Property Hub - Investment Insights & Inspiration - Realty Talk: Property Risks vs Rewards + Reducing rental vacancies + Bridging the financial gap

Episode Date: February 4, 2022

Many investors continue to get caught up in FOMO chasing property rewards without considering the risks, so to add some balance to the equation, successful active investor turned Buyers Agent Rasti Vaibhav from Get RARE Properties joins us.  If you want to optimize the financial performance of your rental property, reducing your vacancy rate is critical. But how do you do this? Leading property manager Lauren Robinson from Rental Results in Brisbane joins us to share her secrets.   In the current rapidly moving sellers market, property buyers that purchase properties subject to the sale of their existing home are being left out in the cold, and bank bridging finance is usually difficult, complex, and time-consuming – until now, because emerging non-bank lender Techlend is disrupting the bridging space with interest free 1-hour pre-approvals and CEO Aaron Bassin joins us to lift the lid on their game-changing innovation. RealtyTalk is your trusted voice in property investment and Australia’s most popular online property show.  RealtyTalk is brought to you by Realty, Australia’s leading search and social property distribution platform that helps investors like you beat the crowd, giving you the earliest access to property opportunities, listings, and insights. Check out Realty. RealtyTalk is hosted by top property investment expert, author, and founder of KnowHow Property, Bushy Martin. Find out how Bushy’s KnowHow team helps investors unlock freedom with finance and property here, and check out Bushy’s podcast Get Invested.  RealtyTalk is supported by BMT, a company that helps property investors save thousands of dollars each year by maximizing tax deductions from investment properties. Find out more. See omnystudio.com/listener for privacy information.

Welcome to Realty Talk, the show that brings together the country's most authoritative and respected property experts. Follow us on all the socials and subscribe for updates and exclusive offers. Realty Talk is powered by realty.com.au, connecting buyers, sellers and agents differently. Greetings and welcome to Realty Talk, your go-to place for all things property. I'm Bushy Martin from KnowHow Property Finance, and we've got another great show for you today. In the current market, many investors continue to get caught up in FOMO, chasing property rewards without considering the risks. So to add some balance to the equation, successful active

investor turned buyers agent, Rusty Vaibhav from GetRareProperties joins us to kick things off. If you want to optimise the financial performance of your rental property, reducing your vacancy rate is absolutely critical. But how do you do this? Well, leading property manager Lauren Robinson from Rental Results in Brisbane joins us to share her secrets. And in the current rapidly moving seller's market, property buyers that purchase properties subject to the sale of their existing home are being left out in the cold and bank bridging finance is usually difficult, complex and time consuming. Until now that is, because emerging non-bank lender Techland is disrupting the bridging space with interest-free one-hour

pre-approvals. Yes, you heard right, one hour pre-approvals. And CEO Aaron Bassam joins us to lift the lid on their game-changing innovation to close out the show. We've got more great property innovations to share, so let's get underway. Greetings and welcome. Now, in the current asset boom that we're experiencing in most investment classes at the moment, I get very concerned when I see a lot of investors getting caught up in the herd hysteria of the fear of missing out or FOMO to chase property rewards without considering the risks. So to add some balance to the reward versus the risk equation, we're joined by a successful active investor turned buyers agent, Rusty Bypav from Get Rare Properties, whose strong investment background has sent him to devote an entire chapter of his new book, The Property Blueprint, to this very important subject. So welcome back to Realty Talk Rusty. My pleasure Matt, thank you so much.

Rusty, I know that you're a very firm believer that risks are underrated in the property industry, so let's start with how you define risks. Sure, before I talk about my definition, I typically would love to share that what is a typical understanding of risk and people talk about that it's a first of all it's not really it's a dirty word not many people want to talk about it and b for them they define it as a capital preservation as the risk of losing money now that's a very traditional definition in the minds of people who don't really know about much about investing but coming from a financial markets background the way we like to define in the as in the financial literature is more about risk of unknown like as a volatility like

