Your Property Success Mentor Call February 28-02-2019

Everyone's situation is different. And while we go to great lengths to ensure that everything we share is accurate, what you're about to hear is based on our opinions and not as intended, not intended to be specific to your circumstances. So in order for us to share this information openly in the way that we do to just need to make the following disclaimer that we're not real estate agents, financial planners, lawyers or accountants and are not liable for any loss, damage or misunderstanding caused by reliance on any of the information provided or inferred. There it is, out of the way. So welcome to the call. Hello, Jane.

Hey, John, how you going?

I'm very well. How are you? Very hot day here in Melbourne today. 36 degrees.

Well, I'm.

It's the short sleeves today.

Well, I'm beaming in from Crown Casino at the moment where I am attending the Better Business Summit.

Snuck off to the casino again mid midday.

You know, a gambler, a gambler at.

Heart and the old. Yeah.

Lots of fun. Well, I am today at the Better Business Summit, which is a very exciting and it's, I think tank for mortgage brokers to hear about all the fallout from the Royal Commission.

So been a big month, Big months for mortgage brokers. Yeah.

Well, I think, I think the important thing is it's kind of been a big month for all this. We've, you know, fourth of February, so we're nearly three and a half weeks down the track from when the Haynes report and recommendations came out. And the reason I came along today and bought the ticket at the last minute was just to hear the industry panel forum about what that means to our customers about anyone with a mortgage in Australia and what we can do to actually ensure that some of these silly recommendations don't go ahead. So really, really exciting, I think, you know, just from a mortgage broking point of view, the 4th of February, when the report came out, we had an interim report that came out in November and it indicated that, you know, the investigation into the banking and financial services industry was legitimate and there were some significant concerns about things that were going on. And the six and a half thousand, I guess, testimonies that went forward about, you know, how lendings and institutions were not done well and in the interest of the client, less than 65 of those were from mortgage brokers. So it was a degree of shock and awe when that report came out which seemed to concentrate on the mortgage broking industry. And just listening to some of the people today who were witnesses in front of the Royal Commission, they actually were only allowed to answer the questions that they were asked. And importantly, Commissioner Hayne was only after breaches, not about good things that are happening. So there was no good stories that came out. But the way that he interpreted how the mortgage broking industry works was not actually how it is. So, you know, for instance, when he talked about the fact that mortgage brokers earn an upfront commission and a trial commission and, you know, they do nothing for their trial income, the reality is, is that banks numerous years ago decided to, rather than pay the mortgage brokers their fee for introducing a loan to them, they actually paid them only 60% of the fee. And they said, you have to do the right thing by the client and to make sure you do the right thing by the client and do a loan that they can afford and is in their best interest. We're holding back 40% of your income to pay over a period of time and we'll pay you over that period of time. And if you get it wrong within two years and they do refinance, we're actually going to take the 60% back off you as well. So, you know, this delayed payment was misunderstood completely by Commissioner Hayne. And from that, what we saw was that, that they didn't realise that, you know, anyone working at a bank gets paid 100% of what they should, they should be paid, mortgage brokers don't. And what that the recommendations that were put in place, the 76, the labor and the Liberal government came out, or labor in opposition and Liberal government came out and said, we will endorse all of the recommendations because no one expected this to come out. And since that both the Liberal and the labor parties have come out and said, look, we never ever thought that they would touch renumeration by mortgage brokers because the Productivity Commission, the combined industry foreman, the treasury report, the SEGWI report, the, the ASIC report that have all been done since 2016, said that it kept competition alive. And so it was a shock. And so hence both of the parties have gone back on their original commitment to say that they would endorse all of the recommendations when the recommendations come out. Both of them said that it's not completely right. So good news that this is happening and, you know, no one really cares about mortgage brokers and their businesses. Let's face it, you know, there's 17,000 in Australia and, you know, 30,000 people employed or so from it. But the reality is it affects competition. So what happens if there's no mortgage brokers being paid by the lenders? The recommendation is that people pay. And if people start paying, we know that 95% of people are not going to pay for the service. And hence it just pushes everyone back to the big four banks. So all of these smaller banks that don't have regional presences like Suncorp or Adelaide bank or Banquest amp, Macquarie Bank Main bank, all of these, Liberty Latrobe, all of these banks that have this really stood by the market and, you know, offer a really valuable service, no longer will have customers. So they have no channel because 80, 90, even 100% of their clients are introduced by mortgage brokers. So all the banks, all the people go back to the big banks and those four will then have, you know, complete market share. And you know, let's face it, you know, we write loans for the big four banks, they, they have a time and place, but there's also the need for competition. And you know, we know that when Aussie John started Aussie home loans way back when, you know, 20 years ago, the banks had to reduce the interest rates by 3% because they had a huge margin before between what they were buying the money at and what they were selling it to us at. And they had to reduce that because Aussie John was saying, well, I only need this margin. And I spoke, was at a conference last year with the head economist for the Anz bank, said that if mortgage brokers went tomorrow, they'd put the interest rates up by 2%. So this has got nothing really to do with keeping mortgage brokers in business. It's about keeping competition alive. And you know, some of the recommendations are fantastic. It's about you have to do what's in the best interest of your client, which is what everyone should be doing, be they a bank lender or a mortgage lender. So some good things to take away has been a shock. You know, I really, and I'll put into the comments below, I would really appreciate if you guys could sign the very quick petition to government. There's had over 30,000 people do that saying please keep competition alive and not give the monopoly to the four big banks. And that means that the backbenchers are talking to the front benches and the shadow cabinet and your politicians, making sure that we do, you know, change some of the recommendations or do not accept some of the recommendations. So it's really important you get behind this because this is going to affect your home loan. And when you're someone like me who has a lot of loans, I don't want interest rates going up by 3%. So it's for all of us. So big mum John and I got to say it's been, we've been doing some pretty exciting things ourselves in your property success. But keeping my mind on, you know, how we're going to rally people to make sure that these changes don't go ahead and look, I'm good, you know, if I went out of business tomorrow, I'm good. But the reality is it's not good for the marketplace and that's what these recommendations are doing. They're taking competition out of the marketplace. And that's wrong.

