Property Newsletter – April 2012

An End to the “Dullsville” Tag?

The next ten years will unveil a very different Perth than the one we’re used to. With more than 60 hectares of land set for development, Perth is set to experience significant economic gains and property investors will reap the rewards. 

It may very well be the end of an era for Perth. The city famously dubbed as ‘Dullsville’ is set to undergo some radical transformations which could finally put an end to this unflattering tag.

In what is likely to be the biggest ever change seen in Perth’s short 183 year history, the CBD and surrounding areas are set to be overhauled in a radical move to breathe new life into the city. Fast forward ten years, perhaps even just five, and we’ll be seeing a very different side to Perth.

In this futuristic vision of central Perth with the unsightly railway line now sunk, you’ll be able to easily walk from the CBD through serene gardens to the culinary delights of Northbridge, or even catch a public concert in the newly built City Square along the way. New waterways will be carved into the bank along Riverside Drive creating an inlet and man-made island. Here in this riverside haven, you can take a morning stroll along the promenade beside the water’s edge followed by breakfast or lunch in one of the many waterside bars and restaurants. Or, you could head to Kings Park with a picnic before catching a cable car down to the inlet, hiring a bike, and setting off to explore the new city sights on wheels. Further along towards East Perth, you’ll now be able to dock your boat at a mooring by the Causeway and indulge in a little retail therapy while the kids take a dip at the newly built public beach on the foreshore.

All these projects will result in more than 60 hectares of land being developed, more than $10 billion dollars spent on infrastructure and development, more than 500,000sqm of commercial and retail space being created, and the addition of approximately 7000 new dwellings (mostly apartments) into the area.

Whether you agree with the specific plans for these projects or not, it’s hard to dispute that this rejuvenation is exactly what a growing, cosmopolitan city like Perth needs. For some time, Perth has lagged behind other more progressive cities both in Australia and around the world with a city hub that is grossly underutilised and lacking amenity and vibrancy. It’s been a poor reflection on what is otherwise one of the most beautiful and liveable cities in the world.

Importantly, these projects also help address some key economic issues. For many years the city has struggled to supply enough office and commercial space to the market, with Perth having the most expensive office rents in the nation and a chronic shortage of short-term accommodation (just 200 beds have been added to the CBD in the past 5 years). Perth is also growing faster than any other city in Australia and is projected to have the highest percentage growth in population over the next 15 and 45 years. 

With land becoming scarcer, Perth will need more multi-residential developments and urban infill to cater to the larger population and these new, smaller households. In an era of growing concern on environmental impacts, the redevelopment of the city centre will also help create a more transit-orientated and sustainable local community that contributes a smaller carbon footprint. 

All of this is good news for Perth investors. This ‘new look’ Perth will attract more tourists and their dollars, more jobs and more new residents needing homes, increased consumer spending by locals and increased expenditure and investment by businesses. The projects will help Perth move forward in leaps and bounds by resolving rather than hindering economic problem areas. Along with the strength of WA’s resources sector, Perth should therefore experience significant growth and prosperity over coming years which is necessary to support a rising property market.

Demand for properties in and nearby the Perth CBD will be likely to increase the most as a result of these transformative projects, however Perth overall will probably feel the ripple effects to varying degrees.  While apartments have traditionally not been as popular as in the eastern states, that trend is probably set to change. I would however stress caution upon investing in one of the 7000 odd apartments due for construction in these areas. Although demand may increase, supply is also likely to be high which doesn’t make for particularly strong capital growth. The apartment would need to have a key point of difference that would be difficult to replicate to be considered a wise investment in my books.

The future of Perth is certainly looking bright and I’m pleased to see that the prosperity Perth has experienced over the recent decade is starting to filter through to projects such as these, which enhance the city and the economy.  It’s just another reason why you’ll be hard pressed to find a better city to invest in over the next 10 years.

Acquisitions: Selecting a Suitable Renovations Candidate – Part One

Many first time renovators make the mistake of rushing into their first project. They are excited and ready to start and unfortunately end up purchasing a property that is not suitable for renovation. They convince themselves that they will be able to fix the problems that impair the property. Sound familiar?

There are a number of characteristics you should look for when scouting a suitable property renovation candidate:

Similar style

People typically prefer to live in a relatively homogenous neighbourhood, where the properties have a similar style. For example, a run down character or period home in a character or period home area would generally be a good prospect.