It can go up and down as well. So, and that actually is a very good point from the viewpoint that it can be of two types, a downside risk where we are losing money, but then there's also upside risk, which whereby it is delivering a lot more than what we had. So the reason I shared this two different definitions that are traditional and more of a modern or a financial literature definition is that lots of people get too much worried about risk as well. and what they say no i don't want to invest money because i might lose money

now i do challenge them and ask them that that's perfectly fine you keep money in your bank of course you earn change over there as the interest rates are super low uh now there are far more bigger risks around it as well and the risk of not meeting your goals not meeting your aspirations being so dependent on your active income like as in like a human capital so so the way i say is that definition of risk is that it's it's a risk of unknown downside and upside risk yeah beautifully said and just to add on to it like risk and returns are two sides of the same coin they have to be going together and for any potential investor they should be looking at the ratio as in risk adjusted returns that what they're

getting out of it. Because if it's a consistent $0.05 in a dollar, if it's consistent, it might be meaningful to someone, especially when people are towards their retirement age, versus $0.10 in a dollar, which can be $0.02 in a year, a particular one. So someone who can take the volatility, that means there's a more shift in the expectation of their returns, will be considered are more risky from that perspective as otherwise yeah yeah nicely said it puts a very different slant on on risk itself in terms of the opportunity side of it so uh sort of drilling down a bit then rusty what are the risks in the property context look there's quite a fair bit of risk involved in property investing but before i get into it i would also say that there's a far bigger risk of

not taking any risk because if i look at like one of the research says that 56 of australians will not have enough money even at the age of 65 to retire upon now to me that's a far bigger risk of not doing anything so there's an opportunity cost yes there's a downside risk that whatever you do today you might lose but there's an upside risk as i said before that as a on a long-term average property has been a wonderful asset class of course we have to be mindful of the specif the list specific to the properties as well so i'll touch base upon few um on that if that's okay so first of all it's a market risk a market risk which basically saying that market might fall or the property value might go down um but then to me that's also an opportunity because

not always if you go by the law of averages it has gone more up than down it's a long term it should be all right the other one is a property risk like risk specific to the property what if there is a storm what if uh you know um uh the building collapses or the wall falls over so of course there are ways to mitigate them maybe if it's okay maybe i'll share how to mitigate them as well because knowing the risk is not enough we have to also know how we should be embracing them how we should be mitigating them would that be okay yeah absolutely yeah okay so for market risk it's more about how we go about diversifying it because because diversification the great thing about property is in australian market context is we have multiple markets within the market

so and as a smart investor or a strategic investor one can choose to buy properties in diversified locations because when it is not synchronous markets what it means is that if one property is going up second one is probably might be lower so that might be on on the downside but on the better side of things is like when the some properties are not doing so well there will be other properties which will be holding their value very well so diversification is the key thing also the research around like buying the properties in those areas which are the supply and demand equation is tilting towards the growth but the demand is more than the supply yeah so so that's how we can take care of the market risk when it comes to the property risk

It's all about buying the sound properties, making sure that a professional building and pest inspector is going out there, looking at the quality of the property at the time of purchase. But even beyond that, it should be more about how, as an investor, you are maintaining the property. Because sometimes it's easy to fix a small issue before it becomes a larger one. And of course, having a kind of a landlord insurance or building insurance as well, so that in case something goes you know like a storm comes there's no not much one can do but insurance

cover would actually help us third type of the risk i would talk about the interest rate risk in the sense that okay what if the interest rate especially when we are at such a low end of the market it will go up it has to go up because that is the i guess the one of the liver that rba or you know the government uh professionals or officials can actually pull to sustain the market in the longer run. But as an investor, we have to be mindful of it. We have to be conscious that what has been the average rate.

And of course, banks, when they are lending money, they are conscious of that. But as an investor, we have to be mindful of our own buffers out there. So having held the buffer for the properties that we have, maybe one of the tactics would be to fix the loan for some time. Because then we know exact cash flow

irrespective of what happens with the RBA cash rate. Other type of the risk that people are very worried about, because I get to see or hear a lot, is about the bad tenants and the vacancies. Because we are relying that the mortgage payment will be covered, almost covered by the rental payments that we receive. But what if there's a bad tenant or what if there's a vacancy in the property? Now, again, it comes down to the due diligence of buying in those areas where the demand is higher. that means there will be always a demand for the tenants to live in the property now what we also have seen that they might it might not be the case and sometimes the case of not really having the right property manager so i've always believed that property investing is a business and property

manager as well as the tenant are stakeholders of your business yeah if we treat our tenants nicely if there's a reasonable request from the tenant always always listen with an open open mind that it might be worthwhile also not really overly charging them or you know going for meager rates because then sometimes for the sake of getting a quick tenant we are probably compromising the quality of the tenant so having a quality property manager again that's something that really people think about the pricing only the fees whether six percent plus gst or eight percent plus gst they're worth the salt when it comes to the quality they can offer so having that kind of assessment of the of the tenant and the presenting the property will make sure and also the pricing

