Don’t be shy, recent rate rises have hurt many of us and I for one can no longer absorb the shortfall.

Contact your tenant, tell them you are reviewing their rent. If they have a fixed lease let them know the amount of your rent increase and give them the option of getting out early if they don’t think they can handle the new rate when their lease is up for renewal. There are plenty of good tenants out there busting to get into a good property like yours.

From the Australian Bureau of Statistics (or the ABS)

Dwelling approvals fall in November 2010

ABS Building Approvals show that the total number of dwellings approved fell 4.2% in November 2010, in seasonally adjusted terms, after rising 8.3% in October.

According to the ABS, Victoria (3.1%), Queensland (3.3%) and Western Australia (7.1%) recorded more dwelling approvals this month while New South Wales (-13.4%) and South Australia (-2.7%) recorded fewer dwelling approvals in seasonally adjusted terms.

Private sector houses approved fell 1.7% with falls in New South Wales (-4.9%) and Victoria (-2.8%) while Queensland (4.1%) and Western Australia (0.9%) rose. South Australia remained steady.

The value of total building approved fell 3.5% in November in seasonally adjusted terms. The value of total residential building fell by 5.9% while non-residential building rose by 1.4%.

Further information is available in Building Approvals, Australia (cat no. 8731.0) on the ABS website at www.abs.gov.au

The following article sums things up:

Mortgage Watchdog.

From NMDDATA.COM.AU

“Housing supply deficit widens

“The fact of that of the national under-supply, half of it is in Sydney, it’s going to take a long time to turn this around. We expect housing shortage to get worse over the next five years and it’s an underpinning factor for price growth, which is going to be pretty strong,” said Braddick.”

Maybe it is time to add to your property investment portfolio. Speak to your mortgage broker and find out your borrowing capacity.

“Non-commercial rental

If you let a property – or part of a property – at less than normal commercial rates, this may limit the amount of deductions you can claim.

Example 7: Renting to a family member

Mr and Mrs Hitchman were charging their previous Queensland tenants the normal commercial rate of rent – $180 per week. They allowed their son, Tim, to live in the property at a nominal rent of $40 per week. Tim lived in the property for four weeks. When he moved out, the Hitchmans advertised for tenants.

Although Tim was paying rent to the Hitchmans, the arrangement was not based on normal commercial rates. As a result, the Hitchmans cannot claim a deduction for the total rental property expenses for the period Tim was living in the property. Generally, a deduction can be claimed for rental property expenses up to the amount of rental income received from this type of non-commercial arrangement.

Assuming that during the four weeks of Tim’s residence the Hitchmans incurred rental expenses of more than $160, these deductions would be limited to $160 in total – that is, $40 x 4 weeks.

If Tim had been living in the house rent free, the Hitchmans would not have been able to claim any deductions for the time he was living in the property.”

This example makes it crystal clear. If you get caught fudging the figures, the tax office has made it as clear they will be cracking down hard. Don’t risk it. Help the kids buy their own property instead. There are a myriad First Home Buyer inducements out there.

The rental property road is littered with obstacles, none more apparent than the need to have tenants. I list tenants as obstacles, as many a well intentioned property investor as had their dreams shattered by a rip-off tenant. Surviving the experience they say makes you stronger, but for many it is the last straw. Many leave the property investing game after a bitter experience with a tenant.

Unless you count Tony Soprano as a close personal friend, Landlord Insurance. is the only way you can protect yourself and not feel so violated when a tenant walks without paying rent or wrecks your investment property.

The cost of a policy can vary wildly, but if you can get cover for around .2% of the replacement value of your property or an amount equal to three weeks rent you are not paying to much. I am always prepared to pay a little extra for a lower excess.

Things you need to be covered for as a minimum are:

Loss of rent due to rent default.
Loss of rent due to death of sole tenant.
Loss of rent due to an insured event e.g; fire, flood, storm damage or damage to a neighboring property that may restrict access to your property.
Legal costs for evicting a tenant in default of rent.
Building replacement, impact, storm damage and flood cover.
Theft, or malicious damage by tenant or visitor.
Personal liability at least $20,000,000
Accidental glass breakage.
Replacement of locks and keys.
Contents cover for fire theft and malicious damage.

These are the basics, a qualified insurance broker can give you the complete picture. Be sure to read the terms and conditions of the policy before you purchase. Get three quotes if you have time. Most landlord insurance providers let you pay monthly, so you can use your cash flow from the property to fund the premium. Or you maybe able to get it deducted from your mortgage. You cannot afford not to have this cover. The Bond money you get from a tenant is never enough to cover the damage they do.

