Title : Gross rent multiplier - A must-have tool to your investment checklist

Description :

The gross rent multiplier (GRM) is a must-have tool for real estate investors. GRM is a quick and accurate formula for estimating investment property value. This blog explains GRM, how it works, and why real estate investors need it.

What is gross rent multiplier (GRM)?

The gross rent multiplier (GRM) is a real estate investment tool that investors use to estimate the fair market value of a rental property. It is a ratio that shows the relationship between property price-to-annual gross rental revenue.

Gross rent multiplier formula

GRM= Property Price/Annual Gross Rental Income

The GRM computation lets investors assess rental properties based on anticipated revenue rather than purchase price. The GRM values property primarily based on rental revenue.

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How to calculate the gross rent multiplier (step-by-step)?

Here are the steps for gross rent multiplier calculation for an income-producing property -

Step 1 - Determine the gross annual rental income

The gross rent multiplier calculation starts with the property’s gross annual rental income (GARI). This is the total amount of rental income that the property generates in a year without deducting any expenses. For yearly GARI, multiply monthly rental income by 12.

Gross annual rental income = Monthly rental income x 12

Step 2: Determine the gross rent multiplier

Next, calculate gross rent multiplier (GRM). Dividing the property’s fair market value by its gross yearly rent yields the GRM.

If both parties understood the property’s condition and market worth, a willing buyer would pay a willing seller the fair market value. Here is the gross rent multiplier formula .

Gross Rent Multiplier = Property’s Fair Market Value / Gross Annual Rent

Step 3: Analyze the results

The GRM may be used to assess investment opportunity profitability.

A lower GRM indicates a more profitable investment opportunity, as it means that the property generates a higher amount of rental income relative to its fair market value.

Higher GRMs suggest lower investment returns.

The gross rent multiplier calculator formula only considers gross rental revenue and not running expenses or other property costs.

Thus, you must calculate the property’s net operating income (NOI) by subtracting normal operating expenditures from gross rental income. The NOI can provide a more accurate measure of the property’s profitability.

Net Operating income = Gross Rental Income - Operating Expenses

How does the gross rent multiplier work?

To calculate GRM, divide property price by annual gross rental revenue.

For example

Consider a $500,000 rental property with a $50,000 gross yearly rent. The GRM is 10 ($500,000/$50,000).

Once you have the GRM, you can use it to estimate the fair market value of the rental property. To do this, multiply the GRM by the annual gross rental income.

The estimated fair market value of a rental property is $500,000 if the GRM is 10 and the gross yearly rent is $50,000.

What is a good gross rent multiplier?

A good gross rent multiplier (GRM) depends on the location, property type, and market circumstances. Target a GRM between 4 and 7.

A lower GRM means that the property provides more rental revenue than its fair market value, which is good.

However, what is considered a good GRM can differ depending on the local real estate market. In a hot real estate market with rising home values, a greater GRM may be a favourable investment.

Most markets prefer a GRM of 8 or less. Before deciding, analyse the property’s net operating income (NOI), operational expenditures, and local market trends.

Ultimately, a good GRM fits within your investment goals and provides a profitable return on your investment.

Why do real estate investors need a Gross rent multiplier?

The GRM estimates investment property value quickly and easily. The GRM lets investors evaluate rental properties based on gross rental revenue. This Gross rent multiplier helps investors find suitable investment properties quickly.

GRM calculations show property investors the property’s prospective cash flow. Investors can estimate the property’s net operating income (NOI), or gross rental income less operating expenditures, using the GRM.

If the NOI is high enough, the property can pay its running costs and give a return on investment.

What are the limitations of GRM?

The GRM helps real estate investors, but it has some limits. Property taxes, repairs, upkeep, and management costs are not included in the GRM calculation. Thus, it estimates the property’s worth using rental revenue alone.

The GRM ignores real estate market volatility and property location and condition. Thus, it should not be the sole criterion for assessing an investment property.

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✓ What Is Equity Finance And How Does It Work? (42 Pages)
✓ Property Investment Finance - Ultimate Guide

How to improve the gross rent multiplier?

Improving the GRM means increasing the rental income of a property. Here are a few ways to improve the GRM:

Increase rental income

One way to improve the GRM is to increase the property’s rental income. This can be done by increasing the rent for current tenants or finding new tenants willing to pay a higher rent.

You can also consider adding amenities to the property, such as laundry facilities or a fitness centre, which can justify higher rents.

Decrease vacancy rates

Property rental revenue and GRM are affected by vacancy rates. Reducing vacancies increases rental income and GRM.

Marketing, tenant incentives, and property maintenance may achieve this.

Reduce operating expenses

Reducing property running expenditures is another strategy to boost GRM. Negotiating better vendor and supplier arrangements, boosting energy efficiency, and lowering maintenance expenses can achieve this.

Lowering operational expenditures boosts property net operating income (NOI) and GRM.

Increase property value

Finally, increasing property value can boost GRM. Renovating the kitchen, bathroom, flooring, or landscaping can achieve this.

These renovations may boost rental revenue and property value.

Gross rent multiplier vs cap rate

Real estate investors use the gross rent multiplier (GRM) and capitalization rate (cap rate) to assess a property’s profitability. However, they consider different revenue and costs.

Dividing the property’s fair market value by its gross yearly rental revenue yields the GRM. It quickly estimates a property’s worth based on rental revenue without considering running expenditures.

Single-family residences and modest multi-unit structures employ the GRM most often.

Divide the property’s net operating income (NOI) by its fair market value to determine the cap rate. The NOI includes property taxes, insurance, maintenance, management fees, and any other income streams except rental income.

Commercial real estate, including office buildings, retail centres, and apartment complexes, utilise the cap rate to assess property profitability better.

Both the GRM and cap rate can reveal a property’s potential profitability, but each has its pros and cons depending on the property and investment plan.

The cap rate is preferable for commercial properties, and the GRM is for quick residential property estimations. When investing in real estate, consider both measures, local market trends, and investment goals.

Learn More

• Rocket science behind rental yield calculations
• What is cap rate?
• 9 Decision metrics for evaluating a real estate investment

How to use GRM in real estate investments

Here are a few ways to use GRM in real estate investments:

Estimate property value

GRM is often used to evaluate the fair market value of a possible investment property. Divide the property’s fair market value by its gross yearly rental revenue to determine how many years it would take for the rental income to pay for the property.

Compare properties

GRM may compare several investment properties’ profitability. Calculate the GRM for each property to compare rental revenue to fair market value.

The lower GRM property yields more rental revenue proportional to its value, making it more lucrative.

Set rent rates

GRM can also determine property rents. Calculating a property’s GRM lets you estimate the rental revenue needed to cover its cost. This helps you establish the minimum rent rates required for investment profitability.

Evaluate investment opportunities

GRM can quickly screen investment ideas. You may easily eliminate unprofitable assets by selecting a target GRM depending on your investing goals.

The GRM is only one instrument for real estate investors. It gives a rapid assessment of a property’s potential profitability, but it doesn’t account for all real estate investing expenses and risks.

Thus, while investing in real estate, net operating income, cash flow, property management, local market trends, and investment goals should be considered.

How to project ROI with GRM

Here are the steps to project ROI with GRM:

Calculate gross rental income

Calculate the property’s gross rental revenue first. The annual gross rental revenue is calculated by multiplying the monthly rent by the number of units and then by 12.

Determine the GRM

Divide the property’s market value by the gross rental revenue to calculate the GRM.

