Your Property Success Q&A Call October 2014

The broadcast is now starting. All attendees are in listen only mode. Hello, it's Jane Slacksmith here and welcome to the your Property Success Q Q and A call for October. Please let me know if you can hear me loud and strong by just putting hi Jane, I can hear you into the chat box. Waiting for our first comments here. Let's see. Thanks, Carl, Jody, Sally, Tanya, Judy, Stacy. Wow, hundreds. Great. Well, look, these calls are exclusively for my premium clients, the students of the Ultimate Guide to Renovation and my Investors Choice Mortgages diamond clients. And if this is your first time on the call, it's a very, very warm welcome to you. These calls take place on the last Thursday of every month, so you've got lots to look forward to. And of course you'll receive email reminders each month when the calls are approaching so you don't miss out. And rest assured, we won't be doing it on Thursday, Christmas Day. So this is the first call for my Diamond Investors Choice clients. And as property investors concentrating on building a portfolio, I'm sure you'll get a lot of value from the questions and discussion that the Ultimate Guide to Renovation students are having. You may have some lending questions as well and something to talk about about fixed loans or what's happening in the mortgage world. So I'm here to answer all your questions. But you know, as property investors we have, I guess, a lot of common queries and questions on our minds. So I thought it was a great opportunity to bring everyone together and in these monthly call, get it off your chest and let's see if we can answer the questions for you. So, you know, I just want to make sure that, you know, you know, I'm not going to be covering your personal loan questions here or your personal situation, but you know, if you've got something that you would like to know and you know, we're happy for me to answer in a general way, I'm more than happy to do that because, you know, it's all about us together building a property portfolio and being on the journey to your success. So for those of you who are my Investor's Choice Mortgage clients, recently we welcomed our spring intake of students to the Ultimate Guide to Renovation. And these guys have been diligently working through 12 modules. Now these are released week by week over a 12 week period. And for those inside the Ultimate Guide to Renovation, this week they've been working on module 3, which is suburb Due Diligence. And as you know, I think the number one key to success is buying the right property at the right price to fit your goals and to achieve them in the timeframe that you set for yourself. So my diamond members, you'll find that in the your property success system course that you have that, you know, we cover these topics in courses one, two and three of the five courses that you have access to as a bonus to your membership. So there's a lot of complimentary information and discussion that we can be having here. Now at the end of module three, in the Ultimate Guide to Renovation, you know, you would have found out the pockets of potential within a suburb. So we've really kind of nailing down from that 14,000 suburbs in Australia down to the suburbs that you really want to concentrate on. And we've been through, through a process of using dot maps and a few techniques of doing that down to the suburb due diligence and spreadsheet information. So next week, module four, we get into actually looking through the properties and looking at what to look for. So I expect to be getting lots of questions tonight about suburb due diligence because you know that finding the right suburb that suits your budget, strategy and criteria is so very important. And there's a lot of you on the call. I can see from the names that have a large portfolio and those of you that are just starting out, but regardless of whether you're using this to look at your current portfolio and seeing how you can guess, look at properties and see if they are worthy to stay in your portfolio and get you to your goals in the timeframe you want, or you're looking at just starting out and building portfolio and you're looking at that first property purchase. It's just as relevant to you. So I guess it's the foundation to me is finding the right suburb. And that's the foundation of everything. So of course, you know, you can ask me anything. These monthly Q and A calls are here for you to get off your chest what you're thinking about. Maybe share some information, ask me any questions. You know, I've got access to some, some databases and information here, so if there's something that's really burning or something that's keeping you up at night or something that you can't really reconcile in your own mind about your property portfolio growth or plans or what you're trying to do, please ask. Just so you know, in previous Ultimate Guide to Renovation intakes, we found that some of the students slipped behind and you know, the idea behind the 12 modules and having lifetime access is that obviously you can do it on your own time frame. When you want where you want and when it suits you and be able to come back to the modules time and time again. And some people we found, you know, kind of slipped behind. They might have been waiting for their dot map or they, you know, life just caught up and we're up to week three and call three and they felt that because they hadn't done the third module that they should skip the call because they couldn't really contribute anything. And they're kind of slipping behind and feeling bad about themselves. And that's why we've tried to. We're always learning and we're always improving here. And that's why we've moved to these Q and A calls being monthly, because we know that there's a lot of questions that people have and some people are going faster than others and we don't want to leave anyone behind. And the Ultimate Guide to Renovation Students, remember, you do have that private Facebook page, the Renovation Network, where your questions are answered pretty much immediately by all the and sundry on the Facebook page. There's some incredible support that's going on there. But you know, if you do have any questions about maybe you're doing a renovation right now and you know, you feel that you're up to a certain module or maybe you were in one of the past intakes and you're listening to this and you've got some questions and you're on this live, you want to ask them. You know, please feel free to ask whatever you want, wherever you're up to and, you know, whatever's kind of your burning desire to know about. We're here to answer the questions. So we're going to have this as an open forum, all things property. I'm going to give my very best to answer all your questions. If I can't, I'll find out the answer and get it back to you on it. But you know, this is for you guys and we've got an hour and a half together. But before I move on, I am going to introduce you to the person sitting next to me. This is Serial Renovator and the co creator of the Ultimate Guide to Renovation, John Hubbard. Hello, John.

Hey, Jane. Everyone.

How are you going? It's been a big week this week.

Yeah, good week. This week I'm busy doing. I've got, as I was talking about with you in previous Q and A calls, I've got a development that's just in the planning stage, probably about a month off, kind of putting a shovel in the ground. So it's getting A bit tight. Yeah. Towards Christmas, but yeah, so that's been very good. So a lot of the stuff around the planning of that and it's the first development that I've taken on. You know, it's a bit of a step up from the structural renovations in terms of the, all the, the moving parts.

So you've been doing structural renovations or renovating for over 20 years. So this is the first development.

It is, yeah. Yep. So you could. Yeah, yeah, it's been good. It's been good. A lot of it's the. When you get to the inside and planning the, you know, the interiors and all that kind of stuff, that, that's very familiar territory. So that, that feels virtually the same. And I'm using all the same tools as we've got in the course, the budget spreadsheet and all that kind of thing. Yeah. Which works perfectly. Yeah. So all of the, the. Yeah, all of those drop down menus. I'm doing the same things, particularly on stuff that I haven't used before and I don't know the price of. So I'm just selecting the. Yeah, the, the estimates. But no, it's been very good. Been a learning curve and learning a lot and yeah, it's going to be interesting going forward if this is going to be the path or not.

And you've been working with Deb on getting some of those mastermind people together too.

Yeah, next week. So Deb's put all the mastermind groups together with the exception of just a couple of last ones. And what we're talking about is the new mastermind groups inside the Ultimate Guide to Renovation. So basically she's doing a bit of matchmaking. So people will be broken up into small groups and depending on how you answered in the survey that we put together together. And so yeah, Deb will be in contact with you probably Monday or Tuesday and, and give you. Yeah. An idea of where you've been allocated to. Yeah.

You and I have both done a bit of masterminding and being in mentoring groups in the past. And I mean I joined my first 10 years ago. Oh, 2005 through, I think I was Australian business Women's Network. We created a goals group of five, five of us and we still keep in contact. And one of the mantras that we had was that we're going to be unreasonable friends.

Yeah.

To support people but be there to keep them accountable as well. Which, you know, we found was really important that, you know, we, we had someone there to kind of act as our board of directors for Our business.

Yeah, it's kind of.

It's handy.

I think that unreasonable friends idea is a good one. That it's not just, you know, like a family member or someone who's always happy no matter what you do kind of thing.

Exactly.

That's good.

It didn't work this week. Oh, you didn't get around to it? That's okay.

Yeah. Why didn't you do it?

Exactly. And you know, for those of you asking, there's that National Trade discount card that's now going to come out the week or two after the 7th of November. So after that month. Month since you joined up. Yeah, we'll be sending those out.

Yeah.

Already know that people have been getting huge savings from a previous intake.

So, yes, it's got the. It's got the Masters discount attached to that too. You actually have to send that off. But that's well worth it too, getting the masters one.

I know I got my 10 off plants and my 5% discount masters the other day. I was quite happy.

Well, there's certain things that are really good at Masters that are kind of different from Bunnings.

And yeah, I have to say I hadn't. I've always been a Bunnings person.

Yep.

And when I got the card, I thought I should go check out Masters and I did. And I was happy for it.

Yeah, I like it for things like baths. They make these really good acrylic baths. Yeah.

Check those out.

Quite cheap.

I noticed at Costco the other day they had entire bathroom kind of packaged stuff, their vanities, and I was taking photos of the price. Oh, interesting. Lower. Lower renovation cost. But yeah, definitely some thoughts there. I've had a big week too.

Yeah. You've been on holiday.

I know.

Well, have you really?

This is the first time in 11 years I've been away without a computer. And as was pointed out by my staff and family members, I did have an iPad and an iPhone with me that allowed me to get onto the Facebook group and talk to the Renovator network and answer anything that was really, really pressing. But no, it was fabulous. Port Douglas.

Oh, nice.

It was really nice. Got married there five years ago, so it's a special place for us. And it was a nice little family break. And also I was awarded Mortgage break of the year.

Yeah.

Which is just.

Oh, my gosh, again, how many is that now?