I also advise you to make friends with a plumber. Tenants are always blocking drains or breaking taps.

Well, unless you’ve been living marooned like Robinson Crusoe on an Island in isolation for the last year, I’m sure you’re aware of the US credit meltdown, and its domino effect on the economies of the world. A new style of economy is coming, and I am now doing a John Howard style back flip.

Don’t get me wrong, I am still bullish for Australian residential property for the long term, but with such a high percentage of our workforce now employed on a casual basis, and consumer demand on the wane, the short term outlook is now very cloudy. Timing is nearly as important as location in the current financial climate. Move to soon you, and you may get badly burned, especially if you have a short term outlook.

It is now a perfect time to review your current loans, credit cards and spending habits. Interest rates are coming down. Call your mortgage broker, organise a sit down, review your mortgage suitablility and see what’s available. If you can better your cash flow at the moment, you may well be in the box seat to take advantage when the new economy emerges.

Educating yourself in the different aspects of purchasing a property is the only way to guarantee that you get the best possible deal. Nearly all the other players involved in your property related transaction have their own interests at heart and you are fooling yourself if you think otherwise.

With the large amount of money involved it is a case of “Buyer Beware”. No amount of government or industry regulation is going to protect you from making errors or mistakes.

Use the following resources to increase your knowledge and help you in making decisions. Buy a couple of good books from our recommended list – they contain a wealth of information that would take a lifetime to accumulate, and the cost is insignificant compared to the money lost if you get things wrong. Find out what LVR is? It is an important term.

The resources listed below are all resources that I have used myself and have personal experience with, including the books which I own, have read, and regularly refer to as I buy and sell property. Internalising this mortgage, home loan and property information will also help you decide which professionals you make part of your property wealth creating team.

Home Loan Resources
Home Loan Rates
Information on current home loan interest rates in Australia.
Borrowers Check List
What you need to have ready before you approach a lender or mortgage broker.
Credit Comparison Rates
All loans are not equal so how do you compare loans?
Mortgage Calculators
Check out different mortgage repayment scenarios. See also the PC based software and loan calculators below.
Property Related Web-sites
Australian web-sites with useful resources.
Loan/Mortgage Brokers
Helpful Brokers who will find the best loan for your personal circumstances.
Recommended Books
A book list and reviews of Property related books by Australian Authors.
Mortgage Calculator – PC based software
The banks do not want you to use this software because of the refunds they have had to make to users. If you have an existing mortgage then it will pay you to buy this particular mortgage calculator instead of using the free bank calculators. Not only can you do “what if” scenario’s but you can check whether the bank has been ripping you off with your mortgage.

Loan Calculators | Australia

Tenants not paying on time or behind, unable to make your interest payment on your rental property loan?

Don’t use your own money, consider setting up an interest only line of credit allowing capitalisation of interest and use it to pay the interest on your principal investment property loan until you have sorted things out with your tenant or cash flow has improved. If you borrow to pay your interest, the interest on the line of credit will be tax deducible as well. The one proviso is that you genuinely have cash flow problems and are unable to pay the interest on your investment property home loan.

See your mortgage broker for details about interest only interest capitalised line of credit home loans. Remember treat your property investment as a business, not a hobby. Give it a chance to succeed, a ten year chance at least.

To this end my mortgage broker and I agree interest only mortgage loans are the number one type of loan for a property investment in Australia. So why are they number one?

Interest only home loan mortgage.
As the title indicates, an interest only mortgage or home loan means your repayments only have to cover the interest portion of the loan. You do not have to reduce your original home loan principle. After all it is only the interest you pay that is tax deductible, paying off principal just reduces your cash flow. Cash flow is king, as you need it to succeed in any and every business.

Freeing up the principal component for use for other investments is good business acumen. Inflation, demand and supply will take care of the value of your property against the amount of your loan. By lowering the ongoing servicing costs you will keep one step ahead of the principal and interest pack. Most major banks and other major home loan mortgage lenders will allow you to choose an interest only period of up to 10 years, if you can get a longer period of interest only on your investment home loan or mortgage, take it.

Some lenders even let you pay interest only in advance. This will give you significant tax savings in the early years if you have the means.

Interest only home loan mortgage statements are also easier to check for errors. I suggest you still consider some pc based mortgage checking software. Mortgage lenders and banks make mistakes. Recent surveys reveal over 50% of loan statements have errors. Please check your statements.

