Capital Properties, Author at Capital Properties

Has US inflation peaked?

You may have heard talk last year about when and where US inflation would stabilise. Followed by headlines at the beginning of 2023 confirming that US inflation peaked in December 2022. Now, the question economists are trying to answer is how far, and how fast inflation will come down.

In this post we’ll answer the question, “what is inflation?”, explain the different types of inflation and how we measure inflation. Then, most importantly, we’ll explain what the current inflation rate means for Australia and the property market, now and in the near future.

If you’re interested in property investment as a way to build wealth and secure your financial future, then Capital Properties can make sure you’re on the right track. Book our FREE Capital Properties Discovery Session to get started.

Already on board? Don’t forget to take advantage of our Property Investment Tools & Apps and essential resources from our Capital Properties Pinnacle Support Program.

On the go? Here’s 30 seconds of take outs:

Inflation is the rate at which the prices for goods and services rises.
When inflation is ‘high’ you get less for your money.
The 3 types of inflation are demand-pull, cost-push & built-in inflation.
We measure inflation using the Consumer Price Index (CPI) & the Wholesale Price Index (WPI).
Inflation can be caused by many factors such as increased demand for goods & services, supply chain disruptions, natural disasters & government stimulus spending.
US inflation matters in Australia because it effects our exchange rate – which effects overseas investors.
Property investors recognise that inflation can raise the value of their assets.
It’s predicted that the inflation rate will gradually reduce toward the 2-3% target by the end of 2024 & drop to 2.5% in 2025.

Keep reading >>

What is inflation?

It’s important to understand what inflation is and how it affects the economy. Inflation is the rate at which the prices for goods and services rises. Inflation has always fluctuated over time. In a healthy economy, there’s a gradual rise in overall price levels over time. That allows for moderate long-term interest rates, stable prices, and high employment rates. This ideally coincides with increasing wages, so people don’t have to be too concerned about increasing prices.

However, when inflation is ‘high’ the cost of goods increases so that your money effectively buys less. In these circumstance people become more careful with their spending which leads to a decrease in consumer confidence and result in slower economic growth.

Negative inflation, aka “deflation” is a sign that the economy is struggling and can potentially lead to a recession or depression.

Three types of inflation

Inflation can be classified into three types:

Demand-pull inflation happens when the supply of money in the economy is increased. This boosts customer confidence and the demand for goods and services extends beyond the economy’s production capacity. This surge in demand then leads to price rises.
Cost-push inflation is a type of inflation caused by increases in the cost of important goods or services where there’s no other alternative available (key commodities). When businesses have to pay higher prices for underlying ‘inputs’, they have to increase prices of their ‘outputs’ for their customers. For example, when the cost of oil goes up, the customer has to pay higher energy prices.
Built-in inflation occurs when people anticipate that the price of goods and services will go up in the future so their demand for goods and services increase. As a result, the cost of the goods/services increases and workers demand higher salaries to maintain their standard of living. This is known as the wage-price spiral.

How do we measure inflation?

Here in Australia, there are 2 main measures of inflation. The Consumer Price Index (CPI) and the Wholesale Price Index (WPI).

Consumer Price Index (CPI)

The most well-known indicator of inflation is the Consumer Price Index (CPI). The Reserve Bank of Australia defines CPI as a tool which “measures the percentage change in the price of a basket of goods and services consumed by households”. In Australia, the Australian Bureau of Statistics (ABS) calculates the CPI and publishes the data every quarter.

Wholesale price index (WPI)

The wholesale price index (WPI) measures the overall change in the price of products (goods and services) as they leave the place of production or as they enter the production process – i.e. before they reach consumers. In the U.S. the WPI was renamed the Producer Price Index (PPI).

In the US, inflation is also measured by Personal Consumption Expenditures price index (PCE) which comes from surveys of businesses that measure their customers spending on goods and services. The Federal Reserve (the US central banking system) prefers to use the PCE to measure inflation as it doesn’t rely on the more volatile food and energy prices.

What can cause changes in inflation?

In recent years, inflation has been rising steadily, here and in the US, due to a surge in demand for goods and services after COVID-19 lockdowns, government stimulus spending and supply chain disruptions. However, by December 2022 the rate of inflation in the US had started to slow down, leading some economists to believe that it may have peaked. We say “may have” because although we do our best to use the measures above to predict what’s happening with inflation, it’s far from an exact science.

There are many other factors can cause changes in inflation. For example, natural disasters such as the 2022 floods here in Australia drive inflation as they result in higher prices in agricultural products (e.g. fruit & veggies) due to disrupted supply chains. And, in March 2023, the global banking system reeled from the collapse of Silicon Valley Bank, Signature Bank and a potential failure of First Republic bank and Credit Suisse. This caused stock markets to wobble and consumer confidence to fall.

So, it’s prudent for us to keep an eye on the US market and ask if US inflation peaked. And what does that mean for Australia?

Why do we care about inflation in the US?

Although the Australian economy is not directly tied to the US economy, there are a few ways in which US inflation could indirectly affect the Australian property market to impact Australian property investors.

For example, in the exchange rate, if the US dollar strengthens as a result of decreasing inflation, this could lead to a stronger Australian dollar. That could make Australian property investments more expensive for foreign investors. On the other hand, if the US dollar weakens, it might make Australian property investments more attractive to foreign investors.

US inflation could also impact the Australian property market’s interest rates. If inflation in the US continues to decrease, it’s likely to lead to lower interest rates in Australia. And lower interest rates equal easier access to financing for property investments. However, if inflation in the US starts to rise again, then we could potentially face more interest rate hikes.

Plus, when the US suffers the collapse of banks, as seen in March 2023, then Australian banks have a harder time convincing Australians that their money and investments are safe. And people are naturally likely to become more cautious about borrowing and investing.

Are there up-sides to high inflation?

In the past, we’ve seen that the top of an inflation cycle was a great time to enter the property market. And many property investors are happy to see some inflation as it raises the value of their assets. As long as they’ve planned for increased mortgage interest repayments and have a rental yield covering those costs.

Inflation for 2023 and beyond

In the US, the unemployment rate is at a multi-decade low. The gross domestic product (GDP) has steadily grown and is expected to reach 23618.00 USD Billion by the end of 2023, leaving it in a strong economic position and still celebrated as the world’s largest economy.

In Australia, our GDP in Australia is expected to reach 1571.00 USD Billion by the end of 2023, to potentially become the world’s 12th largest economy – up one from our current 13^th position. Coupled with an historically low unemployment rate, the future looks stable – if not bright!

And after a year of aggressive interest rate hikes, the Reserve Bank of Australia has predicted that the inflation rate will gradually reduce toward the 2-3% inflation target by the end of 2024. And Trading Economics models have predicted that they’ll drop again to 2.5% in 2025.

Overall, while the recent peak in US inflation may have some indirect impacts on the Australian property market, it’s important to remember that there are many factors that affect property prices. And remember that no one can predict the future with absolute certainty.

Fortunately, the experts at Capital Properties have been around long enough to have negotiated inflation changes many times before. And despite these challenges, they’ve helped thousands of ADF members to successfully invest in property for future financial security.

If you’re interested in property investment, it’s important to do your research, seek advice from professionals, and make informed decisions based on your own financial goals and circumstances.

Our Capital Properties Switched-On Strategy Series and Capital Properties Pinnacle Support Program will make sure you’re able to successfully navigate these changes in the Australian property market.

Are you confident you know how to buy well?

Investing in property can be a great way to build wealth over time, but it’s important to make sure you’re buying well. Like any investment, the more you know, the better decisions you will make. With the right guidance, it is possible to make a smart and profitable property purchase. In this blog post, we’ll share tips on how to buy well in the Australian property market.

The Property Investment Specialists at Capital Properties know how to buy well. And it’s our mission to share our knowledge with you and help you prepare for successful investment during our FREE Discovery Session.

On the go? Here’s 30 seconds of take outs:

The first step towards successful property investment is to know your budget.
Make your money go further & take advantage of ADF benefits with the HPAS, HPSEA & DHOAS – more details below.
Research national & local property markets for house prices, rental yields & vacancy rates.
Get mortgage pre-approval.
Work with a team of professionals to help you achieve your goals.
Location is an important factor to consider when buying property.
Consider the property’s potential for growth & rental income.
Get a building inspection to check property’s condition.
Be prepared to negotiate confidently or work with our buyer’s agent services.

