Rental competition heats up in Perth + Don’t be misled + PropertyTV goes global

Rental competition heats up in Perth + Don’t be misled + PropertyTV goes global

Highlights from this week:

  • Stop reading the headlines
  • Perth rents on the rise
  • Expand or sit tight – that is the question
  • We broadcast live from New York
  • Strata building amalgamation

Transcripts:

Strata building amalgamation – Tom Doran

Kevin:   It’s interesting that one of the more recent trends that investors are now factoring in is the possibility of a longterm strata site amalgamation when they’re looking at strata units.

Kevin:   According to Burgess Rawson’s Associate Director Tom Doran, who joins me as our guest, this is one of the considerations you should be looking into, if you’re looking at investing into a strata development. Thanks very much for your time, Tom.

Tom:   Yeah, absolute pleasure, Kevin.

Kevin:   Can you tell me what’s involved in site amalgamation, and are you witnessing it happening in many locations?

Tom:   Yeah, it’s become a lot more prevalent over the last five or six years. Basically, with a site amalgamation, it’s when a developer comes along and either makes an offer to strata owners to buy out all the lots individually.

Tom:   And quite often, they’re doing that just because the strata that’s in place is underutilised in terms of its floor space ratio. So, if they knocked it over and start again, they could build a significantly bigger building than what’s on there at the moment.

Kevin:   I suppose the value of these together, for that scenario, is a lot more valuable than them as individuals. If you combine them all for that reason, Tom.

Tom:   Yeah, that’s exactly right. I mean, you could have a strata of a few properties on a big block 1,000 square metres of land. The value from a retail or investment point of view could be 2 or 3 million. But with all the vacant sites that underutilised, it could be 5 or 6 million, to use an example.

Kevin:   Is it more prevalent, say in New South Wales, where there have been some recent changes to the law, allowing these sorts of things to happen? Or is it right around the country?

Tom:   Well, I’d say New South Wales and Sydney Metro is where it’s happening most. That’s because we’ve got more established markets. And you tend to find the more strata properties within the CBD or city fringe areas. So if you’re looking at targeting these type of investments, I’d say stick to the major capital cities: either Melbourne, Sydney, and the CBD areas.

Kevin:   My memory, correct me if I’m wrong, the New South Wales reform that was made, made it mandatory for all of those to sell if there was a certain number. In other words, if one or two people decided not to, they would almost be forced to sell. Is that correct?

Tom:   Yeah, that’s exactly right, Kevin. So previously, to end the strata plan, you needed 100% of owners to agree. But now, it’s only 75% of owners that need to agree to activate the renewal rule. So the renewal rules run through the Land Environment Court for the other 25% of owners, so they get fair market value.

Tom:   So the Land Environment Court runs out and they resolve any disputes. Or they can run a mediation process between the owners, to get fair market value for everyone.

Kevin:   Your company, Burgess Rawson, is this actually what you’re doing? And if so, can you cite a couple of examples of where it might have happened?

Tom:   Yeah, so Burgess Rawson, we sell investment properties all over New South Wales. Strata and also Freehold. Also a couple of retail investment properties in Ermington late last year. And that’s out in the western suburbs of Sydney, on Victoria Road.

Tom:   That was an older, 1960s-style building, ground-floor first floor. Had 27 stratas in total. And that was a building that was built when the floor space ratios, and also the height limits, were significantly less.

Tom:   So, when the buyer came along and ended up purchasing at one of our portfolio auctions, he raised the point as well. He just looked at it and said, “It’s not highest in best use as it is. However, it’s a really strong investment property.” So he could see the upside for holding it.

Tom:   Now, we might have an overnight, Kevin, in terms of the strata renewal. But it might be five, 10, or 15 years away, when there’s a little pot of gold at the end of the rainbow.

Kevin:   What do you look for? What you your tips in looking for sites that are going to fit this amalgamation, become a prospect for it?

Tom:   Yeah, there’s probably four main tips that I’d give any property investor. Firstly, you have to look at the fundamentals as an investment. Okay, that’s the main thing. So you want to make sure that you’ve got a good strong tenant. Long lease, and good fixed annual increases.

