Portfolio tracking made easy + “The best book I nearly didn’t read” + Buying in a seller’s market

Portfolio tracking made easy + “The best book I nearly didn’t read” + Buying in a seller’s market

Highlights from this week:

  • Easily track the performance of your portfolio
  • Negotiating in a rising market when sellers have the power
  • “The best book I nearly didn’t read” – Richard Pan
  • The property world is more than Sydney and Melbourne
  • Remote auction bidding is now for anyone

Transcripts: 

Strategy for negotiating in a seller’s market – Simon Pressley

Kevin:  There are some markets around Australia, and they vary from time to time, but they’re always there. There’s always some market where when you’re negotiating, when you’re buying a property, you may end up having to pay more than the asking price. That’s definitely a rising market. Now, in this market, it is happening, and it is happening in various markets in different places around Australia. This is an experience that buyer’s agents have all the time when they’re negotiating.

Simon Pressley from Propertyology was talking to me recently – and he’s going to join me in just a moment – telling me about some experiences where this is happening all the time.

Good day, Simon. How are you doing?

Simon:  Good, Kevin. An interesting topic, negotiating.

Kevin:  It is. It’s one that’s difficult. I know you guys do it all the time, but people who buy and sell property only once or twice in their lifetime find it hard to understand why you would actually have to pay more than the asking price.

Simon:  Yes. And admittedly, it’s not that common, but it depends on the individual market that you’re transacting in and where that market is in its cycle at the time. In a general sense, Kevin, the typical property somewhere in Australia will be listed at price X, and the eventual sale price, give or take, might end up being 3% below the list price.

That’s typically what happens in a normal market, and I think for a majority of DIY buyers when they see a property listed for sale – let’s say the list price is $500,000 on Domain or RealEstate.com – before the negotiation winds up too much, that person who’s interested in it might expect it to land under $500,000, maybe $480,000 or $490,000, something like that.

I understand why people think that, but there are times… And we’re transacting in a market at the moment where we’re seeing a typical property listed at $400,000 and selling for $440,000 or one sold for $450,000. That’s a massive markup on what it was listed at.

Kevin:  Indeed. There’s no doubt that there is a skill to negotiating. What do you see as the qualities someone requires?

Simon:  Some of us have negotiating skills that we use in our daily role. I’m not talking property people: a lot of sales roles for example, a lot of business owners.

Kevin:  Bringing up kids.

Simon:  Great example, Kevin. And that is a skill, the ability to negotiate. But what makes a really skilled negotiator is when those skills are used for a particular purpose. So, someone who has skills in selling apples or oranges or widgets or whatever, what they don’t have is the property-specific skill of negotiating.

It’s having knowledge, that’s what our buyer’s agents find the most important quality to have – knowledge about that individual market, knowledge about that property, knowledge about the vendor’s circumstance. Just being armed with as much information as possible.

Knowing something like the vendor’s circumstances can be useful, because for there to be a transaction to actually materialize, both parties need to feel like they’ve had a win. For the buyers, the win is ultimately the price, but while the vendor, sure they probably want the highest price, but there might be some other circumstances in their personal life that can be used in that negotiation as well.

But there are other tactics as well. The pregnant pause, sometimes deadly silence after we’ve made an offer on a property, and whilst we’re itching and we really want to wind it up, sometimes the best tactic that our buyer’s agents might use is to deliberately ignore that agent and let them feel like we’re not interested. And then when we see their number come up on our phone two days later, we know before even answering that phone we have a really good chance there. Different tactics.

Kevin:  Talking about negotiating, Donald Trump, president of the United States, has always said that he’s one of the world’s best negotiators. Yet if you look at his negotiation style, it’s all about hardball, it’s all about bullying. Is that what it’s all about? Is negotiation all about hardball?

Simon:  Not at all. There are times when hardball is the way to play, but what we can see is the market movement, and that varies from location to location that we’re investing in, the agent we’re dealing with, and as I said earlier, the vendor’s circumstances.

Different agents will use different tactics, so as a skilled buyer’s agent, there’s no point in us just having the one tactic and trying to hardball everything.

The Ray Whites and LJ Hookers of the world for example, some of them advertise properties differently to others. Some might be what’s called a lowball lister: they’ll advertise a property that they expect to sell for $500,000 but they’ll list it for $470,000. So when a buyer sees that, they think they’re going to get a bargain, but really, they’re trying to get a Dutch auction.

