A warning about ‘sprukers’ – BUYERS BEWARE + ICE properties + ‘Cookie Cutter’ renos

A warning about ‘sprukers’ – BUYERS BEWARE + ICE properties + ‘Cookie Cutter’ renos

 

Today we share a sad story with you. Sandy wrote to me with a tale that we can all learn from. “BUYER BEWARE” as Sandy says.  We could also say that if it looks too good it generally is. We get expert comment on Sandy’s situation from Shannon Davis who says he sees this all too often.

We are seeing some alarming statistics about methamphetamine contamination in Australian properties.  In NZ, property screening has shown contamination in 50% of all properties tested. So, what are your tenants up to and how can you tell and protect yourself.  We get all the facts today.

Damian Collins from Western Australia is a guest today as we reflect back on that market in 2016, the lessons that came from it and Damian tells us that there is some good news on the horizon.

Have you ever been tempted to broaden your investment horizons by getting into commercial property? Well anyone who has done it will tell you it is vastly different from investing in residential property. Michael Yardney gives us the lowdown on that and tells us about some of his personal experiences.

We are joined by the queen of renovation – Cherie Barber – who last year predicted that the inner ring cap city markets would be more subdued and her recommendation was to take a ‘cookie cutter’ approach to renovation. She expands on that this year and tells us why we should be the last ones to get bored with a uniform approach to property renos.

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.

 

Transcripts:

A sad spruker story – BUYERS BEWARE – Shannon Davis

Kevin:  I’m going to feature a question that came in – well, probably not so much a question as more a comment or a statement from Sandy, who shares an experience with us that I want to share with you because I think there’s a lot of lessons inside this.

“Kevin, just writing about an unsuccessful investing experience.” This is Sandy writing this message. “I really enjoy the success stories of others but here’s one from the other side.

“I’ve been interested in property for about 10 years and currently have 11 properties. It sounds reasonable on paper and could be marketed in a magazine as a success story if you stopped there. But the reality is I’ve hardly any equity in those properties and all of them have underperformed in terms of their equivalents in even good markets like Sydney, and the majority are in dismally performing areas.”

“How did I get myself into this situation?” asks Sandy. “I got spruiked. I blame myself and not the spruiker. Buyer beware, although I feel like there was a breach of trust in this process. I joined a well-known real estate mentoring group and was sold what I now realize overpriced, undesirable developer stock. There was little transparency in the process of the commissions the sales agent posing as a real estate mentor received.

“I’m now in the process of taking a $250,000-plus hit to steady the ship and start again, this time in the inner ring areas of the four major capital cities and most likely pay a buyer’s agent a fee to find me something that ticks all the boxes – an expensive learning process and one that I would feel much better about had I chosen these properties myself, rather than pay for a mentoring program and then pay much more dearly for biased advice. Once again, buyer beware.”

Sandy says that she writes this as a warning to many of those looking at joining certain groups with underlying vested interests to sell you certain properties.

“Kevin, thank you for a great show. I listen to it regularly and religiously, and I find all your guests very interesting. I feel it’s kept me on the property pathway rather than giving it up due to my recent failures. Kind regards, Sandy.”

Sandy, thank you so much for sharing that with us.

Joining me to talk about this, Shannon Davis from Metropole Property Strategists.

Shannon, a really sad story there for Sandy. What would be your advice to her?

Shannon:  I think first and foremost we have to educate ourselves. I think whenever we go to a supposed mentor – or in this case, spruiker – and say, “I’ve got money; what should I do with it?” you’re abdicating your responsibility and you’re setting yourself up for failure with that.

So let’s educate ourselves first, and the best way to do that is to ask questions – and if a person’s always bringing you back to a certain set of properties or a certain area to invest, it might be that they’re in a process of selling property rather than selling investment strategies.

Kevin:  Sandy talks there about going to see this group, a well-known buying group, and I guess one of the warning signs is if they are representing property. In other words they come to you and say, “Look, this is the solution. I think you should buy this,” that is a warning sign, isn’t it?

