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22 Feb 2019 | Property
Having a managing agent vs doing it yourself
One of the biggest milestones you’ll encounter on your climb up the property ladder is becoming a landlord. Which means that one big decision you’ll face is whether to hire the services of a managing agent, or take on the responsibility yourself.
I want to preface this article by saying that there’s no wrong or right answer here. Well, generally speaking there isn’t.
Basically, it will boil down to your individual situation.
Do you have the time (and patience!) to manage the property? If so, you can probably save a good chunk of your rental income each year by managing it yourself.
However, if you’ve already got quite a few balls up in the air, then you’re probably going to want to offload the ‘managing the property’ ball to someone else.
Now, there’s a lot to weigh up here, so we thought we’d simplify it by breaking it down into two simple lists.
The main advantages of having a managing agent
If you’re the sort of person that likes to sit back and let someone else do all the hard work for you, then a managing agent will:
– Know exactly how to advertise the property to maximise the number of applicants.
– Help you determine an accurate amount you can charge in rent.
– Vet applicants through tenancy database checks, call references, and create a shortlist.
– Undertake regular property inspections on your behalf.
– Be across all the legal and legislative requirements that are in place. If you decide it’s time to evict a tenant, knowing these legal requirements is crucial.
– Act as a middleman to resolve misunderstandings or disputes.
– Chase up any overdue rental payments.
– Inform the tenant if the property is not being kept to reasonable standards.
– Organise for a handyman, electrician or plumber to undertake necessary works on the building, and may have access to bulk discounted rates.
– Arrange all important documents, such as the lease agreement.
– Allow you to live in an area not near the property.
– Finally, time is money. And it can take a lot of time to manage a property yourself.
The advantages of doing it yourself
Don’t forget, however, that there’s a certain level of satisfaction and freedom of choice that comes with doing things yourself. Here are some advantages of the DIY approach:
– Most importantly, it’s cheaper! You don’t have to pay a property agent 7-10% commission, plus other fees such as a letting fee (one to two weeks’ rent).
– You can get a Lease Pack from your local newsagent for $10-$20.
– If you are retired, or nearing retirement and working part time, the extra money you save might be crucial when it comes to your retirement.
– You get to decide how and where you advertise the property.
– You get to vet, shortlist and interview all applicants.
– No one knows your property as well as you do, so you can diligently inspect it for damage.
– A property manager doesn’t just act on your behalf. They also represent the tenant’s interests. You primarily act on your own behalf.
– If you find a great, low-maintenance, long-term tenant who you build mutual trust and understanding with, your required involvement can drop significantly.
Finally, it’s worth noting that yes, it is your property. But don’t forget it’s also their home or office.
Therefore it’s important you know how to tactfully liaise with a tenant if there’s a misunderstanding or dispute. Emotions can easily become involved for both parties so you need to ensure your workload and mediation costs don’t blow out as a result.
Final word
As you can see, there’s a lot to weigh up.
In fact, there are also many other issues that you’ll need to address, including landlord’s insurance, whether to pay for a cheap managing agent or fork out for an expensive one, and reading through the managing agent’s fine print to see exactly what they’ll do to earn your commission.
So if you’re still undecided, or simply want to know more about the pros and cons from a team that’s done all this before, give us a call.
We’d be happy to discuss it with you so that you can pin down exactly what will suit your individual situation.
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15 Feb 2019 | Personal Finance
Buy now, pay later schemes putting young shoppers at debt risk
One in six customers who use payment methods such as Afterpay and Zip Pay run into financial strife. ASIC is putting the ‘buy now, pay later’ industry under the spotlight.
ASIC’s first review of this evolving market finds that buy now pay later arrangements are having a negative impact on spending habits. This is especially the case with younger consumers.
Six buy now pay later providers were reviewed, including Afterpay, zipPay, Certegy Ezi-Pay, Oxipay, BrightePay, and Openpay.
Over-commitment
ASIC identifies a real risk that some buy now pay later arrangements increase the amount of debt held by consumers and contribute to financial over-commitment.
It finds that 1 in 6 users (16%) believe they have experienced at least one type of negative financial impact due to a buy now pay later arrangement.
In fact:
- 7% delay paying other bills,
- 5% borrow money from family or friends, and
- 4% get a loan or cash advance on their credit card to pay the money back.
Those who do pay it off on time? Well, 1 in 4 users (23%) use a credit card to make their repayments anyway.
Users are young and earn less
Interestingly, 3 in 5 of buy now pay later users are aged between 18 and 34 years old. Over 2 in 5 users (44%) have an annual income of less than $40,000.
Prices sometimes inflated
Each provider in ASIC’s review contractually prevents merchants from charging consumers higher prices for using a buy now pay later arrangement.
However, ASIC has received anecdotal evidence that some merchants may be charging consumers significantly higher prices. Particularly for purchases over $2,000, or where the price is less transparent and ‘negotiable’ (eg. solar power products, services).
More expensive, spontaneous purchases
Buy now pay later arrangements result in 81% of consumers buying a more expensive item than they would have otherwise been able to afford.