That's two, actually. I got runner up last year. They rang up and said, oh, I just want to ring to let you know you've been runner up. I said, if I knew I was nominated. I would have told someone about it, but no, you know, it's all qu.

That's great.

So I was really proud of that. That's 10 years down the track. And having been recognized for that by investors rather than peers is something really special. And thank you very much for everyone whose lovely messages and support and to my investors choice clients, expect a magazine in the mail in the next two weeks. So I've bought everyone a magazine I'm sending out.

So you kind of deserved a holiday after that, I guess.

I reckon it's been big and I've been doing some other interesting things now. Thank you to Teresa who sent me interesting website to check out that I've kind of been enjoying called helixpersonas.com helix h e l I x Personas p e r s O-N-A s.com I'll give you a quick little look at that, which I think, I think is kind of cool. And it's basically, it's. Roy Morgan has put together some information on demographics and allows us to kind of look at people in an area and I think it gives us a little bit more information about a type of people, gives us some background on who is in the area. So if you're doing some research, basically you go in and you put in an address and once you've put in the address, you can then have an idea. And I don't know, 10 Holt Street, I think was a place in. I used to look at. In Mossman. Yeah, 106 Holt Street, Mossman. There you go, Holt Avenue. So basically it comes up and it gives you an idea of the type of demographic. So you know, these people are well educated, high incomes, gives you an idea of household income and gives you, you know, there's Ted and Peter and they're doing it their own way and they, you know, want to decorate their house and gives you an idea where they're living over here on Lower North Shore, Sydney, things they like.

So, you know, for a quick, nice interface, isn't it?

Isn't it? And a quick little look at, you know, information regarding the people in the area. So this is Helix Personas, you know, getting around it, learning a bit more about it. But I think it's supposed to be for marketers and people who want to sell stuff to people. But hey, you know, we're all about using some information. So together with that Australian Bureau of Statistics census information that your property success system has in it and the ultimate guide to renovation, we can get into census and See, you know, what streets renters and owner occupiers live in, combined with this and a bit of the other demographic information that you get through profiling, I'm loving it. So that's a nice little website for the week too. What else can I tell you about? Actually it was interesting three hour trip on the plane back today to make the webinar and I was listening to an interesting podcast and there was a gentleman on there who was kind of talking about, well, basically discipline. And he was saying, you know, to do anything, any new venture or try something different. You know, we talk about being disciplined and you know, you're going to lose weight or exercise more, increase your wealth through property. It's kind of about, you know, showing a bit of effort and self control. And that's when you use discipline as a verb. You know, it's a doing word. It's, you know, having some willpower and stumbling along, etc. But disciplines also a noun and having a discipline like a system or a process. And it kind of got me thinking, you know, by having the process, especially what we have in the your property success system and in the ultimate guide to Renovation, a process step by step that takes you through how to do something, actually takes the work out of the verb discipline, you know, because you've kind of got that modeling that allows you to kind of skip over the mistakes and the issues. And you know, I've had some interesting conversations in the last couple of weeks with my discovery calls with mortgage clients and two in particular said to me, this is my first property investment and I expect to lose money.

Yeah, well, that's a strange way to start.

Threw me, completely threw me. And I was like, why do you expect to lose money? I was like, well, I'm just starting out, you know, I'm practicing, I'm kind of, I'm having a go. And it got me thinking about, you know, there's two types of property investors I've got here on my napkin from the airplane Jetstar where I've kind of scribbled down some thoughts here. But there's two types of property investors and there's those that kind of think of it as a hobby, a pastime, the next adventure, or a quick solution to maybe financial issues, but just a quick solution. And they're thinking right here in the moment and you know, the kind of people who say, I'm going to give it a go, I'm going to try, I'll try again and see what happens and I'll have a go. And you know, this is my first one. I'm going to lose a bit of money, but you know, I'll learn from it. And then there's the second type of property investors and they're the ones who see property investing as an income generating business. And I know when I started Investor Choice Mortgages 10 years ago, you know, Todd gave me this kind of book, he got it at Dimmocks and it was, you know, how to, how to write a business plan. And it was, you know, you have to have the plan, you have to know your market, you have to know your product, you have to know your cost, you have to know your expected income. And this is all before you start. And then you have to have a marketing plan and you know, for the ultimate guide of renovation people. That's the renovation is really the ultimate marketing plan, isn't it? And you had to have all of that before you started, which is kind of what we have in these courses. It is the done for you kind of step by step process. It's the discipline of property investing.

Yeah, I think about it the same way when you hear a profession called a discipline. The way that that name reads to me is keeping the discipline to do the steps. That's the kind of way I thought. And even when I was learning to be a tradesman, I thought of it the same way that if you could, as I got good, I realized it was just a process of doing it the same way each time and resisting the temptation to jump ahead. And the other thing is, I think which was a good bit of advice that I took on early, just as an apprentice was a old guy that I was working with said, don't worry about the speed because all the young kids would be trying to do it, you know, helpful letter. So don't worry about the speed. You'll get speed with practice. Just, just take the time to get it right and then, yeah, as you said, do it more. The speed will come.

And I guess, I mean, we've got people, you know what week three about to go to week four of the Northern guided renovations and those listening you who've done it before. And I know there can sometimes be some frustration on my gosh, there's so much effort here involved, but particularly once.

You'Ve got your money approved, it's almost burning a hole in your bank account.

Look, I remember my first renovation. I spent the first weekend out looking at heated and I hadn't, you know, hadn't even taken control of the house. I had six weeks off and I was like, oh, it's cold, I'm gonna have to have heaters. Nothing else was in my mind. I was like, oh, step back, get this planned, you know. And I think, you know, I've obviously I've had enjoyed five days next to the beach and it had me, me thinking, you know, a lot of people kind of have a view of a sea change. You know, maybe they're thinking in retirement I'd like to have a sea change. And people kind of, you know, talk about having a house by the sea with a view. And you know, we kind of associate that beach lifestyle with holidays, relaxing, you know, the easy life or even retirement. And it kind of, it got me thinking about, you know, this, the two types of property investors and you know, the person who we, you know, there's two type of people who create a house with a view of the sea and there's one who wants it quickly, wants it now, and it's a kind of quick response, not planned. And they build the house on set. You know, they've got the view of the sea, they can listen to the waves, they can feel the sea in their face. And then there's the person who plans it out and thinks about it. And they might cut foundations through the rock. They have the property excavated and elevated. They have these great foundations they plan because they plan to be here for the long term. They also get to listen to the waves, they also get to feel the sea air on their face. And they may not get that property done as quick as the people who are building on the sand. But you know, they both get views, the sands. But only one of sorry of the sea. But only one of them have a sustainable, no risk type of property at the end of it to achieve the goal that they wanted. And I think that, you know, as property investors we're all on a bit of a journey and we need to think about this as an income generating business. No matter if you're going to buy one property or if you're going to use these tactics and techniques and this discipline to buy your home and use your home as your investment vehicle, then you know, it's really important that you know, you take the information that we've given you and you know, you have anything that comes up that could be a problem, we answer the questions for you. So that's my musings for the week.

Yeah, good analogies. That's what sitting on a beach for a week does, isn't it?

I know looking at the phone going, do not look at emails or I'LL get in trouble of everyone. Well, okay, so let's get into it. Look, before I open up the lines to take your questions, I want to get some quick housekeeping out of the way. If you're on a computer and you're experiencing any problems hearing, perhaps you can't hear during the questions, there's an option to call in on the phone and the phone number can be found in the sidebar under the Audio options drop down menu. You can call that number from a landline, mobile or even Skype. So you know, if you have any issues, jump on there. So when you have a question, all you need to do is raise your hand by pressing the little hand icon in the sidebar menu. It's quite small and it's hard to see, but it lives directly above the audio tab and is at the very top of the GoToWebinar control panel. So clicking the hand button, that will notify me that you have a question. And when it's your turn, I'll unmute your line. When I do unmute your line, you're going to hear an automated message saying your line is now unmuted. And then you know you're on so we can start chatting. Look, you can ask questions by writing them in the chat box as well in the control panel. I will get to these if time's available, but I really want to give priority to those spoken questions because I find that, you know, when we start discussing things and I can get some more information from you, I can add a whole lot more value. So it's more engaging for everyone to hear, not just me ramble along and John, John as well. So you know, we want to hear from you guys. Remember, there's nothing like a silly question. We're here to answer whatever's on your mind, property, investing, related, finance, anything. Okay, we can call it, call on John's other skills. Now these Q and A calls, look, we do go for about an hour and a half maximum. I ask you for the sake of the group to limit your questions to, to just one question. Maybe a quick follow up question so that no one misses out. If there are no more questions, come back with the second or third or fourth. So you know, we really do want to answer your questions as much as possible. And lastly, just a reminder, this is not a technical support call. If you're experiencing any problems with a video that won't download or anything like that. I'm really not the right person to talk to. So make sure you email my team@supportyourpropertysuccess.com and you'll get on to the right people who can actually fix your problem as soon as humanly possible. And I have to apologize, we did have some website problems last night.

Yeah, we did.

Actually. I had six websites go down last night for four hours, which was rather disappointing.

Yeah, it was a bit scary, really.

We'll, we'll try and try again.

So it was up by when I got up at kind of 7:00 in the morning, which was nice.

Oh, you do sleeping in. I was up at 4:30.

I was gonna say, wait for it.

Mind you, I was watching what they were saying online, going, we nearly got it. So anyhow, so let's dive into some questions.