of the property like let's not be greedy it's more about getting the right tenant and have a longevity of the tenant in the property that will help so another thing that i talk about is over capitalization and what it means is that we should take investment as an investment only not really taking as an emotional aspect not really paying over too much for the property when it's not deserving that money, or even when it comes to renovation. So the idea is that we should follow a strict budget when it comes to any A, a purchase,

or B, as a renovation. Something that I also talk about is cash flow and liquidity, which is more around, okay, what's really happening? Because most of the time, like when we are working on building our portfolio, we always feel that, okay, we should, you know, someone who gets, i guess the bug of buying multiple properties very quickly we have to be very mindful of that

what might happen later on because are we actually biting more than what we can chew or or it is just realistic and we are taking the right amount of opportunity at the same time keeping the buffers with us so not really overdoing it is also one of the aspects that we look at and maybe if i can touch upon a different type of risk which is a personal risk Now, what it means is that, yes, we are building up a property portfolio, but we as a property owner are a significant part of this business of investing. We have to really make sure that we as individuals are covered with the right insurance cover. So what I really mean is that in the life cover, trauma, TPD, even income protection,

that has to be there. And that's how we say that, okay, these are the risks. If we know them, then they are not really unknowns anymore. We can go and tackle one at a time, look at how we can avoid them or mitigate them. And sometimes like a market risk, we should embrace them. Yeah, yeah, very well said. So just to conclude then,

because you've covered a lot of territory already there, Rusty, should we avoid all of the risks then in the context of what you've talked about? Not really. it really depends on what type of risk we are taking about because if we avoid all of them we are probably parking our money under our mattress it's not really going to get us anywhere right it's more about being open-minded to and being educated on what those risks are yeah the risk yeah the risk is unknown but when we know it it's no longer a risk so yes we should avoid all the risks because it it means that it's all unknown but when we know them but then there

a few things you know the nature the force of nature we can't really avoid that's what we have to cover ourselves with the right insurance in place yeah yeah extremely well said so i know you you've actually written an e-book specifically around risk how can listeners get a get a copy of that sure so um so the background of that was that i was looking for the risk in property investing i couldn't really find much of material there so i was then preparing a book writing a book so there's it's a specific chapter on the risk but i didn't want to do a hold back and actually release an e-book on that so it's very much available on my website which is www.getrare.com.au slash resources that's where you can see all the resources and one of the things over there

brilliant excellent well look uh thanks for these very timely reminders rusty and thanks again for joining us on the show today my pleasure my pleasure thank you so much well the takeaways here are very clear. Without risk, there is no reward. And as the great athlete Jerry Rice once said, today you need to do what others won't, so tomorrow you can do what others can't. Because only those who risk going too far can possibly find out how far it's possible to go. So if you want to manage your investment risks to gain greater property rewards, start by grabbing yourself a copy of Rusty's great book, The Property Blueprint, at www.getrare.com.au. You're watching Realty Talk, your trusted voice for all things property.

Successful property investment is a game of finance. Do you have the right team and the right game plan? Realty Talk is brought to you by KnowHow Property. More than mortgage brokers, Bushy Martin and his team of investment architects set you up with a sustainable strategy structured to lower your costs, tax, risk and stress while increasing your capacity for growth. Know-how has helped over 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. Greetings and welcome. Now, although vacancy rates remain tight across the country with the national average currently running at about 2.6%, according to the most recent SQM figures,

what many landlords fail to realise is that having your rental property vacant for just one week between tenancies equates to a vacancy rate of just under 1.9%. While a two week period from buying a property to getting a tenant in is a 3.8% vacancy rate. Now alongside this, if you're getting say $500 a week in rent, then a one week vacancy drops your effective rent down to just $490 a week and two weeks vacant drops the gross rent down to just $480 a week, a 4% drop in your effective rent. So it's clear that if you want to optimise the financial performance of your rental property, reducing your vacancy rate is absolutely critical. But how do you do this? Well, to discuss this, we're joined by Leading Property Manager, Lauren Robinson from