Shannon:  Oh, yes, definitely. Stock lists: they’re masquerading as sellers for developers, really. And you might be paying a commission but they’re getting further undisclosed or disclosed commissions from the builders as well, and very little empathy as to whether you’re going to get capital growth or not.

Kevin:  Shannon, there are a number of questions I want to ask you, one about working out what area you should be involved in, but Sandy did mention there her strategy of four major capital cities. What’s your reaction to that?

Shannon:  Yes, I think Sandy’s on the right track there because she’s starting to look for a little bit more scarcity. I think if it’s a new area that you haven’t really quite heard the name of that suburb before and it’s stage one or stage five to go, there’s not really a lot of scarcity in that investment, and at the end of the day, they’re the properties that are going to be more prone to a correction or a big run on prices.

Kevin:  So, mate, how would someone go about finding it an independent person to talk to about this?

Shannon:  I think that they have no ties to anything at all. They can be unbiased and independent and survey each property for what it is and not on how they’re going to get paid. I think if you’re not paying the person working for you, buyer beware because obviously nothing’s for nothing in this world and they’re getting paid somewhere else, and that’s going to compromise their advice.

Kevin:  Yes. I’m going to repeat this little part because I think it’s quite relevant. Sandy says, “I write this as a warning to many of those looking at joining certain groups with underlying vested interests to sell you certain properties.”

Now that’s the key – that they actually will come to you and say, “Well, look, here’s a portfolio of properties.” You’re going to find that they’re new. They’re probably developer stock. If you do your research properly, Shannon and I would suggest to you that you’d probably find that it’s also grossly overpriced, because they tend to build their own commission in above on top of that, don’t they?

Shannon:  Yes, it’s a very contrived market. Offer stock lists, like you said there, and they’re going to really preach the tax deduction of buying new, but what you find out is you’ve bought very expensive development stock that underperforms in areas of little known establishment, and moving forward, it’s not quite the investment you thought it was.

Kevin:  Another warning sign will be if you are offered any kind of a rental guarantee. Normally what happens here…—You explain it, Shannon: what happens with a rental guarantee?

Shannon:  Again, priced in. It originates to put new investors at ease, but again, it’s priced into the price, and their biggest fear of finding a tenant, you pay a lot for that and you’ll see a significant drop once those leases expire.

Kevin:  Yes, so effectively they build in… They’re prepared to put in over the above rental that you would normally get for that property to make it look a lot more attractive in terms of its return, and as you said, once that guarantee runs out, it will go back to a normal rent, which is grossly under what it is now.

Shannon:  Yes, that’s right. And often, they’ll recommend their own solicitors and own financiers as well to help it escape the scrutiny, as well.

Kevin:  Good talking to you, Shannon, thank you. A very timely warning. And, Sandy, thank you for sharing that experience with us, and I hope that’s a great lesson for many other people, as well.

Shannon, thanks for your time.

Shannon:  Thanks, Kevin.

 

Green shoots emerge in WA – Damian Collins

Kevin:  Let’s check in with another one of our experts who we spoke to this time last year – Damian Collins from a very interesting market, WA, from Momentum Wealth, buyer’s agents in that state.

Damian, thank you very much for your company. Welcome to the new year, and happy New Year.

Damian:  Same to you, Kevin, and we certainly hope to see a happier new year than 2016 for people investing in the west.

Kevin:  Let’s reflect on a few things that you made comments about this time last year.

Damian:  Well, I think in terms of the Perth market, by the time we get into this time next year – early 2017 – we’re going to be saying we’ve just seen the seeds of recovery. In the first half of the year, the market is probably going to be fairly similar to what it was in 2015  – fairly flat and a tough rental market – but towards the end of the year, we’ll start to see the signs of recovery as rental vacancy has peaked and started to drop back. A bit more confidence back in the West Australian market, and early stages of hopefully a reasonable upcycle – nothing significant, but a reasonable upcycle over the following years ahead.

Kevin:  What about those green shoots, mate? Did they start to appear?

Damian:  Towards the end of the year, Kevin, we saw the median price growth start to tick up. Both [1:18 inaudible] and CoreLogic saw growth in the final quarter in the median price. There are glimmers of hope on the horizon. Building approvals – which is the supply coming into the market – have certainly slowed down, but we still have low population growth.