Now, a DIY buyer won’t know that that agent uses that tactic, but a skilled buyer’s agent will know different agents use different tactics, and we need to adapt our negotiation style for the unique circumstances for that particular property.

Kevin:  How much does emotion influence negotiations?

Simon:  It influences emotions a lot, especially if you are negotiating for yourself, if you are the purchaser. Plenty of people will try to kid themselves and say “No, I won’t let my emotion get in the way.” Let me tell you, when you’re in the heat of the battle and all sorts of information is being thrown at you from the agent representing the seller, emotions will get in the way.

A buyer’s agent has not only had a lot of training at keeping emotions in check, but because they’re representing the buyer and they aren’t the buyer, they have a much greater ability of not allowing emotions to get in the way and paying more than what they need to or saying something that might adversely upset the agent and crash that negotiation.

It does play a role. A lot of DIY buyers end up paying more than what they need to for a property.

Kevin:  Because of their lack of skill at negotiating or understanding what the ground rules are?

Simon:  A lack of skill, emotions getting in the way, not having the breadth of knowledge about that property or that market that someone who’s transacting in it everyday for a living will have. At the end of the day, as human beings none of us know what we don’t know. But when someone is doing something all day every day, they’re going to know a lot more than someone who does it occasionally.

Kevin:  I gather from the conversation you and I had, both in this interview and off air, that you’ve obviously paid over the list price on some occasions.

Simon:  Yes. And I know that this is teasing listeners – this isn’t my attention – but there’s a market, not a capital city location, a really strong regional market that we are really enjoying getting as many investors in as we can. I feel this market has just commenced its growth cycle, but a 20% pace is what it’s moving at.

Now, if you think about what our capital cities are doing at the moment, people won’t believe it. But it’s unfolding before our very eyes, and pretty much every property that meets our selection criteria in this particular location, if it’s listed at $400,000 or $420,000 or whatever, we’re missing out on 50% of the properties that we’d want to buy, and then when we go back and talk to that agent a week or two later and find out what it actually sold for, it’s selling for $20,000, $30,000, $40,000, sometimes $50,000 over the list price.

So, our skills as a negotiator representing a buyer in a market like that are different to the skills we’d use within a flat market. In a really rising market like this, we expect more often than not to pay above list price, but we still have to help our buyer work out what’s a good decision and when do we pull up stumps?

Kevin:  When you’re going in for a negotiation like that, do you have several prices that you prep your client with? In other words, you’ll say “The asking price on this is $450,000, but we may end up having to go to $470,000 or something to secure it.” In other words, so you’re prepared and they are prepared as well?

Simon:  Yes, that’s right. What we do is we arm our buyer with as much evidence as we can. We say “Here’s the property, this is what its list price is, here are some comparable properties, this is what they have sold for,” but then the hard thing when a market is moving so hot as this, you actually need to build in a little bit of “This is what it would have sold for last month, and this is what we’re happy paying now.”

No one wants to pay any more than they need to, Kevin, but the thing is when you’ve identified a market that’s at the very early stages of a growth cycle and the pace has picked up in a very short period of time, you want to get into that market as quickly as you can. So, if we get too conservative – “No, we won’t pay that” – and someone else eventually buys it for $10,000 more than us, and we continue and repeat that process for the next two months…

Kevin:  …You’re chasing your growing market.

Simon:  Absolutely. We would have been better off buying that first property and paying that $10,000 extra and getting in. So, it’s a fine balance.

Kevin:  A really good example of that would be Hobart. I know that’s one market that you’ve picked well ahead of anyone else, and there are still people saying “Get into Hobart, get into Hobart.” I don’t know whether you’re still buying there, but the time to buy there was two years ago when you were talking about it.

Simon:  Yes. We stopped buying there mid-2016. That doesn’t mean that buying there today would be a bad decision; it’s just that we got in when that market was flat, not like the market that I’m talking about now. So, our clients benefited from 100% of the growth cycle.

Buying there now, we don’t know when the cycle will end. I don’t think it’s going to end in the next 6 or 12 months, but we’re probably in the second half of the growth cycle.

Kevin:  That doesn’t really matter, does it? If you bought two years ago, you’re enjoying the growth now for as long as it goes. That’s the benefit of it.

Simon:  Absolutely. The time to get into a market, Kevin, is before the growth cycle really ramps up. No one can tell us how long a growth cycle is going to last for, but typically, from start to finish, it’s two years to… We saw Sydney and Melbourne last about four and a half years. That’s probably longer than what a growth cycle normally lasts.

