For many people, an investment property forms part of their retirement plan. In order to avoid any major cracks in the future, this precious nest egg should be nurtured along the way so it lives up to its promise of financial security when the time is right.

This is why it is so important that you select an agency that you can trust, to manage your property as if it were their own.

With tax time looming it’s the perfect time to ensure you’re getting the right level of service from your agent. Paying a management fee covers more than just rent collection; it is also a tax deductible service that should ensure your agent keeps your property well maintained and earns you maximum rental return.

To ensure successful management of your investment property and returns, you need to work with a qualified agency that has a committed and professional approach. Your agency must have attention to detail, knowledge of all the appropriate legalities, and efficient procedures in place to manage the day-to-day demands of a portfolio of investment properties.

The average management fee in NSW ranges between 5% – 7% depending on location and service provided. However, it is the little things that will set a great agent apart from the average.

Ensuring the property is spotless when a tenant leaves is so often overlooked; with dirty vents, cupboards, light fittings and many small areas missed during a vacate inspection. These issues will just build up over each new tenancy and lead to early replacements. A good agent will also ensure everything is in working order rather than waiting for the new tenant to advise.

Detailed pictures of the property are essential in today’s market. Images ensure there is no debate over the condition of the property at the end of a lease, and with a furnished property, an agent can ensure the property is styled as beautifully as it was when it was handed over.

Organising cleaners, removalists, tradesmen and sourcing any service the property or landlord needs should all be part of the deal and at the end of the financial year, your agency should give you a complimentary end of year statement to pass on to your accountant.

Finally, communication is key. Keeping landlords up to date with values and market trends is something our agency is passionate about delivering on a regular basis.

Rohan Alexander, my Associate Director at Lifestyle Property Agency, has specialised in managing and leasing inner city properties for over a decade and always goes above and beyond for clients. Just recently, to ensure a deal was closed for the landlord, he organised a crane to lift a large piece of furniture onto the balcony as it wouldn’t fit in the lift of the apartment building. Both the landlord and tenant were extremely happy with the outcome.

According to Rohan, the following checklist outlines everything a good property manager should be doing for their clients:

1. Manage the property like it’s your own. Be positive, enthusiastic and proactive – there is always a solution!
2. Ensure there is a minimum of two routine inspections per annum – it is essential to monitor the property during tenancies. Many agencies don’t even carry out one inspection per annum!
3. Review the market rent every 6-12 months, depending on the length of the tenancy. The smallest increase will maximise your return
4. Have a great relationship with both the owner and tenant; looking after both parties ensures a smooth tenancy
5. Be proactive with maintenance rather than reactive
6. Ensure your tradesmen are good at what they do, are reasonably priced and reliable
7. Always return calls! Many people don’t hear back when enquiring about a rental property. Prospective tenants, owners and current tenants should always receive a response, whether it is good or bad news

Choosing the right agent is worth the initial investigation and like anything the cheapest is not always the best. Make sure that this small tax deductible cost is working for you and your property portfolio, to maximise the opportunity for positive capital growth in the future.

• The Australian
• 
  
• NICK HASTINGS
• June 19, 2013 10:02AM
• 
  
• GROWING up is hard to do for the Australian dollar.

The number of residential property rental vacancies increased again during the month of May, rising by 0.1 percentage points to 2.1% and coming to a total of 59,670 nationwide, the latest SQM Research figures show.

It was the fourth straight month that the vacancy rate has eased, according to SQM Research calculations.

The majority of capital cities either experienced modest rises, or remained the same during May, with Darwin being the only city to experience a decline – falling from 1.1% to 1.0% month on month.

Melbourne has the highest vacancy rate – 2.7% – of all the major capital cities, but was unchanged over May with 11,806 vacancies.

Perth has the tightest vacancy rate of the major capital cities, though it eased slightly from 1.2% to 1.3%.

Click to enlarge

Given that a vacancy rate of 3% indicates a balanced market between landlords and renters, Perth remains in a severe rental crisis.

Looking nationally, SQM Research managing director Louis Christopher said the May result “reflects a rental market that is continuing to loosen, albeit gradually”.

“However, SQM Research stands by our original prediction that until there is a mass exodus of renters prompted by absorption of stock from the sales side of the property market, we will not see massive increases in vacancy rates,” he says.

Christopher says the rental market is starting to provide “some choices for tenants”.

“Vacancies have increased four straight months now. This is also showing up on our weekly rentals index where cities such as Canberra and Perth have recorded falling rents in recent months,” he says.

Other key findings of the May report:

• Darwin has recorded the tightest vacancy rate of the capital cities, revealing a vacancy rate of 1.0% and a total of 237 vacancies.
• Canberra has recorded the highest yearly increase in vacancies. Climbing 0.8% to 1.5% since the corresponding period of the previous year (May 2012) and coming to a total of 798 vacancies.
• Hobart was the only capital city to record a yearly decrease in vacancies, falling by 0.1% to 2.7% since the corresponding period of the previous year (May 2012) and coming to a total of 739.
• Hobart has however, recorded the highest monthly increase in vacancies, rising by 0.2% during May 2013.
• Darwin was the only capital city to record a monthly decrease, falling by 0.1% to 1.0% during May 2013

St Kilda Road on the Melbourne CBD fringe has the highest residential vacancy rate in Australia, according to figures compiled SQM Research.

