Your Property Success Mentor Call October 31-10-2019

Hello, hello and welcome to the October Q and A for the your Property Success Club and obviously the members of the Diamond Investors Choice and for all of those in the Ultimate Guide to Renovation and Location Masterclass. This is where all your questions are going to be answered. But without going any further, let me hand over to my co host, John Hubbard and that boy. Boring disclaimer. Hey, John.

Hey, Jane. Hey, everyone. Another month has flown by. Let's get that boring disclaimer out of the way. So it's important for you to understand that you need to take care and apply what you hear on this webinar or any training to your own personal circumstances. So everyone's situation is different? Well, we go to great lengths to ensure that everything we share is accurate. What you're about to hear is based on our personal opinions and not intended to be specific to your circumstances. So if we're honest to share this information openly, we 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, misunderstanding caused by reliance on any of the information provided or inferred. There we go, Jane.

That was pretty exciting. Well, I'm glad that's out of the way because now we can get onto the fun stuff. So it is October already. It is less than nine weeks, John, until the beginning of 2020. Where did the time go?

Oh, funny thing happened to me this year. I got older.

In actual fact, I think you've got a birthday coming up in the next week or so, don't you?

That's true. Yep. Yeah, I'm accepting presents to Lygon Street. Carlton.

No, Isn't it the. We'll see everyone on the Friday at the Carlton Yacht Club. You can't.

Yacht Club? Yeah, there you go. Let the cat out of the bag now, Jake.

Well, it's the only yacht club in Australia that has no water near it. But hey, apparently back in 1870, some megalomaniac in Melbourne decided that he really liked Carlton and he'd make a canal up to Carlton from water so he can put his boat in the water and sail down. Didn't happen. But we still have the Yacht club. So there you go. A bit of history around Carlton. So it has been a really interesting time since we spoke to you last. There's been a number of changes that I want to go over and talk to you about. Obviously, if you'd like to ask a question, please ask it in comments. I've also put down. Let us know if you can hear us and see us. Send us a little bit of love. I want to make sure that there's people. I'm just going to check over here, John, and see if there's some people. We've got three people watching right at this very moment. It's good to see the early, early people who get in here. This call happens the, the last Thursday of every month. So just send us a little bit of a thumbs up that you can hear us and we're coming through. Okay. Because we've got lots to tell you about. It's been a busy time, so I'm guessing we're going to get some thumbs up at some stage. John, someone's going to write in a comment and let us know that they can hear us. Without further ado, let's go ahead. So there's been some interesting market changes. Now what we've seen in the market is, particularly in Sydney and Melbourne, is that they have really taken off and we have got some month on month increase in sales and in clearance rates. Now clearance rates is an interesting measure because essentially it's saying how many properties are put up for auction on the weekend and how many of those sold. Now the clearance rate is going up, so there's more properties selling. But here's the big, big problem that we're seeing and especially for some of our done for you clients who are out there in the market and are actively looking and that is there's a low supply. So there's a lot of frustration. Now I know that it can take two to three months to do the research and hit the ground and look for a property and start negotiating and doing all those things. But the reality is that there is a lot of issues when people are in the market looking and there is limited supply. It pushes the prices up, but it also makes people, you know, what's that saying that we use, John? The fear of missing out as people are going to auction and bidding way over the market value.

Yeah, it's that old thing. There's never a perfect time in the property game, is there? I mean, when we don't like it, when it's on the downside. We don't like when it's overheated. And on the upside, when it's in the, in the trough or in the recovery, there's never enough stock on the moment. So there's never a, a sweet spot where there's a perfect every, everything. There's always a downside to every part of the cycle. And I remember years ago that we were Going into a blue chip suburb of development sites or two, three blue chip suburbs, which are our target suburbs, great suburbs, Canary, Camberwell and Kew. And we thought, fantastic, the market's come off. This was the previous cycle. The market's come off. We're going to get some bargains here. But the stock just dried up and the stock that was there, there was competition for it and it didn't really give us any great advantage. And in some of those good suburbs, they don't really fluctuate that much either. So that was another, another thing where, you know, when you get the really solid these blue chip suburbs in Melbourne, it doesn't give you a whole lot when the market comes off, you know, typically stock stock dries up a bit. So yeah.

We're seeing so from some of our done done for you clients, which is where we do the research and then engage a buyer's agent who's a specialist in those areas and is out there looking and we concierge the properties they look at in that kind of 1 million to $1.2 million price point. We're seeing such a low level of stock that, that in Melbourne and we've just started the same process for another client in Sydney. But there's such a low level of stock that people who are going to auction and are going to auction at that with a price expectation of 1.1, 1.15, the properties are going for 1, 3, 1 4. So you know, and that's because people like, well, I want to get in before the market keeps continuing. So it's really difficult. So if you are in that price point, you know, you probably want to bring down your stack starting prices to suburbs at around 950, because there's no doubt in my mind that we're going to in the next few months this have a substantial run now. Interesting thing, John. We have a number of other clients who are looking inside the 500 to 750 price range and the buyer's agent that we have looking for one set of clients in particular segment of that price range and another set of clients that are out there looking for themselves using the suburbs that we came up with. They are all and they're in different suburbs, but they're all saying that there's quite a bit on the market and you know, they don't need to go to auction because what we're going to see is that, you know, those people with expectations at the higher price point are going to start lowering their price point. So we're going to see that pressure then on the lower price points come in as people can't afford it. Those people in the 800 to 900 price point, once the people to the 1.1 start coming down to 950, they're going to be pushed down a little bit to get back in the market. So know that this is the flow on effect that we're seeing through the low stock, the clearance rates and the difficulty at the high in the market. It's going to start filtering through. I know with one of the Dun Dun for you clients last week the buyer's agent that we'd engaged had, I think he presented like 14 properties to me to review before they went to the client and there was a plethora of properties. Another buyer's agent who was looking in that higher price range presented two properties and none of them are right, that you know, new townhouses. So we weren't even going to present those to the client. So, you know, just be aware that the market is moving now. Macquarie bank just recently came out and said that their market estimates for Melbourne and Sydney in the next 12 months is a 10% price growth. So the.

