How much House Can I Afford?

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Are you considering purchasing a home and wondering how much house you can afford?

For many of us, homeownership is a lifestyle aspiration as well as a huge financial decision.

It feels great to be free of the landlord. To know your home is your own, and you can stay put as long as your like. The larger payments that normally come with a mortgage and inflexibility are the downsides.

I’ve written before about reasons not to buy a home, and how to save your deposit if and when you buy. I think it’s becoming more common knowledge that buying a home is not always the best financial move.

So How Much House?

One of the first questions first home buyers tend to ask when they have decided they want to buy a home is how much house to buy.

The easy temptation is to start by working out how much you could qualify to borrow. But this is not the best way to go about this life-changing decision.

Your overarching financial strategy should be front of mind when deciding how much house to buy. Instead of buying a house consistent with the amount lenders will lend you at the time, there are two valuable strategies in approaching home purchasing:

  • Buy less than you can afford to keep cashflow free for investing, travel, freedom
  • Buy as much as you can possibly stretch to maximise capital tax free growth

Of course, there is plenty of room in between for intermediate strategies, but I think deciding which extreme your own property strategy falls closest to is a good start.

Strategy 1. Buy as Much home as You Can Possibly Stretch to.

This is the traditional strategy. The idea is to max out your borrowing capacity to buy the best house (or the worst house on the best street). The strategy often involves upgrading your property every few years, to take advantage of your growing salary and to leverage any equity you have gained in market movements. Over the years, you able to purchase houses in better and better streets.

Many of our parents followed this strategy, and it worked out well for many. The idea goes that property is a great investment, and will grow in value over the years. At the end of your career, you can sell your (hopefully) massively appreciated house without any taxes and downsize to free up cash for retirement.

Any gains are currently tax-free as long as you live in the home as soon as practicable after your purchase. There is even a 6-year rule. This means you can leave the property and live elsewhere and continue to treat it as your principal place of residence. Despite being absent from the home for up to 6 years, you can protect your capital gains tax exemption on sale. As long as you check with your accountant and make sure everything is done and documented properly.

-Strategy 1: If you Pick a Property Poorly, the Strategy Fails

This strategy works incredibly well if you purchase a property(s) that ends up delivering fantastic capital growth. The dangerous “rule of thumb” that property doubles every 7-10 years imply this growth occurs to all properties. Some properties grow in excess of this, some don’t grow at all.

Sydney and Melbourne property prices have historically performed far stronger than the rest of Australia, which is why these cities are so unaffordable. The rest of Australia has not done so well. Up until this latest property boom, our property value in a regional town has just about matched inflation since we purchased.

If you pick the right property, in the right suburb and in the right city. But if this home is your single retirement plan (as it was for my parents), there is a whole lot riding on your choice! This is an example of concentration risk – all your eggs in 1 expensive basket.

Even if you choose a location that has historically provided great capital growth, there is no guarantee this will continue. If you maximise your leverage into a home in Sydney, what if Sydney lies dormant for the next 20 years whilst Melbourne booms?

– Strategy 1: You Get to Live in that Dream House

If you aspire to live in a prestigious area, and you get the investment part right, you are fulfilling an investment and lifestyle goal in one. You get to live (eventually) in your ideal home, and then it pays for your retirement. Sounds like a dream!

Inevitably though, few people can afford their actual ideal and still have to make some compromises. But you should definitely get an absolutely lovely home with this strategy

Strategy 1: Tax

The fact that this strategy means all your gains remain capital gains tax-free is attractive. You need to move into the property as soon as that is possible or you lose your capital gains tax exemption altogether. So no renting it out for the first few months, or delaying moving in after settlement.

Unfortunately, interest paid on own home is non-deductible. This means you are footing the entire interest bill for the duration you own your home. We currently have record low-interest rates, which makes this considerably less painful. But assuming interests rates eventually rise, your capital growth needs to increase faster than your annual interest rate.

Strategy 1: Reducing Options & Financial Stress

Having a mortgage repayment eating up half of your take-home salary drastically reduces your options in life. You cannot take a pay cut by changing jobs or reducing hours. You will probably not be able to invest money elsewhere for several years.

The reason I personally don’t like the idea of this strategy is from watching my own parents struggle for years. My father worked 7 days a week for decades! I wanted a different sort of lifestyle for our growing family.

If buyers can get through the first few years (the first 2 are the highest risk), financial stress tends to reduce. Those expecting a large pay rise in the near future may be tempted to push the borrowing in the short-term reassured that income will soon increase.

Those that don’t have 100% secure income or plan a reduction in income in the next few years (parental leave) need to take this into account when working out how much house they can afford.

Strategy 1: How Much House – Remember Interest Rates Do Go Up!

Mortgage repayments don’t look so bad with today’s low-interest rates. But they won’t stay low forever. Borrowers have the option of fixing rates, which can reduce risk significantly for tight budgets over the first 2-3 years. But once your fixed rate expires, you are at a mercy of interest rates at the time.

Our household purchased our family home in 2008, paying an interest rate of around 8%. Since then, interest rates have gradually dropped making our (less than we could afford anyway) mortgage less expensive over time. I buying a home and then experiencing interest rates inch all the way back to 8% over the next 10 years would be stressful.

-Strategy 1: The Downsizing Plan

Many who have followed this strategy have then struggled to downsize when the time came.

After many years living on the best street, it can be hard to downsize or move to a less prestigious suburb.

My parents brought the biggest and best house they could possibly afford. They were under financial stress for many years trying to pay the debt down. By the time they were ready for retirement, they were used to (and very proud of) owning a big, lovely home on a good street. The thought of downsizing to anything less prestigious was unappealing!

Strategy 2. Buying Far Less Home than You can Afford

This strategy works far better for those buying in a town not likely to see above-average returns. It also works well for those that want to have money left over for holidays, time off for kids and retirement. In lower house values areas, you also get a lot more house for your money so it doesn’t necessarily mean living in a suboptimal home.

There has been recent news about tightening lending conditions again. A borrowing maximum of six-time gross income has been suggested.

On a $150,000 gross salary, 6 x borrowing would be $900,000.

Repayments on $900,000 over 30 years at 2.99% would be $3790, or ~40% of net income assuming the income was earned by a single worker. That seems like enough of a mortgage to me!

Yet according to this financial review article, recent average loans in Sydney are written based on 8x salary! Even a tiny movement in interest rates makes these loans impossible to pay (hopefully they’ve fixed rates).

With Sydney and Melbourne prices, borrowers have been pushing these limits just to get into the market. If they have selected a great property, fingers crossed it will pay off.

In a regional city you may be able to get away with only borrowing half your potential borrowings.

– Strategy 2: Missing out on Capital Gains

The big opportunity cost here is if you plan to live and work in an area that will benefit from a significant capital gain over the next few years. It is important that if you choose the smaller mortgage, you use the extra cash flow consciously on something that will give you long-term value.

– Strategy 2: Missing out on Living in the Dream Suburb

If the prestige of living in THE suburb to be in is something that appeals to you, this is something to weigh up. Perhaps you won’t live as close to cafes and restaurants, or have your colleagues on your street. The benefit of living in a more average suburb includes less pressure to “keep up with the Joneses”. If you purchase on the street of your dreams, you may find you NEED to upgrade your car, and dress in more upmarket identifiable labels.

– Strategy 2: Spare Cash Flow Potential

Your extra cashflow freed up by buying less house than you can afford can be put towards investing or lifestyle goals (or both). Options include:

– Paying the mortgage down

A worthy and low-risk goal. Increasing your equity will allow you to borrow off this if you want to invest in property in a few years time (which feels like hitting two birds, one stone).

If you invested this money in the stock market, you would need to pay tax at your marginal rate on any dividends or withdrawals. So your returns need to be good enough to beat your mortgage interest saved after tax. That shouldn’t be too hard over the long-term at current rates, but as interest rates increase, paying down your mortgage becomes even more attractive.

When “paying off” your mortgage you may like to fill an offset account rather than actually pay down the loan. It has the same effect on the interest paid (less and less as you fill your offset) but the money still legally belongs to you, not the bank. This means you can withdraw it if in financial distress when the bank could prevent you from redrawing. It also provides flexibility if circumstances change (a new job offer in a new city?) and you decide to convert your home into a rental property. The offset cash can be withdrawn and used as a deposit on a new PPOR (or for whatever reason) and interest on the remaining loan balance remains tax-deductible.

– Purchasing an Investment Property

You are probably not going to be able to immediately purchase an investment property after buying a home, but with an aggressive pay down strategy and a booming market like currently, you could be ready to go pretty soon.

Interest on investment properties, as opposed to your principal place of residence, is tax-deductible.

Between renters and tax incentives, this makes owning a 500K home and 500K investment property potentially more profitable than owning a 1M home. The renters are helping significantly (particularly at current interest rates) and any shortfall is further softened with a tax deduction.

Owners of a 1M home pay every bit of the mortgage themselves, with no help from the Australian Tax office.

Interest rates are often slightly higher on investment properties (mine are 0.6% higher) than homes. And you lose out on the capital gains tax exemption you would get on the 1M home (although you would still receive it on your more humble 500K home). You would receive a capital gains tax discount of 50% on your investment property if you kept it for a year or more. And you pay no capital gains tax on an asset you never sell.

Automated investing into your superannuation or index fund ETFs outside super

This is easy and ideal for busy professionals who don’t have the time or interest to do significant research. Your super will allow you to direct debit extra payments directly into the fund, brokerage fee. Keep in mind that you will not be able to withdraw until your preservation age, so don’t invest so aggressively in super you are left short.

Those wanting to retire earlier than their preservation age (keeping in mind that may change) or those with a long term non-working (on the 0% tax bracket) adult at home may want to invest outside super. This will take a little research but is pretty easy to organise and automate through Pearler*.

