Stay the Course in Real Estate Investing

By Michaela Ryane for the Australian Property Investor magazine May 2007 issue. Not many of us are turned on by the idea of ‘getting rich slow’. But patience does pay off on the winding road that is property real estate investment.

Remember Veruca Salt, a.k.a. the girl who screeched: “I want an Oompa Loompa now!” in Charlie and the Chocolate Factory? Well, if we’re really honest, a lot of us have some Veruca in us – we crave for instant gratification.

Occasionally, property real estate investors get rich quick. But for most of us, it’s a case of sitting back for a while before the gains become obvious. In the meantime your inner Veruca might become impatient. She may even urge you to sell up. So how can you get out of the Veruca mindset and into the mindset of ‘staying the course’?

1. Consider historical data

If you’re influenced by short-term events, you’ll make yourself unnecessarily anxious. Historical data confirms that real estate property values and rents have always gone up in the past. Best selling property author Jan Somers has been investing in real estate since the seventies. She uses historical data to build her confidence. However, she cautions: “You shouldn’t rely on those statistics to decide when or where to invest.”

2. Take a long-term view

If you buy real estate property expecting strong short-term gains, there’s a reasonable chance you’ll be disappointed. With a long-term view there’s a much lower chance of disappointment. “Long term is more than four or five years,” Somers suggests. “I can’t tell you the number of people who in the late 1990s and early 2000s had held on to property for four or five or seven years and said, ‘look nothing’s happening and we’re going to bail out’. And they’ve bailed out and missed out (on significant gains).”

3. Remember why you’re doing it

Goal setting 101: if you set a goal, write down the reasons why you want to achieve the goal. If you didn’t do this when you started investing in real estate, do it now. This is your big picture – your motivation to stay the course. You can refer to it whenever you start to get impatient. You may be forced to make some sacrifices when you start investing in property and real estate investments, but if your big picture excites you, you’ll be more willing to do whatever it takes to achieve it.

4. Know your risk profile

If you’re prone to anxious worrying, look for ways to increase your ‘sleep-at-night’ factor. You can fix rates, hire property managers, get landlord’s insurance. Whatever it takes for you to stay the course.

8 Top Tips for New Real Estate Investors

As a relatively stable interest rates outlook and tight rental markets begin to tempt more real estate investors into the market, broker Mortgage Choice has released the following tips for would-be investors in the Australian Property Investor magazine April 2007 edition.

1. Create a long-term property portfolio plan
Understand that property investing is a long-term strategy and that property cycles generally involve highs, lows, and steady patches over seven to ten years. Consider your real estate investing goals and all possible outcomes.

2. Consider all costs and tax implications
The interest and related expenses you incur on your property investment (such as repairs and maintenance) are tax deductible. Some properties may be negatively geared (where your loan repayments, fees and other costs exceed your rental income), meaning the net loss can be offset against your other income. Others may be positively geared, meaning the rental income is higher than the costs. Also think about the capital gains tax you’ll have to pay if you decide to sell the property.

3. Research, research, research
Read articles, use reputable property research companies, and the Real Estate Institute of Australia, search the internet and talk to people to research the areas you’re interested in buying in. Invest the time to fully understand the real estate market – it could save you thousands.

4. Consider using your equity
You can tap into your home equity or equity in another investment property as a launching pad into more property, so long as you can afford the extra repayments.

5. Think about buying with others
More and more Australians grappling with affordability issues are pooling their resources with friends, family or work colleagues to break into the property market or increase their property ‘wealth’. There are a myriad of home loan options now available for such situations, though you’ll also need to get legal advice to set up a contract with your co-buyers.

6. Choose a loan to meet your current needs
Apply for a loan that suits your current needs and lifestyle, as you can refinance down the track.

7. Use a buyers agent
A buyers agent or property finder can provide advice about the best property real estate for you. Buyer agents know the real estate market better than most and can help you choose and buy your property.

8. Visit a financial adviser or accountant
You need to discuss your full monetary situation with an experienced adviser to be sure an investment property is right for your situation.

Real Estate Investing Books and Property Investment Resources

If you are looking to purchase a book on how to invest in real estate or property investments or guides to property management, renting, seeking financing or general personal financial help, please read below.

The following web site is a great resource for real estate investors across the United States and Canada to purchase the best investment books that will guide you through the process of building wealth through property investments.

The two books that are recommended by everyone before you get started in the property investing arena are written by world-renowned author Robert Kiyosaki who teaches you on how to get out of the 'rat race'. By reading these two books, you will gain knowledge on why you are investing in real estate and how to change your life so that you can maximise your time, wealth and prosperity.

Book #1 - Rich Dad Poor Dad by Robert Kiyosaki

Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money That the Poor and the Middle Class Do Not


For CD Version:



Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money That the Poor and the Middle Class Do Not
A #1 New York Times bestseller, Rich Dad, Poor Dad is a true story on the lessons about money that Robert Kiyosaki learned from his two 'dads.' One dad, a Ph.D. and superintendent of education, never had enough money at the end of the month and died broke. His other dad dropped out of school at age 13 and went on to become one of the wealthiest men in Hawaii.

Book #2 - Who Took My Money by Robert Kiyosaki

Rich Dad's Who Took My Money? : Why Slow Investors Lose and How Fast Money Wins


For CD Version:

Rich Dad S Who Took My Money? Why Slow Investors Lose And How Fast Money Wins! (Cd/spoken Word)


Rich Dad's Who Took My Money? : Why Slow Investors Lose and How Fast Money Wins
Kiyosaki starts this book by asking the reader to study one's paycheck. "Look at all the deductions that reduce your take-home pay-federal taxes, state taxes, FICA, 401k deductions, etc., etc.," observes Kiyosaki. "For every dollar you earn, you seemingly only take home 60 or 70 cents! What guarantee do you have ALL these monetary deductions, like your 401k or Social Security, are ever going to come back to help you when you decide to retire?"Using this platform as a jumping-off point, Kiyosaki shows how today's employees can finally start taking advantage of their OWN investments to put them on the fast track to become independently wealthy. In short, Kiyosaki explains "who took your money" -and what you can do to make sure you aren't short-changed!

