Late last calendar year, the ATO revealed that it had identified 26,000 taxpayers who had incorrectly claimed deductions for travel to rental properties during tax time 2018, despite recent changes to the law in this area.

New rules, introduced just over a year ago (and therefore perhaps not ingrained in many people’s minds), mean that investors can no longer claim travel expenses relating to inspecting, maintaining or collecting rent for a residential rental property as deductions, unless they are carrying on a rental property business or are an excluded entity.

This measure was introduced to address concerns that some taxpayers were claiming travel deductions without correctly apportioning costs where there was a private component to the travel, or claimed travel costs that were exclusively for private purposes.

The changed rules mean that travel expenditure incurred in gaining or producing assessable income from residential premises is not deductible unless incurred by certain institutional entities or incurred in the course of carrying on a business.

Exclusions

The legislation is primarily targeted at individual landlords who are not in business. Travel deductions can continue to be claimed by the following taxpayers who own residential rental property:

• corporate tax entities (companies, corporate limited partnerships, corporate unit trusts, and public trading trusts)
• superannuation plans that are not an SMSF
• public unit trusts
• managed investment trusts, and
• unit trusts or partnerships where every entity is of the types listed above.

Taxpayers carrying on a commercial business of renting residential properties, such as owners of hotels, motels, boarding houses, are also exempted.

Note that the ATO’s view is that it is quite rare that individuals who own standalone residential rental properties are carrying on a business, even where they own multiple standalone properties.

This is in spite of several court case decisions seemingly giving scope to an argument that a taxpayer who owns a portfolio of standalone residential properties could be deemed to be carrying on a business, and therefore should continue to be able to claim travel expenses. However this will depend on individual circumstances, and the number of properties would need to be significant — certainly more than just a couple.

Residential Investment Properties

The changes apply to “residential properties”, which takes on its ordinary tax law meaning of land or buildings that are occupied as a residence and are capable of being occupied as a residence. This can include a “floating home” and commercial residential premises such as a boarding house.

Whether a property is residential in nature is determined by the property’s physical characteristics. It would be expected therefore that the property has characteristics such as kitchen facilities, shower, toilet, laundry, bedrooms and so on. However not all premises that have such facilities are residential premises to be used predominantly for residential accommodation.

If it’s apparent from the physical characteristics of a premises that its suitability for living accommodation is merely ancillary to its main function, the premises is not a residential premises for the purposes of the new rules. For example, a multiple-story office block that has open spaces for cubicles and desks, and smaller separate offices, may also contain kitchen and toilet facilities. Despite this, such premises are not residential in nature.

Note that under the new rules, where you are not using the property to derive rental income but are using it for other income-producing purposes (for example, you are using it in a business) travel will continue to remain deductible. This exception accommodates cases where residential premises are converted and used by a professional, such as a doctor or dentist, to operate their business.

Where there is a mix-use of the property, each trip to the property must be considered on its merits, and if necessary the expenses apportioned.

Capital Gains

Travel expenditure that is prevented from being deducted by the new rules cannot form part of any element of the cost base or reduced cost base of residential premises for CGT purposes. Consequently, the travel expenses that are no longer recognised on a taxpayer’s revenue account are also prevented from being recognised on their capital account.

Travel Expenses

The new law is broad in scope and denies deductions for not only travel to the property for the purposes of inspecting, maintaining or collecting rent for example, but also travel undertaken that’s related to the property but not to the actual property itself.

This includes travel to a body corporate meeting, or to visit the real estate property manager to discuss the property, or travel to buy and install assets used in the rental property. The prohibited deductible travel expenditure under the new rules includes:

• motor vehicle expenses
• taxi, Uber or hire-car costs
• airfares
• public transport costs, and
• meals and accommodation related to the travel.

All is Not Lost

A question that may be exercising investment property owners is whether travel to see a tax agent is deductible when preparing a tax return in relation to a residential property’s income and expenses.

The good news is that the new law does not apply where travel expenses are incurred to visit a tax agent for the purposes of preparing and lodging an income tax return that happens to include rental income and deductions. This is because such expenses relate to the management of your income tax affairs (which is made specifically deductible under the existing rules), and not to the gaining or producing assessable income from the use of residential premises for residential accommodation.

