Episode 6: Why NOT BUYING Property Could be Your Biggest Mistake

Welcome back property enthusiasts to another exciting episode of The Property Now Podcast. Today, we're diving deep into a topic that every aspiring investor should pay attention to – "Why Not Buying Property Could Be Your Biggest Mistake." We'll explore the benefits of property ownership, strategic investment approaches, and a spotlight on the thriving Austin Estate in Lara.

Chapters: Time Stamps

0:55 Agenda Items

5:01 Why Invest in Property

12:26 Growth Strategy

20:55 Applying the Right Mindset

26:45 Growth & Income Strategy

32:45 Special Guest - Chris Smith (Austin Estate, Lara)

44:02 Choosing the Right Solutions

51:59 Financials Required to Proceed With Property

Learn how to generate higher income on properties that are designed specifically to help more people source rental properties and also help FHB's save to buy their own home faster. 

We talk about special strategies, things you need to know with our population and retirement, and also why investing in property could be the best thing you do for your back pocket and livelihood. 

Disclaimer: All views and opinions expressed in this podcast are for informational purposes only and should not be considered as financial or investment advice. Please consult with a professional financial advisor or property expert before making any investment decisions.

Chapters

• 0:55 Agenda Items
• 5:01 Why Invest in Property
• 12:26 Growth Strategy
• 20:55 Applying the Right Mindset
• 26:45 Growth & Income Strategy
• 32:45 Special Guest - Chris Smith (Austin Estate, Lara)
• 44:02 Choosing the Right Solutions
• 51:59 Financials Required to Proceed With Property

Transcript

Speaker 1 (00:01):

Welcome to the Property Now podcast, where we talk all things property investment and new homes with your host Matt eol. Speaker 2 (00:09):

Yes, there's bad debt. Yes, there's good debt. The good debt is not bad. It will never send you broke. Ever rich people rely on debt to expand because without debt it's pretty hard to expand. It's almost impossible. Speaker 1 (00:20):

If you want to learn more about what's happening in the market and how to benefit from property investment, then go no further. We dig deep as to why our sector is a key to building financial security and safety for your family. Never before has it been more important to understand the playing field than now, Speaker 2 (00:39):

And I would say this, this is probably going to raise some eyebrows with some people, but your family home is not an asset. It's a liability. It's taking money out of your pocket from a cashflow position. Speaker 1 (00:49):

So let's get on with the show. Happy listening and we'll see you on the other side. Speaker 2 (00:54):

