Property Hub - Investment Insights & Inspiration - Realty Talk: It’s a war out there + Property disruptor

Starting point is 00:00:00 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, your trusted voice for all things property. I'm Bushy Martin from Know How Property Finance and host of the Get Invested podcast. Now, property investing continues to be one of the most successful long-term wealth creation strategies in Australia. But with so many approaches to property investing, it's no

Starting point is 00:00:39 wonder that many struggle to understand the fundamentals that drive success in property. So to assist you choose the right strategy, Buyers Agent Lachlan Bidler from Atlas Property Group joins us to discuss his new book, A Military Guide to Property Investing. now property has always been a game of finance and with property around the country enjoying the fastest rate of growth in over 17 years marcus roberts from brighter finance joins us to reveal the current mortgage trends that are driving property markets big data and machine learning technologies are providing new approaches to how property is developed priced sold and bought so to discuss the latest innovations we're joined by jordan

Starting point is 00:01:22 de Jong, a data scientist and data analyst and the founder of Game Plans. And to finish off the show, my bush pipe this week discusses why interest-only loans should be your only interest as an investor. We've got a lot of great insights to share, so let's get on with the show. Welcome back to the show. Now, property investing remains one of the most successful long-term wealth creation strategies in the country. But with so many different approaches to property investing out there, it's no wonder that many struggle to understand the true success drivers. So to assist investors choose the right strategy to suit you, two former military professionals

Starting point is 00:02:09 are publishing a new book, which is called A Military Guide to Property Investing. And we're joined by one of the co-authors today, Lachlan Biddle, who's director at the atlas property group buyers agency so welcome back to the show thanks for having me mate uh what military approaches uh that you've learned in the navy have helped with your property investment for me i think there's probably three really big things that i take into my own investing journey and that i also bring into clients journeys the first one would be strategy and i think that's so important without a great strategy you're not going to know where you're going you're not going to know any of the path the points along that

Starting point is 00:02:53 pathway so strategy is so important and the military they play such a huge emphasis on working out your military strategy before you do anything i'd say the next one is discipline and i think that ties into the strategy where if you don't have the discipline to uphold the strategy you're not going to be able to achieve anything right so you've got to make sure you stay disciplined in your approach and you stick to your strategy because otherwise you won't really be able to go anywhere and I think the third thing which a lot of people I hope will think is kind of obvious but is equally as important that's execution you've got to execute what you've what you've planned out and you've had the discipline to be trying to do if you can't execute it then you're

Starting point is 00:03:31 never going to have any hope and I think that the common thing that I see with execution is analysis paralysis where people they know what they want to do they've saved they're ready to go but they just can't execute it that final step and that's what holds them back from possibly a whole lifetime of success yeah very good points there mate and some really good parallels there between the disciplines that you pick up in the navy and what's appropriate to be successful in property tell me what property portfolio results have you personally achieved from adopting that approach well i mean my partner and i uh we've invested together and and for us it's all about growing together and i and i mean i'll be the first to admit it's a lot easier to

Starting point is 00:04:13 go down the portfolio pathway when you can build with somebody else it's you know two incomes two ways of thinking everything is that much easier but for us we've been able to build out our own portfolio where we've got properties in multiple states multiple regions and by that i mean you know we've got some in the cities and we've got some out in that you know those really really big regional cities and for us it's been great because it means no matter what sort of uh property life cycle stage we're in in australia and right now we're obviously in quite a big boom time but regardless of that something is always going up in our portfolio and we're always able to move forward and and we've also started doing a little bit on the development side as well which sort of

Starting point is 00:04:49 is that really next sort of advanced step for people and for us we were ready to take that leap and it's paying big dividends for us yeah terrific well look yeah i'd love for you to share with us a quick overview of the 10-step military method that you detail in your new book, if you can. Yeah, absolutely. So like you said, our new book that's coming out, A Military Guide to Property Investing, it's all about taking that military approach to be able to conquer those property investing goals. So the way that we lay it out, exactly like you said, is 10 steps. Now, I won't go through all the steps, but every single one of those steps, it basically takes on a characteristic or an attribute or a value that is so important in the military. So for me, some of

