Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Friday, 2 March 2012

How to minimise property holding costs


I was chatting to a mate who lives on Sydney’s prestigious north shore the other day about the funding of property investment and how it can be done.

Property in Australia currently tends to drain funds from you in the form of holding costs (interest rates in the UK and elsewhere are presently so low the reverse tends to be true – investment properties there tend to be positively geared).

In Australia, 3 year fixed rate mortgages are available from around 6.00% at the moment, which is very reasonable, but even so, repairs and maintenance, vacancies, strata fees, council tax, letting agent fees and other costs tend to result in a negative cash flow.

However, here are 12 straightforward strategies you can use to minimise or even negate a draining cash flow:

1 – Invest in an area with a high rental yield – in Australia, this tends to mean regional centres and more remote areas away from city centres.  Capital growth can tend to have an inverse relationship to rental yield, so the compensating result may be lower growth

2 – Put down a big deposit – putting down a 25 or 30% deposit is great tactic if you can afford to do so.  I’ve used this strategy several times; it reduces the mortgage required and thus the resultant negative cash flow

3 – Perform a cosmetic renovation - and then increase the rent.  Adding an extra bedroom or subdividing is a particularly effective strategy

4 – Pay down some of the mortgage debt – again, great if you can afford to do it…

5 – Invest in units rather than houses – units can generate 5-6% rental yields which tends to be higher than the yield of houses

6 – Avoid units with pools, gymnasia and 24 hour concierges – as these tend to result in high strata fees
7 – Invest overseas – such as in the UK where interest rates are currently very, very low.  There can be disadvantages to this strategy too

8 – Manage the property yourself – good in theory, but if you are investing in property to give yourself more time, this can be counter-productive

9 – Buy at the right price in the first place – using smart negotiation skills

10 – Find a cheaper property with a tenancy problem – and solve the problem!

11 – Claim all depreciation benefits – sounds obvious, but many people don’t do it.  Engage a surveyor to prepare a depreciation schedule; this may cost you around $500 initially, but the tax savings will save you this many times over

12 – Use an accountant with extensive property experience – don’t’ try to shortcut by using a local accountant with no experience as this is penny wise…but extremely pound foolish!