{"id":10630,"date":"2017-03-03T07:00:34","date_gmt":"2017-03-02T20:00:34","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=10630"},"modified":"2017-03-03T07:00:34","modified_gmt":"2017-03-02T20:00:34","slug":"9-important-money-tips-how-to-improve-the-income-of-your-rental-whats-best-new-or-established","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/9-important-money-tips-how-to-improve-the-income-of-your-rental-whats-best-new-or-established\/","title":{"rendered":"9 important money tips + How to improve the income of your rental + What\u2019s best \u2013 new or established?"},"content":{"rendered":"

Sonya asks if a depreciation schedule is a good indication of a unit’s value.\u00a0 It appears an agent said it is just an estimate.\u00a0 Brad Beer<\/b> from BMT Tax Depreciation sets the record straight.
\nThe risk or otherwise of relying on rental guarantees is something that we get asked quite often.\u00a0 I seek Damian Collins<\/b> opinion on that.
\nHow often have you said \u2013 \u201cIf only I knew then what I know now, how differently things would have been.\u201d.\u00a0 <\/i>Well as Michael Yardney<\/strong><\/a> points out, it might be too late for you and I but he gives us 9 lessons about money we should be teaching our kids.
\nMy good friend Margaret Lomas<\/b> is back with us from Destiny Financial Solutions and star of that great show on Sky TV, Property Success with Margaret Lomas.\u00a0 We chat about buying new and\/or established property.\u00a0 Which does she prefer?
\nIf you\u2019re looking for some clever ways to improve the income of your rental property, stand by, because that\u2019s exactly what we\u2019re going to be talking to Miriam Sandkuhler <\/b>about. Miriam is the founder of Property Mavens,\u00a0 a property advisory firm helping investors buy the right property, and they also help with vendor advocacy.
\n <\/p>\n

Transcripts:<\/strong><\/h4>\n

Is a depreciation schedule a good indication of value? – Brad Beer<\/h2>\n

Kevin:\u00a0\u00a0<\/b>I had a question from a listener during the week who writes, \u201cI inspected some units currently being constructed and was shown a depreciation schedule. The agent said it was just an estimate. How reliable would it be, and is it risky using these estimates to calculate the unit\u2019s viability?\u201d
\nTo answer that question, a man who knows all about tax depreciation schedules, Brad Beer from BMT Tax Depreciation. Good day, Brad.
\nBrad:\u00a0\u00a0<\/b>Hi, Kevin.
\nKevin:\u00a0\u00a0<\/b>Sonya\u2019s question there, is that something she should be cautious about?
\nBrad:\u00a0\u00a0<\/b>It\u2019s an interesting question. As quantity surveyors, we do a lot of estimates of what sort of depreciation might be available. The important thing is looking at who it\u2019s being prepared by. Has the builder prepared it? Has a specialist quantity surveyor prepared it? What exactly the numbers are made up of. Have a look at it.
\nNow, we have calculators on the website you can use to check against. You can talk to us or someone who\u2019s reputably doing depreciation. It should have a minimum and maximum range of depreciation potentially available.
\nObviously, it\u2019s an estimate. When we\u2019ve done that as an estimate, we don\u2019t have all the information. But we\u2019ve done a lot of depreciation schedules, so if we\u2019ve done it, and we know what we\u2019re doing, we should come up with numbers that you should be able to rely on being pretty close to the truth.
\nUsing the minimum or a bit less than the minimum to be really safe is the thing to do. Making sure it\u2019s prepared by someone who knows what they\u2019re doing is the important thing.
\nKevin:\u00a0\u00a0<\/b>Are these depreciation schedules, or the supply of these, regulated in any way, Brad?
