Property Hub - Investment Insights & Inspiration - Realty Talk: Cash Flow Reports + Tenancy Pain + Forced Value

Episode Date: November 18, 2022

How and where do you find the best cash flow properties and locations across the country? Respected data analyst Kent Lardner joins us to show you the way with his weekly cash flow reports. Recent Qld tenancy legislation reforms have made significant changes to periodic tenancies. Leading property manager Jamie-Lee Billerwell helps you unpack the impacts. Under current property conditions around the country, you need to force value, and Joe Tucker from Property Principles and the Aus Property Investors forum joins us to show you how. RealtyTalk is part of the Property Hub podcast channel, your home for property investment insights, inspiration, and stories from Australia’s top property experts, investors, leaders, and analysts. Subscribe now to get every RealtyTalk episode delivered to you each week for free, and also get full access to Get Invested, the leading podcast for Australians who want to unlock their full ‘self, health, and wealth’ potential and get inspired by the stories of investors, founders, and entrepreneurs. Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media. Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Welcome to Realty Talk, the show that brings together the country's most authoritative and respected property experts. Follow us on all the socials and subscribe for updates and exclusive offers. Realty Talk is powered by realty.com.au, connecting buyers, sellers and agents differently. Hi and welcome to this week's Realty Talk, the flagship of the new and expanded Property Hub. Your home for property investment insights, inspiration and stories from Australia's top property experts, investors, leaders and analysts, which is done in collaboration with Apiro Marketing and DM Media, Australia's largest independent podcast network. I'm Bushy Martin from Nyhow Property Finance and we've got more great property insights for you

this week. To kick things off, how and where do you find the best cash flow properties and locations around the country. Inspector Data Analyst Kent Lardner joins us again to show you the way with his new weekly cash flow reports. Recent tenancy legislation reforms in Queensland have made significant changes to periodic tenancies, so leading property manager Jamie Lee Billiwell from the Co-Property Group helps you unpack the quite significant impacts. And given current flat property conditions around the country, you need to start creating and forcing value. So Joe Tucker from Property Principles and the Australian or Oz Property Investors Forum joins us to show you how with these low cost yet very high value tips.

And before we get into it, make sure you don't miss another episode of Realty Talk by subscribing to Property Hub on your favourite podcast player, where you'll also get two powerful episodes of both Realty Talk as well as the Get Invested podcast delivered to you each and every week. And make sure you also sign up on the realty.com.au homepage, where you'll also get a free copy of my award-winning book, Get Invested, just for making the effort. We've got a lot of great insights to share, so let's get on with the show. Greetings and welcome. Now, there's an old saying in property cycles that capital growth gets you out of the game, but cashflow keeps you in the game. So if you've switched from

the accumulate stage to the cashflow phase of your investment strategy, what I like to call the capital growth to cashflow curve transition. How and where do you reliably find the best high yielding cashflow properties and locations from amongst the 15,353 suburbs and localities around the country? Well, to lead your way, we're joined by one of Australia's best and most respected property data analysts and a long-term supporter of the show, Ken Lardner. He's the founder of Suburb Trends, and he's just released his new weekly cash flow report series. So welcome back to the show, Kent. Thank you, Bushy. Great to be here. Absolutely, mate. I've been busting at the seams to get in front of you for ages, so this is a bit of a bucket list opportunity for me, mate.

Sort of diving right into the subject, mate. How do most investors identify cash flow opportunities? I think most people zoom in on a suburb and they use a suburb median. So that's a suburb median for the sale price and a suburb median for the rental price. And there's two problems there that compound. So essentially, you need to have a suburb median that's very reliable and robust. That's the first thing that can go wrong. The second thing is that you are assuming that you're going to buy a property spot on that median.

