Property Hub - Investment Insights & Inspiration - Realty Talk - Luck and success don't work together

Episode Date: August 15, 2024

Successful people make success look easy.  How many times have you heard - or in fact said yourself of a successful person - he or she is lucky.  Luck has little, if anything, to do with success.  Azeem Rahman is an experienced self made investor who has amassed a $3M property portfolio over the last 8 years on the strength of his own determination, grit and perseverance.  Hear Azeem tell Bushy about his journey, the challenges he faced and the decisions he has had to make along the way.  Also today Jo-Anne Oliveri delivers a sobering message for investors who could be cutting off their nose to spite their fate. Subscribe for free to Realty Talk on the Property Hub channel, join our community and get more insights here: https://linktr.ee/propertyhubau 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.See omnystudio.com/listener for privacy information.

Hello once again and welcome to the show. Successful people make success look easy don't they? How many times have you heard or in fact how many times have you said of a successful person he or she is lucky? Luck has little if anything to do with success. As an investor you will struggle to purchase a property it's potentially through those properties that you're missing out on that will then drive fear, frustration and disappointment and all the range of emotions that you know you're missing out on all these great opportunities. That's experienced self-made investor Azeem Rahman who's amassed a three million dollar property portfolio over the last eight years

on the strength of his own determination, his grit and perseverance. Today you'll hear Azeem tell Bushy about his journey, about the challenges he faced and the decisions he had to make along the way. Also today, Joanne Oliveri delivers a sobering message for investors who could in fact be cutting off their nose to spite their fate. That's coming up later in the show. Before we start, I want to thank our supporters and content partners, realty.com.au, BMT Tax Depreciation Know How Property Finance Get Rare Property

and Apiro Marketing and you'll find us on all podcast players as The Property Hub also on the Southern Crosshouse Radio Network, Hot Copper and all social media platforms 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 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.

Realty Talk and your host, Bushy Martin. now it's fair to say that most of us have been surprised by the very high competitiveness of property conditions around the country since the beginning of the year with many markets running hot and unsuspecting investors finding it increasingly difficult to find and then secure good properties in growth areas so how can you better overcome this well to shed some much light on this quite timely topic experienced self-made investor azim rahman who's amassed a $3 million property portfolio purely on the strength of his own determination, grit and perseverance over the last eight years, joins us now to share his winning tips for buying

property in hot markets. So welcome to Realty Talkers, eh? Thank you, Raj. It's a pleasure to be on. Looking forward to having a chat and it's great to talk to someone who's rolled up the sleeves and got their hands dirty with it. But I guess just to sort of set the tone for the subject, what do you define as a hot seller's market? Yeah, it's a good question. So I think, Bushy, for me, a hot sellers market is one where there is essentially a tremendous amount of attention being channeled through into one specific suburb or region. And it's that attention that actually drives the value of the properties in the short term, and potentially at times, you know, driving overvalued property prices as well too. So that's what I refer to as a seller's market. And in addition to the short-term capital gains that the owners are going to reap who are selling at the time, existing property owners within that suburb as well, too, are not selling.

They also are going to be enjoying and reaping additional capital growth that's happening at that time as well. From my experience, there's three key things that really drive so much attention into a particular area or a particular suburb. It's definitely, one, investors who are following the data. that high volume of buyers agents who have strong relationships with sales agents within the local area uh and definitely media as well too you know particularly when they're not painting a doom and gloom picture about the about the property market oh yeah you make a very good point and i think we've gone from sort of no information 20 years to go to way too much information now and in the ai age where people have got instant access to a lot of data uh i'm certainly seeing

a lot of buyers agents become market makers very much like the stock market where they're all coming to the same conclusion so they're all filing into that location and by virtue of that driving up the values because they're all competing with each other for the limited properties that are on the go so it's a it's an interesting exercise and a bit of a change in the way the market's actually working from that perspective but that of course creates some challenges so I'd love for you to sort of unpack what are the challenges of trying to buy properties in high competitive hot markets and what are you seeing and experiencing in this regard i think uh there's two key challenges the first challenge is that you will as an investor you will struggle to

