Buyers agent Cate Bakos joins us this week to answer some questions we have received from listeners who are deciding if investing interstate is for them. Cate tells us the pros and cons and why it’s OK not to do it.
During the summer months, owners often think about the work that needs to be done in the yards of their investment properties. Work done in the yard of an investment property not only helps to boost the street appeal and attract potential tenants, but can also possibly increase the rental value of the property and the depreciation benefits. Brad Beer from BMT Tax Depreciation explains what a property investor should be aware of when doing any renovations to the yard in an investment property.
If you’re looking to get into property or move up to the next rung of the property ladder, Michael Yardney has some words of advice. He calls it property investment 101 for rookies but it is much more than that.
There is a new App you can download that has been designed to give auctions a tech makeover and streamline the bidding process for buyers. We talk to the inventor and tell you how to get this great buying tool – and its FREE!
Andrew Mirams – as well as being the guru of property finance – is a seasoned investor who helps people all over Australia develop their property portfolios. He shares some of his personal experiences with us this week as our feature guest.
You will find us at iTunes under podcasts as Real Estate Talk. Listen there for free, leave a review which helps us grow and tells us what you like and how we can improve the show. Don’t forget to subscribe at the site as well –even if you do get the show through iTunes – so that we can tell you about the bonus offers we make to subscribers. Your questions are welcome through the site as well.
Why it is OKAY not to buy interstate – Cate Bakos
Kevin: A question I’m quite often asked is about buying interstate. We’ve had this conversation many times in the show. You do actually cut off a lot of opportunities if you just look in your own backyard. But then by the same token, there are some good benefits in doing that because you become very familiar with your own backyard and a lot more confident about buy there.
I want to ask that question of Cate Bakos, who no doubt as a buyer’s agent has had to look in different parts of Australia on a number of occasions.
Do you prefer to buy in your own backyard, Cate?
Cate: I do, Kevin. As a buyer’s agent I’m licensed in Victoria and not just Victoria but a more specific patch of Melbourne that I’m completely familiar is always an exciting way for me to take a client journey because I am very intimate with the area, I have good relationships in the area, and I have a good feel for some of those micro-facets of those markets, which I wouldn’t have if I was an Australia-wide generalist.
Kevin: Swings and roundabouts, though. Some markets move through good times and some not-so-good times. Do you find you have to sometimes broaden your horizons a bit, Cate?
Cate: I think any investor should. As an investor myself as well, I have interstate properties, and I have chosen to do that because diversification is important. I think jumping around from state to state to try to get the next hot market can be a bit of a trap for people, but if you’re doing it to diversify, I think that’s a really good plan, but you need to understand the growth drivers in the area that you’re going into.
You need to also accept that you won’t have that same familiarity and market knowledge, so you need some good people who you can trust who are part of your team, whether it be the agent that you’re buying from or the property manager who’s looking after your property or the conveyancer who’s on board. I think having local expertise is really vital when you are stepping outside of your own landscape.
Kevin: And when you do step outside, do you advise that people should get their feet on the ground, or can you actually build up enough reliable people in those areas to take their advice, Cate?
Cate: I think the answer is a bit of both, and it depends on your own timeframe. If you are wanting to be hands on and do it yourself, you need to satisfy yourself that you’ve canvased that market at a more in-depth level than just sitting in front of the screen and looking at figures.
You need to understand the demographic that you could be catering for, so understand your target tenant. Talk to the local property managers about streets that they avoid or streets that they prefer, and really get an in depth view from people who know what they’re talking about.
You can do that if you jump on a plane and go and see the place yourself, but you probably won’t be able to do it in a weekend. You need to accept that you’ll be clocking up some air fares, and even still with the advice that you’re getting, you’re just getting few viewpoints.
I think it can be done if that time is available to you, and if it’s not you need to interview and identify a buyer’s agent in the area who knows the area inside out. You’ll probably need a bit of validation from whether it’s past clients of theirs or agents who they’ve dealt with or would use online, and just understand that they are a market expert in that area and that they have a strategy in mind that dovetails into your own strategy.
