Property Hub - Investment Insights & Inspiration - Property WEALTH (6/7) - T: Treatment

Starting point is 00:00:00 Welcome to Get Invested, the leading weekly podcast to help you unlock your full potential and enjoy your version of sustainable success that lies at the intersection of your three elves, yourself, your health, and your wealth. I'm your host and guide, Bushy Martin, and each week we go deep, sharing great conversations with proven experts in all walks of life, including the best investors, property experts, analysts, leaders, founders, sports stars and health gurus to uncover their secret know-how on where they invest their time, their skills and their money and the benefits that this creates. To help you find out what it takes to break free from the grind and discover your flavour of

Starting point is 00:00:45 freedom to create your freedom formula. You see, the truth is that everyone invests. Every second of every minute of every day, we're investing our time, our skills, our energy and our money in something. Some of us are investing consciously, some unconsciously, sometimes for good, sometimes for bad, and sometimes for no impact. Get Invested will help you start living by design, not by default. I'm going to help you to make it happen, not let it happen. You'll hear the top tips on how you can live with conscious intent so that you can live more, work less, and live your legacy by investing now. You'll enjoy the stories and secrets of high performers who invest for success in every aspect of their lives and discover the top tips on how to get started,

Starting point is 00:01:34 how to make the most of your investment journey and ultimately to be living your dream, not someone else's. As you engage in each episode, you'll glean the information, inspiration and implementation that you need to get empowered and get invested in imagining and actioning the life that you've always dreamed about. And Get Invested is proudly part of Property Hub, your home for property investment insights and inspiration. Make sure you subscribe now on your favourite podcast player to get every episode of Get Invested and Realty Talk, which is Australia's leading and longest running online property show that's full of red hot property investment news and insights direct from all of the industry leaders and influencers. You can also connect with me

Starting point is 00:02:20 personally and join the Get Invested community of fellow Freedom Fighters at bushymartin.com.au or on knowhowproperty.com.au. Now, let's get invested. Hi, Freedom Fighters. How do you find, negotiate, and secure the best possible high-performance property that fits your strategy in brief in order to help you achieve your ideal lifestyle goals? Welcome back to session six of your Freedom Formula, where we're going to help you answer this question under part one of the tea for treatment stage of your six-stage property wealth revolution. You'll be pleased to hear that we've finally reached the place that you've all been impatiently waiting for, the property purchase stage, the part where you finally

Starting point is 00:03:10 get your hands dirty and invest. Now, this is the phase of a property wealth revolution where you finally get to implement and deliver your strategy solution and personal prescription treatment based on your specific needs, capability and sleep at night factor. If you completed the previous stages, you'll already know exactly how much investment assets you need and are capable of securing safely and affordably. You'll also fully appreciate the critical importance of time

Starting point is 00:03:41 on your investment success and the required urgency to invest every time you can afford to because it's never a question of when, but it's always a question of what and where. So if you haven't taken the time to complete the prognosis, diagnosis and prescription phases of your preventative wealth plan and you leap straight into securing the first investment property that gets put in front of you,

Starting point is 00:04:07 your short-sighted impatience is going to cost you dearly in the long run. So if you haven't done so already, I strongly advise going back and completing your why examination approach and leverage phases now as the old adage goes if you continue to do what you've always done you'll continue to get what you've always gotten and be honest with yourself how well has that worked for you so far because the key qualities that separate the best from the rest are preparation patience and persistence so go back don't pass go and don't collect $200 rant over but if you've been following and actually in the previous freedom formula sessions your property investment strategist has helped you

Starting point is 00:04:54 to get clear on how you want to live you know how much this lifestyle costs you've calculated your freedom numbers to determine how much property you need to invest in now to bridge the gap between where you are and where you want to be your investment specialist finance broker has worked through your bare facts to determine how much property you're actually able to acquire and how much it's going to cost you to hold. You've crafted your personal wealth by stealth income replacement investment strategy to make it all happen and you've engaged your professional team of independent proven property specialists. As a result you've effectively created your property investment brief that details what value of property you can comfortably afford and you know what type of

