Interested in increasing your rental returns by up to 30%?

Interested in increasing your rental returns by up to 30%?

What would you say if we told you that you could potentially increase your rental returns by up to 30% simply by ticking a box? You’d probably call us ‘barking mad’.

But according to new research by Domain Group data, median asking rents for pet-friendly properties are higher than for homes that don’t allow pets in almost every capital city.

Take Melbourne’s inner city, for example, where just 1% of apartments allow pets.

The median rent for pet-friendly apartments is $550, whereas the median rent for apartments that don’t allow pets is $422.50. That’s a $127.5 difference, or 30%. Think about how much quicker that could help you pay off your home loan.

It’s a similar trend around the nation, too.

In many Sydney suburbs the median rent difference ranges from 12-26%, Brisbane’s southern suburbs have a difference of 13%, and so too do Perth’s western suburbs.

Houses are no different

When it comes to the difference in house rental prices, Brisbane’s inner city leads the nation where houses allowing pets fetch 21% higher rent. Meanwhile, the Canberra suburb of Gungahlin (13%) slips into the nation’s top five among a number of Sydney suburbs.

The recurring theme seems to be that the lower the proportion of properties advertised as pet-friendly, the higher the difference in median rental prices.

“We definitely see an increase in rents when properties are pet-friendly,” one Sydney real estate agent told Domain. “Hands down it’s the biggest inquiry we get for any property.”

Here’s what a Brisbane real estate agent added: “I love to give out a property which is pet-friendly because I know I’ll have a bigger pool of people coming through and the take-up is much faster.”

Factors to consider

Ok, so not every property is suitable for a pet. Not to mention that some strata bylaws don’t allow pets.

But if it’s something you’re interested in looking into, here are some important factors to keep in mind.

– Put in place a pet agreement: Have your tenant sign an agreement that outlines how many pets are allowed, what breeds, and what rooms they cannot enter (ie carpeted rooms). It can also stipulate that the pet should not annoy neighbours, not damage the property and that the tenant should take pest control precautions to keep the property free of fleas.

– Ask for a pet reference: There’s a good chance that the people moving into the apartment have rented another property before. Therefore be sure to ask their previous property manager how the pet behaved at that premises.

– Insurance and tax implications: While the tenant will be liable for most property damage (except general wear and tear), it’s worth double checking your landlord insurance policy to see what you’ll be covered for. And when it comes to footing the bill for general wear and tear, the good news is that it can be deducted from your rental income come tax time.

Final word

As you can see, there are some pros and cons to weigh up.

Sure, advertising your property as pet-friendly when seeking a new tenant can increase your rental return, but you’ll want to ensure you’re welcoming a pet into your investment that won’t be destructive or keep the neighbours up at night.

If you’d like to find out any other tips about potentially increasing rental returns on your property, then don’t paws for thought – give us a call right meow!

Found an account transaction error?  Don’t foot the bill

Found an account transaction error? Don’t foot the bill

Most of us have found ourselves in a sticky situation where we’ve spotted an unauthorised or mistaken transaction on our bank account or credit card statement. Here’s how to avoid footing the bill.

The average Australian makes about 480 electronic transactions each year – and that number is rising quickly.

Amongst these daily transactions, both mistakes and unauthorised transactions occur.

It’s therefore important that you spend a bit of time each week or month quickly reviewing your transactions for discrepancies.

Because as we’ll explore below, the sooner you inform your bank, the better your chances of getting a refund.

How mistaken and unauthorised transactions occur

Everyone is guilty of making the occasional typo.

The thing is, though, that if you slip up when typing in a BSB or account number, you can end up paying the wrong person or company.

Sometimes it might not even be your fault. The person you’re paying might have accidentally supplied you with the wrong number.

An ASIC report shows that 83% of mistaken transactions are due to somebody typing in the wrong number, while the other 17% are due to people selecting the wrong payee.

Meanwhile, unauthorised transactions occur when funds are transferred from your account without your knowledge or consent, by someone who has access to your account.

The ePayments Code

Ok, so you’ve found an anomaly in your bank or credit card transactions? Here’s the good news.

Users of electronic payment facilities in Australia are protected by the ePayments Code, which covers electronic payments including ATM, EFTPOS and credit card transactions, online payments, internet and mobile banking.

Most banks, credit unions and building societies in Australia – as well as consumer electronic payment facilities, such as PayPal – subscribe to the code.

How does the code protect you against transaction errors?