Tom:   They should also, secondly, they should look for all the buildings. They’re the ones that would have built 50 or 60 years ago. So there certainly could be some further FSR or height that’s been added in zoning over the last 50 or 60 years.

Kevin:   Sorry, FSR means?

Tom:   Floor space ratio.

Kevin:   Yep, thank you.

Tom:   That’s the amount you can build on a particular building, and counsel will give you the FSR if you search their web site on a particular site.

Tom:   Thirdly, I’d say developers love corner locations. So if you’re going to look at a strata building, see if you can find one that’s got a corner location. It’s just more efficient for developers to build residential developments with light wells and so on.

Tom:   And then lastly, I’d just say look for strata buildings with underground parking. Developers save a lot of money; the underground parking’s already been built out.

Kevin:   Very good tips. And it’s an interesting area that we’ve never explored, but it’s certainly a developing area. Tom Doran is from Burgess Rawson. Their web site is … Is it sydneyburgessrawson.com.au?

Tom:   It’s just www.burgessrawson.com.au.

Kevin:   Okay. My apologies. All the ws, burgessrawson.com.au. Tom, thanks for your time.

Tom:   Thanks, Kevin, have a great day.

Perth rents on the rise – Emma Everett

Kevin:   We’re always looking for good news, and it’s great when it comes out of Western Australia, Perth. You’d be aware, I’m sure, of the fact that we’ve tipped that the Perth market is actually showing some good signs of recovery. Green shoots appearing. Here’s some great news about the rental market; rental competition in Perth is on the rise according to property investment consultancy, Momentum Wealth.

Kevin:   Joining us from Momentum Wealth to talk about this, Emma Everett. Emma, thank you very much for your time.

Emma:   Thanks for having me, Kevin.

Kevin:   Yeah, great to see some good news happening here. What it is you’re noticing? Is it increased numbers through open homes?

Emma:   It’s interesting. We’ve seen some improvements in the vacancy rate and the number of rental listings on the market over the last six months. What we’re noticing now that’s different to perhaps when we spoke to you last year was seeing that translate into extra competition. More people at rental home opens, more applications. That’s starting to filter into higher rental prices for owners as well.

Kevin:   I imagine with the competition you’d probably notice a few more frantic tenants as well. Is that translating to offers over the asking price?

Emma:   Look, we have seen higher levels of motivation from tenants. There’s still a decent amount of rental listings available. It’s certainly not a heated market in that sense. But we have started to see some offers above the asking price. The Residential Tenancies Act in Western Australia is pretty strict about how we approach this. You can’t ask for bids like you might do in the sales market, of course. To be seeing one or two properties who’ve had $20.00 over the asking price offered by tenants just keen to get their application to the top of the pile.

Kevin:   Mm-hmm (affirmative). You can’t stop them if they want to offer you the incentive but you can’t encourage them to do it, pretty much.

Emma:   It’s a tricky thing. For property owners who have been in a market as a buyer where they are negotiating, to then be owners in a rental market where there are those restrictions can be a bit tricky for them. But certainly if a tenant attends a home open, there’s 17, 18 other groups of people through that home open, and they can see others taking applications, it’s only natural that some of them would offer that little bit extra just to make I guess their interest in the property really clear. So we certainly don’t stop them from doing that.

Kevin:   Emma, you mentioned at the top of our interview that vacancy rates are improving as well. Where are they now and what were they at their worst?

Emma:   The absolute worst they were over 7% back in 2017. As of yesterday at 2.8% in the three months leading up to end of December. So it’s interesting compared to even six months ago, that’s still a very significant drop. In September we had a 4.5%, in November it was at 3.9% and now we’re down at 2.8%. So this is a trend that has continued over the last 12 months. We’ve just gradually seen more and more tightening of that rental market, which is great news for investors.

Kevin:   At what point do you call it equilibrium? Where is it … You know, more comfortable?

