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The Big Property Q&A: Market Risks, Buyers Agents & 2025 Hotspots · The Follio Property Podcast

• 0:00
  The housing market is near a crash. There's a lot of speculation in the market at the moment. Is it better to keep money in an offset or make over repayments on your mortgage? Where you're living isn't in a rising market, well then it changes the conversation completely. If you're trying to build a portfolio, should you leverage the 5% deposit scheme? Because it's flexible, it's liquid, it's available. Is land banking a good strategy in 2025?
• 0:23
  Typically trying to lamb bake early in cycles is preferable because lamb baking, what's your opinion on the Darwin property market? And they've also said still waiting to hear who Reese's Barber is.
• 0:36
  You're listening to the Folio Property Podcast. I'm Rhys Beddell, and I'm here each week with my co-host, Lachlan De La Hunty. If you're enjoying the podcast, do us a favor, hit like, hit subscribe, and leave a comment so we can grow this channel. Lachlan, we've had this podcast for six months now, so I thought it was time to actually start replying to some of these comments we're getting in YouTube and Spotify, social media. And please keep them coming, because we might make a segment of this each month to answer your questions. So comment on this, any questions you want us to answer.
• 1:06
  Yeah, and look, I personally do go back to a lot of these on YouTube. I'm glad you do. I try to. Some of them I miss. I'm not always on the ball, but some of them I've actually even gone back and said, look, I'm going to address this on a Q&A because I think it's a good one people would want to hear.
• 1:20
  If you're trying to build a portfolio, should you leverage the 5% deposit scheme or is the 20% a smarter option long term? So this is referencing the first homeowner cap. Yeah, I think, Rhys, if you're in the fortunate position where you can take advantage of the first home buyer scheme, because it's not going to be there forever, you'd be silly if you didn't take advantage of it. Obviously, you get the stamp duty exemption as well. So you get the stamp duty discount as well.
• 1:44
  Although if you can afford the 20%, you say, well, why wouldn't I just use that up front? I'd use the additional cash flow to put in an offset because it just gives you more flexibility. So certainly taking advantage of that 5% why it's available. Obviously some requirements around that you need to be able to live in. It's got to be a home. So if where you're living...
• 2:02
  isn't in a rising market, well, then it changes the conversation completely. But if you are in an area that you think's got growth fundamentals that are strong, you'd be absolutely silly not to take advantage of this and use any surplus cash to put an offset that you can obviously be more liquid with.
• 2:20
  Yeah, and really it's going to depend once you speak to your mortgage advisor as well because you'll probably have a higher borrowing, not probably, you will have a higher borrowing capacity on an investment loan versus an unoccupied loan anyway because you've got the rental income coming in. So you've got to really have that understanding of where you want to be buying. The offset's an interesting one actually because that's the next question I have here. Now, look, we're not financial advisors. We don't give financial advice, but we do get a lot of questions about it. Is it better to keep money in an offset
• 2:49
  or make over repayments on your mortgage? I personally keep it all on an offset. And the reason for that is because it's flexible, it's liquid, it's available. It's not to say it's not as liquid. If you do pay off your loan, you can refinance. But the banks can change their policy very quickly. And if there is...
• 3:10
  any event or if there was a stagnation in the market or there was some uncertainty, then I want as much liquid cash as I possibly can. And offset allows me to do that. And that's essentially your cash. The bank can't touch that per se. The moment you start paying off the loan, you want to withdraw that. They can take control of that. They can shut the walls down and say, look, there's no redraw on this. So if you're looking for flexibility, you're looking for...
• 3:36
  And understand the offset benefits. When it's in the offset, you are paying interest on a lower loan amount. So the benefits are very, very similar. And we spoke about this on the podcast with the broker. The large benefit is the fact you've got liquid cash in your offset.
• 3:49
  Next one, we've already actually done a podcast on this, but just a quick, quick reply. I've been hearing a lot of noise surrounding the bubble and that the housing market is near a crash. Now, the bubble, I think, could be referring to the 18.6 or maybe a bit of a winner's curse. Everything's been rising. What's your opinion on this? Probably keep it short.