Keep reading >>

Know your budget?

The first step you must take towards successful property investment is to determine your budget. It’s wise to do this before you start looking at properties, so that you don’t waste time and resources on properties that are out of your price range.

To begin, you need to examine your current financial situation, including your income from your salary and any other investments. Then you need to make an honest list of all your expenses, related to your family, car, home, shopping, insurances, debts, and miscellaneous spending on leisure and entertainment. Yes, everything! All of this will dictate your future earning potential, how much of a deposit you can afford and your ability to pay off a mortgage. It might be worth meeting with a finance broker and getting a copy of your credit file to definitively establish your borrowing capacity.

Next, you’ll need to consider any future income you might earn if you’re planning to rent out the property and factor in ongoing costs such as property management fees, maintenance costs, and taxes.

Many people aren’t really sure where to start when it comes to budgeting for property investment. When you book a FREE Capital Properties Discovery Session, we’ll help you get a grip on the numbers. Our Property Investment Toolkit makes the process easier, and the Capital Properties Budget Planner is the best online investment calculator you’ll find.

Make the most of your budget

ADF members are often eligible for financial benefits, such as the Home Purchase Assistance Scheme (HPAS), Home Purchase or Sale Expenses Allowance (HPSEA) and the Defence Home Ownership Assistance Scheme (DHOAS). We’ve discussed these in more depth in the blog post: “Buying a house while in the Defence Force”. These benefits/incentives can help you secure a loan with lower interest rates and fewer fees.

It’s important to be realistic when setting your budget. You don’t want to overextend yourself financially, but you also don’t want to miss out on a good investment opportunity because you’re being too conservative. You do need to keep a close eye on your ongoing budget. This is where a cash flow analysis is essential. Check out our post “Getting to know your cash flow: It’s power to you!”

Once you know what your budget is, it’s time to start looking at the nitty gritty of how to buy well.

Research, research, research

Before you even start looking at properties, it’s important to do your research. This means understanding the national and local property market and getting a sense of what properties are available within your budget. Start by looking at property websites so you can research median house prices. Investigate the historical trends in the market, such as price growth or decline.

Read updates about what’s happening in the market, such as our recent post “Will Australian house prices drop this year (further)?” And stay informed on the latest property market news, data from reliable sources like Capital Properties Property Investment Resources.

If the plan is to buy an investment property, you’ll want to make sure there’s strong demand for rentals in the area. Look at vacancy rates and rental yields. Next, you’ll need to define your property selection criteria, i.e. what kind of property will attract your ideal “target” tenant. We know that many tenants prefer new builds, so investigate builders and build design. Talk to local real estate agents or property managers to help you make an informed decision on how to buy well. And remember it always pays to get independent valuations.

If this sounds overwhelming, remember that we’re here to help. Our Capital Properties Investment Process is designed to take you through this process step-by-step, all the while empowering you with the knowledge you need to make the best decisions for your circumstances.

Get mortgage pre-approval

Before you can make an offer on properties, or start building, it’s a good idea to get pre-approved for a mortgage. This will give you a clear idea of how much you can borrow and what your interest rate will be. It will also show sellers that you’re a serious buyer and can help you stand out in a competitive market. Learn more about pre-approval in this post “Why being finance ready pays dividends”.

Get a good team around you

When you’re ready to get started in the property market, or even if you’re building on your property portfolio, we strongly recommend that you surround yourself with a team of licensed professionals who know how to buy well.

A good real estate agent is a valuable asset when buying property. They’ll help you find houses that meet your criteria, negotiate with sellers, and guide you through the buying process. If you don’t have time to deal with multiple agents, then work with a Buyers Agent service.

What you want is an agent who has experience working with military buyers and who understands your unique needs and challenges. And ideally work with someone who specialises in investments and knows regional and local area market conditions intimately. The Capital Properties Buyers Agent service will help you find your ideal property and negotiate the lowest price and settlement with ease.

Next, you’ll need to find a great Property Manager who will manage the risks associated with tenancy and landlord agreements. From screening tenants and carrying out routine property inspections to make sure your investment is in great hands.

Don’t forget you’ll also need a professional Mortgage Broker, Accountant and Financial Planner. And if you’re building, you’ll need a Conveyancer or Property Lawyer, Quantity Surveyor and of course a builder that you trust.

Consider the location

You already know that one of the most important factors to consider when buying property is the location. As a member of the ADF, you may be stationed in different locations throughout your career, so it’s important to think about the long-term prospects of the area where you’re buying.

You’ll want to look for areas with strong rental demand, good infrastructure, and a diverse range of employers. Renters also want access key amenities such as schools, shops, and public transport. Right now the number one property driver is lifestyle – we’ve written about what renters and buyers are looking for in this post “Lifestyle and the property decision making process”.

Think about the property’s potential

When buying property as an investment, it’s important to think about its potential for growth and rental income. Look for properties that are in good condition and have the potential to be improved with upgrades or renovations in the future.

For most investors it’s key to have a property that starts delivering a rental yield immediately. It’s important to identify your ideal tenant and cater for their needs. Think about the number of rooms required and look for properties with features that will appeal to those tenants such as air conditioning, off-street parking, and modern appliances. The ADF property buyer checklist is a handy quick read to help with making some of these decisions.

Book a building inspection

Before you make an offer on an established property, it’s important to get a building inspection. This will give you a clear idea of the property’s condition and any issues that might need to be addressed. A building inspection can also give you leverage in negotiations with the seller. If the inspection reveals issues that need to be fixed, you can ask the seller to reduce the purchase price or fix the issues before you settle. Our blog post “Why use a building inspector when constructing” is a great read to clarify how a Building Inspector will help.

Brush up on your negotiation skills

From securing finance to the purchase of the property, finding the right tenants, dealing with maintenance/construction and so on, you’ll need to be prepared to negotiate confidently. If you don’t have the time or the expertise to negotiate effectively, then we recommend you work with our buyer’s agent services to negotiate expertly on your behalf instead. Working with professionals will ultimately save you time, stress, and money.

The Capital Properties free Discovery Session will guide you with everything you need to know on how to buy well for effective property investment.

Check out our FREE investor tools: Sign Up to Our Switched-on Property Investors Program| Your free online property investment toolkit

New or established, what’s best at the moment (ATM) ?

There’s a lot to consider when it comes to investing in property. What the overall property market’s like, the predicted market trends in the area you’re thinking of investing in, whether the numbers stack up and so on. In Australia, we’ve been mostly lucky that the property market has been a lucrative investment option and one of the most popular ways to create long-term wealth and financial security.

But when it comes to property investment, particularly as a member of the Australian Defence Force, one of the most important decisions you need to make is whether to buy an established property or build a new one. In this blog post we’ll discuss the pros and cons and help you decide what’s best; buying established vs building ATM?

As ex-ADF members ourselves, we’ve been in your boots and will help you make informed decisions so you can choose the best property investment type to suit your circumstances. Our property investment experts at Capital Properties invite you to attend our free Capital Properties Discovery Session to learn more. It might just be the best decision you ever make.

On the go? Here’s 30 seconds of take outs:

An established property is a house that’s already been built and is ready to live in.
The pros for buying an established property for investment purposes are: instant income, location & cost efficacy.
The cons of buying an established property are greater overall upkeep, depreciation of value & limited design input.
Pros of building a new property for investment are: customisable design, lower maintenance costs & tax benefits.
The cons of building a new property are: higher initial costs, delayed income & uncertain market conditions.

Keep reading >>

What’s an established property?

When we talk about an established property, we mean a property that’s already been built and is ready to live in. That might be an older home that requires some renovation, or a newer house that might need some superficial repairs. There are pros and cons to purchasing an established property for investment purposes.

Pros of buying an established property for investment

The goal for property investors is to purchase a property that will deliver a strong rental income while the property appreciates in value over time to deliver capital gains. In many ways, an established property can deliver on these objectives. Let’s take a look at the pros of buying an established property for investment.

Instant income

For the most part, an established property is ready for occupancy within a short amount of time. Even if renovations or repairs are required, there’s far more surety around the timelines of having that work done and finished. That means you can get a tenant into the property asap and start generating rental income almost immediately.

