Quality Real Estate Tips
Renting Basics: Tenants Rights
Rental properties are a good place for first time buyers to save their funds before climbing onto the property ladder. Thus far in our renting basics series, we have looked into finding the right property and understanding tenancy agreements upon moving in, among others.
Provided you’ve been through the paperwork with a fine-toothed comb, most rental periods go swimmingly – but there is the odd occasion when unforeseen difficulties between tenants and landlords/property managers may arise. In light of this, what are your rights as a tenant? Here are just a few.
According to NSW Tenants, it is your right to have “reasonable peace, comfort and privacy” while you reside at your rental property. If the landlord or anyone associated wants to visit, appropriate notice has to be given, as well as your consent.
You have further rights. Consumer Affairs Victoria asserts that a rental property owner is not allowed to undertake an inspection until three months of continuous tenancy, and after that no more than four times in total over each year – it does differ slightly state by state, so make sure you check with your relevant authority.
Repairs and Maintenance
Provided it isn’t your fault, the landlord is obliged to fix any damages or things that aren’t working. Necessary repairs can include failures to the power or gas supply and any breakdown of essential services like hot water, cooking, heating, cooling or laundering.
If you are unable to contact your landlord, they are taking too long to do urgent repairs or are unwilling to do them, you can arrange for the fix ups to be done.
Health & Safety
They might have been great materials to use in the 1940s, but asbestos and lead are both now largely banned for most uses across Australia, because of the health and safety risks.
If your rental property has these materials included and provided they pose a risk to your health, you can request them to be removed as part of your landlord’s obligations. This is the same for any potential safety hazard your rental property may have.
Just like any repairs or maintenance, ensure you record all conversations in writing and keep them on hand – you never know when they might come in handy!
6 Mistakes People Make When Buying Real Estate in Their Super Fund
Purchasing property in a super fund is extremely popular, however there are number of common mistakes that people make when they buy. Ken Raiss, Managing Director, Chan and Naylor, shares the top 6 mistakes he says people make when buying real estate as part of their super.
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Mistakes to Avoid
You cannot use borrowed funds to improve the property. Improvements include additions, granny flat, extensions etc. For these activities cash resources of the fund must be used. You can however use borrowed funds for cosmetic renovations. It is critical to keep good records in your SMSF to identify whether borrowed funds or internal cash is used. When debt is used, the property must be held in a Holding Trust with a Corporate Trustee and not directly in the SMSF.
Apart from the legislative requirement to not hold the property directly in the SMSF there are real and practical reasons why you would not want to hold it in the SMSF.
Associated Party Loan
Many people use external funds to assist them in purchasing property in their SMSF by contributing the cash as a non-concessional contribution. The problem is that once contributed you cannot get the funds back until retirement or worse still you cannot put in sufficient funds within the allowable limits. You can however lend the funds to your superannuation which allows its release if refinanced and there is no limit on the amount of the loan.
The mistake that many people make is to lend the funds with a simple loan agreement. The loan agreement must meet the limited recourse borrowing requirements of the legislation as well as clearly identifying all terms and conditions. Note: Market Interest Rates must apply.
Renovations which merely return the component back to a new condition are classified as repairs for the purposes of the superannuation borrowing legislation. Therefore a cosmetic renovation which replaces the existing kitchen or bathroom is allowable even with borrowed funds.
The mistake often made is to improve the kitchen by say extending the bench area or knocking down a non-load bearing wall. The latter two are deemed to be improvements and must use internal SMSF cash. It is a simple matter to ask your builder to split the invoice to show the improvement as a separate piece of work which can then be funded with cash and not borrowed funds. If a property is demolished and say a duplex is built or land is initially purchased and then a separate contract to build is entered into then these are changes to the original asset and cannot be done within the SMSF while there is still an outstanding debt on the property.
Life insurance premiums are tax deductible in super. A common mistake is to assume this is still valid if the SMSF fund takes out a policy to repay debt on the death of a member. It is not. For the premiums to remain tax deductible they must not relate to the specific use to pay down the debt. Insurance to effectively achieve the same outcome and be tax deductible is possible with the correctly worded SMSF and policy identification which may also improve the liquidity of the fund if a death benefit arises in a fund holding property with debt.
When the debt is paid down the property must be transferred from the holding trust into the SMSF. Many states will charge stamp duty at the full property transfer rate. With the initial use of additional documentation at the time of purchase the second stamp duty trap can be avoided.
Purchasing From a Member
While the SMSF can purchase a residential property from a non-related third party, it cannot purchase a residential property off a member or related person of the member. An SMSF can however purchase listed shares or business real property (commercial and industrial) off a member. There will be CGT and stamp duty consequences to the sale but in relation to stamp duty most states allow for a minimal stamp duty if the property is in the individuals name and they are also the SMSF member directly benefiting from the property in the SMSF.
BASICS OF BUYING & SELLING A PROPERTY