Here are the categories listed:

1. Rich Dad Poor Dad by Robert Kiyosaki
2. Donald Trump - How to get rich through real estate
3. Real Estate Investing for Dummies
4. Flipping Property and How To's
5. Real Estate Financing and the Banks including Mortgages
6. Renting Real Estate and Property Management
7. Home Renovations and Reno for Dummies
8. Recreational and Resort Real Estate Investing including Timeshares
9. Canadian Real Estate Investing and books by Don Campbell
10. Life, Wealth, Prosperity, Retirement - General Financial Help Books

Avoiding the Pitfalls of Real Estate Investment

In Part 5, Monique Wakelin talks about what to watch out for when deciding what proper real estate assets you should consider in the December issue of API Magazine for the article: ‘Take Control: How Home Equity puts you in the driver’s seat’.

It’s not unusual to hear tales of woe from both first-time and seasoned real estate investors who have fallen for the traps and failed to achieve the capital gains they expected. Some of the most common mistakes that could potentially cost thousands of dollars include:

Investing in speculative sectors of the residential property real estate market. These include off-the-plan developments that concentrate on “inducements” such as rental guarantees, offers of finance or tax breaks. The “inducements” often mask a propensity for low or no capital growth.

Faulty real estate asset selection. You can select a real estate investment property in the right suburb but in the wrong street. It may be that the surrounding buildings and aspect detract from its attractiveness and long-term growth potential. The wrong building style can also be a slow mover, even if it’s in the right area.

Failing to understand the importance of scarcity value. The higher the demand for the asset and the less supply, the greater your capital gain in real estate will be.

Buying a real estate investment property for tax benefits, stamp duty savings or rental guarantees. On a properly selected investment property, these factors are an added bonus rather than the primary reason for the purchase. Nobody ever becomes financially independent concentrating on saving tax.

Failure to check major body corporate expenditure. The fees charged on some apartment developments canbe astronomical. In the case of some CBD high-rises, body corporate fees can be between $3000 and $4000 a year. This is a major part of an investor’s outgoings and an unnecessary expense.

Paying too much. An overpriced real estate property will take a great deal longer to catch up with its true worth and to start producing capital gains than one that was bought at the right real estate market price to begin with. Always do your homework in regard to prior benchmarking in real estate value.

Failure to diversify locations and building styles within a property portfolio in real estate. Not all real estate sectors of the property market move in a uniform way – even in the high demand areas. Diversity in a real estate portfolio can help the investor ride out any short-term anomalies in one area or market sector.

Relying on historical statistics. Most of the property real estate data we see is already three months old. This puts the investor in the position of trying to make tomorrow’s decision with yesterday’s news. You can’t beat on-the-ground homework for the most accurate picture of where the market is and where the real estate markets are moving.

Lack of independent information. When seeking advice from anyone in an advisory capacity, always check their qualifications, length of time in business, affiliations, any vested interest, what they abse their recommendations on, what ongoing services they provide and ensure their fees are paid by you, the customer, and not by other interested parties. Always ensure they have unrestricted access to the real estate market.

The cost of waiting for the “ideal” circumstances. This could be a wait-and-see attitude to interest rate movements or whether the property real estate market is going to soften. There’s no right or wrong time to buy an investment real estate property. If investors apply the long-term principle then the cost of waiting can be very expensive indeed!

Monique Wakelin is the co-founder of Wakelin Property Advisory, www.wakelin.com.au, a Melbourne-based property consultancy. For more home purchasing and real estate investment tips and checklists, please visit this link.

Real Estate Help is at Hand and Home Renovations - On the Improve of Real Estate

Got a real estate renovation question? Who better to ask than Reno King Paul Eslick? Published in API January 2007 magazine in Australia.

Question: My home renovation involves pulling out a kitchen cabinet and a wall to create more open space at the back of our house. After much hunting around, I’ve found some terractotta tiles that look almost identical to the tiles already in place through the rest of the kitchen. However, these tiles are somewhat thinner than the originals. What’s the best way to lay tiles so I get a level end result?

Answer: I assume we’re talking about floor tiles here. Tiles that require padding for levelling purposes should be laid onto a finished correct height solid base which has been attached to the original floor with nails and glue. Tiles are then fastened as per the manufacturer’s recommendations. Reno Kings usually tile all their wet areas with 200mm x 200mm white tiles for a BBC room – bigger, brigher and cleaner!

Question: What’s the best approach to painting concrete path or driveway? Is any special preparation needed?

Answer: For unpainted surfaces, new concrete requires curing for at least 12 weeks before painting. All unpainted surfaces, new and old, need to be etched to give good adhesion. Mix one part spirit of salts to nine parts water and spread with a stiff broom until fizzing action has ceased. Repeat on smooth concrete surfaces, wash off and allow drying before painting.

For painted surfaces, scrape off all flaky paint and remove all contaminants like oil, grease etc. Sand smooth surfaces to rough for better adhesion. Paint a small section only and allow it to dry and then test compatibility with old paint, looking for signs like lifting. If poor adhesion is visible, remove old paint. If not, paint as per manufacturer’s instructions.

Painting concrete sounds harder than it actually is. The Reno Kings paint these surfaces often. It gives the house a left and dries in two hours. What a bonus instant equity!