\nBrad:\u00a0\u00a0<\/b>The regulation is not very heavy as far as an estimate like that. The costs that are used for the purpose of depreciation \u2013 a quantity surveyor\u2019s cost \u2013 will be acceptable. Sometimes a thing to be a little bit wary of is when it has an agent or someone who is selling you the property. It\u2019s probably in their interest to make the numbers look high, so you really want to double-check it or make sure it\u2019s done by a reputable company that\u2019s not prepared to move the numbers to help sell the unit. That\u2019s the thing to be really careful of.
\nKevin:\u00a0\u00a0<\/b>How would you check out their credibility? Go to their website?
\nBrad:\u00a0\u00a0<\/b>Go to their website. Ask your accountant, \u201cHave you used their report?\u201d Have the accountant have a look at that. If it\u2019s not done by a depreciation specialist, get a depreciation specialist to actually have a look at it.
\nKevin:\u00a0\u00a0<\/b>That\u2019s actually a very good point \u2013 going to your accountant \u2013 in all of these things. If you\u2019re buying any property, you should always be checking with your accountant and your solicitor, and running it by them anyway.
\nBrad:\u00a0\u00a0<\/b>If they\u2019re an accountant who deals with property investors \u2013 and if you\u2019re a property investor, you probably want that to be the case \u2013 they will probably have specialist depreciation guys that they regularly do use. Maybe the accountant would want to ask their contact, just to get a double-check on that to make sure it\u2019s not something done by the builder or something to make it look more than it really is going to come out at.
\nKevin:\u00a0\u00a0<\/b>Is it reasonable that someone would want to get their own depreciation schedule done even if they are looking at buying? Would that help them substantiate those figures, Brad?
\nBrad:\u00a0\u00a0<\/b>That\u2019s most definitely the certain way as a potential buyer of any property, not just one that\u2019s new that has a depreciation estimate done. There are calculators on websites, and they\u2019re free. You can go in and use them to check and see. Put some of the information in yourself, and see if it comes out close to what\u2019s been provided.
\nYou can always talk to my guys about your particular property, and send us some photos. We\u2019ll have a discussion and give you a rule of thumb based on what we can see. We don\u2019t charge for that to have a bit of a look at it.
\nIf you want to be certain, you get one done properly, absolutely, but normally it\u2019s done after the fact. We can get pretty close with an estimate, and we\u2019ll give you a range. Whenever you\u2019re plugging in and crunching your numbers on property, it\u2019s always good to be conservative to start, and then at the end of the process anything else is a bonus.
\nKevin:\u00a0\u00a0<\/b>Very good advice from Brad Beer, one of our recommended suppliers. Of course, all BMT Tax Depreciation\u2019s details are on our website, and you can check out their featured channel, as well. Lots of great information there for you, and in fact a link straight back to their site, as well, if you want to check that.
\nBrad, thank you so much for your time. We\u2019ll catch up again soon.
\nBrad:\u00a0\u00a0<\/b>Great. Thanks, Kevin.
\n <\/p>\n

Rental guarantees – be careful – Damian Collins<\/h2>\n

Kevin<\/b>:\u00a0 Ask any wise investor and they will tell you that if it sounds too good to be true, then it probably is. Now, this can apply to rental guarantees. Let\u2019s find out what they are, first of all, how you should be a little bit wary of them, and what you should be aware of before you start to get involved with rental guarantees.
\nJoining me is Damian Collins from Momentum Wealth. They are buyers agents in Western Australia. Damian, firstly, tell me what a rental guarantee is and why you think we should be cautious of them.
\nDamian<\/b>:\u00a0 Kevin, a rental guarantee is usually provided by developers, whether that be residential property, sometimes serviced apartments, or hotel operators. What they\u2019re providing to the investor is a guarantee of the rental return over a period of time. Sometimes they range from one year, sometimes even up to three, four, or five years.
\nWhat it effectively does is it means that the investor gets a certain level of return over that period, so they\u2019re not subject to the vagaries of the market going up and down. It sounds good in theory, but obviously, there are reasons why the developers offer it.