Starting point is 00:05:31 the really big ones that I like is teamwork. I think it's so important. It's so important in the military and it's so important in your property journey. You've got to be surrounded by a great team. Excellence. You've got to understand the strategies and the factors that go in to have that personal excellence and that educational excellence to be able to know what's going on in the property world and what you need to do to be able to start achieving what you want. And I think the next one that's really big for me is courage and then loyalty. You've got to have the courage to keep going through in your journey you're going to have roadblocks you're going to have things going on things will get hard but if you have that courage to keep

Starting point is 00:06:06 going you'll you know you'll do fantastically and then finally loyalty it's loyalty to yourself it's loyalty to your team members it's loyalty to your family whether that's current or future but if you have that loyalty to yourself you are going to go far and you're going to achieve success in property yeah very well said and some some really good fundamentals and foundational approaches there. So we really appreciate you coming on and sharing that with us today, Lachlan. Thanks for having me, Bushy. So the message is very clear. If you want to be successful in property, adopt the military approach that's driven by strategy, discipline, and execution. And of

Starting point is 00:06:47 course, if you're serious about doing it properly, grab yourself a copy of Lachlan's new book, A Military Guide to Property Investing, which you can grab at majorstreet.com.au. That's M-A-J-O-R-S-T.com.au. Stay with us because you're watching Realty Talk. Property deductions can save you thousands of dollars each year. To make sure you maximise deductions, you need to work with the most experienced quantity surveyor in the country.

Starting point is 00:07:17 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. Welcome. Now, if you've been listening to Realty Talk for a while, you'll know that we're big believers that property is a game of finance.

Starting point is 00:07:48 Finance is a fuel that enables buyers to secure property and has a massive influence on housing demand. The more money that's flushing around and the cheaper and easy money is to borrow, the higher the demand and the higher the price rises, which is exactly what's happening with property around the country right now, with the fastest rate of property growth in over 17 years. So to dive into current and future mortgage trends and their impact on property, I'm joined by Marcus Roberts from Brighter Finance.

Starting point is 00:08:15 Welcome to the show, Marcus. Thanks so much for having me. Really appreciate the time you're spending with us and looking forward to speaking. Yeah, likewise, mate. you've done some great research on market trends that are affecting property generally at the moment. So just to kick straight off, what are the key mortgage trends that you have identified that you believe is going to impact property over the next six months or so? Yeah, so one of the big ones that I see more and more in my day-to-day work, and certainly one I

Starting point is 00:08:43 see in conversations with other brokers, is just the bank of mum and dad being more and more part of first home buyers and first property purchases, for that matter, live. So a few years ago, we were looking at the Bank of Mum and Dad being sort of 10th to 15th in the national rankings of size of finance. And they're now all the way up to number five. So they're just under the big four. What we're seeing is we're seeing a lot more gifts being provided by Mum and Dad.

Starting point is 00:09:14 We're seeing a lot more family pledges in the case where you've got guarantors, mum and dad providing an unencumbered property or maybe an investment property towards the kids' first purchase. And we're really seeing, yeah, the proportion I'm seeing has grown from what I would have said act early was about 10% up to about 50, 55% for that first home buyer, first property purchase market. I think at the same time, we're seeing banks really going after the good borrowers out there and the good borrowers being classified as those that have got significant amount of savings. So what we're seeing a lot of at the moment is huge retention strategies, as well as aggressive marketing campaigns aimed at your borrowers who have maybe 30%, 40%, 50% equity in their own home, that they're either looking at refinancing or if they're looking at purchasing, they have significant savings. Really some strong pricing that's coming out of the big and the small banks in that regard. one of the other things that i truly am seeing more and more of especially this last couple of months two to three months is is a more i guess a strengthened impact and emphasis on digitalization of mortgages and paperwork so in the past when you know for listeners out there

Starting point is 00:10:39 that have done mortgage applications before you see 300 000 pieces of paper and that goes from all the way from the start of application process all the way to the loan documents themselves all the way through to settlement we're seeing more lenders jump into that digital verification space even to the point of some lenders doing online mortgages and docusign type mortgages so you can do almost seamless without printing and wet signing any type of mortgage application or document outside of that one of the the more lifestyle pieces that we're seeing is we're seeing a lot of young families trading up and buying that next home looking at moving into some larger states so I think COVID has probably assisted in I guess the the quickening of that so you know what we're

