Mortgage offset accounts, are they worth it?

Offset accounts are an established and attractive feature of many home loans today – but are they really worth having and will you actually benefit?

The answer depends on your actual money habits and what happens once you buy the property and settle into your new budget. You might find it either works well or is a waste of time and money.

Read more

Six tips for making a pre-auction offer

In Sydney around 30% of advertised auctions were sold before the auctioneer did any work. In a strong market many buyers fear the auction process because competition drives prices out of their reach. Auction clearance rates are high so there is no doubt we will continue to see a large number of buyers try and avoid the auction.

So what happens when you’ve been through a property a few times and you love it? You’re partway through arranging finance, Read more

ONCE upon a time, a woman’s place was in the home – these days, she wants to own it.

Almost half of Gen-Y women say owning their own home is their number one goal, according to an online Westpac survey of more than 1,500 Australians.

Home ownership ranked above having children and getting married, which trailed behind at 14 per cent and five per cent respectively.

The findings suggest Gen-Y women want to lay their financial foundations before pursuing other life goals, Westpac general manager of retail banking Gai McGrath said.

“It seems it is only once they are comfortable with their financial position that they are ready to look at other lifetime priorities,” she said.

More female respondents also put buying and paying off a property as their top lifetime ambitions than their male peers.

For public relations graduate Clair White, 22, having a property of her own is the best way to protect herself against the unpredictability of life.

Ideally she would be able to purchase a house with a partner, but she wants to be prepared to go it alone.

“Most people want that husband, 2.5 kids, standard life,” she told AAP.

“But I think you have to keep in mind your own interests – you can’t just be relying on that dream life.”

Learning from her parents’ generation, Ms White says “getting it done early” seems like the best approach when it comes to entering the property game.

She’d love to own an investment property one day, and plans to start saving a deposit as soon as she gets a full-time job.

But considering she’s just come back from a five-month overseas trip, that might take a while.

In the meantime, she says there’s no harm in looking.

“I’m actually addicted to the Domain app. I look at houses all the time!”

From: “The Australian Website”


Where have property investors struck gold after 18 per cent rent rise?

SOARING rental returns on units have property investors singing ‘Bound for Botany Bay’, as they set sail to the  bank.    

Rental prices in the Botany Bay Local Government Area (LGA)  grew by 18 per cent per annum between 2011 and 2013 for two-bedroom units,  according to PRDnationwide’s NSW Quarterly Rental Report; easily the highest in  the greater Sydney region.

Tenants now pay a median rent of $580 per week- $160 more  than two years ago. The sharp increase came on the back of a 22 per cent lift in  new tenancies for the area.

The rise means that the yearly gross rental income for  investors that own a tenanted two-bedroom unit has risen from $21,840 to  $30,160.

PRDnationwide research analyst Oded Reuveni-Etzioni said  the rental increases had prompted locals to turn their own homes into investment  properties in order to cash in on the higher yields.

“Botany Bay is a popular location for renters in the  current market and there has been strong construction activity in the area with  industrial zones being rezoned for residential use,” Mr Reuveni-Etzioni said.  “The completion of a number of new shipping infrastructure projects, the area’s  proximity to iconic Sydney beaches and having the airport nearby is proving  attractive to new residents who are searching for a balance between employment  and lifestyle opportunities.”

South of Sydney, Shellharbour was another strong performer,  demonstrating 15 per cent growth per annum for rents on two bedroom units, which  have risen from $200 to $265 per week since 2011.

“The construction of the Shell Cove Marina, expansion of  Stockland Shopping Centre and improvements to the Princes Highway are all  contributing to attract new residents to the area,” Mr Reuveni-Etzioni said.

Botany Bay and Shellharbour were well clear of the rest of  the Sydney Greater Metropolitan Region for rental price gains. The next best  LGAs were Rockdale and Campbelltown, with seven per cent, followed by Penrith,  Leichhardt and Wyong with six per cent.



As our property markets show signs of life again, many investors recognise that this cycle will be different to the last; it will be a cycle of more subdued growth.

In order to outperform the markets one of the most common questions is “where’s the next hotspot?”

People who ask my opinion are usually disappointed that firstly, I don’t know and secondly, I don’t really care.

I’m not in the business of speculating.

Instead, I make my investment decisions based on proven long-term performance, rather than short-term speculation.

The fact is hotspotting – seeking out the “next big boom” location – is speculation and not true property investment.

If you look at the track record of people chasing the next trend it’s been pretty poor.

On the other hand to “invest” in property requires the intention of generating long-term capital growth that tracks above average long-term price growth for the area.

Now, here’s what I find interesting: a lot of the hotspots predicted by some of Australia’s property analysts turned out correct.

Some of the regional areas and mining towns boomed, at least for a while as investors chased up prices but, unless they got the timing right, chasing the next hotspot has turned out disastrous for many investors.