We’re at the bottom of the cycle. Exactly where we are is always difficult to say, but 2017 is going to be another year of slow recovery. I’d expect the prices to be fairly stable across the board, but you might find a few pockets here and there where you might do a bit better than the market. In the years ahead, there’s still a strong long-term outlook for Perth, but short term, it’s not going to rise in a hurry.

Kevin:  Was it a tougher market in 2016 than what you had anticipated, Damian?

Damian:  It was a little bit tougher, yes. We thought that the market might start to recover, and as I said, the median price showed it did towards the end, but I still think that might be a just quarterly blip.

The population outflow was the big one that I think took people a bit more by surprise. It was evident that with the end of the mining construction boom, we’d see a slowdown in population growth coming in, which we definitely did, but the number of people leaving and going out of state or overseas was higher than most people expected.

That has held back the recovery. Going back 12 months ago, I would have thought coming into 2017, we’d be starting to see it pick up from early 2017, but I still think that’s going to be towards the end of the year or even in 2018 before we see a sustained, across-the-board recovery in the property market.

Kevin:  Do you see any opportunistic buying coming into the WA market, given the fact that things have come back a bit, Damian?

Damian:  That’s where it is at the moment, Kevin. As you would know, you have Sydney, Melbourne at the other extreme where people are paying potentially over the top. They’re at the other stage of the cycle, and we’re at the bottom, so we’re certainly getting some really good properties that in a normal market, you’d find more competition, and we’re getting them at exceptional prices.

If you have a long-term vision, the fundamentals are there in Perth. The agricultural sector is going very strongly this year. It’s not just mining. Mining is the big industry. Commodity prices have recovered. As we speak, it’s about $80 (U.S.) a ton and has been for a little bit.

The fundamentals are there. I think it’s just confidence that holding people back. It’s a great year to get those opportunistic ones, lock them away, and if you have a five- or ten-year horizon, you’ll still do well.

Kevin:  Can you be a bit specific and tell us where you think some of the best opportunities lie right now in WA?

Damian:  We’re certainly focused on being in proximity to infrastructure and particularly trains and future train lines. Obviously, we’re seeing tourists spending a ton of money in New South Wales and Victoria. As the city gets bigger and more congested, people really focus on that public transport, and that becomes an important determination of where they want to live.

Perth is getting into that stage; it’s two million now. We’re focusing up in the Northern Corridor. We still like Warwick and Joondalup and Craigie up the Northern Corridor, and we still buy selectively in Forrestfield. It did have a bit of a run-up with the rezoning; it has come back a little bit, but there is still a train line going out there, which is going to make that area quite accessible to the city once that train line gets built, and it will be up and running in a couple of years.

So really, the focus is on being near that important infrastructure, and still areas that are rezoning. That’s another area we’re focusing on. We’re looking at where prospective rezoning is because that gives you that uplift. Even in a flatter market, we’ve seen some rezoned properties jump 20% or 30%.

It’s really about doing a lot of research and picking out the best properties. The good thing at the moment in Perth is that you can do that. In 12 or 18 months, it will be a lot harder, because there will be a lot more competition.

Kevin:  We’re hearing some terrible stories around Australia about the tightening the banks are going through and what flow-through that’s having for a lot of developers. Are you seeing any signs of that in WA at all, Damian?

Damian:  Yes, it certainly has. Because the confidence has been down for a couple of years, developers have really struggled to get projects off the ground. Getting the requisite number of presales has been very difficult, so we haven’t had a substantial oversupply of apartments. Yes, there is a bit of an oversupply, but a lot of the projects haven’t been built. We have more general oversupply in the market, whereas some of the other cities have a particular issue in apartments. So, it has been, and there have been some sales fallen over in some development projects, but nothing substantial.

But it certainly has affected investors. We’ve had clients who could potentially borrow $1.5 million before the changes; now it has pared back to about $800,000 or $900,000. So, it certainly has had an impact on people’s borrowing capacity.