Kevin: Is it fair to say, Cate, that you can do a limited amount of investigation on the internet and by talking to people? In other words, you’d make the decision about an area and then to make a decision about a specific property, you need to be on the ground?
Cate: I think so. I’ve purchased sight unseen myself and it was a bit of a surprise going and seeing the property, and I would caution people against doing that. I think buying sight unseen is a mistake. If you have someone who can see it for you and even video it for you – and these days, with smartphones, that should be easy for anyone – that’s certainly a step in the right direction.
Your point about doing some research before you head off is great, because you can eliminate areas or you can put an itinerary together for yourself and really get maximum value out of your stay. If you’re doing that, you need to be conscious of when you’re going up, what the market forces are at that time of year or during the week. You don’t want to go up on a day where agents are unavailable, so you just have to be quite particular about your planning phase as well.
Kevin: How do you avoid the analysis paralysis is? You can over-analyze the situation, can’t you?
Cate: I see so many people over-analyzing, and the time that they spend perfecting the model precludes them from the market that they could have bought in to – they’ve lost time in a moving market – or they’re just so petrified of making a decision they don’t make a decision.
I think making sure that between yourself and your partner, if you’re doing this with a partner, that you’re both prepared to press the go button and commit to a purchase. The most important piece of logic they can have in their mind is understanding that there’s no property that scores 100%. Once you’ve accepted that, you can accept imperfections, because property is all shades of gray; it’s just not black and white.
Kevin: Do you rely at all on gut feel, or do you rely solely on the facts?
Cate: It has to be a combination. Intuition and gleaning information from other agents or from the agent who’s selling the property is one thing, and gut feel is an important concept to understand. But all of the figures have to be pointing into the right direction first.
I always look at the cash flows and I look at the comparative sales analysis so that we have the right figures in mind and we understand the yields and we understand what sort of growth we can anticipate. But when it comes to a particular purchase or a tenant type or a street type, you absolutely need to trust your intuition.
The better results are always achieved when you can put a description on that gut feel if it’s a bad one so that you can understand what it is. It might be that the neighborhood just feels unsafe or that the orientation of the property is wrong and it feels too dark. If you can label it, then you’re already stepping in the right direction.
Kevin: Cate Bakos has been my guest. If you want to talk to Cate, you can do that at her website, CateBakos.com.au.
Cate, thanks so much for your time, talk again.
Cate: Thank you, Kevin. Look forward to it.
Spend money outdoors and reap the benefits – Brad Beer
Kevin: Well, during the summer months, owners quite often think about the work that needs to be done in the yards of their investment properties. Work done in the yard of an investment property not only helps to boost the street appeal and attract potential tenants, it can also possibly increase the rental value of the property and the depreciation benefits.
So what should a property investor be aware of when their doing any renovations to the yard of an investment property? To answer some of our questions, Brad Beer from BMT Tax Depreciation joins us.
Hi, Brad. Thanks for your time.
Brad: Hi, Kevin. Great to be here.
Kevin: I wonder if starting off, if you can just give us some examples of outdoor structures that do qualify for the capital works allowance?
Brad: Well, Kevin, basically whenever you do any sort of work in the yard, most things are going to have some sort of deductions. Any retaining walls or hard landscaping, pretty much any money you spend on structural type things will have some Division 43 allowance available.
Kevin: Can you give us some examples of the plant and equipment items in the yard that can also attract depreciation deductions?
Brad: Yes, definitely. An interesting one is a garden shed is seen as a removable structure.
Brad: Not the concrete slab; that would be Division 43. But the actual garden shed is a plant and equipment item. Watering systems and things that are mechanical that you add to the yard in any way. If you’re doing pools, things like pool pumps, anything that you add that’s kind of mechanical in nature is probably going to be plant and equipment.
Kevin: Just on another point now, if I were to remove something from the yard or throw it out, is it best to contact a quantity surveyor before I actually do that?
