Borrow My Brain - Jack

Hello and welcome to Borrow My Brain. Now today I am going to talk to a very interesting person who is actually buying from overseas an investment property in Australia. But first let me give you an update on Kim. Now, if you missed Kim's story, the video is below, so check it out. And Kim wanted to buy a property in Melbourne and she wanted me to look at the property because she had some concerns about the old people's home across the road. Now, I also found some other considerations that she wanted to consider such as the development next door and some parking issues. Now, she put in a low ball offer. It was declined. She was happy that it was and she's moved on to looking now in Queensland. So good luck with that, Kim. Now, as part of the COVID crisis, you know, I wanted to be able to assist people. Usually I do deal assessments on properties or suburb assessments for my mentoring students or my mortgage clients. However, I have offered that to everyone who would like to apply to Borrow My Brain. And I hope that you're enjoying this series because sometimes people just want a second set of eyes or some advice or information or assessment on where and what to buy. And today we have that as well because we have Jack today that I'm speaking to and Jack is an expat and he is going to buy in Australia and he wanted to know where to buy. So we took the 15,655 suburbs in Australia. We narrowed it down to a state, a city and a couple of suburbs that had growth potential and those low risk factors as well. And we looked at even properties on the market at the moment. So let's have a listen to Jack and I hope you enjoy it. Hello. So I have a Jack, Jack with me here. Hi, Jack, how you going?

Good, thank you. How are you?

Good. So you're beaming to us from where?

Bangkok. Bangkok, Thailand.

Aha. So an expat looking at buying something. Tell me a little bit how you would like to borrow my brain today.

Yeah, so I currently have an investment property in Queensland and I've been lucky enough to be advised at some point in the future, once all the paperwork clears, I will be getting inheritance. And look, that date is still a little bit unknown, I would assume 2020, but yeah, it'll come in the next month. Month, two months, three months, whatever. Yeah, and I just really want to make a good move, you know, a good capital growth move that can help me maybe offset, well, manage the risk. If I was to come back and I've got an asset and I haven't been priced out of the market, maybe live in it or maybe just keep it as an investment.

I think one of the things there's a lot of people I speak to who you know, granted a legacy and almost a sense of I really want to fulfill what this person has left me to be able to leave to others or benefit them and do them proud. So there's an extra, almost an extra responsibility of getting it right, isn't it?

Yeah, like I want to make a good move and you know, and you know, look, it's a nice amount of money whenever it arrives like it and I would really want to make. Get some good value out of it.

Absolutely. Now tell me a little bit about your first investment property in Australia and Queensland. How did you come about that property?

Yeah, so I utilized a buyer's agent. So they bought like it's not like a development or anything like that. It was 8004 square meter property in Red Bank Plains at 5.6 yield. So it's caused no problems. I don't have high hopes for capital growth but it's a very consistent sort of performer in terms of rental. It's always rented. It's a nice firm house. Perhaps at some point I might do something with it. But yeah, I'd like to get something more with a strong capital growth focus.

Because I think traditionally what happens is people either say I want to yielding property and I want to make some money so cash flows are important or they say my strategy is around growth and my thoughts are you should be able to have them both. And sometimes you can do that with a hands on approach with renovation but you can also do that across your whole portfolio. So by having that yielding portfolio piece you already have, having some growth now and having the funds from one property kind of fund the other one and.

It'S the one that's going to grow for you I think would be really the right thing to go ahead and try and achieve if I can. Yeah.

So now you did mention a few things. So being an agnostic investor is fantastic. Which means that we can get a price point and we can look all over Australia and see where you could get the most growth. But you did throw a bit of a spanner in the works and saying that you might live there in the future. So does that mean that you could be skewed between to one specific city or not?

No, to be honest, look, no, no, I don't think so. I mean for me I'm quite comfortable with being a rent investor. I suppose so it makes good sort of commercial Sense. Yeah. Look, thinking about it, I do believe you get too emotional when you think that you might live in it at some point. And I think you're better off just keeping it business focused.

Right, so it's all about the numbers.

Yeah, yeah. And money. Yeah. And making sense.

So tell me, what kind of price point are we considering here?

Well, look, I did some analysis based on, with my broker, based on me basically getting the money. So I think you gave me approval up to 550,000.

Great. So 550 is purchase price.

Yeah.

