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1) No written plan

People generally fall into four categories. First, there are people who are not investing (they haven’t taken action yet). There are people who are not investing enough (i.e. who are not maximising their opportunities). There are people who are investing too much (yes, that’s possible). They think that the clock is ticking and they must buy another property before the bell sounds. These people are probably unnecessarily taking too many risks. Last, there are people who are investing the right amount – not too much and not too little – just right. There are very few people in the last category. The sole reason for this is that people fail to stop and ask themselves; “how much property do I need to own (in dollar value), when do I buy it and what do I need to do with it?” Instead, they buy one to “see how it goes”, get distracted by all things work and family and wake up one day and realise that retirement is just around the corner. Alternatively, some people make a promise to themselves to “buy one property a year”. That is such a meaningless goal and smacks of zero planning (although I must admit that it’s better than doing nothing).

As the old adage suggests, “aim at nothing and you’ll hit it every time”. Having a goal and a plan to achieve that goal significantly increases your chances of success.

2) Not reviewing performance

Time is irreplaceable. There is one thing that most property investment strategies need and that is time. Therefore, if you are holding investment properties, you must ensure that they are using time efficiently. You don’t want to hold onto a property for 10 years only to realise that it’s a dud and hasn’t increased in value by anymore than 5% per year. You’ll never get that time back again. You need to find out if your property is a dud as soon as possible, so that you can sell it to the first person silly enough to buy it.

It is absolutely critical that you review your investment properties’ performance periodically (probably annually). Look at the growth (change in value). Compare it to what the general market has done. If we select good quality assets, then we should expect them to outperform the general market. Therefore, if the median value in your State has increased by 10%, you should expect your property to increase by more than 10% (because after all, the median value is made up of good and bad properties).

3) Not being smart about managing risk

Risk comes with all investments. The higher the risk, the higher the expected return. However, you can exploit this equation by developing a smart risk management strategy aimed at mitigating or transferring as many risks as possible. A risk management strategy is normally developed after the investment strategy. Therefore, once you have determined how many properties, when, where, how much and so on, you can sit down and identify each and every risk. A risk is something that can prevent you from meeting your goals. The most common risks for property investor are:

• Under-performance – the investment’s capital growth or rental yield (income) do not meet expectation.

• Ability to acquire sufficient property – this relates to borrowing capacity, having a debt plan and managing cash and equity.

• Ability to hold onto the property long enough to “do its thing” – this relates to your ability to support the property with other income such as salary. What happens if you lose your job or fall ill and can’t work?

Most of these risks can be mitigated (reduced) or transferred. Fixing your interest rate on your investment loan is one way you can mitigate risk (as your interest rate exposure is therefore capped). Obtaining income protection insurance is one way of transferring risks (as you transfer the risk to the insurance company). It is important that you have a plan to reduce risk as much as possible, as this will greatly increase your chances of success in the long run.

Written By : Stuart Wemyss
Source : Property Investment Update (2 October 2009)

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Wireless systems are enthusiastically promoted as the future of home automation by many industry members. So how do they work and benefit you and your family?

Wireless home automation systems use radio frequency (RF) transmitters to send information to devices such as computers around your home.

The major drawback of wireless networks is that they can’t transmit the amount of data with the speed of a fully cabled network. The CAT 5e cables found in most computer networks can transmit data at a substantially higher rate than any wireless network on the market.

This isn’t something that should upset you – wireless solutions are more than adequate for most applications and are getting more advanced all the time. Wireless is very suitable for automating your appliances and light fittings, for example, and wireless internet has enough speed to sate the average user.

Wireless is useful in places where wiring is difficult. If you live in an existing house or flat, particularly one that’s double brick or sandwiched between two concrete slabs, you have little choice but to retrofit your home with wireless. It’s especially useful for renters who aren’t allowed to rip up their landlord’s walls.

With a bit of thoughtful planning and careful selection of technologies you should be able to put together a system that will do everything you want.

