Note: This episode is a re-run of one of our older episodes. It originally aired on 2nd July 2020 😊
In this week’s episode, Bryce and Ben answer 10 listeners’ questions!
With practical advice on property selection and analysis, this episode is your guide to navigating the intricacies of property investment in Australia.
If you have a question, leave us a message here!
If we answer it on the podcast, you’ll get FREE access to our Start & Build Workshop (usually retails for $497!!). This online course is a deep dive on the foundations, framework and everything else you need to know on how to build your very own property portfolio.
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Guests Mentioned
LISTEN TO THE FIRST 20 EPISODES HERE >>
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👉 Google Play: https://bit.ly/3OT86bW
👉 Web platform: https://www.moorr.com.au/
FREE MASTERCLASS:
- How to Build a Property Portfolio and Retire on $2,000 a week >>
FREE BEST-SELLING BOOKS:
- The Armchair Guide to Property Investing
- Make Money Simple Again
FIND US HERE:
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Note: This episode is a re-run of one of our older episodes. It originally aired on 2nd July 2020 😊
In this week’s episode, Bryce and Ben answer 10 listeners’ questions!
With practical advice on property selection and analysis, this episode is your guide to navigating the intricacies of property investment in Australia.
If you have a question, leave us a message here!
If we answer it on the podcast, you’ll get FREE access to our Start & Build Workshop (usually retails for $497!!). This online course is a deep dive on the foundations, framework and everything else you need to know on how to build your very own property portfolio.
Free Stuff Mentioned
Guests Mentioned
LISTEN TO THE FIRST 20 EPISODES HERE >>
MOORR MONEY MANAGEMENT APP:
👉 Apple: https://apple.co/3ioICGW
👉 Google Play: https://bit.ly/3OT86bW
👉 Web platform: https://www.moorr.com.au/
FREE MASTERCLASS:
- How to Build a Property Portfolio and Retire on $2,000 a week >>
FREE BEST-SELLING BOOKS:
- The Armchair Guide to Property Investing
- Make Money Simple Again
FIND US HERE:
- Website
- Instagram
- Facebook
- Youtube
All right, folks, welcome back to the Property Couch Podcast and have we got a special episode for you today? Back in the old days, ben and I used to do Q&A Day, which was our favorite day of the week, but this particular episode that we're going to play today, we actually covered 10 questions. Who would have thought how did we let that get through to the keeper? But 10 questions all about what property to buy and practical tips for asset selection. So we covered what type of property should an investor buy, what indicators can we measure to prove it's a good one, and how can you increase your capital growth.
Speaker 1:Folks, we talk about borderless investing. We talk about moving into one of our rental properties. We talk about Defence Housing Australia. We talk about fixer-uppers, buying to subdivide and building units. We cover a lot of ground in this episode, folks, so it is one that we think is worth making sure that you have listened to. And before you get to the episode, folks, we have a brand new report that has over 20 statistics, 39 pages long, and you can get it totally for free. All you need to do is go to thepropertycouchcomau forward slash property report, leave your details, put in almost any suburb across the country and you can download that for free folks, so check that out Whilst you are listening to this episode, which is a 10-question Q&A on what property to buy and practical tips for asset selection.
Speaker 2:Welcome to the Property Couch where, each week, you get to listen to two of Australia's leading property and money experts Bryce Holdaway, co-host of Location Location, location Australia on Foxtel's Lifestyle Channel and co-host of Escape from the City on the ABC. And Ben Kingsley, chair of Property Investors Council of Australia and a back-to-back winner of the Property Investment Advisor of the Year Award, and both are partners of the multi-award winning Empower Wealth, co-creators of MORE, the free lifestyle design app, as well as best-selling authors of the armchair guide to property investing and make money simple again. Stay tuned as they bring you the insider's guide to property finance and money management all right, folks.
Speaker 1:Welcome back to the property couch podcast and welcome back to youtube, benjamin. Hello, mate, how you going? I'm well. How are?
Speaker 3:you, am I in trouble? You call me. Well, it's what my mum. Well, how are you? Am I in trouble? You're calling me Benjamin.
Speaker 1:That's what my mum used to do when I used to get in trouble. Benjamin, yes, so clearly you're going to talk about the footy. I would have thought, oh no, that's right, you go a little quiet.
Speaker 3:Yeah, we lost our first game. That's right. Yes, by two points away, in difficult circumstances. Yes, against the top four side, poor Collingwood.
Speaker 1:They've had to endure. They don't have to play at the MCG for 20 games for the season. They've actually had to do something else.
Speaker 3:We're going over the West soon, mate into that bubble. So you know, just be mindful of that. But how's for our going on the board yet? How's your percentage?
Speaker 1:Mate, we're going. All right, we're second bottom. So if our percentage was terrible, we're going better than Adelaide, that's for sure.
Speaker 3:No, I understood. Look, it's a difficult, difficult season, very challenging for the spectators, but also for the players, more to the point.
Speaker 1:It's not easy to play footy when you've got all this anxiety hanging over your head. Exactly, and speaking of some challenges, I mean clearly here in Victoria we are not behaving ourselves in terms of the national dialogue for coronavirus, so you can just imagine what the other states think of anyone who's got a Victorian driver's licence or a number plate.
Speaker 3:Well, obviously New South Wales had their own goal, which was the Ruby Princess right and we've. You know, we did everything right based on our directive, we locked ourselves down and we stayed down for longer. It's almost like Bryce. We had three deadlocks on the front door. We had the iron bars on the windows. We had everything secure except the back door. We had the iron bars on the windows. We had everything secure except the back door. The back door was wide open and we're seeing some very interesting stories coming into the media now about the training, the security training that was done. So we had bouncers looking after these returned people in quarantine and let's just say they don't appear to have been well supervised, well educated, and yet obviously in other states and territories they had police and also the army doing the quarantining and the management in a precision way and unfortunately, we had private security and that has definitely put an impact in regard to, obviously, our COVID situation and really jobs and the economy.
Speaker 1:It's definitely yeah, well, it's serious. It's serious because clearly there's a bunch of people that are now going back into a world of pain in those lockdown suburbs. But for anyone who's listening outside of Victoria, it's not just a Victorian challenge, it's an Australian challenge, right? I mean, even if you think about Queensland, for example, how many Victorians are usually sort of frothing at this point in time to head up to Queensland to actually thaw out Correct? And right now they can't even do that? So it affects tourism in Queensland, it affects everything. So it's not ideal. No, it's not ideal. So, as we have done throughout this pandemic Ben is, we've always just wanted to shout out on the community service announcement to say, hey look, let's do it. Download the app.
Speaker 3:Download the app. Let's do it together. You're going to be interrogated with and when you get it, so you might as well just say well, here's my app. Okay, thanks very much, we it.
Speaker 1:So you might as well just say well, here's my app, okay thanks very much.
Speaker 3:We know where you've been.
Speaker 1:It's all good, nothing to see here. Download the app, people. So there we go, folks, we've got to take this seriously, and it's not ideal that we've re-entered into this phase. Hey Ben, you've got some picker news.
Speaker 3:Yeah, look, I think the biggest picker news of the week has been the Western Australian Government have called for submissions for their tenancy review. And look, I've got to be honest, Bryce, they've had some thought bubbles going on over there which are a little bit interesting, so I wanted to just share a couple of those in terms of some of their proposed changes. Now, at this stage it's just in, you know, sort of thought bubble stage, but you know frequency of rental increases reduced to every two years. Rent increases capped to be applied on all investment properties. Modifications to premises without owner's consent and the lesser requirement to obtain an order that withholding consent is justifiable. Landlords are required to lodge a bond. Landlords are required to lodge a bond. Landlords are required to lodge a bond. Termination of tenancy agreement by the tenant in prescribed situations without incurring break lease fees. Removal of no grounds termination. Pets to be allowed in rental properties with only limited exemptions, and fixed term tenancy agreements to be prohibited in all circumstances, and the tenant is entitled to renew for a minimum period of five years.
Speaker 3:Sounds like there's a bit of deja vu in some of those questions. Oh, this is ongoing. At this stage it's only in submission stage. So you know this is what our money goes to. We've had Emily, our chair of the Western Australian Picker Association, over there, have done a great job in putting our submission forward. So that's what you know. That's where you know your dollars go to in terms of helping us.
Speaker 3:To put you know, these people are volunteers and we're putting in that submission and obviously we're working very closely with industry to get the balance right, because those proposals don't quite have the balance right. So you know there's more to be said there. We're not panic stations like we are in Queensland and obviously we've got a very poor outcome in Victoria for the owners of the properties compared to the tenants of the property. So I think that's the you know the other point of the properties compared to the tenants of the property. So I think that's the other point. So we've got to make sure that now that we're organised and we can advocate for property investors, we do so. So more to be said here. But that submission will also be uploaded onto the Picker website for people to be able to read as well.