Let's try Jenna. Jenna's got her hand up.

Oh, great. Jenna. Hey Jenna, I'm unmuting your line. How are you going there? Hey Jenna, have you got a microphone?

Sounds like she might.

I can hear some bubbles.

That's all right. We'll come back. We did catch you by surprise.

Okay, Jenna, do you want to try to see if you can work out your microphone while we get some people to put their hands up? So who would like to put their hands up for a question? Oh gosh, it looks like I get to chat on.

What else were you thinking about while you were lying on the beach?

We've got hundreds of people here with questions. Okay, Jenna, do you want to try one more time? Oh, Jenna didn't know her hand was up. Do you have a question? Oh no, she's typing. No, we can hear her typing.

No.

That's fantastic. Well, look, I've got a couple of questions here that I'm going to get onto that people have written down in the chat line. So just make sure, guys, you know any questions you have, more than happy to answer those for you. And if you want me to dive into some numbers, here's a chance to ask, ask away. So let me take on Tenja's question here. And she says, I'm finding it hard to find a focus and just wondering if I should limit myself to one strategy or entertain all options. I found five suburbs which are within my price range. However, each require different strategies. I, eg, renovation and flip, renovate and add a granny flat and hold. Should I be focusing on the strategies and find suburbs that work within that or keep my suburbs and use different strategies for each? My strategy was to look at houses. However, as I'm researching these areas, some of the better suited to units and houses. Does that mean I now need to look at units in one suburb and houses in another. If I do, do I create two dot maps? Okay, so lots of questions here, Tanya. I guess the questions and the queries and the uncertainty that you're having is kind of, it's almost associated with not being very clear on what your goals and your objectives are to start with. So in Module 1, Ultimate Guide to Renovation and Course 1 of the your property success, we go through, you know, what your, your risk profile is and you know, what kind of strategies to consider, etc. And you know, in renovation we talk about, you know, is it around holding or is it around flipping? So buy, do something to it, add value and sell. Or is it around, you know, cosmetic renovation, so get in, you know, and, and do a cosmetic, non structural renovation, or is it to do a structural renovation? So it can be very confusing. One of the things about defining what your goals are, that is I want a $50,000 passive income in 10 years time, for instance, allows you to understand what portfolio you need, what cash flow that portfolio needs to deliver, and what capital growth that you need for you to actually achieve that. So for instance, if you did have a $50,000 passive income goal in 10 years time, then we know times that by 20, that means you need a million dollars in the bank earning you 5% or a million dollars completely paid off of property, earning your 5% rental return and a little bit more with costs, obviously. So you know that that would be the goal. So if we needed a million dollars of equity, for instance, and we're talking about buying now at an 80% loan to value ratio, then that might mean that you need to have $3 million or $4 million worth of property in 10 years time. And let's say we just take some numbers. A capital growth of 7% rule of 72, 72 divided by 7 takes 10 years to double your money. So capital growth of 7% means that a $3 million property portfolio in 10 years time is one and a half million now. So is that five, sorry, three $500,000 properties or is that, you know, five $300,000 properties? And that comes down to your borrowing capacity and that comes down to your ability of what you can buy and borrow. Now the cash flow or the rental yield is important to consider because, you know, you don't want to be eating mints every night for the next 10 years as well until you get to your goal. So, you know, we want to make sure that this allows you to, you know, that your property is not doing a 2% return on rental yield where interest rates are 5% and we know that on costs are at least 25% of the rent. So you know, that would be costing you a lot of money, Whereas maybe a 7 or 8% rental yield is not costing you a lot of money. So it's really important that you nail what your goal is because that will kind of help you with what your strategy is. And this is kind of an organic situation where, you know, you can go back and you can test and go, well, if I know, if I need to have a property portfolio worth this by this time for me, then I need to understand that I require now a property or in the next two to three years, you know, three to five years, maybe a property portfolio worth this much and can I afford, you know, the properties that I need or do I need to potentially, you know, flip properties to get some extra equity or do I need to, you know, improve my rental yield by having a granny flat? Or so you kind of need to nail that right up front and have some thoughts around that before you get onto the dot map which is taking that 14,000 kind of suburbs around Australia in the area that you're considering. So maybe, you know, Sydney, for instance, down to the three to five suburbs that you go and do the analysis on. So you know, the dot map will give you an idea of actually putting that 10 year past growth on the maps. That gives us an indication of where is that ripple effect, where has there been growth? And the flow on effect is the neighboring suburbs are going to experience growth in the future. Maybe they will, maybe they won't. That's when you get into your spreadsheet analysis that you've been doing this week that goes through the vacancy rates and the demographics and all the extra information that you need to know about your suburb. And specifically when you start getting down to your borrowing capacity, don't limit your dot map to I can only afford $400,000, so I'm only going to put the dots on the map of the properties that have a medium value, according to the back of Australian Property Investor magazine of, you know, $400,000 or plus, as we say, 20%. So $480,000 because you may be able to negotiate lower. Now, you know, you would be doing a dot map for houses or you would be doing a dot map for units or some people have tried to do it on the same map. It does get a little confusing. So I would recommend that you two separate if you're going to do that. But you know, if your aim is your buying criteria is I can afford a $400,000 property. I want to project manage this cosmetic renovation because that's the strategy that suits me and I want to do that in Sydney. Therefore, you know, you, you've either got houses up to 400,000, which obviously are kind of outer ring areas, or you've got units that, you know, can include some of the middle ring units as well, so, or inner ring units even. So you are looking at different information and you're looking at the different flow on effect of the neighboring suburbs and what that can bring to the party. And remember, the dot map is just one tool in your toolbox. So you're going, all right, so you know, when I did this in 2006, I was like, like, you know, Ramwick and Maroubra and Ramwick and Kensington and Coogee all had median values over a million dollars and Kingsford had a median value of 680. Now I checked today, medium value of 1.5 million in Kingsford, 22% growth last year. I mean that's extraordinary, you know, so I bought in 2006 at 620,000. The value of the property is worth what, 1 4, 15 at the moment. And that's I guess based on the fact that it was the ripple effect of, well, when people can't afford a million buck house in Coogee, Maroubra and Kensington, where are they going to look? Kingsford. And I didn't just go on buying Kingsford based on that. I then went and did my suburb due diligence and went, okay, so the census data, where are the renters wanting to live? So I knew where the renters wanted to live. What percentage of renters catch public transport? Well, there was something like 60%. So I wanted to be within 3 to 500 meters of the public transport hub. So I had four streets I was looking in, you know, so I really.

Defined that down exactly where you wanted to be. So, you know, it is interesting that some different suburbs do suit different strategies and sometimes not until you look at them that you can tell where the twist is or the granny flat or whatever till you get on the ground. So I guess, am I correct in saying that once you've defined the kind of monetary return that you need from it which meets your end goal, then there is room to find the strategy too?

Yeah, and that organic kind of.

So there would be a bit of toing and froing to kind of get to that endpoint.

Yeah, exactly. So I mean if you found that you could afford, let's say Kingsford, my popular data point. Let's say you found that you could afford that and you were considering a, you know, a cosmetic hold strategy, which would be the renters in the area. And you know that there's a huge. Oh, let's, let's flip it around the other way. Let's say you're looking at a structural renovation and you were therefore targeting the streets where the owner occupiers live. And you looked at the pricing disparity and you thought, yeah, you know, that's fair enough. There's enough pricing disparity between the unrenovated and renovated for me to make some money here. I'm going to be making X amount and I'm going to go through the council approval and you start looking at the council and you find that their approvals take a year and a half and you're thinking, gosh, that's a lot of whole cost. But this still intrinsically has some really good value to this area because of the ripple effect. What about if I look at the cosmetic hold strategy? All of a sudden your demographic information that we show in the spreadsheet comes up with the fact that 70% of people rent in the area and you're thinking, well, maybe renting is a, ah, you're really my target market here. And let's have a look at the pricing disparity in the streets and looking at the, around the streets where the renters want to live. You know that 3 to 500 meters, so you still found the right suburb and you're still in houses. So you're still on the right map and you're just going, okay, let's be a little organic about this. How will this then get into my goal? So if I'm buying the same valued property because the house is in the median, the same in the suburb, I'm not flipping, but I'm actually going to buy and hold a. Is there a rental return here and how's the vacancy that allow me to make sure that I've got a property people want. So I'm next to the university, I'm next to the hospital. There's always going to be a rental demand. The vacancy is 2%. At 3% vacancy, we know there's kind of an equilibrium of people looking and people renting. 2% means, you know, people, there's, there's more people wanting to rent than those that have properties to rent. So this is good. You're looking at the rental return around 5, potentially 4 and a half 5%. So you know, you start going, well that means if I can get a 5% loan then you know, there's not a lot of difference between I can fix it for five years, not a lot of difference between my costs, etc. So you know it is organic.

Yeah. So you've discovered that and you've had to pivot a little bit. So it might be the case, the scenario might be that you, once you actually start doing the suburb due diligence that you go back and you change the, the two properties, they might be two higher priced properties rather than three or four lower priced properties or whatever, depending on what the demand was and the opportunity in the suburb.

Absolutely. So great question, Tanya. I hope that answers for you but don't be discouraged because it is kind of organic and I think you may need to do a little bit of work on your goals first of all and make sure that if you can renovate and flip, usually you're looking at a higher price point. It is possible to do at a lower price point but as we discussed, you know, the numbers are. You have to be very, very focused on numbers and you might 400, $500,000 property, you might be talking about 3:30 to 50,000 profit. You're the, you're the flipper.