Kevin:  We’ve learned a lot of lessons out of the market of 2016.

Damian, all the best for this year. We’ll talk to you as the year goes through, but thank you for giving us your time and your insight this morning on the show. Thank you.

Damian:  Pleasure, Kevin.

 

Broarden your investment horizon – Michael Yardney

Kevin:  With the residential markets slowing down or showing signs of slowing down, many people wonder if this could be a time to switch to commercial property. There are some differences. Let’s find out exactly what they are. Michael Yardney joins me.

Hi, Michael.

Michael:  Hi, Kevin.

Kevin:  You’ve had experience with this, not only on behalf of the people you work with but personally, the differences between commercial and residential investment, Michael.

Michael:  In my mind, they’re very, very different investments, and while I can understand why some people are tempted to get into commercial property, I’d be suggesting to leave it until later on in your investment career. It’s really more an investment for the big boys.

What are commercial properties? There’s a range. There are shops (which we call retail), factories and warehouses (which we call industrial), and offices (which we tend to call commercial). The big difference is that they’re yield-based investments.

Kevin:  Does it take a different type of investor to become involved in those, Michael?

Michael:  It depends in which stage of your investment career you are and what your investment philosophy is. To me, residential real estate is a high growth but low yield investment, and as I started to say, commercial is really a lower growth investment (because the increase of the values of commercial properties tends to be pegged to the CPI) but they have a higher yield.

Some people say, “If the return is the same overall, why not go for the one with the high yield that gives me cash flow?” The big thing, Kevin, is many beginning investors need to grow their asset base. And while yields are taxed, capital growth isn’t, so it’s much easier to build a big asset base using residential property, and then later in life, transitioning into the commercial field.

Kevin:  If that’s the case, Michael, then why do some people consider getting involved in commercial property?

Michael:  I guess they’ve noticed that institutional property investors as well as those investors of the BRW Rich 200 list own commercial properties, and they wonder why. They see them getting high yields; it seems a bit attractive. They don’t understand the downsides, Kevin.

Kevin:  Michael, I wonder if you would be kind enough to spend a minute or two and take us through what you see as the fundamental differences between commercial and residential investment.

Michael:  Sure, I’m happy to. I got involved in commercial real estate in the late 1970s when I bought my first factories, and. I did a lot of commercial and industrial development in the late 1980s. Great properties; some of them I still own.

Interestingly, since then – and that’s 25 or 30 years – those properties have only doubled in value. They’ve had good rental return, they’ve not been vacant long, they’ve had great tenants, but because they only go up much more slowly, they’ve only doubled in value.

Having said that, a lot of the residential real estate I own has doubled in value in eight or ten years, sometimes even five or six years if I’ve done some developments. That means my wealth has grown because the rents have grown proportionally, as well.

So, it’s something I’d be recommending people consider when they’re at a different stage of their life, or maybe in their superfund where they’re looking for more cash flow. I know I haven’t answered your question about the big differences, but I thought that was an important place to start.

Kevin:  It is indeed. You said that commercial properties tend to yield higher returns.

Michael:  Yes, they do. Now, it depends upon the lease. The more secure the lease… If you have a lease to Officeworks for 15 years, you actually are prepared to accept a lower return than if you have a fish and chip shop leased to mom and dad.

First of all, if you want to get involved in commercial real estate, to get the benefits of the security of the long leases, you normally need much deeper pockets – firstly, because probably unless you’re spending $2 million or $3 million, in my mind you’re not buying an A-class commercial property; you’re buying secondary properties – and you shouldn’t do that.

The other thing, Kevin, is banks will often only lend you maybe 60%, sometimes 70% of the value of the property. You need more deposit because they have lower loan-to-value ratios, and also many banks charge you a slightly higher interest rate.

One of the big differences is that you need much deeper pockets and you need to be looking to get cash flow out of them.

Kevin:  Yes, we can see there are some fundamental differences there. I guess like anything, Michael, we should always take advice on this before you take those kinds of steps.