Question: I’m currently renovating a Queenslander real estate property and will be sanding the paint off the old deck and recoating it to show off the natural timber. I’m unsure whether to use a decking oil or a lacquer. What would your recommend?

Answer: Maintaining a natural look of timber deck equates to a lot of challenges to both the timber and the coatings. Decking, either hardwood or treated pine laid horizontally, has weather and foot-abrasive traffic to contend with. For this reason, I’d prefer decking oils as they can penetrate better into the cellular structure of timber. Keeping the natural look will require the deck to be recoated every 12 months.

The Reno Kings love decks and so will your tenants! They add value and increase rents. Pay special attention to the condition of stairs and handrails. You don’t want your tenant having an accident.

Question: Do you have any tips on how to get tradespeople to turn up at the appointed hour?

Answer: It’s a sign of the times unfortunately. The tradespeople have too much work and not enough time to do it in and a small number of workers can tar the rest. Getting tradespeople for real estate renovations from the Yellow Pages without checking previous work ethics is fraught with danger. I suggest you only approach tradespeople reno real estate recommended by reliable sources. When you find a good tradesperson, pay the promptly and you’ll become a preferred client.

The Reno Kings are flexible. If one tradie is a no-show, we move into another area to kept the job going.

Question: I’d like to add a water feature to the front yard of my real estate investment property but don’t know where to start. Is this a project a DIYer can handle or does it call for a professional?

Answer: There are plenty of complete systems that can easily be assembled by anyone. Costs vary from $200 up to $800. My friend Tony at Bunnings says they’re big sellers and all stores regularly conduct free DIY installation classes.

The Reno Kings say be careful of money suckers on your real estate investment property. How much will the rent increase and the house revalue with a water feature? Not much. This sounds like an emotional project. Forget it!

Visit the Reno Kings at www.renos.com.au. Do you have a real estate renovation question? Email it to editor@apimagazine.com.au and we’ll answer it in a future issue of API. If you would like more Real Estate Renovation Tips and Checklists, please visit this link.
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Home Renovations | On the Improve of Real Estate

Australians are spending more on major real estate renovations than they have in two years, as resilient house prices, a strong labour market and high vacant land prices drive people to improve rather than move.

Home Renovators spent $891 million on major works in September 2006 quarter, up 5 per cent on three months earlier, according to the latest Renovations Monitor from the Housing Industry Association (HIA).

HIA chief economist Harley Dale said market conditions in real estate were making major renovations an appealing option. “This is especially the case at a time when land supply constraints, higher interest rates and unjustifiably high government-imposed costs are conspiring to make new real estate residential construction a less appealing option than it should be.”

The average cost of a major home renovation was $86,476 in September, up 3.1 per cent. However, Dale noted that the real estate renovations most susceptible to interest rates – ground floor and upper floor extensions – lost ground.

Published on Page 6 of the Australian Property Investor Magazine – February 2007.

Real Estate Renovation Rumbles

Written by Michaela Ryan for the API Magazine in Australia, Jan 2007

How can you renovate a real estate property and keep your relationship intact?

First a confession. I find renovating real estate properties stressful. Sometimes it makes me lash out at my husband when really, we’re but just doing our best to work through what seems like the world’s longest “to do” list. But apparently we’re not alone. A survey by AAMI in 2005 showed 58 per cent of people find their real estate renovation projects stressful. Thirty per cent find the renovation real estate projects to be a source of tension with the people they live with.

For information regarding why you should purchase pre-construction condos in Vancouver real estate versus buying old properties, click here.

So how can you minimise that tension? As a real estate property investor, this is important to address, because if one bad experience puts you off renovating for life, you could miss out on some great opportunities.

Katrina Spyrides, executive officer of the Conflict Resolution Services to the ACT, suggests that before real estate renos, couples should consider the problems they’re likely to face and discuss how they’ll deal with situations if they arise.

“If the couple is anticipating (various issues) then they can be on the same wavelength, rather than all of these dramas being a shock to them,” Spyrides says.

Possible Real Estate Reno Problems

1. Feeling exhausted
It can be exhausting working full-time and then coming home to do physical work on a renovation of a real estate investment property. It can also be mentally taxing to coordinate tradespeople.

2. Inequality of effort
Resentment can grow if one partner puts more time and effort into the real estate reno than the other.

3. Kids
“(Your kids) are at a school during the week and they want mom and dad’s attention if they’re being shipped off at the weekends then they might start acting up as well,” Spyrides says.

4. Lower quality of life in the short term
During a real estate property renovation, time and money can be scarce. your lifestyle accordingly suffers.

5. Disagreements about the details
How much to spend on a bench top? Which colour? Whether to bring in a tradesperson or do it yourself? There are plenty of little decisions that can potentially lead to disagreements between partners.

6. Living in mess
If you live in the house you’re renovating, there could be tools everywhere. And there will be rooms out of action for periods of time. comfort levels can suffer.

Coping Strategies of Renovation or Real Estate Property

1. The pre-reno discussion
Before your renovation project, it helps to talk about the issues we’ve just mentioned and how you might be able to (a) avoid them, and (b) deal with them if they arise. It’s also worth creating a ‘to do’ list (which will be a work in progress). Delegate all the tasks and establish a realistic timeline. Budget carefully for your investment property renovation project. Factor in a buffer for unexpected expenses – every reno has them!

2. Choose a good time to talk
Conversations can be counter-productive if you’re angry or tired. If you have a problem you need to discuss, Spyride says, “Set aside time when neither of you are tired and talk about it.”

3. Switch off
“Sometimes within a renovation of real estate property couples start to see each other as sub-contractors and every bit of their conversation is about the renovation. It’s about putting that line in and saying, “okay after eight o’clock we won’t talk about the renovation,” Spyride suggests.