Yeah. Well, you've just got to be spot on with your numbers because you lose so much in the transaction. Yeah. Basically losing 5% of the transaction. And a lot of these ones, unless you're in a higher priced suburbs, there's mostly it's only 10 or 15% profit in it and that's. And you've got to buy well to get that kind of thing.

So. And you know, renovating and adding granny flats, I mean, I know there's a lot of people who are looking at probably buying a big block and renovating the property at the front, maybe subdividing and getting rid of the land at the back or putting a granny flat on. You know, there's so many different strategies and it really comes down to a, your, your, your risk kind of profile. But be what you can afford and, and see what you're trying to achieve in the long term.

I like those twists where you can force the equity like you, you can do it with a. You talk about your twist as a cosmetic renovation where you just add a bedroom by changing the floor plan. And that in a way forces the equity because it pushes it up into the four bedroom market. And it's the same thing if you can subdivide or you can you can do something to literally force the equity and it's not just reliant on pricing disparity. That's a kind of nice place to be.

Yep. Great. Well, Tanya is here online. So Tanya, did you want to be on a microphone there? Do you want us to say hi and tell us if you've actually answered. We've answered the question for you.

There we go.

She's gonna put her hand up. Hey, Tanya.

No, I don't think the mic's going to.

Hey Tanya, do you want to plug in your mic or check audio?

No, no sound there.

Okay. So Tanya says, hey, that's a lot clearer now. I didn't realize how important the first goals are. I will rework the goals. Really appreciate the time taken. Answering question. Pleasure. Absolute pleasure. Got a question here from Steve. Oh, Helen.

Helen's got a hand up.

Helen's got a hand up too. Hey Helen, how you going? Yeah, good. How are you? I'm good, I'm good. Can you hear me? Yes. Oh good, good. Yes. I've got a question about if you change jobs, can you access your equity if you haven't got two years in the one job and if not, what can you do to access new equity? Good question. So the whole two years around the two year number is associated with self employed people, Helen. So basically most lenders require to have two years of an ABN registration. So you have to have your ABN registered for two years, not necessarily GST registered. So over 70,000, you need to be registered for GST. But what they're doing is looking for consistency. So often what they're, you know, I think it's something like some terrible 50% of businesses fail within the first year. So they don't really want to be left with giving you a 30 year loan based on numbers of a new business venture. So that's why they're looking for the consistency over the two years. Most lenders, if we are talking self employed, just to cover that off, most lenders will either if there's a difference of 20% between one year on the next, they'll take the lower year. And if there is no difference of 20%, so it's the difference between 2013, 2014 figures is just, you know, 10% difference, they'll average them. There's some lenders like Anz that if you are self employed for 2 years and have 2 year ABN, they'll only look at the last year's figures. So if you just started out and the first year was pretty dismal, While you kind of defined your process and your discipline and the second year was much better and indicative of what you're expecting for the future, then they're a good lender to talk to. Having said that, if there's mortgage insurance involved, they can always ask for the second year. But as a person considering changing your job, if you're going from, let's say you're an office manager or a nurse or an architect or a doctor, and you're going from that job with one employer to the next job with the same different employer, the same job, same kind of responsibilities, then most of the big four or five banks now will actually allow you to, will take your first pay slip or maybe even your contract if there's no mortgage insurance involved. So you can be with XYZ on Monday through to Friday and then ABC after that and have the same job and they'll actually take your past income and your contract and some of them will ask you for your first pay slip. But there's a lot of lenders these days that if you have no, you know, big break between the job, so it's not like you go off and do an overseas year in London, then come back and then, you know, take up another job in the same role with another company. But a lot of lenders like you to, you know, especially second tier lenders like you to have gone through a probation period, maybe three months. If you're working for the government, there's usually a six month probation period. But if you're changing jobs and it's like, for like Helen, it shouldn't be an issue. Great, excellent. Thank you very much. You don't have to wait two years is the good news. Oh great, that's even better. Unless you're starting that new company. I didn't know what I was going to do for two years. Do all that research. Okay, yeah. Lots of dot maps. Exactly. Oh, I've seen, I've seen a few dot maps recently. That's. They're dotting everywhere, aren't they? Okay, thanks Ellen. Okay, thanks a lot. Bye.

So I've got Tim here. Is that where you were headed before?

I was heading to Steve.

Oh, sorry, where's Steve?

Steve up the top there says his house is too noisy at the present. So he's listening intently but he can't speak to us. So Steve's question is he's got two investment properties and he said he's 53 years young and he wants to know they're interest only loans at the moment. He wants to know the value, the value of the properties now are actually greater than the loan amount. So he has some equity built up and he wants to know how lenders are thinking about repayments of the principal for people who are entering into their 60s or retirement. Will financiers fund investment properties? When I'm in my 60s, I anticipate to retire at 65. Excuse me, sip of water. So that's 12 years away. Look, it's a really good question Steve. And since you know the National Consumer Credit Protection act that came through 2012 around responsible lending and making sure people can afford the loans, et cetera, it wasn't unusual for lenders to write 30 year loans for 55 year olds. And obviously if you're going to pay off the loan in 30 years, that that's we're talking like being 85 and with a retirement age around 70, I think these days really realistic. My mother in law turned 71, I don't know if I'm allowed to say that, okay, my mother in law turned over 70 and doesn't look a day over 55 and works full time and no one where she works knows how old she is. So I'm sure someone did at one stage but you know, we all are working longer and since that kind of 2012 period where the lenders got really tough on that kind of responsible lending and their interpretation of that, one of the things that has happened is we've got some strange policies, people over 45, which I would consider very young.

Oh yeah.

Just a word or two on a Macquarie bank application and saying, you know, here's a property for this 45 year old and yes we are after a 30 year loan and the exit strategy is, you know, that they sell the property at some stage in the future and pay it down is enough. Other lenders, especially when you're getting to 55, 60, you know, if you've got an interest only loan now if you're with a lender that allows you to roll your interest only period over. So usually the maximum they'll let you roll over is 10 years because lenders do expect you to pay back your loan at some stage. So a lot of lenders will give you a five year interest only period and at the end of the five years they'll send you a letter saying would you like to roll over your loan like Westpac does for instance or CBA. And some of the lenders actually have 10 year interest only loans that you can take out initially. However, sometimes the servicing is a little tougher. CBA for instance, if you want a 10 year interest only loan, the servicing is a bit tougher than a five year interest only loan. But for those lenders that ask you if you want to roll over, fabulous, you know, you've got the 10 years covered of interest only periods. If you do refinance to a new lender, that interest only period starts again. So if you can afford to do that, then you know that interest only period will start potentially for another 10 years. However, as you do get closer to 60, they will ask your exit strategy. Now if you were, you know, Jane and Jim who own their own home and they're 60 and they're buying, selling our property and they're buying, you know, the next home, taking a 30 year loan and saying your exit strategy is to sell it off and downsize. You know, in 20 years time is probably going to be a little bit awkward for lenders and they're going to see that as a risk. Whereas you know, if you're, you know, Stephen and Susie and you know, you're 55 and you're looking at refinancing or buying a property and it's an investment property and you own your home or you're paying off your home and, and you've got a couple other investment properties then where you are at the moment, Stephen, with the property worth more than the loan. What they're going to look at is what your mortgage broker will do is write your exit strategy for them, which is the exit strategy of Steve and his wife are, is to in 10 to 15 years time sell off these properties and pay down the rest of their mortgage on their home. So there's a very defined exit strategy. So lenders get a little bit nervous around if it's your home and that's all you have as an asset base. But a lot more understandable, understandably, you know, if you've got investment properties and you've got equity in them, then they can see that possibility and just be aware that there's some lenders like oh, here comes my bankwest, for instance, at the end of your five year interest only period, they will reassess your entire loan. So if you've got your home loan with them and you have access to equity, go and buy investment properties because they're so tough on their, their servicing. When the five year interest only period comes up and they say, hey, you know, what do you, what do you want to do? And we're moving to principal interest and you say I want another interest only period, they say, well have you taken on any new debt in the last five years since we assessed you originally, say, yeah, I bought two investment properties, you probably won't service with them, so you'd have to go to another lender. So, you know, that's why it's so important to have your finance strategy. Right. And I know the ultimate guide to renovation. The next couple modules, you're gonna, guys are gonna get into this and I really try to explain to you how to be aware of it, but you.

Know, would they be, when they do that reassessment, would that, would they be concerned if you changed job or.

Not necessarily you're earning the same amount. Like if you're earning, I mean, interest rates have come down as well in the last five years, so people's borrowing capacity is usually a bit better. But if you've taken on two new debts and you know, if the current interest rate, for instance with Bankwest is 494 and they're assessing and actually I can show you what their assessment rate is.

So just so I understand, they automatically assess after five years even if you're not asking them for further finance with another additional property.

No. So what, so what they're doing is they're actually saying, you'll get a letter to say, hey, your five year interest only period's up, you're moving to principal and interest. And you might say, oh no, I don't want to do that. I want to, I want, I want another five years interest only. Okay, we have to reassess.

You gotcha. Yeah.

