Choices Newsletter December 2011

Who doesn’t love a good debate? There are endless topics people choose to disagree over on a daily basis, from what’s the best pizza topping to who should be Prime Minister.

In the spirit of debate, this issue of the newsletter tackles three topics notorious for getting people hot under the collar. Our first article looks at using either a bank or a mortgage broker in order to obtain a home loan.
In the second article we look at what makes a better investment: new property vs. old property. In the third article, we consider the house vs. apartment debate.

Look to the fourth article for advice on beating work blues. This year may have seemed like a long one if you’re unhappy in your job, so it’s a great opportunity before the year ends to bring some satisfaction back to your work life.

Check an interesting bit of history that may be repeating itself, in “Do you know?”

Do you have a story to share? Please let us know. The top story will be published on our website.

If you are new to our newsletter and enjoyed reading the articles, you can click here to subscribe.

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BANK VERSUS BROKER

When the time comes to apply for a home loan, many people head straight to their bank, but be warned, you may be missing out on significant benefits if you bypass consulting a qualified mortgage broker.

There are countless reasons why it pays to use a broker when shopping for your home loan and if your heart is not set on using a particular lender, a broker can be your best friend.Even if you prefer to use your own bank for your mortgage, you can still use a mortgage broker to process paperwork and manage the application on your behalf.

Here are five arguments as to why every borrower should seek out a qualified mortgage broker when applying for property finance:

1 Choice

The first and biggest advantage of a broker over a bank is choice.
When you sit in front of a Multi-Choice Home Loans broker you are sitting in front of 25+ banks and 300+ products versus visiting a banker who has access to only one bank’s products. This is especially important at time like now, when the banks are saying ‘no’ more often, and by having more choices you’re likely to get a ‘yes’.

2 Experience

Ask your Bank lending manager how long they’ve been helping people with home loans. Our brokers are committed to their clients in the long term, and most have many years of industry experience. Banks are big companies; they move their staff around and reward good performers with promotions away from their customers.

3 Specialisation

If you’re looking for specialised assistance with your loan, it pays to talk to a home loan broker. For example if you’re starting to invest in property, talk to a broker who understands property investment. Bank staff often don’t have the training or experience in this area.

4 Save time and stress

Following up the progress of your loan application is time consuming and frustrating. A Multi-Choice Home Loans broker has a system for chasing up information required, keeping you informed and saving you time. They liaise with agents, lenders and solicitors on your behalf to ensure your loan settles on time.

5 Personal Banker

Bank staff change often so even when you find a good personal banker they change jobs before you know it. However, your mortgage broker is like the perfect personal banker. They know what needs to be done, they make sure it happens, you are the core of their business, and they’re in for the long haul.
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OLD VERSUS NEW

If there’s one topic property investors rarely agree on, it’s what makes a better investment: old or new?
Proponents of buying ‘old’ argue that established dwellings are typically more affordable and can be renovated to create equity, whereas those buying ‘new’ argue that this is outperformed by the tax incentives that new properties deliver.

Confused? Here are the arguments for both sides of the debate, but remember there’s no ‘right or wrong’ answer, regardless of which corner you stand in! Old and new properties both have distinct, unique advantages and what counts as an investor is that your decision matches your individual strategy and goals.

Reasons to buy ‘New’

1. Tax depreciation
If you’re an investor, one of the big advantages of buying a newly constructed property is that you can claim depreciation as a tax-deductible expense. This includes the depreciation of assets in the buildings and the cost of the building itself, as well as for wear and tear on fixtures and fittings in the property. The newer the property, the higher the level of depreciation.
2. Better quality tenant
Brand new properties tend to attract a better quality tenant, which means a higher rental income and fewer headaches for the landlord!
3. Less maintenance
Unlike new homes that require little maintenance, owners of second-hand properties are often faced with immediate maintenance issues. The costs of repair in older homes can significantly inflate ongoing expenses.
4. Warranty
As a purchaser of a new property you are protected for a number of years against major building defects by home warranty insurance, which all builders of new homes in Australia are required to carry.

