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Brisbane landlords

Posted by admin on 11 May 2012

We had a call from our accountant the day after the Federal government’s budget was announced. Get an urgent message to your overseas landlords. The Treasurer is pulling back their tax benefits!

With no warning they’ve introduced changes to our capital gains tax rules and the 50% reduction in assessable gain will no longer apply to non-resident property owners. Importantly you can apply the discount based on the value as at May 8th 2012, so please discuss this with your Australian accountant asap. It might be best to get a registered valuer out to your property now, and lock in your ‘protected’ gains.

And for all investors we think it’s worth a reminder that the depreciation allowances on your property can add up to a substantial tax deduction. So if you haven’t got a professionally prepared schedule you may be underclaiming – and apartment owners often forget that as a part-owner of all their common property such as lifts, pools, gyms etc etc, you are entitled to depreciate this in your claims. Annual deductions over $10,000 are common.

We understand there can be options to adjust previous years’ tax returns too, so the fee to have a depreciation schedule prepared might be a good investment.

And as always, please talk to your accountant for up to the minute advice.

Posted in Brisbane landlords, property taxes and rates etc | No Comments »

Posted by admin on 24 April 2012

When it turned up in the mail over the past couple of weeks you probably didn’t pay much attention to your Annual Land Valuation Notice. Most of us know the Council uses this number to calculate our rates bill but it’s such a random amount we rarely know how it translates to actual expenses. So few of us bother to check whether it’s fair, let alone go through the steps to appeal it.

The government’s recently reviewed how they set the valuations but doing these for every property across the state means the process inevitably remains flawed. So it’s worth a reminder that Council rates aren’t your only cost. If you’re not already paying land tax, a small increase in your property’s site valuation could easily tip you over the minimum. It’s just $350,000 for companies/trusts or $600,000 if owned in personal names. The government have grouping rules too so you only need to own one decent inner-Brisbane house or an average house plus one apartment and you can easily exceed the limits.

Step 1: Check your latest Site Valuation at the govt website. Many are showing big increases on last year, despite the market having mostly gone backwards.

Step 2: If you feel the amount is unreasonably high download a valuation objection form – most of the info you need to complete it is at the webpage in step 1.

Step 3: Do your homework on what you feel the valuation should be. There’s now plenty of sales data available on sites like www.myrp.com.au and www.pricefinder.com.au If you’re a Bees Nees landlord we’d be happy to assist with a sales report at no charge.

You have time limits on submitting your objection and the steps really aren’t as difficult or time-consuming as you’d think. And the result could be a saving of thousands.

Have you appealed a valuation in the past? We’d love to hear your comments

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Posted by admin on 23 April 2012

The headlines are frequent: “Vacancy rates tight”, “rental home shortage puts pressure on tenants”. Plenty of property commentators have announced the return of a stronger rental market and skyrocketing weekly rents. Over recent months there’s been huge expectations created amongst landlords, with property developers and other vested interest groups latching onto vacancy data and the limited supply of new rental homes to arrive at incredible forecasts.

One report we saw last week gave a written forecast for a new project’s rents to be 29% higher than we’re currently achieving for comparable apartments. How? Well settlement’s not due til next year and rents are rising quickly. Apparently.

So it comes as something of a surprise to many that rents in most of Brisbane’s inner city are not actually going up.

The Residential Tenancies Authority has just released their March quarter stats and some of these agents and their market commentating/tea-leaf watching/crystal ball gazers should have a good read. Across Brisbane’s inner-city rents in most postcodes have now been flat since June 2011. The reports are correct that supply is constrained – in these same suburbs the rental pool has grown by just 1100 homes in the past year. Hardly the numbers we’d expect to keep up with population growth and a long-term trend to city living.

So how has the supply/demand argument faltered? We’d suggest it’s caution. Caution from landlords who keep reading we’re in tough times and don’t press for rent increases for fear of having a vacant property. Caution from tenants who aren’t upgrading their homes, who are staying put and checking comparable rents carefully anytime their lease is up for renewal.

We’re not economists and can’t offer a more complex reason. But on the ground we see overconfident landlords who over-shoot the market suffering long vacancies – all while reading about this apparent shortage of homes.