Emma:   Generally around the 3% mark would be considered to be a balanced rental market from a vacancy rate point of view. So I would say we’re probably there now. Of course it depends on the location of the property. Some suburbs have more supply than others, and some types of properties might rent more quickly than others as well.

Emma:   As a market overall, I would certainly say we’re a fairly balanced market from a renting point of view.

Kevin:   Great news for investors, too. Are you finding them moving back into the market?

Emma:   We’ve certainly seen a little bit of extra confidence. We haven’t seen statistically a lot of extra investment activity in the market quite yet. Of course, APRA reviews and the Royal Commission have made it more tricky for some investors to get lending. So those investors that we are seeing are finding they just need to do a bit more homework and a bit more preparation of their finances before they can reenter the market. So that might slow down that investor increase over the next few months until we find that new normal in that finance space.

Emma:   We are seeing more inquiries, and we are seeing a little bit more inquiries in the first home owner price ranges. That will be the other thing I suppose, is that as rent gets more competitive, as it gets more expensive, that tends to tip first home owners out of the rental market back into the purchasing market again. Which then allows other people to trade up or buy other properties and then do other transactions as well.

Kevin:   What areas around Perth are you seeing as the most popular? Even take us into some of the coastal areas, any more popular than others, Emma?

Emma:   Yeah, it’s interesting. I was just looking at this earlier this week. The coast and the city are the two big draw cards and of course, to an extent, the river as well in Perth. What we’re noticing is that days on market in the sales market are telling a story that has not yet translated into the actual retail prices in those areas. So you look at a corridor like for example Craigie, Kingsley, Padbury which is one suburb in from the beach north of the river in Perth. Those properties are selling on average two weeks more quickly than the suburbs immediately surrounding them, so the more expensive coastal suburbs that are right on the coast. But they’re selling about a month faster than suburbs that are, say, two suburbs further inland.

Emma:   So that makes a really big difference if you’re entering that market, needing to make a quicker decision and potentially competing with other buyers. Likewise we’re seeing some pretty interesting buying competition in the trade up home buyer market, in $800,000.00, $1 million plus, in some locations close to the river, close to the city. We’ll be seeing again quicker sales and isolated more resilient prices. So again it might not translate into median house price increases at this stage, but we are seeing more activity which is a great sign in those areas.

Kevin:   Yeah, it’s a fantastic sign. Another indicator too would be employment opportunities. Are they … Seem to be opening up? Is that expanding?

Emma:   Absolutely. So there’s a lot of anecdotal evidence and a lot of I guess information out there in the market now about employment opportunities in resources, in gas, in lithium. Recruiters are telling us that where perhaps a year ago, two years ago, they weren’t interested in any interstate or overseas candidates just because they had more than enough candidates to shop from here in WA, they’re not starting to actively seek out those candidates to fill the vacancies that we have.

Emma:   The other interesting thing about the phase we’re in in the mining story that’s a long-term part of the WA economic story, is that we’re in … A lot of the projects are in more of an operation phase and less construction. So where perhaps previously a lot of jobs were about building new sites and we knew that those jobs would be relatively short-term, these projects are in operation so that demand is ongoing and so that employment is ongoing as well. Which is great news for those people.

Kevin:   Yeah, fantastic news. Any good news out of Perth is always very welcome. Emma, thank you for sharing it with us. Emma Everett is from Momentum Wealth in Perth. Thanks for your time, Emma.

Emma:   Thanks for having me.

Expand or sit tight – that is the question – Shannon Davis

Kevin:   Recently, I caught up with Shannon Davis from Image Property, keen to get his tilt after the Christmas break into the new year as to what he felt was ahead. Is this a good time to be expanding your portfolio, or is this a time when you need to consolidate? Here’s what his thoughts were.

Shannon:   Yeah. I think every market presents opportunities. I think, first off, first home buyers will probably never get a better time to enter the market, especially in the more southern markets of Sydney and Melbourne. There’s still good value in Brisbane, as well.

Kevin:   Why do you say that? Because, I mean, we’re hearing so much publicity about how unaffordable it is. Surely first home buyers are going to struggle the most.

