The types of property foreign investors can buy

The types of property foreign investors can buy

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to discuss what types of property foreign investors can purchase in Australia.

You may think why are foreigners allowed to buy property in Australia?

Isn’t it unfair for everyday Australians?

After doing a bit of research on the area I actually think it’s an area where a decent amount of logic prevails.

The reason foreigners can buy property according to the Foreign Investment Review Board or FIRB “is to increase Australia’s housing supply”.

The theory goes that the money from overseas, will help build new properties locally.

Without that money it would be hard to supply as many properties as we need, leading to upward pressure on prices.

The flow on benefits are through the construction process “new jobs will be created which will help support economic growth for everyday Australians”.

Effectively this money is helping companies to employ more people, who in turn can experience better wages and standards of living.

Foreign investment also increases government revenue from “stamp duties” and “other taxes”.

Here are some of the coolest findings on foreign investment:

As foreign investment is used to supply more housing, it makes sense foreigners can’t purchase established residential property in Australia because it’s doing the opposite.

This is why they can generally get an “exemption certificate” when purchasing off the plan property through a developer whose projects has more than 50 properties in a multi-level building, they can’t purchase house and land packages or townhouses.

The only time foreigners can get approval for established property, when it’s for redevelopment and at least 2 dwellings are built for the one demolished, the foreigner has to have approval before entering into an unconditional contract though.

Foreigners can buy vacant land for this same reason as they will be adding a house where there was none before, but need approval, the house needs to be built within 4 years to stop land banking. The approval fees increase with price.

If a foreigner lives in an Australian property for more than 6 months in a year, they will need to pay a vacancy fee which is to encourage greater levels of rental stock in the market.

Commercial property seems to be more relaxed, as foreigners can usually purchase commercial property without needing approval, if the value is generally below $266m.

Large penalties apply for breaching foreign investment rules, ranging from a few thousand dollars to a few hundred thousand dollars

All in all foreign investment policy seems to make sense to me when the rules are followed.”

Which is cheaper renting property or buying property?

Which is cheaper renting property or buying property?

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today we’re going to discuss which is cheaper renting or buying?

This is a particularly interesting topic for first home buyers and downsizers.

Purely on numbers renting is obviously the cheaper option, and it definitely is in the short term.

As the upfront costs associated with buying are much higher with stamp duty and the deposit.

But there is one main way, over the medium to long-term buying becomes more affordable than renting.

The main way is:
turning half the property into an investment

I’l first explain the numbers then show how this can make it cheaper.

Comparing like for like.

Buying a $600k property at a 4% interest rate versus renting that same property at a 4% rental yield.

In both instances the cashflow will be the same, about $461 per week.

When buying you will need anywhere from $80k+ upfront for a normal buyer.

This figure will vary depending on each state such as NSW, VIC, QLD as stamp duty rates are different.

You will need a bit less if your a first home buyer as NSW and VIC have first home buyer grants, which can save upwards of $20k-$30k.

I’m not taking into consideration council rates, water, electricity, any maintenance on the property and strata rates if it’s a strata block.

Now this is where things gets interesting, like a Louis Theroux investigation.

Simply turning half the property into an investment means you could potentially receive about $250 per week in rental income.

This would cut your mortgage repayment by upwards of 50%.

Which would mean your weekly repayments effectively become $211 from $461.

This graph shows that by receiving that extra $250 per week, the property becomes cheaper and effectively pays off the initial $80k outlay after 6.1 years.

Meaning anything after that period makes the purchase more affordable than the renting option as your recovering more than you spend.

Would it be worth sharing with someone else, if it gets you onto the property ladder?”

The Governments affect on property prices

The Governments affect on property prices

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to discuss how the government in power affects property prices.

We all love federal elections, with heaps of advertising on TV, radio and billboards. Not!

You know those news segments with the politician shaking some persons hand he has never met in hope they will like him enough to vote for him after meeting for 1 minute.

And how about those ads with the ending “this is a message from a party you most likely won’t vote for, authorised by some dude trying to get more power in Canberra, Australia.”

Since 1975 the Coalition or the libs have won 9 elections and labour 7 elections.

I’m not a particularly political person, but wondered which government may be correlated to a greater affect on property prices, which is more interesting to me.

I analysed the terms both governments served since 1975 until 2018.

In my calculations the coalition has been in power for 24 years and labour 19 years during this timeframe.