Speaker 1:Okay, so any action that people Picker members at this point Ben, or is it just an FYI?
Speaker 3:Look, it's an FYI. At the moment there is a petition running around but I'm sort of thinking look, you know, this is not a critical stage. This is the proposals that closed out on the 30th of June. So from our point of view, we now go into consultation stage with the state government and work through it from there. But that's the big news. But it just goes to show you and it's what I've consistently been saying, bryce, it's property investors are not flavour of the month when it comes to our situation, and if we don't advocate, then there will be further restrictions on interest rates, on penalising us, on negative gearing on capital gains. So the more successful we are, the more restrictions we're going to have put in front of us, and that, to me, is very concerning for Australians who basically want to self-fund their retirement and not be a burden on the government in the future. So from that point of view, it's challenging, but more to be said in future episodes, I'm sure.
Speaker 1:There you go. Very good. Hey, if we kick on our show today, ben, we're going to do Q&A day today, which we're pumped about. We put a shout out to the socials around what property to buy, so we've got some really great questions. We're going to get to those shortly.
Speaker 1:But, um, my mindset minute theme that I want everyone to sort of go into this weekend with ben is is a concept around being coachable, and usually the, the players that, uh, that a coach, uh, particularly likes working with, are the ones that are actually prepared to actually take on advice and improve versus the ones who aren't coachable. And and I I want to use that as a context because I've got a story where, as you know, ben, I have had a desire to learn the guitar for some time and I've had a couple of false starts around having a go at doing it myself, and what I quickly realized is I actually wanted the accountability of talking to someone who could coach me through it right, and so I had this interesting scenario where I did three lessons. First, two lessons I was really, you know, into it and then the third lesson, you know, I had to do the basic chords, sort of A minor, the E chord, c chord and the G chord, as well as understand all the frets and then do some strumming, right. So for anyone who plays the guitar, all the basics right. But what I was doing was not putting in the work in between the second and the third lesson, ben. So I get to the third lesson and he's going oh, give me, show me A minor. And I had to sort of go back to the basics and, you know, slowly get my fingers ready for the strings. And so he just looked at me and he just went you haven't been actually doing the work in between the lessons, have you? And I went well, excuse number one, excuse number two, excuse number three. And then all of a sudden I went hang on a second. That's actually not good enough, right, because I'm the one who wants to be the one playing, not the guy who's teaching me, right. So it was an interesting exercise for me.
Speaker 1:But here's the gold, right. When we unpacked it it was a kind of a case of you've actually just got to have the guitar in your hand, a bit right. So he said, when you're sitting on the couch, what you do is you have the guitar there, and so what I'm doing is I'm doing the spider through the chords. Ben, I can actually now recall the chords quite well. I sort of ghost strum so I can get the technique right. And all of a sudden, just by doing that particular technique, I'd say my growth in that particular instrument has gone exponential. Probably 3, 4x from the previous lesson, right, great. So I guess the point of the story is not about guitar lessons, right, it's about being coachable, because the tip was to actually do the work on the couch when you're doing other things and if I
Speaker 1:did. If I didn't do it, well then I'd be going back to the next lesson sort of in the same position, whereas now I'm really excited about going to the next one to up my game. So what does that mean for the context of what we're talking about here? We want every single one of our listeners to be coachable. Right, we've given the frameworks where you sign off every week, ben, by saying knowledge is empowering, but only if you act on it. But here's the deal If you are the people who have had success, we have people who write into us, ben. We've had people who have testimonial videos. We testimonial videos. We've had people who and the reason that they're actually having success, ben, really comes down to the fact that they're coachable. Here's a framework. They've implemented it. Here's a framework versus the people who go yeah, yeah, yeah, I've heard that before or already know all about this. So I'm going to have a life hack today, which I'll get to later on the episode around being coachable. But what I want to say to folks, the important thing is that you've got to be coachable, ben, because we talk about these frameworks, we give people an opportunity to implement these frameworks, but at the end of the day.
Speaker 1:This Mindset Minute is not about a guitar lesson. It's just about a parable around the fact that, if you want to be coachable, the advice that we're giving Ben so we've been to the summit, we want to take people along to the summit with us and our advice is to implement our frameworks. Number one is to make sure that you get the house in order, which is the basics of money management. We've given some resources for that. Number two is then you implement the frameworks to allow you to buy investment properties under a get-rich-slow scheme, so that you can reach the summit. So I just want to shout out to those people who aren't coachable to actually think about whether or not you are someone who, for whatever reason, can change your stance so that you can be coachable, because what we're saying is money is simple, behavior is hard. Get around the behavior stuff and make sure you're coachable.
Speaker 1:So, again, using the analogy of what I've just gone through with uh, with with guitar lessons, which can be applied to any area of life, it's important that we remain coachable, and I just want to remind folks who haven't actually got a copy of our books Ben, you can get a free copy of Make Money Simple Again by going to makemoneysimpleagaincomau. It's a digital copy. You can get it straight away. And if you want to get a copy of our first book, the Armchair Guide to Property Investing, you can get a copy of that for free. I think we've got a few still around here in the office for those people that are quick, and if you go to thearmchairguidecomau you'll be able to get access to that. So, folks, my mindset minute for you to think about for the next seven days is make sure that you coach. All the best players in any sport are usually the ones that take instruction and take mentorship for those people around, and we want to encourage you to do the same. So there you go, ben.
Speaker 3:Well said, mate, well said.
Speaker 1:All right, Ben, today is our exhorting, exhorting, exciting day.
Speaker 3:Exciting.
Speaker 1:Exciting as Catherine Kim would be proud Q&A day. So we put a shout out to the socials. So I just want to say to folks if you want to be a part of our Q&A day, I certainly recommend you go over to Instagram, you go over to Facebook, you go to all of our socials and go and like us there, because we do the shout outs and you get an opportunity to get your question read out. But today I'm going to kick it off with Sandbrook's Lex Ben and Sandbrook's question is this I'm going to kick it off with Sam Brooks, lex Ben and Sam Brooks' question is this Long-time listener, first-time engager Welcome.
Speaker 1:We have been epically saving for our first home, which we would like to have the option to make an investment property when we grow out of it. Only catch is we currently live and rent in the Whitsundays, which is struggling significantly due to lowered tourism rates from COVID. Having listened to the podcast for over two years, I understand the risks of purchasing property in a location with a poorly diversified economy, understanding that you are unable to provide personal financial advice. Is there anything else we can do to mitigate the risk, as we love the area and both have stable employment and can see the potential of some of the lower range properties coming onto the market. Ooh, which Sunday's been stable employment, and can see the potential of some of the lower range properties coming onto the market. Ooh, whitsundays, ben, that'd be nice to feel.
Speaker 3:I know the area very well. I lived in Airlie Beach for a period of time there, Bryce, and did some work up there and played footy up there as well. Great part of the world Go. The Whitsunday Seagulls Won a premiership up there with them.
Speaker 1:Very fun time up there in my younger years you watched them win one.
Speaker 3:No, no won one. Yes, I had a great time up there.
Speaker 1:Won the league's leading goal kicker as well, just for the record. What were you? The leading goal kicker, leading goal.
Speaker 3:Kicker in the league Kicked 64 goals in 13 games, so you could understand that it was a wonderful time for me up there in terms of having a bit of fun. So there's a little fluff my own pillows if you want, well done Nice. So, yeah, that was great fun. It was a great time up there, great memories.
Speaker 1:A grade or D grade?
Speaker 3:Oh look, it was called the Mackay AFL, so the Maffle. Yeah, yes, I mean, look, there was only 16, 17. I mean it was old country footy. Right, it was rough footy, but it was a bit of fun.
Speaker 1:So you know that was Not bad, I know I was very lucky, very, very lucky.
Speaker 3:I had that Because what happened? I mean, I know we digress right, but I had VFL players playing, we had VFA players playing, so we had an elite midfield. So all you just needed to do was run to the spot and you would be served up. And you know I'd never leave the 50 arc Bryce. That was back in the day. You could sit in the goal square all day and just lead out.
Speaker 3:Anyway, very fortunate, good fun up there, but we digress. So there's always exceptions to the rule, and this is probably what I wanted to focus in on. If you're because early beach is one of those areas where it can be a boom and bust economy um, when everything's going well, because it is the most beautiful part of the world. As you go to canningvale and come into early beach itself, it's one of the most spectacular views that you'll ever see out to the Whitsundays, and so I can understand why there is an attraction there and why, from a lifestyle choice, it's brilliant and you could make really good money on running a short stay accommodation there. And so when you live in an area like that and you want to embed in an area I saw a lot of our friends shout out to a couple of them, doug as well who I can think of, who basically bought several properties up there and they were just cash cows. They didn't grow in value a lot other than that super boom period of time, and then they can also give up some of those gains. But that's the risk you take. If you want to cash flow, the passive income that you want to come in on and you're not relying on capital growth, then that would be the exception to the rule here.