Estimate operating expenses

Estimate property taxes, insurance, upkeep, repairs, and management costs. Net operating income (NOI) is gross rental income less expected operating expenditures.

Estimate cap rate

Another technique for real estate ROI projections is the cap rate. Divide NOI by property market value to determine the cap rate.

Project ROI

Use GRM to calculate NOI by subtracting expected operating expenditures from gross rental income. To calculate ROI as a percentage, divide NOI by property market value and multiply by 100.

If the NOI is $35,000 and the property is worth $500,000, the ROI is 7%.

Conclusion

In conclusion, the gross rent multiplier (GRM) is a powerful tool that real estate investors must-have in their investment checklist. It helps to estimate investment property value accurately and quickly, based on the relationship between property price-to-annual gross rental revenue.

A lower GRM indicates a more profitable investment opportunity, while a higher GRM suggests lower investment returns. While the GRM formula only considers gross rental revenue, investors should also calculate net operating income (NOI) to get a more accurate measure of the property’s profitability.

Finally, while the GRM has its limitations, investors can improve the GRM by increasing rental income, reducing vacancies, and lowering operating expenses.

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Post Date : 06/01/2023

Title : Understand IRR calculations in just 2.7 minutes

Description :

Internal rate of return (IRR) is a basic financial analysis method for assessing investment profitability. It is a crucial tool for real estate investors to evaluate different projects or capital budgeting decisions.

In simpler terms, it is the rate of return that makes the initial investment worthwhile. This article will cover the IRR formula, how to calculate it, and why it is essential in financial analysis.

What is the internal rate of return (IRR)?

To define what IRR means: It is the compound rate of return on investment. IRR is the discount rate that makes a project’s net present value (NPV) zero.

Investments with higher internal rates of return are usually better. IRR is consistent across investments and may be used to rank several potential investments or projects. When you compare similar investment options, the one with the highest IRR is usually the best.

IRR calculation formula

The formula for calculating IRR is as follows:

NPV = ∑[CFt / (1+IRR)^t] = 0

where:

• NPV is the net present value of the cash flows
• CFt is the cash flow in period t
• IRR is the internal rate of return
• t is the time period

You can calculate IRR with trial-and-error or financial calculators with IRR functions. Find the discount rate that makes cash flow NPV zero.

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How to calculate IRR (step-by-step)

Step 1: Determine the expected cash flows

First, calculate investment or project cash flows. These cash flows can be positive cash flows or negative and may occur at various times.

Step 2: Set up the equation

Calculate cash flow NPV using the equation. The equation:

NPV = CF0 / (1+IRR)^0 + CF1 / (1+IRR)^1 + … + CFn / (1+IRR)^n

Where:

• CF0 is the initial investment (negative cash flow)
• CF1 to CFn are the cash flows for periods 1 to n
• IRR is the unknown internal rate of return
• n is the number of periods

Step 3: Choose a guess for IRR

Choose a guess for the IRR. This can be any reasonable value, such as 10% or 15%.

Step 4: Calculate the NPV

Calculate cash flow NPV using the selected IRR. If the NPV is negative, use a lower IRR. Repeat until the NPV approaches zero.

Step 5: Check for convergence

Convergence occurs when the NPV approaches zero. Calculate the NPV using many IRRs and see whether they all get the same result. If so, you discovered the IRR.

Step 6 - Interpret the result

Interpret the IRR once discovered. The discount rate at which cash flows have zero net present value is the IRR. Profitable investments have an IRR larger than the needed return. Unprofitable investments have IRRs below the needed rate of return.

Learn More

• 10 Financial Property Investing Mistakes Made By Investors [Part 1-2]
• 10 Financial Property Investing Mistakes Made By Investors [Part 2-2]
• 9 Decision metrics for evaluating a real estate investment

Understanding IRR calculation with example

You can easily calculate the IRR with the help of online calculator and spreadsheet applications. The IRR is the discount rate at which the NPV of a project equals zero. Set the NPV to zero and solve for the interest rate.

IRR calculation example

The initial investment and future cash flows are needed to compute the IRR. To calculate the NPV, discount each future cash flow at the appropriate interest rate and add them. Find the interest rate that makes the NPV 0.

Suppose investor A invest $10,000 in an investment project that provides the below cash flow -

Year 1 - $3,000

Year 2 - $4,000

Year 3 - $5,000

The discount rate is 10%. To determine the NPV, discount each cash flow at the proper rate.

The formula for calculating the present value of cash flow -

PV = CF / (1 + r)^n

Where:

• PV: Present value
• CF: Cash flow
• r: Discount rate
• n: Number of years

Using the formula, we can calculate the present value of each cash flow as follows:

• Year 1:

PV = 3,000 / (1 + 0.1)^1 = $2,727.27

• Year 2:

PV = 4,000 / (1 + 0.1)^2 = $3,305.79

• Year 3:

PV = 5,000 / (1 + 0.1)^3 = $3,801.72

Now, we can sum the present values to calculate the NPV:

NPV = -10,000 + 2,727.27 + 3,305.79 + 3,801.72 = $834.78

The negative sign in front of the initial investment amount indicates a cash outflow (investment). The positive NPV of $834.78 indicates that the investment is worthwhile, as the sum of the present values of the future cash flows is greater than the initial investment.

Now that we have the NPV, we can use a financial calculator or spreadsheet software to find the IRR. Using the IRR function in Microsoft Excel, we can calculate the IRR to be 16.09%. This means that the investment is expected to generate a return of 16.09% per year, which makes it a good investment opportunity.

Why should you use IRR in financial analysis?

IRR is an essential tool for financial analysis because it measures the investment return relative to the cost of the investment. It helps investors choose the best investment opportunity.

In capital planning, the IRR is used as a hurdle rate or minimum acceptable rate of return for a project to be a worthwhile investment.

IRR also considers the time value of money. Due to the possibility of various interest rates or other returns, a dollar now is worth more than a dollar tomorrow. The IRR accurately measures investment profitability by discounting future cash flows at a specified rate.

Learn More

• How do property developers get finance?
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• How to calculate ROI on real estate? – The ultimate guide

What does an IRR calculation actually tell you?

IRR calculations estimate an investment’s lifetime return. The interest rate makes the net present value (NPV) of all future cash flows from the investment zero.

The IRR is a financial metric commonly used to evaluate investment opportunities. It provides investors with a way to compare the expected returns of different investments, taking into account the time value of money.

Calculating the IRR for an investment is like asking, “What rate of return do I need to make this investment worthwhile?”

Profitable investments have an IRR larger than the investor’s hurdle rate or minimum acceptable rate of return. The investment is unprofitable if the IRR is below the hurdle rate.

Let’s imagine an investor is evaluating two investments. The first opportunity costs $10,000 and generates $2,000 each year for five years.

The second possibility costs $15,000 and generates $3,000 each year for five years. The investor can compare IRRs to decide which investment is best.

The initial investment is lucrative if the IRR is 12% and the investor’s hurdle rate is 10%. The second investment is not lucrative since its IRR is 8%, below the minimum allowable rate of return.

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And Other Books On Real Estate Development Finance

Includes 5 x detailed eBooks

✓ Property Development Finance: Easily Finance Your Project? (26 Pages)
✓ 10 Big (Financial) Property Investing Mistakes Made By Investors (58 Pages)
✓ 10 Finance Options For Your Next Property Development Project (29 Pages)
✓ What Is Equity Finance And How Does It Work? (42 Pages)
✓ Property Investment Finance - Ultimate Guide

Limitations of internal rate of return (IRR)

Investors should be aware of the limits of the internal rate of return (IRR), a valuable financial indicator for assessing investment possibilities.

