Borrow My Brain - Amelia

Hello, it's Jane here and welcome to the next installment in the Borrow My Brain series. Now there has been quite a few of these in the past and look around here somewhere. I'm sure you will see a link to some of the other in the series that we have already recorded. And I really appreciate all the feedback from people. Now I started the Borrow My brain series during COVID 19 because you know, I was listening to a lot of calls and seeing a lot of worried people about what they should do in the market, should they buy first, home buyers thinking about buying, investors, should they sell. And I thought it would be really great if I could share some of my experience and some of my resources and help all of those people out there who are asking these questions. So I hope it has been a benefit to you. If you would like to have access to some of the resources and things that we have, just head over to YourPropertySuccess.com and you'll see some of the location masterclass and some of the resources that we have that we talk about. But also I want to make sure that when I'm demonstrating and answering some of these questions that you see there's free resources out there as well. But I just want to show you how to use those resources and how to ask the questions to do an integrity check on the information. And that is exactly what we did today. Amelia wrote in and asked if she could Borrow My Brain. And as she has a son who is a first home buyer and he's considering buying a property in Sydney. So we had a bit of a chat about that and I show some of the resources that are available to everyone that don't cost you anything that you can get in and use now. But I also show you sometimes the data doesn't tell the full story and how you can do a little bit of an integrity check on that. Anyhow, I hope you enjoy this video episode of Borrow My Brain. Hello, it's Jane here and I have a very special guest today for our Borrow My Brain series. Amelia has written in and she's asked an interesting question. Not for herself, which is so very generous of her, but for her 27 year old son who is looking at buying his first home. So let's hear from Amelia. Hey Amelia, how you going?

I'm very well and thanks so much, Jane. This is an exciting time. You know, to have an hour from you is just invaluable. Thank you so much for your time and it is a pleasure. It's such a new concept. I Hadn't heard a bottom of my brain but I just think amazing concept, you know, all of us to do with borrowing, borrowing like brains of people who are geniuses in their field. So my story or my question this afternoon is about my 27 year old son. He is looking to buy has only about the $55,000. A few weeks ago he brought me this investment opportunity at Stanhope Gardens. A two bedroom unit. You know, coming up there was something that's going to be ready in December of this year and there's another block that's going to be ready I think mid 21st. So he came up to me and he said mom, do you think that's a place that I should consider in this current environment with all that's going on? I was not sure. I sent him and my, my husband, he's there to kind of go have a look at the property. He came back, he was quite enthused about what he saw. All the units that were available for purchase at the end of this year were sold that day. So you know, I mean there are so many eager beaver first home buyers. The first home that opportunity was for people to kind of get in and I think you needed to have like a salary of $80,000 and it was a no money down deal because they were going to get your money from the first home buyers brand. The developer was going to kick in some and there was stamp duty savings. And then he said something that set off alarm bells. He said there was a rental guarantee. And I'm like rental guarantee?

No.

We got burned with merit in, in 2002 with buying a property in Hornsby that had a rental guarantee. You know, I said I would stay far away from that but I said let me explore, you know, what other options you have if you've got that money and you are keen to kind of get in the market. He just started a photography and videography business so he doesn't have like much of a history. He used to be with NAB and some share broking companies in the past and he decided he's wanting a career change. But he doesn't have, you know, he doesn't have that set salary guarantee behind him. But he's still looking to kind of consider he doesn't mind a bit of hard work. Dad and me have been property investors for the last 20 years and we are kind of willing to kind of give him, you know, a leg up to help him get into the market. But whether this is the right time, whether he's also not against looking At Inner city unit, a two bedroom holder unit and I would recommend something like that, an older unit where there is more land content. Newcastle, you know. So I just wanted to have your ideas about. I don't think he'd look at Canberra would be a. No, not Brisbane. Whether he'd consider looking at Melbourne. Living in Melbourne. I know there are properties in the Geelong area for like the 400,000 you could get quite nice, you know, three bedroom, two bathroom homes. Whether he lived there? No, I think having lived in Sydney for the last 20 years, Sydney would be his first choice. He wouldn't mind Newcastle or the Hunter region. Yeah. So what are your thoughts about that, Jane?

My goodness, so many things to discuss. Amelia. Yeah, so his boring capacity is around 500,000, is that right?