Speaker 3:But traditionally I would say it's a no-go zone for certainly boardless investors who aren't intimate with the area and don't know what they're doing. Because it is a hands-on, active investment strategy, you've got to, you've got to be really on top of the people who are staying in those accommodations. You've got to be, you know, be on top of the cleaners who are looking after it so your properties aren't damaged and so forth. And the other thing about the whitsundays is and the same with cans is the climate is harsh, that sun is unbelievably harsh, the weather, the rain, everything. So your wear and tear on your actual property is also quite harsh. So it can be a real bonanza for those people who want to be hands-on and build out a couple of little cash cows in that particular area. But if you wanted a set and forget strategy, you wouldn't go into those particular markets. You're only chasing yield in those markets and sort of sluggish, moderate growth. That's my summary.
Speaker 1:Yeah, I mean, I agree, Ben, it's largely around a cash flow story, right, but I guess in the nature of the way that the question has been phrased, it sort of already highlights some of the key risks. We live and rent in the Whitsundays, which is struggling significantly due to lowered tourism rates from COVID. So you put yourself into a scenario where you are affected by these X Factor events. But the fact that they live there, they see potential. They've got here to see the potential of some of the lower range properties coming into the market. So if they can turn apples into apple pie, add some value, ben, and, as you say, turn it into a cash flow. And because they have the intimate knowledge of the area, well then, that's the.
Speaker 1:So as a general rule to our community we'd be saying no, that's not a property that you want to be considering. That's not a property that you want to be considering. But for someone specifically in that niche who knows how to pick the eyes out of the market, knows which parts are in the most in demand, where demand exceeds supply, even in a downturn market, that also has the potential to take into advantage some of the natural assets that are there, that will mean that people want to come and stay there, whilst also taking the volatility of what happens. Well then, yes, but the alternative is to consider being a rent investor and putting in the frantically saving. They might want to take advantage of some of the incentives that are available for first home buyers. They may want to have the emotional feeling that comes from touching your own four walls, which is very, very tangible, which can't be measured on a balance sheet.
Speaker 3:then, so you know, in the absence of some of those details, but there are. Yeah, if you buy at the bottom and your principal place of residence is capital gains tax-free, yeah, and you're really confident that you're going to stay there for the medium term and then you can potentially see that as there will be some growth. I mean, you only need to look at the historical history of those areas. They have some big runs in property values.
Speaker 1:They have a spike right.
Speaker 3:They do so. If you time that spike well to exit if you wanted to, there's also an opportunity, but it is definitely an exception to our fundamentals.
Speaker 1:And how long are you going to stay there too? If it's a 20-year decision, well, you might have paid the thing off in 20 years. So you use it as an equity base to move on. But as you say, ben, you were at one of the stages of your life, you lived there and then at some point you pivoted and said I needed something differently. So, yeah, good luck with that. Sam Brooks, thanks for writing the question. This one's from Matt Feely.
Speaker 1:Ben, I often see properties bought by Power Wealth with the historical growth rate, et cetera, on Facebook, instagram. Is this a fact to consider when deciding whether a property will perform over the long term, say 20 plus years? Thanks in advance. It's a good question from Matt. And just to lift the veil a little bit on that question, matt, as a buyer's agency team, we'll get a brief from our wealth advisory team that says hey, look, we need you to buy a property that's $800,000, that has 6.5% growth and 3.5% yield, in some cases 4% yield. So the brief that's given to us really is about financial transformation that fits the circumstances for a particular client. So therefore, if we know that they're purchasing at 700, at 6.5% or 800 or whatever it is, we've got to have some confidence that that property, over a longer period of time, will actually achieve that for the person, to achieve the financial transformation that we're chasing. So therefore, we do actually go back and have a look at the historical performance, which is one of the reasons why an investment-grade property doesn't include brand new, because if you buy something brand new, there is no historical facts Setting aside the fact that there's a whole bunch of reasons why we don't think brand new in medium and high density doesn't work.
Speaker 1:But let's just assume that that wasn't part of our paradigm. If I'm buying something brand new, I actually want to go well, has it stacked up? And I can't actually go back and see what it sold for five years ago and seven years ago and 11 years ago and something similar, because it's brand new, brand spanking new onto the market. So therefore, as an off the plan purchaser or a brand new purchaser, I am taking all the risk, whereas if I buy an established property and I can see back in 1980 it sold for x, and I can see back in 1987 sold for y, I can see back in 1999 it sold for z it allows me to form a view and a picture around what it means. Now.
Speaker 1:Whenever you're dealing with, say, stocks and shares, you always get the standard disclaimer that says past performance is no guarantee of future performance, because businesses are around human beings, management, all that sort of stuff. But largely a lot of the principles around buying real estate don't necessarily change a lot over time. If it does, it might be a gentrification that goes up and in some cases you get a negative stigma attached to it. But generally speaking, the reason why a location works doesn't necessarily change. It's not, like you know, a seven kilometer suburb from any major city in the world. The fundamentals don't really change. If the government changes or if the management of ASX 100 companies change, those fundamentals stay the same. So, matt, we do use that as a basis for helping us determine whether that property has a track record. That gives us confidence that our client will fulfil their financial transformation story, which is our number one goal.
Speaker 3:It is Bryce will fulfill their financial transformation story, which is our number one goal. It is Bryce. And I think you know if I dig a little deeper in terms of the historical performance. What we're really looking at is the land appreciation and the improvements on the land, with the X factor being also the attractiveness or the owner-occupier appeal of the asset right. So that's where the little X factor comes in, because we're selling into, so we're buying out of and selling into a dominated owner-occupied market. So in a sense it's almost like selling or buying into an art market whereby you know if people are amazed by the art, they'll pay a premium for it with that owner-occupier appeal.
Speaker 3:But what's fundamental about property is its land component. So when Bryce was mentioning before about that's why we don't buy brand new, it's because we're not focused in on the depreciation component which helps with cash flow. We and do depreciation, so we try and do cash flow affordability outside of depreciation. Depreciation is a bonus and, yes, absolutely you need to understand whether there is any depreciation you can get to help with cash flow, but it's not a consideration in terms of why we buy that asset. So what we talk about there is sort of saying if there is some depreciation, that is a bonus and we'll always get our depreciation schedules done.
Speaker 3:But if it stacks up from an assessment that we've done on a cash flow model and we present that to the buyers' agents and they know the brief, they don't need to worry about how much they get, whereas a lot of the sales spruikers will tell you oh, look at the depreciation, this is not going to cost you, it's going to cost you, bugger all to hold this outside of your, your week-to-week budget, and we say to that is like, yeah, but you know that's what you're robbing yourself of. So we fundamentally believe that the land value closer to the central business districts of any area and and there's affluent and upper class areas and there are also lower socio-demographic areas and there are areas that are gentrifying. So that's where we go to the data and that's where we study the historical performance of the area and then we drill down to the street and then we drill down to the asset and that's basically part of the assessment work that we do.
Speaker 1:And there is an art and a science to it, ben. So it's not because, even though location does 80% of the heavy lifting, it is still even micro within the macro. So if you narrow down the suburb, there's also A, b and C sections of the suburb. So a little tip for some folks is part of the data that our team, um, gets access to, which is not easy to get access to, to be frank, ben, which is why we pay a bit of money to get access to the data. But you can actually see, based on the census data, when people fill in, they actually put an income range, and so what we can actually see is those.
Speaker 1:Just pick a suburb again, seven kilometers out, 17 kilometers out, just pick a suburb. It's possible to see where the higher income earners live within that suburb versus the people on a lower tier and lower tier, and what that actually does is because income is such a fundamental part of borrowing power, then if you're on a higher income, you can actually usually borrow more money, usually borrow more money, so therefore you can usually buy the more expensive houses within the suburb. So therefore, by studying the income demographic, the micro income demographics within a macro suburb also helps us better understand where the A's, b's and the C's parts of that particular suburb are, because you've clearly got the stuff that really outperforms, and then you've got the stuff that underperforms, and then you've got the stuff that's in the middle.
Speaker 3:Very well said, mate.
Speaker 1:I forgot to say this at the beginning, Ben, but we've set ourselves the challenge of getting through 10 questions.
Speaker 3:Which we've probably never done before.