Starting point is 00:11:31 finding is people have been maybe stuck inside or people have been living in doors for the last 12 to 18 months. And in that time, they realize, well, we need more space. We need a lot more space. We need a backyard. Where do we move? Can we move further out from the inner ring of each capital city? So moving further into suburbs, perhaps, or moving up in property values to that next run on the ladder. Yeah, awesome. Well, there's some interesting moves that are impacting there tell us how do you see these trends impacting on potential buyers in the short to medium term so i think uh if we look at the the aggressive marketing approach that lenders are looking at for those good borrowers of those that have significant amount of savings what i do think

Starting point is 00:12:19 you will find is that if you're one of those borrowers if you're one of those applicants you really will have a pick of the letter in terms of you know the lender choice that you have available to you you're going to have potentially incentives you're going to have low interest rates thrown at you because they're really cognizant that they want to get that type of applicant onto their books at the same time with the bank of mum and dad and the rising property markets that we're seeing across the country in various capital cities and elsewhere you're seeing a strong demand you're seeing you know double digit growth over the last six months to 12 months across capital cities and for those borrowers that are applicants they're buying their

Starting point is 00:13:01 first property buying their first home with the assistance of mum and dad with the assistance of either family pledge or gifts you I do think you're going to continue to see some of those very specific price points at say that 650 maybe that 850 and 1.1 million dollar mark in Sydney's market, really continue to have strong demand after it because there's a lot of people going for very specific price points, either for government incentives or because they've saved some money, mum and dad have thrown in some money and that's given them the flexibility to go to a certain price point. Yeah, that's very good points there. Direct flow on then, you sort of covered this a little bit, but how are you seeing these trends continuing to impact on property values

Starting point is 00:13:51 moving forward yeah we're still seeing auction clearance rates in in you know in very high waters in the 80 percent marks um certainly in the sydney market and even with lockdowns the way that it is we're now into too many weeks of lockdown here in sydney um what i do expect that we'll see is we're going to continue to see those prices creep up and up because you've also got the investor market but looks at the property market and says well instead of getting one percent of our savings if we buy a property with that superannuation money or with those savings that we've accumulated over the years we really have a chance to build a passive income stream through rental property or similar and it's going to give us more capital gains in the long term

Starting point is 00:14:41 than potentially the one percent we're getting on a term deposit to have a local back branch yeah and very well said well uh some some very uh sobering thoughts there uh marcus i really appreciate you opening our eyes to the trends that we're currently experiencing and and thanks for your time on the show today absolutely thanks so much for having me well there you have it uh some more compelling evidence that property is definitely a game of finance with uh some houses thrown in the middle for good measure you're watching realty talk your trusted place for all things property property depreciation is the natural wear and tear of a building and its assets property investors can claim depreciation as a tax deduction each financial year depreciation

Starting point is 00:15:24 is a non-cash deduction this means you don't need to spend any money in order to claim it on average bmt tax depreciation find residential investors almost nine thousand dollars in first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. Welcome. Now, real estate has long been known for its reliance on tradition and intuition, but emerging big data fuel technologies can provide new insights and approaches to how properties develop, price, sold and bought, and has the potential to upend and totally disrupt current industry business models. So to discuss this potential, we're joined by one of the industry's rising stars, Jordan DeYoung, a data scientist and data analyst and the founder of

Starting point is 00:16:13 gameplans.com.au. Welcome to Really Talk, Jordan. Mate, thanks for having me. I'm really excited to be here. Likewise, mate, Dan, a great subject to be jumping into given its potential to really disrupt the industry in the future. Mate, can we kick off by getting you to give us a rundown on what big data machine learning and prop tech innovations disruptions and trends that you're seeing emerge in property at the moment yeah no definitely it's a good one and you know it's a hot topic a little while ago uh it still is a hot topic every now and then but i think one of my biggest gripes with you know the the australian market is that america always leads the way in in the in the data game um they're always ahead of us and so i tend to always kind of look over