But you don’t want to be buying two years into a growth cycle, I don’t think, and when we’re spoilt for choice in a country as big as Australia, there will be markets at any given time, I can promise you, where the growth cycle hasn’t started yet.

That’s our strategy: get in while it’s flat, or in this particular case, we started a couple of months ago when it was flat and it’s just starting to heat up now. It might have three years of good growth ahead of us, so we want to get as many people in as we can right at this early stage.

Kevin:  Good talking to you, mate. And if you want to find out a little bit more, just go to Propertyology.com.au. Simon Pressley has been my guest. Thanks, Simon, talk to you again soon.

Simon:  Thanks, Kevin.

The best book I nearly didn’t pick up and why – Richard Pan

Kevin:  In 2004, when Richard Pan held a position at a major bank in Sydney, he believed that according to traditional standards, he was living the dream. Richard started out following the traditional path of work, save, retire, then one of the world’s most famous business books changed his life. Richard joins us to tell us that story.

Richard, thank you for your time, and welcome to the show.

Richard:  Thank you for having me.

Kevin:  Richard, what was that book?

Richard:  It was Rich Dad Poor Dad by Robert Kiyosaki.

Kevin:  Richard’s story of success is the current success story in the edition of Your Investment Property that is out now. In the article, you say “If I had known that it was a personal finance type of book, then I wouldn’t have touched it in a million years.” Why is that, and what changed as you were reading it?

Richard:  I was growing up in a family with no businesspeople, no investors, so everyone was working as an employee, so because of that. And one piece of advice I was getting since I was very young was to study hard, get into a good school so that you can find a good job and work hard and save for retirement. That’s it.

So, I didn’t know that there’s an alternative plan. This is a classic example of I don’t know what I don’t know. So, while I was reading that book, what actually changed was I started to see the new possibilities. I started to ask myself “Wow, that’s really cool.” We’re talking about the passive incomes you can generate from a property portfolio. “Can I really do that legally in Australia?” That’s the question I started to ask.

In his book, he was talking about facing the same challenge, and his poor dad would say “I cannot afford it,” and at the same time, his rich dad would say, “How can I afford it?” So, the second one obviously opened up possibilities. That’s basically what I was feeling by reading that book. I feel there’s something out there that’s for me. I just have to work out a plan to get it.

Kevin:  Richard, what reaction did you get from your family when you read the book and then decided there was another way?

Richard:  The great thing was at the time I was just living with my wife, the two of us in Australia. I was originally f rom China, so at the time, both my parents and my grandparents were still living in China. So I didn’t really talk to them about “I found this book,” or anything like that. No, I just found this thing quite interesting and I started the journey all by myself, without really talking to them about what I’d read.

Kevin:  Yes, very wise. Talking about your journey, can you describe the beginning? Like you’ve put the book down, now you know there’s another way; how did you begin?

Richard:  At that time, my wife and I didn’t have any money. Both of us had just started out with an entry level job. I think I was making about $34,000 a year and my wife was making a similar amount. We were saving for a deposit, and obviously, that will take some time.

At the same time, I decided the most important thing for me at that point of time was to educate myself, so I started reading more books – personal finance or property investing in particular. And while saving the deposit, I started going to open inspections in the suburb where I was living and the nearby suburbs.

I still remember I felt so nervous. I went to some of the open inspections and literally didn’t ask any questions. And then sometimes, I asked one or two questions and I could feel my heart was really beating there.

I thought “You know what? I just want to have a feeling what it feels like talking to the real estate agents and asking those questions.” But everyone has to start somewhere, so that’s basically what I’ve done.

Kevin:  I think you’ve described that feeling of starting out on a property journey quite well, how difficult it can be. Your portfolio, as we can see in Your Investment Property magazine, is not spread too geographically. All the properties are in New South Wales. Do you find it difficult with different state regulations to invest outside of the state that you live in?

Richard:  Personally, that was a small part of it. It’s not really the main reason. I can think of two main reasons. As a matter of fact, we built a portfolio in the city of Sydney, and the reason for that was, number one, I am a big believer of being a suburb expert.

I think that’s actually one of the most important factors to being a successful property investor, because when you become a suburb expert, you will know the price. If you came across a listing, you would know if that’s a bargain price. And that way, you actually have the skill and knowledge to identify to identify an opportunity like this, you can take action very quickly.

