Your Property Success Mentor Call December 03-01-2019

Hello everyone and Happy New Year and welcome to the first Q and a call for 2019. But technically it's actually the last Q and a call for 2018. Now I trust everyone has had a wonderful break, festive season time with family and friends and obviously had time to think about what 2019 is going to be about. All for you. Now as always, I have my co host of the ultimate guide to renovation and your property success podcast. And of course these mentor calls, John Hubbard with me. Hello John, how are you going?

Hello Jane. Hello everyone. Happy New Year.

So one of those things that kind of creeps up on us. Hey.

And they just go faster the older you get, don't they? It's just last year seemed shorter than the year before. Yep, every year gets a little bit faster for me, but there we go. But looking forward to a great year. Lots of things planned and it'll be awesome.

John, do you have that boring disclaimer that you're going to run off the top of your head that you want to tell us about?

Yeah, I do, but. You reckon? I'd have it loaded up, but yeah. We're not real estate agents, financial planners, lawyers or accountants not liable for any loss, damage or misinformation inferred. Everything we're about to say is based on our own personal experience and opinions and is based on our not based on your personal circumstances. We have to say that just so we can share openly in the way that we do. So please contact a professional about your own specific circumstances.

Okay, well that's out of the way. Yay. So John, it's been 2018 as we're in a wrap up period here. It has been huge for us at your property success. We have welcomed so many new people into our community which has been so exciting. I think our special Facebook club actually hit over a thousand people as well, which we are just so delighted about because that means that there's a thousand people who have made a commitment to one of our courses or programs or following our content, made a donation even to the Pippilepsy foundation and are really part of this journey. And your presence is very humbling to us. But in addition to that, you're where we focus all our attention. So the top thousand people out of our many, many tens of thousands of database, you're the people that we're here to serve and that's what these Q and A calls are. So if you haven't had the opportunity to be part of one of these calls before, welcome. These are just for people within our community. And clients of Investors Choice Mortgages as well. And you know, we share with you. You know, usually the format is that John and I will have a bit of a chat and talk about what's been happening for the month and what's our plans for the future. And we encourage you to click on the link that's in the comments section if you would like to be on the video with us and have your webcam and your microphone set up so that we can answer your questions live. Otherwise, type your questions in below and we'll get to those as well. We've had I think three or four questions sent through to us via email to our email address, John, which is questionsourprobablyourprobablysuccess.com so we will get onto that. And well, I guess the really big exciting thing that we've spent a lot of December on and is obviously welcoming all of our new students, John, into the Ultimate Guide to Renovation.

Yeah, there's another great enrolments open for the Ultimate Guide. Gee, there's been a few now when you think about it, since we developed it in 2013, was the first one after developing it, putting it together in 2012 and we're well up. We just had a look before there, Jane. Well up over 700 students since then. You know, we would never have thought when we did that original release, we didn't know that, you know, how popular it would become and how long it would, you know, hang around and continue to attract people and help people. But. And you know, we're always improving it, but it's still, it still stands up, doesn't it? Every single part of that. I guess that's really what property investing is about. It's the fundamentals that don't change over time. Obviously websites change and we tweak things and that kind of stuff, but the fundamentals stay the same and it's still performing as well as it did day one.

Absolutely. And if you are in the Ultimate Guide to Renovation, every now and then you might come across something that you think, oh, that report's not there. We're in the process of always updating things and improving things. We realize some of the reports are no longer available, such as John, we used to love the Residex renovators report and when CoreLogic bought Residex, they cut that. And unfortunately the person that we had on the inside of CoreLogic, they cut her recently too when they cut 80% of their marketing team. She was working on putting that back in for us. So we're recontacting our core corelogic people and letting them know how much we would really appreciate that report. But for now, unfortunately, some of those reports are no longer available, so we're updating those and letting you know and just putting announcements on the page just so you're aware of that, rather than going back and reshooting all of the videos straight up. But we do have plans for making some changes as well. So now. So that was pretty exciting, John. But also after, oh my gosh, I can't even think of, I would say having been mentored for well over 13 to 14 years myself, I decided to step up and start our own mentoring program, which, my gosh, it's been so exciting as well.

It's been crazy. And it's one of those things that I guess, you know, if we're honest, we were a bit reluctant to take on because we knew the amount of time and effort it would take to do it properly. And it's one of those things that sometimes is potentially more of a mental hurdle than an actual hurdle. You get plenty of those in property investment too. But it is so great, isn't it, now that we're into it and the first group of people are coming through and you kind of wish that you did it earlier, but either way it's a beautiful thing and it's great to have people aboard. And yeah, it's going to be really. I think that's the thing I'm really excited about 2019. We're catching up three times. You know, we're doing, apart from the obvious, the one on one that goes on week in, week out, catching up three times a year. We're going to hire a bus, we're going to go to houses that actually legitimately available for purchase that are in our pockets of potential that come from the suburb selector software. So lots of exciting stuff that we're going to be doing very practical stuff with the mentorees, which is going to be awesome.

And the thing that I really am excited about, and obviously it's where complete attention for me is going to be in the next couple of months, is absolutely jumping in with this initial group of mentorees that have come through and I think we open, opened up places for 10 in December because we really want to make sure that we give them everything that they, we can give them and give the benefit to them. So that means, guys, I won't be answering all of your questions on your little chats all the time because I won't be able to spend all my time in there. We've got obviously the support team. They're going to be helping you out there. And there's so many people, there's over a thousand people on the Facebook page that can answer your questions as well. So my attention is definitely going to be on those mentoring students. The real exciting thing is John is actually sharing that list of the suburbs that fit our main criteria. And the new data came through the end of December. You know me with my Excel spreadsheets between Christmas and New Year. I had a lot of fun in actually pulling that together. So I've got that new list for our mentoring students of the suburbs that meet the criteria. Now it's less than 80. Within Australia, we made sure that the suburbs went from $500,000 to 1.1 million. And it was great to see know less than $650,000 is like 20 suburbs that still came up that had all the great criteria that you can then take and go and do the next lot of analysis. We've actually set up alerts for the those suburbs with a specific property type that suits that suburb and the specific size of the block. And we're getting alerts through weekly now from RP data as properties within those suburbs that are the the right type of property are coming up. I'm reviewing one of those properties a week which may just be one of the properties. Mentor just has to go out, mentoring has to go out and buy. But we really encourage you obviously to do your own work. But all my focus is going to be in making sure that our mentoring students get to the success that they want. So I think we've got a few.

Just wondering what we're talking about there, Jane. Each month our suburb selected software is powered by SQM research just for people that don't know. Each month we get a fresh batch of data which is the latest data that SQM provide via an API. Backend into 20th of the month.

Yep.

And so the 20th of the month Jane goes into a little frenzy. It's Christmas day on the 20th of each month and runs her macro and puts our first pass criteria over. That just eliminates a whole bunch of suburbs that you would have wasted a whole ton of time in. So that's a little each month that we have in our office. And before now, obviously it's mainly been for our own amusement, but now we actually get to. Now we get to share it with a wider group of people, which is quite cool.

Yeah. And I think the thing is about that is that, you know, I've always wanted to teach the man to fish. And it's why I've been so reluctant to actually just hand the answer over. And I think people want a combination of doing some of it themselves, being supported, understanding how they can learn it so they can replicate it. So, you know, we have the location masterclass and ultimate guide of renovation, which is for people who want to do it themselves. We have the done for you where we get you the suburbs and give you the hookups of where to buy. We have the done done for you where we actually then find a buyer's agent and find you the property. But this is a beautiful meeting in the middle where I can give you everything that you need and then that personal mindset assistance. So I've got some pretty exciting things I want to share with you, the mentoring students. I'm going to be talking to you, obviously, within the next 10 days. We're going to have that, you know, a couple of hours, one on one, to make plans for you for 2019. But more importantly, the really exciting thing about this is that I think a lot of the people I speak to or who have had properties in the past, John, it kind of comes down to the fact that they have. There's often something that's holding them back or a mindset problem, or they want a second set of eyes or someone to hold their hand. And it's when I see what I can do to assist people over those stages and get to the property they want. I think, you know, it is such a success story for all of us. And that's what I'm so looking forward to in 2019, just continually sharing with people, you know, the success stories that we're having with mentorees. So that's where my focus is going to be completely. I do have here, John, just a link to that webinar that we ran around this, if you want to talk to that.

