Borrow My Brain Debbie

Hello, it is Jane Slacksmith here and welcome to Borrow My Brain. Now, I think you're going to enjoy today's discussion. I talk to the lovely Debbie. Now, Debbie at the moment is locked out of her home and her home state. They were traveling around the country when Covid hit and they're currently in Western Australia and she has built up a property portfolio over a period of years. And the question is, oh, we're now dipping into our savings and we're not too sure what we need to do do because we don't know how long it's going to be until we get home. So it's a really interesting question. We have a look over her portfolio, we have a look at maybe some of the properties that she could consider selling, some of the properties that are definite keepers, some renovation potential, and we even discussed maybe building a granny flat on the back of her home. Anyhow, I hope you enjoy Borrow My Brain. Hello, it is Jane Slacksmith here and I am with the lovely Debbie, who reached out in the Borrow My Brain series to ask a question because she's not too sure what to do next. Hello, how are you?

I'm well, thanks.

Jane. Now, I understand you've got an interesting situation. You're in the middle of being locked out of your home due to Covid. Do you want to tell me a little bit about that?

Yes. So my partner and I decided after one of us lost our jobs and one of us had a contract come to an end, that it was the perfect time to start to travel. So we decided we would buy a caravan and start to travel around Australia. And we had a 12 month time frame and a 12 month budget to do that in. And we got as far as Western Australia and then the world changed. January, February, last year. So we're stuck in Western Australia, which is an amazing place to be stuck in, I can tell you. And so we then faced a dilemma because we're now using our savings to live and we are concerned that we won't get back into the job market.

Yep.

We Both just turned 51. Not that that's, you know, a death sentence for work, but just given the current situation, we're concerned that we need to position ourselves to have an income if we can't get a job. If we get a job, then that's the cherry on the top.

Absolutely, yeah. So, and tell me, when did you leave? When were you planning to be home by?

So we left March 2019 and we were planning on being home March 2020.

Oh, wow. So it's You've been away for a long time.

Yes, we have and we have seen some amazing things in Australia. So I can highly recommend, if anyone is just thinking about it, just bite the bullet and do it. It's been an amazing experience.

So, okay, so you've taken this time out, you thought you'd have enough savings for a year, you planned for it. It's now been like 18 months and you're starting to look at, you know, we're gonna a have to get home, which I imagine is gonna take a little while anyhow. But as well as that is that you've got some concerns about your income stream going forward. Now I imagine you've got some super as well, but you can't touch that for, you know, another 15 years. So put that aside. So we've got like 15 years of living that we have to fund and you've got a few years worth of savings that you're dipping into right now. Correct. So tell me, what have you got available to you? Tell me a bit about your property investing journey and what you've got available and how you'd like me to kind of look at the properties and answer any of your questions. Yep.

So I started investing around 24 years ago. Yeah. And actually did most the investing as a single parent. So I'm not afraid of property and purchasing properties. I will admit to not having sold many properties in that time. I've only sold two. One of which was a principal place of residence to buy, to move to the coast and buy another one. And then the other one we bought or sold, sorry, was the very, very first one I bought 24 years ago.

Wow.

Yeah. So I had actually used that property as the equity for purchasing software subsequent properties. And so what ended up is that that property had quite a high mortgage and had the lowest rent. And so it was actually costing me money to keep it.

And I think it's a really, it's a good tribute to your kind of knowledge of property as well. Because a lot of people put the properties in their portfolio and they sit there and you don't do that review and go, well, in actual fact, if it's costing me all this money and it's done its job to get me into leverage into other properties and it's not getting. Going anywhere now, maybe we have to kind of get rid of it. Yeah.

So that was a pretty snap decision and the only kind of criteria was that it was costing me money whether or not it was a good property and not a good property in the right position. You know, potential for renovation. I hadn't thought about any of that. It was like, it's costing me money. It's got to go. So all of my property purchases have been done. I will put a little caveat on this before I came across the wonderful Jane Blacksmith and her Trident strategy. And so I have no idea whether the properties we've purchased are good properties, bad properties, whether we should keep them, sell them, buy more properties. So we've kind of. Well, I have come to the position where I feel like I've got this analysis paralysis. I kind of keep looking at it, not knowing what's good, what's bad, and what we need to do to reach our goal of having an income stream, as you say, for the next 15 years that can fund our lifestyle.