Brad: The yard is no different than the rest of the house in that respect, Kevin. Anything that you’re throwing away, if there has been any value in relation to that item claimable as either plant or Division 43, whatever is left is an instant potential reduction in that year that you throw it away. So before you throw it away, make sure it’s been depreciated over the time and you get to make that deduction instantly for whatever value is actually left.
Kevin: Yes, another good reason to contact BMT if you’re going to be doing anything like that.
Mate, another question I’m commonly asked is does the depreciation schedule have to be updated any time any new items are added to the yard?
Brad: The important thing is to get it done before you rip things apart because, firstly, you want those deductions, and secondly, if you do rip it apart, you have evidence of what was there.
Now afterwards, with very simple things, sometimes the accountant can make an update or we’ll make an update. So it’s best to contact, have a discussion. You have some of the costs. We can easily add them in afterwards. If it’s just one thing, it could be the accountant just does it, but if it’s a few, talk to us and we’ll update the schedule very easily.
Kevin: On our website, Real Estate Talk, there’s a special area for BMT Tax Depreciation. You can contact them there; just click on the button.
Mate, just before I let you go, I just want to ask about everyday repairs in maintenance to, say, items in the yard. Can that affect the depreciation deductions?
Brad: It’s the same with across the property. If it’s a repair, then it should be claimable straight away. Maintenance, like mowing the yard and things like that, you’d expect to be instantly deductible. When you actually make improvements, then those things need to be depreciated instead.
So if you repair a fence with a couple of palings, that should be instant deductions. But if you replace the fence with a new one, then it’s probably going to be a capital improvement that needs to be depreciated over time.
Kevin: It’s so easy to see why so many investors miss out on the opportunities with depreciation, because it is a complex area and very easily overlooked. That’s why we always recommend you contact our friends at BMT Tax Depreciation. They will put you on the right track.
Once again, Brad, thank you so much for your time, mate.
Brad: Thanks, Kevin. Always a pleasure.
Property investment 101 – Michael Yardney
Kevin: This show, of course, is all about helping you build a good strategy and build a good portfolio. But what happens if you want to move to the next level, if you’re uncomfortable with where you are now or even if you want to start? Let’s have a look at some property investment 101 advice for rookies. Michael Yardney joins me from Metropole Property Strategists.
Michael, I guess you come across this quite often where you’re very knowledgeable – as the rest of your team and you’re dealing with this all the time – but someone comes to you and just says, “Look, I just need some very basic advice.” What would you say to them, Michael?
Michael: Good question: where do you start? Because property investment is simple but it’s not easy and, Kevin, that’s really not a play on words. It’s not something you enter into lightly, but for some reason, that’s what a lot of people think they can do. They dream they can make millions of dollars with real estate and they just go off, and buy any house and they stick a tenant in and they think they’re going to make a killing.
It doesn’t work that way. The market’s been very brutal to a lot of investors recently, hasn’t it?
Kevin: It certainly has. What are some of the pieces of advice you would give, Michael?
Michael: I guess the first one is knowledge is power in property investment, so you need to understand what makes an investment grade property, because most properties aren’t. In my mind, in the current market, where there are over 250,000 properties for sale in Australia – which is actually a bit less than are normally on the market – there’s probably only about 2% of those that would in my mind fall into what I would call investment grade.
First of all, you have to recognize that you make your money in real estate four ways: You make it through capital growth – that helps you build a sound asset base. You make it through cash flow, which you need to help pay your mortgage. You make it through tax benefits. And the fourth way you make your money in property is through forced acceleration by manufacturing some capital growth through renovations and development.
Understand how property works. Step one, Kevin, would be to get a good understanding of property, finance, and a little bit about economics.
Kevin: So understanding the market and understanding, too, I guess, Michael, that it moves in cycles. You and I have talked about this on a number of occasions, haven’t we?
Michael: Definitely. The next step is understanding that there’s not one property market in Australia, and even in your own state, there are multiple markets defined by geography, defined by price points, defined by the sort of property, and that they are all at different stages of their own cycle.
