Property Hub - Investment Insights & Inspiration - Realty Talk: No signs of a slowdown + Fragile Melbourne

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. Hello and welcome to the show, which is hosted once again by Bushy Martin from Know How Property Finance. And of course, his very popular podcast, Get Invested. This week, Bushy's guests include Stuart Weems, Eliza Owen and Simon Presley. Bushy's last word, or as he refers to it, his bush bite, we might have to actually change the name. He questions if converting from long term to short term rental investment is such a good idea if it's short sighted.

Starting point is 00:00:53 And we'd love to get your feedback on that as well as anything else in the show. And you can do that in the comments section under today's show. Well, just when you thought the threat of changes to negative gearing were over, done and dusted when Labor lost the last federal election, here it is under pressure again. With 60% of Australia's 2.2 million property investors being negatively geared, I would have thought that the ALP might just have learned a lesson. But that's politics, I guess. More on that later.

Starting point is 00:01:29 Simon Presley makes a return this week, and he brings some of those very enlightening graphics with him. This time, it's to demonstrate that despite growth of 5.5% in property prices in the last three months, Melbourne's fundamentals are still somewhat quite fragile. But first up today, CoreLogic's Eliza Owen tells Bushy that Australia's housing boom is rolling on with national home values lifting another 2.2% in May. The improvement was almost universal, being recorded in 97% of sub-regions across the nation. Eliza will list the reasons driving the continued improvement and its likelihood to continue. Now, I know you're going to want to hear about that and all the other topics that we cover in today's show. So let's get started.

Starting point is 00:02:32 Welcome. Now, housing markets around Australia continue to surge in May with CoreLogic's home value index up another 2.2% over the month, resulting in a 7% rise across the country over the last quarter. And of the 334 regions analysed, 97% have seen value increases over the last quarter, which is really rare. And one of those occasions where we're actually seeing the rising tide raise all ships. So to discuss the details and what's behind this and the continued growth that we're seeing, we're joined by leading property market analyst and the head of research at CoreLogic, Eliza Owen. Welcome back to the show, Eliza.

Starting point is 00:03:15 Thanks for having me. Eliza, why are we seeing such a strong upswing in values across all areas and all property types at the moment, do you think? so i think that there are some really impactful broad factors that have created demand across a wide array of different segments in australian housing and that is largely to do with low interest rates any direction in the movement of interest rates generally has an inverse relationship with property values so with interest rates sitting at record lows mortgage rates coming down to record lows, that's created a swift increase in property prices. But I think more

Starting point is 00:04:03 structurally at the moment as well, we've seen an increase in other types of assets and products and commodity values is a big one. So as well as a housing market upswing, we've got a uplift in production and mining as well. And that's sort of supporting those more resource markets and even manufacturing markets that may have typically performed counter to some of the larger property markets in Sydney and Melbourne in the past as well. So as you mentioned, we saw of the SA3 sub markets that we analyze, 97% have seen an increase in value in the past three months. So that leaves about 11 markets across the entire country that didn't see an increase. And even among those, you know, they tend to be further afield regional markets that

Starting point is 00:05:03 are maybe more associated with gas markets as opposed to iron ore, which is performing more strongly, or they have started to see a monthly increase, but in quarterly terms they're sort of lagging behind the rest of the market. um so i mean within that there are kind of different dynamics and there are areas that are doing better than others but uh it's definitely good for sellers in many parts of the country right now no question so just to sort of dig in a little bit how has value growth varied across locations types and price points as you've seen it well it's been really interesting so if we look at the change in values over the past year say

Starting point is 00:05:46 we could see that regional markets have really outperformed the capital cities so home values across regional Australia were up 15 percent over the year compared to a nine percent increase in the regional markets once we get to the monthly movements though that performance gap has really shrunk with capital cities actually outperforming the regions by you know just 10 basis points not much at all and then across the house and unit market for example that's where we're seeing some other major changes so an uplift of about 13 per house 13 percent in the house segment as opposed to about three percent in the unit segment over the year so both segments still in upswing but houses well outperforming now in terms of what we've seen

Starting point is 00:06:45 in that outperformance among regional Australia detached housing, it comes back largely to the profile of the buyer. If we look at ABS housing finance data, the latest release was April. So that came out last Friday. That showed that the dominant buyer in the market at the moment is still the owner-occupier buyer who's not a first home buyer. So upsizes, downsizes, people who are moving. People who find themselves pretty cashed up because of the increases in property values recently, they can afford to participate. They can afford to get into the detached housing style. And of course, through COVID, we've seen some preferences and trends develop in housing where people want a larger home. They want land associated with it because they have to spend

