Highlights from this week:
- The small things around the house that add enormous value
- What you should NOT do in a renovation
- Asset protection and where a ‘vesty trust’ fits in
- The critical decision every property seller must make
- How to take a macro view with your research
- Barry DuBois – The Living Room – and his property journey
- How to read the market to get top value
- The restrictions around trusts
- Steps to getting top dollar when you sell a property
- Unearthing trend data and how it can be a treasure trove on insights
Would you go home with this man? – Barry DuBois
Kevin: Barry DuBois is an interior designer and master builder with over 30 years’ experience. He’s one of Australia’s best loved TV personalities. Barry possesses the unique ability to communicate his professional knowledge on design, architecture, renovations, and DIY to homeowners who are outside the building industry.
You’re going to see that so cleverly demonstrated on Channel 10’s The Living Room where Barry meets people at Bunnings and then goes home with them to help them with a DIY task or two that they may actually be struggling with. Barry joins me.
Good day, Barry. How are you, mate?
Barry: Kevin Turner, always good to be on the show, mate. How are you?
Kevin: Mate, I’m fantastic, thank you. Great to have you back, too. Barry, I mentioned there about you going to Bunnings, and I love that part of the segment. Have you noticed when you do that, there’s actually a lift in their confidence level?
Barry: Definitely. My philosophy with DIY is just to get any job and break it down to as many small jobs as possible. When you’re in Bunnings, you often see people just strolling aisles, wondering how they’re going to take on this big project. I grab them, I see what the project is, and then we break it up into a couple little bits. And you’re right; it gives them confidence to do more jobs, which is great for the home and great for your self-esteem.
Kevin: Yes. And some of the small jobs that I’ve seen you do too, I know you can discount how difficult they are, but gee, don’t they make a huge difference, both to the people who live there but particularly to the property, Barry?
Barry: I did one a couple of weeks ago, and I think every suburban house in the country should have this. It was just a little screened enclosure for the front wheelie bins. An eyesore of the streets, they make up the landscape of our streets, but a job that looked like it was too big for this couple. They took it on, and the pride they had not just in themselves but in their home once we were finished was really beautiful for me.
Kevin: We talk about you being on Channel 10, and I feel like I know you very well – I’ve been talking to you for quite some time – but…
Barry: You do, mate.
Kevin: Just going back in history, you were a very successful builder, you had a great building company, and then at age 46, you retired and you went sailing. Tell me about that. What prompted that, Barry?
Barry: I loved what I did. I was a good designer, builder, and developer. If you love it and you do get confident, you become good at it. As you know, I’ve been in the property market most of my life, and we’re in a pretty high rate. We’re at one of the bubbles as I like to describe it. Some don’t like to describe it as a bubble, but we’re in a bubble.
And I was a little bit depressed. I’d lost my mom to cancer, Leonie’s dad had gotten sick and cancer as well, and I got a little depressed. I’d set goals earlier in life, and it seemed that we’d reached those goals financially. We weren’t there emotionally and mentally, I guess, but financially we were, so I said, “Okay, I’m going to take some time out.”
My dad was struggling with the loss of mom, and something I always dreamt about doing is sailing around the world, so I went for the Paris Boat Show in 2004, I think, or 2005 and ordered our beautiful yacht, Bella Sogni. Then my dad and I spent three seasons sailing around the Mediterranean in Europe until I lost dad as well.
But I came out of my depression, and my wife and I discovered lots of new things together. And I ended up on TV.
Kevin: It’s an amazing story. Obviously, you’re very busy, and I appreciate you giving us your time. I know how busy you are with your media commitments. You’re also a supporter of quite a few charities. You’re also the father of twins, Arabella and Bennett. What are they now, five or six?
Barry: They’re five and a half years old. They just started Nippers this season, which we’re all very excited about. We’re very proud. As I said, Leonie and I had had 13 failed attempts at IVF over many years. Leonie got cervical cancer after that, and we lost the ability to have children naturally.