Assumptions about cash flow reinvestment

The IRR calculation assumes that all future cash inflows will be reinvested at the same rate as the IRR. It may be difficult to identify investments with IRRs. This assumption might create exaggerated ROI expectations.

Ambiguity with multiple IRRs

Some investments have numerous IRRs. If the investment cash flows change sign many times, the IRR equation has multiple solutions. This uncertainty might make calculating the investment’s return challenging.

Inability to compare investments with different cash flows

IRR calculations depend on cash flow timing and amount. Thus, comparing cash flow investments is challenging. Even though it yields less cash flow than a lower IRR investment, a higher IRR investment may have a shorter payback period, making it more appealing to some investors.

Inability to account for risk

Two investments with the same IRR may have quite different risk profiles, affecting their predicted returns. Thus, investors should evaluate investments using risk-adjusted return on investment (RAROC) indicators.

IRR vs discount rate

IRR and discount rates are similar yet different. The discount rate discounts future cash flows to compute the current value. The interest rate that zeros out all future cash flows is the IRR. In other words, the discount rate is used to calculate the NPV, while the IRR calculated is the result of the NPV calculation.

The discount rate is typically used to represent the opportunity cost of capital or the rate of return on an alternative investment with equivalent risk. The IRR, on the other hand, is a measure of the investment’s return relative to its cost.

Which industries benefit the most from IRR analysis?

Internal rate of return (IRR) analysis is a financial statistic used in many businesses. IRR analysis may assist some industries make more money, depending on the sector and investments.

Real estate

IRR analysis can assist investors in assessing a property’s return on investment throughout its estimated lifespan. A property developer may use IRR analysis to assess the profitability of a new residential or commercial development project.

Infrastructure

Transportation, energy, and utilities require huge, long-term investments in infrastructure. IRR analysis may assist investors in assessing these investments’ predicted cash inflows during the project’s lifetime and the impact of alternative payment and financing methods.

Private equity

IRR analysis may assist investors in assessing these assets’ return on investment, including predicted cash inflows during the investment’s lifespan and the effect of possible exit plans.

Venture capital

IRR analysis helps to evaluate these firms’ return on investment, including predicted cash outflows and inflows during the investment’s lifetime and the effect of possible exit plans.

IRR vs ROI (return on investment)

Both the internal rate of return (IRR) and return on investment (ROI) are financial indicators used by investors to assess an investment or company’s cost and prospective profitability. However, they have distinct applications and interpretations.

ROI compares investment profit to investment cost. The percentage formula is:

ROI = (Gain from Investment - Investment Cost) / Investment Cost x 100

For example, if an investor purchased a stock for $1,000 and sold it for $1,200, the ROI would be:

ROI = ($1,200 - $1,000) / $1,000 x 100 = 20%

IRR, on the other hand, considers cash flows over the investment’s lifespan. It’s the interest rate when an investment’s cash flows have zero net present value (NPV). IRR is calculated by finding the discount rate at which the total of future cash inflows equals the initial investment cost.

For example, if an investor is considering a real estate investment that requires an initial investment of $500,000 and has a net present value of $600,000, the IRR would be the interest rate at which the present value of the future cash flows equals $500,000.

What is a good internal rate of return?

A “good” internal rate of return (IRR) relies on the investor’s risk tolerance, the investment, and the market. A decent IRR is usually higher than the investor’s minimum acceptable rate of return (MARR).

A wise investor may have an 8% MARR, whereas an aggressive investor may have 15%. The IRR needed to invest viable increases with MARR.

In addition to the MARR, other factors can influence what constitutes a good IRR. The IRR needed for a fair return depends on the investment and market circumstances. In a competitive real estate market, the IRR may be greater.

Finally, the IRR should not be the exclusive indicator for investment evaluation. When investing, investors should consider risk, liquidity, and capital appreciation.

Learn More

• How does property development finance work?
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• 7 Easy Steps To Market Your New Development Project

Conclusion

The Internal Rate of Return (IRR) is a fundamental tool for assessing the profitability of investments, especially in real estate. It is the discount rate that makes a project’s net present value (NPV) equal to zero. The formula for calculating IRR involves finding the discount rate that makes cash flow NPV zero.

You can calculate IRR with trial-and-error or use financial calculators with IRR functions. Investments with higher IRRs are generally more profitable.

IRR is consistent across investments and can be used to rank multiple potential investments or projects. By using the IRR calculator, investors can compare the returns of different investment options and select the one that provides the highest return on investment.

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Post Date : 05/31/2023

Title : Cash-on-cash Return: An inside look

Description :

Real estate investing can be a great way to build wealth and generate a steady stream of passive income. However, before making any property investment, knowing the prospective return on investment is crucial.

The cash-on-cash return is a critical metric you can use for assessing the profitability of a real estate investment.

What is a cash-on-cash return?

IMPORTANT

Cash-on-cash return is the ratio of cash earned to cash invested. This financial metric estimates the ROI percentage based on cash invested rather than the overall property value.

Typically, property investors and property developers use the cash-on-cash return to measure commercial real estate performance. It is also called cash yield or equity-dividend yield on property investment.

Divide the annual net cash flow by the total cash invested to derive the cash-on-cash return.

IMPORTANT

Net cash flow refers to the residual amount of cash generated from a real estate investment after deducting all annual operating expenses, including mortgage payments, property taxes, insurance costs, and other related expenses, from the annual rental revenue.

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How to calculate cash-on-cash return?

Calculating the cash-on-cash return is simple. Divide the annual net cash flow by the total cash invested.

Cash-on-cash return formula

Cash-on-cash return = Annual net cash flow / Total cash invested

Cash-on-cash return example

Understand cash-on-cash return with this example.

You bought a $500,000 rental property. You mortgaged $400,000 after a down payment of $100,000. Your other expenses, including mortgage, property taxes, and insurance, are $40,000. The annual rental revenue is $60,000

To calculate the cash-on-cash return, you would first need to calculate the total cash invested:

Total cash invested = Down payment + Closing costs

Total cash invested = $100,000 + $10,000 = $110,000

Next, you would calculate the annual net cash flow:

Annual net cash flow = Annual rental revenue - Annual operating expenses

Annual net cash flow = $60,000 - $40,000 = $20,000

Finally, you would calculate the cash-on-cash return:

Cash-on-cash return = Annual net cash flow / Total cash invested

Cash-on-cash return = $20,000 / $110,000 = 0.18 or 18%

What is a good cash on cash return?

Good cash-on-cash returns depend on certain parameters such as investment goals, risk tolerance, and the local real estate market. Real estate investors generally agree that a cash-on-cash return projection of 8 to 12 percent indicates a good investment.

How To Finance Your Property Development Project?

And Other Books On Real Estate Development Finance

Includes 5 x detailed eBooks

✓ Property Development Finance: Easily Finance Your Project? (26 Pages)
✓ 10 Big (Financial) Property Investing Mistakes Made By Investors (58 Pages)
✓ 10 Finance Options For Your Next Property Development Project (29 Pages)
✓ What Is Equity Finance And How Does It Work? (42 Pages)
✓ Property Investment Finance - Ultimate Guide

Are cash-on-cash return and ROI identical?

Cash-on-cash return is similar to ROI but not when debt is used in real estate transactions.

