The Key to Cairns property investment

Before diving deep into the Cairns property market, the best advice is to do your research first. Low vacancy rates and recent market slides have seen in influx of interstate and local property investors coming back into the property market.

The Cairns property market (much like throughout Australia) is a solid investment choice due to it’s consistent increases over time.

When investing in property it is important to remember that there is a regular cycle. This can be during a seven to ten year period and during that time the market will experience both highs and lows. Investing in property is a tried and tested way of creating a valuable assett.

The Australian Tax Office permits negative gearing for investors. This means that if an investment runs at a loss it can be claimed as tax deduction offsets. This is one of the reasons that many people prefer to invest in property – if the market is at a low then their losses are claimable.

With more and more interest rate increases we are seeing that lenders are being more cautious with the amounts they are lending and to who. Our Cairns property investment specialists will find the right lender and loan offer that is right for you. We do the research for you which leaves you more time to find the perfect property.

How to find the right investment property and maximise your income

Unit or house in Cairns?

Units are generally easier to maintain than a house. If the unit that you purchase is held under a Strata Title then it is regular practice for the care and maintenance of the common areas of the complex to be looked after by the Strata. This also incurs Strata Fees. A unit will more often than not increase in value at a slower pace than a house. The benefit of having a unit in the right location in Cairns is that they are often more sought after due to their low maintenance which makes it a perfect rental for the busy lifestyles of many tenants.

Location matters

When you are looking for a Cairns property investment, start by scrolling through the current rental availabilities on a regular basis. Take note of the areas they are available, how long they are advertised and the prices. This will give you insight into the current rental market in the area. Tenants in different stages of life will be looking for different things. Locations close to schools, transport, services and shops are attractive to most and can yeild a higher rental income depending on the condition of the property.

Don’t become emotionally attached

We spoke to a Cairns property manager and one of the main leading questions they asked their potential clients was ‘are you emotionally attached to the property’? If they answered yes then then they would suggest thinking carefully about renting the home out. A home that you grew up in, raised a family in or are looking to settle in in the future can cause you to see the property in a different way to someone who has no intention of using it themselves. Taking out the emotion means taking out your individual style. When looking for an investment property it is best to approach it logically. What would appeal to tenants? You want it to be comfortable, liveable yet not high maintenance.

It’s not just about the Cairns mortgage

When calculating your finances make sure not to forget to include additional payments that come with owning property. You will be required to pay land and water rates, possible strata rates if you purchase an apartment or unit and also you will need to cover repairs and maintenance. These things can all add up and having them incorporated in your budget is a great way to estimate the total cost involved.

Would you drive a car that wasn’t insured?

Hopefully not! That’s why we strongly recommend that you consider taking out Landlord Insurance. Landlord insurance covers the building itself (and can include fixtures such as hot water services and airconditioners) but also gives you piece of mind in the event that the property is abandoned, damaged or the tenant leaves a hefty rent arrears bill.
If you have invested in a property under strata title then the building insurance will be provided through the body corporate. Make sure that the insurance they have is sufficient enough to cover rebuilding the structure in the event of damages. It can get confusing trying to determine what is covered by strata and what is the owners responsibility. An easy way to think about it is internally it is the owner from the paint on the wall. Everything outside of that is the body corporate.

Interested in interest only loans?

Locking into an interest only loan is a stategy used by many investors as interest payments are tax deductable. Running the property so that you don’t receive an income means that you are not generating a profit, you are only gaining a profit in the long run on the hope that the property will increase in market value over your ownership period. This is referred to as negative gearing.
If you will make an income from your Cairns investment property you may want to lock into a principal and interest loan. You can then direct the profit into the loan to reduce the principal payments.
Have a chat with your accountant today about your goals and personal situation. Make sure to update your Cairns mortgage broker so that they can assist in directing you to the right loan to achieve your tax goals.

Manage your Cairns investment property

Are Property Managers worth it? Most definitely! Whilst they can’t remove the risk of renting out an investment property altogether, they can put in place policies and procedures to mitigate the risks that may occur. This is because they are educated on the Residential Tenancy Act and can act within the guidelines provided. Property Managers collect the rent, carry out reference checks, advertise the property, create legal binding documents and do thorough inspections on a regular basis. They also can arrange repairs, provide in depth condition reports and represent the Landlord in the event of any dispute. They hold records of documents and provide end of financial year statements for tax purposes. Their management fees are also tax deductable. Should you decide to engage a property manager, do some research – ask your friends, colleagues and family members for recommendations. Check out your local agencies online and make sure you read their reviews.

Still on the fence and think you can go it alone? Make sure you are up to date with the current tenancy laws. Document everything and make sure to carry out regular routine inspections. Most agents conduct them every 12-16 weeks.

Each person has their own individual situation. JGM Lending & Finance mortgage brokers in Cairns have a great rapport with local lenders and will negotiate the best loan for your needs.

Depreciation? Appreciated!

When purchasing a new or more modern property, the ATO discounts the tax paid for depreciation on a property. The amount is determined by the year your property was established, the fittings included in the building as well as the materials used to build. Contact a professional in tax depreciation to arrange an assessment of the property. This can be included in your tax return and costs approximatley $600.