So today we're going to go through why we buy investment properties. It's pretty clear that people do invest in property. It's our largest owned asset class within Australia. However, I think that why or understanding why we actually do that is a really critical component to it because it makes making decisions a lot easier when it comes to the point having to make those decisions. We're going to talk about strategy. We're not going to go into a heap of detail around strategy, but generally when we talk property investment and strategy, we look at two strategies, and that's generally growth or income. We don't combine the two. We don't see the two combined. Like for example, commercial generally delivers a high income for you, whereas residential is generally a higher growth component. So we're going to talk about a strategy that we've generated which will deliver to both, hopefully that's the plan has been delivering both, so it opens up opportunities for people in challenging climates.
(01:54)
Then we're going to talk about a feature estate, which we love. We're actually recording from here, Austin Estate in Lara. We're going to talk a little bit about that with our special guest who is a guru in the space and he manages the estate here. So we're going to talk about that and why we like it from an opportunistic standpoint. We're going to talk about providing the right solution, how that works and what we look for, and then we're going to have an offer. We're going to invite you to an opportunity to speak with us further if you feel like that's something that you wish to do. So let's get on with it. Quick disclaimer, so we're not a licenced financial company. Everything that I share with you today is educational in nature. It's generic. Please don't make any decisions based on this presentation. Speak with us first.
(02:39)
We are aligned with financial planners, with finance companies, with people that can give you the advice that you need in that respect. But this presentation is not a licenced presentation from financial standpoint. So I just need to touch that off the housekeeping stuff. So key steps to wealth, what we're really looking for, keep in mind that everyone has different goals, different things that they want to achieve within their own wealth journey. The key things that we really try and help people do because we know it's one of the biggest challenges that people have is to really pay off their family home a lot faster. There are ways that we can use investment properties to pay off your family home faster. We generally try and get that into underneath 10 years to get that off, which is obviously something that makes a big difference to people once they don't have that mortgage hanging over their head.
(03:30)
We want to increase your cashflow position. A lot of these property companies speak about negative gearing and it's a topic that's been a bit of a buzz topic in the past about using a loss to create some tax reduction. We generally don't want to do that. It's still something that happens and we take advantage of it, but if we can increase your cashflow position, that's a good thing. Yes, you pay tax on that, but we want you to be making more money, not less reducing your income tax. That is something that can be used through negative gearing in other ways as well. And then also using your superannuation. So a lot of people come to us and they don't actually realise that they can use their superannuation to get into property and you can specific ways that you need to do it, but we can help you do that if that's something that you are interested in exploring.
(04:20)
So this is our special guest for today. He's not coming on yet, but he's sitting there in the corner. No, hold your horses Chris. He's getting ready to jump into the hot seat, but Chris is going to speak with us a little bit later so you can see there. Here's the Austin estate sales manager. He's got 45 years plus of experience in property, so he is got me covered. Hopefully he can deliver a bit more value than what I can talk about about this development in particular, which is Austin Estate in Lara. He's specialised in the land, he's worked in commercial residential sales and property management as well. So look forward to having you on in a second mate. Be ready to go and come on. Good.
(05:01)
Alright, let's get into it. That's our introduction. I'm going to talk about why we invest in property. This is, as I mentioned earlier, this is the information. This is the information that I really want more people to know. I think that we should get this kind of stuff into schools so that we can understand why we're making these key financial decisions for our future. So if we were to interview a hundred people age 25 years of age, this is based on research that's been conducted to date. You can see that the stats in front of you, unfortunately 12 will be deceased, 35 will be on a pension, 40 will still be working, nine will be financially independent and only four will be wealthy. Now, when we say wealthy, that means we're totally reliant. Well, we're totally independent of any reliance whatsoever from government, super pensions, these kind of things super will form part of your wealth creation.
(05:56)
So that in my opinion is way too low. We need to increase that. We need to get more people in that bottom section. 13 out of a hundred is not enough in my opinion. I think it all starts with education. Without the knowledge, it's pretty hard to make the decisions and take the action. We hear this term, I've heard this term since I was a young man. The rich get richer, the poor get poorer. Cash is king. I've got written on here that cash is not king. The reason why that we need to understand this is because the value of money actually decreases generally it decreases or habs in value every 23 years as a guide at the moment with our high inflation economy, it's actually halving a lot quicker than that. Hopefully we can get that down a bit more so it's not as damaging, but money in the bank is important at the start.
(06:47)
Then later we want to use it to try to leverage into income producing assets and these kind of things. So yeah, the answer to this is assets. The rich get richer because they acquire assets. So we want to learn how to do that in a safe environment that can build our wealth for the future. This is a stat that probably has actually dropped a little bit recently, which is good. This is a great thing, but I'm quite concerned that it's going to go back up to a number probably around this I'm guessing, but it's a pretty powerful statement. I won't get into the full details around it, but essentially what it's saying is at some point in time over 30% of Australians will be in retirement and they will be living at a level below the equivalent of the poverty line. Now obviously living is getting more expensive and we expect this to be the case moving forward naturally setting yourself up for this stage which is meant to be your prime time part of life where you sit back and enjoy all of the hard work that you've put in to relax.
(07:53)
But we're not seeing that unfortunately with enough people as you're seeing from the stats from the slides previously, and we want to reduce that number. Part of the reason why this is happening, it's all good to share these stats and highlight them, but part of the reason of why this is occurring is because our population is actually ageing at a very fast rate. We're one of the fastest ageing populations in the world, mainly due to the baby boomer era. Unfortunately, no offence to them, but you can see there. So we're currently sitting at about 16% of people age 65 or older in our community and it's growing very quickly. Now the reason why this is important is because this puts a lot more stress on our governments to be able to support us with things like pensions. It's why we're seeing the superannuation rates increase and it's why they're bringing different policies to try and help you create your own wealth without the reliance on the government.