Yeah, yeah. It's like they've punished the wrong person.

It's like you got all the testimony and all these things that went wrong and why did you, why did you like, you know, do this? I don't know.

Yeah, yeah, definitely need competition. That's definitely in, in the interests of the consumer, that's for sure.

So. And we've been working on something pretty exciting. I hope everyone's seen Sharon's video.

Yeah, that's been good. Now let me see. I don't know if I can put a link on the, the thing here and show it, but I can put it in, link in the description afterwards. Anyway, let's just see if that works. There we go. So that's janesacksmith.com Sharon Story. So this is a fantastic story actually. So what we did is we've obviously we've not. Obviously many of you will know we started a mentoring service in December for the first time where Jane's working one on one with people over a 12 month period. And Sharon was one of the first people to sign up to this. So what we thought we do with her permission was bring the cameras in behind the scenes, record some of the goings on that takes place when Jane takes someone through the entire process which really starts with, you know, current situation, where are they now? What's the balance sheet look like, what's the vision? What's it going to cost to get there and then what's the plan? So that's the basic steps that we go through. So this video is a really good and unique insight and I don't know how many more we'll be able to get at these, but it's a really unique insight into someone going through that process. And obviously Sharon's a fantastic story. Single mom, you know, 15 years, struggled, got the one property and suddenly the seesaw started to correct and, and it started working for her and it really, you know, it's yet another story about how, you know, property and, and money Leverage can, you know, turn your life around, which it did for her. Couple ups and downs won't give all the story away. But go and watch it if you haven't done already.

It's funny, I was at this conference and one of the mortgage brokers came up to me and said, I've been watching your videos and your webinars just to see how you do this. He said, is there a bit of work put in place? And I had a laugh because John and I and Diego have been working, I would say, for the last three weeks. John. Whilst John was filming the story with Sharon. We've been working on, you know, a bit of a video series coming out next week on what all of this means because. And you know, just sitting down and spending hours in thinking about if you were going to transform someone's life and make them aware of maybe some of the issues that are in the portfolio without saying, by the way, you got it all wrong. But helping to learn from that and then move on to understand some of the other fundamentals that successful investors use that no one really talks about. And you know, I think I'll see you in about two hours, John, when we'll start filming till 8 o' clock tonight to get some of those done. But you know, there's so much thought that we put into why we do what we do and there's so much background to the outcomes that we want for you when we, when we do these things. And you know, when Sharon saw that original webinar and said, you know, this is me, I need some help. And you know, she joined the mentoring and obviously she's getting the suburbs and she's getting the lists every week of, you know, properties on the market in the right areas and all of that great stuff and deal reviews. But she also had that two hour kind of strategy call with me and that visualization that you see her go through, we've replicated now with quite a few of the other mentoring students. And you know, some people don't dream big enough and some people have already have a. Like I spoke to someone last week who was saying, I've always made money problem, I've always made money mistakes and that's just what I do. I was like, well, hang on a second, because you've made money mistakes and we can identify what they are, we can correct them. And she told me all these mistakes she made and none of them were mistakes. There were decisions that were made that, you know, if you look at, you know, where she was sitting in her Personal balance sheet. She made all these amazing decisions that, you know, took her in an incredible direction. And yes, up here there was not a lot of money but that's what we can concentrate on now. So she'd always had this kind of psyche that she was doing things wrong and that's not the case. So I think sometimes just having a third person observer or someone who can look out for you and try to help you course correct is really important. So I'm really excited about the video series next week. I think, you know, John, the time that, that we've all spent on it and thinking it through and rethinking it through and trying to work out how to give people the most information about not just the property stuff because, you know, we all know about that, but it's this extra things that actually go into making your property portfolio work for you and you get to where you want to go. And that's this Sharon story for me is like setting that vision of where she wants to go. I just loved it. It made me cry. I just. And the emails we've been getting from people make lots of people cry.

Lots of people have been crying. That was the goal achieved.

There you go.

Yeah, it's great. It's, it's, it's had a fabulous response and in fact I'm just collating some of the responses today to send through to Sharon. And obviously Hugh, huge, huge, huge thanks to Sharon for being so open and generous in sharing her story. And it wasn't easy, you know, that they're vulnerable topics that, you know, I'm sure you understand what I mean if you've watched the video and so many people got so much value out of it. So it's, you know, you haven't seen it. Go and watch it.

It's yeah, 12 minutes of your life. It's probably better than, you know, married at first sight or something.

Yeah, it's a tiff. It'll definitely make. Yeah. Do a lot more for you than marriage at first sight. So that's great.

Make you cry.

Yeah, that's true. And the video series coming out next time and what's been interesting about the whole process leading up to the video series next week is, is picking apart what you've seen in, you know, 18 plus years of working with, with investors both in what's works and then what doesn't work and where you see people tripping up and then if they have tripped up, what's the opportunity now? And part of what we've, I guess gleaned as We've gone through that, particularly when we lay out people's portfolios is plenty of people make mistakes and it's not the end of the world if you make a mistake. The problem is if you leave course correction too late because there's a window of opportunity that closes and the further you get along with, you run out of time. Both in that, the window of finance so that, you know, up and the bank will stop lending to you basically because you get too old for them to want to lend you money. But there's also just the, the, you know, how long it's going to be until you get to that place that you want to be, you know, the life that you want to create for yourself. So it's all around that course reaction, course correction and, and sometimes it's that admitting that you've made a mistake, isn't it? And that course corrections necessary rather than, you know, burying your head in the sand is we all are guilty of from time to time.