Most commercial buildings include debt; thus, the cash return on investment is different from the ROI. ROI evaluates investment returns, including debt. However, cash-on-cash return only evaluates the return on the actual cash spent, offering a more realistic investment performance measurement.

ROI includes capital gains and cash flow generated over a period of time. It considers all cash flows, including original investments, operational expenditures, mortgage payments, and taxes.

Cash-on-cash return measures an investment’s cash income compared to its cash investment.

Both ROI and cash-on-cash return are essential for assessing a real estate investment’s profitability, but ROI is better for long-term investors seeking capital appreciation and cash flow.

Learn More

• 11 Easy ways to boost real estate cash flow

Cash on cash return vs ROI

Understand the difference between cash-on-cash return and ROI with the help of an example.

Investor A is considering a $500,000 rental property. The investor expects $20,000 in net operating income (NOI) from $50,000 in rental revenue and $30,000 in operating expenditures.

The investor has two options for financing the property: Option A involves a 20% down payment of $100,000 and a 4% fixed-rate mortgage with monthly payments of $1,996.05. Option B involves a 50% down payment of $250,000 and no mortgage.

Using the cash-on-cash return formula, we can calculate the cash-on-cash return for each option:

Option A:

Annual cash flow = NOI - mortgage payments

Annual cash flow = $20,000 - ($1,996.05 x 12)

Annual cash flow = $20,000 - $23,952.6

Annual cash flow = -$3,952.6

Cash-on-cash return = Annual cash flow / Cash invested

Cash-on-cash return = (-$3,952.6) / $100,000

Cash-on-cash return = -0.0395 or -3.95%

Option B:

Annual cash flow = NOI

Annual cash flow = $20,000

Cash-on-cash return = Annual cash flow / Cash invested

Cash-on-cash return = $20,000 / $250,000

Cash-on-cash return = 0.08 or 8%

Option B provides a larger cash-on-cash return, making it a better investment.

The ROI for each option is different. To calculate ROI, we must account for all financial inflows and outflows throughout time, including original investments, operational expenditures, mortgage payments, and taxes.

Option A:

Total pre-tax cash inflows = ($50,000 - $30,000) x 10 years = $200,000

Total pre-tax cash outflows = $100,000 (down payment) + $23,952.6 (mortgage payments x 10 years) = $369,526

ROI = (Total pre-tax cash inflows - Total pre-tax cash outflows) / Total pre-tax cash outflows

ROI = ($200,000 - $369,526) / $369,526

ROI = -0.458 or -45.8%

Option B:

Total pre-tax cash inflows = ($50,000 - $30,000) x 10 years = $200,000

Total pre-tax cash outflows = $250,000 (down payment) = $250,000

ROI = (Total pre-tax cash inflows - Total pre-tax cash outflows) / Total pre-tax cash outflows

ROI = ($200,000 - $250,000) / $250,000 ROI = -0.2 or -20%

Option A provides a greater ROI despite a lower cash-on-cash return. Option A offers a lower initial investment and mortgage interest tax deduction.

This example shows how cash-on-cash return and ROI differ and how they can affect investment selections based on the investor’s goals and finances.

Learn More

• How to calculate ROI on real estate? – The ultimate guide

Does cash-on-cash return include principal?

Cash-on-cash return excludes mortgage principal payments. It solely considers the property’s down payment and closing fees.

Principal payments diminish property equity, which might boost ROI. The cash-on-cash return does not include it.

Cash-on-cash return vs. NOI

NOI is a property’s cash flow before mortgage payments, interest, taxes, and depreciation. It quantifies investment income like the cash-on-cash return.

NOI includes rental revenue, operational expenditures, and other income streams, while cash-on-cash returns solely include rental revenue and operational expenditures.

Cash on cash return vs IRR

IRR, or internal rate of return, measures an investment’s prospective return over time. It accounts for the time value of money, including the initial investment and future cash flows.

IRR takes into account the investment’s total cash flow and its time, unlike cash-on-cash return. Cash-on-cash return solely analyses investment income relative to cash invested.

Cash on cash return vs cap rate

Cap rate (capitalization rate) is a property’s potential return on investment depending on its revenue. It is calculated by dividing the net operating income by the property’s value.

The cap rate helps assess assets’ prospective profitability but doesn’t account for capital spent. In contrast, cash-on-cash return considers only the cash invested in the property relative to the cash income generated by the investment.

In conclusion, cash-on-cash return is a simple yet valuable metric for real estate investment profitability. It shows investors the property’s projected cash income compared to their investment.

To make informed investment decisions, examine additional elements such as the local real estate market, operational expenditures, rental revenue, and investment objectives.

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Post Date : 05/30/2023

Title : The impact of interest rates on your mortgage payments

Description :

The real impact of interest rates on your mortgage payments

If you’re thinking of buying a home, you’re likely to be taking out a home loan or mortgage.

Interest rates and mortgage payments are correlated; it is crucial to consider both of them when evaluating the financial implications of a mortgage.

What are interest rates?

The interest rate is the price paid to borrow money. Interest is added to the loan balance whenever money is borrowed, including for a mortgage or a home loan.

This interest is often applied to your mortgage payments as a percentage of the loan balance.

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The cash rate and its impact

The cash rate is the interest rate that the central bank sets. When the cash rate is low, house loan interest rates are often cheaper, making it an excellent time to finance a property purchase.

However, interest rates tend to rise along with the high cash rate.

What do rising interest rates mean for home loan repayments?

Rising interest rates mean that your mortgage repayments are likely to increase, which could affect your ability to make your monthly repayments. This is because higher interest rates result in higher monthly mortgage payments.

Rising interest rates and your mortgage repayments

Your monthly mortgage payment might go up if interest rates go up. Plan and make sure you can afford the additional payments.

During the fixed term of a house loan, your payments will remain constant regardless of market fluctuations. However, once the fixed term expires, you may be exposed to rate increases.

Learn More

• Difference between interest rate and comparison rate?

How can additional repayments Save You Money?

If you have a house loan with a variable interest rate, you may save money while rates are low by paying extra towards the principal. In the long term, this can help you save money by reducing the length of your mortgage loan.

There may be caps on how much of your mortgage you may pay down each year without being hit with prepayment penalties if your loan has a fixed interest rate.

Choosing the right home loan

When choosing a home loan or mortgage, consider the interest rate, total cost, loan duration, and loan amount before making a home loan decision.

Consider your financial flexibility and your preferred payback schedule when choosing between a fixed and variable-rate mortgage.

Why are interest rates rising?

Growing economies, rising prices, and changes in monetary policy all contribute to an increase in interest rates.

Increases in interest rates are commonplace during economic expansions and periods of low unemployment. The central bank takes such measures to avoid inflation by keeping the economy from overheating.

What to do if interest rates rise

Changing to a mortgage with a lower interest rate might help you save money if rates increase. Another option is to negotiate a lower interest rate with your present lender.

As an alternative to making larger mortgage payments, you may place your money in a high-interest savings account.

What can you do if you are worried about making higher mortgage repayments?

A few options are available to you if you’re concerned about increasing your mortgage payments. You may save money on your mortgage by refinancing to a new loan with a different interest rate.

You can save money on interest and pay off your mortgage faster if you make additional payments on your loan and use a mortgage offset account or savings account.

How To Finance Your Property Development Project?