While timing the market isn’t the be all and end all of it, it certainly helps to understand how the market moves and where your current market is in its own stage of the cycle so that you don’t get caught out as it turns.
Kevin: What about location? How important is that, Michael?
Michael: In my mind, the location does the majority of the heavy lifting of your investment. While it’s not exactly accurate, about 80% of the value of the property is in the growth of your property – the success of your investment is related to the location – and 20% is maybe that property within the location.
I look for demographics. I look for locations where people have higher disposable incomes and can afford to and are prepared to pay a premium to live there. In general, Kevin, these are the inner and middle ring, affluent suburbs of our big capital cities.
I also look for areas that are gentrifying, where the nature of the property is changing as well and more affluent people are moving in, because these people tend to spend money on their homes and improve the houses, therefore pulling up the value of other houses around them.
Yes, you’re right, Kevin; location is a critical component to the property game.
Kevin: I’ve heard you say, too, that property investment is really a game of finance. So money is pretty important, Michael – how you handle money and how you strategize around it?
Michael: Kevin, more so today than for many, many years. It always has been important, but if the banks will lend you more, you will then be able to buy more. So a well-rounded understanding of how to maximize your borrowing power by using equity and leverage to buy more properties is going to be important to you.
And just as important is understanding the power of having a facility like a line of credit or something like that as a cash flow buffer for when circumstances change.
Kevin: Michael, since we’re talking about money – we’ve talked about this – it’s relatively easy to make lots of money through property investment, yet many people still manage to lose it. Why is that?
Michael: Kevin, we’re not taught how to do money. You’re not coming out of the womb knowing how to do it. Therefore, we pick up bad money habits along the way and often from our parents and very much from our friends. The world and society is making it easier to do that with anyone able to get a credit card or a store card or interest-free for 24 months.
Yes, to become financially independent you have to become financially literate. You have to become financially fluent. More than literate, you have to be good at it. Managing money, budgeting, balancing the books – they’re basic things that you have to get to before you can even start managing a multi-million dollar property portfolio. But most people don’t know how to balance their credit card, Kevin.
Kevin: That’s right. Just sum it up for me, Michael. What would be the final words of advice or maybe the warning that you’d give to investors?
Michael: There are a couple of steps to it. First of all, formulate a plan. Understand what your end goals are, what you want to achieve, and then make decisions according to that.
Be cautious. Everyone’s happy to give you advice, but rather than listening to all these well-meaning friends, not everything that glistens is gold. Not everyone can be a property millionaire, so take things with a grain of salt, I guess.
Understand the difference between a salesperson and an advisor, because everyone’s going to be around wanting to give you advice when they suddenly hear that you’re interested in getting into property investment. Instead, be prepared to pay for advice. I find that good advice is never expensive; in fact, it’s much cheaper than learning from your mistakes.
And understanding what becomes a good investment property and not rushing off and buying the first thing you see and getting too excited by it all. Because property doesn’t discriminate; it doesn’t care who owns it. And even though we’re going to have some interesting times ahead this year, over the next 10 years, our property values are going to double again. They’re going to go up by billions and billions of dollars in Australia. They don’t care who owns it, so you may as well own part of it and get it right and have your share.
Kevin: Indeed. Great words of advice, Michael. Thank you so much for your time.
Michael Yardney from Metropole Property strategists. The blog for Michael – check it out for yourself. If you’re not already subscribed to it, you should be. It’s called PropertyUpdate.com.au.
Thanks for your time, Michael.
Michael: My pleasure, Kevin.
My secrets to property investment success – Andrew Mirams
Kevin: Our feature interview this week is featuring Andrew Mirams, who’s no stranger to our show, but we’re hopefully going to learn a little bit about Andrew that we didn’t know before we started this conversation. Andrew, of course, is from Intuitive Finance and he’s a regular contributor to our show. We certainly know how talented you are when it comes to talking finances, but let’s find out a little bit more about you.