Yeah. And, and I think the thing is that I'm most excited about is that, you know, when we were working out last year about the premises and the fundamentals of successful investing that we wanted to teach our hot, you know, our mentoring students, we want to give them the access to thinking. So we're not just talking about location, although that's really important and you know, main premises and that, you know, I want to go on the journey on with this small group of mentoring students in the next 12 months. You know, we're going to discuss three of those on this video series next week. And I just want to let you know this more than just getting the finance and the property right, you know, and the three things that we're going to discuss next week, I just hope, you know, go into it with an open mind, but because it's a little bit out there and I know it's a stretch too far for some people and that's just fine. I get that. But over, you know, 18 years of talking to investors and thousands of people that I've spoken to, and not just spoken to, I've intimately been involved in thousands of people's portfolios and seeing what they have and what they've got right and what they've got wrong, and you're just, I can pick up someone's portfolio and say, oh, you follow this person, do you? Or you got your, your education from this person. Like, how do you know? I'm like, well, you've, you know, you've done exactly. Or bought exactly where they suggested to Buy and. And it doesn't always turn out that well. And sometimes it's about recognizing what's gone wrong and cost and it's possible to do that. And I think some people just give up. And we'd like to come in and help people with portfolios who want to have that review and make sure that you're on track. But also for people who are buying, you know, the opportunities that are bound at the moment, like I am, you know, between I read the media and, you know, I read probably, I know between 15 and 20 media sources a day on what's happening in the market. And, you know, we've got the doom and gloom and we've got, you know, something's happening to interest rates and something's happening to this. And the fact is that, you know, the, the things that are positive, like employment's the lowest it's ever been, never get discussed. And I'm worries and concerns and you know, between now and May and the, you know, the clearance rates are down. We properties that want to be sold every week. We've got all suburbs that are now, you know, dropped to 850, 900 that are now affordable. So there's more areas that are affordable. You couldn't afford to buy last year, you could afford to buy this year. Even with the changes with servicing, you know, you've got people station. We've got.

Seem to have lost Jane there. Hopefully she will come back in a second. Jane, if you can hear me, you might just have to take yourself out. There you go. Good. All right. While we're waiting for Jane to come back in, I'll just let. I've had. We haven't got questions for today's Q and A. No questions came through during the week. I was going to address a question that someone gave me this morning that I think might help others. But in the meantime, if you've got a question for Jane or me, please type it in the comment section and we'll be sure to get to that in a few minutes. And if there's no questions, we'll just bang on until we run out of things to say and. And then finish up. But the question was this morning around that the mentoring service and how it differs, I guess, from other services or education that is offered by your property Success. And the basic definition that I gave is the mentoring is really guidance around property investment mastery. So it's not that it's doing the work for you. The mentor is still doing all of the work, but it's essentially in constant communication. With Jane with the ability to get feedback on all of that as it happens, along with some more kind of advanced training. But if we. And I think we've got Jane, so I'll just see if I can bring her in that.

I had a great conversation with myself, John.

You'd be happy to know I can see that. Let's bring you in there. All right. No, we'll go to that one. Yes. I was just explaining the difference between the services, Jane, with the mentoring and the done for you service. And I guess the course is Location Masterclass and the Ultimate Guide. But when you think about the mentoring compared to, say, the done for you, the done for you service, which is us doing the suburb or our team doing the suburb research and the suburb due diligence and even the property selection on your behalf. So that's really just handing over that whole. Those three modules are the ultimate guide to innovation and saying, here, I'll pay you to do it. So that's the done for you service. The mentoring's different. You're doing that work, but you're doing it under our guidance and primarily Jane's guidance. So you're growing yourself as an investor and you're having the benefit of basically 20 years experience in a second set of eyes. That's the mentoring service. But essentially you're going through the same course content, you're going through exactly the same steps, because there's nothing different that you would learn in Location Masterclass or the Ultimate Guide to Renovation. So that's just the three, and everyone's at different levels and will be of interest to you depending on which stage you're at. But that's kind of the delineation between the three things.

Yeah, absolutely. And I think the other thing, John, is that we understand that there's so much more to just finding the right property in the right location and having a portfolio successfully set up. And so that kind of. I'm going to use the term mindset, but it's so much more than mindset. You know, we're going to be together in Katoomba on the 23rd, 24th of March with our small group of students for the weekend. And, you know, I've got a money coach who will be well zoomed in from Columbia, and we're going to talk about some really in depth understanding your money cycles and how your relationship with money is. You know, we've got. There's so much more than just getting your property. Right. And I think there's a lot of people who sit back and go I've got the properties but I don't know why they're not working. And there's something else. So watch the video series next week. I really encourage you do it. We put a lot of weeks of thought into making sure that you're going to walk away with something that's really beneficial to you and, and something that you can use straight away. And those people who want to join us in the mentoring, I've already got a seating plan for some of them. John. I know there's some high res people I want to have together and. Yeah, and there's a few single moms too but who've had to do it by themselves. And there's people, we call them investors in solitude. Well, you know, because they might have a partner who's not that receptive as well. So I can't wait to. Yeah, I can't wait to share some of the real in depth stuff that we don't usually get the opportunity to talk about.

Yeah, I'm particularly looking forward and going through that process and seeing it play out with a couple of high res guys as well. I think it'll be the first time we've gone through and done a full marrying strategies together. So the tried strategy all the way up to the property itself and then a multi unit dwelling in that. So in other words, instead of just one tenant you've got maybe four or six or even more tenants in it. So that's a really interesting, I guess coming together of worlds there because if you get into a great capital growth area and you've got that cash flow strategy on top of that, which will also essentially be funding the other capital growth properties potentially in your portfolio, that's pretty exciting stuff.

Yeah, it's pretty cool. Now John, I'm not seeing anyone who's clicking on the link to join us and I'm not seeing any questions there and I know no one sent some questions through. So it might be an opportunity to maybe jump through and have a look at some of the things that people have been talking about or have raised with us over the last couple of weeks as well on Facebook too. We had Louis Christopher come in and see us last week. And for those of you who want to know what's happening in the market, he was quite generous with his time too, John, wasn't he talking about what he's seeing in the market around Australia?

Yeah, yeah. The funny thing is whenever we get Louis or used to be John Edwards that used to cop this or even Terry Ryder, it's so what's your hot tip, Terry? You know what's our tip?