Part of that period through 2005 and 2006 and 2007 and 2008, we were investigating adoption and so on, but we discovered surrogacy in India, and our beautiful angels, with the help of some donor eggs and a surrogate carrier and my contribution, our beautiful angels were our seventh attempt. I wouldn’t change my life for anything.
Kevin: It’s a blessing, isn’t it? Mate, when did you get involved in property investment? How did that happen?
Barry: I’ve loved property my whole life. I was a builder, I was an apprentice carpenter, and I loved the fact that we built the homes of people who were going to have family. Family is the most important thing in the world to me. So, I love property.
Even as a young bloke, though, my dad had two philosophies. Everything you do, you can do 10% better. And his second one was my favorite: he’s never made a mistake his life; there’s just a shipload of things he’s not going to do again.
I would watch the builders we were working for and say, “You know, if he had done this, he would have been able to save those couple of bits of timber, and if you’d done this…” I would always say, “If I’d do it, I’m going to do this, I’m going to do that.”
And as it happens, I was only 19 years old and I was driving down the highway to our little farm we had down there in Goulburn, which is in the southern highlands of Sydney, New South Wales. I’d had about $2000 in the bank, which in those days was a lot of money, Kevin.
I whacked that deposit on that block of land, back when you could buy a block of land for $9000. Amazing. And then my girlfriend and I and my pal would go down. I’d work all week, I’d save material when I could with the blessing of the builder, and I’d go down and literally by hand, designed and built my first home when I was 19 years old.
It took a year to build it. I funded it literally with beg, borrow, and I’m not going to say steal, but I bought things out of my own pockets so that all I had was a little loan, which was only a personal loan on the land. I completed the house, and there it was for sale at $128,000.
For a young bloke – we’re talking 1979 or 1980 – that was a lot of money. I loved that house, so I made my first mistake, and I’m going to share this one with you. This is beauty. I fell in love with that property, and I made a house for $128,000 in a street that was only worth about $90,000.
So, as much as it was an amazing house, it wasn’t the right house for that street. I knocked back offers of less money, and then sat on it for a while and sold it, which was great. So I’ve learned things too. I never sit on property for too long now because there was a little interest rate rise there as well. And that didn’t hurt me but it cooled the market even more.
I sold the place in the long run. I sold it for $107,000 in the end. I had it on the market for $128,000. It sold for $107,000, which was still a lot of money, and I went on to my next one. And that was the start of my spec building career, designing and building homes.
As you know, that ended up going on to beautiful waterfront properties in Sydney Harbor, and I’ve developed since then land, I’ve developed shops and units, I’ve developed and built and designed just about every area of real estate in the country.
Kevin: You learned a lot of lessons along the way. We’ve probably got about a minute to go. I’m keen to talk to you about the record that you hold for the second highest per square meter rate sold in the country. You would have learned those lessons from those early days about how to make a property really valuable.
Barry: Yes. Two things you have to know when you develop property: never under-develop a property and never over-develop a property. They’re the important things. I was involved in a block of units that was the only two-story block of units in a street of three- and four-story units. So, rather than just develop it, I realized the potential there was to get the three-story.
It was in a prime position, so I went for big square meterage and I put a 200 square meter penthouse on the top of a block of units at Bondi Beach. That achieved just on $8.5 million, which to this date I think is the second highest ever achieved square meter rate in the country, around $46,000 a square meter.
Kevin: Barry, it’s fantastic talking to you, mate. I’m going to get you back into the show more often. You can catch Barry, of course, on Channel 10’s The Living Room.
Barry, thank you for your time, mate.
Barry: Always enjoy a chat with you, mate. Take care, and good luck to everyone.
What really adds value to a property – Ben Kingsley
Kevin: What improvements will actually improve the value and the return on your investment property? A lot of people have made the mistake – I know I have – of throwing money at a property and thinking that any improvement’s going to improve the value. Not so, according to Ben Kingsley, who is the CEO and founder of Empower Wealth and also the Chair of PIPA.