And Other Books On Real Estate Development Finance

Includes 5 x detailed eBooks

✓ Property Development Finance: Easily Finance Your Project? (26 Pages)
✓ 10 Big (Financial) Property Investing Mistakes Made By Investors (58 Pages)
✓ 10 Finance Options For Your Next Property Development Project (29 Pages)
✓ What Is Equity Finance And How Does It Work? (42 Pages)
✓ Property Investment Finance - Ultimate Guide

What will cause interest rates to fall again?

If economic growth slows, inflation slows, or the central bank decides to follow a monetary strategy that lowers interest rates, then interest rates will fall again.

Interest rates can go up or down depending on the global economy and political climate.

Fixed-rate vs. variable rate: Which is a better home loan?

There are benefits and drawbacks to both fixed- and variable-rate mortgages.

The ability to predict and plan for monthly mortgage payments is a major benefit of a fixed-rate mortgage arrangement. However, you risk missing out on future rate reductions.

With a variable-rate mortgage, your monthly payments are flexible, but you may save money if interest rates drop.

Interest-only or repayment mortgage?

In a repayment mortgage, you pay both the interest and the principal throughout the life of the loan, whereas in an interest-only mortgage, you pay just the interest.

Since you still have to pay off the original loan balance once the interest-only period ends, this type of mortgage often costs more over time.

The interest on a repayment mortgage is often lower, and after the loan’s term, you’ll be the home’s sole owner.

What is the difference between the cash rate and the loan rate?

The cash rate is the interest rate set by the central bank, while the loan rate is the interest rate charged by banks and other lenders for borrowing money.

The cash rate usually influences the loan rate, but other factors can also affect it, such as competition between lenders and the state of the economy.

In conclusion, interest rates can have a big impact on your mortgage repayments. You may save money and shorten the term of your mortgage if you familiarise yourself with the process, select the appropriate house loan, and make extra payments whenever possible.

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Post Date : 05/29/2023

Title : Pros and cons of different types of property loans?

Description :

One of the most significant financial investments that the majority of Australians will ever make is purchasing a property. The choice of a home loan can have a substantial impact on the long-term financial outcome, just like any significant investment.

There are several types of home loans accessible in Australia. To assist you in making a sound decision, we will examine the pros and cons of several Australian home financing options in this post.

Standard variable rate home loans

One of the most common forms of home loans in Australia is the Standard Variable Rate (SVR) mortgage. The interest rate on this kind of loan may change over time based on the state of the market.

Pros:

Flexibility

The loan structure for variable interest rate home loans is relatively flexible, allowing you to make extra payments or pay off the loan early without paying penalties.

Rate reduction

If interest rates go down, so will your interest rate and payback schedule, resulting in less interest paid overall for the loan.

Learn More

• Difference between interest rate and comparison rate.

Cons:

Uncertainty

Planning your budget and finances might be difficult when you have an SVR home loan since you are unsure of your future repayment amounts.

Higher interest rates

SVR home loans sometimes offer higher interest rates than other types of mortgages.

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Fixed rate home loans

Fixed rate loans are a type of home loan where the interest rate is fixed for a set period, typically between 1-5 years. During this time, borrowers make both the interest and principal repayments, which means their monthly repayments remain constant for the duration of the fixed-rate period.

Pros:

Stability

A fixed-rate home loan gives you greater financial security since you know what your payments will be for the duration of the fixed-rate period.

Budgeting

Fixed-rate mortgages offer a fixed monthly payment, making it simpler to plan for loan repayments.

Learn More

• Do property developers get mortgages?

Cons:

Limited flexibility

Fixed-rate home loans have limited flexibility, so you can’t make extra payments without paying a lot of money in fees.

Higher interest rates

Fixed-rate house loans sometimes have higher interest rate than those of other home loan alternatives, which deters some borrowers.

Learn More

• Variable rate loan vs Fixed rate loan?

How To Finance Your Property Development Project?

And Other Books On Real Estate Development Finance

Includes 5 x detailed eBooks

✓ Property Development Finance: Easily Finance Your Project? (26 Pages)
✓ 10 Big (Financial) Property Investing Mistakes Made By Investors (58 Pages)
✓ 10 Finance Options For Your Next Property Development Project (29 Pages)
✓ What Is Equity Finance And How Does It Work? (42 Pages)
✓ Property Investment Finance - Ultimate Guide

Split-rate home loan

Split-rate mortgages allow borrowers to divide their loans into a fixed and a variable portion, giving them the advantages of both loan types.

Pros:

Stability and flexibility

Split-rate home loans give borrowers stability and flexibility, enabling them to benefit from declining interest rates while still having some degree of predictability regarding their repayment obligations.

Additional repayments

Split-rate home loans provide borrowers with the option to make extra payments on the loan’s variable balance.

Cons:

Higher costs

Split-rate mortgages sometimes have higher startup and account-keeping costs than other types of mortgages.

Split-rate mortgages might be more complicated than other mortgage alternatives, so it’s essential to fully comprehend their structure and expenses.

Interest only loans

Borrowers with interest-only mortgages are required to pay just the interest portion of the loan for a certain amount of time, often between 1 and 5 years.

Pros:

Lower repayments

Interest-only mortgages feature lower monthly payments than other mortgage choices, which appeals to property investors and borrowers with erratic income.

Tax deductible

For real estate investors, the interest portion of the loan is tax deductible, bringing down the total cost of borrowing.

Learn More

• The A – Z guide of tax saving Tips Australia.

Cons:

Cost surcharge

Despite the lower monthly payments, the longer loan period and interest-only portion result in a higher overall loan cost.

Higher risk

Because borrowers aren’t making principal reductions on their mortgages, interest-only home loans may be riskier overall.

Investment loans

Investment loans are designed for investors who want to purchase an investment property. These types of home loans typically have higher interest rates than owner-occupier home loans.

Investors seeking to reduce their tax liability may find investment loans to be an appealing option, as the interest payments on such loans are eligible for tax deductions.

Pros

Higher borrowing limits

Investment loans typically have higher borrowing limits than standard home loans, allowing investors to purchase a more expensive property.

Tax benefits

Interest payments on investment loans are tax-deductible, making them an attractive option for investors looking to minimise their tax liability.

Potential capital gains

Investment properties have the potential to increase in value, allowing investors to realise capital gains when selling the property.

Cons

Higher interest rates

Investment loans typically come with higher interest rate than standard home loans, making them more expensive over the loan’s life.

Limited flexibility

These types of home loans have limited flexibility, making it harder for investors to make extra repayments or access funds if needed.

Higher fees

These loans can come with higher fees and charges compared to standard home loans, which can increase the overall cost of the loan.

When selecting a home loan, it’s crucial to consider essential elements like interest rates, fees, loan features, and repayment flexibility.

Gain an extensive understanding of the loan term and structure, including potential penalties for early repayment or additional repayments, to properly compare home loans and ensure a successful borrowing experience.

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We specialise in Development funding | Commercial finance | Construction loans | Portfolio refinancing & Property investment loans in Australia.

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Post Date : 05/25/2023

Title : How to prepare for a successful loan application?

Description :

Loan application can be a daunting process, but with the right preparation, you can improve your chances of approval. Whether you’re applying for a personal loan, home loan, or business loan, here are some tips to help you prepare for a successful loan application.

Tips to improve your chances of loan approval

If you want to apply for a loan, make sure you take steps to up your chances of getting approved. Here are some tips to help you improve your loan application so you can get the funds you need.

Clean up your bank statements.

Before you send in your loan application, check out your bank statements and make sure they look good.