What should we buy?

We turn into.

That's what people ask us, total newbies.

And say, come on, what's your hot tip? Well, depends. Yeah. Which is what we say. Well, it depends. Yeah. So that was good. And so Louie was in, he spent a couple of hours in with us. James dropped out again there and let's see if we can. No, she's gone. So yeah, Louis Christopher from SQM Research, if you don't know Louis, he's got a great report called the boom and bust Report. I'll get rid of Jane there until she comes back if I can. There we go. All right, so hopefully Jay's not too far away. Here she is back again. Not quite. So Louis, for those who don't know is from SQM Research. And the reason or the significance of our relationship with Louis is that he provides the data for the suburb selector software. So each month all of the suburbs in the suburb selector software come via an API and back end into the suburb selector software. And he's also the person who's responsible when the data is a little bit off to which he explained to us and we actually took, we went through a couple of scenarios where he explained why the, the data was, you know, statistically not relevant with. So there's always an explanation. But the good thing is about that data is it's, it's literally hot off the press so you're not waiting, you know, to find it in a magazine. And we our from what we can work out, we think it's probably about the fastest market data that's coming through. So it is really fast. I'm getting a iPhone overcooked message from. Got a phone message from Jane saying her iPhone is overcooked. So that's where we are at the moment, Sue. Yes. So SQM Research brings through the SOAP selector software so opportunity to ask questions. Feel free to type in the comments. While we're waiting to Jane to come back from Crown Casino on a live cross. One of the things actually that I might run past you guys that Louis mentioned with us is if we would like to have price per square meter in the suburb selector software, if that's something that you would like. Even if you're watching the recording of this, type it into chat and let us know the way that obviously in development price per square meters are pretty important thing. You have benchmarks for each suburb of land value. So it's basically the, the price divided by the square meterage to work out Your price per square meter. The other way that I use it and I think it's good is in spring. Jane back in is with renovations. So when you're doing the feasibility for renovation. Got you back there now, Jay. It's also good for I used to go through when I was doing my suburb due diligence and record the price per square meter for unrenovated, dated and then renovated properties. And that gave me a really good benchmark in terms of where I needed to buy at and what I would be renovating up to. And it was just another measure of comparison for working out that end value. So if we think of the feasibility equation, so it's N value minus all costs minus profit equals buy price and that end value is a really important figure to get right. So if you're recording the price per square meter, it's another double check that you can do to help with that. Welcome back, Jane.

Thank you.

Turns out that your iPhone can overheat and try to explode. So now we're going on to our talking about.

Oh good.

So the thing I want to wanted to talk about with Louis that John was where he saw the markets at the moment. He still felt Melbourne was overpriced. Sydney was back in line. Hobart has done its dash, some interest in Adelaide. Now the interesting thing was that the SQM research new operations manager, shall I call him, had a background and had work at Australian property monitors with Louis many years ago and moved on to banks and doing, you know, calculations and algorithms around the risk and they had. He'd been part of running a number of scenarios around the greatest risk markets in Australia and that was number one, Perth. So you know that the bank that he was working with was told not to buy in Perth. So they say it's a huge risk. So we had a bit of a chat about the mining industry and you know, the economy there. And I think also is that you're possibly going to find that there's been a difference in the way that the next mining boom or the next way that miners work will be. So there's a lot of expansions going on once again up at Port Hederland and around the area. But a lot of the.

Use of.

Equipment now is remote. So you know where you build something and there's a lot of people on the build and then you have to run it like what we saw in Gladstone. You know, there was thousands of people to build the LNG plants, but only two or three to switch this. They'll switch on at the end of the day and switch it off kind of thing. So you know, I think we may not have the amount of employees on the ongoing basis that we have had in the past when we've had those mining kind of accelerated booms in Western Australia. And the other thing is a lot of the contractors who now have the contracts for business are flying fly out not from Perth but from anywhere in Australia to get the right people. So you're not necessarily going to have the people who are on site for two weeks and then back for a week living in the suburb close to the airport in Perth. They could live anywhere in Australia. In actual fact, I know people who go to go to Bali. I've got a client who flies back to Bali when they, to meet up with his family and his wife and kids are in Bali. And so you know, that's the lifestyle that they like. So you know, I think that we might see a change. And it's interesting that the conversation that has been going on here in this summit that I'm at today at Crown Casino is around, you know, what are the industries of the future and what are going to, to be the jobs of the future and what are the skills that people need. And I wrote down the top three skills which I found really interesting were things like being the first one was novel thinking, you know, being able to look at something and reinvent what it is. So that's something computers can't necessarily do. They can run scenarios, you can set them up with scenario analysis but they can't necessarily come up with the out of the box creative thinking. So that creative thinking is something interesting. So you've got some kids at school start thinking about this. Number two is sense making. And that's a lot of kind of like what John and I try to do is look at complex information and make sense out of it. And number three, social intelligence which is, you know, continually adjusting to feedback that you're getting from people as well. And that's, you know, there is some amazing AI technology out there at the moment where they're doing therapy for ex military, US military people and they're finding that the therapists are able to detect, you know, pupil dilation and temperatures of skin and facial ticks and things of what the person is thinking and potentially feeling. But there's still that capacity to then have, have to change the way that you talk to someone. And so I think, you know, there's all these things that are happening out there and that will affect industries and you know, you've got the, the huge amount of money that has been spent into understanding what disruption looks like, etc. And you know, Nikes are bringing in, you know, 3D virtual reality people to say how would you create the future in the world and how big money is actually shoes or you know, how can we put electronics in the shoes so that people have a better experience. So there's all these things where we're having this mishmash of all these industries and I think, you know, thinking that the next mining boom is going to be like the last and potentially drive that market in Perth and even Darwin could actually be a problem. So you know, I wouldn't be jumping into those markets and Louis I guess validated that as well. Brisbane still kind of ticking along. Canberra, things are happening. And I think from my memory John, Louis was saying that he saw potentially the capacity for the Sydney to drop another 10 this year and Melbourne as well. So you know, and then so we should say.

