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Transcript

The Secret to Buying Your House · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirkby. Welcome aboard. I hope you enjoyed some of
0:16
Speaker 1: the recent shows and recent guests we've had. You know,
0:20
Speaker 1: every now and again someone comes on the show with
0:23
Speaker 1: what we might call a blinding insight. And I actually
0:27
Speaker 1: thought Tonyo Doherty in the last show and his point
0:31
Speaker 1: that when you are selling a property or selling your house,
0:36
Speaker 1: the secret is not that you're selling your house. The
0:39
Speaker 1: secret is that someone is buying a home and that
0:43
Speaker 1: is so so I think that's terrific insight into the
0:47
Speaker 1: dynamics of it all and really told us something that
0:50
Speaker 1: would be very useful in the future. In today's show,
0:54
Speaker 1: I want to develop some of those fundamental issues aren't
1:00
Speaker 1: and properties and flip it over actually and we'll have
1:05
Speaker 1: a look at buying this time and buying a property,
1:09
Speaker 1: buying investment properly. And the ideal guest for such an
1:13
Speaker 1: exercise is someone who's been on the show before. Jared
1:16
Speaker 1: McCabe of the Weightling Group. Hi, Jared, how are you on?
1:20
Speaker 2: Very well? Jimes, thanks for having me on again.
1:21
Speaker 1: Oh great to have you on. Haven't heard from you
1:24
Speaker 1: for a while. People will be very keen to catch
1:25
Speaker 1: up with where you're coming from on the market especially
1:29
Speaker 1: it's interesting, you know, insights, insights of commentary, hard to find,
1:35
Speaker 1: to be honest, hard to find in any field, particularly
1:37
Speaker 1: hard to find a property. And I thought, as I say,
1:41
Speaker 1: Tony had already from from McGrath's up in Brisbane, who
1:45
Speaker 1: was very good on that issue of how you sell.
1:48
Speaker 1: Now your expertise as a buyer's advocate is in how
1:51
Speaker 1: you buy. And one thing I wanted to talk to
1:54
Speaker 1: you about straight away is this issue about when you're
1:58
Speaker 1: buying somewhere and everyone's gone through this, and it doesn't
2:01
Speaker 1: matter if you the listener, are buying a first home,
2:05
Speaker 1: a first apartment, if you're an investor and you're buying
2:08
Speaker 1: your third property. Same as she comes up every time
2:12
Speaker 1: you have to make compromises, the perfect property is not.
2:16
Speaker 1: There some things you can compromise on and maybe some
2:19
Speaker 1: things you can't. What can you compromise on, Jared.
2:22
Speaker 2: There's a lot of things that you can compromise on.
2:25
Speaker 2: There's not necessarily a lot of things that you should
2:26
Speaker 2: compromise on. So I think the first question though, is
2:30
Speaker 2: that you really need to determine what the purpose of
2:33
Speaker 2: the purchase is, so and have a very clear understanding
2:36
Speaker 2: as to what your objectives are and what you're looking
2:39
Speaker 2: to gain out of the acquisition. So are you looking
2:42
Speaker 2: to buy a home or are you looking to buy
2:43
Speaker 2: an investment or are you looking to buy a lifestyle
2:45
Speaker 2: property as a holiday destination, something on those lines, So
2:48
Speaker 2: what's the reason for the purchase. And once you've got
2:51
Speaker 2: an understanding as to what you're looking to achieve out
2:54
Speaker 2: of that, you can then start to look at well,
2:56
Speaker 2: perhaps I can compromise in certain areas, but there are
2:58
Speaker 2: other areas where I really should. So if you're looking
3:01
Speaker 2: to focus on capital growth because it's more of an investment,
3:04
Speaker 2: or you're looking at more of a rental return, well,
3:06
Speaker 2: then there's going to be aspects of a property that
3:07
Speaker 2: you don't want to compromise on. And it's usually the
3:09
Speaker 2: fundamentals around the things that you can't change about that property,
3:13
Speaker 2: so that you can make improvements, and you can alter
3:16
Speaker 2: things that perhaps aren't quite right, and that might be
3:18
Speaker 2: as simple as paint, carpet, those sorts of things. But
3:22
Speaker 2: things that you can't change about a property are the suburb,
3:25
Speaker 2: the street that you're on the style of property, perhaps
3:27
Speaker 2: that you've purchased, it's orientation and outlook that it might have,
3:31
Speaker 2: or the adjoining uses that might be surrounding the property.
3:34
Speaker 2: So those are the sorts of things that you probably
3:36
Speaker 2: don't want to compromise on. But if you're looking at
3:39
Speaker 2: it from a home point of view, then there might
3:41
Speaker 2: be other reasons of why a certain property might be desirable,
3:44
Speaker 2: and it may be particularly around Melbourne, there's a lot
3:47
Speaker 2: of school zones that people are looking to try and
3:49
Speaker 2: buy into.
3:50
Speaker 1: To get inside this catchment, yes, to.
3:52
Speaker 2: Get able to get children into that school. So in
3:55
Speaker 2: order to get into that zone, you may need to
3:57
Speaker 2: that's the priority, that's the objective of buy this property.
4:00
Speaker 2: So there may be compromises that you might need to
4:02
Speaker 2: make in terms of size of property or style of property,
4:06
Speaker 2: or perhaps you need to be on a main road
4:08
Speaker 2: in order to get in, which in a capital growth
4:10
Speaker 2: investment focus you probably wouldn't do that. So understanding the objective,
4:14
Speaker 2: I think is really important before you start worrying about
4:17
Speaker 2: where you'll compromise.