Considerations Going Forward

Virtually all travel related to earnings from residential rent – provided that it is not as part of a business – is now denied a deduction, and is not claimable under other provisions of the tax rules.

You can still claim a deduction for the cost of employing other parties to carry out tasks on your behalf. This includes enlisting real estate agents to carry out property management services, such as inspections, or hiring tradespeople for repairs and/or maintenance. Indeed, where the travel expenses are significant (and now no longer deductible) it may be a smart option to consider engaging the services of these other parties.

The post Rental Travel Expenses Mostly Off the Table appeared first on PropertyInvesting.com.

It raises the question of ‘what might happen if a severe correction or crash was to occur in the property sector?’

Here are six probable outcomes:

1. Decline in value ‘feedback loop’

The saying ‘the bulls climb the stairs and the bears jump out the window’ is an apt way of describing how prices tend to rise gradually, but then fall suddenly.

It is true that bad news travels fast, and what causes rapid property value declines is a sudden spike in forced sales, at a time when there are fewer buyers looking to purchase. The result is sellers then outcompete each other in a race for financial survival.

More and more forced sales feed a whirlpool of declining property values, and as prices fall further and further, more and more property owners are drawn in via negative equity and loan margin calls.

2. Retirement Shock

Australian’s hold a large amount of their wealth in the value of their homes. If there is a value collapse then that will decimate retirement nest eggs, meaning those who are expecting to downsize to a comfortable retirement may need to reassess their plans.

The fall in values will reverberate through the SMSF sector too, where owning real estate has been increasingly popular.

3. Banking Shock

There will be an increase in mortgage defaults, which will require lenders to increase doubtful debts and ‘book’ losses. The value of their shares would be expected to fall. This will add to the erosion of further wealth for retirees and SMSFs.

4. Insurance Shock

The ability of mortgage insurers to payout large numbers of claims will be an interesting scenario. If they default, then lenders will be at risk of failing too, and Australia could have its own version of a domino-style financial collapse of brand name institutions. It is likely the Australian Government would have to step in to prevent a larger scale banking collapse.

5. Buyer Lock Out

Many people have mentioned to me that they’re waiting for a price crash, at which point they’re going to buy up ‘big’. This sounds like a nice plan in theory, but unless they’ve hoarded cash, it’s unlikely to work in practice. Why? Three reasons: the value of their homes and assets will be falling too, so their wealth will be declining; lenders will almost certainly stop lending to all but the most gilt-edged borrowers and properties; and the ‘blood on the streets’ psychology will make it hard to stomach risks.

6. Economic & Social Shock

Large scale job losses are likely as people stop spending and more staff are retrenched. Local tourism evaporates. Mental illnesses rise sharply, as do crime levels. Tragically, incidents of domestic violence and suicides rise too.

How To Avoid The Carnage

To ensure you don’t get caught up or wiped out in a severe property downturn, you really only need to avoid being a forced seller, and that means:

1. Have no or low debt

Leverage is your friend when prices are rising, and your enemy when prices are falling.

Having low, or ideally no, debt means you’ll have ‘margin’ to soak up falling property values without having to sell.

2. Maintain appropriate insurances

If losing your job means you couldn’t afford to make your loan repayments, then you ought to see an expert about the merits of getting income protection insurance as soon as possible.

3. Avoid buying in investor-rich areas

Avoid areas where there are a high percentage of owners who are investors, as these locations tend to fall faster in value and it can take a lot longer to sell. For more on this topic see this article.

4. Keep cash reserves

Cash reserves will provide breathing room in a crisis. The more cash you have, the greater your margin to ride the rough economic waves.

The Financial Storm Won’t Last Forever

While a severe property correction or price crash will be a horrible and bleak time, it too will pass – eventually. Prices will rebound and sentiment will recover, which is why the ones who stand to lose the most are the poor folks who will be forced to sell at distressed prices.

Application

Have you stress-tested your property portfolio recently to ascertain how well you’d survive if property prices fell a little or a lot? For instance, how would your wealth scenario look if you lost your job and/or property prices were to fall 10%?  What if they fell 25%, or even 50%?

Let’s hope a severe property correction or property crash doesn’t happen, but it would be wise to have a financial survival plan in place, just in case it does.

The post What If the Worst Happens? appeared first on PropertyInvesting.com.