When we say job come off by another 10. Yeah.

Yeah. So reduce to 90 of what it is worth now. So yeah, I think and there's you know, arguably being between 8 and 10% drop. So he's, he's more negative than a lot of the others that we've seen. But you know what that just means is opportunity. People want to sell, want to get out because they want to get into the dream property in the same market. And there's also people who see opportunity, opportunity but you know it's, it was good to sit down and have a chat to him. We're also looking at doing some upgrades to the suburbs like software. So stay tuned for that. For those of you who are in the Location Masterclass and Ultimate Guider Innovation.

Well I gave a little bit, I gave a little bit of that away while you're, while you were gone. Yeah.

And I think there's some really good opportunities to improve all the time.

Yeah, I'm interested, I'm personally interested in that. We're still waiting for him to come back. It's funny, every decision you make with this software you then have to work. Then there's another bunch of decisions that come off the back of that. Okay, so what are we going to compare that to? Is it 3 month data set from last year? Is it a 6 month data set? Why is all that stuff important? J. Why do we, why do we have to do all this? Can it be simpler?

You know, it could be simpler and obviously you know, with that done for you service it's just like, just do it for me. But the reality is I think most people who are in our community just like to have input and understanding as well. And sometimes it can get too much and stop people from taking action. And that's my greatest fear and why we kind of introduce extra services because we really just want people to get into the right property as easily as possible. And when we originally had our spreadsheet and said go and find all the research and people were like, oh, it's also hard. So when we just, you know, we invented the suburbs, such as software to make it easier, but you still have to do the analysis. This is a comparison tool and you know, you put our filters on and then you come up with the suburbs and then you get up with the streets and suburbs and you know, the typical property you can with laser focus, get down very quickly. And, and you know, I do a deal review every week for our mentoring students. One of the properties that's on the market in one of the suburbs. And out of the eight and a half thousand suburbs that we start with every month, I get this month, I just finished the list, there's 141, I wouldn't look at any of the others that's across all of Australia, you know, and of those 141, we've set up alerts and the typical type crop in the typical size block. And so, you know, obviously mentoring students get those listed every week and I.

Do a deal review.

It's as simple as that really, but it's following the bouncing ball. And you know, I'm talking to some people at the moment in the club and in other places who are still kind of confused in a way, three year growth and not ten year growth. Ten year growth and not three year growth. And you know, and they're trying to rework the system and there's reasons for that. You know, 10 year growth actually kind of levels the playing field. So it's really important to, to do that because otherwise you're going to have these huge fluctuations like you know, the properties markets dropped in the last year in some of the capital cities. So you know, we're trying to always get the longer time frame. Hopefully Louis will get us a 20 year growth figure rather than 10 year growth figures. We'd love you to dot map 20 years if you could. And you know, and then, you know, it's the dot mapping process. Yes, you can do it electronically and yes, we have some very clever people doing electronically and yes, we have our electronic ones for our students or for our done for you students clients so that we can get it done too. But doing it the first time and seeing the names in the suburbs and going, oh, I haven't heard of that one before and oh, is that where that is? Oh, that's not interesting. That's a 3% growth and this one's a 6% growth. I wonder what happened here. Those, those kind of questions you ask when you do this yourself is so important. So I really encourage you if you're in the location masterclass and obviously if you're in a guide to renovation, you have that in module 2 and 3. Get in and have a look at the process because we don't share often all the thinking that went in behind it. But there was so much risk assessments going into every one of those filters to get you down to the ideal area. So you know, know that we got you back on that and you know, if you want to know more and why as I, you know, go to some of the units here and have a look at suburbs like the software and you know, we've had some of those discussions there. So that's on the Facebook page over the left hand side you can see about discussion and units. And I've tried to put some of our discussions under order so that you can pull that up quite quickly. But you know, this information I like.

I like the manual, I like the manual process. At least once there's something about just one by one looking at those suburbs, what their growth is and going around, you get to know the metro really well. And yeah, something about that, a high hand eye action, you know, it gets into the brain and it works well. And it's funny, it is the point where a lot of people don't make it pass. And we've had people come to the workshop and they've maybe been in the ultimate guide. When we're doing the suburb selection workshops, they might, you know, had the ultimate guide for three months and they haven't got around to doing the dot map exercise in location masterclass. And we have other people that show up to the workshop, you know, join same time and they've got like four dot maps, so. And they're working a job and managing a family.

I spoke to someone the other day. Who was it? One of our mentoring students. She said I have literally got four hammer maps in the car with me. And she said I'm just deciding which one to do first. I was like, go. You know, fantastic. It's going to give you a great insight. And just, just on the dot match, you can see in the discussions, don't dot Map Duffau or Tamworth or some of these areas that only have like East Dubbo, North Dubbo, South Dubbo, West Dubbo. The idea is that you get understanding the ripple effect so you really need a significantly large regional or capital city to get that ripple effect. For the smaller regional areas, you're not getting in the patterns, you're not getting the ripple effect and it doesn't give you much information. So just be aware that the dot map is there. When we talk about Dot map is like a capital C city type exercise that we want you to do. But I see we have some questions.

Oh good. Have we. I can't see them so you feel free to read them out.