– Location

Choosing the right location to invest in is always one of the biggest considerations for successful property investment. Buying an established property means that you’re usually looking in a well-established area. We know that renters look for neighbourhoods that offer amenities such as schools, retail and entertainment facilities, parks, and public transport. We discussed the trend towards lifestyle culture in the blog post “The big shift in Australian demographics”.

That means that buying in an area that offers this lifestyle will attract reliable rental income and capital growth over the long term.

– Cost effective

Older properties in an established location are often priced lower than newer properties in the same location due to their age and condition. That’s assuming the property doesn’t need substantial renovation and you can move the tenant in quickly. And, of course, that it still appeals to the type of tenants you’re hoping to attract.

Cons of buying an established property

As with all decisions, it’s important to consider all sides of the story. Here’s some of the cons of buying an established property for investment.

– Greater upkeep

With an older property, there’s always going to be more maintenance and repairs required than in a new property. That means you’ll have to spend more money on renovations, as well as deal with the hassle having to organise the work and/or negotiate what needs to be done with the Property Manager.

As ADF members, we know that added hassle is the last thing you need. Repairs and miscellaneous costs can also eat into your rental income and reduce your profit margins.

– Depreciation of value

To calculate depreciation, we divide the value of the property by its useful life which is 27.5 years for residential rental properties. The resulting amount is then subtracted from the net income that the property generates. So, the older the property is, the less it’s worth in terms of depreciation.

This means that you may not be able to claim as much depreciation on an established property as you would on a new property.

– Limited design input

Purchasing an established property means that you’ll have limited opportunities to customise. If you want to make any significant changes, such as adding an additional room or changing the layout, you will most likely have to apply for council approval. This can be a time-consuming, costly, and often frustrating process.

Pros of building a NEW property for investment

When tackling the question ‘buying established vs building ATM?’, we need to examine the pros and cons of building a new property for investment purposes. In recent years, building a new property is becoming increasingly popular with property investors who are looking for more control over their investment.

– Customised design

One of the biggest advantages of building a new property is the ability to customise the property to meet the needs of your tenants and therefore maximise your rental income. You can utilise the latest design trends and advanced technology that makes running costs less expensive and add great long-term value. Features like new appliances, solar panels, security systems, electric vehicle charging etc make your property more attractive to potential tenants. Which in turn means a higher rental yield.

– Lower maintenance costs

When a new build is completed and building handover inspection documents are exchanged, you can be pretty sure that there’s unlikely to be any major maintenance issues with the property. We’ve written about the process of handover in the blog post “Crumbs! My property is close to handover. What’s next?”. However, it’s nice to know that even if something does crop up, it’s more than likely going to be covered under your builder’s warranty.

During the handover you’ll be able to clarify what the maintenance and warranty periods are. We’ve explained these in the post “What to expect during the maintenance and warranty period of your new build investment property.”

Having these in place means that you can save money on upkeep and repairs, which will improve your profit margins.

– Tax benefits

Building a new property in some states means you might only have to pay stamp duty on the land and not on the house itself.

Also, when you build a new property, you can claim depreciation on the building over 40 years (that’s how long the ATO says a building will last before it needs replacing). For example, if it costs $250,000 to build your new build you could claim $6,250 (= 2.5% per year).

Plus, you can claim a tax deduction on all the fixtures, fittings and furnishings over 5-10 years. Which means you’re far more likely to be able to claim a greater tax deduction on a new property than you would on an established property. And who doesn’t love money back from the tax man?

Cons of building a new property for investment

Although it’s hard to see past the upsides of building a new property, there are of course some considerations that need to be made prior to investing. Here are some of the cons of building a new property for investment.

– High initial costs

Building a new property can be a blow to the wallet, so investors need to be sure they have the capital available to fund the cost of the land and build. Always leaving something in the kitty to cover unexpected material or labour costs.

It would be remiss of us however if we didn’t squeeze another ‘pro’ in here and mention that there are various grants available to first home buyers who are buying or building a brand-new home. We’ve discussed these in the blog post “Buying a house while in the Australian Defence Force”.

– Delayed income

Building a new property can take an extended period of time. Starting with finding the piece of land, finding the right builder, securing permits, designing the building and actual construction. We’ve written about the process before in this post “Yay. My property settled. Now what?”

It’s also not unusual to experience unforeseen delays. Although if you’re well-organised and work with the right people you can manage these better. Our post “Why use a building inspector when constructing” will point you in the right direction.

– Uncertain market conditions

With a new build, you may not have the desirable infrastructure that appeals to renters as you would with an existing home in an established suburb. Plus, in any market, property values can fluctuate. So, there’s always a risk that the value of the new property may not increase as expected, which can impact the long-term profitability of the investment.

That’s why it’s vital to work with experts like Capital Properties to determine when and where is the right time to build an investment property.

Still wondering if you should be buying established vs building ATM? We recommend talking to the property investment experts at Capital Properties to help you decipher what’s best for your circumstances.

Take the next step and get in touch now. Or book our FREE Discovery Session to help you gain knowledge and confidence about how investing in property will help you achieve your goals. While you’re here, check out our FREE investor tools:

Take a look at our Switched-on Property Investors Program and our free online property investment toolkit

Invest to build wealth – a proven post Defence Force investment strategy

The team at Capital Properties have seen what it’s like when people leave the Defence Force without a retirement strategy. Suddenly your ADF cover stops, along with the death and invalidity benefits – as it’s designed only for serving members of the ADF. And transitioning from a military role to a civilian role can be difficult, leaving some people in a real financial crisis. That’s why a post-Defence Force property strategy is essential.

And that’s also why our mission is to help you make the most of your current position in the ADF and start now to build wealth for future financial security.

During our FREE Capital Properties Discovery Session we’ll help you get on top of your financial literacy and help you formulate a plan to start now to ensure your future is bright. You’ll gain access to our Property Investment Specialists who’ll share their extensive knowledge as well as our Capital Property Investment Tools & Apps.

Plus, with our Capital Properties Pinnacle Support Program you’ll be supported with ongoing expert guidance and advice.

On the go? Here’s 30 seconds of take outs:

A post-Defence Force property strategy is essential.
The sooner you start, the brighter your future will be.
Property investment is a good wealth-building strategy for:

– Capital growth
– Cash flow generation
– Tax benefits
– Inflation hedge

As an ADF member you’re entitled to rental assistance, tax benefits & home-buying incentives.
You can also use your property as your principal place of residence (PPR) for main residence exemption on capital gains tax when you sell.

Keep reading >>

Why property investment?

The best investment strategies for ADF members in Australia will ultimately depend on individual circumstances. At Capital Properties we work with you to identify your financial goals and risk tolerances so we can develop a plan that’s tailored to your needs.

In our experience, we’ve found property investment to be one of the best/if not THE BEST investment strategy for building wealth. Property investment is usually far less volatile than shares or other investments. Even after a global pandemic, here in Australia our property market is making a strong recovery.

The recent CoreLogic Monthly Housing report (Feb 2023) shows that national home values are still higher than this same period last year, and “would need to decline a further 13% to reach March 2020 levels”. As well as that, the Australian gross rental yields rose to 3.9%, up from 3.21% a year earlier, making it the highest rent yield since November 2019.

So, let’s take a closer look at why property investment is a good wealth-building strategy and why you need a post Defence Force property strategy.

– Capital Growth

Property investment can be a wise investment for several reasons. Here in Australia there’s excellent potential for long-term capital appreciation as properties tend to appreciate/accumulate over time. That’s especially achievable if you know when and where to buy and are skilled enough to invest in desirable areas during times of economic growth.

– Cash flow generation

Good property investments will generate regular income in the form of rent. This provides a steady stream of cash flow that can be used to cover any expenses associated with the property, pay down the debt and/or reinvest in additional properties.

– Tax benefits

Property investment can offer a multitude of tax benefits, including deductions for mortgage interest, property taxes, and depreciation over time.

– Inflation hedge

Property investments can provide protection against inflation by providing rental income that also increases with inflation. And the property value is likely to increase as prices rise. This is an especially important piece of the post Defence Force property strategy.