I seem to remember watching a 60 Minutes program not that long ago when the market was going to drop by 30%. Was it?

Yeah, well, and then keen before that, the last time I was going to drop another 30%. Look, we know that there's been a drop. We know that there's some areas that had significant drops and you know, there's up to not the 20% that was, you know, talked about. Some areas have like 15%. Most areas that you know, within 20k CBD we've definitely seen you have definitely had a drop up to, you know, 10, 12% in some cases. Some have actually weathered the storm quite nicely. So, you know, I think there's, there's a lot of different market factors out there but if you're in the position at the moment to borrow and to buy, I'd really encourage you that you should be acting quite quickly now the next thing that's going to happen. So we've got nine weeks until the first of the first 2020. First, the first 2020. The government has just announced more details this Sunday around that first home loan deposit scheme. They've named the caps that you can go to in the capital cities and the major regionals and then in the regional cities as well. So you've got a cap of around 700 in Sydney, 600 in Melbourne, et cetera. So you know, there's definitely what does that mean Jane.

So properties over that amount don't, don't.

You can't qualify for the first time loan deposit scheme. So to give you an idea, 100,000 first home buyers entered the market last year. The first home loan deposit scheme allows the people to get into a property with a 5% deposit. And what would normally happen is that the remaining 15% to get up to the 20% that lenders like you to have, as you know, money in the game, bit of protection. That remaining 15% is usually covered by a lender's mortgage insurance, which is a once off insurance fee that you pay that protects the banks. And what the government said is that hey, you don't have to have to pay that. We'll back it. Now the numbers that came out on Monday indicate that that first home loan deposit scheme will be filled within the first six weeks. And they're talking about only doing this once every financial year. You know, you have to wait till July next time. So for those people who think that they can't afford a property, there's been a lot of changes recently. You know, ASIC and APRA put a lot of restrictive lending onto borrowing capacities. A lot of the, the banks have followed through and put restrictions on as well. I'll have a give you a little mortgage update later. But if you kind of try to see what your borrowing capacity was last year or the year before, it's probably higher now and you need less to get in. So for a $600,000 purchase, which is the cap in Melbourne, with a little bit of mortgage insurance now you could get in for $36,000. But if you were under the first home loan deposit scheme, so the rest of the mortgage insurance would have to go on top of the loan. If you're on the first home loan deposit scheme, you only have to put in 5% because the stamp duty for established and new properties is covered for you. So you're saving an extra 30 grand. So there's some significant savings that can be made. If you're looking at buying a $500,000 property with mortgage insurance, most of it going on top of the loan, you can get in for 30 grand if you're under the first home loan deposit scheme, 25 grand. So my.

And if you added into that maybe a little bit of help from or dad with the deposit then.

Exactly guys. And even some of the lenders are actually looking at the rent that you're paying and they're saying, well, if you weren't paying rent, this would be essentially the savings that you could have saved. So they're actually considering rent as part of the genuine savings of the 5%. So the restrictions are if you're an individual, you have to earn less than 125,000. If you're a couple, you earn less than $200,000. And so I think it's really interesting. We've got nine weeks until that date and then we're going to have 10,000 those home buyers on the market and Hungary. So beware, if you're willing and able to borrow and buy and you have some plans of doing in the next 12 months. The market has started moving now with a lot more of the demand from these first home buyers that are coming into the market in nine weeks time. The market will continue to grow. And I don't think that Macquarie bank is out of line of thinking there's going to be a 10% increase in the next 12 months.

You imagine that that sub 5 mark, right?

Exactly, exactly. Well, see, this is the interesting thing. There's a lot of people who, you know, the millennials. So I'll tell you about my first home buyer show. I think a lot of you are aware of it, but I've been doing a lot of research on millennials. I was at a breakfast meeting with Pippa this morning as well and there was a significant amount of information shared around what the typical renter looks like. And so we went through, looked at all the prop techs and fintechs that are out there in the market at the moment around property management and helping real estate agents and all of these things, getting funding, et cetera, et cetera. And one of the interesting studies that was done by Call Logic about two years ago, they did a review of how happy different segments were with real estate agents, buying, selling, investors and tenants. And tenants are like 30% happy with the real estate agent they were dealing with. So there's a lot of people out there who are getting more and more frustrated with being renters. But what they found was the typical renter these days earns around 120,000, is often in a family unit. So, you know, that's so yeah, and that's kind of the sweet spot.

You mean it has a partner and child or two.

Partner and potentially child.

Yeah.