Starting point is 00:16:52 to them to see what they're up to um zillow which is kind of like an rea or a domain equivalent over here are always sort of up to something new. And in fact, I actually entered into a machine learning competition with them two or three years ago when they were doing some predictive modeling on pricing, which is always tough, right? Like if you take a typical ABM or automated value valuation model, everyone sees those sort of crazy 100K ranges on a 500K property. And it's for a reason. There's so many factors that go into every purchase. There's human emotion, personal circumstances, the economy, government policy. And unfortunately, our data here in Australia is either number one horrific or two it sort of lags two or three months behind and so

Starting point is 00:17:31 you know we're in markets like we are today there's data that's sort of two or three months old is almost irrelevant once we look at it so prices have changed so much in that time that it just becomes unrealistic and so I think you know in terms of the the big data sort of stuff that there's plenty that's coming through but what one of my biggest focus in and what I'm kind of really excited about is what we're able to do in terms of machine learning on images of properties. Yeah, that's really exciting, mate. So let's dive in there. How's this likely to impact on property in the future as you see it? Yeah, I think our images are going to allow us to do quite a few things. So firstly, you know, being able to sort of rate the quality of a

Starting point is 00:18:12 dwelling from those sort of unedited realistic images, not the ones that we sort of see that are handpicked on some of those main sites. But you know, how many times have we gone to an open home and then been really disappointed with the current state of the dwelling? It's nothing like the images that were shown online and it's all just become a waste of time so sort of being able to do do a quality there the second thing that I can see is you know maybe having some ornate automated defect reports being run so if you can imagine just getting like a typical building and pest inspection done based on those same sort of raw images and some machine learning behind the scenes again that's going to cut out some of that time wasting with having to get someone to go out

Starting point is 00:18:49 every time maybe you can identify some of those major issues up front without having to get someone to go out rather than sending them in and then thirdly i think you know putting this all together with sort of all that augmented reality i mean um the gaming world has just gone ballistic over the last sort of decade and um games are almost as realistic as a fully polished movie these days and so you know you can combine all these things together and create this space where people could start to do things like decorate their homes select their paint colors place where their kids bedrooms might be whatever it might be um you know you can pretty much do these inspections without really even attending the open home.

Starting point is 00:19:25 And although that's definitely something I wouldn't recommend doing right now, you know, there may be a time where this is achievable. And, you know, I think this is all getting enhanced right now because we're in lockdown and we can't even physically go inspect properties, especially in different states, sometimes not even six kilometres away,

Starting point is 00:19:42 sometimes not even altogether. So, you know, it's hard to do these things just on a video recording. And yes, we're in certain circumstances now, but I think these frustrations obviously lead to innovation. and I can just imagine there'll be people working on the vaccine at the moment and there's always someone working on a solution. Yeah, no doubt about that, mate. That's one thing that's constant. It's rapid change. So how can property investors take advantage of big data and machine

Starting point is 00:20:06 learning to optimize their results in the current scheme of things? Yeah, I think right now it's just getting a better grasp of trends. You know, property markets aren't like shares. We don't review our property prices every single day. They're generally a little bit more steady in terms of volatility. And what that allows us to do is sort of pick up some early trends as they start to happen. We can sort of follow those waves of the trends and then take note when things do change and sort of reassess, okay, well, what is the change of that data? Why are things moving down? And have just a more realistic overview of the whole market. Although I'm not a huge fan of like timing the market or anything like that as you know we kind of project out things over a 30

Starting point is 00:20:48 year period of what i'm doing um you know it does give us a little bit more clear of a picture of where things may move into the future uh especially into the short term and how we can potentially take advantage of those things um the second thing would be sort of clustering suburbs together i know there's a lot of talk in the industry at the moment about you know sa3 regions and not going down to the suburb region and sort of looking at um sa3 regions which is like a government um or census data region um and that's going to allow us to sort of pick up on things like gentrification a little earlier than we would you know things that could only have been done on the ground previously gone and saw new cafes or cycling tracks or whatever it might be in terms of

Starting point is 00:21:27 gentrification you know we might be able to start to pick up some of those things uh just based on big data and clustering some of those suburbs or sa3 regions together yeah exciting times mate uh and some very enlightening and exciting insights there in where it's heading so i really appreciate you coming on the show to share that with us today mate thanks bushman it's always a pleasure always now word if you're looking for an edge in what is really happening with property and how to predict trends and their impact big data machine learning companies like game plans can assist you to make much better and fully informed decisions and we appreciate your decision to keep watching Realty Talk. Welcome. Now, if you're an existing or a potential property investor,