4. Outsource
If the DIY jobs are causing too much stress, investigate the cost of outsourcing. If a tradesperson can complete the job within a day that would take you a couple of weekends to do, they might pay for themselves because you can tenant the property a week earlier.

5. Keep an eye on your tradies
Try to check on your tradies’ work every day if possible. It’s amazing what you discover when you drop in for a chat! If you pick mistakes up straight away, you can avoid big headaches down the track.

6. One step at a time
If you keep thinking about how much there is to be done, it can feel overwhelming. Sometimes you need to keep your focus on the next task or two in your real estate property renovation project in order to keep stress levels under control.

7. Just deal with it
“not all problems can be resolved. But they can be managed,” says Spyride. “It doesn’t mean that you have to have a bed of roses at the end of the day. Sometimes things will just be the way they are and there is not resolution. It’s probably just about working through them until they subside.”

Take heart – the real estate renovation won’t last forever!

For more real estate renovation tips and pre-construction condo purchasing opportunities, please click on this URL.

Real Estate Tax Straight Up Questions and Answers

Resident tax expert Julia Hartman answers questions from API readers in the January 2007 magazine.

Timing the real estate renovation

Question: We are about to purchase an apartment on a first homebuyers grant and plan to live in it for the required time, and then lease it out and move into something a bit bigger. We were wondering if it would be worthwhile doing the upgrades to the real estate property while we are residing in it or rather when it becomes an investment property.

Answer: It’s probably more cost effective for you to do them while you’re living there and the tax consequences for any upgrades, as opposed to repairs, will be the same. If you replace the bathroom or kitchen most of y our expenses will only qualify for the special building write-off of 2.5 per cent a year for the next 40 years, so you’ll still benefit from that when you move out. Replacing equipment such as air conditioners, vinyl, carpets, stoves, and the hot water system is best done just before the tenant moves in, as they’re depreciated over 10 to 12 years. Initial repairs, i.e. things that needed fixing when you bought the real estate property, wouldn’t be tax deductible anyway. It’s only later repairs that are better done once the tenant has moved in but these repairs can’t improve it beyond the state it was in when you bout it.

Interestingly, the ATO states in TR97/23 that you can claim a tax deduction for real estate repairs carried out while the unit is rented, even though they became necessary while you were previously living there. For example, if the walls don’t need painting at the moment but by the time you move out they’re starting to look a bit shabby, providing you put tenants in there first you can claim the cost of a repaint of the apartment real estate property. If possible avoid buying depreciable items that cost under $300 until the real estate tenants move in as these can be completely written off in the year of purchase. Examples of these include curtains, light fittings, and fans. But all like items must be grouped together to be under the $300 limit for the year. So if you’re going to replace all the curtains, wait until the tenants are in there and then only do $300 worth per year.

Finance Confusion

Question: I own my own real estate home, have an investment loan of $200,000 and savings of $80,000. I would like your advice on how I can utilise my savings in the best possible way over the short term, as I will need access to this money in the future. I was recently advised that if I put the $80,000 onto the investment loan (and reduced the balance to $120,000), if I was to later redraw this money back out for non-investment purposes only the interest on $120,000 would not be tax deductible. However, if I was to deposit the money into a 100 per cent offset account (which is separate from the loan) I could later withdraw my savings and not affect the tax deductibility of the interest on the full $200,000, even though the total amount of interest actually charged in both scenarios is the same. Is this information correct?

Answer: Yes it is correct. Couldn’t have put it better myself.

Consequences of Payment

Question: My real estate investment property was leased to the Defence Housing Authority for nine years. The real estate lease had a contition that on the end of the lease the property would be repainted outside and inside and new carpet put in. The real estate property was painted inside but I chose cash compensation instead of outside painting and new carpet. How will this payment be treated in my tax return?

Answer: This would be assessable income.

If you have tax questions you’d like answered, please email it to: editor@apimagazine.com.au. Julia Hartman is a CPA, registered tax agent and founder of BAN TACS Accountants Pty. Ltd.

Choosing the Right Real Estate Assets

Part 4 of the ‘Take Control: How Home Equity puts you in the driver’s seat’ by Monique Wakelin for the API Magazine, Dec 2006 magazine issue that focuses on being smart with your home equity and investment property strategy.

As mentioned earlier, choosing the right type and location of real estate property is crucial to achieving the desired outcome. If we look at the demographics, homeowners account for about 70 per cent of the Australian population, leaving a consistent 30 per cent pool of renters. Rental demand remains particularly strong in the locations and for the types of real estate property that enjoy the highest levels of underlying growth – and growth is all about buying real estate property that’s in high demand and limited supply.

Real estate investors will never get the type of capital growth required in oversupplied sectors of the real estate market. The target properties are generally 2 to 10 km from the central business district of major capital cities and a key feature is scarcity. This can only be found in architectural styles – for example, Victorian, Edwardian and art deco styles are irreplaceable and limited in supply. Access to schools, and other amenities are vital in these areas. Specific streets and locations also need to be taken into account.

The aim is to hold on to real estate and properties, that’s subject to greater demand than supply for the long term. Even when other sectors of the housing market are showing price stagnation or decreases, these prime real estate assets will remain relatively stable. In the case of apartments, the prime holdings are in smaller blocks in the right locations and always with car parking. Such properties are hard to find and the investor real estate must know at the outset what price to pay for them.

