Category: Financial

5 steps to stay on top in a renter’s market

How astute landlords can secure their rental returns, in any market

The latest National Residential Vacancy Rate figures from investment research house SQM Research have some investors feeling uncertain.

The figures show that in some parts of the country, vacancy rates are still substantially higher than previous years.

These increased vacancy rates, combined with amendments to the Residential Tenancies Act and an oversupply of properties in certain areas, have created a ‘renter’s market’ that some investors are finding challenging.

One of our investors, let’s call her Janet, had an investment property that was ticking along nicely, until she received a call from her property manager telling Janet her tenants had requested a rent reduction of $20 per week.

The request took Janet off guard. She was at first indignant, then concerned:

• If I agree, how will I cover the extra expense?
• Will they ask for more reductions?
• If I don’t agree, how long will it take to find new tenants?
• What if my property sits vacant for months?

These are the type of questions many investors face in a renter’s market, where renters have more properties to choose from, are less willing to accept rental increases, and in some circumstances, like Janet, are even negotiating reductions in their rent.

If you own an investment property, it may seem like there is nothing but bad news, however we work with many investor landlords who continually see strong returns, no matter the market.

Here’s how to keep it in perspective

1. Remember the big picture (and why you started to invest in the first place)

It’s easy to view any reduction in your rental return as a loss, however, if you compare the weekly reduction to the cost of a prolonged period of vacancy, these reductions take on a new light.

Let’s have a look at this:

If your property is on the market for $400 per week and you are offered $380 per week, you may see that as a loss of $1040 per annum.

However if, in rejecting the offer of $380, your property remains vacant for an additional two to three weeks while you wait to achieve your set price, you have lost at least $1140 per annum. That’s more than the $20 per week loss.

If the property remains vacant for six weeks or longer, your loss is in excess of $2,500.

Plus you will have additional costs of advertising and re-letting fees (typically another one or two week’s rent). So recognising this loss and responding to the market is key to reducing your investment property losses.

2. Explore offsetting the reduction

When the market is strong and stable, we tend to set-and-forget.

When the market presents challenges, astute investors look to offset their losses by reviewing and renegotiating their financial arrangements.

Whether it means refinancing your mortgage, reviewing your property management fees, or renegotiating agreements with service providers, there are always opportunities to reduce your expenses in order to offset the reductions in your rental returns.

Remember we are still in the lowest of all time low interest rates, even for investors. If you have not reviewed your investment loans in the last 12-18 months then it is certainly worth a call and a quick chat to see if there is room to move with your interest rates.

3. Invest in your investment

When there is an oversupply of inventory in the rental market, it’s more difficult for your property to stand out from the crowd and achieve the maximum rental returns you aspire to.

It is worth noting that not all properties are affected by a renter’s market – high rental yields can still be achieved on premium properties or properties in highly desirable areas.

While it’s tempting to tighten the purse strings when the rental market is sluggish, the opposite may offer the most rewards.

By investing in your property and ensuring it is in good condition with desirable features, you are not only putting yourself ahead in the rental market, but increasing the property’s resale value, and potentially your equity.n for investor

Most additional investment in your property can also be claimed as a tax deduction. If you’re not sure, let us know before you do the renovation or replace items and we may also be able to suggest the most efficient way to finance these items. Your accountant will also need to know for depreciation purposes.

4. Remember – it’s a cycle

What goes down, must come up!

Our most successful investors understand the market moves in cycles. While the current renter’s market may pinch a little, you can rest assured that at some stage things will turn and rental yields will increase again.

Don’t panic or be too reactive to what is most certainly a temporary trend.

Make decisions that will position you to move with the ebbs and flows of the market in the most lucrative way.

5. Timing is everything

No matter the size of your portfolio, regularly assessing investments is a common practice of our most successful clients.

It’s important to view your investments with a critical eye and understand when the time is right to sell elsewhere or to stay.

To make good investment decisions, you need to be informed.

With so much misinformation, personal opinions and poor analysis available online, it’s challenging to stay reliably informed without one-on-one professional support.

As your financial specialist, we can help you stay informed and understand all the options available to you, tailored to your unique situation.

We work with you to protect your investment to ensure it provides you with the returns you deserve.