Starting point is 00:07:37 more time at home. So the only real flip, I guess, that we've started to see now is that owner-occupier first-term buyers have started to come out of the market a little bit. And we're also seeing that affordability constraints and the rise of the investor segment could see a pivot back towards the unit market. And some of those monthly trends are indicating that people are becoming more bullish about capital cities again. Interesting. Okay. So I was going to ask you about investors. you're starting to see an increase in that segment? Yeah. So again, the April finance data from the ABS marked this consecutive month of increase in the value of finance lent for investment property purchases. Investors have been trending higher proportionally in the

Starting point is 00:08:27 market as well. So as of April, they made up about 26% of the value of property that was lent out over the month now that's well down from the decade average which was more like 36 but they've come off recent lows so they're coming back um they they're still not making up as as dominant a part of the market as they have done in previous housing booms and things like that but they are starting to come back um i guess the other thing with the investor segment is we know it's not the first home buyer who's doing the rent vesting strategy that's reflected in the the abs data as well but it could be a buyer who um is buying a holiday home uh it could be a rise in overseas uh investors in australia's property market um or it could be people looking to you

Starting point is 00:09:15 know just grow their wealth through through property and taking advantage of rising rents in some areas as well interesting well i'm going to ask you to get out your crystal ball now and which is always fun and games but what's your your read of what's likely to happen with property values moving forward and why yeah so it I mean that's the ultimate question as soon as the market starts um doing as as well as it is um when when is this going to end um and I I probably couldn't answer when exactly it's going to end at the moment I don't see any major headwinds to housing market performance, or at least they didn't before Melbourne went back into extended lockdowns. I think the major headwinds for the housing market that could turn the direction of the market

Starting point is 00:10:08 are a spike in COVID cases and subsequent extended lockdowns. I think what's happened in Melbourne shows that we're still vulnerable to that without a more comprehensive vaccination policy and a lack of government support that we saw were introduced in stage two restrictions last year. The other thing we're obviously looking at very closely is the lending space, because a lot of this growth is driven by housing finance. So as I mentioned, mortgage rates are still at record lows. Average lending rates continue to fall through April, even though we're starting to get this speculation that interest rates are going to shoot up and it's going to be disaster for people's finances that's probably going to happen very gradually we are starting to see a

Starting point is 00:10:53 bit of an increase in the longer term fixed rates as banks prepare for higher funding costs in the long term but ultimately our regulators our institutions they understand what's at stake in terms of a change in market conditions and any change to lending conditions is going to happen very gradually, very carefully, communicated very carefully. I think we're actually already seeing soft enforcement of tighter lending conditions. We could see APRA's deputy governor gave an address to the mutual banking sector a few months ago and was saying, hey, your LVRs are looking a it high you might want to watch that so you know even things like that where it might not be a policy like we saw in 2017 where bam there's a limitation on interest-only loans this could be

Starting point is 00:11:51 a gradual softly communicated thing to to try and gradually take the foot off the accelerator in the housing market that that would be my prediction for the nature of the downturn if institutions can control it right there's always economic shocks that that can't be controlled as well yeah of course and i think you're right i think the just the public signaling of uh raising those issues uh has as much impact as actually totally introducing actual potential measures which which is likely to happen if things continue to get out of control so no always very interesting uh appreciate those insights uh eliza and and thanks for your time on the show today no worries at all thanks again and take care thanks eliza well it's obvious that

Starting point is 00:12:40 the perfect storm is going to continue for for some period and enjoy it while it's there i've always been i believe that the best time to buy a property is every time you can so uh make take advantage of that and some really good thoughts today so stay with us because you're here on Roti 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. 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

Starting point is 00:13:27 1300 728 726 today for an obligation free quote. Welcome. Well, despite being the hardest hit area by COVID, Melbourne has seen 5.5% growth in property values over the last three months. But how fragile are Melbourne's fundamentals? Well, to discuss this, I'm joined by renowned industry contrarian, Simon Presley of Propertyology. So welcome back to the show, Simon. thank you bushy contrarian yes i get uh the adjective gets used a lot with my name well you're one of those that's not scared to say it how it is and you're often uh way ahead of the pack in terms of predictions that that nine times out of ten turned out to be correct rather than the other mate so uh always loving having on the show mate but uh sort of jumping