Open floor plan

Open floor plans and flexible living are a desired part of today’s lifestyle. The floor plan needs to flow well or an opportunity needs to exist for the property to be altered (preferably requiring only minor structural change). The property must be able to accommodate today’s living requirements, such as large dining areas for entertaining and predominantly double bedrooms. You should always have a tape measure with you when inspecting property to renovate.


An important feature in any property is the ability to maintain privacy and present a pleasant outdoor entertaining area. Being overlooked by adjoining properties is a serious detriment, especially if it cannot be addressed.

Off Street Parking

If it is not available, you should assess whether it can be added – perhaps to the rear via a paved lane or perhaps the front if it does not compromise the property? Will the council permit covered parking to be installed? If there’s no opportunity to provide parking then this becomes a flaw that may make it harder to sell or rent.

Property with a sense of style or charm

Some older homes that were butchered in the 60’s and 70’s by horrible alterations can possibly be returned to their former self. If the property was build in the 50’s through to the 80’s that it is less likely to have any style or charm that is appreciated today.

Natural light

Does the solar orientation of the property provide for an aspect that lets plenty of winter sunshine into the courtyard areas and the living spaces? Is the home protected from summer sun? Does the inside of the home have lots of natural light? Can dark spaces be fixed, perhaps with skylights? Natural light and solar orientation are becoming more important in the purchase decision.

So be aware, although all properties can be renovated not all properties can be renovated successfully and for a profit. Look out for our next newsletter in which we’ll discuss some of the less desirable characteristics to avoid.

Current Property News: Market Commentary

The latest population projections for WA, released recently by Planning Minister John Day, show that by 2026 the state’s population will grow to over 3 million thanks to strength of the economy.  

WA’s population boom expected to be even bigger

The latest population projections for WA, released recently by Planning Minister John Day, show that by 2026 the state’s population will grow to over 3 million. This new view of the future is 400,000 more than previous projections made in 2006.

It is based on a recovery in the fertility rate and the assumption that WA’s record of good economic performance will continue for at least another 20 years, which will drive overseas migration.   

In light of the data, Mr Day called for more urban consolidation in Perth and emphasised that outdated practices of pushing the boundaries of the Perth metropolitan area were no longer best practice.

“In other words we can’t continue to rely on peripheral urban developments, greenfields developments, producing urban sprawl as by far the dominant way to grow our city” Mr Day said.

Hot Property

In this month’s Hot Property section, we go back to see how one of our previous buys in Carlisle has performed 12 months on. 

Around 12 months ago, we shared with our readers an acquisition in the suburb of Carlisle for a client who had a tight $400,000 budget. They were specifically looking for a property with good capital growth potential, but also a reasonable cash flow to aid in the shorter term.

Buyers’ agent Ray Chua located a fantastic 1970’s duplex half for them in the suburb of Carlisle that met the required criteria. Not only was Ray able to strategically purchase the property under market value, but he saw the potential in creating instant equity and a higher rental yield through a small renovation of the property.

The client paid $316,000 for the property. Upon settlement, the client proceeded to undertake approximately $11,000 of renovations; this included painting, replacing floor coverings, refurbishing the kitchen, and opening up the living area.

12 months on, a bank valuation was recently ordered on the property. Despite what some would say has been a gloomy period for the Perth property market, the property has netted the owners $90,000 in equity according to this valuation. Some of the improved value is attributed to the renovation which brought the property up to market standards, although the main lesson here is that purchasing the right property with strong growth fundamentals can pay dividends no matter what the state of the market. 

SPECIAL FEATURE: Momentum Wealth’s Rising Stars

In this quarterly special feature, we profile one of our star client’s who are well on their way to achieving their wealth creation goals. This month we speak with a couple nearing retirement proving that you’re never too old to start your wealth creation journey. 

Hugh Soord and his wife Anne had dabbled in the odd property investment here and there, but it took moving closer towards their golden years to kick-start them into taking property investment more seriously.

With their three children now all grown up and retirement looming, Hugh started contemplating their financial future. Having sold previous investments and not convinced superannuation would provide them with a comfortable retirement, it took a chance discussion with a work colleague (coincidently, a client of Momentum Wealth) that put Hugh and Anne on the right path and in touch with buyers’ agent Mark Casey.

Although the couple had bought and sold some investment properties in earlier years, Hugh openly admits that they just didn’t have the know-how to do it successfully, hence why they had made the decision to ultimately sell each of them. 

