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.
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!
You’ve probably seen ‘negative gearing’ and ‘capital gains tax’ in the news recently. That’s because they’re set to become hot topics ahead of the next federal election. Today we’ll take a look at both.
If you’re an aspiring first home buyer, negative gearing and capital gains tax (CGT) are things that you may have heard a lot about, without paying a whole lot of attention.
That’s because, well, if you don’t have an investment property yourself, who really cares?
However, Labor is proposing to reform both negative gearing and the CGT if it wins the next election.
Reforms may have a flow-on effect for the entire property market – whether you’re an aspiring first home buyer, or a budding property baron.
But before we (cautiously) tread our way into the political hoo-ha, let’s take a look at what negative gearing and CGT actually are.
What exactly is negative gearing?
Ok, rest assured it’s all much simpler than it sounds.
Gearing is when you borrow money to invest.
Negative gearing is when the rental income from your investment is less than your interest repayments and expenses.
Why on earth would you want to make a loss?
Well, negative gearing is a common technique used by property investors, who are often prepared to accept a loss to reduce their taxable personal income.
In turn, this minimises the amount of overall tax they need to pay.
For example, if you’re earning $90,000 a year, and you’re losing $10,000 on your investment property, your taxable income drops to $80,000.
Capital gains tax discount
Still with us? Great.
Ok, so we’ve established that negative gearing can help minimise your personal tax each year.
But you’re still going to need to pay tax on the profit that you make once you sell the investment property – this is called capital gains tax (CGT).
However, if the property is held for more than a year, investors may be entitled to a 50% discount on their CGT.
Who is negative gearing mainly used by?
Well, property investors first and foremost. Australia has more than one million landlords using a negative gearing strategy, according to the ABC.
The Liberal party says negative gearing benefits middle-income earners such as nurses, teachers and policemen.
However Labor disputes this, saying it’s mainly used to benefit high-income earners.
They point to Grattan Institute data which shows it’s used most by surgeons, anaesthetists and lawyers.
That all said, the option is open to all. It’s just whether or not it’s in your own best interests – and that varies according to your personal situation.
The flow-on effect
Now, earlier we mentioned that Labor was looking at reforming negative gearing and CGT, remember?
Labor wants to limit negative gearing to newly built properties and halve the CGT discount from 50% to 25%. Labor says this will help first-home buyers get a foothold in the property market.
The Liberal party, on the other hand, says these policies will crash the property market.
Now, that’s about as much as we can say about the situation without wandering too far down the political path.
Suffice to say many economists say the reforms have the potential to lower property prices. That’s good for first home buyers, not so good for (current) property investors.
Want to know more?
The above outline is only scraping the surface of negative gearing and CGT.
It’s also important to reiterate that everybody’s situation is different.
How much you earn, where your property is located, your age, and many other factors will all have a significant bearing on whether or not negative gearing would be a good fit for you.
There’s also plenty of pros and cons, not to mention risks vs reward, to weigh up. All of which, once again, will depend on your individual circumstances.
So if you’d like to find out more, get in touch. We’d love to discuss your options further with you.
We all know that recycling is great for the environment. But debt recycling? Well, if done right, that could be great for your own little patch of planet earth.
There are three things that many Aussie property owners wish they could do: make their debt tax deductible, pay off their mortgage sooner, and invest in other asset classes to build towards future wealth.
Well, with debt recycling it’s possible to achieve all three. But it’s a somewhat complicated strategy that’s not without risks.
But first, what exactly is debt recycling?
The idea behind debt recycling is to take the non-deductible debt from your home and recycle it into tax-deductible debt.
That is, to replace your mortgage debt with investment debt.
The earnings accrued from your investments can then be used to pay off your home loan.
If done effectively, not only can you pay off your home loan much faster, you can also generate higher levels of wealth as your home and investments grow in value over the long term.
Who might it suit?
Debt recycling is a higher-level financial strategy that is more suitable for certain individuals including those who:
– Are happy to invest for the long-term (5 years plus), as opposed to seeking immediate returns.
– Have a high marginal tax rate (greater benefits from tax-deductibility).
– Have a good appetite for risk.
– Have a secure income source that is not affected by investments.
When executed properly, debt recycling offers a number of significant benefits, such as:
– Allowing you to start investing almost immediately, even if you have no existing source of finance with which to get started.
– You don’t require years of investment practice to begin debt recycling (although it is highly advisable to work alongside an experienced financial planner).
– It can help you to cover the gap between your superannuation savings and your retirement targets.
– It can help you to pay off your mortgage earlier and relieve your debt burden.
Though it is true that you can reduce risks by gaining a firm understanding of debt recycling and other investment strategies, you will never be risk-free.
The two major risks you face are:
- In the same way that you benefit from compounding gains over time, a market downturn can compound losses, meaning that the amount you eventually owe could be more than the value of the portfolio.
- You could also be at risk of losing your home if you use the existing equity in your home as security for the investment loan.
Is debt recycling right for you?
It’s fair to say that debt recycling isn’t for everyone. Like most things in life, it will depend on your personal circumstances.
So if you’d like to find out more, get in touch. We’d be more than happy to run through your options with you.