Wednesday, 14 September 2011
By: Staff Reporter – www.spionline.com.au
A draft ruling by the Australian Taxation Office has given self-managed superannuation fund members the ability to use money from inside their fund to renovate their property.
Previously, the ATO said SMSFs could not use money from any source to improve property, however, under the draft ruling they can potentially renovate to improve the value of the property.
Charterhill Group Chartered Accountants chief executive officer George Nowak told Smart Property Investment that the draft ruling would ultimately make real estate a more attractive option to the $420 billion SMSF sector.
“We have been in support of this outcome since the 7th July 2010 when the remodelled legislation was delivered. It is an absolutely positive move,” he said.
According to Mr Nowak, the drafted legislation clarifies some nuances of error in the original legislation.
“The ATO understands that the future buoyancy of the property market will be heavily dependent on SMSFs’ investing in property as well as providing rental occupancies for younger people.
“This new drafted legislation, which will almost certainly become law, addresses everything everyone I have spoken to in the industry has been scratching their heads over.”
But while SMSF trustees will be able to renovate using money within their funds, borrowing to renovate will remain prohibited.
Ken Raiss, director of Chan & Naylor, told Smart Property Investment, the prohibition of borrowing to renovate property held in a SMSF was very difficult to understand.
“Hats off to the ATO – a lot of good things have come out of this draft ruling,” he said.
“The fact that you can now renovate, with non-borrowed money, is very good.
“But the main problem is that the ATO’s draft ruling neutralises or diminishes the sole purpose test which is to provide retirement benefits to members.”
With the ability to manufacture capital growth through renovation a big drawcard for property investors, the same capacity should also be available through SMSFs, he said.
“If you’re looking to provide retirement income you should be allowed to maximise it.”
Investors could be running out of time to find a bargain, with Australian Property Monitors (APM) predicting the property market will pick up in 2012. Despite softer conditions in 2011, senior economist Andrew Wilson says the company’s quarterly House Price Report indicates better times are ahead.
“Early signs are emerging of increased first homebuyer and investor activity in most markets, albeit from a low base, that will help to encourage market activity and confidence,” Wilson says.
APM predicts Brisbane will be one of the first cities to gather momentum. Brisbane median house prices have fallen by 1.3 per cent in the June quarter and 4.9 per cent over the past 12 months. However APM says it’s unlikely there will be further drops and “buyer activity in Brisbane should increase as the reconstruction effort gathers pace, with prices starting to stabilise into 2012.”
Sydney and Melbourne also showed slightly better results over the last quarter. Prices in Sydney increased by 0.1 per cent, after falling 0.5 per cent in the previous quarter.
“In the June quarter, diverse local conditions had a more significant impact on median prices in each city, with these individual factors expected to have continued variable effects on growth in each market,” Wilson says.
“This is in contrast to the effect of national market conditions that have impacted prices across the board until recently. The prospect remains, however, of increased buyer activity emerging through the spring selling season.”
Source: API Magazine
THE Hunter Valley has emerged as one of Australia’s hottest places to invest in property thanks to the international resources boom.
A list released yesterday of the nation’s 10 best investment locations included the Hunter Valley coalfields, Glen Innes in the New England district and North Western NSW towns like Moree and Gunnedah.
Property researcher Terry Ryder said he chose the top 10 regions based on their low prices, strong rental returns and potential for growth.
“There has been so much media attention on affordability issues but it tends to focus almost exclusively on the major cities,” he said.
“That ignores all the good prospects in some of our regional centres.”
Decent four-bedroom homes in Muswellbrook, on the doorstep of the Hunter Valley’s coal mines and horse studs, were advertised online yesterday for as little as $198,000.
But real estate experts predict those prices will climb dramatically with the opening of a billion-dollar coal mine and expansion of transport and energy infrastructure.
Approved in 2007, the Mangoola coal mine is expected to see more than 1500 miners and their families move to the area, many of whom will need rental accommodation.
Muswellbrook real estate agent Phil Lawler said his agency took four deposits on homes in town yesterday.
“It’s a long, long time since I have seen such urgency in the marketplace,” he said.
“Rents are starting to increase dramatically, and that will start to turn investors’ heads.