There were 360 properties vacant in May in postcode 3004, which is predominantly St Kilda Road, equating to a vacancy rate of 13%.

There are 3,651 apartments along St Kilda Road, according to Census 2011 data, and only seven separate houses.

The census data indicates it is property investment hotspot with more than half of apartments (52.6%) on St Kilda Road rented.

SQM Research data shows that the vacancy rate has actually declined on St Kilda Road having peaked at around 24% in January 2102.

In total there are six Victorian postal codes on the top 10 list including two more in Melbourne.

These are Doreen, 26 km north-east from of the city, has a vacancy rate of 11.2% with 142 properties vacant over May and Southbank, just across the Yarra from the CBD, with a vacancy rate of 9.7%.

Commenting on the high vacancy rates on St Kilda Road and Southbank, SQM Research director Louis Christopher suggests this may be driven by the rise in the number of new residential property developments that have come into these areas in recent years.

“I think there is no coincidence the two postcodes are in close proximity to each other,” he says.

House and unit prices have remained “relatively flat over recent months” though ”still higher than the previous year” the minutes of the June 4 RBA board monetary policy meeting reveal.

However, signs of a pick-up in household appetite for borrowing and a “range of housing market indicators” suggested to the RBA the “housing market generally appeared to be improving” following previous cash rate cuts.

At the June 4 meeting the RBA left the cash rate unchanged, but the minutes reveal it discussed the possibility of further rate cuts noting that the “inflation outlook as currently assessed might provide some scope for further easing, should that be required to support demand”.

Overall with respect to the housing market, the June minutes were similarly upbeat as they were in May with members observing “that the effects of low interest rates had been evident in a range of housing market indicators”.

“Building approvals for both higher-density and detached dwellings had increased over recent months.

“The Bank’s liaison contacts were generally becoming more positive about the outlook for dwelling investment.

“Also, loan approvals had grown more strongly in recent months, including for new housing, and auction clearance rates were well above average in Sydney and had picked up to be a bit above average in Melbourne.

“While measures of dwelling prices had been relatively flat over recent months, they were still higher than the previous year,” say the RBA minutes.

The RBA board also notes that following the decision in May to reduce the cash rate target by 25 basis points, “most lenders in Australia had subsequently lowered their standard variable housing rates in line with the reduction in the cash rate”.

“This resulted in lending rates for most households and businesses reaching or approaching historic lows.

“There were also signs that the appetite for borrowing in the household sector was picking up, and the housing market generally appeared to be improving, as the effects of the most recent and earlier reductions in the cash rate worked their way through the economy,” says the RBA.

In the minutes accompanying the May 7 decision to cut the cash rate by 25 basis points to a 53-year-low of 2.75% the RBA noted that “conditions in the housing market remained generally positive” with dwelling prices “around 4% above their trough in mid-2012”, and that auction clearance rates had increased.

It also noted an improvement in the mortgage market and that the pick-up in demand for new housing was improving “with enquiries from prospective purchasers and visits to display homes increasing”.

“New dwelling investment had increased since the middle of the previous year, with members observing that approvals for higher-density dwellings had increased, while approvals for detached dwellings had been flat over this period,” said the RBA in May.

Property Observer recently reported that the Australian Tax Office will write to 110,000 property investors over concerns they may have claimed rental property deductions they were not entitled to claim.

The ATO now has sophisticated data-mining tools that pick up inconsistencies in tax returns compared with previous years,

With around two-thirds of property investors negatively gearing their rental properties, knowing what you can claim is vital.

These are seven allowable rental property deductions:

1. Claim straightaway for interests on loans

Some expenses may be immediately deductible in the income year in which they are incurred. For example, you may be able to claim an immediate deduction for interest on a loan used to purchase a rental property, purchase land to build a rental property, purchase a depreciating asset for the property – such as an air conditioner; or to finance renovations or home improvements, like a deck.

2. Claim straightaway for depreciating assets

Deductions can be claimed in the income year in which they are incurred for the decline in value of some types of depreciating assets in residential rental properties – for example, curtains, blinds, dishwashers, refrigerators, stoves, television sets and hot water systems. However, construction costs are not depreciating assets

3. Claim straightaway for costs to repair and maintain your rental property

You can claim a deduction for the costs that you pay to repair and maintain your rental property. For example, replacing part of the guttering or windows damaged in a storm; replacing part of a fence damaged by a falling tree branch; or repairing an electrical appliance.

4. Claim straightaway for tenancy costs

Tenancy costs such as the preparation of a lease agreement, or costs associated with evicting a tenant are also immediately deductible expenses.

5. Claim deductions over a number of years for assets that are part of the property

You can claim some deductions over a number of years, including the cost of depreciating assets, structural improvements and most borrowing costs. Assets that are part of the property such as stoves, refrigerators, air-conditioning and hot water systems can be claimed over a number of years as a ‘decline in value’ deduction.