Odds are you're not. So the trick really is to come up with a measurement system that looks at the individual property and what it's sold for and then pair that to a rental estimate. Yeah, okay. Well, given that context, what are you suggesting are some of the improved and better approaches that you and your suburbs trends team adopt to better understand cash flow opportunities? Yeah, my approach is to take a sold price and then pair that to a rental estimate and then publish that and plot that on a map or in a data table or both. and then what you can do is actually look at the actual yield for an individual property and then I sort and filter and you can see where the clusters are of properties that are spinning up higher yielding properties now typically I used to say three and a half percent higher was

high yield but things have gotten better so I've gone to four and a half percent now now we get a bit greedy we might go a bit higher so and typically I do a cut off and just plot the ones that are offering that that higher yield so typically four and a half percent and higher it is an estimated yield, but it's significantly more accurate than trying to use a suburb median for rent and a suburb median for sale price. Yeah, it makes complete sense. So talk to us about some of the key criteria in your unique 13-point area score that you use to actually identify the highest yielding locations. Yeah, so typically there's a number of factors that we look at on the rental side, and I'll start with that. So we're obviously looking at yields.

We're looking at the rental tenure, which is Australian Bureau of Statistics, ABS stuff. So we looked for a sweet spot there to say there's not too few renters. So we want a good rental market. We look at other factors like income and socioeconomics. So there's a range of things that the census gives us that we can lock down for five years and keep on using, which is great. Then when we look at some of the capital related stuff, the market there, we look at factors like inventory. So inventory measures that ratio of how many sales, how many listings, and the more months of stock, which is ultimately the measure we're using there. That means the market is switching between buyers and sellers.

And the other key thing we're looking at with inventory is if that's building, the trend tells us the direction of the market. And at the moment, we're seeing a number of markets that are probably about, on average, five, six, seven months or more beyond their peak. inventory levels have been building but they're actually starting to ease in a lot of spots so that's a bit of a lead indicator it's not a one size fits all measure but inventory is a pretty solid metric looking at what's going to happen to prices in about three to four months time so look at inventory look at days on market I think a lot of people know days on market quite well and a range of other variables so you know I do some forecasting as well some short-term forecasting the call out there is i used machine learning to do a lot of forecasting the models are

awful right now so you know you've got to really be careful with how far you try and predict because the volatility in all the data sets right now it's really really hard yeah it's it really is difficult to throw a net over something when there's so much variation happening yeah price location and everything else. And that's the danger of some of the projections that we're seeing in the media at the moment, Kent. But look, you've just released your new weekly cashflow reports. So can you give us a bit of a rundown on what it's about, what it is, what it shows, how it helps and who's best suited to grab a hold? Yeah. So what I'm doing is I'm taking up areas that I like to look at. And we mentioned the

census data so i've identified effectively 50 areas that i work with 50 sa3 regions statistical area three so there's 50 markets that i call evergreen and i'm working against those markets now and then just a plotting against that a 13 point scorecard effectively and then that will ebb and flow and month to month week to week you'll see different data sets there and then what i do is i go through each week and i grab the recent sales and i pair up a rental estimate and then I attach that to each of those regions. So across those regions, you can look at how each market's operating

and then effectively, after you know what those market conditions are, you can know what some of the cash flows are. Yeah, brilliantly done. Well, I really want to thank you for coming on and sort of leading the charge on assisting investors with your very forward-looking reports, Kent. And thanks again for your time on the show today, mate.

Thank you, Bushy. Thanks, Kent. Well, as you can see, if you're a property buyer, investor, buyer's agent or other allied property professional that's looking to make better informed property decisions based on quality data, do yourself a favour and jump on suburbtrends.com where you can tap into Kent's new weekly cash flow reports as well as an entire suite of other very useful and timely property reports. Keep watching the Property Hub's Realty Talk, your trusted voice for all things property.

property deductions can save you thousands of dollars each year to make sure you maximize deductions you need to work with the most experienced quantity surveyor in the country bmt tax depreciation is the leading specialist in the industry they've completed over 700 000 tax deduction schedules for residential investment and commercial properties australia-wide bmt guarantee to find double your fee in the first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. Now, if you're a landlord in Queensland, you may or may not be aware that as of the 1st of October this year, new tenancy reforms came into play in relation to the treatment of periodic tenancies

and pets, which the Real Estate Institute of Queensland CEO Antonio Murparello says has actually swung the pendulum distinctly in favour of tenants and reduces property owners' contractual rights. So if you're a Queensland property investor or landlord, you need to listen up. And if you're not, I'd still be paying attention as these tenancy changes are progressively being rolled out right around the country.