About Property Loan Advisor

Our goal at Property Loan Advisor is to ensure you receive expert loan advice to suit your personal situation and property goals. We take the time to listen and understand your circumstances and what you would like to achieve in the future.

Contact us if you are looking to set up a financial budget, refinancing or have plans to buy a home, contact us first so we can help you become financially savvy. We will help you achieve a good credit report and put you in the right position before going to the lenders.


Are Millennials more financially astute?

Millennials have long been labelled as a generation that spends frivolously, however this article suggests otherwise and implies that parents (and older generations) may have a thing or two to learn from this generation.


Heard the saying “The older you are, the wiser you become”?

In some cases this is true. Life experience does bring knowledge.

HOWEVER the millennial generation is giving this saying a good shake when it comes to money matters.

Millennials have been labelled travel-loving, experience-seekers and mortgage dodging, yet some reports suggest that parents may have a thing or two to learn from their offspring.

Millennials are:

• delaying marriage and starting a family
• studying longer (or starting later), and
• expected to live much longer than generations before them.

Add to this higher house prices, growing education costs and high cost of living, it’s no wonder they are treading carefully when it comes to their finances.

A recent report1 looked at the spending habits of young millennials (people born between 1981 and 1996) and shares some interesting data.

Millennials now represent:

• almost half of our workforce (44% of all workers) and
• one out of every three dollars spent.

They are turning away from credit cards. The proportion of young Australians with a credit card has fallen from 58% to 41% in the last 14 years.

Millennials are using Buy Now, Pay Later (BNPL) as an alternative to credit cards. Beware! BNPL comes with its own risks – there’s another whole article on that one! However our millennials seem to be managing that as well.

Millennials are better savers and budgeters than their parents

36% of millennials save regularly compared to just 28% of older Australians.

80% of millennials have a budget compared to just 67% of older Australians.

This tech savvy generation is shaping the future of lending. They want to understand their data, their credit score and are eager to be involved in their finances.

Almost one in three millennials use online tools to track their spending and 72% do their research BEFORE they spend.

On the other hand, research by a major bank shows only 40% of millennials feel on top of their money and one in five don’t have savings.

Regardless of these varying reports, there are lessons to be learnt from the millennial generation.

We have seen some of our clients let their guard down on their money matters until it’s time to buy a home. They then find themselves disappointed with how much the banks are willing to lend them due to their credit history and spending habits.



About Property Loan Advisor

Our goal at Property Loan Advisor is to ensure you receive expert loan advice to suit your personal situation and property goals. We take the time to listen and understand your circumstances and what you would like to achieve in the future.

Contact us Contact us for our ‘Millennial money savvy tips’ and you will find yourself in a much more favourable position when it comes time to buy your first or next home.


When buying a home becomes a family affair

A family that plays together, stays together – right? What about a family that buys together?

Many Australians are pooling family resources to improve their buying power and achieve their property goals.

There is a range of lending options to suit a variety of needs, from family pledges to joint purchases or buying a percentage of a family home.

Wading through these options to find the best one for you is no easy task.

On a personal level, there’s a lot to consider. It can be a wonderful opportunity for families – parents wanting to help their kids secure their own homes, adult children wanting to take care of their asset-rich cash-poor parents, or siblings wanting to buy an investment property without taking on a mortgage alone. There have been a lot of great outcomes for families who buy together.

But not every story has a happy ending. No piece of property is worth ruining a family relationship, so it’s important that each party fully understands and agrees on the details of arrangement and all the possible variables.

Understanding what’s on offer is the first step.

Family pledge

Trying to save for a deposit can put homebuyers on a financial hamster wheel. While saving, property prices can increase, and over time that elusive mortgage remains just out of reach.

A family pledge allows borrowers to use their parents’ or another family member’s home as a guarantee in lieu of a deposit (on both residential and investment properties). A lender could consider a family pledge from parents, parents-in-law, step-parents or siblings.

Rather than guaranteeing the entire mortgage, a family pledge will generally be applied to the deposit amount of 20%. The property you are purchasing will provide the security for the remaining value (approximately 80%). So if the property is worth $600,000, the family pledge for 20% is $120,000 taken against the equity of the pledger’s home. Also, some lenders will insist that the guarantor be able to prove that they can service the pledged amount.