So that means that we're going to see, you know, we make an assumption about, you know, what the first home buyers are looking at. And it's not necessarily the sub 500 market. So I think what we're going to have, and I'm hoping, because I'm committing to educating them some very savvy first home buyers who are going to be able to get into the market and they may not even wait the nine weeks to, you know, save a little bit on mortgage insurance on top of the loan because they say that within those nine weeks they're probably going to the property prices are going to increase that much that they need to get in soon. So for people who are thinking of buying, get in there and buy would be my suggestion. Yeah John, I might just talk to people a little bit about that first home buyer model. So this is the framework that I've established for that. So you know, I really believe that first time buyers these days don't want to live in their property forever because and that they know that it's not the property their grandkids are going to come back to. And you know, as most of you know, I had a bit of a time out about 10 weeks ago and recovering well from surgery. But whilst I was there I spoke to a lot of nurses and first time buyers who essentially said, you know, we're going to buy a off the plan unit or house or this, you know, we can't afford a home so we're going to buy an investment and there's this great company who's going to, you know, hook us up with a developer and a property manager, mortgage broker and find us the property as well, which is just a great big marketing scam. And so I had an opportunity to sit back and think, okay, so the traditional model that most people follow is, you know, you get a partner, you buy a house, you have kids and then around 40 you go, oh my gosh, I'm going to retire in 20 years. And I don't think I want to retire on the couple's pension which is now $33,000. What do I do? A lot of people, even when they make this decision a little bit later at 45, 50, make a riskier decision. And as you know, from our framework that we've worked with, you know, there might be, there might be a dreamer or they be a gambler. You know, a lot of those gamblers are looking at risky decisions, mining towns, buying in the US you know, developments, etc. And when they're doing that, the decision doesn't always work out. So John and I speak to a lot of people every week who are applying for our mentoring program to see if they're a good fit, etc who said, you know, I've bought these properties and they're not really, you know, returning what they should return. So I was sitting there thinking, what if we actually put the traditional model on its head? What if we used all the government schemes and you know, first time buyers grants and stamp duty concessions and even first home loan deposit scheme to put as little money as possible into a property and you buy that and you suck it up, live there for six months or 12 months, depending on the state that you're in, and then convert it into an investment property and get on with life for the next 20 or 30 years and find the partner and maybe use the equity to buy a home or, you know, have that freedom of choice. And at 40, you're sitting there going, well, you know, I've got one or even two properties that I've done like this that has actually given me the choice to, you know, do what I want to do. So that's why I created this framework, as you can see here. You know, you start with, and we always talk about this, starting with the vision, understanding what you're going to do. Now a really interesting example this week, John, I spoke to one of our ultimate guide to renovation students and he's given me permission to talk about this. Now he's 60 and he's looking at what he looked at the ultimate guide to renovation to assist him in buying his first investment property. And he followed it step by step. He was a little bit hazy on the dot map, but he followed it step by step, secured a property in the central coast and now he's looking at going, wow, I could actually add a granny flat. And so we started talking about this ability to add a granny flat. Now, because he hadn't decided decided on doing that and understanding his strategy to start with, he's now kind of playing catch up and checking with the council to see if it's even possible because it may not be possible. The size of the block might be too small. So he might be excluding a whole strategy because he didn't see what he wanted to achieve first. Now the other interesting thing as well was that when we talked about this, he was saying, well, I'm actually going to use all of my cash to build the granny flat. We had an opportunity to talk about this a little bit further and say, well, in actual fact, it's probably not a great idea to use your cash because that's your only buffer and this is his life savings. Maybe borrowing a little bit more to be with, to be able to borrow the money to do the construction of the granny flat would actually serve you better. And if you decided to at Any stage, you could use your offset account to pay that down. So when we actually looked at this, he's bought the house, he's doing a renovation on it. The increased value of that was actually going to provide the equity, the 20% he needed as the deposit for the construction loan. And he didn't have to put any of his own cash in, which is a clever strategy when you think about it. But he was with the wrong lender. The lenders don't allow construction loans. So this is why it's so important. Be a first home buyer, or be it an first investor or a tenth investor or buying your own home. It's so important to understand what your strategy is first. I'm really clear on this and I know first time buyers can't look 10, 15, 20 years down the track, but understanding what you're going to do in the next year, buy strategically in an area with good growth that's going up in value, maybe the potential to add some value with renovation and negotiate to get it under the market. We're talking trident strategy. Obviously, you know, being able to do that is insanely essential. And they look three years out and go, well, you know, potentially can do it again. We talk about that. Two properties, one renovation, a million bucks in the bank. Imagine having that done, set in stone within three to five years based on being in good growth areas. And don't doubt it, the growth is coming. So, you know, we talk about, see it. I then go through and set it up. This is about saving that deposit, which is the hardest part to start with. But most people don't realize their rent can be considered. It's about getting the right mortgage for your strategy, obviously. Give us a call, we'll have a chat to you about that. And then it's about sourcing it. You guys have access to, you know, all the information resources. You might be in your property success club. You might be in the ultimate guide to Renovation. You might be in location masterclass. You understand the process and the diligence. Like this person I spoke to last week who bought a humdinger of a property with potential to renovate. And so, you know, sourcing the property is important. And then we get to negotiating. Now this is slam it, negotiating, doing conveyancing and setting it up. Right. And John, I'm just going to unmute you now. We had some echo problems before, but you and I hooked up with an incredible negotiator, Scott Agate from hello House about three months ago who came and spoke at our mentoring program. Right? Yeah.

I love that stuff. He was, he was awesome. So he worked, what, nearly a 20, 20 year career in real estate with one of these firms in Sydney. And, and he opened with, you know, you guys are getting eaten alive by these agents because you just don't know some of the tricks that they're using. And he gave us the whole litany of devices and tools and tricks and negotiation tactics. And it's. And it's true. And they just, and they do role play and all sorts of stuff. So they just go into these things week in week out trying out these strategies, which often have nothing to do with the vendor's position and getting really high prices. So. And the reverse is true too. When you're negotiating for your property, it's one of the easiest times in the whole process. Far easier than doing a renovation, having dust in your hair, and every night waking up with dust in your hair.