And to unpack the details of the changes and what impacts they're likely to have, we're joined by leading property manager, Jamie Lee Billywell, from the Code Property Group for a special two-part feature. So welcome back to the show, Jamie. Thank you for having me. It's always a pleasure. Always.

Love having you on. And Jamie, what I thought we'd do, we'd kick off by diving into the changes affecting periodic tenancies and then in part two in coming weeks, we'll unpack the changes to the treatment of pets. So sort of kicking straight into the subject, for those who aren't aware, what is a periodic tenancy and what changes came into effect in that area on the 1st of October? Great, thank you. So essentially a periodical tenancy is a month-to-month lease agreement.

It is quite popular if people are building a property and they're not quite sure when it will be complete. It's also popular if people are looking to buy or they've just moved. So traditionally that's the only reason that we would entertain a periodical lease. The new legislation essentially means that there's no way to end a periodical lease. I personally believe that it is just a gap in the legislation however that legislation has passed and you're essentially signing yourself up to a lifetime lease with the tenant because you can't end it anymore well that's a fairly major change and and as you and i know jamie lee once it's in legislation that's very difficult and slow and painstaking to change so given given that scenario where you can

effectively no longer terminate a periodic tenancy, what impact is it going to have on the periodic exercise? Essentially, my advice to any investor is to not pursue a periodical tenancy. Pursue a three or a six-month lease. The problem is you can't end the tenancy without grounds, which is the term that we were able to use previously. There are ways, but the tenant has to be naughty so in the sense that if you've got the perfect tenant and nothing's going wrong it is extremely difficult to end that lease term so if if a tenant is not paying rent or it's a non-livable property or there's a sale contract in play there are ways of course but it is extremely difficult so that may cease to end all periodical tenancies in Queensland. Yeah it sounds like it so

So what do investors or property managers need to do if a tenant doesn't sign off on a loose renewal offer, for example? And they're in a periodical tenancy currently? Well, probably more around if a lease is coming to an end and it normally would roll into a periodic, as I understand it. Right. That's clearly not an option anymore because you've been locking them in forever.

So what's your advice around that? The question's multifaceted, so I may go on a little bit of a tangent here. If hypothetically you're on a periodical lease, currently the legislation has passed and you were unaware of that, my advice is to have a conversation with your property management team and put a strategy in play to essentially put the tenant on a three or six month lease because you can still end a three month lease without grounds. The other option is to do a 60 day lease. Of course, it's not desirable because you've got that constant rollover, but at least it will protect you. Any good property management team worth their salt was doing this six months

ago. They were removing all the periodical leases out of their rent roll. So it would be a surprise to me if you find yourself in a periodical lease, that's a problem with the property management team. if you as the investor were not aware of that. Yeah, that's a very, very good tip then. So if a fixed-term lease is coming to an end and a tenant would now like to move to periodic, what should landlords now do? Get an understanding of the circumstances.

If hypothetically the tenant is wanting to build a property and they've got, say, a random move-in date with builders that are always pushed back anyway. if it's six weeks offer them a six-week lease instead of a periodical lease so make sure it's got an end date it's not an open-ended date because like I said before you're essentially signing up to a lifetime lease that's a very scary exercise and something particularly landlords who are privately managing I can imagine they're going to get themselves in a lot of hot water with this in times moving forward, even more reason to be engaging

a professional property manager in that regard, Jamie Lee. But, look, I really want to thank you for opening our eyes to the impacts of the Queensland tenancy legislation changes and thanks for your time on the show today. My pleasure. Thank you. Thanks, Jamie Lee. Well, as you've heard, the world of periodic tenancies

has just become a lot more challenging. So if you want to make sure you're on top of ongoing tenancy law changes and are actually maximising your protection, Make sure you reach out to a specialised and dedicated local property manager like Jamie Lee and the Co-Property Group. Stay with us for more here on the Property Hubs, Realty Talk.