Andrew, good morning, and welcome to the show.
Andrew: Hi, Kevin. How are you?
Kevin: Good, mate. Good to be talking to you again. Andrew, we probably will end up talking about finance because we always do whenever we talk to you, but what about your involvement in property investment? How did it start for you?
Andrew: Basically, I’ve been in finance all my life, so as a 15-year banker before, now a nearly 15-year mortgage broker, obviously being around it all the time it tweaks your interest. I’ve always had an interest – even at an early age – in finance and property and maybe games of Monopoly. I can’t remember whether I won or lost, but I was always intrigued by accumulating property and how you did it and all that sort of thing.
So, I started at a young age and then once you start in the industry and you start seeing people doing well themselves, that obviously piques your interest.
Kevin: You’d certainly rub shoulders with a lot of people who are doing it well, and you’d also see a lot of people you’ve no doubt learned from over the years. So, I will ask you about that, but tell me about your first property investment purchase. Where was it, and how old were you?
Andrew: It’s the classic story. Obviously, we bought our first home. Our first home was a little house in Castlemaine in country Victoria. We did that because my wife and I just got engaged and we wanted to move in there. But you move around as we did in the bank in those days, and the first actual property investment is a classic, like probably most people do.
The house for sale over the road went up and we thought it would be a great little investment, so we bought it. Not the best investment. It was in a country town called Stawell, which is actually where I grew up in country Victoria.
Yes, the classic like what we all do, Kevin. We see something across the road or in our local neighborhood and we think that’s the best investment, so let’s grab it. We did, and we didn’t do too badly out of it, but like everything, if you could put an old head on young shoulders, we wouldn’t have invested there. We would have made much smarter decisions earlier on.
Kevin: Was it where the property was, or was it the fact that it was in Stawell?
Andrew: No, it’s still a beautiful little country town in Western Victoria. It’s just the limited growth in a small country town. We got a good rent return. We thought, “Oh, this is all right. It’s paying for itself.” But like I said, we were able to get ourselves out of it without any real damage done but didn’t make any money. We learned a very valuable lesson very early on, Kevin.
Kevin: I remember in our very early investment days when we were moving around a lot, when I was in radio, the banks were quite reluctant to lend to you as an investor. They really just wanted you to buy your own principal place of residence and pretty much stay there. They wouldn’t even allow you to transport loans in those days, so that’s going way back.
It made it very hard to start to build a portfolio at a young age.
Andrew: Yes, it did. But when we had the deregulation, when the markets and the banks and the finance market deregulated, that probably started to free up things and made it easier for people to be able to accumulate.
In the old, olden days… Way before our time, Kevin, of course. We are a couple of young guys…
Kevin: I’m giving my age away here.
Andrew: You are a bit. We probably both could, but let’s not.
The only way to do an investment portfolio would have been literally if you had money. The wealthy just kept getting wealthier. Now it’s a little bit easier for everyone to get into the market.
There are some rules and regulations. The same old golden rules still apply – you have to have a deposit and you have to have an income to service it – but pretty much the markets have liquefied as the county has grown and everything like that.
You’re encouraged now to build your own wealth profile and look after yourself rather than rely on a pension, so it’s become easier in time to be able to get into the property markets.
Kevin: I want to ask you about mentors and who you turn to and who you get your inspiration from. But before we do that, can I take you back? You purchased that first property with your wife. That was the one in Stawell. After you sold that property, was your next property a principal place of residence, or was it an investment?
Andrew: We’d always had our principle place of residence and things like that through the journey. We’d been able to buy and sell our homes and upgrade, so we’ve done okay there.
Our next investment property journey, we put our trust a little bit blindly into a financial planner’s hands in Melbourne who bought us a property. Nice property. If I said I’d bought a property in South Yarra, it makes people say, “Gee, that must have done well.”
Another golden mistake, we trusted a planner who was getting a little bit of money on the kickback, so we didn’t get the right figures. It was actually a studio apartment with Quest Group, a service department, and that was really a yield plan I didn’t need when I was in my mid to late 20s. I didn’t even need yield; I wanted capital growth.