Making 10% up front with the negotiation, that's it.

Far easier to make 10% up front. So, yeah, great, great. He was a great addition to the, to the mental workshop, but also a really good lesson that you can spend so much time doing a whole bunch of other stuff. Your easiest money can come just from the buying.

Well, and we know, you know, for Sharon, one of our mentorees, he went in to negotiate. Now if you want to hear that story, I interviewed Scott yesterday on the third episode of the first Home Buyer show. I'll put a link up in the notes for you to check it out because it doesn't matter if you're a first time buyer or anything. He, you know, although we had obviously a whole masterclass at our mentoring weekend and he actually did the whole process for Sharon. He shares the story of how he got from 980 down to 908 and how he's doing that time and time again. But I have to say in the interview yesterday, John, I started to feel a little bit dirty because he was telling me about some of the things that real estate agents will say to get you to get to the next stage. I was like, oh my God, they said that to me. And I believed it. And I'm like, I've been buying for ages and talking to people about negotiation. I was like, oh, I got hoodwinds on that. And I thought that I was in control. So go over and listen to it. It's amazing.

Yeah, it's great.

So just quickly going through it, obviously we have the another segment which is our supersizer, which is an optional extra. So I haven't had that in Here, which is about renovation and then it's stash it. So that's essentially the whole model that I have for the first time buyers. It's one of the things that I think is really important to get them set up correctly. But just imagine if you could have your first investment property stashed away at the age of 25 or 30 and have another 20 or 30 years of growth. And you know what we do in trying to get to the growth areas, I think this is just a beautiful way. So if you know of anyone who've got any kids, send them over to First Home Buyers. Show their first house buyer group is where we have the conversations as well. So check it out. That's what I have been up to for the month. Getting ready to do that.

John, that's terrific. It kind of occurred to me that you've taken through a generation of people up into their mid-40s and early 50s and now their kids are to an age where you can help them.

I know, it's incredible. Well, one of the other things I've had, I've been working with quite a few people who've also at that age where their parents are leaving them legacies as well. So they're sitting there and saying I want to be able to create something and go into the next generation. So we're obviously helping them with the purchases that they're making with our done done for you or done for you services. So you know, I think that's interesting. Age group that 40 to 55. We've got aging parents, but also kids that you want to help get into property as well. So I think it's a perfect place for a lot of people. So interesting. Anything that I'm going to go into my beautiful digital dot map for the month if you have.

I'm looking forward to seeing the the digital dot map this month.

Okay, let me share with you my digital map. So as you know, there's people. Actually I'm just going to bring John down here for the moment. As you know, we've got a number of techniques that we use and you know, obviously the Trident strategy is the premise to all of that, which is the three ways of making money, buying below the market, understanding the market and negotiating well, adding value through renovation and then buying a growth area. So if you really start stuff one up unless you've got two others working for you. Now I've been teaching the dot map, which is a Medina Simmons technique for many a year, just to get an understanding of growth. Now, you know, when you're in your property success club. Head over to this side. Let me get this right, head over to this side and find units written over there under units I've got a dot map unit. There's all the questions there. And I think we probably get a question at least once a month saying the back of your investment property magazine doesn't have 10 year growth. It doesn't does it's under average median growth. It just means 10 years. You go to the data bank in the beginning of that section, I'll explain to you that it is the 10 year growth. They just don't name. It confuses us all the time. So one of the things that we do is we do a dot map. Now whilst I was laying in hospital recently I had the kind of thought that, you know, we have a lot of our students who do do these dot maps, don't we John, who tried them over the years and I've got your mute, so don't worry talking to me. But the, you know this is essentially taking the 10 year data now I take the 10 year data from different sections so we get the data from SQM Research. Now obviously you know, you can do this yourself if you know how. But this gives us an indication of the pricing pressure. So we're kind of looking, remember we're looking for a 2% pricing pressure. So we're looking at oranges that are punching onto greens or oranges onto light greens. So this is a really a traffic light system that we look to and you know, when we're looking at say for instance, I don't know, we start up here with these greens here. So we're up here around Pasco Vale South. Coburg. Coburg North. So we're up in those areas and we're in these darker greens and it's punching onto this. 4% are here. So we've got some 4% here in Pasco Vale and 4% are here in Hadfield. So this is the kind of thing that you're looking at with the dot maps. So it's really, it's a really interesting exercise. You know, obviously I have got them for all the other states as well. But you know, just going through and you can see, you know that kind of Melbourne overview, we had a lot of these, you know, greens and yellows. Look how many reds are here. They're just insane. So you know, I think that it's really obvious that this is where the growth has been over the last 10 years and but look at what's been happening up in The Central coast, too. We have some of our mentoring students and obviously one of our ultimate go to renovation students. John, you're off mute now. Who is buying in the Central coast? So, you know, you want to zoom in and look at that later. So this is obviously something that I've created and share with my mentoring students every month, but to give them a bit of a head start. But you can see here, you know, there's still some really good red spots here. But what I had to do in Brisbane is I had to change the legend to a half percentage just to try to get any differences because, you know, you can see here smaller than zero. There's a lot of smaller than zero zeros that are coming up. And I think overall, you know, what we have seen in the past is that Brisbane hasn't performed as well as Sydney or Melbourne. Now, just for everyone else in the other states. So you don't think that I am completely capital city, eastern, eastern area centric. We can see here what's happening in act. It's really difficult, guys, to do dot maps for areas like Geelong, smaller suburb areas like Canberra, you know, and this just tells you the story. Everything starts yellow and then it comes out and comes out. You know, this is exactly what we would expect to see. But in those smaller regional areas, it is really difficult because there's just not that many suburbs to do the analysis on. Now, this is kind of interesting as well. In South Australia, I once again had to change the legend. So if you look at this and go, wow, there's so many reds. They must be over 10%. In Adelaide, you can see here, the reds are actually over 4% and there's not that many of them. So, you know, I had to go all the way down to minus four. So anything that's actually a green is actually zero or below. And that's what's happened in Adelaide in the last 10 years. So it's really important. And under dot mats, we have a number of these conversations around. Where else have we got, Tassie? A number of these conversations that we have around, you know, what's happening. Once again, Hobart's really difficult. You know, the properties on the water's edge are always outperforming the others. And there's not that many, you know, suburbs that are there as well. And we have Western Australia and Northern Territory. Let you think that we don't know that you exist over there in the west and north. But once again, you know, here I had to change the whole legend. Once again, you know, it Was just so hard, just so hard. And it was really, this is the legend I was using for this one. So you know, down to two threes and fours. So you know, anything less than green, purple or blue is below zero. So this is, is this depressing for everyone in Western Australia? I went to the Pipa breakfast this morning and spoke to quite a few buyers agents about their experience in buying. No one is really looking in Western Australia at the moment, which is interesting. And once again, you know, small amounts of data here for Northern Territory. So that's the dot maps, John, and that's what we've kind of been working on over. Well I've been working on for the mentoring students to give them a bit of a heads up over the last month as well. So interesting to see the data. But once again looking at that 10 year data. Wow, difficult.