Shannon:   Yeah. But their gain can come from other people’s pain, so as there’s falling prices, they might get more affordability in there. They’re a clean skin when it comes to credit, so they’ve got a lot of factors coming into their play to take action.

Kevin:   Will they be governed by fear? Because, I mean, there’s already reports that Australia’s in for somewhat of a tough time this year.

Shannon:   Yeah. I think fear is always there. I remember my first home purchase. You’re pretty nervous when you sign that contract. But it’s also, sometimes, you just got to take action, as well. There will be a lot of people in stale mode at the moment, because credit is hard to get. You’ll see some developers that are unable to get their projects up and running, so you might see some projects come back to market with development application already granted. There’s going to be some people that feel the pain there. There’s some people waiting for the federal election to pass, as well, to see what changes are happening to property legislation in that respect. If you’ve got your backyard sorted, then it’s probably a good time to take some action and be able to gain from other people’s pain.

Kevin:   First time investors, people buying their first property, Shannon, it would be difficult for them to say, “Well, I think this has got to be the ultimate purchase, so therefore, I’ll wait to get the right one.” Do you think it’s a matter of looking for opportunities, even if it’s not exactly what you want? If it presents a good opportunity, it’s worthwhile moving on?

Shannon:   Yeah. I think in good markets, bad markets, there’s great opportunities. They’ve got to do their work and not be caught up in analysis paralysis. I think it’s a long-term investment strategy, as well, so be prepared to last the market out. Don’t be thinking of flipping and making that short-term gain, because the entries and exits are too expensive to do that anyway. I think if a good opportunity presents itself, you’ve done the sums, it’s going to have to service … because that’s all banks care about these days, not how rich you are, but whether you’ve got serviceability … and it presents, then you should go for it.

Kevin:   Because we’re hearing, too, that the banks are getting very tough on their lending. With open banking on the way, there’s going to be a lot more scrutiny about where we spend our money. What would be your advice to someone starting out, maybe looking at their first purchase or even their second or third? How should they be preparing themselves to go to the bank?

Shannon:   Yeah. Show genuine savings, I think. I think you need at least 20% deposit in most cases. I think you should be trying to demonstrate that savings. Less on the Uber Eats and more on genuine savings week in, week out, and you should find a friendly ear in your banker.

Kevin:   You talked, then, about Uber Eats. That’s related to credit card spending and credit card limits. Are we moving more towards just wanting to spend cash as opposed to credit?

Shannon:   Well, there is a lot more scrutiny on your statements. Before you could roughly disclose how much it costs for you to live, but people are going through it with a fine-tooth comb right now. All those discretionary spends are coming into it.

Kevin:   Looking around the country, where do you think the best opportunities are going to lie? Is it in the regions, or is it in the cap cities? Because you mentioned earlier about looking at Sydney and Melbourne. You don’t think they’re a little bit overheated?

Shannon:   They have been overheated, definitely, and they’re coming back to a more appropriate value right now. There’s a correction going on. Australia’s the most urbanised country in the world, so we all live one hour from the coast, and we mostly live in cities. For me, I want to invest where most bums on seats are, because that makes a more liquid market and a more profitable market when it’s rising. For me, I’ll be concentrating on the urbanised areas of Australia.

Kevin:   Could you name a couple of those?

Shannon:   Well, Brisbane has been slow and steady. Its house market’s still going strong. The apartment oversupply stories largely finished. We’ve seen that absorbed, and there’s more demand with interstate migration. I think Perth will eventually come back, as well. You don’t want to catch a falling knife, but at some stage, Sydney and Melbourne will reflect more attractive buying opportunities, which they haven’t for the last three years.

Kevin:   What about the northern part of Australia? I was asked a question about Darwin. I only ever hear bad reports about Darwin. What’s your view on that market?

Shannon:   I think the size of the market’s important, so Darwin can be a pretty volatile market. There’s not a lot of market depth there. That’s one thing that you need to watch for when you’re investing into places like Hobart and Darwin. Yeah. I think, for me, I prefer where I’ve got a lot more density, plus two million, wherever possible.