We haven't really gone to his borrowing capacity. He's got $50,000 saved up and I would think that would be enough for a 10% deposit.

As a first time buyer as well.

Yeah, as a first home buyer.

Okay. Oh my goodness, so many things to unpack here. My brain's going mad. So first of all, kudos to you. It's obviously you and your husband have had a number of property investments and you've seen over the last 20 years some of the good marketing opportunities that are presented to people. And hearing the rental guarantee and having experienced the pain of that yourself, well done in saying that. And for those people who don't know what that means, essentially what the developer or builder or marketer is, is promising is that if you buy this property as an investment property, they will guarantee a certain amount of the rent for you for a year or two. And what often happens is they actually put the price of the property up to incorporate that rent. But when you start hearing about no money down, we'll give you the cash, you can use all the grants. There's a rental guarantee, you know, if it seems too good to be true, it often is. Not to say that some opportunities come out and you're just like this is a no brainer. Fantastic. But it's around doing that research first so well done in identifying that. That was a bit of a concern. And you know, for the people who are buying in the development that you talked about, it might actually suit them. But what we are seeing is this incredible optimism from first home buyers. And you know, if I put my mortgage broking hat on, you know, it's where we're getting the most inquiries, it's where the most financing deals have been in the last few months. And you know, we were with my first home buyer show, I did a lot of promotion and education for first home buyers leading up to the first to the no deposit or not 5% deposit. But the government deposit scheme that came out in January and now it's just come out again in July 2020. So there's another 10,000 places, but this.

Is how much is it? Or it's only 10,000 places or is it $10,000?

No, it's just 10,000 places. So what happens with that is that. Let's just say your son has a 10% deposit instead of having to pay mortgage insurance to cover the bank in case he defaults. The government is backing 10,000 people and you have to have earn under 120,000 as a single person and buy under a certain amount. So we can have a look at some of those things. So I've got a grants book that we can share. Just actually I updated yesterday so with all the latest information of what states can benefit from what things to include the home builder grant, etc. But one of the things that really strikes me about the home loan deposit scheme that the government has done is with as little as a 5% deposit, you don't have to pay the mortgage insurance. So that could save you on this kind of purchase, maybe $13,000. That usually goes on top of the loan, but you pay for it. Right. So I'm not averse to mortgage insurance. I think it's an opportunity cost to get into the market with a 5% deposit rather than saving for 20 years to get a 20% deposit. And I exaggerate there, but it might take to save $100,000 for a $400,000 property. It could take five or six years. If you were to buy now, you could get in now. So there's a lot of the benefits that are happening right now that your son could take advantage of. Yeah, take advantage of. And this optimism that I'm seeing with the first home buyers unfortunately means that they are jumping on a lot of these units and they are looking at a lot of these off the plan units and completing soon units. And actually I put together a presentation for my mentoring students this weekend on a marketing update and I'm just going to share some of the data that came through. This is the, this is from CoreLogic, so beginning of July data and they run the Valex system which is essentially an electronic valuation system that most of the banks use. But this is what really concerning to me is this portion of the off the plan settlement valuations where the valuation was lower than 10% of at least 10% of the contract price. So if we go over here to Sydney, so we're talking about 50% of all properties that are bought off the plan. Their current valuations are 50%, 50% of them are 10% or more. So if you buy a $500,000 unit, you sign on the dotted line, the developer's gonna give you some cashbacks, they're gonna give you some money, they're gonna give you rental guarantees or anything like that, the valuer could go out there. 10% less is $450,000. So when you've made a commitment to buy that property and you will have to either come up with the difference or if the developer has to potentially go back and sell it and he sells it at 470, you have to make up that 470 to $530,000. All these terrible things. Now this is, Sorry, So this is 50% that is lower than the contract of sale and this is like 25% that is more than 10% lower. So this for me is a significant concern and especially this optimism that I'm seeing and this, you know, and I want to encourage in looking at the first home buyers, grants, the stamp duty concessions, the home builders, all of these things that we're seeing and the deposit scheme, the government guarantee, all of these things are fantastic. But you still are buying a half a million dollar property that you have to put some thinking into. Let me just also jump in. I want to share with you here the. What do I want to share with you? Let me think. My whiteboard. Okay, so this is my. Where am I? My whiteboard. So what I want to do here, actually let me just jump out of this for a moment and I'm going to share my screen share, get rid of this little funny thing. And I want to just bring up this. So this is the, I guess it's essentially five steps and I've got an optional six. But this is the financial freedom framework that I came up with to explain how to buy to first home buyers. But it's just as essential to anyone else. And the important thing for your son is to consider what he wants to achieve in the next one to three years. So it sounds like he's been through a corporate role. He's made the decision to, to now follow his heart and dream and passion, do photography, et cetera. So it's around, well, what does this purchase allow him to do? So let's think about the one year plan.