Speaker 1:Which we've never done and, based on the run rate, not looking good for this section. But let's see if now we've set ourselves the challenge and the accountability partner of the people listening to this, let's see if we can rip through some of this. So hopefully that's helped you, matt. Good question. This one's from Todd. Question borderless investing buyers agents. My partner and I are looking at buying our next property interstate to one, diversify our portfolio and two, reduce the land tax liability. Are there buyers agents which cover Australia-wide who can give you an objective view of which interstate market to buy, or do we need to reach out and find a local buyers agent in each state? Sign T hey, todd, great question. I'll kick it off, ben. There are a number of buyers agents across the country. We've had a number of them on our podcast who are quite capable of understanding how to buy borderless. Now what I generally say is if you're looking to buy a property as an owner-occupier, my own philosophy is I think you're best served by having a local buyer's agent, because the reasons why you're buying your own occupied residence are different to why you buy it as an investment property, and some of the nuances of a suburb, in my opinion, are best served by being local Not impossible, but best served. And I'm talking about the best interest of the client here, right, because my buyer's agency team, ben, would be very capable of fulfilling a buyer's agency, a brief for an owner-occupier interstate. But the question is, is it the best interest of the client In terms of buying an investment property? Look, and I'm just going to do a little side note here, ben, because I'm really proud, going to do a little side note here, ben, because I'm really proud.
Speaker 1:Last week, uh, the reb, the national awards, um, nominated I think it was about eight or nine companies as the finalists for the buyers agency of the year, um, of which we were one of those finalists, and I'm really super, super proud to say um that empower wealth buyers advocates. Um took out the award, ben, as the well done. Yes, it was great news, wasn't it? As the Buyers Agent of the Year. So I'm accepting the accolade on behalf of a team of unbelievable A graders, and I think everyone would expect me to say that about our own team, but I'm so incredibly proud.
Speaker 1:So, so the fact that we, as a company, we buy in Adelaide, so we buy in South Australia, we buy in Victoria, we buy in New South Wales, we buy in Queensland, then. So the ability to buy for an investor across borders because we have a big network. We have a big network on the ground in each of those particular states. When we're allowed to fly, we jump on planes and we go and see these markets we have within our own business. We have an internal research team that helps us identify some of the stuff, like what we're talking in the previous question. So the answer to your question, todd, is that if it's an investment brief, if you're talking to the right buyers agency business now clearly I feel we're one of them, but there's others out there too, but only a handful, to be honest, that can actually cope with interstate buying. If you then talk to other buyers agents who don't have that interstate presence, they'll probably talk it down, ben.
Speaker 3:There's no doubt that you're asking different barbers about their opinion on who's a better haircut, who cuts hair better. So of course, we're going to have a bias towards what we think we do, but what we do is data led and it's led on the fundamentals. So, coming back to the question about analysis, in any one street price, by way of example, you could have a $700,000 to $800,000 property, which you might say is a renovator's delight, and in the same street you could have a $2.5 million property. Now, that's not consistent in every suburb, of course, and that's where you're saying it's art and science. In some of the suburbs here in Melbourne and Sydney, we can have huge fluctuations in terms of valuation, variances in the millions in certain suburbs, and you need to understand that to ascertain land value, because that's the thing that is the most important from an investor's point of view. That's the thing that you want to see dragged up. So, if you can buy, you know the worst house in the best street. That's the principle, that's the origins of that statement. Right, Worst house, best street. Now, if you go into a homogenous suburb and it's just rows and rows of the same builder who built that estate 10, 20, 30 years ago, your variances in price point might only range $100,000 because someone's put an extension on or whatever they've done right, but there's not much different. So the land value is going to be pretty consistent. So when you're buying interstate and those types of things that's what Bryce was mentioning before we spend hundreds of thousands of dollars a year on data because that's how we can get to a quick algorithm or a quick assessment or a quick geospatial overlay in our technology and our mapping systems to work out what something's worth in a particular area and obviously do our comps and those types of things.
Speaker 3:So that is the advantage you have when you serve so many people that you can actually have a competitive advantage. It's a bit like you know, why is man United so successful? Why do they win so many? Shout out to Liverpool. As a Liverpool supporter, we won the Premier League, so that's pretty cool. But the point being, the majority of the riches normally go to the most resourced clubs and you know that have the best training, the best facilities, the best research, the best technology, and that's probably why we are so successful is because we reinvest into that.
Speaker 3:So when you're talking about you know the average punter on the street being able to compete with us in terms of the data knowledge sets. You don't have the level that we do and so that's a disadvantage to you. If you think you can overcome that through heavy research, terrific. And in some cases, if you want to do, you know we talk about it in the book. If you want to do 500 hours of research in a localised area, you will get to our level of knowledge and you will make really informed decisions.
Speaker 3:Your challenge is you're probably going to start with 30 or 40 suburbs to get to that outcome, but that's the sort of level if you want an outperformed result, you've got to really get intimate with the numbers and we encourage people definitely to invest borderless. Because the land tax. Why do you want to give it to the government when you want to basically get a return on investment that's consistent with your investment strategy. You don't care where the asset is. You want good, reliable tenants in your property and you want your property to be basically tightly held and have scarcity so it appreciates in capital growth over time.
Speaker 1:As a group, ben, we see hundreds and hundreds and hundreds of properties a month, right. So it reminds me of the analogy that I've used on the podcast way back. I think it was in the first hundred episodes, but it was around the guy who's working on his car all weekend. Ben, he's Saturday morning right through, can't fix it. Sunday, can't get it. Then a mate drops over just after lunch on Sunday afternoon and says mate, I've been working on this for a day and a half, can't get it fixed. The mate who drops over says oh, can I have a look? Lifts the bonnet, has a look for five minutes, asks for a hammer, gives a couple of taps on the engine block and then says try that, turns it over and she starts and the guy goes wow, that's amazing, I've just burnt two days on this and you've done it in five minutes. I think you should send me a bill. And he goes okay, I will. And for the purpose of this analogy, the bill comes to the, the person, and he says you know, um, two thousand dollars. He has two thousand dollars. Um, how much? Uh, can you itemize that for me? He goes yeah, yeah, no problem. Um, five dollars. Uh, tapping the engine block, uh, one thousand nine hundred ninety five dollars, knowing where to tap right. So it's a beautiful story to illustrate that um, through experience, through seeing lots of properties, enables you to understand where to tap on the engine block.
Speaker 1:When it comes to property, which a lot of the principles are universal. But then you have some nuances around. Say, in South Australia they've got a two-day cooling off period. Here in Victoria it's different. In some states they don't have a cooling off period. In South Australia you don't have a standard clause to do a pre-settlement inspection, whereas in Victoria you do. In New South Wales it's an exchange. So there's lots of nuances that then you need to know within each state what's the type of property. In Queensland they don't necessarily want to double lock up garage as much as you do down in the more southern states. So it's understanding the fundamentals, overlaying them in the localised conditions and being able to understand. But for someone who's doing it like us, who's seeing lots and lots and lots and lots of properties, who specialises in seeing that across borders, well then you can do that. But if you're talking to a buyers agent who doesn't specialise in that, they will come up with challenges and they may dispute that. But in my experience buying interstate as a buyers agent still requires an awful amount of skill to do that.
Speaker 1:I also want to talk about another conversation I had yesterday, ben, with a high-performing sales agent down here in Melbourne and she rang me and she says Bryce, I just want to be a buyer's agent, I want to join your team. I've been a sales agent for nine years now in my particular patch. I'm ready to make the change to be a buyer's agent. And I went great, no problem.
Speaker 1:Here's the challenge For a sales agent. 80% of what they know and do every single day is irrelevant when they come to be a buyer's agent, the way that we are. And looked at me and she went what do you mean? I said because because you know your patch inside out, which might be five suburbs better, might be four, might be three, might be six, right, because you know your patch intimately doesn't necessarily mean you will transfer your skills over to our side of the fence. Because if we were a buyer's agent that specialised in buying for owner occupiers in your particular patch, you'd be a shoo-in.
Speaker 1:But I can assure you a lot of the conversations you're going to have as a buyer's agent are not about comparable sales in your area, how you do a campaign, should you do auction or private sale and I mean no disrespect whatsoever to any sales agent who's listening to that, ben, I just want to make that clear. But from our perspective, you're going to have more conversations around LVR. You're going to have more conversations around LMI. You're going to have more conversations around what location You're going to have conversation around. Should I buy in Victoria? Should I buy in Queensland? You're going to have conversations around investment fundamentals more than you're going to have conversations around Section 32s or what is it in Section 66 calling off? Yeah, 66W.
Speaker 1:That's it 66W in New South Wales, or a disclosure statement. Those things that are nuances that are part of your everyday vernacular and language as a real estate agent in your patch just don't happen. So that's why I say there's a handful of about three of us across the country who do multiple markets really well. The people who could do it have this intellectual horsepower that allows them to pivot into different markets. That, I think, is unique and I think it's really important that if you are considering being borderless and you are considering doing it for an investment purpose, I will go on record as saying I don't think there's a lot of folks who can do that well, then it's possible to be done, but I don't think a lot of folks do it well.