Some are left with properties worth considerably less than they paid and with less rental income than they expected. Now, they are unable to sell their properties as buyers have abandoned these markets which have little depth from local demand.

If you’re into investing in short-term trends, being right isn’t what’s important, it’s being right at the right time that counts.

Very few can do that, so the history of investors trying to find the next boom town is littered with people who get the story right and the outcome wrong.

Instead I buy in areas that have a proven long-term history of outperforming the average capital growth and are likely to continue to outperform because of the demographics of the people living in the area.

And I like buying the property for the right price – below its intrinsic value.

Hotspotting is virtually the opposite of this sensible, not-so-sexy, tried and tested system for successfully building a property portfolio.

Let’s have a closer look at a few other reasons why I steer clear of looking for hotspots:

1. Hot spotting is about short-term speculation, not long term wealth creation.

Most property investors are trying to build their asset base so that one day it can replace their personal exertion income.

The key to building a substantial property portfolio is to use your first property to leverage into your next property and then use those two properties to leverage into more investments, and so on.

You will only have the ability to do this if you invest in locations that consistently provide long-term capital growth.

By definition, ‘hotspots’ are not these types of areas.

Just as quickly as they heat up, property values in these locations can come off the boil and cool very quickly.

Just look what happened to many mining towns and sea change locations, such as Mandurah.

2. Hot spotting often means following the crowd and more often than not, the crowd gets it wrong!

Many people trying to buy in the next hotspot get their advice from online reports or “get rich quick” seminars and in the short-term some of these predictions are self-fulfilling.

If you suddenly get a diverse group of investors buying up in a small town that has little market depth, this tends to push up prices “proving” this area really is a hotspot.

What’s really happening is that you’re seeing an over-inflated market that more often than not, is unsustainable in the long term.

Some of our mining towns, the Gold Cost and Sunshine Coast are great examples of this phenomenon.

On the other hand strategic investors buy counter cyclically, when others are afraid to get into the market.

3. Hotspotting requires accurate timing, yet most investors don’t have the necessary knowledge to know when it’s the best time to buy.

Some hotspots have excellent potential to generate long term capital growth, but these are rare.

For example, there’s the inner-city suburb that’s yet to take off because while it’s on the verge of gentrification, yet it still has an air of industrialisation.

Some investors can pick these areas before the market takes off, but timing markets like this is difficult.

The real problem is that by the time you find out about the next hotspot, it may be too late to benefit from that substantial early growth.

Or the opposite could be true. You might end up jumping in too early and not reaping the rewards for many years while in the meantime, your money has been tied up and you’ve missed out on real opportunities in proven areas.

A great example of this is the inner western Melbourne suburb of Footscray, which has been “going to improve” for the last 35 years but just hasn’t!

4. Hotspotting is usually based on opinions rather than facts.

When you read articles in the media or hear reports on TV that suggest an area is about to take off as the “next big thing”, in reality you’re simply just being given someone’s opinion.

Be careful, are they biased because they have properties to sell and it suits them to be spruiking a certain area?

You’re better off to rely on your own research and due diligence, rather than blindly accepting a so-called expert’s potentially biased advice.

5. Hotspotting can generate short-term inflation in suburbs that can’t sustain a high level of price growth over the long term.

Today’s hotspot could be tomorrow’s over heated market.

For example, when the resources boom hit Western Australia and far north Queensland, thousands of investors jumped on the bandwagon and bought into the mining towns that sprung up overnight and became a buzz of activity.

But now that the resources sector has cooled off, many of these towns have gone from boom to bust as the major industry supporting the local economy came crashing down.

I know of many investors who are still having trouble offloading their under performing properties in these mining towns and regional centres which recently were called hotspots.

My suggestion is avoid the excitement of hotspots.

This may make your investment boring, but it allows the rest of your life to be more exciting as you growth your wealth.

So what is the alternative?

To ensure I buy a property that will outperform the market averages in the long term; I use a Four Stranded Strategic Approach:

  1. I buy a property below its intrinsic value.
  2. I buy in an area that has a long history of strong capital growth and one that will continue to outperform average capital growth because of the demographics of the people living there. I look for affluent areas where people are prepared and can afford to pay a premium to live, or gentrifying areas where a wealthier demographic is moving in and pushing up prices as they improve the area.
  3. I look for a property with a twist – something unique, special, or a bit different or scarce about the property.
  4. And I look for a property where I can manufacture capital growth through refurbishment, renovations or redevelopment.

By following this approach I minimise my risks and maximise my upside.

Each strand represents a way of making money from property and combining all four is a powerful way of putting the odds in my favour.

If one strand lets me down, I have two or three others supporting my property’s performance.

By Michael Yardney
Metropole Property Strategists