Property Newsletter – March 2012

Property Management:  Want more growth plus high rental returns?  The answer may be outside.

A large block can help an investor build wealth, but tenants are typically unwilling to pay more to live on a large block. So, is there a way to make the outdoor space more valuable to tenants and therefore increase rental returns? 

A small property on a large block can be an investor’s dream. It can deliver strong capital growth as well as the opportunity to add value through developing the property in the future. But while a large block can help an investor build wealth, tenants are typically unwilling to pay more to live on a large block, resulting in lower rental yields for this type of property.

So, is there a way to make the outdoor space more valuable to tenants and therefore increase rental returns? I believe so. Although the size and quality of a property’s indoor space plays a large role in determining what tenants are willing to pay, the outdoor space offers excellent opportunities to boost the rental value.   

In fact, recent research and trends suggest that desirable outdoor spaces are one of the few characteristics that a tenant would be willing to pay more for. And in a place like Perth with long, hot summers and alfresco lifestyle, outdoor space is probably more important than in any other city around Australia.

But not all spaces are created equal. Properties with large outdoor areas can put off tenants because of the effort and costs associate with maintaining the outdoor area. Some tenants might discount a property entirely because of a high-maintenance outdoor area.

What’s clear is that tenants don’t want to open the back door to a sparse landscape of endless grass, an old Hills Hoist, and meters of bland fencing. Nor do they appreciate an overgrown jungle. The truth is many of them aren’t motivated to look after an outdoor area that they just don’t use.

Unfortunately though, this scenario is all too common as many investors place little importance on the outdoor areas of their investment property, focusing instead on the presentation of the interior. When the outdoor spaces do receive attention, it is usually the front garden that gets most of it. While this is valuable for street appeal, it might not be enough for tenants if the back area is poor and unusable.

So, what do tenants want in an outdoor area and how can you make your investment property more desirable to them (which will improve your rental yield and help you rent your property faster)?

What tenants ultimately want is an area where they can entertain guests, a relaxing environment where they can unwind after work, and green gardens that are attractive but require minimal maintenance. 

Here are some key features and ideas you may like to consider for your property:

BBQ area

Just about every tenant would want a space where they can place a table to entertain guests by the BBQ. A simple paved area or small deck would be ideal, or even a gravel area with stepping stone pavers would do. If there’s existing ugly concrete, consider painting it or laying do-it-yourself decking tiles over the top for an inexpensive update.

Sun coverage

To make the space more usable and complete it as an ‘outdoor room’, consider some sort of shade structure. This could be as expensive as a covered pergola or as cheap as an open pergola with a vine or some shade sails. 

Hardy plants

A bit of greenery will never go astray, but choose plants that are hardy, slow growing and need virtually no maintenance. Visit markets and discount nurseries to pick up some bargains and make your dollar go further. There’s no need to go overboard; using plants as borders around hard areas (like paving) and in a few feature beds is all that’s necessary. 


Sometimes the size of the yard can make it too big a job to improve and too expensive. In this case, consider partitioning or screening off a part of the yard and instead focus on just improving a smaller, more usable area nearby the house.  

Of course, when it comes to improving the outdoor space of your property, the exact specifications of what is desired will vary from area to area.  For example, properties in family areas may need to have grass for the kids, while in other areas tenants may prefer no grass at all but prefer a large shed with plenty of storage.  It’s worth doing some research by looking at other competitive properties on the rental market to see what you’re up against and what the outdoor areas are like of properties that appear to be most in demand.

Don’t forget that improving the outdoor spaces isn’t just about attracting tenants; it also adds value to your property. For buy-and-hold investors, it can be worth spending a bit more on the outdoor areas. For those looking to redevelop in the near future, it doesn’t make sense to spend too much if it’s only going to be torn apart, however some small, inexpensive changes can make the world of difference for the short term.

Speak to your Momentum Wealth Property Manager first about updating the outside of your property. They can give you an idea of the market expectations and what potential value an update may add to your property.

Finance:  Helping your kids get on the property ladder

These days more and more kids are relying on their parents to help them buy their first home or investment. And most parents are happy to help if they can. So as a parent, what options do you actually have?

With property prices climbing year on year, it’s not always that easy for the next generation to jump onto the property ladder. It’s no wonder then that these days many mums and dads are willing to put their hands in their own pockets to help their kids kick-start their future.  Some of the options could be:

Provide cash for a deposit

If you are in a position to do so, you could provide all or part of the money to put towards a deposit. If you don’t have cash but have equity in your property, you could refinance your property to pull out the cash although you will now have repayments to make on this new loan. Providing a deposit can be made as a non-repayable gift or as a repayable loan. If it’s provided as a loan, some lenders may require a formal contract to be signed. If you are close to retirement, also bear in mind there are social security consequences with gifting that need to be considered.