Starting point is 00:14:17 straight into the subject then uh you know we've seen property prices in melbourne rising strongly and we're seeing very strong auction results. And until the recent lockdowns in Melbourne, we were seeing high traffic at the opens. So why are you concerned about Melbourne moving forward? Yeah, I think always with property, unlike shares, Bushy, people need to be just as much focused

Starting point is 00:14:39 on the next few years ahead as they are in the moment because we don't buy property for a day. We can certainly buy shares for a day, but that's not how one transacts in property. So people only need to go back to early 2017. And the same really high auction clearance rates and long queues at open homes that we see today is what they saw in early 2017. But little did those people know, they're only a

Starting point is 00:15:04 few months away from the start of a downturn. So this is where we need to understand fundamentals and analyse them objectively. And when we've done that for Melbourne, here's a few numbers that are not by any means pretty. Overseas migration on the demand side of property, Melbourne typically gets about 80,000 people per year, a net figure, adding to their population. In the last six months, they have lost 20,000 people. So a net loss of 20,000 in six months compared to normally a gain of 80,000 in 12 months. Internal migration. These are the existing residents of Melbourne who may move from one location to another. Normally, Melbourne gains about 2,000 people per year. Last year, Melbourne lost 26,000 people per year. So technically, Melbourne's population declined in the 2020 calendar year. Construction. Melbourne has about 45,000 to 50,000 new dwellings already in the construction pipeline. And the Victorian state government, as part of its economic recovery plan, is cranking that up.

Starting point is 00:16:08 resale supply the number of properties listed for sale today yes it's the low volume of supply is contributing to the high results seeing at the coalface today but that number of properties listed for sale is growing pretty significantly and at a faster rate than any other location in Australia vacancy rates which is rental supply Melbourne today has the highest vacancy rates in all of Australia and the highest in its 200-year history. There are now 25,000 rental properties empty in Melbourne. Just a year ago, that was 11,000. Significant extra rental supply. Rents, it's not just the CBD rents that have declined by in excess of $100 per week. Suburban houses, particularly in the inner east and the northwest of melbourne have declined by about two thousand

Starting point is 00:17:05 dollars per annum over the last 12 months so there's some household budgets there there's a landlord behind those properties that's had a big big hit to its uh to its income um and then we've also got uh new rental legislation which is certainly not going to encourage more investors to participate in real estate if anything it's going to discourage them so none of these things are um are good um and then there's some concerns we've got about melbourne's economy as well going forward well let's jump straight into that and get you to talk us through how you're seeing melbourne's economy and and how this is relevant to uh property markets yeah so if we bring up a graphic here bushy uh look at this graphic called melbourne's fundamentals and you can see the green line there

Starting point is 00:17:51 we've got uh we've got eight different metrics here the green line is showing uh melbourne and and the blue line is showing its comparison to other parts of Australia. And none of those trends are good. Now, a local economy, so in this case, Melbourne's economy, more than anything else, a local economy always has the biggest influence on a property market. Because at the end of the day, it's economic conditions which create jobs or causes job loss or wage growth or wage decline or confidence. Before anyone buys a property, we don't think of it this way, but we actually buy the debt. And no one willingly buys debt without confidence. There's quite a bit of pent-up demand in Melbourne at the moment, which is reflected at the open homes and auctions. But once they

Starting point is 00:18:37 purchase that property, they're gone. Where's the next layer of people coming through? That's going to come from their confidence or lack thereof in Melbourne's economy. Now, Melbourne is a global city, always relies heavily and benefits a lot from international business. Tourism, for example, Melbourne typically gets about 11 million visitors per year from people coming from overseas. And that generates about $10 billion per annum to Melbourne's economy. It hasn't got that for the last 12 months. Who knows how long it will be before it will return to that. International students. Melbourne usually has about 200,000 people living in Melbourne to study at the universities, and they've come from other parts of the country. It doesn't have that. We don't

Starting point is 00:19:24 know when that's going to return. CBD office vacancies. There's 60% of Melbourne CBD offices that are empty. That's miles more than any other location in Australia. Now, how that affects property markets if people are it's not only the landlords of those offices that aren't getting a rental income it's the people who are normally there monday to friday 7 a.m to 6 p.m or whatever is if they're not there they're not going out getting coffee buying suits and dresses and supporting all those local businesses so um we shouldn't underestimate how important that is to melbourne's economy it's retail trade it is the weakest these are official abs figures they've got the weakest retail trade in all of australia job advertisements are the lowest

