reduce the rent? or fix the ad?

Our property settled on May 26th so time for a tenant. The agent put it up on the web for rent at $510 per week...and we waited...and waited...and waited.

After one week he told us the bad weather in Sydney was affecting the property market and we needed to drop the price to $490. As you can imagine I was totally unimpressed. But I had to take his word for it - isn't he the professional? I'm over here in HK so what would I know about fair rental values? So the price was lowered.

Two weeks later and still no interest and now he's saying to drop it to $460! I exploded. Countless filthy emails were composed (and deleted) along the lines of how can he call himself a professional and then ask us to drop our price by 10% in less than a month?! The rest of the Sydney market was increasing so why weren't we?! What rubbish methodology did he use to come up with $510 in the first place?!!! (Ok,  b r e a t h e )

After calming down I decided to look at the online ad to see if it held any clues. Real Estate websites are paramount in Australia; they're probably the most important property marketing tool.

Imagine my horror when I saw our advert - OMG it was rubbish! Dreadful! Dull, ugly photos and a short non-descriptive blurb that ignores all the key features. And excuse me but what is a LUG?  No wonder people weren't interested. The properties advertised either side of ours had over 200 views each - mine had only TEN in the same time! And my property was the one with the ocean views and it was closest to the beach.

In a fit I rewrote the ad and forwarded my version to him, demanding he replace it immediately (in the nicest possible way, of course). Then I very cheekily quoted the weather report and told him it would be sunny for the next 2 days so he'd better get out and take new pics :)

To his credit he changed the text immediately and one day later we had 45 hits! Vindication!! 400% increase in views (my boy sarcastically pointed this out to the agent haha).

Three days later with both new pics and new text we were up to 75 hits. Ha! Bad weather my butt. More like lazy real estate agent.

This is the sad reality of property ownership - there's no such thing as set and forget.

Lesson learned - lazy agents try to drop the price as a first (easy) measure. Instead, make sure your property is being promoted properly to show off its best features first! It could earn you $$$ more in income.

TWFT: CGT issues for expat's buying Hong Kong property

Each week (or thereabouts) I'm going to post the most interesting piece of financial advice I've come across for expats during the past 7 days.

To kick it off, my inaugural expat finance tip is regarding Hong Kong property and capital gains tax.

It's true that one of the many expat-friendly tax rules in Hong Kong is that there's no CGT on the sale of property. And given its not uncommon for HK property to rise 30% in one year, that's a massive tax saving and a bulging purse!

But one thing to note as expat - when you return home, if you still own the HK property and decide to sell...uh oh...you could be stung with CGT! So for those Aussies and Brits who land back in Sydney or London, with their Mid-levels property still in the portfolio - sorry, but you'll now be taxed at your marginal rate on any gain made since the day you resumed tax residency.

E.G.

I'm an Aussie expat living in HK. In 2000 I purchase a HK property for HKD$6,500,000. In 2008 I return to Sydney, at which time my property is worth HKD$8,000,000. The value on my day of repatriation is the new Cost Base for Australian tax purposes. 

In 2010 my property is worth HKD$10,000,000 and I decide to sell it; my capital gain is HKD$10m - HKD$8m = HKD$2m. This is converted to AUD and included as taxable income in my Aussie tax return. Ouch!

Some ways I could manage this:

~ Sell the HK property before I return to Australia

~ If I sell the property when back in Australia, 

a. sell in a year I'm not earning anything (or low earnings) so on a lower tax bracket

b. make a concessional super contribution and claim a tax deduction (maximum is either AUD25k or AUD50k depending on my age AND can only make a concessional contribution if self-employed or satisfying the 10% rule)

c. offset the gain with any other losses I've accumulated

~ Don't sell!

It's potentially a tricky situation so think ahead before returning home.

Using the fine print to your advantage

More about buying a property...