Yep. So that was the webinar. If you'd like to check it out and learn more about the mentoring program, we're going to be opening up spots again in January. You can check out the webinar we did just before Christmas when we opened up for the first group of people. There is an application process that takes place. You'll learn about that on the webinar. Not everyone is going to be a good fit, and that goes obviously in. In both directions. But, you know, we're only working with people who we know we can help, and they're going to be a good cultural fit because we're going to be spending a lot of time Together. So that's the way it works, I'd just say, because there was a couple of questions even on the webinar, Jane, and you raised a good point is there's different horses for courses. You know, it's not for everybody and it's not supposed to be for everybody. But I think like if you think of our done for you service, for instance, where we literally, you know, people pay us $5,000 and we literally go away and do the suburb research on the behalf, hand them back a short list of, you know, three suburbs, normally a couple extra suburbs, and then the actual pockets within those suburbs where we recommend that you should be buying, you know, based on everything you learn in location, master class or the ultimate culture renovation for a lot of people, they don't want what I found in doing those calls. I think I've done over 100 calls with people about the done for your service now. And what I found is there's a large group of people who want to learn it themselves. They want to go through the process because they want to become an experienced and effective investor by themselves. And so what we've seen is just through the course of speaking to 100 people about the done for you service now is there's some, most of the people that actually come through and just say, yeah, beauty, I know how hard this is, I've done it before and hand over their money and we just do it on their behalf. Most of those guys have already got one or two investment properties and they've been through the process themselves. So they've satisfied the or scratched the itch that they know enough, they know what's involved and know what's involved to do it properly and then see the value for money for us doing that. But there's another large portion of people that they need to go on that journey themselves for their own growth, which is what we all did. And that's where I think the mentoring is a little bit different. Whereas it's really and not dissimilar to the ultimate guide to innovation where you're going on the journey yourself, you're learning all the steps, how to become a really effective investor. And then you've got things like these calls or in the case of the mentoring, you know, that one on one time where you're guided through the process as well. So yeah, courses for courses and not one size fits all. At least now I think we've got all of those bits in place where we can help people depending on where they are in that journey.

I know, look I'm so excited. You know, as you know, it is Christmas day on the 20th of every month for me when I get to have that short list of suburbs. But just seeing what the short list looks like and then looking at properties on the market and being able to share those and then do deal reviews for people, I'm just so excited to get people to their outcomes and this is really where we're going to be. So as I said to John, as John just mentioned, check out that replay. I don't know how I put this back on the screen. One more time. Check out the replay. Have a look. We do have some time available within the next 10 days to go through that application process again. So, you know, make the commitment, spend the time with me. We work out, we work together. I did speak to people at the end of last year and did tell them that this wasn't right for them. So I know that it does work for some, some people. I know it doesn't work for other people and I really, you know, I've got your best interests at heart here. So if I don't think that we can work together on this or it's not the right time for you, I would definitely let you know. So please don't think it's a waste, waste of time and effort. And if it is right for you, I know that we do have a period of time in the next, probably four or five months where the market is going to be ripe for us to take action and get in the right property for the next 10 years. So please don't let that go. So I'm going to get rid of that now. But I just want to share with you, John. I run this control here. So you see me looking around things but every now and then I see something funny. So someone has clicked on the link and it's Nicola. I'm just gonna see if I can add it to the broadcast. You can see what I'm seeing. I don't know if she wants to be a guest. I have messenger to say, did you want to be a guest? But she's driving at the moment and I'm getting a beautiful view of her driving around. So this is what some of the images I've got. So I think that you. Nicola, I don't know if you can hear us. If you can hear us. Hi. We can see you driving. You may be on the wrong. Wrong link. You just need to be on the Facebook page if you don't have a question. But John, that's what some of the videos. I can see her changing, moving her phone around now. Now I can see there's a lot of people have joined us and Julie, Kevin, Maria, Suzie, there's quite a few people watching at the moment. Hi. Give us a thumbs up or a hello. And if you have a question, there goes. Nicola, have a question, please don't hesitate to, to jump in and put it in the notes. But John, we do have some questions that we can go to.

What would be great, Janie, if you could start with the one about Ian Urgarte, because that was a great question I thought and I think you've got it up there. I haven't got it in front of me.

Okay, I've got. This is a question that came through our support desk from Andre, Andre with a J. Hi, Andre. And he says hi. Okay, let me just get into this. Hi, Jane and John. It looks like I wouldn't be able to be present at the Q and A today, but hoping that my two questions below could be answered as I would definitely listen to the recording. So for all of those of you are listening to the recording and you're in the ultimate guide of renovation or location Masterclass. There's over four years of monthly Q and A calls that you have access to and I know a lot of people listen to me while they're exercising because I get feedback quite often from that. Okay, so question one. I'm currently studying high res with Ian Agarte and hoping to marry the best of your and Ian's teachings, come up with my own strategy for the next few years. I recall John mentioning in one of the previous Q and A's that he was considering the Trident strategy incorporating high risk strategy. And, and I'm curious if he or you have any more thoughts on this information. So as you say, John, really good question there. We are a great supporter of Ian's philosophies and his amazing gosh moonshot goals of affecting the change of million people in Australia and giving them accommodation, affordable accommodation. So it's something that we love. And the conversations that we've had with Ann, we've discussed this marrying, how we would marry these two things together. Do you want to have a word on that?

Well, yeah, they marry together beautifully. There's some real synchronicity there. There's a couple of areas that we've been discussing recently, Jane, of I guess where more thought has to be taken to how it marries in to the training strategy. But firstly I think let's do a bit of a review of Ian's strategy would probably be for those who aren't familiar with it but it's essentially like a modern day rooming house strategy. So you've got and they build new developments and do it and basically, you know, essentially have self contained one bedroom equals, you know, one lease type of thing. And he'll have anywhere from four to seven even depending on state regulations, even over 10 people in the one house all paying rent separately. And the idea is that this kind of two times or even three times your rental yield or your rental income for that property. So it doesn't new but the main thing that it seems to be used on is retrofitting current houses. And that might be a house that you're, you know, buying as an investment property or it might be a property that's already in your portfolio. And the big thing with this is obviously there's lots of regulations around this and it's different in each state that you're in. So that's really where Ian's been able to go away, look at all of the regulations and also identify where there's markets of people who are really crying out for affordable accommodation that don't need a whole house and need to be close to, you know, work and infrastructure and transport, those kinds of things. And single women in their 50s and 60s is one of those groups that he's targeting.

Jo largest growing demographic of homelessness in that demographic. But it's interesting why we love the concept is that, you know, and this is one of the things whenever I've been asked in the past to be part of articles we used to have like Margaret Lomas was very much on cash flow and I can't even think of the person who was always on capital growth. I was always in the middle saying look, I want to have cash flow and I want to have capital growth. Now the way I improve my cash flow is through renovation so I can push the rent up and grow equity. Now if you have a good capital growth area and you have a good cash flow stimulator, you know, you can have the best of both worlds. And this is why we really like this high res solution. Now as John said, there's a number of different components. People who build purpose built building that could be community based living, someone who retrofits. And there's also people who are actually who don't have the funds to own the property themselves who are taking over a lease for a longer period of time with the obvious landlords agreement. So what we like is the fact that it kind of fits into you know, people who have the money to do the developments or do JV there, people who have a current property and people who don't really have the money to have their own property, to actually build up their own deposit. So this is a great strategy. And where we see this, you know, absolutely overfitting is, you know, as John says, there's a number of councils and states regulations where there's specific suburbs that. That bit this type of development and are more lenient towards it. And then we've got our suburbs that we're coming up with every month and, you know, you can. You do your research with the location masterclass suburb selector software and, you know, go through and come up with your own list of suburbs. But the suburbs I'm looking at every month, and as I said, you know, the ones I'm sharing with my mentorees this month, there's about 83 of them that fit, that have growth potential. So this is the initial analysis that we look at and then we go, these have got growth potential. So where we see this working is the suburbs that fit into high res and the suburbs that have high growth. Hey, you know, it's an absolute kill of a strategy together.

Yeah, yeah. I think the only thing I'd add to the. And I think it's a, It's a. It's a comment. In all property strategies, not just high res or even the trimester strategy, is when you're weighing this stuff up, you've got to work out how that strategy is applicable to you or if it's suitable to you. So, for instance, if you're going on the high risk route, there's a substantial time investment of time that you're going to have to put in to that strategy or potentially you're going to pay someone else to manage that for you, and that's not going to be for everyone if both of you are working and you're already managing lots of activities and all that kind of stuff. So I just wanted to say that, because I don't want to make people think that now the only strategy is Trident Strategy plus high res, because the Trident strategy, just with a simple renovation or even postponing the renovation, might be a much better strategy for you in your current circumstances than trying to link these things together.