Where lenders like, you know, WESTPAC and CBA for instance, will say, as long as you're not increasing the loan and changing the loan and you're just asking another five years interest only, is everything pretty much the same? They might ask you that question, they may not ask you that question, but you've been remaking the repayments without issue and they can see the last five years of repayments being made. If you have had problems making repayments, then they're going to be asking for details. Yeah, but you know, basically, I don't know if you want to jump up on this screen, I'm going to show you something that I probably shouldn't. But hey, you know, who's going to tell? So this is my screen here. So you can see here the different lenders now, the interest rates at the moment we jumped over and looked at, you know, for instance, what was I saying? I was talking about Banquest, wasn't it interest standard variable 5.29. Their fixed rates here. So 529banquest is their standard variable rate. But this is what they're assessing you at 7.25%. So if you've then gone and got an investment property even though it's interest only, Bankwest will assess you with principal and interest at 7.25. So if I just jumped in here quickly and said, okay, so you've got a $350,000 loan at 7.25%, although you're only paying, you know, you're paying at the moment, maybe, gosh, maybe you're fixed over at Macquarie bank at 499 for five years. So you're paying a repayment of 1455 per month. They're going to assess that at principal and interest at 725, 2,388amonth. So nearly $1,000 more. That's why you possibly can't afford it.

Yep.

So hope that helps, Steve. But it's the fact that they're investment properties and the fact that you've got equity in them already is a really good position to be in. And how will lenders assess you? As long as there's a really strong exit strategy that's telling them what your plans are. I wouldn't be 60 and planning on trying to get a new loan because that will be a bit difficult and potentially all it is, they'll requested maybe a 20 year loan term and look at your equity position in the other properties. So hope that helps helps.

Yep. And use a mortgage broker. Julie, can you hear us?

Julie? Yes, I can hear you. Can you hear me?

Yep, loud and clear.

I think you've kind of covered mine a little bit in the last couple of questions, but mine's also a finance question and I'm not sure how the banks would see me. My income is really on. My tax return is really low. I'm self employed, have been for a number of years, but my equity is really good. So I own my own home and have another investment property that's cash flow positive of about $500 a week. But my income is very low according to the tax department. So are they more interested in my equity level or my income? They're definitely interested in your income. So your ability to service the debt is what they have to consider. So they don't want to be on Current Affair with, you know, I gave Julie a $400,000 loan and, you know, she could only afford, you know, $10 a week to live off, you know, kind of story. So. So if you think of Lenders protecting themselves. They protect, they're assessing, they're doing a bit of a stress test. So as I showed with, you know, that bank west example, you know, they're adding on, you know, a 2% additional interest rate and principal and interest to see if you can afford it. There are lenders that I use for my clients that are better in assessing self employed people. So some lenders have some really great, you know, add backs. If you're paying extra in your own super or if you've got depreciation or you've got all those other things, there's some lenders that are more amenable to adding those in. If you've got a company that has debt associated with it, then most, well, that's good. Most lenders want you to include that debt in your personal debts, but some lenders don't. But it's not an equity position. And in actual fact there's quite a lot of people have this huge equity position but they've hit the servicing ceiling. And being self employed, if you can't, and I know being self employed myself, obviously there's that whole dilemma. And I have conversations usually in June with many accountants of my self employed clients who ring up and go, okay, we're doing the figures and we need to make sure that a, they can keep buying what their plans are buying and show the right income. But we've also got all these disbursements to make. Let's work together. So we work together on obviously making sure that it's all legal and above board but where the funds go. So it is really hard because you pay tax on a profit, but you need to have an income to show that you can afford the loans as well. And sometimes maybe director's fees or covering some of your additional costs, some lenders will use those costs that you've taken in your business as maybe a mitigant against your own personal living expenses. So there is some ways around it, but really lenders are first and foremost looking at whether you can afford the loan itself. So they're looking at your income and debts. Then they're looking at have you got money to put into it? So can you afford, you know, because there's a lot of people out there who have the ability to their borrowing capacity is huge, but they don't have any cash to contribute. So they don't have their first deposit or stamp duty chart that they can pay for. And then on the other hand there's people who have a lot of equity like yourself, but not the Income to show. So often that's where people sometimes get into joint ventures. But one of the things you might consider, Julie, is and for people who have kind of hit that ceiling and depending on how exposed you are to, you know, other asset classes, et cetera is and you know, really suggest you talk to a financial planner about this because I'm not. But from a mortgage broking point of view, if you bought in a self managed super fund, most self managed super funds look at just your, your, the, the debts and the incomes of the self managed super fund. They take that in isolation. They don't look at your personal debts and income because in a self managed super fund you have to be able to cover the interest repayments and costs with the income that's coming into the self managed super fund, be it from share dividends, be it from the 9.25 or 9.5% that you need to contribute from your income plus the rental income. So there might be a way around it. I wouldn't suggest that you put all your assets in property. Maybe you want to hedge some of that against having some in shares or wherever your current super is. But it's, it's a way around it. Okay. All right. Okay. Hope that helps.

It's a real dilemma, isn't it? I know the, I've been in the same situation because I've been self employed, you know, most of my life and the, you know, getting the accountant to pay tax is just like pulling teeth. They just hate doing it. Yeah, but you've got to show more.

Tax just to, and look, I had a chat to a potential client the other day who I suggested shouldn't become a client and shouldn't take a loan. And she was, she was really upset because she had accountant tell her she couldn't sell a property because of the huge capital gains tax that she was going to pay. But she was doing it really tough and she actually had a huge amount of equity and the capital gains tax in the end was like a tenth of what she was actually going to put in her bank account and make, give her an easier life.

You have to understand, put it in perspective.

Yeah, exactly. And it didn't sound like a big number until you went, well, you know, in actual fact you can, you know, have reclaim a bit of your financial future and, and you know, get on with enjoying your retirement. So understand accountants, you know, are fantastic people to have on board and you know, there's some really great ones out.

There that's saying might be coming from their own paradigm when You're a hammer. Everything looks like a nail.

Yeah, exactly.

Yep. Tim's got a question. He says, how do the banks view flips? Do they view them poorly as they don't make much money out of you and if so, do you have to be creative with the truth?

Tim, we're never creative with the truth when it comes to banks. They get you on that. They call it fraud. But it's a really, really good question because there's a lot of people who want to flip and you know, the question of financing flips is. Well, we kind of COVID it actually in Ultimate Guided Renovation Module four.

Yeah, it's coming up. You'll get a lot actually, actually.

Here we go. I've got it here and open. So. But the, the thing is that you need to be really aware about is, is not so much yet. Module 5 is. It's not so much the, the fact they're not going to make money out of you. However they are thinking that way. And, and lenders, you know, I go to lender presentations nearly monthly and they say if we can wrap them up with two to three products, it's so much harder for them to leave us. So we've got the credit card, got the savings account, got the loan and you know, the personal insurance or whatever else. And you know, that's a strategy of managing their business and, you know, having clients stick by as flippers. You need to be very wary of something that I think a lot of people aren't aware of. And that's your credit file and your credit file and you can find this@mycreditfile.com but your credit file is essentially the blueprint that the lenders pull up as soon as you make an inquiry that shows them what you have done in the past in way of taking out loans. And if you're a director of a company, all of your directorships and everything are listed as well. Since March 2014, where we kind of moved into a different type of the Privacy act changed and we moved into this reporting mechanism where, you know, even in theory and the banks haven't all committed to this, but in theory they can show your current balances of your loans rather than the fact that you just inquired for a loan last year. It's the fact that you were successful and your balance is X, it's that that's going to get you. And I can think of a client that I had last year, you know, income well over a couple hundred thousand dollars, very financially stable, with a lot of investment properties and came to me as a new client and had the year before four or five of their properties, they had refinanced from one lender to multiple lenders. And they'd hit their credit files and some lenders hit the credit files with an application. They hit the credit file with pre approval, hit the credit file again just to check that there'd be no difference at a formal approval stage. So you're talking potentially 10 to 12 enquiries in a year. And the servicing was absolutely fine. It was an 80% loan to value ratio. And the lender actually said, no, the credit score has come back so high, we can't overrule this. We're not going ahead with the loan. And we could clearly explain the fact that this person wasn't just out there applying for 10 credit cards. They weren't out there being unreasonable in what they're doing. They had bought a property portfolio, interest rates are at a good point. They had gone and refinance and the lender came back and said, no, we can't override credit scores. Now, credit scores are something that happens within banks. No one is privy to how they come up with them. But there's simple little things like, you know, did they have a. Do you have a landline versus a mobile? Do you, how long have you lived in your current property? How long have you been in your current job? You know, is the person when I'm writing an application, regardless of whether, you know, say husband and wife and husband on $50,000, wife on $100,000, but wife's only been in the job for three months and husband's been in the job for 20 years, then applicant one would be the husband because it's more stable job, regardless the fact of the income. So being strategic about, you know, and anticipating sometimes how they credit score is an art that mortgage brokers do. But this whole buying a property, getting a loan for $400,000 even without mortgage insurance, but $400,000, say with a $500,000 property purchase and six months later selling that property and going back out and getting another $400,000 loan with another lender or with the same lender, you're starting to build up a profile. And I've had a few comments from credit assessors who have said things like, look, there's, there's been the magic number 12 over the last five years is on the credit file. And like, what's magic number 12? Something that goes in the credit score. So it is something that as flippers, you really do need to be aware of. And you know, you might get away with two, two or three, but it is a kind of building up on your, on your profile. There are definitely strategies around this, guys. I mean if you've got a property with a large amount of equity, you could use the equity to buy the property.