Starting point is 00:20:15 change in volume in all of australia over the last 18 months residents continue to relocate away from melbourne they're not moving into melbourne and sadly it's in lockdown again those who watch the news would have seen the droves of cars heading out of melbourne so we've got some concern for psychological impacts of the lockdown on Melbourne, how that will not only affect the economy, but also demand for housing, whether it's to rent or buy. And the last but probably most important bit is the enormous amount of debt that the Victorian state government have taken on. Now, every government in the world, bar none, has taken on a lot of debt to respond to COVID and that's mostly good but Melbourne has taken on more debts than any

Starting point is 00:21:03 other state in Australia by a country mile and how that affects property markets is going forward its ability to raise funds for future infrastructure projects or to support different parts of its industry we only need to look at Queensland to see the adverse impact of a state government having too much debt Queensland state economy my home state Bushy we have had the highest debt in Australia for many many years now for about 15 years Queensland's economy has been one of the weakest economies for that decade Queensland's property markets have been significantly underwhelming because of that so big picture stuff but people need to be aware of it yeah well some really good indicators there what general advice then would you give to us about Melbourne's

Starting point is 00:21:52 property market moving forward yeah um i guess it depends on uh on where you sit and which demographic you're in um i don't want there's no reason to be panicking i'm not i'm not forecasting a market crash i'm not saying that people should you know wholesale their properties but you need to be aware that what your barbecue discussions the lunchroom discussions is got nothing to do with the fundamentals we've been talking about there um i i have i would not rule out the possibility of Melbourne property prices declining at some stage over the next couple of years. Again, not a crash, but the boom that is happening at the moment is widespread, and I do not see that continuing in Melbourne. If you're the owner of an apartment, I would be

Starting point is 00:22:35 concerned about that. Nothing to do with COVID. We've already got examples in places like Perth and Brisbane where apartments have not seen any growth at all for at least 10 years. That's without the stuff that Melbourne's had to deal with with the coronavirus. So anyone who's thinking that that could not happen to an apartment in Melbourne, I'd suggest that that's not wise thinking. And you're going to have problems with your rental income

Starting point is 00:23:02 if you are an investor in a Melbourne apartment for quite some time. It could be several years before you see any rental growth. So you need to factor that into consideration. I think the middle ring detached houses will remain solid. I don't think the strong growth that Melbourne's seen in the last six months will continue for much longer, but I think that those values in general will hold up. If you're an investor, now and always, you need to consider yourself borderless. The city that you live in is irrelevant when it's time to invest.

Starting point is 00:23:35 You need to consider the fundamentals of every location in Australia, and Melbourne have the weakest fundamentals in this country by a long shot at the moment. And the last piece of the puzzle, commercial offices and inner city retail. If anyone owns those property assets, unfortunately, there's a bit of pain ahead in my view. Yeah, no doubt about it. Some very sobering thoughts there. Thanks, Simon. I really appreciate you coming on the show to share that with us. My pleasure.

Starting point is 00:24:03 Thanks, Bushy. But, well, it's very clear that you need to dig deeper than the headlines and the stats to really understand what's going on in property. and there's no doubt that Simon and his team at Propertyology are very uniquely positioned to help you with that. Stay with us for more here on Realty Talk. Property depreciation is the natural wear and tear of a building and its assets.

Starting point is 00:24:27 Property investors can claim depreciation as a tax deduction each financial year. Depreciation 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 $9,000 in first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote.

Starting point is 00:24:53 Welcome. Now, if you're a property investor, you'll probably remember the huge sigh of relief that we all had when the Labor Party lost the last federal election, largely on the back of their policy to abolish negative gearing, with over 60% of the 2.2 million landlords in the country currently negatively geared. So you'd think we were safe from seeing negative gearing being under any threat in the future. However, today's guest, Stuart Weems from Pro Solutions, is here to warn you that negative gearing may not be here to stay. So welcome back to the show, Stuart. Great to be with you again, Bushy. Thank you for the invitation. Yeah, always like having a chat and you've got some great insights, Stuart.

Starting point is 00:25:39 But sort of getting into the meat of the subject, before we dig into your warnings, can you start with a very quick and brief summary of what negative gearing is and why so many investors are negatively geared? Yeah, sure. So, I mean, negative gearing just allows you to offset any rental income losses against other income and probably best explained with a very, very brief example. So if I earn $100,000 from my job, I will pay about $24,000 in tax. But if I have an investment property and that property's income less expenses is a negative $10,000, then I can offset my $100,000 job income with my $10,000 investment loss. And my taxable income then is $90,000. And I then pay $20,500 of tax.

