RE/MAX Profile Landlords' Newsletter October 2013

In this edition: How long will it take for your property to rent? An Hour’s Number Crunching Can Save You Thousands The Best Policy is to Expect the Worst Who Has to Pay? How the Tribunal Decides on Compensation

October 2013

Learn YOUR Rights with the Latest RTA Tenancy Videos A Selection of Properties Recently Leased Quote Calendar of Events

We're delighted to inform you that

our rental department grows this

month as we add Karyl Paterson

to the team. Her main role will be

to focus on renting out available

properties even faster. With the

increase in days on the market

and a growing trend of break

leases (tenants moving before a

lease end) this is an ever more

time-consuming part of our busi-

ness and Karyl's appointment is

to ensure you are being given the

best service possible. As an

award-winning agent with many

years in both sales and rentals,

plus with a wealth of experience

as a business owner, we're

thrilled to welcome Karyl to the

team.

Our rental arrears continue to be

strong, with some days this

month returning 0 arrears and

this an absolute credit to the

team's selection of tenants and

follow-though processes.

We remind you this month to

check if it's time for a pest and /

or building inspection on your

property to make sure everything

is in order. Although we are very

thorough with our routine inspec-

tions we're not builders or pest

controllers, so a professional in-

spection is recommended. How

frequently this needs to be done

depends on each particular prop-

erty.

Wishing you all the best, and for

those of you with children (and

those without!) - hoping you get

to have fun these school holi-

days. After we make your month-

ly payments, we will be enjoying

some precious time away with

the boys, can't wait to lie on the

beach with a book!

Wishing you health, wealth and

prosperity,

Christina

Checking pest and/or building inspection

Karyl Paterson

www.propertyrentalsbrisbane.com FREE Information Guide For Landlords & Tenants

How long will it take for your property to rent?

That of course depends on the time of the year so here are the latest statistics for August. BRISBANE STATISTICS The Market Source: rentfind.com.au

Brisbane, QLD August 2013 Annual Change

Median Weekly Rent - House $400 2.6% increase

Median Weekly Rent - Unit/Apartment

$380 1.3% increase

Days Vacant (Avg) 14.8 0.8 decrease

Days on Market (Avg) 25.4 1.1 decrease

An Hour’s Number

Crunching Can Save You

Thousands

Want to be $96 per week better

off?

Before walking away from pur-

chasing a first or next investment

property, make sure to crunch

the numbers correctly. That next

bargain may actually be afforda-

ble if property depreciation is

claimed.

Astute investors will usually con-

sider the potential rental return of

the property, the property’s loca-

tion in proximity to local services

and facilities, local employment

drivers and historical growth of

properties within the area.

They should also work out the tax

deductible costs and other de-

ductions involved in owning the

property such as: property man-

agement fees, rates, interest, re-

pairs, maintenance and property

depreciation.

These deductions add to the in-

vestor’s net cash return and eve-

ry deductible dollar comes back

to the owner at their marginal tax

rate.

More often than not, investors fail

to consider the financial benefit of

claiming depreciation prior to

making their purchase. The fol-


lowing example shows how one property investor identified an additional yearly cash flow of $4,992 from

property depreciation.

The property investor was considering purchasing a ten-year-old house priced at $560,000. They did some

preliminary research and asked their Property Manager for a rental appraisal of the property, which resulted

in an expected rental income of $530 per week, or $27,560 per year.

The investor was also able to work out an estimate of the costs involved in owning the property. Expenses

including interest rates, property management fees, rates, repairs and maintenance costs came to a total of

$36,060 per annum.

They contacted BMT Tax Depreciation for a free assessment of the likely depreciation deductions they could

expect from the property and found that they would be able to claim approximately $13,500 in depreciation in

the first full year.

The following table provides a summary of these costs and the investor’s annual position, depending on

whether or not depreciation is claimed.

The depreciation estimates in this case study have been calculated using the diminishing value method of

depreciation.

Without claiming depreciation, the property investor would experience a loss of $103 per week during the first

year of owning the property. By claiming depreciation, the weekly cost is reduced to $7, saving them $96 per

week or $4,992 in the first year of ownership.

An investor who crunches their numbers prior to making a purchase will gain a better perspective on the af-

fordability of the property and their future cash flow position. Once they purchase the property, a specialist

Quantity Surveyor can be engaged to prepare a property depreciation schedule to ensure depreciation de-

ductions are accurate and maximised.

Ten year old house priced at $560,000

Scenario without depreciation claim Scenario with depreciation claim of $13,500

Annual expenses $36,060 Annual expenses $36,060

Annual income ($530 x 52 weeks) $27,560 Annual income ($530 x 52 weeks) $27,560

Pre-tax cash flow (expenses less income)

-$8,500 Pre-tax cash flow (expenses less income)

-$8,500

Total taxation loss -$8,500 Total taxation loss (pre-tax cash flow & depreciation)

-$22,000

Tax refund (total tax loss x tax rate of 37%)

-$3,145 Tax refund (total tax loss x tax rate of 37%)

-$8,140

Annual costs of the investment property (pre-tax cash flow + tax refund)

-$5,355

Annual costs of the investment proper-ty (pre-tax cash flow + tax refund)

-$360

Weekly cost of the investment property -$103 Weekly cost of the investment property -$7

Depreciation difference = $96 per week


large deposit, to investors who

have their equity tied up, and self

-employed people - who may oth-

erwise not be able to get a loan,

or have to pay higher interest

rates.