To do that, no book or seminars can replace the local knowledge you will have by going out to those open inspections, meeting with local real estate agents, and sometimes talking to local people. Because of that, we actually select suburbs in Sydney so that we can go to the open inspections and do what I plan to do. That’s reason number one.

The second reason was some of the property that we bought was during the time when Sydney was really booming. So, it’s like I can get what I want in a market which increases very fast, and that makes sense for us to focus on Sydney at that point in time.

Kevin:  What’s been your best investment, Richard?

Richard:  I would say that’s probably my very last purchase. To begin with, we’re quite happy about the price we negotiated. I believe that was about 7.5% off the vendor’s original expected price; that’s point number one. Number two is that in the calendar year of 2017, after we bought the property, the suburb actually increased in value by about 17.5%. And point number three, we actually did a bit of renovation ourselves, so I believe that the actual capital growth for this particular property should be more than the capital-driven growth.

And also, at the same time, two new train stations are being built, a brand new primary school is being built, some commercial buildings, a retirement village, and other shopping facilities are also being built as we speak. Also, my property is inside the catchment area of the best primary public schools in Sydney. So, because of that, I still have a very positive view about the potential for this particular property.

Kevin:  It’s interesting that you’ve highlighted your best investment as your most recent one, which means to me that you’ve learned a bit along the way. Now, tapping into that, I have to ask you the next question about what’s been the investment that taught you the best lesson – in other words, what you learned from – and what was that learning?

Richard:  One thing I’ve learned that I think is quite important to be a successful property investor is when you analyze a deal, it needs to be based on numbers only. And also, you need to have a plan to identify any potential risk, and then minimize the risk to a level where it is acceptable to you.

At one stage of my life, I was actively looking at opportunities in mining towns in Queensland – that was actually in the middle of the mining boom – because the yields were just so great, close to 10%. But we fortunately asked three questions that changed our decision. The first question was what’s the upside? The second question is what’s the downside? And then the third one is can I live with the worst-case scenario?

We thought a mining town, because it only has one major industry, the risk is probably too high even if we can get a pretty decent yield. So, because of that, we decided to walk away. That’s something really fortunate for us that we didn’t go ahead, because we all know what happened in the last 24 months.

Kevin:  That is such a powerful lesson too. Richard, a final question. In the article in Your Investment Property magazine, you give us four property buying tips. Now, one of those is to know why they are selling. How does that help you, Richard?

Richard:  I think in one sentence, if you know the reason they want to sell the property and then you actually customize your offer to meet their needs, you actually increase your chance for your offer to be accepted. That’s why I always ask the questions when I talk to the real estate agent and then find out the story of why they are selling now and tailor my offer.

A lot of people think buying property is all about the price – how much you’re paying for it – and they actually ignore a very important fact that a lot of times, terms are also an important factor. Sometimes you cannot negotiate the price but you can negotiate the terms.

You can maybe negotiate that you can access the property earlier if you plan to do a renovation. That’s basically if you know the seller is already committed somewhere else, the property is vacant, and then if they’re not flexible with the price, see if you can negotiate a longer settlement where you can access the property earlier so that you can start the renovation earlier.

Kevin:  Yes, you certainly learned a lot along the way, Richard, that is for sure. You can read Richard’s story in full – it’s a success story – in the latest Your Investment Property magazine. He’s been our guest on the show today.

Thank you so much for your time, Richard, and all the success to you and your wife and your family in the future. Thank you.

Richard:  Thank you very much, Kevin.

Easily track your portfolio daily – David Hows

Kevin:  I want to talk in this interview about building your team. There’s now a great way for you to be able to do that, to track what your portfolio is doing, and doing it online. We’re seeing more and more of this happen, but I want to find out in particular about this product which is called Monefly. Now, we’ve spoken to you about it before. The website is monefly.com and it’s a great portal. The man behind this is David Hows. He joins me.

David, thanks again for joining us.

David:  Good morning, Kevin. How are you doing?

Kevin:  Good, mate. Fine, thank you. Tell me about Monefly. How does it work?

David:  Monefly is a website and app that both consumers and their advisors can use to make it easy to put all the financial information around a person or around a household or around their portfolio into one location and then make it easier for the consumer to then pick and choose who they want to share what with, to make it faster to manage their information online, and then there are finance applications, as well.

Kevin:  One of the things I do want to talk to you about is security, because I think that’s something that most people nowadays are concerned about. We’ve seen a few security scares. We’ll come to that in just a minute.