Speaker 3:So did we really answer the question? Hopefully we did. We want you to be a borderless investor. There's pros and cons with working with a generalist in terms of so they've got to make sure that they've got access to the data and the insights and the team of people and they're backing it up with their demand and supply tests for that area. And you know you might be on a good one, but not everyone can do that work as well. But if you're buying for owner-occupier, yeah, bryce is basically telling you that you want to go potentially with a local specialist.
Speaker 1:Yes, I think that can be done, but I think you'd want to strongly consider that. So hopefully that's helped. Your question, todd. The question was do we need to reach out to find local buyers? Asian East state? The answer is it depends. Hopefully the last five, 10 minutes has helped with that. We're not going well on our run right now Dan Colletti's asked this question.
Speaker 1:Obviously depending on your own horse and what course you want to ride, but typically speaking, is it worth having two smaller to mid-range properties delivering high yield 300 to 350 with 6% or worth chasing a high growth, high level home 600 to 7 with 3% yield? Or even if the yield and growth stories were aligned, is 2 at half the per annum income better than one at full per annum income, lower or higher risk. There's some layers in that one, ben yeah, but it's a fundamental one that we've, you've got to understand to get right.
Speaker 3:I'm going to say this slowly because it's important. You bank cash, you can't bank percentage gain. So I'll say it one more time you bank cash, you don't bank percentage gains. Now, what is that in relation to? Because I've had this question quite a lot before.
Speaker 3:Capital growth is the bee's knees of property investing. If you can find an area that delivers significant capital growth, in other words, you turn a. You know what's? An example I bought that property in Flemington for $395,000 in 2007. It's now worth in excess of a million dollars. In Alexandria, I bought that property for $395,000 back in 2001. It's now worth about $1.3 million and I've done nothing to it. I'm banking that profit. So they're the examples where that monetary gain um has happened over that course of time.
Speaker 3:So I'll let time do its work. And my rental income has gone. You know if you think about, you know I took a loan out on um alexandria at around sort of that. I think it was about 200 and no, sorry, 350 odd thousand dollars for 395 purchase at the time. Um, the rent that I get on that property every week is now $780 a week, right and comfortably let. So all of a sudden I've got to, in terms of off the origins of the property, I've got a significantly high rental yield if I backdate it to its original value.
Speaker 3:So I've always taken the view that I want to be buying properties that have strong capital growth and I want to be buying in areas where land is scarce and there's high desirability for people to get in that area from a livability point of view and from a status point of view. And I realise that then means that traditionally I have to buy properties in gentrifying areas or areas close to the city, and those are very, very difficult properties to buy in the current environment. I don't disagree with you Not everyone can start up and walk up and buy a $1.3 million property in today's value terms, but that shouldn't exclude you from the fact that the ripple effect is saying some of the next suburbs along in that sort of $750,000, $800,000 range. When I was buying, interest rates were 7%, 8%, in some cases even as high as 9% when I first started, and then back down into the six and sevens for the long term, and now we're back down to historically low interest rates. So I'm of the view, depending on your cash flow situation, if you have really really strong surplus cash flows, in other words high disposable household income, then you should be chasing assets in the 900 to nil to nil three range because I'm banking capital growth and I'm banking it based on the growth of those assets over time.
Speaker 3:Now I realise technically that if the lower valuation properties, like the $150,000 property, goes up by 60%, I'm making more money, more percentage, but I'm not necessarily making more money and I potentially have risk at that lower level in terms of quality of tenants where that location is. I carry risk in terms of the economic. Why is it priced so low? Because it's in the middle of nowhere, so I don't have scarcity of land, I don't have all of those other fundamentals. But coming back to the question, if you're getting that 6% yield and your cash flows were tight and you just wanted to start out and you're getting on the property ladder, that may be a perfect entry point for you. But I'm not a splitter. I don't agree in sort of I've got a million dollars to spend, so I should split that into two $500,000 properties and diversify. No, I'm a Warren Buffett thinker here. I don't diversify. I buy the best asset that I can in the best location that I can, based on the fundamental analysis that I do and that's how I work.
Speaker 1:Well said, ben. I don't think there's anything else to add to that if we're going to try and get through these questions. But it's a question that comes up a lot. But I think we've been reasonably clear on this podcast over many years that, all else being equal, we're going to chase growth and round it out with yield many years that, all else being equal, we're going to chase growth and round it out with yield. But it always comes down to people. If they're going to be in a vulnerable position on cash flow, well then it might make sense to split those two up, because then there's a better opportunity to protect them for that. But again, on the limited amount of information that we have, it's very difficult to go down that path. So very good. Thanks for sending that one through, dan. Hopefully that has helped you as well.
Speaker 1:Hey, kieran Walters, tossing up between moving into one of my rental properties, as I've been renting the last 12 months after selling my home, $1 saved is better than $1 earned at the minute. Do you think this is a good strategy to ride out the COVID storm rather than to buy right now? I want our next property to be the big rock in the jar. I also want to buy acreage. What are your thoughts on Sanford Valley in Brisbane for the long term?
Speaker 1:Now, for those people who are not familiar with Sanford Valley, ben, it is in the northwest of Brisbane where they can go just a little bit further out and get bigger blocks, which I find interesting, a lot of money in Brisbane. I'm not pretending that I know all the acreage blocks in Brisbane super super acutely, but in Brisbane, ben, um, you've got Ascot and Hamilton and Bulimba, but you don't you don't really um, have the two racks of the world in Brisbane, because it's um, uh, if you're going to Ascot, you can still get a one-bedroom flat there, but you can also get these amazing beautiful homes in Hamilton's the same right. So a lot of money in Brisbane tends to go that little bit further out so they can get the extra space and have these acreages. So I think there's I think there's always strong demand for that, given that it does offer something unique for that particular city. But good question from Kieran Ben around moving into a rental property or riding out the COVID storm rather than buy right now.
Speaker 3:Yeah, it's just hedging your bets. I mean, we'll be talking about the performance of properties in June in my you know what's making property new, section soon, section soon. But yeah, I just feel like from that point of view that's a personal judgment call in terms of if it was a financial decision, but it's about getting your big rocks in the jar, then I always want your big rocks in the jar. And if this is a short-term thing, I've always said rentvesting is not a long-term strategy. If you ultimately want to get into a dream home, you're better off sort of buying an entry-level home owner occupied first and then stepping up, than potentially rent investing. Rent investing for me is you're always going to rent and you're going to build a portfolio of assets around you, so you've got flexibility, but you don't necessarily have you know the property that you own.
Speaker 1:An important point on rent investing too, ben, isn't it is. You've got to stay the course, because if you pivot midstream, yeah it gets it, don't work, or it blows it out for cost, um, hey, uh. Last thing for that, kieran, for me is um, if cash flow is okay for you because you want to put the big rock in the jar and you've saved a bit of money because you've been in, uh, one of your rental properties for the last 12 months, just be mindful not to make 15, 20 year decisions based on six weeks of information. So if there's an opportunity for you to be job secure, cash flow is okay and you can buy into these markets, that's going to be a 15, 20 year decision. Well, it sounds like the big rock in the jar is important to you, right? So sometimes you can't measure that from a financial perspective, and now might be a good opportunity for you to get in.
Speaker 3:And think 20, 30, 40 years from now. Bryce, those acreage properties usually then get sliced and diced up as population and urban sprawl continue and if they don't get carved up then they become very, very scarce assets and they usually do very well. So if you're buying the standard block in the standard estate, then there's not really much you're just going to get. You're going to get what we call sort of rising tide valuations on your land. But if you've got a scarce block or a unique block or a block that's got city views that can't be built out, that's that scarcity element and it's historically larger.
Speaker 3:Blocks in the outer suburbs on acreage are of high demand short and medium term Because a successful tradie who wants to store his boats and his toys and all of that, he will go out there and he's well cashed up and so there is competition on those assets over time. But if you're talking about just going wide just to get a standard block in a standard estate and there's heaps of acreage blocks or whatever like, there's hundreds and hundreds of them, no scarcity there You're talking about, you know, 40, 50 of those acreage blocks surrounded by your standard subdivision blocks. Those properties will be prized assets over time.
Speaker 1:Hey, ben, covid has shown up an interesting thing too, because those lifestyles type of properties have become more and more popular. But even in Queensland, the very northern tip of Sunshine Coast, the very southern tip of the Gold Coast, I was chatting to one of the agents in my area, ben, I live on the surf coast. I was chatting with her this morning and I said how's it all going? You, I noticed you've got a few listings. Are you flying along? She goes, we are flying along.