\nKevin<\/b>:\u00a0 Why do they offer them?
\nDamian<\/b>:\u00a0 Well, it\u2019s to give their investors certainty. Nervous investors \u2013 particularly first-time investors \u2013 in the market think, \u201cWell, what do I do if my tenant leaves? What happens if something goes wrong? What happens if the rents drop?\u201d All those things, they provide them with that certainty of the rental return.
\nBut, of course, nothing is for free. Any developer offering those sorts of rental returns has factored that into their sales price, so as a buyer of one of those properties you\u2019re going to be paying for, that rental guarantee is going to be loaded into the sales price.
\nAlso, importantly, I think what we often see is that the rental guarantees are not necessarily reflective of the market. When you come to getting a loan for the property, you often find that the valuers and the banks will only take the actual income based on the real market value, not what you\u2019re getting offered as a guarantee.
\nImportantly, you have to understand that when that guarantee period runs out, you\u2019re going to go back to the market levels. I\u2019ve seen them offered at 6 and 7% returns on properties where the real market value is probably closer to 4.5 to 5%. Investors get lulled into a false sense of security thinking they\u2019re going to get that rent forever, but the reality is that it\u2019s over market, and you\u2019re paying for it. One day, you\u2019re going to have to pay the price when it comes back to normal market terms.
\nKevin<\/b>:\u00a0 Damian, is it drawing a long bow to say that you could apply that to all properties that offer rental guarantees?
\nDamian<\/b>:\u00a0 Look, definitely. Nothing is free in this world. Anyone offering a guarantee is either struggling to sell it and they need to offer some extra incentive for people to buy it, hence, it might be overpriced, or alternatively, some other developer offering it, they have their profit margin they need to make. If they are going to pay 1 or 2% extra rental return for a couple of years, you can guarantee that there could be 4 or 6% in extra cost out of their pocket. They\u2019ve put that in the price, as well.
\nThere\u2019s certainly nothing for free in this world, and one way or the other, you\u2019re going to pay for a rental guarantee.
\nKevin<\/b>:\u00a0 If I were to see a property that seemed to be fairly reasonable on the surface in terms of its price and that rental guarantee looked fairly good, how should I proceed to make sure that I\u2019m not going to get trapped?
\nDamian<\/b>:\u00a0 The first thing I would be asking, Kevin, is why are they offering the guarantee? If the property was that good and stacked up on its own, why are they offering the guarantee? What\u2019s the purpose behind it? What am I missing here? What\u2019s hidden?
\nI\u2019d certainly be doing my own thorough market research on what is the proper and fair value for that property without any rental guarantee. At the same time, I\u2019d be looking at also what is the fair rental market without this inducement of the rental guarantee. Do your numbers based on that.
\nThe guarantee is a nice little additional bonus, but most people do get lulled in that false sense of security and end up paying too much for it because of that security. Do your homework, find out what\u2019s the real market value of the property, what\u2019s the real market value of the rent, and if the numbers still stack up, well, it\u2019s worth having a look at. But in my experience, the vast majority of them, that guarantee is loaded into the price.
\nKevin<\/b>:\u00a0 We\u2019re talking here about rental guarantees, of course, but could you draw the same conclusion from a property where they may offer you a Mercedes Benz with every unit that you buy or an overseas holiday? Could you draw the same conclusion from those?
\nDamian<\/b>:\u00a0 Definitely, Kevin. Again, there are two reasons why. People offering a Mercedes or offering overseas holidays, it\u2019s simply one or two things. It\u2019s that they can\u2019t sell them at the price they want and they need to load that in, so it\u2019s over priced for the real market value and they\u2019re using those as additional incentives. It\u2019s either that, or they\u2019re really just looking for other ways to maintain that price.
\nNothing is for free. Developers factor that into their project. Holidays, Mercedes, anything over and above or just to buying a normal property on fair market terms and conditions, at the end of the day, the buyer is usually paying for one way or the other.