Starting point is 00:26:34 So my tax bill has gone from $24,000 to about $20,500, so I've saved $4,500 there. That means that of the $10,000 that I lost on my investment property, I will receive a refund of $4,500, so my out-of-pocket cost is $5,500. So it allows us, or it defrays some of the cost of holding on to negatively geared property, that is when the expenses are larger than the income. Yeah, and I guess the reason for going down the negative road is you're betting on the fact that the capital growth is going to more than compensate for the cost of holding it in the meantime. Exactly right. There's no point losing money just for the sake of it.

Starting point is 00:27:16 We definitely hope that over the long run, the dollar value of the growth that I get out of the property will make any losses, any income losses, look immaterial. Yeah, absolutely. Now, I want to give you the interesting bit now. What are the three reasons why you think that negatively gearing might still be at risk? Well, I think the first one is that as it's been well documented, government debt will exceed probably $1 trillion sooner or later.

Starting point is 00:27:46 Well, that's actually predicted next year. So there's two ways that the government's going to be able to not only just service the interest cost of that debt, but ultimately repay it. one way is to grow the economy if we grow GDP we as a result grow tax revenue and obviously that's a that's a good thing everyone wins if you like another way is to increase taxes or reduce tax deductions and I think we look at the the the population the amount of population that invest in property it kind of informs us to some degree around if I'm a government coming up with some tax policy, how many votes do I have to lose? So about 11% of Australians, adult Australians

Starting point is 00:28:30 invest in property. So as we saw from the ALP's election policy back in 2019, that was widely unpopular. But only 3.3% of the population own two or more properties. And not all of those would be negatively geared, right? Because if I've accumulated a couple or more properties, maybe I've been doing it for some time and the rent's appreciated and I paid down some debt, et cetera, et cetera. So by limiting negative gearing, as opposed to abolishing it in full, I think is going to be a far more palatable policy for the electorate. That is, it's a way of me potentially raising tax dollars without losing too many votes. So that's my first reason, Bushy. My second reason is you know if interest rates remain persistently low it really does hamper the negative gearing

Starting point is 00:29:26 benefits of investing in property that is that if I'm investing in property that the tax savings that I would have got maybe 10 years ago aren't nearly as high as what they are today mainly because my cash flow costs are low because interest rates are so lower right so a million dollar property today you would be lucky it's losing in terms of income somewhere between 10 and $15,000. Whereas 10 years ago, give or take, you know, the loss would have been somewhere, depending on interest rates, between $25,000 and $50,000, right? It's a massive difference. Now, will interest rates increase? That's a million dollar question, of course, but we only have to look to economies like Japan and see that they've been stuck on zero interest rates for

Starting point is 00:30:10 nearly 25 years. So we do know, particularly when there's a high level of government debt as a result of and more quantitative easy and so forth we do know it's difficult for economies to get off low interest rates so if interest rates remain persistently low for the next five to ten years well negatively gearing benefits or tax savings if you like are going to be impaired as a result of that so for the people that have incorrectly invested in property just to save tax or predominantly save tax unfortunately it might not necessarily help them do so and of course Bushy we all know the only reason we invest in property is to build wealth any tax savings are um are really just icy on the cake yeah uh and the last one is the stage three tax cuts so um in a couple of

Starting point is 00:30:56 years time they're going to flatten the the the tax brackets uh so that anyone earning between forty and two hundred thousand dollars forty thousand and two hundred thousand dollars we'll be on a 34 and a half percent tax rate whereas we know anyone earning over 180 is on the highest marginal rate and between and it used to be between 80 and 180 it was 39 percent anyway as the tax rates fall so do our negative gearing benefits and so it kind of flattens the curve as a result of that yeah it's a very good summary and I guess what you're talking about there were the limitations means that it's more likely to impact on the higher income earners which from a from a voting perspective is going to be much more palatable to the politicians so

Starting point is 00:31:45 makes a lot of sense what you're saying there final question then Stuart what does all this mean to investors do you think well I would caution anyone from making decisions to invest in property or any other asset for that matter on the basis of tax benefits alone and I guess it's a it's something that I've always said and I know other many other commentators do as well saving tax alone will not make you independently wealthy of course we shouldn't go and pay any more than we absolutely need to as sure as we we should take every avenue to reduce our taxes but avoiding with the sole focus of just avoiding tax isn't necessarily going to help you build wealth so you know I used to get I don't get that many phone calls like this these days thankfully