4:18
Speaker 1: So the compromises might be slightly different for the home
4:21
Speaker 1: buyer and the investment residential property investor. So that's a
4:26
Speaker 1: good example. The home buyer might make a compromise they
4:31
Speaker 1: would never think of, never want to make. But if
4:33
Speaker 1: there's certain aspects like access to a school inside a
4:37
Speaker 1: catchment zone which is going to see thousands and thousands
4:39
Speaker 1: of year a year, then hey, they're winning, all right.
4:43
Speaker 1: That's a good example of the home buyer's compromise allowable compromise.
4:47
Speaker 1: What about investors and the compromise is that they might
4:51
Speaker 1: be able to make that aren't crucial though we might
4:54
Speaker 1: think they are.
4:55
Speaker 2: So you can look at things like moving and it's
4:57
Speaker 2: a common term that we see around particularly and media
5:00
Speaker 2: is around looking at bridesmaid suburbs where perhaps you might
5:03
Speaker 2: be well, you can go to basically the suburb that
5:07
Speaker 2: might be the next one out that might still have
5:09
Speaker 2: a lot of attributes that the object or the suburb
5:12
Speaker 2: that you were looking at still has, But by going
5:15
Speaker 2: to the next suburb out you can still achieve all
5:17
Speaker 2: of those objectives. There's still demands to be in that location.
5:20
Speaker 2: Perhaps the land values are not quite as strong, so
5:23
Speaker 2: if you and there's plenty of examples around that you
5:26
Speaker 2: can use to do that. But by taking that step
5:28
Speaker 2: for one suburb further out, the price has come down
5:31
Speaker 2: a little bit, but you can still afford to get
5:33
Speaker 2: a good quality house or a good quality apartment or
5:35
Speaker 2: unit whatever you're looking to purchase in a nice, quiet street,
5:38
Speaker 2: but that you make sure that it's still close to
5:40
Speaker 2: public transport because the transport line still heads out through
5:43
Speaker 2: that same suburb. It's still got good access to public
5:47
Speaker 2: to a local village, it's still got good access to schools,
5:50
Speaker 2: that sort of thing. So there can be ways in
5:52
Speaker 2: means you can take that step out and still achieve
5:55
Speaker 2: your objectives, but by compromising perhaps the suburb of not
5:59
Speaker 2: being exactly where you thought you might need to be.
6:02
Speaker 1: Right, Yes, okay, that's really interesting. So the different compromises
6:06
Speaker 1: that are for the home buyer and for the investor,
6:11
Speaker 1: And notice you talk about the compromises are very much
6:13
Speaker 1: around property, physical issues, around location, etc. What about on
6:20
Speaker 1: financing or on other issues like that? Are there also
6:24
Speaker 1: compromises that a person could make.
6:26
Speaker 2: You can look at whether or not. And again this
6:28
Speaker 2: is probably more of a financial advisor type question than
6:31
Speaker 2: a biased advocate properly advisor question, but it's probably you
6:34
Speaker 2: can look at things like whether you pay principle and
6:37
Speaker 2: interest or whether you only pay interest and there'll be
6:39
Speaker 2: different philosophies and thoughts around that, but that might save
6:42
Speaker 2: you some money. You can look at variable versus fixed
6:45
Speaker 2: interest rates and there's ways and means to focus on that.
6:47
Speaker 2: And again, depending upon what the expectation is around interest
6:50
Speaker 2: rate movements, that may dictate your decision around that side
6:53
Speaker 2: of things as well. So there's ways and means that
6:54
Speaker 2: you can compromise or make alterations how much you want
6:57
Speaker 2: to put down in terms of your deposit. You may
6:59
Speaker 2: have gradic capacity, you might not.
7:02
Speaker 1: Yes, right, okay. And we mentioned in the last show
7:04
Speaker 1: about you Know buying that in fact it was all
7:08
Speaker 1: about the focus was the mistakes perhaps that people make
7:11
Speaker 1: when they have their own property and they're selling it
7:13
Speaker 1: and they're thinking about being a seller, and they're thinking
7:17
Speaker 1: all with this frame of mind about selling to someone
7:21
Speaker 1: when in fact, you know, our previous guest suggested that
7:24
Speaker 1: the sort of breakthrough is to look at it the
7:26
Speaker 1: other way around. The buyer wants a home. You're trying
7:30
Speaker 1: to win the argument with someone that this could be
7:35
Speaker 1: their home. So that was the sort of real estate
7:38
Speaker 1: agent seller's insight. Now from your point of view, you're
7:42
Speaker 1: the buyer's advocate. So what tell me when people are
7:46
Speaker 1: someone's standing beside you, you meet them first time, they're
7:50
Speaker 1: saying we want to buy extra y. I presume there's
7:54
Speaker 1: common mistakes you come upon at that point. Is the
8:00
Speaker 1: anything you could tell us on that front?