The sooner you report a transaction error, the better.

If you report the error within 10 business days the Financial Ombudsman says the funds will be returned to you – so long as your account institution believes the mistake is genuine.

If you report the problem between 10 business days and seven months, you should still get your money back if the funds are still in the recipient’s account.

The recipient will have 10 business days to show they are entitled to the funds. But if they can’t, the funds get returned to you.

If it has been longer than seven months then things start to get a little messy.

Basically, if the money is still in the recipient’s account, you’ll only get the money back if the recipient agrees.

It’s important to note that BPAY payments are not covered by the ePayments Code, as BPAY uses a different process to resolve mistaken payments.

You should still contact your financial institution though, as they may be able to advise you of steps you can take to recover the funds.

Getting your money back after an unauthorised transaction

While the process for resolving an unauthorised transaction is different, once again speed is key. So report it to your bank immediately. After all, you also want to prevent any more unauthorised transactions.

According to ASIC, you are likely to get your money back if:

– a forged, expired, faulty or cancelled PIN or card was used

– the transaction was fraudulently made by an employee of your financial institution

– the transaction took place before you received your card, PIN or password

– a merchant incorrectly debited your account more than once

– the transaction occurred after you told your financial institution that your card was lost or stolen, or that someone else may know your PIN or password

– it’s clear you haven’t contributed to the loss.

Meanwhile, you’re less likely to get your money back from an unauthorised transaction if you acted fraudulently, accidentally left your card in an ATM, didn’t keep your PIN or password secret, or unreasonably delayed telling your financial institution that your card was lost or stolen.

Reporting the issue

Before you report a mistaken or unauthorised transaction, check to see if your bank or payment service provider has subscribed to the ePayments Code by looking here.

If they have, get in touch with them straight away. And don’t forget to request a reference number so that you can verify that you made the report if required at a later date.

If they are not a subscriber, feel free to still raise your concerns with them. They may have an internal policy in place.

Final word

Mistakes happen. To err is human. People make tipos all the time.

The two most important things you can do to protect yourself are to regularly review your accounts, and instantly inform your financial institution of any account anomalies you spot.

Oh, and if you happen to be on the receiving end and find unexpected funds in your account, resist the temptation to spend it as there’s a good chance you’ll have to pay it back.

Instead, get in touch with your bank or financial institution and let them know what’s occurred.

How the new govt scheme could give you a head start on property

How the new govt scheme could give you a head start on property

Did you know that it takes four to seven years for the average household to save a 20% deposit for their first home and avoid paying lender’s mortgage insurance? However, a new scheme promises to drastically reduce that time by dropping the required deposit to just 5%.

As you may have seen, the Coalition government recently announced a plan to let first home buyers borrow up to 95% of the value of a property and still avoid paying lenders mortgage insurance (LMI).

Now, the First Home Loan Deposit Scheme “isn’t free money”, points out Prime Minister Scott Morrison, but it means fewer young Australians will need to ask the “bank of mum and dad” for cash upfront.

Why is this a big deal?

Ok, so as it stands, it is possible to get a home loan with just a 5% deposit.

But people with a deposit of less than 20% usually have to pay LMI, which can be a pretty big deterrent if you’re wanting to crack into the market.

Basically, LMI is the insurance that reimburses a lender if a property is repossessed and sold for less than its outstanding mortgage debt.

The insurance covers the backside of the lender, but the premium is paid by the borrower.

Under the new scheme, the government would guarantee the additional amount needed to reach the 20% threshold, which would save borrowers thousands of dollars in LMI.

How much could I save?

Ok, let’s say you want to purchase a $400,000 home to get your foot in the property market.

Currently, if you have saved up $62,000 for the deposit and fees, you’ll have around a 15% deposit. In that case, you’ll pay about $3,500 in LMI.

If you have pulled together a 10% deposit ($42,000 in savings), you’ll be up for $6,500 in LMI.

And if you’ve only put away a 5% deposit ($22,000 in savings), you’ll face $12,500 in LMI.

As you can see, that’s quite a lot of money you’ll be able to save in LMI under the new scheme.

The government’s policy in a nutshell

We’ve gone through the government’s policy and pulled out some of the more relevant tidbits. They are as follows:

– The scheme will commence on 1 January 2020.

– Eligible first home buyers can’t have earned more than $125,000 in the previous financial year, or $200,000 for couples (and both need to be first home buyers).