Limiting the amount of the guarantee (to a maximum amount of 20% of the property value) reduces the risk for the guarantor, however it is still a major financial commitment for you as the purchaser as your house and your guarantor’s house will be at risk if you default on your mortgage payments.

For the borrower, a family pledge is not a fix-all. Borrowers must still be assessed on their ability to service the loan and their saving and spending history.


Whether it’s a first home or an investment property, a joint purchase between family members can increase your buying power while reducing the individual mortgage repayments.

There are two ways in which co-ownership is structured – tenants in common or joint tenants.

A tenants in common ownership allows co-buyers to decide on the ownership structure in any way they choose – 70/30, 80/20, 60/40 etc. If more than two are purchasing the property then the ownership structure will reflect each person’s share (for example 3 people could be 50/25/25 or four people could be 25/25/25/25 or any other combination).

This ownership structure is generally reflective of the financial input of each party. So if you contribute 70% of the purchase price you own 70% of the property.

Generally, a tenants in common agreement also allows each co-owner to leave their share to a beneficiary in their Will.

Under a joint tenants agreement, ownership is split 50/50. If one tenant were to pass away, the property is automatically passed to the surviving tenant. To end a joint tenants agreement, one tenant must buy the other out, or, if that isn’t possible, the property may be ordered to be sold and the proceeds split 50/50.

In both tenants in common and joint tenants agreements, each co-owner is impacted by the financial viability of the other. If your co-borrower has a weak credit history or lower earnings, the amount you can borrow will be based on their ability to service the repayments.

Additionally, each co-borrower is liable for the entire debt (it’s called ‘joint and severally liable’ in legal terms). Each individual is equally liable for the full amount. Even if one of the co-owners (who is also the co-borrower) paid for their share of the property entirely in cash, they are still liable for the entire mortgage.

That’s why lenders tend to like co-ownership – it’s generally a safer bet for them.

Buying a percentage of the family home

Buying a share in your parents’ or grandparents’ home gives them access to cash (many are asset-rich and cash-poor) and provides the buyer with equity in a larger property. There are many factors which will impact the type of arrangement that works best here, including if the home still carries a mortgage or if the person buying the share needs to arrange finance.

Most arrangements will mean drawing up new mortgages (possibly a tenants in common), or amending existing mortgages if the lender allows, and adjusting legal ownership documentation.

Let’s say your parents’ home is worth $500,000, and is mortgage free. You agree to purchase a 20% share at $100,000 that they will receive as cash. Alternatively, arrangements are often made where parents sell to their children at a ‘favourable price’ (generally below market value) in exchange for being able to live in the house as long as they like. So your $100,000 may for instance purchase a 50% share with the stipulation that your parents stay in the home for as long as they like. Again, this is dependent on a variety of factors.

Remember there are also tax and Centrelink pension implications to be considered, however this can be a strategy for families to ensure parents can stay comfortably in the family home for as long as possible.

Family borrowing, in all its forms, has some great advantages. But it should be done with a full understanding of all the components at play.

Of course, if you are considering any form of co-ownership most lenders are now insisting that you seek independent legal advice before signing any sales contracts.

If you or anyone you know are considering co-ownership, we are happy to get together with everyone and step you through the process.


About Property Loan Advisor

Our goal at Property Loan Advisor is to ensure you receive expert loan advice to suit your personal situation and property goals. We take the time to listen and understand your circumstances and what you would like to achieve in the future.

Contact us for our article ‘The importance of documenting family loans’ to find out why you should have a loan agreement when lending money to a family member.


5 tips to an amazing Christmas without the financial hangover

Set a spending limit – we tend to be so busy and often the year passes in the blink of an eye. By the time we get to the end of the year we will pay just about anything to get through the holiday season. We also feel a little guilty that perhaps we have not spent as much time with our loved ones and try and compensate with expensive gifts to show our love.

Making a list and checking it twice, works for Santa and works for the busy person preparing for Christmas. The list helps maintain the agreed spending limit and makes you think twice about buying something that you do not really need. Think about this… how often have you just seen something that you never knew existed before and now you find that you absolutely cannot live without and then buy it. To make it worse it ends up on the nature strip in 12 moths time with a sign, free to good home!