Yeah, yeah, Bit of an echo happening there. I was just watching it on the Facebook page. There's a little bit of delay so I'm a city behind because our audio is a little bit ahead of everyone's. But it was interesting just seeing Darwin there and how fewer dots there are when you get to those smaller capitals as long as regionals. But yeah, it's a fascinating thing to do. I think even the, just the exercise of comparing looking at different capitals is a worthy exercise to do. You know, often, you know, there's a period there I only ever did dot maps for Melbourne and when I first looked at another city it was like, oh wow, the patterns are different, you know what's going on but it gives you, you start to recognize the, the same patterns in other cities but for some different reasons. So the spokes might be different. It might be rivers and freeways versus exactly coastlines and second CBDs and that kind of thing.

Yeah. Now I see Susie has joined us. Hey Susie, how you going? It's good to see you. Now Susie, I saw that you posted a question over on Facebook so let's head over and John, I'm going to mute you again because I'm going onto the page that's going to make us not be able to see things. So there you go, double view. So a question that we have here from Susie which is hey everyone, we're in the process of applying for a pre approval as oldies soon turning 60. She's a very young oldie, let me tell you. We've been told that for our bank that we need to have a strong exit strategy as they look at how we pay for the loan out in five years. Because they're looking at a 65 as a retirement age. Another bank we are looking at is not as discriminatory but we still need to submit a strong exit strategy. So my question is, with the intention of using the Trident strategy, how do we word our intentions and word a strong exit strategy to be appealing to to the banks? I'm told our serviceability for a loan is great, so we tick the boxes there. But I don't want to blow our chances here with a poorly worded exit strategy so. Oh, as Suzy, she says yay. So look, you know, Nicole has a really good point here. She says your mortgage broker should be doing this for you. You know, be very aware of how the finance words world looks at people. The five cents which is character. So let's just make sure that you know, you are paying off your debts. Go to my credit file and see what they're looking at. And since there's been the introduction of positive credit reporting, they'll be able to see your monthly payments as well rather than the fact that you just made an application for a loan. They don't know if you actually took it out or not. Now they can a lot of the banks, there's a few banks that still haven't signed on completely, but they will be very soon. Your capacity, which you've got nailed there, which is, you know, what can you do to pay back the money. So you know what your capacity is to pay back a normal monthly mortgage, what your capital is. So how much you've got to contribute to make sure you have the funds to contribute. What are the conditions? Now this is the issue that I think you're facing here Susie is around the fact that you technically five years out of having to pay off a property and then there's the collateral as well, which is, you know, what can you put up and what the property's like and will it, you know, be get through a value or etc. So these are really interesting strategies and she does ask what the exit strategy is. Now Susie, I know this is kind of like a first home purchase for you, you're a first time buyer. But I believe this is and just please confirm for me this is investment that you're looking at doing. Obviously Daniel and Nicole come in and say go to investors choice mortgages. Yay. That's us. Now for reasons that Susie needed to do, she went to the bank directly and this is now where she's standing, where she needs to have obviously the. Exit strategy being really clearly defined. So Susie, the thing about this is that you need to be aware of what the banks are looking at now from an assumption of this being a first home or a home that you're purchasing. Then there's going to have to be some kind of pay it down strategy that they're going to want to see. So that makes it a little bit difficult. But in reality the banks are really very conservative for people who are over 60 and are buying their first home and how they're going to lend to them. So often instead of saying we've got a 30 year loan they do actually give you like a 20 year loan. So you have to make more repayments as well. So you know there might be the capacity for you to make more repayments because you know you've got parents. And this is similar for the property. I see you're saying that it is an investment property but it's similar for investment properties. So it's similar to the extent that you have to just show that you have the capacity to actually pay it off. So let's just say it's a $500,000 property and it's a $400,000 mortgage. So where in the next five years are you going to get $400,000? Now you speak of the Trident strategy and I