Speaker 1:She said the amount of people that are coming down from Melbourne saying that COVID has provided us to go. We were going to make a move in five to ten years and it's just incentivised us to actually just do it now. She said so one person drove down down once, had a look at the school, the actual school that my kids go to, which is a really nice school, and they go. Um, we want to put the kids in that school, so therefore we'll go and find a property. Um, let's get it done. The decision was made like it sounds like a lifetime dream. Was was made in a very short period of time. So those things are happening all over the country. I think about back home in in Perth, mandurah is probably more appealing than ever, given that that was just fringe commutable. There's a train, though, that goes down there. But even if you go down to Bunbury or some Dunsborough and some of these great places, you know, you know Rockingham very well, ben.
Speaker 1:You know Christie's Beach, you know Port Nalunga in Adelaide the surf coast here, even into some of the Yarra Valley towards Heales, all those sorts of things that were where people go. Maybe I'll do that when I retire, whereas now they're going. You know what? I think I've got a pretty good chance to negotiate two or three days working from home, because we just proved that it works. So therefore, where Kieran's looking to purchase, it's still well and truly commutable to Brisbane. So those sorts of lifestyle assets will continue to be in demand anyway. All right.
Speaker 1:Jack McCoy is asking this one Getting the location right can be narrowed right down to the street. But as an investor holding long term and not actually wanting to sell, is it better to try and get a house on that busy street in an A-grade suburb at a discount? So when getting valuations and comparable sales in the future will work in your favour? I've always got this thought, ben, that cheap in, cheap out. Right, so if you buy cheap in you get cheap out. But if you're still getting, you know an average property in a great suburb is better than a great property in an average suburb. So it kind of can play with people's mind. But I always think it comes down to four things the growth yield, vacancy rate and quality of the tenant. And those last two really are the important points for this discussion here.
Speaker 1:Because if you, if you are on a busy road, quite often the quality of the tenant tends to diminish because the large percentage of the population don't want to be on a busy main road. So for me it's around a discussion around whether or not you want to get into some challenges with the type of tenant that you get. Now there are busy roads, and there are busy roads, ben, there are people who want to get into a suburb who can't afford. It. Might be the only option, so there are exceptions to that. Are busy roads, ben. There are people who want to get into a suburb, who can't afford it, and it might be the only option, so there are exceptions to that. But for me it's a framework around understanding capital growth and yield. Sure, that might be because you're lower priced, the yield might level and even the growth might not lag that behind something else, but it's the last two. It's around the potential for vacancy and the potential for the quality of the tenant that needs to be considered when considering questions like this.
Speaker 3:Yeah, so the data does show that it definitely lags, bryce, but it can't lag too much. In other words, you can't have $5 million houses one street back and only have a $400,000, $500,000 house on the main road. There will be a buyer, but you just see it in the demand supply, when they get listed, when they go to auctions, the number of people that are interested buyers and all of that, they're just not as interested, right? Because what you're effectively getting you're not getting the owner-occupier, you're potentially getting the investor who's having a view. Look, I'm going to get that property in that particular location. But, as you say, when the tram's coming down the road or the big VWs are coming down or the train lines are ringing and you constantly hear that and the house shutters, that's the X variable, that the tenant doesn't stay for a long period of time, right? So you normally get a lower socio-demographic tenant in that particular location because they do want the asper, you know, they do want to be in the better area, the amenity and all those types of things. So you just get a few more headaches with those types of properties.
Speaker 3:But and it's a slight adjustment in terms of the long-term performance of those areas, and that's where the data is quite amazing. I mean, we now have the ability to, in a suburb, to put hexagon colours over. You know 50 metre square areas and look at the colour difference in terms of house sales and you can see it. I mean, you know, along a riverfront, you know two streets back beachfront, two streets back busy road, two streets back. You know that's the sort of stuff that we can see in the data now, because you can get these overlays and you can interpret that data and get those insights a lot quicker than what the old manual process was, where you literally studied it for hours and hours and hours.
Speaker 3:And so you know, jeremy Jeremy, I think, has done that research to say that it's not materially different, but but it is still different. Um, but you've got to look at those other factors in terms of how you're going to be dealing with that, how you're going to be dealing with the wear and tear. Houses move when big v-dubs come past it right. Big big trucks, um, come past when tram lines I mean they are heavy steel, you know sort of those houses can shake a little bit right, and so that's the sort of element that you've got for those really, really busy roads where you don't get necessarily attract the owner-occupied buyer.
Speaker 1:Our buying team. Just to help you with that question to there, jack, is that we just have a blanket rule we don't buy on busy roads. We just have a blanket rule we don't buy on busy roads. So, and if an owner-occupier has a brief that to get into that suburb and the busy road isn't sort of Grand Central Station, we might have a very minor variation of that, but as an investment, we just don't buy on busy roads. Hopefully that helps you. Okay, here's one here from Matt Thoughts on buying Defence Housing Australia projects. I wouldn't buy new, as I understand you're buying the developers margins, but would you buy a second or third owner once the market's caught up? Are there any downsides to permanent long-term leases? I believe you're locked in with a real estate agent that it's a much higher management fee, around 16%, but they cover any minor repairs and at the end of the defence lease they refresh the house up to new standards new carpet, fresh paint, et cetera. Ben.
Speaker 3:Yeah, so I mean second and third leaseholders. I still go back to the fundamentals. If there was something in that location, 80% of the heavy lifting is in the location. So you have that opportunity. People are attracted to that security of 100% occupancy over that period of time and the sweetener in the end the sweetener in the end is being paid by the 16% that you're paying as management fee. So it's double what the standard management fee should be, maybe even a little bit more than double. So you are already paying for that refresh.
Speaker 3:So I then say, okay, well, if the property is valued at the same as what I can get for the standard demand from non-defense housing, would I buy something different in defense housing and only have a 7% management fee or an 8% management fee and then get the capital growth of the area. So I don't necessarily see why I would need to go to defence housing to do that. I'd potentially get a better return. I'm banking that money in terms of the models and we talk about 1.5% that we set aside for maintenance and upkeep of the property every year on those properties, indexing at 3%. So I don't know why I need to get the defence housing in that area, because if it is in a good area and it's got proven scarcity, your occupancy rate is going to be around that sort of 95% to 98% anyway, so why would you necessarily need to pay a premium for that in terms of going into defence housing?
Speaker 1:But it gives you a nice warm, fuzzy feeling whenever you're a first-time investor and someone says anything to the effect around rental guarantee. It makes you feel good, it makes you think well, there's the risk mitigation. If someone's going to guarantee me some rent and therefore I find that this particular segment fits into that because it's long-term tenants, they're always going to be there, they're backed by the defence force, so for that reason reason, I understand why they can be appealing. But, um, I guess, as an overarching framework, we always try and answer these questions with. The framework is I prefer to buy into a suburb where there's a there's, there's a variation of life cycles and people within it, and by that you mean just to the point where there's a variation of um demographic, um, uh, that that lives there, so someone who might be. We obviously want the income up, but someone might be doing a job in this industry and someone might be doing a job in this industry and someone might be in another. And equally, I want to have a scenario where some people might have the home fully paid off, some people might have a 40% LVR, some people might have a 90% LVR, because that diversification helps underpin the strength of that particular suburb because if someone falls out of it, there's someone very much willing to fall in Versus.
Speaker 1:If you're in the mortgage belt, everyone's at the same level of mortgage same credit card, same amount of kids, same life cycle, that sort of stuff. So there's a defence housing estate in Western Australia on the coast Wonderful, wonderful location right on the beach. But the whole estate is defence Ben, which to me it almost defies the location, does the 80% of the heavy lifting because the whole concentration of this particular segment is actually just one segment of the market. So therefore, no owner-occupied demand, it's all just investors. Someone wants to sell. It's another investor who's buying.
Speaker 3:Capital growth is compromised right.
Speaker 1:Absolutely so. I guess my answer to this and I want to be very, very respectful of anyone who has these types of investments is Ben, and I have seen lots of investors and lots of successful investors over time and generally speaking, ben, generally speaking, the successful investors don't hold this type of property, anything that has any form of warm fuzzy around the rental. They're quite happy to back themselves to buy the right asset and put it into the marketplace to have a willing renter and a willing landlord and a willing tenant prepared to meet where the market's at. So we get this question a bit, ben, but I think, if you break it down, the comfort and the security that comes from around the rental comes at a cost and it comes at a price to get that security and that warm fuzzy feeling.
Speaker 3:Yeah. So again you're getting a general response here. There are always exceptions to the rule in terms of if you're, if you know, for whatever reason you're one of only five defense houses in that whole local urban area, then great. And I and I think I've said this before in the podcast I had a friend of ours in cronulla who had a property and said he just contacted defense Housing before it was all sophisticated.