Okay, with your careers, is there. I mean, it might take a period of time. We know that unemployment is up and down and issues. But in the careers that you have, are they careers that you feel that there's going to be likelihood of employment in the future and you're just being conservative at the moment, or is there really, like your airline pilots? And we know that you're not going to be applying for a few years?

No, we do have transferable skills. So, yes, project management and construction. So there is, you know, a possibility that we will work in the future. But I'm kind of being very conservative and thinking worst case scenario, if we never get a job, we need to live for 15 years. How do we position ourselves for that to happen? And anything else on top of that is a bonus.

So the next question I have is with your properties at the moment, are they actually costing you money out of your pocket or. It's kind of like it's, you know, they're fine.

Yeah, they're fine. So on paper, they're creating a loss due to depreciation and other tax benefits, but I don't feel like we're getting money in the bank either due to some of the high costs of some of the properties. But we're not putting our savings into keeping any of the properties, which is why we sold the one that we were.

Okay. So I think what we can do here is we'll have a look at from a holistic point of view. I don't want to give away all your private information, but I want to look at the properties that you purchased and what they look like now. So I've got a list of those that I'd share. I might just get you to talk with me regarding those properties so that we can kind of have a look and see what they look like so that we can determine which ones we might keep or sell or consider in the future. So you've got one in Little Mountain in the Sunshine Coast. So do you want to tell me a little bit about that one?

Yep. So this property I purchased five years ago, around then. Sorry. You know, I've got travel brains still. So this property is actually my principal place of residence. So since I purchased it, I've done a full renovation on it.

Right.

And so it's not kind of. Yeah, it's been renovated. There could be, depending on council planning rules, potential to put a little granny.

Flat out the back.

But yeah, it's a three bedroom.

You've renovated to what you want it to be. This is home. You're comfortable in it for moving back there and this is where the home's going to be.

Yeah.

Okay, perfect. Yeah.

Not, I mean, not wedded to the fact that it needs to be home, even if it makes sense to sell it.

All right. But you're going to have to live somewhere.

Yes.

And I guess this is once, once we open the borders, this is where you're heading back to immediately. Okay. Yeah. And so the next property, sorry, we.

Don'T necessarily even have like we're not opposed to for the rest of our, you know, life even renting a property if it doesn't make sense for us to purchase and be sitting on an equity. Renting a property, I don't even know if that makes sense. So yeah, just throwing that into the mix.

And the next property was your partner's home previously? Yep. Yep. And but this is an investment at the moment?

Yes.

Yep.

So they're both rented.

Okay, good. And the. Tell me about the Woodford property. So this is a house. What was the thoughts around buying this and the opportunity around that?

Yep. So the thoughts around buying this were one of your big mistakes. It was in an area that I knew that I used to go shopping and was close to where I lived and seemed like a good idea at the time.

You thought, why not pop in and buy a house while I'm picking up a handbag? Yeah, why not? Not alone. You're not alone. A lot of people do that.

Yeah. So the property I sold was actually on the same street in the same town.

Wow. Okay, so you really did have a big exposure there. Yes. Okay, tell me about this unit. Tennis court, pool. Sounds like a lot of strata fees.

Yes, very high strata fees, around $7,000 a year. This unit again was purchased on a bit Of a whim, someone at work was looking at purchasing a property in this unit complex. And there were a number of units that were mortgagee sales. And I kind of quickly crunched some numbers and went, that doesn't sound too bad. And it could be potentially somewhere I could live, because then we could just lock up and leave if we go traveling. And so, yeah, put an offer in, thinking they wouldn't accept it, and they did.

Yay. And so it was cheap. We don't know if it was cheap just from long term could have affected your portfolio, but it was cheap at the time and it potentially could be a home.

Yes.

Okay. All right. And tell me about Lakemba, a unit in Lakemba.

Yes. So this was purchased at a time where my partner and I were like, okay, let's look at some more property, because, you know, I feel comfortable with property. And we thought, okay, well, we've got no clue where to buy, how to buy. Let's engage a buyer's agent. And so this property was purchased using the buyer's agent. And at the time it was sold to us as a great buy. A suburb that was only 20 minutes on the train to the CBD in Sydney has all the amenities. We had no idea about the town of Lakemba or the principality of Lakemba. And so, yeah, we purchased that just based purely on numbers.

