17 Jul Line of credit, offset account and redraw facility | 10 events that could crash the housing market | “The Best Price For Your Home is the Love Price” | Top ten tips for first time property investors | Renovations
We are experiencing many warnings of housing bubbles, crazy house prices and other alarms. So what needs to happen in the economy to cause dwelling prices to fall significantly is a question we ask Michael Yardney. He outlines the 10 events that will signal such an event.
Our finance expert Andrew Mirams explains the difference between a Line of Credit, Offset Account and Redraw facility. He outlines when it is best suited and which one might work best for you.
You will have heard agents talk about getting a premium price for a property – it is language they use to secure a listing. In a new book that I have been reading, written by top Aussie agent Peter Hutton, he tells you how to make sure you get the LOVE price when you sell. We talk to Peter today.
If you are a first time investor well we will have the golden rules for you to follow if you don’t want your plans to come to a screaming halt.
It is romance sometimes that drives investors to think that renovations are the path to wealth. Something you can build in to add value. Well we tell you today that renovation could be the last thing you want to do.
Kevin: We hear these terms all the time, and I don’t know about you but sometimes it’s nice to know exactly what they mean: lines of credit, offset, and redraw facilities. These are all important tools for property investors but what do they really mean and how can you best use them?
Andrew Mirams from Intuitive Finance joins me. Good day, Andrew.
Andrew: Good day, Kevin. How are you?
Kevin: Good, mate. We bandy these terms around all the time. I thought it might be helpful if you could take us through what they really mean.
Andrew: Yes, we do. It’s quite interesting. We ask all of our clients when we’re talking to them about these terms, and it’s quite interesting the amount of information or lack of information out there about what they mean and how it can have an impact on certainly your investment portfolio.
For the home, it’s a little bit different, but if you’re using some of these facilities on an investment portfolio, you can actually muddy the waters, really mix up your debts, and it can have some significant tax impacts.
Kevin: Would it be fair to say, Andrew, that these can be used at different times for where you are in your portfolio building status?
Andrew: Absolutely. Lines of credit, they were the first thing that came to fame with all these, “You can pay your home loan off in 10 years and draw your money in,” and things like that. What we’ve found for people, as a rule, as a home, we think it’s normally better to have a home loan with an offset account.
Lines of credit, people tend to not be that disciplined with their home, and they can see themselves getting ahead, and then they find their way to going on that holiday, buying a new car or something, and the debts tend to sit there and not reduce. Lines of credit are really effective for setting up your investment portfolio, trading, and helping you manage your day-to-day cash flow with an investment portfolio. That’s their real strength.
Kevin: Pardon me interrupting you, but if I had a line of credit, say for $100,000 as an example, when the bank is looking at me as a financial risk, if you have $100,000 there even though you’ve only used $20,000 of it, do they say, “We’re going to count that full $100,000”?
Andrew: Absolutely, they do. Yes, because you can go out and spend that tomorrow. It’s a bit like a credit card. It’s a limit. A line of credit is an exposure that you have. Yes, a lot of people we also talk to say, “I have a line of credit for $200,000 but I’m not using it.” It doesn’t matter because you literally write out a check tomorrow. That is why the bank is committed to give you that access to that credit, so yes, they always do an assessment based on you using the full figure. That is right, Kevin.
Kevin: Let’s look at some of the others.
Andrew: Probably the key between an offset account and a redraw is a lot of people don’t actually understand what it means. A redraw account, or a redraw, is on any payments that you’re in advance on your loan. It’s really effective for a home loan. If you’re paying principal interest on an investment loan and you’re putting extra money into it, you have access to those additional repayments.
Why we probably like offset accounts a lot more, especially on your investment debt, is it’s cash. It sits in the account, and while you’re saving interest on your loan, it is your cash. It’s quite effective, an offset account, for people who might buy their first unit but they’re going to in the future, keep that unit but upgrade to a house. There’s no point to paying off that home loan as it stands today, because when it becomes an investment, you want to have the maximum debt against that. By having it in an offset account, it’s your cash. You can then go and do it.