Kevin:   You mentioned Perth there as the possibility that it’ll turn around. What about the Adelaide market? We’re seeing a lot of buoyancy there. There was a lot of negative press about the car industry, but that seems to have, by and large, have gone now.

Shannon:   Yeah. I think, also, they’ve won some awards with defence spending down there, and that’s going to create some jobs. I think the mining’s on the way back, as well. Things like Olympic Dam and things like that are going to lead to more prosperous living. The trend is people looking for affordability be it retirees, or downsizers, or young people of the hunt for jobs. They don’t want to spend all their disposable income on a mortgage that is propping up a $1.5 million house. You’re starting to see people move to more affordable areas when those cap cities have been over-bought.

Kevin:   The Canberra market seems to have performed pretty well this year, too. There’s been a lot of new housing go on. There was the Mr. Fluffy scare a couple of years ago. That seems to have now gone. Does the Canberra market, in your experience, suffer much because of the federal election? A lot of uncertainty, more so than anywhere else in Australia.

Shannon:   Well, when you think John Howard got elected, and the first thing they did was sack 10,000 public servants. Then that has a real big knock-on effect. If we’re hiring public servants, Canberra will do well, and if we’re firing, not so much.

Kevin:   Well, we see a Labour government move in. There’s a possibility they will bring of more public servants, so are you foreshadowing the fact that if Labour do win, that maybe that’ll be good for the Canberra economy?

Shannon:   Yeah. Historically speaking, I think so. That’s a safe assumption to make.

Kevin:   It’s an interesting one, too, because we hear only negative press about Labour. Although, there seems to be a lot more positive press now about negative gearing, and it seems to me as if it’s almost gone on the back burner. It’s nowhere near as important or critical when you consider what’s happening overseas in the U.K. market and the U.S. market right now. That’s probably going to have more impact on us.

Shannon:   Yeah. Definitely share market wise, I think, maybe Brexit might be advantageous to us on a trade level. We might do more, but the tariff war definitely is going to bite Australian shares and the Australian economy, given the importance of China to our economy now.

Kevin:   Bottom line?

Shannon:   Bottom line, I think it can be a bit of a volatile year, especially when we’ve got Trump in charge over there, and they seem clueless about Brexit, as well. Yeah. It could be rocky internationally. Australia’s 27-year run, if we’re not careful, might come to an end with a recession, so we got to watch those things and make sure the economy’s on the up and up wherever possible. When we’ve all got jobs, that bodes well for property.

Kevin:   Well said. Shannon Davis, Image Property. Thanks for your time, Shannon. Always great.

Shannon:   No worries, Kevin. Thanks.

We broadcast live from New York – Stephen Sharry

Kevin:   Well, next week in the show, we’ll be featuring a number of interviews that we conducted while we were in New York at the Inman Conference. A huge number of people, in fact, it’s the biggest real estate conference in the world. We were pleased to be there and broadcast live for three days. All of that, of course, is available for you to watch now on propertytv.io. Propertytv.io. Go and check it out.

Kevin:   The reason I’m mentioning that is because one of the fellow directors from Switch Media accompanied us on that trip, Stephen Sharry who is also the editor for Property TV. Stephen, thanks for your time.

Stephen:   Not a problem, Kevin. How are you?

Kevin:   Yeah, good, it was a great experience. And, next week, our entire show will, as I said, contain a lot of those interviews that we did while we were in New York. It was a tremendous experience. For me, the first time I’ve ever been to the States, having worked in real estate for so long, just to see the differences, the stark differences, between Australia and America, with real estate.

Stephen:   Well, Kevin, you know, you forgot to mention the biggest different between Australia and New York, and that’s the cold.

Kevin:   Yes, well, that, too.

Stephen:   You can’t ignore -7 degrees now, can you?

Kevin:   Well, it’s amazing to be sitting in Australia, in the heat, and I saw a post not long before I went that said that Australia recorded the top 10 hottest places in the world on that particular day, and then to go to -7, it was somewhat of a shock, even for a 22-hour plane flight, yeah.