8:02
Speaker 2: There can be many mistakes around around those sorts at
8:05
Speaker 2: that point in time, and it really Again I might
8:07
Speaker 2: sound like a bit of a broken record here, James,
8:09
Speaker 2: but I think the clear the conversation that we always
8:12
Speaker 2: have at the start is trying to understand the objective
8:14
Speaker 2: of the purchase, and everyone has different ones, and so
8:17
Speaker 2: for a first time BUYO, as an instance, it might
8:18
Speaker 2: be I need to get into the market, but this
8:20
Speaker 2: is the first stage of my property journey, and I
8:22
Speaker 2: want to take steps up the ladder. So they may
8:25
Speaker 2: well have a mindset of, well, I just want to
8:27
Speaker 2: get something. I want to get in. Whereas if you're
8:29
Speaker 2: wanting to take steps up the ladder, there needs to
8:31
Speaker 2: be other targets to hit in order to gain capital growth,
8:34
Speaker 2: to build equity so that you can leverage off that
8:36
Speaker 2: acquisition and take those steps up the ladder. So having
8:39
Speaker 2: those sorts of conversations.
8:41
Speaker 1: So if I said to you, I just want to
8:42
Speaker 1: get in. You don't like that approach. Obviously it's too simple,
8:46
Speaker 1: is it.
8:46
Speaker 2: Yeah, it's too simple to just say I just want
8:48
Speaker 2: to get into the market. I just need to get in.
8:50
Speaker 2: It needs to be a lot more thought to it
8:52
Speaker 2: than that around what you're looking to achieve out of that.
8:54
Speaker 2: So and that conversation and that thought process is quite
8:58
Speaker 2: often a conversation that first home buyers particularly have if
9:02
Speaker 2: they've missed out on a number of properties. I'm sick
9:04
Speaker 2: of missing out. I'm starting to get really down. I
9:08
Speaker 2: just need to get into the market. And that's when
9:09
Speaker 2: the risk of compromise probably becomes greatest, because it's not
9:13
Speaker 2: a case of where should I compromise it. I just
9:16
Speaker 2: need to get in, So I'll compromise anywhere in order
9:18
Speaker 2: to just get into the market. And that's when people
9:20
Speaker 2: start making mistakes.
9:22
Speaker 1: That must be so common just now with such a
9:24
Speaker 1: tape market. What sort of mistakes do they make?
9:26
Speaker 2: Then?
9:27
Speaker 1: So they say, Okay, I've been to three options, we
9:30
Speaker 1: got wiped out each time, and I'm tired, and I'm
9:32
Speaker 1: fed up a bit, and I want to just I
9:34
Speaker 1: just want to get something that sort of ticks a
9:36
Speaker 1: couple of basic boxes and then what do you say
9:39
Speaker 1: to that person.
9:41
Speaker 2: Some of the mistakes that they make are usually around
9:43
Speaker 2: trying to focus on something that's lower priced in order
9:47
Speaker 2: to make sure that they give. But usually that property
9:50
Speaker 2: is lower priced for a reason, and you need to
9:52
Speaker 2: be aware of what's made it compromised and why the
9:55
Speaker 2: price point is a reduced level, so that you don't
9:58
Speaker 2: make you don't make that stuck.
10:00
Speaker 1: So people come to you and say, we want you
10:02
Speaker 1: to help us buying number twenty two rare by Cuttings.
10:05
Speaker 1: Does it happen that you see it? No, you shouldn't
10:07
Speaker 1: be buying that. Yep, yeah you do.
10:10
Speaker 2: Yeah, I've said, I've told many clients not to buy
10:13
Speaker 2: certain properties.
10:14
Speaker 1: Absolutely right, And then they go and then the whole
10:18
Speaker 1: conversation begins a pressure I expect.
10:20
Speaker 2: Yeah, it does, I mean, and it's important to be
10:22
Speaker 2: able to say that. I mean, it's important to be
10:24
Speaker 2: able to look at client in the eye and say, no,
10:25
Speaker 2: look this is not the right property, and it's for
10:27
Speaker 2: these and these reasons. Now it's not my decision at
10:30
Speaker 2: the end of the day, but a client comes to
10:32
Speaker 2: me and says, look, this is what I want to buy,
10:34
Speaker 2: this is why I want to buy it. My role
10:37
Speaker 2: initially is to point out the positives and the negatives
10:40
Speaker 2: around the property so that if they do decide to
10:42
Speaker 2: proceed with the purchase, they're doing it full informed. They've
10:45
Speaker 2: got all of the information so that they can then say, Okay, well,
10:48
Speaker 2: I am compromising here, but I understand it. I'm compromising here,
10:51
Speaker 2: and I'm understanding why I'm compromising here in order to
10:54
Speaker 2: achieve that original objective that we were discussing.
10:57
Speaker 1: Does it happen more often with the horn by us
11:00
Speaker 1: a pose to the investor.
11:02
Speaker 2: Well, usually with the investor clients that we work with,
11:05
Speaker 2: they're relying on us to determine the property that they
11:08
Speaker 2: should purchase. So more so with the home buyers. They
11:11
Speaker 2: home buyers obviously know what they do and don't like
11:13
Speaker 2: and what they want to purchase and why. So yeah,
11:15
Speaker 2: it's more a case of they can sometimes have rose
11:18
Speaker 2: colored glasses on with certain properties, and once you point
11:21
Speaker 2: out some of the perhaps flaws that are there, that
11:24
Speaker 2: it starts to open them up and they realize that
11:26
Speaker 2: perhaps it isn't the perfect property and then they may
11:28
Speaker 2: need to look at alternatives.
11:30
Speaker 1: The home buyer is more intense, I imagine on each
11:32
Speaker 1: property because they have to imagine.
11:34
Speaker 2: Far more emotional and because it's such a big decision,
11:37
Speaker 2: and first home buy is probably even more so because
11:39
Speaker 2: it's the first time they step into the market, so
11:42
Speaker 2: it's a lot. You get a lot of enjoyment out
11:43
Speaker 2: of working with first time was that can be tough
11:45
Speaker 2: to work with because they don't necessarily know as much
11:48
Speaker 2: as others, but you can get a lot of enjoyment
11:50
Speaker 2: because it's such a big deal.