An apartment condominium purchased in the Melbourne suburb of Armadale is a case in point. A one-bedroom apartment condo in a small block built in the mid-1960s with its own car parking space sold for $25,000 at the time. The same apartment is worth about $250,000 on today’s market. It has demonstrated 10 per cent annual compound growth since it was built and is in high demand on the rental market. Or, a single fronted Victorian, one of a pair, in a very consistent streetscape that was renovated in the 1970s and is still in good condition, was purchased by an investor in real estate in 1997 for $236,000 and sold for $437,000 in 2001. Its current estimated value in the real estate market is $540,000.

Tips on Saving for a Real Estate Down Payment

For many first-time home buyers, the thought of saving a substantial amount of money for a downpayment can seem overwhelming. But there are several ways to make a down payment a lot easier and have you into your new home faster than you’d ever imagine. Published in the New Home Buyers Guide January 19 – February 02, 2007 on Page 22.

Invest in yourself first
No doubt you think that paying your monthly bills is an important financial commitment. Like most people, you may also consider savings or investments to be purely optional.

However, if you can commit yourself to paying everyone else, you can make the same commitment to yourself. Set up a savings or investment plan and start making payment to it, just as you do for other creditors.

Re-organize your finances and you may find the money you need to collect for the purchase of your first home. Often times, finding some extra money for savings is as easy as reorganizing your budget. Managing your money a little differently perhaps by consolidating your debts, can sometimes free up the extra money you need.

Consider tapping into your RRSPs
RRSPs are a good way to secure your financial future while enjoying the tax benefits today. As a first-time home buyer (or if you haven’t owned a home in the previous five calendar years) you may qualify for the government approved RRSP Home Buyers Plan that allows you to use your RRSP savings toward the purchase of a home. If eligible, you and your spouse may withdraw up to $20,000 each from funds that have been in your RRSPs for at least 90 days.

The funds aren’t taxed as long as you repay the total amount to your RRSP over the next 15 years. Your payments don’t have to start until the second year after the initial withdrawal.

Use GICs to help you save
GICs offer you competitive rates of return and offer a safe, secure way to grow your savings. For flexibility, you can choose from a variety of terms. Choose non-cashable GICs and your money will be securely tucked away for the term you choose and you won’t be tempted to dip into it.

Another government approved program allows you to have less tax deducted from your regular pay cheque. You’ll benefit from a tax refund each month rather than one lump sum next year.

Every month you’ll have extra cash on hand to add to your downpayment savings on your new home or real estate property and then once you own your home, you’ll be able to make your regular mortgage payments or contribute to your RRSP more easily.

First Time Home Buyer Info

The first time real estate home buyer property purchase tax exemption. First time buyers are exempt from paying the property purchase tax under the following conditions:

1. Price of real estate property is $325,000 (Lower Mainland of Vancouver) or less. For homes between $325,000 and $350,000 an exemption is available on the sliding scale. Above $350,000, there is no exemption available.
2. Mortgage loan to value ratio is 70% or higher.
3. Mortgage term must be for one year or longer.
4. Mortgages held by parents do not qualify.
5. Maximum amount of real estate principal buy down in the first year is $13,000, in the Lower Mainland.
6. Home buyers must not have owned a house anywhere in the world before. If only one client qualifies then only their portion of the home purchase will be eligible for the exemption.
7. Home buyers must have been a resident of B.C. for at least one year, or have filed tax returns as a resident of B.C. for two of the last six years.
8. If home purchasers move out of the home prior to their one year anniversary, a portion of the Property Tax will be payable.

The price and savings for this tax exemption for first time home buyers of real estate properties:
$325,000 = $4,500
$275,000 = $3,500
$250,000 = $3,000
$200,000 = $2,000
$150,000 = $1,500
$100,000 = $1,000
$50,000 = $500

For more information about Real Estate Checklists and Tips for Real Estate Investment Condos in the United States and Canada, click here.

The Home Buying Process

Frequently asked questions about buying a new home from the New Home Buyer’s Guide BC Homes & Resorts from August 25 – September 22, 2006 edition with permission from the Canadian Home Builder’s Association (Visit CHBA at www.chba.com and HomeBase.ca for more information).

The home buying process should begin with questions – lots of questions to help you to make the right decisions about the builder you choose and the home you buy. Asking questions helps you to understand the buying process and eliminate any uncertainty you may have about it. Here are some of the common questions that home buyers ask in consumer seminars, in calls to local Home Buyers’ Association offices and in builders’ sales centres.

How do I make sure that I choose the right new home builder?

Talk with several new home builders first. Check out each company and the quality of their homes. Visit model homes or sales offices. Get facts and figures about every builder: How long have you been in business? Where have you built real estate before? Where are you building now? Can I visit one of your construction sites? Are you a member of the Canadian Home Builders’ Association? And so on. Ask about their customer service and third party warranty. Ask for references from past customers and follow up with them.

What kind of products will my builder use?

Professional builders use only products with a good reputation and a proven track record, products that are made by established manufacturers, meet Canadian standards and come with a warranty. The use of brand-name products in new homes offers a double benefit – you know what you are getting and so does your builder. I am not sure about my builder’s construction methods and technologies. How do I know they really work? Home building has advanced tremendously even over the last ten years, and technically, new homes are more sophisticated than they used to be. If you have questions about any aspect of how your home is built or how any of the systems or products work, such as the furnace or ventilation equipment, don’t hesitate to ask. Professional builders will be happy to explain things in detail. They often have cutaways or examples in their model homes or offices, or they can give you manufacturer’s information or third-party (such as government) reference materials.

What if there is a delay in finishing the home?

Both you and the builder want to see your home completed on time, and in the vast majority of cases, your home will be ready as scheduled. Occasionally, a delay may happen as a result of the unforeseeable – most often, sudden shortages of materials or labour. When a delay in unavoidable, your builder will work hard to minimize any inconvenience to you and your family. Ask your real estate builder to explain in detail what you can expect in case of delay.