It effectively works the same because the cash in your offset is effectively paying down your home loan. If you’re paying it into redraw and then you want to convert that property into an investment property down the track and you’ve paid your loan down, you just can’t take the money out of the loan and use it because you’ve blended the use of the money. You’ve taken that money to buy an owner-occupier, not an investment debt. That’s really the key.
Kevin: How easy is it to set these up? Is it just a matter of talking to your broker or the bank?
Andrew: Yes, really simple. We will always set them up. All the banks are a little bit different about how, but we’ll guide all our clients through what needs to be done with an offset account. I would probably say 99% of our clients always will have an offset account.
We’ll always give them access to redraw, and if they’re setting themselves up with their portfolio, a line of credit is really important to having access to using and managing their cash flow effectively. We’ll talk through every client’s situation and circumstances to make sure they understand what we’re doing and why we’re doing it for them.
Kevin: Very good. Thanks for clearing that up for us, mate. If you want to get a bit more information, talk to Andrew and his team at Intuitive Finance. You can contact them through the website, RealEstateTalk.com.au, and watch out for all those new blogs that are coming your way from Andrew regularly on his featured channel.
Andrew, thanks for your time.
Andrew: Fantastic, Kevin. Thank you.
Kevin: Property prices go up and down, but the talk about a crash is something that really brings a lot of emotion. Prices will go up and down all the time, but what actually will cause property prices to crash? This is a question I want to pose of Michael Yardney from Metropole Property Strategists.
Michael: Hello, Kevin.
Kevin: It’s highly emotive – isn’t it – when we talk about price crashes?
Michael: That’s what one implies when you talk about a bubble, that it’s going to burst. Let’s be blunt that in the big capital cities, we actually haven’t had price crashes in the past, while we have in segmented markets, but it could happen, Kevin.
Kevin: List out some of the events that could run us into that area.
Michael: I guess it’s the things that have been leading us up to these high property prices that may change. One of the dangerous ones, I guess, is a halt to our rising population. Our property values are increasing because there are more of us. I’m not suggesting that it could happen, but that is one of the things that could cause property values to drop – if our population doesn’t keep growing at these very high rates.
Kevin: Is it as simple as supply and demand, Michael?
Michael: The demand side is related to household formation from our population growth, but also if there was a recession or, more likely, a depression where the entire country would have high unemployment and people defaulting on their mortgages.
Remember, if we’re talking about a crash, we’re not talking about the orderly slowing down of property values or slight drops; we’re talking about the fact that people can’t sell their homes and sell them at any price. That’s when property values freefall. That doesn’t usually happen because we’re underpinned by a whole lot of owner-occupiers, so we really need some significant events, Kevin.
Kevin: What about overseas buyers, Michael?
Michael: In certain segments of the market, overseas buyers make a big difference. If, for example, the Chinese and other Asian buyers stop buying, that definitely could affect their property markets.
The two most likely causes are the government’s actions making Asian investors feel unwelcome or some effects in their own hometown – like we saw way back in the 1980s when the Japanese were buying up Australian real estate and then all of a sudden, their economy faltered and it stopped them buying overseas. Again, we’re just talking about the possibilities. Both of those are possibilities but probably not probabilities.
Kevin: Mixing up and all the talk about negative gearing, is that a danger for us?
Michael: Clearly, the investor market is one of the things driving our general Australian property markets. In some locations, especially Sydney and Melbourne, investors make up a significant portion of purchasers. If negative gearing is taken away, it will have a definite short-term impact when a whole heap of purchasers are out of the market, and that could cause property values to drop significantly.
Kevin: At a more local level, Michael, with councils, how much influence do they have on the market in terms of their approval for developers and so on?