Stephen:   But, it’s a great place, Kevin, it’s a great location for a conference, and the Inman Conference is just one of the best because it’s so focused. It’s basically focused on technology, but there’s a lot of peripheral around the edges, so, even if you’re not particularly interested in technology, there’s something for everybody.

Kevin:   Yes, you’re right. It’s not totally technology-focused, but, it does actually contain a lot of that. But, it was also good for me the trends that we’re seeing, and how real estate agents are working, or how consumers are relating to real estate agents now, Stephen. There was a lot of time spent on that.

Stephen:   Yeah, the U.S. market works a little bit differently to Australia. In some aspects, they’re behind Australia, and in others, they’re way ahead. They use, pretty much in the larger agencies, CRM systems.

Kevin:   Customer relationship management, yeah.

Stephen:   Yeah. I think it’s ahead of many of the Australian operations, but, when you have a look at their signage and the way they work their clients, Australia is right up there.

Kevin:   Even though Australia may be ahead in some areas, the challenges facing agents and consumers, both buyers and sellers, are pretty much the same, Australia and America, Stephen.

Stephen:   You know, with the current market, as well, Kevin, we’ve got a softening market in Australia, as we know, but it’s also in the U.S. and in the U.K., although Australia, I think, is outstripping both of them currently in the percentages of softening.

Stephen:   But, apart from that, the U.S. and Australia are very similar, and the U.S., surprisingly, look to Australia for some direction in some processes within real estate. You know, particularly where we’re got a single agent for both buyer and seller, whereas, in the States, they still predominantly have a buyer’s agent and a seller’s agent, so that’s one of the biggest differences.

Kevin:   Yes, and you’re quite right about that, too. They find that quite fascinating, how there is no conflict of interest. And, it is something we’ve debated quite often, but, in Australia, and in other parts of the world, too, we do that quite successfully.

Kevin:   There was another interesting aspect to it, and when we were over there, prior to going there, we developed an auction series, which is seven episodes talking to leading agents and auctioneers about how auctions work. That series, by the way, is still available on propertytv.io. But, we made that available to American agents, because they look at auction totally different. They look at it as a last resort if you can’t sell it, or, if you put your property to auction, you’re a desperate seller. They were interested to see how we approach it, Stephen.

Stephen:   Yeah, I think no one’s ever really explained to them the in-depth theory behind the auction process, and I think they’re a little bit averse to get out there on the bleeding edge. But, some agencies are starting to play with it, Kevin, and quite successfully. And I think once they understand how it works and work the system, it benefits the seller and the buyer and the agent, so everybody wins.

Kevin:   Yeah. The programmes like, channels like Property TV, bringing this world closer together, we’re sharing a huge amount of information, and we’re very pleased to be a part of that world. Propertytv.io.

Kevin:   Our guest this time has been the editor of Property TV, Stephen Sharry Stephen, thanks for your time.

Stephen:   Not a problem, Kevin. Look forward to talking to you soon.

Stop reading the headlines – Cate Bakos

Kevin:   Sometimes I think it’s important when you buy an investment property to stop reading the headlines, because they seem to change every single day. You could get yourself into a bit of a panic, thinking that maybe you bought the wrong property at the wrong time in the wrong location. It’s a strategy called buy and forget, buy and hold. If you do your groundwork and your due diligence well enough at the start, you should be prepared to hold on.

Kevin:   Cate Bakos joins me. Cate is a buyer’s agent. Cate, I want to talk to you about this. Is that a sound piece of advice, do you think?

Cate:   It is a sound piece of advice, providing your strategy is buy and hold, and you nailed that in your introduction, Kevin.

Kevin:   So is it a matter of knowing your why? Is that too broad, Cate?

Cate:   No, I love this. It’s all about understanding your long-term strategy, and that particularly relates to your debt retirement strategy. And when I say that, there’s really three common ways that people can approach debt retirement with their property portfolio. Some people will amass capital growth properties with the plan to sell off one or two towards the end and reduce all of the debt. Other people will buy what we call a balanced portfolio that will organically reduce itself, thanks to rising rents and popping all of the money that they’re saving into an offset account and diligently managing that debt reduction until they hit retirement. And then some others will amass equity and live off that and go to their grave with a large amount of debt and let their executor deal with all of that.