purchase a property um for the price range that you have in your mind in a hot market uh and it just creates a domino effect right so i think a hot market leads to more competition and more competition then leads to potentially more properties being missed out by you and then it's potentially through those properties that you're missing out on that will then drive fear frustration and disappointment and all the range of emotions that you know you're missing out on all these great opportunities which could then in turn drive you not carrying out your due diligence properly and cutting corners um or offering above and beyond what the actual genuine value is of the property so i see it actually plays out in quite a domino effect in that place

So I think that's the first challenge is not to get yourself in that position because it can be very risky and dangerous, particularly from a bank valuation perspective, because you can still get it wrong, even in a hot market from that perspective. So I think that's the first challenge. And the second challenge is that a hot market can't actually sustain that price growth for the long term. And I think that's something that a lot of investors, particularly who don't have a large portfolio and don't have a lot of experiences doing themselves or getting the assistance

don't actually appreciate this concept that the challenge is that if you already are looking to purchase you're not actually going to be getting a much longer period of short-term capital growth that you think you'll be getting and a lot of this is actually being artificially driven by buyer's agent as well to continuously trying to drive the short-term growth in a particular market which is fine for that point in time but the pinch is felt by the investors when the market goes through a bit of a natural correction yeah very good point because we all know that locations go through the ols curve of growth over a sort of average 15 year period you don't want to be buying a property and jumping for joy for the first year and then saying that they you flatline for the

next five to eight years and not see any growth so uh so some lessons there uh now you've written a really good linkedin blog uh that gives your suggestions on some winning tips for secure properties and hot markets i'd love for you to give us a bit of a quick dot point summary of of those and then i'll break break down some of the key ones yeah absolutely sure so i think uh the the tips that i've shared in my in my article is number one you need to be patient and persistent you know even in the best circumstances uh you will not be able to purchase a property overnight so you know give yourself the time that you need to do it well uh to have your finance pre-approval ready to go. It sounds very logical, but many investors still don't do this. Number three is

to set your alerts so that you're very clear on the type of property and the price range that you're looking at so that when something does hit the market, you're ready to pounce on it. Another tip is to have your team ready to go. So when I say team, I'm specifically referring to all the people that need to be involved and play a crucial role in the purchase of the property. So your mortgage broker your property manager conveyance building and pest and potentially a buyer's agent as well factoring indexing during valuation i think is very important to do specifically in a hot market don't compromise on due diligence which we kind of spoke about a little bit earlier to get a gauge from the selling agent by asking some good quality questions

negotiate terms which i think is important to do at the contract stage and lastly look for cooler markets try to go against the tide and look for areas that aren't hot but eventually will be down the track some absolute gold on those tips and i'm going to suggest that everyone jumps on your linkedin page and has a has a read of that blog because there's the some really discussed good discussion on but let's break into a couple of the key ones there and first of all i'd like for you to expand a bit more on what you call factoring in indexing during the valuation can you sort of break that down for us yeah sure so indexing uh in simple terms is where you adjust the the recent market comparables um typically from the last three months or so um for any price

increases that are occurring within the suburb which won't actually be reflected in the data so what i mean for that so so just to keep it simple for instance you might be looking at recently sold properties for say for for a particular configuration which is showing that for the last three to six months it's been average selling price is about five hundred thousand dollars however if we come to the current period you may have seen five to six properties sold just last week for five hundred and twenty five thousand dollars right so those properties that have just sold within the last week they won't majority of the time actually be reflected in the data so each property that is being sold is a data in itself and that actually won't be

um reflected immediately that typically takes anywhere from one to two months which is when the property is actually settled so if you are not factoring that in and you're just looking purely based on the fact black and white and saying okay the last three to six months has been um selling prices about 500 and you go with that mindset in mind when you put in an offer for a property chances are you'll continue to miss out um which kind of talks to what i was saying earlier is where that frustration will come into play and the disappointment and the fear of missing out, where in actual fact, if you just apply a little bit of indexing