This is definitely a worthwhile idea since the demand for student apartments is extremely high, but you should also be aware of the fact that having students as tenants is quite different than having families, seniors or young couples as tenants.

We have examined some of the pros and cons of renting your properties to students and how to overcome the cons.

PROS

High Demand: Landlords have to be aware of the fact that the demand for student apartments is extremely high.

More and more students decide to move away from home and study either in another city or abroad and all of those students need a place to stay.

This means that landlords have a lot of applicants to choose from when searching for a new tenant and can be quite “picky” about who they will choose.

Focusing on renting your property to students might therefore be a really good decision if you want to find someone fast and hence limit vacancy risk.

Less Picky Tenants: Students are usually not that picky when it comes to choosing a place to live.

Usually they are mainly interested in the location and the price and do not really care about the floorplan rather than decor.

This means that your tenant may be more forgiving if property is somehow cosmetically challenged, or not considered trendy by today’s standards.

Easier To Keep Happy: Having students as tenants may equate to less complaints. Of course, you will need to follow the laws and regulations concerning tenants, but our experience is that students tend to complain a lot less than some other tenant types.

Examples include students being less precious about noise, agreeable to smaller private open spaces as they are less maintenance, are not put off by smaller bedrooms or smaller living areas.

Get Your Rent In Advance: Subject to tenancy laws allowing it, students with parents supporting them are sometimes able to pay their entire rent up front.

This is of course an advantage for the landlord as they do not have to worry about whether or not they will receive the rent and can also pay the mortgage or any other costs easier and faster.

Longer Term Rentals: It’s a mistake to think all students will be short-term tenants. Experience shows that some students will rent the same dwelling for the entire duration of their course – up to 3 or 4 years!

This means that as a landlord you will not have to deal with finding new tenants every couple of months which will save you a lot of time and energy.

CONS

Seasonality: It can be quite challenging to find student tenants for the summer months as this is normally the time when students have a break at the University and usually go either back home or go on holidays.

In some cases, such as participating in a study exchange programmes, students will also search for space to lease for only one semester as they will afterwards move back to their home country.

This can be a disadvantage for the landlord as he or she might have to deal with an empty apartment during summer months.

Student Lifestyle: Students definitely have a different lifestyle than young professionals or families with children. This lifestyle has to be considered when renting to student tenants.

Although there are students that will be studying most of the time and you will not even know they are there, many students also want to make the most out of their tertiary schooling experience which means there may be some partying and some noise complains from unhappy neighbours.

Possible Damages: Since students are young they are still developing an adult sense of responsibility.

This means that they might not treat the furniture and appliances in the property as carefully as other older and more mature tenants might. Possible damages or breakdowns of appliances might therefore occur more often in student apartments.

How To Overcome The Cons?

Having names to possible risks, the way to mitigate them is diligent pre-screening, and proper documentation of the tenant’s rights and responsibilities.

As a landlord you should make sure to include all the necessary clauses in your lease agreement, and you should receive always ask for a security deposit (aka rental bond).

Of course, diligent management to police and enforce the lease agreement is essential to ensure everything is going to plan.

A lot of times it also turned out that the prejudices people have about student tenants are not true and that in reality students make great tenants.

This is a guest post contributed by HousingAnywhere.com.

If you’re interested in renting your investment property to international students and young professionals then check out online housing platform: HousingAnywhere.com.

This website helps match landlords to students, and to make the whole process from posting to renting out your investment property easy and safe.

The post The Pros and Cons of Renting Your Properties To Students – And How You Can Overcome the Cons appeared first on PropertyInvesting.com.

Why do some people attract wealth and others repel it?

Have you ever noticed that some people just seem to keep winning financially, making steady progress toward their goals? Others, however, continue to struggle and face setbacks. They never can seem to get ahead. 

I believe the answer to “Why?” is found in an ancient Hebrew proverb from King Solomon of Israel. In the following 10-minute video clip from the beginning of the webinar, I use Solomon to explain the distinction between two types of investors: the “prudent” and the “simpleton.” 

Then at the end of the clip, I pose some thought-provoking questions to challenge you to develop a plan for becoming more prudent in your investing decisions.

So, what’s your plan for becoming more prudent?

After watching, take a moment to share your thoughts in the comment section below.

The post The Prudent or the Simpleton –
Which One Are You? appeared first on PropertyInvesting.com.