Can I visit the construction site to watch the progress of my home?

Seeing your home take shape can be an exciting aspect of buying a new home. Ask your builder about the company’s policy on site visits and how to make arrangements. Can you tour your home while it is in progress and when? During construction hours, or in the evening and on weekends? Keep in mind that, for safety reasons, you should not enter the construction site for an unscheduled visit.

I have heard about the “other costs” of buying a home. What are they?

By far, the largest cost of home buying is the price of the house. However, there are some accompanying costs that you should be aware of. These costs vary from one region to another, but typically include lawyer’s fees, an appraisal fee (for mortgage purposes), fire insurance, and adjustments if you are selling your current home. Ask your builder or lender to give you a list of items and an estimate of costs. (Home buyers are often encouraged to set aside between 1.5% and 2.5% of the rice of the house for additional costs). At the same time, make sure to ask about the projected taxes for the new home, and the builder’s estimate for utility bills.

How long will it take to build my home?

The time required to build a new home can vary considerably, depending on development of the land, availability of labour, size and design of the home and a number of other factors. In larger developments, construction of your home may no begin until a certain percentage of the homes have been pre-sold to ensure an efficient and cost effective real estate construction process. Your builder will provide you with a detailed schedule of events and milestones, so you’ll know exactly what to expect and when.

Can I make changes to the design?

Today, customizing is the norm, not the exception. Often, your chosen plan can be modified, before the foundation is built, to suit your own needs and desires – eg. Moving walls, wxpanding closets, adding windows. However, each builder has a different approach, so ask about flexibility and limitations in the design. Do I have choices? Can I make changes and when? In larger real estate developments, the exterior style elements and colour scheme may be architecturally determined, so there are fewer opportunities to accommodate personal preference.

What is warranted and for how long?

Professional real estate builders provide third-party warranty on their homes to protect purchasers against faulty materials or workmanship, usually for one year, and against major structural faults for up to five years (up to ten under extended warranty options). The warranty also protects deposits up to a certain amount. Warranty programs vary from one province to another, so make sure to have your builder explain exactly what’s covered or call your program office for more information.

What else should I know about?

How buyers ask many other questions, depending on the specific circumstances. For instance, when you are buying from a model home or from a drawing, you want to know if there are any differences between what you see and what you get. You also want to know about your choice of features, if you can supply your own fixtures or materials, and if you get a credit or refund when eliminating items included with the home. In large developments, ask to see the utility plan: Where are the electrical boxes or panels placed? Streetlights and postal boxes? Where is the bus stop? Also find out about the landscaping plan and when the roads will be paved.

Professional home builders welcome your questions. They know that a well informed customer is most often a satisfied customer – the greater your confidence in them, the more satisfying the process for both you and your builder.

Bricks and Mortar Real Estate Investment Tips

Welcome to another instalment of Bricks & Mortar, where our panel of experts answers real estate property investment questions from API readers. Published in the December Australian Property Investor real estate magazine.

When to sell real estate?

Question: My husband and I are both working at the moment, however, I’m going to be starting 12 months’ maternity leave in January. We think we might need to sell one of our investment real estate properties (we have six) to help ease the financial load during this time. My question is, from a CGT perspective, would we be better off selling the property while we’re both earning an income or should we do it when I’m at home with the baby? The property is in both our names, 50/50.

Answer: Congratulations on your pregnancy. I hope everything goes smoothly for you. From a CGT perspective, it’s best to wait and sign the contracts in a financial year where you have a lower income so that any gains made on the sale of a property are added to a lower base income and not a higher base income. By the way, and for what it’s worth, another option instead of selling an investment real estate property is to use a line of credit (LOC) to help with the cash flow. This LOC will mean that your debt will increase over this time but twhere the funds are used to pay for property-related expenses and mortgage repayments, the interest should still be tax deductible.

This real estate investment strategy enables people to keep their properties at times like this instead of triggering the enormous costs of selling and seeing their portfolio decrease, and allos them to keep all future gains in real estate value on the properties in question.

Dale Gatherum-Goss

Can I claim the interest on a real estate investment property

Question: I have an investment property in real estate with about $68,000 left on the loan. Long story short, the interest I currently incur isn’t deductible against income against the property. If I were to “refinance” this real estate property loan as part of opening a new loan which I require for the explicit purposes of buying another investment property, will the interest earned on the sum total of the loan (i.e. the $68,000 plus the amount of the new property) now be deductible against income from the new and/or both properties?

Answer: No unfortunately the Tax Office follows the money in cases like this to see the purpose of the new home loan and how the funds were used. So, any new house loan would be apportioned between tax-deductible debt and non-tax-deductible debt I’m afraid.

Dale Gatherum-Goss

Is it too late to invest in real estate?

Question: I am a 53 year old nurse who works full-time and I’m concerned my superannuation won’t provide me with enough money to enjoy my retirement years. I currently earn $55,000 per annum and have almost paid off my home which is worth about $300,000. My question is, is it too late for me to invest in real estate or property to help secure my financial future? If it isn’t too late, what should my real estate strategy be going forward?

Answer: No, it’s not too late. Yours is a common scenario where an individual realises that relying on superannuation alone isn’t going to deliver the retirement lifestyle they were hoping for. Provided you are five to ten years away from retirement, you can still capitalise on your income and home equity in your existing real estate property to build wealth.

To maximise that wealth creation through real estate property investment at this point in your life will require a very unemotional and businesslike approach in order to maximise your capital gains. Your selection of the right real estate property asset is crucial and you should be concentrating on only one area – the high-growth inner urban areas 2 to 12 km from a major CBD – where scarcity value, high demand and low supply will underpin your real estate investment. By focusing your property strategy on capital growth you will build and control home equity. And it’s controlling equity that’s the key to attaining financial independence.