(08:56)
And what's also happening is not only are we ageing very quickly, I'm going to share a stat with you on the next slide, which is extremely powerful and something that I think we should all understand, but our life expectancy is increasing and it's increasing quite dramatically. So at the moment we're sitting at about 82. It's a little bit longer for ladies as opposed to men, but by 2070 un predictions are that we're going to live to an average of around about 90 years of age. Now if you look to the right of this screen, you will see that our life cycles are changing and this is probably the most important reason why we need to understand this stuff and why we need to understand why investing in property, that's what you wish to do. You're obviously here so it's something you might have interest in, but this is why we're seeing such a change and why we need to take action now when we're younger as opposed to leaving it when we're older.
(09:49)
So if you look there in the 20th century, you can see this is an art piece that we've got up in our display in our investor centre. You can see there that in the past people were generally working or starting work, going to school, starting work earlier in life. They might've started work at 16, 17, 18 as a guide. They were working longer, so they were retiring at about age 67 as a guide and then they were passing away sadly at the age of about 70. So there's only that three year period where they're not relying on an income to support themselves. They've got their savings, their homes, their superannuation, whatever it is that they needed to support themselves in those periods. You look at the 21st century and we're now going to school longer. People are going to university, which is fine, they're having gap years.
(10:38)
People don't want to, or younger generations don't want to work as hard anymore. It's just a reality of our evolution and they actually want to retire earlier. They want to hit 55, 60, whatever the age is for each individual and retire. They don't want to work any longer. The challenge with that is that they're living longer. So that gap that you can see of supporting ourselves when we're not working full-time is getting a lot longer. The way that we counteract that is obviously by acquiring assets and building that up over time. So this is the stat that I wanted to share. So taxpayer to retiree ratios, this is why we're seeing superannuation rates increase and the government don't have the resources that they used to per capita. This is also the reason why we're seeing so many international migrants being allowed into the country is because we need more workers.
(11:31)
We need more people to support the economy and support our ageing population. So I won't touch on each of those. You can see them in 1936, it was 13 taxpayers roughly to everyone retiree in 2023. It's actually a little bit lower than that now. I believe it's about 2.7 to 2.8 taxpayers to every retiree, and that will change once we get the influx of international migration. But it's a problem and it's something that we need to do something about and what I'm essentially trying to say here is that we can't really rely on the government anymore. Even though we are in a first world country and we do have good support systems, we need to alter our approach and really support ourselves a little bit more. And as you can see there, Paul Keating 30, 40 years ago saying that no government could afford to look after pensioners.
(12:23)
Cool, cool. This is just a bit of a track performance. This is in our investor centre as well. So the one thing that I want you to see here, this is price growth in property in Victoria from 1970 to 2023. You can see that there's a trend. There are peaks, there are troughs. Property does go down in value. People talk about property going up in value all the time. That's not the case. It does need to adjust itself and correct itself from spikes. The last three years we've seen massive spikes post covid. We didn't think that that was going to be the effect, but it was. But essentially what we're looking at here is the long-term trajectory and we're talking about developed economies, capital cities. Obviously Melbourne and city Sydney are the two biggest, but we can see that because mainly the population is increasing.
(13:16)
We can see that the long-term growth is on an upward trajectory. So most people usually put their queue in the rack and sit back and see what's happening when things have dropped off, generally that's actually a pretty good time to make a move and get into something if you can. Yeah, and you can see here this is the 25 years up until 2018, the performance from an annual basis per year, capital growth you can see across the capital cities is quite consistent. Melbourne and Sydney are a little bit hot US 8.1% for Melbourne, 7.6% for Sydney. But that average annual dollar value, which you can see, which is how much these capital cities are growing every year in value is where we really access this leverage. It's very hard for people to save, what is it in Melbourne? $28,000 a year. Now that's increasing too because the values have increased very hard to save that amount of money.
(14:15)
So this is where we get the leverage from getting into investment properties, which is what we want. Yeah, house and land prices. This is a great demonstration. I really love the images here and it shows you the different value in prices from 1980 to 2010, new homes from only $20,000 I think. Chris, were you selling houses in 1980? Yes, I remember Bob telling me about this and he thought he sold his last property when it sold for 50,000. It was a house on land package I think in 1990 and he said, that's it. We'll never sell another house of land package again because it's so expensive at 50,000 and jumping ahead up to 2010 land from 116,000 house of land packages from 380,000. I dunno about you, I started in 2007, but I still remember each year going, oh, surely it's not going to double in 10 years from now.
(15:15)
That's not going to happen. But it's continued that trend and who knows where it'll go in the future, but if the history is anything to go by, I think we've got some pretty strong confidence that it's going to continue on its trend. One of the reasons why that actually happens, and people may have heard about this topic, but we do have a huge housing shortage. We actually shared some information on bifa social media yesterday about the actual amount of shortage that we have in homes in Australia. It's going to continue to get worse as we do have that influx of international population growth. But in 2009, 2019, five and a half thousand affordable homes as a shortage by 2036, we expect that to be over 23,000 just in Melbourne alone. The numbers that were shared yesterday were actually quite concerning, quite a bit higher than that and home ownership rates unfortunately are declining, especially in first home buyers.
(16:15)
If you look there since 1990, they've almost halved for under 30 fives to now. So we are developing an economy of renters. We don't want that. It's the people who have the assets that are renting out their assets to these renters that do benefit, but we want to get more younger people into property. So that's what we're trying to do as well. This is what I just touched on, 650,000 migrants coming in from overseas in the next two years is what's being forecast. A lot of those will be students but they'll be cashed up. Students over 55% of those come to Melbourne and Sydney. So we do see the most activity in these two economies. That's the main reason why we see the growth that we do. They're able to build the CBDs and the economies faster because they've got more people and obviously house prices increase because there's more competition.
(17:07)