Starting point is 00:22:18 are your investment property loans interest only? Why do I ask? Well, in recent times, I've been quite disappointed to hear that in our know-how finance-breaking business, many investors have gone rate-chasing to get the lowest rate on their investment property loans and have switched from interest-only to principal and interest without considering the much bigger consequences. What do I mean by this? Well, in the run-up to the Royal Commission on Banking a couple of years ago, interest-only loans copped a lot of bad press

Starting point is 00:22:50 as an irresponsible option to meet borrowers' needs. But like anything, interest-only does have its place and it creates some great benefits for investors. As a result, interest-only loans are now much harder to get and come at a higher rate premium than principal and interest loans. Interest-only investment loans are currently approximately 0.25% higher than principal and interest investment loans, especially with the big four banks,

Starting point is 00:23:17 with an even bigger differential with some of the second-tier lenders. But by switching to a lower principal and interest rate, your actual repayments go up. And to illustrate this as a broad rule of thumb, converting your loans from interest-only to principal and interest at the same rate increases your repayments by somewhere between 35% to 55%, depending on the loan size and the lender. So $1,000 a month repayments on an interest-only loan can increase to about $1,500 a month on a principal and interest loan. Now, even if the principal interest rate is

Starting point is 00:23:57 a quarter of a percent cheaper than the interest-only rate, your monthly repayments are still increased. So why is this a problem for investors? Well, property investors who still have a home loan and have gone rate chasing to get the lowest rate on their investment loans by going principal interest are actually missing the point. They're also missing the significant benefits they give up by chasing low rate instead of lowest cost. In a nutshell, going principal interest on your investment loans when you still have a home loan means that you reduce your cash flow affordability, you reduce the pay down of your home loan, and you reduce the tax deductibility of your investment property. By going principal interest on all of your loans, you end up paying

Starting point is 00:24:42 a little bit off all of your properties, but take a lot longer, like years longer to own any of your properties freehold. So why am I suggesting you go interest only on your investment property loans with an offset account while remaining principal interest on your home loan? Well, if you have a non-tax-deductible home loan, one of the little-known benefits of investing is to use the investment property to help pay off your non-deductible home loan years earlier, as well as save yourself tens of thousands of dollars or more in interest. By keeping your investment loans interest-only instead of principal interest, the surplus monies can be channeled into your home loan offset account to help you pay it off and get freehold ownership of your home a lot

Starting point is 00:25:28 quicker. In addition, by keeping your investment loans interest only, the reduced repayments improve the cash flow affordability of the property and the resulting cash flow surpluses can also boost your buying capacity as well as the savings for your next property. And the other important consideration is that if you convert your investment loans to principal interest, then you're effectively paying the loan down and in so doing, reduce the tax deductibility of the diminishing interest on the loan. Conversely, by keeping your investment loans interest only with an offset account, your investment loan remains fully drawn and you maintain maximum tax deductibility on the loan interest. So to see what loan structure is

Starting point is 00:26:15 best for you and your specific situation when everything's considered, reach out to a savvy mortgage broker and your accountant. The take-home message, if you're a property investor with a home loan don't just focus on low rate loan chasing but consider your overall cost position and as an investor in the accumulation stage of your property journey interest only is your only interest on your investment property loans that's more food for thought i'm bushy martin from know how property finance and the host of the get invested podcast have a great week and stay tuned for more well that brings us to the end of another week a special thanks to our guests Lachlan Biddler, Marcus Roberts and Jordan Dijon. And a reminder that you can see all of our shows

Starting point is 00:27:02 at realty.com.au along with one of Australia's most extensive range of properties for sale from over 7,000 agencies nationally. Thanks to realty.com.au and BMT Tax Depreciation for their ongoing support. I'm Bushy Martin, host of the Get Invested podcast and I look forward to seeing you next time. 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.

Property Hub - Investment Insights & Inspiration - Realty Talk: It’s a war out there + Property disruptor

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