''It gives them an even playing

field,'' says Ms Sakr, noting that

Genworth's products, for exam-

ple, allow for people to borrow up

to 95 per cent of the value of a

property.

The Insurance Council of Austral-

ia estimates that about 20 per

cent of all mortgages in Australia

are insured with lenders' mort-

gage insurance.

Ms Sakr says lenders require

people to take out mortgage in-

surance to ensure that should

they default on repayments for

any reason - whether it be for a

marriage breakdown, unemploy-

ment or credit issues - any short-

fall in the loan amount is covered.

''Where the borrower goes into

default, the property is sold and

there's a shortfall between the

sale price and what's owed to the

bank, our product covers 100 per

cent of that loan amount.''

BMT Tax Depreciation offer a

number of ways for investors to

obtain an estimate of the depreci-

ation deductions that will be

available for any investment

property they are considering

purchasing.

The BMT Tax Depreciation Cal-

culator is available online or as a

mobile app for iPhone or Android.

Investors need to know only a

few details about a prospective

property in order to calculate a

quick estimate. To use the calcu-

lator online, investors can scan

the following QR Code.

Alternatively, investors can call

BMT Tax Depreciation for a free

over the phone estimate of po-

tential deductions.

Article Provided by BMT Tax Depre-

ciation.

Bradley Beer (B. Con. Mgt, AAIQS,

MRICS) is the Managing Director of

BMT Tax Depreciation. Please con-

tact 1300 728 726 or vis-

it www.bmtqs.com.au for an Austral-

ia wide service.

The Best Policy is to Expect

the Worst

Lenders' mortgage insurance

Required by lending institutions

for people with low deposits, this

insurance protects the lender

against the risk of borrowers de-

faulting on their mortgage repay-

ments.

Bridget Sakr, chief commercial

officer at Genworth, which is one

of the main suppliers of lenders'

mortgage insurance in Australia

and helped about 38,000 people

into homes in 2012, says lenders'

mortgage insurance was intro-

duced in 1965 to help people with

less than a 20 per cent deposit

into homes.

These days it is paid by a range

of borrowers - everyone from first

-home buyers who don't have a


It's usually charged as a one-off

fee, which can be paid at settle-

ment by the person buying a

property, or capitalised on to the

loan so payment simply becomes

part of the monthly or fortnightly

loan repayment.

While the fee amount depends

on how much is being borrowed,

Genworth says for someone bor-

rowing $350,000 to buy a

$400,000 home (an 88 per cent

loan-to-value ratio) the fee comes

in at $4620 (less for first-home

buyers, who qualify for discounts

of about 10 per cent).

If capitalised on the loan, this

means about $8 a week on top of

mortgage repayments.

The Insurance Council of Austral-

ia says the average lenders'

mortgage insurance premium is

about $3000.

Mortgage protection insurance

Aimed at protecting a borrower's

ability to pay out a loan or to

meet repayments, mortgage pro-

tection insurance needs to be

taken out by the borrower, and is

independent of lenders' mortgage

insurance.

Jo Attard, of Moonee Ponds-

based finance adviser Jo Attard

& Co, says that while lenders'

mortgage insurance is aimed at

protecting the lender, mortgage

protection insurance offers pro-

tection for people working to-

wards paying off a home loan. As

well as covering a mortgage in

the case of a person's death,

such products also offer ''living

benefits'' that cover the mortgage

while a policyholder deals with a

serious illness.

Ray Hair, chief executive of the

ALI Group, whose products are

available only through mortgage

brokers, says his company's of-

ferings include loan protection

insurance and loan repayment

protection insurance.

The former product covers every-

thing from the death of the policy-

holder to major traumas and the

loss of jobs (this is for the first 12

months of the policy only), with

benefits ranging from complete

payouts of the policy in the case

of the death of the policyholder to

part-payment of benefits for

specified events such as illness.

Loan repayment protection insur-

ance, on the other hand, is aimed

at protecting the borrower's ability

to make repayments if the bor-

rower is unable to meet them for

a specified period as a result of

an accident or illness.

Mr Hair explains that ALI's prod-

uct will pay benefits for 52 specif-

ic events. ''We'll be paying vary-

ing amounts from six months to

36 months of repayments, de-

pending on what's occurred.''

The premiums vary depending on

circumstances such as age and

smoking status of the policyhold-

er (payments will generally not be

made on pre-existing conditions),

but Mr Hair says ALI's average

premiums are about $600 a year

or $50 a month. Premiums are

paid directly to the insurer.

Ms Attard says taking out mort-

gage protection insurance should

be part of an overall repayment

strategy.