It could be.

I want to Take benefit of the government scheme. I want to take the benefit of the first time buyers grants and concessions. But for all of those you have to live in Sydney or New South Wales in the property for 12 months.

So this 12 month, 6 months or 12 months.

Well it depends on different states. So we have a look at New South Wales for instance. So I'm just going to pull up my New South Wales thing here. So with New South Wales you can get a $10,000 grant for new homes. So this is only if you're buying new or very significantly renovated property. The property value has to be under 600, which is good. Now the stamp duty concessions on new and established properties are for properties up $650,000 and this could be up for $650,000 property that's up to a $24,000 savings. So quite substantial. And the other thing is that you have to live in there for 12 months continuously. Sorry, within the first 12 months in New South Wales you have to live there for six months. Yep. And for the first time loan deposit scheme, there's a cap of $700,000 in the capital city of Sydney and then Newcastle, Lake Macquarie and Illawarra and the rest of the state. So I'll put a link up here to the first home loan guide. So it goes through what all those deposit schemes are that people might get, but also the new grant home builder grant. And there's also obviously that first home super saver which other people have, other people can do to put money into their super as well, up to $30,000. So if we think about him here in this see it kind of stage, it's like, well this home is not a home forever. This is a stepping stone. So maybe commuting from Newcastle or Wollongong or wherever is something he could consider or maybe living in a suburb, you know, near the Blue Mountains where he wouldn't normally say well this is where I want to live forever, but it's got some potential. So this is kind of like the plan where I think he's going to come unstruck is here in this. Set it up. Now this is the finance part of it. Make sure you understand your borrowing capacity, understand how much the cost is going to be of the loan afterwards. Now where I think he might come unstuck here, unless he has a full time job, he is going to be considered self employed. And most lenders are only going to lend to someone who has had an ABN that's been registered for two years. Most lenders need two years worth of financials as well. So from that point of view, I think this might be where he comes unstuck, depending on how generous you and your husband are going to be. But this is one of the things that you need to understand then we this source it here, this is where we're talking today. Where can you afford for the price point that you're looking at? If this is going to be strategic purchasing to be become an investment property in the future, then let's see, where do the renters want to live? Where is the capital growth potential? So we look at that next and then we move on to slam it, which is negotiations, settle, you know, inspections, pest and building inspections, pre settlement inspections, Getting your lawyer involved. Supersize it is adding value, making money out of thin air, maybe adding renovation value and then stash it. You know, get the property set up with the property manager, get everything set up for you to move out. So this is the kind of the, I call it the financial freedom framework. But it's essentially a number of steps you need to think through. And unfortunately what often happens is someone drives by and sees a house or the unit comes up in the development you talked about and people just rush out and have a look at it and they've kind of missed all of the steps that allow you to see how's this property going to get you to your financial goals. Are you actually set up and pre approved? Is there any risks like the fact that the valuation could come in low? Is it in an area that's going up in value that I could turn into an investment in the future? And you know, am I actually negotiating this? Well, so you know, this potentially was all missed and could have been quite a significant issue for you until, you know, you, you kind of picked up on this being a problem. So this is all good news. Now we kind of know what's happening correct ways. Yeah. So let's move on to where can you afford to buy and you know, what does that look like? So I think, you know, one of the things that's really important here, if we have a look at this is I'm going to share my screen once again. So for those people who are already a member of your property Success Location Masterclass, ultimate guide to Renovation. If they go in here through to the Location masterclass course, we get the access to the suburb selector software because what we really want to run is, you know, where are the suburbs that he could potentially afford. So it gives us an idea. In Sydney, for instance, if we use that $500,000 mark. I'm sure he's happy to go, you know, down to 400 and we might just set the stage go up to 550. Only because, you know, it could be the fact that there's an opportunity for the market to come down a little. You know, we're in the middle of the COVID 19 pandemic when we're recording this. There's a speculation that the market will drop 5 to 10%. So, you know, if we go 10% above and start negotiating, well, we could get into a suburb that may normally be out of the price point, just from a distance traveling. Seems his work is, you know, could be anywhere. Has he got any apprehensions about living anywhere in particular? Not really.