– Holidays and travel

You may be purposely avoiding over-commitment to a huge mortgage to include more fun in your life. This may be more eating out, buying nice things or going on awesome holidays. Spend on what you value and brings you joy. Just put a little aside to do the grown-up thing and save a bit too.

How Much House Can I Afford?

How much house you can afford depends on your:

Current gap between income and spending plus rent paid –

Find out your net income, and work out what you actually spend, not a budget based on a hypothetical idea. Use expense tracking to work out what your actual expenses are. Your bank is going to examine (with a fine-tooth comb) your real-life spending using bank statements so you might as well get to grips with reality.

How Much House: Income security and anticipated income changes

Do you have a permanent contract? Doctors are often on temporary contracts for many years, but banks do seem to accept this as a norm. You could negotiate a longer contract with your employer to provide yourself and the bank extra reassurance.

If you are hoping to start a family or reduce income in some other way in the next few years, make sure you take this into account. Make sure you aren’t committing yourself to financial stress during anticipated times of reduced income.

Do you have income protection insurance, or will you qualify for a policy large enough to cover your intended mortgage? Unfortunately those with significant “pre-existing conditions” will often struggle to get cover. If you or your partner suffer an illness or injury that prevents them from earning an income for a significant period of time, there needs to be a backup plan.

It is a good idea to have some cash sitting in the bank in case of emergencies on settlement day. The last thing you need after spending every dollar on that dream house is for the car to need a major repair, or the hot water system to blow up and need replacement.

Priorities for the future

This involves a bit of daydreaming. Set audacious goals and design your ideal life. What is most important to you? Incredible house or incredible holidays? Intended retirement age (do you need to invest extra)? Is getting mortgage-free important to you?

Almost no one can have everything. You have to prioritise what you really want to make sure you get it!

Area you want to live in

How confident are you of its capital growth potential? Are you happy to bet the (literal) house on it? Is it in a major capital city within the commuter belt? Is it an established house (new homes and high rise units seem to perform poorly)?

How Much House Can I Qualify For?

Only after answering the above questions should you work out whether the bank will lend this money to you. Your ability to borrow depends on;

– Income

What is your gross income, easy to find on the ATO website. Banks will want at least 6 months of payslips or two years if self-employed.

– Security of income

Permanent employee > temporary employee > self-employed.

I was questioned about my income protection, total permanent disability and life insurance by the bank during the latest property purchase. If anything terrible happens to you, the bank wants to know you will still be able to repay your loan.

-Gap between Income and Spending

If my recent experiences applying for a mortgage are anything to go by, they are not going to take your word for it. They will ask for every bank statement you have ever received. One at a time. A couple of times each.

OK, maybe I’m exaggerating a bit. But your pie in the sky budget (that never foresees the emergency car repair, dental treatment…) is not going to cut it.

If there is a reason to keep your banking simple, this is it. Being asked for statements on 9 accounts repeatedly is really annoying. Sorry Barefooters!

– Other borrowings

These make a big impact on your borrowing capacity. Credit card limits are treated as if you have maxed out your card and need to make minimum repayments. Even if you pay them off every month religiously. If you’re anywhere near your borrowing capacity reducing card limits or closing unused cards and accounts may be worthwhile. Check with a mortgage broker.

– Credit score

You can apply for your credit report from Experian and monitor it monthly on Creditsavvy. I did have one random application appear on my file, which was erroneous. I managed to get it removed but had to be pretty persistent with the company involved.

– Profession

Certain professions are considered ultra low-risk borrowers because as a group they rarely default on loans. These include doctors, accountants, lawyers, dentists. Many banks will allow high borrowing (up to 90%LVR) without charging lenders mortgage insurance which is a big bonus.

– Deposit

How much deposit have you saved? You will generally need at least 5-10% of the purchase price plus ~6% buying costs.

– Age

Banks have become much less keen to lend to those they don’t see having enough working life to pay off the mortgage. A colleague was questioned (and offended!) by the bank about her plans to pay off the debt despite her advanced age (45!).

How Much House to Buy?

This is a very personal question, which depends on your capability of paying back over the next 30 years as well as your priorities. Do yourself a favour and spend some time reflecting on these questions (with your partner if you’re buying as a couple). Make the right decision for yourselves.

Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Landlord Insurance

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

As a landlord, your rental property is one of the most valuable assets you own. It’s important to protect it adequately.

Landlord insurance can help protect this asset and provides personal injury and property liability protection. Many firms have, however, reduced coverage for rental default as a result of COVID-19.

Read more about landlord insurance in this guide for new landlords!

What is Landlord Insurance?

Landlord insurance consists of two components. The first protects your rental property just as your own home buildings insurance does. This policy compensates for theft, fire or flooding and landlord liability coverage if someone is injured at the rental unit.

The other component of landlord insurance is in relation to tenants. This covers, depending on the policy, malicious damage caused by the tenant or their pet. Certain policies will also cover loss of income in case the tenant defaults on the rent, absconds or needs to be evicted. Landlord insurance policies may cover legal fees, costs of changing the locks and even tax audit fees.

Like all other insurance policies, there is a huge variation in the cover. It is wise to decide on what cover you require before comparing and read the PDS carefully.

Why Is Landlord Insurance Important?

All insurance companies aim to make a profit by paying out less in claims than it collects in premiums. This makes insurance policies a losing bet for consumers. And (hopefully) a boring waste of money!

But consumers who cannot yet afford to self insure need to protect themselves from financial catastrophes.

If your investment property burned to the ground, or a visitor suffered a serious injury on your property, the event may cause financial ruin. Changing the locks after a tenant was evicted? Annoying but hopefully not financially catastrophic if you are a property investor.

You should have financial buffers and an emergency fund.

The only reason you should take on the losing bet of an insurance policy is to insure against disaster. So when looking at policy inclusions, focus on ensuring you have disaster covered. It’s easy to get distracted by bonus inclusions that you are unlikely to recieve. Don’t pay extra for insurance you don’t really need.

How Does Landlord Insurance Work?

Landlord insurance works by providing coverage for the non-owner occupied residential rental property (i.e., landlord). It also provides liability coverage for bodily injury or property damage to others that arise out of your rental activities.

The landlord pays an annual or monthly premium. Most of the time, they won’t need to claim. If a claim is required, it’s time to call the insurance company. Only then do you find out how much of a battle it’s going to be to actually get the cash!

What Is An Excess (deductible)?

An excess is a dollar amount you pay on an insurance claim before the insurer pays anything toward the loss. For example: If you have a $500 excess, you would pay the first $500 for repairs yourself.

Increasing the excess will often reduce the cost of a policy. Again, the majority of the time you (hopefully) won’t need to claim, whereas you will always need to pay the insurance premium. It is generally more cost-effective to accept a higher excess for a lower premium

How Much Coverage Is Enough?

In general, landlord insurance covers replacement cost value or actual cash value (depreciated) for your building plus any additional living expenses due to damage from an insured event such as fire or storm.

It is important to consider all risks involved with owning rental property when purchasing landlord insurance because each landlord may have different coverage needs based on their situation and the type of property they own.

Terry Scheer was recommended to me. I have never had to claim (touch wood!) They cover $2 million in liability.

Underinsurance of homes is a massive issue, revealed every time Australia has a natural disaster.

The most accurate way to estimate the rebuild cost of a home is to order a quantity surveyor’s report. If you are planning to order a depreciation report for your investment property, enquire about a replacement property valuation for insurance purposes.

Alternately, insurance companies have calculators to help you work out the insurable value of a home on their websites. Use multiple sources and take care to get the estimate as accurate as possible.

Landlord Insurance Policy Features To Consider:

  • Excess options
  • Does the insurance company cover replacement Cost or Actual Cash Value of Building and Contents?
  • What Is Covered? (i.e., what is NOT covered?)  
  • Limits Of Liability Coverage For Bodily Injury Or Damage Claims/Lawsuits
  • Malicious damage by tenant
  • Damage caused by pets (do the insurance need to know about pets prior?)
  • How Long Does Landlord Insurance Last Before It Expires / Becomes Invalid
  • Are There Any Exclusions (“acts of God exclusion” is pretty subjective!)
  • Online reviews on claim process
  • Rental cover in case of tenant default, absconsion or (hate to imagine) death*
  • Eviction costs

*Following COVID-19, many firms have cut loss of income cover. Landlord insurers stopped offering new policies for a while as their costs blew out with unexpected claims. Multiple insurers do offer rental default cover again if this is important to you.

How To Get The Lowest Price On Your Landlord Insurance?

It is important to focus on the quality of the cover before trying to find the cheapest option. Cheap insurance that doesn’t cover financially catastrophic events is a waste of money.

The cost of a policy will depend on the size, value and makeup of the building, its location, policy inclusions and excess. It is usually more expensive than your principal place of residence insurance policy.

Shop around and compare landlord insurance quotes of appropriate policies. There are many online sites that offer landlord insurance comparison shopping. Make a list of available policies from different companies with all their pricing information, policy features and exclusions.

Another option is to ask your property manager if they have a recommendation.

Can You Make A Claim On Your Landlord Insurance?

Landlords can make landlord insurance claims for covered losses resulting from an insured event.

If you have to make a landlord claim it is important to follow all instructions given to you by your agent and landlord insurer regarding filing landlord insurance claims properly.  Speak to your insurer before commencing repairs if possible.

It’s also good practice to maintain detailed records of any conversations with agents about coverage information related to making claims, sending proof of loss statements etc. Keep copies of all documents filed during the process including receipts for repairs/replacement items purchased.

Landlord insurance is an important defensive tool to limit your risk in property investing. Make sure your policy covers causes of financial catastrophe, and then minimize cost.

Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

M&M – Over Leverage by The Joyful Frugalista

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Everyone makes some money mistakes. But learning from others is a lot less painful than making your own! I have benefitted from listening to tales from family and friends investing disasters and have confessed my own financial errors for readers, in turn, to learn from.