Again, you learn by trusting others. We all need mentors around, and we need the right mentors. That’s probably the key and doing your research and what’s in it for everyone, not just in it for you
We got out of that property without any real damage done, but when I say that, we’re not losing money, but the idea of investing in property is, of course, to make money. We got out of that, and since then, we’ve slowly and surely built a great team around us.
We use some buyer’s agents now who we know have our interests at heart, because I don’t have time to go out and do all the research myself and things like that. It’s not because I don’t know the markets; I literally just don’t have time to be doing what they can do really well. Now they’ve helped me start to build and accumulate my property portfolio.
Kevin: When you’re working with buyer’s agents like that, Andrew, do you actually give them a good brief of what you want, or do you find that they intuitively know what you need or what you want in your portfolio?
Andrew: A bit of both, but again, it also comes down to your budget. You can’t have a champagne diet on a beer budget. It has to be within your limitations. It has to be what you’re looking for, what you should be trying to add to your portfolio. You do that in conjunction with good mentors, good buyer’s agents, and things like that.
They’ll work with you about who, what, when, where, and how, and as long as you have a budget, they can generally find the right property or the style of property to complement your portfolio.
Kevin: Do you work with more than one buyer’s agent?
Andrew: Yes, I have one really strong networking connection, but we have some networks. Over the journey, you meet lots of people, so we do know quite a number of the buyer’s advocates. It’s like brokers and bankers and everything like that; there are good ones and bad ones. I shouldn’t probably say bad ones, but there are ones I trust more than others, I guess, with the same philosophy as mine.
Kevin: Do you invest in different parts of Australia, or are you pretty much just doing it in your own back yard?
Andrew: No, I learned about the own back yard, or as it was, across the front yard, on the other nature strip. No, across numerous markets. It’s the old diversification. There’s not one I hold dear about having to have cash and shares and things like that, but I do think you can invest in different markets with the right team around you to help you buy in different markets, because you’re going to get different metrics and different performance from different properties at different stages.
Yes, I invest across Melbourne, Sydney, and Brisbane.
Kevin: What would you say has been your best property investment?
Andrew: Mid last year, we finished our house, which is quite a nice property in Hampton in Melbourne. And it’s great. It suits our lifestyle and it suits all the things that we’re able to put in the property. That’s been good. We added a nice little unit in Coogee a few years ago, and that has gone up quite substantially, so that’s probably the best one.
But I’m finding now anything you can add value to… Buying the new properties and the amount of properties that are coming up out of the ground and things like that, I think if you can get the old ones with the really good structure and bones around them, the nice big open areas, and things like that and do a really nice renovation, I think you can do really well.
That can be units or it can be houses. You don’t have to completely bulldoze a house, either; you can do really nice renovations and improvements – structurally or non-structurally – to add value to your portfolio.
Kevin: What sort of property investor are you? Are you adventurous? Are you conservative?
Andrew: The reality is you get a tax deduction for putting your investment out there, so everyone who does invest is a little bit adventurous. I wouldn’t say I’m a great deal. I’m not a developer, I’m not trying to make the next quick buck or anything like that. History would show that capital growth is what I’m after, and capital growth is brought about by buying the right properties in the right areas and then allowing time to do their thing. So, probably not adventurous.
Aggressive: I want to get as much property as I possibly can and have as much there, well leveraged and looked after with a nice buffer so that I can continue to support my lifestyle now but more so into the future when I’m not working as hard and have a nice portfolio there to support me.
Not adventurous, but certainly aggressive while I’m trying to build and continue to add good properties to my portfolio.
Kevin: Help me with a bit of advice now for someone who may be looking at getting started with their own portfolio. Can you give us some good advice we can pass on to them, things that you’ve learned over the years?