Michael: Council approvals are one of the reasons why property values are high. Ask any developer and he’ll tell you how hard it is to get a development approval for apartments, but even if you go through the new estates, how hard it is and how expensive it is to get the infrastructure in. Therefore, changes to building regulations, in a way that they actually free it up and make it easier and therefore, increase more supply, could be one of the factors, even though I think it’s unlikely to cause a property price drop.
Kevin: What about unemployment, Michael?
Michael: Unemployment or concern about your job – in other words, consumer confidence, really – is one of the big factors that affects people making big buying decisions. If you’re not certain about your job or if you haven’t got one and can’t keep a mortgage, that is one of the factors that can cause property prices to crash.
Kevin: What about higher interest rates? How much of a lever are they really?
Michael: I remember paying 18% or 19% in the late 1990s. I bet you do, as well, Kevin.
Kevin: I do.
Michael: It was for a really short period of time, but you don’t even need to get to those levels. We found in 2003 – it actually happened in 2010 and it happened in the 1990s, as well – just an interest rate rise of about 2% stops the property markets dead in their tracks. That is probably the most likely thing that is going to stop this property cycle a couple of years down the track.
Kevin: I guess population is one thing. You mentioned that earlier, Michael. What about the aging population?
Michael: Interestingly, currently pensioners are encouraged to hang onto their dwellings rather than downsize, but if these rules were changed, many dwellings would possibly come onto the market. People have talked about what the Baby Boomers are going to do, as well. That is one of the factors on the horizon that, if there are significant changes, may affect our property markets.
Kevin: And superannuation?
Michael: Clearly, one of the big drivers of investor purchasing in the last couple of years has been people buying their self-managed super funds. Interesting, not just Baby Boomers, but I’ve seen a lot of younger Gen X’s and Gen Y’s already getting into the property market through their self-managed super funds. If the government tinkers with those, that is another factor that could have a negative effect on property values.
Kevin: A lot of things to consider there, Michael. Sum it up for us if you could
Michael: They’re all possibilities, but if we talk about probabilities, the most likely thing to stop this property cycle will be rising interest rates or creditor squeezes in the way of macro prudential controls stopping investors in particular, but also home buyers, spending on properties.
I don’t see either of those happening in the near future, and they’re not likely to cause a crash, Kevin. I think it’s just going to slow the market down and property values will fall a little.
Kevin: Thanks for that insight. Michael Yardney, thanks for your time.
Michael: My pleasure.
Peter Hutton Part 1
Kevin: I want to chat about a book that I’ve been thumbing through for the last couple of weeks. It’s called “The Best Price For Your Home is the Love Price.” It’s written by a Brisbane real estate agent, Peter Hutton, who joins me.
Peter: Good day, Kevin.
Kevin: Good to be talking to you again, mate. A great read. As I said, I’ve been looking through the book for the last couple of weeks. It’s a book that you’ve written as an agent, I guess, with some inside knowledge but from your experience about where agents and sellers can go wrong. You call it getting the love price. What do you mean by the love price?
Peter: I thought long and hard over the years why some buyers pay more than other buyers. My realization – quite a few years ago, and it really helped my clients – was that similar properties often don’t sell for a similar price. When I realized that, Kevin, I went looking for why that is, and what it is is it’s emotion.
The love price is about love, actually, and when a buyer falls in love with a property, they often put their budget aside, they put their rationale thinking aside. That emotion drives them to acquire that property.
Kevin: Great agents, Peter, can actually tap into that emotion, though, can’t they? It’s not just the property and the buyer; the agent plays a pretty important part in that.
Peter: A very important part, actually. Just putting a sold sticker up on a sign doesn’t represent, in my mind, and in my experience, success in terms of getting the very highest price for a homeowner. The agent has a big part to play in that, and moving a buyer up that what I call that process of emotional momentum, building that momentum so that they make a buying decision, and pushing forward in that negotiation process for every last cent.
I guess there will be a few buyers listening today, Kevin, who may not like to hear this, but that’s the truth. Our job is to look after the seller. We’re employed by them, we’re there to protect their interests. Really, we have to get the last cent for that property.