Okay, cool. And that gives you enough money to pay for the stamp duty and all of the other costs.

Yeah, exactly right.

Excellent. Okay, so 550 is a good, a good amount of money. So you know, what I would consider here is now where could we get you the best growth potential and diversify your portfolio so that if there's one economy moving up, the other economy potentially could be having some correction. So you don't have all your eggs in one basket. So you do have one property in Queensland already. Yep. Okay, so if I look, you know, if I take the whole COVID 19 situation off the table and say that you're investing for the long term, we're looking at like a 10, 15 year plan here.

Yeah, look, I really believe you shouldn't sell properties.

Yeah, okay, good, good, good. Because I think it's easy to be tainted by some of the short term issues that are going to come out of, you know, COVID 19. And obviously, you know, we've had like a second wave in Victoria with the lockdown there. Again, you know, you know what, when people are watching this, who knows what could have happened. But you know, fingers crossed, there's a vaccine. We're not expecting that for a year or two. So we're going to have to expect some period of time where we're going to, this is going to be the new norm. The economy, you know, is going to go into recession, there's going to be more losses of jobs. You know, there potentially therefore can be a low supply of properties on the market, which might mean that the properties on the market sell well or it could mean that they don't sell well and the property values come down. So recording this in July 2020, there has been like a second month of dip of property prices in Melbourne, for instance. But if we look long term, you know, Sydney and Melbourne and some of those larger regional areas have been the consistent performers, five and a half, six, six and a half, seven percent kind of growth over the last 10 years. So if I was going to say where are we going to buy? That could get you a price point of $550,000 anywhere in Australia. I would go to where the consistent proof has been of where people need to live and work. That would be the main centre. So you know, Sydney and Melbourne have got the biggest property markets and then we move on to, you know, Brisbane, Canberra, Adelaide and then, you know, we know that Northern Territory, Darwin and Perth haven't been performers and Hobart's arguably already had quite a bit of growth that's come through. So let's now put the COVID 19 on and say, well, how can this affect your investments in the future? And I know with my mentoring clients, you know, we've been having as a group a number of brainstorming sessions around what's the future social fabric look like? You know, we continue working remotely. Does that mean that we commute once every, you know, two weeks or a month and two to three hours out. We then looked at things like what's the effect of immigration being stopped for a year or two on some of the suburbs in the main cities. We've then looked at will there be a hankering for not the traditional three bedroom house which most suburbs have as their typical property, but a four bedroom so you can have a media room. So we've been masterminding this almost weekly for the last three months and reading all the expert information, you kind of look around and you getting a feel for what's happening. And as a mortgage broker I also get to spend speak to people every single week about their purchasing decisions. And there's only been one person who's been a client of mine who said we were going to buy this property in the town as an upgrade home. But now we've decided to go completely self sufficient. We're buying a piece of land, there's water, there's septic, et cetera. So there's only one person and we have exposure to lots and lots of people. So there's only, I'm only getting anecdotal evidence of the people making these big moves. And then if I overlay it, I mean you're based in Jakarta, you're in Bangkok at the moment, what's happening in Hong Kong, et cetera. After the big catastrophes of the 20th century and the plagues and flus and wars and things, people come to the safe haven and Australia's an island and we're safe. And at the moment we're looking at potentially welcoming a lot of Hong Kong people who are at risk Citizens. So I think that they're not going to go regionally. That mass of people who will move to either Canada or Australia are going to move to the capital cities. So in my mind if I overlay long term growth and then short term, you know, is there more opportunity to get more money regionally, et cetera? I still think that the Sydney, Melbourne, Brisbane, Capital City markets, Canberra also is an interesting market. It's very hard to predict because it's really around what government gets in. And you know, one government usually has contractors, the other one has full time people. The jobs move around a bit but they are all government based jobs. So Canberra always seems to do well and will do well in the current situation. But long term, let's see what we can do with your money. So you've already got exposure to the Brisbane market, Brisbane Ipswich market, I think the Sydney market, that 550 price point gets you away from some of the areas that would be able to give you the commutability, enhanced growth potential without the oversupply of land that could then affect your investment. You'd be too far out.

Yeah, got it.

There could be some places. So that then brings me to Melbourne and looking at, well, you know, price. Median price in Melbourne's around 750. What can we do for 550 before we'd have to go regionally and look at a regional area. So how about we consider that as where we would have a look and start from?