Don’t be daunted by the higher prices in these areas. One very well chosen, more modest real estate asset – such as an apartment – can outperform the wider marketplace and inflation, not to mention larger, lower growth properties in middle to outer suburbs. Seek independent financial advice on the best loan package for your circumstances.

Next, seek truly independent real estate property investment advice to ensure you do get the maximum capital gain and good, long-term rental income. These two advisory areas should be kept separate. Don’t waste any time before seeking the appropriate advice. Steer totally clear of any “get rich quick” property real estate investment schemes. Many people seeking to rapidly top up inadequate superannuation have been tempted by these to their financial detriment.

The safest way to invest in this real estate asset class ist o take an unemotional, longer-term very well advised view.

Monique Wakelin

Real Estate Valuation discrepancy

Question: Why is there such a big difference between a real estate agent’s appraisal and a valuer’s valuation of a property or home, particularly when it’s for the bank? I had an agent give me an assessment of the value of my home before getting my loan but the bank valuer said it was worth a lot less.

Answer: It probably comes down to a question of the instructions and motivations of the valuer and the real estate agent. The valuer is instructed by the lenders to provide a realistic assessment of the real estate market value of the property as they find it on the day of inspection. They can’t take into account future improvements or presentation issues you may attend to if you were to place it on the real estate market. The lenders simply want to know a “safe” amount they should use as security, so in the unlikely event they have to take over the property, they’re covered.

The real estate agent’s appraisal isn’t bound by these instructions. Often the reason for providing a free appraisal is as a marketing tool to try to gain your favour and ultimately a listing. Therefore, it’s in their best interests to be “bullish” about their opinion of the market value so that you’re more positive and inclined to list it with them. Remember that real estate valuers are totally independent and have no vested interest in your real estate property or home.

Phil Grahame

Buying a new home or real estate investment

Courtesy of the Canadian Home Builders Association and also published in the New Home Buyers Guide in October 2006.

The Typical New Home Buying Process

Buying a brand new home is a big decision and an important real estate investment, and there is a lot to think about. You want to buy with confidence, enjoy the experience and know that you have made the best decision for you and your family. Typically the process of buying a brand new home or real estate property takes place over time and in several stages. To begin with, you want to take some time depending on your priorities – what you want in a home, where you want t o live and how much you want to spend on your property – and then explore what’s available. Once you have narrowed your choices down to one community, one builder and one real estate home, you are ready to work out the details and sign a contract with your builder. Then it’s time to step back and let the builder do the work.

Before you start looking

Get off to a great start by doing some pre-planning before you go house hunting or real estate shopping. Discuss with everyone in your household what they want in your new real estate property and surroundings. Make a list of what’s important and divide them into must-haves and would-be-nice-to-haves. Also think about what you absolutely don’t want to live with. Here are some of the things you should consider.

Community
- distance to work; traffic; public transportation
- schools and child care
- places of worship; hospitals; libraries
- distance to shops
- green spaces; recreational facilities

Your Home
- style; size; number of bedrooms; home office, other needs
- layout; open or divided spaces; formal or informal; privacy needs, flexibility for changing use of space in the future
- mobility restrictions, health considerations; indoor air quality
- energy efficient outdoor spaces
- special features – the things you have always dreamed about having
- pre-wiring for automation; security systems, communication, entertainment, business

Financing
- the downpayment you have available
- the monthly mortgage payment you are comfortable with
- other financial obligations and needs

At this point, find out who the CHBA members builders are in your community. Check ads in your newspaper to get a sense of what builders are offering. Talk with family, friends and co-workers who have recently bought a new home. Ask your lender for mortgage pre-approval so you know the price range you should be looking at. Attend a home show or real estate investment show to see the latest in features and finishings, and to meet area builders.

Exploring your Options

Now you are ready to see what’s available. As you drive around visiting builders’ model homes, sales centres for new real estate deals and offices, it’s a good idea to take notes. That way, it is much easier to make comparisons later.

The key to successful home hunting is to take your time. Don’t rush. Take a thorough look at everything and ask questions – lots of them. The real estate builder or salesperson should be ready and pleased to answer each question. Sales centres will often have a complete information package on the real estate and homes, the development, and the real estate community, including schools and other facilities. And keep in mind that a real estate builder’s model home is usually just one of several designs offered by the company – a starting point.

The community/development
- Does the community meet your needs (as determined in your planning)?
- Does the development have a good “feel”? Can you see yourself living there? Ask about landscaping plans and common facilities, if any. Visit a builder’s finished real estate development for a better impression
- What are the long-term plans for the community and real estate development – e.g. growth, roads, facilities, commercial/industrial expansion?
- Are there any community or development convenants and bylaws that restrict how you can live in your home (e.g. no pets)?

Model homes and real estate plans
- Take a close look at the qualify of each model home – is construction solid, the real estate finishing well done with attention to details?
- Compare real estate floorplan layouts and size (more square feet does not always mean more living space).
- Find out if the features in each model home are standard or upgrades (i.e. extra cost) and ask to see samples of the real estate builder’s standard finishing products.
- Note the features of each real estate property and home that appeal to you (worth considering when you have made a final decision on a model and have some leeway for details).
- Imagine your family’s daily routine through out the seasons.
- Note if the real estate builder is using brand-name products you know and trust.
- Ask about each builder’s design flexibility (e.g. moving walls, enlarging windows).
- Ask about optional or upgrade “packages” (e.g. lighting and plumbing fixtures).
- Look at the real estate company’s other designs and plans
- Visit model homes outside your price range for ideas for layout and features (but stay focused on the price range that’s most comfortable for you).
- Ask about lot availability for the home model suite you are interested in – there may be restrictions.