\nKevin<\/b>:\u00a0 Good advice there from Damian Collins from Momentum Wealth. They\u2019re buyers agents in WA. Damian, thanks for your time.
\nDamian<\/b>:\u00a0 Pleasure, Kevin.
\n <\/p>\n

\u00a09 great money lessons for kids –\u00a0Michael Yardney<\/a><\/h2>\n

Kevin:\u00a0\u00a0<\/b>Often in our program, we get to talk to a lot of very talented people around Australia about money, finance, about investing, and one of the questions I love to ask them is what are they teaching their children about property investing, about saving money and building their wealth?
\nI\u2019m going to pose that question today of Michael Yardney, because I know Michael has done me a favor and he\u2019s listed down the nine top tips or important steps that he believes all people should be teaching their children about financial control and independence.
\nMichael, welcome to the show.
\nMichael:\u00a0\u00a0<\/b>Hello, Kevin.
\nKevin:\u00a0\u00a0<\/b>I thought it would be wonderful if you could just take us through what you see as those nine important steps, Michael.
\nMichael:\u00a0\u00a0<\/b>It\u2019s important to teach your children about money because we\u2019re not born knowing how to do money. And the apple doesn\u2019t fall far from the tree, so we learn a lot of our habits about money and wealth from our parents \u2013 the things that they say but also the things they don\u2019t say and also the way that they do things with it, whether they\u2019re savers, whether they\u2019re teachers.
\nSo, I\u2019m sure the conversations around Kerry Packer\u2019s home, James Packer\u2019s table when he was young was very different to what you and I heard from our parents when we were young, Kevin.
\nKevin:\u00a0\u00a0<\/b>Indeed, mate.
\nMichael:\u00a0\u00a0<\/b>And that would have influenced him very much so.
\nI think as a parent, it\u2019s important to teach your kids about money, and I think it\u2019s worth looking at those points. What I came up with, the first one is that today\u2019s debt equals tomorrow\u2019s slavery.
\nWhen we\u2019re young, we tend to think in really narrow time increments. We\u2019re really looking for immediate gratification, and often delaying something that we really want is too hard to do. But unfortunately, this leads a lot of young people into a credit trap, because they can buy things with credit cards, with store cards, with no interest for so long, but today\u2019s debt is robbing them of tomorrow\u2019s lifestyle.
\nI think one of the early things one has to teach people is to limit your debt obligations when you\u2019re younger, which means you\u2019re going to have more control of your life when you\u2019re older, Kevin.
\nKevin:\u00a0\u00a0<\/b>Yes. The second one you say is he who dies with the most toys is not the victor, and that is a great lesson in life, isn\u2019t it?
\nMichael:\u00a0\u00a0<\/b>Kevin, I liked my toys when I was young; in fact, I still like them now.
\nKevin:\u00a0\u00a0<\/b>Who doesn\u2019t?
\nMichael:\u00a0\u00a0<\/b>Of course. But they are a difficult enemy, because we tend to spend on short-term gains, short-term pleasure, things that decrease in value. But it\u2019s so difficult when you see these things on TV, you see the glossy magazines, consumerism is all around us. But it takes the lessons of life as you get older to learn that true wealth is what you\u2019re left with when you lose all your money, when you lose all your possessions. It\u2019s a hard lesson to learn as you\u2019re young, Kevin.
\nKevin:\u00a0\u00a0<\/b>It is. And point number three, taking responsibility, which is a key thing, I think. We need to teach our kids how to do that, because that makes you the master of your own destiny, Michael.
\nMichael:\u00a0\u00a0<\/b>Very much so, Kevin, because it\u2019s so easy to play victim and blame others. Kids do it; adults unfortunately still do it as well. What you have to do is be responsible. You are where you are today because of all the decisions you\u2019ve chosen to make and all the decisions you\u2019ve chosen not to make. So, rather than blaming the system or the education or other things, be responsible, be in control of your life.