Here’s the coolest stuff I found from analysing these periods:
If you own property, then it would be wise to vote for the coalition government even if you really don’t like them.
Simply, prices rise more with a coalition government than a labour government in Sydney, Melbourne and Brisbane during there terms since 1975.
Based on my calculations, this works out at 2.9% more per year for Sydney, 1.8% more per year for Melbourne and 2.1% more per year in Brisbane.
Based on my calculations at current prices, a Sydney sider will make about $31,000 more per year with the coalition in power, $15,000 per year for Melburnian’s and $12,000 per year for Brisbanites.
Prices rose the least during the Labour GFC period from the mid 2000’s, on average 4.5% per year for the 3 capital cities.
Prices rose the most during the Coalition period during the 70’s and 80’s at about 10.45% per year on average for the 3 capital cities.

I don’t see the coalition getting back into government anytime soon though.

Maybe the only reason to get them back could be for our property prices?”

FHB Process

FHB Process

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to talk about what to do when buying a house for the first time.

Your a first home buyer and no doubt want to get your first purchase right.

However you are finding it hard to work out exactly what the process actually looks like.

To start you need to know how much you can borrow.

To do this, speak to your bank or mortgage broker and they will be able to collect a bunch of information from you to better understand your capacity.

Once you have your borrowing capacity and are ready to purchase, get your pre-approval which generally lasts for 3 months.

I would usually research which areas would will be right for your requirements. You may already have a specific area you want to focus on, which is great.

Start searching for properties that match your budget and areas of choice.

If you did your research correctly you will start finding a few potential options within a few weeks.

If your finding it impossible to find anything which is remotely suitable, your budget maybe too low for the area and may have to re-visit your research.

Once you have a property or properties, you should inspect them to make sure you like them. I would look out for structural issues, signs of pest or water damage and anything else which is not quit right.

It can even be worthwhile asking the agent representing the seller if there are any issues.

If you like one of the properties and want to put forward an offer, I would also request the contract at this stage for your solicitor or conveyancer to review.

You now enter the negotiation.

This is a time where money can be saved or spent very quickly.

It’s important you don’t give too much away if possible. As the saying goes, keep your cards close to you.

You will want to set a maximum price you will go to. Generally starting from a lower point that is reasonable and is in line with the current market.

Terms will also affect the purchase of the property. Strong terms such as a cash offer with limited cooling off period and settlement period or the period the sellers most want would be attractive to the sellers. Usually first home buyers won’t have this cash option.

The deposit is another negotiation hot point either 5% or 10%. Try go for the lower the better.

If the offer and terms are accepted it would be wise to get a pest and building inspection for a house and or strata report on a strata development.

If that all comes back positive, then proceed to go through the conveyance with your legal representative. If there are some points of concern, then re-negotiate the terms and or price if there could be significant cost to rectify the issues.

You will most likely now pay 0.25% deposit and sign the contract to exchange and go into a 5 day cooling off period, after which the balance of the deposit agreed would be paid.

Sometimes the sellers would want a 66W which is an unconditional exchange, in which case you would pay the full deposit amount straight away that was agreed during the negotiation.

It’s important to keep your bank and or mortgage broker up to date during the whole process so they are in a position to get your approval formalised as soon as possible.

Once this has occurred you will have gone unconditional.

Now you will wait for the settlement period to occur, usually around 42 days. Once this has happened your mortgage will come through and you will formally take ownership of the property.

Congratulations! You just bought your first home.”

How to build a great property portfolio

How to build a great property portfolio

Transcript
“Hello and welcome back to Berman Buys, daily buying tips from Dean Berman.

Today I want to discuss what makes a great property portfolio.

I will start of by providing a simple analogy to help you understand my point.

You’re in a restaurant, and hungry.

It’s a degustation menu (which basically means a bunch of courses designed to flow from one to the next), well known restaurants like Testuyas do it.

I haven’t eaten there though, so can’t say from experience!

What I’m getting at is each course builds on the last one.

Which is where my analogy comes together.

A great property portfolio is much like this dining experience.

Each property compliments the last.

Each property builds on the last.

One has great land content, the other may be in a more prime location, while the next one may be a knock down rebuild and the next could be very high yielding.

You can simply repeat the one process over and over again, which works great, such as knock down rebuilds or renovations.

But to have a truly diversified buy and hold portfolio you want to purchase in a variety of locations to take advantage of the various growth cycles.

I like houses.

I also like great land content

In my opinion, the more you can do with the properties inside the portfolio the better, as they lend themselves to multiple options to potentially profit from into the future.

So you want your portfolio to have the process of the degustation menu, but the choice of a la carte.”