Successful property investment is a game of finance. Do you have the right team and the right game plan? Realty Talk is brought to you by KnowHow Property. More than mortgage brokers, Bushy Martin and his team of investment architects set you up with a sustainable strategy structured to lower your costs tax risk and stress while increasing your capacity for growth know how has helped over 1900 homeowners and investors secure more than 800 million dollars in property wealth so get set to live more work less and live

your legacy. Want to know how to invest in your freedom? Visit knowhowproperty.com.au. Hi and welcome. Now, given that Australia is just coming out of the second biggest property boom in the history of the nation, where property values in many areas are now likely to actually soften and plateau for an extended period of time, how can you continue to grow value in flat conditions? Well, to open your eyes to low cost yet high results options that give you the best bang for your bucks, we're joined by Joe Tucker, the founder of Property Principles Buyers Agency, as well as the co-founder of the rapidly growing Oz Property Investors Facebook community that now boasts over 28,000 plus members. So welcome back to the show,

Joe. Thanks for having me, Bushy. Great to be back. Yeah, love it, mate. You've always got some great insights to share. So diving into this subject, what mistakes do investors make when it comes to increasing property value, as you say it? Well, I mean, the typical way to go about increasing property values is through renovation. That is typically speaking, the easiest and most affordable way to go about. So that's the way I like to go about increasing the value. There's also subdivisions and developments,

but that takes a lot of time, skill and effort. And not a lot of the people have a lot of those resources. So cosmetic renovation is the way to go. But some of the mistakes people make is pretty isn't profit. Just because it's the most beautiful end product, that's what people see and that's what they want. So they buy based on the beautiful styling and the amazing tapware and all of that thing. So people, one, buy that bad product because the value has already been created.

What you want to do is buy what we call an ugly duckling. And that's something where it's got good bones, it's solid, it's fundamentally an amazing property. It just needs a little bit of work. It's a little bit ugly. And you're able to buy that property at a premium price because it is a little bit ugly. but when you increase we call it equity harvest right you can harvest the equity in there by spending a little bit of money but really it doesn't actually take too much work if you have a good team behind you we do cosmetic renovations all the time for clients they haven't even been

to the property haven't even been to the state you don't need to go there you can have a good property manager that will be able to help you through getting the the painting done the floor polishing we can cover off a little bit more in detail of that but those are some of the mistakes people just getting the prettiest thing possible and not looking at not seeing the potential of the ugly duckling yeah okay well you've touched on your thoughts on what is the lowest cost biggest impact way to force this value and equity harvest as as you say in flat market conditions but when you say a cosmetic reno let's break that down a little bit because that sounds like sounds like putting lipstick on a pig to some degree. Joe, for those that are listening in, what does a

cosmetic reno actually mean and what sort of things can you do to the property? We'll perhaps get to some examples in a minute, but let's break that down to start with. Yeah, I mean, one of the best ways to add value to a property, and this could be one of those beautiful properties, right? If you don't have any renovation skills or expertise, you know, don't do it. But how are you're going to add value. One of the best ways to do that is to change the profile of the property. And what I mean by that is turning a two-bedroom home into a three-bedroom home or a three-bedroom home into a four-bedroom home. By adding just a wall and a door, you can all of a sudden take your property from the price of a three-bedroom to the price of a four-bedroom. So those are some

of the things that you can kind of look out for to add value to a property. Another one is adding an extra bathroom. If you can go from three bed, one bath to four bed, two bath, just have a look on realestate.com at the different prices between those two assets. Spruce up the property a little bit with some paint as well. If you want to go a little bit extra, but don't do that even. Just do an extra wall and convert that from a three bed to a four bed and you'll make a big big difference to the property yeah i think you've uncovered a good one there because you're essentially changing the the profile of the property and we know that bank valuers and others are looking at well is it a three bed one bath or was it a four bed two bath if you're got the opportunity to create

and change that profile you're suddenly putting in a different price bracket that's a really good way to harvest that equity that you spoke about. So I guess the real art with this though is being able to actually see ahead of time how you can create those opportunities. What's the best way for investors to be able to do that as you say? Well, the easiest way to do it really for anybody