Rental Results in Brisbane. Welcome back to the show, Lauren. Thanks very much, Bushy. Now, Lauren, can you start off by summarising the sort of range of options that landlords have to minimise vacancy rates? I think, I mean, essentially, it's really important to not only understand what the vacancy rate for your the suburb that your property is in but also understand what the property is competing with so knowing the market understanding what comparable properties are currently available and how that compares to yours because essentially tenants are looking for value for money so there's no point sort of holding on to a price um just because that's sort of what you believe the property should be able to achieve if the market is telling you otherwise so when it comes

to knowing the vacancy rates i think it's also really important to have a property manager who can guide you on what the specific vacancy rates at the time are and when it comes to whether it's time to reduce the rent add an incentive look at also how the property is presenting online why is the property not moving so um essentially it always comes down to three things the price presentation promotion the three p's um i always come back to so love it that's a great way to summarize it actually so you uh sort of in parallel with that how important is it then to set market appropriate rents oh it's integral to having a really successful investment property so i think that's really the key is making sure that you you do set the rent right at the beginning and i think

it's really important there's going to be peaks in the rental market in any in any area um but it's also knowing is there a demand at the time for that particular product or that particular property but also um you know you might try on the higher side for a rent for you know a few days or possibly even a week but i think it's knowing okay we haven't achieved this we need to take action now because it's more important to get someone in as you were saying it's it's that annual return as opposed to just holding out and waiting for that tenant to turn up and pay five hundred dollars a week yeah spot on well it certainly it is pretty tight and it does vary around the country obviously but the the rental pressure is quite tight at the moment and there's a there's a bit

of a temptation almost for landlords to want to up the rent given some of the pain that some of them have been through with COVID over the last 12 months so how should rent rises be managed in a tight market do you think yeah I think it's that it's that fine line between you know having a good tenant in the property because I think to me a good tenant is really like gold you want to be able to keep a good tenant in your investment property, especially if you know them, they've got a good track record of paying on time, looking after your investment property. So it's a balancing act between knowing, okay, the market rent is this, but because I've got a great tenant, I'm going to keep the rent slightly below market rent. So it might be $10 less. And I think it's also

about making sure that you can provide that evidence to the tenant to say, this is where the property sitting in the market at the moment. We really do value your tenancy. We want you to stay on. And that's why the owner is going to be increasing the rent. But to this point, as opposed to if you were to move out, then the rent would be sitting at this higher rate. And I think that's really just explaining it, having those conversations with the tenants. I think, you know, often if a tenant jumps online and starts looking around to see what else is available at the time, you know, they'll clearly see pretty quickly, okay, well, this is where the rent's at. yeah that's that's a great suggestion so sort of as a roll-on from that and expanding on that what

what advice would you give in relation to retaining existing tenants yeah i think when it comes to having a good relationship with the tenants it's it starts from the very beginning so of the tenancy so you want to make sure that that tenant feels like they're being heard and and that they can communicate any maintenance things are actioned quickly um and that they're they're um responded to in a timely manner at all points during the tenancy. Having good tenants is really invaluable and also making sure that you know at different points along the way you're asking them are there different other things that would make the property more comfortable for you to live in so and then they might be things that as an investor that you could you know perhaps put

into the property to in order to keep that tenant for a longer period or you know strengthen that relationship it depends on obviously what it is so um not if it's going to add value to the investment in the long term but often if the people living there are saying you know a security door might be an additional benefit you know for the price of four hundred dollars a week um you know as oh sorry four hundred dollars as opposed to having a week's vacancy you know it's time to sort of weigh up those things um and make sure that you know ideally you're keeping tenants for the long term. Yeah, I love it. And I guess it's the dual benefit there, depending on what you might put into the property. Some new items that might be of great benefit to the tenant and

therefore the tenant may be prepared to pay a slight premium on the rent for it. They also have some depreciation benefits that can also ultimately reduce the ongoing holding costs of the property. So there's a couple of joint opportunities there. Some really good insights there, Lauren, and really appreciate you coming on the show today to share that with us. Thank you, Bushy. It's a pleasure. Thank you, Lauren. Well, the message there is pretty clear. Minimising vacancy rates can have a massive impact on the financial performance and the cash flow of your investment property. So make sure you're engaging a proactive, independent property management professional

like the Rental Results team to look after your property. Stay with us for more here on 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. BMT Tax Appreciation 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 1-300-728-726 today for an obligation free quote. Hi and welcome. Now in the current rapidly moving seller's market, property buyers that purchase property subject to the sale of their existing

home are being left out in the cold as cash buyers or others without this complication are often good zumping them. So how can you overcome this? Well traditionally some of the banks offer bridging finance that are short-term lines that enable you to purchase a new home while you're selling your existing home. The bridging finance is usually a difficult, complex and quite time-consuming process, until now that is, because emerging non-bank lended tech lend is disrupting the bridging space. So to lift the lid on this, we're joined by the Chief Exec of Tech Lend, Aaron Bassam, to do a two-part special feature on this groundbreaking innovation. So welcome to Realty Talk, Aaron. Thank you for having me, Bushy.