Starting point is 00:32:30 but I used to in you know 15 years ago get phone calls I still I want to buy an investment property because I paid too much tax last year okay that's a good reason that's not necessarily a good reason by itself to go and buy an investment property so look I would counsel investors probably to disregard any tax benefits as a result of investing in property and if they occur and they remain well that's all I see on the cake but if they if they end up getting abolished at least it doesn't upset your investment strategy and I just think it's going to be too tempting for a government to fiddle with those negative gearing rules. Yeah it's very good advice as always Stuart really appreciate your insights today and thanks for coming on the show. Pleasure's all mine.

Starting point is 00:33:15 Great Stuart well as we've always said here at Realty Talk you don't invest just to save tax you need to focus on investment grade properties with the highest growth and don't rely on negative gearing as part of your strategy to afford the property. That's the key take-home message I take there. So stay with us for more here on Realty Talk. Welcome. Now this week's bush buy, I want to ask you a question. Is short-term accommodation short-sighted? Why do I ask that? Well, according to the latest CoreLogic stats, there's been a 46% reduction in the number of properties for long-term rental over the last 12 months. And with the consequent boom in domestic tourism that's happening right around the country, there's also been a correlated big increase

Starting point is 00:34:14 in the number of short-term Airbnb-style properties that are now currently being converted. now if this is you or you're considering doing it then I want to open your eyes to some of the risks that might be associated with it and the first of those is around income consistency because while you know $400 a night sounds very attractive compared to $400 a week you may be very disappointed with the level of occupancy rates that you actually achieve given the amount of competition and how aggressively you need to market that property. Now I say that because my good wife and I used to own a property management business where we managed 70 very high quality beachside properties in a beautiful coastal location and of those 70

Starting point is 00:35:08 only two were profitable. Why? Well unfortunately in the peak times when those properties earn their highest income quite often landlords wanted to use them. So Christmas, Easter, school holidays were generally the times that the landlords wanted to block out. They are also the times when most people want to take advantage of those properties and what that meant was you'd only get the occasional booking, and therefore the rental income was a long way short of where expectations were. Secondly, if you're going to do this, you need to be very proactive in your advertising, and you also need to be extremely responsive in relation to responding to any inquiries. It's the quick or the dead. When people are looking, they're making a decision. If you're not there

Starting point is 00:36:02 to do it, and you're just doing this part-time as something to do on the side, you're probably to be very sadly disappointed also you need to take account of the massive expectations that people have when they secure an airbnb property they're still thinking they're booking a hotel room and unless your property looks like something out of a resort then you're likely to incur not only a lot of disappointment a lot of complaints a lot of headaches and heartaches but you'll also incur significantly increased expenses around maintenance around cleaning of the properties and around general disruption to your life when you have to drop everything to sort something out or to clean a property and have it ready for occupancy at very short notice so not everything

Starting point is 00:36:52 it's cracked up to be the other thing that you need to take in consideration is a lot of investors we've seen have this assumption that even if they are successful in getting increased income that that income is going to help them in relation to their future borrowings if they're looking to add properties or to refinance etc. Now unfortunately because of the short-term nature of that income and the inconsistency and unreliability of it the bank's view is well we will discount it and we'll only apply the current long-term market rent and then know generally shade that by 80 so you're going to be quite disappointed in relation to its impact even if you are successful at creating a profitable short-term accommodation opportunity

Starting point is 00:37:44 so unless you're going to run it as a business and it becomes a serious second job and you're going to put the time effort and money into it I would seriously question whether you're going to be better off having a property as a short-term versus having a consistent long-term tenant guaranteeing the income and then making sure that you're not putting yourself at risk financially. That's the food for thought for this week. I'm Bushy Martin. You're watching Realty Talk. Once again, thanks Bushy. Some really good advice. Catch more of Bushy at his Get Invested podcast. Well, that's it for another show. A special thanks to Bushy's guests, Eliza Owen, Stuart Weems and Simon Presley.

Starting point is 00:38:35 And a reminder that you can see all of our shows 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 and also to BMT Tax Depreciation for their support. I'm Kevin Turner. We'll see 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: No signs of a slowdown + Fragile Melbourne

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.