Can I just ask you though, from what you’ve told me, does this actually replace the need for an accountant?

David:  No, it doesn’t replace the need for an accountant at all, but what we’re seeing is a big trend towards putting data online. So whether it’s an accountant or a mortgage broker or a financial planner or even your property manager, they can work with you in real time, already having the data instead of having to spend the time collecting the data to be able to get to a starting point.

Kevin:  is this just for property?

David:  No, it’s for wealth across the board. So property shares, superfunds, any other assets you want to track, businesses, artwork if you want to, anything you’d call an asset, a liability, income, or expenses.

Kevin:  I mentioned security. We’ve seen in recent times a lot of breaches of security with what we thought were secure platforms, like PEXA. Tell me about the security here. How is it built in, how secure is it? Because we’re putting a lot of stuff online.

David:  Yes, it’s really critical for us, particularly given some of our partnerships. We’ve partnered with Envestnet and Yodlee, which provides access to financial data globally through 15,000 different financial institutions, and then we’ve also partnered here in Australia on credit score and credit data information.

Both of those partners require us to have bank-level security to ensure the highest security standards are applied. And we’ve had to go through some pretty rigorous testing over the last two and a half years as we were connecting consumers to banks, credit cards, loan accounts, and credit score information.

Kevin:  Yes, there’s no doubt that this is the future. We need to probably get used to the fact that we need to put this stuff online. Well, I want to ask you, what is the future? Where do you see it going? Is this about adding power to the individual?

David:  Yes, absolutely. Our focus is on empowering the consumer by putting their information into a digital place that they can control, and then they can see the whole picture without having to go to advisors to have them tell them what the picture is, and then they can choose how to use the information, who they share with and what they do with it.

But most importantly, it’s about empowering the user to be able to transact more easily, whether it’s investing or financing or real estate or whatever they do, because let’s face it, it’s a pretty archaic process where you have to fill in a 5- to 15-page mortgage application form and attach 30 or 40 or 50 attachments if you’re self-employed Our vision is just in real time, all of the time, and secure, so that it’s much easier to invest and to build a portfolio and to create and manage wealth.

Kevin:  Monefly.com is the website that you have to go to. We’ll throw a few links into the commentary below this interview so that you can jump in and have a look at it for yourself.

Team: you talked there about team. I guess we have to also face the reality, David, that when we give information to our accountant, they then put that into their own system, and we need to make sure that they have security over our information as well.

David:  Yes, absolutely. You have to pick and choose your partners or your advisors based on the quality and security of the systems they use and how they protect your data, because we’ve see recently some very large companies globally that have had data breaches. It’s definitely a risk that has to be managed.

Kevin:  You mention on your website about building your team. I think I saw a video on the home page there. This would be a good way of building your team. Who do you think you would want on that team?

Let’s look at property for a moment. The obvious ones may be your accountant, a tax expert. Who else could you put on that you would share this information with?

David:  In my experience, your quantity surveyor who does your depreciation reports, your conveyancer and/or your solicitor, your property manager, your mortgage broker, and your financial planner or advisor. We’re seeing a lot of people who are probably investment coaches who want to help their clients having that relationship set up through Monefly – anybody you consider somebody who helps advise you or connect with you.

And you can use the platform for just communicating and tracking your communication history, or you can start sharing some information, as well. It’s completely up to you on an advisor or team member by team member basis.

Kevin:  One of the other big advantages of Monefly.com that I haven’t mentioned up to now is that you have a constant updating of the value of anyone’s portfolio. How does that work, David?

David:  The focus with Monefly is to connect you in real time, so we’ve built a lot of connections and integrations and partnerships around data. It saves you having to go and capture information manually or pay for it somewhere else, and we make all that available in real time on Monefly.

So, that means credit card, bank account, mortgage account data, share market data daily, superfund data daily, real estate data monthly, all updated so that instead of your accountant having to plug these things in, automatically you have that information at your fingertips rather than having to run the numbers or calculations to work it all out.

Kevin:  Yes. As I said earlier, it is all about empowering the individual. For investors, this is fabulous. You can bring it all together, you can see it on one dashboard. The other point I want to make too here is that this free.

How does that work? How do you monetize this, David? Because I have to say, we’ve heard the saying that the only free cheese is in the trap.