Now, it's quite an exciting innovation that you've introduced into the lending market, Aaron. So to kick things off, can you give us a quick rundown on your personal background and how you ended up in the property space? Yeah, sure. So I've been around the tracks for some time in the property and finance space. I've had a passion for property from an early age, coming to being born as a first generation in Australia and watching my parents succeed in their property journey has really left me with a lot of passion and drive to go into my own property journey. And I always found it quite fascinating

how difficult the barriers of entry are continuously as the property market keeps moving away from us. And really that's what has driven me towards starting Techland. So Techland is a bridging finance provider. We enable our customers to buy a property before they've realized the liquidity and the cash from the sale of their existing asset. It's very hard to manage two mortgages at the same time, which is an option for some customers

if your income levels allow you to cover two mortgages. But otherwise, there's a lot of borrowers and homeowners and Australians who are excluded and are forced into positions that are not necessarily the best option for them. Yeah. Okay. Well, let's dig into that a little bit, Ben, in terms of the Techland solution. How exactly does it work? So a customer or a broker will come to us and they'll identify a property that they want to buy and we'll enable that purchase for them. We use the equity in the existing home plus the equity in the new home to help facilitate that bridging loan. We use a lot of data, streamlined processes to be able to offer our customers real-time outcomes,

same-day approvals, sometimes for downsizes. We're actually able to provide approvals within an hour because for those customers, the assessment process is a lot easier. We're taking an asset view on the bridge rather than an income and serviceability perspective. And so we're able to purchase the property for our customer and then when they're ready to sell,

they sell the property and pay back that loan. uh it's it's a very simple clear solution puts a lot of control into the hands of uh of of the borrower yeah i love it i love the simplicity of it and the and the focus on the security rather than the income side which the the banks often trip themselves up over so you're sort of summing up then what what other key benefits to buyers if they choose tech land over a bank for their bridging lines are yeah so it's customer service is is one of the most important factors all of our staff are here in australia it takes one minute for us to pick up or 10 seconds to pick up the phone rather than being on hold for hours but it's it's the solution is tailored towards

bridging so we know exactly what our customers need and we're able to tailor that solution for them the process is very quick compared to a traditional lender you know we we saw headlines about bank SLAs, you know, extending to 21 days. I mean, that's a terrible experience when you want to go and buy your dream home to wait before an application is even picked up for 21 days. Wow, that's, to me, that's outrageous. You know, in the 21st century,

to be experiencing that as a consumer is just unfair. And further, you know, the traditional banks, they don't, they've really, they've started to pull away from bridging. the criteria to actually be eligible for a bridging loan is very selective you have to be an existing customer you have to have you have to be upsizing because if you're downsizing you're left with no mortgage they're not going to help you so you know my grandparents can't get a bridging loan because when they want to downsize uh there's no one there to help them except tech

land um and it's it's it's our touch points and the you know the human um interaction with our customers that really sets us apart with our customer service. Yeah, I love it. So a very refreshing, exciting disruptor to the whole space in that regard. So I'd really want to thank you for coming on the show today to open our eyes to this innovation, Aaron, and thanks again for your time on the show today. Thank you very much, Prishi. Thanks, Aaron.

Well, there you have it. If you're a home buyer needing to buy your new home before selling your existing property, reach out to the team at techblend.com.au to secure an interest-free paperless bridging loan with pre-approval confirmed potentially within an hour. Stay with us for more here on Realty Talk. Well, that's a wrap for this week's show. A big thanks to our special guests, Rusty Bypav, Lauren Robinson and Aaron Bassam. And to make sure you don't miss an episode of Australia's longest running and most popular online property show, subscribe to Realty Talk now on Apple Podcasts, Google Podcasts, Spotify, YouTube, or wherever you listen. And make sure you sign up

on the realty.com.au homepage to get every episode in your inbox every week. And while you're there, make sure you check out one of Australia's most extensive range of properties for sale from over 7,000 agents nationally. Thanks again to realty.com.au and BMT Tax Appreciation for their ongoing support i'm bushy martin from know how property finance and i look forward to seeing you again next week miss something in this week's show or want to catch up on past shows do it anytime at realty.com.au where we connect buyers sellers and agents differently