While in the negotiation stage for buying the property, we received a copy of the Contract of Sale. Going through the detail with a fine-tooth comb we stumbled upon:
1. The Vendor and their agent had the same surname (and an unusual one at that)
2. There was a caveat on the property from a finance company
3. A clause to release our deposit monies immediately to the Vendor for their use

What's so interesting about that?
Well, the same surname indicated the Vendor and their agent might be related - giving the agent either extra motivation to get a high price OR extra motivation to get rid of the property quickly. And the caveat indicated the Vendor had a second mortgage on the property - meaning they were under pressure to sell to repay this second mortgage. The deposit clause indicated the Vendor needed our money asap to repay debt or purchase another property.

As it turned out, we were spot on with 1 and 2 and sort of right with 3. Having a chat with our Buyer's Advocate, they went in to the negotiation offering an even lower amount than we had originally planned to offer (now AUD50k less than the asking price), but being completely flexible with settlement date. We also got clause 3 removed - our solicitor said this was too dangerous to remain as the Vendor can take your money and run.

And surprise surprise - our first offer was accepted. The Vendor was under financial pressure but also needed to purchase a new home to live in. They took the flexible settlement a step further and made it 6 - 14 weeks so they can have simultaneous settlement when they find their replacement property. To be honest, not having a concrete settlement date is really unusual and a little tricky to manage, so our solicitor and mortgage broker are aiming to have everything ready by the 6 week mark (if we have to delay settlement it costs us an extra 7% of the purchase price - yuk).

Now it's a waiting game to see when settlement occurs.

Buying a house in Australia when you live in Hong Kong

 

http://www.freefoto.com/preview/33-06-29?ffid=33-06-29&k=Brick+Texture

After 18 months of Hong Kong's low taxes (15% compared to Oz 45%) the boy and I were able to save enough to purchase our first investment property back home. Buying a property from overseas is a whole different kettle of fish - you can't just do a drive-by inspection on your way home from work or go to the open-home on the weekend. Plus, you're now dealing in at least 2 currencies which can be confusing as well as expensive (exchange rates + bank transfer fees). There's so much to think about. No one really tells you how to do this so it's a little trial-by-error.

We haven't settled yet but I'm going to do a series of posts to cover the different issues we've faced or lessons we've learnt.

~ Firstly, think about how you are going to FIND the property. You've got a couple of options:
a. Spend every spare minute you have on real estate websites (www.realestate.com.au)
b. Get family members back home to check the options for you
c. Fly back to your home country for hunting missions
d. Pay a Buyers Advocate to find one for you

To be honest, we are pretty protective of our spare time and also wanted to buy in a different state to our family, so a and b weren't options. Option c was too expensive so we went with d. Yes, it cost us AUD15,000 to have someone find our property BUT, unlike our house-hunting friends, we didn't spend every weekend for 4 months driving around the countryside looking at properties. Plus, for Australian investment properties you can add these fees to the Cost Base of the property (which helps save a little tax if you eventually sell).

During the 3 months it took our Buyers Agent to find our property, we had 2 friend's weddings, 2 house visitors and a ski holiday - when would we have had the time to look for ourselves? Like everything, its that battle between money and time - which is more important to you. Ultimately, I'm happy we paid a professional to use their knowledge and experience to find our property, I would have got too emotional about it. Back to his fee - given he was able to negotiate almost AUD$50k off the asking price we figure we're still in front after paying him.

The time between when we met the BA and when they contacted us to say they'd found something felt like ages. And then it felt like they were rushing us when they called to say they'd found something and we had to move quickly. A little more follow up in the meantime would have made us feel more comfortable...but they definitely made up for it once we'd committed and they held our hands every step from there. So big tip - if you've made the committment to engage a BA, have EVERYTHING ready so you can go at the drop of a hat. This includes:
~ enough cash in an account for the deposit (preferably in the correct currency)
~ the ability to write a cheque in the purchasing currency

Next post - Use the fine print to your advantage...