think this is a really good place for you to actually say this is our plans for the property. We've been involved with educating ourselves on how to locate high growth areas. We've chosen the areas of unless it's Macquarie Lake on in the central coast, you know it has this new infrastructure. The council is moving their staff from the city out there. There's been strong demand. You know the recent increase in sale prices in Sydney has flown has a flow on effect. This area, you know, it's got the infrastructure, the train goes through it on the way to Sydney. People are commuting. So you're building up the reason why. And you know I would head over and I'm going to show you an example of this a little later. I'm going to show you two examples in this call of predicted growth for this area. This means that the $500,000 property with an 8% growth in five years time. And remember this is how you do that calculation. You can see my screen here. So what we're looking at here is a $500,000 property in times it by one point and let's say it's got 7% growth to the power of five years time. So 1.07 to the power of five years time equals 700,000 so we believe that this $700,000 property that we're going to have in five years and if we, you know, we plan to sell that, so for 400 plan to sell it and pay the loan off of $400,000. Now they're probably going to make you have a principal and interest loan anyhow, which means that you've probably paid it down to 450 in that period of time. We're going to have $250,000 in equity and that's based on growth alone. However, what we're also doing is we're going to be spending $50,000 for doing a renovation in the area. Now here's the comparable prices that we've shown in the area. So we're going to buy it for 500, spend the $50,000 and we believe that we can get, because the area has the capacity for it, $2 for every $1 we spend. So the property is going to be worth $600,000. So now we have at a 7% growth in the next five years, a $600,000 property. So we're going to have 800, 4,000, $840,000. We're going to pay back your loan that we have paid down a little bit. So just lost my thing, $840,000 and we're going to pay back your loan. So it's now, sorry, not 400 but 350. So we're going to have, you know, this much left over for us to then buy a house outright. So that, that I think, you know, if you say, you know, you're part of an investment strategy, investment club, the isn't I think spruce is because most people are. But this is kind of going to give you, you know, some of the reasoning why that they can that your exit strategy. So once again just have a look at that a $500,000 property and let's just say in the growth of 7% to the power of five in the next five years, 700,000. Your loan then potentially be paid down a little bit within five years, maybe 10 grand off a year of your principal. 350. So you're going to have $350,000 that you're going to use. And you might then say, you know, my 89 year old mother, I don't know if this is the case, 89 year old mother has also promised my sisters and I, you know, a share of her million dollar house. You know, I'll be able to put the money in that as well within the next five to 10 years so that we'll have money for us to live off. So you've created funds for you to actually then go into buying your own home. That other calculation was you bought the $500,000 property. You pay $50,000 for a renovation. You add $2 for every $1. So you now have a $600,000 property that is going up in value and let's say 7% again. You can choose the number and I'll show you where you can get that data in the next five years. It's now being worth 840. You pay off your loan, and you now have $490,000. So that's. That's where you can potentially have an exit strategy conversation. Because quite frankly, you know, as you know, we've had this catch up before. Anyone over 45, you add the 30 year loan term, that gets you like 75. Banks are getting a little bit harsher. So anyone at 60, as you can imagine, they're saying, well, technically you should only be working five years. Now. You guys have capacity to earn. You know, you. You've spent years. I don't know, how many children do you have, Susie? Like 10 children. You've spent years with the family, you know, growing your family, and that's where you put your money. And, you know, in doing that, it's now time for you. This is what you plan to do. Buying in a growth area. This is the kind of numbers you've done around the areas that you're looking at with predictions, and this is the kind of numbers that you're expecting with the renovation that you plan to do. So that's exactly how I would be doing an exit strategy. Great. That's exactly what I needed in here. Oh, my gosh. Another great. So, John, I didn't meet you again. Maybe everyone's echoing. Sorry, guys, but that's exactly how I would go through that exit strategy. And. And that's how I would share that and make sure that you can, you know, do it. So that's my thoughts on that. John, Any thoughts?

No, it was just that I was just still reeling from the fact that she had seven kids.