• 4:07
  Yep. There's definitely some merit to what people are saying. When things are too good to be true, they normally are. There's a lot of speculation in the market at the moment. So there's a probability that we may see some easing in the market over the next couple of years. There's over 15,000 suburbs across Australia. And we know that different markets through the test of time perform in different ways and some have debunked any downturns in the market.
• 4:34
  Yes, there is some bubbles in markets, and we've spoken about this. I've got grave concerns about regional markets at the moment. I believe some of these markets are overexposed or overvalued. I've raised my concerns about Adelaide. I have fears for that market where it is based on the affordability index. I spoke about Sydney 18 months, two years ago from an affordability point of view.
• 4:54
  So you've got to look at markets also in isolation as well as a macro view. But this 18-year cycle we spoke about, if you look at the last downturn, the GFC, there's markets across Australia in the next 12 months post-GFC that went up double-digit growth. So it's just understanding the fundamentals. Okay. This one's pretty relevant with what we talk about on the podcast. Looking to buy in Perth rather than Melbourne because of the holding costs. Am I making a mistake?
• 5:22
  They put here long-term probably, and they've also said still waiting to hear who Rhys' barber is. So some really relevant topics on this podcast. I will reveal my barber at a later date, but to the actual question, looking to buy in Perth rather than Melbourne because of the holding costs. We get a lot of clients, and this could be a perfect one to have a chat about actually. Yeah, it really depends on the strategy, and I don't want to like to put a caveat there because I get asked this to friends all the time.
• 5:50
  And the argument, if you want instantaneous growth, Perth still is the best bet in the country. Over the next six to 12 months, I can't, based on the data that we track, see a better play. But when I look at the long-term fundamentals, when I say long-term, long-term is five to eight years normally. Melbourne, to me, the fundamentals seems like a better play.
• 6:11
  So depending on the exposure in your portfolio, if you've already got exposure in Perth, and I had a good mate that recently helped get into the Melbourne market, he's got an asset here already in Perth. He's done well. He's playing the longer game. So yes, we're going to leave some money off the table by not buying another one in Perth in the next 12 months, but I think the longer term benefits of the Melbourne market in its current cycle will be,
• 6:35
  will hold him in good stead. So to answer your question, if you've already got Perth exposure, I'd have serious consideration to Melbourne long-term. If you're looking for more of a shorter-term trading play, you want instant equity, you're probably going to get more of that out of Perth. But understand if you make 20% in the asset, when you look at stamp duty, entry costs, exit costs,
• 6:55
  To get ahead, you really need to be making north of 10%. So with that long-term in mind, we don't invest in markets unless we see north of 50% runway. Is land banking a good strategy in 2025? So this is a generic question, so I don't know what particular state or city it's referencing. Obviously, it's well talked about land tax in Melbourne. But is land banking a good strategy in 2025?
• 7:20
  Land banking is always a good strategy for the right client that can afford to hold it, right? So that's what when you look at land banking, you're typically buying high land value assets and sitting on them that they may not have very good rental returns. The category of clients that can take these type of assets, typically higher income earners,
• 7:37
  where they're getting a tax benefit and all those that are buying these in cash. But land bank is always a good strategy for the right client. But typically trying to land bank early in cycles is preferable because land banking mid or late in the cycle, you're paying too much to do so. A couple of regional questions here. We get this one frequently, so it's not a specific question, but what's your opinion on the Darwin property market?
• 8:04
  We'll see a run over the next 12 to 18 months, probably a significant market. I see Darwin as a large regional, not a typical blue-chip capital city like Sydney, Melbourne, Adelaide, and Brisbane.
• 8:17
  Therefore, we won't take a position, albeit it might be the highest performing market with Western Australia, with Perth over the next 12 months. Out of the two, I prefer to place capital in areas that are backed by better economics. And understand the holding costs in Darwin when you pay the insurances is significantly higher. The gross yields are fantastic. The net yields aren't as attractive, just knowing what you're buying there. But I think you'll see a run on that market. But do I want to have an asset in my port?
• 8:46
  Do I want Darwin in my portfolio long term? No. Perfect. What's your opinion on Geraldton? Brennan Ptolemy absolutely loves- He got me excited about it, actually. Geraldton. You almost- Yeah, you almost- He actually, like, I, you know- Almost- It's not our radar, but he sold it to me pretty well. Almost talked me into it. Again, talking long term, I don't have Geraldton in my portfolio. Yep.