There's going to be 250,000 births as well in the country in the next two years. So 900,000 population growth in the next two years just alone is only going to put more pressure on house prices. People saying that prices are going to continue to go down because of interest rates, interest rates do make a difference, but it's the supply and demand component that has the biggest effect that we need to keep an eye on and that's what we look for when we assess properties for investment opportunities. So 200,000 people as a net overseas migration. So that's people coming in on top of people that are leaving. So there's about 600,000 coming in, 400 leaving as a guide. This is according to the A BS and this is for the foreseeable future. So we're seeing a huge boom in the next two years for the foreseeable future, 10 plus years, they're expecting 200,000 people a year.
(18:03)
So what will that do on house prices? I think we know rental crisis obviously. I dunno if you're try to rent at the moment. If you are, I wish you all the best. It's quite challenging. You can see the rates of return, the increases in rental costs for people. Vacancy rates are below 1% pretty much across the country, which is making it challenging. I actually went and had a look at a property just as a bit of a experiment last week and it was a very basic property in South Melbourne. There's a one bedroom apartment or something for $450 a week. There must have been 50 people there legitimately, and I won't name the address so it doesn't matter, but the house was very, very underwhelming to be nice. It wasn't very impressive and there was at least 50 people and that's just when I was there.
(18:56)
It was a line around the corner. So I can't imagine how many applications they would've got. It's going to make it hard for you to get approved. So we are hearing of places where people are living in tents in their cars, which we generally relate to overseas and third world countries, but unfortunately it is occurring here in Australia as well and that's a problem. So what do we do? We act. We acquire income producing assets. Obviously we're acquiring things that require a lot of research. It's a big decision to acquire an investment property. I totally understand it. Scary at times. Once you've done it becomes easier. Like anything I teach my daughter or she used to be scared of going down the slide, she's not scared of the slide anymore. We got her to try it. So it's the same with investing in properties and this is what the rich do as well.
(19:46)
Rich or wealth is different to every person, but it's what the rich do they acquire and they're used to it so they know the value in it and that's why they keep doing it. This is one of my favourite sayings, the best investment on earth is earth. We've got a demonstration out the back, which is I'll actually show you later in the slide, and it demonstrates the value of the earth that we have or the soil that we have. Kings have invaded and conquered lands for centuries and that's because they want the resource, which is the earth. They can build upon that. They can grow communities, they can build castles, all these kind of things, and it's the same in today's world. We can house people who need shelter. It's pretty hard to have a good life and to grow a good life if you don't have shelter and want and security and these kind of things.
(20:35)
I'm trying to get through these slides as quickly as I can, so I'm talking quite fast. It's because I want to pack in as much as I can into this. I don't just want to talk about booking you in or something along those lines to try and sell something. It's about really trying to add as much value as we can and this is why we're so education focused because it makes it easier. Mindset's a critical thing to anything that we do in life, not just investing. You can see there that, I mean I've applied a lot of development in my mindset, but you can see they're poor people. Unfortunately. They're afraid of investing. It's okay to be afraid, but we need to work through that. The question I ask is what's the alternative? What happens if we don't invest? We generally know you're going to have financial difficulty later.
(21:22)
Things cost them money, so they buy things that cost 'em monies, they get car loans, credit cards, personal loans. These kind of things go on holidays, which sounds like fun, but unfortunately it puts strain on our financial position. You can see the wealthy people, they know that they must invest. They buy things that make them money, put money into their pocket, not takes money out of their pocket and they focus on good debts, minimising their tax, these kinds of things. You hear stories about certain people not paying full amounts of tax and the poor community not being happy with that. It's because they know how to do it. They research to have people that support them in doing that, but they do contribute in much larger ways to the economy in different areas by employing people, et cetera. Assets versus liability. These are real. This is a snapshot of what we've just been talking about.
(22:13)
Understanding that assets will put money into our pockets as opposed to liabilities, taking money out of our pockets. One thing that I like to challenge with home ownership is that your family home is actually not an asset. It can be used to generate more assets. You can use obviously the equity within a home that you have if you have that to be able to create or acquire assets to put money into your pocket. But the family home is a liability and if you rely on your family home to retire or to use the security when you're not working, you're likely going to face some challenges and that is because everything's relative and other homes are growing in value too. So if you need to sell that, you're going to need to get something else and that's gone up in value too. Just some quick stats around home ownership from an investment standpoint.
(23:02)
You can see there the numbers, 6% of Australians own an investment property. It's nowhere near enough. We need more people to own investment properties only 0.08% of people in Australia own fight. The reality is with investment properties, if you set it up properly from the start, which what we help people do, you can leverage that to multiple plus properties quite quickly. So there's a bit that goes into it, but those numbers need to increase in my opinion, and that's obviously what we are here to help people try and do. So keys to wealth education, it all starts with learning. They say that knowledge is power. I think knowledge is potential power. It gives us the ability to understand more, which is great. We don't want to educate ourselves, be around people that have educated themselves and learn from them multiple streams of income. The reason why people talk about this so much is because multiple streams of income, if you're just relying on your sole source of income, which would be a job for most people, which is totally fine, but if something happens to you and you can't work, what happens then?
(24:07)
How do we support ourselves? How do we protect ourselves from not being able to work? You might hurt yourself in a football injury or whatever the case may be, and that's why people have success talk about this so often. One way that we can do that is through property. You might want to get into shares or crypto or start your own business or generate art collectibles. It's up to you. We like property. We think it's the safest space to operate within mainly because of the leverage, but it's up to you. We just need multiple strains of income to protect ourselves, income producing assets and action. At the end of the day, if we don't act, nothing comes of it.
(24:49)