And so what was the buying criteria you gave the buyer's agent?

We just gave him a criteria that we wanted something that was going to be in a high growth area and would provide us with an income. Okay, so that was the.

And have you seen the value of the property go up since you've purchased?

The value of the property has gone up and gone down like a yo yo. So at the moment, given the current situation, it's lost about $50,000 in value compared to what it was valued at 12 months ago. And the tenant that we had in there stopped paying the rent and was overseas at the time. And so we had to reduce the rent by an amount that now only just covers our outgoings on that property. Okay.

So I think one of the things that might be really handy for us to do is actually look at. And it was something that I did a number of years ago. I did a video series about the portfolio killers in your portfolio. So I think what might be really handy here is have a look at the areas and just see what the growth has been since you purchased and what you purchase price. So we'll just go through them. I'll put in, you've supplied me with some of the end values that you've got of what you think. They are just available on domain at the moment. So I've just put those in. Do you want to just tell me you said the first one you thought you bought about five years ago, so about 2015. Do you want to just give me an estimate of the purchase price?

385.

And you've done a renovation as well, right?

Yeah.

And how much do you think you spent on the renovation?

43.

Okay, so let's just add that in just so that we've got, you know, the total kind of cost investment so we can see what the growth has been as well. What about the next property, the other principal place of residence? Yep. So when was that? One five years ago?

Yep, about the same. 2015.

And estimate of purchase price.

Estimate of how much it cost to build? Probably around three. 360.

Yeah, great. And the Woodford?

So around 360.

And how is that for the Woodford? No, we've lost. Can you hear me? So tell me about Woodford. When. What was the purchase price and when did you purchase that?

So that was purchased for 190.

And.

That was 12 years ago.

So wow, 2008. And what about the mortgagee sale? When did you pay?

So that was four years ago. And that was 384. Say 384.

Okay. And what about that Lakemba?

So that was around eight years ago and that was purchased for 220.

So this is fantastic because what it gives us an idea of, is there anything in your portfolio that really hasn't grown or performed for you? So we get an idea here. The mortgagee sale, this makes it look like an absolute champion and doing a 13% return. So. So you can see they're buying under the market has actually made you equity, especially because it may have been worth $500,000 at the time or $450,000. But because you bought below the market, we think of that Trident strategy. Buy below the market, you make money then be in a growth area, you make money then. And if you can renovate an improvement, make money. So you've got the three ways of doing it. So you've really activated here two ways of doing that. But we're not too sure how much growth it has had in the past. And then we can look to the future, whether it's a keeper or could potentially be a killer. I mean obviously the home with the renovation and your partner's growth in his home as well, these are really strong, kind of bought at this price and they're now valued at a higher price. So there really is a strong portfolio that doesn't indicate if we were going to. And you, you could afford to keep it, it's not costing you any money. Would you have to get rid of any of these? There's nothing here that I'd go, oh look, I'd hit this one up straight up in the beginning because it's a bit of a killer. The fact that your situation is a little bit different though, and we have the time now where you're not earning an income and you're like, well, we don't want to keep dipping into the savings now let's have a look at the portfolio and say, well, what do these really look like and what can we look at from a growth point of view of going forward? Because just, and I know you've shared with me some of the lending that you have against the properties. Looking at these, it gives me the thought that there might be some of these, that if you could sell one of them, for instance, and put that money into paying off a couple of the loans, like it could be paying off your home loan and it could be paying off one of the other ones. So you've just got those incomes coming in that could really work. Now obviously you need to talk to your accountant about this, but you've got capital gains on all of these properties. So you're going to have the capital gains tax, although you've held them for over a year, you're going to pay 50% of the value against your current income. The fact that you're not working at the moment is kind of handy as well. So, you know, once you talk to your accountant, they might actually say, you know, it doesn't matter that you could sell one of your homes and be under the six year capital gains tax free threshold because you actually have no income that we're assessing this again. So there could be some opportunity to not just make the assumption that it's one of the home properties that's going to get you the biggest return. So what I'd like to do is kind of look at what's the growth been in the past, what we could look to and make some assumptions about the future. And if you did have to get rid of a property where you could consider that, I think, and that just gives us a little bit of information and once we have that information, we can be better at making decisions. So let me just bring up for us the reports that I've just generated from rp Data on the past growth of these areas. So first of all I've got Little Mountain, which is where you live and it's the house. So it's up in the Sunshine coast. The median value is around 600, so you know, your estimate is below that. So it's not like you've got the best property in the area and you know, really an outlier. The one of the things that I would want to have a look at is just making sure that there was the ability to, that it's the typical type of property. So I think you said it was a three bedroom house. Three bedroom houses are the most typical type of property in 80% of the markets in Australia. So I'm assuming that there's no real problem there as well. So you know, we're getting this information that kind of gives us what's been happening in the market and what kind of growth that we could expect and we can get. So one of the things that I would also look at is just get a feel for with those areas what we would expect for what the capital growth has been in the past. So you know, the numbers are kind of really difficult here to see. When we've got, you know, we've got vendor discounting, we've got days on the market here, the change in median value. So we've got the kind of values going up and down and over here, you know, we've got the median value and the number sold. But what I want to do is just get a feel for. Always takes a little while, just get a feel for what the growth has been in that area. Because once we see that if we've got the typical type of property on a typical type of block and it has the opportunity for you to keep it and be comfortable with it, then what we're hoping for is that it will come up and say, well it's, it's an area that we might consider in the future to keep. So all I'm doing here is just going into any random property in Little Mountain that's a house just to get a feel for what the annual capital growth has been in this area. So we can see here over the last 10 years, Little Mountain has kind of done 2.3%. So it hasn't been an absolute game changer. And when we look at, you know, the growth that we've got here, some of that was manufactured by you. So you know, we're kind of looking at this and we're going, okay. So if we look at the future growth and we know what the, you know, if we're looking at what the future growth is based on, well, tell me a little bit of what's been happening in the past. We've only got that 2.3%, so it's not a, an absolute, you know, outlier. But we know that things have been changing as well. So what I would do here is I'd go through each of these and just have a look at, you know, what does Meridian planes look like? So if I go over here to Meridian Plains, you know, once again you're below the median value, which is great. We've got, you know, the median values are going up, which is good as well. There's some really nice disparity there between the median price and the higher price. Has that property actually been renovated before?