Hi Ben. Thanks for your time.
Ben: Good day, Kevin. Thanks for having me on.
Kevin: It’s a pleasure, mate. Not always the case, is it, that any improvement is going to improve the value of a property. What have you found actually improves it overall, Ben?
Ben: The number one thing is painting, Kevin, and decluttering. If you can paint… The material cost is quite low; it’s just the labor cost. If you’re going to do a bit of that yourself, then obviously that labor cost is also reduced. The number one thing to improve a property is a paint job.
But don’t get too cute with it. Just keep it simple, nice, clean, bright, fresh colors. And obviously soft, consistent colors like classic whites, off-whites, arctic whites, those types of things are the number one things.
I think you made a good point, Kevin, about what shouldn’t you do? Some of the mistakes I’ve seen are probably… The biggest one is if you’re going to do structural changes, make sure that the structural change is going to meet the market.
There’s no use in creating a third bedroom but that third bedroom, you couldn’t swing a cat in. It just becomes a study nook or something like that. So, by the time you put the labor cost into those types of things, is it going to create the value or was it better to have a really large second bedroom is a good example. I see a bit of that happening.
I also see around the custom carpentry work… It is the labor cost that is the most expensive when we’re doing big renos. If we’re bringing the tradies in to relocate pipes or do custom carpentry work, that may not be as big a bang for buck as potentially just getting something from Ikea or some type of mass-produced kitchen cabinet or bathroom cabinet or something on those lines.
That’s where I see people going “I need to buy the whale,” when you have to meet your market. If your market is mid-range or lower, meet that. If it is absolutely top-end upper, then brands do give you results.
Kevin: Just listening to what you’re saying there, I was thinking and reflecting back on how we’ve changed in the way we live. We used to actually treasure having a bedroom, even though a small bedroom, but as time has gone on, all of the programs now, we’re opening rooms up. We’re making things a lot more open, a lot more spacious, because that’s a reflection of how the family has profile has changed, Ben, as well.
Ben: Yes, totally. Obviously, we’re having fewer children, so having that spare room for relatives who may be visiting isn’t as important as having that open-plan living-dining and a bit of al fresco piece out the back. We’re definitely seeing that. And then obviously, the parents can jump on the couch if they’re visiting. Or, they can basically rent around the corner with Airbnb. So, different things like that where they’re only coming once or twice a year.
We have to think about what we’re trying to plan for, but certainly the template for the new mainstream owner-occupier-appeal home is bedrooms up the front, divided by bathrooms for that noise separation, and then living and entertaining out the back.
Kevin: It’s interesting, going right back to the start of what you said, the two improvements you highlighted are two of the cheapest and quickest that you can do – just decluttering and painting.
Ben: Yes, totally. Clean up the yard, declutter, keep it to a minimum. No one wants to see other people’s personal belongings or wedding pictures and hundreds of pictures. Just make it clean, because they obviously have to imagine that home as being theirs, and we want them to connect to the floor plan, we want to connect to the space, and that’s what they’ll pay a premium for.
Kevin: Good talking to you, Ben Kingsley. Ben is the CEO and founder of Empower Wealth and also, as I said, the Chair of PIPA. Thanks for your time, Ben.
Ben: Pleasure, Kevin.
A ‘vesty trust’ and how it can be used – Ian Rodrigues
Kevin: I’m going to answer a question now that came to me, and I have to say I was a little bit baffled about this one. Nick sent it in to me about a week ago. It was in response to an interview that I did about asset protection, and he was asking whether I knew about a vestey trust. I Googled it, a bit of a gray area, so I’m checking in now with Ian Rodrigues from Bishop Collins Group.
Ian, thanks for your time. I know you pulled up on the side of the road to have a talk to us. Thank you for doing that. I know we’re getting you without too much notice, but a vestey trust; tell me what you know about that.
