|
Marketing Clients:
Plastic Injection Moulding
|
Whether you are considering a property purchase in Brisbane, Sydney, Canberra,
Melbourne, Adelaide or Perth, a home equity line of credit (LOC) can be an
excellent financing tool, if it is used properly. A LOC is basically a credit
card or cheque account secured by a mortgage or deed of trust on your property.
You only pay interest on the amounts you borrow on the LOC. If you don't use the
line of credit, you don't have any monthly payments to make.
LOC accounts are advertised on television as a means of consolidating debt and
improving your existing property but can be used very effectively by investors.
For short term available cash, a LOC can be very useful. For example, if a
seller makes an offer, "give me $75,000 cash and I'll sell you my $100,000
house" you will need to act in a hurry. Another example of cash in a hurry is at
a foreclosure auction, which may require payment at the end of the auction. When
you need cash in a hurry, there's no time to go to the bank, make applications
and wait for approvals.
While the interest rate on your LOC may be a higher than other sources, it is
temporary financing, which can be repaid when you refinance the property. It
would be unwise to use your LOC as a long-term financing source – as it may get
you into financial trouble. If you don't pay the LOC, you can lose your home!
Only use your LOC if the deal is a steal and you can pay off the LOC money
within a few months. Generally speaking, institutional lenders will not lend you
the balance of a home loan if you borrowed the funds for the deposit.
USING CREDIT CARDS
Credit cards can also be quite useful in real estate investing. You may already
have more available credit than you realize. Most major credit cards allow you
to take cash advances. The transaction fees and interest rates are way too high,
but you can access this money on 24 hours notice. Also, since credit card loans
are unsecured, there are no other loan costs normally associated with a real
estate transaction, such as title insurance, appraisals, pest inspections,
surveys, etc.
Do your homework, you may be better off paying 18% interest or more on a credit
line for three to six months than paying 9% interest on an institutional loan,
which have up front costs that would take you years to recoup. Just like your
LOC, use a credit card carefully and only as a temporary solution if the deal
calls for it.
YOUR INVESTMENT PROPERTY
An investment property can produce cash flow today and well into the future. The
“passive income” derived from your investment property allows you to deduct your
maintenance, operating expenses, taxes, and insurance, along with any overall
losses which are called “passive losses” and use these loses to offset some of
your other ordinary income. The tax benefits associated with owning investment
real estate properties can be substantial.
As with the purchase of a family home, the location of your investment property
is critical to the income you can expect to generate from the rent.
Emotional involvement with the appearance of a house or apartment is a common
mistake made when buying investment property. Remember you don't have to live
there but someone else will. Do your research and look at the potential of the
investment. Is it in a desirable location?
LOCATION
Location is the most important factor.
Is it convenient to shops, schools and transport? Convenient means within a
comfortable walk - not right next door to a school, right on a six lane highway
or right beside a railway line! What is the condition of the surrounding
properties?
Consider the land value, tenancy rates and property values for the area. Are
there any nearby parks, playgrounds etc.?
What is the current council zoning? Are there any plans to change the zoning in
the foreseeable future? Thoroughly investigate any potential zoning changes with
the relevant authorities
Unless you are prepared to pay an agent to take care of your property, consider
if you really want to drive an hour to change the locks, make sure the cleaning
agency did a thorough job, check to see if the lawn is actually being mown,
etc.? The proximity to your normal stomping grounds is an important factor.
CONDITION
Is the house basically sound? Buying a property with structural problems is
unwise unless you possess the skills to fix it cheaply. Your offers for a
property should always be subject to a satisfactory building and pest
inspection.
POTENTIAL
By increasing the value of your investment property you create equity that can
be used for future investment purchases. So what do you look for?
The Cosmetic Makeover
This is an excellent way to add value quickly. By the simple addition of a third
bedroom to a two bedroom cottage, the value of the property will go up
instantly. It's rental potential is also elevated by this simple improvement. Is
it the worst house in the best street? Would a coat of paint, wall cladding or
new windows and doors bring it into line with similar houses in the same area? A
simple addition such as a verandah can add value to the property.
Learn to overcome the common fear about purchasing the worst house in the street
and getting stuck with it. For every reason a house is slow to sell, there is an
answer.
- House too small - add an extra room or two.
- Only one bathroom the size of a postage stamp - add an extra toilet or shower.
- Unappealing mission brown & beige front appearance - repaint using two pleasing
fresh colours.
- Interior dull and uninteresting - repaint using pleasant co-ordinating colours,
not white or beige throughout. Add some inexpensive and interesting borders or
accessories.
- Ugly brown shag-pile carpet - remove immediately and either polish floorboards
or recover with something up to date.
- No air conditioning or heating - for most houses from Brisbane to Melbourne,
Adelaide to Perth, air conditioning is not an option. Just do it!!
The cosmetic makeover will....
- Make the property sell quickly
- Make the property more valuable
- Improve your reputation in Real Estate investment circles
- Make your dealings with buyers a more satisfying event because you know you have
a great product.
- Improve your sleep and sex life. Yes, you read it correctly...more sales equals
more money. More money equals happier partner. Happier partner equals more
frequent sex. More sex equals better sleep.
POSITIVE INVESTMENT RESULTS
You can make some large profits on these houses because you can buy them dirt
cheap.
Many of your competition investors won't touch them.
They're easy to find and easy to buy.
At today's interest rates buyers can qualify with low incomes.
Financing is plentiful. Sometimes with no deposit.
YOUR "REAL ESTATE PERSONALITY"
Have you ever talked to a seller or a Realtor you really didn't like? The one
who wouldn't shut up long enough for you to ask a question or the grouchy type
that treated you like a nobody until you passed some unspoken means test. Then
there's the know-it-all Realtor who tries unsuccessfully to impress you with
their intelligence in the art of real estate and finance.
How many times have you been annoyed by some clueless, indecisive spouse who
can't even tell you the asking price of their property or needs permission
before giving you any further details.
Perhaps it was the couple in the middle of a divorce who spoke to you like you
were responsible for them being forced to sell their property and divide the
proceeds.
WARNING
Do not become like any one of these people! If you suspect you already are,
record your calls and listen to yourself selling your house. If there is a moron
on the tape you'll probably recognise his/her voice. If you can't sound
friendly, flexible and excited every time you talk to a potential buyer.... get
someone else to sell your houses.
|