We’d argue rents are trending upwards and most tenants do accept this. But when developers and Brisbane real estate agents who have properties to sell are spruiking double-digit growth in rents we’d suggest more caution is needed – from anyone reading their predictions.

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Posted in Brisbane landlords, Brisbane's rental market | No Comments »

Posted by Rob Honeycombe on 4 April 2012

Increasing concern about rising body corp fees has added fuel to a new discussion (and in some cases a verbal “punch-up”) about Management Rights. The government’s calling for submissions by May 8th for a detailed review, and change may be in the wind.

We’ve always liked to do things differently in Queensland. Across our 40,000 community title schemes (apartment buildings, townhouse complexes etc) we have more than 2500 Management Rights operators. Often called Caretakers or Onsite Managers they’ve usually bought their business with the contract for maintaining common property and the opportunity to run a rental business from the building.

Other states have very few Management Rights operators: NSW has approx 200 of them, Victoria 25 and the others states even less. This one-time cottage industry grew in the Sunshine State through offering individually-owned apartments for short-stay accommodation. Legislation set up to provide a structure for this is used across all types of residential buildings and may have inadvertently created a dangerous friction point, with apartment owners feeling they’ve lost control of their buildings, running costs higher than may be needed, and Managers pressured to find a return on their investment.

Lot owners have become second class citizens, according to The Unit Owners Association of Queensland. They argue the limited options for a body corp to sack their Manager, even when they’re not doing a good job, has taken control of buildings out of the hands of their rightful owners. They say the 25 year contracts are unfair and Managers have a natural conflict to prevent owner-residents moving into the building as it reduces their rental pool (and value of their business). The UOAQ have lobbied hard for change and government may be listening. While apartments have been largely investor-owned the pressure on Managers has been limited. But with increasing numbers of owner-residents the scrutiny and expectations on Managers is rising quickly.

As agents we meet and deal with a lot of body corp Managers and there are some fantastic operators. Some who treat their lot owners with heaps of respect, take real pride in their buildings and have a genuine interest in improving the lifestyle for all residents. And of course we’ve met some who seem to believe they own the entire building and their purchase of the business gave them a right to run rough-shod over owners’ interests.

But rather than focus on the personalities the current review will hopefully resolve whether the structure is wrong. Should a developer be able to sell the Management Rights at the outset, often for a price that’s 5 times annual earnings? Managers make a huge financial commitment and this can put them at odds with lot owners. In NSW developers can only bind the body corp for one year, then the lot owners make their own decisions. The UOAQ says contracts should be a maximum of 3 years. If developers sell the Rights for less (shorter terms = lower price) then all apartments will be a little more expensive. If a change is made how do current Management Rights operators (and their financiers) have some protection of the value of their business?

It’s a complex issue and there’s strong views on all sides. But it’s a discussion we have to have and we’d encourage you to give your opinion by emailing before May 8th: managementrightsreview@justice.qld.gov.au

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Posted in Brisbane landlords, property taxes and rates etc, real estate marketing, trends in Brisbane property | 4 Comments »

Posted by admin on 10 March 2012

Are you insured if a guest slips on your wet bathroom floor this weekend? A common claim against property owners is when someone falls  through a glass shower screen. Try Googling “slip and fall claim” and see how many lawyers are ready to assist them in suing you.

“But the body corporate covers all the insurance… doesn’t it?

Many investor owners think they don’t need coverage because they don’t have any contents or furnishings – but this isn’t the case. We often speak to Brisbane apartment owners, some who’ve owned their properties for years, who are blissfully unaware of the risks they face.

To be crystal clear: Apartment owners generally do not have cover from their body corp for incidents inside their apartment. This includes owner-residents and landlords.

Peter Lynch of AON Risk Services says apart from insuring their physical contents apartment owners need liability cover. “This provides bodily injury coverage, since as the unit owner you may be responsible for anyone who is injured inside of your unit, even your tenant.”

In one well-publicised claim a child sued his friend’s parents when he fell from a bunk bed, the court awarding him $853,000 for his injuries . It goes without saying that the number of lawsuits is on the rise. And the size of the claims can be enough to bankrupt most property owners.