Buying a rental property can be a rewarding experience, but protecting your income and assets is paramount.  After all, investing in property is a business and you need to safeguard against things that can go wrong beyond a fire or water damage.  So choosing the right level of insurance cover is crucial.

The simple fact that not all insurance is the same makes it extremely difficult to weigh up the benefits of one policy versus another. Too often the glossiest brochure or the cheapest price wins out, and investors fail to put adequate thought into what is likely to occur should a claim be necessary.

When it comes to insuring a residential rental property, the differences between policies can be significant. Having been involved in landlord insurance since 1991, I will try to help identify some key mistakes that many investors tend to make.

 1. Buying on price alone

Like any business, Insurers are out to make a profit, effectively by paying out less in claims than they receive in premiums. Although price must always be considered as a factor in your buying decision the reality is that cheap cover is likely to represent poor value when it comes to making a claim.

The adage “When you pay too much you may lose a little, but when you pay too little you may lose a lot” has never been so true as it is with landlord insurance. The number one priority must always be to ensure the right cover is being obtained. You should look to obtain “value” rather than “cheap”.

If there are risks that won’t be covered, make sure they’re risks you are willing to wear yourself should a loss occur.

In any policy, look for the specific types of damage that are covered.  For example, some policies will cover malicious damage but not accidental (more on that later).  So if you choose to have a policy that only covers malicious damage, you need to be willing to take the risk that if accidental damage occurs, you will not be covered and will need to wear the expense yourself.  Choose wisely, or you will be self-insuring for some of the risks.

2. Deliberate fire by tenants

Believe it or not, some Insurers will tell you they will not pay claims if a tenant has deliberately started a fire, on the basis that they exclude “malicious damage by the tenant”. This is often simply a case of companies not understanding their own policies well enough. For you as the investors, when it comes to the risk of a total loss – your property burnt to the ground – you simply cannot take any chances.

One simple question to ask is, “Do you pay a claim where the tenant maliciously sets fire to my property?” This should give you some peace of mind, or tell you to look elsewhere.

Unfortunately, it can often be the case that even asking simple questions to phone staff can yield different answers.  Insurance can be very technical, and the way a question is phrased can sometimes be interpreted in different ways.  That said, this is an area you don’t want to leave to chance If you cannot be 100% confident that the answer you receive is what you want to hear, and is accurate, it’s worth checking further or find an Insurer you have confidence in.

3. Excesses

When you make a claim, there will often be a portion that you must pay, known as the excess, before the claim is paid. Some Insurer’s charge ridiculous excesses which may almost render a claim worthless.

Watch out in particular for those policies that charge an excess on Loss of Rent claims. You will benefit far more on policies that have a nil excess on loss of rent, and reasonable excesses on damage claims.

Ideally the policy should allow your bond to be used to pay the excess.

As a general rule all policies will have some form of excesses, but they can vary dramatically.  Some of the major Insurer’s will not only apply an excess, sometimes equivalent to 4 weeks rent, but this may also be applied AFTER not paying the first 4 weeks.  This is like a double whammy and could render your claim worthless.  I assume they are working on the logic the there is a bond in place equivalent to 4 weeks rent, however that’s not taking into account all the other allowable deductions that are not covered by insurance, such as cleaning costs and minor damage.

4. Underinsurance

Whether it be replacement of the whole building, your contents, or simply the risk of rent loss, your cash flow and assets are the lifeblood of a successful investment.  Saving a few dollars by insuring for less than the true replacement value is simply ridiculous, and remember, insurance for your rental property is generally tax deductible.

Underinsurance is rampant in Australia.  This is where you do not insure your property for its full value, the full replacement cost, and instead insure for a lesser amount.  This practice, which is fraught with danger, is sometimes deliberate and intended to save a few dollars on the premium, although may also be inadvertent by not properly calculating the current replacement cost.

Statistics suggest that around 29% of homeowners in Australia don’t have home and contents insurance, and as many as 40% who do have insurance are underinsured.

5. Malicious Damage by the Tenant

Ten years ago, very few policies covered Malicious Damage by the tenant. Today there are far more with it included, but it is something to check carefully as the limits and excesses can vary considerably.  The consequences if not included can be quite horrific.