Absolutely. But I mean, I hope, Andre, that answers your question, because that's how we see it working together. And as John said, it's not everything for everyone, but it's definitely one of the ways that you can actually get cash flow and capital growth. So Have a think about that now, John, we've got another question.

I just wanted to add a couple of things to Andre's thing if I could, Jane, because I think if you were using both of those strategies together, which I'm considering, as Andre said in his question, and I've just been thinking about where obviously that overlap, you know, if you do the suburb research, the way it's outlined in location masterclass modules 2 and 3 of ultimate guide, and then you overlap those shortlisted suburbs with the councils that come up that are, you know, amenable to that high risk strategy, the multiple dwellings or multiple, you know, leases in the one dwelling, then it really comes down to, and I think there's no, it's pretty seamless integration between the two things at that stage when it comes down to the property selection. We were having this conversation I think in November, Jane, you and I, and I don't know if we shared that with any of these, you know, with the rest of the community, but we're talking about the property selection and a lot of the time from what I can gather from Ian's students, is their trying to choose a property that is quite large. And that's where I see it as a little bit of a departure from the Trident strategy in that it's not a typical property for the area. And can you just talk to why that might be a problem, Jane, on having a typical property for the area?

Yeah, absolutely. So the thing is, when we're looking at the Trident strategy and remember my background came from risk assessment, so I was looking at how can I minimize my risk, my little $45,000 deposit, which is all I had to start with, I wanted to give my money the best possible chance to not just make money, but grow as well and have less risks when it came to managing those properties. So I wanted to have the typical property for the area. Now if the typical property. And I've done research of the 15,655 suburbs in Australia, I have to say I've seen thousands of them and the typical type of properties, there's majority of them are three bedroom houses. So when we look at the fact that the three bedroom houses are the. Just getting a little bit of feedback there, John, I'm not sure if you've got your Facebook page open with the volume.

I don't think so. Let me just close it just in case.

But when we're looking at the typical type of properties, which are typically a three bedroom house, what that means is that when we look at a bell curve of size statistics, you know, 80% of all of the properties or what everyone in the market is looking at is this kind of the three bedroom house. Some are looking for five bedroom houses, some are looking for one bedroom units, but the majority of people are looking for the three bedroom house. So in my mind if I have a long term exit strategy which is have the typical type of property that the typical type of person wants, I can sell it when I need to sell it by emergency exit strategy is if I really have to get out quick for whatever reasons I want to have a property that can get on the market and not sit there for months because it's not typical. Now the problem that we see identified with a retrofitted high res property is that once you've done a retrofit it's kind of hard to undo that. So as you, you know, if you do the course and we can put a link in there for a little bit in the comments below into the ebook that Ian has shared with us that we can share with you. So you can get a little bit of an overview with this. But one of the things that can happen is that once you retrofit say let's say a three bedroom or four or five bedroom house into these individual units, then refinancing is going to be difficult because most banks are going to look at it and say, well this is a boarding house so you have to have your finance and everything set up up front and know that the property as it is and as it stands it's probably got the finance you have when you get it is the finance you're going to have throughout it.

That can be a problem in itself. Right? Because if you've got a five bedroom or six bedroom house, if they're trying to get the biggest house they can, how do you go when you can't find comparables sales when you're trying to get your finance?

Yes, John makes a really good point there. So even when you're purchasing the property before you've retrofitted it, the purchasing can be difficult when your property is not typical for the area. So most valuers are looking for two to three at least recent sales. So I've had mortgage clients that have bought eight bedroom properties in suburbs in Brisbane over the last 15 years of being a mortgage broker and the value has come back and said there's no comparable sales. And the bank said, well because this is a specialized security, we either have to put it under commercial lending with much higher interest rates or we won't lend to It So if you have a six bedroom property, you know, a four or five bedroom property, not unusual. But if it's a much larger property, which would make it a lot easier for you to rent a few, let's face it, rather than converting a three bedroom house with two big living areas into, you know, individual living spaces, it's something to be aware of. But once you have retrofitted it and it does look like standalone units, it can be difficult to then get refinanced. And that means that when you come to sell it, you're actually targeting a very specific demographic of people who are going to buy it, which are investors who want cash flow or someone who loves the location and the area enough to think I can retrofit this back to a three bedroom house. So without boohooing.

When he talks about the. And I know you haven't gone through all the modules but often when they're retrofitting it's, it's stuff that you could, you could take away. Yeah, reasonably easily. So it's a couple of weeks job if you wanted to dismantle it and reinstate it as its normal house.

And I mean I've, I've had a client actually one of our done for you clients, John, that has been a mortgage client of mine for over 10 years and he bought a fabulous property in Canberra. And it could be he created into two living spaces, had over $1,000 a week rent, fabulous people in the front of the house, people in the back of the house. But when we came to refinance, we just made sure that that common wall that was kind of making it into a 12 bedroom property actually became one bedroom property again. And the bank's value was, the valuer that the bank appointed walked through and it was all fine. So you know, you can be quite strategic about how you do these things as well.

Financing with an abnormal property. When it comes to actually getting the finance originally, what would you advise people do? Is that just a process of meeting with your mortgage broker before you put in the offer and showing them the property?

Yeah, it's really important. I know when I have initial conversations with my clients so obviously they go through the pre approval or the assessment process and then they have a one on one with me and we talk about this strategy and their price point, we talk about where they're going to buy and what their goals are with the property. I know up front and you know, obviously my mortgage brokers who work with me have already gone through and they've told us what Their strategy is, so we're not going to be putting them with a bank for instance that you know, if they want to build a granny flat on the back of a property, we're not going to put them with bank west that doesn't do construction on a second title, a second property on the one title. So we need to make sure that with the right lender to start with. So that's absolutely important that your broker knows without any question of a doubt what your strategy is so that you get with the right lender to start with. And then subsequently when you're finding the properties if something does vary then you know, you need to be aware of it. And I find with my diamond and gold and the mentoring students would, they'll do the deal reviews for and go through the property for them. They send me the property once they found one and put an offer in or about to put an offer in, then I'll just record and go through as deal review and pick up any issues or problems. And that's when one of these things can come up and I can come up with saying, well I'm just looking at the recent sales and there is no other five bedroom properties here or you know, you're on 110 acres without sewage connection and this is. The banks aren't going to like that. And you know, so we can, we can definitely. It gives you a point to be able to have that conversation so you know what the risk is. Now the good thing about that John, is that if you're having that problem with a specialized property then anyone else who's trying to buy the property, unless they have cash and they're going to buy it with funds with lending, are also going to have the same problem. And the owner and real estate agent's going to know this. So you know, I can think of examples where you know, we had, I had a mortgage client that had found the perfect property. She had a child with a disability. They needed to have a ramp access for the wheelchair. The property was amazing. She'd searched for months. We were so excited about it. And when the valuer visited the property they came back and said you're within 60 meters of high tension power lines. Now this person needed to have mortgage insurance. And the mortgage insurer said we won't accept being within over 50 meters. So we won't accept being under 100 meters from high tension power lines. So the owner had known this, there was an opportunity potentially to negotiate a little bit on the price as well as saying, look, this is, this is really quite difficult for us. But what I found with investigation was another mortgage insurer was happy to accept a property that was in 50 meters of high tension power lines. So things like that can come up that you can't plan for because it's not a strategy based. It's something that's unusual. But if something comes up that does have some issues associated with this, this is an eight bedroom property and there's no other comparable sales. You're going to have trouble selling this. And, you know, you might be able to put in maybe a 30% deposit to make the lender feel happier about having a specialized security. And you can get $30,000 off by negotiating with the owner because they know how hard it's going to be to sell. It can be a negotiation tool. So there's some opportunities there as well.

Yeah, that's great. Pays. Yeah. It's just another example of why you really need good professionals in your, in your team all the way through, isn't it? You don't want to be stumbling across these things all by yourself.