Risks with property investment

As with any investment, there are risks involved. Property investment is vulnerable to economic circumstance, changes in government regulations or natural disasters. That means that property values can fluctuate, and there may be periods where it’s difficult to find tenants for your rental property. However, with careful planning and research, property investment has proven to be a sound financial decision for ADF members.

What makes property investment so attractive for ADF members?

The short answer is rental assistance, tax benefits and home-buying incentives!

As a member of the ADF, you’ll be able access rental assistance that can cover a significant portion of your rent. Which in most cases makes it possible to put some of your income towards building a property portfolio.

Additionally, there are tax benefits associated with property investment, including deductions for expenses such as repairs, maintenance, and interest payments on your mortgage. And finally, there are some awesome home-buying incentives for ADF members.

Why rental assistance can give you a head start in property investment

ADF rental allowance (RA) subsidises the cost of renting for eligible ADF members. You can check eligibility here. Once approved, the RA will be paid directly into your pay. You’ll need to renew the RA agreement each year and update any changes to your personal circumstances or operational activity and apply for any reimbursements.

Because your rent is subsidised, you should be able to save more from your fortnightly pay. We’ve found that for most ASF members, it’s achievable to save 20% of your income towards financing your property investment(s). If you start now and funnell that 20% into investment property, we promise you’ll thank yourself further down the track.

Property investment tax breaks

We’ve written in depth about the tax breaks you can take advantage of whilst in the ADF in this post about “Tax minimisation strategies”. Put simply, you can claim back on:

Interest paid on your property investment loan
Managing Agent fees
Water & council rates
Building & landlord insurances
Bank fees & disbursement set up costs
Depreciation

ADF home loan incentives & home loan grants

As an ADF member, you’re also likely to be entitled to some great deals on home loans and government grants. Again, we’ve covered these in greater detail in this post “Australian Defence Force Home Loans.”

They key thing to consider is that most of these incentives are only accessible if you’re an active ADF member. So what happens when you retire/leave the ADF?

What’s your post Defence Force property strategy?

Have you thought about what happens once your rental assistance ends and you’re no longer eligible for grants and incentives? Depending on your circumstances, you may find that you no longer have the same level of disposable income that you had while receiving rental assistance. At this point, it’s worth reviewing your assets to see how they can be used to help you achieve your financial goals.

Your investment property can be more than just an investment

One option is to consider using your property as your principal place of residence (PPR). This can provide several benefits, including the ability to take advantage of the main residence exemption on capital gains tax when you eventually sell the property. Additionally, owning your own home can provide a sense of security and stability, especially if you’re transitioning out of the ADF and into civilian life.

Of course, the decision to use your property as your PPR will depend on a range of factors, including your financial goals, your lifestyle preferences, and your long-term plans.

The property investment experts at Capital Properties can help you weigh the pros and cons of this option and determine the best course of action for your individual circumstances.

Now’s the time to consider your post Defence Force property strategy

There’s little doubt that investing in property while serving in the ADF can be a smart financial move, especially if you take advantage of rental assistance, tax benefits and home loan incentives/grants. And it’s especially important to consider how the decisions you make now will support your future lifestyle.

Once your rental assistance ends, it’s worth considering how your assets can be used to help you achieve your financial goals, including the possibility of using your property as your PPR.

With careful planning and the right advice, property investment can help you build wealth and secure your financial future. Our Capital Properties Switched-On Strategy Series and Capital Properties Pinnacle Support Program will make sure you become a switched-on property investor.

Securing your financial future

Life in the Australian Defence Force can be full of challenges. And we know that it’s easy to get caught up in the busyness of everyday and forget about prioritising your long-term goals. But taking intentional action to secure your financial future as early as possible is a wise move. Being proactive means that you’ll put yourself in the best possible position to achieve the future lifestyle of your dreams.

At Capital Properties, we help to keep our clients on track throughout the year. But it’s a great exercise to take time at the beginning of each new year to review your goals and financial vision to make sure you’re on the right track.

Meet with our experienced Property Investment Specialists at our free Capital Properties Discovery Session and get help setting realistic goals for your future financial security.

On the go? Here’s 30 seconds of take outs:

To achieve long-term goals, you must have a well thought out plan that’s easy to stick to.
Knowing what floats your boat & having an emotional connection to your end-goal keeps you motivated.
Goal setting requires you to visualise a specific outcome & commit to it with an action plan.
The Capital Properties Goal Setting Guide will help you work towards your dream lifestyle.
Use the SMART framework: Specific, Measurable, Achievable, Relevant & Time-specific.
Categorise your goals into short, mid, and long-term goals.
Use the Capital Properties Goal Setting Toolkit to review your goals.

Keep reading >>

What drives you?

It’s a fact that most New Year’s Resolutions are destined to fail. And the key reason for that is most people don’t take the time to really nut out their goals for the future, so they’re guessing at a vague outcome. Secondly, they go about it in a way that doesn’t feel easy or convincing.

For example, the New Year’s Resolution to lose weight won’t last more than a few months (if that) unless the person has identified that the reason for their desired weight loss – presumably to become healthier. And within that lofty goal, there must be some achievable smaller goals to keep them on track, e.g., exercise 4 times a week, reduce processed foods and lose 0.5 to 1 kg per week. If people go in without a plan, with forced exercise, starving themselves and expecting to lose 5 kilos asap, then, we’re sorry to say, it’s highly likely that they’ll fail.

And it’s the same with your financial goals. In order to set long-term goals, you must make a plan that’s well thought out and easy to stick to. That means you have to identify your priorities and key motivations in life. Which means asking some hard questions and being honest with yourself about the answers.

One way to help with this process is to ask yourself one fundamental question and think honestly about the answer.

What floats your boat?

There’s no point in setting goals unless you’re clear about the reason ‘why’ behind them. Really knowing what floats your boat is key to achieving your goals. Having an emotional connection to your end-goal will drive your actions and keep you motivated even when the going gets tough.

Having a vague idea of a ‘better future’ is great but it’s not enough to carry you through inevitable setbacks. If/when the poop hits the fan, you need to know the impact it’ll have if you don’t meet the targets you’ve set and adjust your game plan to stay on track.

For some people the goal is to retire early and travel at leisure. Some want to make sure they’re able to pay for their kids and grandkids education. Some want to live debt free in their dream location and enjoy the good life. Whatever your ‘why’ is, knowing what drives you/ floats your boat and working to achieve it is a priority. And the earlier you figure that out, the more targeted you can be in your financial goal setting strategy.

Why is goal setting important?

At Capital Properties we know that having meaningful goals can set you on a path to future financial security. So, once you’ve figured out what drives you/floats your boat, now you can start goal setting and planning to make it a reality. Though knowing what your dream is, isn’t enough. As Antoine de Saint-Exupéry said, “A goal without a plan is just a wish.”

Goal setting requires you to visualise a specific outcome and commit to it by developing an action plan that will ultimately motivate you to achieve your goal. We know that simply thinking positively about our future boosts our ability to create goals, take action to achieve them and take control over the goal outcomes.

How to successfully set goals/ financial vision

The team at Capital Properties are not new to goal setting. In fact, our Founder & Director Marcus Westnedge has written a book about it. This Goal Setting Guide is an inspiring and straightforward guide to help you plan your dream lifestyle and details the steps you need to take you get there. “The Psychology of Success” uses a powerful goal setting technique called “The Well-Formed Outcome” which guides you to create your plan of attack and hit each of your targets.

Your financial vision is the specific goal you decide for your future financial security. Everyone has goals that are unique to their personal circumstances. You need to decide what your financial vision is so that you have a specific target to aim for.

If you’ve already read the book and are just here for a quick refresh to review your goals & financial vision, then a great place to start (again) is by goal setting with the SMART framework.

Goal setting using the SMART framework

The SMART framework is a great way to sanity-check your goals to make sure they’re still as relevant as ever and you haven’t strayed too far from your original goalposts. Here’s a quick refresher to make sure your goals are:

– Specific

Make sure your goals are as specific as possible. Confirm the ‘what’, ‘how, ‘when’, ‘where’ and ‘why’. What must I achieve? How am I going to get there? When should I achieve this goal?

– Measurable

Making sure you can quantify the success in achieving your goal makes it easier to track progress.

– Achievable

Make sure your goals are realistic. Talking to experts can help you set realistic boundaries.

– Relevant

This goes back to what drives you – your ‘why’. Is the goal really going to push you towards the life that floats your boat?