That was a brand new build, so to say.

Right. And the thing is around the brand new builds is that you can actually make money obviously by, by not having to pay all the on costs, etc. So the construction is always attractive because you have that opportunity. So let's just have a look at what the growth has been in that area in the past. So this is Meridian Plains and obviously you guys like the sunshine coast, an area that you know well. And I think that's, that's the kind of trap that people fall into. It's like when you know an area really well and you're comfortable with it, or you do the shopping and you see something come up and then all of a sudden you've got your entire portfolio that's linked to an area, and that area might be linked to tourism, for instance. And so if the area is linked to tourism and everyone loses their job, then all of a sudden you've got this issue where people can't actually afford to live in the area. So once again, all I'm doing here is I'm just going to Meridian Plains, I'm pulling up just one of the properties just to see what this annual growth has been. So over the last 10 years, this has only done 1.9%. So you know, when we start looking at that, we're like, oh, okay, this is not as fantastic as what the numbers were actually showing us. So would we keep these properties is what I'm trying to work out. And, and if we do keep these properties, you know, what would we be looking for in that area? So, you know, is it the typical property? So it would seem to me that this would definitely be the typical property for the area. It's another three bedroom. When we look at Woodford and this is the property that is close to, you know, the area that, you know, median value is around 4. So we're looking at this, you know, at the moment. You know, once again you're below the median value, the 340. So we've got the Woodford market here as well. You know, the property prices seem to be coming down in that area. So let's just have a look at something that looks like a house rather than a unit. All of these look like units to me. Must be lots of subdivided blocks, country towns. So there's probably acreage that have been subdivided, like 3,000 square meters. 3,000? Yeah. Okay, so let's. And what's the size of your block?

It's I think 850 actually.

I should have that here, shouldn't I? Yep. Perfect. So let's just have a look at. Properties under 850. So we're doing like a like for like. But the reality is all we're doing here is really just pulling up the data that we want to see is what the growth has been in the last 10 years. Now Brisbane, the last 10 years has only done like 2.5% growth. So you know, it's not around the fact that this is like horrifically different to the area that you're actually in. So we just keep that information up. Once again, it's 1.9. So at the moment you've got properties that in the last 10 years the growth has not been substantial. Now I tried to get a report for this para era and it made it very difficult for me. Apparently it's an area that's difficult to find information on. So I don't have that suburb report. But let's just have a look at Para.