Andrew: Yes. Get a great team around you. Again, in finance, I thought knew it all. I won’t say I do now, but after 30 years of seeing lots of mistakes – some I’ve made myself but lots of people’s mistakes – get a great team of financiers, buyer’s advocates, lawyers, accountants, and things like that around who you can trust, who actually work for and get paid by you so that they have your best interest at heart.
Do your research on those people. Google and the Web and everything like that is an amazing tool to be able to just get some research and validate the person you’re actually in business with. That’s the first thing.
No one starting out should have to make the same mistakes that we probably have, Kevin. So listen and learn from people who have made those mistakes. None of us are bulletproof; we’ve all made mistakes. The best team you can get around you that can help you try to avoid some of those mistakes, I think the better you’ll be in the long term.
Kevin: What books or courses would you recommend anyone should undertake if they’re looking at starting a portfolio?
Andrew: None of the courses that are spruiking. Don’t go to anything like that that has something for sale. I can remember walking along Noosa. They used to grab all what they call the Mexicans on the Gold Coast and wheel you into some show and try to get your data. They’d give you a couple of tickets to something, but they’re all about trying to sell you something. So, anyone who’s got something to flog or to present or hoping to get a signature from you that day, don’t ever attend those.
Go to people who are doing it. Listen to people who are doing it and saying it. I think one of the best property mentors and guidances is Michael Yardney. He has numerous books out there that you can read.
I think people like Chris Gray and people like that who are doing it themselves, they have a reputation, they obviously put themselves out there to be questioned, but they’re quite honest in their approach and have the same thing: the test of time. They’re all long-term investing, not a get rich quick scheme or buying something off the plan or anything like that where you’re going to save some stamp duty but it won’t go up in value. Anything like that.
Like I said, Google and the Internet is a pretty amazing tool that you can get lots of information from. Don’t go to anything that anyone is trying to sell you something on that day, because they’re just trying to rip you off, talk to your emotions – like going to an auction, talk to your emotions, and get your autograph on a line. So, steer clear of those, but otherwise, there are lots of great mentors and property advocates out there.
Kevin: What advice are you giving your kids about getting into property?
Andrew: Great question. You can hand your kids some money one day and go, “Here, go ahead and do it and potentially make some mistakes.” I’m making my kids save some money, so I want them to have some skin in the game, but we’re educating.
We’ve been showing them what we’ve been doing for some time. We’ve had them actively involved in the decisions and the portfolio and things like that we’ve done. And the plan is… My son is working, my daughter isn’t at the moment. They’re 22-year-old twins.
We want to help them by showing them and getting them involved in doing it. So, their first property investment – I hope, if everything goes well and they can save their money. My daughter is just about to start work, so she hasn’t got much money having been a uni student for three years.
We want to get them into a development where they’re going to put some of their money in, but they’re going to get to see the start to finish project – how to buy, what you need to do. They’ll have their hand held by a buyer’s agent and obviously myself looking and hoping, but I want them to make some decisions. They’ve seen what we’ve done, so now I think the best way to educate them is by doing.
Most people learn when you do something and make mistakes, or you have to actually make a decision. It sticks a lot more in your mind than just having some money, buying something and hoping it goes up.
So, we’re trying to do that, trying to teach them. Rather than throwing them a fish and feeding them for a day, we’re going to try and teach them how to fish, Kevin.
Kevin: Yes, well done, mate. That’s very well said, and that’s some great advice. We’re going to leave it there. Thank you so much for your time, Andrew. It’s been great talking to you, and thank you for sharing your story with us. It’s always quite inspirational.
Andrew Mirams from Intuitive Finance. Thanks for your time, mate.
Andrew: My pleasure, Kevin. Have a great day.
Auction bidding made easier – Simon Cohen
Kevin: I mentioned at the start of the show that there’s a brand new platform called AuctionWiz streamlining the bidding process for buyers. Joining us now from the company who’s behind this one – Cohen Handler – Simon Cohen, who is one of the directors of that company.
Good morning, Simon. Thanks for your time.
Simon: Good morning, Kevin.