– Time-specific

Set a realistic timescale and/or deadline. And work towards a specific date.

Review your Goals & Financial Vision

Once you’ve set your goals and are working towards them, don’t forget to take the time to check in regularly revisit them. This is vital to make sure they’re still relevant and to check that you’re making progress.

As the end-goal can sometimes be off in the far-away distance, it’s vital to set shorter-term goals to keep you on track. These smaller milestones will help you track your headway, make any adjustments if needed and motivate you to continue with your plan. Our Capital Properties Goal Setting Toolkit makes this process far less daunting than it might seem.

It’s also important to set medium-term goals. For example, if your long-term goal is to retire with the income from 4 investment properties and the short-term goal is to funnel 20% of your income into financing these investments, then a medium-term goal might be looking at developing a property over 4-5 years with the intent to add value.

So, categorising your goals into short, mid, and long-term goals and setting them against the SMART framework essentially creates a plan for you to follow. It keeps you accountable. And it allows you to measure your progress, so you know if adjustments need to be made, or if you’re on track for successfully achieving your dream lifestyle.

There’s no time like the present to take control over your future financial security. At Capital Properties we love to see our clients shift their mindset to one of possibility and abundance and take action to create the life they’re dreaming of. Our team will help you stay focused on your goals & financial vision all year round.

Check out our FREE investor tools: Sign Up to Our Switched-on Property Investors Program | Your free online property investment toolkit

Are housing affordability & low rental vacancies driving the rental crisis?

There wasn’t much love in the recent Australian Property Investor magazine headline on 14^th Feb 2023 declaring “Rental crisis only going from bad to worse”.

With the last few years of highs and lows in the rental market, the situation shows no sign of stabilising just yet. There are several factors that have contributed to the current position, including a lack of affordable housing, extremely low vacancies, and increased demand. In this blog post, we’ll take a look at these issues and explore how they’re impacting property investors in the Australian Defence Force.

Capital Properties’ Property Investment Tools & Apps will help you adapt to changes in the property market. If you’re just getting started with property investment, then you should come along to our free Capital Properties Discovery Session.

Already on-board? Make the most of our ongoing guidance with our Capital Properties Pinnacle Support Program.

On the go? Here’s 30 seconds of take outs:

Median rent values have increased by 22.2% in a year (Sept 2021 – 2022)
Rental vacancy rates have fallen to their lowest level in over a decade.
Demand for housing far outweighs supply
There are calls for regulations to short-term letting in popular tourist areas.
The Federal Government has announced a $10 billion Housing Australia Future Fund for 30,000 new homes in the next 5 years.
As part of the Victorian Labor Government’s Big Housing Build they’ve committed $50 million to build 130 new homes for youth in regional areas.
Asproperty prices look set to fall there are some great opportunities for investors and first home buyers.

Keep reading >>

How did the Australian rental crisis begin?

When COVID-19 first struck in early 2020, Australia’s economy (as well as many other global economies) fell into a brief recession caused by lockdowns and reduced migration. This resulted in plummeting rents. Suddenly CBD apartments were sitting empty, and landlords dropped rents to attract tenants.

However, within mere months the tide began to turn and after September 2020 the rental market began to recover. In fact, the recovery was so immense that in the past two years we’ve seen a surge in the median rent value by a whopping 22.2%. So, what’s driving this change? Let’s look at some of the factors involved:

Demand > supply

Put simply, demand is greater than supply. This effectively means there are not enough homes to keep up with increased population and housing demand. In the year from June 2020 to 2021 there were 214,819 new houses built in Australia. The following year, from June 2021 to June 2022 there were only 174,931 houses built – that’s a shortfall of almost 40,000 houses (18.6% less than the year prior)! Since then, worker shortages, increased building costs and supply chain problems have resulted in many builders stalling, or worse – going bankrupt and leaving projects unfinished, further adding to housing pressures and extremely low vacancies.

Housing affordability

As property prices have steadily risen over the last few years, and surged in some desirable areas, many people have been priced out of the housing market. Some people have been waiting for the market to settle and have missed out altogether. Now with increased mortgage interest rates reducing many people’s borrowing capacity, these people have little chance of escaping the rental rat-race.

Changing family structures

After years of declining divorce rates, the pandemic through 2021 saw an uptick in divorces and presumably a higher percentage of separations – although there’s no data available to demonstrate just how many. The division in these households puts more demand on rental housing.

Internal migration

Between 2016 and 2021, 184,000 people moved from capital cities to regional areas – that’s more than double the rate of internal migration reported in the 2016 Census. This significant shift created unprecedented demand in regional and rural areas putting huge pressure on local vacancy rates.

International migration

Although it might take a little longer before we’re back up to previous immigration numbers, the return of overseas students and travellers means that an already burdened rental market is struggling to cope. As the Labour Government has promised a huge hike in skilled visas this year, this will add even further demand.

The Airbnb effect

The impact of short-term letting through providers like Airbnb and Stayz has made housing affordability a real problem in tourism-rich regional and coastal areas. In some holiday areas such as Byron Bay in NSW, the Gold Coast in Queensland or the Mornington Peninsula in VIC, short-term rentals are having a major impact on supply. This is forcing some states to review the impact of short-term stays and there are increased calls to introduce changes to regulate these markets.

Is there a rental crisis in Australia?

According to recent reports, rental vacancy rates across Australia have fallen to their lowest level in over a decade. While the national rental vacancy rate is at a record low – below 1%, it’s certainly more apparent in some areas. Sydney and Melbourne have only 1% availability, which is an all-time record-low for Melbourne.

Having fewer properties available for rent is driving up the cost of rental accommodation with the price of rent in capital cities up 17.6% for units and 14.6% for houses in 2022.

And the costs are increasing nationwide. Melbourne experienced the biggest unit rent rise with 20%, followed by Sydney (18.6%), Brisbane and Adelaide (both 14.3%), Perth (10.3 %), Hobart (9.%), Darwin (8.%) and Canberra (5.7%).

What does it mean for renters?

The declining housing availability in the rental market, rising weekly rents and ever-increasing living costs means that many people are seriously struggling.

In a recent ABC news article, Jacob Visser of Visser Estate Agents said rental availability was the worst he’d seen in more than 10 years working in the industry: “I’ve never witnessed, or experienced, the levels of crisis we are currently seeing“… “Tenants are desperate – really, really desperate,” he said.

News reports show people lining up around blocks to view houses, with sometimes up to a hundred people attending inspections. Many properties are receiving close to 30 applications and people are applying sight unseen. Some applicants are even offering higher than the advertised rent, pushing prices up for everyone. And although the rental crisis is affecting everybody, the young to early middle age population are feeling it the most.

Is the rental crisis going to get better this year?

Although the rental market is always in a state of flux, the prediction for many renters this year looks grim. The recent news that 6600 affordable homes are being removed from the National Rental Affordability Scheme this year, is adding further distress for disadvantaged renters. The scheme gave property owners a subsidy of nearly $11,000 annually for 10 years for renting out newly built houses at 20% less than the market rate. Queensland is due to lose 2500 homes, while Victoria will lose 1350, Western Australia is to lose 1100 and 605 properties gone in NSW. Plus, a further 9200 houses are to leave the scheme in 2024.

Under increasing pressure, the Federal Government have announced a $10 billion Housing Australia Future Fund to build 30,000 new social and affordable homes in the next five years. However, many campaigners are arguing that this falls far short of what is needed.

On 13^th February 2023, the Victorian Labor Government announced a $50 million investment to build 10 new housing projects (more than 130 new homes) for young people across the state in Werribee, Wangaratta, Wodonga, Shepparton (Mooroopna), Bairnsdale, Mildura, Reservoir, South Morang and Frankston. This funding is part of the Labor Government’s landmark $5.3 billion Big Housing Build.

What can be done to solve the rental crisis?

A recent report by the Australian Housing and Urban Research Institute (AHURI), suggested that more assistance from the government was required to help shift more tenants into home ownership: “Investors should be encouraged to participate in social, community and affordable government housing programs.…On top of that, seeing meaningful improvements in gross rental yields this quarter will hopefully encourage investor activity helping to address supply issues.”

Taking advantage of falling property prices & government grants

As property prices look set to fall across many Australian regions this year, there are some great opportunities for investors and first home buyers.