Kevin: I think that’s one of the reasons why buyer’s agents are becoming more accepted around Australia is that the skill of the agent in working for the seller is now getting much better all the time, and I think that buyers are looking to counter that in some ways. That’s where buyer’s agents are coming in, Peter.
Peter: Yes, I think so. Similar representations. Look, I’ll say this. I saw an old buyer who bought a property from me years ago – and I talk about this in the book – and it was advertised by another agency – long story short – for offers over $1 million. The sale was concluded at $1.425 million, and during that whole process, I had to hold the hand of my buyer and allow that emotion to drive them forward.
A few years forward in time, I ran into that buyer in Cole Shopping Center in Mercer Village, and he was delighted to see me. He paid top dollar for that property, but you see, what he got was it’s a home for his family and they love it. Yes, he paid more than the other buyers might have paid, but he’s been in that property, now, for over five years and absolutely adores it. Their life is there. It’s worth every cent. What price do you put on happiness?
Kevin: Peter, just moving away from buyers for a moment and getting back to sellers, there are two key things, in my opinion, the seller needs to do apart from making sure that their property is presented in the best light, of course, and that is choosing the best method of sale and, of course, the best agent. Are they both as important as each other, or do you think there’s one more important than the other?
Peter: It’s a really good question. I actually think they’re both very important, but here’s the problem, Kevin. Most people think two-dimensionally about the method, for instance, and what I mean by that is they think in terms of auctions versus private treaty, to give you an example, and that’s a very two-dimensional way of looking at method. Method is a lot more than that.
Selling real estate is dynamic, and there are a lot of influences on price. You have to actually marry up the right method with the owner that matches them. You have to look at the property, you have to look at the market that property is in, the market at the time, the competition that’s out there from other properties that are on sale. You have to look at supply and demand issues and all of those things.
Method is critical, and obviously, best agent is critical. I think the biggest problem with choosing an agent is it’s the default setting of most consumers, not just in real estate, but in consumers of all products and services. Our default setting is we tend to look towards the familiar brands out there and because they’re familiar, they have the most “for sale” signs up, they must be the best. Now, that’s actually, again, a very two-dimensional way of looking at what is the best agent.
The question is, how do you define the best agent? What vendors need to understand is how to actually define an agent.
Kevin: Yes, we might get to that in a moment because I want to refer a little bit later in our conversation to that survey that was released by CoreLogic during the week that I think gives us a great insight as to how to choose that agent.
A very interesting point you make, though, Peter, and that is the brand – which is why a lot of agents are attracted to a big brand – will actually get you inside the door, but it’s actually the skill of the agent in locking that listing up once they’re inside the door.
The brand will only get them in there; the skill of the agent then has to come into play to actually secure the listing.
Peter: Look, absolutely. There are a lot of big, successful brands out there, and they do get their foot into more doors. Because of that, they’ve got more salespeople per office, generally, the big brands, and then owners are, I guess, more open to their point of view because they’re the biggest so they must be the best.
What I say to sellers is you have to be a lot more discerning. If you really want to get the love price and get that really top price, firstly, you need to understand how that price is going to be created, the agent needs to be able to explain that to me methodically, really explain it deeply, and then, also, the agent needs to be able to demonstrate that they have the prowess to do it.
Kevin: We’ll take a quick break, now, and when we come back, I’ll continue my talk with Peter Hutton, and we’ll talk about his pitch to buyers. This is Real Estate Talk.
Peter Hutton Part 2
Kevin: Peter Hutton has written a book called “The Love Price,” and I’m talking to him about that this morning. A great book for buyers or sellers, if you want to know a little bit of inside knowledge about how agents work and how you can get the best price if you are selling.
I continue that talk with Peter Hutton.
There is another point I want to raise with you. In a part of the book, you talk about the importance of the pitch to the buyer. What do you mean by that?