So he has work in the mountains, he's got work in the city. He's got work in Newcastle. So I think he'd prefer the north, you know. Yeah, the north of the city. Right. Right up to Newcastle.

Okay. So what we're seeing here is the good news is there are some suburbs, and you'll be able to see this on the replay, but there are some suburbs that are coming up now. A lot of these are in the western area that we can see here now. So what that might mean is he might look at this area and go, oh, it's not really what I'm comfortable with. Or we might look at this area and go, wow. You know, for instance, if we look at North St. Mary's on the Google maps, you know, you might sit here and go, oh, actually, you know, this is kind of near the Badgery Creek development. There's some opportunities here, but if I could get a house, I'd be a lot better off. And for those who saw the July 2020 pain and gain report from CoreLogic, you know, we know that houses outperform units with those that actually sell with a profit. So if we could get in there, even better and we have a look at that area. What I've done here is I've essentially done a digital dot map so that we could. We could have a look at, you know, the dot map technique is the technique that use to try to work out the ripple effect. So one of the second CBDs in Sydney is Parramatta. Parramatta.

Correct.

There's also that ripple effect that we see coming out from Parramatta. So, you know, people want to be where they're going to work. But we also have this interesting development down here in Badgery Creek. And we can see here, you know, there's been over 10% growth in all of these suburbs next to Badgery Creek. So you know, when there's large development opportunities and, and there's sustained population that is going to have to service that. So we're not talking about Gladstone. It takes thousands of people to build a plant and then five people to run it. We're talking about 2,000 people a day have to run Badgery Creek.

So that whole area is going to be called that Sydney Aerotropolis. It's huge. It's huge.

