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Why Cheap Agents Can End Up Costing You More

By | Agent selection | No Comments

We have all had an experience (or several) where we have realised that cheap goods or service cost you more in the long, and sometimes very short, run. Be it a cheap t.v. or whitegoods that fail just after warranty expires; or maybe it was that accountant that gave you a $99 tax return that saved you $50 to $100 in initial fees but you in actual fact have missed a lower tax bill by $500 to $1,000; or maybe it was that real estate agent that promised to sell your house for a lower fee, but then another property in your street gets sold a month or two later by a different agent, and it wasn’t as nice and big as your one but they got $20,000+ more.

And the reason why this happens in real estate lies in the motivation of the agent; do they just want your business and money or do they genuinely want the best result for you. Anyone who provides the same service to two clients yet gets paid less for one will logically provide a lower quality service and therefore result to the one paying less and they won’t be willing to go the extra mile to get you the best price possible. They will be looking at you like a number, another one in and out of the system as soon as the agent gets the price that will get them their commission, not what is the best price that I can get for the client.

You may have already experienced this if you have sold before, or if you have an investment that is managed by the cheapest agent you would have likely found that rent reviews were not regularly conducted, or that the repair to leaking roof cost a few hundred dollars more than what it should. According to the REIV, the current (June Quarter 2017) Melbourne median house price is $822,000 and the median rental is $420 per week. A real estate agent that would sell your house for half a percent more would equate to $4,110 in higher fees, one $10,000 bid at auction would cover this and then some; or a property manager that is a percent more in management fee would equate to $219 in higher fees, miss one $10 per week rent increase and it would cover the agents higher fee for two years approx.! And when you factor in potential tax benefits, the reasons for using the better agent are even greater.

But be weary of some premium agents too, sometimes they may just be “mutton dressed as lamb”.  So next time you look at an agent solely based on fee, think about how much they might be costing you in the long run. Avoid the temptation of the “quick fix” of getting the cheapest fee, focus on using an agent that has passion, wants the best result for you, is or has created a brand and legacy, has history of great results and not just a great number of sales.

If you need any advice regarding the sale or management of your asset please do not hesitate to contact us.

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Why advertise when you can sell off-market?

By | Selling | No Comments

There are many ways to sell a property and one of the methods is to sell “off-market”.

Selling off-market is when an owner decides to sell their property and appoints an agent to do so without the use of traditional advertising.

So what are the benefits of selling off-market?

The benefits of selling-off market including not needing to outlay any monies to advertise, no sticky-beak neighbours popping in and having only genuine buyers inspect the property. Where time is of the essence, say in the case of financial distress, an owner may want a quick result and not be willing to wait for photos and advertising/marketing material to be prepared. In the case of high end property, there are only a limited number of buyers that can afford to purchase such properties and they are usually known within the network of the estate agent, therefore in some circumstances there is little need to advertise.

What are the negatives of selling off-market?

Whilst you may have an idea of who your typical purchaser will be, you never know who will actually end up buying it. By not advertising to the open market, you restrict the number of potential purchasers and this can limit the end sale result. There is also limited urgency on behalf of the buyer as there is less competition therefore not giving the buyer incentive to put forward their best offer.

If a property is ready for sale, good agents will already have a list of buyers looking to purchase and will show these buyers through before advertising. This is not a true off-market opportunity but rather a pre-market opportunity where if you pay the owners price they will sell. Some owners apply the tactic of “if I get my price, I sell”, these properties usually don’t sell and end up being “conditioning properties” used to show buyers “expensive” properties in the area, agents will then offer these buyers other properties which are “better value” driving up the price of the property that the agent thinks they can sell.

Some agents don’t have the ability to manage an off-market sale without compromising the sale price and as a buyer these are the agents you want to follow, as a seller follow the agent that has the skill to navigate the challenges that an off-market sale can bring and who can get you a great result.

If you are thinking about selling please give us a call to discuss the best selling method for you.

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What is the point of a lease renewal?

By | Lease Renewal | No Comments

It may seem obvious to some, but for many Landlords and Tenants they can’t seem to understand the reasoning behind a lease renewal.

It’s not just a quick process that property managers do, it’s a calculated, thought out task that can benefit both the Landlord and Tenant.

Let’s look at the Landlord’s side of things first, from a Landlords point of view you would want a good tenant to stay long term and not move out after a year or so.

This is where discussing the lease renewal with the existing tenants is so important, if we can secure another year or more and possibly increase the rent* this is a great result for the Landlord. *Depending on market conditions, more on rent increases can be found on our previous blog http://www.directpropertygroup.net.au/rent-increases-and-getting-them-right/ Read More

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Make money from renovating your investment in three years

By | Maintenance, Renovations, Tax deductions | No Comments

For this month’s blog we take a look at renovating your residential rental investment and what value and financial benefit that can bring you as an owner. Each example includes the cost of our project management fee as we managed each of the renovations of these assets.

We take three different properties in three different suburbs and understand: –

– what their previous rental amount was;

– what value was added and the cost of the renovation (including our project management fee);

– what the current rental rates are and;

– what the payback period is for investing in the renovation*.

Example 1 – Three bedroom home in the Altona area

Property was being leased at $1,434 before Tenants vacated and a renovation was completed. We managed the renovation that included installing a second hand near new kitchen, painting, lighting upgrade and tiling. Total investment towards repairs was $14,210 and the property was leased after one open at $1,695 per month. Annual rental improvement is $3,132 combined with $972 in tax savings in year one brings the total annual benefit to $4,104, the payback for this renovation is approximately 3.36 years*.

Example 2 – Two bedroom apartment in the South Yarra area

Property was originally vacant however a similar two bedroom apartment in the building was leased at $1,217 and was in better condition. We managed the renovation process which included new kitchen, painting and various other repairs. Total investment towards repairs was $11,405 and the property was then leased after one open at $1,477 per month. Annual rental improvement is $3,120 combined with $780 in tax savings in year one brings the total annual benefit to $3,900, making the payback period approximately 2.84 years*.

Example 3 – Three bedroom home in the Brunswick area

Property was being leased at $1,950 before Tenant vacated and we undertook a substantial renovation. We managed the renovation that included installing a new kitchen, painting, landscaping and new guttering. Total investment towards repairs was $19,800 and the property was leased after two opens at $2,390 per month. Annual rental improvement is $5,280 combined with $1,354 in tax savings in year one brings the total annual benefit to $7,931, making the payback period just under 3 years*.

*The payback period factors a modest $5 per week rent increase each year and the tax saving is calculated on you having one rental investment and being in the 38% tax bracket with an 18% reduction in tax savings each year, these figures are estimated and your individual tax situation may be different so please seek professional financial advice specific to you.

Our calculations do not factor the time saved in securing a new Tenant as new properties generally take a shorter time to lease, we have done this to roughly offset the time taken to renovate the property.

As you can see from the examples, it’s clear that by undertaking a renovation you will in a short time frame have your initial investment paid back whilst reaping the rewards of a significantly higher rental for the future. Not only do you get the higher rental to begin with, you typically gain a better quality Tenant and a lower amount of repairs being needed during the year.

Contact us should you be considering the need to renovate your investment and would like a chat on how we can help you make managing your investment much easier.