Yeah, I'd love to. I'd also like to put into the equation what sort of cash flow we're trying to achieve because I think maybe potentially like you said, there could be job losses and I want to be able to hold onto the property if something went wrong, you know.

Yeah, absolutely. And I think, you know, I've been keeping up to date with where the applications for jobkeeper have been coming from per postcode as well. And a lot of what I'm seeing and the analysis that I'm seeing, especially the analysis that came out of Victoria, indicated that some of those house and land packages around Melton, Tarneet etc. Was where the biggest percentage of applications came from or biggest numbers. Yeah, so. And I would think that you potentially, you know, often what we find with those house and land packages, people stretch themselves just to get that, you know, as we talked before, the emotional kind of home and they're right at the limit of their resources and then all of a sudden like something like this comes along and they're losing their income. So things become a Little bit tough. So I think that, you know, staying away from those type of, you know, areas would be clever. So if we, if the price point got me to those kind of areas, I'd start pulling back and going, yeah, not feeling so comfortable.

Okay, cool.

Okay, so let's just. What I'm going to do is I'm going to share my screen. So the traditional methodology of how we would look at the ways to find an area following, you know, location Masterclass and my teachings and learnings is that what I would originally do is get people do a dot map. And essentially a dot map is grabbing the your investment property magazine. Going to the data section at the back there's a column that says annual growth that when you read the data bank actually says this is the 10 year annual growth. So we're looking at that annual growth, which is the 10 year growth. And then you. Now this is a physical map that most people do. So the physical map, most people do. But in my case I've created a digital version here just so that I can share it with my mentoring students. So you get to see the sneaky version. So this usually takes about two to three hours. But what I'm always looking for when I'm doing this dot map and doing this analysis is I'm actually looking for pricing pressure. So traditionally what you would see is, you know, the areas close to the cbd, you know, this is where everyone wants to live and work. This is where, you know, some of the major demand is. And then what happens is as we start moving out, you know, we start getting this pricing pressure. So you can see here, you know, we've got orange, which is 8 to 8.9%, 7%. And these are pushing on these green areas. So for instance, you know, Coburg at median price of a million has this pricing pressure going on it. So when people can't afford to buy in Brunswick east or Thornbury for instance, they're going to start or Northcote, they're going to start buying in the next suburbs. So that's how I look at the ripple effect. So what I would traditionally do is I would go and do this every month. I'd look at where there's a 2% or 1% difference and I'll come up with a list. And the next thing that I do is I then come to the suburbs like software, I put in our price point. So let's say 550,000, happy to go, you know, at least 20% below that. Possibly not go much over it. But let's put 10% over it, just so that if there is this price drop that potentially could happen, we'll actually see might be some suburbs that come into your price range. And I would normally say let's be like 20Ks from the CBD. Well, actually let's say 25Ks in the CBD just to see what comes up within these suburbs. So what would be the next part of the process is I would start looking at these suburbs that were on my dot map list and I would start marking those off. So I'd go through. And for instance, I might have, you know, we just saw Coburg, for instance. Coburg's over our price point here. We click on Coburg and then we'd go through to the next stage. So for instance, here we might have areas like St. Albans and Deer park, et cetera. That allows us to look at these sections and they go, okay, so let's now get more information about these suburbs. So I'm just going to show you how this works so that, you know, you've got an idea of what we're looking at. So if I look at Deer park and the surrounding suburbs here, often what you will see is that, you know, the suburbs that are closer, so for instance, you know, Albion, are higher in price. So there's this price pressure that you see. And the things that I'm really interested in here is percentage of renters. So I'm always looking for ways to minimise my risk. So here I'm looking at, for instance, less than 30% renters or less than 28% renters start to concern me because I start thinking, oh, you know, am I actually going to have the renters there if I need them in the future? So around about that number becomes a filter point for me. Just from a convenience point of view, I'd rather have more than 60 properties sold per year because I just don't want to be wasting my time.

Yeah, yeah.