I just wanted to touch on this very quickly. LMI is something that I hear a lot of negative feedback around. We don't want to invest in property because we have to pay L-M-I-L-M-I stands for lenders Mortgage Insurance. For those who aren't aware of what it is, LMI is a wonderful thing. It allows us to be able to invest into these income producing assets with less resource, if that makes sense. Yes, it does cost us some money, but that money that it costs us is generally absorbed very quickly by the growth in a property and can actually allow us to be able to buy multiple properties. Some people avoid paying lenders mortgage insurance so that they can buy one. It might be that we put someone into lenders mortgage insurance so that they can buy two properties, maybe three properties, and this allows us to do that.
(25:41)
So it's just something that I threw in there last minute that I wanted to touch on. I do get asked about it a lot. I've got a good friend at the moment who's thinking about buying her first property and she's got a lot of savings. I think a hundred plus thousand dollars in savings and she's like, well, I'm still going to pay some lender's mortgage insurance, so I don't want to do it yet. It's that old wive's tale of you need to have a 20% deposit to get into property. It's not the case. Debt will never send you broke. Bad debt will good debt won't. Debt's very important. We use other people's monies to acquire these assets. The bank will take your money. I promise you that if the bank's offering you their money, as long as we're going to use it correctly and we're not going to go to Italy, which sounds like fun, we can do that later once we've got these assets.
(26:29)
But debt is key. We need debt to be able to grow. So don't be afraid of debt as long as we understand the debt properly. It's a key ingredient to success in this space and something that we want people or more people to know, growth and income. So I'm going to transition. So Chris, we're going to get you on after this not long, five more minutes. I just want to touch on this base quickly. So I spoke earlier about having a growth and an income strategy applied in one. Now I want to put a caveat to what we're going to share here, and this is not for everyone. This is not something that I recommend for everyone. You might be a traditionalist and you want to stick to that path. All good for you. I have no issues with that whatsoever, but the reason why I've developed this strategy is because we're reading the data, we're seeing what's happening in the world.
(27:19)
We're seeing these rental crisis and we're seeing it being a little bit harder for investors to manage these assets as an absolute cyclone going on out the back. I don't know if you can hear that, but it's getting pretty rough. So this strategy that we've applied or that we've generated has really been designed to help more investors own assets with more cashflow and to also protect renters and provide more affordable homes for renters. Just touching on the story that I shared with you before, we need more of these type of properties might not be for you, but for a lot of people this is something that's really working and our investors really enjoy. So we've called it the multi live range. You can attach this to things like Airbnb and shared accommodation, these kind of things. As I said, it's not for everyone and we do actually do presentations on this strategy which go for an hour and a half just alone.
(28:16)
I'm not going to go into that much detail in this respect. What I am going to do is I'm going to share a couple of key points around this strategy in case you do have some interest in exploring it further. But you can see there the key things that we're trying to achieve here is we're designing homes in a specific way that are all supported by council, by developers, by building codes to house more people under the one route. So especially designed homes that generally achieve an income of a much higher growth or a much higher percentage point. To give you a bit of an idea, Melbourne properties generally rent for about 3% to 3.5% as a yield as a guide. We are selling properties at the moment that have 10 plus percent as an income. They're single key homes. So they're normal homes that have just been designed in a specific way to be able to achieve these numbers and they're much more affordable for tenants, which is why they're appealing.
(29:17)
I will go into some of the ways that we can achieve these incomes if we build these type of properties. We don't have to stick to one type of income. If we build a four bedroom family home, we pretty much know it's going to be leased to a young family or a professional, maybe a couple, something along those lines. One of the challenges that we have is that most of the properties we build are of the same nature and we're catering for different types of people, singles, young professionals, retirees, these kinds of things. So we talked about multiple streams of income. You can see there there's five types of income streams that we can develop through these types of properties, which gives us more options to make moves. You can play around with it to be strategic as opposed to just having the one option.
(30:04)
They all may develop a council and ancy act requirements. It is specific as to how you do that. It's quite detailed, but we manage all of that for you so you don't have to stress about the finer detail. It's fine if you do like stressing about the finer detail. We'll work through it with you. And the reason why we do this, as I just mentioned, there's two reasons. There's tenants and there's investors. I did touch on this so I got a bit of ahead of myself, but we are in the worst rental crisis in a hundred years. Rental vacancies are below 1% and the increase in the cost of living interest rates are playing a big part of that inflation, these kind of things and making it harder not only to afford a rental property, but it's making it a lot harder. As I touched on before, for first home buyers to save a deposit for first home buyers to get the capacity through the bank to borrow to get into their first home.
(30:58)
What we find with these properties, because they're so much more affordable, is that first home buyers actually increase their savings rate quite quickly and it improves their ability to get into a property of their own. So there's a huge shortage of single room accommodation. Over 82% of homes that are constructed to three plus bedroom homes. The average size of the family home is in the amount of people within a family home these days has declined dramatically. So we need to approach it differently because things have changed with our family homes. So we've got too many four bedroom homes on the market. We need more of these homes that can house individuals for investors lower yields. It is getting higher, especially when we see interest rate rises and these kinds of things. Cost of livings, rental returns are increasing quite dramatically, which is great. That is a good thing for investors, not for tenants, but we still do find that yields are a little bit more challenging.
(31:55)
So it gets harder for people to actually acquire these assets and hold them. It's why people like buying property in super. It's a bit easier to stomach if interest rates increase. It doesn't affect their ability to shop at the shopping centre because it's totally separate of their personal position. So we can see there just a couple of points trying to get through here. I want to get Chris on as quickly as I can. A couple of interesting points with this. We do use specialist lenders for these type of properties and they are commercial loans. One of the benefits that comes with that is that we actually get commercial valuations so when the increase in the rent occurs, the increase in the value goes up as well. So resale value is actually strong with these type of properties. Alright, we're getting close to bringing on Chris. That's one of my favourite stats. We need leverage so you're all stretched up, mate, you're ready to go. We have Chris Smith coming in. Welcome to the show, mate. Make some space for you. Speaker 3 (32:55):