“We were trying to do things on our own and we thought we were making the right decisions but we weren’t necessarily buying property in the right place at the right time, and we really had no idea how to keep building our property portfolio”, says Hugh.

However, with Mark and the team at Momentum Wealth on side, they now felt in safe hands and confident in the expertise of Mark to help them make the right decisions for their future.

After evaluating a few different properties, Mark found a property in Kingsley that hadn’t even hit the market yet. He proceeded to run background checks on the property, presented comparisons to other properties that were being considered, and gave Hugh and his wife a frank and detailed evaluation of the property’s investment potential. Armed with this information and after a private inspection of the property, Hugh gave the nod and Mark proceeded to secure the property for $485,250. Not only is it a structurally sound 4 bedroom home in very good condition, but it is also a duplex site with the potential to be a triplex site in the future.

Before the dust has even settled on this purchase, Hugh and his wife are already preparing to do it all again with another investment property purchase in about 6 months time. As for the Kingsley property, they would like to hold the property for 5-10 years before looking at developing the land to its full potential. When that time comes, Hugh plans to involve their children in the re-development as a way to give them experience in property investing; something he feels he was never lucky enough to have and learn from at their age.

“For me I wish I’d known about property investment in this way. I mean I knew it was out there but I didn’t know how to do it. If I’d known how to do it at a much younger age I’d be better off now than I am. So that’s what I’m doing with my kids”, remarks Hugh.

Buoyed by their experience so far, Hugh and Anne are confident they’ve made the right move to secure their financial future. It’s a journey they say you don’t need to take on your own, and they count the guidance and advice they’ve received from Mark as being instrumental to their success. When looking for an investment property, Hugh has now learnt the true value of thorough research.

“Find out as much as you can about the property that you’re thinking about purchasing, because if you’re looking at it from an investment perspective, you may be making the wrong decision if you haven’t done that homework and Momentum Wealth does that homework for you”.

As for their age, Hugh and Anne have certainly proven that it’s never too late to invest in property. Hugh admits that investing at his age was initially a bit frightening, with a fear of losing money or worse, your own home. But the fear of not having enough money and assets when he retires was a far scarier prospect that made investing well worth the risk. 

Finance: Improving Your Chances of Securing a High Valuation

Leveraging equity from your current properties is essential when building a property portfolio. But what can you do to improve your chances of securing a high valuation.

For most investors, buying further property often means having to refinance with the bank in order to gain access to their equity. 

Many people do complain that valuations come in lower than expected. In fairness to valuers, it’s not the easiest job because no two houses are alike. Valuers need to assess the land, location, physical attributes such as age, condition and size of the property, and analyse and compare it to sales of similar properties in the area. Generally speaking they will look back on about six months worth of data but this will all depend on market conditions. If conditions are quite volatile, it could be less; if stable it could be more. 

Valuations can, and do, often fall on the lower end of the price spectrum for various reasons. Firstly, valuers have limited time to turnaround valuations. They usually spend their whole day rushing from place to place to return a full valuation in 48 hours or less. This can result in the overlooking of important information. Secondly, the valuer takes legal responsibility for their estimate, meaning they can be held accountable in the event a property needs to be sold and the lender can’t recoup their costs because it didn’t meet the valuation figure. This liability risk can cause valuers to err on the side of caution. Thirdly, as mentioned earlier, it may be because there are limited recent sales to compare against which generally means the valuer will make a more cautious estimation. 

So what can you do to improve your chances of a better valuation or challenge an existing valuation you’re already received?

It’s always best to do your homework and preparation before the valuation. There are not many instances I know of where someone has been able to get a valuer to revise their valuation, unless they have been able to present some new evidence which wasn’t considered or available at the time. Generally, you’d probably need evidence of at least two to three recent comparable sales that support your higher estimate in order to have any chance of success. But there are a couple of things you might like to consider prior to a valuation in order to get the best possible outcome:

Prepare a summary for the valuer

Valuers are busy people so it’s a good idea to prepare a short document summarising aspects of the property to give to the valuer prior to the inspection. Use this document to bring to their attention key selling features such as proximity to schools, transport and other amenities, the size of the land, number of living areas, completed renovations, views, and less obvious features like smart wiring.  You may also like to propose your own estimate of the property’s value. This should be based on actual comparable sales data (which you should present to substantiate your estimate), not listings currently on the market. Talk to your property manager or a sales agent to see if they will help you obtain access to such information.  A sales agent may also be able to shed light on sales within the past month or two that wouldn’t yet be publicly available. Do try to be as objective as possible and draw on a range of recent comparable properties, not just those that support your highest estimate. A valuer is more likely to consider all this information if they feel it is valuable and impartial, but won’t give it a second glance if they sense you’re information is unrealistic or biased.

