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Self Managed Superannuation Fund Q & A

The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions. Click here for full Terms of Use.

What are the best insulation options for my home?

Insulation is an often-overlooked piece of the homeowner puzzle. Not only can it keep you warm during winter and cool during summer, it can do wonders for your energy bill.

With this in mind, if you find yourself making decisions regarding the type of insulation to use inside your home, it can pay off to understand exactly what the pros and cons of each option are.

Fibreglass

Perhaps the most well-known type of insulation, fibreglass is created using rock slag, recycled glass, quartz sand, soda ash, limestone and boron. This insulation comes in blankets, segments and loose fill.

It can be found at your local hardware store, and is probably the most widely used insulation material by DIYers.

Wool

Comprised of either new or recycled sheep wool, this type of insulation is often blended with other preservatives and materials to make it stronger. It is also usually treated to make it resistant to pests, mould and fire.

Wool is slightly less effective than fibreglass at containing heat, but the chemicals it is treated with make it more fire-resistant.

Synthetic

Synthetic insulation can come in various forms, including polyester and polystyrene. Polyester is more affordable than fibreglass while offering the same heat-containing properties, while polystyrene is actually better than fibreglass at containing heat.

Both types of insulation are long-lasting, but are also vulnerable if exposed, especially to water. Additionally, polystyrene can shrink over time.

Foam

Made out of urea and formaldehyde, foam insulation is pumped or injected into existing walls before it dries and becomes a solid shape.

This can be very beneficial to homeowners who do not wish to remove wall linings or cladding. However, foam insulation can lose its heat-containment strength as it dries, and is not suitable for brick homes.

These are only a few of the options available for home insulation, and regardless of which you choose, it's important to take effectiveness and cost into account, as chances are you'll be living with the choice you make for quite some time.

What are some of the common mistakes landlords make?

Some property investors choose to manage their own rental properties. This has both advantages and disadvantages. One advantage is that you can save on real estate agent costs but there are challenges you need to be mindful of. Some mistakes self-managing landlords make are:
  • Access – Landlords must obtain permission from their tenant to access their property - some fail to give adequate notice. Whether it is for inspections or to undertake maintenance duties, landlords must not ignore the rules about access
  • Bonds – Some landlords ask for more than four weeks rent (which is against the rules) and/fail to lodge a rental bond with the appropriate authority, where applicable, in their state
  • Proper documentation – Some landlords fail to put written tenancy agreements in place, complete comprehensive property condition reports, or keep proper records of rental payments. This can lead to significant difficulty if or when a dispute arises.
  • Charging for utilities – There are clear rules for when you can and can’t charge for water usage and other utilities but these vary from state to state.
  • Failing to make communication easy – Some landlords fail to provide tenants with their full name and address or phone contact details. This can make it difficult for tenants to communicate about problems or respond appropriately in emergencies
  • Not seeking help – Landlords often forget they can seek guidance from appropriate tenancy authorities in their state. Many services and information sheets exist and state based real estate institutes can help direct landlords to the help they need.

When is it appropriate to increase the rent?

Landlords should review their property portfolios on an annual basis to assure an appropriate rent is being asked, and that any improvements that would help maintain their property’s competitiveness and return are executed.

Landlords are entitled to raise the rent periodically and although no tenant wants to pay more rent, it is sometimes necessary to implement rental increases to cover the rising costs of maintaining a property.

Before increasing rent, however, it is important to:
  • Familiarise yourself with the legislation in your state or territory to ensure you aren’t breaking any laws or rules
  • Consider your tenant’s payment history – a good tenant that pays the rent on time is worth keeping in place
  • Carefully consider whether your desired rent increase is fair, when compared to other available properties
  • Think about the opportunity cost of a vacancy period, should your existing tenant choose to vacate rather than accept the increase

What do I need to know when buying an apartment off the plan?

Buying ‘off the plan’ provides investors with the opportunity to buy some of the best-positioned apartments within a complex. When the market is rising, it can also sometimes offer property investors a capital gain by the time construction is completed.