11:52
Speaker 1: Yes, yeah, when they cook and getting them across the lane. Okay,
11:55
Speaker 1: we'll taking sure a break. One or two things I
11:57
Speaker 1: really want to talk to you about you've covered recently
12:00
Speaker 1: and I think it would be really interesting for our listeners.
12:03
Speaker 1: And one of obviously the big jump in moving in
12:07
Speaker 1: investment property and moving to investment property and moving beyond
12:10
Speaker 1: a single investment property, which is what the majority of
12:12
Speaker 1: investors in Australia have, and also how to manage that property.
12:16
Speaker 1: We'll be back in a moment. Hello, Welcome back to
12:27
Speaker 1: the Australians Money Puzzle podcast. James Kirby. Here, I'm talking
12:31
Speaker 1: to Jared McCabe of the Wakelan Group. Jared is a
12:36
Speaker 1: buyer's advocate. He's been on the show fairly regularly over
12:39
Speaker 1: the years, always interesting on the street, taking the pulse
12:44
Speaker 1: basically of the market and really having a nuts and
12:47
Speaker 1: bolts understanding of the dynamics of the market we're in.
12:51
Speaker 1: I wanted to ask you about managing property. First of all,
12:55
Speaker 1: it's interesting. So sometimes I think people in their innocence
12:59
Speaker 1: think that if you have a property manager, what that
13:01
Speaker 1: means is that you pay someone and they're managed the property.
13:07
Speaker 1: In my experience, stock its property managers all the time.
13:11
Speaker 1: If they're manager property, I mean it's I would say,
13:13
Speaker 1: obviously as hard as actually being in there and doing
13:16
Speaker 1: it without a manager. But it's by no means set
13:19
Speaker 1: and forget, is it.
13:20
Speaker 2: No, definitely not. And part of the role of owning
13:23
Speaker 2: a property is then your role then is to manage
13:26
Speaker 2: the property manager to make sure that you're getting a
13:28
Speaker 2: level of service that you that you expect.
13:30
Speaker 1: Yeah, what mistakes do people make in that regard?
13:33
Speaker 2: Well, one of the bit there's a number, one of
13:35
Speaker 2: the big ones is they something It can go both ways,
13:38
Speaker 2: but people chase too much rent at different stages and
13:41
Speaker 2: push too high, asking for significantly increased rental figures. And
13:45
Speaker 2: you can have a property that can sit there vacant
13:47
Speaker 2: for an extended period of time, and that extra twenty
13:50
Speaker 2: to fifty dollars a week that you were chasing and
13:52
Speaker 2: hoping to achieve when the property sits there vacant for
13:55
Speaker 2: a number of weeks means that you've fullgone that anyway,
13:57
Speaker 2: So that's a big one. I think people put too
14:00
Speaker 2: much focus on property management fees at different stages too,
14:04
Speaker 2: because if you've got the right property manager and they're
14:07
Speaker 2: extremely experienced and they're looking after one of probably one
14:09
Speaker 2: of your biggest investment assets going around, you want to
14:12
Speaker 2: make sure that you're paying a reasonable rate to get
14:14
Speaker 2: the best person there. And when you actually start running
14:16
Speaker 2: the numbers on going from a seven percent to a
14:20
Speaker 2: six and a half percent or six and a half
14:21
Speaker 2: down to six whatever it might be, and it's over
14:25
Speaker 2: the lifetime or the rate, it's actually not a significant amount.
14:29
Speaker 2: And if you've got the right person looking after the property,
14:31
Speaker 2: I think that's far more important to make sure that
14:33
Speaker 2: your asset's being looked after and they're keeping in close
14:36
Speaker 2: contact and working well with your tenant or your renter.
14:38
Speaker 2: I think that makes a really big difference.
14:41
Speaker 1: Tell me, is that number seven percent or so? Does
14:45
Speaker 1: it change in different states.
14:47
Speaker 2: I'm not sure. I mean it changes very dramatically in cities.
14:51
Speaker 2: I mean property management fees can go from anywhere between
14:54
Speaker 2: probably five percent up to there's i know some charge
14:58
Speaker 2: over eight percent in terms of management fe So.
15:00
Speaker 1: It sounds like you're saying the ease is not necessarily
15:04
Speaker 1: worse than the five It's a question of quality of.
15:09
Speaker 2: I think the bigger focus needs to be on the
15:10
Speaker 2: manager and yet look once. And it's a bit like
15:12
Speaker 2: when you buy the investment property in the first place, James,
15:15
Speaker 2: the biggest thing needs to be on the asset selection
15:17
Speaker 2: first and foremost. Then worry about the price you're going
15:20
Speaker 2: to pay for it. So find the right property and
15:22
Speaker 2: then worry about the price, find the right property manager,
15:25
Speaker 2: then worry about the fee that you're going to pay them.
15:27
Speaker 1: You're looking for property managers, the people or the brand,
15:30
Speaker 1: because it seems to.
15:31
Speaker 2: Me people always people.
15:32
Speaker 1: Yeah, the individual press is so important out there, but
15:35
Speaker 1: my experience sometimes you sign up someone the griefs, but
15:38
Speaker 1: they leave, and that's.