It is rare people are brave enough to share their financial horror stories. The shame and embarrassment of a huge financial mistake often prevent people from reporting or warning others.  But learning from others mistakes is sometimes more valuable than stories of success.

In the M&M series, I have asked financial content producers to bravely confess their worst financial mistakes. Read these warnings carefully and learn as much as you can from them to avoid making money mistakes of your own.

Over Leverage

Hi.  My name is Serina Bird. I’m the author of The Joyful Frugalista*, and host of The Joyful Frugalista Podcast.

I turn 49 in a few weeks’ time (how did that happen!), and I am mum to two boys (9 and nearly 12).  I’m a former Commonwealth public servant, who left to pursue other goals. I didn’t have a particular FIRE goal or target, but I was close enough to being financially secure that I felt I could take the leap when I did.

Oddly enough, I’m back in my former role part-time, and I’m enjoying the intellectual rigour and connecting with others.

My Worst Money Mistake: Over Leverage

In my first marriage, we were over leveraged in our property investments.  I was the primary income earner and for several years the only income earner.  We both had a goal of having at least ten residential investment properties.

So far, so good.

But I felt like it was often up to me to be the sensible one who watched the income and expenses where things were going. As I was in a busy job working overseas on posting, this wasn’t always possible.

In the last year of our marriage, we had huge gaps in our tenancies.  One property was vacant for six months before I realised what was going on! My ex-husband didn’t want to ‘worry’ me, and he also didn’t want me to lower the price. 

At that time, he had the main role of liaising with the real estate agents and I guess I wanted him to have a clear role as he wasn’t in the workforce at that time.

After returning to Australia, and then leaving the marriage due to an escalating anger situation, I suddenly had the burden of ten investment properties, plus legal costs, plus childcare.

I guess my worst financial error here was over leverage to the extent that there was no emergency fund.

We had a maxed-out credit card and an overdraft that was also at its maximum. 

While on paper I was wealthy, it didn’t feel like it. I was essentially living payday to payday and it was stressful.

Back in 2014 when we separated, the property market in my city (Canberra) plummeted due to cutbacks in the Commonwealth public service.  It wasn’t a good time to sell, yet both of us needed cash.  We managed to reduce the carnage by coming to an agreement to sell one and to avoid a fire sale. Selling at the lowest point of a market is never a good strategy.

What this taught me was the importance of building up wealth gradually and also of having funds available for contingencies.  Marrying (again) to someone who shared similar, frugal money values has also shown me how powerful it is when two people work together to achieve shared goals.

Related to this, another big financial error was being overexposed to property.

I love property investing and always have ever since playing Monopoly as a child.  Nothing’s going to stop my love of property investing!

But I almost totally missed the big mining boom because of fear of investing in shares – despite working on China issues at the time and reading about the big need for iron ore.

I also didn’t take the time to understand how my superannuation plan worked.  My ex didn’t like shares or believe in superannuation, and I guess I also was a bit sceptical of super. It seemed such a long way away before I would ever need it!

Warning Signs (in hindsight) I wish I’d Noticed:

With the benefit of hindsight, there were many warnings that my ex-husband and I weren’t on the same page when it came to investing and finance.  He had larger visions, but I was the one who was taking the responsibility for making mortgage repayments.

On the property investing front, the family tried to tell me we were taking on too much and being too ambitious. I heard this as them being jealous or thinking we were being greedy.

To be honest, there was a lot being written about leveraging heavily to buy more investment properties.  The boom of the early 2000s had a profound impact on people seeing how residential property could explode.  But booms don’t happen every day.  The money trail of what was coming in and going out should have told me that we were financially stretched.

How I Could Have Avoided this Error:

I could have avoided this error by having a more diversified portfolio, and crucially, ensuring we had an emergency fund – or at least access to a redraw facility in one of our mortgages. 

I also should have looked more closely at what was going on with our finances.

At the time when there were tenancy gaps, it was an especially busy time with my work as I was balancing being a mum to a toddler and baby plus many work-related evening events.  That said, it’s important to always prioritise your finances.

When I realised Over Leverage was a Mistake?

I don’t’ think I realised there was a ‘mistake’ as such for many years.  We had been so proud of our property portfolio. I was adamant we had made a good decision.  Yet looking back, I was always so anxious and, I think part of it was the stress of worrying about how I would make payments. It also held me back by keeping me in the same job as I didn’t have the courage to quit to follow the entrepreneurial path I had dreamed of.

On paper, selling the properties when we did was a mistake. If I had held all of them until the big 2021 boom, I would be laughing.  But, it would have been extremely stressful to have done so and my kids and I would have had to have made extraordinary, beyond the normal frugalista sacrifices. I think the pressure of doing that would have had a defining and adverse impact on my kids. I mean, there’s frugal and then there’s just plain crazy penny-pinching.

Looking back, I think around six years or so ago, I began to start rethinking my finances and how they aligned with my values. While I still loved property, my focus was more about ensuring that I could provide for my children through any contingency. Accordingly, a heavily geared strategy (even though it could have paid off eventually in a mega-bonanza), was incredibly risky.

How I recovered financially from Over Leverage:

It has taken me several years to restructure my investments. I have now rebuilt my super (I lost a third in the property settlement) and rebalanced the investment properties.

Two of the investment properties I retained.  I retained – then sold – the former family home, and my ex retained one house.  The rest we sold. 

I now have zero mortgage debt on the apartment where I live, my husband and I drive one car (car loan free), we pay our credit card off in full each month, he makes the maximum contribution to his superannuation, we have a cash emergency fund of $10,000, and we are building up our ETF portfolio. 

We have three investment properties and plan to start selling them down in 18 months’ time (ahead of hubby’s retirement at age 55). 

Without having to devote large amounts of funds to mortgage payments or car loans, we find we have more surplus funds to direct to ETF and other investments.

And we’re both somewhat amazed at how quickly our investments are growing now that we have reduced debt and consolidated our finances.  And the most important thing is that going into COVID, we knew we were in a good financial situation and didn’t have any reason to panic.

Thanks, Serina!

Thanks so much to the generous Serina Bird for sharing her financial mistake of over leverage, and her time to warn us! This warning is so relevant in todays over heating property market.

This article also contains a powerful warning to always be fully aware of how the household finances are being managed. Never outsource this completely to your partner.

Serina has also shared her investment strategy with Aussie doc readers earlier this year. The Joyful Frugalista book* shares more details on Serina’s property over leverage experience and loads of ideas on how to save money. I can recommend picking up a copy, I’ve read it twice to pick up hints on becoming more frugal!

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

The Landlord Experience: Year 2

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

I long aspired to be a property investor. I, like many Australians, was bitten by the property bug. My journey from deciding to take the plunge, the purchase and property management has been documented for the benefit of those considering taking the plunge themselves.

The Purchases

Property number 1 was purchased in July 2019. Then property number 2 was purchased in April 2021, amidst an insanely hot market. Our household also owns a principle place of residence.

Our attention has well and truly been focused on the acquisition of property 2, including an onerous and lengthy mortgage application process, finding a property manager and tenants.

The Landlord Experience with Property 1

Meanwhile, property 1 has been ticking along very nicely. Rent is deposited in our account each fortnight, a rental statement is emailed to me every month. A tidy end of financial year statement arrived by email promptly, for me to forward to my accountant.

Property inspections are organised on schedule by our property manager, although due to COVID-19, these have been virtual this year.

As mentioned in a previous article, our 1st tenants built their new home and vacated in August 2020. They left the property in good condition. Our new tenants moved in within a week. Mid COVID-19, the property was tenanted at a slightly lower rent.

We had tenants competing for the property in 2019, pushing the rent above expectations to $500 per week. In 2020, the property was rented for $470pw. These tenants have now been in for a year (time flies!) and have already renewed the contract, increasing rent back up to $490.

Some legal changes required an upgrade in smoke alarms this year, which the property manager alerted me to and organised. A couple of minor repairs required a handyman and the gutters got cleaned. All of this was organised by my property manager after emailing us to approve.

With the purchase of property 2, we took the opportunity to refinance all of our mortgages. Property number 1’s loan was converted to interest-only at a lower rate, freeing up cash flow for ETF investments.

Financial Results

Similar to last year’s article, I will summarise the financial outlay and capital growth so far.

Costs from 2019-2020 include:

Acquisition Costs $36,000

Buyer’s agent fee $14,000

2019-2020 Cash flow out of pocket costs after-tax benefits –$5085

Costs from 2020-2021 include:

Interest on property loan–         
Council Rates–         
Repairs & Maintenance–               
Property agent fees–   
Advertising for tenants –      
Depreciation –


Net Rent-6207
Tax Refunded from PAYG employment2793
Out of pocket costs for 2020-2021-$3414

In total we have spent net $58,499 in purchasing and maintaining this property.

I had a formal property valuation in October last year, but have not repeated this.

Our initial purchase price was $587,000. Valuation in October 2020 came in at $630,000. Online value estimates on, and currently come in at $668,000, $775,000 and $650-700,000.

I confess these numbers are a bit rubbery! Online valuations are pretty unreliable.

But if I use the lowest estimated value at $668,000 the property has grown $81,000 since purchase in July 2021. This would be around 13.8% growth over just over 2 years.

It also means I am now in theoretical profit.

I will update this article when I have a formal valuation to confirm whether this is a fair assessment.

The Landlord Experience: A Summary.

Again, and frustratingly, there is no real way to know whether this property will perform without waiting many years. This year, property all over the countries has been going crazy. Prices seem to be up all over and there is a full-on buying frenzy going on. We are in a boom time!

I am feeling pretty optimistic that the timing of this purchase was, in retrospect, pretty good. It certainly didn’t feel good, with so much doom and gloom in the media.