Michael:  This even more so. Even the leases are complicated, Kevin, so you don’t get the normal property manager to do those. You need a solicitor’s advice for this. The due diligence is significantly different, and commercial real estate is very much more cyclical. It depends a lot more upon how the economy is going and what happens with interest rates, so a lot more homework and due diligence.

Kevin:  Michael Yardney from Metropole Property Strategists. Michael, thank you for your time and your insight. I appreciate it.

Michael:  My pleasure, Kevin.

 

When you are on a winner – stick to it! – Cherie Barber

Kevin:  We’re going to check in with another one of our experts who we spoke to at this time last year about the property market and what they expected to have happen, and that is Cherie Barber.

Hi, Cherie. Nice to have you back in the show again, and happy New Year to you.

Cherie:  You, too, Kevin.

Kevin:  Cherie, let’s have a listen to what you said this time last year.

Cherie:  Moving forward, I think that for the next 12 months that property prices are probably going to come back in the order of 5%, particularly in the inner city rings. We just have to be mindful that the property market is not one market, Kevin. Moving forward, I think the outer metro ring, a little bit farther – 50 K’s onward – are going to get really good capital growth opportunities for anybody looking to renovate.

Once somebody makes the decision to do renovating as their property strategy, generally your strategy remains the same. Typically you would just focus on a small cluster of suburbs. Instead of being a jack of all trades, you become a master of one. You focus on a small cluster of suburbs, so you’re not spreading your wings too fine.

You’d be looking for the same sort of property deal after deal. In an ideal world, you’d be renovating that property in the same manner, so almost adopting a cookie-cutter approach to how you renovate.

What I teach my students is not to get fancy on any cosmetic renovations, to work with a template that works. That comes down to color schemes, the type of kitchen cabinet you put in, the type of floorboards, what color you sand them, all that sort of stuff. All you do is just replicate that project after project so that your renovation projects become a production line, a cookie-cutter mentality. If it’s cookie-cutter mentality, while it may not win you any design awards, what it will do is make you money, so people don’t need to reinvent their strategy property after property.

Kevin:  We’re back live now with Cherie Barber. Cherie, you made some very good points in there. The opportunities for people to make money – which is what we focused on there in that last little segment – were there some good opportunities did you see last year?

Cherie:  There were. There’s definitely very strong interest in renovating still right across the country because the premise of renovating is all about adding value regardless of what the market is doing. Some states have suffered. Obviously, the Perth market has taken substantial losses in 2016. However, most of the other states from a renovation perspective really held their own. Most people in 2016 flipped from the buy, renovate, and sell strategy to the buy, renovate, and rent strategy, which is very lucrative right now.

Kevin:  Yes, we’ll talk about that more in just a moment. I’d love to get your insight into that. You made a very good point I thought – and you and I talked off-air about whether we should make this a national focus or a local focus. I think there is a danger for people to become too broad. In other words, I think you made the point in that segment about making sure that you work within the small cluster of suburbs and get to know them quite well. Is that still your premise?

Cherie:  Absolutely. That’s a problem. People chase renovation deals. They might be in one suburb one weekend and a couple months later, they’ll be chasing a deal 20 K’s away. I’ve personally always adopted this theory of becoming a master of one, not a jack of all trades. I’ve always applied that rule to my property investing, and I’ve done very well.

Certainly for my students across the country, I say focus generally on a cluster of suburbs – five suburbs or less. Become an absolute expert at them, because then you know what’s happening in those suburbs. You know what prices you should be buying at as a renovator. You know the likely demographics of who’s either going to buy or rent that house when you finish your reno project.

And obviously, once you become a suburb expert it means that you can forecast your expected resale or revalue price before you even buy. When you become too broad, your ability to do that really gets hindered.

Kevin:  You also mentioned in that segment about the cookie-cutter concept. I imagine if you had a formula  that worked and you’d done it once or twice, would that make it easier to shop around and find the type of property in the area that you want, Cherie?

Cherie:  It does. I do preach the merits of the cookie-cutter template to my students nationally. Yes, that makes us a little bit more boring. We’re not going out an installing all the latest mod cons and all that sort of stuff. I am a big, firm believer of a cookie-cutter template for your renovation projects.