And there's money being spent there. So you know, we start looking at this North St. Mary's you know, we've got this 8% growth that's already happened here. So we've already got this growth. There's a couple of suburbs below here that's only, you know, had 7%. So what we normally trying to do is get that kind of pricing pressure. So we've got all these eights and eights that are already and we've got this pink so you know, pink which is nine pushing on to an eight. So we've got some ripple effect indications and I guess what the thing is that he could look at this and say yes, there's some opportunity for me here and you know, you'd like to consider that or he could potentially go through and have a look at Newcastle and for Newcastle to get into the central coast. This is my workaround here. If we say add 150k's on. So we're going to get, you know, out to Scone and up to Port Macquarie or wherever. But you know, there's going to be some of these areas that are affordable, you know, quite close to Newcastle as well that have some opportunity to get him into a, you know, Central Coast. Budgy Woy 490 for instance. So there's all of these areas now these areas are picking up on, you know, Just his price point. So we've got no information here about, you know, pricing pressure like that dot map the ripple effect. We've got no information here about, you know, is this going to have the criteria that I would use for low risk investing? So you know, we've got these suburbs that come up that are kind of, we're within the price point but are they really deserving of, you know, potentially going through this ripple effect and having these criteria? So I mean I'm just going to take one randomly. But what I'm talking about is being a low risk investor. I'm always looking to make sure if I was going to use buying wallsend, it's in my price point. It's only 11ks in CBD of Newcastle. But what I want to see here is that when I do rent that property out, there's over like 30%. Renters might come down to 28% but I'm over, you know, a third of the population are renters because I want a target market. And I also wanted, you know, I don't want to waste my time every weekend looking for properties where there might be less than 60 sales a year. So this is really good for me to see as well. And then look, this rental return outpacing Sydney by an absolute wallet, which is fabulous. And this just gets to know the area, you know. What are you looking at? Well, a three bedroom house is the typical property. But what's also important here is this vacancy rate. So in Sydney units at the moment we know that there's these vacancy rates that are over 4 or 5%, 3%. There's more people looking to rent than properties on the market. So this is good, healthy, not a lot of public housing, you know, the price point's good. Over the last 10 years it's done 3.9%. There's not a lot of units. So this is the kind of thing that I would look for for him if he was prepared to buy a house over a unit, then we would look at that. And I guess if I run my. So one of the things that I also would consider is what if he doesn't want a house in Newcastle? What if he just wants to be like in Sydney and the unit is something he wants to consider. And the difficulty is like all of the modeling and everything that I do looks at what the housing market does because I know as a low risk investor and what I teach to my students, the Trident strategy, buying below the market, adding value through renovation, being in a growth area. And the pain and gain report supports this. Houses are outperforming units and with all of the building integrity issues that we've seen, unit complexes in Sydney, there's a lot of worry and concern and so there should be. And they're also being overvalued. So I would take what you said earlier, maybe a unit in an older style block, you know, no lift, 18 units, three floors, you know, that kind of thing possible. But how do you get that data? So if I go to my source data here, you know, let's just say between 4 and 550, but I make the vacancy rate 5% because we know that there's going to be the current excess units on the market will be absorbed within the next 18 months, two years, which is when then he would potentially make it into an investment property. Looking at that now, as I said house data, I want the typical property to be houses because houses are what grows the capital growth. Even if I'm targeting a unit from a suburb point of view, annual sales 60. So I'm just going to run my little macro here and you can see here, you know, I've been running this for years now, but you can see here we're looking at Sydney over the last 10 years. 6.66% is the capital growth compared to some of these other areas. So we know traditionally that these areas are the areas that are actually, you know, coming up with most of the data. And you know, so this, I mean you can see here we've got like 15,000 suburbs here that we go through and have a look at and we come up with a short list of suburbs that are really in that, that data point that allows us to have a look at and go, okay, so now let's just have a look at the New South Wales suburbs that are house prices in that, in that actually have, you know, the vacancy rates that we want. They've all got really good rental yields. But once again, these house prices start looking at, you know, when I'm running this kind of short list, I start looking at all of these things and we're seeing Newcastle, Newcastle, Newcastle. So this is still going, not helping us. So what I've done here is I've run the ripple effect. So I'm looking at where is the pricing pressure on suburbs? Take away all of the factors of low risk investing, percentage of renters at the moment, where's the ripple effects that could potentially not get him into a house, but get him into a unit? Correct. So I've run this for Sydney and what I've said is how far away is this from the CBD? What's the last 10 year growth that's been exhibited for houses in this area? And the reason I'm looking at this is because where there has been growth for houses and there's opportunity for people to buy, often what happens if they can't afford to live where they want to live in the house they will rent, you know, the unit, for instance. So you know, I'm not saying that you're going to get a $500,000 unit in Zetland. What we start doing is coming up with, well, there might be some older style blocks that are coming up in these areas, you know, Dulwich Hill for instance, or you Know, Malabar. So these are, these are the suburbs that start coming up for me within, you know, 20Ks of the CBD. That starts kind of looking at, well, there are some opportunities here that you could go and do the investigation. So he might have a look at. Do you have access to the suburb selector software?

No.

Okay, so let's just say that he decides to have a look at Epping, for instance, and he's like, okay, you know, that's kind of a good area. It's what I want to have a look at. If I then went over here and went into census. So this is free abs.gov au census data and I put in Epping. So all the suburb selector software does is I essentially have curated the experience so you don't have to get the information from all these different sources. So if I go down to Epping, what I'm trying to see is that first number to make sure that I'm kind of a bit safe. So I want to come down here and say, where do people live? So the most prevalent population is mum, dad and kids. So I can see that it's kind of families. And most people are in houses. There's only 15% in units. But this is 2016 data, so there could have been a lot of units come about.

There are, there have been, yeah.

Look at this. Most people own houses and they're four bedroom houses here. So you know, we're saying a two bedroom unit, 15%. There's only 15% of the properties. There are units. And you know, he's probably looking at a one to two bedroom. And that's not the most typical type of property. And we know that mum, dad and kids are the most typical kind of people. And here's the rented, there's only 21% rented. So he can go through the kind of list and I'll send you that list for you to have a. But he can go through that list and go, okay, so let's just do a bit of a sanity check here. You know, is there many people want to live there? And then he can jump over here to SQM research and he can put in. We're just using Epping as an example here. Epping, go, Epping, go. And just see what those vacancy rates are. So you know what's really concerning here is this vacancy rate is through the roof. Yep. Right. So this is like, okay, there's not that many renters, but there's a lot of people trying to rent these properties.