And from your point of view, we might consider something like rental yield as well. So we get a feeling for what that cash flow looks like. And I also like to have some confidence that over the last 10 years there has been some good growth and 6% growth is great and just little things that I might note here, like public housing, for instance. So that then allows me to start looking more detail into the suburbs. So I want to know what the typical property is so that I'm minimizing my risk. I want to know who my market is. Mum, dad and the kids. The most prevalent. I want to get an idea of public transport. And I also want to get an idea here of, you know, what is that typical property. So here it's definitely houses, but I want to be able to see if there's a large potential for units in the area. Could there be, you know, these guys stealing my client, my tenants as well. I'm also looking here at vacancy rates. So always like to think that there's, you know, less than 3% vacancy rate means there's more people looking to rent than those landlords are out there renting. So this is kind of the starting point of where I think, you know, it's important to start looking at, you know, where the areas are that we should be buying. Now the. What that means is. So do. Is there any questions that you have around that makes sense?

Yeah, it makes sense. Yeah, yeah.

And that just gives us. So we're getting some historical information that is actually telling me, you know, what is happening historically in the area, but it also is telling me things like, well, what, you know, so I get a picture of, you know, pricing pressure, historical information, but I also get a picture of, well, how can I just minimize my rent, make sure the renters are there, make sure I have the typical property and make sure that I've got the vacancy rates to support all that as well. I'm just going to share my screen again so that you can see this. But what I'm looking at now is this is my quick methodology of doing this. So that's that dot map takes, you know, two, three hours. The analysis of then moving the dot map onto the suburbs that you can afford and looking at the filtering, you know, can take 10 hours or so. But I decided that if I could create a program for my. For my clients and make it a whole lot easier, that'd be great. So what I've done here is so let's put in 600,000 for your price point and let's go down to. Let's go down to 480 just to get a feel for, you know, what you can afford. Now I'm going to make the percentage of renters here 28%. I'm looking for a house's maximum vacancy rate, 3% annual sales, 60. So what I'm going to do now is just run this program. Now, the reason that I have created this program is that I really wanted to be able to make something that was a lot quicker in the process than normal. So, for instance, what I found is that people kind of want the answer now, right? So it's not like you want to go and do all this research and you know, having used to agent, they're out there doing that kind of research for you. But if you could actually come up with the answer straight away, then it would work. So in a matter of minutes, I'm just going to run the program. So I've set the criteria now and now we're going to have a look at the results. So I'm going to press my button and see what comes up. I love it when things like this ever right. Live demonstration. Okay, so let's see what we've got here. So when I have a look at the results here, what I see is all of the suburbs that have either a 1% or a 2% pricing disparity comes up and I also have the suburbs that have created that pricing push onto it and I then have also filtered it by those filters we put in place. So, live demonstration. As I said, let's have a look at this. So we're going to bring up Melbourne here and we're going to have a look at the suburbs that come up. So we have in that pricing position right now, we have these two suburbs that have come up that have got. So let me just show for easy information what we've got here. So we've got Deer park and epping, they're between 17 and 20Ks in the CBD. So let's just make this a little bit easier to read from a public housing point of view. Nothing significant that I'd be worried about here. From a rented point of view, 30, 28% rented is fantastic. I don't really need to know about the demographics right at the moment, but let's get a feeling for what kind of properties are there because I want to make sure that I'm not overexposed or my prices have been affected. So there's eight and a half thousand houses in Epping and 2,000 semis. Now what this could mean is that when we look at the median house price, which is here, that the median house price on the ground when you're actually looking at it, could be a little bit higher for Epping because the number of semis prices are being used as well. So does that make sense when they're coming up with the median in Deepak? Not such a big deal. It tells me how many people, primary school, secondary school. So we get into more detail later on that it tells me the typical property is what is a three bedroom house, which is great. And then let's just have a look at what's been happening here. So what I'm doing here is I'm trying to get a feel for over a period of time what the growth has been in these areas. So it's been really nice and consistent in the last one year, three years, five years and 10 years, you know, we've had like 6% growth, as I said, really impressive. Our rental yields not as good as what you're getting in Queensland, but still. Okay, we're all right with that stock on the market. Let's just remove that for a moment and days on the market. So the number of sold, so we've got 163, 70. So there's a lot of on the market that you can afford and really low vacancy rates. So this then takes me to, here's some areas that you can afford potentially. So we would start in this median and I would look at this 580 and start thinking, okay, so I know this is the median.580. Let's learn a little bit more about Deer park and Epping. So you then take this to the next stage of finding out where would you be looking in these areas for property. So let me just show you where we're looking at here. So Deer park is over here in the west. Now there's a lot of, you know, things that you also have to go and, and do, you know, analysis on. So for instance, I would then go and go in and do some in depth demographic knowledge. I then look at, you know, say for instance, the percentage of kids in secondary or primary school might mean that you spend some more time looking in near the school zones. If there was a large public housing, it might mean, you know, identifying the streets where you wouldn't be buying. So let's for the moment just look at Deer Park. So you would probably go into and find the council area. You'd have some information there about, you know, I think it's Brimbank Council get a feeling for what else is happening here. And you know, just anecdotally there's supposed to be a train that goes to the airport that's going to come out via this sunshine Deer park area. So there's some infrastructure benefits. So I don't know, how does that sound as the process so far of getting down to, you know, what we're looking at?