Peter Lynch also points out that your own insurance is needed for a number of common issues that the body corp won’t cover. “It also provides property damage coverage. If a loss originates from within your unit, you may be responsible for your neighbours’ personal property damage. The liability coverage is included in your Landlords contents cover.”

Real estate agents get very little training in body corp law so it’s no surprise very few apartment buyers are given a ‘heads up’ on what they might need. Many, many apartment owners are left to think they don’t need any insurance, especially if the place is rented without furnishings.

The cost of this sort of insurance for your apartment? Usually around $5 per week, and tax deductable for landlords.

Note: we’re great real estate agents if you’d like to sell or rent your property, but not qualified to advise you on your insurance or financial needs. Please talk to the experts.

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Posted by admin on 21 February 2012

Median rents in Brisbane’s inner city did not go up once during the March quarter of the past 7 years.

It’s been a long-held belief amongst landlords: target the start of each year for your leases to expire and the frenzy of new tenant arrivals will get you the best rents. Over the years we’ve had landlords offer all sorts of deals to make sure their rental homes were on the market in January and February. These are seen as the busy months, the peak time to squeeze the market and achieve maximum rents. And that’s such a widely-held view that we often hear agents repeat it.

But in Brisbane’s inner-city it just doesn’t ring true to us, so we decided to analyze the stats and find out the full story once and for all. And here’s the simple findings: The start of each calendar year is the busiest but it is the worst for rent increases.

We looked back over the past 7 years of bond lodgements with the Residential Tenancies Authority and on average 31% of each year’s tenancies started in the March quarter. It’s busy and probably too busy.

On average rents drop during the March quarter (-1.2%) and the biggest growth actually happens from April to June, which is also the quietest period. The stats showed the June quarter had just 21% of the year’s new tenancy starts and accounted for an average 6.4% rent increase.

So how did we end up with this ‘March quarter myth’? Historically the universities had a huge impact on our inner-city rental market and in St Lucia for example, rents do still have their biggest jump at the start of the year (averaging 5.2% in the 7 year study compared to 2.6% in the June quarters). But Brisbane’s inner city is a much more diverse market today with tenants from all walks of life, all arriving in Brisbane at different times through the year.

There are more tenants out there looking at the start of each year. But there’s also a huge number of available rental homes and the stats show supply has often exceeded demand. Agents’ resources are stretched to the limit and despite the rush of prospective tenants some landlords overshoot the market demand and end up with extended vacancies.

It’s worth talking this one through with your property manager.

Note for the stats lovers: The RTA record the median of rents for all new bonds lodged in each postcode. We looked at the 2 bed apartment sample (by far the largest rental property category) and focused on their “City Inner” data for the 24 suburbs surrounding our CBD.

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Posted in Brisbane landlords, Brisbane's rental market | 1 Comment »

Posted by admin on 13 February 2012

Often we’re asked to take on the property management of an investment and the owner asks us to collect the file from the current agent immediately. We love helping new clients and are keen as mustard to take on new properties to manage. But there’s one time constraint we have to work with when a landlord is terminating their current agent’s service.

The Property Agents and Motor Dealer’s Act says a property owner and an agent must give eachother a minimum of 30 days notice to part company. Writing in the REIQ’s Journal this month Carter Newell Lawyers’ Paul Hopkins confirms that, ready as an owner might be to get a new agent underway, Section 114(4) of the Act requires that month’s notice.

“It is not possible to contract out of the statutory minimum notification period and any attempt to do so may potentially expose the property manager to formal disciplinary action by the Office of Fair Trading, which may result in severe fines or penalties. ”

“Relevantly, a property manager will continue to be responsible for the property throughout the entire period of the appointment (up to and including the whole of the statutory termination period). This will remain the case, regardless of whether or not the property manager has access to the property. ”

Paul Hopkins also explains that a common industry practice of paying out the agent for their 30 days’ fees is not a way around the 30 day law. “The acceptance of monies for a service which is no longer being provided will expose the property manager to a breach of sections 133 and 139 of the PAMDA, which states that commission may only be claimed in relation to actual amounts collected by the property manager on behalf of the landlord client.”

The requirements of the Act might seem onerous, especially if you’re really unhappy with that agent. But for the time being it’s the law they’re obliged to comply with.