You Matthew. Welcome Speaker 2 (32:56):

Everybody. How you going? Good, Speaker 3 (32:59):

Good. Very windy, cold, blustery day out there I'm afraid. So there might be some interference, but welcome here to Austin Lara Estate. I'm the estate manager. I've been working this estate since it began about five years ago. The estate comprises a proposed 1100 lots approximately, of which we've now sold around about 800 now. Just as a matter of interest for those of you who are contemplating buying here and investing here. Over the years I've concentrated mainly on selling for land to home buyers to build a home for themselves to live in. Now that's been a conscious effort to keep the mix of ownership to a reasonable balance close to what is experienced in Lara. Anyway, around about 15 20% will be inevitably rental investment properties. Now the reason for that is we want a pride of ownership being exhibited in the houses in the future and obviously the balance of the rental stock will make up the rest of it. Now that preserves the values for everybody within our state. It's a mix of what sizes ranging from around about 170 square metres, which is your typical site for a villa unit or a townhouse without the hassle and expense of an owners corporation right up to 740 square metres has been the largest lot that I've sold. Now it's Speaker 2 (34:40):

Almost Core Acre Chris, Speaker 3 (34:41):

Correct? These days, 740 square metres is a gigantic lot in most subdivisions. So the mix generally in that range, but most commonly land sizes between 300 square metres to about 500 square metres. Speaker 2 (34:58):

Tell us about the location, Chris. I mean we've got a slide up on the screen, which you can see here. One of the things I love about Lara so much is its strategic positioning. If we talk about defence, it's always about strategic positioning. So you've obviously got Geelong, which has just absolutely gone gangbusters. Yes. And then Melbourne, which you positioned in between. So how important is that for investors? Speaker 3 (35:19):