Yeah. With that new reporting, has that not fixed up any of the credit file things now that they can actually see in.

The lenders haven't actually signed on to releasing all the information or showing the information to each other. So we're still getting told that, that they're seeing what we're seeing on the. My credit file or when we order a credit file for our clients through Vita. That's what the lenders are saying. So although we have it is technically available, my understanding is that the lenders aren't seeing all that information at this stage or the lenders haven't actually signed on to giving that information over.

So.

Interesting.

It's pretty blunt instrument, isn't it? Like using a credit score like that without actually knowing what it's for.

No idea.

Yeah.

And I mean just through 10 years of writing mortgages, I guess getting an idea of some that are getting through and some that are not getting through and why wouldn't they get through when they look as good is kind of, you know, an art. But. Yeah, no, Tim, it's a really good question. So some strategies around it. If you are a flipper and a serial plan planning to be serial flipper. Two things, you know, if you've got a million dollar home with $300,000 mortgage against it, then you know, you've obviously got a huge amount of equity there. So at 80% loan to value ratio, a million times 80 means $800,000 equity available. You've used up 300 for your home. There's 500 left over having $500,000. And obviously you have to service that debt. Show that you can service that debt. But $500,000 to go out and buy a $300,000 property, do a renovation and sell it and put the money back in your line of credit and never have a loan against the first property would be the ultimate way of being able to do it. But not all of us have a million dollar home with a $300,000.

Do you want to just explain what a line of credit is just for us?

Line of credit is. It's like a big credit card. It's basically just a bank product. It's a loan product. The standard variable loans. The standard loan is variable and matched against the RBA with the bank's margin on top of it, usually principal and interest. But you can have 5 to 10 years interest only. Whereas a line of credit is, well, basically like a big credit card. So you might have approval for $500,000, but if you only pull out 300,000 to purchase a property, you only pay interest on the 300,000. Now, not all line of credits are equal. Some are 30 years interest only, which is great. Some are 10 years interest only, some are 15 years interest only. Different lenders, although they use the same term, have different, I guess, characteristics of the lines of credits. Some are what's called a continuous or revolving line of credit. So let's say you have a $500,000 line of credit and a 300,000 is drawn. Then the $1,500 a month repayment could come out of the remaining funds in the line of credit. Some lenders let you do that, some lenders don't. It's a dangerous game to play if you can't actually afford to make the repayment, to actually keep increasing your loan amount. So just be aware of that. But Tim, one of the things that I have done for some of my flipping clients is found a lender is a deposit taking facility. And let's say, and this only works if you doing like, for like loan amounts and loan to value ratios. So let's say you're buying a $500,000 property with a $400,000 loan at the end of the property's property's being sold, move that $400,000 loan over to a term deposit. Now with a term deposit, your loan to value ratio, cash against cash could be almost 100% or 95%. So you might only need to have, you know, $420,000 in a term deposit for a $400,000 loan, for instance. And some lenders will let you, with portability, actually move, say the $400,000 loan straight over to a new property worth no less than 500,000 with the $400,000 loan. But it's back to back settlement has to happen same day. You know, if you're a flipper and you're out there and you're renovating, renovating, renovating, you're managing a structural renovation, then trying to sell it. You're in the sale process then to go back and do your research and find another property that you can do the same thing on within a certain period of time and settle in the same day really hard. So portability, most lenders, some lenders allow you up to 30 days. But most lenders want a back to back same day settlement. So this strategy of being with a major deposit taking facility where you can move potentially the loan against to a term, a deposit and you're still paying interest on this loan, remember? So it's not something that you just kind of park there for a period of time and forget about it. You're paying interest on it. So it's just moving the security from a property to a term deposit and then you're moving that loan once again, changing security. Some lenders might charge you 100, $250 to change the security. So you're changing from the term deposit to another address. So there are some strategies around it. Hope that helps. Yeah, yep. Does that clear it up for you, Tim? No microphone, Tim. Yep, yep. Good.

Here's R. Kev. Sorry if I've pronounced your name wrong. Hi, Jane. Where are the best opportunities in Australia right now and what part of the property cycle are they in? As both Victoria and New South Wales are in a seller's market.

Oh my goodness. This is the kind of question that I'm always tempted when I sit down with, I don't know, property Professor Peter Cooley is, or John Edwards or someone, hey, where should I be buying? And they say the same thing to me that I'm going to say to you, which is always so very frustrating, which is it depends on your personal criteria, what you're trying to achieve in the goals and the time frames that you want to achieve it. So, you know, it is, it is frustrating for me to say that to you, but let me try to be a little bit more clear it for you. Where are the opportunities? So there are many, many opportunities in Australia and although there is a, you know, as you say, a seller's market in Victoria and New South Wales, Victoria, New South Wales are made up of so many different markets and in some areas there is nothing happening and in other areas, you know, there's, there's definitely a huge growth. We've definitely seen a huge growth, growth period. I mean, I think I was looking at the, I just got in the mail, in my email today, I subscribed to the Residex report as an annual subscriber and I have the annual supplement which gives me all the, the up to date information on New South Wales and medians and the growth and four of my properties in New South Wales grew over 20%.

Yeah, that's great.

Last year I was like fabulous. Yeah, this is what, this is what happens. Passive income's about.

Yeah, well, Even with my development site. And I know you don't do. We haven't done any figures on growth, but I'm watching that go up at the moment.

I'm thinking go exactly so. And you know the Trident strategy, we talk about growth being the one thing that you wouldn't, you know, give away. Especially you know, for the hold strategy, obviously not the flipping strategy but as John just said, you know, flipping from a development or even, you know, some, a short term hold on your structural renovation.

Still nice to have.

It's nice to have that extra go. Now I'm just going to flick over to the your property success toolbox. So you guys should have got this October toolbox where I have a bit of a discussion about the block and my experience in the block and whatever. If you come down to. So this is, so this is the your property success toolbox, resources toolbox. If you're trying to find it. If we go down to Heron Todd White and this should just be a report that you guys get and read every year. Every year, every month. This, what I've done here is whilst this is downloading, I've just done a quick little map here where you can see, you know, where the, the bottom of the market, the peak of the market, you know, rising market started recovery. This is just a grab from this Heron Todd White. So Hare and Todd White are valuers and if you go all the way down, 70 page report every month. So they send their valuers out. They've got thousands of valuations happening around the country every single month. They ask their valuers different questions every month. Some are, you know, where the opportunities or what are the typical demographics or what can you get for under 500,000, etc. That's fabulous report. This here at the end is a quick, you know, what's happening in the market. So you know, if you're looking to find out where the market is, capital city industrial units, houses for instance. So here I am up here, I'm trying to make this a little bit bigger for you so you can read it. So you know, they tell us where, where the market is. So you know, in the capital cities, you know, peak of the market, Sydney, you know, Melbourne, rising market still. So still some legs in Melbourne obviously Brisbane's rising. We've got, you know, start a recovery in Adelaide, we've got a declining market in Perth, started recovery in Hobart, rising market in Darwin and the bottom of the market in Canberra. So you can start looking at that and looking at opportunities within that. You know, there's also a trend around vacancy rates, the stages, property market, blah, blah.

That's good, isn't it? So how much attention do you pay to that? Because I've heard you say before that you, you bought when you had the money is how much of that informs where you, where you were borrowing.

Well, see, this is the thing. I've got clients at the moment, let me think, who have I worked with in the last couple of weeks? I've got clients buying in, oh goodness, Geelong, lots in Brisbane, quite a few in Sydney. I've got some regional based New South Wales still few in Perth, no one in Adelaide, no one in Hobart, few in large regional areas in New South Wales. So we're talking, you know, the Newcastles, the Port Macquaries, the Dubbos, the Mudgies, Toowoombas, Ipswich, which gosh, there's so many. So if I, if I thought about where I'm seeing people buying, thank goodness I've got no house and land packages and no inner city Melbourne, Brisbane kind of apartments off the planks. Those valuations are questionable actually. Interesting thing I read in Australian Financial Review today is that there, you know, we talk about Sydney being, you know, there's no land left in Sydney. There's a land being released in Delhi Road Ride that can accommodate 3,000 households and they're releasing the first bit which is going to be 800 units on it. It's like, you know, when we, we hear about this whole supply and demand, well all of a sudden that area is going to have a huge amount of units that have gone up and we've seen what, you know, that's done.

So yeah, I guess where I was headed with that. How much do you worry about the cycle when, when it's when you've got cash to buy?

I, I think it's time in the market rather than timing the market which is so important. So you know, for me it's like if I can afford to buy, I would afford in the best place that I can afford to buy that has the buying criteria I want which is the, you know, borrowing, you know, the purchase price is what I can afford. Obviously my, you know, capital gain, capital goal, capital growth, percentage that I need, the rental yield that I need and then I look at the variables around vacancy etc. I would definitely, you know, where we got top, where's the top of the market at the moment? Oh so now I'm looking at regional areas. So this is New South Wales regional as I was just trying to show you that they've got different regional Areas as well. So you know, the peak of the market in Sydney, for instance, there's still people buying in Sydney and this is houses. And if I look at units, you know, peak of the market in, in Sydney for units as well. I've, I've still got a lot of clients that are looking and buying and buying well in these areas.

Yeah.