Here are some tips to help you make sure you make the decision that’s best for you:
  • Make sure you look carefully at the displays that developers make available. These will show examples of carpets, tiles, kitchen fittings and finishes, colour schemes and general fittings.
  • Ask about previous projects that the developer has completed. Arrange an inspection to make your own judgment as to the quality of construction
  • Ask residents of the developer’s previous projects how happy they are with the property they purchased
  • If you’re not confident you understand floor plans, consider asking an architect to assist you with your decision making
  • Banks generally wont provide unconditional approval of your property loan when you buy off the plan. If the market moves downwards, between your purchase and settlement, you will need to be prepared to find additional funding
  • It is a good idea to include a finance clause in your contract and get a valuation ‘as-if-complete’ when you’re getting your initial approval. This will allow you to gauge how the property stands within the current market, as well as how the bank views the area and the property’s potential
  • Get legal advice before signing a real estate contract. Make sure you understand delivery timeframes, sunset clauses, size variation clauses and confirm that you are buying what you believe you are buying
By conducting your due diligence and taking your time, you can take advantage of what off the plan purchasing can offer buyers; a way to secure a quality property in the future, at today’s price.

Should I get a building and pest inspection?

Building and pest inspections typically cost around five hundred dollars but are a vital part of the due diligence process when buying a house. When buying an apartment, a strata inspection report may be more appropriate, depending on the size and construction of the block. Remember though that almost all inspection reports reveal some form of problem, particularly with older properties.

A building and pest report will provide crucial guidance as to the condition of the property you are considering and can be useful in price negotiations, if significant problems are present. Here are some tips on understanding and responding appropriately when you receive your report:
  • Don’t be shocked if your report is in the order of 30 or more pages. That’s normal.
  • The presence of ‘past termite activity’ should not be viewed as a deal breaker. What is important is the extent of the damage and whether there is evidence that corrective action has been taken. Naturally, if current termite activity is present, this is potentially serious and needs to be fully assessed and dealt with
  • It is the building inspector’s job to point everything out that he/she sees to ‘cover’ themselves. It’s important you calmly read through the information and understand what it means
  • If you have a question, phone the inspector. They will often be happy to discuss their findings and explain their relevance.
  • If major faults have been found, discuss these with your real estate agent. It may be possible to negotiate a suitable adjustment to the agreed property purchase price.
  • Be realistic. A small range of typical faults may not be fair grounds to renegotiate price

How do I work out market value so I don’t overpay when buying real estate?

"Market value" is whatever a willing buyer will pay for a property when it sells.

While this advice doesn’t help new buyers, or even experienced buyers, there are ways to work out what you should pay for a property. Here are our tips:
  • Use technology. Many real estate websites provide suburb median prices and recent sales details. Remember that a median price is only indicative of the middle price in a suburb; it may not reflect the value of the property you are considering
  • Ask real estate agents
  • When buying an investment property, rental returns are the key factor in determining value. 5 per cent gross rental return is considered the ‘rule of thumb’ which essentially converts to $1 in weekly rent for every $1,000 spent buying a property
  • Obtain a valuation. Formal valuations can cost between $500 and $1,000 but a licensed valuer must support his or her indicative price with solid comparative market evidence

What is the best strategy to win when buying real estate by auction?

While it may all come down to who has the deepest pockets on the day, sometimes how you bid will influence just how high the other bidders are prepared to go.

However, the most important factor with a real estate auction is to decide what is your realistic limit in advance. Be prepared to be a little flexible, but don’t allow yourself to get carried away with emotion. Here are First National’s tips:
  • Obtain pre-approval for your loan before the auction. This provides you with confidence that the bank will support your highest bid.
  • Some people like to enter the bidding early and then keep bidding strongly in the hope that other buyers will find their tenacity off putting
  • Some buyers like to open the bidding with a very high bid but this can risk paying too much for the property
  • Others prefer to wait until the bidding appears to be exhausted, before starting to compete
  • If two bidders keep upping their bids by similar amounts, some buyers believe it is advantageous to suddenly bid with a stronger, larger increase than has been generally taking place throughout the auction. This is thought to convince competitors that you are determined to succeed and will just keep bidding
  • If the auctioneer indicates that the property is to be ‘passed in’, make sure that you are the highest bidder if you wish to have the ‘first right of refusal’ following the auction. This means you will be first to have the opportunity to negotiate with the vendor
Whatever your style, the one thing that rarely works to anybody’s benefit is being loud and obnoxious. Other bidders sometimes say they are prepared to pay much more to make sure that somebody that is rude does not get their way.

What are the free online resources that every real estate investor should know about?

SOURCE: propertyobserver.com.au

The rise of the internet over the last 10 years has changed property investing materially – and the number of free resources that you can access right at your fingertips, any time of day or night, is astounding.

Here are some recommended “go to” free real estate websites and resources for pushing your investments that one step further.