The builder
You should shop around for your real estate property builder as carefully as you do for your home.
- Is the company a member of the local Home Builder’s Association? Membership is an important indication of their professionalism.
- Does the company belong to a provincial new home warranty program?
- How long has the company been in business, and on average, how many real estate properties do they build annually?
- Where else have they built and/or are they building now (it’s worth a quick tour to see if you like the finished results).
- Will they give you the names of past customers for references (Do check with a few to find out if they are satisfied and would recommend the real estate builder).
- Call the Better Business Bureau to see if there are any complaints against the company.
- Ask about after-sales service – most builders have an established follow-up system
- Find out, in detail, what the warranty on your real estate property or home covers.

And you also need to know
- What is the recommended deposit? Can you make a refundable deposit to hold the home/lot for a few days or a week, while you make a final decision?
- Are you expected to make milestone payments throughout construction or pay the full price of the home, less deposit, on the day you take possession?
- When can construction and real estate development begin, and when can you expect to move in?
- Who will your contact person be, before and during the real estate construction phase of your home?
- Would you be able visit your home during construction?

Once you have found your new home

When you have found the home you want, and you are confident that you are dealing with a professional builder, you can ask the builder to write up a sales agreement. Make sure you have a lawyer review the contract before you sign. From here on, you will be working in close contact with your real estate builder, or builder’s representative to see your home purchase brought to a satisfactory conclusion.

- You need to finalize arrangements with your bank lender, if the real estate contract is conditional upon financing.
- As construction progresses, your real estate builder will call you into choose finishings such as cupboards, floor coverings, and tiles (referred to as “colour selections”).
- Your builder may ask you to make final decisions on placement of electrical, telephone and cable outlets.
- The builder may make arrangements for you to visit your home in progress (for safety and insurance reasons you cannot drop by the construction site unexpectedly).
- Just before your home is completed, you will be asked to join the real estate builder on a walkthrough of the home to verify that the work has been done according to plan. You will be asked to sign a certificate of completion, noting any last-minute touch-ups or details yet to be done to your real estate property. This triggers the warranty coverage on your home. Outstanding work will be done before you move in, or soon after.
- The builder will provide you with the manufacturers’ warranties on components and products used in your home.
- On closing day, title to the home is transferred to you from the real estate developer, the outstanding payment balance is transferred from your financial institution to the builder, and you get the keys to your new home. This is done through lawyers who register everything with the appropriate authorities.
- Before the end of your first year in the new house, the real estate developer will touch up any small imperfections that may have merged due to the house settling and materials drying out (completely normal in any new home).
- BUT you don’t have to wait if you have questions, concerns or problems. Professional builders provide effective after-sales service-part of their commitment to customer satisfaction.

Four questions to ask your selling real estate agent

What better way to test your real estate agent’s ability to answer tricky questions from potential home buyers than by asking a few curly ones yourself?

Published in the Australian Property Investor (API) Magazine in Australia, this article was written for the December 2006 issue. Please visit apimagazine.com.au for more useful real estate and property information.

Property sellers can’t afford to simply assume their chosen real estate agent will get the best possible price and should test their negotiation skills, according to the Independent Real Estate Consulting group. The group’s director, Robert Williams, says inexperienced sellers often make the mistake of assuming the best of their agent. “most real estate agents offer priceless expertise and do their best to negotiate the best possible real estate deals for their clients,” Williams says. “However, there is a worrying small percentage of agents who are clearly out to look after themselves.” “The idea of asking your real estate agent specific question is simply to feel out how they would deal with a potential home buyer and to assess if they have the ability to increase your sales price.”

“The way they treat potential home buyers is likely to reflect the way they will treat you.” With that in mind, Independent Real Estate Consulting suggests sellers ask agents four tricky questions including:

1. How much do you allow for real estate negotiation?
The real estate agent’s answer to this question will give you a clue as to what you can expect your property to sell for. “The best response from your agent should be along the lines that they don’t allow anything and they’re after the asking price,” Williams says. “in most cases, how your real estate agent responds is often what they’re also telling potential home buyers, so if their answer is ‘we usually allow about 10 per cent’, the best price you’re likely to get from that agent will be 10 per cent under your asking price.”

2. How would you respond to the question, “How long has this real estate property been on the market?’
This is an extremely common question among potential home buyers who want to determine how urgently you need to sell the real estate property – and thus get an indication of how much yhou’re likely to negotiate on the price. “It’s important that the agent does not give out such information,” says Williams. “They need to be skilled enough to answer the question without giving the details away.”

3. How negotiable are your real estate fees?
While many real estate sellers might like to hear that their agent is willing to lower their fees, this can also be a warning sign that they’re too quick to negotiate. “if the agent easily drops their fees without much pushing, you can assume that they may just as easily drop your selling price just to make a sale,” says Williams.

4. What can you teach me about negotiation?
You want your agent to be a skilled negotiator with considerable knowledge and experience of the best approach to dealing with real estate property buyers. This question can help you to decide whether you’ve found the right person for the job. Williams advises, “If you’re not impressed with their response, or don’t learn something worthwhile, then it may be time to reconsider your choice of agent.”

The Right Person
When choosing a real estate agent to sell your home, keep the following guidelines in mind.
a. Shop around. Get the names of one or two real estate agents from other homeowners in your area who have recently sold. Talk to at least three agents.
b. Make sure your agent has a valid license.
c. Get a list of all their fees.
d. Find out if they have good knowledge of your area.
e. Ask if they adhere to a code of ethics.

For more real estate tips and pre-construction condo listings, please click here.