Paria. Kuana island is the other name that it's known as.

Okay. So you can start to see here that the portfolio. Although we know that you've actually been making money off these properties, it goes to show you that you could build and make money that can make you look like you've got an area of great growth. But what we're seeing here is each of these have around about 2% growth associated with the last 10 years of the typical type of property or house in that area. So I just want to be conscious of the fact that what could happen in the future and are these properties going to be properties or areas that you can actually. You know what, I need to go back from here because this is where the unit is, right, isn't it? Yes. Yeah.

So this is a Unit. There's lots of units in this area.

Okay. So let me just pull up a unit so that I can get capital growth kind of. And has it been an area that's been recently developed or. It's been developed. There's always been units in the area.

There's always. Yeah, there's always been units in the area. It's got like an artificially built canal that goes through it and it's very close to the new university hospital that's been built.

Okay. So it's got some good kind of characteristics. Because the thing is, with some of these, the unit areas, when it's only been. They've only really developed, or the council has only changed the requirements in the last few years, it's hard to actually get some numbers. But if, you know, the units have been there over the last 10 years, it says that it's gone back in price. So this is just, you know, and we know that you've been, you know, you've been fortunate in not going backwards, but the reality is that that's kind of like what it has done in the past. Let's just go and have a quick little look at Lakemba as well.

What not to do when you purchase property.

You know what, you've held them long enough that they've almost redeemed themselves. So it looks like, you know, it's all good. But when we get down to, well, we want to actually make this better than just good because we're going to come up with a decision on what to do next. That's where it becomes really important. So I'm just going to go past the house staff here and we're going to have a look at the units. So unit prices started coming down 2016, bit of a blip, but since June 2019, they've been going up. Now, this is unusual to see. Once again, in light of the fact that there has been Covid and all of those things going on, we can see here that it's worth around seven. Sorry, worth around 360 now. So it's within, once again, below the median kind of price point. So this is all really good in the sense that it's not a standout. Let's just have a look at what else is happening in that area and I might just pull up just so we can have a little. For people who don't know where Lakemba is, we can actually go into one of my digital MapSecret files and look at it. So LakeMBA, 57% rented, which is interesting. Vacancy rates a Bit high. So this gives me indication there's probably a lot of units in that area. Where did Lakemba go? I just lost it. Lakemba, where did you go? So we're here at the moment. So it's kind of in. And it's kind of in that area where we've got the Bankstown Airport etc, you know the new airport is coming out. This area we've got. Parramatta is like the second CBD of Sydney. So you know there's a lot of. I've seen a lot of areas, you know, take off between this kind of pricing pressure between Parramatta coming out and Sydney coming out. This is, you know, possibly getting some of that flow on from there. The growth in the last 10 years for houses, this is not units, it's been 8%. So let's just have a look a bit of what has been happening in the units there so we can get a feel for what has happening. And we know that La Camba's had units there for many years. So you're in the Sydney market, you diversified. The units have done 5.4%.

That's the best performing. And isn't it interesting? That was the one we were thinking, oh let's just sell it.

And why were you thinking about selling it?

Just because that's one that we've probably had the most issues with tenant I guess with the tenant, you know, absconding, not paying, having to reduce the rent during because of COVID and we're now really just covering our costs. It was like yeah, that's probably the one that we'll sell next. So it's interesting.

Okay, so let's just have a look at that because I think it's interesting when you start looking in kind of this big picture and you're like okay, so what's the growth potential for these properties? If we assume that the growth from the past is going to be replicated in the future. Now there's some argument around the Sunshine coast and the potential for higher growth. With people moving from the southern states to the sunshine States going well, we can remote work. This is great. We've got a three bedroom house on the Sunshine coast. Love it. So there's potential upswing there with some mass migration movement. I don't think it's gonna be mass but I think there's gonna be some stimulus. Woodford itself, I don't get a lot about that Woodford area. So it hasn't really done a lot. It's still in that Glasshouse Mountain kind of area. It's very few kind of listings. I would be doubtful that it's got a high percentage of renters in the area.

In the town. It does. But further out where you've got the acreage properties then.

No. Yeah. And it's made up a lot of the acreage properties. It makes up a lot of the area. Yes. Yeah.