Okay. Miriam says, hey, I've been playing with the great calculators on Investors Choice Mortgages. Is the data used in the Property plus Calculator from SQM Research and when's it updated? Miriam, the data that is on in the Property plus calculator. I am going to have to go back and check when it's updated. But that is actually from CoreLogic and that was from Residex Original data that was then bought by CoreLogic which is RP data. And I'm not sure how often they update that now. It used to be quarterly, but I'm having my doubts. And as you know, you know we, we love the data from SQM Research and that's why it's in the suburb selector software and location masterclass etc. Because it's actually updated monthly and a lot of the data that we see come through is done quarterly. But there's Louis and his team are actually looking at live sale data every single week and course correcting now what that can mean. And we've had one instance of this a few weeks ago where there was one suburb, I think it was Andre who bought it up was like a 94% growth in one year. It was because there was only five sales and there was like three really expensive ones. So you have to, you have, there's lot we're compiling the information for you and giving you some direction but you still have to be take responsibility for looking at that information going does this really sound right? And when there's only been a limited number of sales, you know you're not going to see the data there because we know it's so wrong that we, you know, we've taken it out and just you have zeros across there. So Miriam, I will get back to you on how often it's updated. But that data is from RP Data courtesy of residence. And we have another Andre here saying, hey, just dialed in, loves the idea of getting the meters squared per price. John. And he's got a question here about lending. Okay, trust. I was told now a couple of times that if you hold a geared investment property in a trust and the trust is profitable and the accountant's happy to provide a letter confirming the trust is profitable, then this property does not need to be listed as a liability when going for new additional lending. I was told that only a couple of lenders treat trust this way. Yep. I'm curious. This has been always been the way that having property in a trust name could potentially improve your borrowing capacity greatly and that only a couple of lenders were treating trusts like this. Assume the above would make your borrowing capacity far better than borrowing in your own name where you currently get assessed at 7.25%, only 80% of rental incomes taken account. I understand there are other implications versus employed business owners. Look, Andre, complex question, but the simple answer is every lender does assess your lending capacity differently and every lender has different policies associated with your lending capacity. Trusts are quite unique and it depends whether you have a family trust, a unit trust, a hybrid discretionary trust. A lot of lenders don't like hybrid discretionary trusts and you know, woe me, I got one set up in 2002. No one wants to lend to it because it's kind of like a family trust and a unit trust and, and they don't like, like that. Westpac for many, many years used to do exactly what you're talking about, which is saying, hey, you've got a company, a property in a trust and it's self sufficient, I don't want to know about it. Which is fantastic, you know, so you know, some of our mortgage clients that might have had a number of properties in a trust and was looking to buy the first property outside of the trust or had been told that they couldn't buy any further. We completely ignored those properties in the trust. However, most have changed that. They do change things regularly. So these policies that we're talking about is have, you know, I get maybe three alerts a week about policy changes from lenders. So I mean, I can't imagine anyone being that interested in keeping up with that themselves unless they were a mortgage broker. But just be aware that, yes, what you've been told has been true in the past. As to whether there's any lenders doing this now, I would suspect the answer is no. With the responsible lending focus from the Royal Commission and All of the other studies that have been done over the last 18 months and the restrictions lending that we've seen, there's been more and more vigilant assessment of people's capacity to borrow. I think there's also some fear associated around the fact that some people have gone into a negative equity position which means that the loan is higher than the value of the property because the value of the property has dropped. So I suspect, but I haven't checked in the last three months but I suspect that it'd be very difficult for you to find someone who would isolate the trust lending going forward.

Yeah, it sounded a little bit too good to be true.

It was for many a year.

Yeah. Today's lending climate. Yeah.

But yeah.

So Andre, what you have been told, it may have just been that the person who's told you, maybe the person in a group or someone who's done it themselves previously or your accountant who's seen it happen before or broker who hasn't done it for a while may have given you that information. But things have changed significantly and will do as we get the recommendations of the Royal Commission endorsed.

So can each interesting, interesting conversation with Louis about APRA and when they would step in and lift the current restrictions and they've already done that a little bit so far. Can you just speak to that because you're going to relay that conversation a lot better than I can.

Yeah. So I mean we know that 2015 there was more vigilance put onto the lending. We saw a restriction on investment investor type lending. So apres stood in this, you know, we don't want any more than 30% of your new loans to go to investors and all of a sudden the banks to pull back on investor lending made investor interest rates higher. You know, the servicing calculators started changing a bit. When you hear people talk about hem it's, it's essentially a assumed living expense expense that you have mum, dad and two kids is $2,400 a month. So all of these things changed. Then there was a focus on this interest only loans. They wanted all the new interest only loans to be low 10%. So the banks worked pretty hard on putting in measures to comply with these requirements. So what we saw around about October last year was that all the banks had actually come under that 30% cap of, you know, having invest in new loans. And so we were seeing forensic attention online by line bank statements and EFT cost statements by the assessors who were trying not to give out money. Basically let's face it, because they were told we've got to cap and keep underneath it. So around October last year, we started seeing that in the, the major lenders pull back on that and say, oh, you know, this is okay now. Yeah. And early this year APRA came out and said, okay, you guys have done a great job. That cat's gone. The focus on interest only loans is interesting because I mean, you know, I used to be a pink diamond CBA mortgage broker, which has meant that, you know, we had such a high level of standard of the loan applications that we went in and volume of loan applications that we were essentially given the right to go straight to an assessor and get things done within 24 hours. And as a mortgage broker, when you've got a client, you want to get things done really quickly. But with the combined industry forum of all the banks and broker groups and aggregators got together and said, look, we'd like to self regulate our industry and make sure we do things better.

What can we do?

So we'll pull back on brokers getting benefits through the volume of loans that they write. So One of the KPIs that CBA now judges me on is not how many loans I write or how well I write a loan so that it just goes straight through, it's on how many interest only loans I write. So obviously with a large base of investors and first time investors as well who are like, you know, we've used up all our cash or rent vested, we used to up all our cash to buy this property. We want to create a buffer again. So we want to have, you know, three or five years of interest only loan so we can put our buffer in place and save some money. I'm no longer a diamond broker who can speak to an assessor in 24 hours, it's now 48 hours. Because I insist on making sure that my clients are set up for the long term. Well, and they think that interest only means that we're putting people into risk. So you know, there has been changes that have been made. It's really important to know that you know, your broker has your back across all of these different changes and things. But we are seeing that that vigilance is coming off post your recommendations being put in place. We will see in the scale, you know, more vigilance around people's living expenses and how they can afford to, not just now, but in the future, make the repayments they need. And all loans are assessed on a principal and interest around 7.25%. So you know, even though most People are paying, you know, somewhere between 3 and 5, 3.5 and 5% on their interest rates at the moment. It's all your loans are being assessed as if the interest rate have gone up like six times. And you know, most economists at the moment are believing that the next interest rate change is going to be downwards. So there's a lot of buffer that's being put in place and that's why people we're talking to now can borrow less than they could have afford last year or even not the current loans they have, which is quite confronting as well.