I know, I know. You know, that's what I kind of. Every now and then I'd been, you know, once every two or three weeks, someone will tell me about a scenario of how they let the perfect property get away because the bank said no. Like, oh my gosh, there's like 40 extra banks out there. You know, did you try the others? Like, no. I'm like, so, you know, there's so many examples that come up. Or someone has bought a property that they didn't really want but they felt pressured into it. So, yeah, having, having that extra set of eyes or support. I know people in the community. That's why you're here and that's why you're asking the questions. But we have another question from Andre and I think we've got. Okay, so his question here. Okay, this is going to be a big one for us. Johnny Reed, concentrating. I recently heard on a property podcast that for a property to qualify as an investment property, it needs to pass three tests. Land component of the property has to be equal or over 50% of the purchase price. So they're basically saying it's a house, not a unit. Scarcity. There needs to be a limited supply of land in the area or limited supply of the type of properties that we're investing in. So we're talking about supply and demand, proven growth. We need to see that there has been growth. And he says here, doubling every five to, sorry, seven to 12 years, which is essentially. 5 to 7% per annum growth rate. When researching the potential property to purchase, it has had to double every 7 to 12 years or neighbouring similar properties must have doubled in 7 to 12 years. Logic behind it is that if there's proven the capital growth, then we're not gambling. So once again, the low risk strategy, as we know property we will purchase is performed before it is likely to perform again. So, okay, so they're the three things. Land component, scarcity and proven growth. My question is interesting.

One was the land component one. What do you think of that?

I've got to get to the question, Chris. We haven't got to the question.

You haven't finished yet.

No, that was this T sister and John, I've heard this podcast and they're very good friends of ours from Property Couch, Ben Kingsley and Bryce. So in actual fact we're heading off to help Bryce this afternoon, sharing some of the things that we're doing with him. So we'll let him know that we're answering.

We'll get back to you.

We'll let him know that we're answering questions from his podcast on his behalf. The question is if you could please comment on the above points and whether you think they're valid in terms of using these prerequisites for future property purchases. On top of the Trident strategy, of course. Okay, so John, we finally get to it. Land component of over 50%.

I wouldn't say any of those is on top of the Trident strategy. I'd just say off the top, but let me just open with that and then I'll hand over to you, Jake.

Oh, thanks. Back to you. Okay. Well, I think.

It'S really just a different way of thinking about houses versus units.

Right, Absolutely. And if you think about all of these things, they're coming down to protecting you on the side of not being risky. So land component means that you're going to. We're looking at houses, not units. The majority of people, over 75% of people in Australia live in houses. So it's a, it's a risk adverse strategy. If you look at scarcity, we're looking about the fact that there's a supply and demand, so there's not an over demand or so oversupply of properties that are sitting there and they're, you know, there's nothing that's distinguishing between them. It's like the blocks of units you see in all the big capital cities. No one wants to buy them because, you know, they're dime a dozen. And as people get desperate, they're selling them for less. So, you know, we're looking at where there's demand now, councils can make changes to zoning, which can change this on a whim as well. So that's why we talk about doing some research into what the council's prerequisites or thoughts or planning plans are for the future. So, you know, I think that the scarcity thing's really important and the growth actually comes out of scarcity also, because where there's demand and a lack of supply, people want to buy. And the reason that we say, I know, I read a lot of the hotspotting reports and obviously we're good mates with Terry Rider. There's someone else, I think, John Lindemann, who writes something about buying hotspots, but he's looking a lot further out. And often what I see, some of these, the people who are talking about these areas set to growth, they're right on the outskirts of town and a lot of them haven't had that growth proof to say that they will take off. Not to say they won't take off, but what I'm saying is that there's nothing really proven to show that there has been the interest in the area in the past. And, John, that's something that we look at, isn't it, in the dot maps, when we're looking at those, looking at the suburbs that are surrounding the suburbs that we're talking about as being hotspots of the ripple effect. Because we want to see that there's been proof that people want to live there in the past and they're interested in going to just that next suburb.

Yeah, because there's plenty of reasons. Because you can spot a suburb and this happens quite often. It's like Fool's Gold on the dot map and you see that there's high growth around it and you go, bingo, that's the one. And then when you look into it, you find that it's had a prolonged period, it's never really grown well at all. And when you dig in a little bit deeper, you find out there's reasons. It's a bit of a. It's a bit of a dud suburb, basically. So that might mean that it's got a lot of industry, it might be that it's got a lot of housing commission, might be that it's just miles away from any infrastructure or transport.

It could have already had its growth and it could be a $2.5 million suburb that no one can afford to buy.

Yeah. Behind the market, growing at a lower Rate.

So to answer your question, Andre, you know, look, I agree with all of those things. I think they're all proven risk minimization strategies. It's what we talk about in the Trident strategy, having a plan A, B and C to make sure that you're going to make money out of your property. This is just make. This is the components of step A of that, which is the location and capital growth. So that's all of those steps we.

Follow in Location Masterclass too. I mean, if you look at the stock, for instance, and we look at turnover sale, if you think about supply and demand and proven track record of growth. So they're all the steps we're going through in the workbook to do it. So that's completely, I think, the only thing that's just coming at it with a different. Which I think is interesting. And I'll be keen to ask them about it because when you think like we often do the price per square meter when we're thinking about blocks for development. So different suburbs have different land prices, you know. So from there you can say in.

The words of David here, not all land is created equal.

Exactly. So that suburbs to suburbs. So but it's interesting that that ratio they're using of the land component, 50%, the land has to be 50% of the price. So it's an interesting measure that they're using there. So I think we should quiz them about that a bit more this afternoon, Jane, and just see how they came up with that particular measure and how they use it.

Well, I think Andre might have this. The way I remember it is that the property has to be at least 50% of the land component. So that kind of gets you rid of the McMansions in developing or development areas, house and land kind of areas. So we will ask about, is it 50% of the purchase price? But I'm pretty sure it's. The house is actually 50%.

That throws a spanner in the works. But yeah, okay, I think we need to. We'll come back to you on that one.

David has a quick question here. How about commercial or mixed commercial residential property? How about it, David? What would you like to know about it? I think he's typing away there, John. I think the thing, like just general comments around commercial property is that it is really driven by rental return, which means it's driven by having a tenant in place. Now, I have a good friend in Brisbane and what she used to do is she'd buy these empty blocks of office space and she'd move her company in there and sublet out some of the office space and she'd actually rent it out as fully. So she'd have it all fully let. And then because it was fully let, she'd actually get like a 20% put premium on sale price and she let the property on 20%. So re list the properties a sell and she'd sell the property, make couple hundred thousand dollars in profit and then after a year or so move her her business out and go and put her business in the next property she bought. So.

Take me off for a second. I'm just going to plug my computer in.

You are off.

All right, thank you.

And the other thing is that commercial residential. So the very first property that I purchased was commercial residential dual zoning. And I actually had it. There was an aboriginal art gallery downstairs and I think a counseling service in the rooms upstairs. I had it rezoned to residential. Lenders weren't worried about the zoning. The use that I was going to take was residential. So they didn't have a worry about it. But I think the interesting thing there is that with commercial property, it's not based on capital growth, it's based on market demands, et cetera is where it is. And that's more about an economy. And there's obviously warehouses and there's office spaces and there's kind of shops. So I know, you know, some of my clients have little small strip shops. Some of them have strip shop malls, strip shops and like something sleazy. There's people who, I've got colleagues who have purchased sheds that have made them into man sheds, man caves. And so, you know, the man cave phenomenon. And you know, they can put their car in there and a billiard table and upstairs they can bring the mates in and have a good time. They've got a great 10, 12% return. It's a very isolated group of people who can rent properties like that. But they're making a bit of a go at it. David's come back with a little bit more information here. What is the best way to recognise a dud suburb, for example, housing commission statistics. And what percentage of housing commission is considered? Okay, is there a distance from housing commission that makes a house more acceptable? Because it's such a big question, you can't see my face. I'm going to get rid of it. It's an interesting question. If it's from Susie, this question. There's a different tolerance to housing commission based on different areas. So for instance, in Melbourne, every suburb has housing commission. I think that'd be right in saying that, John, isn't it that.

Yeah, definitely. Some of the best suburbs in Melbourne have got Housing Commission and often it's not. Yeah, yeah. And there is, and I don't know if it's true for all states, but depending on where you are. Yeah, a lot of the alarm around Housing Commission is unwarranted, particularly in Melbourne, but it's often resettlement for new migrants to Australia. And so it's not, you know, what you would think of, you know, down and outs of the local population or something like that, as historically you may have thought about them. Now that might be different in different states, but certainly true of Melbourne.