\nI guess you should be the pilot of your life rather than just a passenger being dragged along by the world.
\nKevin:\u00a0\u00a0<\/b>Indeed. Michael, one thing we do talk about is this younger generation. I know that\u2019s a broad term and I shouldn\u2019t use it, but the younger generation seem to want everything at once. Patience is a virtue, isn\u2019t it?
\nMichael:\u00a0\u00a0<\/b>It is, but it\u2019s really hard to learn. A lot of psychological university studies have shown that those who are successful later in life have the ability to delay gratification. They\u2019ve even done these studies with young kids where psychologists put them in a room with marshmallows and said, \u201cI\u2019m going out and I\u2019m coming back in five minutes. Those of you who actually don\u2019t eat them now but can wait five minutes can have an extra one.\u201d Some kids couldn\u2019t hold off, and I guess that may have been me when I was young, if you were to put a marshmallow or a chocolate in front of me.
\nKevin:\u00a0\u00a0<\/b>What are you talking about \u2013 when you were young? You do it now.
\nMichael:\u00a0\u00a0<\/b>Yes, I know. I saw you thinking that as I was saying it.
\nBut really, what happened was it was shown that those who could delay gratification as a kid were able to do it later in life and that actually opened up a whole wide range of other opportunities.
\nSo, those who are able to invest in their education, to go to university, or to go and get a trade and do an apprenticeship, later on in life will be rewarded for it. Yes, patience is a virtue, Kevin.
\nKevin:\u00a0\u00a0<\/b>Another one that I think needs to be taught, too, is that people who do well in life are not necessarily just lucky.
\nMichael:\u00a0\u00a0<\/b>Sure, luck does come into it a little bit, but really, I see people who get lucky and win the lottery or get an inheritance, and that they don\u2019t keep it, either. You actually have to be the right person \u2013 in other words, with the right headspace \u2013 at the right time and understand and appreciate that, as well.
\nI think luck has very little to do with it, and hard work has a lot more to do with financial success and success in other areas of life, Kevin.
\nKevin:\u00a0\u00a0<\/b>Earlier, Michael, we talked about patience. Number six I think deals with risk, doesn\u2019t it? You don\u2019t need millions to achieve financial freedom. Interesting that so many wealthy people actually have a lot of debt, too.
\nMichael:\u00a0\u00a0<\/b>Yes, they do. I think the other point here is that to feel wealthy, you actually have to feel gratitude. We all know millionaires, multimillionaires who are all miserable sods and don\u2019t enjoy or appreciate life and people who don\u2019t have as much money enjoying life.
\nOne of the lessons I\u2019ve taught my children \u2013 and I suggest others do \u2013 is be grateful and appreciate what you have, because unless you have gratitude, unless you appreciate your life, you\u2019ll never be wealthy, no matter how much money or how many properties you have, Kevin.
\nKevin:\u00a0\u00a0<\/b>Michael Yardney from Metropole Property Strategists sharing here with us the nine lessons that everyone should teach their children.
\nLesson number eight, a very simple one, but I\u2019ve heard you talk a lot about it before: spend less than you earn and invest the rest.
\nMichael:\u00a0\u00a0<\/b>It\u2019s a golden rule of financial freedom that if you spend more than you earn, you\u2019re always going to owe other people money. So, the suggestion is to invest or save at least 10% of your money right from the beginning. Build that habit early in the piece, then invest, and when you have got enough, you can reinvest. And then eventually, you\u2019ll be able to appreciate and enjoy life.
\nIt really means that in the short term, you\u2019re going to actually have to make some compromises to be able to enjoy the later part of your life.
\nKevin:\u00a0\u00a0<\/b>Michael, the final one \u2013 number nine \u2013 is one that I wish I\u2019d been told when I was young, because it is so true. Tell me about it.