Ian: Kevin, the trust deeds that you can buy, you can get a range of trust deeds from pretty standard trust deeds for a few hundred dollars, or you can get specialist lawyers or barristers who have their proprietary trust deeds for quite a lot of money, thousands of dollars. All of them essentially do the same thing, but the vestey trust will be another one of these trusts that the promoter or the constructor or innovator of the deed says does some special things.
Kevin: From my reading of it, it relates to a wealthy English family, Lord Vestey. I found it very hard to work my way through, probably because as you said, they’re all pretty much the same.
Ian, can you just give us some advice about what you’d suggest if anyone is confronted, as Nick is, with the opportunity to get into something like this. What should they do? What questions should they be asking?
Ian: Nick should be looking at whether this trust deed is suitable for his purpose. The historic purpose of trusts was to hold assets for people and divide it up the way the person who set up the trust wanted to do it.
At the moment in Australia, mostly trusts are used to hold ownership of businesses or assets amongst families, with a family or discretionary trust, or a unit trust where there are fixed interests. But trust are also used to protect assets from the claims of creditors and other people, where you are taking risks where you could have a problem in one business and if it’s not structured properly, it could bankrupt the entire business empire. So, there are very legitimate uses for these trusts.
As to whether a vestey trust does that particularly well or not, I believe Nick needs to be getting some independent advice from his own lawyers about what this trust deed says and does. A lot of bankruptcy law has been changed over the last few years, specifically in relation to trusts and overriding what the law has been to make sure that creditors can claim against certain assets.
Nick needs to get some pretty solid advice, not from the seller of this trust deed – they have a vested interest in selling you the trust deed – but independent legal advice to see whether this trust deed does what it says it does and whether it’s relevant to Nick. If Nick just has a job as an employee and he’s not conducting any business, what risk is he trying to protect himself from?
Kevin: You made a very good point, too, right at the front, where you said most trust deeds are pretty much the same, only some just offer protection in certain areas. Is it fair to say that most trusts have some kind of restriction to them? That’s the reason they’re there, to give some solid protection in certain areas, Ian?
Ian: By putting an asset into a trust, you ultimately give up some control over the asset, but there are rules in there about the construction of the trust and who can remove appointors and all sorts of things. It all gets very complicated and very legalistic.
They’re the things that come out, and when there’s a bankruptcy or a claim against assets, there are lawyers at ten paces looking for every angle on how they can access an asset. And the larger and messier the claim, the more determined they will be to challenge every part of your structure.
A lot of trusts, people have them there with this notion that they’re protecting their assets, but in 99% of cases, they never actually get tested. When they do get tested, that’s when you want to know that they have been set up right.
Kevin: I guess it gets back to your earlier advice to make sure that Nick or anyone who’s confronted with this situation gets some independent legal advice.
Ian, thank you so much for your time. Ian Rodrigues has been our guest from Bishop Collins Group. Thanks for your time, Ian.
Ian: No problem, Kevin. All the best.
The 5P’s to getting top dollar when you sell – Justin Nickerson
Kevin: Over the past three or four months, the Real Estate Institutes around Australia have been conducting a competition to try to find Australasia’s best auctioneer. Last month, five of them got together for the finals in South Australia: Mark McGoldrick from New Zealand, Bronte Manuel from South Australia, Ned Allison also from New Zealand, Clarence White from New South Wales, and Justin Nickerson from Queensland.
Justin Nickerson – for only the third time in history – took out the award for the second year in a row. When I caught up with Justin, I wanted to know from him his experience about how sellers can get absolute top dollar when it comes time to sell.
Justin: Sellers want to achieve the best price, and we break it down to what we call the five P’s to get you a premium price. Because the reality is that you could always sell a property, you could chuck a sign out the front tomorrow, and you could find someone at lowest common denominator to buy it. The challenge or the hunt is actually to get the best price that’s out there. I think an emotional buyer and a competitive environment are your two keys.
The five P’s we talk about are presentation, so ensuring that you present your property well. People walk through there and it doesn’t have to look like a show home or a display home, but it certainly has to be to the best of its ability. Space is a big one. Not having a cluttered home is a huge thing, because space allows people to visualize what the property potentially can be. Obviously, being cluttered makes the property feel smaller, which is something you never want to do.