GOOGLE ALERTS

Much-used and much-loved, Google Alerts can be set up for news on any area of your liking. Property Observer editor at large Jonathan Chancellor suggested in his speech at the Home Show that setting up alerts for your chosen suburb or locality plus keywords like ‘infrastructure’ or ‘government spending’ are possible approaches to ensure you buy in ahead of the pack. This scrapes local news online, as well as other commentary, and sends it straight to you.

You can set them up to be as frequent or infrequent as you like, all you need to do is send them to your Google account. You may want to also consider using an RSS reader or a bookmarking system.


A FAVOURITE LISTINGS WEBSITE

While it’s suggested that you peruse a number of listings websites (not all agents list on every portal), it’s worthwhile having a favourite that you can check in on regularly. Whether it’s realestateVIEW, realestate.com.au, Domain, Homely, Homehound or another, be active in viewing them. Property price guidance might come from sites like onthehouse. Keep an eye on areas of interest, new listings in your price range and even how much properties are renting for – this will quickly show you changes in the market, and what is selling. You’ll also get an idea of the active agents in the area. This brings us to…


AGENT RATING WEBSITES

It’s good to know the active real estate agents you can call and speak to, and potentially list your property with in future. RateMyAgent is one of these sites, that shows you which agents are the busiest and selling the most and provides some localised data.


GOOGLE EARTH AND MAPS

Such an easy portal to use, Google Earth and Google Maps will tell you a huge amount of invaluable information and orientate you instantly. Whether it’s using the Street View portal to get a better look at just how close it is to the main road, and whether you can see any graffiti in the pictures, it can also show you how close the property is to the nearest school, shops, public transport and even how close the suburb is to the capital. This is a first stop when researching a new area.


LOCAL TENANCY PORTALS

If you’re a landlord, then get yourself armed with information. All of the legislation is online, and now there are even hubs that provide guides and assistance for landlords and investors. Consider spending some time on different Tenants Union websites as well, these help quickly show you common renters’ concerns and how you might assist as a property owner. You will also want to have the details for your local tribunal on hand.

Legislation by state and territory:

New South Wales

Queensland

Western Australia

South Australia

Northern Territory

ACT

Tasmania

Victoria


INVESTOR FORUMS

Investing in property doesn’t have to be a lonely task and that doesn’t mean you always have to spend money to attend groups and meetups. A number of forums exist for you to speak your mind with other property buyers, and naysayers. From Somersoft to renovation forum Home One, whatever your investment tastes there’s something for you. A number of industry experts are often also online and able to answer questions via the forums.


TELEVISION RE-RUNS

Missed that episode of The Block that everyone’s discussing (it gets tense when it’s up against My Kitchen Rules)? Or want to get some background on Location Location Location? They stream them through their websites, and at least include past seasons for you to get your fix.


BRAND NEW AND COMING SOON RESOURCES

The National Building Code of Australia is soon to be freely available online under new changes - great news for owner builders and anyone considering a structural renovation. And, in the last year, we've seen a crop of new websites offering useful assistance in all areas of investing. Genworth launched their LMI Toolkit in November last year, and new website and app realAs believes they have the algorithm that will accurately determine what a property will sell for (with a success rate of usually within 5%). Another startup, Next For Sale, allows potential sellers to list before they are actually sellers.

How can I renovate a bathroom on a shoestring budget?

Along with the kitchen, bathrooms are one of the most important assets of any property so it pays to invest wisely in their renovation. As with all property investment, careful consideration will help gain you the maximum return.

First National’s top tips for renovating on a limited budget are:
  • Your goal should be to make your bathroom bigger, better and brighter
  • Aim for glossy tiles on the walls as they have high perceived value
  • Choose matt or textured tiles on your floor – they look clean for longer and are less slippery.
  • Explore tile factories and online shopping outlets, instead of retail tile showrooms - savings can be huge
  • Consider your target buyer - cater to their style and storage needs
  • Use quality towels and home décor items to best present your renovation

What are my obligations to neighbours when renovating an apartment?

Renovating real estate is a great way to add value, improve salability, or increase your rental return. However, your neighbours will likely be less than thrilled with the noise and disruption your renovations will cause other residents in your strata plan.

First National recommends the following course of action:
  • Inform the Owners Corporation, residents and immediate neighbours of the date you will start renovating and when you anticipate finishing
  • Comply with council and building rules and guidelines around safety, noise and rubbish removal i.e. what hours and days of the week are works permitted?
  • Be considerate but don’t pander to unreasonable resident demands
  • Make sure your tradesmen don’t obstruct driveways or hallways while working
  • Make sure lifts are properly cloaked with protective curtains
  • Assure that tradesmen clean up at the end of each day so residents are not adversely affected
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