Starting point is 00:05:37 property you need to secure to achieve all this. So before we step you through the step-by-step property search and selection process, let's refresh and reinforce the key property performance principles. The first step is to start seeing things differently by shifting from your rear view mirror microscope to your future focused telescope. As I've mentioned previously, based on historic property research, it takes 15 years on average for a location to go through a full property growth cycle, which I'll break down in more detail shortly. So you need to invest for the long term and to do this effectively, you need to develop a clear vision of the future. You need to be able to transport yourself into the future and imagine

Starting point is 00:06:26 how an area and a property is going to look in one to two decades time and not be too distracted by how it looks today. In this regard you need to look beyond the rear view mirror of past performance, throw away your myopic microscope that focuses on today's minute and strap on your long-range future vision time travel telescope. You need to be able to take a step back so that can see the forest from the trees. Too often, investors focus just on the past and the present of an individual property and chase hotspots that quickly become not spots, instead of visualising the future of the entire area based on research that confirms committed positive change and improvement. Successful investors are informed visionaries with a very clear picture of the

Starting point is 00:07:16 future. In other words, you need to transform yourself from short-sighted Mr. Magoo to futuristic Elroy Jetson. And if you're too young to know who these cartoon characters are, then do a quick Google search online. So here's a brief snapshot of all the key fundamentals that you need to capture to set the property search scene. Firstly, to achieve long-term affordable property growth, you need to capture the balance of what's called the holy trinity of property that combines maximum capital growth, cash flow and value added potential, as I discussed in more detail in Freedom Formula Session 4. In addition, the Pareto Principle of property confirms that 80% of property value growth

Starting point is 00:08:03 is generated by the location, not the property itself. So you need to shift from a neighbourhood backyard focus to a national borderless approach in order to secure the highest growth location at your affordable spend. As an example, just a 3% difference in the growth rate from 5% to 8% on a $400,000 property will give you an extra $800,000 in nest egg equity over 20 years. and this is a 75% increase on just a 3% differential. Property growth drivers are affected broadly by a dynamic and constantly changing mix of demand, supply and sentiment drivers, along with many other lift and drag factors that affect property values

Starting point is 00:08:52 in different areas at different times for different reasons. Highly respected property analyst Simon Presley from Propertyology has encapsulated these really well. On the demand side, at the local and regional level, they include things like new infrastructure, major projects, industry and employment diversity, income levels, affordability, immigration, population, births and deaths, transference, and lifestyle amenity attractiveness. On the supply side, they include things like rezoning, gentrification, land releases, building approval levels, property taxes, government incentives, and the availability of credit. then comes the often forgotten but increasingly important sentiment influences sentiment includes political stability job security government policies interest rates and the growing influence and importance of media driven perception now the recent instance where the mainstream media

Starting point is 00:09:49 has created a crisis of confidence in property through a fear campaign based on the misleading conclusion that rising interest rates cause property values to fall at a time when our property fundamentals have never been stronger is a great case in point. In addition to this, you need to consider the lift and drag factors that influence property values. Dragging influences include affordability, inflation, rising interest rates, tighter bank credit assessment policies, skilled labour shortages, political rhetoric and property pessimist media commentary. Lifting influences include overseas migration, wage growth, rising rental incomes, home equity increases, home upgraders, lifestyle buyers, investors,

Starting point is 00:10:34 international tourism, household savings levels, infrastructure project spending, building approval limits, and construction material supply constraints. So as you can clearly hear, there's a multitude of dynamic, constantly changing factors that influence property price movements, because there's more moving parts and more combinations than a Rubik's So this is where the three key eyes in growth through positive improvement in areas of infrastructure, industry and incomes comes to the fore when identifying future growth, as discussed in more detail in previous Freedom Formula Session 4. and if you want to make things really simple in identifying growth just follow the jobs because strong and growing income demographics in an area will support the affordability of strong and growing property prices for scarce high demand properties in tightly held lifestyle areas that

Starting point is 00:11:32 people want to live in and all of these growth driver influences need to be considered in a top-down approach of what I like to call the macro, mid-cro and micro level. And these all vary in a very fragmented out-of-sync way by location. So one area can be experiencing growth while another can be experiencing plateauing property prices. Because History Grant again demonstrates that each and every area moves through a spring-like cycle that resembles an S curve formation over an 8 to 15 year period, where a location will experience a 2 to 5 year period of strong growth, after which property values will often come back 5 to 10% before flatlining for 5 to 8 years before the area goes through its next growth spike. So like a set of