And I think the other thing is that when we've spoken to people who, and I know people who've grown up in Housing Commission areas, they've said that there's no, there's not a lot of crime in those areas. There's no one actually, you know, does dirty in their own backyard. So, you know, surrounding suburbs, watch out for them. But, you know, so the percentage of Housing Commission is one of the things that I would look at, Susie. So, for instance, there's been some fantastic gains and I think there's a book, I think the author of the book, the Millionaire Next Door in Australia made a lot of money about buying up old commission houses in Adelaide and he bought heaps of them and converted them into beautiful homes, et cetera. So even buying old Housing Commission area properties is a strategy that I've seen a number of people do as well. The percentage is important to note. So when you're actually going through, and you're going through the suburbs selector software and you're looking at maybe you're comparing five suburbs and you're down to step four and you're comparing those five suburbs. Susie, have a look at what seems typical for the area, so the surrounding suburbs as well. So what seems typical now? Anything that's over 10%, I would start just noting down in my notebook in the location masterclass suburb due diligence notebook that you get, you know, keep in mind that, you know, there's a higher percentage of Housing Commission and make sure identify where those Housing Commission areas are within the suburbs so that you know where they are. So it's about knowledge, knowledge is power. So I wouldn't necessarily say that, you know, 10% is the number that makes it right or wrong. In some areas it's going to be more than that, but it's typical for the surrounding suburbs. So, you know, I wouldn't be closing off anything that's based on the fact that it looks a little bit different.

You've also got your top end of your rental, 70% there. So that's a bit of a threshold there as well. So 30 to 70% rent is okay.

We have another question here. John, let me read this out to you. So this one's from Saw and Saw says Jane. In one of your renovating videos you mentioned having a bathtub resurfaced. May I ask what method of resurfacing was used? Okay, so this is in our video series, John, how durable you found it over the long term. I've had a friend who resurfaced their bathtub with those tub and tile sort of paints. But the paint peeled off on the floor of the tub within a year. So I'm concerned of doing it this way too. What would you recommend? Do you have anyone in Brisbane that you could use for this kind of thing? The tub is still good, but sadly stained. I'm not thinking of doing the thaw, just the tub. John, do you want to have a question about.

Yeah. The product in the video series is. Correct me if I'm wrong, Jane, but it's a Rustoleum product called Tubbin tile.

That's right.

And that property certainly not had any problems. We went through and did the prep work necessary as they recommended, from memory of some kind of etching primer that you paint on first and clean it first and so on. So I'm not sure of your friends experience about what kind of bath it was or what preparation was involved. There could be a lot of variables as to why it went wrong, but I wouldn't be, I certainly wouldn't want to use it if I thought that it was going to have those problems within a year. And that hasn't been our experience. And I guess sometimes with those renovations and things, what stage you're on, what type of renovation that you're doing. But you know, often we see, we say to people, you know, buy the best in the best location you can afford and then do a very light renovation and then come back to it later. So you know, in the situation where it's going to buy you a couple of years and then you get a property that's working for you and growing in value, then that would seem a very good, you know, cost effective alternative to having to do a full blown renovation at once and having to buy in a lesser suburb. So that's the way we sometimes think about some of those methods. My experience of having a bathtub professionally resurface is that I haven't been able to make that cost effective when I've looked at it each time that I've looked at it. And that's mainly because the cost of. Now this will change depending on your bathroom layout, whether it's a hob or what's currently in your bathroom. But the prices of baths now, particularly if you're going with an imported bath, even a composite stone bath you can get for under $2,000 in a that you'd be using in a very high end renovation. So when you get down to the more typical, let's say 500, $600,000 house, you can get a pretty good bath from say four to six hundred dollars, like a really nice looking bath for that kind of money. And the resurfacing in my experience tends to come in at that kind of level where it's just resurfacing yourself using the tub and tile. I forget what the exact figure we say in the video, but let's say it's, you know, under a couple hundred bucks probably.

Yeah. And the only thing I would mention with that is that when you are replacing a bath, there's the hob and the tiling and all the prep work that you have to do that goes with it. So it's not. When you look at a bath and you see it's only a couple hundred bucks, don't think that's the whole expense. You know, there's a whole lot more to it as well. Now I'm just going to bring up.

There Jane is whether it's freestanding or built into the hobby and whether you have to move the plumbing for the waste.

Exactly.

Considerations there that you'll have to weigh in over and above that cost of the resurfacing.

Now I've just got on screen now John Saw's question here where he asks that question. Rebecca's come back with an answer for you and this is why we have the community and so you can put your questions into the Facebook group. And she's used thermaglaze on their home. Now for anyone who doesn't know what PPOR is, it's principal place of residence at home. I remember they're a little bit more expensive at the time, but they were the only ones that found they'd sprayed the floor and give a warranty. The substance they use is a porcelain substitute. So different from what the others use. A friend used someone else's and it was peeling within six months. So I just wanted to show that John, because I Think it's important that you know a it's great to see the community members helping each other. There are different products out there. The product that we used we had no problem with. However, there's been previous comments as well where people have actually commented and said that they've had issues with the tub and towel. There is a pre coat that you have to use as John said and there's people who will come in and resurface it for you like Rebecca's mentioned here with a thermo glaze. So you know there's a number of options available to you to look in your cost benefit analysis. Now whilst I'm on the Facebook page I may as well show you just for those that aren't aware, there's also up here there's some units that I've added in here. So there's popular topics that are coming up here. So you know when you see that a topic is popular and it's coming up regularly on.mapping etc. But there's also units that have been added here. So as I see things that I think go under a particular topic like dot mapping or the suburb selector software which is our next question. John, from Charlie Staging. Here's all our monthly Q and A calls so you can find them quickly. Some reports and things. Now I've just found some historical interactive maps that I think are fantastic that I've added in there. Property case studies, people including you know, people sharing their case studies and all of their financial information about what they've made and done some handy information. So I think I'd probably put that the thermo glaze story in there and some module feedback and renovation tips as well. So you know, don't forget over here in the unit section that you know we've got some units that and you can really use that this as well to help you.

Navigate.

Get up to gate. Yep. Get up to date with things. So don't be scared. Make sure you post in there. And I did have a question here from Charlie who posted a question. So once again Charlie, he had a question in here around the ripple effect. Now let's see if I can pull up Charlie because he had quite a big question that I saw was posted here as well. No. Okay, so one of the things that that Charlie has asked here John, is that he's having some trouble with the ripple effect and it's going to be difficult in understanding his problem because this is what he said. Please explain which suburb you would look at in this ripple effect example. I'm not quite understanding it and thought an example as per below will assist. Okay, so this is, this is what Charlie has shared with me, which is essentially. Let me see how I can. It's got suburb A, B. Oh my God. I don't even know how to share this. Let me have a look. All right, let's see if I can put this in here and share this and see if I can show it up on the screen. Okay, technology. All right, so he's got suburb A, B and C on one line.

It's Charlie, isn't it? That's.

Yeah, yeah.

By saying that this won't be a substitute for doing the research, but we'll try and understand your question and give you the principles behind. Won't be possible for us to do the process of elimination that's necessary here, which is obviously the steps in the, in the videos and the book. But let's try and get to the bottom of how you can do it yourself.

Okay, so he's got suburb A, B and C. And then his next line, he's got D, E and F. And the next line he's got G, H and I. Okay, so I'm assuming he wants me to compare suburb A, B and C together. Now when we talk about the dot map and the way that we're looking at ripple effects, we're usually moving out from the cbd. So we're moving out from the CBD and we're moving in a ripple effect as it goes out. So what you're seeing is like high growth areas, maybe 5, 6% or 3, 4% depending on your city. But you're seeing the percentages are usually higher around the cbd. And then as you get to the next suburb and the next suburb, the percentages of growth drop off. And we're Talking about the 10 year capital growth growth figure and that 10 year capital growth figure for the dot mat we suggest you get the. Your investment property magazine. And this is actually all covered in also the videos, but also in the units that are in the Facebook page. But you go and get it and it's called the annual growth. It's not called 10 year growth. It's confusing. We've spoken to the editor. Annual growth. So it's called annual growth.

I thought it had average in there as well.