For example, for my personal projects, all of my projects are the same color – the same internal wall color, the same external wall color. You never have two houses that are side by side, so it’s not an issue.

When you adopt a cookie-cutter mentality, your renovation projects become nothing more than a production line where it’s a different day, a different address. That’s how you get time, cost, and process efficiency. Your tradies come on site. If you do the same thing, the same signature look, project after project, then your tradies automatically know what to do, so you’re not reinventing the wheel, and that does save you a lot of money.

Also, cosmetic renovations work best at a certain price point, and at the price point that cosmetic works financially, you don’t need all the bells and whistles. You need to get in there, make the property look better than before – obviously to a good quality standard but it doesn’t need to be a slick, modern, designer premise. That will cost you more money, which will erode your profits. In large part, it’s about getting back to basics.

Kevin:  You call it a cookie-cutter concept; I call it a winning formula. If you know it’s going to work you have to recreate it. You said there about being boring. The only person who would get bored with that would be us ourselves because we’re seeing it all the time, but bearing in mind that we’re going to be selling these properties to different people, we’re the only ones who are going to get bored with it, I would think, Cherie.

Cherie:  That’s true. For example, I’m about to do my 100th renovation in the next couple of weeks, and for a large part of those, I have adopted the same cookie-cutter template for all of my projects. When you do that it just saves yourself a lot of headache. You don’t have to go to Bunnings and buy new fixtures and fittings. You don’t have to go to the paint store and look at 300 new paint swatches. Your life becomes very easy when you adopt a cookie-cutter production-like mentality for your renovation projects.

For example, I obviously do Channel 10’s The Living Room and renovation shows overseas, and for those shows, I have to reinvent the wheel every single project. I can’t use my cookie-cutter template on those projects because then they’d say, “You’re boring, Cherie. You’re doing the same thing.” So I have to reinvent the wheel. I tell you what. It causes me so much frustration in getting paint colors wrong, in choosing a kitchen laminate that doesn’t look as good as my normal cookie-cutter template, so there is a lot of merit for sticking with a winning formula.

Once you get a winning color scheme, a color scheme that is timeless that won’t date, that will still look great in 10 years, and fixtures and fittings that appeal to the majority of people – once you have that template, just roll it out project after project so that you do maximize your renovation returns.

It’s a very, very, simple concept, but people try and over-engineer things or they try and win design awards. At the end of the day, I don’t need a trophy on my mantelpiece to say I’m the best designer; my renovation projects need to make money.

Kevin:  Okay. Fast forward to this time next year, will you still be saying that buy, renovate, and hold is the strategy for 2017?

Cherie:  Absolutely. It’s getting very difficult. It doesn’t matter what state of Australia you’re in, it’s very difficult to buy, renovate, and sell if you’re doing a cosmetic renovation. With the high entry and exit costs of a renovation project these days, it’s very hard to get the numbers to stack up.

I do believe that the buy, renovate, and rent strategy has a lot less cost involved. It also means that if people are not selling their property on completion of their renovation, they’re going to be renting it out to a tenant. A tenant technically should pay all of the mortgage. If not, and they’re still in a situation where they’re forking out a bit of cash, most of that they’re going to claim back. The owner of the property will claim that back on negative gearing benefits anyway, whereas structural renovations are still very strong for buy, renovate, and sell.

Obviously, we have the two types of renos – structural renos and cosmetics. The structurals are buy, renovate, and sell – no problem there in most states of Australia. But for cosmetics, it’s definitely buy, renovate, and rent.

Kevin:  Well done, Cherie. You can catch Cherie, of course, at her website RenovatingForProfit.com.au or catch her on Channel 10’s The Living Room Friday nights. A great show, too.

Cherie, thank you so much for your time, and all the best for this year.

Cherie:  Thank you so much, Kevin. It’s a pleasure always.

 

ICE properties – what areyour tenants up to? – Bryan Goodall

Kevin:  We’ve reported on this in the past, and more and more, we’re starting to see this emerge as a major problem now. If you are the owner of a property – an investment property or even your own personal home, probably more so an investment property – you’re going to really want to have a listen to what we have to say in the next few minutes.