• 9:10
  Okay, this one, we just recently got this on a podcast that we recorded on YouTube, but we've had similar questions like this in the past, and we have referenced it, but I thought let's just have a question on it to outline it. Maybe don't go into detail on every single one, but just what you look at. So the question the person asked is, can you define what an A, double A, B, C, D great assets are? Now, I don't know if we said double A, but we definitely talk about A, B, C, D great assets. Okay.
• 9:39
  You've mentioned that. Let's not do a breakdown on what supplies and addable. I can. Yeah. So AAA is what we refer to from a suburb point of view is markets that exceed 6.5% compounding growth over the long term. Yeah. So that's ever since 1980 when data come out.
• 9:55
  Some markets have performed or outperformed other markets and history gives us an indication of what will perform well moving forward. So AAA is 6.5, essentially up to 10% long-term compounding growth. BBB is 5.5 to 6.5. CCC is 4.5 to 5.5.
• 10:13
  And after that, just don't buy it. But essentially, where do you want to pay capital? Do you want to put your money in suburbs that have had a 4.5% to 5% long-term compounding growth rate over the last 50 years?
• 10:28
  The answer to that is no. What markets have done that locally in Perth? Armadale, great example. Thornley, these sort of speculative markets that peak in trough. Or do I want to go to an equivalent of that in Melbourne, an area such as Melton, Werribee, great example. Or do I want to pipe my capital in AAA-rated suburbs that have produced 7% returns, 7.5% returns over the last 40 years? Great example is them, Mount Hawthorne.
• 10:56
  in Western Australia, Mount Lawley, Western Australia, Claremont, Western Australia, blue chip localities. There's also better price points that have AAA ratings. Equivalent on that in Melbourne is Kew, Hawthorne, go further out, Blackburn, those sorts of areas. So that's from a suburb point of view. And then when we look at A grade, B grade, C grade assets, A grade is an established home.
• 11:18
  No strata. Ideally, when we look at A-grade assets, family homes, land to value ratio, somewhere between 65 and 85%. When we look at B-grade assets, it's typically low-density assets. Survey strata. Survey strata means you're still
• 11:37
  own the land, but it may have two units on that side or three units, sub five. And then you're looking at C-grade assets, we're going sort of medium density. So I think units, billers, assets, and then D-grade assets, we throw higher density into that equation. Okay. Awesome. That does really well explained. This one's a good one for almost a negative connotation, but I think it's a good one to address.
• 12:03
  because we've had similar comments. This is the reason I've pulled this one out because I've seen something similar before. But the statement says, every time a buyer's agent says off market, you can be sure they've overpaid for that property by at least 50K.
• 12:16
  Let's put this on the I call bullshit segment. That's the most ridiculous thing I've ever heard. Every asset that we buy off market, we get proven within typically two to three weeks, sometimes when it settles, that we've underpaid significantly. So yes, there's a premise that suggests that you have to pay an off market tax. You have to pay a premium. And I think in a slow market, in a stagnant market, there's merit to that. In a rising market...
• 12:43
  we are talking the opposite. We're talking 5%, 10% gains by the time it settles. We're seeing this on a daily basis. We'll buy an asset and then two weeks later, something will go online and sell $100,000, $150,000 for more than what we currently have under offer. So that is a ludicrous statement.
• 13:03
  But is that, okay, so that's a ludicrous statement for us as a business, but what about other spruikers out there? Is that something, a strategy they will employ? Is there merit to, not necessarily with us, obviously quite passionate with the response and we know how we operate as a business, but are there some of these cowboys out there that that's actually a strategy that they're employing? Look, there could be. I can't speak because I haven't even said it. I've heard agents tell me that typically people
• 13:31
  For us, it's East Coast investors investing
• 13:34
  out of their core area. So I think for buyers agencies that are buying in markets where they don't have boots on the ground, they could pay massive premiums for properties because they don't understand the fundamentals. They don't understand what market value is. I've also heard rumors that buyers agents are telling the agent to increase the price by $50,000 and then pay the buyers agent a marketing fee as a kickback, which makes me absolutely sick. So to answer that
• 14:04
  out of their core areas where they don't have boots on the ground. And agents have got to do the best job by the seller. And if I've got an undereducated buyer's agent that just wants to get a deal done in Sydney to buy in Perth, I'll tell him whatever I want to tell him to buy the asset. And you do hear that. You speak to agents. You go, how did you get that price? And they're like, oh, it was a Melbourne buyer's agent. They don't understand the Perth market. They paid 100 grand too much.