Our landlord experience so far has been pretty easy. I suspect a lot of this has to do with having a great property manager.

I have no doubt things will get more challenging at times, and I am aware of many finance bloggers who have sold their properties, regretting the hassle involved. At some point, these properties will need major repairs and renovations.

I am happy to deal with some hassle every few years for leveraged (and untaxed) capital growth. Our plan is to never sell these properties. Only time will tell if we follow this plan.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.




brick x

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Many millennials struggle to save enough to fund their first home deposit. With prices rising rapidly, and unaffordability in the news every week, it’s easy to feel demoralised.

Savings account interest rates are stupidly low, leading many savers to search for a better return. Savers want to help their savings keep pace with the property market.

Investing in ETFs is tempting, but assuming most have less than 7 years before their planned home purchase, likely too risky. A market crash could decimate your home deposit savings, and take years to recover.

What is Brick x

Brick X is an online managed fund. The platform offers fractional residential property investments. I note they have recently branched out into commercial property.

Brick X purchased its first property in 2015. This Australian company purchase properties within a trust with or without borrowings. They then divide the properties into 10,000 virtual bricks, available for purchase by investors.

Brick X organise the property management, tenant screening, rent collection and deal with any real estate dramas. They pay investors distributions based on rent minus expenses, but the main draw of the platform is to invest for capital growth in the property value.

The idea is that want to be homeowners (and investors) can invest their savings in Brick X, so that their savings can keep pace with the property market.

How Does it Work?

Investors can start with $250. Brick X clients can choose a property from those available on the platform, or opt to direct debit a regular investment and let Brick X allocate their investment money.

The platform has a low barrier to entry, particularly in comparison with buying direct property. The ability to automate investing is a useful feature in helping investors stick to their own plan.

I have looked into the platform several times over the past 3 years. Initially trying to save a deposit for our 1st investment property, the Brick X concept seemed appealing.

What are the Brick X Fees?

Investing through this platform is, as expected, more expensive than investing in property directly. But is it worth it? Fees according to the 97 page PDS:

A signup fee of $10 taken from your initial minimum $250 investment

0.5% transaction fee on any purchase and sale of bricks. If wanting to direct debit small amounts into the platform each pay, this fee eats into returns. Investing less often would obviously create fewer transaction fees.

The Brick X transaction fee is comparable with brokerage fees. With Commsec Pocket, you will pay $2 for a $1000 trade, or 0.02%. If you can invest larger amounts less regularly, brokerage can be found far cheaper.

Brick X employ property managers and charge a 6% per annum property management fee. This seems very reasonable, from my experience with property managers so far.

Acquisition Costs

On purchase, the usual acquisition costs include stamp duty, solicitors fees and a cash reserve for unexpected expenses is calculated. A cash reserve consisting of 3 months of expenses, along with all other acquisition costs is added to the purchase price when setting brick prices. These costs are amortised over 5 years.

Brick X orders an independent valuation of each property annually, which incurs another small fee and updates the price of individual bricks.

But this is the killer. Brick X can claim a management fee of Up to 2% of the gross asset value per year. Thanks to Michelle, I note this fee is variable, and often far less. You need to read the individual additional disclosure statement attached to each property to work out what the management fee is.

My super fees are ~0.7% and ETF fees are usually less than 0.5%.

Unless you have been living under a rock for the past 10 years, you will have seen an industry superannuation advert, and understand the significance of a 1% increase in fees compounded over decades.

The return on your investment needs to compensate for this management fee plus transaction fees.

But Brick X can also reward themselves with a bonus if the asset outperforms their prediction. They can take a performance fee of 30% of any outperformance in addition to all the fees above. This is also disclosed in the individual property disclosure statement, and is also variable according to the property.

What are the Risks?

Property Market Risks

By investing in property, you are taking on all the usual risks of the property market. Property prices can and do go down as well as up. Some take years (or even decades) to recover.

Interest rate risk exists, albeit to a lesser extent with Brick X because most of the properties have lower loan to value ratios than most individual investors would start with.

Tenant risks also exist. The professionally managed properties should have robust tenant screening. Of course, this is not 100% effective, but Brick X investors also have no power over assessing the competence and diligence of their property manager.

Expensive repairs and vacancies also occur at no fault of a tenant.

But with Brick X you also have an additional risk, that of the company itself. If Brick X goes bust, they turn the properties over to an alternative manager who will sell the real estate and return funds to investors. I wouldn’t like to guess how long that might take.

What are the Returns?

Capital Growth Performance

Brick X investors are trusting in Brick X to choose suitable properties for investing. The platform provides historical suburb capital growth and predicted rental income. Of course nothing in investing is guaranteed.

Brick X’s historic performance is not that easy to find. The company produce reports every 6 months comparing performance with Corelogic’s home value index.

In the six months leading up to June 2020, Brick X underperformed the index representing the entire Australian property market.

In the six months leading up to June 2019, Brick X outperformed Corelogics home value index. June 2018’s report also shows Brick X outperforming.

I couldn’t find the data I really wanted – Brick X’s performance since its 1st property purchase in 2015.

I would expect properties purchased by professionals for investment to consistently outperform a home value index representing all Australian homes. It is unclear from the reports I can find whether the report to June 2020 was just a blip.

Brick X may Dilute Investors Holdings in Property Price Falls

If a property value drops significantly, so that is worth less than the valuation of 10,000 bricks, Brick X state they may release extra bricks to fund the shortfall, effectively devaluing current investors holdings.

Rental Returns

Net rental returns have historically been around 2% or less. As regular readers will understand, I am a fan of focusing on capital growth more than yield. I prefer gains to be in capital growth, to compound tax free for years before I will need retirement income.

I do note some higher rental yield properties on the platform now, offering 5-6% net rental yield. They appear completely different types of property than the initial investments, suggesting a change in investing philosophy by Brick X.

Historic returns plus expected net rental returns advertised are 12-13%, which seem almost too good to be true. It will be interesting to check in again in another 3 years to find out what the actual performance was.

An Example of a Property I have been Following.

Brick X purchased this cute 2 bed in Ballarat in August 2018. I was almost tempted to invest in this property 3 years ago.

Ballarat has been an area of interest for property investors, and I liked the look of the property when I first looked (not an amazing investment thesis!).

The purchase Price 3 years ago was $401,000.

Brick X incurred $44,021 in acquisition costs, including stamp duty, solicitors and bank fees

A cash reserve of $5,279 was set in case of unexpected expenses.

The property was conservatively leveraged with a loan to value ratio of 30%. A 5-year interest-only loan was fixed at 3.79%, after which the loan will revert to principal and interest repayments.

Each brick was priced initially at $33.

An independent valuation in June 2021, almost 3 years after purchase came in at $450,000. That’s around a 12.2% return in 2 years and 10 months of ownership.

But the current brick value is $35.69, representing only an 8.15% total return over 2 years and 10 months. Not terrible, but certainly nowhere near Brick X’s advertised historic annual capital growth of 8.17%.

Net rental income is just 1.23% annualised or around 4 cents per month currently.

Perhaps it seems a little unfair to analyse this single property based on just under three years valuations. But this was the property I would have invested in 3 years ago if I had decided to go for it.

A three year period also represents a fairly likely scenario for a first time home buyer investing their savings intended for a home deposit.


The lack of liquidity seems to be the major complaint of Brick X investors. You cannot simply sell your bricks back to the platform for their current valuation. Most of the time, this seems to happen in around 3 days currently.

To sell your bricks, you need a buyer. And you need to agree on price. This means sellers may offer less than the official brick valuation.

In the event that Brick X had some major negative publicity, fewer investors may wish to invest in Brick X. If Brick X were in serious (and public) financial difficulty, investors may find their bricks unsellable. They would then be waiting for the property to be sold in order to recoup their investments, similar to direct property investment.


One positive of investing in bricks rather than direct property investment is the ability to diversify a relatively small amount of money among several properties.

Direct property investment is an extremely “lumpy” investment, resulting in a large amount of investors net worth being tied up in a single asset. This makes asset selection (and in my opinion professional assistance) paramount. But even professional help does not guarantee results.

By spreading your investment over several properties you can hedge your bets, and spread the risk. If one property ends up vacant for six months, all is not lost as your other properties continue to perform. However, having your investment spread across a handful of properties with BrickX, all exposed to the business risk of Brick X is not nearly as diversified as purchasing shares in a real estate investment trust, or in broad-based index ETFs.

My Brick X Conclusions

Fractional property investing is a nice idea. Unfortunately, the fees and liquidity risk make Brick X less appealing, and certainly more complicated than other options.

I was curious and tempted to invest in Brick X in 2018 whilst saving a deposit for our first investment property. It seemed to be taking forever (it always does!).

However, I couldn’t get over my doubts concerning liquidity and risk.

Instead, I worked a lot of locum shifts and eventually pulled that deposit together in my mortgage offset account.

You never really know how an investment will turn out until you have been invested for a few years, but I don’t feel like I missed out on much with Brick X.

Those wanting to save for a property deposit should consider the First home super saver scheme, as potential tax savings can augment your deposit savings. Consider the pros and cons and alternatives on my article on saving that first home deposit.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

How to Choose a Property Manager

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Have you, or are you in the process of purchasing an investment property? You can breathe a sigh of relief after finally completing the kilograms of mortgage paperwork and exchanged!

But you still have a pending deadline. You need to find a great tenant and decide whether you will manage the property yourself, or engage a professional property manager.

Why Employ a Property Manager?

Managing the property yourself can save a few dollars in the short term, but without experience, screening of tenants is less likely to be thorough. If you have invested in property far from your hometown, managing maintenance yourself is impractical.

Many have plenty on their plate and wish to make their property investments as passive and stress-free as possible. And that is where a great property manager comes in.