Average annual growth. But it doesn't have a number in front, which is important to note. So what we're talking about here is we're talking about the ripple effect. So we're trying to find suburbs that there's been based on, obviously the podcast that we just talked about with Andre as well. There has been some proof that there's been some growth in the past. We don't want to be out in an outlying area, but we, we want some proof of growth. So we're looking at a 2% difference between these suburbs, capital growth over the last 10 years and the suburb that we're trying to target. So when we're looking at A, B and C, if we're saying that A is suburb here and B is the suburb here and C is the suburb here, we've got four, five and four. There's not a large differential there at all. And it's kind of like there's. They're all suburbs are almost performing the same. And the fact that one suburb has had a little bit more growth than the others could be something that's more variability. But what we'd be looking for when we're looking at D, E and F, we've got 3%, 6% and 3%. What we would normally see here is that you'd see maybe the 6% and then we'd have 3%, 3%, 2%, whatever that comes out. And you're like, well, this has had some really good growth and there's more than a 2% difference between this suburb and the next. So regardless of the fact there might be 3%, 6%, 3%, which is what your numbers indicate here, the 6 to 3% shows a 2% increment. So I would put that suburb, that's the 3% suburb F on my suburb shortlist for the dot map. Now remember, when we start with Location Masterclass, you can start straight away with the suburb selector software and you can put in the fact that you can afford between 500,000 and $600,000 in Brisbane and all of these suburbs are going to come up and you're going to go, wow, I'm going to have to compare all of these suburbs now. Or you can start with a short list. One of the ways you can start with a short list is with the dot map. So you've got these suburbs that already have like a 2% increment. So they're already on your list of going, oh, there could be some flow on effect or ripple effect. I have to do more analysis. You could go and buy a report like Terry Riders report for Brisbane, $99. And you could buy that report and he will come up with some suburbs as well. So you put them on the dot, the list below the dot maps. You've Got your, you know, short list. You could be talking to the taxi driver and he tells you about a great suburb. You can put that on the list. Because of course you're then going to put them all into the suburbs like software and do your due diligence. This is just the short list. So it's around coming up with a short list. So don't get too precious around the fact that this is the only list that you have. It's a starting point. And if we look at the next GH&I. Let me see if I've got this right. So we've got ABC, GH and I. So G is 4%, H is 5%, I is 4%. So there's only 1% increment in there. So there's not a lot of change between them. So it's not like there's all of these people as in D, E and F. In suburb e, there's been 6% growth. There's been all of this growth, all this demand. Everyone's wants to be in there. We know with growth, prices go up, there's been a high price point move, and then all of a sudden they can't afford it. So it flows over into their suburb F, which is at 3%. And all of a sudden you start seeing growth there. We want to get you into that suburb before everyone else is aware of it. So that's essentially what that means. I hope I've explained it. Charlie, have I confused you?

John, I was just going to let some practical examples from the workshops. When we used to do them all together as a group in the workshops, and we would do a first pass and we've got these in the, in the book as well, where we go through and we record all of the suburbs into the book that had neighboring suburbs that had a 2% increment. And once we'd exhausted that list, we did the same thing with suburbs that had a 1% increment. And then the next thing we do, we go back and look at each of those suburbs and we look the patterns leading out. So was there a pattern of growth radiating out from the CBD where you had a higher growth coming down to lower growth? So you could kind of see that trail of growth coming out, or it might be along those spokes. We often talk about the spokes in the wheel. So that might be freeways or along the rivers or along the coastlines. So is there a pattern of growth that you can see coming along that? Because this is all the detective work that might be saying okay, well this is definitely something that warrants further inspection because what you want to do is try and get end up, as Jane said, with a short list of suburbs that you've done a lot of that grunt work on already and then you can bring it into the suburbs, select the software and eliminate the suburbs that don't match that next set of criteria.

Yeah, absolutely. So you know, it gives you an opportunity to as a starting point, but you know nothing. It doesn't mean that that suburb is the one. You then have to go through all the rest of the filters and check percentage of renters and vacancy rates and percentage of housing commission and all of those other things to get you to the next stage. So I hope that's helped you Charlie, in working out that. But I mean that's one of the things that we do with our research team, John, isn't it? With when we do the done for you services is we do a dot map, that's where we start and we buy all the reports and we start with the short list of suburbs and then put it in the suburbs selector software. If you don't want to make spend your time in doing that and you come up with, you know, to start with suburbs selector software. It just means you've got a bit more work to do in looking at it and may miss out on that kind of ripple effect as well. So that's our thoughts. So now I do have a question here. Now it turns out that Nicola didn't want to share her pictures of her car roof earlier but she's asked a question here about peer to peer lending. We're moving a relocatable house so we're limited in the borrowing opportunities and peer to peer is one of the options. Nicola, really good question here and I think the, you know what I would have said almost. Even 12 months ago. And I've had to look over the years for funding for people. Even my cousin was trying to buy a relocatable property and put it in a tiny little town called Cassilis in western New South Wales. And I looked at this for them 10 years ago and I've just come back from New Zealand. I had Christmas in New Zealand with my family, my husband's family over there. And you just, you're driving past these great big lots regularly that have relocatable houses on them that they use quite a lot. And the only state that does this a lot of the time is in Brisbane that we see these relocatable houses. Unfortunately, lenders will not lend to you until you have services hooked up to that property. Which is a real shame because a lot of these houses, you know, really, really small and they get you a property on the land really quickly. I think it's this month's your investment property magazine, which is probably Home Beside my Bed that I read an article about a couple that have done this a couple of times and moved a relocatable property and made quite a lot of money out of doing it. So check out your investment property magazine, could be Money magazine, it's one of those two this month because there's a story around it. So 12 months ago I would have said to you, Nicola, it is really, really hard to get this kind of funding and especially thinking about how tight the lenders have got, it'd be like a no go. The really exciting thing is, and one of the things that I've been watching is in the prop tech and fintech market space is all these new innovative companies that are coming on and really disrupting what is happening. And you know, you might have seen over the last couple of months we've talked to companies like Yabonza and we've talked to Open Home. Open Home with the property management of. Having a mental break breakdown there John Proper. So are you.

Sorry, Ash from Proper, Was that who you were?

That's right. Proper and Ubonza that have some really amazing property management, low cost, incredible services that they're offering. But when we're looking at that we see that there's a lot of coming into the lending space. Now there's a company that I've been talking to the CEO of and they've just done their final round of funding and I believe that we're going to see the, the money come up come very soon to the marketplace but they're actually accessing funds from superannuation companies and I think they're going to really disrupt where we see the market for funding in 2019. We've got companies like Estate Baron and Domicom which is probably the most commonly known companies. Domicom has a methodology where you put a property up and people can buy components of it which may not fit into your typical thoughts about how you wanted to own a property. The peer to peer space is still a little bit further away so I think we're going to see that come up in 2020 where we have more and more of the peer to peer lending where people will allow you to lend money and minimize their risk by only putting a certain amount in. When I was in New Zealand I was Looking into a company over there that's kind of doing that for people who want personal loans and say someone might want, you know, $2,000 to move house or you know, buy something and they're after the money and they'll put up, that's what they might want the money for. And I might put in maybe a hundred dollars that I'm prepared to lend that person or $100, lend the platform and I might lend $10 to 10 different people's programs and get paid back and with a little bit of interest when they're finished. So there's some really interesting peer to peer lending happening. I haven't seen it happen in Australia at this stage for property. But I think, you know, John, we've talked about this when we look at the suburb selector software and we can pinpoint the suburb, we can pinpoint the street and we can pinpoint the property that can be purchased really, really quickly and work out what the risk profile of that property is. If you can combine that with the risk profile of a person. I think that we're going to say, you know, almost instantaneously using blockchain transactions, going ahead and peer to peer lending being one of those components that can come into the park and start sharing money. So I do think it's going to have come. Okay, now I think I've got some other questions here that are coming up. Let's have a look here. John, we've got one from David and David says big question here. How would a change in federal government bill shorten promises, changes in capital gains, negative gearing affect the housing prices and property selection or if that wouldn't have much effect on the property selection strategy. It's a really good question, David, and it's one that we've talked about a lot about and one that I talk about with my property colleagues a lot as well. I think we don't really know what's going to happen and we know that when labor did introduce getting rid of negative gearing, they quickly changed it back. I think combination of affordability issues that we have in Australia at the moment with the high price of property, Even with the 7% drop in Melbourne, the 10% drop in the last 12 months in Sydney, you know, we still have property that is quite expensive and people who can't afford it. First home buyers that can't afford it. If first home buyers can't afford their own property, they need to rent. If the investors are not prepared to buy the property to rent to someone, then we have quite a large issue and potentially this is where high risk comes in and everyone can rent a room and be quite happy. But I think the issue that we see is that we can't actually anticipate what this means. All we can do is plan and protect ourselves. In the next four to five months before the election is called, it will be the time to buy property and grandfather or lock in the current capital gains tax and negative gearing requirements. Once you buy a property and actually I was talking to Ben Kingsley about this just recently about a number of properties I have and one that I was thinking about selling and I was saying to knowing that once you sell it, we've got a great capital gains tax environment now, but we may not have in the future. It's like you really wouldn't want to sell it. And especially, and if you, you know, especially looking at your portfolio. So I think it's going to make people consider their portfolio. I think that, you know, when we look at the Trident strategy and we look at the strategies that we have around buying, which is in good quality areas, pushing up the rent and adding equity and value and minimizing your risk by putting making the value higher than your loan, you're actually minimising risk there. And we're talking, talking about buying under the market and making money. You know, the more money you make, the more capital gains you have to spend. I'd rather give less to the government than more. But I think, you know, we might have, based on the Victorian election, we've seen a landslide labor movement. We may have one or two terms of labor in office unless the Liberals do something quite magnificent in the next few months to turn that all around. Maybe a new leader, John why not? They've had a few of them, but.