15:39
Speaker 2: A big issue with property management as an industry. It
15:42
Speaker 2: can be a little bit that you don't there's not
15:44
Speaker 2: a lot of property managers that are career property managers.
15:48
Speaker 2: It can be a little transient, it can be a
15:49
Speaker 2: career path to get into sales as well, so people
15:52
Speaker 2: use they're not necessarily having it focused on this is
15:55
Speaker 2: the career that I want to develop. And it's been
15:57
Speaker 2: a really tough period over the particularly during the pandemic period.
16:01
Speaker 2: Property managers had to deal with a huge amount of
16:03
Speaker 2: issues and people were in really tight positions.
16:05
Speaker 1: Yes, it must have been so difficulty.
16:08
Speaker 2: Very difficult, and and a lot of times they weren't
16:10
Speaker 2: able to get out and look at properties, and there
16:11
Speaker 2: were people in financial difficulties, both landlords and tenants at
16:14
Speaker 2: that point in time. So it's been a really tough
16:17
Speaker 2: industry to be in. And I know from speaking to
16:20
Speaker 2: owners of agencies and things, they've found it really difficult
16:23
Speaker 2: to get good quality people to take up employment in
16:26
Speaker 2: that industry as well, and there was a lot that
16:28
Speaker 2: left the industry during that period because it was such
16:30
Speaker 2: a tough time. So it's really so when you find
16:33
Speaker 2: someone that's good at doing a good job, it's worth
16:36
Speaker 2: paying them.
16:37
Speaker 1: Yeah, I believe that it's like financial advisors and the
16:40
Speaker 1: whole population the shrinking for different reasons. But I didn't
16:44
Speaker 1: know that about property managers that it doesn't surprise me
16:46
Speaker 1: because though it's a tough the reason the sandwich really
16:50
Speaker 1: aren't you as a property manager. And as you see,
16:53
Speaker 1: many people do it on their way to doing something else.
16:55
Speaker 1: And the difficulty is that you expect a lot, but
16:59
Speaker 1: really you can of it. You really have to be
17:02
Speaker 1: realistic in what you could reasonably expect from someone on
17:05
Speaker 1: the deal there on. For the value of the property.
17:08
Speaker 1: I imagine you'd like to think, as always general, that
17:10
Speaker 1: the higher the value of the property, the better they are.
17:12
Speaker 1: But I don't know if that's I don't know if
17:14
Speaker 1: that's true.
17:15
Speaker 2: Not always the white case. Now it's definitely now, you're right,
17:17
Speaker 2: definitely not.
17:18
Speaker 1: Just one last thing on the segment, the move to
17:23
Speaker 1: owning a second investment property. Many people, the vast majority,
17:26
Speaker 1: I can't remember what the status, but it's something like
17:29
Speaker 1: eighty percent of those who own investment property just hold one.
17:34
Speaker 1: Holding more than one puts you in a totally different frame,
17:38
Speaker 1: and holding several demands a completely different approach. Just tell
17:43
Speaker 1: us about that, and about that big jump. I mean,
17:46
Speaker 1: I don't want you to scare people, obviously, but tell
17:48
Speaker 1: us the reality of making that jump.
17:51
Speaker 2: Or even just what we were talking about in terms
17:53
Speaker 2: of property management, you've potentially got because I mean we
17:56
Speaker 2: talk about yeah, and not necessarily. I mean a lot
17:59
Speaker 2: of people would like to use the same property manager
18:01
Speaker 2: to manage both of their properties. But if you've gone
18:03
Speaker 2: down a diversification path, and whether or not you own
18:05
Speaker 2: another property on the other side of the city or
18:07
Speaker 2: whether it's interstate, you've potentially then got as just as
18:10
Speaker 2: a starting point, you've got two property managers to manage,
18:12
Speaker 2: like we said, So there's that as a starting point.
18:15
Speaker 2: But there's a lot of benefits too. Obviously, if you've selected, well,
18:18
Speaker 2: you've got two properties building equity for you. It gives
18:21
Speaker 2: you a degree of flexibility, and if there is some
18:23
Speaker 2: financial uncertainty at some point in time, you can potentially
18:26
Speaker 2: look to sell one to look after the other. It
18:29
Speaker 2: can create extra equity by selling one to pay off
18:33
Speaker 2: the other, and then you've got the income stream being
18:36
Speaker 2: generated from that property to help with retirement. So there's
18:39
Speaker 2: a lot of benefits. But yeah, there's you doubling or
18:42
Speaker 2: tripling depending upon how much how many properties you own.
18:46
Speaker 1: The risk is there, Yeah, the economies of scale aren't
18:49
Speaker 1: really obvious on this one, because as you say, even
18:52
Speaker 1: if you they're both managers, two different managers, probably on
18:55
Speaker 1: different time cycles. Everything's the bills come in at different times.
18:59
Speaker 1: Is there a sort of oft the shelf system that
19:02
Speaker 1: people can use or spreadsheets or programs that are popular.
19:06
Speaker 2: No, there's always standards and a lot of the property
19:09
Speaker 2: managers have got their own software programs that they'll use
19:12
Speaker 2: in terms of communication with investors, and so there's some
19:16
Speaker 2: great apps and things that are coming through now too
19:18
Speaker 2: to work with, so it keeps you up to date.
19:20
Speaker 2: You can see when the rents come in those sorts
19:21
Speaker 2: of things, so that works works really well, and it
19:24
Speaker 2: gives you keeps it interactive and that sort of thing.