So you need to ensure all your personal loans and money stuff is organised and there’s no bad stuff like bounced checks or overdrafts. Lenders usually check out your bank statements to see if you’re good for the home loan and can repay it.

Check your credit score (for free!)

Your credit score is super important when it comes to getting approved for a loan. Make sure you check it out before you apply!

You can check your score for free online, and if you need to, you can work on improving it. Having a solid credit score can not only up your chances of getting approved, but it can also score you a better interest rate.

Pay off your debts.

If you owe money already, it’s best to pay your debt off before trying to get a new loan. This not only helps your credit score but also shows lenders that you’re good with credit and can handle your money well.

Ensure you meet the eligibility criteria.

Make sure you’re eligible for the loan before you apply. Lenders and banks look at how much money you make if you have a job, your credit report, and how much debt you have compared to your income.

If you don’t meet the criteria, your loan application won’t get approved.

Check your chance of approval.

Many lenders have online tools that let you see if you’re likely to get approved before applying for a loan. These tools do a quick check to see if you’re likely to get approved and give you an idea of your credit status.

This can help you avoid applying for loans you probably won’t get approved for, which can mess up your good credit score anyway.

Learn More

• How to get a home loan pre-approval?

Be honest in your application.

When filling out your loan application, ensure you’re being honest and accurate with the info you give.

If you mess up or lie, they might say no to your application, and you could get in trouble.

Find the right lender for you.

Lenders all have their lending criteria and requirements, so it’s essential to find the one that’s right for you.

Check out different lenders and loans, and pick the one that gives you the best deal and suits your needs.

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What are some basic lending rules?

Lending rules are the lending criteria that a borrower needs to meet to borrow money from Australian Banks or any other certified lenders. A good knowledge of lending rules can increase your chances of a successful loan application.

Maintain a good credit history.

A high rating makes you more attractive to lenders, giving you access to lower interest rates on loans. Keep your credit utilisation ratio low and your bill payments on schedule to keep your credit score high.

Have a consistent income.

Lenders prefer borrowers who can prove that they have a consistent source of income from which to repay their loans. The likelihood of obtaining a loan authorised rises if you have a regular source of income, such as a job.

Check and Correct Errors on Your Credit Report

Take a look at your credit report and fix any mistakes! If there are any mistakes or issues, it could mess up your credit score and make it harder to get a loan.

Pick the correct loan option.

There are various kinds of loans to pick from, including fixed-rate and variable-rate loans, short-term and long-term loans, and secured and unsecured loans.

Pick the loan term and sort of loan that meets your current demands and budget the best.

Shop around for the best deal.

Don’t take the first loan offer you get; instead, look around for the best rate. Find the finest loan terms, conditions and interest rates by shopping around at multiple lenders.

Learn the details

Make sure you know what you’re getting into before signing the loan agreement by reading it thoroughly and asking questions if you need to help understand something.

Make a strategy to pay it back.

Prepare a strategy for regular loan repayments. Make sure you can afford your loan payments without letting other obligations pile up by making a budget.

How To Finance Your Property Development Project?

And Other Books On Real Estate Development Finance

Includes 5 x detailed eBooks

✓ Property Development Finance: Easily Finance Your Project? (26 Pages)
✓ 10 Big (Financial) Property Investing Mistakes Made By Investors (58 Pages)
✓ 10 Finance Options For Your Next Property Development Project (29 Pages)
✓ What Is Equity Finance And How Does It Work? (42 Pages)
✓ Property Investment Finance - Ultimate Guide

Loan application documents checklist

Australian loan applicants must submit the following documents when applying for a loan:

Proof of identity

To prove your identification, you’ll need a driver’s licence, passport, or birth certificate.

Proof of income

Submit documents that prove your income, such as pay stubs, tax returns, bank statements, and job contracts, are required.

Employment details

Your employer’s name, contact information, job title, and length of employment are required.

Residential information

Provide your current and past residences, including your landlord’s name and contact information.

Bank statements

Show your income and spending with 3-6 months bank statements.

Assets and liabilities

You’ll need to list your assets, such as property or cars, and liabilities, like credit card debt or loans.

Details of the loan

You’ll need to provide details about the loan you’re applying for, such as the loan amount, the purpose of the loan, and the repayment term.

Lenders and loan types may demand different paperwork than other loans. Check with your lender to see what documentation you’ll need to apply for a loan.

What fees and charges will you have to pay as part of a home loan application?

Australian house loan applicants may have to pay several fees and levies. Some of them include the following -

Application fees

The lender charges a one-time fee to complete your whole loan application process. It can cost hundreds to thousands of dollars.

Lender-charged valuation fee

A professional valuer values your property. Location and property size affect cost.

Learn More

• 5 Property valuation methods you may not know about

Lenders Mortgage Insurance (LMI)

LMI covers the lender if you default on the loan if you borrow more than 80% of the property’s value. LMI costs depend on the loan amount and property value.

Legal and conveyancing fees

Your property’s title may need to be confirmed and transferred to your name. The transaction’s intricacy and legal expenses determine the cost.

Stamp duty

This state or territorial tax on property purchases varies by region and value. Some states exclude first-time home buyers from stamp duty.

Ongoing costs

After getting your home loan, you may have to pay yearly or monthly account-keeping, redraw, or early repayment fees.

To calculate the loan’s total cost, you must carefully evaluate and budget for home loan fees and charges. Before taking out a mortgage, review all charges with your lender and get independent financial advice.

What is the difference between pre-approval and full approval?

If you’re trying to get a loan, you might hear people talking about “pre-approval” and “full approval.” Here’s the deal on the diff between the two.

Pre-Approval

It’s like a first look at your loan application to see if your financial situation is good. Pre-approval usually involves a soft credit check and can give you an idea of how much you can borrow.

Just because you got pre-approved doesn’t mean you’re approved. They still have to check things out and make sure everything’s good.

Full approval

Full approval is when they’ve gone through all your stuff and given you the green light for your loan. Usually, getting full approval means they’ll do a deep dive into your finances and credit history with a hard credit check.

Once everything’s good to go, the loan gets paid out, and you and the lender are locked in.

In conclusion, preparing for a successful loan application involves checking your credit score, organizing your financial documents, reducing your debt-to-income ratio, saving for a deposit, and comparing lenders and loan options.

Understanding the difference between pre-approval and full approval can also help you navigate the loan application process with confidence. By following these tips and taking a proactive approach, you can increase your chances of approval and secure the loan you need.

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Post Date : 05/24/2023

Title : Benefits of Refinancing Your Home Loan in 2023

Description :

A home loan is a significant financial commitment that can take many years to pay off. Given the current state of the economy, it is wise to review your existing mortgage and assess whether refinancing is a viable option.

Refinancing your home loan can provide many benefits, including lower interest rates, reduced monthly loan repayments, the ability to buy another property, and equity release to finance your needs.

Explore the major benefits and risks associated when you refinance your home loan.

What are the benefits of refinancing your home loan?

Here are some pros to refinance your home loan in Melbourne, Australia, in 2023.

Lower interest rates

You can get cheaper interest rates by refinancing your house loan. Over your mortgage, this can save you a lot. Low rates can save you money throughout the life of your loan.

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Reduction in mortgage repayments

Refinancing might lower your mortgage payments if you’re having trouble paying them. You can cut your monthly mortgage repayments by refinancing to a loan with a lower interest rate.

Reduce the length of your loan

Refinancing also shortens your mortgage loan term further. Refinancing to a shorter-term loan can assist you in paying off your mortgage faster and saving on interest.