Some women in there as well.

Who knows what's going to go on. But you know, I think the thing is that we might have one or two terms of labor and Liberals will come back in and they may just change it all back again. But there is a real risk. People can't afford to buy their own properties and we know that the market is deteriorating in some of the states, but we know that it's going to start booming back again because people need to live where they need to work and we know where they need to work, which is, you know, majority of people live in Melbourne, Sydney. So I think that you can be cautious about it. I don't think you. The low risk strategy that we talk about, buying under the market, making money when you buy, renovating to add value and being in a capital growth area to make even more value. I mean you wouldn't substitute any of those growth risk minimization techniques for anything. And I think, you know, we're going to see tax environments and lending environments and all of those things come in and go. But if you've got a good quality property in a good quality area, it's the best kind of guarantee that you can have for your financial future.

I know you wrote about it Jane. Is that the idea that the behavioral knock on effect of people moving away from, you know, safer long term strategies like the Trident strategy where you're potentially foregoing some of that shortfall, you've got a negatively geared property and you're holding it to realize that you know, the doubling of value down the track as part of your exit strategy and that then turns into your passive income. And we typically are working with, you know, people with a passive income goal of 50 to $250,000 which is realized at the end of that 10 or 15 year period that people move away from that type of strategy driven by the tax benefit to a shorter term cash flow strategy which you have that inverse relationship between capital growth and cash flow. Those high cash flow areas are often, you know, the one horse towns where there's a fair bit of risk going on and then they haven't got the opportunity to realise that exit strategy where they're able to get a substantial amount of passive income. Instead they're getting a small amount of passive income now which, you know, who knows if they're holding onto it and they won't be in a great place 10 or 15 years down the track. A bit of a worry.

Absolutely. And I'm just going to put an article in the comments here, a link to an article that I'm going to bring up on the screen and this is actually an article that came out yesterday. John, that's exactly what you mentioned there. So day before yesterday first. So you know, investors dream of having a property that's cheap but high rental returns. A five year analysis Australian housing market found that high rental yields don't necessarily lead to high overall returns. Have a look at this article because what's really interesting here is that the, I think the top hundred percent of the properties that were 100 properties that were looked at didn't. No suburb listed in the top 100 housing rental returns also made it on the list of the top 100 capital growth over the last five years. And I think this is really important to look at and note because often we have this Conversation with people. John around can we sacrifice one for the other? It is difficult to find growth and yield together. It's definitely difficult to find a property that's going to pay for itself when we're looking at four, four and a half percent interest rates often for investment loans. But the thing is you can manufacture the cash flow through improving the rent and putting it up. I put up the rent on one of my properties by $100 a week just recently.

It's around hitting the 100 plus dollar a week mark with renovations.

Yeah, absolutely. We're seeing that often. And that extra $5,000 a year a can help obviously pay back you for the renovation, but it also gets you a property that's newer and more rentable. The tenants seem to stay longer in my experience and it rents faster. So I'm just keeping up on some of the maintenance. So I've just put that link in there so you can see it. But I think it's really important to note that you can't have both often, but you can manufacture both.

I was just going to mention there, we did one recently and I can't remember the exact numbers of the buy price but this person was particularly worried about being out of pocket and that was really driving their strategy. And when we worked out how much they were going to be out of pocket, it was like the equivalent to a latte each day, you know, over the course of the year. So it's easy to get it out of context and I think you've always got to come back to that, where are you going to be in 10 or 15 years? Because often, yeah, you'll be out of pocket. But if you actually, if it was something that you're really committed to doing, it's not, you know, for most people it's a mental hurdle rather than an actual, you know, financial limit.

Absolutely. I've got a final question here from Charlie who says the suburb selector software only contains house information. So what happens if you want to look at units? So Charlie, although there is this similar data for units that is available, the data that we have is from SQM research and the reason we do that is it's more up to date and more timely and we find that, you know, I've had a number of questions come through, even a question that came through yesterday regarding, you know, the fact that when someone looks at all these different sites, the average house, median house price seems to be different. My suggestion is use one set of data and go with it. The reason we've used SQM research is we're not looking at data that's three to four months old. Often the data that you're getting through some of the websites who are using Australian property monitors or RP data. And the other thing is, you know, we're all about minimizing risk. And as I said, the majority of properties within Australia are houses and they're not units. Now, there are some suburbs and, you know, you do your analysis and you might find that footscray, for instance, the two bedroom unit is the typical property and it's within your price point and, you know, suits what you want. But when we're trying to look at minimizing the risk and we're looking at the typical type of property for the area and the typical type of property that most people want and we're looking at what renters are after, etcetera, Then majority is a house. And the other thing is, you know, we have the ability to look at an area and say with that ripple effect, you know, as people, you know, want to buy and leave close to work but they can't afford it. Yeah, we have those suburbs that are going up in value as that ripple manufactures out from that CBD hub or hub units are. We can't predict, we can't put down the, you know, the ripple effect. And the reason behind that is that it is based on what the councils will allow. So you might have one council out here that is really pro units and they're allowing developers to build. So you see this whole influx of units and you have some of the suburbs in between that don't. So you have. It's really hard to actually gauge that information. So it is with that in mind where we're trying to give you the most accurate information for you to make the best decision that suits your needs. It's around having the typical type of property in the area and the majority of those are houses. So that's why the suburb selector software is only covering houses, because we want to set you up with the. The best opportunity. Having said that, I do own or have owned a couple of units. I own a unit at the moment. Oh, my gosh, John, you wouldn't believe the update that I have on my strata management people. So I don't think I'm ever buying strata again. But essentially.

Yeah, another thing for houses.

Oh, my God. I worked on this over Christmas. I think I spent about four and a half hours auditing the project manager's costings and predictions. But essentially there's a million dollars to be spent on a property to fix up the windows and concrete, bit of concrete, cancer on the, on the garages etc and you know, it's 18 units that it's over eastern suburbs, Sydney and you know, it's a lot more than people expected to spend. However, since starting the works, there's all these extra things that the residents have kind of like, oh, it'd be really nice to paint it and you know, the council said we need to upgrade the fire safety and there's some things we have to do and some things that have been nice to do and things that are not necessary. But we've got the Strata loan. Some people have paid up front to make the changes. Some people had to scrape together their super, they're retired people living in these units. And his latest estimates come in at $1.7 million to finish the work. So we're three quarters away through the work, you can't finish it and that's what the latest price tag is. So unfortunately I decided that I'd take a step back and not be on the body corporate committee. So that's going to be changing next week and there'll be a whole lot more vigilance going on. But the people who are up in Sydney who have been monitoring this and watching this, it's just haven't really been keeping on top of it. And yeah, that's the story. No more Strata property.

Yeah, and yeah, that's the thing with those committees too. They're not always, you know, made up of the most. What would you say effective operators experienced.

Yeah, unfortunately it didn't do us any favors. So that's where we are. Okay, I've got a couple of questions here. So one here from. Who is this? This is Kerry. So Kerry says if a high growth area is going through massive changes, for example houses being demolished and being rebuilt, should you move to the next suburb? Interesting question.