Yeah, it makes sense. I mean, I think, yeah, like, yeah, it makes logical sense but I mean 580. So say my budget's 550 and that's probably unmovable. Is it a case of waiting to See if there's yeah, an opportunity for it to go down or.

Perfect. Yeah, really, really good question. Because what this means is, well, let's just find a little bit more out about this suburb. So, you know, there's probably, there's a couple of suburbs that would come up, for instance, that you want to do more analysis in. But for now let's take Deer park and do some analysis on that so that we can see, well, is there a possibility that there are properties, three bedroom houses and find out what the typical size block is that we can therefore go. Well, in actual fact, this is something that we, we could buy now or have on a watch list and look for. So one of the tools that I use to kind of do that analysis is RP data. Can you see RP data? So the first thing I'd probably do is go and do a suburb report. So let's do a suburb report on Deer Park. And the reason that I really like this report and the reason that I utilize this report is that it allows me to look at information about the suburb and give me an idea of, you know, the price range between the lower end of the market and the higher end of the market. So this is where I start to be able to build up my information to get to that point. So let me just save that and I'll open it and share this with you. Okay. So this is the suburb profile. So you know, we've spent what, 20 minutes now and we've been able to go from, you know, all of Australia down to, you know, the kind of suburb, the suburbs that have pricing pressure. And we've gone down to the suburbs and we've got rid of the risky suburbs that don't have the investors that we need. So really quickly we've got down quite quickly to this. This gives us a bit of a profile about the suburb itself so we can get a little bit of information about. Gives us this median. Now medians change between data providers as well. So we had that 585 from SQM Research. RP Data is saying around 575, we start finding this information now. This is what I really like and this is the reason that I use this, is that it allows me to look at what's the spread of properties values across deer Park. So 550 is kind of like the number that we have to work with. We can see the median here. So it says the middle sale price of all transactions recorded over the last 12 months with the suburb note, the sale price is low. Okay. So this is telling us this is the median over the last 12 months, 564. It can go down to the bottom. 25% of the market is at 516 and the top is around 618. So this tells me that if we know that Melbourne's had a little bit of a pricing correction and potentially could have more, this puts you in the ballpark of a suburb with a ripple effect going up in value, infrastructure for the long term and all of those kind of low risk qualifiers that allow us to go with confidence. I'm pretty sure we're going to end up with a rental if we're going to put the typical property on the market. Now this also gives me an opportunity just to confirm is that three bedroom really the typical property? So we can see here there's only one one bedroom for sale. Sorry, one two bedroom for sale. There's 25, three bedrooms for sale and 18 four bedrooms. So this is good. This validates to me. Yes, they're around that price point. I can see here some recent sales. One that's recently sold at 528. So I want to get some more information about this. Now one of the things that I would do at this point is I would jump over to XQM research just to validate what the real typical property looks like. So I've come up to their free data on property information and what I'm trying to do here, I'm kind of manipulating their data for my own means to be honest. But I'm using all the sold records that they have for the suburb and trying to find out what that typical size block is. So it gives me a little bit of an indication. So I have to come down here. I put in Deer park and Deer Park Victoria. So let's let that come through. Deer Park 3023 and this is going to give me the sales over the last 12 months. And what I can see here is, is most of the. See how most of the sales are in this like 450 to 750. Yeah, yeah. Because I don't want, I don't want anything down here. You'll see that's 2/8, RM1 36. This tells me that there is some developments or subdivisions that are happening. But the typical property I would put probably between 500 and 700 square meters. What that allows me to do is to come back to Dear Park. This time we're going to get all the information that we need on it. Do you have access to RP data?