With government grants for ADF members such as T he Victorian First Home Owners Grant and The $10,000 NSW government grant as well as the Regional First Home Buyer Guarantee, there are some excellent incentives to buy a property now.

The recipe of historic low rental vacancies with high yields, makes it a dream scenario for property investors considering entering the market, or expanding their portfolio. And with attractive asset depreciation tax benefits for new properties which can attract better quality tenants, the outcome for investors looks favourable.

It’s essential for property investors to stay informed about market trends and conditions. Our Capital Properties Switched-On Strategy Series and Capital Properties Pinnacle Support Program will make sure you stay ahead of the changes.

Being strategic in your investment decisions and working with experienced property investment professionals, ADF investors can build a successful property portfolio to deliver stable rental incomes and long-term growth.

In July 2022, the team at Capital Properties identified that lifestyle had become increasingly important to Aussie home buyers in our blog post: The big shift in Australian demographics. In that post we predicted that this trend would continue to grow, along with a push for eco-friendly builds and green energy. Well, not quite a year later, we’re back to confirm that lifestyle is the number one driver of the property decision making process.

In today’s blog post we’ll examine what’s causing this shift towards lifestyle-friendly living and what buyers are actually thinking and feeling when they make the decision to purchase a lifestyle property. And we’ll share tips on how to choose properties that will appeal to lifestyle buyers.

We also discuss property trends and make sure you’re well placed to take advantage of them during our free Capital Properties Discovery Session. And if you’re already managing one or more investments, remember that our Pinnacle Support Program will keep you moving in the right direction.

As always, the Capital Property Investor Tools are available to help you with your property investment journey.

On the go? Here’s 30 seconds of take outs:

Environmental factors affect purchasing decisions, e.g. population growth means more demand.
Although location is key, buyers are looking away from cities and shifting towards lifestyle, and ideally beach living.
Properties that offer prestige, status and great design are more important to buyers now than ever before.
There are 7 factors that drive the property decision making process:

Emotion
Cultural superstitions
Perceived value
First impressions
A home that tells a story
Social proof
The ideal lifestyle

Keep reading >>

Predicting the property market

Before you call us soothsayers, we’ll be honest and tell you the key to our accurate prediction has nothing to do with magical fortune-telling and everything to do with research.

In our role as your Property Investment specialist advisors, we spend many hours looking at market trends, past and present. We regularly examine sales data across all Australian states and territories and investigate what’s happening in each market.

That includes looking at what infrastructure projects are in the works or planned. If the demographic of a certain area is shifting, key industry changes, etc, etc. And we look to experts like Bernard Salt for their take on Australian geographic and demographic culture. Again, we’ve discussed Bernard before in the blog: The big shift in Australian demographics.

What drives the property decision making process?

If lifestyle is the number one driver of the property decision making process, then what’s driving this? As always, there are multiple factors at play.

Looking back we can see how environmental factors affect our purchasing decisions. For example, in the first half of the 2010s, a surge in population meant that not enough homes were built to keep up with demand. International students poured into city centres and foreign investor demand soared.

Almost suddenly, apartment construction boomed. With more than 700,000 new apartments, units and townhouses built across Sydney, Melbourne and Brisbane in that decade, along with more than a million houses!

But each of these purchases was motivated not only by necessity, but by desire. Yes, people need places to live, but what drives people to choose one area or one property over another? What really drives the property decision making process?

What are home buyers looking for?

Of course, almost every home purchase starts with the location. Even if the requirement to move is driven by relationship changes, work opportunities, investment potential or lifestyle aspirations. The first consideration is usually…where?

The new flexibility of working from home for many people post pandemic has caused a significant shift in where people choose to live. Because the need to be close to work is less important, people now look for properties offering prestige and status. That means that design has become more important to buyers, within their price range obviously.

But, the truth is that the practicality of choosing where to live is always overwhelmed by the psychological factors that influence a home buyer’s decision.

When it comes to buying a home, we choose with our hearts, not our heads!

The property decision making process

Some years ago, CoreLogic (Australia’s leading provider of property data and analytics) reported that there are 7 psychological factors that drive the property decision making process. And believe it or not, location and price don’t get a look in!

Instead, the 7 factors that drive the property decision making process are:

Emotion
Cultural superstitions
Perceived value
First impressions
A home that tells a story
Social proof
The ideal lifestyle

1. Emotion

Although it’s useful for home buyers and in particular, investors, to keep their emotions in check, it’s naive to think we won’t have an emotional response when purchasing property. It’s why the Capital Properties team invest so much time in property market research and created our Goal Setting Guide, amongst many other Property Investment Resources to keep you on track and focused.

But, for the average home buyer, emotions take over. In fact, in past surveys, a significant amount of Australian home buyers reported that they were happy to pay more for a property if they “really liked it”.

2. Cultural superstitions

OK, most of us Aussies think we’re not the most superstitious bunch, but at the same time, you’ll rarely meet a person brave enough to light three cigarettes with the same match. And many of us would think twice about buying house number 13.

Whereas the number 4 is considered to be bad luck in some cultures, because it sounds like “shi” which translates to death in Mandarin. So, it’s still relevant to keep superstitions in mind as an essential part of the property decision making process.

3. Perceived value

It’s only natural that buyers want to get the biggest bang for their buck. Walking into a well-presented house will appeal to most buyers because they know they won’t be faced with any unexpected expenses in the near future. But buyers that spot damp patches in ceilings or musty smelling carpets will be immediately suspicious that the property could turn out to be a money pit – i.e. everyone’s worst nightmare!

4. First impressions matter

First impressions matter, because they last far beyond that first moment. This is due to something called the ‘primacy effect’, which means that when we’re exposed to a sequence of things, we tend to remember the first thing the most.

And when we think about first impressions of a property, we’re talking curb appeal, natural light, a clean uncluttered environment, and quality furnishings/fittings.

5. A home that tells a story

As investors, we tend look at properties using a more logical frame of mind, often using tried and tested formulas to select properties without acknowledging any sentimental attachments. However, we need to be mindful that buyers WILL have an emotional response to the home – and we want it to be a good one.

Buyers love to hear about the history of the house, or if the property is new, create a story about the area it’s been built in. Hearing stories about the designer/ builder designing a specific corner for the Christmas tree to be positioned, or how the kitchen’s been designed for an enthusiastic home chef, can make a real impact on the property decision making process. Painting a picture of the lifestyle the buyer is aspiring to is a winning strategy.

6. Social proof/ Testimonials

People don’t buy from businesses; they buy from people. And we want to know that the people we’re buying from know their stuff and are trustworthy. That’s why social proof from past/existing clients is so important. Bad reviews are bad for business, but good reviews will reassure buyers that they’re making the best decision.

7. The ideal lifestyle

Last, but certainly not least – buyers aren’t just purchasing a house, they’re investing in their ideal lifestyle. Right now, and for the foreseeable future, that means sea-changes for a large portion of the Australian population.

As we discussed in The big shift in Australian demographics, and The great interstate migrate, Aussies are migrating to beach side living more than ever before. People are looking away from the city as their centre point and getting as close as they can to the relaxed beachside locales. At Capital Properties, we’ll advise you how to choose properties that will appeal to lifestyle buyers.

Now that you know that lifestyle is the number one driver of the property decision making process, we can help you find the property that delivers on this. Simply contact Capital Properties today.

Book a free Discovery Session to find out more and let us help you achieve future financial security.

Sources:

https://www.forbes.com/advisor/au/personal-finance/property-market-update/

https://www.smh.com.au/politics/federal/albanese-to-act-on-queue-of-1-million-migrants-20220902-p5bet8.html

https://www.afr.com/work-and-careers/education/international-students-to-return-en-masse-in-2023-20220825-p5bcpy

In this blog post, we’ll discuss the nitty-gritty of buying a house in Australia while in the Australian Defence Force (ADF). We’ll include the information you need to take advantage of some loan subsidies and other incentives that are available to you as an ADF member.

Want help choosing the right property? Book a discovery call with Capital Properties today. As investment specialists, it’s our mission to help defence personnel and others attain future financial security.