Bryan Goodall is the National Sales Manager for a company that is called Octief. Basically, Bryan, your company is on top of the situation with regard to detecting methamphetamine poisoning in properties.

Good morning, and welcome to the show.

Bryan:  Good morning, Kevin. Thank you very much for having me.

Kevin:  I read with interest that at least one state government is finding it difficult to get on top of this, paying about $400,000 just to clean up some homes that have been poisoned with methamphetamine. That was in Victoria.

Bryan:  That’s absolutely right. And in fact, we use New South Wales as another example. Each year, they knock down six to ten homes that are probably so contaminated that they’re not economically worth cleaning. It’s a massive problem everywhere you go.

Kevin:  Is this increasing? Are you noticing it increasing?

Bryan:  The awareness is certainly increasing. We know that the usage – and we talking per capita – has nearly tripled in the last five years in Australia. Contamination therefore is bound to increase, also.

Kevin:  Correct me if I’m wrong, Bryan. It’s not so much the fact that people are endangering themselves with this but the poisoning that’s left behind on properties is both hard to clean up and also quite harmful to innocent people like children and even adults.

Bryan:  Absolutely. To be quite fair, I think that most people who are using – as in they’re smoking methamphetamine – they’re not necessarily out to harm anybody else or to do damage to a property or anything else, but they’re just not aware either of the effects that they’re having.

The chemical contamination that they leave behind is both invisible – you can’t see it and can’t necessarily smell it – and you have innocent people who come into that room. You might have a future tenant, for example, and they have a small child. No one knows that that contamination is there, and then people start getting sick.

Kevin:  The onus of investment properties relies very much on property managers to keep them on top of these types of situations. Are they aware of how widespread this is, and are they testing?

Bryan:  Some are testing. I’d say that the majority are not testing. It’s quite concerning. I’ve spoken to a number of property managers in the last probably six months or so, and there are a lot of people who don’t believe we have an issue, they don’t see that there’s a real problem there, and they have their heads buried in the sand a little bit.

There’s a real differentiating fact here between if we’re talking about a manufacturer’s house, like a clandestine lab where people have been manufacturing methamphetamine inside the house. That’s quite well-known and the awareness is out there. There are movies like Breaking Bad, etc. where people already have an image in their heads of what they’re doing to a house and the kind of contamination that can be left. That’s one problem.

The other problem is – like we say – from people smoking, where we can’t see it, we can’t smell it, we don’t even know that contamination is there, and that’s a whole different story to deal with.

Kevin:  What are the signs that a property manager should be looking out for?

Bryan:  Like I said, Kevin, if we’re talking about a house that’s been smoked in, there literally are no signs. It could be as clean and tidy as your house or my house. There’s no staining and are no smells. You don’t know until people start getting sick.

Quite often, that’s when these properties are discovered – when someone has been admitted to hospital on a number of occasions and no one quite knows why they’re getting sick. They get removed from that environment and they start getting well again, and they go back into that environment and they start getting sick. Then testing is done and we realize that there is, in fact, contamination there.

Kevin:  Is there a low-level test that property managers can do to see if this is happening?

Bryan:  There certainly is. That’s actually a service that we offer. We call it our Methamphetamine Baseline Screening. That’s a test where we would come out to your premises. We would take samples, send them to the laboratory, and the laboratory would actually give us a result to tell us whether there’s contamination there. From that early result, we can also tell whether the contamination is from manufacture or from use, as well.

Kevin:  We’ve already covered the cost of cleaning up, and that can be quite extensive. It just depends on the amount of poisoning. What does one of those tests cost?

Bryan:  The laboratory test is $550 including GST, and that’s available in metro areas.

Kevin:  Certainly something that property managers should be looking into and certainly property owners should be well and truly aware of. If you want to get a bit more information, the website is Octief.com.au.

My guest has been Bryan Goodall. Bryan, thank you very much for your time.

Bryan:  Thank you, Kevin.

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Kevin Turner
kevin@realestatetalk.com.au
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