Location is everything, and I suppose it's a pretty worn out cliche, but when you look at Lara on the street directory or map, we're only about 20 minutes, 15 ks into the CBD of Geelong, we're about a 50 minute journey by train from Lara Station to Southern Cross Station costing about $9 50 a day return. Now driving Tide normally about one hour at the moment. We've got some holdups along the Westgate Freeway and Tunnel works, but that will improve, but the train would be my preferred way to get into the CPD of Melbourne. Now the demographic of the people who are working within the Lara District around about half are working around greater Geelong Werribee. The other 50% are working in various parts of Melbourne and it's a fairly quick commute, normally up to Melbourne from here. The other benefits that we've got within the location and Geelong is well known for it now it's probably our education facilities, superb.
(36:27)
We've got some of the best private schooling within the country. We also have a couple of tertiary education facilities in the form of Deakin Uni and Gordon tafe. Apart from that, there are some very large hospitals within the district. Three notably being the Geelong University Hospitals, so John of God Private hospital and Epworth Private Hospital making up the three major health facilities. So in this demographic we've got most of our people working in construction and building education and health. Apart from that, the other activities of course are bound in private business opportunities, technology, et cetera, and also what is available in Melbourne Now from a desirability point of view, it's the quick and cheap access up to Melbourne for those who work up there balanced with a lifestyle. So an hour away from work, you've got Lara, you've got access easily and quickly down to the surf coast, the Ballin Peninsula into the western rural parts of Victoria for those lifestyle balance opportunities Speaker 2 (37:44):

Into the wine country, into Speaker 3 (37:45):

The wine country and it's a bit of a food bowl around here too. So those of you, our thirties would also well recognise the reputation of some of the restaurants around this part of the world. And I dare say poking the Melbourne Knights in the eye. We've probably got better coffee in Geelong now Speaker 2 (38:03):

Little river half is apparently a good one, ly a Speaker 3 (38:07):

Gastro destination along with Bray at bi. Speaker 2 (38:10):

Still haven't been there, but so we can see that the median house price, and this is just for homes across all room sizes is 710,000. I think Geelong's median house price now sits over 900,000, which is pretty Speaker 3 (38:24):

Incredible. It would and that is reflected here in Lara as well. So I think the median in Lara is still around 700, 700 and thousand. However, you've got to look at the mix of housing styles that make that up that is growing incredibly with the explosion in brand new larger homes being built and that will therefore protect your value of your asset in this area incredibly in the future. Now I heard Matt say something about 1980. The first house that I ever sold was in 1978 and I was only allowed to sell that because no one else was available to show this particular buyer through it. That house was in just off High Street, Thornbury between Northcott and Preston now regarded probably as being an inner suburb of Melbourne. It was a two bedroom, one of a pair, no vehicle access toilet down at the back fence, abutting the night cut men's lane to collect the can during the early hours now that sold for $25,000 lead history, be the teacher for what is to come that was 45 years ago. What will properties be worth in another 45 years? What I've seen in the last 45 years of my career and there has been highs and there's been lows, but ultimately it has been an incredible growth. That particular house today is probably worth well over a million dollars that sold 45 years ago for 25. I'll leave that one with you. There is no better investment in my view on this planet than real estate. Speaker 2 (40:20):

That's wisdom right there. I think obviously we don't all get exposure to that much experience in real estate and you would've seen that journey evolve along the way. So it's pretty cool mate, it's been really good having you on. I just want to touch on one project that is occurring within this immediate region. It's the Mad Business park, which is a 3.3 billion I think it says that the 3.3 billion project which is occurring in the area. Do you know much about this project? Is this something that's happening? What's your take on it? Speaker 3 (40:54):

It is something that will happen and has to happen. We're already seeing around the Avalon Airport, the growth of businesses that are setting up their warehousing and transport hubs to take advantage of the airport and it's one of a number of exciting projects. It's probably the largest of 'em and that will, as I understand it, be a commercial hub for warehousing, perhaps some industrial and other business park opportunities. Naturally that will require people to be employed. Obviously making Lara being the closest township to that particular activity being a very attractive, convenient destination for those future employees in that particular business park and when it's going to happen. I'm sorry, I dunno, I can't give you an insight on that. It's still in the planning stages and the development stages, but it is something that's going to be just another of the exciting features of this greater Geelong district in Victoria. Speaker 2 (42:05):

Yeah, and I mean this is what developers talk about. They look at areas that are going to be rezoned. They look at areas that the government are going to invest into. They look at these kind of things, these kind of projects. These are region changing projects that should they occur, which we think they will, it's just a matter of when, as Chris was saying, is likely to benefit you as a homeowner within that region or a house owner because we're not living in these homes, remember. So obviously transport's very good. It's a very connected place. You've spoken about that. Yes, Speaker 3 (42:36):

Train is obviously the major one. As we develop in Rro West you'll also get the public transport buses being made available. There is some talk in the neighbouring lovely banks residential growth zone that they'll be having a trackless tram proposed wandering around there. Doesn't take a great leap of imagination for that trackless tram to wander down through Lara West to Lara Station and beyond, even to the Avalon airport. Speaker 2 (43:07):