– The First Home Loan Deposit Scheme will be limited to 10,000 first home buyer loans each year.

– The lender will still have to undertake the full normal credit check process (meeting all their legal obligations) to ensure that you’re in a position to afford your repayments.

– If the borrower refinances, or the loan comes to an end, the Commonwealth support will terminate.

– Eligible first home buyers will be able to use the scheme in conjunction with the First Home Super Saver Scheme as well as relevant State or Territory first home buyer grants and duty concessions.

Other factors to consider

Keep in mind that having a 5% deposit, rather than a 20% deposit, means that the monthly repayments on your home loan will be larger.

You’ll also likely pay tens of thousands more dollars in interest over the life of a 20-30 year home loan.

That said, this scheme will enable many young Australians to start growing their property portfolio years earlier than they otherwise could have.

And for most people, it will also mean they can save a few years paying rent.

For example, if you’re paying $400 a week in rent while saving for a deposit, that’s $62,000 over three years that could have gone towards the mortgage on your first property instead.

Basically, it’s a decision each prospective first home buyer will need to make according to their own personal circumstances.

Final word

If you’d like help cracking into the property market, or know a family member who would, please get in touch.

As we’ve alluded to, lenders will still be required to go through all the checks and balances to ensure a first home buyer has genuinely saved up their deposit and can afford their mortgage.

We’d love to provide you with some helpful tips and techniques to ensure that when lenders look through your accounts in 2020, you’ll be well and truly prepared.

APRA suggests banks relax key lending criteria

APRA suggests banks relax key lending criteria

Here’s a bit of good news: you may be able to borrow more for your next home loan after the prudential regulator sent a letter to the banks asking them to relax a key lending criteria.

In a letter to lenders, the Australian Prudential Regulation Authority (APRA) has proposed removing its guidance that lenders should assess whether borrowers can afford their repayment obligations using a minimum interest rate of at least 7% (although most ADIs currently use 7.25%).

Instead, APRA has proposed that authorised deposit-taking institutions (ADIs) use an interest rate buffer of 2.5% over the loan’s actual interest rate when assessing a customer’s ability to manage repayments.

How you’ll be assessed

CoreLogic research analyst Cameron Kusher has done a pretty good job of breaking down how you’ll be assessed under these proposed changes:

“If someone is looking to borrow at an interest rate 3.9%, the borrower would previously have been assessed on their ability to repay the mortgage at an interest rate of 7.25%,” he said.

“Now they would be assessed on their ability to repay at a lower 6.4% (3.9% + 2.5% buffer).”

Kusher added that the proposed APRA changes seem sensible given the interest rate environment with the expectation that rates will fall from here and remain lower for longer.

“Furthermore, since 2014 it has become much more difficult to get a mortgage, that is partly because of this serviceability assessment,” he said.

Why the change?

APRA chair Wayne Byres said the operating environment for ADIs had evolved since 2014, prompting APRA to review the ongoing appropriateness of the current guidance.

“APRA introduced this guidance as part of a suite of measures designed to reinforce sound residential lending standards at a time of heightened risk,” said Mr Byres.

“Although many of those risk factors remain – high house prices, low interest rates, high household debt, and subdued income growth – two more recent developments have led us to review the appropriateness of the interest rate floor.”

Mr Byres said with interest rates at record lows, and likely to remain at historically low levels for some time, the gap between the 7% floor and actual rates paid had become quite wide in some cases, and “possibly unnecessarily so”.

What does this mean for borrowers?

Mr Byres said the changes are likely to increase the maximum borrowing capacity for a given borrower.

However, he warned banks that the changes are not intended to signify any lessening in the importance that APRA places on the maintenance of sound lending standards.

“The proposed changes will provide ADIs with greater flexibility to set their own serviceability floors, while still maintaining a measure of prudence through the application of an appropriate buffer to reflect the inherent uncertainty in credit assessments,” Mr Byres said.

What next?

A four-week consultation will closed on 18 June, ahead of APRA releasing a final version of the updated guidance.

CoreLogic’s Kusher said the changes will allow some borrowers who can’t quite access a mortgage currently to get one.

“Overall for the housing market, it will mean more people are able to get a mortgage. These proposed changes in conjunction with the uncertainty of the election now behind will potentially provide additional positives for the housing market,” Kusher said.

In the meantime, if you’d like to find out if these changes might help increase your borrowing capacity, then get in touch. We’d be more than happy to run through your situation with you.