Seven in 10 users are now also making more spontaneous purchases.
As a result, as of 30 June 2018, there was a whopping $903 million in outstanding buy now pay later balances across Australia. That’s $37 for every man, woman and child in Australia.
Potentially unfair contracts
Finally, in ASIC’s view, each buy now pay later provider includes terms within their standard contracts that are potentially unfair to consumers.
They also provide a very broad range of circumstances under which a consumer will be regarded to be in ‘default’. Hold consumers liable for unauthorised transactions. Even when the provider knows or suspects the transaction may be unauthorised.
What next?
Given the potential risks to consumers, ASIC has supported extending proposed product intervention powers to all credit facilities regulated under the ASIC Act.
Basically, this would provide ASIC with a much more flexible tool kit to address emerging products. Including services such as buy now pay later arrangements.
It could also ensure ASIC can take appropriate action where significant consumer detriment is identified.
In the meantime:
- only shop for items you can afford
- Set up a budget to save for those big items
- Focus on paying down your debts, such as your mortgage.
That’s something we can help you with.
And if you do really want something that you need to take out a loan to purchase an item such as a car then give us a call on 07 3911 1190.
There are a number of reputable and responsible lenders to choose from that operate under the National Consumer Credit Protection Act, unlike buy now pay later providers.
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8 Feb 2019 | Personal Finance
A smooth sailing guide to dealing with memory loss and finance
It’s an unfortunate fact of life: as you grow older, your memory is likely to fade. While you’ll probably be forgiven for forgetting the odd anniversary, the stakes are much higher when it comes to keeping track of your finances.
Most of us have watched on as a loved one’s memory has faltered and faded. It’s painful to see.
But, as with many reminders of our own mortality, all too often we put the experience behind us and hope we never suffer a similar fate.
But if you start to experience early warning signs of memory loss in yourself, or a loved one, there are some simple steps you can take to safeguard your financial future and property assets.
A quick look at the stats
Dementia (including Alzheimer’s disease) is Australia’s second leading cause of death, only behind heart disease.
In fact, 35 Australians die as a result of dementia every day.
However, due to Australia’s ageing population, ABS statisticians believe dementia will overtake heart disease as Australia’s leading cause of death as soon as 2021.
Memory and your mortgage
Staying on top of your spending, saving, investments and bills can be tricky at the best of times.
But dementia and ageing can complicate matters further. Not only may you forget to make important mortgage repayments, but it could become harder for your to absorb information and comprehend advice.
To protect yourself and your loved ones from the financial consequences of memory loss, ASIC recommends you take the following steps.
1. Keep it simple
Simplify your finances by having just the one transaction account, reducing your credit cards, and saying goodbye to the trusty old cheque book.
Also, create a list of your regular bills, such as mortgage repayments, and stick it to your fridge. Once each bill has been paid, immediately cross it off the list. You can also set up a direct debit system, which will take away the hassle almost entirely.
2. Appoint an enduring power of attorney
Choose a person to manage your affairs if you lose the ability to make decisions for yourself.
People often choose someone they trust implicitly such as a spouse, child, another relative or friend. But it could also be someone independent, such as a solicitor.
Another safeguard is to choose two enduring powers of attorney. Just make sure they’re two people who know how to agree with one another and will always act in your best interests.
Importantly, make the appointment early.
If you leave it too late then a court or tribunal may make the decision for you.
3. Update your will and Super beneficiaries
If you haven’t created a will, or it’s been a long time since you updated it, then it’s time to create one – no matter your age or memory capacity.
Now, unlike your other assets, your Super account does not automatically form part of your estate.
You generally have two options to ensure your Super fund goes to the right people in the event of your death.
The first is to make a binding death benefit nomination (aka a binding beneficiary nomination) through your Super fund. The second option is to nominate your estate as the beneficiary of your Super fund. This will ensure your Super will be distributed according to the terms of your will.
4. Sort out important documents
Last but not least, you need to compile an easily accessible file of all your personal and financial information. After all, you want to make this whole process as easy as possible for your power of attorney.
The list will be quite long, and should include your birth and marriage certificates, your will, tax file number, a list of your assets, house deeds and insurance policy details.
Financial documents may include bank accounts, ongoing direct debits, mortgage details, Superannuation papers, information on any loans or debts you have, investment documents, and any pre-paid funeral plans.
Finally, don’t forget all your important health documents, such as Medicare card number, pensioner concession card, and private health insurance policy.
And that’s that!
As you can see, it’s quite the list to get in order – no wonder people put it off!
So if you need any information from us to help you put your list together, don’t hesitate to get it in touch.
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8 Feb 2019 | Interest Rates, News
Stress tested your home loan recently? Don’t stress
Seven in 10 Australian mortgage holders have not stress tested their home loan. But don’t stress, it’s much easier to do than you think.
Deloitte Access Economics’ latest report makes for pretty interesting reading.
It turns out the average Australian has a “wide-ranging hesitancy to make any sort of change” when it comes to their mortgages and other financial products.