No, no, no, actually, Jane, it's because that is 2016, these are not marrying up. And this is through to. This is 2020.

That's right.

In the last four years, there has been a plethora of units that have come up in Epping and you wouldn't know that if you were in Melbourne, but because epping's, you know, 10 minutes down the road from us, I know that is 2016 and the face of Epping has changed. So it's no more a mom and dad suburb with four bedroom homes. It is now, you know, lots and lots and lots of units.

Exactly. And this is why you have to take the data and do the analysis and go, but what does this mean? Because exactly what you said, what I would be doing in this instance is I'd be looking at this data and going, okay, not many units, mum, dads and four bedrooms. But wait a second, how do you end up with not many, not many renters and 6.9% vacancy? Jump over to. I use suburbview.com you can use realestate.com au you can use domain, etc. But the reason that I would do that is because I'm just wanting to get a feel for. And they scrape this data so they, oh, they don't get it from everywhere. So they don't, you know, I don't know who they scrape it from, they scrap it from real estate agents, etc. But I wanted to have a look at what is happening in this area. So I'm going to have it say, look at this, 200 units. So without being 10 minutes down the road from Epping and investing from say Melbourne or somewhere else, this is how you follow the data to go, oh, wait a second. Since the last census data, something has changed. This is all the unpaid ways that you can start doing that analysis. So there might be suburbs on this list that he would start looking at and going, oh, this is okay. And as you get, you know, you, you know, obviously correct, get the information, but then he can start following it through. And if you had, you know, something like the paid access to RP data, so this is like about $150 a month and that was exciting. You know what, I hate it when I get kicked out. But when you start looking at the data, and I want to show you another as well, Oops. When you start looking at the data and you start looking at some of the paid reports, and I did do a paid report earlier on a different area for a client. So I'm just going to show you what they kind of look like so that you've got.

Yeah, I've seen RP data reports in the past. I used to subscribe to RP data. I haven't done a while now.

Yeah, okay, so this is kind of like, this is North St. Mary's so if we have a look at this, this is what it tells us about the area. And if we go down here to units, we start looking at units for sale. So it's like, oh, okay, so there's been a number sold that, you know, are coming through every single month. But all of a sudden now we've got this influx of units for sale, Units sold. Incredibly, the pricing differential is extraordinarily different. And we're starting to see the fact that there's not a lot of data coming on about these recent sales. So it seems to me that this would have me concerned and going, oh, there's something happening in this unit market. There may be no units in St. Mary's north, but these kind of reports give me an indication of, you know, what is really happening in the market. And at the moment, no units in St. Mary's north, but no, there are no units.

It's only homes.

And so this is the kind of report that you would be, you know, kind of, if you're going to have a paid resource that would kind of bring up the data for you so that you can have a look into it and go, okay, so what's the next step? For me? And I think the thing is about, you know, when you look at some of these properties and suburbs and you're starting to try to work out where do I buy and how do I decide with the money that I have, what I can do? The conversation that he's probably going to have is, is it acceptable for me to be in what I know is going to go up in value house? Where can I afford that? Well, we're kind of looking at Newcastle in the central coast, and there's good opportunities. And then he could possibly consider that the idea of adding value while he's there, you know, renovating it, and if he was doing that, he'd be looking at a pricing disparity between the unrenovated and the renovated properties. So see what the properties that are selling for that are renovated and see what the properties are selling for that are unrenovated and. And work out, you know, it's not really worth your while if you can't make $2 for every $1 you spend. So, you know, we look at a $500,000 property unrenovated in Central coast and we've got a 600 is the, the top end of the renovated. Well, it's probably going to cost you about 10% to do a cosmetic renovation. So 500 plus 50 for and get 50 back gets 600. That means there's pricing disparity. If it's 575, not so much. So I think there's opportunity for him to consider looking at where this ripple effect is in Sydney and going where's the suburbs that are going up in value that people might want to live in and where are the areas that there's potential for me to be able to afford a property. But I'd stay away from the new units, I'd stay away from builds, I'd stay away from all of these kind of marketing gimmicks to get you in that could potentially lead him astray in the long term. But you know, as you said, there's a lot of free data out there that he can go through and just check with Sensus and see what the percentage of renters were and then go and validate it with the vacancy rate with SQM research and then go and have a look at suburb view or domain or real estate. See what selling because it will give him an indication of, well, is there a market for me, is there a rental market for me after I move out of this property?