And you know, I know that there's, there's going to be a pullback on the growth that's been exhibited. But you know, if you're getting what, 20% in sub subovers last year and I pull back a growth to 5%, the properties aren't going backwards. So the 5, $60,000 that you're spending now is not going to be 5,40,000 if you're using these criteria to buy the right way and buying the right property in the right areas to suit the demographics. So to answer your question, I definitely, I look at this, it interests me because it shows me the demand that's in the area. But also if I can back that up with my suburb due diligence that shows me the demand for the rental because I'm a hold person, you know, you're obviously a flip person but you know, from my hold strategy, if I can back that up with a vacancy rate and the rental yields that I need, then I'm not scared away by the fact that it's peak of the market and I wouldn't be rushing to where's the bottom of the market here? Bottom of the market for Canberra units. You know, I wouldn't be looking at this and going fabulous. You know, I'm going to be on part of the growth structure because they're, there's going to be some places in Canberra that you know you want to buy. There's, there's going to be, there's been a large amount of development that's happened there. So you might have a huge supply over supply. So you'd have to then go do the research. As I said, you know, it's like the dot map, it's like the suburb due diligence. It's like any of these things. This is one tool that you throw in the toolbox and go, this is some analysis that I need. So I think that what's archive he said, yep, thanks for the report. Yeah. So the data and information is king. It sure is. But where to buy, you know, it really has to come down to what you're trying to achieve and you know, if your goals you've done module one or course one, your property success system. And your goal is to have $100,000 passive income in five years time. And, and my goal is to have a $50,000 passive income in 15 years time. Then you're going to have a whole lot higher risk kind of investment strategy than I am. I'm going to be looking at the property that I can afford that has a certain amount of growth and yield for the 15 years. You're looking at doing something quite significant to increase that equity. So it might be a development, for instance, or it might be some type of change. You know, waiting for zoning to change and, and being on the cusp of, you know, buying the million dollar land bank out near Orem Park, Sydney, and, and the council then changes it and it all of a sudden's worth $30 million. So you know, it's, you know, your strategy is so important when it comes down to what you're trying to achieve. When. So you know, where should you be buying? Where should. Wherever it suits your goals. But you know, do as I said in the beginning, you know, be one of those investors that see property investing as an income generating business. And you know, setting up that kind of business plan is really that setting up those goals and understanding the costs and knowing what you can afford and knowing what you can do and what your risk profile is and the strategy that suits that and that's the most important thing.

Okay, so we've got one from Charles here.

Charles, great.

No hands up at the moment. So there's a chance, if you want to put your hands up and have a chat, how do you estimate the price differential for villas versus duplex versus freestanding houses? And you see the second part also, what is a good way to estimate in comparing the value of a property? Is it predominantly land size?

Okay, villa versus duplex versus freestanding houses. You know, what I have seen is that different states lump different types of properties. Like the villa might be in a unit in, in Queensland.

So the naming differs.

Yeah, and we're at. Villa in, in Melbourne might be considered like a, what do you call the. Oh my gosh, I'm gonna say duplex, but it's not. It's like a, you know, older style.

House, single level, split, one on each.

Side, having mental blanket blankets.

Not like a terrace or something.

Yeah, like, you know, like you have a terrace. Like you drive down the street down here and there's like, like two houses shared common wall.

Yep, yep. Oh, just a semi.

Like a semi.

Yeah.

See that's what happens when you spend.

Yeah, you've been away Too long. Yeah, there we go. Yeah, there's a few answers coming in there too.

Oh, thank you everyone. Appreciate the fact that you're helping me out with my brain drain here. So it is really difficult. And look, my, my thoughts on that is that you need to understand how they they termed in the area that you're looking at. So Charles, if you've done your say, dot map or you've done your analysis that says, you know, for instance, Red Hill in Newcastle is where you want to buy and you get into domain or realestate.com and you put in, you know, $400,000 property in red Hill and all of a sudden you come up with villas and duplexes, et cetera. And they're talking about them being units. So if you put in your criteria as unit, they come up as units or they come up as houses. So you get a feel for what that 400,000 is buying for you and what the terminology in the local area is, because the local agents are going to use the local terminology. So if I was having those kind of doubts of, oh gosh, is this $400,000 in the area that I'm looking at, is that a house or is that a duplex or is that a semi? Look, you know, in Melbourne, for instance, a semi would be considered a house, whereas, you know, it might be considered a, you know, a dual key kind of, or not dual key, but something in Queensland that is a semi that we term a semi down in Melbourne may be considered a unit up there. So it's really about finding out what the local's terminology is and then doing your research around that. So that I think is really important. What's a good way to estimate comparing a value of a property? Well, John, I kind of had this conversation on the renovate network and threw you into this last week too, because it was one of the things that I know that you were doing in sub. Was it Essendon that you did the study on. You're looking at renovated versus old style renovations that had been done and unrenovated and looking at the land size.

Do you think that question is a good way to estimate comparing a value of a property? Is it talking about one property compared to the next or. I mean, I'm not sure if it's a question about comparable sales or if it's a question about pricing disparity.

Charles, do you have a microphone? We can help here more. We can define what you can do.

Just stick your hand up there if you've got a microphone. Charles, there we Go. Beauty.

Okay, Charles. Hey, Charles. Can we just confirm your question there?

Yeah.

Can you hear me? Yeah, gotcha.

Yeah, I thought I was trying to unmute myself and I couldn't find it.

Oh no, we're in control here.

Yeah, it's really. You got it spot on. Meaning like I want to compare different properties in the same area. One is like fully renovated and the other one is really run down investment property. You know, what's. How do I say, how do I estimate the price differential of these properties and some with bigger land size and some are on a smaller block.

Do you want to take this?

Yeah, I've spent a fair bit of time doing this and it's not an exact science by any means, even for valuers. I don't think it is. So you're looking for comparable sales and really like, for like. And sometimes, I mean, ideally you want to be trying to see stuff similar kind of housing stock. If I'm trying to compare an unrenovated property to the fully renovated property, it needs to be kind of similar, kind of vintage. So you know, they might both be Californian bungalows or they might both be, you know, federation house or whatever it is, or 60s brick veneer or whatever. So it needs to be like, for like say comparing apples with apples and land size definitely also comes into it. One of the ways I used to try and do it when and try and become a real expert in the suburb that I was operating in is I would literally go through all the open for inspections of everything that came onto the market. So every weekend and sometimes on Thursdays as well, I go to the opens and I just keep a record of what they were. And the way I'd categorize them would be whether they're unrenovated, which I would say the majority of the population probably wouldn't want to move straight into it. You know, the average, average kind of couple wouldn't be into that unless they were into kind of renovating because you know, there may be cracks in the walls and maybe some rest dumping or something like that. And then just to kind of an average, a dated property. And I would consider a dated property something that kind of hasn't been renovated in the last 15 years. Maybe a kind of 80s kitchen, something like that, that. And then I would classify the, the renovated properties and that would be typically, you know, in the last 10 years that it's been renovated or it might even be 15 years. But it's just for, to the eyes of most people is a pretty modern property kind of thing. And then what I would do is record when that property. So record that as I'm doing the open for inspections and then when it sold, go back and mark off the result. So I'd look at a couple of things. One is the price per square meter. So how much was the. How much did it sell for per square meter?

Is this living area or land size?

A land size, yeah. And that way you can start to compare that to, you know, like, for, like with properties that are unrenovated. So that's just, that's one measure and also just trying to work out if you can. I mean I do things like just run my own median between, between all of the unrenovated properties and all of the, you know, the median's just the middle number. So work out a median for the unrenovated properties, the dated properties and the renovated properties. And then kind of sometimes you might find like I did, James was just talking about that example in Essendon that the dated properties and the unrenovated properties were selling for exactly the same price and on both measures on. At a kind of median level but also on price per square meter because of the demand for unrenovated properties was quite high. And people just have a perception that there's equity to be added to the unrenovated property, which is not always the case unless. So yeah, it's important to know those numbers. So they're two of the things I think the most important thing is though, particularly when it comes to making the buying decision that you are comparing like for like because is it's so tempting to try and look at the best house on the street and think that that's what you're going to have the ability to renovate up to. And yeah, so it's just been realistic and disciplined around. Yeah. What's your realistic end value? And it's, it's hard sometimes because it's always the catch 22 if you're too conservative, you'll never take on any job because if you kind of always the bottom of the values. I think a good measure though is John Edwards from Residex told us in an interview we did with him that he likes to look at 80% at the 8. You know, if you looked at the, the, the pricing spectrum of a street, he likes to not look at selling more than the 80% mark. And so because that final 20, you're kind of into the thin air of the, you know, the really custom houses and all that kind of stuff and, and anomalies in Sales and that kind of thing. So if you can kind of, if you can kind of look at the 80% mark and think, all right, well could I renovate up and sell at that 80% level? And it stacks up. I think that's a good way to measure it.

Yeah, that's great.

Thanks.

Can I have another question?

Sure, yeah.

Adding a granny flat, is that a good idea in terms of exit strategy? Because does that limit your market more? If you add a granny flat, your market is for selling later on will be a bit less.

Granny flats as an exit strategy.

Yes.

I'm just thinking of if you add a granny flat, maybe you increase your return, but then rental return. But then when you're about to sell your, your property with a granny flat, you know, is it, is it gonna kind of hit your capital growth because you're putting in a lot more equity compared to extensions and your limit, your market might be limited. Not everyone might want.