No. No.

Okay. So RP data is just a plan that you can get access to.

Like a search engine based on.

Yeah. Now Valex is one of the valuation softwares that most of the banks use to get their data and a lot of that is back ended into RP data. So when you're actually looking at this data and some of the valuations that come up, you're actually looking at the same data that the banks would be using for valuing the property as well. So handy to know. So there's 7354 properties in Deer Park. We actually only want to look at the three bedroom houses between 5 to 700 square meters because I want minimize your risk as much as possible. So let's check out what the typical properties look like. There's 2,000 of those. Now here's a little tip for you. What I would do at this stage is I would go in here and I would actually click all of these and add them to your watch list. So if any of those properties come up for for sale, they go straight onto your watch list and you'll get notified every Sunday that this property that's come up on the market that fits your criteria.

Right, right.

Or if you've got the, you've got access to RP data. If you use their little app, you'll get them daily. So.

Okay, great.

No one knows that. That's a secret. Okay, so let's just have a look at what the sale data has looked like. So this is, I'm looking now since January. So this also allows me to look at, you know, what's been happening in the price points as well. So there's been 40 sales since January. Now the reason I would look at these, so we know we're on the typical size property and block. I just want to see if there's some sales that are coming in at your price point. Because if I was looking at these and everything was over 550, I'd start getting worried. Right. I'm like, yeah, maybe not our suburb. So I can see here, you know, June 536, March 490. And this also allows you to build up a little bit of knowledge around what the typical property looks like. So I'm thinking brick, you know, brick, brick. So all of a sudden we now have so much information around what these typical properties look like and what the sales prices within our kind of price range. And now we look at this and there's 13 properties right on the market at the moment. So you could go in and have a Look at. So this is a brick. Looks typical. Three bedroom, 650. We've got private sales, 550 to 585. So all of these kind of look typical kind of price point points for us. So 500 to 550. Let's choose one. We'll choose this one. Why not? Starts with a W. And so what this allows me to do is go in and start looking at the property. So one of the things I do pretty much first up is I check the date. So this is the date, July 20th. And then I go backwards and just see if there's any old. So he's January 2008. This is 12 years ago. So this gives me a little chance to see, oh, have they done any renovations or improvements in that time? Because often what will happen if I'm generating a valuation, I'm not getting a true valuation if they have improved the property because the valuations, automated valuations through this system gives me just what they think the price is worth based on its last sale price and the growth in the area. So we can see this. There's nothing objectionable about this. Nice clean kitchen, you know, floorboards, door. Everything about this looks fine.

Right.

So this is kind of information we want. I then just jump over here for a quick little look and go, well, is this kind of, is there a big development next door? It's in a nice little cul de sac like this looks okay. I might wander down the road a little bit to see, you know, what's happening at the end of the road to see, make sure it's not a, you know, a busy road. You could be doing this from Bangkok. Right. And then I just want to zoom out a little bit and get a feel for, you know, I'm not next to a cemetery or, you know, something that commercial premises. I just want to get a little kind of pick on that. And then I'm going to come down here. You know, it sold in 2016 for 401. Yeah. It tells us that, you know, 6% is what's been happening in the last 10 years. It will also tell me what information has come through on the listings and if there's been a DA put in. So often the DA's will come up here and I can have a little look and see if they put in for a new deck or pool or improvement. So this is good. Now this tells me that they have only just listed this. So it's only been on the market so seven days. And it also tells me it's been rented up to 330 a week recently, you know, so I'm going to drop.

Why the drop? So we've got a 340.

Yeah. So it was 340 back four years ago and there's been a bit of a drop. So this is be something that you'd put down on your list of $10 a week less or it might just be, gosh, it was the end of March. These guys did not want to go into April and May after shutdown and not have a tenant.

Yeah. So they could have been panicking about COVID Absolutely. Yeah.