Buy the property jointly

In this scenario, you buy the home as ‘tenants in common’ with your child. This allows you and your child to treat your share in the property separately, and to split ownership however you wish – for example, 40% ownership to your child, 60% ownership to you. 

Act as guarantor

If you have equity in your own property (ies), you may be able to use this as security for your child’s purchase. Your child will still need to borrow the full amount, but may avoid lenders mortgage insurance if the sum you put forward as security allows their loan-to-value ratio to come down to 80% or less. With this option, you do not have to physically dip into your pocket at all – you are simply just making a promise to the bank that you will support the loan (in full or in part) if your child defaults. While you may think this is unlikely, you must be prepared for the risk of this outcome as it does happen and shouldn’t be taken lightly. Once your child’s house has grown enough in value, you will be able to be released from their loan.

If you don’t have the financial capacity to help your children, don’t be dejected. The best thing you can do for your child is to help them become financially savvy themselves as early as possible. There are many ways to do this – for example, if you are able to have them stay at home longer, help them to save through paying you board which goes into an interest-bearing account in their name and then put towards a house deposit when they are ready. Learning to save, recognising the importance of long-term goals, and understanding the fundamentals of investing in property wisely is worth just as much, if not more, than money itself.

If you are looking at assisting your child financially with the purchase of a property, speak to a Momentum Wealth broker. Different lenders have varying requirements, and with the recently implemented NCCP legislation, your broker can advise the best options that are suitable for you.

Hot Property

In this month’s Hot Property section, we highlight a house in the suburb of Rivervale that was purchased by Buyers’ Agent Mark Casey on behalf of his client who was looking for a future development site. 


With two properties already under their belt, our clients were looking to acquire their third investment. Buyers’ Agent Mark Casey was put on the case to find them a high performing future development site, that would also generate a good rental return for the short term. The client was looking for a property located close to the city and proposed football stadium to be built in Burswood.

The final property chosen was a 1960’s brick and tile home in Rivervale which is close to the city, within the client’s desired search area, and with strong growth potential.  Mark’s superior knowledge of the area enabled him to widen his search as he was aware the particular location and street selected has only recently been rezoned to higher density. 

Located on a triplex potential site, the selected property perfectly matched the client’s needs and Mark was able to acquire it well under the estimated market value and approximately $50,000 under the advertised price.  Today, it is also achieving an excellent rental yield of 4.4%.


Purchase of a 3×1 brick and tile house in Rivervale, 5km from Perth CBD.

Purchase price: $499,000

Estimated market value at time of purchase: $520,000 – $540,000

Savings: $21,000 – $41,000


Suburb Snapshot:  Hamilton Hill

Our bi-monthly Suburb Snapshot section shares our tips on the best suburbs to keep a watchful eye on for your next investment purchase. In this month’s issue, we’re going to profile the southern suburb of Hamilton Hill. 

Hamilton Hill is a large established suburb located approximately 16km south-west of the Perth CBD.

Situated near the coast, it is just a short drive to Fremantle and is surrounded by the suburbs of Spearwood, North Coogee, South Fremantle, and Beaconsfield.  The suburb is easily accessed via the key transportation routes of Leach Highway, Stock Road, and South Street and is convenient to a number of amenities including Cockburn Gateway Shopping Centre, Murdoch University, St John of God Hospital, and Murdoch train station.

It is home to a number of primary and high schools, both within the suburb and just beyond, and enjoys the benefit of a number of parks and reserves including Manning Lake wetlands and surrounding natural bushland. Additionally, homes on the west side of the suburb are ideally situated within a ten minute walk of popular South Beach.

Hamilton Hill has a number of features which make it a potentially sound investment. Many parts of the suburb are undergoing transformation and thanks to the Department of Housing´s Urban Renewal Program, the number of state housing projects has diminished with the advent of newer re-developed estates such as Phoenix Rise.

The suburb will benefit from the approved Phoenix Central Revitalisation which includes a number of areas for rezoning and rejuvenation of the Phoenix town centre. It will also feel the effects of the proposed Cockburn Coast District Structure Plan for the beach-side and old industrial area alongside it which are set to transform into a cosmopolitan hub of activity. The area was just recently rezoned from Industrial to Urban by the Metropolitan Region Scheme and is now out for public comment. It’s expected these plans will bring more young professionals to the area.

Properties in the suburb offer good value for money and are quite affordable in light of the future potential of the area. Properties around Manning Park and west of Carrington Street tend to be most popular and command a more premium price accordingly. Houses are a mix of both old and new, and include everything from apartments and villas to family homes and large plots ripe for development.

