02 Jun I will have a twist please
Michael Yardney answers Adam’s question about looking for a property with a twist.
Kevin: Adam sent me an e-mail that we’re going to address now. Thanks for your e-mail, Adam. “I was wondering if you could ask Michael Yardney to define in greater detail what he means when he says to look at properties with a twist.” Well, good news, Adam; Michael joins me on the show.
Michael Yardney, thank you for your time.
Michael: Great, thanks, and it’s a good question, Adam. What I’m really looking for is a property that’s going to outperform the averages, an investment-grade property that will remain stable, not go up and down in value as much, and grow with wealth-creating rates of return.
What I’m looking for is something that in strong markets will always do well, but as we’re now getting into the weaker stages of the property cycle is also going to do well. When there is a shortage of properties, when there are more buyers or renters around, every property will rent, every property will sell, but now in some parts of Australia, where the equation is turned the other way, I want the sort of property that will attract potential tenants and also if ever I want to sell – not that it’s my intention – will attract buyers, that’ll always hold up the value of my property.
A twist is something that’s different, unique, special, scarce. You never get that in those big-high rise monolith blocks where there are 50, 100, or 200 apartments that all look the same. But it could be nice features, it could be an art-deco apartment, it could be two car spots rather than one, to attract a wider range of people. It could be just a two-bedroom apartment but interestingly, it has two bathrooms, an en suite. It may be a nice outdoor living area, good views, a good aspect, something that will make it special and different from the pack, to make it unique.
Kevin: Michael, would you say that a property with a renovation potential has a twist?
Michael: Yes, it has a twist, but I don’t put it in the same category. When I look for an investment property, I use a five-stranded strategic approach. Kevin, I’m sure you know by now that I like the properties with renovation potential, but that’s a one-off, and once you’ve done it, then the renovation is done. It adds some value, it manufactures capital growth, it increases your rental return, it gives you good depreciation, but then it’s gone. To me, the twist, the scarcity, is something that will be there in the long term.
Kevin: What about a renovation potential to reshape? In other words, I’ll give you an example: a two-bedroom apartment that has one bathroom but a very large laundry, that you could then turn into maybe another en suite, so you end up with two bathrooms.
Michael: Sure. Again, that’s a great one-off, and it is a form of twist – no argument that it’s going to make it a bit different – but I’m talking about a twist being that property in the long term – 5, 10, 15 years’ time – when it’s open for inspection, tenants go into that and they compare it with down the road, they’ll think “Hey, this is different. This is a bit better. I like this one.”
Kevin: So Adam, there is the answer to your question.
Michael Yardney from Metropole Property Strategists. Michael, thanks for your time.
Michael: My pleasure, Kevin.