So.

Yeah, no, it's good. Yeah, it's interesting. He was going through a different couple of scenarios there because we grilled him as we would because we had the opportunity to being in the office. But one of the scenarios that were kind of saying, okay, so what if this played out this way? And it was that if labor get into, into power and all the changes come into effect in regards to negative gearing and if they accept all of the things with the Royal Commission in relation to mortgage brokers, what would happen? And so we throw it at that scenario and then he'd go through. Well, we'd probably, you know, and that was a, probably a doomsday scenario. But one of the things that he said would happen was that APRA would come in straight away to try and at least take off their proportion of, of what's restriction, you know, keeping. Yeah. Restrictions and keeping the market down. And, and they were saying, okay, well how much, how big a difference would that kind of make? And he was like, well, maybe not that much because they've taken some of the restrictions off already. So it's, it's interesting how many levers there are at work though, isn't there? And if you get. Yeah, and his point, which is not really the same as he said in the podcast, which if you haven't seen it as a, haven't listened to it as a terrific episode. One of our most popular podcast, and it's called the Meaning behind the Numbers with Louis Christopher. But he basically was saying, and that's a couple of years old now, but he was basically saying it takes a couple of things to come together for that market for it to really have a downturn that he worries about. And they're the kind of things, they're the kind of things that do it.

Yeah. And I think the other thing is that if you are really interested in this, please Google sqm research. Boom and bust report. Because December 2018, you know, Louis puts a report out Every year. And he's run with six different scenarios. Australian dollar at a certain amount, you know, labor gets in, interest rates go up. Now, no one predicted the royal commission, so that is a completely nest fuel, you know, taking. Adding an extra 3% interest rate on if all mortgage brokers go. But. And you know, so I think there's some significant things there. But please, you know, you can buy his report and he will go through and explain what's happening in suburbs and the ratings they give each other. But if you just Google SQM research, boom and bus report, you'll see all of the different scenarios he's ran. So really interesting stuff.

Yeah, that's great, John.

There's a couple of things on the Facebook page this month that I just wanted to pick up on because I think we talk about this sometimes. I've had enough talking about finance now. Talking about. See this with a couple of people regularly. It comes up and last posted a property that they were really keen to purchase and they came across, you know, a high moisture level that was found in the inspection report behind the bathroom tiles. And he talked about, you know, there's, well, could there be an asbestos issue and is this a deal breaker and.

What do you think?

So high moisture level behind the tiles would indicate that the waterproof membrane had failed and that water was getting, getting in behind the membrane.

Yeah. So at which implications, John?

Well, potentially water goes downhill, as we know. So it's in the floor that the main problems are. If it's a couple of studs you have to replace, not a big deal. Even if it's a solid wall, not a big deal to, you know, strip it off and leave it to dry out for a few weeks, particularly if it's in summer. But mainly it's in the joists and the bearers, which, if you think of the way our house is built, you've got one that goes that way and then one that goes that way and then one that goes that way. And the bottom one's the bearer, next one's the joist, next one's the floorboard. And so the joist or the bearer can be rotten and have to be replaced most of the time. It's not the end of the world. It's. It's something that you might need to bring a carpenter in and they'll spend, you know, maybe a day or two replacing those. It's. There's the whole disturbance factor of ripping up the floor and, and that kind of thing. If, if you're doing it while you're Gutting a bathroom anyway, not, not such a big deal. You've got, probably got the floor up anyway. But if you're doing it in a house that's otherwise fully functional, big deal. So. And potential potentially, you know, I don't know, let's, let's say 1500 to, to $4000 worth of damage, I would say.

And that's one of the things I said to Lars, which was, you know, just find out how much the cost is going to be, worst case scenario, and see if you can get it off the price, like negotiate it down or even more. Right. So you create enough anxiety around the fact, well, when everyone else does these inspections, they're going to come up against this too. Burn in the hand, you know, it's, you know, Laos might know it costs $4,000 and they must be $10,000 less. And the owner goes, okay, but one of the things with Lars is that although I mentioned that, he also then said, oh, look, then I realize there's a duplex, there's no backyard. I'm wondering if it's actually the typical property for the area. I have other concerns. And as I said to him, sometimes you put so much into this investigation of where to buy and what to buy and you found a property and you're trying to make it fit into the squares and, and it's a circle and it's never going to fit. And you think, oh, maybe I can make it fit by this and maybe I can justify it with that. And I get the fact, and this is some of the mindset stuff that, you know, is at a kind of different level. I get the fact that there's almost a grieving period of letting one of these deals go because you think, I've invested so much time. The plumber there, I've had the builder there, I've looked at this and this and this. I may have paid for $500 for a pest and building inspection. And then you're like, oh, there's enough things adding up and you could be paying $250,000, this property at $500,000 or two and a half million dollars for the property. At the end of the day, walking away from that is, seems really tough, but I've got to tell you, it is so much harsher ten years down the track seeing a non performer. That won't get you to your vision, especially if you have a 10 year vision to stop work and do what you want to do. And that has then delayed your vision for five, ten years or forever. So as John said, you know, you can course correct. You know, you've got where you are now, where you want to be and where your property portfolio is getting you in this spot here, you can course correct and bring it back in line. But if you're going to wait to the end, it's almost too late. And that's what we don't want to happen for people. So, you know, if things start adding up and please know you've got these concerns, this is what we're here for in the club. Post them up so we can have these chats because we don't want you making your own mistake and, and try to justify to yourself and especially if you're an investor in, in solitude, you know, maybe your partners relinquish the responsibility to you or maybe you are doing it by yourself. You don't have to make all these decisions by yourself. You know, that's what the group's here for. There's a lot of really experienced investors in the group, more than happy to share, you know, their thoughts on these things. But don't cling to something that could become. Okay, a lurking time bomb in your portfolio for the future.