But look at this. Now we're back to 1979 when it was bought for 12,007. All the data is here, which is fantastic. And then it allows me also to come into here and do this valuation report. So let me just pull that up. But you can see how really quickly we're kind of getting that information built up and we can narrow down like we're, you know, 30 minutes in and we're, we're kind of almost narrowed down completely into areas that allow us to really just lock in, you know, a property that could be of a potential for you. Okay. And this valuation document, when it comes up, it gives you a confidence, you know, so you're hoping that it's at least in this medium to high. They're confident it's a price point. But you know, look at the range here. It's like 479 to 597. Like really don't know. But 540 is what they're estimating. But what it does do is it does give you some comparables as well. So this is some things that have sold recent 536. Here's a bigger one that sold for 580, 460, 530, 520. So this is 480. So this is giving me confidence that we are in the price point that you could actually afford.

Right. Yeah.

So this is all really good. And the only other thing, if I was concerned that maybe we could be out of the price point, I would jump across here just to have a look at this market compare tab. And what this does is it lets me know properties that have come on the market and have sold and any price drops. So, you know, the actual sale price against what they advertise. So they're saying, you know, they're tracking and saying, well, it's come down 4% since they originally said you could get it for 520 and now it's come down. So the percentage to the actual sale price. So the actual sale price compared to what they listed that you could buy it for came down 5%. So this also gives me a little bit of an indication if I was going to go in and negotiate what's the acceptable amount that they're really coming in under. So if I could see here that it's 5% below asking price, then what I might do Is start at 7% or 6% below asking price, knowing that there's going to be some negotiation. But this gives us a real bit of feeling for A, what's happening in the suburb. But B, it also tells us exactly what we need to know about where to buy and what to buy.

But then we would need to know really, like the local costs, like, what is this house gonna really cost me? And then that would be more detailed on the.

Absolutely. So this is. So this is the starting point. So you know, where in Australia can I buy with 550,000? Let's get you a growth potential. If we were going to choose anywhere, let's go to where you can afford to buy. That's got cities with proven track records, with immigration in the future, that's going to bring people in that's going to have the population growth potential. And with your price point, where does that put us? So we've got down to some suburbs that you can consider. And then it's about getting to know the suburbs. What's the typical property? You know, what's the people in the area like, how many, you know, is there a lot of school kids in this near the secondary school that you'd rather be know where the secondary school is so that you can, you know, look around those streets, for instance, where's the public housing that you might stay away from? And then you start coming up with the alerts, and you set the alerts for the typical property, and as they come through, you would assess them, or you would have someone on the ground, you might have a negotiator, or you might have a buyer's agent or someone working for you that could then go and assess the properties on your behalf. But this kind of gives you some areas that there's growth potential, there's rental potential, and then you step back and go, okay, so if I can buy less than my price point of 550 and I have a 3.5% yield, what's this property going to cost me? And so that question gets to, okay, so what's the yield? So if we did a calculator and we said, you're buying at 550 and you're getting a yield of 3.5%, that's 19,250 a year in rent that you're going to get. So your main cost is going to be your mortgage, which is a function of the size of the mortgage and the interest rate that you've got. And the other cost that a lot of people don't take into account is all the on costs. So having seven investment properties, I've been diligently monitoring my costs over the years and I have older properties that I've renovated, so they usually have a bit more cost, but I allow between 20 and 25% of the rent for the on cost. So council rates, maybe water, the rental manager, landlords, insurance, building insurance. So all of those things. So if I looked at that 19,250 and I times that by 20%, I'd add my costs of three and a half, $3,850. And you don't have to tell me, but if you want to throw a number out, there is like a mortgage number.

I think I'm on 3.2 right now.

I think so. 3.2%. And how much. What's the loan to value ratio that you consider for this property?

So it would be 80%. Yeah. A 20% down payment. Yeah.

Great. So 80% is 440,000.

Yep.

And it'd be interest only. Traditionally investors are doing that. So let's put that down at 0.032. So the cost for the loan is going to be $14,000. The on cost that we're allowing, which, you know, for every all those little costs is about 3,800. So let's take that to like 17, $18,000.

Sure.

And we've just said the rent is 19,250.

Yeah.

So somehow or other in a capital growth area, you've managed to have a positive cash flow property.

Yeah, yeah. Which is nice because I mean, you know, say, say I lost my job, you know, I was working casually, I'd be able to, you know, hopefully hold the property, you know.