Peter: The pitch is like the pointy end of the whole process. You’ve promoted the property, you now have your open home and buyers are coming to the property, and that’s where a pitch starts. You’ve probably heard of the term elevator pitch, where you have 30 seconds to convince somebody to buy your service of product.
That’s pretty old school, actually, when you’re thinking about pitch. We’re not in a rush. We have more than 30 seconds, so there’s no point trying to hammer a buyer in to buyer a property they moment they walk into a property.
Pitch is like a bit of a dance, really. They come in to the property, and how you manage that process, and how you help them understand the property, and how that then moves towards closer to them, asking the kind of questions that signals that this buyer is somebody who has got a deeper interest, and how you follow up on them as an agent in those critical conversations that we have in the days after a buyer has gone through a property is crucial, and that’s part of the pitch.
Then the pitch rolls into now the buyer is getting closer to making a buying decision, and how do we move them towards the negotiation table? Then once they’re at the negotiation table, how do we actually help move them so that it’s natural, it’s not manipulated, but they are opening up their pocket, so to speak, their wallets, to actually buy that property and get that property? That’s what pitch is all about.
There’s a real art to it, and I think one of the key things that an agent should learn is how to negotiate. I don’t see enough of that in the industry of education. They get taught how to list a property and do listing presentations and be really good at prospecting, but negotiation, to me, is the critical part of the whole thing.
Kevin: Yes, a great lesson is for agencies to be able to demonstrate how well they’re going to negotiate. There has been a lot of training around that over the years, for agents to be able to show sellers how they can negotiate, and even for a seller to ask a question like, “If someone comes in with an offer that’s $50,000 below what we’ve already told you we’ll accept, how will you negotiate those people up?” A good agent should be able to tell you that.
Peter: Yes, exactly. That’s right. There are various schools of thought about that, and when I wrote the book “The Love Price,” Kevin, one of my best friends is a prominent barrister – I won’t mention his name because he’ll get embarrassed.
Kevin: He’ll probably sue you.
Peter: Yes, he’ll probably sue me. I asked him to have a read of my book first, because he teaches negotiation all around the country, and I have a thorough listing of dos and don’ts in the book about negotiation. It’s very good for a homeowner to read them, because they’re in the negotiation, as well, obviously. He just gave it a big thumbs up, which is fantastic.
Kevin: Yes. It’s a great read, and I thoroughly recommend it to anyone. We’re going to round this chat out very quickly, mate, but I just wanted to touch on a point that you did raise, and that was people choosing their agent.
I was surprised in that CoreLogic survey to read that 38% of people said they only interviewed one agent. Is that changing? Do you think people are becoming more attuned to the selection of the agent, so therefore, they only need to talk to one?
Peter: I think, unfortunately, the world has become so busy and we make decisions quite quickly. In interviewing somebody, we go, “Okay, we’ve seen their signs up. They have good listings.” There’s a lot of social proof of an agent’s success, but as I said earlier on, Kevin, that actually is no indication that they’re actually the best agent.
What I would suggest to any seller is, yes, interview that agent, definitely. Why not? You’d be crazy not to. But, also, choose at least one or two others that are different to them and get some balance into your decision making. Yes, it’s going to take a little bit more time – you’re going to have to spend another hour or an hour and a half with each of those agents – but it’s well worth it.
Kevin: Speaking of time, we are out of it. Pete, thank you so much for your time. The book is called “The Love Price,” and you can find a little bit more about it by going to Pete’s website, HuttonAndHutton.com.au.
Pete, once again, thanks for your time, mate.
Peter: Thank you, Kevin. My pleasure.
Kevin: Maybe you’ve decided to become a first time investor. Well, congratulations. To help ease the burden as you first start in, George Raptis – a man with a huge amount of experience – has helped lots of first time investors get into the market. George, of course, is from Metropole Properties in Sydney.
Good day, George.
George: Hi, Kevin. How are you going?
Kevin: Good, mate. I want you to give me your top ten tips for first time property investors.