Correct.

And I think that, I mean you're a long term investor, you've invested in interstate.

Yes.

And so just understanding, you know, you know, it comes down to the numbers when you're assessing your investments interstate. And so it comes down to a, gee, there's a lot of fantastic opportunities at the moment for first time buyers to get incentives to help them buy their first home. But if they need to think strategically, what's the long term plan? The worst thing that could happen is he ends up with a property that has building issues. He's in, you know, NCAT or Supreme Court with all these kind of problems. It's costing him money and he spent a lot of time saving his $55,000.

180 properties, 180 other units in the complex, 180 units, you know, so I said you can't add any value to kind of differentiate from the other. And even if you're going to lease or you're going to sell, look, there might be another 20, another 30 of the 180. So you know, let's not go down that path. But then he's saying there's all these incentives which are not really applicable to, but you know, I still think long term to go without the brand new and shiny, it will make imminent sense. Yeah.

And I think the incentives are just such a short term kind of opportunity. And I honestly think the first home buyers, you know, if they're thinking strategically like we talked about with that, you know, financial freedom framework and thinking where do you want to be in one to three years time, is this the home for life? And obviously for most it's not. So if I think strategically about buying this in the right area, buying in the best possible area that I can afford, and maybe adding value to the renovation opportunity, even if they decide to sell it, which is great because no capital gains tax because it's their home, they've got a chance of that $500,000 property becoming a $600,000 property rather than a $500,000 property for the next three or five years. And that extra hundred thousand dollars money out of thin air will get them into their next home if they decide to sell or if they've thought as an investor, then they've got the right kind of area. The renters want to be in close to transport going up in value, so they've kind of minimized their risk. So long term, I think first time buyers have a fantastic opportunity right now. And I know investors choice mortgages, we're talking to a lot of them because of the government incentives that are racking up. But unfortunately we're also seeing a lot of the marketing material around these new developments and house and land packing that are really attracting people, getting to get the incentive of not having to put in maybe 30 or $40,000. But long term it could be costing them, you know, 2, 3, $400,000. And even, you know, we're in COVID 19 at the moment. We know that there's a prediction that property prices are going to come down. And we know that, you know, we're not going to have immigration come in to quickly take up a lot of the surplus stock that we've got in units. So that unit price is going to keep coming down for a long period of time. A lot of vacancies and we've got a lot, a lot of the short term stay Airbnb units in central Sydney in particular that have come onto the market. And that's why this vacancy rate so high and that's not going anywhere soon. So from a point of view of buying now, I think it's great because there's low stock on the market. But so we know that people who are putting the Properties on the market, you know, want to sell and so there is kind of some scarcity around it but for good quality properties that are coming on, you know, if he's in a position to be ready to buy, I'd say, you know, get there now, get ready, do the research first. But from his personal situation, having gone self employed, he possibly can't be won't be able to lend at this stage until he's that two year ABN up.

Even, even if we went in as guarantors, as parents went in.

Yeah. So the, the way that guarantors work is that you basically put up a property that you have to not to pay mortgage insurance.

Yeah.

And so he still has to be able to afford the property himself and when he needs to to afford the property they assess him on his income. So if you're self employed most lenders will take the last two years and if there's a 20% difference they'll take the lower year. And you know, if you just started off usually the first year is really bad. Just learning how to run a business and become savvy in marketing and get the clients whilst you've servicing clients as well and all of those you're thinking of. So it does take a while to get that. But other lenders will take just the last year which is good when you've had maybe a slower year. But for anyone who's on jobkeeper or have access their super, the lenders are looking at this as well and going oh wait a second, I can see into your accounts. This is what's happened. So you've got some worries about your work so that can actually be against you when you're getting a loan as well. So I think where he is is possibly keep taking direction from mum and dad and start doing that kind of thinking about well if I was going to have a home, where would it be? You guys might decide that, you know, getting a $20,000 in stamp duty saving is not as. And waiting two to three years, you know, for him to buy it might be an opportunity for you guys to buy together and he can put his money in and he could be the sweat equity that does the renovations and things. So there could be some other opportunities that you could consider.