On the go? Here’s 30 seconds of take outs:

Capital Properties property investment advice experts can help you with these ADF property-buying incentives:

Home Purchase Assistance Scheme (HPAS) offers eligible ADF members a lump-sum payment of $16,949 before tax.
Home Purchase or Sale Expenses Allowance (HPSEA) compensates for costs accrued when selling/buying in a new area.
Defence Home Ownership Assistance Scheme (DHOAS) improves recruitment/retention by helping ADF members and their families own their own houses.

ADF property investment schemes

Purchasing a property is recognised as one of the best ways to take control of your financial future. A well-designed house in the right location will consistently deliver capital growth.

The Australian Defence Force has provided various incentives to make it easier for its members to own a house. There are multiple loans, grants, and subsidies to enable ADF members to become homeowners.

These ADF property investment incentives come in two categories:

Assistance to purchase (HPAS/HPSEA); and
Assistance to repay the loan (DHOAS).

Let’s take a closer look.

1. Home Purchase Assistance Scheme (HPAS)

The Home Purchase Assistance Scheme (HPAS) is an ADF property investment assistance scheme designed to help you purchase your home. It comes as a lump-sum payment of $16,949 before tax – not bad!

If you’re considering buying a house while in the defence force, the amount you’re eligible to receive depends on your ownership share. For example, if you’re buying a property with your partner, the amount will be halved.

Criteria for eligibility to receive an HPAS payment include:

You cannot have received the HPAS payment before. You only get this payment once in your entire period of service.
The home you want to buy must be in your current (or new) posting location.
When you sign the purchase contract, you must plan to serve in the post for 12 months after purchase. This means you have to live in the house for the remainder of your tenure at that location.
If you are categorised as a member with dependants (unaccompanied) [MWD(U)], then you need to remain in that category for the next 12 months.

Find out more about how Capital Properties can help you secure your HPAS.

2. Home Purchase or Sale Expenses Allowance (HPSEA)

The ADF created the Home Purchase or Sale Expenses Allowance (HPSEA) to compensate ADF members for reasonable costs accrued if they’ve had to sell their house due to being posted to a new location. The allowance also covers any expenses that an ADF member might accumulate if they sell in one posting location and buy again in a new one.

For example, imagine you own a house in Victoria but get posted to Sydney, and you decide to buy a home there. You would be eligible to receive HPSEA to cover the sale of your home in Victoria and the purchase costs of your new home in Sydney.

HPSEA also reimburses you for other reasonable costs such as real estate agent commissions, stamp duty, solicitors fees, mortgage costs, etc.

Find out more about how Capital Properties can help you secure your HPSEA and other property investment advice.

3. Defence Home Ownership Assistance Scheme (DHOAS)

The Defence Home Ownership Assistance Scheme (DHOAS) aims to achieve two goals:

Helps Australian Defence Force members and their families own their own houses and;
Improves recruitment and retention within the Australian Defence Force.

A DHOAS loan subsidises your home loan and does so for a period of time, correlating to how long you serve.

As of last year (2021), it contributes a monthly amount of between $185 and $370 to your home loan. The amount you receive under DHOAS varies and is based on a three-tier system. This table shows the current subsidy tiers and their details as per the DHOAS government website.

Subsidy tier	Minimum Permanent service	Minimum Reserve service	Subsidised loan amount	Maximum monthly subsidy*
1	4 years	8 years	$310,937	Up to $185
2	8 years	12 years	$466,406	Up to $277
3	12 years	16 years	$621,874	Up to $370

*Estimated monthly subsidy values based on the April 2022 median interest rate. These monthly subsidy values fluctuate based on changes in the median interest rate.

To be eligible for DHOAS, you must have been a member of the ADF for at least four years. You also must have served within the last five years, undertaken a qualifying period, and accrued a service credit. There are also occupancy requirements, such as having occupied the premises for at least 12 months. Full eligibility criteria are on the DHOAS government website.

There are three banks approved to provide DHOAS loans for people buying a house with the ADF scheme. These are the Australian Military Bank, the Defence Bank, and the National Australian Bank (NAB).

Find out more about how Capital Properties can help you with the DHOAS.

Property investment advice

If you’re considering buying a house while in the defence force, Capital Properties can help you navigate home loans.

The decision to purchase or invest in a house is one of the best decisions in any person’s life. And thanks to the ADF property investment scheme, buying a house while in the defence force is easier with access to grants and incentives to help you buy your dream home.

Are you an Australian Army, Royal Australian Air Force or Australian Navy member? Are you looking to gain financial independence by buying property in Australia? Do you want to leverage government loans and grants? Then look no further; we are here for you. We’ll help you walk you through the entire process of buying a house with the ADF scheme and settling in your dream home in Australia.

Ready to get started? Contact us now!

It’s no secret that buying a property is one of the best investment decisions that you can make. Property investment is far more predictable than shares or crypto, for example, which can be massively volatile in unstable economic times. Investing in property allows you to benefit from tax advantages while gaining predictable cash flow and great returns.

The current demand for rental properties is increasing faster than ever, and with a rise in house prices, it’s also more lucrative than ever. So, if you’re after a tried-and-tested way to invest your money, buying a property should be at the top of your list.

This article will walk you through our top 10 tips to help you buy your first investment property and ensure you get the most out of your investment for future financial security.

Want some help choosing the right property? Book a discovery call with Capital Properties today. As investment specialists, it’s our mission to help Defence personnel and others attain future financial security.

On the go? Here’s 30 seconds of take outs:

Here’s Capital Properties 10 top tips to help you buy your first investment property:

Choosing the right location is key.
Check the condition of the property & don’t over-capitalise on improvements.
Make sure you have time to invest in your property investment or hire an expert to help.
Stay updated on regulations & property maintenance.
Research thoroughly before buying your investment property.
Work out your budget, including projected expenses & profit.
Refrain from making emotionally charged decisions or let our expert Buyer’s Agent Service team negotiate for you.
Choose investment partners wisely & clearly assign duties & tasks.
Be finance ready – seeking pre-approval for a home loan is free, easy & will save you money.

Keep reading >>

What is an investment property?

Let’s start by taking a closer look at what an investment property is. Simply put, an investment property is a residential or commercial property that’s purchased as a financial investment – i.e., it’s an asset that you can make money from through renting or adding value and re-selling. Therefore, it’s not usually your home/primary residence.

Some properties will have more income or investment potential than others, so it’s vital to know what to look for when you go to buy your first investment property.

What you need to know before you buy your first investment property

When you decide to invest in real estate or if it’s time to add to your current portfolio, here are some of our top tips to buying an investment property.

Location. Location. Location.

We’ve all heard that location is important, but are you sure you know what to look for in a location for an investment property? Residential tenants require properties that are close to amenities. For most tenants, that includes easy access to public transport or main arterial roads. Families require local schools, shops, medical clinics etc. Singles/young couples want shops, restaurants, bars and safe public spaces. Commercial properties need high foot traffic and/or extensive parking. Remember, a more desirable location will have increased demand and can command a higher rent.

One thing to note is that some up-and-coming areas may have a higher potential to increase in value over time than already popular areas. Although this is true in many cases, bear in mind there’s more risk involved when investing in an unproven location.

Condition of the property

Another important consideration when buying an investment property is the condition of the property at the time of purchase. Although taking on a fixer-upper ensures there’s potential to gain more capital, you need to be certain that the cost and effort pays off when it comes to selling.

Carrying out an extensive renovation and over-capitalising is likely to result in less profit. Especially when you consider the time it takes to complete the project, the costs of improvements, including paying skilled trades, building materials, bank fees etc., as well as the ability to recover your investment due to delayed rent collections.

Time

As a first-time buyer, negotiating the purchase your first investment property can be time-consuming and stressful. And as your investment portfolio grows, it will place even more demands on your time.

If you have a full-time job, you’re already likely to be juggling many responsibilities. And it’s even more of a burden if you’re deployed away from home or overseas. That’s why the Capital Properties team strongly advises that you consider hiring a property manager to help with the workload and carry the stress! We’ve talked about building a property investment ‘A-team’ before here. You won’t regret it.

Regulations

Becoming a landlord is not easy. It’s your responsibility to be aware of current codes and regulations concerning rental properties and the rights of your tenants. For example, there are extensive regulations surrounding repairs and maintenance of the property, including swimming pools, smoke alarms, gas safety and other facilities that may be part of the property.