Bear in mind that “Malicious Damage” is a very specific term and when it comes to insurance, generally, you will need to prove that the damage was caused “maliciously”.  This means that you need to prove that the tenant caused the damage with malicious intent, that their intention was “to damage your property”.

Example of what IS malicious damage:

A tenant has a dispute with a landlord and leaves the property, but before he does, he takes to the walls with a sledgehammer and indelibly leaves his mark.  Presumably this would be reported to the police and would more than likely be classified by an Insurer as malicious damage.

Unfortunately, this need to prove malicious intent means that as much as 60-70% of damage claims will not be classified as malicious damage.  So your policy needs to have more, which brings me to my next point.

 6. Accidental Damage

To prove Malicious Damage, you will generally require a police report, and technically you may need to prove that a tenant caused the damage with malicious intent, meaning that their sole aim was to cause damage to your property.

Look for a policy that has Accidental Damage, or at the very least includes “deliberate and intentional” which broadens it a little. Also ensure the Accidental Damage clause applies to both the building and contents. Some Insurers limit it to contents, which can leave you exposed in major situations.

Example of what IS NOT malicious damage:

A tenant has a particular attraction to the colour black, so she takes it upon herself to redecorate the entire inside of your property in this attractive colour.  The tenant did not paint the walls with the intent of damaging your property.  In her mind, she was enhancing it.

This situation is not likely to be classified by an Insurer as malicious damage. At the very best it would be classed as deliberate and intentional if your policy includes it.  You would be even safer is to have accidental damage included.

There are many more examples of accidental damage such as:

• The tenant changes the engine oil of his prized Harley-Davidson on the living room carpet….and spills.
• A quiet celebration turns into an impromptu party and the result is red wine ruining your much-loved carpet.
• A tenant wants to hang pictures, so all over the house go picture hooks into your newly plastered walls. Under some policies, this may be payable as “deliberate & intentional” damage.

And then there’s the ones that simply aren’t the work of a “bad” tenant at all. Here’s an actual claim I came across:

• A tenant was teaching his wife to drive. She hit the mailbox, and then panicked, hitting the accelerator and causing more than $14,000 in damage and lost rent.

7. Check the Qualifying (or disqualifying) rules

Some insurance companies will make putting a policy in place very technical, although you may not find this out until you go to make a claim, unless you’re an expert on fine print. Some policies require the tenant to not have been in arrears at any stage during the preceding two months where a breach notice could have been issued, or else some cover may be restricted.

Look for a policy that keeps it simple, unless you are 100% sure of your tenant’s history, in strict accordance with both the legislation and the policy conditions.

Ideally the policy you arrange should keep it logical, in fact pretty much common sense.  I expect all policies will require you to have a bond equivalent to at least four weeks rent, so that’s a given.  It is also logical that the tenant should be up to date with their rent at the time of taking out the policy.

But where it becomes more difficult is if the policy has conditions that refer to the tenant’s history, such as if the tenant has been in arrears in recent times.  From a landlord point of view, if your property is managed, you may not even necessarily know for certain whether this is the case.

By agreeing to conditions like this, you could find yourself with a denied claim months or even years down the track, all because when you arranged the policy the tenant had a not so perfect history.

Keep it simple. Make sure you abide by the rules of arranging the policy, but make sure they’re fair.

8. Check for complete cover

Policies vary in the way they cover your property. If you have a house you may need two policies: a building defined events policy as well as a landlord policy. Some of the combined policies that have hit the markets in recent years may fall well short of the mark when it comes time to make a claim, so don’t be fooled by the lure of the “big name” Insurer and the promise of a low price. There’s generally a reason the premium is so attractive.

That’s not to say combined policies are no good, just be sure it is a “genuine” landlord policy and not simply a pumped-up household policy.

There was a time when landlord insurance was a bit of a novelty. Only a handful, in fact less than a handful, of providers offered the cover.  That was the early 90s.  Jump forward 25 years and there are any number of policies available from all sorts of companies. The problem is determining the quality products from the pretenders.

Many policies on the market today are likely to be household policies that have had a few features tacked on and renamed as a landlord insurance policy.  It’s in the detail that you will find the difference.  Look for features such as “tenant hardship”, “death of a tenant” and “denial of access”, along with the accidental damage already mentioned.  These should be a few indicators of a policy that has been designed with some property management industry knowledge.