Prices in the area typically start in the low $200,000 – $300,000 which will buy an apartment or small parcel of subdivided land. Three bedroom villas or duplex’s are available from the low-mid $300,000’s although better properties usually fetch more than this. Larger plots of vacant land are mostly in the high $300,000’s. Houses start from $400,000 with more desirable properties in the high $400,000’s and larger family homes and potential development sites starting in the low $500,000’s up to as much as $850,000. Rents range from around $275 to $500 per week depending on the property. 

Key Statistics

Growth rate (1 year average) -4.5%
Growth rate (5 year average) 3.0%
Growth rate (10 year average) 11.3%
Population 9,258
Median age of residents 39
Median weekly household income $702
Percentage of rentals 37%

Source:, January 2012 


Wealth Protection:  Prostate Cancer & Trauma Insurance

Prostate cancer is the most common cancer for Australian men. After lung cancer, it is also the second most common cause of cancer deaths for Australian men. Each day about 32 men learn they have prostate cancer and tragically, every three hours one man loses his battle against this disease.

Trauma Insurance and the Trauma Insurance Plus Plan provides valuable cover, should the policy holder suffer from prostate cancer. It can provide financial support at a time when they need it most. It can be used to obtain specialist medical attention not covered by health insurance, or cover financial commitments.

Key features of the Trauma insurance plus plan

Trauma insurance is about protecting the policy holders lifestyle and supporting them through the financial stress a traumatic condition like prostate cancer can bring to an individual and their loved ones.

Some Trauma Insurance Plus Plans will make a 100 per cent benefit payment if a prostate tumour is classified under the TNM (or equivalent) classification system as:

·         T1c or above, or

·         T1a or T1b with a Gleason Score of 6 or above, or

·         T1a or T1b and is considered untreatable or if the person insured is required to undertake major    interventionist therapy.

A partial payment (the greater of 20 per cent of the benefit, or $10,000, up to a maximum of $100,000) will be made for prostate tumours classified as T1a or T1b under the TNM (or equivalent) classification system with either a Gleason score less than 6, or where major interventionist therapy is not required. Please refer to the Insurance product disclosure statement for the full definitions.

Trauma reinstatement option

Some trauma reinstatement options enables clients, who have been paid a claim, to reinstate their trauma policy 12 months after the insurer receives their claim form. Without this option, it is unlikely they will be able to repurchase trauma insurance.

Most other insurers would typically exclude the original event the client claimed on when their trauma insurance is reinstated, and the new trauma policy issued. There is only one Insurer who has industry leading trauma reinstatement option allowing a client to claim again on cancer and heart attack eventsrelated to their original claim. A partial benefit of the lower of $50,000, or 10 per cent of the benefit amount under the new plan will be made.  

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.


Acquisitions:  Real Estate Contracts – What you should know when purchasing a property

In the excitement of buying property, many investors overlook the importance of including sufficient contract clauses to protect themselves. As Kent Cliffe explains, it is not the Sales Agent’s job to represent the best interests of the buyer.

I have come across a number of people who have purchased property through a sales agent and have been badly burned by not seeking representation when purchasing the property. It is the Sales Agent’s job to represent the seller. Therefore, they are naturally aiming to get the seller the best price and use contract clauses that most favour the seller.

When purchasing a property, it is crucial that buyers are aware of the potential pitfalls when it comes to real estate sales contracts. These contracts are legally binding documents – once accepted and signed by both parties (purchaser and seller) you are obligated to uphold its terms and conditions.

Contracts for the sale of property do vary from state to state so advice is recommended before you place offers to ensure that you are adequately protected and not in breach of any legal requirements.

At Momentum Wealth, we always add our own clauses to contracts to protect clients from concealed or unforseen circumstances.

Researching properties for purchase can be a time-consuming process, especially when looking at multiple properties. There may also be some issues that weren’t attended to before placing an offer on the property. This is why we always use a sufficient “get-out” clause to protect clients in these instances.

I am still surprised at the number of people who believe the use of a finance clause will protect them should they change their mind about purchasing the property or find some problem with the property that they were not aware of. Typically finance clauses state that the purchase of the property is subject to you the purchaser obtaining finance within a particular time period.

Anyone using this clause on its own is taking quite a risk. If you discover something that may affect your purchase decision, (for example a development next door, or structural problems with the house) then you may find yourself in breach of the contract if you walk away from the sale.

We always ensure that we use other clauses or sufficient “get-out” clauses to cover our clients. This provides them with an option to walk-away if something arises that we were unaware of when making the offer on the property.

The Real Cost of Buying the Wrong Property

It’s no secret that the Perth property market has suffered over the short-term since our 2006 boom. However, with the resources boom fuelling a two-speed economy, property in Perth has been viewed by many (and myself included) to make a “recovery” more so than its national counterparts.

With increasing rents, low interest rates and the ability to purchase property at competitive prices, there is currently an excellent window of opportunity for investors.