I have recently completed the purchase of our 2nd investment property. A property manager local to each property professionally manages the rentals. There was never any debate that I wouldn’t employ a property manager, but I could find very little information on how to choose one.

Now I have selected two property managers and worked with both for 4 months or more. I’m starting to pick up the contrast between the two, and what to look for in a property manager in the future. I thought I might share my insights with those of you investing in property.

What Does a Property Manager Do?

A property manager in Australia must have a certificate IV qualification and may have other real estate qualifications. They (often as part of a team) provide property management for multiple properties. Included in a property manager’s role are:

Advertising for a tenant.

Property managers are experienced in finding tenants for properties. They will have a streamlined process for photographing, providing a written advertisement and setting up an advert on and other websites.

Tenant Screening

A property manager will provide potential tenants with an application process. Tenants need to be screened, previous references checked and tenant database searches to check for prior blacklists, verify tenant identity. Tenant screening is the most critical first step in avoiding a nightmare tenant.

Organising a Written Contract

Your property manager should have a legally checked tenant agreement, and work out any negotiations between tenant and landlord.

Rent Collection, Payment of Bills & Income Statement

The property manager will provide the tenant with a convenient way to pay their rent, and prompt the tenant if payment is late.

You can request your property manager to pay all the bills for the property. Organise these to be sent directly to the property manager. Water, rates and maintenance bills will be paid out of rent before you receive it.

A big advantage of this is having everything documented with the management company. At the end of the tax year, your rental property manager will provide an income statement documenting all ingoings and expenditures ready for your accountant. No lost paperwork and one less thing to do for you.

Your property manager will also collect the rental deposit and document appropriately.


Your property manager will be responsible for keeping the home in a safe and comfortable condition. Should the tenant raise an issue, it is your manager that will initially field the call. They will manage any issues they can sort without your intervention (and that really depends on your agreement), or request approval from the landlord to carry out repairs.

In the middle of the COVID lockdown, the stove in our 1st investment property broke. With supply chains interrupted by COVID, it was my poor manager who spent days searching for a replacement, not me!

I have found the property manager’s access to reasonably priced and reliable tradespeople invaluable so far. Little maintenance issues come up regularly. The property manager emails me a quote, I click to approve and it gets organised.

I can’t even get a tradesperson out to my own home to fix issues a lot of the time!

I also find I’m being charged far more reasonable rates for repairs in Brisbane and Geelong than in my own regional town.

It is also a property manager’s responsibility to understand the rental property laws and ensure the property is maintained in accordance with them. These, of course, vary with each state and include fire alarm checking, gas and electricity safety checks. If you plan to own real estate in multiple states, keeping up to date with these rules may be something you wish to outsource to a property manager.

Organising and Completing Property Inspections

Property inspections are important for picking up maintenance issues before they get too bad. A property manager will contact tenants to organise an inspection, perform this and send the landlord a detailed report.

Lease Renewals

A property manager will contact the tenants before their lease expires, and confirm whether they plan to stay. They can make a recommendation on any change in rent in line with market conditions and negotiate between tenant and landlord before signing a new lease.

If the tenant moves out, the property manager will complete a final inspection and handle refund of the deposit, or repairs as appropriate.

Tribunals & Evictions

If the worst should happen, your property manager will guide you through the process and help to keep you at an arms-length from the stress.

During COVID property managers helped landlords consider applications for rental relief.

Short-term Rentals

Airbnb type short term rentals need far more intensive property management due to frequent turnover of guests, cleaning and higher maintenance requirements.

How Much Does Professional Property Management Cost?

Property management fees vary by location, structure and level of service. There is a large range between 5 and 12% of the gross rental payment.

My property management is 8.8% of the gross rent in Brisbane, 6.8% in Geelong. If you are going to outsource such an important job, it’s worth paying a reasonable amount to secure a great manager. There is considerable variation in fees between cities.

Property management fees are tax-deductible, along with the other maintenance costs, and interest paid on an investment property.

The fee structure varies. As well as a direct fee, monthly admin fees, re-letting fees, end of year statement and inspection fees may apply. It’s really a case of comparing each potential manager’s fees in detail.

Property Manager A vs Property Manager B

It’s hard to know what you’re going to get with a property manager. I had conversations with both of my property management companies before signing up. My properties were immediately handed over to a property manager working under the principal manager.

Within 4 months of signing my new property manager (for the second investment property), the difference between the two managers is obvious. Property manager A emails me inspections on schedule and occasional maintenance requests. She called me during the stove problem and kept me in the loop whilst she solved all the problems.

Property manager B’s company was selling the property I was buying. It made sense to engage the same real estate business so that it would be in their interest to allow an open inspection before exchange to secure a tenant faster.

Problems surfaced pretty quickly with this second manager. The big issue from the very start has been communication. I had to chase this manager to find out whether they had any potential tenants days before the exchange. Safety reports were performed, found issues that weren’t communicated to me until I chased the manager.

Maintenance and cleaning was supposed to be performed and then turn up later as having not been done (or done properly). COVID is not helping with inspections currently being performed virtually in both properties. But it is obvious that manager A is far more on top of things. Manager B, I have to proactively check-in and prompt about routine matters.

How to Choose a Property Manager

I’m not sure this would have been identifiable before the property manager was actually employed. I think the most valuable factor in selecting a property manager is a glowing personal recommendation from another investor.

If you don’t have a personal recommendation, it’s probably best to interview a few potential managers. Communication, organisation, experience and access to reliable and reasonably priced tradespersons are the most important. I would suggest asking your actual potential property manager give you a call. Find multiple sources of online reviews, if possible and read in detail.

Questions to ask include

  • How many properties does your agency, and each manager control? Do you have a dedicated property management department?
  • What are the qualifications and experience of my property manager? Can they give me a call for a chat?
  • Do you have access to a reliable and reasonably priced pool of tradespeople?
  • If my manager is sick is there someone else who will stand in?
  • How many of your current tennants are in rent arrears?
  • How often do you schedule open homes? Do you perform these yourselves?
  • What are all the fees?
  • How often do you organise inspections? Do you perform these yourselves? How much detail is provided to the landlord?
  • How are potential tenants screened?
  • Can I speak to a current landlord client

What to Expect from your Property Manager

  • Communication without having to be chased for information
  • Scheduling inspections and informing you
  • Cleaning and maintenance to be organised at a reasonable cost and be performed correctly (or promptly corrected without additional expense)
  • All legal requirements to be completed, and this communicated to you

How to manage your property manager

  • Make a note of when inspections, and leases are due. Set a reminder on your calender or schedule an email to yourself to check whether the inspection or lease renewal has been organised.
  • If your property manager hasn’t already been in touch by the inspection due date or within 3 weeks of lease renewal it’s time to reach out and check in. With COVID-19 difficulties, a little more flexibility is required, but needing to prompt your property manager to organise an inspection is not a good sign.
  • When maintenance or compliance work is requested, make sure you recieve confirmation it has been completed. Again, reach out to confirm the maintenance was completed successfully.

If your not happy with your current property manager, it is reasonably easy to change over. Check your property management contract for the notice period, and find an alternative property manager to take over. We will find a replacement property manager B towards the end of the lease, I’ll probably check if my buyer’s agent can recommend someone.

Are you a property investor already? What was your experience with property management?

Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Buying Property Investment Number 2

*This post may contain affiliate links. This mean if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Thinking about buying property but worried about getting it wrong? I wish I’d had a role model that would let me learn from their investment decisions and planning. Being that person for younger colleagues is really what has inspired me to start this blog.

A professional financial advisor is ideal to work out a financial strategy, the big issue is finding a trustworthy one.

For those that are looking to integrate buying property for investment along with superannuation, it gets even trickier. Most “financial advisors” cannot advise on property, because they lack the qualifications, or they make no commissions from advising property.

Finance professionals blame an increasing level of compliance tasks, created to protect the consumer. This consumer protection has made financial advise unaffordable to ordinary Australian families, and difficult to justify even for higher earners. That $40,000-$50,000 for the first year of investing advice would make a great investing starter fund!

My experiences so far investing in property with Empower Wealth have interested some readers. I have promised to update regularly.

Buying Property: The Decision to Buy A Second Investment Property

My very post on this site documented my thinking around whether I should invest in property, or keep things simple by sticking to super and shares. Two to Fire is another Aussie Fire blogger who was following my property posts, considering property investing themselves. They decided against it and document their rationale and decision here.

After 3 years of research, I came to the conclusion I needed professional help. We engaged Empower Wealth to assist with property selection for our first investment property. Check out my review of Empower Wealth.

We purchased our first investment in Brisbane 2019. The property value has grown in the first year and been rented without vacancy for the first year. I have taken extended leave from work for babies and travel. I need to do some catching up to meet my goal of being work optional by age 55. My calculations tell me I needed a second property growing at around 6% as well as additional super/share investments.

Empower wealth do have a property advisory service, where they can design a property portfolio to meet your goals. I was literally scraping together every dollar I could find to find the deposit. Two to three thousand extra on a plan seemed too much.

I also really wanted an integrated, holistic plan looking at property, shares and super together. Empower wealth are property centred, and I’d rather hedge my bets with a strong super/shares portfolio as well.

Empower wealth

There was no doubt in my mind that I wanted to utilise the services of Empower Wealth’s buyer’s agent. And I really wanted the same buyer’s agent as the first time around. Empower Wealth offer a significant discount on the $15,000 Empower wealth buyers agent fee for using their mortgage broker. The first time around, these two teams worked really well in synch and made the whole experience very smooth.

In September 2020, I bit the bullet and emailed my favourite buyers agent and mortgage broker. Mid pandemic, Empower wealth, similar to most of us, were scrambling to get used to a new way of working. This time around things have a lot slower, and a little frustrating on the mortgage broking side.