19:26
Speaker 2: But that's that also goes back to that point we
19:28
Speaker 2: said before about having the right property manager who's got
19:31
Speaker 2: the right systems in place to support you as the
19:35
Speaker 2: as the owner, to make sure that you're able to
19:37
Speaker 2: keep everything up to date and up to standard to
19:39
Speaker 2: maintain that property.
19:41
Speaker 1: Are the apps from the from the managers or are
19:44
Speaker 1: there apps that the investor can have.
19:46
Speaker 2: No, it's usually the property managers that they've got and
19:49
Speaker 2: different programs and software programs that they use, so you
19:52
Speaker 2: usually have to work in with them. On that. I'm
19:54
Speaker 2: sure there's there's different programs.
19:56
Speaker 1: There's sounds like there's an opportunity out there. I'm sure
19:59
Speaker 1: there are. Yes, I'm sure they'd come through or tell us.
20:02
Speaker 1: How could you not have mentioned a B or C.
20:04
Speaker 1: But let's hear from you folks if you have something,
20:06
Speaker 1: let's add to the conversation. You know, the email the
20:09
Speaker 1: Money Puzzle at the Australian dot com dot you. Okay,
20:12
Speaker 1: we have some really good questions this week. I want
20:13
Speaker 1: to get to their on property. We'll be back in
20:16
Speaker 1: a moment. Hello, Welcome back to The Australian's Money Puzzle podcast,
20:33
Speaker 1: James Kirby with Jared McCabe. Okay, now it's a very
20:37
Speaker 1: interesting correspondence. This is John in a recent article in
20:40
Speaker 1: The Australian. You that's me if you know what I mean.
20:44
Speaker 1: Quote from a report from accountants about the tax office
20:47
Speaker 1: being incredulous with valuation valuations being the same for three years.
20:53
Speaker 1: These must be city based accountants with no knowledge of
20:56
Speaker 1: country towns. My brothers self managed super fund had a
20:59
Speaker 1: commerce building in a town where there were no sales
21:02
Speaker 1: commercial buildings for five years. Valuation started at one point
21:06
Speaker 1: eight million and it's steadily reduced in value as and
21:11
Speaker 1: when sales of other buildings happened. A better building sold
21:15
Speaker 1: nearby for one million. When my brother's building was sold,
21:18
Speaker 1: it only chieve nine hundred koch. The valuation had been
21:23
Speaker 1: the same for three years. There is another story of
21:27
Speaker 1: declining country towns and declining values, and it would be
21:30
Speaker 1: interesting to see how the ATO handles is. Gee, that's
21:32
Speaker 1: really interesting. I was being facetious in the peace, and
21:35
Speaker 1: definitely I was pointing out that the ATO, in one
21:38
Speaker 1: of their sort of endless crackdowns in this area on
21:41
Speaker 1: property investment, had warned about people putting the same valuation
21:45
Speaker 1: each year. And I will concede, living in the middle
21:47
Speaker 1: of a large city, that's not something I would be
21:50
Speaker 1: familiar with, that the valuations don't change. But obviously it's
21:54
Speaker 1: different stokes, different folks.
21:56
Speaker 2: And I can speak from a loftime ago, James. My
21:59
Speaker 2: career prior to getting into the buying service was as
22:02
Speaker 2: a value That's what I used to do, and I
22:04
Speaker 2: used to work in regional Victoria. So I know exactly
22:07
Speaker 2: what John's talking about in terms of properties not moving
22:10
Speaker 2: far and certainly in a lot of regional towns, not
22:14
Speaker 2: just from a commercial sense, but from a residential sense too,
22:16
Speaker 2: you can go through extended periods of time where there's
22:18
Speaker 2: very limited sales evidence to be able to rely upon it.
22:21
Speaker 2: And although there's been good market movement in a lot
22:24
Speaker 2: of regional areas sort of pandemic and immediately post pandemic,
22:28
Speaker 2: there's been a lot of reversions over the probably more
22:31
Speaker 2: recent times too, where have left those regional areas or
22:34
Speaker 2: those growth patterns haven't been sustainable because there hasn't been
22:37
Speaker 2: the influx of population into those areas. So these absolutely
22:41
Speaker 2: spot on in terms of they can very easily hold
22:44
Speaker 2: it go backwards. In some regional locations, they can jump
22:48
Speaker 2: significantly up too, though at different stages.
22:50
Speaker 1: Sounds like the commercial property in the regional and locations
22:54
Speaker 1: is a different story than the residential property.
22:58
Speaker 2: Very much so. I mean it's the yields and things
23:00
Speaker 2: on commercial property in regional areas are very different to
23:03
Speaker 2: what they are in metropolitan areas as well.
23:05
Speaker 1: Right, I see, Are they higher?
23:08
Speaker 2: Yeah? Because they're a riskier asset, So there's typically it's
23:11
Speaker 2: typically your yield is typically higher, yeah, of.
23:13
Speaker 1: Course because because your your spectrum of potential tenants.
23:17
Speaker 2: Correct commercial property. Without getting into the nitty gritty. But
23:21
Speaker 2: commercial property is a lot in a lot of instances
23:23
Speaker 2: heavily reliant on the lease that's in place, whereas residential property,
23:27
Speaker 2: because the turnover is a lot greater, the least plays
23:29
Speaker 2: a far less important role in the value of the property.
23:33
Speaker 1: Right, Very interesting, Very interesting? Okay, just a quick one.