George: Thank you, Kevin. Obviously, the first one is you set clear financial objectives. Never invest in something just because someone else said it was a good thing to do.
Kevin: Not even you, George?
George: That’s right. Not even me. Investing in property is no different. Take a step back. Make sure you have yourself clear financial goals. For starters, you would have to define what they are and then ask yourself, “Will investing in real estate help me achieve them?” You have to have tangible things like return on investment, cash flow, and timeframe. You also need to consider risk and liquidity factors.
The next thing I would say is treat your investment like a business. Owning a business is like owning a business and you’re the CEO. You have to make sure your business is structured correctly, supported by the right leadership, resources, technical knowledge, and experience, is financially viable, it’s meeting your financial targets, and it complies well with the government rules and regulations. If you think you can’t deliver on these requirements yourself, then you need to hire someone who can or think twice before investing.
The other important thing, Kevin, is some people think they can do it on their own. Seek help. Before taking on what will be probably one of the biggest financial and emotional commitments one will make, make sure you learn about and fully understand the business of property investing.
Kevin: Is this about building a team around you, George?
George: Correct. Remember, a little knowledge is a dangerous thing. If you don’t invest, you don’t know, and if you don’t get the right advice from sources like trusted family and friends who may have prior investing experience, independent advisors like accountants, property advisors, and financial planners are essential.
Research the market. As part of your education process, make yourself the area expert. Get out there. Hit the pavement. Have a look at what’s selling, what’s not selling, what people like, what they don’t like, and so forth. In other words, get out there, focus on a particular market, and know what’s going on in your local patch.
The next one would be be patient. Invest sensibly. We see so many people rush off and they follow the stampede. They want to do something for the sake of doing it. Don’t rush. You have to balance two competing requirements – what you want and what your potential renter and buyer wants. Take your time. Consider all the options.
Another thing is capital growth is key. It might be stating the obvious, but you should only buy where there is potential for above-inflation and long-term capital growth. This is where research, education, and wisdom come to the fore.
Kevin: That’s another great reason to take your time with it, George. Isn’t it?
George: Exactly right. There’s no rush, Kevin.
Property inspection is a must. The last thing you want to do is buy a lemon. How many times do we hear about people buying something off the Internet halfway around the world and when they have a look at it, it’s nothing like what they envisioned it to be?
It’s important that you inspect a property thoroughly with an objective eye, and it’s a good idea to bring some family, friends, or get an unbiased perspective on what’s good and what’s not. If you’re serious about a property, bring in the experts for a structural or pest report just to make sure you’re not buying yourself into a money pit.
The other important thing is cash is king. It’s extremely important that you don’t over-commit yourself financially and that you can afford to own, manage, and maintain your investment property. This means you must prepare both a personal and property budget so you can qualify how much of your own money you’ll have to commit up front as well as everything on an ongoing basis.
Avoid these fancy rental guarantees. We’ve heard about these rental guarantees, Kevin. They’re often associated with new property developments. It’s a bit of a marketing ploy – that little carrot dangling in front of you to entice you to buy. It sounds good in theory that you’ll get a minimum rental return no matter what, but in reality, they have a dubious value. They’re not there for no reason at all. Obviously, they’re trying to entice people with regards to a rental guarantee, and at the end of the day, you’re the one who pays for it.
Last but not least, don’t do it all yourself. As a first time investor, it makes sense to get all the advice and help you can get. Sure, you can do it yourself, but unless you have the right level of knowledge and experience, you’re more likely to make mistakes unless you have the support and guidance of a trusted and experienced advisor. Of course, there are costs involved, but you should view this as a way of mitigating your risks and as an investment in your education.
Kevin: Indeed, it is. I’d suggest you go back and have a listen to those words from George because there is so much good advice in there. If you want to not make mistakes when you start out, that’s the way to do it.
George, thanks so much for your time and sharing your experience with us, mate.
George: You’re welcome, Kevin.