Exactly. And I think the really important thing is understanding, especially, you know, we can buy with the long term, 10, 15, 20 year plan, but we're living in the short term. So we have to take into account the fact that we do have the COVID crisis going on. And if we do have that affecting us at the moment, how can we minimize our costs and our concerns that we have around that? So one of the things you might do, for instance, is you might say I'm going to keep a buffer of cash so that, you know, I've got enough money in case I have three months of vacancies.

Sure. Yeah, exactly.

Or you might say, I'm going to. There's a few things I could do to the property to make it more desirable. So I'm going to go in and nothing significant. It might just be, you know, a $3,000 paint job throughout. It might be. And this is where the demographic analysis will assist you. So when you go in and you look at the demographic for the area, it might say that everyone has two cars and you're like, oh, maybe I'll have a second carport. It might just be those little things that the area is right for that area. It might be, you know, it might have, you know, you might go and spend two grand and put WI fi meshing through the whole house. So the things that people know go, wow, if I get this property over the other one, I'm going to be in a much better place. So that would be, you know, my thoughts on what you could do. And you know, we just talked about the fact that I think that rent for that property was 330. Was it?

Yeah, yeah, 330. It was a 340.

So if we didn't take the typical rental yield for that and we took the 330, 330 by 52, $17,000. So that makes it like mutually.

Yeah.

So, you know, and one of the things that you could consider, you know, is having an offset account to be able to put cash in against your interest only loan so that, you know, improving cash flow or now we're about to go into an environment where banks are going to get very, very competitive on fixed rates. So if it's convenient for you and you have maybe the offset account on your other property, then maybe you might consider fixing this. And they're going to have a two in front of them.

Yeah, exactly.

So just. And just consider, you know, how can you protect yourself? So for instance, for a couple of my mentoring students who've purchased during COVID I looked over the contract and as part of the offer, I said I want to have access to the property to repair these things. So it's ready to rent straight away. And I want to have access to be able to rent it straight away, especially if it's vacant. Yeah, exactly. So you can actually have those kind of mitigations. But it looked like this is just being rented. So I would, for instance, this. I'm not saying go buy this property but this is kind of assessments that you can do that allows you to minimise your risk.

Yeah. Okay, excellent. Yeah, it's nice buying in a large city because, you know, despite Covid, Melbourne will always be a population hub. Right. I mean, I don't think that's going to change.

And I think, you know, we look at the long term predictions of population and yes, there's a lot of overseas students data that does push up the Melbourne population, but it is predicted to overtake Sydney in the biggest population in Australia. So we do have that population growth. The price point allows you to get into an area that's affordable. So this is all really positive news. Yeah.

And I mean, look, they're going to come back. That's true. Yeah.

And I think we can see a lot more people come back. We might lose 300,000 people this year, but when we get over this and Australia opens their borders, I think we're going to have people coming to the sanctuary of the island that can be closed down and shut off from the world easier than anywhere else.

And the reality is like the hotel quarantine program works, you know, I mean, they just stuffed it up. So I mean, you know, they could just, you know, they'll allow different groups back in. Yeah. Okay. Well, that was very helpful.

Yeah. So have you got some clarity? I hope my brain helped you.

Yeah, no, it certainly did. Thank you so much.

Fantastic. Well, at least you now know, you know, sitting out there, you know, away from Australia, how it is possible to actually look across Australia. Consider your price point, understand the risks and understand the opportunities. Invest for the long term, but consider the short term and how that you can mitigate some of your risks. And, you know, purchasing a property that's already rented might be one of the things that you consider when you have those alerts come up, you might go, you know what, when I'm looking for something, I want to make sure that it's already rented out. And now if you have access to RP data, then, you know, you can do that. So, you know, I think that there's a number of ways that you can start, you know, having these alerts on real estate on Domain for the suburbs. Go and do the same kind of analysis on Epping and have a look at.

Yeah, exactly. And I think it was really comforting to see like you can nearly achieve something neutral in Melbourne. Yeah. Because worse comes to worse, I go find something to do with work, I could find that shortfall.

Exactly.

Yeah. I'd be quite comfortable.

You're quite close to the city as well. It's not like we're talking about being in the wolves, you know, this is. This is an area that, you know, it's on the way to Geelong. It's like got infrastructure builds, you know, so there's investment going on out there, so, you know, some really good areas and I'm glad that we could find it for you.

Yeah, all right, Pleasure. Thanks so much, Jen.

Okay, all the best.

Cheers now. Bye. Bye.