Yeah, seven children. I know. She's amazing. And having grandchildren and all of those amazing things are too. So there you go. Now, why am I not seeing you, John? I don't know. One second. Now, I just wanted to pick up a couple of other questions in the Facebook group as well. And let's just do that. I'm making you. I know what's going on. All right. Ta da. Hi. Welcome back. Oh, my God. 15 grandchildren. Seriously, Susie, no wonder you're so busy. Okay, now I am going to once again go up to the shared screen and I'm going to share this. So we've got a couple of other questions here. Daniel, congratulations. Your name went on our wall the other day. He's bought in Geelong and so did David, who assisted Daniel with all of his research that he'd been doing in Geelong. David's one of our mentoring students. Now, this is an interesting question, John. What's the best way to value the building of an existing property for insurance purposes? So the question there is, for insurance purposes, how would you value a property? Now, I know that you've just purchased a property, so I'm going to assume it's in. The question is within the scope of. Oh, my goodness. The bank now requires me to purchase, to get insurance before settlement to show that their asset, which technically they own because of the titles in the bank and you're paying off, is going to be protected in case of fire, et cetera. Now what happens, and I know you're working with us at Investors Choice, have a chat to Lisa. But the valuation usually comes back and says this is what the property value is. And the bank will usually tell you what the value is that they need as a minimum of the property to be insured. So make sure that you have a chat so if your broker or your bank will have those numbers for you so you don't have to guess and go, I'm going to. I'm going to, you know, go for a $300,000 value or go to RP Data, which often says this is what the land value is. So you take the land value off the building value and say, this is the number that you're going to use. Don't risk it. Just find out from the bank exactly what they need. That's my answer on that. Okay. I'm just looking over here, John, to see if there's any other questions that I can. Okay, I've got another question here, and this is an interesting question because Grant talks about. I'm wondering if anyone is willing to share how they determine if there's enough pricing disparity between renovated or unrenovated properties, the same property type, in a particular area of street. We're looking in western Sydney. There seems to be a premium paid for unrenovated properties, which is not uncommon, and I don't want to fall in the trap. Price difference seems to be only around 50 or 100k. So Max was staff duty, other purchase costs, wants to leave room now. I think Kristen, another mentor, says, do you have access to the ultimate guide to renovation? There's a whole module on this, so if you're in that, I hope you got the answer. He said, yes, I do, but I don't understand the calculations. So there's a whole great conversation here. Now what I wanted to show you is a sneaky way that I am now using, using RP data to actually find out the pricing disparity on a suburb that when we're assessing the potential of a suburb for renovation, potential. So oh, would turn out that someone else has logged in here and kicked me out. Excellent. Love it when a plan comes together. Okay, so for those of you who have access to RP data, please go through. And I don't know why it's not working at the moment. Well, whilst I'll, I'll, whilst I work that out, we can have a chat about it, John. But whilst, so I mean it, again, it's working. Let's try and see what we've got going on there. Okay, so if you come in here and you go to suburb report and Western Sydney, let's take Blacktown in New South Wales, I'm going to do this for Grant. Okay, so what it does is it goes away and gets all the information about the suburb and typical demographics, how many sold, etc. And once we have that report, it also comes up with information around the median prices for the area. So let's just say the median price was 700,000. The median is the 50% mark of any of the properties that are actually on the market at the moment. So when we have a look at this and have a look at this report, what it also does is it says, well, let's go and have a look at the properties that are at the 25 percentile range. So you can see here at the 25 percentile range we have properties at 605. So the median price is 665, the lower quartile is 605 and the upper quartile which is 75% of the market. So we're not talking the total top price, we're not talking in the total bottom price, we're talking at the 25 percentile, 50 percentile and 75 percentile. This is what the price range is. So if I use my clever little calculator again, if I was looking at this and saying, oh, is there capacity to add value? So the Median price is 665. Let's just say I can't find any bargains in the area. Now technically I may spend 10% on a cosmetic renovation. $65,000 and I want to add $2 for every $1 I spend. So I'm going to get another dollar back there. 795 is essentially what I need to have this number look like for me to have the confidence there's capacity to add value. Now you might just think that you're pretty good at this and you're going to be finding the 605 property. So $60,000 for the Reno. 60,000 to add value. 725. So you can see here there's a little bit of capacity. So what you know is there's going to be a median point somewhere between here, 605 and 665. It's probably like 630 or 640 that you're going to hit this tops percentile of the market. And when you do that there's no capacity. So if I was looking in this suburb I'd say gee, you know, it's a, it's the Sydney market, it's moving fast. Am I going to be able to find these kind of discounted properties at the time you know what is out there? And then I would go into RP data. So once again I'll put the link below. But if you're in our club we can offer you RP data and $150 per month and you only have to do it month by month. I know that a lot of other educators require you to do more. I know a three bedroom house is the typical property for Sydney so I'll make an assumption here. So the 18,720 properties in Blacktown. I just want to have a look at the last six months sale and just see what the prices are going for. And so this is the whole process I go through Grant, I'd say okay, 580. What was that meeting again? 660, 665. This is interesting. And when was this data from? So they usually tell you here when they're pulling the data from. So let's check it. They say over the last 12 months. So we're doing this in October. I would say that this data is probably from a month ago September. Can't see it being written down here yet. Let me just check it. Oh, I hate it when they don't tell me when they did the data. All right, so 665 is the number that we're looking at here. So let's just see what we're seeing. So there's from 580s, there's some 545, there's some 600s, there's some 520s, there's some 660s. Now here's a 733. So this is getting to the top of our end here. So I would be checking this out and just looking through the pictures and going well is this a renovated property? What does my property have to look like for me to be able to consider it? I don't know if that's. It's on the floorboards. Technically they've painted older style kitchen, a bathroom. Sorry. So there is some information there to indicate that it has had some degree of renovation. So you'd want to compare what the higher priced properties are looking at looking like. And if you're thinking the market is moving really quickly. I changed my sale date here say well we know may post election things got pretty crazy. I only want to look at the last three months. So you might just choose the last three months here and you redefine that because you then want to say that in the last three months there's been properties that have been selling and what have they been selling at? Are any of these 580s here? No, there's a 560 but you can see the market seems to be a bit higher now. So this is the way that I would go through and look at doing what we just discussed doing which was going through the property going through what we have at our disposal hence the RP data and using that and using the suburb report. So that's a really cool way John. And a new report that people can use to look at pricing disparity.

Yeah it's great and I think I just wanted to emphasize there that having it the ability to have that just well, particularly while you're in the property search is just. Yeah there's so much benefits that and we do have it so you can switch it on and off. So just use it for your search and then switch it off again which you can't do anywhere else. I would very for a couple hundred bucks, you know, 150 bucks a month even if it's two months it's just, you know, so, so beneficial.