That's a good question.

Yeah, look, the whole granny flat, it's obviously a new, a new thing. And since Keneally kind of introduced it in New south Wales in 2012 and you know, people were getting on board with it more and more. Yeah, she became premier. Yeah. The, I guess what I've seen with clients of mine that we've organized finance for granny flats, there's a lot of them are actually constructed in the granny flats. And you know, when, when we started doing granny flat loans, so usually the construction of a 60 square meter addition out the back was around 80,000 and now I'm seeing them more at 120 and we're clients who are doing them in Port Hedland and they're around 180 because they have to be kind of shipped in already ready made, but the market seems to have gone up in price point. But what the problem that we found in getting, say construction loans for them is almost similar to what you're kind of indicating will be the exit strategy, which is lenders have to get a valuer to go out to a property and value the property. So if you're constructing, you know, a granny flat or if your potential buyers are trying to get a loan to buy your property with a granny flat already there, they need three comparable sales before the lenders usually take the property on board. And if you're the only house in the suburb that has a granny flat and getting three comparable sales within the last three months is going to be very difficult for them to do. And hence there could be issues for you in your resale in Actually trying to sell the property.

So does that just mean that they would compare it to a lower price or a property without a granny flat and so you would get a lower value?

Well often what they do, and I've seen the same with not boarding houses but large houses that have May seven to 11 bedrooms in them is that there's no comparable sales in the area that allow people, allow the value to say there is a comparable market here. They're not going to do a well five bedrooms worth this but this is a seven bedroom. What they often do is say there's no comparable sales and the lender will say the risk to us is too great in taking this on as an asset to support a loan because this is a one in the area.

So there's not a.

If you default we can't sell it. So.

So rather than compare it to properties that are actually lower in value they just say no, there's no other properties. Yeah, there's no other property that's the same as this so we're not giving you a loan.

Or they might say well we'll do it. But we, we, we're so worried about this being such a unique type of property in the area. So once again we're talking about uniqueness. It's not necessarily granny flat could be the seven bedroom property or whatever that you have to put in a 40% deposit. So we will only go to a 60% loan to value ratio. So you know it is. I personally have some concerns around the whole granny flat strategy and I do have clients that are doing it very, very successfully and have amazing rental yields and some. But they're doing it in areas where it's kind of a tried and tested proven like Blacktown in Sydney. You know, I think you know maybe 60% of all the greening flat loans that I've written have been in Blacktown, you know. So you know in areas where there is, there is a history of that type of property then or you know there's been some changes in. So I've got a client in Perth at the moment who is anticipating some council changes which is going to allow them to do some subdivisions in their area. So they may not be the first, they may be one of the first to actually do that. But because of the change in the council requirements or planning ruling they're going to be one of many. So when they do get to the exit strategy it's not going to be that unusual. So you do have to anticipate what your end market is and that's not just for the flippers who are thinking, okay, well I'm going to be selling to mum, dad and the kids. It's you and your exit strategy too. So the reason I don't buy student accommodation or I don't buy studio apartments is that I look at it and go, I might have an exit strategy in 15 years time, but what's my emergency exit strategy if I have to get rid of this next year due to personal circumstances? Is there going to be a market to buy a 24 square meter studio apartment? And the answer is it's not the majority of the market. It may not be the majority of the market in that suburb and therefore the risk to me of getting out of that is too great. And that's how the banks look at it as well. They look at the risk and they go, this is unique, this is different and it's too great for me to lend this. So as an owner of a property, looking at your own personal exit strategy, think of what the lender is going to be saying to your potential buyer. And if they're going to say, you are, you know, you're sitting in Lithgow with the only property with a granny flat, this is too much for us to anticipate then, you know, you may decide that that's not the strategy in that area. You might look for an area that is better suited to the granny flat. So does that help Charles in trying to.

Yeah, yeah, yeah, that's good. Yeah, thanks. Thanks, Gene.

No problem.

Okay. Question from Kate. Do you ever help clients figure out their buying criteria and strategy?

Oh, Kate, you might have to email me on that. I do have some personal mentoring kind of things that I do, but yeah, it's not something I advertise. So I'm happy to have a chat with you offline with that if you want to email me.

Okay, so we're just about at time by the looks of things. Any last remarks?

I just wanted to clarify something that we said to Charles. I don't know if you can jump over to my screen.

Sure.

I just wanted to pull up Residex report on a particular property and this is a property I've just chosen at random that I have done as a Residex report for one of my mortgage clients. So when, when you mentioned that, you know, John Edwards is saying he wants to sell at the 80% mark, this is what Residex actually does is it takes the street rating and it looks at all the properties. I hope you can see that screen, can't you? Yeah. So 0 to 10, so there's 100 properties within the street. Remember, Residex does the value of the properties based on the past sale. So they only use older properties, they don't use brand new properties past sale and they also use the recent growth. So if there's 100 properties in the street, they can automatically say what every property's worth. Obviously, if you've done renovations on it, they don't know that, but based on the previous sale data and they rank them from 0 to 10. So you can see here in this example, if you've got a 2 or 3 or a 4, which is we're talking about the median is 878 in this street. So we've got some street values here, 878 in this street. Then you want to be buying below the median and you want to be. If you're flipping, you want to be selling above the median. So he's saying don't try to create the best house on the street and don't buy the best house on the street. Well, if you're flipping, this is not where you want to be. You want to be at the 8. So you want to know, can you buy at a 4 and can you sell at an 8 and make money? So if we're buying at 860 here and you're selling at 970, then you know, we're talking about the fact there's only 110,000 difference there. Now, structural renovation is often going to be about 40% of the value of your property. Right. So you'd be creating way past the best house in the street. You'd be creating something up here. So in this instance from a flipping. So these are the Residex replacements that you actually have access to as a Diamond member. So obviously get onto the membership page and put in your request for the property. But this is how you can read those. So it's telling you, you're buying around here, is there money to be made? And in this instance, no, if you're going to be doing something substantial, I mean, if you're doing something that was, there's 110 there. If you're buying costs, et cetera, you want to be buying here maybe only spending 20 grand on it, with all the stamp duty and capital gains tax implications and, and selling around this much to make that money back. So to make another 20. So I would be saying in this instance, no, but that's how you read those reports. So you wouldn't be trying to get above the eight, but you want to be Buying below the median. And this is how you can see within the street that you're looking at whether that's possible or not.

For a whole strategy. They just usually recommend sticking to the median street rating or also go for the lower.

So we, I mean that Trident strategy. Yeah, the Trident strategy. We talk about trying to buy below the median. So we're trying to, we're, you know, buying below the median to renovate to just above the median area or median size, median price so that you, you know, you're creating something just a little bit better to be able to sell, you know, a bit faster or be able to rent a little bit faster. So yeah, so there you go. That's how you read that. So I just wanted to pick up on what John was saying in there.

Cool, thanks. Thank you.

Okay, well, I think we've covered off lots of, lots of questions, lots of finance questions. Great. Some property questions. I hope you guys have got some value of listening of what other people are doing. We've covered what granny flats, we've covered where to buy, you know, how to get your strategy right, etc. You know, so, and you know, servicing and all those kind of questions, how lenders look at flipping, etc. This is what these calls are here for, to try to answer as many as you questions as possible. I encourage you to, you know, module four is going to be out and about for the ultimate guide to renovation. People who are listening to this live. For those of you previous intakes, you know, once again, you know, there's the renovator network to grab some value and do some things to ask you questions on there and there's obviously a lot of people on there supporting and for investors Choice diamond clients, make sure that you jump into your membership area, request the, you know, Residex reports that you want on the suburbs or the, the properties that you're looking at or you know, trying to do a query on your portfolio value. And also I'll be uploading in the next couple of days where we've got the discounts for buyer's agents. I've got one of those buyers agents that's got some properties on the markets that well, they've anticipated or they've found in a number of the cities that they think are really good buyers that you might want to contact them on. So they'll be on up by Monday and a copy of this recording will be up tomorrow.

Yes, that's right.

So all good.

I think we've, and the, so we've got the Mastermind group spinning out or there'll be emails going out on Monday. And and not too far away is also the ambassador program for this year.

Too, which is really exciting.

Yeah, stand by for that one too.

Small group of people we get to work with. So I guess that's it for us. It's time to to wrap up. I'm not sure if you're still seeing my screen. Nope. And I really, I have to thank you very much guys for being part of this and being so enthusiastic. It is so fabulous to see so many of you there and the questions and I know some of you have got some, some burning questions and you may not want to put your hand up this month but hey November, we'll be chatting to you again then and just make sure that you know so you go about and do your research and consider what you're doing. And back to what I was saying about the two types of property investors at the beginning of the call, my notes I made on a Jetstar's napkin today. Just make sure that property investing is you treat it as an income generating business. And remember if you're creating that kind of foundation for a view of the sea, you're doing it with the research and the right foundation so you can have the portfolio growing for you for a long period of time to come. So you know, this is, it's been a great call. We've got some interesting things coming out in the next few weeks. Diamond Members book for that magazine, the Bag Ultimate Guide, Renovation Guys, you know, make sure you're looking at the emails regarding the Must Minds and the investor program. So thanks everyone and Traycard and the trade card will be coming out in the next couple weeks too.

Yep.

So looking forward to hearing your questions and speaking to you soon.

See ya.