Order your own valuation

You could also consider organising your own accredited valuation. Typically they cost between $300 and $600. If you go down this path, I recommend using a valuer on the bank’s panel and doing so prior to lodging your refinancing application. If you are happy with the valuation, ask to have it assigned to your lender when lodging your application.  Doing it this way gives you more control over the valuation and the bank less control. There is a good chance under these circumstances that the bank may accept your provided valuation but if not, it may still have some influence on their own ordered valuation. You should be aware though that some banks may want to organise their own independent valuation regardless of what you do.

Aim for the right type of valuation

As mentioned earlier, there are different types of valuations – desktop, kerbside (drive-by), and full. The type of valuation you receive could potentially work for or against you. For example, if your property is a bit of shambles from the outside but fully renovated within, then you will want to get a full valuation to ensure the valuer inspects the property internally. You may simply ask the bank for the valuation you wish, but if they don’t oblige you may be able to influence the type of valuation you receive. For example, if you borrow a large sum of the property’s value or a not already a customer of the bank you are applying at, this would more than likely guarantee the bank pursues a full valuation.

Present your property well

A misconception amongst investors is that a valuer will be able to see past the mess and clutter of you or your tenants and value the property on its fundamentals. This is untrue. The valuer needs to base their estimation on what your property would get today, presented as it currently stands. We all know poorly presented homes can turn off buyers, hence why presentation is important to securing the best valuation. Remove the beat up old cars decaying in the front yard, mow the lawn, tidy up, de-clutter and fix up the old peeling paint.

Leveraging equity in your properties is a key wealth creation strategy so getting a fair and strong valuation is critical to maximising your portfolio. If you have had a poor valuation, or believe you will, give some of these suggestions a go or talk to one of our finance brokers who will be able to help you improve your chances. 

Momentum Wealth and its affiliated entities are not Accountants or Financial Planners. While all information is provided in good faith, you should seek your own independent advice in relation to all matters regarding investing, taxation and superannuation.


Property Management: Protecting Your Interests With the Right Lease Term

Little thought is often given to the length of a lease. However, choosing the right lease length can benefit owners in more ways than one.

When leasing a property, one of the areas that often doesn’t receive enough thought is the length of the lease.

Most residential leases have a typical length of six months, twelve months or even twenty-four months, but there are circumstances where it’s beneficial to deviate from the norm. If you have plans to renovate or sell the property in the near future, then it would be wise to consider a shorter lease as it’s very difficult (if not impossible) to move a tenant on when they are signed under a fixed lease. However, shorter leases can expose owners to more frequent periods of vacancy and higher management and maintenance costs.

On the other hand, longer leases provide stability and security for owners, which can be particularly important for those who have a large mortgage on the property. The risk in offering a long lease is that owners can be stuck with tenants they aren’t happy with and have less flexibility over their investment should their personal or financial circumstances change.

Owners and property managers should also consider the overall portfolio of the owner when setting the lease length. Preferably, owners should not have all their properties’ leases expiring close to one another. In the event one or more tenants decide to move on, the owner could potentially be left with more than one property being vacant at the same time. Lease periods should instead be staggered to protect the owner’s cash flow. This could mean setting a more unusual length like 8 months or 13 months for some leases.

There may also be times of year when leasing a property can be more difficult, for example the week of Christmas. In this situation, the expiration date of the lease should ideally be adjusted to fall a few weeks before or after this time to minimiseany possible vacancy period.

Good property managers don’t just manage your property; they appreciate the needs of an investor and always go one step further to ensure your best interests are managed also.  

Development: Protecting Yourself When Acquiring Your Development Opportunity

You’ve done your research and now you are ready to put an offer in for your development property. It sounds straight forward, but there are some potential traps that you need to avoid.

Although you may have conducted substantial research prior to placing your offer, it’s unlikely that you would have had the time or the opportunity to cover all your bases. With that in mind, it’s an absolute necessity to have a ‘due diligence’ clause in your contract of purchase. This gives you the ability to walk away if you are not satisfied for any reason with the outcome. Despite what some people may believe, a finance clause is not adequate!