Reasons to buy ‘Old’

1. Equity
There is little opportunity to add value to a new home, whereas the investment made in an old home can grow in the future should you choose to renovate or extend.
2. Affordable
It’s often said that you get more house for less dollars buying a second-hand home than when buying a new one. For entry-level investors, old properties can have the advantage of an affordable price tag.
3. Unique appeal
Older homes often have great features that can’t be replicated in new homes. A well-maintained period-style home, for example, will reap rewards in capital growth down the track
4. Established sales history
There’s less guesswork in buying an established property because you’ll be able to trace back the property’s appreciation and find out how the suburb has performed. This can help give you the assurance you need that you’re buying a good property.
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HOUSE VERSUS APARTMENT

Does a house make a better investment than an apartment? It’s a common question but like the ‘old versus new’ debate, the answer depends on who you speak to!

Houses are often perceived as slightly ahead on price growth than apartments; however, a recent RP Data Property Pulse report states that apartment values are increasing. Over the past five years (July 2006-July 2011) apartment values for combined capital cities have climbed 6.0 per cent, up 1.2 per cent on housing values during the same period.

So where does that leave you? Well, it’s important to remember that regardless of whether you buy a house or apartment, your ultimate goal is to find a property that will deliver the best return on your investment in the long term. Factors like how much you can afford and what you want to achieve from your investment should drive your decision-making.

Here are some issues to think about that may help clarify which type of property best suits your investment goals:

•Rental demand: do your research about what type of dwelling will be popular in what area. An investment apartment near a university, for example, can allow you to tap into the demand for accommodation by overseas students.

•Affordability: apartments are cheaper to buy, making them a good option if you are a first-time investor and want to break into an up-and-coming market you couldn’t otherwise afford.

•Fees: in addition to the usual landlord costs like council and water rates, you will have to pay strata or body corporate fees if you own an apartment. The more facilities on offer – such as pools, gyms or lifts – the higher the strata levy.

•Maintenance: houses generally require more maintenance than apartments but the upside is you can decide when to spend money on repairs. With an apartment, you are locked into a strata levy but at least much of the maintenance is taken care of by the body corporate.

•Capital growth: knowing the median prices and sales history of properties in the area you are considering buying into will give you a more accurate idea of whether a house or apartment will attract more capital growth.
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BANISH WORK BLUES

We all have periods when we feel less than enthusiastic about being at work. When this happens, consider the following tips for achieving greater job satisfaction.

•Develop realistic standards – strike a balance between what you ideally hope for and what you are likely to get.

•Work smarter, not harder – look for ways you can better organise your time, systems you can develop, or options for using technology to your advantage. It might take time to set up, but once you’ve made changes you’ll find yourself working more efficiently and effectively.

•Learn to laugh – laughter is a cure for many ills and a great way to provide balance for stressful situations. A daily injection of laughter improves morale, clears the cobwebs from the brain and helps get the creative juices flowing.

•Give yourself praise and encouragement – don’t wait for someone else to.

•Stop for lunch – it’s tempting to wolf down a sandwich at your desk when you’re busy but it’s actually not a very productive use of time. Even a small break outside in the fresh air will do wonders for boosting your mood and energy levels for the afternoon ahead.

•Banish negative thoughts – focus on what is positive and rewarding about your job and relieve mental tension and gloomy thoughts by making exercise a part of your daily routine.

•Turn colleagues into friends – start a social club or lunch group.

•Do it now – when faced with a difficult task, break it up into a series of smaller, more manageable jobs.

•Give yourself a distraction – it might be saving for a holiday, training for a marathon or re-decorating your home. When you have a personal goal to work towards, your job no longer dominates your life.

•Create a list – if you are overwhelmed with endless tasks and deadlines, ticking off things from a to-do list can help you regain control and give you the satisfaction of knowing you are making tangible progress.
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DO YOU KNOW?

The Roman Empire did not fall in a battle of war. There was no single big clash of arms that drove it to its knees. It was corroded from the inside. At one stage, the wealthy held so much gold coins that there was not enough currency to keep services to the public going. By keeping the money to themselves the wealthy had simply run the nation into the ground.

History is strewn with such examples. Has this now happened to the United States? Or is the US too big to fail?

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