9. Court Orders

Some policies talk about long periods of rent loss being covered simply for “default.” On closer inspection, you are likely to find that court orders are required for anything other than the most basic periods.

That’s okay, but be sure you know what it is you’re getting so that you can make sure you get the most out of the policy conditions.

Policies these days don’t have “fine print” and are written in “Plain English”.  That’s not to say they are simple to understand for the average person.  You are entering into a contract with an Insurer, so there is a lot that needs to be spelt out and itemised down to the finest detail, in an attempt to cover such a wide variety of potential risks.  The issue of how much rent is payable under what circumstances is certainly one that needs close attention. You are likely to find specific conditions that need to be met before you are entitled to the full extent of rent loss. In other cases, lesser amounts will be payable.

10. The Body Corporate already insures my property.

Wrong.

The Body Corporate (or Owners Corporation) may be required to insure the building and common grounds in a strata-titled property, but the moment someone steps inside your unit or townhouse, the problem is yours.

This is a common misconception where many landlords believe if they own a strata-titled property they do not need their own insurance, as the Body Corporate will cover it.  In most circumstances this is certainly not the case.  The Body Corporate will generally cover the building structure and common areas such as the grounds, driveways, pools etc., but they do not cover the interior of your unit or townhouse.

Your “contents” such as your carpets, curtains, blinds and light fittings, plus often the interior paintwork and various other fixtures and fittings, need to be insured by you, the property owner.  This includes insurance against defined risks such as fire, storm and water damage, as well as tenant-related risks such as malicious and accidental damage.

The most significant risk to an investor is liability should someone injure themselves inside your premises and place you at fault. The legal bills alone can be catastrophic.  These days your policy should include at least $20,000,000 liability cover. In all honesty, you can’t have too much.

11. Periodic Tenancies or Lease Continuation

Most landlord insurance policies require the tenant to at least have initially been on a written lease and most likely for a fixed term. The length of the required fixed term of the agreement may vary between policies but the simple logic is that there needs to be some sort of written agreement in place for the tenant to be deemed as having done something wrong.

What has come to light in more recent years however is that some policies will not pay claims if the written lease has expired, and the tenants have simply rolled on to a “periodic lease” or “lease continuation”. This could be a major problem. Check your policy immediately. You can’t afford to find out that you are no longer insured at the time when you try to make a claim.

A check of the definition of a lease is the most important thing to do in this case.  This may be a reference to a “written agreement” or similar.  Ideally you are looking for terms that refer specifically to including a “periodic tenancy”, a “tenancy at will”, or some reference to the cover continuing for the period immediately following the end of a fixed term lease or rental agreement.

If your policy references simply that there is a requirement of a “written agreement” in place, you need to be careful.  There are plenty of landlords who have been caught out, expecting that the policy continued once the fixed term ceased but the tenant stayed on, only to find out otherwise when they went to make a claim.

12. When you figure out “you don’t need insurance”

To say I’ve heard them all would be an understatement.  “My tenant has been there for 6 years and I’ve never had a problem” – that’s until the job loss, or the illness, or the marital dispute. “That’s what I pay my property manager for, to make sure I don’t have problems” – and property managers are generally clairvoyants that can foresee all the problems that happen in people’s lives.

Insurance is what we call a “grudge buy.” Nobody wants it, but you’re running a business, and to not protect yourself is just plain dumb.

Television and newspapers often relate the stories of people who have suffered losses and were uninsured.  No-one is immune from the risks that insurance is designed to cover: natural events such as a storm, a bushfire or a fire that starts through an electrical fault, and the multitude of other things that can go wrong including tenant-related losses.  Let’s not forget the very real risk of liability claims which can amount to millions of dollars.

No amount of care can ensure you do not suffer a loss.  The bottom line is, if you choose not to insure, you’d better be prepared to wear the losses should the unthinkable occur.

My advice about insurance is provided for your general information and does not take into account your individual needs.  You should read the Product Disclosure Statement and Policy Wording prior to making a decision. These can be obtained directly from EBM.

The post The 12 Most Common Pitfalls When Insuring Your Rental Property appeared first on PropertyInvesting.com.

The Australian Bureau of Statistics (ABS) released property price growth data last week, and home prices grew 2 percent over the June quarter across Australia’s capital cities. Over the same period, Sydney property values jumped 2.8 percent, Melbourne is up 2.7 percent, and Brisbane values increased 1.1 percent. Over the twelve months ending in June 2016, Brisbane property prices actually increased more than Sydney.