There are likely several reasons for this. One, the pandemic, and working from home, adds new challenges to a previously smoothly operating team. Two, my lending was more complex given I now have an investment property (and a principal place of residence mortgage). Three, my mortgage broker left the business partway through, resulting in an incomplete handover. Four, I suspect this business is getting more and more clients due to the incredible popularity of the Property couch podcast, and word of mouth (or blog) recommendations. There may be growing pains from bringing on more staff and losing some of the efficiency of a small business.

Borrowing and Property Purchase

Once you have a basic financial plan and decided to invest in property, the next step is to work out your borrowing capacity. A chat with a mortgage broker will give you an idea pretty quickly whether your plans are realistic.

Borrowing gets more complex as you add properties, which adds time. Banks also change their lending policies without notice, and I was caught out by this. Commonwealth decided they were not going to waive Lender’s Mortgage Insurance (LMI). I needed a high LVR to retain a good cash cushion but did not want to pay LMI. LMI is insurance you pay if you want an LVR > 80%. It protects the bank’s investment and provides no value to the buyer. Many borrowers will waive the LVR for borrowers from very low default risk occupations.

Getting loan approval was quite a painful process, despite being a strong candidate on paper. After the Commsec debacle, we had to restart the whole process again with ANZ. ANZ are particularly difficult to deal with in my experience, requesting an insane amount of paperwork repetitively. I was pretty frustrated to miss out on buying pre-February 2020 when there would have been minimal buying competition.

Banks are rumoured to be loosening lending criteria, so hopefully, this process will become slightly less painful.

Buying Property Defence: Life Insurance

Boring! But as the main income earner in our household, taking on investment debt meant reviewing my insurances. I reviewed my life insurance and income protection, and topped up income protection (whilst preserving my “agreed value” status”). If the worst were to happen to me, my partner could pay off the mortgages with some to spare. My family could stay in our home and the kids in school.

Using a Buyer’s agent to Purchase Property

I was really thrilled to purchase with my favourite buyer’s agent again. And boy did I need her expertise. By the time I was ready to purchase in February, the market had already turned. Each property attracted multiple bidders. Few homes were being put up for sale. As you have all heard, prices started escalating FAST.

My buyer’s agent knew how to assess vendor motivating factors. She also understood around what price had a chance of securing the property without paying more than I needed to.

We missed out on the 1st property to buyers that were willing to buy without buildings and pest inspections. This was a risk I was unwilling to take. The next property attracted 15 offers, but we bought the home after a tense and lengthy negotiation.

Buying Property for Investment – the Exchange

Things went far more smoothly after the contract was signed. Empower Wealth’s instructions were clearly communicated, and the property was exchanged with minimal hassle.

The search for a property, lending, bidding, actual exchange and tenant selection is stressful (at least for me). There were frequent requests for one more piece of paper or bank statement and yet another trip to the bank. Uncertainty about finding a tenant and worry over selecting the correct one still feels uncomfortable.

As you can read in my article asking do I regret investing in property, this settles down once the tenant is in, and inevitable early tenancy repairs dealt with.

With this second property, there were new Victorian tenancy act regulations to follow, and some needed repairs identified by the tenants when they moved in.

Renting the New Property

It was in my interest to use the selling agent to manage the property as a rental after the sale. It meant they were motivated to ask the vendor to allow a rental viewing before exchange. When I hired my first rental manager at the Brisbane property, I didn’t really know what to expect. Harcourt’s solutions send me the rent each fortnight, keep me informed by email of any changes, and seem to have access to reasonably priced, reliable tradespeople. I’ve been happy with their management, but had nothing to compare it with.

I should not have taken for granted reliable communication. The new rental agents went completely silent after being hired. I had to prompt them several times to get information on the search for a tenant.

They organised the safety checks required by the new Victorian tenancy act but didn’t actually feedback that they had identified work needed completing until I chased them. I am clearly going to have to be a pro-active manager of the property manager until I find someone more dependable when my contract ends. I’ve set myself a monthly reminder to check if there are any issues with the property.

Where to From Here?

My excel document tells me I can stop here, investing extra in the stock market before pivoting to pay down debt once the investment properties become positively geared. I am on my journey to financial freedom.

Even with a professional plan, there is no guarantee the anticipated returns will actually occur. I do feel an urge to invest a little more than in my plan to provide a margin of safety.

We have not completely dismissed the idea of a 3rd investment property, but am spending the next year or two filling my offset, investing with Pearler as well as putting extra into superannuation. Given my fairly short investing horizon, I need to avoid being equity rich/ cash poor. So I will likely buy a neutrally geared property if we purchase again. I am learning about commercial property investments but am currently not comfortable with the risks.

Are you considering investing in property or have already taken the plunge? What are you stuck on at the moment? Subscribe to make sure you don’t miss out on the updates when we get our 1st valuation on this new property investment and an updated value on our 1st.

Aussie Doc Freedom is not a financial adviser and does need offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Victorian Residential Tenancy Act CHANGES 2021

This post may contain affiliate links. This mean if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Are you, or are you considering becoming a Victorian Landlord? You have probably heard a little about the recent legal changes to the Victorian Residential Tenancy Act that were finalised in March 2021. You have also probably heard some drama about increased costs to meet the new laws and more power to the tenants. Some have even declared that property investing is no longer a viable option in Victoria! More than 130 reforms have been introduced, making getting up to date a bit overwhelming.

I own two investment properties, recently buying property for investment in Victoria. In this article, I will summarise the changes to the law, and we’ll check out how fair the new laws are.

The changes to the Victorian residential tenancy act have been created in order to make renting a fairer and safer proposition for tenants. As much as there seems to be a general sense of resentment towards landlords, most of us have lived in rental properties.

Around 25% of Victorian residents rent. I have appreciated the availability of fairly priced, good condition properties I have rented. I have also resented the excessive rules and found it difficult to understand why I couldn’t hang a picture on the wall.

Now I am on the other side of the fence, as landlord I want to provide safe, good condition properties at a fair price to my tenants. Of course, I wouldn’t have become a landlord if I didn’t want the investment to pay returns. Residential investing has to produce a profit, or else why would investors accept the considerable hassle and risk of owning a rental property.

Many of the changes are what any reasonable person would expect (eg a functioning toilet!) Some, however provide opportunities for abuse. I’ve highlighted the changes I consider potentially concerning.

Victorian Residential Tenancy Act – Tenant Selection

It is unlawful to discriminate against renters based on their personal attributes such as age, race, religion or disability. Pets cannot be unreasonably refused, but tenants still have to ask permission. Rental providers can only apply to VCAT to refuse a pet.

Landlords can’t request “inappropriate information” in a rental application – for example the renters bond history. I’m not sure I understand why this is inappropriate.

Rental providers cannot encourage someone to enter a rental agreement by misleading or deceptive conduct or statements.

Advertising for Rent

Your investment property can no longer be advertised with a rental range. It has to be advertised for a fixed rent. Landlords and agents cannot ask for or invite rental bids above the asking price.

Unsolicited bids of higher rents by the potential tenant in order to secure a property as still allowed.

Signing a Tenancy Agreement

Certain information now has to be disclosed to the potential tenant when a tenancy agreement is signed:

  • If the property is to be sold
  • If the rental provider is not the owner of the property, and the rights they have to rent it out (subletting)
  • Mortgage default and the home is going to repossessed
  • The property is supplied electricity from an embedded electricity network (ie a block of units are all contracted to a single electricity provider, which may not be the cheapest).
  • There has been a homicide in the property or common ground within the last 5 years
  • The rental property complies with all the legal minimum standard
  • If there are any outstanding recommendations from the gas and electricity safety check
  • The home is registered under the heritage act 2017
  • The property has been used for trafficking or cultivation of drugs of dependency over the last 5 years
  • The home has friable or non-friable asbestos identified
  • The property is affected by a building or planning applications
  • The home or common property is known to have building defects or safety concerns
  • There is a current dispute between owners, occupants or the manager that affects the property (Owners corporation act 2006)

I can’t even imagine how awful it would be to have a homicide in or around your property. Or then how difficult it would be to rent when you have to disclose this to potential tenants. This is an unlikely nightmare situation I hope none of us have to tackle!


Landlords cannot ask for more than 1 months rent as a bond, or required payment more than 1 month in advance if the property rents for $900 / week or less.

A condition report must be completed at the start and end of the lease.

I can imagine the bond can be grossly inadequate if you get a nightmare tenant who destroys a property. 1 months rent as bond has been fairly standard before these changes though, so I don’t think this changes much. Rental providers must have to rely on their landlord insurance in these situations.

Safety Checks

Landlords need to perform gas and electricity safety checks every 2 years for all new rental agreements after 29th March 2021.

Fair enough. Will increase costs to landlords and tenants, but if it improves safety no-one can really argue with that.

Victorian Residential Tenancy Act Changes – Minimum Standards of Rental Property

These have been improved.

Door locks

  • External entry doors should be fitted with a deadlock if possible
  • If this is not possible, the external doors must be openable with a key from the outside, and lockable from the inside with or without a key.
  • External doors opening onto a common area (unit corridor) are excluded from this rule

A lockable door seems like a pretty reasonable demand!


Ventilation of the property needs to be compliant with the ventilation standards of the building code of Australia

Vermin proof bins

  • Council bins must be provided


A rented property must contain a functioning toilet. It must be connected to an appropriate waste system and in a room or structure intended to be used as a toilet area (the mind boggles!).

Bathroom facilities

Must contain

  • Hot and cold water
  • A wash basin, shower/bath
  • Minimum 3 star rated shower heads

OK. So it has to be a bathroom. You might need to replace a shower head.

Kitchen facilities

Must have

  • a dedicated food preparation area
  • A sink with hot and cold water
  • A stove top in good working order with at least 2 burners

Again, expectations are pretty basic.

Laundry facilities

If provided must have a reasonable supply of hot and cold water

Structural soundness

Rented property to be of structural soundness and weather proof

Again, only in line with very basic expectations of a property you would accept living in yourself.