23:36
Speaker 1: No value on valuations and valuers and all that. Are
23:39
Speaker 1: they still crucial in the piece? And is that business
23:43
Speaker 1: As a leman, I would have told you know, a
23:45
Speaker 1: lot of the work they have valuablely used to do
23:47
Speaker 1: can be done quite quickly with AI at this stage
23:49
Speaker 1: or whatever. Is that the key.
23:52
Speaker 2: Is becoming a bit like that? But I mean we
23:54
Speaker 2: talk about valuing properties in our business, and valuing properties
23:59
Speaker 2: are parts ofcience, and AI can do the science. I
24:02
Speaker 2: don't think AI can do the art. And I think
24:04
Speaker 2: there's a lot of human nature that needs to add
24:06
Speaker 2: the art side of things to be able to interpret
24:09
Speaker 2: things in different ways. So I still think that there's
24:11
Speaker 2: absolutely a place for value. Is they need to be there.
24:14
Speaker 2: It's a bit unfortunately. It can be a little bit
24:16
Speaker 2: like property management too. It can be a thankless task.
24:19
Speaker 1: Yes, And I noticed that the range that it's still
24:23
Speaker 1: the case that people will put up prices on properties
24:26
Speaker 1: and you will just look at it and you'll go,
24:27
Speaker 1: that is just so far off. There's no way that
24:29
Speaker 1: estimate is right. How does that still happen.
24:33
Speaker 2: It's a very good question, and it happens. It does
24:35
Speaker 2: happen a lot that there's no way that the property
24:37
Speaker 2: is going to sell within that range. More often than
24:40
Speaker 2: not it's on a conservative side, and more often than
24:42
Speaker 2: not it's when the property is going to auction rather
24:44
Speaker 2: than private sale. But it happens in reverse too. There's
24:48
Speaker 2: properties that have been pitched, particularly on expressions of interest
24:51
Speaker 2: or private sale, that are pitched far too high and
24:54
Speaker 2: properties sit there for months and months.
24:56
Speaker 1: The overest may well be where do you have expressions
24:59
Speaker 1: of interest and properties that are seen to be in
25:02
Speaker 1: some way special, and the underestimates on routine properties at auction.
25:08
Speaker 2: It's the method of style, so that the auction process
25:10
Speaker 2: you're trying to build and garner interest to create competition,
25:14
Speaker 2: whereas the private style typically the price is more of
25:16
Speaker 2: a target price, and so you work you're starting from
25:19
Speaker 2: that and potentially having to work backwards.
25:22
Speaker 1: That's really interesting. That's really interesting, okay, Paul. Final question,
25:26
Speaker 1: A prominent economist is saying that lower deposits paid under
25:30
Speaker 1: the home guarantee scheme would necessitate higher interest payments over
25:35
Speaker 1: the life of the loan. Paul asks, if the taxpayer
25:39
Speaker 1: is paying the other fifteen percent of the deposit, why
25:42
Speaker 1: would the loan recipient be paying more? Perhaps I've misread
25:45
Speaker 1: this article, Perhaps you have, Paul, and none of this
25:48
Speaker 1: is advice information only, But you know those government guarantee
25:51
Speaker 1: schemes they don't hand over, so as you know, the
25:56
Speaker 1: new home loan guarantee scheme, which is now going to
25:58
Speaker 1: be universal, basically that is it. There's no limited number
26:01
Speaker 1: of places anyone can use the home loan guarantee scheme
26:04
Speaker 1: buying a first home, which is very interesting dynamic in
26:07
Speaker 1: the market. Now. The terms of that is that you
26:10
Speaker 1: can have a five percent deposit and the government will
26:14
Speaker 1: cover the twenty percent deposit by guaranteeing the fifteen percent
26:18
Speaker 1: you don't have. They don't hand the bank the fifteen percent,
26:21
Speaker 1: if I've got this right, Jarred. They're just saying that
26:24
Speaker 1: should everything go awry in the future, they would guarantee
26:29
Speaker 1: the bank that if it was necessary, they would stump
26:31
Speaker 1: up that money if it was necessary, and ninety nine
26:34
Speaker 1: times out of one hundred, it won't be necessary. So
26:37
Speaker 1: in fact, what the flip side of this home guarantee
26:39
Speaker 1: scheme is that we're going to have all these first
26:41
Speaker 1: home buyers and they're actually on ninety five percent mortgages,
26:45
Speaker 1: and that is why they have higher dollar payments. Have
26:49
Speaker 1: I got that?
26:50
Speaker 2: Yes, that's my understanding too. That's my understanding is that
26:53
Speaker 2: instead of having a twenty percent deposit so you don't
26:56
Speaker 2: have to pieland as mortgage insurance, you can have five
26:58
Speaker 2: percent and the government will cover the lender's mortgage insurance
27:01
Speaker 2: for that extra fifteen percent. But you've still got to
27:04
Speaker 2: come up with that yourself. The banks, the government's not
27:07
Speaker 2: giving you the extra fifteen percent.
27:09
Speaker 1: Yeah, So in fact, ninety five percent of the value
27:12
Speaker 1: of the house on the day you buy it is
27:14
Speaker 1: you have only put down a five percent deposit, so
27:16
Speaker 1: your mortgage covers ninety five percent, which means it's bigger,
27:19
Speaker 1: much bigger than it might have been and will take
27:21
Speaker 1: a lot longer to pay off. Maths would suggest have
27:25
Speaker 1: you seen that there's a theory abroad obviously that this first,
27:28
Speaker 1: this big scheme now signature scheme from the new government
27:34
Speaker 1: will create intense competition at that level of the market
27:37
Speaker 1: that's inside the scheme. And then if you're just schooll
27:40
Speaker 1: tiny bit higher than where everybody is chasing, that that
27:44
Speaker 1: scheme is better value. What do you think of that period.