You can get the money you need to extend or renovate

Refinancing your home loan might also give you money for home improvements. Refinancing to a loan with a greater loan-to-value ratio unlocks home equity for repairs or extensions.

Reduced monthly home loan repayments

Refinancing might lower your monthly mortgage payments. Refinancing to a lower interest rate or more extended repayment period can drastically lessen your monthly home loan payments.

You can buy another property

Refinancing might provide you with equity to buy another house or investment property elsewhere. You can leverage the equity in your house to buy another property by refinancing to a greater loan-to-value ratio.

You get what you pay for

It’s More Than Just Interest Rates when considering refinancing your home loan; it’s important to remember that the lowest interest rate may not always be the best option.

When selecting a new lender, you should also consider other factors, such as loan features, fees, and customer service.

High-interest debt consolidation into a low-interest home loan.

Refinancing your home loan can also allow you to consolidate high-interest debts, such as credit card debt, into a low-interest home loan. By consolidating your debts, you can reduce your monthly repayments and save money on interest payments.

Save your property if your home loan is in arrears

If you are struggling to keep up with your mortgage interest repayments, refinancing can allow you to save your property.

Refinancing a loan with a cheaper interest rate or longer repayment periods can reduce your monthly repayments and avoid defaulting on your loan.

How To Finance Your Property Development Project?

And Other Books On Real Estate Development Finance

Includes 5 x detailed eBooks

✓ Property Development Finance: Easily Finance Your Project? (26 Pages)
✓ 10 Big (Financial) Property Investing Mistakes Made By Investors (58 Pages)
✓ 10 Finance Options For Your Next Property Development Project (29 Pages)
✓ What Is Equity Finance And How Does It Work? (42 Pages)
✓ Property Investment Finance - Ultimate Guide

How do I apply for a new home loan?

Applying for a new home loan in Melbourne, Australia, is simple. Discuss refinancing options with your current lender or new lender. You will need to provide documentation to support your application, including proof of income, a copy of your credit report, and details of your existing loan.

Learn More

• How to get a home loan in Australia.

Take advantage of new loan features

New loan features help you manage your current mortgage if you refinance. Offset accounts, redraw capabilities, and penalty-free additional repayments are examples. These features may include the following -

• Offset accounts
• Redraw facilities
• The ability to make extra repayments without penalty.

What are the risks when switching home loans?

Switching home loans may provide reduced interest rates, more flexible repayment choices, or superior features. Borrowers should consider the risks before applying.

Fees and charges

Some lenders may impose application, discharge, and valuation fees for breaking and establishing a new loan. Borrowers must compare the savings from a new loan against these charges, which can mount up rapidly.

Lending criteria

Switching loans may involve new lending requirements or eligibility criteria that debtors may not match. Loan acceptance depends on income, job, credit, and property value.

Hidden costs

Borrowers may miss fees, increased rates of interest after an introductory period, and early repayment penalties. To avoid unpleasant surprises, read and understand the loan terms.

Loan suitability

Switching loans isn’t for everyone. Borrowers need to consider their financial circumstances, such as their financial situation, long-term financial goals, the amount of the loan, and their ability to make repayments.

Credit score impact

Lenders analyse credit scores when approving new loans. Borrowers should avoid asking for multiple loans because it might hurt their credit scores.

Unloan – variable rate home loan – refinance only

Unloan is a variable-rate home loan product offered by some lenders in Australia, specifically designed for borrowers looking to refinance their existing home loans.

The main features of the Unloan product include:

Variable interest rate

Unloan is a variable-rate home loan product, which means the interest rate can fluctuate over the life of the loan in response to changes in the official cash rate or other economic factors.

Learn More

• Variable rate loan Vs Fixed rate loan?

Refinance only

Unloan is only available for borrowers who are refinancing an existing home loan. It is not available for new purchases or construction loans.

Flexible repayment options

Unloan offers flexible repayment options, including the ability to make extra repayments without penalty and to redraw any extra funds if needed.

No application or ongoing fees

Some lenders offer the Unloan product with no application or ongoing fees, which can save borrowers money over the life of the loan.

Loan amount

The minimum and maximum loan amounts for Unloan can vary between lenders but are generally in the range of $100,000 to $2,000,000.

Loan-to-value ratio

The maximum loan-to-value ratio (LVR) for Unloan can vary between lenders but is generally in the range of 60% to 80%. This means borrowers will need to have a minimum amount of equity in their property to be eligible for the loan.

Offset account

Some lenders offer an offset account with the Unloan product, which can help borrowers reduce the interest they pay on their loans.

Refinancing your home loan in 2023 can offer various benefits, including lower interest rates, reduced monthly repayments, equity release for renovations, the option to purchase another property, and debt consolidation. However, when considering refinancing, it’s essential to weigh the risks as well.

Switching home loans may result in additional fees and charges, new lending requirements, hidden costs, loan suitability, and impacts on your credit score. Additionally, before refinancing, it’s important to consider the loan features, fees, and customer service of your new lender. By weighing the pros and cons of refinancing, you can determine whether it’s a viable option to achieve your financial goals.

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We specialise in Development funding | Commercial finance | Construction loans | Portfolio refinancing & Property investment loans in Australia.

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Post Date : 05/23/2023

Title : What is a buyer's agent?

Description :

What is a buyer’s agent in Australia?

A buyer’s agent in Australia is a professional who acts on behalf of a home buyer in the purchase process. They help buyers identify the ideal property, negotiate the price, and oversee the transaction.

Tasks of a buyer’s agent in Australia

Australian buyer’s agents may undertake the following tasks and responsibilities:

• Locating properties that suit the buyer’s needs and preferences
• Conducting property inspections
• Contract interpretation
• Negotiating price and terms
• Communicating with lawyers, mortgage brokers, and other transaction professionals
• Advising the buyer on market trends and conditions
• Assisting the buyer in making an informed decision.

Buyer’s agents are licensed and registered like other real estate agents and get a commission based on the property’s price. They’re impartial and represent the buyer.

A buyer’s agent can save time and stress because they are experts in the real estate market and have access to properties that may not be publicly listed.

They also know the legal and financial aspects of the process and can guide the buyer through the purchasing process, which can be especially helpful for first-time buyers or investors.

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Benefits of using a buyer’s agent

Using a buyer’s agent while buying a home or property has several benefits:

• Having a dedicated advocate during the buying process gives you an advantage.
• Provide objective information, recommendations, and help for purchase.
• Searching and assessing the property for you saves time. Having someone handle this for the buyer usually speeds things up.
• Negotiate the best deal.
• Choose a property with superior capital growth and rental yield.
• Access private databases and off-market properties.
• Having one representative instead of multiple selling agents reduces stress.

Ultimate Getting-Started Guides To Property Development

Everything you need to get started in property development.

Includes 6 x detailed eBooks [159 pages]

✓ My Secret Property Development Process (42 Pages)
✓ Preparing For Your First Property Development Project (29 Pages)
✓ How To Choose Property Development Courses For Fast Results (24 Pages)
✓ What Does The Property Clock Say? (14 Pages)
✓ Property Market Cycle – Get In Or Get Out? (31 Pages)
✓ Bonus: Property Investment Strategies: Definitive Guide (19 Pages)

Is a buyer’s agent worth it in Australia?

Whether or not a buyer’s agent is worth it in Australia depends on the buyer’s specific circumstances. Here are some considerations to follow when choosing a buyer’s agent:

Time

A buyer’s agent can rapidly discover houses that fit your preferences and arrange inspections for you.