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Posted by admin on 17 January 2012

Brisbane’s tenants are out home-hunting in big numbers with a very busy start to the year. Bees Nees Manager, Annie von Rudzinski says real estate agents are “flat-strap”, reporting big crowds at many rental inspections and that’ll lead to solid rent increases on many homes.

It’s good news for Brisbane landlords after new Residential Tenancies Authority’s latest stats showed rents remained flat during the second half of 2011.

“Across Brisbane we had a 4% rise in rents last year but all of that was in the first half of 2011. Landlords have been patient and this busy start to 2012 is really encouraging,” Ms von Rudzinski said. “At the moment it’s not uncommon for more than a dozen tenants to arrive at each rental inspection. The supply of rental homes has not grown much at all but we’re still getting new tenants coming to Brisbane,” she said.

“Across Brisbane the total rental pool grew by just 1,131 properties (less than 1%) in the December quarter. In the inner-city suburbs we now have less rental homes to offer tenants than we did 3 months ago, so it’s inevitable rents will rise in that sort of market.”

December’s RTA stats showed no increase in rents since the June quarter. A 2 bedroom Brisbane apartment remained at $380 per week.

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Posted by admin on 10 January 2012

Most of the ‘old heads’ we meet amongst property investors have a calm patience about them. Many owned property during the soaring inflation of the 1970’s, interest rates of 17% and ‘recessions we had to have’ in the 1990’s, and finally the boom times of the 2000’s. Slow to panic in dropping markets, un-tempted by rising valuations, undeterred by a troublesome tenant, they focus on the long term. We’re not saying it’s the only way to approach property investment, but it’s certainly worked for many.

In the early 1990’s one Brisbane property investor and author jolted plenty of us into investing in real estate. Jan Somers, a former Cleveland school-teacher, wrote a best-seller called “Building Wealth Through Investment Property”. Her message? You can’t do nothing and expect to retire on anything more than chicken feed. Compulsory super won’t be enough so invest then be patient. It’s become unfashionable to buy books like that… but the message remains sound.

So as we kick off 2012 will investors return to Brisbane real estate? We’ve seen self-managed super funds nibbling at the offerings and the ATO reports that of the $418 billion held through SMSF’s less than $15 billion of it is currently invested in residential real estate. And $114 billion is sitting in cash deposits. It’s a huge market waiting for the ‘right time’.

What would tempt you to invest in real estate right now? Higher rents? Scrapping capital gains tax? Reduced stamp duties? Or is just not the right time to buy Brisbane real estate?

We’d love you to share your thoughts in a quick survey (5 questions only). Please click through.

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Posted by admin on 19 December 2011

Like a kid who can’t wait to grow up, inner-Brisbane’s property owners are wishing the days away to the start of a fresh year. The market soothsayers are surprisingly quiet about the prospects for 2012 – and probably because 2011 caught so many of them out. Here’s a quick recap:

1. Home prices in inner-Brisbane can drop when the experts least expect. After a mini-recovery in 2010 median prices  dipped further this year (“officially” around 6-7% but with plenty of variation between suburbs and price brackets).

2. Home owners will choose to stay put. During 2011 sales volumes in most inner-Brisbane suburbs dropped to their lowest in over a decade, with many not willing to sell for less. Just 12 months ago it seemed likely we’d have a busier market, with good job security giving buyers confidence to upgrade and move. Few predicted the economic uncertainties of 2011 (or the daily in-your-face negativity of that bloke on the Today Show amongst others).

3. A tight supply of rental homes has not led to strong rises in rents (yet). Rents grew 4% in the June quarter but have otherwise been fairly flat in Brisbane’s inner-suburbs this year. Remember the post-floods hysteria with predictions of rent blow-outs? This subdued market hasn’t surprised us – most landlords are not wealthy and become very cautious with rent increases and potential vacancies when there’s economic uncertainty.

4. We can use our money wisely. Many of us are taking advantage of interest rate cuts to pay down debt, building equity without price growth.

So bring it on 2012, we’re ready for you. Inner-Brisbane’s home-owners have had a tough year but we’re in good shape for anything you can throw at us!

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