Speaker 3:So I'm going back 15 years and he basically presented that property as it and they said, yeah, we absolutely need one in this area, that's perfect. So he actually was proactive, got the rental guarantee, but he did it on his terms and he bought it in in a suburb like Cronulla which is very, very highly prized. So he got the capital growth and he got the render because he was clever. And there are other opportunities that you can do where you can contact government agencies and they do need certain type of housing stock in certain areas and you can potentially get a government tenant. So that type of stuff is really proactive. But the fact that they've homogenised defence housing now and it's all sort of run through a standardised program, it's that stuff and again we want to be very respectful here because it does mitigate risk, but in terms of what we talk about and picking the eyes out of the market, you can't do it usually with defence housing.
Speaker 1:Very good, Thanks for the question, Matt. Hopefully that's helped. This one's from Damien Rackliff. Could Bryce and Ben talk about active investing fixer-uppers, buying subdivide build units and buying two bed, one bath period character homes to turn them into four bed, two bath homes?
Speaker 3:Oh yeah, how much time have we?
Speaker 1:got. I was going to say that's a whole episode.
Speaker 3:Look, I mean I want to come back for this, but in simple terms, nothing wrong with it, but just be very clear that it's not investing. You are creating a job right. You are getting a return, not from just being a passive investor, and so it's completely fine. And there's people doing it very, very successfully and we've got some great industry friends who are specialists in this area in terms of how they add value and make returns on that. But it's a job. It's an absolute job. Whether you're the project manager or whether you're hands-on. You can make a lot of money, but you are self-employing. You are not a traditional investor.
Speaker 3:I am not grabbing that asset, putting a property manager in front of that asset and saying, look after that property, I'm off to play golf. That's the difference. So we have no problems with it. And yeah, let's put that on our radar, bryce, to do a deeper dive into that, because, yeah, there is absolutely money to be made in this area. We've done other shows on it before, but maybe we need a refresher where we do talk about, you know, one for $2 return and what you're putting on and keeping it simple and going for standardised colours, and so there's a lot of stuff we can talk about there in terms of helping people do that. But just be mindful that you can't brag about the profit that you made, because you normally don't add $100 an hour or $200 an hour for labour in there that you should be adding when you're doing your feasibilities on that. So, yes, it's definitely a possibility for a lot of people who are good at it.
Speaker 1:We'll put in the show notes. Um, the episode we recently uh, two episodes ago, with peter kulesoff spin we went through the 12-step plan for property development. So that was a good one. So I'd certainly recommend that you go and check that one out, damien. Um, and we've also had a number of podcasts with our good friend, jane slacksmith, who talks about renovating. So there's development, there's renovating, there's subdivisions, fixer-uppers. So I think you summed it up beautifully, ben. The point is that if you have a look at the stats Across the country, there's not very many people buying investment property period, but then of those who do, not many people buy more than one. So the reality is that not many people are active investors. Most people either don't invest or they're passive investors, which is why a lot of what we talk about on the podcast is helping people with the Get Rich Slow scheme through passive investing. First of all, our mission is just to make sure people sort their money management out.
Speaker 1:Like if you're totally transparent, if you get your money management right, the rest there's a whole world of excitement that comes from that. So therefore, we talk a lot about obviously passive investing, but if you're an active investor, you've got an appetite for it. You understand it's a game of finance being able to subdivide and build units, understand the extra risk that comes from part of that and knowing what it takes to have the skills to turn a two-bed into a three-bed or a four-bed and add bathrooms. Clearly, if you have that skill and you have the appetite for it, you can be an active investor, but it can be being passive.
Speaker 3:Well, I mean, we've got Naomi Finlay's episodes as well. We've got the guys from the blocks that we've interviewed over the journey. They've also, you know, they're turning apples into apple pie. So yeah, there's definitely a fair bit of content there in terms of what's available.
Speaker 1:Yeah, and I certainly hope at some stage to provide resources through courses for our community to get access to those for those people who have an appetite for that. There you go, damien. Hopefully that's helped. This one's from jared. Uh, jared needling. I bought a house and land three years ago before I was educated. What can I do to ensure growth, ben?
Speaker 3:wow, what can I do to ensure growth um?
Speaker 1:if we go back to the fundamentals, growth happens when demand exceeds supply.
Speaker 3:Yeah, and so and so if you bought in an area where there's still plenty of supply, that's going to come on. Unfortunately, you're going to be waiting a little while. What can you do? Look, get a good tenant in there. Look after that tenant.
Speaker 3:It may be a case of you may be in the wrong location where you're not going to see growth for years to come. A case of you may be in the wrong location where you're not going to see growth for years to come. So hence the sell or hold, um, you know, review that you might need to undertake if you, if you're worried and frustrated about the fact that there could be another five years of no growth. Um, the only bonus that we have post-covid bryce is that there will be a period of rising tides lifting all ships again as we find that balance of value with historically low interest rates. So I do expect that 2021, 2022 will be very good for property values on that basis. So that's going to make land and those house and land packages a little bit more expensive, which means you might get some growth in that area. But I don't want to be throwing good money at bad here, bryce and sometimes I see that happening.
Speaker 3:If most of those houses in the house you know are usually three-bed, two-bath or four-bed, two-bath dual living areas, double garage. That's not unique, it's not. It's homogenous stock. So unfortunately you're just going to get that sort of rising value. You'd never put a granny flat on it. It's not an area for granny flat demand at that stage and maybe in 20 years time it might get some of that demand, but not now. So there's not a lot of upside there, unfortunately for that particular question. You know that's.
Speaker 1:That's the sad reality the underlining of that question, ben, is the, therefore the importance of the a pillar asset selection, because if you don't get it right, you then ask questions like what we've got here, jared's saying, well, what can I do? Well, the answer is not a lot.
Speaker 3:As an individual owner. The market's going to do a lot of the talking for you. I tell you I'm going to do something, bryce, on my economic update next week where I'm talking about GST. So a little sneak peek in terms of if yeah, I'm going after GST. So a little sneak peek in terms of if yeah, I'm going after GST. I think it's a good opportunity for us to have an honest conversation about that. The consumption tax should go up, and I'll talk more about that and what I'm referring to. There is potentially the abolishment of stamp duty and if that happens, then mobility and transactions of this nature will improve and you might be able to get out with less of a cost and buy into a better area. So you know, there is some real upside in terms of having a higher consumption tax and a more broad-based consumption tax. I'll take a deeper dive into that next week.
Speaker 1:There you go. Folks Check that out. Ben will have a chat about that. So last one here is from Matt. Is putting a granny flat out the back a good idea when retiring out the debt pros and cons?
Speaker 3:cons are um you have got a bigger yep, it affects, um, the repurchase demand for that asset. A lot of people don't necessarily need an extra dwelling out the back. They, you know, they don't have the privacy. They've got a stranger living in their area. They can't, you know, live in their home comfortably knowing that someone could be peering in their back windows or whatever at any time.
Speaker 3:The the, the con sorry, the pros are, yeah, cash cow, right. So yeah, if you want to retire that debt out and you're never interested in selling that property and and that's going to pass on through inheritances, building a legacy, and you want to retire debt, no problem at all. But again, how many you know in the areas where they approve granny flats, there was a flood of granny flats that went into their area. So you've also got to try and measure the interest of granny flats in that area and the appetite for tenants to live in those. And you do that through having detailed conversations with several property managers in the area to gauge their interest in managing them. And if they've got bugger all interest, it's also going to tell you that it may not be a good thing to do.
Speaker 1:Yeah, a lot of investors. I mean, we buy some properties in an area, ben, where there's a competitor of ours who tends to put granny flats in all of them, right, so it's clearly a cashflow strategy, but I think we're going to trump them on growth, given, as you say, the demand for it. All right, ben, we did it. We did it. We got through all of the questions, so we obviously didn't believe we could, but well we're over in terms of that.
Speaker 3:So what's your life? Hack mate.
Speaker 1:Well, a couple of things, Ben Free resources, abcd in a pandemic, and the top five frameworks. We're going to put them in the show notes so that they tie into what we're doing, what we've been chatting about today, so you can get free access to those reports, ben, which will solidify some of the chats that we have been having. But thank you about the life hack, ben. So, start of the new financial year, ben. So quite often, 1st of January, the 1st of July, they tend to be dates that provoke action. You know, people want to set up some new routines, habits, rhythms, all those sorts of things.
Speaker 1:I want to encourage everyone to set up what could possibly be the roaring 20s. Well, because if you're actually going to the end of the 2020s, ben, and looking back, we're of the view that you know, I've said it before could be one of the best times to be involved in real estate, because real estate demand will probably be unprecedented for this decade than before, right? So if you want to do that, ben, if you want to buy investment properties, you actually have to have the basics of the money management sorted. You actually have to have the basics of the money management sorted.