Starting point is 00:12:26 stairs, property values follow a repeated peak and plateau step-like S cycle over the long term. The implications of this are that you need to be holding a property for a minimum of 15 years to go through a full growth cycle. And if you'll break free investment horizons at least this long or more, then you don't need to worry so much about trying to pick property bottoms and tops, which is generally a bit of a hit and miss mugs game. However, you can stack the odds in your favour to some degree if you're looking to turbocharge your equity uplift in the first few years so that you can access equity growth for the deposit on your next property by endeavouring to pick locations around Australia

Starting point is 00:13:07 that are about to go through their next growth spike. And you can do this by keeping an eye on what is called the national property clock, where you wrap the S-curve of growth around the face of a clockwise ticking watch face, where 12 o'clock is the boom time and 6 o'clock is the bottom of the market. On this basis, in a perfect world, you only buy properties when prices are sitting between 6 and 9 o'clock as property values start to rise, and you stay out of the market between 9 and 4 o'clock, and you only sell your property between 11 and 1 o'clock. To assist you

Starting point is 00:13:45 with this, years of research by respected national property valuers Heron Todd White has confirmed that suburbs, regions and states all vary in terms of where they're at in their respective demand and supply price cycles. In other words, where they are on the property clock. And better yet, they encapsulate these locational variations in their regular property reports. Their residential report assesses the property cycle status of major towns and suburbs right around Australia and plots these on the clock. To download a free PDF of their latest report, which also provides further information for each region,

Starting point is 00:14:23 just go to htw.com.au forward slash month in review and then click on residential. And I stress that each area is generally in a different part of the cycle than others. And when I say area, I'm talking about precincts, neighbourhoods and maybe suburbs, but definitely not regions, states, and nations. So be very wary of basing any of your property decisions on large area aggregated property markets that don't exist and median prices that are at best misleading and at worst, downright dangerous. Because every property in every street in every suburb is different from every other of the 11 million odd properties

Starting point is 00:15:09 across Australia, which means you're not comparing apples with apples, but it's more like comparing an apple with every other fruit and vegetable known to exist, which is the reason I actually like property because it's not a like-for-like commodity and it's much easier to create distinct property attractiveness as a result of all of this. The next fundamental is that a region must have a critical massive population of a minimum of about 25,000 people to ensure that there's sufficient employment diversity to support property growth. So avoid small one-trick pony locations like mining towns and remote regional towns. In addition, the area where you buy a property shouldn't exceed 30% of rental properties, as it's owner-occupied properties

Starting point is 00:15:58 bought on emotion that tend to drive property value growth. So you need to secure an investment property amongst a majority of owner-occupied homes so that you just slipstream on their value growth. Conversely, if there are too many rental properties in an area, they tend to dilute property growth as rental properties are purchased more using the head than the heart, and properties in high rental concentration areas don't attract the same level of property pride, and this tends to affect the attractiveness and demand in that area. If you want more information on the reasoning and justification behind these parameters, then have a read of my book, The Freedom Formula, for more of the details. Now, only about 5% of locations and 5% of properties satisfy these

Starting point is 00:16:45 fundamental criteria that I've just outlined at any point in time. And it's more important than ever to be focusing on quality by securing properties in A-grade growth locations that are investment-grade properties but also have owner-occupier appeal. Because we've just been through the second highest property boom in the history of the nation post-COVID, so many areas and properties are likely to flatline in value for an extended period of time unless they're exhibiting new and ongoing growth drivers. And you also want to be in a position to sell your property in the future to an owner-occupier in order to optimise your sale price, as owner-occupiers represent 70% of property buyers, so you want to maximise your buying audience. And owner-occupiers