It's a 20 minute drive to the Bruce highway, which is the major arterial road into Brisbane. Yeah. So I think people live out there for lifestyle as opposed to convenience. Yeah.

Okay. So it might also have a bit of that flow on effect with people go into that lifestyle move. The Sunshine coast tenants in that property.

Since I purchased it. So that she's just been there since I bought it and has stayed there. Interestingly, the Sunshine coast vacancy rate at the moment like in the last six months has been very low, like 0.

To 1%, which is good to see because a lot of the worries were that once the Airbnb and the shutdown of the tourism market and all of those units come onto the market as long term rents, the rents would drop and the vacancy rates go up. So it's nice to see that there's some kind of take up of those extra properties coming onto the market. Now if we just have a look at the other areas here. So we've got Lakemba. I know that you, you talk about the fact and I think the buyer's agent's done you a solid on this. He's definitely come up with the goods on, you know, the growth potential. The area has had proven growth in the past. It's, you know, within driving distance to the two big CBDs and on transport hubs as well. It's, you know, potentially the things that you faced with this being the fact that Covid's made you put the rent down. Well, that's unfortunately a case that most people have had to deal with. Your rent was reduced by how much a week?

We had to reduce it by $40 a week.

So to give you some context, I've got a unit in Sydney as well and I've just had to reduce my by $120. So I understand your pain, but you know, to get through the next six to 12 months, you know, we need to be doing this and making sure that we're working with the current situation, knowing that's not going to be the situation going forward. So I think that all of the things that you've got that have concerned you about that property are actually just circumstances rather than anything else. The high maintenance and strata fees that you've got on the Sunshine coast unit with, you know, the pool and the gym and all of those things, I would have some concern about as well. And I think the situation that you're in at the moment, when we kind of like distill it, you've got a portfolio that has been purchased, I'm not going to say haphazardly, but it's been purchased without the rigor and the research that you now know that you can put into purchasing a portfolio. If I looked at your current portfolio and the potential for it, obviously that Sunshine coast unit in the past hasn't had a lot of growth, but for you personally, you bought it below the market and you would have got the mortgage based on what you purchased it at. So you would have quite a considerable amount of equity in there. And it probably pays for itself. If a property pays for itself, does it deserve to be in your portfolio? Is the question you have to ask. And so it's kind of like you can cover up the situation by going, you know, well, in actual fact, it's all okay because it pays for itself. But the reality is if it's got no potential really for future growth and you know, you're probably going to have, you know, I know you've got some savings at the moment, so you don't have to make like dash decisions. Probably worthwhile seeing what happens when we're getting these borders open in the next month or two. And obviously the fact that you're stuck in Western Australia and you can't rush back and make things nice for selling stuff as well, you wouldn't be rushing into selling, but I'd be watching to see what happens on the market because I know that there is a lot of opportunity in the Sunshine coast with universities and hospitals and all of those employment hubs that have started and we might just start seeing this move from the south to those more lifestyle positions. And if this unit is the type of unit that people would like to move to, then it might actually start creating the demand. However, what could also happen is the developers go, hey, we've got demand. And they're just building all the brand new blocks of units and they're in competition to you and more supply comes on, there's less, you know, scarcity and you, your property stays in the same value. So does it deserve to be there? And if you've got that much equity and just looking at that quickly, you know, although you, you potentially could look at, you know, the fact that you've got the two houses in the Sunshine coast and say, well your partner's house could be sold and could pay off to, you know, your home. So you're not, you don't have deductible debt but sorry, non deductible debt but it could also pay off one of these other properties. So you've just got that income coming through and you know that they're a bit of a holder. You would normally kind of look at that, you know, capital gains tax potential and go, well this is fantastic. But you're actually in a non earning potential to be selling a property anyhow that has got, that won't cost you a lot. So I'd get your accountant to kind of run the numbers on potentially looking at those units and just seeing which one of those potentially could be in your interest to get exit from. So it might just be that this one, you've got equity in it, you bought it really well, you've made your money. All it's doing now is just sitting there and you could actually sell that and pay off say this property and even the one with one of the other ones. Then you could probably have like 30, $40,000 a year in income coming through and that's going to be enough to tide you over to go, okay, so we have this income coming through now that is allowing us. So we're not selling the whole portfolio, we're not giving up. The Lakemba unit I think is in a growth area. They're not making any new land in the middle of, in Sydney. So we're not going to have that risk of new units coming on. So there is that scarcity. I think it's going to be a bit yuck for the period of time while you're taking the lower rent. But it has the capacity potentially to have growth and because it's an older style, you can actually potentially renovate in the future as well.