David:  That’s a good analogy. In our case, our whole focus is on empowering consumers, and that can sound socially shallow, but it truly is. We see the value of providing to advisors to use Monefly to connect to their clients being huge in terms of the time it saves in gathering that information.

We have advisors – who are mortgage brokers, financial planners, accountants, what have you – paying anywhere between $99 and $349 a month to be able to use Monefly professionally and invite all their clients. So, it’s free to consumers on the basis of the advisors paying for it.

We see the value in the information for the advisor is great as well, and we truly want a platform that consumers have no resistance to using it that really does help and empower them financially.

Kevin:  And the feedback you’re getting from the people you’re inviting to come on to use this service, what feedback have you had? Have you had any pushback? What’s acceptance like?

David:  The [7:18 inaudible] has been fantastic. There are layers of people who come on. There are people who come on and they go “This is fantastic,” and connect everything. There are others who come on and say “Well, this looks interesting, but I don’t know if I trust you with my bank information.” So, you would start plugging properties in and shares, and all the things you’re comfortable plugging in, and then when they get to know us, maybe a month or two later, they start activating mortgage accounts and credit card accounts and bank accounts because they want to see the extra information when they start to feel comfortable with the platform. It’s all about horses for courses.

Kevin:  Yes, a great point, I think, is that you can start and just progress as you become more comfortable with the site. The site once again is called Monefly.com. My guest has been David Hows from Monefly.

David, congratulations on the service. Thank you very much. I look forward to seeing how it progresses in the years ahead. Thank you.

David:  Thanks, Kevin.

Where to look outside Sydney and Melbourne – Michael Beresford

Kevin:  Melbourne and Sydney are, of course, two major markets that we’ve seen tremendous growth in in recent times, but as you’re going to hear in this interview, there are a lot more markets in Australia than just Sydney and Melbourne. One of those markets is Brisbane. It’s showing remarkable resilience and great growth right now. Joining me to talk about this, Michael Beresford. Michael is the director of investment services at OpenCorp.

Michael, thanks again for your time.

Michael:  You’re welcome, Kevin. Good to be talking with you.

Kevin:  Thank you. Tell me about Brisbane, your view on where that’s headed.

Michael:  We see nothing but positive things regarding Brisbane. And when you boil it down to the basics, this property investment caper is not all that complex. There are a few key indicators that we need to look at.

Starting right from the top, it’s really supply and demand that drives these markets. Obviously, Sydney and Melbourne have seen the major benefit of the population growth and that growth cycle that happens, but when we look historically and when we look at the fundamentals, Brisbane is the next capital city that follows Melbourne and Sydney.

The gap between Sydney’s median house price and Brisbane’s median house price has never been as big as what it is today in percentage terms. Net interstate migration has rapidly increased in the last 12 to 18 months into Brisbane, and when you consider the fact that the median household income in Brisbane and Melbourne is virtually identical, yet the median house price is close to $400,000 different, logic says that Brisbane has some catching up to do. And historically, when it does start to catch up, that catch up happens pretty quickly.

Kevin:  What about stock? Is there sufficient stock to fuel that demand?

Michael:  Yes. Over the course of the last three to four years, Brisbane went through large numbers of building approvals – more so in the apartment space, and that was limited to certain sections of Brisbane and reasonably close to the CBD and the principal activity centers around.

But in the kind of areas that we’re focusing in – middle ring growth areas – there are pockets of available select properties in the locations that we want to be in, but nowhere near the supply in terms of volume that we saw in Melbourne going back two and a half, three years ago when our clients were buying in here, and the vast majority of them have made 40% to 50% or more in that time.

Yes, relatively speaking, the supply is still pretty constrained, especially in the housing part of the market as opposed to apartments, which is obviously where we focus on.

Kevin:  What sort of growth potential do you see for Brisbane? Is it going to be anything like what’s happened in Sydney or Melbourne in recent times?

Michael:  If we all had the crystal ball, we’d be a lot wealthier than we are. Look, I’m very confident that over the next three to five years, Brisbane will be the next best-performing capital city for us to focus on. History tells us that, those key dynamics that I mentioned tell us that, and logic tells us that as well.

If someone in Sydney can sell a median house for $1.2 million and buy something even nicer than what they’ve got in Sydney in Brisbane for $650,000 and pocket close to $500,000 in cash, then a number of people… And we’re seeing it already. Once we talk to clients about this, they’re like “Oh, I know people who are doing that.”