• 14:26
  It's like, okay, that makes sense. But when you're in your core market, and that's why when we buy for our clients, they're with local buyers agents on the ground that know what value is, and that's really, really important. So maybe I will backtrack on that ludicrous statement. That was probably pretty heavy-handed. I just almost took insult to it, because I'm like, that's, I can just look at the deals that were purchased. I'm like, but you're right. I think if you, yeah, potentially if you're with an agency that isn't familiar with the market they're buying in, there's a huge risk of overpaying.
• 14:53
  And you've just said there, so for the listeners and anyone that has that same thought process, you've said a few key things to look out for to make sure you've got the right buyer's agent that isn't going to be doing a strategy like that. Yeah, make sure you meet. When you're in that, say, yeah, we've got legs on the ground. Well, you don't want to speak to the person giving the advice. You want to speak to the buyer's agent on the ground and give examples of what they've purchased recently. And you want evidence.
• 15:16
  Yep. This one refers to the episode we were doing on like portfolio build or what you should be looking at in your portfolio. So keywords here, debt to income, which do you want to just quickly explain what debt to income is quickly? It's your total debt in comparison to income. So if you've got a million dollars of debt, you're on $200,000 income, your debt to income is five times. Yep.
• 15:39
  Okay, so now that's been explained. This question was referencing that podcast that we spoke to and we're talking about levels on the debt to income. It says, are you suggesting that we should not use equity from the principal place to buy investment property since this will increase our debt to income ratio for our principal place? Really good question.
• 16:00
  If you can avoid it, yes. If you don't have to use equity from your prime place of residence, I look at your prime place of residence as your safe haven. That is your home. And as I've said on the podcast, once you've paid that off, you have achieved life's work, really. You own a home in Australia. It's Australian Dream. Own your home debt-free. Yeah.
• 16:18
  But understand, not everyone's in a position where they can do that. So it does lend itself the opportunity to recycle that capital to get into the investment property. If you can avoid it, I would avoid it. However, it's all about the ratio. Like I said on the previous podcast, we don't want your debt to income on your home to ideally exceed three times.
• 16:39
  no more than three and a half because it makes it very difficult for the bank to give you access to serviceability debt to buy your investment properties so it's not to say don't really re-leverage if you're paid off your debt you might have bought your house at three and a half times your income okay that's fine you've now paid off quite a bit you've brought it down to 2.8 i've got no issues with you having to refinance pull that equity out brings it back up to three five three six to buy that investment property because without that you may not have been able to purchase the investment property so i've got no issues with that that's a really good strategy
• 17:07
  And then the strategy becomes then, how can I continue to get that debt down? Look, we get a lot of questions on Melbourne and Perth. I think what we'll do before the end of the year is we'll do some minis just specifically target on Melbourne and Perth because obviously we talk about it. So there is a lot of questions there that we'll address in a later episode. The last one I've got here is a generic one. Has the first homeowner cap increased, just increased the baseline medium house prices up to that level?
• 17:33
  Without a doubt, we've seen anecdotally on the ground somewhere between $50,000 and $70,000 between that $600,000 and $750,000 price point overnight. I want to say overnight in the last 30 days. Yeah. Interesting. Okay, guys. Look, keep those comments coming in. I actually enjoyed going through some of these. Yeah, we should do this more often. Just spitfire. I'll answer it. Yeah. Yeah.
• 17:58
  critique me come back with some feedback i'm sure there's some some people have their own opinion yeah and look i do try to reply to some of those comments i miss some there like i said there's a lot on specific especially perth and melbourne i think before the end of the year we'll do some minis just targeting so people can have a have a listen for our thoughts on some of those because we could be here all day talking about that but yeah thank you you've been listening to the folio property podcast