Yeah.

Yep.

It's hard, it's hard to course correct. And there's a. Yeah. Particularly once you've put a certain amount of effort into it. You really want to see it through or you, you determine that you're not going to let go. And that's, that's often what gets people, is the, it's almost like the alternative to start again is just too, too much to think about. You know, they're going push through anyway.

And we've all been through it, I get it. But when you're so clear on exactly what you need and your criteria is crystallized in front of you, the deal of the century will come up every week. Like, take my word for it, when you know what you're looking for, like when you're going to buy a red car, every car is a red car you drive past. That's just the way it works because you're clear on what you want. And that's, I mean, that's taking it from a different level to what we usually talk about. But just, just know you back yourself, you know, with confidence. Back yourself with your original research and criteria that you set for yourself. Yeah, another one here. Just check out. Guys. We would love, love, love, love for you to post the renovations you worked on, the properties you have in your portfolio at the moment. Let's just throw them up there and have a Chat about, you know, when you bought it, what you bought it for, what you think it's worth now, you know, if you want to do this in the next couple of days, I'll go in and grab a quick report for you on estimated value. Now, if you want to put some details, and they can, because we'd love to see what you have in your portfolio, kind of conversations that you're having in your own head about, you know, does it work and does it not? But you know, Fiona's has posted up a property here. She's got $250,000 in Rockhampton. She says vacancy rates were 10% at worst, but now there's a bit more rental demand. She's about to get involved and do a renovation on this property. And she says she bought it for the 2005 purchase price. It's been on the market since 2008. So calculate that 11 years this property's been on the market.

Okay.

This would have me questioning some of the. Why is it on the market as well. But she's done a due diligence and it's yielding 9%, so she's going to jump in there and do some renovation. Fiona, we cannot wait to see what you're going to do with this property. It's cost you $250,000. And, yeah, please make sure that you, you post up some of the renovations and what you're doing at the moment, because we would love to see, you know, people who are out there and what you're up to. And I know that there's people who will be listening for this in years to come because I spoke to someone this week who's just. They joined us in the ultimate go to renovation, John, I think in November. And he's back to 2015 now of our monthly calls saying like they call it's still relevant today. So I know people listening to this in the future as well and just saying that, you know, John mentioned our podcast. We've just been voted by Money magazine of being the top 10 podcast, 10 in the world Money podcast. So go and check out your property success. The information in those are timeless. We've done that so that people can learn the lessons. Because the reality is, you know, there's nothing new under the sun. And often, you know, the same things come around again and again. So, yeah, go and check them out.

Absolutely. Describing the link for that now. Jane, I can't see. Have you got. Can you see any more questions that have come through there? I can't see any at my end.

Hey, just one more thing that Louis told us. Louis was part of the seven person think tank that was invited to speak with Scott Morrison and Josh. How do you pronounce his name? Freiberg the treasure.

Yeah, I'll go with it.

Yeah, last night so it was really nice to kind of go, hey, so what happened behind closed doors? Give us a heads up because we want to share this with our club. And Louie was saying that essentially Scott and Josh are very much across what the recommendations of the Hang report mean to mom and dad and everyday Australians who are trying to just make ends meet and you know, the loss of competition. What they are also quite concerned about is the effect of what negative gearing being removed from established properties will do to the marketplace. So obviously if the labourer gets in and those recommendations go ahead.

I think.

We'Ll see an upsurge John, in the new property sales and people buying buying based on, you know, getting the, the negative gearing benefits and depreciation etc from new properties. And I, as we know buying new properties has brought with a lot of risks that people don't realize. So I just, you know, just be conscious of, you know, what the different, not political politics platforms but just what these things could mean to you and your portfolio. When you're looking at your portfolio now and looking at when you want to grow your portfolio because I urge you if there is a change of government I'd hate you to be caught out and get in while market is down and confidence is down and rates are down and when there's more affordable properties out there and why you can negatively kid your, your strategy and have that grandfather to, to come because we saw what happened when they got rid of negative gearing last time and what happened in the market and I don't think it's gonna, it'll be a positive thing for us. So get in there if you're ready to buy and do it soon.

Yeah, that was good. That was funny. Louis. Louis met with the PM yesterday and then us the next day.

Hey, that's just where we are.

No, we were number one. He had to, he had to tell the PM he was number two.

No, I don't see any more questions, John.

I reckon we're good.

We want to hear. I really, I'd love you guys to go and listen to Sharon's story. As I said it's 12 minutes and you know the feedback we've been getting is just amazing and high heartfelt and you know there's so many things that are happening out at the moment. And, you know, we've got people in positions of power who've taken advantage of those who are not in power and, you know, people who are being sentenced to go to jail for horrendous crimes that were in exploited their positions of power. And I look at people's portfolios day in, day out, and often I see someone who has confidence in the seemingly a position of power making recommendations for someone who may, it may not be in their interest. And just some of the letters that we've been getting in the last week of people who lost, you know, $70,000, $50,000, $500,000 through being recommended doing things the wrong way. And I just, you know, take hold of your own future would be my words. And don't let people in positions of power exploit you. And the way that you do that is get yourself in a position so that you can confidently take action yourself and know why you're doing things. And so I'm not going to say any more about that, but I just think that there's a lot of demon good balloon out there and it's not just in the coffee market. It's, you know, there's some really sad things happening and it's up for us to rise above it. And the way you do that is by arming yourself with knowledge and information and, you know, being the person that you can depend on yourself. So go for conquer.

Yep.

Word from Jay. Well, John, I think that's it.

Yeah, we're all good. There's no more comments come in, nothing on the Facebook page. So, yeah, feel free to put in. You'll see these posts come up for the next call at least a few days out. Feel free to type in questions in there ahead of time or send them through to questionsourpropertysuccess.com and we'll read them out on the call and you can listen to them on the recording.

Perfect.

And as always, here is to your property success.

See.