It’s at this time of rising confidence that investors need to be savvy, cautious and selective with their purchases. Not all properties grow at the same rate – and the cost of buying the wrong property could be higher than you think.

What’s the worst that could happen?

Property is a popular investment vehicle for many Australians because it appears safe and stable. It’s widely believed that all properties will grow in value, and that the “worst case scenario” is simply a lower rate of capital growth.

Sadly, this is not the case. Recently we have been contacted by owners of properties that have significantly dropped in value, severely undermining their owners’ investment goals. Other properties have stayed stagnant and are likely to continue in this vein for a number of years to come. Unfortunately none of these people used Momentum Wealth to find their property and they have suffered as a result.

Here’s some examples:

Townhouse, QLD :        Purchased for $384,900            Re-valued at $238,000

Apartment, WA:           Purchased for $349,000            Re-valued at $310,000

Apartment, WA:           Purchased for $1.2 million        Re-valued at $850,000

Townhouse, VIC:          Purchased for $510,000            Re-valued at $380,000

Why did these investment properties fail?

Every property is different, and there’s no perfect matrix of investment factors that will always produce the same result. However, we noticed a few common factors between these examples that contributed to their poor performance:

Too much supply: Property, like the wider economy, is a game of supply and demand. Large quantities of new supply, such as new apartments and new house & land packages, hold back the capital growth of established properties in the area. While there is ample supply of brand new properties, there is no incentive for established property prices to rise. Not only this, but when developers are under pressure to sell more properties (as they have been in most cities in Australia over the last 3-5 years), they offer discounts and incentives on their brand new properties which effectively discounts your property as well!

New property supply is not evenly distributed across Australia’s capital cities; in every city, there are regions that have significant supply of new property (with more supply still to come), and suburbs which are tightly held. Investors who buy in these over-supplied locations can find themselves waiting for years for “the next boom” instead of enjoying the steady capital growth they expected.

Inflated purchase prices: Another reason that some properties have not increased in value is because of commissions loaded into the price of some of the projects by developers. Our finance division has been flooded with requests for assistance where investors have realised they have lost significant value in their properties. The problem is, many of these properties were never worth the contract purchase price. Commissions in property marketers can be significant and can add up to 10% to the property sale price – putting the investor on the back foot before they’ve even begun.

Investor-targeted marketing: All the properties listed above were marketed by “Property Investment Companies” as great investment properties. The problem is, when a development project is marketed primarily at investors, it can hide the real state of the market. 

Exercise caution

We’ve said this before, but I will say it again. Be careful who you trust as your property advisor.  A few things for investors to consider are:

  • If an “advisor” is offering to help you with acquiring an investment property without it costing you a cent, that’s a serious alarm bell. You need to ask the question, how are they getting paid if you’re not paying them? More often than not, they will be paid a handsome commission from a developer for selling their property to you. In that case, are they really acting in your best interests and providing you with unbiased investment information? Stick with property firms who don’t take any commissions from developers and instead get their payment directly from you. It may appear to cost you more upfront, but it will easily pay itself off in a great investment.
  • If you are looking to buy an investment property, be wary of businesses that help you acquire the property but that also sell property. This could be directly, as in they also function as regular real estate agents, or indirectly, in that they have “relationships” with developers and the like. This presents a real conflict of interest as it is in their best interests to try and sell you the properties they promote, rather than other (perhaps better) investments on the market for which they don’t make a cut on. Only a Buyers’ Agent can truly represent the buyer in a property purchase.
  • Be cautious about businesses that will only sell you very specific projects. Typically these projects are branded developments that are heavily marketed. You can usually spot them because they are packaged and promoted under a name that sounds rather glamorous. These projects in most cases are brand new off-the-plan apartments or house and land packages in outer suburban growth corridor areas. In some cases these types of projects may be an okay investment, but more often than not you can do much better elsewhere. Generally they are fully priced, full of fat including sales commissions and GST, in areas with below-average growth prospects. Not a wise investment in my books.
  • If anyone tries to tell you investing in real estate is a guaranteed investment, they’re lying. Very few things in this world are guaranteed. Although property has generally been relatively stable and profitable for many over the last 100 years, real estate is still a risk like any other investment. If they tell you it’s easy to become a millionaire in next to no time, without of taking a reasonable level of risk, they’re also lying. You can become a millionaire through property investing but it requires time, patience and most importantly smart investing.

Too many people don’t understand enough about investing in property and rely fully on the advice provided to them, often via just one source. In these current market conditions, it remains crucial that investors choose properties selectively. The wrong property purchase could leave the purchaser waiting for another Perth “boom” – while the right purchase will benefit from the tightening market conditions to provide excellent returns to its purchaser in the next 1, 3, and 10 years.

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.

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