Gift giving Don’t buy everyone gift. A simple and fun way is to do a Secret Santa gift giving game. Swap, steal or unwrap is a hilarious Christmas gift giving game. Each person brings one gift to the value of a specified amount. You need a dice and for each number on the dice, you assign an instruction of swap, steal or unwrap. Start rolling the dice and you will have your whole party laughing so hard that they will remember the day for years to come.

Lay By – this used to be a really good way of buying gifts and spreading the cost over a number of weeks leading up to Christmas. The modern-day version of this is now take the goods a pay later… BIG TRAP. Most of these transactions are now a credit contract, which means that they are a loan. The impact for people will be when they go to borrow in the future, say for a car or personal loan and they have three or more of these transactions in a short space of time, their credit score is often halved and can lead to their loan being declined.

Share the love with the food preparation– if you are hosting Christmas this year, enrol lots of other family members to help cook and prepare a special dish. Food that is cooked with love always enhances the feel of the day. Ask the more senior members of the family to bring that special dish with the recipe that has been handed down from generation to generation. Ask the younger generation to prepare a dish with latest modern twist on traditional recipes. You will find that the day is far less stressful for you as the host because you are now one of a team of people preparing food and the cost is dramatically reduced as it is now spread over several people.


What is the difference between an offset account, a line of credit and a redraw facility?


At property loan advisor we deal with a lot of enquiry when speaking and advising clients on what type of mortgage is suitable for them. The options appear to be endless and can be confusing. The key is to have a loan product that will help save you money, offer flexibility and help you achieve your goals.


The simplest way to describe an offset account is a normal everyday transaction or savings account that is linked to your home loan. That means when the mortgage lender calculates the interest to your loan, they take the balance in your offset account off what you owe on your mortgage and apply interest on the reduced amount. So at the end of the month when interest is added, a lower amount of interest is added to the loan. These savings could be quite significant just for letting your accumulated funds and wages sit in your account.

The bank or lender may charge transaction fees, but most lenders will waive transaction charges on offset accounts altogether, they are more likely to charge a “package fee” for the loan, offset account and a credit card. Many clients like to have all of their salary paid directly into the offset account. This ensures that any income not spent is being used to reduce the balance of your loan. While receiving the interest savings you also have the flexibility to access your funds at any time.

The below example is based on one of our clients – they have $50,000 in their account and it offsets $50,000 on their loan account, having the effect of interest only being charged on $300,000 instead of $350,000. As you can see the savings are quite substantial and the clients have the ability to access the funds at any time they need to.

Albert Einstein said that compound interest is the eighth wonder of the world I am going to suggest that Mortgage Offset Accounts are the ninth wonder of the world! These accounts have so much flexibility and can save you lots of money!


The simplest way to describe a line of credit is that it is like a giant credit card limit, secured by your home. This product has loads of flexibility, although … along with flexibility comes responsibility. Many of our property investor clients love the line of credit product as it is part of their overall strategy for growing a property portfolio.

For example, our client may own a home that is worth $500,000 and currently have a home loan of $300,000. Their goal is to buy an investment property. We can approach a lender to set up an additional $100,000 as a completely separate loan to the existing home loan of $300,000. The advantage of doing it this way is that you have loans set up with different purposes. The existing home loan can remain on a principal and interest loan and the second loan of $100,000 can be a line of credit loan and can be interest only. The line of credit can then be access for the deposit and cost for the purchase of an investment property. The other major advantage of having the loans split into this structure is that you keep your non deductable loans separate from your deductable loans. Check with your accountant if you are entitled to claim the interest on your line of credit.

Many people approach their existing lender with the goal of purchasing an investment property and they are offered an increase on their existing home loan and then they can access the cash through a redraw facility which I will discuss next. The problem with this loan structure is that your borrowings are not separate and when it comes time to tax time you may have destroyed a very nice tax deduction.


A home loan with a redraw facility allows you to borrow money you’ve already repaid and is usually offered with variable interest rate loans. It allows you to use any extra income or savings to reduce the balance of your loan, thereby reducing your interest repayments and “redraw” that extra money in the future should you need it.

Some lenders will limit you to as few as two redraws per year. Others will charge you up to $50 per withdrawal, and some even insist that you redraw a minimum of $2000. Check with your bank or mortgage broker for a redraw facility that provides you with maximum flexibility at minimum cost.

All three options will you to save money, getting the right advice on each facility will not only give you savings on your home loan but will allow you easy access to cash to help you with your goals.