Mould and dampness

Each room must be free of mould and damp caused by the building structure

Can imagine this might cause dramas for those with old properties. But no-one wants to get sick. It’s got to get sorted.

Electrical safety

Must have electrical safety switches installed

Seems like a basic safety thing. Don’t want any electrocuted tenants!

Window coverings

All windows in the bedrooms and living area must have coverings that can block light and provide privacy

I don’t have window coverings in my living room, there is no privacy concern. It will help temperature control though. An additional expense, but a one off cost at least.


  • External windows that can be opened must remain open and closable
  • Where possible, locks are to be provided for all windows. If the window is not capable of having a lock, it must have a latch to secure against external entry.

Again, an additional one off cost and will improve security. Depending on where your property is located depends on whether that extra security is required.


Rooms and corridors should have access to natural or artificial light

Were you just going to have your tenants use torches?!


  • A fixed heater is required in the main living area of all homes
  • If a fixed heater in the main living area has not been installed, an energy-efficient heater (2 star minimum) must be installed
  • From 29 March 2023, the heater in the main living area must be an energy-efficient fixed heater (minimum 2 star rated)
  • If the rental property is in an apartment block and installing an energy efficient heater is not feasible the energy efficiency requirement does not apply, but a fixed heater is still required. 

A one off additional cost, although may be a significant one. I’m not sure why Victorian properties don’t seem to be that well set up with heating, it gets so cold! Get it sorted and have happy warm tenants who hopefully stay longer.

Damage & Urgent Repairs

Renters must report damage as soon as possible.

If they have made a reasonable attempt to contact the rental provider or agent and the urgent repair has not been fixed immediately, renters can now pay up to $2500 for an urgent repair.

If a renter paid for urgent repairs up to $2500 because the rental provider did not respond, the rental provider must pay the renter back within seven days. Previously rental providers had 14 days.

The list of urgent repairs now includes:

  • Failure to comply with minimum standards
  • a failure or breakdown of cooling appliances or services
  • Failure or breakdown of any safety related devices
  • any fault or damage that makes the property unsafe or insecure.

Open to abuse unfortunately. Whilst you have reasonable tenants and reasonable landlords, this isn’t going to be a problem. In fact, you wouldn’t need it, but obviously some landlords have not been fixing urgent safety / comfort issues promptly so here we are. Tenant screening and treating them well will hopefully encourage them to reciprocate your reasonable human approach to issues.


Rental providers need to provide a free set of keys to renters. Extra sets should be provided at reasonable costs.

They kind of need to get in. Ripping tenants off over an extra set of keys is not cool.


Tenants can make simple modifications without seeking permission, including:

  • Picture hooks or screws for wall mounts, shelves or brackets on surfaces other than brick walls, 
  • Wall anchoring devices on surfaces other than brick walls to secure items of furniture, 
  • LED light globes which do not require new light fittings, 
  • Low flow shower heads if the original shower head is kept, 
  • Blind or cord anchors, 
  • Hardware mounted child safety gates on walls other than brick walls
  • Security lights, alarm systems or security cameras that do not impact on the privacy of neighbours, can easily be removed are not hardwired 
  • Non-permanent window film for insulation, reduced heat transfer or privacy,
  • A wireless doorbell,  
  • Replacement curtains if the original curtains are retained by the renter,  
  • Adhesive child safety locks on drawers and doors,  
  • Pressure mounted child safety gates,  
  • A letterbox lock.

In contrast, painting requires the landlords permission, but should not be unreasonably refused.

Properties under the heritage act will need permits for many modifications, and renters need to adhere to these rules.

Before the end of the rental agreement, the renter must reverse the modifications (fair wear or tear excepted) or pay the rental provider for the cost of reversing them, unless both parties have agreed otherwise.  

Most of these seem very reasonable, and may encourage your tenant to stay longer. If renting didn’t feel so much like living in someone else’s house, it wouldn’t be so unappealing.

Paying Rent

Once you have your tenant in, you can only increase rent annually.

If your tenant is behind on the rent, but pays back within 14 days, any notice to vacate is cancelled. This can occur up to four times in a year.

This could be annoying. But I guess if they are in financial dire straits, and they are actually paying the rent it’s certainly better than not paying the rent. I’m not sure why you would abuse being able to get away with paying rent late repeatedly, if you still have to pay it. I’m sure there will be a few who just want to annoy the landlord!

Domestic and Family Violence

If a renter is experiencing family violence they can change or terminate the rental agreement and not be held liable for damages in some circumstances. These requires an application to VCAT, who will consider the tenant’s claim within 3 days.

We all know domestic and family violence is a huge problem. Who wouldn’t want to help someone escape from this situation? Involvement of VCAT reduces the risk of non-genuine situations.


You can no longer throw someone out of their rental accommodation without a reason. Say what?! Why would anyone do that? Landlords now have to give a “Valid reason” including sale, change of use or if the owner is moving back in.

A renter can be evicted if they are violent towards the landlord, agent or neighbour

Ending the Tenancy

Renters can request their bond be returned without the landlords agreement.

This goes through an independent body to make sure it is fair and not a greedy landlord trying to maximise profits unfairly. I’ve never been through this process, but hope they are fair to both sides.

Renters can end the tenancy if the property isn’t structurally sound.

A professional clean can only be a term of the lease if it is required to return to the property to the condition it was (apart from fair wear and tear) at the start of the lease.

Landlords need to give the tenants 14 days to collect left behind at the end of a tenancy. The items need to be kept safe in the meantime

Not sure about this. Beyond a significant emergency, I’m not sure why tenants would leave belongings or why the rental provider should clear up after them, and store it! Reasonable if the tenant has left in an emergency, domestic violence, which I assume is why this law was created. But I don’t think it’s uncommon for tenants to leave houses full of “stuff” rather than getting rid of it.

You can find the full information on changes to the Victorian residential tenancy act here.

Rents are Likely to Increase

No one can argue with increased safety precautions, but they do unfortunately increase costs. The gas and electricity safety checks, installation of window locks and new heaters will produce extra costs that will eventually be passed on to tenants.

Risk and Potential for Abuse from the Victorian Residential Tenancy Act

Some of the changes do increase risk for rental providers. You can no longer choose to have pet free tenants in your property. Rental providers now have to apply to VCAT to stop a tenant bringing a pet to a rental property. Pets obviously cause more wear and tear to the properties, increasing costs. Some owners are irresponsible pet owners. It is wonderful for responsible pet owners that rent that it will be a lot easier to find a property. But the extra costs are again likely to increase rent.

The urgent repair law applies to heating and cooling equipment. Fair enough if the air conditioning is broken in the middle of summer. Hopefully common sense will prevail and tenants will realise that if the air con breaks in the middle of the winter that’s not urgent and vice versa. Landlords need to be aware that they need this cash available at short notice.

Victorian Residential Tenancy Act – Conclusion

Most of the new Victorian residential tenancy act laws are what any reasonable tenant and landlord would expect. There are extra safety precautions that will increase costs (and eventually rents), and hopefully safety. A nightmare tenant can abuse the grey areas, making tenant selection and screening even more critical since the changes. Your property manager needs to be on top of helping you ensure your property is up to date with the latest requirements.

Aussie Doc Freedom is not a financial adviser and does need offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

How To Avoid Getting Carried Away With Property FOMO

Would you like to purchase the property of your dreams, without getting carried away with FOMO, paying too much or buying the wrong home? Learn factors contributing to FOMO, and how to protect yourself.

A National Property Boom

Unless you have been living under a rock for the past 2 months, you will have noticed the “Property boom” constantly being announced in the media. Unusually, prices have been going up almost everywhere in Australia, rather than in 1-3 cities as in recent booms.

A year ago, there was terrible doom and gloom, with house prices about to take a dramatic tumble, wiping out household wealth nationwide.

A core logic article days ago confirmed the final drop in Sydney’s home value index of 3% before the turn around.

Now the media are telling us that house prices are booming, with national prices tipped to increase by 9% in 2021. Months ago, CBA said prices could fall by 30%. These predictions, in my opinion, should be taken with a spoon bucket load of salt. [Don’t actually consume that amount of salt, we all eat too much].

Auction clearance rates (ACR) indicates the percentage of properties auctioned that were successfully sold. It is a commonly used property data point used to indicate the condition of the property market.

Clearance rates of over 80% indicate a high demand / hot market. It means you are more likely to miss out to other buyers when trying to purchase your property.

Every state / territory (no data for Tasmania) had an ACF of 80% or more this week, with ACT at 97%.

Data from

Reasons for the Property Boom

As we are now aware, the COVID-19 shutdowns have disproportionally affected young people, especially those working in hospitality.

For many other households, COVID-19 has had an unexpected side effect – increased savings. Essential services workers may have found themselves increasingly asked to work more. During shutdowns there was very little to spend money on, as we weren’t going out to eat, drink and socialise.

Beyond the lockdowns, booking a flight is still a dicey prospect, with the risk of borders shutting. If Australian’s have holidayed in the last 12 months, it has been domestic, far closer to home than usual and consequently cheaper.

Those struggling to save for a home deposit have a silver lining from this terrible pandemic – a boost to their savings. Many are now trying to get into the market. A similar surge is being seen in 1st time stock market investors.

Add to that the government incentives of the first home owners grants, first home loan deposit schemes and home builder grants and stamp duty discounts, home buyers are scrambling to take advantage of the assistance.

New home loan commitments are at 10 year highs.

It’s a Partly Artificial Boom

What tends to happen when government incentives increase, is that benefits are quickly swallowed up by a matching increase in prices. House and land packages in my area, I noticed way back when I was looking to buy a first home, immediately increased prices to completely consume an increase in first home owners grant.