In terms of home automation, solutions such as Clipsal’s C-Bus Wireless or HPM’s iCONTROL are very attractive prospects for a pre-existing home. Appliances can be automated by plugging wireless communicators into your standard power sockets, and switches on your walls can be installed without cabling.

It’s actually cheaper to set up wireless home automation if you are just looking at connecting a couple of rooms, however if you’re looking to do the whole house with all the bells and whistles laying cables is probably a more cost effective option. That’s because the wireless connections aren’t capable of the sort of data transfer like a wireless computer network. You can still have Clipsal’s touch screens, for example, but they’ll need to interface with a wired component to get the data that appears on them.

Clipsal, HPM and the other players in home automation have created their own wireless protocols to offer reliability and features specific to automating your home. Although they can be jigged to interact with a computer network, they don’t use a standard specification like wireless broadband or wireless mobile phone headsets do.

Let’s look at those standards in more detail. They’re what you’ll need to know when you want to set up a wireless network (or more specifically, a wireless local area network or WLAN) in your home so your computing devices can talk to each other.

• 802.11 (WI FI) – Designates a variety of standards that provide ethernet connectivity to computers fitted out with wireless network cards. The most used standard is 802.11b, but a faster version of the technology is slowly superseding it. Called 802.11g, it offers speeds of 54 megabytes per second (Mbps). Wi Fi is also used at wireless ‘hotspots’ the world over, public places where people can use their device to connect wirelessly to the internet. Some food chains and airports, for example, have set them up. If you want to use your laptop to connect to the internet outside your home, make sure your network is Wi Fi compatible. Just like your desktop computer, network router, broadband modem, and any other device you want to put on a WLAN, it will need to have a wireless network card – or an inbuilt wireless transmitter – to transfer data.

• BLUETOOTH – A short distance, low speed radio frequency technology, primarily used to allow a Personal Digital Assistant (PDA) or mobile phone to interact with a laptop of desktop computer. Bluetooth is increasingly becoming standard on these devices. It’s used in the home for a variety of applications, such as sending images from your Bluetooth-enabled mobile phone or digital camera to a printer, or using a handsfree, wireless mobile phone headset. At the moment Bluetooth is unsuitable for high speed transfers of large data, for example broadband internet. Future advances may make this possible, but for now you’re restricted. That’s why, when you your Bluetooth devices, it’s sometimes called setting up a PAN, or personal area network.

• SECURITY – Wireless data transfers can be intercepted by anyone within range who has an appropriate receiver, so it’s very important to secure your network. If you have an unscrupulous neighbour with a Wi-Fi card in their laptop, you may find that they start using your wireless broadband to connect to the internet. A dedicated hacker may even be able to break into your computer, although this is unlikely to occur.
But accessibility has advantages for you, too. You can work from your laptop or notebook anywhere in the house, or and head downtown to the CBD, sit in the sun, and still have the same access to the net – as long as you’re inside a ‘hotspot’.

Source : Sebastian Vasta (www.realestate.com.au)

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When buying investment property, one of the important figures to look at is the rental return on the money you’ve invested, also known as the net rental yield.

Investors should assess the net return and compare it to the average returns available on other properties when deciding whether to proceed.

Too low a return may mean that alternative investments should be reviewed, while a very high relative yield may mean there is an accompanying risk factor that’s higher than normal, PK Property Search and Negotiators advises.

Areas that produce lower yields predominately have a higher capital gain, which might be the ultimate aim.

The yield is calculated by starting with the purchase price. This is the denominator. The numerator is your net yearly income.

To figure out the net income you take your yearly gross rent and subtract your outgoings. Outgoings for residential properties include management fees paid to the letting agent, council and water rates for the year, estimated repairs, maintenance and strata levies and land tax if applicable.

You should set aside a yearly amount for repairs and maintenance, since big expenses occur periodically and not necessarily yearly.

When investing in property plan to hold the property a minimum of five years. This accounts for economic cycles and changing conditions.

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