Kevin: Tell me about AuctionWiz.
Simon: For about the past five years, we’ve seen a lot of buyers bidding at auction. We sponsor the major auction centers in Australia, and we’ve seen bidders who go up and specifically bid on the biggest asset they’re ever going to buy without much experience. Mainly over the past 12 months, Ben and I have built this platform where someone who wants to bid hops on, they fill out the criteria of the property they are looking to buy, they get matched with three of the buyer’s agents from Cohen Handler. All these buyer’s agents have independent reviews – and they get to choose who they want to bid and represent them at the auction.
Kevin: How much work investigation will you do, and will you help me set some limits and values on it?
Simon: Yes, absolutely. There will be different options. What you will do is you’ll hop on the platform, you fill out all the details of the area you’re looking in, etc., and you’ll get matched with three different buyer’s agents in that area, so you have your choice.
You’ll be able to pick which one you like the sound of. You can then connect with them and they can go into as much due diligence on the property for you if you wish, or they’ll simply just discuss price limits and they’ll bid at auction for you. That’ll be up to you as far as how much due diligence you want.
Kevin: I imagine this would be fantastic, too, for someone who wants to buy a property in Brisbane, say, and may be living in Melbourne. They can engage a buyer’s agent in the Brisbane market to buy it for them. Is that the idea?
Simon: It’s definitely one of the ideas. A lot of Sydney-based investors, for example, use us to buy in Brisbane, and as you rightly say, it’s a huge benefit for people like that. But also buying at auction is highly emotional. It’s very stressful.
Even if you’re buying your own home and you’re a first-home buyer, you want someone to take control for you. Otherwise you really get pushed up in price, you go beyond your limit, and you don’t really know what’s going on.
Kevin: Who is going to use this, do you think? Who will be the major users? Will it be investors or will it be home buyers – maybe people too busy to go or even don’t have the skill to do this?
Simon: I think it’s going to be a bit of a mixture of first-home buyers and investors. It might take a bit of time for the more seasoned buyer to catch on. But definitely investors, as you say, and first-home buyers. For them, it’s a no-brainer.
Kevin: What’s the cost of doing this, Simon?
Simon: It’s around $699, which is just a one-off flat fee.
Kevin: That is only if I get you to buy. So getting the app is free?
Simon: Yes, absolutely. And if you engage with us.
Kevin: How much notice would you need to gear up for this?
Simon: It really depends how much choice you want. You’ll get matched to the three. If the one out of the three is already busy at that auction time, you’ll go to the next person or the next person. It really depends how much choice in the person you want bidding for you.
Kevin: I’m just curious to know why someone would use this. Most people generally do actually bid on their own behalf but given the fact that some people only ever buy one or two properties in their entire lives, what do you see as some of the tragic mistakes they make, and how can spending this $700 actually save them some money?
Simon: I’ve seen people bid against themselves at auction. They were the last bid at $690,000. The agent or the auctioneer gets them to bid against themselves to $700,000 or $710,000, which is highly unnecessary. I see them bid because they think someone else has made a bid but they haven’t. I see them go above their limit.
Typically increments at auctions go in $10,000, $15,000, $20,000, increments. So, if you’re spending $695, to save $10,000 or $15,000, it certainly makes sense.
Kevin: They’re pretty basic mistakes, aren’t they? Does that happen because of the emotion of the auction or the fact that they don’t really know or understand what’s happening?
Simon: There are some incredibly seasoned people who go to auction – people who have done it before – but emotion takes over. Whenever you’re buying something for yourself, emotion always takes over.
Kevin: Good talking to you. Simon Cohen, director of Cohen Handler. Tell us how we can get that app.
Simon: Just go into the browser and type in AuctionWiz.com and it should come up. It’s in beta stage right now. We’re just making a few touches, but you can enter all your details and you’ll still be in touch with a buyer’s agent.
Kevin: Sounds fantastic. AuctionWiz. Good on you, mate. Thanks, Simon.
Simon: Thank you. Have a great weekend.