So you mean we get the loans in our name and. But then he will not be able to avail of. Will he still be able to avail of any of the first nothing.

Depending on the state, if he buys an investment property before he buys a home he could still get stamped duty savings as a first time buyer when he actually buys a home. And what that could do is potentially I've got a couple of my mentoring students who are doing it with their kids to get their kids in the mentality of buying together. And all of a sudden what it means is that geographically you're not constricted to where you need to live. You are open to other markets, have bigger potential and a lower price point.

Correct.

So there are opportunities to consider in that respect. So I think there's some good reasons why you might think about it.

Okay, that's been so good. There was so many things that I didn't really consider. Jane. It's been amazing. He's on a shoot, actually he's on a 12 hour shoot. He left at 5:30 this morning and he was going to be back like six this evening. But I will call him at some stage and tell him this is what the conversation I've had. And you know, maybe he just needs to hold his horses because if we can't do anything in terms of his income, you know, personally I think I don't know whether my husband and I have the appetite to kind of go into any more property at this stage of our life. We are looking to streamline and you know, pare down. But you know, he might be able, I don't know whether he'll get a job. So if with a job you can get a six month, six months in six months time. If he has a steady job, then.

He gets it depends on the lender. There's some lenders like CBA for instance, their first pay slip is all you need to show that you've got a job and that you've got the capacity to have the income to service the. So some lenders want you to have like a go through a three month probation period. So it really depends on the lender and you know, so there are opportunities out there and it might just be, you know, for someone who's just started a business as well and has come from the corporate background, you'll want to have a buffer. So you won't want to spend that full $55,000 either. So maybe having a part time job or a full time job or whatever it is, maybe having a job and doing the shoots. I mean obviously he's got jobs which is great, but doing the shoots on the weekends or after work for a period of time might be something to consider without having the fast pace of the corporate role that he had before. There's all these other opportunities you could look into, but you Know, I think the thing is, you know, we are in a situation where sometimes all of the marketing we say does seem too good to be true and rushing into these things without thinking about it. Imagine he signed up for one of these properties and in December he goes to the bank and they go, nobody come back in 18 months time. What do I do now? I've just signed up to pay. So, you know, there's all of these things that you need to think about and that's why it's really important. You know, when we talk about this idea of plan it and see it and then set yourself up, a lot of people miss this out. And the problem with that is that they then get into trouble when you come down to slam it and you're thinking, yay, all I have to do is turn up to the bank and the bank says no. And you're like, oh my gosh, what happens now? You know, but look, I really appreciate you asking the question because there's so many people at the moment thinking about all of these grants and opportunities and so seeing all of the information saying you too could have this. And I think just being strategic about is it the right time for me to buy? He could sit out of the market for 12 months, improve his income. The property prices could come down and he may not get all the grants, but there still will be grants and there will still be some concessions and things for first home buyers in 12 months time. There always has been. You know, he could just sit out for the moment because it may not be right for him. You know, just because you can afford to buy a property doesn't always mean you should. And just because you see a property that you think you should buy doesn't always mean that you're ready to buy it either.

That is your wisdom of experience. And yes, fantastic. Thank you, Jane. That is invaluable. Really good to have this time and you know, this chat. There's so many things that you mentioned that I wouldn't have kind of considered before. You know, all your data that you were able to bring up and I'd forgotten about RP data, I used to do it. We haven't bought for the last four years, haven't used an RP data report since then, but it's been amazing, invaluable. But I'll be in touch with you about our personal portfolio and we'll see where we can go from there, how I can use yours as, as a mentoring student or whatever else you might have, you know, to offer.

Great. Well, I look forward to talking to you. And look, I really appreciate your question because I think it's. It's something that so many people are asking at the moment, and there's. There's so many incentives. It does seem sometimes it's too good to be true, and sometimes that's because it is. So appreciate you doing it. Doing a bit of a, you know, stepping in and stopping your son before he signed on the dotted line. We should be listening to your mom more.

Yes.

Thanks. Jane. Thank you for your time. Thank you.

Afternoon.