Kevin: We talk about adding value by doing a renovation, and sometimes it might not be the answer. That’s according to real estate expert and wealth development coach Zaki Ameer from Dream Design Property.
Good day, Zaki. Nice to be talking to you again.
Zaki: Good day, Kevin. How are you, mate?
Kevin: I’m fine. Thank you. You say that renovation is not the be all and end all. Why do you say that?
Zaki: I feel most people who buy a property whether it’s in original condition or somewhat even new condition, they believe that just because they renovate, they’re going to increase the value of the property or increase their rental income. I don’t think that’s the case in all investment properties, as I’ve experienced myself.
Some properties, if you do your research, even if it’s original condition and can do with a new bathroom, kitchen, etc., you might see that you’ve already got good value in it. So I suggest that do you research, see what the comparable properties in the areas are selling for, for a similar condition, and just have a think about “If I did spend $50,000 renovating this property, is it actually going to increase the market value?” Or even when it comes to the rental income, is an extra $10 to $20 of rental income a week going to make such a difference to go through the headaches of managing a renovation.
Kevin: Yes. As you say, not all renovations are going to return well for us. How do you know which ones to renovate and which ones not to?
Zaki: Definitely, the first thing you have to decide is “Am I making an emotional decision renovating the property?” You might want to actually question that yourself before starting a renovation.
The second part is when you know you’re doing this [1:36 inaudible] numbers, just to work out the numbers, saying, “Okay, if this property was bought for – let’s say – $500,000, and I’m going to spend $15,000 renovating, am I going to make an additional $30,000?” What I’d look at is somewhat close to doubling the value of the renovation before I begin that process.
Kevin: Of course, it’s very easy when you’re doing a renovation to over-capitalize, as well. Is that one of the other problems, Zaki?
Zaki: That’s true, and that’s the same with our clients at Dream Design Property, and that’s one of the reasons we offer that project management for renovations. We find many investors out there not really having the experience to project manage a renovation. The builders will say, “You need a new this, new that,” and then you just keep spending money because you feel like that’s the right thing to do, and before you know it, you’ve over-spent.
Kevin: One of the problems I see, too, with people who do renovations is that they renovate from the heart as opposed to from the head. In other words, they don’t really look at it as a business.
Zaki: That’s correct, and that’s a rule of investing, anyway. You have to decide that investing is a pure numbers game and has nothing to do with… Controlling emotions is everything about it, and that’s why sometimes outsourcing those positions of project managing a renovation is probably a good idea to someone who does this day in and day out for a living.
Kevin: Is it still possible, Zaki, to buy a property, to renovate it, and then flip it and make a profit, or are the margins too narrow nowadays?
Zaki: Compared to when I was investing seven years ago, 2007/2008, I feel like they’re starting to slim down, because the majority of the investors, like myself, have already got into the market, especially around Sydney’s western and southwestern suburbs, and turned in all those original-condition properties back to somewhat new condition. I feel it’s just a matter of time before you have that opportunity, again, to go in and turn it around.
Kevin: How far away do you think that timing is?
Zaki: In my view, I’d give it another ten years, especially for Sydney. But if you look at the Brisbane and upcoming areas in Brisbane, then you have the same opportunities I had back in the western and southwestern suburbs of Sydney to renovate a property.
Kevin: What sort of properties are good in the Brisbane area to be renovating right now? The Old Colonials?
Zaki: Yes, that’s it, the same thing – the properties that are about 30 or 40 years old in the surrounding areas of, say, Logan, Ipswich, [3:57 inaudible] areas, some areas around the Gold Coast. They have properties in original condition that you could buy and renovate.
But once again, you have to do your research, like we do for our clients, before you actually even purchase a property. “Is this property one that we’re going to renovate? And if we do renovate, is it going to add value to it?”
Kevin: That makes sense to me. Thanks for your time. I’ve been talking to Zaki Ameer. Thanks, mate.
Zaki: Thank you, Kevin.