You must also remember that sales agents work for the seller, and for that reason their contracts are skewed to suit the seller’s needs and not necessarily yours. A properly written due diligence clause is essential; a poorly written one could cost you tens or even hundreds of thousands of dollars. Using a buyer’s agent is a good way to manage this process as they should have the appropriate clauses to insert into the contract and can also protect your identity and motives for purchasing to give you leverage.

Where possible you should aim to negotiate a reasonable period for due diligence, enough for you to undertake all the extra checks you need to. And also, a longer settlement is also advisable.

Once your offer and all terms and conditions have been accepted, then it’s time for you to get started on your post-acquisition feasibility study. Start by refining your numbers (particularly in light of any new information you acquire), and begin conducting your due diligence. This is your opportunity to look at the property in more depth, find out if there are any nasty surprises, and walk away from the deal if you’re no longer comfortable.

Your due diligence can encompass a number of things. Start by talking more freely with sales agents about realistic sale prices and get the builders on site to ensure your costing estimates are valid.  Consider undertaking a soil analysis to ascertain what sort of foundations might be required (amongst other things), investigate the services available and where they are located (such as sewerage lines), and check the title for any restrictive covenants or easements. Talk with surrounding property owners about the site and your plans – this will give you an indication if you’re in for a battle! And don’t forget to liaise with the local council about your plans and their requirements to make sure your proposed development has a strong chance of approval.

There is lots of work to be done once you decide you’re ready to place an offer, it’s definitely not the time to rest on your laurels. But know that if you go into it with your eyes open, you can rest assured that you’ve done all you can to protect yourself and make your development a success.

Wealth Protection: Shopping for the Right Income Protection

Three centuries ago, the original premise of life risk insurance was based on the assumption that an unexpected event, such as death would affect another party detrimentally. If no detriment to another party resulted from such an event, there was nothing to insure. Insurance is most definitely not designed to be a windfall, if it was, it would be classed as gambling.

Travel forward to today and nothing about that basic premise has changed. To compensate for the detrimental effect of an unforeseen event is still what insurance is all about. The available tools have changed however, such that advisers now have a plethora of products with which to work to solve the risk management issues of clients. But apart from the tools – products – which we use to craft protection packages, advisers can also offer clients their capacity to provide advice.

This, alas, is where the process is still falling down. It is all too often that the advice provided has been driven by just a few fact finding questions which have not adequately uncovered the totality of a client family’s detriment. Rather than asking “What are all the circumstances which would be of detriment within your whole family (and business for that matter) sphere, if you were to die?” The common questions imply “What would happen to your spouse and children if you were to die?” This is not broad enough, if an adviser is to do a truly thorough job during the advice process.

 If an architect were to construct a plan for a high-rise office building without considering the safety exits, the plan would be flawed and the building, if it went ahead, would not be appropriately catering to the risks which the building’s occupants may have to face. Planning for such a substantial project must employ breadth – and depth – of vision. This idea similarly applies to the “sphere of risk”. It simply widens the aperture over the client’s circumstances so that all detriment likely to result from an event is discovered and addressed in the advice given.

This is done by asking questions beyond the impact on just the spouse and children, it is finding out about any particular group of people who would be impacted if an event occurred, such as parents, adult children, ex-wife or ex-husband, disabled niece or cousin for whom the client is legal guardian, etc.

The lack of attention to the building safety exits would be easily noticed and rectified by the engineers and builders. However in the risk insurance advising arena, the missed elements of risk insurance advice and the subsequent plan are most likely to be noticed only when it comes time to claim. Like the fire in a building with no exits available, the client’s circumstances might well be in trouble at this point.

The risks which will pop up as ‘unplanned-for problems’ might be so familiar to the client that they don’t even think of them. These risks might sit at the edge of the adviser’s vision but are often shadowed by the ‘main game’: that is the risks and consequent needs of the immediate family. The adviser or client may never have thought of these peripheral risks during the advice process.

Many clients have not been through or their adviser may not have provided a thorough enough advice process and this unfortunately only becomes evident at the worst time, a claim. Are you comfortable that you have catered for the appropriate safety exits? 

Justin McManus is a representative of AXA Financial Planning Limited, ABN 21 0005 799 977 AFSL 234663. This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness, having regard to your objectives, financial situation and needs


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