All these incentives, grants and discounts are being factored in by buyers, who can now afford a little more than they could 3 months ago. They can bid that bid higher, as can you.

Government incentives, pent up demand from would-be buyers last year who delayed purchasing, and record low interest rates should all increase prices.

Potential sellers have also been sitting out, waiting for the doom and gloom to pass. A low number of properties being listed for sale has contributed to competition and consequent price rises.

Once these sellers are encouraged enough by the property boom media coverage, more properties will come to market. With more choice, competition will be less fierce and price rises may not continue as steeply as predicted.

Property FOMO in a Boom

The effect is a lot of FOMO – Fear of missing out, fuelled by sky high auction clearance rate, prices and media hype.

Wannabe property purchasers are frustrated by bidding for and missing out on property after property. First home buyers, especially, are itching to finally get into their own home.

Media reports of purchasers buying properties in lifestyle locations unseen during lockdown suggests some pretty impulsive decision making based on a short-term situation.

Purchasers are putting offers in without buildings and pest inspections to try and gain an upper hand in the bidding war. A buildings and pest inspection does not eliminate the risk of investing, but reduces it, and in my opinion is foolish to go without.

Risks of getting carried away with FOMO in a hot property market include:

  • Paying a silly price > 110% of true value, only to find property prices cool once more properties are listed for sale
  • Buying a property you later regret, just desperate to buy, longer term goals get forgotten.
  • Buying without a building and pest report and then finding a MAJOR structural issue that will cost $10,000+ to remedy
  • Overstretching financially so mortgage payments cause financial stress

How to Resist Property FOMO

1. Work out your Goals and Priorities

What would you like to buy? Where is the property? A house or apartment? How many bedrooms? What features (e.g. off street parking). Start with the ideal purchase, although unfortunately pretty much no-one can afford their ideal home.

Then work out your priorities. Is this your forever home? Or do you need it to grow in value in order to trade up in a few times? Are you rentvesting, or utilizing other advanced strategies. In the case of just getting on the ladder, this should be a decision heavily influenced by growth potential and be looked at as mostly a financial decision.

Are you happy to move out a suburb or two in order to get the extra bedroom? Buy a “do-er upper” that you can live in and renovate as you save more cash?

Write down your goals and priorities to refer back to prior to offering on a property.

If your goals turn out to be unrealistic, you will need to revisit. But make sure you do this whilst consciously reprioritizing, not just buying any property you can. Property purchasing is an expensive business. Holding a property for a short period of time is often worse financially than renting.

2. Stop Comparing

“Comparison is the thief of joy”

Theodore Roosevelt

It is completely irrelevant what your friend, sister or colleague has just bought, and how it compares to your purchase. Mind your own business! Stop worrying about what everybody else is doing and focus on your own goals and priorities

3. Don’t be seduced by government grants

Again, these are largely factored into prices. Don’t buy or build because there is an incentive. Saving a few thousand dollars now can end up losing you hundreds of thousands dollars over the long-term.

Any incentives should be cherries on the cake if they are available, and certainly not influence your decision making. The government is offering these to stimulate the economy as a whole, not because it is in your best interest.

3.  Know How Much the Property is Worth

This is getting hard, in a fast moving market. But when you have found a property you like, you need to work out how much you will pay for it.

Automated valuation tools you can find online are notoriously inaccurate at the best of times, and next to useless in a hot market.

Price guides and for sale prices can be completely unrelated to final sale prices as buyers are bidding well over asking price / reserve.

The “sold” section of is a good place to start. You really need a number of comparable properties that have sold in recent weeks to get an idea. Land size and number of bedrooms are easy data to use in comparisons. But there are other factors that are more tricky, such as position on street, natural light and finish quality.

A buyers agent can offer value here. In a slower market, a buyers agent offers access to “off market deals” before they are even advertised for sale. Real estate agents are having no difficulty selling property right now, so have no incentive to offer buyers agents off market deals. The more competition they create, the better for the agents final commission.

But a buyers agent should have plenty of experience in the area you are buying, and help guide you on limiting offers to reasonable prices. They are also expert negotiators, often able to identify the sellers priorities, and making you as attractive purchaser as possible.

4. Make Yourself an Attractive Buyer

There is no point in offering on property at the moment (arguably ever) without a loan pre-approval in place. Find your lender and get this organised 1st. Get pre-approval for more than you think you will buy for, to allow some flexibility.

There are factors other than price that will influence a seller’s decision on who to seel to, particularly in a non-auction situation. A settlement period that is short (if they are in a hurry) or long (if they haven’t found their new home yet) may be preferred.

A “No chain” buyer, ie first home buyer, who isn’t reliant on their own property settling as planned will often be more attractive.

An option to rent the home back to the seller for a few months while they continue looking for their forever home may be appealing.

Having the buildings and pest inspection scheduled immediately, so the offer can go unconditional quickly may appeal to the buyer.

5. Maintain Perspective

No matter if you have lost out on 1, 2, or 3 properties, this property is not the last chance. The market may cool better properties may come onto the market. Yes, property prices may continue to rise, but not by a massive amount each month. There is no point in buying the wrong property. Take your time if you need to and get it right.

6. Be Decisive

Once you have found a property that meets your goals and priorities, you have worked out a value and you have a pre-approval, it’s time to make an offer. Be decisive, there is no time for dilly dallying.

7. Don’t Get into Financial Stress

Ensure you can really afford repayments on the amount you are going to offer on a home. I’m not just talking about the bank approving you. Buyers need to take responsibility for loan commitments.

There are rules of thumb such as not dedicating more than 30% of household income to mortgage repayments. A far better technique is to form an accurate budget or track spending and work out how much you can borrow based on the repayment you can afford.

Remember to calculate mortgage payments presuming interest rates are at least 2% higher. If using a fixed rate mortgage, will you be able to afford repayments if interest rates jump once your fixed rate ends?

Don’t spend all your savings, allow some to be kept as a buffer in case maintenance issues arise. What if the water heater dies a week after moving in?

Good luck with your property search. Keep a cool head and stick to these rules to pay reasonable prices and buying property successfully in a hot market. Read about the Victorian residential tenancy act changes.

Are you trying to buy a property at the moment? Comment below to describe your experiences, and share any tips you have picked up.

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Stamp Duty Changes: What do they Mean for You?

The high fees involved are the biggest impediment to property purchases in Australia. Recent stamp duty changes are sure to interest those of us purchasing property in Victoria or NSW over the next few months.

Stamp duty varies from state to state, but with rates of up to 6% of purchase price, has a massive impact on property affordability.

Stamp duty changes in Victoria

Commercial and industrial properties will have stamp duty discounted by 50% from 1st January 2021.

Residential property worth up to $1 million dollars will have stamp duty discounted. A 50% stamp duty discount is available on brand new property, 25% on existing properties and vacant land 25%.

A contract of sale must entered between 25 November 2020 and 1st July 2021 to be eligible for the discount.

The discount can be applied with first home buyers grant use, and regardless of whether the property is for owner occupation or investment.

Homes costing over $1 million dollars do not receive a stamp duty discount. First home buyers buying property worth less than $600,000 have been exempt from stamp duty all together since 2017.

For those purchasing an established property for $600,000, the discount save around $7,500. Great news!

Check out the Victorian stamp duty rates here.

Victorian Land Tax Relief.

Land tax is payable on investment properties over a certain threshold for each state. The threshold in Victoria is particularly low at $250,000 land value (per individual, excluding principal place of residence).

For landlords significantly affected by COVID, and either having empty property or needing to discount rent by 50%, discounts in land tax are available of 25-50%. Check your eligibility for land tax discounts.

Applications for 2021 land tax relief will close on 30 June 2021.

Changes to Stamp Duty in NSW

First home buyers are currently exempt (until August 2021) from stamp duty on new homes up to $800,000 and vacant land purchased for up to $400,000. A first home buyer grant is available to eligible new home builders/purchasers of $10,000.

NSW home owners are exempt from land tax on their principal place of residence. Owners of vacant land, commercial or residential investments with a land value over $755,000 (for 2021) pay NSW land tax currently.

NSW is proposing an option for home buyers. Pay stamp duty up front (and land tax if over the threshold every year) OR skip the stamp duty and pay an annual property tax instead.

If a home buyer chooses to pay the annual property tax, the house will be forever liable for property tax instead of stamp duty and land tax, even after resale. All properties will, as a result gradually become liable for property tax rather than stamp duty (over decades).

For those home owners who have paid stamp duty, there will be no property tax payable. Feedback on the plan is still being gathered.

Pros and Cons of the Property Tax

At first glance, removing stamp duty seems like a big win for those trying to get into the property market for the first time. But first home buyers purchasing for less than $650k for established properties and $800k for new homes don’t pay stamp duty. A $25,000 grant (only for three years though) to maintain some advantage for first home buyers.

First home buyers of established properties may benefit from skipping the stamp duty and getting into their home faster.

Stamp duty is a huge expense, and discourages people to move home. Over the very long term, an annual property tax will allow people to move home for affordably. But home owners buying their forever home, the property tax will likely cost more if they stay put for 15-20 years.

For investors, the switch to a property tax would reduce the upfront expense of buying a property. Significantly, the property tax would be deductible against income. Stamp duty is not tax deductible, but the cost can be added to the capital base. This means you can’t deduct the cost of stamp duty against income, but can use the cost to reduce capital gains tax at point of sale.

The huge elephant in the room is the inability of any government in history to keep it’s word. Once committed to property tax, you can not switch back. If the government decides to significantly increase tax over time, you could be a lot worse off that you calculated when making the decision. Will they introduce something else to replace stamp duty?


Does this affect you?

What do you think of the changes?  Are you planning to buy soon?  Would you choose a property tax or stamp duty?

Check out the FOMO article you are trying to get into a hot property and want to avoid gettng carried away , paying too much or buying the wrong property.  

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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