These laws change often and vary in each state and territory. Falling behind may make you unwittingly liable if you don’t stay informed.

Do your research

It goes without saying yet deserves repeating: it’s 100% vital to do thorough research before you buy your first investment property. From location to loan type, regulations, area demand and more, you need to be across every aspect of the property you’re considering investing in.

Capital Properties book “The Property Investment Book for Switched On People” shares expert investment advice and is a must read for first-time investors and anyone looking to expand their property portfolio.

Manage your budget

Before you buy your first investment property, it’s fundamental to work out your projected expenses and profit. Capital Properties investment toolkit will help you make sense of the numbers. Our free online calculators, spreadsheets, checklists, and apps will help you make well-informed property investment decisions.

The Capital Properties Budget Planner tool makes budgeting a streamlined process and will ensure you don’t forget anything and end up with potentially costly ‘hidden’ expense. And our Property Investor Planner helps you to generate an accurate annual budget for all of your investments.

Be aware of making emotional decisions

Buying a property is always going to be an emotional process. Excitement, worry, pride, joy… it can be a lot! But when it comes to buying your first investment property, it’s important to remain logical.

Think of it as strictly business and try to negotiate as logically as possible to get the best results. If you find it difficult to remain emotionally detached, our expert Buyer’s Agent Service team can help you.

Choose your partners well

Investing in a property with a partner can be a fantastic way to spread the financial burden and risk, but it can also go horribly wrong. So, it’s essential to calculate the pros and cons of the partnership before you leap in.

Do you trust this person? How well do you know them? Are you fully aware of their financial status? How will you divvy up the operational responsibilities and financial aspects of the investment expenses and profits? Are you protected if the partnership becomes untenable?

Again, having an investment partner is a great option, but being open, honest, and thorough when assigning duties and tasks is crucial to maintaining a good relationship.

Prepare for negotiations

Negotiations are a vital part of every property transaction. Starting with securing finance, to the purchase of the property, to dealing with any maintenance/construction, to finding the right tenants. You need to understand the negotiation process and be prepared before you dive in.

Don’t want to deal with the stress of negotiation? Then let our buyer’s agent services negotiate expertly on your behalf instead. It’ll save you time, stress and money.

Be finance ready

Obtaining pre-approval for a home loan is free, easy and will probably end up saving you money. Receiving pre-approval and knowing your budget means you can negotiate from a position of strength and help you secure a great deal.

Our blog post “Why being finance ready pays dividends” is worth a quick read.

Need help with your first investment property?

Your chances of making a profit when you buy your first investment property are significantly increased when you work with experts who understand the investment property industry.

At Capital Properties, our mission is to guide you in your property investment journey and support you to make the best property decision. We’re always available to chat and offer helpful information, so book a free Discovery Session today and let us help you work towards your future financial security.

In the 2022 federal budget, the federal government announced a new Regional Home Guarantee (RHG) scheme to boost construction and help homebuyers get onto the property ladder sooner in regional/rural areas.

Let’s take a closer look at the Regional Home Guarantee – 5% Deposit Scheme and see what it might mean for you.

Need help navigating government grants and choosing the right property? Book a discovery call with Capital Properties today. As investment specialists, it’s our mission to help Defence personnel and others attain future financial security.

On the go? Here’s 30 seconds of take outs:

The Regional Home Guarantee (RHG) is an extension of The First Home Guarantee, that gives buyers the ability to purchase a home with a 5% deposit without the need for lenders mortgage insurance (LMI).
The RHG applies only to new properties in regional areas.
The RHG comes into effect in October 2022 and will continue until 30th June 2025.
You must be an Australian citizen or permanent resident aged at least 18 years.
There are income restrictions, see below for full eligibility criteria.

Keep reading >>

What is the Regional Home Guarantee?

The Regional Home Guarantee (RHG) is an extension of the First Home Guarantee, previously known as the “First Home Loan Deposit Scheme (FHLDS)” which came into effect on 1st January 2020. That scheme allowed eligible buyers to purchase a property with a smaller deposit of only 5% without the need to take out Lenders’ Mortgage Insurance (LMI).

This new RHG will allow eligible buyers in regional areas to purchase or build a new property with a similarly low deposit without paying the LMI because the government acts as a guarantor on part of the loan, guaranteeing up to 15% of the purchase price. That means the bank/lenders no longer need to take out this insurance and the savings are passed onto the buyer.

The RHG is only available to first-home buyers or people who haven’t owned a home for at least 5 years. The full eligibility criteria are explained below.

How does the Regional Home Guarantee work?

The Regional Home Guarantee now allows potential buyers to purchase a property with a lower than usual deposit, allowing them to get onto the property market sooner. Usually, borrowers with less than a 20% deposit, i.e., borrowing more than 80% of a property’s value, would be required to pay LMI to protect the lender.

The government predicts that regional buyers will be able to save up to $32,000 in LMI, a significant saving for all first home buyers.

The Federal Government has allocated 10,000 guarantees a year starting from October 2022 until 30 June 2025. This is in addition to the 35,000 guarantees a year promised under the First Home Guarantee/’FHLDS’.

Who’s eligible for the Regional Home Guarantee – 5% Deposit Scheme?

To be eligible for the Regional Home Guarantee – 5% Deposit Scheme you must meet these criteria:

You must purchase a new home in a regional location and have saved a 5% deposit.
Be a first-time buyer. This includes an investment property, commercial property, land/or a company title interest in land in Australia.
You must be at least 18 years of age and an Australian citizen or permanent resident.
You cannot have an income of greater than $125,000 as a single person, or more than $200,000 for de-facto/married couples in the previous financial year. This income cap is reassessed every year by the National Housing Finance & Investment Corporation (NHFIC).
Outside of marriage/de-facto couples, joint applicants are not eligible (e.g., parent/child, siblings, friends, etc.).
You must live in the property within six months of purchase and continue to live there while the home loan is guaranteed under the 5% Deposit Scheme.

What properties are eligible for the Regional Home Guarantee – 5% Deposit Scheme?

The Regional Home Guarantee is applicable to new homes only. This means that the property must have completed construction on or after 1 January 2020 and cannot have been lived in by anyone previously and/or sold, rented, or leased.

The exception to this is if the property’s been significantly renovated in place of a demolished property and put on the market in an as-new condition. It doesn’t allow you to buy an old house and do your own renovations.

Eligible properties include freestanding houses, townhouses or apartments such as:

Newly built properties
Off-the-plan properties
House and land packages
Land and a separate contract to build a new home

Property Price Caps for the Regional Home Guarantee

As per the First Home Guarantee, with the Regional Home Guarantee you can only purchase properties within certain price caps:

State or Territory	Build or purchase newly built home
	Capital city & regional centres	Rest of state
NSW	$950,000	$600,000
VIC	$850,000	$550,000
QLD	$650,000	$500,000
WA	$550,000	$400,000
SA	$550,000	$400,000
TAS	$550,000	$400,000
ACT	$600,000	N/A
NT	$550,000	N/A

Source: National Housing Finance & Investment Corporation (NHFIC).

How To Apply the Regional Home Guarantee – 5% Deposit Scheme

Applying for the Regional Home Guarantee – 5% Deposit Scheme is a similar process to the First Home Guarantee. We’ve covered the 5% Deposit Scheme before. Applications must be made directly with one of the 27 participating lenders of the Scheme or via a mortgage broker.

Capital Properties can put you in touch with a Mortgage Broker to help you with this process. And we know what makes a great Mortgage Broker.

If that’s the good news. What’s the bad news?

While the Regional Home Guarantee – 5% Deposit Scheme is great news for many first home buyers who would otherwise struggle to get on the property ladder, some homebuyers and builders are concerned that the move could mean higher property prices in regional markets.

However, the probability is that it will increase demand for more affordable properties, bringing new life to some less populated areas.

There is also some concern that due to further probable interest rate rises in 2022, even these smaller loans will be more difficult to service. Capital Properties strongly advises that you seek expert advice to help you make the best investment decision for your situation.

If you’re still wondering what the Regional Home Guarantee means for you, then get in touch. As experienced property investors, we can help you navigate the Regional Home Guarantee – 5% Deposit Scheme and any other schemes that can help you invest and work towards your future financial security.

Book a free Discovery Session today and let’s get started.