Mate, it's been a pleasure having you on. I really appreciate it. Hopefully you guys got some knowledge from that. Thank you. Chris will be available to speak to people that are interested in this estate as well, but we're going to move on to the next section. We're going to try and close out the next 10 to 15 minutes. Really appreciate it mate. Thank you very much. Thank you, man. Alright, great, great. That's just one of my sayings. So obviously that's knowledge that we don't get access to every day and I love working alongside Chris when we're out here. He definitely knows his stuff. So nothing created, nothing great, created sovereignly. Nothing more than a bunch of grapes or a fig. This is a great little saying that I feel is very relatable to property. So I want to try and get into the final touches of what we do and what we offer. I did say that we'll try and keep this to 60 minutes, which I think we're going to be able to do, which is good.
(44:01)
Talking about the right solutions. So one of the things that Bayfair Property Group does in great detail, which gives you that advantage of feeling confident within your decision choice is we actually apply a lot of data to the decisions that we help you make. We are actually a building provider. We're not a builder. We're like a finance broker, a middleman. We use a bunch of different great builders that we vet prior to recommending, which means that we have access to a whole wide range of solutions. We are a licenced estate that can help you with established properties. However, we generally stick to the new property space and there's much stronger benefits from a cashflow depreciation tax standpoint, and obviously we get protection from builders with warranties and these kind of things as well. So turnkey homes from 229,000. We're extremely competitive. We have gone above and beyond to try and find the best solutions for you for home builders.
(44:57)
We do help first home buyers as well. So if you're a first home buyer watching this, there's a lot of people on here. So I don't know who's who, unfortunately you might have a friend, you might have a son or a daughter or a brother or sister who's a first home buyer that wants to build. Please put them in contact with us if they'd like assistance. We have over 50 designs. We have full custom service available as well, and we actually support you throughout the adventure, the journey, the experience as a middleman representing you, which is a great advantage. Something tends to happen with a building issue. We've generally experienced it, so we can help you through that experience. There's some of our facades. I want to get into the final touches of this presentation. Thank you so much. All the people that are on here, it's been a great turnout.
(45:43)
You can ask some questions soon if you wish. You're welcome to chuck them in there now, but that's okay. So this is just when we're investing in property, it's obviously the beauty is that we're not restricted geographically. We can buy anywhere. We can buy anywhere in the world technically if we know how to do it. But the key information that we need with this kind of stuff is that we need data. We need to understand what's happening within a region. I do two hour, three hour presentation sometimes where I go into the really fine granular information around this and how we work it. I don't have the time for that today, but this is just some of the information that we share. It's going to be really hard for you to see that on the screen. We actually run you through this if you do get to the point of looking at a property with us.
(46:28)
But we have access to data Australia wide and there's over 50 sources of data that form our reports that we generate and we're looking at key stats or key parts of the market to try and assess which opportunities are best. Now I won't go into the details of Lara with these kind of reports, but it comes up very well. Okay, so we look at supply metrics. We want to look at how much stock is on the market, how much access to stock there is. This brings in certain things like inventory, whole periods, how long are people holding the properties. Chris mentioned obviously there's much more homeowners here than investors, which is actually great because it means there's less rental properties available. So we're going to have less vacancy. People are going to want your resource when you provide it more, if there's less availability of stock or supply.
(47:16)
We look at the demand, how many people are in the area, how long are home's taking to sell? They do that by looking at the days on market, these kind of things. You can have a look at those stats there, vacancy rates, discounting, so many different metrics that we look at. We actually provide a report for you based on each property so you can go, yeah, we're pretty comfortable with making that decision, which is good. I think decision making is all about the information that you have at hand there and then obviously you can't tell what's going to happen in the future as long as you're comfortable with the decision that you're making at that time. At that point in time, we do need action. Then I think that you're making the right decision, whatever that decision is. I'm just giving an example, fundamentals. So supply, demand and fundamentals are the key points that we look at.
(48:03)
You can see some of the things there. We look at growth rate cycles, unit to house ratios and a bunch of other different things. How many renters to owners, which we just touched on then. So there's a lot that goes into this. One of the mistakes that I see people making with investing in property is they go it a loan, they go to a broker or a bank, they find out how much they can borrow. They then look on realestate.com and they go down the road and they buy a house that looks pretty good because it's close to home. They can drive past it, they can see it. They can see the tenants playing up. That's all good and well. However, there's a very good likelihood that investment's not good for them and for their strategy and for their portfolio development. So we really want to get off to a good start and set ourselves up for that.
(48:48)
We look at population as well. You can see some of the stats that we use. We provide full reports on this, which is good. I'm trying to hurry this along a little bit. We look at suburb profiles, et cetera, et cetera, both from a rental standpoint and from a sales standpoint on how much a home is valued. One interesting point with Lara, this is one of the ways that I look at assessing an investment opportunity. We spoke about the median house price being 750,000 for four bedroom homes. If we can build below that median house price, we generally know that we're getting in at a good rate. We're going to share some of the packages that we've got in Austin at a high level here in a second, but you can see that we're buying well below the median house price, which is a big advantage and generally means that we're entering the market at a good rate and we're positioned to try and catch up to that median house price.
(49:41)
So if we can get some incident equity, that's a really big bonus and that's where we can fast track our portfolio development. This is a cashflow analysis that's going to look confusing. It's a whole heap of numbers. We actually get our financial planners to explain those numbers for you so that you can understand it in great detail. But yeah, cashflow is very important. As I said at the start of the presentation, we want to increase your cashflow. We don't want to decrease it. We don't want to put more pressure on you. Okay, so Austin estate, this was probably better for Chris to explain, but that's okay. We do have, well Austin estate have title land coming up from 263 grand, sorry, not titled. That's land that's coming up down the track. Quite often we put people into house of land packages or stock that's not titled yet.
(50:26)
They not be in a position to do something just now. So we would position that dependent on the strategy that we're going to apply and there's titled land for 390,000. So we know that we can build, you've seen the turnkey prices before looking at this packages from sort of 520 as a guide upwards with rental returns of four 60 upwards. So these are strong numbers and these are positioning you for some really good outcomes if we're providing the right solution. So I want to invite you guys for all of those people that have been here on the presentation and been patient. Firstly I'd like to say thank you. I really hope that you've got value out of this. As I said, I'm very passionate about this information and I want to get it out to more people. This is a saying that I love. Be fearful when others are greedy and be greedy when others are fearful.
(51:20)
Generally human psyche is that we follow the trend, the market's downward and things aren't going as well as what we would like them to be. People freak out and they don't act so they stay away from acting. It's actually countercyclical because we really should be looking at opportunities when the market's down if we're confident that it's going to increase again because that obviously positions us for success in the short term. So this is what this saying says and what it explains, and I think that that opportunity is something that's ripe for the picking here in property investment as well, depending on where it is that you go in required financials. I do want to put a caveat on this as well. We do have alternative solutions available. We can help people get into property with less resource than we used to be able to. So this is just a guide.
(52:12)
We generally want to have access if we're an investor to about 60,000 as a deposit or call it a hundred to 120,000 in equity. You might have a guarantor, you might have a family member that's sitting on a lot of resource with their own home that's paid off or something along those lines. Obviously they can act as a security asset for you as well. If you're a first home buyer, you don't need as much. There are things that we can attach for you first, home loan deposit schemes and whatnot. Generally say about 20,000 as a deposit to get started. We can get you in with less. Sometimes you won't have as much variety to choose from, but that means that we can get you in the market then that's a good thing. That's what we want to do. From an income standpoint, I generally say about 85,000 for a single and 120,000 for a couple.
(53:03)
Once again, if you're not far off that, please don't hesitate from booking because we can look at alternative options for you. We want to try and get you into asset owning as quickly as possible. Clean credit rating. There's caveats to that too. I mean we can look at ways of increasing or cleaning up your credit rating also to get you going. So it's not the of the world if you do have a poor credit rating. So we're going to do 10 appointments. We've already had a couple booked, which is great. It's not a sales meeting guys, so please keep this in mind. This is really important to understand not being sold anything. This is a discovery session. We're looking at your position. Where are you at now? Okay. Where are the potential opportunities to get you to where it is that you want to be and how do we fast track that to make that happen? So this is all about understanding your position in more detail and getting you or helping, getting you to where you want to be faster than what you'd probably be able to do it on your own. So that's our invite to you.
(54:08)
We do have a paid option with our services. This is optional. I don't ever recommend that. This is something that people take up until they do meet with us. You don't have to pay to use our services. That's just one component of what we do. We do help people with no outlay of initial costs as well. But these things that we add on here are all upgrades and bonuses that you can get for working with us as an investment company, which we're going to apply a special offer to for the people that are on here today and who book. You can see there that things if you do actually go through and acquire a property, we have depreciation schedules provided. We have free contract reviews by conveyances and lawyers for you. 24 7 conveyancing support. We have VIP property access. We do have people come to us, especially at the moment.
(54:57)
We have properties coming back on the market we might have Chris say to us that someone's selling a property and can you represent it for us and sell it? That does come up. We give that to our VIP community first. So that's something that comes with that. And you've got access to us. We provide annual portfolio reviews for nothing, and you've got access to our team and our community from the start for life essentially as well. Okay. I'm going to open up the floor to questions, so if you've got any questions, please fire them through. So where do you recommend Lara as a first investment? Look, it's case by case. I mean, we can't always say that a specific area is going to be the right investment unless we understand your position. So once you speak with us, we can look at that and say, well, hey, yeah, we're confident because of this, or we're not confident because of that, which is why we want to speak to people first before making any recommendations. Is negative gearing going to be abolished?
(55:56)
How long is a piece of string? They've been talking and threatening that for a very long time now. It hasn't occurred. I think it would be carnage if they did. I think any government to do so would be very brave. So I mean, I personally don't think that they will. Why would they? That's one of the incentives that the government give us to be able to get into property in a safer environment. So, no, I don't think so. But I'm not government. I can't speak for that. Bruce is depreciation free? I'm not quite sure what you mean there, but I think what you mean is, well, you have to pay for a depreciation schedule first. That's what you do to be able to apply for your tax credits with the A TO you apply, provide the depreciation schedule to your accountant. It is free in the respect that it's the only tax offset that you don't pay for first, if that makes sense.
(56:53)
So with everything else, with your property management fees, your council rates, your water rates, maintenance, these kinds of things, you have to pay for them first and then at the end of the year you can claim them as an offset or a tax return with depreciation. It's actually provided for you because the home that you are buying goes down in value as it gets older. So the land that increases in value, that is considered as a write-off, and that's the main incentive that the government provide to us to be able to incentivize more people into building new homes. So depreciation's, my favourite thing of all time when it comes to investing in property, because it's just such a great insurance policy, it doesn't cost much to get it, and it's a free tax write off. So it's a very big advantage. Well, look, I'm going to finish it up there, guys. I really appreciate your time. For those that have booked a discovery session, I look forward to speaking with you in person and learning more about your position. Hopefully we can help you get to where you want to be.
(57:59)
This presentation has been something that we've put together with 27 Media. Thank you for your help. If you want to do the same kind of thing, reach out to them. Look on our socials. We're going to share behind the scenes activity from this as well so that you can see how it's set up and how it's made. There's a huge TV production behind you, which is pretty cool. But yeah, we've got lots of great things coming up. Reach out to us if you want assistance. I would like to think that we're the good guys to everyone who's come. Thank you again, I really appreciate it. Hope you got some value and we will see you soon. Thanks you. Speaker 1 (58:32):

Thanks for listening to The Property Now podcast with Matt elo. We hope you learned something valuable and enjoyed the show. Should you wish to reach out to us, you can do so by calling 1 302 8 9 3 2 4. Or you welcome to email matt@hellobayfairproperty.com au and he'll be more than happy to help. However he can. Have a great day.