and actually factor in that, it's actually going a little bit above, which is $25,000 in this example, then you're actually in a better position to not only put a good offer in place, but increase your chances of actually securing that property. Very good advice. It's the old story of continue to look through the windscreen, not through the rear vision mirror,

because I know really good quality data sources like CoreLogic, they will give you instant valuations on what they think the property is, but it's on the previous historic sales data, which is often out of date. So an easy trap there and very good advice on that. I'd love also to get your thoughts on how buyers can ensure that they don't compromise on due diligence in hot markets,

given the speed that things often have to happen or the pressure that's applied to them by selling agents and others. Yeah, so I think from my perspective, you should never compromise on due diligence, period. So it is never worth cutting corners in that regard at all. I would never do that at all. But what you can do is sort of be a bit more efficient with your time and have, like I was saying earlier, have your team ready to go

so that when you need to pounce on the opportunity, everyone can fire at the time that you need them to do. um so when i talk about due diligence i'm specifically referring to your building and pest inspections your finance and your contract reviews um and i the suggestions i have is number one as i said spend the time and speak to all the people um that you need to to get them ready so they know that you will be getting in touch with them in another couple of weeks time or within a month's time so they're ready to for your phone call um your building and pest inspection in particular when you do receive that read it and actually try to understand what's in there and

ask the questions there's no such thing as a silly question um your property manager have someone on the ground to actually inspect the property particularly if you're looking interstate and make sure you have all your finances in uh the contract just in case there's something that happens that's unforeseeable and and you decide that this is actually going to be a deterrent for you or restrict you from going ahead you're actually protected by your um your clauses in place great advice and you know sort of reinforcing a couple of the key ones you've made there i think a good conveyance that will actually view the contract on your behalf they read them all the time so as you say if you've got them lined up then get them to go through the contract terms

and break it down into simple english so that you know what you're actually committing yourself to but also the property manager i 100 agree getting a good independent dedicated property manager who's not a part of a sales team who can actually knows the area knows the property knows how it compares to others in the location that intimate local knowledge is worth a lot right up front and early so getting that done before you've even made an offer on the contract is a really key part of it so some great thoughts there lastly I'll just you know because one of the points you made was starting to think about cooler markets so can you share your thoughts on looking at this because i think this is a really key point given the market conditions that we've talked about previously

yes i think this is a tip that i don't see is mentioned enough at least certainly from my perspective which is to look at cooler markets so contrary to popular belief there are data-driven methods to identify and analyze suburbs and regions which will be poised for growth and become what we call as a hot market down the track um but the only way that you can actually do this is as i said by looking at the data so there's a few key things that you need to look at personally i look at days on market i look at the stock on market online search interest ratio and the demand supply ratio but the key thing bushy and for anyone who's listening is it's it's important not to just look at the current static um figure and the metric but it's

the trend that's very important and not only do you look at the trend but it needs to be positive and encouraging if it's not a positive and encouraging trend then i wouldn't be confident to to look at that suburb and say hand on heart okay this is a cooler market that's on the rise um but if it does then it give it would give someone more confidence to be able to say that and myself as well too and in addition to the trend there needs to be some level of price growth occurring as well too so if you have a look at these metrics and it actually makes sense to you yep okay everything is heading in the right direction looks good thumbs up but there's actually stagnant growth or in fact the growth actually is going in the reverse that's also

something that you need to keep an eye for there needs to be some level of price growth occurring as well at the same time um i personally don't think it's it's wise and i haven't done that in my in my uh investing journey up until this day is to purchase where the average median growth is actually um going exceeding um more than 50 percent in the last three years yeah which is why i prefer to go for uh for cooler markets yeah i'm right with you i'm a bit of a contrarian in that context and i'm you know i'm looking with a telescope not what the microscope when it comes to looking at properties and for me yeah the i talk about this all the time but in in looking at cooler markets that have the potential for growth,