Okay, I'm going to show you one more report. So once again there's been a bit of conversation around the suburb suburb growth reports that are out. They're part of the fintech arm of the Empower wealth the guys in Property Coach Couch. I was having a chat to Ben Kingsley this morning and Said, you know, I bought like 10 of your reports recently, just checking them. These suburb growth reports, John, are really interesting and I'm just going to see what the whole conversation is going on about this. Let me just share my screen so you can see what I'm looking at here. So we've got the. We've got Adele in the group. She's just done her dot map on Melbourne and Geelong, which is great. We've got tiny houses conversation going on. We've got our call. Okay, so Mark here posted around this suburb growth and was saying, you know, there's this new prediction report. Now the guys from Jeremy shepherd from Location Score, he has about 17 different things that he uses to look at a suburb and its potential to grow and all of those great things. And what he has done here is he's combined this and he's come up with these suburb scores. Now I've purchased a few of these just doing some analysis in the last couple of weeks. Now this is Newport in Melbourne. It just has a little bit of information about, you know, what's happening in the area and talks about the growth predictions. Now what's really exciting here is it's only based on three years, but you can see here, you know, the median value property there is a million dollars at the moment. They seen the next year there's going to be like a 5.6% growth, but in year two, 7.6% and in year three, 7%. So this represents a $220,000 growth. So this is kind of what these reports look like. I think, you know, statistically they've done the information. They've applied these 17 kind of pro formas around supply and demand and clearance rates and vacancy rates and all of those kind of things. They've applied all of those and this is how they've come up with prediction reports. Now I know that RP Data, having acquired Residex and getting rid of their prediction reports, which we were devastated about, have been spending the last three years on coming up with something they still haven't. So this is the only predictive analysis that we have at the moment. So this is really interesting. You know, it goes through and it shows, you know, what the kind of cumulative growth has been historically. So, you know, we talk about a property suburb, if it has 7% growth in 10 years, it doubles in value. So it's around here at 500,520 and it's up here around a million. So in 10 years time we can see that this has had the statistically 7% growth over that period of time, the annual growth year on year, the. What do we got here? So the years up and down. So overall we have some down years like we're having at the moment, and then we have some up years. But what it does show us is that overall, you know, the value has gone up. And there's a bit of a profile here, just nice little demographic stuff about the house stock on the market at the moment and the number of properties for sale, the number of days on the market. You can see here they're asking rents, the rental listings available and the total listings. So, you know, this kind of gives you a really good overview of what is happening in the market. And I think, John, you know, when we talk about having all the tools available to us, this is another tool that is out there and available for people to use. So that is suburb growth. I'll get you a link to and put it in there as well. But Those reports are $20 each, so I know that they were doing a bit of a discount at one stage. So, you know, find the discount and that will work for you too. So there you go.

Good value and see good value. And it's great to see that someone's still doing it. We're missing on Edwards, aren't we?

Oh, absolutely. And I think the other thing is that it's really, it is really difficult to put a lot of research and knowledge in and we teach everyone through location masterclass or guided renovation, your property success club, you know, how to get down to the area and the typical property in the area. But there's always that question of like, oh, I've done all this analysis and I believe there's the ripple effect and I believe this is happening. But, you know, it's nice to have a bit of a confidence boost. I mean, some of these reports that I'm seeing in Sydney and in Melbourne, you know, talking 8, 9, 10% in year two and year three as well. So, you know, there's cumulative effects going on. And I just want to make sure that everyone's got all the tools that they have so that they can get into the market as soon as possible. Because it's only nine weeks to the end of the year now. John, I don't see any more questions for us.

I can't see any more there, Jane, and might be unless anyone's got any last ones. If you have type away fast typing, otherwise we might have to wrap it up now.

I think the next call is going to be when I'm in New Zealand. So I haven't even told John I'm going yet. I just never see each other anymore. So busy, all of us. But so I'm going to try to be calling in from New Zealand if possible next month. Otherwise we might have to move the date a little bit. But I'll get back to you and we'll set that up closer to the date. But as you know, you know, if you've got any questions, you can send the questions to us. Questions@your propertysuccess.com thank you to everyone who sends us personal messages on our Facebook and email and asking for personal assistance. We can't always I get about two or three a day of people saying I've got a quick question for you. Could you tell me how. Can't obviously answer everyone's questions. But if you jump into the your property success club, you can see there's such an incredible group of people there that are happy to answer. John and I are in there every couple of days answering as well. So, you know, and we really want to be able to use our time to maximize it to benefit as many people as possible. Just like Susie's question, to be able to make sure that we can help not just one person but the many. So if you've got any questions, jump in there. If you want something more spec specific and happy to wait a little bit, put it, send it through to questionsourpropertysuccess.com and every single month we will be getting on there and answering your questions. Oh, there you go. Susie's going to be in New Zealand too. We might have to do a show together. I appreciate that you appreciate us. Anyhow guys, you know, please stay tuned for next month. Jump in the club. Check it out. I know we've got a lot of people going through the ultimate guide of renovation at the moment and keep on plotting through it. It's so good to see you. It's so nice to have so many of the finance and strategy calls that you have complimentary with me in week eight so that we can kind of nut some things out and get over any barriers or blockages that you have. If you know a first home buyer, send them to the first house buyer Facebook page or to learn with Jane Slacksmith on Facebook as well because that's where we have the first time buyer show. And I think that's it. John, no more questions.

No, no more.

Well guys, you have a fantastic November. John, you have a good birthday. I'm going to have a good birthday in November as well. And as always, here's to your property.