\nMichael:\u00a0\u00a0<\/b>What I said was that youth won\u2019t last forever, so use it wisely. I think the comment here is enjoy it in two ways: number one, enjoy the journey, because if you don\u2019t, you won\u2019t actually enjoy the destination. But the other is take advantage of time and compounding. Because if you would have bought one property 20 or 30 years ago, it doesn\u2019t matter where almost in Australia, look how much better off you\u2019d be today.
\nWho wouldn\u2019t like to have bought their parents\u2019 house for the price they paid 30 years ago, and then just used the benefits of timing, compound, leverage? One of the things that Albert Einstein said is that leverage is one of the most powerful forces in the universe.
\nSo, the message to my kids is to start saving and investing early in life, because that\u2019s much more likely to secure your financial future.
\nKevin:\u00a0\u00a0<\/b>Wrap it up for me, Michael. Give it to me in a nice, neat parcel. What\u2019s the bottom line?
\nMichael:\u00a0\u00a0<\/b>Wealthy people do certain things every day that set the apart from everyone else. Wealthy people have good success habits that they\u2019ve learned from their parents. These habits are the reason for the wealth gap in Australia \u2013 and, in fact, all over the world \u2013 the reason why the rich keep getting richer.
\nAs parents, we\u2019re likely to be the main mentors of our children when they\u2019re young, and we\u2019re definitely going to be among the most influential one for our children. So, unless we teach our children good money habits to help level the playing field, the rich are going to continue to get richer and the poor will continue to be poorer.
\nIt might pay them \u2013 literally \u2013 to give them a bit of your time, Kevin.
\nKevin:\u00a0\u00a0<\/b>Indeed, it will. Michael, thanks once again for your insight and your time. Michael Yardney from Metropole Property Strategists, and of course Michael\u2019s blog, Property Update.
\nThanks, Michael. We\u2019ll talk to you again soon.
\nMichael:\u00a0\u00a0<\/b>My pleasure, Kevin.
\n <\/p>\n

What’s best – new or established? – Margaret Lomas<\/h2>\n

Kevin:<\/b>\u00a0 My good friend Margaret Lomas is back with us from Destiny Financial Solutions and star of that great show on Sky TV, Property Success with Margaret Lomas.
\nHi, Margaret.
\nMargaret:<\/b>\u00a0 Hello.
\nKevin:<\/b>\u00a0 Good to be talking again. Margaret, the specific question for you today is a question I get asked quite often: is it better to build with a buyer-established property? I guess here, you have to take into consideration depreciation, as well.
\nMargaret:<\/b>\u00a0 Yes. Look, I guess one of the things that the spruikers\u00a0<\/b>always try to do is convince everybody that they need to buy new so that they get the maximum depreciation. But in reality, a property that\u2019s a couple of years old doesn\u2019t have a big difference in its depreciation than a brand new one, which a lot of people don\u2019t realize.
\nThe construction depreciation is, of course, exactly the same every year for 40 years, which is 2.5%. The fixtures and fittings in that first year or two, they don\u2019t really age that much, and there\u2019s not a big difference in the depreciation that you can claim.
\nThe reason why the spruikers\u00a0<\/b>like you to buy the brand new one or to build the brand new one is because generally there\u2019s a fair amount of builder profit in there and they can get a good cut of that in the form of a commission.
\nI always feel, as well, that from an investor\u2019s point of view, if they\u2019re buying that brand new property, they\u2019re more than likely paying a little bit more than it\u2019s probably worth or than they could pay for that property that\u2019s two or three years old, but they\u2019ll get the same rental yield as the older property.
\nKevin:<\/b>\u00a0 It always strikes me, too, that new properties purely by definition are going to be built in areas where you\u2019re developing a lot of new stock, and it does actually take a while for them to actually start to gain any increase in value, Margaret?
\nMargaret:<\/b>\u00a0 Exactly. The reason that is, is because most often when they\u2019re being built in a new area, even if it\u2019s in a suburb that\u2019s already established, it\u2019s very, very difficult to really work out what the true market value of those properties are.