6. Claim deductions over a number of years for assets on construction costs

You may also be able to claim over a number of years the cost of building, construction and structural improvements made by you or a previous owner as a capital works deduction, for example adding a room or constructing a retaining wall or fence.

7. Claim deductions over a number of years on stamp duty and other fees

Another example of expenses that need to be claimed over a number of years is borrowing costs such as stamp duty charged on a mortgage, loan establishment fees and title search fees charged by the lender. If these amounts are less than $100 in total they can be deducted immediately. Otherwise, they are generally deductible over five years or over the term of the loan, whichever is less.

This advice is sourced from the ATO. It is of a general nature only and does not constitute financial advice. Investors should seek qualified professional financial and tax advice when completing their tax returns

The Telegraph.co.uk

By Ambrose Evans-Pritchard, International Business Editor

The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead.

“The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation,” said Charlene Chu, the agency’s senior director in Beijing.

“There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling,” she told The Daily Telegraph.

While the non-performing loan rate of the banks may look benign at just 1pc, this has become irrelevant as trusts, wealth-management funds, offshore vehicles and other forms of irregular lending make up over half of all new credit. “It means nothing if you can off-load any bad asset you want. A lot of the banking exposure to property is not booked as property,” she said.

Concerns are rising after a string of upsets in Quingdao, Ordos, Jilin and elsewhere, in so-called trust products, a $1.4 trillion (£0.9 trillion) segment of the shadow banking system.

Bank Everbright defaulted on an interbank loan 10 days ago amid wild spikes in short-term “Shibor” borrowing rates, a sign that liquidity has suddenly dried up. “Typically stress starts in the periphery and moves to the core, and that is what we are already seeing with defaults in trust products,” she said.

Fitch warned that wealth products worth $2 trillion of lending are in reality a “hidden second balance sheet” for banks, allowing them to circumvent loan curbs and dodge efforts by regulators to halt the excesses.

This niche is the epicentre of risk. Half the loans must be rolled over every three months, and another 25pc in less than six months. This has echoes of Northern Rock, Lehman Brothers and others that came to grief in the West on short-term liabilities when the wholesale capital markets froze.

Mrs Chu said the banks had been forced to park over $3 trillion in reserves at the central bank, giving them a “massive savings account that can be drawn down” in a crisis, but this may not be enough to avert trouble given the sheer scale of the lending boom.

Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire US commercial banking system in five years,” she said.

The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. “This is beyond anything we have ever seen before in a large economy. We don’t know how this will play out. The next six months will be crucial,” she said.

The agency downgraded China’s long-term currency rating to AA- debt in April but still thinks the government can handle any banking crisis, however bad. “The Chinese state has a lot of firepower. It is very able and very willing to support the banking sector. The real question is what this means for growth, and therefore for social and political risk,” said Mrs Chu.

“There is no way they can grow out of their asset problems as they did in the past. We think this will be very different from the banking crisis in the late 1990s. With credit at 200pc of GDP, the numerator is growing twice as fast as the denominator. You can’t grow out of that.”

The authorities have been trying to manage a soft-landing, deploying loan curbs and a high reserve ratio requirement (RRR) for banks to halt property speculation. The home price to income ratio has reached 16 to 18 in many cities, shutting workers out of the market. Shadow banking has plugged the gap for much of the last two years.

However, a new problem has emerged as the economic efficiency of credit collapses. The extra GDP growth generated by each extra yuan of loans has dropped from 0.85 to 0.15 over the last four years, a sign of exhaustion.

Wei Yao from Societe Generale says the debt service ratio of Chinese companies has reached 30pc of GDP – the typical threshold for financial crises — and many will not be able to pay interest or repay principal. She warned that the country could be on the verge of a “Minsky Moment”, when the debt pyramid collapses under its own weight. “The debt snowball is getting bigger and bigger, without contributing to real activity,” she said.

The latest twist is sudden stress in the overnight lending markets. “We believe the series of policy tightening measures in the past three months have reached critical mass, such that deleveraging in the banking sector is happening. Liquidity tightening can be very damaging to a highly leveraged economy,” said Zhiwei Zhang from Nomura.

“There is room to cut interest rates and the reserve ratio in the second half,” wrote a front-page editorial today in China Securities Journal on Friday. The article is the first sign that the authorities are preparing to change tack, shifting to a looser stance after a drizzle of bad data over recent weeks.

The journal said total credit in China’s financial system may be as high as 221pc of GDP, jumping almost eightfold over the last decade, and warned that companies will have to fork out $1 trillion in interest payments alone this year. “Chinese corporate debt burdens are much higher than those of other economies. Much of the liquidity is being used to repay debt and not to finance output,” it said.

It also flagged worries over an exodus of hot money once the US Federal Reserve starts tightening. “China will face large-scale capital outflows if there is an exit from quantitative easing and the dollar strengthens,” it wrote.

The journal said foreign withdrawals from Chinese equity funds were the highest since early 2008 in the week up to June 5, and withdrawals from Hong Kong funds were the most in a decade.