is to go onto domain.com, go to suburb profiles. And in that, it tells you what is the median, what the average price the price of a two-bedroom generally speaking or the price for a three-bedroom i believe they use median but we we don't have to go down what the the negative size of what median price is um but you can just see a two-bedroom goes for this a three-bedroom goes for this whatever a three-bedroom should i be looking at a three-bedroom to a four-bedroom so this there's markets where i look that it's got a twenty thousand dollar difference between a two-bed and a three-bed i'm not gonna make money there so i'm not gonna go there there are other suburbs

where there's 120, $150,000 by doing that. And when you, it really depends on your outcome for your property. If you are looking to get your deposit back, right? You put a deposit into this house. I want that money back in the form of equity. So what I'm going to do is renovate it, add a wall and then get my deposit out

so I can then go again onto my next property. So you want to look for those fat, chunky markets where a three bed and a four bed are in different places. and look for extra living rooms and extra laundries because that all of a sudden turns into that extra bedroom and turns into that extra bathroom. Those are some of the things that you can actually go out there and do,

but it takes time and energy and effort, right? You do have to go out there and do the research and make sure that you can actually get these things done, but it is possible. So jump on, that's my top tip. Go to domain, suburb profiles, look at the difference in prices and then look on the actual buy side of things

and can I afford this type of property? is this going to work looks like it is let's go for it take some action and make it happen yeah i love that mate but good news now with with you know apps like domain and realestate.com most of them actually have the floor plans of the properties on the listings and it's pretty easy once you start looking at floor plans to be able to identify well this living room is big enough for me to carve off a bedroom and put an extra wall and a door in uh it's you know you can do a lot of that desktop even these days before you even jump in the car and go and check the property out and what I also love about what you're suggesting is you know one of the major trends

that we're seeing as a result of the post-pandemic activity is that people are now we've actually seen a reversal of house sizes shrinking to people looking for bigger houses with the exodus lifestyle and the need for remote working in offices in a location so if you can pick up some of those older properties that have a big footprint but you can actually create those spaces then that's an awesome way in a flat market to actually manufacturing i love your term harvest the equity mate so look thanks for opening our eyes to these high impact value creation opportunities joan and thanks again for your time on the show today thank you very much bushy have a great one thanks mate well as you can see there's always low cost opportunities to force and manufacture value

on property, regardless of the prevailing conditions. And if you want to rub shoulders with other like-minded investors where you get exposure to the full spectrum of all investment options in a very safe and friendly environment, make sure you join Joe's Oz Property Investors Facebook community. And if you want to hear more from Joe, have a listen to the deep dive conversation that we enjoyed on the Property Hubs Get Invested episode, or you can reach out to him direct at propertyprinciples.com.au. Stay with us for more here on your Trusted Voice in Property Realty Talk. Now, before I leave you, here's a final thought from me. Given what has just been introduced in Queensland and is likely to roll out across the country in relation to periodic

tenancies, if you're an investor landlord, don't fall into the trap of allowing them and make sure you've got a really good property manager who's up to speed and on top of all of the ongoing tenancy legislation changes and their impacts, because if you don't, it could be very expensive and extremely restrictive. That's more food for thought. And that's another wrap for this week's show. Another big thanks to our guests, Kent Lardner, Jamie Lee Bilwell, and Joe Tucker. And to make sure you don't miss another episode of your trusted voice for all things property, subscribe to our property hub on your favorite podcast player now where you'll also enjoy the Get Invested podcast delivered to you each and every week. And make sure you sign up on the

realty.com.au homepage to get a free copy of my award-winning book, Get Invested. And while you're there, make sure that you check out one of Australia's most extensive range of properties for sale from over 7,000 agents nationally where you'll even find properties that just aren't listed anywhere else. Thanks again to realty.com.au, BMT Tax Depreciation, Appiro Marketing and DM Media for their ongoing support. I'm Bushy Martin from Know How Property Finance. Remember to always get invested in your knowledge before you get invested in your property and I look forward to seeing you again next week. Miss something in this week's show or want to catch up on past shows? Do it anytime at

realty.com.au where we connect buyers, sellers and agents differently.