Expertise

Buyer’s agents know market trends, property valuations, and negotiating methods.

Access to properties

Buyer’s agents have access to properties that may be private, giving you an advantage while shopping for your dream home.

Stress

A buyer’s agent may manage the transaction and communicate with other specialists to reduce stress.

Cost

In Australia, the seller pays the buyer’s agent commission; therefore, the buyer pays nothing.

However, some purchasers may not justify the cost of engaging a buyer’s agent. Thus, using a buyer’s agent depends on the buyer’s demands and the purchasing process’s intricacy.

Learn More

• Important costs for your property development cost budget

Depending on the buyer’s goals, time, and money, a buyer’s agent can provide professional advice, access to properties, and support during the buying process.

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Post Date : 05/22/2023

Title : How to choose a builder that won't go bust?

Description :

How to choose a builder that won’t go bust?

Choosing a builder to work on your project is a crucial decision that requires careful consideration. With the increasing number of building contractors available in the market, it’s essential to choose a reliable and reputable builder who won’t go bust halfway through your project. Here are some factors and tips to consider.

How to choose a good builder?

Several considerations and ways assist you in avoiding hiring a builder that has gone bust.

Reputation and Experience

Reputation and experience are essential when hiring a builder. You may read customer reviews online. Ask relatives, friends, or coworkers who just finished a building project for suggestions. A reputable and experienced builder is more likely to provide excellent work on schedule and within budget.

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Financial stability

When choosing a builder, financial stability is crucial. You want to be sure your builder can finish the job without going bankrupt.

Check their financial statements, credit ratings, and other information to assess their financial soundness. You may also get a guarantee or insurance against builder bankruptcy.

Certifications and licences

Licensed and certified builders are trustworthy. Check the builder’s local licence and industry qualifications.

These credentials show that the builder is competent, trained, and up-to-date on construction codes.

Contracts and Warranties

Read and understand the builder’s contract before signing. The contract should specify the scope of work, project timeframes, payment terms, and other specifics.

Builders should also guarantee their labour and supplies. A reputable builder should offer guarantees and warranties for flaws and damages during and after the project.

Warranties and Insurances

Add this to your list of making sure by sighting a confirmation that the builder has indeed taken out domestic building insurance.

Recently, when Porter Davis collapsed, one of the largest project builders in Australia, it was revealed that the builder was taking deposits from clients without actually taking out home owner’s warranty insurance, which covers the client in case the builder goes bust.

So as part of your due-diligence, you must sight the home owner’s warranty insurance certificate that the builder has taken out against your deposit to cover you.

Communication and project management

Successful building projects require good communication and project management. A trustworthy builder will communicate with you throughout the process.

A project manager should oversee the project, guarantee it’s finished on schedule and within budget, and resolve any concerns.

Property Development “How To’s” & Frequently Asked Questions

Includes 5 x detailed eBooks [142 pages]

✓ How To Become A Property Developer? In 10 Easy Steps (51 Pages)
✓ How To Overcome Fear In Property Development? (15 Pages)
✓ How To Become A Real Estate Developer? Without Experience (37 Pages)
✓ Property Developer FAQs – Who, What, When, How? (20 Pages)
✓ How To Become A Real Estate Millionaire In 10 Steps? (19 Pages)

Quick tips to choose a builder that won’t go bust

Check credentials

Check the builder’s licence, insurance, and credentials.

Choose a builder with relevant experience.

A builder who has worked on projects like yours will know the rules and regulations.

Ask for references

Contact the builder’s former clients to gauge their service and job quality.

Learn More

• Is a property developer a builder?

Consider location

A nearby builder will make inspections and work simpler.

Communicate well

Make sure the builder can explain the procedure, and you can communicate with them.

Compare detailed quotes

Before choosing a reputable builder, request a complete quotation with all expenses and materials and compare it to others.

Check their reputation

Check internet reviews, testimonies, and ratings.

Check insurance

Ensure that the builder’s liability and workers’ compensation insurance are sufficient.

Hire a builder who offers a warranty.

A builder that gives a warranty is more likely to stand behind their work and accept responsibility for any difficulties.

Question their project management.

Learn how the builder will handle and finish the project on schedule and under budget.

Check their communication and responsiveness.

A professional builder will respond to your requests and keep you informed during the construction process.

These things will assist you in assessing the builder’s qualifications, experience, and work style.

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Post Date : 05/21/2023

Title : What is a Quantity Surveyor?

Description :

A Quantity Surveyor (QS) in Australia is a professional who specialises in the measurement, management, and documentation of construction costs.

They are involved in the project from the initial feasibility stage to the final account. They provide cost-effective solutions and advice to clients, architects, engineers, and contractors in the construction industry.

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What does a quantity surveyor do?

Quantity Surveyors are responsible for ensuring that the project’s cost is managed effectively, providing cost-effective solutions, and providing accurate and timely information to all parties involved in the project.

They work closely with architects, engineers, project managers, and other professionals to ensure that the project is completed on time and within budget.

Some of the specific tasks that a Quantity Surveyor may perform in Australia include:

Provides estimate for material costs

Quantity surveyors evaluate customer material prices by considering the type and quantity of material needed for a construction project. They advise clients on the most cost-effective project materials.

Analyse construction designs

Quantity surveyors analyse construction designs to identify material needs. Quantity surveyors can effectively study blueprints since they summarise construction projects.

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Review existing budget

Quantity surveyors typically check a company’s budget to see whether it needs improvement. They may cut or boost department funding while revising budgets.

Manage projects

Quantity surveyors supervise projects to stay on budget. They evaluate project viability, plan revisions, and costs during construction. Quantity surveyors supervise projects with architects, engineers, and builders.

Negotiate contracts

Quantity surveyors prepare and negotiate contracts between their customers and construction business to maintain the budget.

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Track expenditures

Quantity surveyors also track expenditures by creating budgets, contracts, and purchase receipts for their customers.

Examine the company’s finances.

Quantity surveyors must also extensively assess their clients’ accounts to fix any anomalies that might cause financial harm. Client financial estimates are often based on this study.

Visit construction sites

Quantity surveyors visit building sites to verify projects stay on budget and employees use all purchased materials. If not, they can order less material for a similar job.

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Role of the quantity surveyor in the construction stage

Quantity surveyors estimate and track construction costs for all building types.

Quantity surveyors understand building documents (architectural and engineering plans, drawings and specifications). They estimate and track expenses from idea to completion using construction methods and supplies.

Pre-construction or design phase

Quantity surveyors create cost plans for concept design, design development, and construction tender documents throughout pre-construction. They help evaluate and select builders and create tender documents (Bills of Quantities or schedules of rates).

Construction phase

Quantity surveyors track construction expenditures against planned categories and report on project expenses. They may also help you with monthly cash flow forecasts and progress payments.

Completion of the construction phase

Quantity surveyors can provide tax depreciation schedules and insurance replacement cost estimates after construction. They may also assist in mediation and arbitration.

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What is a quantity surveyor report?

A quantity surveyor report is a detailed document that provides a comprehensive assessment of the cost and quantity of materials, labour, and other resources required for a construction project.

The report includes a breakdown of all expenses involved in the project, such as the cost of materials, labour costs, and other expenses.

This report is prepared by a quantity surveyor, who is responsible for ensuring that the project is completed within the allocated budget and according to the client’s requirements.

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Post Date : 05/18/2023