we're looking at the key growth drivers that are going to get behind that. And that's new infrastructure, road, rail technology. It's new and diverse industry that's going to bring in jobs which are going to increase the incomes that will support that growth moving forward. So that means looking at state government,

federal government and local council websites to find out what committed infrastructure has been put in place. Look at zoning maps to see where the rezoning is going to occur. That's where the goal comes out. And often, if you're in there early enough before that occurs, you're not fighting off the hordes of others that are caught up in the FOMO trap and then paying more than what they necessarily need to. And I guess the proviso there, of course, is that you're investing long term.

because if you are a contrarian and we know that the average time to go through a full S-curve of growth is about 15 years for most areas across the country, then if you're getting in a little bit early and then riding the wave once the others finally work out what's going on, then you're in a much better position

and you're not having to fight over the hot chips with the seagulls in the meantime with everyone else piling in. So some really good advice there, Az. I really appreciate it And I really want to thank you for taking the time to give you a really quite hands-on investor focus approaches as, and it really reinforces the need to actually work harder and smarter if you're going to succeed in securing great properties, and particularly in competitive conditions, as well as the real need to consider fishing in calmer ponds with growth drivers away from the feeding frenzy.

So thanks for coming on board to share all of this with us on the show today. Appreciate it, Bushy. Thank you very much. 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 know how 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 1,900 homeowners and investors secure more than $800 million 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. This is Realty Talk, powered by realty.com.au. Now, are you one of the many increasingly disgruntled landlord investors that's getting unsettled because your property costs just keep increasing and you're constantly trying to cut back and to cut costs? Well, as you're about to hear, you may be cutting off your nose to spite your face. An author, an award-winning global property management thought leader and founder of Revolution, Joa Liberi, joins us now to unpack her three decades of experience to reveal your potential false economy so welcome to Realty Talk Jo. Hi thank you it's great to be here thanks

for having me. Yes I'm gonna love the topic we're gonna dive into and I guess just to sort of kick things off there why do you think investment landlords have never been so disgruntled? I think what's been happening in the industry is that they have been just wanting to take on business at any cost and that cost is a cost to the rental property owners um so they think they're saving money when in actual fact i believe it's costing them money and i think we need to you know help them to understand it's not about the fees it's about the net result that they earn on their property beautifully said uh i'd love for you to share with an example that really highlights that inappropriate focus that you can joe yeah sure and i'd love to share it because you know

i started in the industry about 30 years ago um and you know back then we were charging eight percent management fees and really proud of it and and i can't think of another industry where their fees have gone backwards um and expectations have you know risen um and so what we're seeing is a lot of uh property management um companies are reducing fees to seven percent six percent five percent and even lower i was with a company today and they were doing it four percent it's like they're not making money on that we're not making money is actually a problem for the rental property owner yeah i can share a couple of examples of where you have that false sense of economy to me it's like when you're flying and i fly a lot i don't fly the economy airlines

because i think it's a false sense of economy yeah by the time i get on and pay for food and luggage and all the inconvenience of potentially cancelled flights i save more by paying for the you know the better fares and the better airline makes perfect sense uh i'd love for you to then sort of highlight the impacts that this low fee sort of race to the bottom is actually having on investor landlords and their property performance too, if you could. Yeah, definitely. You know, if I do an analysis on someone who's getting around $2,000 a month in rent, so that's roughly $500 a week. If they were paying 5%, they would be paying roughly $1,200 a year in management fees, which means that they net about $22,800.

Now, that same rent, if they were paying 8% in management fees, so 3% more, they'd be paying roughly $1,920 a year in management fees, so netting $22,080. So, there's an extra cost of seven hundred and twenty dollars well you know that is significant however let's turn it around and see what happens in the second year so in the second year you're more likely to have rental increases set at market rent by the agent who's charging you eight percent so if we increase the rent just to twenty two hundred dollars a month so that's you know like fifty dollars a week which we're seeing higher rent increases than that. Yep.