Yes, it is good for a renovation. But yeah, I guess we're lucky that we signed a lease with our tenant for 12 months. So lucky and not lucky. The tenant would only accept a 12 month lease. So the tenant was dictating the terms.

Yeah, yeah.

And so unfortunately we're stuck with that much lower rent for 12 months and that just been negotiated in the last.

Month or two and that's okay. Look, you're in a situation and they're in a situation, you need to do something. And that Lakeamba unit at 360 value that you've got, you know what I would normally do with my pricing disparity is I'd Kind of go, okay, I've got 360. Let's just say I spent 36,010% on renovating it. I don't think you probably need to do that, but. And make $2 for every $1. Is there capacity in here to see that the upper quartile is, you know, under 430. Oh, sorry, above 430. And the answer there is yes. So I would be looking at, you know, what you've got available. So I'd be looking in Lakemba and I'd be looking at very typical.

That's what our unit block looks like.

Yeah, perfect. No lifts, no tennis court, no huge strata. And that's what, you know, these kind of. This is kind of like what my unit looks like too in Sydney. It's like blah, but it's like a good blah. It's decent, it's, you know, well built. You know, you go through those things and if we start just looking at the sales history, you know, potentially there might be the opportunity after the year tenancy is being done that you could go in there and do a bit of a renovation and there might be the opportunity at that stage to then release some more equity for, if you want or just push the rent up and because I think you're kind of in this phase now where you want to have that income but you don't want to be forced to go back to work so you can pick up contracts if you want. This here. What I'd be doing here is I'd be looking at, you know, the 360s are kind of like where your price point is. I'd be looking at where the higher ones are so we can't see. So the 485 is another kind of typical, it's brick kind of property. Even the 400s, 418s. So I'd be looking at these and just looking at the past sold properties and going, well, how much would it cost me? And is it even possible for me to take my property to look like this property? You know, do I need floorboards? Is that even possible? Do I need to pick, you know, well, that's not even a fancy bathroom, that's not even a fancy kitchen. So you might look at this and go, I don't even have to do much to make my property look like that. So there could be some capacity for you to push that rent up even better in 12 months time. So it has the capacity to add some value to. I love the concept that you've also got the capacity to maybe put on like 130, 40, $50,000 granny flat on your home currently and have income coming through there. So potentially what you could consider is, you know, at the moment, wait and see, let's just see if it's worthwhile getting rid of that mortgagee sale. Check with your accountant before, you know, you kind of go back to work. If you sold in this financial year, what would be the differences between selling your partner's property and selling, you know, potentially that unit in Sunshine Coast? Because you've got a lot of exposure to Sunshine coast. Then I would consider potentially doing a renovation on the Lakemba unit, increasing the equity there. You could pull that equity out when you've got the job security again and go and use that to build the granny flat so you're not using your savings and then you may be getting 2$300 extra in rent from that. So you could potentially say sell one of the properties, pay down some of the loans and I personally wouldn't pay down the loans. You know, obviously talk to your mortgage broker or give us a call and we'll talk through some strategies, but probably just put it into your offset account so you've got the cash available but you actually reducing your costs so that you've got the flexibility and buffer just in case we have, you know, you know, 2020 comes back in 2022 when everyone, you know, we got more unemployment. So I think cash is going to be really important. But this kind of gives you that strategy of well, what has made money for us in the past. And we look at those portfolio killers and I think there's a couple of things that hide some of the risks. And then we start looking at the actual growth of the typical type of property that yours represents in those suburbs. And like they're not out performers where some of the risks that we have an opportunity, we don't need to make a decision now. So I think there's some really great opportunities for you in your current portfolio. I think it served you well. And now with the knowledge that you have around the strategy, et cetera, you can actually take this and optimize the portfolio to a make sure that it still doesn't cost you money. Get rid of potentially a non performer and use the money from the non performer to build up your cash flow again, go back in and do a renovation, small renovation to make it the rent go up even better. So monitoring the rents when Covid reductions finish to make sure there's a value there. But if you can add $2 for every dollar you spend 30,000 and make 60,000 and take 80% of that out. You can take out an extra component of that put towards the granny flat, for instance. So I think there's all these opportunities in your portfolio that just a few little tweaks is actually going to give you that confidence to go, okay, we don't have to rush back to work. We can be selective with the jobs and contracts we take, but we know that the portfolio is working towards where we need to be in 15 years. We're still contributing to our super. We've had 18 months traveling Australia and you know, we can do that again.