“For $250,000 to $350,000 you can get a really attractive property up here that can return up to $600 in rent a week if furnished.”
Real Estate Institute of NSW president Wayne Stewart said the rural lifestyle on offer in the region added to its allure.
“Some of those areas are only an hour from the ocean and that is part of it as well,” he said.
According to the report, Glen Innes made it onto the list for its location at the junction of the New England and Gwydir highways, the quality of homes on offer and plans for new development in and around the town.
Mr Ryder, who runs the hotspotting.com.au website, said a planned inland rail link and mining expansion meant real estate in North Western NSW was also likely to boom.
2010 is fast approaching, and we have already helped a number of investors map out their plan for next year.
If you are looking to plan your property wealth for the next 20 years, it’s important to work what you want to achieve rather than impulse buy. Remember, property is a long term strategy requiring long term plans, and for a lot of us, it’s the basis of our family’s wealth.
So where do you start?
Here are 5 quick steps to get you started in planning your property investment for 2010:
1. Start with a clear and definite objective – When, why, who for, what do you want to achieve?
2. Have a sound property & financial strategy – What type of property, what price, which lender, how much cash do I need?
3. Take Action – Once you know your market, start shopping for wholesale prices. Find properties that are not on the market and work out how you can buy low, and sell high. Start researching sales prices, or get some help like a Buyer’s Agent.
4. Follow Through with the plan – Look at 100 properties. Your favourite may be No.7, or it may be No. 85. The more you compare, the more you get the feel for what is right for you.
5. Create a supporting environment around you – Build your team of advisors and likeminded supporters. Talk to people in the know, research the areas and use reputable property research companies to gather the information.
Sound like a lot of work? Buying at wholesale prices takes effort, yet there are shortcuts and ways to save you time and eliminate stress.
Plan Assist regularly helps investors with all areas of property purchasing, from planning to completion. It’s our job to coach you through and keep you on track. Call our Acquisition Team today on 02 9449 2333 for a no obligation chat about planning for 2010.
How to find the most desirable investment property with the best chance of good returns.
You wouldn’t want to take a guess at how many suburbs there are in Australia, let alone homes. So how do you select where is the best place to invest? The key is choosing a highly desirable property. Purchasing a home that everyone wants to live in will help ensure that you get good capital growth and/or rental returns.
The golden word for property investment is average. This may seem contradictory as we just mentioned desirability, but having a desirable property means the majority of the population want to live there. As a result you should select a very average property with a very average value. Why? Because the bulk of the population live in these homes which makes them well sought after.
…you should select a very average property with a very average value…
Land content is another attribute that makes properties desirable: land is scarce. So houses are obviously better than units, having a much higher land content which makes them usually less risky.
Investing in units can have a good outcome, but you will need to be extra careful in choosing where to buy. We recommend purchasing in an older, smaller unit block. With rents quickly rising, tenants are not going to want to pay extra for the trimmings of the luxury new apartments. Another reason for purchasing in older unit blocks in that maintenance is usually less, meaning cheaper body corporate fees.
We recommend smaller unit blocks because uniqueness is derived from the fact that there are unlikely to be many up for lease or sale at the same time as yours. This means the vacancy period between tenants is likely to be less and you won’t need to price your rental or selling price as competitively.
…the more bedrooms you have, the more people can live there and share the cost of renting…
Whether you are buying a house or a unit, a property with lots of bedrooms is also a sought-after feature for renters. This is because the more bedrooms you have, the more people can live there and share the cost of renting, which of course is very attractive to tenants after cheap rents.
The obvious characteristic that will help ensure you get good returns is investing in a good location. By this we mean an area that is well serviced by transport, close to shops, schools, medical facilities with plenty of job opportunities. There needs to be a reason for people to want to live there, and the more facilities there are, the better.
To help with the process of finding an investment property that is likely to do well, Residex has put together the Predictions and Best Rent report. The former is more tailored towards investors that are owner occupiers, whilst the latter is for investors after capital growth and rental yields.
In both these reports we have complied suburbs which are predicted to have good capital growth and/or rental yields over the next five and eight years. Combining this with the attributes mentioned above, buying an investment property really does become as safe as houses.
(Source: By J C F Edwards, 20-August-2007 )