We’re starting to see that progression happen already, but they’ll only move on one proviso, and that’s that there’s a job for them to go to in Brisbane. And Brisbane has been very strong in the last 12 months in job creation. When you adjust the numbers for the size of the population in a capital city, it’s by far and away number one, even exceeding Melbourne and Sydney.

I think there’s a bit of a changing of the guard. Obviously, the population growth has underpinned a really strong Sydney and Melbourne market performance over the last three to five years, hence why we see Brisbane doing the same moving forward.

Kevin:  Are there any pockets of Brisbane that you’re favoring? North side, outside, south side?

Michael:  The main areas that we are focusing on are within that Brisbane city council area as an immediate focus. Way too much data and complexity to get into in a short discussion, but it’s safe to say that’s really where the focus of the government spend and development is as a first step.

It will obviously then spread throughout, and it’s not to say that other pockets… Especially within the Redland area, the Morton Bay regional council as well are areas that we favor, but it all really comes down to where the governments are spending the money, and those are those major hubs that they’re investing in.

Kevin:  What about yourself? What are you doing in your own personal investment portfolio?

Michael:  I do exactly the same, Kevin – as do the other guys and our employees as well – as what we talk to our clients about. Two of my last three acquisitions have been in Brisbane. The one before that was in Melbourne, and that’s gone up about $160,000 in 18 months. Yes, it’s exactly the recipe I’ve been talking about that I apply to my own personal portfolio as well.

Kevin:  Let’s take a wider view. What about Australia-wide, where do you se the property market headed?

Michael:  I think obviously, Perth has been in a period of flatness – for lack of a better term – since 2011, really. So, that will be bound to come back. And while Perth is not all about mining, it is obviously a major factor within that capital city. That will come back in time, and we think obviously, Perth generally follows Brisbane, so that’s one to keep an eye on.

I definitely think that Sydney is, if not at the top, very close to the top. A lot of this doom and gloom – which really irritates me – is around how the Sydney market is in decline and the boom is ending and all that kind of thing. Let’s keep these things in perspective. The Sydney market was up 75% since 2013, so if you had said to me back in 2013 that you could make 70% growth, I wouldn’t be too fussed about it coming back by 5%. That’s what happens with property markets: there are minor corrections and then it stabilizes.

I guess the usual story: as long as you’re taking a long-term approach to your investments and you’re not buying speculatively, trying to make some money quickly at the top end of the market, as I say to clients, even if it takes 12 months for the Brisbane market in hindsight to start moving, it’s far better to add another 12 months to that growth cycle and get in at the bottom than make a quick $50,000 or $60,000 at the top and then be sitting flat for the next seven to eight years.

Kevin:  Even the growth cycle in Brisbane is still fairly consistent. We’re still getting annual growth of around 6%. That’s not too bad if you’re in a holding pattern and waiting for some sort of growth to come through.

Michael:  You took the words out of my mouth. I was actually going to say one of the areas that we have been putting clients and ourselves into in Brisbane in the last 12 to 18 months has seen a 6% increase in the four-bedroom median house price in that suburb in the last 12 months. So yes, it’s pretty spot on.

Look, I guess there are always going to be headwinds and challenges, whether it be the lending environment, whether it be what Donald Trump is doing or what Asia is doing, or anything like that, but we’re really passionate about helping people try to eliminate that white noise and take that long-term view.

It’s not whether you can pick a winner today or next week or time the market perfectly for six months’ time. What we’ve learned over 25 years of doing this investment caper is you have to be in the market, buy well, don’t buy on emotion, follow a plan, make sure your holding cost is low, and the growth will happen over time, and time moves pretty fast. So, you’ll look back on it 15 years ago and think “Wow, I remember buying that property for a lot less than what it’s worth today.”

Kevin:  Thank you. I look forward to catching up again soon.

Michael:  Good on you. Bye for now.

Bid securely online for an auction property – Joel Smith

Kevin:  Gavl is the world’s leading live-streaming and bidding platform for real estate auctions. To date, it streamed more than 6000 auctions, which have achieved 3.5 million views from 50 countries. But what if an auction that you want to bid on is not available online? Well, now property buyers can choose which residential or commercial auctions they would like to have live-streamed. Cofounder of Gavl, Joel Smith joins me.

Joel, thanks for your time.

Joel:  Good day, Kevin. Thanks for having me.

Kevin:  Firstly, let me just ask how it actually works. How does Gavl work?