Cate:   But I guess if the middle one is you and you’re looking at having a portfolio that organically pays itself down and then delivers you a rental return into your retirement as your income, then does it really matter what a property’s value is throughout your holding period, if you know that you’ve picked the right property?

Kevin:   Yeah, I think sometimes people look at property investing a bit like share investing, where you do actually follow the market, don’t you, on a daily basis?

Cate:   Yeah.

Kevin:   Sometimes on an hourly basis, to see what’s happening with your portfolio.

Cate:   That’s exactly right.

Kevin:   But it is next to impossible to plot the property’s value because by the time you come to sell it, you’re in a totally different market.

Cate:   You’re absolutely right. Share trading and property investing are so vastly different and property trading is almost impossible, just as you mentioned, because the buying and selling costs are quite prohibitive anyway. And I guess the closest type of property investing that involves trading that I can think of is flipping. And so I’m not talking about flipping when I talk about values, because obviously, if someone is a flipper, so someone who’s buying property and quickly renovating it and adding value and selling it for profit, then they will be looking at the value all the time and biting their nails when a change occurs.

Cate:   But if your property portfolio is long-term and you’re planning on holding that all the way through to retirement, we’re probably talking about decades for people. Then looking at the blips on the growth charts is not a wise move. You’ve actually got to look at other metrics that will provide your income into retirement, such as the rental terms and the condition of the property and the type of tenant who’s living in it. I think they should really become a keen focus for anyone who is a long-term buying home investor.

Kevin:   Just picking up on your comment about flipping, even with flipping, it can take you anything up to three months, if you’re really quick, because by the time you look at maybe a four-week settlement, a bit of renovation time, then some marketing time, you are looking at about three months. I’ve heard of people doing it much quicker, but gee, even the quick ones can take anything like from four to six weeks. That’s a long time.

Cate:   Absolutely a long time. And anyone who has undertaken a significant renovation that involves council or planning, they would definitely laugh at the suggestion of a short, quick turnaround, because it just doesn’t work like that. And then you’re looking at also the cost of each transaction, so the purchase costs are not just your your stamp duty, but you’ve got legal fees as well. And then you’re managing a renovation. You’re paying trades. You’re dealing with delays. You’re dealing with all of the overruns that any investor who’s renovating deals with.

Cate:   And then when you’re selling it, you’re dealing with the selling costs, as you mentioned, the marketing and the advertising. And then you’ve got the tax implications. And if you’re flipping and you’re doing it on a regular basis, it does become something that the tax office would consider a business activity. And so you’ve got all kinds of things to think about when that becomes your strategy. And I’m not suggesting that it’s not a good one, but it’s certainly not my bag at all. I think there’s a lot of risk involved in that.

Kevin:   Yeah, I’ve always been very concerned with our almost obsession with what’s happening with median prices, as if that’s an indicator of what the market, if there is such a thing as “the market”, is doing. I mean, it really is a lot of nonsense.

Cate:   Yes, it is.

Kevin:   I mean, each property is unique. There is no one market and median prices are really not an indication of value. They’re just an indication of where people are buying, in terms of price range.

Cate:   You’re absolutely right. Yeah, it’s just the middle data point in a vast array of data. And if you’ve got an area that’s eclectic, so you actually have different housing styles and sizes, then the median house price is not a great indicator, and particularly if you’re having an ebb and flow with your sales volumes. You might see a drastic change in median house price reported data when you’re having a larger number of sales of a particular genre of property. And then you’ve got a quarter that exhibits different sales. It’s a really flimsy piece of data to rely on.

Kevin:   It is indeed. So our advice to you is buy and then forget the news. Don’t worry about the news. Hey, Cate, great talking to you. Thank you so much for your time. Cate Bakos is a buyer’s agent. Catebakos.com.au. Thanks, Cate.

Cate:   Thanks, Kevin. Talk to you soon.

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Kevin Turner
kevin@realestatetalk.com.au
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