\nMarket value is never really established until a secondary sale takes place. Whenever properties are being sold and resold and resold, then we know what the market value is, because it\u2019s whatever the market pays.
\nWhen people buy a brand new property, which could be either off the plan or just newly built, really the buyers pay what the developers are asking them to pay. Very often, they do that because most people when they buy a new home, they\u2019re buying it with a view to living in it, and when we live in a property, we are often happy to pay that bit of a premium to get the kind of things we want in a home or to get the lifestyle that we\u2019re after.
\nWhen it comes to being an investor, though, the extra premium that you pay to get that brand spanking new property is very often not seen returned to you in increased yield, and it ends up being, as you say, that you have to wait that period of time for the market to work out what it\u2019s really worth, and very often, it will stay quite flat for quite a few years.
\nKevin:<\/b>\u00a0 Another reason why I tend to like more established properties is because they\u2019re going to be built in established areas where you do have all that infrastructure. If you\u2019re going to be attracting tenants, they like to be in areas where there are good schools and where there are lots of shops. But in some of those new areas, those things don\u2019t happen until you get a fair number of houses in there.
\nMargaret:<\/b>\u00a0 That\u2019s very true. The other thing about a property that\u2019s a couple of years old, maybe up to five years old, is it\u2019s a little bit less that brand new car, which by the way, also loses value when it drives out of the driveway. When you get a new car and it takes you that little while to work out the bumps and sometimes when you buy that new car, there can be things that go wrong with it.
\nWhen you buy a property that\u2019s a couple of years old, it\u2019s already settled, you know how it\u2019s sitting, you know whether it\u2019s going to have cracks. There\u2019s many things you can already know about a property.
\nMost houses last 50, 60, up to 100 years, certainly in the olden days, then there\u2019s not that big of difference in the big scheme of things between the brand new one and the five-year-old home. I can tell you in ten years\u2019 time, a five- and a ten-year-old property don\u2019t look much different at all.
\nKevin:<\/b>\u00a0 Very good. Very practical advice from Margaret Lomas at Destiny Financial Solutions. Margaret, we\u2019ll get you back in a few weeks\u2019 time. I want talk to you because I know you\u2019re across all of the Australian suburbs, but I\u2019d love to have a talk to you about what you see are the up-and-coming suburbs if you\u2019d join us again in a few weeks\u2019 time?
\nMargaret:<\/b>\u00a0 I would love to do that.
\nKevin:<\/b>\u00a0 Good on you. Margaret Lomas from Destiny Financial Solutions.
\n <\/p>\n

How to improve the return from your property investment – Miriam Sandkuhler<\/h2>\n

Kevin:\u00a0\u00a0<\/b>If you\u2019re looking for some clever ways to improve the income of your rental property, stand by, because that\u2019s exactly what we\u2019re going to be talking to Miriam Sandkuhler about. Miriam is the author of a great book I\u2019ll tell you about in just a moment, but she is also the founder of Property Mavens. They\u2019re a property advisory firm; they help you buy the right property, and they also help with vendor advocacy.
\nMiriam, let\u2019s look at the best ways that you\u2019ve found to improve the income of a rental property.
\nMiriam:\u00a0\u00a0<\/b>Kevin, it\u2019s really about understanding who your demographic is \u2013 who is the tenant you\u2019re targeting who\u2019s going to want to actually rent the property from you? It\u2019s a case of the property itself, the surrounding vicinity, the suburb, who you\u2019re likely to attract, and what it is that they\u2019re going to want.
\nWhen you have the ability to understand that and do the research, then you\u2019re in a better position to make sure that you can do what\u2019s required to your property to extract as much rent out of it as you can.