Joel:  Effectively, Gavl is a live communication platform that agents use during an auction to engage a greater audience than the 10 or 20 people who may turn up. We’re not really re-inventing the wheel here. If you have a look at most industries around the world that transact, they give their customer three options. That’s face-to-face, you either walk into a shop, you call them on the phone, or you get online and do your business.

So, what we’ve really given real estate is a way for them to be able to still run their traditional auction but now able to communicate and transact with buyers and sellers three ways – either face-to-face, turn up, on the phone, or online.

Kevin:  Yes, because we’re seeing auctions now being live-streamed as well, people are becoming more comfortable with the concept. The step to watching it to actually bidding on it, I guess, is another thing. Is there a cost to the service at all, Joel?

Joel:  There is a cost. Technology is expensive, especially when you’re building it from scratch. How we position this is it’s a software that the agents can use, so effectively, there’s a charge to the agent, which in most cases, they pass on to the vendor.

Kevin:  In the event that someone bids at an auction and they become the successful bidder through Gavl, how binding is that on them?

Joel:   What we must remember is that Gavl is not running the auction. All we are is a communication portal. So, in the same way as if a buyer and a seller are speaking verbally on the phone, they’re communicating through a digital platform. It’s up to the agent and buyer to come to an arrangement of how they’re going to bid and transact, and up to the state legislation.

As you would see in many states, a number of buyers who are going to be offsite or remote, a lot of agents get them to sign waivers or authorities or proxies to be able to bid on their behalf, to sign contracts on their behalf. They even ask for deposit payments in advance.

As I said, we’re not re-inventing the wheel. There’s a current best practice in place in a number of states in terms of dealing with remote buyers. We’re effectively giving them a better tool to be able to engage and communicate.

Kevin:  Yes, and I can understand how that would be better for them too, because we’re quite used to seeing phone bidders. I guess in a way, that’s exactly the same thing, isn’t it? The agent, as you pointed out, takes responsibility for making sure that the contract is completed by the buyer.

Joel:  100%. And this is no different. In some way, the agents for 5, 10, 15 years have been taking a phone to digital product using voice technology. In Gavl, what we’re doing now is giving that buyer and seller more tools to communicate, where the buyer can now visually see what’s going on through the large screen, they have audio of the auction, they can see where their competition is at, they have full transparency on what’s going on at the auction, and that’s allowing that person on the other end of the line to make a fully informed decision on where that bid needs to be.

Kevin:  Have you got any evidence that exposing an auction to a wider audience, say through Gavl, in this way has achieved a sale that maybe you wouldn’t have had otherwise?

Joel:  We have. We have multiple cases. Gavl has been around for a good 12 months, but the bidding piece was only launched a few months ago, so it’s only early days, but we have multiple examples where buyers would not have bid if they couldn’t use the Gavl service for whatever reason.

Life is busy, people – especially on weekends – are time poor, and they find it very hard to be in two places at one time, whether that’s through weekend sports, holidays, ex-pat Aussies coming back from overseas. This platform gave them the confidence to be able to go to the auctions.

Kevin:  At the outset, I said that there are 6000 auctions that have been streamed through Gavl. How many of those have actually sold to a bidder online?

Joel:  As I said, the 6000 auctions is over 12 months’ worth of live-streaming and engagement, but it was only in the last few months that bidding has been enabled. We’ve had a couple of hundred registrations so far. There have been bidders on about 30 properties.

And the exact number who have purchased, it’s hard for me to gauge that data, because obviously the agents, this is a tool they use, so they keep a lot of that close to their chest. But we have heard of numerous times where they’ve either purchased under the hammer or they’ve been the highest bidder and negotiated thereafter.

What it’s done also is it created competition, and if they haven’t been the end buyer, they’ve been the under-bidder and pushed the price up.

Kevin:  I guess the story here is if you can’t get to an auction that you want to find out a little bit more about, you now have the ability to contact Gavl directly and request for that to happen.

Joel:  Yes. We’re currently running a little promotion just to demonstrate consumer demand where a consumer can engage with Gavl and request an auction. It gives them a chance to watch any auction, not just our current clients. And we’re seeing a pretty good uptake from not only buyers but also vendors. It’s really resonating with vendors, this service.

Kevin:  If you’d like to know a little bit more, go to the website, Gavl.com. Joel Smith has been my guest, Joel, thanks for your time.

Joel:  Thanks for your time, Kevin. Cheers.

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Kevin Turner
kevin@realestatetalk.com.au
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