The second one is process, so dealing with an agent who actually genuinely understands the way that buyers think and are going to be able to pass the information back on to you, because what you want your agent to be doing for you is giving you true information from the market.
Not necessarily what people think the property is worth or what the property might sell for, you want your agent representing back to you what people are actually going to pay for your property. So, making sure that you tick off on the process side of it.
Promotion, which is advertising. Whether you’re a believer in the newspapers or not, that’s your own belief, and your own spot, depending on where you are, whether it’s going to be relevant or not, but making sure that you do promote the property well.
So, the photos look good. If you’re doing videography, which is an area that we’re really exploring at the moment, you do a good video to really promote and highlight the benefits of buying the property, and just making sure that the advertising really does capture the buyers. Talk about the key attributes of the home, and talk about why the sellers are selling to make sure that the value-based buyers get engaged, as well.
Pricing strategies: that’s deciding whether you go with a price or without a price. You can put a set price on the property or an “offers over” strategy if that’s what you want to do. Being an auctioneer and being compensated to stand in people’s front yard and call out numbers, I’m always of the belief that auction is the best method to go with, but again, having a clear strategy in mind and knowing why you’re embracing that strategy.
The last one, which is a bit of an under-rated one, is choosing the right person. It’s not necessarily highlighted enough how good a good agent can be for your sale price. I know that there’s always a cost battle there that you want to try to save as much money on the commission as you can, and we’ve seen the rise of flat fee, lower-priced agencies existing.
The reality is a good agent can make a difference in your sale price of many, many thousands of dollars more than their commission. If you don’t choose correctly at the start, the rest of those other four P’s can all be sacrificed as well. So, making sure you get the right person, someone who has a demonstrated sales history in the area, someone who communicates well to you, and someone who believes in your property as well and thinks they’re going to get a good price.
Kevin: In selecting that agent, that point number two – the process – is one way to determine whether you’re with a good agent as well, and also, give them a test, I believe. Make them follow you up, see how well they follow you up, because if they follow you up well, they’re going to follow up your potential buyer as well.
Justin: Yes, spot on. Go to open homes, go to auctions, interview a number of agents, and make sure that you’re not based around the fee, because the funny thing is that if you ask an agent to discount their commission, you’re testing their negotiation skills, and if they’re ready to roll over and say, “Okay, sure, take my money,” when a buyer is coming to do the same thing, they’re going to do the same behavior.
You really want an agent who knows what they’re worth, they’re willing to stand up for what they’re worth, because chances are, when it comes down the line and they’re negotiating on your behalf, they’re going to do the same thing.
Kevin: There you go. Just to summarize, the five P’s are:
Presentation: I guess that comes down to staging. The process the agent goes through: a great opportunity for you to get an understanding about do they really understand the auction process, and believe me, that’s absolutely critical. Promotion: you cannot sell a secret. The price strategy: what is the pricing strategy, how much does that agent understand about the market and where your property is going to sit? And I guess probably the most important one, as Justin said, is the person to do the job.
My guest that time was Justin Nickerson, Australasian Auctioneer of the Year.
Reports you should always get and the ones you can trust – Kylie Davis
Kevin: Making the decision to buy an investment property is really very exciting. It’s just a bit scary sometimes, too. We talk about research; you can actually over-research. Some of the biggest decisions are where and what to buy, but doing your research and spending just a fraction of the amount that you intend to invest can actually save you thousands and minimize the risk of making a costly mistake.
What reports should you be looking at? We’re going to highlight five for you today. My guest will take us through those, Kylie Davis from CoreLogic.
Kylie, thanks for your time.
Kylie: Thanks, Kev. Nice to talk to you.
Kevin: No doubt this is a question you’re asked quite often: which of the reports should I really be taking notice of? Which ones would you suggest?