\nKevin:\u00a0\u00a0<\/b>For\u00a0<\/b>someone who may be struggling a little bit with their property \u2013 in other words, it may be untenanted for a while \u2013 a good idea might be just to go and immerse yourself in the local area and maybe find out why it\u2019s not renting. It\u2019s not always about price, is it?
\nMiriam:\u00a0\u00a0<\/b>No, it\u2019s not about price. Frequently, it could be the physical size of the property itself. It could be the features that it may or may not have. A perfect example would be an inner-city suburb where you have high density, you have older apartments with a whole lot of new apartments being built close by, and you have tenants who are prepared to pay a little bit more for something shiny and new, whereas your tired old apartments may be inadequate and unappealing.
\nThat\u2019s where something like a cosmetic renovation might come in. You might need to do new carpet, new paint, new window furnishings. If that\u2019s not adequate, and the property manager is advising you that tenants want more, that\u2019s where you\u2019d start looking at possibly putting in a new kitchen or a new bathroom, but making sure that you don\u2019t overcapitalize in the process.
\nKevin:\u00a0\u00a0<\/b>That was going to be my next point. You have to make sure on all of these things that you do not overcapitalize. What\u2019s your experience there about making sure that that doesn\u2019t happen?
\nMiriam:\u00a0\u00a0<\/b>Work on a percentage of your purchase price of your property. If you spent, say, $400,000, and you have one of these apartments that might be a bit tired, only be putting 1.5% of the value of the purchase price into the renovation on the bathroom. If you spent $400,000, don\u2019t spend more than $6000 updating the bathroom. You can do it affordably and within a reasonable budget nowadays. You can go to organizations like IKEA or Masters, and they have got more affordable options for you. The same with the kitchen. You don\u2019t want to spend more than that 1.5% or 2% of the purchase price.
\nWork on a percentage, stick to that budget, and do the best you can with the money that you have.
\nKevin:\u00a0\u00a0<\/b>And remember, too, that you\u2019re not really renovating it to suit yourself; you\u2019re really renovating it for your target tenants.
\nMiriam:\u00a0\u00a0<\/b>Absolutely. Talk to your property manager, talk to other property managers, find out what tenants want, and then, if it\u2019s a case of extra bells and whistles, maybe if you throw Foxtel into the package, that might appeal to them. It may be that you need to put a gardener in if it\u2019s a really great property but it\u2019s a high-maintenance garden.
\nStart thinking laterally and creatively. Ask the property manager what the feedback is from prospective tenants, why it doesn\u2019t appeal to them, and then come up with creative solutions, but make sure that they\u2019re affordable. Make sure they\u2019re not going to blow the rent out so that ultimately it doesn\u2019t appeal to anyone.
\nLook, maybe it comes down to have you bought the right property and is it in fact going to perform how you need it to? Sometimes it could even be a tough lesson that it may be one that you need to let go of.
\nKevin:\u00a0\u00a0<\/b>I guess sometimes, too, you have to remember that any improvement you make is not necessarily going to help you get more rent but it may just help you make sure you keep your tenants in there and that you really reduce that number of vacant days.
\nMiriam:\u00a0\u00a0<\/b>Absolutely. You don\u2019t want it sitting on the market for weeks and weeks on end. It\u2019s about being pragmatic in a really reasonable and fast time frame so that you can do whatever it is you need to do as cost-effectively as possible to make sure that it\u2019s tenanted. You do not want a property languishing and costing you hundreds of dollars a week in mortgage repayments and not having any revenue coming in to offset that.
\nKevin:\u00a0\u00a0<\/b>At the start of the chat with Miriam, I mentioned about the book that Miriam has written. It\u2019s called \u201cProperty Prosperity: Seven Steps to Investing Like an Expert.\u201d You can get more details on that at Miriam\u2019s website, as well, Property Mavens.
\nMiriam, thank you very much for your time.
\nMiriam:\u00a0\u00a0<\/b>Thanks so much, Kevin.
\n 
\n\u00a0<\/strong>
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

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