''Because it's no good having a

house and then tragedy strikes


Who Has to Pay? How the

Tribunal Decides on

Compensation

QCAT Senior Member Peta

Stilgoe answers common ques-

tions about Tribunal compensa-

tion applications.

Can an agent continue to

charge rent after the tenant

has handed back the property

until such time as it is brought

back to the state the premises

were at the start of the tenan-

cy?

Yes, but:

• the timeframe must be rea-

sonable

• the repairs must be genu-

ine – not a refurbishment at

the tenant's expense

• the agent must demon-

strate that it has attempted

uine pre-estimate of the loss.

If an Entry condition re-

port (Form 1a or 1b) was not

prepared, how does the Tribu-

nal view an affidavit in lieu of

the report?

With some suspicion.

How does the Tribunal view

the lack of an Exit condition

report (Form 14a or 14b)?

It may affect credibility. Even

though it is the tenant's obligation

to complete the Exit condition

report, a prudent lessor should

make sure that a report was com-

pleted and a copy given to the

tenant.

How long after the tenancy has

ended can a lessor continue to

require additional items to be

cleaned/repaired?

It depends. The lessor has a duty

to mitigate loss so it should iden-

tify what needs to be done quick-

ly.

Are photos a good source of

evidence?

to mitigate the lessor's loss.

Is compensation for items over

10 years old considered?

Yes, but the Tribunal rarely or-

ders replacement value if the

item has been depreciated 'off

the books'. It might order a token

sum for the cost of repair.

What does the Tribu-

nal consider when a tenant is

claiming compensation for

a lessor's failure to repair?

Is the lessor's response reasona-

ble in the circumstances? Does

the lessor have evidence that the

delay in repair is out of its con-

trol?

How does the Tribunal deal

with break lease fees and/or

advertising costs when the

tenancy is terminated by the

tenant relatively close to the

end of the tenancy term?

The Tribunal always considers

whether the break lease fee is a

genuine pre-estimate of the loss.

If the lessor was going to have to

re-advertise anyway, it is unlikely

that the break lease fee is a gen-

and you can't afford it,'' she says.

Insurance Council of Australia's Find

an Insurer - findaninsurer.com.au

Mortgage & Finance Association of

Australia - mfaa.com.au

Source : www.domain.com.au (9

April 2013)


They can be, although a party

might take a photo in a way that

highlights their case (lessors

magnify damage; tenants mini-

mise it).

The Tribunal will not accept elec-

tronic copies of photos or film.

Photos should be date stamped

and the person who took them

should be available to give evi-

dence. A party relying on photos

should have the originals availa-

ble for the Tribunal and copies for

the other side.

Are quotes considered?

Quotes will be considered but the

age of the quote, and the reason

why the quote has not been ac-

cepted, will be a factor in the Tri-

bunal's decision.

How does the Tribunal view

the 6 month limit under s419(3)

of the Residential Tenan-

cies and Rooming Accommo-

dation Act 2008?

There is no discretion for the Tri-

bunal to extend time under s419

(3). If the application is not made

within 6 months of

the breach, the Tribunal cannot

order compensation.

Source : www.rta.qld.gov.au (5 June

2013)

The 3 videos, Before a tenancy,

During a tenancy, and Ending a

tenancy, highlight the most im-

portant facts you need to know.

RTA General Manager Fergus

Smith said it was important peo-

ple have access to key tenancy

information in the medium that

suits them best.

“Giving people the nuts and bolts

of renting will help them better

understand their rights and re-

sponsibilities and help improve

tenancies in Queensland,’’ Mr

Smith said.

“This video series will comple-

ment the information we have

available on our website, through

our call centre and via our range

of printed publications.’’

Know where you stand can be

viewed on the RTA Queensland

YouTube channel.

Learn YOUR Rights with the

Latest RTA Tenancy Videos

The RTA has launched a series

of videos designed to give people

an overview of the renting pro-

cess in Queensland.

The Know where you

stand series gives owners,

agents and tenants the basics to

help make your tenancy run

smoothly.

7 October PUBLIC HOLIDAY 18 October Mid Month Accounting 1 November End of Month Accounting

A Selection of Properties Recently Leased

Herston House $510p.w.

4 bed, 2 bath, 1 car accommodation

Quote

“Twenty years from now you will be more disappointed by the things that

you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbour. Catch

the trade winds in your sails. Explore. Dream. Discover.”

-- Mark Twain

Red Hill House $660 p.w.


RE/MAX Profile Real Estate 141 Boundary Road TEL 07 3510 5221 FAX 07 3876 5544

www.profilerealestate.com.au Bardon QLD 4065 TEL 07 3510 5227 Helen [email protected]

www.propertyrentalsbrisbane.com PO Box 388, Paddington, 4064 Chelsea [email protected]

Errors & Omissions: These details have been prepared by us on information we have obtained and while we trust it to be correct, is not guaranteed by us and you should rely on your own enquiries.

The Gap House $520 p.w.


Calendar of Events

Documents

RE/MAX Profile Landlords' Newsletter October 2013