Frequently Asked Questions

What is a residential investment property?
What if I don't feel comfortable with debt?
What happens if my income stops and I can't service debt?
What if I need money in a hurry?
What happens if interest rates rise?
What happens if I can't find a tenant for my property?
What happens if a property is damaged or if I have a bad tenant?
What if I don't have time to manage my own investments?
What if I don't have enough money for a deposit?

We specialize in helping people select the right property, helping people get the right finance, helping people to save tax and create wealth, helping people get the right answers...

Q: What is a residential investment property?
A: A residential property is a house, townhouse, terrace or unit, which the owner does not use as a personal residence, but rents out. This allows the investor to benefit from both tax advantages and rental income from the property.
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Q: What if I don't feel comfortable about debt?
A: While the concept of debt may seem disturbing, the reality is we live with debt of one form or another, and few people attain true financial independence without some form of leveraging.

In fact, most Australians are actually more comfortable with debt than they realize, through the mortgage on their own home, or perhaps the loan on their motor vehicle. Many of us are in "debt" to the taxman by virtue of the fact that we earn an income.

There are two key principles that will ensure security when it comes to borrowing:

  1. Only borrow to purchase appreciating assets
  2. Make sure your debt is manageable
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Q: What happens if my income stops and I can't service debt?
A: The answer to this question can best be demonstrated by looking at the financial circumstances of the average Australian family in 1994. With interest rates the lowest they've been in years, many families are focused on paying off their own home as quickly as possible.

For example, a couple may be trying to reduce the term of their loan by paying an extra sixty dollars each week. If one partner gets sick, or loses their job, they may be placed in the position where there is no redeemable asset base to turn to but their own home.

If that same sixty dollars a week were invested in a second house the risk may actually be diminished. The advantage of investing in a redeemable asset base is that, if something happens, the family house is not put on the line - there is something else to turn to.

Life or trauma insurance and income protections policy will replace 75% of a person's regular income while that person is unable to work.
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Q: What if I need money in a hurry?
A: Residential property offers a lot of flexibility. Today, if you need cash in a hurry you can actually draw the equity off your own home simply by refinancing.

If, in worse case scenario, an income stream is cut off for an extended period of time and there is no other redeemable asset base to turn to, the investment property can be sold to pay back the loan.
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Q: What happens if interest rates rise?
A: If this is a concern take out a long term or fixed interest loan. This gives the investor two advantages:

1. Because the amount of repayment is known in advance, it is easier to plan financially.
2. The amount of interest paid will remain constant for the duration of the fixed term, despite a rise in interest rates.

Remember, whenever interest rates rise, property prices also rise providing the capital growth income stream for investors. We only have to look back to 1988 to see an example of the parallel between a rise in interest rates and a peak in property prices.
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Q: What happens if I can't find a tenant for my property?
A: It has been our experience that, provided a building is in a reasonable state of repair, and you are not a greedy landlord, you can find a tenant for it.

This is particularly true of the lower end of the rental market. If there is a protracted vacancy rate (for example, anything more than two weeks) it may be a matter of adjusting the rent slightly.

With the right property management in place, however, vacancy should not be a problem. A good manager - in the form of either on site management, or a local real estate agent should have no difficulty finding suitable tenants with whom they can foster a long term relationship.
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Q: What happens if a property is damaged or if I have a bad tenant?
A: A comprehensive insurance policy will protect your property against most forms of damage. The cost of the insurance is minimal and is tax deductible.

If you are correctly insured, an instance such as a natural disaster can actually work in your favour, by creating a significant tax advantage.

With effective property management, tenant difficulties should be nonexistent or reduced to a minimum.
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Q: What if I don't have time to manage my own investments?
A: Maintaining control of your investment does not mean active involvement. Once a property has been purchased, an investor's involvement can be reduced to a minimum through the use of an effective property manager.

As mentioned in a previous question, the right kind of property management will save the investor time, money and tenancy headaches.

Managers can assist in some or all of the following areas: maintenance, improvements, tenant screening, rent collection, lease preparation, advertising, inspections, and tenant relationships.

When selecting a professional manager, it is important to look for someone who is not only a good people manager but also someone who runs the rental roll like he would run his own business.
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Q: What if I don't have enough money for a deposit?
A: Cash is not necessary as a deposit when there are sufficient assets to borrow against. For example, the equity in an existing home can be used to finance the purchase of an investment property and its associated costs.
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