Starting point is 00:17:34 often buy on emotion, so they'll pay a premium for a property if it's what they really want. now it's important to point out that rather than identify a so-called property hotspot and then just buy whatever you can afford in that area we believe that you need to adopt a very different approach because if you're chasing hotspots it's normally too late to get into an area once a hotspot's been identified and it's probably close to its peak price in the cycle and if you're only able to secure a unit or apartment in this location at your affordable spend then you're not likely to enjoy the level of growth that a high demand three to four bedroom home property profile on a decent block of land is likely to achieve. Remembering that the rate of growth

Starting point is 00:18:17 will have a massive impact on the size of your nest egg at the end of the day. So in contrast to this location first approach that many investors take, we suggest you adopt a very different approach where you establish your achievable and affordable purchase price first and then find the highest long-term growth location around the country at this price for a three to four bed, double bath, double living, double garage home. Because this is the safe sweet spot that optimises your opportunity while minimising your risk. And this concludes all of the key underlying property principles and fundamentals that you need to incorporate as a precursor to finding, negotiating and securing

Starting point is 00:19:02 the best possible high performance property that will best fit your strategy in brief in order to help you achieve your lifestyle goals. The take-home summary here in terms of the guiding property principles that you need to incorporate to secure an investment grade property with an owner-occupier appeal in an A-grade location are firstly to play the long game and invest for the long term for a minimum of 15 years by becoming an informed visionary with a very clear picture of the future based on research that confirms committed positive change and improvement in the area that you're looking to invest in. Secondly, ensure you capture the balance of the whole eternity of property that combines maximum capital growth, cash flow, and value

Starting point is 00:19:45 added potential. Thirdly, remember that 80% of property value growth is generated by the location, not the property itself. So you need to shift from a neighbourhood backyard focus to a national borderless approach. Fourthly, property growth drivers are affected broadly by a dynamic, constantly changing mix of demand, supply and sentiment drivers, along with many other lift and drag factors that affect property values in different areas at different times for different reasons.

Starting point is 00:20:15 Number five, to capture the growth drivers, adopt a top-down macro to micro to micro scarcity approach that starts with your affordable spend, synchronises with the National Property Clock's S-curve of growth and then filters from state to suburb to sanctuary level so that the actual property is the last thing that you look at. And finally, the area you invest in needs to have a minimal critical mass of population of 25,000 people

Starting point is 00:20:43 to ensure that there's sufficient employment diversity to support property growth, along with a rental property ratio of less than 30% to ensure that you're slipstreaming on the back of the majority of emotionally driven owner-occupier home buyers. But what actual property purchase process do you need to follow that's simple, easy, time-effective and low cost that will help you to secure properties that have high growth and high yield potential in order to maximise your property rewards, minimise your costs

Starting point is 00:21:15 and reduce your risk? Well, this is exactly what we're going to go into detail in the next concluding session seven of your property wealth revolution that's more food for thought and stay tuned for the next installment of your freedom formula here on your property hubs get invested thanks for getting invested now here's three easy ways you can take action to start making it happen to ensure you build momentum and start living by design not default so that you're following your freedom formula. Firstly, subscribe to this podcast if you haven't already and keep the weekly inspiration coming. Secondly, get a copy of my book, Get Invested, for free and find out what it takes for you to invest in living more and working less. Just visit bushymartin.com.au

Starting point is 00:22:06 forward slash books or knowhowproperty.com.au or click on the links in the show notes. And thirdly, join me and the Get Invested community. Each month I send a free and exclusive email full of practical self-help and wealth wisdom that our current Freedom Fighter subscribers can't wait to get. Just visit bushymartin.com.au, scroll to the bottom of the page and sign up. And there you have it. In three easy steps, you're on your way to dusting off your forgotten dreams and making them a reality. Get Invested is proudly part of the Property Hub, your home for property investment insights and inspiration. When you subscribe to the show, you get all of your Get Invested episodes, along with Realty Talk, Australia's longest running and

Starting point is 00:22:54 leading online property show for red hot property investing news and insights, direct from all of the industry leaders and influencers. And finally, feel free to connect with me on Twitter, Facebook and LinkedIn, as I'd love to hear your feedback, your inspiration, your ideas, and your questions and queries anytime. Thanks for listening. Hear you next week. And as always, dream as if you'll live forever and live as if the day's your last.

Property Hub - Investment Insights & Inspiration - Property WEALTH (6/7) - T: Treatment

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