Once the data for the September quarter is released, we’ll likely see even higher numbers, perhaps up to 4 percent additional growth for Melbourne and Sydney homes. With no sign yet of a slow down over the December quarter, many investors are scratching their heads, wondering how much higher property values can go.

It stands to reason that at some point soon home price growth should flatten, as values keep pushing the boundary of affordability. Rather than speculating on continued capital growth, some investors are turning to more active, manufactured growth strategies, like renovation, subdivision, and development.

In this post, we introduce Dean Parker, a developer in Queensland, and a friend of PropertyInvesting.com. We’ve asked him to share with you some of his insights and wisdom that he’s acquired along the way. Keep your eyes out for more posts from Dean in the coming months.

Video Transcript:

Hi, I’m Dean Parker and I’m the managing director of Your Style Homes. In the coming months, I will be hosting a number of video blogs for the PropertyInvesting.com community.

I’ll be talking to you about the day-to-day challenges that we face in our development business and how we overcome them. My hope is that you will be able to pick up some helpful tips and tricks along the way. Really, these are just everyday issues that we come up against that require us to think on our feet and find solutions to.

To start with, I’ll give you a brief introduction of what we do. We’re a development company in Brisbane. We’ve been up here since 2011, but first began operating in Melbourne.

We now focus on townhouse and apartment projects in the Brisbane area. I’m standing now in front of a townhouse project we’re just completing in Coorparoo in Brisbane. There are eight luxury townhouses here, with city views. It’s a beautiful development.

As part of this project, we’ve been able to retain an existing Queenslander that sat right at the back of the block there. We’ve moved it all the way forward to the front. We’ve refurbished it, split it in half, and turned it into two townhouses. We’ve also built six brand new townhouses around that original Queenslander.

At this point of the project, from our point of view, we’re aiming to deliver a really high quality product to our purchasers. We’ve actually sold seven of the eight townhouses off the plan. We really want to make sure that when we hand these properties over that they’re of high quality and that the owners are extremely happy.

We could go and actually do our own defect checking and then give our feedback to the builder. We would do that at a high level just to make sure all the colours are right, the tiles are right and the fixture and fittings are okay.

But what we’re doing because we’re dealing with bigger projects – really, you could do this on any sized project – we’re employing a third company separate to us and separate to the builder to do our quality assurance check.

In this case, we’re using handovers.com, but there are plenty of other companies you can use out there that do a similar thing. Essentially, the process from here is the builder issues their practical completion to say that they’ve finished works, and then we get our independent company in to do a full inspection.

They’ve already been in for the first inspection two weeks ago and found 800 defects. That’s how thorough they are. They know the building code. They know what is a defect and what isn’t a defect. Any tiny little thing they find, they list it.

They basically get all this information to us on one really helpful spreadsheet. It lists the room, the defect issue and then the trade that they think would be responsible for fixing it.

We get that full list, then we give that to our builder. It’s a really easy process then for the builder to fix it. They print it off, they give it to their site supervisor, he goes through it, issues it all to the trades and then they simply work through the list.

Today, we’ve got our independent company back here again, now doing the second inspection. Hopefully, they’re in there behind me ticking all these items off, and we can then finally give the builder our final handover certificate to say that we’re happy with the product that they’ve delivered.

The challenge on this site really was to deliver a high quality product. Now, we’re not builders. We’re a development company, so I don’t really know the ins and out of every little building code that’s out there. That’s why we’ve got this third party company to come in. They know what the rules are.

The other great thing about this is they’re the meat in the middle of the sandwich. It’s not us being particularly difficult with a builder. It’s an independent company. Really, we’re just the conduit between the two.

The way that we’ve solved our problem here is to get this independent company in. They take away a lot of the headaches. It means that instead of us rushing around trying to do this defect processes ourselves, we can now deliver a really high quality project knowing that an independent company has done a full inspection and that we’ll get the project delivered on time and with a great finish.

I hope you got some value from our first video update. We’re looking forward to working with the PropertyInvesting.com community and delivering a lot more tips and tricks over the next few months as we progress through the projects we’re developing up here. We’ll see you soon.

This video transcript was edited slightly for readability.

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