“Why is it that educated consumers who know they’re not getting the best deal on many of their household products are so unwilling to take action to improve their household finances?” asks a surprised Deloitte.
Interesting mortgage stats
It turns out that 41% of Australians with a mortgage don’t check for interest rate changes because they either have no interest, don’t know what the RBA cash rate is, or do not see its relevance.
Even more interesting is that 68% of people say they have never stress tested their home loan.
“This is a particular worry,” says Deloitte.
“Recent estimates show that a 0.5% increase from current interest rates would cause mortgage stress to jump from one in four mortgaged households to one in three.”
Worse still, a 2% increase would throw half of all mortgaged households into stress.
Now, that might sound like a big increase, but don’t forget that it wasn’t so long ago that interest rates were at that level. In fact, it was only six years ago in June 2012.
So how do you stress test a home loan?
Simple.
Calculate how much extra a 0.5%, 1% and 2% increase on your mortgage would cost you each month and whether your budget can allow for it.
If you’d run into trouble, give us a call and we can work through some risk mitigation options with you, which could include locking in a home loan rate.
Why don’t people care about getting a better deal?
Interestingly, 1 in 3 people know there are better deals out there, while 1 in 5 don’t bother to check for a better deal.
It turns out there are three key reasons people don’t change to a home loan that would see them better off financially, with the first being decision making paralysis.
“Too often, many consumers get stuck before making a choice – and then they do nothing,” explains Deloitte.
Another big reason is people “hate feeling dumb”.
“Consumers also hesitate when they fear or worry about the possibility of making a bad decision. This, coupled with the fact that people tend to avoid what makes them nervous,” adds Deloitte.
The final key reason is that people simply put it off.
“Outcomes set in the distant future typically lack a sense of urgency in contrast with everyday needs, making it easy to defer decision making to a tomorrow that never arrives,” says Deloitte.
How can you overcome these barriers?
Well, here’s the good news. We can help you overcome all three.
For decision making paralysis we can come up with a shortlist of options, reducing the choices you need to make.
Worried about feeling dumb? I bet you we’d feel pretty dumb if we did your job for a day too. But we make it our business to help educate you and bring you up to speed in this market.
And how can you overcome avoidance? Simple. Give us a quick call today on 07 3911 1190 and we’ll get the ball rolling for you. You’ll be surprised how little time and effort it takes.
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1 Feb 2019 | Personal Finance
How much does it cost to own a pet?
We thought we’d have a little fun this week and look at how much it costs the average Aussie family to own a pet. After all, two in three households have one and very few budget for them!
Let’s be honest, owning a pet goes hand-in-hand with the great Australian dream of property ownership.
So let’s be clear here: we’re definitely not making a case against pet ownership. However as Christmas time usually coincides with a spike in pet purchases, it’s a good time to look at the monthly cost factor.
Because if you’ve decided to take on the responsibility of welcoming a pet into your household, then it’s something you oughta plan for and do right!
First, how many of us own pets?
Believe it or not, but two in three Australian households own a pet.
Yet how many of them do you think run a proper budget for it? Probably very few.
And when you consider that more than $12 billion is spent on pet products and services every year, that’s a lot of unallocated money!
So if you’re looking to get a pet for your family, here’s the most common options available, listed from most expensive to cheapest.
Dog
If you’re looking at adding a puppy or rescue dog to your very own wolf-pack as 38% of Australia households have already done, expect to pay about $1475 per year.
Basically, you’re looking at an average of $123 a month for food, vet care, health products, grooming and boarding.
To avoid any vet bill blow outs, it might also be worth considering pet insurance, which will cost an extra $293 per year. Or $25 per month.
And while we’re at it, here’s a fun fact: the number one thing that dogs eat that makes them sick is underwear! So be sure to keep them out of reach!
It’s also worth noting that the above figures don’t factor in upfront costs, which can range from $1000-$5000 to purchase a select breed, or $300-$500 to adopt an RSPCA dog.
Cat
If you’re more of a cat person, like 29% of Australian households, expect to pay $1,029 per year. That’s about $86 a month.
Pet insurance is slightly cheaper for cats, coming in at $20 a month, but then again – cats probably aren’t underwear connoisseurs!
It costs between $100 and $300 to adopt a cat from the RSPCA – depending on their age – while a select breed will cost you between $1,000 and $2,500, and sometimes even more.
Bird and fish
If you’re looking to ease yourself into pet ownership, welcoming a bird or fish into the fold is a much cheaper option.
It costs just $115 per year on average to own a bird, while fish are even cheaper at $50 per year.
Final word
As you can see, purchasing a pet is unlikely to cost you an arm or a leg (so long as they have adequate play toys!).
However, you can minimise the impact it has on your bottom line by including the monthly amount in your family budget, and protecting against vet cost blow-outs with pet insurance.
If you’d like to know more about budgeting, get in touch on 07 3911 1190. We’d be happy to help out.
As Christmas time usually coincides with a spike in pet purchases, it’s a good time to look at the monthly cost factor of owning a pet.