Speaker 1:So I'm going to encourage people if you haven't done it, ben to go and access our portal, for a couple of reasons. One, if you want to be a successful property investor, you have to get the house in order. I talked at the beginning about being coachable. We're saying to be coachable, you've actually got to get realistic around where your money goes, how you manage it and how you are disciplined around trapping what you've got. So we've got a book and we've got a portal that is for free and you can remain anonymous.
Speaker 1:So my big call to action, my big life hack today, is for anyone in our community and we know there's up to 70,000 listens per week, ben, so we know there's a lot of people that aren't doing it. You can go in anonymous, but get the house in order. Use this traditional line in the sand of use resolution setting new goals, starting fresh for the new financial year. I'm going to say it's the start of a new financial year, at the start of a new decade, ben, where we want to set people up for financial transformation. Now's the time to do it. If you've been thinking about doing it for a long time and you haven't got around to it.
Speaker 3:Ben, be like me, get the guitar out on the couch and start doing what the coach has told you to do, which is to get the house in order. Ben, the best thing, bryce, is you don't need to do the 10,000 hours of training on it, right? Money Smarts is a rules-based system that, basically, once you get set up, it's only 10 minutes a month, right, so you don't have to continue to keep running it. But I appreciate that. You know we're coming up to 23,000 people have registered their accounts on the MyWealth portal. Now, that says to me that they are. They're really interested in terms of taking action, um, because they've made the first big step in terms of registering. Now they've just got to get in there and and play around with it, work out what their their cash flow targets are, their surplus targets are, trap more money, organize and just get organized. Um, because once you get into rhythm, it's really straightforward. So, yeah, nice little shout out, nice little message it's free to use. We'll be free forever, so jump on there and check it out.
Speaker 1:Now, ben wwwtpc, as in the property couch moneysmartscomau, you can go there to sign up. But I'll make it even easier, ben. What?
Speaker 3:are you going to do?
Speaker 1:Just go to our homepage, go to thepropertycashcomau. Top right-hand corner. It says portal login. Yeah, that's it. So we'll put it in the show notes where you can go, can I?
Speaker 3:also give you another little tip, ross facebookcomau, and you get the copy of the book. So you get the instruction manual and also the portals get set up.
Speaker 1:Get set up for you as well. Well, so there you go, folks. Actually that's the best way, because you get, you got to have the manual, don't you bet yeah, and there's also training guides in terms of how we get you set up. Well, that's a good point, because you're putting lots of videos together on actually how to use it right so for those folks who think, oh yeah, I don't know what to do, don't worry, just follow the bouncing ball you know that's my passion this year.
Speaker 3:I'm going to be focusing on doing a few more facebook lives in terms of teaching people how to use money, smarts and basically getting on the portal and kicking the tires on it, just so you know. So I I might be that that guitar teacher. I might be that money teacher, bryce.
Speaker 1:Yeah, coach well, the knowledge is empowering, but only if you act on it. This is is where you've got to act on it, Ben. So what's making property news?
Speaker 3:Well, the big one, mate, is obviously. The results came out yesterday from CoreLogic in regards to house prices and, yes, as anticipated, they aren't falling off a cliff.
Speaker 1:And there's a couple of really Technical decline, yeah, but that's.
Speaker 3:Yeah, which is exactly what we were talking about in terms of where it sits. But what we were talking about in terms of where it sits, but I'm just going to read out because there's also some areas that are growing. So, yes, we heard mainly that negative across the nation was 0.7. We saw a negative 0.8 for the month in Sydney negative 1.1 in Melbourne because of lockdowns. Brisbane negative 0.4. Adelaide negative 0.2. Perth negative 1.1. Hobart up growth of 0.3. Darwin growth of 0.4,. Adelaide negative 0.2,. Perth negative 1.1, hobart up growth of 0.3, darwin growth of 0.3 and Canberra growth of 0.1. So we are seeing some of those markets and, interestingly, some of those markets that haven't recorded any COVID cases for a long period of time outside of WA, where property prices are growing and obviously less you know. So Melbourne is the pain point because of the uncertainty and the sentiment changes that we've got there. But here's the deal, bryce. I mean we saw obviously a severe correction in the share market which resulted in around I'm just going to round it around 10% falls, which was one of the worst results on the share market in the last sort of 10 years. Right, the annual return for property in Sydney. Are you ready for this Annual return for property in Sydney, 16.7% for the last 12 months.
Speaker 3:Melbourne has been 13.8% positive. Brisbane has been 8.4% positive. Adelaide's been 6.5% positive. Perth has even been 1.6% positive. Hobart has been 11.9% positive. Darwin's even been 5.7% positive. Canberra's been 11.2% positive. Now that's total return, that's putting in the capital and also the rental income. The national return has been 11.7% Bryce and I'm going on record today as basically saying to everyone that we will not see a negative return, a negative overall return on property during this COVID phase at all over that annual return.
Speaker 3:So watch me see if all my predictions are correct. Now I wanted to also just highlight quickly what has been a real test for the market is the demand is there and this is what we have been saying. So there has definitely been an increase in activity. So just to give you an idea, in terms of the, the growth in activity and the overall consumption of property has materially improved back to pre covert levels. Yet property prices aren't falling off a cliff which says to, and this is owner-occupied led. This is first-home buyers and upgraders and potentially even downsizers making that move to the coast.
Speaker 3:And what you're seeing here there are buyers out there. A lot of people think that they know there's no buyers and let's wait for this fiscal cliff. It's not there and you can see it in the data and we'll put a link into the show notes where you can have a look at the data from our great friends at CoreLogic and you can listen to interviews that Tim Lawless has done recently, just basically saying it's been a great test for the property market. Yes, there's still uncertainty about JobKeeper and JobSeeker in September, but I'm not as concerned as some in terms of what that looks like. So there you go.
Speaker 1:Well, ben, anything that happens with the concern around JobSeeker, JobKeeper, it's not as if people are going to wait for the six months and they go oh, it's time to sell. So all that distress stuff is happening now. Nerida Connersby has put out on her blog this week that the distress selling is actually lower now than it was at the same time last year and I can 100% back up that. You know, you've talked at the macro level there. I can say from the micro that our team, I can guarantee that the demand of the coalface is enormous.
Speaker 3:Enormous On the stuff that we're looking at.
Speaker 3:On the stuff that we're looking at, I mean there is going to be yeah, there is absolutely going to be blood on the streets for CBD high-rise apartments. It is, and I'll be talking about that next week in my economic update. There is going to be that is going to be one market that is going to be really, really challenged and I suspect there's going to be really, really challenged and I suspect there's going to be easily double-digit declines in that particular market into the 10s 15% range because it has all of the fundamentals all messed up. It's in a jarring position as per this Black Swan event. But suburban real estate it's actually holding up really, really nicely and I suspect that will continue.
Speaker 3:I don't think there'll be a contagion effect in that particular area, so we'll talk more about that. But that's you know. And just on that point around distress selling, I think Eliza Rowan in her update to Picker members recently talked about it's actually um, mortgage stress or mortgage in possession sales is 50 percent lower this year at this time compared to last year. Go figure. And a lot of people you'll be listening to the, you know, to the news, to the mainstream media and hearing all the negative property price stories. But the reality is, is that um? No, you know, everything's holding up pretty well at the moment very good, well said.
Speaker 1:Hey, I'm being a good show. Ben, we love Q&A day. Hey, I just wanted a little tease to the folks for next week, ben, we have got a professional soccer player coming on next week and we had to. We had to chat to Chris in advance and you and you said Ben quote, this was in your top two episodes yes, it was in my top episodes, absolutely, and I'll call it two.
Speaker 3:That's fine. I'm happy. It was brilliant. I really enjoyed a chat with a young man who's going places so folks stick around for that.
Speaker 1:We're looking forward to bringing that to you next week, but, ben, until next week until we chat to soccer player next week, Ben.
Speaker 3:Knowledge is empowering Bryce, but only if you act on it.
Speaker 1:You're a wise bloke. See you next week, folks. Hey there, folks, bryce Holdaway here. Before you go, if you're new to our community and only listen to maybe a handful of episodes, I thoroughly recommend that you go all the way back to episode number one, where we unpack all of the foundations when it comes to property investing.
Speaker 1:Now, for those of you that might be a little bit time poor, I've got good news for you we have a binge guide that you can download straight away, which summarizes the first 20 episodes where Ben and I unpack the foundational pillars of the ABCD and so much more, and you can get that straight away If you go to thepropertycouchcomau forward slash TPC20,. You can download it and consume it whenever you want. It's completely free and available now. And for those of you just a quick reminder that nothing we've spoken about today constitutes financial advice we recommend that you reach out to your licensed professional advisor so that you can look at your unique circumstances before acting on any information. And don't forget, go to thepropertycouchcomau forward slash TPC20 and get your binge guide today.