27:47
Speaker 2: Well, I mean the scheme's been in place for a while,
27:51
Speaker 2: it has expanded further so rather than I think there
27:53
Speaker 2: was a fifty thousand that it was limited.
27:55
Speaker 1: To and now that's right places.
27:56
Speaker 2: Yeah, and then obviously the I think the price limits
27:59
Speaker 2: have bad going to be increased, and this all starts
28:01
Speaker 2: as off first of January next year, is my understanding
28:04
Speaker 2: twenty twenty six is from what I can remember. So look,
28:07
Speaker 2: I think it will have a bit of an impact.
28:10
Speaker 2: I don't think it's going to have as much of
28:11
Speaker 2: an impact as what say, some of the previous ones
28:14
Speaker 2: have had in that regard where there was a perhaps
28:16
Speaker 2: a limit. I know at one stage that the limit
28:18
Speaker 2: was six hundred thousand dollars and it was a hard limit,
28:21
Speaker 2: and as soon as you paid six hundred and one
28:23
Speaker 2: thousand dollars you were no longer entitled to any benefits.
28:27
Speaker 2: And so there was I went to a number of
28:29
Speaker 2: auctions and this was probably ten plus years ago, James,
28:32
Speaker 2: but a number of auctions where the auction ran up
28:35
Speaker 2: to six hundred and as soon. It was basically a
28:38
Speaker 2: race to who could hit six hundred first and as
28:40
Speaker 2: soon as an investor at the time, because investors were
28:42
Speaker 2: quite active putting six poht one, but just stopped.
28:45
Speaker 1: Dead because the investor knew that they were all.
28:49
Speaker 2: That they wouldn't pay more because they were focus so
28:52
Speaker 2: focused on the free money or whatever. So whether it
28:54
Speaker 2: was a stamp duty exemption or whether it was a
28:56
Speaker 2: twenty five thousand dollar cash bonus, whatever it was, at
28:58
Speaker 2: the time, it well, I can't pay up. And we
29:01
Speaker 2: had a lot of conversations at that point in time,
29:03
Speaker 2: particularly with first home buyers in that because what we
29:06
Speaker 2: were seeing was properties that were worth in the early
29:08
Speaker 2: five hundreds were being run up to six hundred, and
29:11
Speaker 2: properties that were worth six fifty to six eighty you
29:14
Speaker 2: could pick up in the early six hundreds because there
29:17
Speaker 2: wasn't the same level of competition, So you were better
29:19
Speaker 2: off for going that little bit of extra free money,
29:22
Speaker 2: so to speak, and buying a better property at a
29:25
Speaker 2: cheaper price than you were paying above the odds for
29:27
Speaker 2: this lesser quality.
29:29
Speaker 1: But of course the person had to be to basically
29:32
Speaker 1: give up forego that the grant. Yeah, that was obviously
29:37
Speaker 1: going to happen again.
29:38
Speaker 2: Now this is hard to get people's head around that,
29:40
Speaker 2: but once they could, people could understand that it made sense.
29:44
Speaker 1: Yeah, very interesting. So that's interesting folks that aspect that
29:47
Speaker 1: if you were aware of these schemes, particularly the first
29:49
Speaker 1: time guarantee scheme and the range that it has and
29:53
Speaker 1: basically that first time buyer market. Take a look at
29:55
Speaker 1: the tables because as Jared alulded to, it's laddered right,
29:58
Speaker 1: so every state no cap on the number of places.
30:01
Speaker 1: It's now a universal scheme, which means anyone who wants
30:03
Speaker 1: to can put down five percent and that would allow
30:07
Speaker 1: them to buy their first home. But there are limits
30:09
Speaker 1: dollar limits, and they link their links with the values
30:12
Speaker 1: in the states, so each state is different. Quite easy
30:14
Speaker 1: to find out and have a look at, but once
30:17
Speaker 1: you do, you'll get an idea of what the cutoff
30:19
Speaker 1: point is for those type of buyers. And as you say,
30:23
Speaker 1: if nothing else, Jared, the value is probably better just
30:25
Speaker 1: above that limit in the state each time.
30:28
Speaker 2: It can be. But obviously for some people too though
30:30
Speaker 2: that it's in order to get up to that limit.
30:32
Speaker 2: In the first instance, they needed that money, whereas if
30:35
Speaker 2: they don't have that money then they might need to
30:36
Speaker 2: be a lower right and so that you've got to
30:38
Speaker 2: take all of that into consideration before making those decisions.
30:42
Speaker 1: That's right. Well, that's called getting to know the market,
30:44
Speaker 1: and the more you know, the better you will fare,
30:46
Speaker 1: I imagine terrific. Hey, thanks Jared, love you to have
30:48
Speaker 1: you on the show again.
30:50
Speaker 2: Great to be Thanks very much, Jones.
30:52
Speaker 1: That was Jared McCabe of the Weakland Property Advisory Group
30:55
Speaker 1: buyer's advocate and always good on that issue of needless
30:59
Speaker 1: to say, buying home. Some of the things I think
31:01
Speaker 1: we cover there we haven't covered before. Very elementary, very useful.
31:05
Speaker 1: I hope to you keep the emails rolling the money
31:08
Speaker 1: puzzle at the Australian dot com dot au. Talk to
31:11
Speaker 1: you soon.