At 8%, their management fees increase to $2,112 a year, which means that they are netting $24,288. So remember, at 5%, they were netting $22,800. So now in the second year alone, they're earning an extra $1,490. odd dollars so that's significant and that's the second year then it goes into the third year and the fourth year and the fifth year and you know i i just think it's really wrong that we as an industry have focused the rental property owners um you know kind of like uh focus on on fees rather than the net result and that's where it's really important now there's all sorts of other

things that come along with that in that the asset value of your property is also impacted so you know don't be tricked by low fees it's a well if if the property management office doesn't have appropriate time and resources because of the low fees to process maintenance and and be careful about who they're selecting to do the contracting uh then there's a whole series of other flow-on effects are there any others that you know of that that investors need to be aware of where they are cutting costs and therefore that flow through occurs yeah well most definitely i mean you know one of the biggest things is the tenants are in your and a lot of property managers because they're you know their tenants themselves they don't like sharing the news that your rent

is going up and so what they do is they have the conversations with the owners and i'm an investor myself so you know i hire professional property managers who come to me with these conversations and i say no when they're telling me that i'm better off not increasing the rent and keeping the tenant because they're a good tenant i mean what constitutes a good tenant is it a tenant has to abide by the contract um you know just because the the bank wants to increase mortgage rates they're not going to go to the mortgagee and say you've been really good at paying your you know mortgage every month we're not going to increase your rate so you know we've got to have that same mindset in property management and be prepared to pay for a better agency where there's not pressure

on profit because when there's pressure on profit what they're doing is they're bringing in property managers who are not accountable and so um you know the the leases are periodic now no rental property owner wants a periodic lease no way even if it's short term then get a fixed lease knowing that it's fixed for three or four months because that fits into your timeline because the tenant can up and go at any time and so you know there's pressure on the property owner because that could be at a horrendous time to be you know advertising your property um the other impacts are you know Like I said about the asset value of the property, it's very, very important that the asset value of your property increases because there's no point in having it if it's being run down. And these lower fee agencies, they typically have no accountability on contractors and what's going on because the property managers are just getting things done or not done.

So, you know, it's really important to understand as a rental property owner, know how to hold your property management company accountable, not the person, it's the company, and, you know, embrace the higher fees and look at the higher net returns that you're going to get as a result. I totally agree. And I think the other hidden exercise there where you're fee chasing is that if the office isn't resourced to cover it, then there's going to be no contingency. If your property manager is sick or has to go on holidays and there's no one to cover the base, then there's a potential world of pain that might emerge as a result of that. So, look, I guess to bring this to an obvious conclusion then, Jo, what do investor landlords need to be thinking and doing differently in the context of what we've been discussing? Yeah, well, you know, the first thing I would advise is when they're contacting a potential management company is don't go in about the fees first. Go in and ask about the service and the results that they're achieving for their clients. Are they earning higher than the average market rent in the area? what process do they have when the the property becomes vacant because you know if they're following the process there should be no downtime in between tenants except for the you know the

three days that we allow to you know do a turnover of property yeah um you know what do they do in the event that a property manager is on leave because i see most companies and you know i represent the industry and i'm just being honest here to rental property owners where if a property manager is away the work is not done so you know if the tenant's in arrears or if that property becomes vacant you're waiting for the property manager to come back and if I was the the rental property owner I'd be saying well are you going to refund my fees for that time because no one was managing my property so you know I would love for rental property owners to know how to hold their property management company accountable

and you get the results that they should be getting on their property. Yeah, extremely well said. Well, look, I really want to thank you for making it real for us, Joe, in terms of the negative financial impacts of adopting a sort of a lowest common denominator focus on fees and costs

versus focusing on service value and profitability because as I always say, you always get what you don't pay for. So thanks for sharing this with us and joining us on the Property Hub today, Jay. My pleasure. Thank you. Are you curious about harnessing your super for property investment? Propel your future with the enlightening online seminar,

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