If you are residing out side Australia and love property like I do, but are wary about a new purchase due to the credit crisis, I have some good news for you. There is a strong rental market in Australia that could provide steady returns for you as an overseas investor.

Australia has a strong economy, is politically stable and safe with strict consumer protection laws. A Residential Tenancy Act of Parliament offers protection for both tenant and landlord, so you get plenty of quality people renting. There are also considerable tax incentives in Australia for landlords. There is also a Privacy Act in Australia that protects consumers. This Act stops unwanted marketing or soliciting. The Australian Competition and Consumer Commission and the Office of Fair Trading are the legal watchdogs appointed by the Government to make investment safe and reduce risk.

Experts agree that as an increase in rental demand pushes rents upwards, Sydney, Melbourne and Brisbane/Gold Coast will have the best rental return potential and capital growth over the next few years. They are also great places to live.

There is one small prerequisite for non-residents investing in Australian property: All non-residents who would like to invest in Australian property have to apply for Foreign Investment Review Board approval. If you have been granted Permanent Residence or citizenship in Australia you will be exempt from this prerequisite. One rule you need to be aware of is that as a non-resident you can only buy new properties and not second-hand properties. A second-hand property is one that has been registered in someone else’s name other than a developer before the non resident purchases it. I suggest you contact the Foreign Investment Review Board for an exact explanation of this rule. The laws of Australia are based on British law which means that the laws behind real estate title are similar.

Experienced property investors can capitalise on the tax incentives in Australia and clean up for years to come. Our home loan interest rates are a little higher than the US, but have generally been fairly stable over the last fifty years and our reputable mortgage brokers and most of the lenders love overseas borrowers.

So consider Australia for your next property investment, better still emigrate here, we would love to see you.

I believe Australian residential property is the very best place to invest your money for consistent long term growth. I am also a great believer in keeping a cash reserve or having a line of credit home loan with unused limit available to cover periods unforseen financial or mortgage stress. I also believe every property investor should have a valid will, various power of attorney’s, as much life insurance as your budget will bear and a mortgage checker program. I don’t think I need to spell out why you should consider these products, you are smart, you are considering a residential property investment!

All the risk management products mentioned above are available online, so there is no excuse if you have made the decision to be wealthy, start today, effectively managing your risks is a priority.

Historical evidence backs up my belief in residential property, and the longer you can keep a property in our capitalist society the wealthier you will become. However, there are a couple of myths about residential property I would like to clear up.

Myth 1. “Australian Residential House Prices Will Never Fall”

I would like to continue to proliferate that myth, but the facts don’t allow me too. The sad fact is House price’s have fallen in the past and a fluctuation in pricing is just a fact a of life that mortgage holders and property investors, rental property owners have to learn to live with while they make a fortune. When demand is high, prices will rise. If demand is low some prices will continue to rise (Location, location), but on the whole prices will tend to slide, but you will still have the rent. Factors that effect demand like interest rates, job’s, business sentiment, government interfering and population will always be present. The underlying factor that drives my confidence in Australian Residential Property is the simple fact that usable land is a finite resource, especially in our capital cities.

Myth 2. “Any Home Loan Mortgage Will Do”

“Just get me the lowest interest rate. I have found the place I want.” My Mortgage Broker bemoans this statement every time we talk about property investment finance. He generally agrees with the notion that his client has the ability to choose a suitable investment property, but he takes exception with the direction to find the lowest mortgage interest rate. The lowest interest rate home loan does not always match with the clients needs and the ideal mortgage loan for the clients circumstance may need to include features that demand a higher interest rate. So there is always a trade-off between cheap and right or quality. Right and quality should always win, because the property investor should be in it for the long haul, and the quality will last. The cheap will probably need to be replaced. (This is why I like my guy, he tells the truth, except for a recent mortgage for a purchase, my loans are all over five years old. Some mortgage brokers would rather churn your loans every three years and make a fat commission every time.)

So I say anytime is a good time to acquire a residential home or investment property. After all you have made the decision to wealthy haven’t you? Plan to keep it for a generation if you can. Cover yourself with the various insurance’s and estate protection legal device’s. Find a trustworthy mortgage broker mortgage coach, a competent lawyer, conveyancer, accountant, builder, real estate agent, insurance broker, planner, quantity surveyor, mortgage statement checking software and friendly property investment mentor. Get it happening, now!