Excellent. Fantastic. So that's been really interesting to do that exercise again to see things on paper as opposed to, as you say, making decisions based on circumstances and not really understanding the growth potential and being overexposed in one particular area.

And even, I mean, you know, the fact that you're potentially just going to get rid of Lakemba because it's been a pain. Well, the pain is kind of like what everyone's faced. It's not like it's a bad property in an area that's not typical and no one wants to rent it. It's the circumstance of the day. So I'm glad you didn't rush out and sell that one as well because that could actually be the one that could get you to the next step.

Yeah, yeah. And yeah, we've changed agents as well. Well because the previous agent wasn't a good agent and so yeah, there's been lots of changes in that property. So yeah, I think you're right. It needs, we need to have a bit of a settling in period now and just see what the new normal looks like.

Yeah, absolutely. But I mean, I know that you're kind of sitting across the country and it's like everything kind of feels like it's falling apart. You start asking these questions and having the waking up at 2 o' clock in the morning going oh my God, what am I going to do? But I think you don't need to rush into anything, which is great, and come home, settle in, watch the market. But I think there's potentially some opportunity for you within your portfolio to pay down some. And then who knows, two or three years time you could once again be back in those full time roles and be back to the point where you start looking at buying again and diversifying further. You know, so I think there's, there's still upside, you know, based on your age. The lenders are a little bit, you know, around, you know, the fact that really you get a 30 year loan and you're 50, we're gonna work until you're 80. So there might be some pullback on looking at things like, you know, maybe having a 20 year loan, the fact that you've got other properties and you're not just buying a home they're comfortable with. So we have to, you know, be conscious of all of those things. So they're right, you're not going to work till you're 80. But there might be an opportunity now with your current finances to potentially safeguard your lending. And look at it, when you do get back and you have an income and you have the opportunity to refinance, you might consider whilst you're under an age that you know could become a flag that you move to a loan with a 10 year interest only. So, you know, consider doing that and then you're minimising the risk of potentially in the future if something goes wrong again and the economy and your jobs are where they are, that you don't, you're not going to be pushed in the middle of that to being forced to make a principal and interest repayment. So I think long term you can consider those kind of options as well.

So do lenders generally only lend if you have PAYG or self employment income as opposed to property income only?

Yeah, it depends on the lender. Some lenders got really quite strict and would only take 60% of your rental income or they would only take up to 50% of your PAYG income. So if you're earning 100,000 they go, I don't care, you've got 80,000 in rent, I'm only taking 50,000. So different lenders do have different requirements and they do change over time. So by the time that comes around it might be all different again for you. But at the moment they'd look at you and they go, yeah, you're not working. And we did assess you on the fact that you were working. The fact you're still making your repayments is good. You're not on our radar. But the reality is if you go back and say, oh hi, can I refinance even for the same amount, they'll possibly look at you and go, we wouldn't even give you this loan now. And you're like, okay, back out the door, don't take my name. So in all honesty, when you make an application for lending, there is an assessment that's done. It's usually not reviewed unless you come under a reason for it to be reviewed. You're not making repayments, etc. So the fact that your portfolio is coming itself, they don't know that you're not working. Technically, you should be telling them that you're not working because your circumstances have changed. And it's like technically you need to tell them if you have a baby and technically you need to tell them if you get married. And technically you need to tell them if the investment property is now a principal, place of residence or what. So all of you know your contractive sign says that you should do these things. The reality is that the lenders rarely go back and check those things unless there's a problem. And the problems usually highlight by the fact that you've missed a repayment or there's an issue. Yeah.

Yeah. We're very fortunate that that's not going to happen. So.

Yeah. Yeah. Oh, that's good. Well, look, I hope I've helped and given you some, I guess, clarity and comfort about where you are at the moment. You don't have to rush back and be worried that you'll be selling up tomorrow.

Excellent. It's been fantastic. Thanks, Jane. Really appreciate your guidance and your brain. So you thank. Thank you very much.

Well, thank you for your question.

Thank you. Bye. Bye.