Take control of your Cairns investment property

Speak with your local investment property specialist and Cairns mortgage broker, JGM Lending & Finance for up to date advice on considerations of dual income options for property ownership.

FAQ – Property Investment

Why should I purchase a Cairns investment property?

Capital Growth

Capital growth means that the value of property increases over a cycle. On average the long term growth rate in Australia is approximatley 9% per year. During a 10 year cycle for example, a property may increase, decline or stabilise. Based on a 10 year cycle, with an increase in the current market value of 7.5% per annum, your property will be worth twice the purchase price.

Rental income

Rental income is the rent collected from your Cairns investment property. Over longer periods the capital growth for a property that generates a lower rent income than a more expensive home will see a higher capital growth.

Tax benefits

Owning an investment home that is negatively geared (costs you out of pocket to have) means that you will benefit from the Federal Government tax offset. Every dollar that it costs you the owner is money that you won’t have to pay tax on. Added to your annual income this can be quite beneficial.

Leverage

Investment properties generate a higher increase in value over time than stocks. By using your property as leverage, you can take out a mortgage to purchase an investment. If a home that is valued at $500,000 increases by %10 in a year you generate a $50,000 profit.

How much money can I borrow?

Each situation is different, contact JGM Lending & Finance to speak to one of our Cairns mortgage brokers to find out your borrowing power.

Which loan is best for me?

We love helping local residents learn about range of home loans available to them. There are so many options available let our experienced mortgage brokers talk you through the different types and features on offer.

How much do I need for a deposit?

Depending on the value of the property you will need a minimum deposit of 5% – 10%. This amount is to be paid when signing a sales contract. Already have an existing property? Contact us today to find out how you can borrow against the equity.

How much will my loan repayments be?

JGM Lending & Finance Repayment Calculator is a great tool to use to estimate your home loan repayments. Due to various home loan products and offers to secure the best loan rate contact us today.

When do I make repayments on my home loan?

Having a home loan with different repayment options offers you the flexibility to pay either weekly, fortnightly of monthly. Did you know that by making more regular payments on your home loan you may pay your loan off quicker which will save you money?

FAQ – First Home Buyer

Am I eligible for the First Home Owner Grant?

Being a first home buyer means you may be eligible to apply for the first home buyers grant. If you are an Australian citizen or a permanent resident and wish to make Cairns your place of residence for 12 months then chat with our lending specialists today to find out more about the QLD eligibility requirements.

Are there any charges/fees that I need to be aware of when buying a property?

Being aware of the fees and costs involved below when purchasing a property will ensure that you don’t get any surprises:

– Stamp Duty – Stamp duty is a government tax that is legally required to be paid on single property purchases. The amount that you will be required to pay varies and is dependent on the value of the property and in which State you are purchasing. The mortgage may incur a stamp duty fee also.

– Conveyancing and Legal fees – You will need to engage a conveyancer. They are licensed professionals who provide title searches and legal documentation preparation, they assist both the vendor (seller) and purchaser through the selling process. These fees vary and often range from $1000.00 – $1500.00.

– Building inspection – When discussing your contract of sale, you should do so by including the condition ‘subject to buiding inspection’. This allows you the opportunity to engage a qualified building inspector to inspect the property prior to purchase. Should there be any structural problems this will then ensure that you have the opportunity to withdraw your offer without incurring any financial penalties. An inspection report varies depending on the property size. The sales agent or your conveyancer can arrange an inspection for you and the cost can be anywhere up to $1000.00. This amount may be paid at settlement and is not included in the conveyancing charges.

– Pest inspection – We have all seen the horror stories of the damage white ants can do. Make sure you include ‘subject to pest inspection’ in your contract of sale. Allocating up to $500 to secure a pest control inspection will ensure that the property is free of unwanted pests which can cause significant damage to the home. If there are any pests residing on the property then you will have the option to withdraw from the contract without incurring financial penalties. The sales agent or your conveyancer can arrange an inspection for you. This amount may be paid at settlement and is not included in the conveyancing charges.

– Lender fees – An establishment fee between $600 – $800 is a common fee charged by the lender. This covers the cost of administration and valuation. Your mortgage broker will advise you of the exact charges when establishing the home loan.

– Moving costs – If you plan on using a removalist make sure you include their charges in your calculations.

– Lender Mortgage Insurance – Lender Mortgage Insurance (LMI) is incurred if you are borrowing more than 80% of the purchase price of the property.
In addition to LMI, you may also want to sign up for Mortgage Protection Insurance.

– Strata – If you purchase a property that is a strata title (when purchasing units or apartments with communal areas) then you will be required to pay ongoing strata fees. The Sales Agent will be able to provide you with information relating to the annual costs involved.

– Ongoing property costs – The following costs associated with owning a property should be considered: Water rates, council rates, insurance, and loan repayments. Most home loan lenders require the borrower to insure their property with building insurance as a minimum to cover the borrowed amount.

 

Looking for an investment property in Cairns?

Contact JGM Lending & Finance to find a loan that is right for your situation. Send us an enquiry and our finance brokers will contact you.

Need a home loan?

Whatever your circumstances, we will look for a loan that’s right for you, not the lender. Send through a quick enquiry and we will be in touch.