Kylie: I think there are a few that we should look at. The first one is you need to understand is now the right time, or what is happening in the property market as a whole at the moment?
The best way to understand that is to look at a quarterly economic report to see what are the economic drivers that are affecting the property markets? Are prices on a property on the way up, or are they on the way down? What’s employment doing? What are the interest rates doing? What’s construction doing?
These things can set the scene for how the Australian market or how the market in your capital city is performing and give you an understanding of what’s likely to happen, because we all want to buy property and know that’s immediately going to go up.
That’s what we all hope will happen, but it’s often good to be alert and to understand is that something that’s going to happen in the next year, or do I actually need to buy this property now, thinking about what’s going to happen five or ten years out?
Kevin: We always cover those quarterly economic reports in our show, as well – a lot of excellent ones out from CoreLogic.
What about rental performance? How important is that, and where can we find out about that, Kylie?
Kylie: If you’re looking to buy an investment property, you really want to know what the rental performance is going to be, and so there are a couple of key metrics that you look at as part of an investment property.
You’re looking at the rental yield, but you’re also looking at what the weekly rent is going to be. You need to do that in the context of how realistic it is inside that suburb. You’ll often see inside data that a suburb might have an amazing rental return, but if there’s not much of a rental market in that area, or if the vacancy rate is really high, then sometimes those figures can be a little bit out.
So, the rental performance reports look at them across a lot of different criteria. They look at how big is the rental market in that area, is it a realistic rental market, what’s the yield, and how much is it returning, what is the median rent, how does that compare to the median price, and is the median value of the properties going up or down? You’re looking at something that’s trying to get capital growth as well as a good return.
Kevin: All of this data, of course, does actually show trends, doesn’t it? You have to monitor those trends, as well.
Kylie: Yes, it sure does. What you want to see is there’s no point buying a property that’s an amazing rental return if the capital growth is tanking out in that suburb. You could buy it, but you want to know that that’s what’s going on before you do it. You don’t want to find out after you spent an awful lot of money.
The idea behind the reports is to make sure you go in with your eyes wide open about what the situation is in that market, and a rental report will help you hone in on which suburbs you should be looking at to find the right property.
Kevin: I guess that brings us to the next one – doesn’t it? – getting down to specifics, getting right down to the suburb, as well, Kylie.
Kylie: Yes. Once you’ve worked out that you’re comfortable with where the market is at at the moment and you’ve identified some suburbs that you think are good rental opportunities, then you start to want to go right down into the fine detail of those individual suburbs.
The suburb reports will give you information on how the suburb is performing across a lot more criteria than just investment stuff. It’ll tell you where the median values are, what the capital growth has been over an extended period of time, and give you an understanding of the types of properties that are for sale in those markets.
Kevin: One of the things we have learned over the years, too, is that there is no one market in Australia. Even if you break it down into suburbs and then go into the suburb, you’ll find there are different markets even within a suburb. You have to really dig right down into the individual property level, as well, Kylie, don’t you?
Kylie: Yes. And I guess that’s the last report that you should buy, because a suburb on the whole can be providing a great return but it doesn’t guarantee that every property in that suburb is doing the same thing.
The best investments are made when you select the right property at the right price. So, once you’ve narrowed down your search and come up with a couple of properties that you really like, it’s worthwhile then going into a property report to see how long it’s been owned for, the age of the property, to get all of the details sitting behind that to make sure that the investment you’re about to make is not going to have any nasty surprises in it.
Kevin: Okay, there you go. There are the five reports that you need to be looking at, and Kylie Davis has taken us through those. Kylie is the head of content and property services marketing at CoreLogic and also heads up the CoreLogic reports. I imagine these reports are available at CoreLogic, Kylie?
Kylie: Yes, you can find these ones and a whole lot more. Some of them are free; some of them are paid for, but they’re all on the CoreLogic Report Store, CoreLogic.com.au/ReportStore.
Kevin: Good stuff. Kylie Davis, thank you so much for your time. We’ll catch you again soon.
Kylie: Thanks, Kevin.