I've seen examples like that, Jay. When we were looking at DOT maps in Melbourne and we saw this suburb called North Orwan and there was a massive difference in pricing disparity between unrenovated and renovated houses. And there's also a massive rise in capital growth. You could just see it outpacing the surrounding suburbs. And so really interested to have a look. And when we arrived there, we discovered that it wasn't actually a difference in the price between renovated unrenovated and renovated properties. What it was was the difference between existing house stocks, unrenovated properties and new builds where they were going through. And they were literally the suburb was being systematically bulldozed and all these old federation, not federation Deco and post war bungalows were being wiped out to build these great big French provincials for the Asian market, the mainly Chinese economic migrants to Australia. So in that case it was a suburb that was undergoing massive change. It was driving up the capital growth and it was making a huge disparity between the existing stock and the new stock. But what wasn't easy to take into account was to build a new stock. It was like 1 to 1.3 in build costs for the. But it was taking it from say like a selling for around the 1, you know, 9 to 1.2 and then the resale at the highest point they were selling for almost $3 million. But then when the Chinese clamped down the funding and they went right back down to like about 1.9.

Yeah. So they may not have even recovered their costs.

Yeah.

This is a really interesting question also you know, should you move to the next suburb? Being aware this is where feet on the ground is really important John. And this is where we talk about 80, 90% of the research can be done online. But then getting the suburb and seeing what's actually happening now to some degree you're going to pick that up when you look at recent sales on you know where I show you on SQM research, the, the typical size block of property you're going to see you know, a lot of sales up here on the 800 square meter property but then all of a sudden a lot of down here at the 3,400 square meter property. So it's one of the things you'd note down in your workbook. You're also going to, when you start looking at say 6, 7, 807 recent sales in RP data and if you haven't got access to RP data, please contact our office and you know, organize the access. We've got a really great deal going on and you don't have to sign up for a month at a time rather than for a year which everyone else usually makes you do. But you know, just using that tool and you'll see in the videos how powerful it is or you know, my deal reviews, we've seen those. It gives you the opportunity to look at three bedroom houses on 800 square meters. You can actually look at the recent sales and if you're seeing those recent sales coming up in that block and there's a lot within a certain area, it might give you an indication also that there's maybe a lot of developments that are happening in that area as well. So you can, you can start and if you look at the names of the people who are actually buying the properties, when they have developers or group or PTY ortd afterwards, it gives you an indication that developers are buying it. Now the question is, would you move to the next suburbs? I think this is a really good opportunity for you to move to the next suburb because the developers will move with the market. So when they can't afford to make money out of this suburb, they're going to move to the next suburb as well. So there could be an opportunity and I would just see what the council requirements are for the subdivision of land. So is it 800 square meters or is it a frontage of 15 meters or whatever it is? I'd be doing a little bit, yeah.

Because now you have to do. If you were using that as a strategy, which would be brilliant, that you now have to think like a developer and do the due diligence, the developer would and say, okay, well, is there demand in the next suburb visit? You know, is there a track record of other properties that have been done, will cancel approval? Are the blocks big enough, you know, which way does the services run? All of that kind of stuff. You need to think like a developer in doing that research. But it also comes down to when you think about that because it's really just like when we looked at that north wall when we said, okay, well the typical property there or the property that's getting the big dollars is a French provincial. Could we build French provincial? So we went in and did our costings on building a French provincial. And then that's how we found out how much it would cost to build. But then we decided it was a, a strategy that was too high risk for us for our risk profile, because one, we were going into building a type of development that we had no experience in doing for a culture that we had no experience in providing. When you think about your customer avatar, we really had no insight into the avatar. So we'd be learning that from scratch. And plus we had this other added factor of this, you know, foreign market or regulation system that could wipe, you know, could affect us in day one, which ended up being the case. So for us to actually do, to do the full strategy and provide that stock wasn't an option. But potentially we could have, as you said, looked at providing the land component for something else, doing that strategy. At the same time, you still have to think about what some of those other ramifications are too, because that could market could dry up overnight as well.

Absolutely. What we got here, Julie says, I find no owners want to be on the committee and it's left to the caring for you like me, bunnies like me. I know I've depended on bunnies like you. And you're a lot more astute, though, as we know, Julie, than some of that are on my committee. So off to Sydney next week, I think, and got a final question here, John. Susie, what if the lower growth areas. Back to the dot map we are now, what if the lower growth areas are closer to the CBD than higher in that city? I noticed that in some of the areas. Yeah, exactly. They may have had that growth, but what often happens is that they might be too expensive. So they had the growth and they've had a big influx, maybe the last boom, you know, seven years ago. And you're finding that the other suburbs have caught up. So they've actually slowed down. Their median price is $1.5 million. These ones are still at $900,000. These are at $600,000. So you've got, you know, that market that is still viable going out. But the ones closer to the cbd, I have already had that growth period and it may be a virtue of the price point. Now, Susie, from recollection, you're looking in the central coast and often you'll find on the dot map. That's right. You'll find on the dot map that for areas that haven't got the high volume of suburbs, it's really hard to get a ripple effect. So, you know, for instance, dot mapping in Dubbo with four suburbs, essentially east, west, north, south Dubbo, you're not really going to get the pattern that we're looking for. When we're looking at patterns, which is what the dot map and the ripple effect allows us to do. So if you're looking in the central coast, you know, Newcastle to some degree, you can get some indication to get some short list of suburbs. But when you're looking, you know, somewhere where we've got that space, even the Gold Coast, I found it's hard to do a dot map and a ripple effect for that when you don't have really by virtue the pattern that you can actually look at and replicate. So something to remember. And I think that's about it. John, for questions. Yeah, it's great and it's good to have so many people on here. Now, just a bit of a heads up for what is coming up now. I think that there's a, I think January, we're in January and it is the beginning of the year and a lot of people are making commitments to, you know, making changes in their lives and usually around health, wealth, getting skinnier, getting richer and doing all the things that we want to do, spending more time with family, doing what we want to want to do, when we want to do it. If you are making your New Year's resolutions at the moment and you're doing that and you may want a little bit of inspiration from some things as well. I have a Facebook group called your success club and I'm sharing in there some of the things that I've been doing. There's an amazing seven day transformational kind of video series that I'm watching at the moment that I'll share in there a little bit later today that I think is fabulous. One of my previous mentors, Brendan Burchard has put it together. So I did a mastermind with Brendan or mentoring with Brendan back in 2012 and I was flying backwards and forwards from the US spent tens of thousands of dollars. You do not need to spend tens of thousands of dollars with me, with Brendan. But it is well worth making that investment. And I still watch what he does and I think he's got some fabulous information. So I'll put a link into the your success Club. Just go over there and ask to join and I think there's a question that says what success means to you and answer your question and I'll approve you. But that's where I'm sharing a lot of the kind of transformational personal development and goal setting and things that we're doing. Another thing, I've got friends who's actually running a money manifestation course in Melbourne next week. I'll put a link into that in the comments below as well. I'm heading off there. I think there's 10 of us attending the course so we'll be able to sit down together. And I think the course is like $250 sit down together. Apparently there's seven sacred money something or others blockages that people have. So I'm going to go and learn about that and share those with with you as well. So you know, if you're interested in actually joining it, I'll put the link below and you can come along and sit with me and we'll have some lunch together and chat about those blockages and find out what it all means. But I think there's some really interesting things there as well. So that's all exciting and I think that's about it for us. John and I are heading off to see our mentor after next. John, you're riding up by a motorbike. I'll be flying up, but we're going to be spending a couple of days with our mentor. And.

Look down at the right time. You might be able to spot me.

Exactly. I'll wave. John's camping on his way up. I'm just going to fly straight there. But yeah, it will be great. And I think, you know, we practice what we preach and we, we spend a lot of money on mentors over the years and our current mentor we're working with to make sure that we can add more value to you, our community. And as I mentioned before, we're obviously still doing applications for people who would like to join our mentoring program. My 100% commitment is going to be spending most of my effort in just helping those people this year get to their, their goals. And can't wait to share with you this week my list of suburbs for, for us and the deal reviews that we're going to be doing on some of those suburbs. So very exciting. If you're in the mentoring program, we will be chatting very, very soon. I can't wait to share that information with you. And I think that's about it for us. We're going to be having our last, our January Q and A mentoring meeting the last Thursday of the month at 12:30, which is the normal time we'll be having that. So that's about it from us. Right?

Great call, Great questions.

Okay, guys, Happy New Year. And if you're still on a break, please enjoy yourself, drive safe. And as always, from John and I, here's to your property success.

See ya.