Property Hub - Investment Insights & Inspiration - Realty Talk: Simon Pressley Says + Duplex Developments

Episode Date: March 3, 2023

This week’s show answers more of your key questions on what’s really going to happen with property, how can you improve project profitability and do you really need a Buyers Agent?  Leading property analyst Simon Pressley kicks things off with his property predictions for the year ahead based on the facts not the fiction. Tom Pettifer then joins us to reveal how you significantly improve the profitability of duplex projects simply by considering financing alternatives. And to close out the show, PK Gupta shows you how you can secure an A Grade property without a Buyer’s Agent. RealtyTalk is part of the Property Hub podcast channel, your home for property investment insights, inspiration, and stories from Australia’s top property experts, investors, leaders, and analysts. Subscribe now to get every RealtyTalk episode delivered to you each week for free, and also get full access to Get Invested, the leading podcast for Australians who want to unlock their full ‘self, health, and wealth’ potential and get inspired by the stories of investors, founders, and entrepreneurs. Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media. Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Welcome to Realty Talk, the show that brings together the country's most authoritative and respected property experts. Follow us on all the socials and subscribe for updates and exclusive offers. Realty Talk is powered by realty.com.au, connecting buyers, sellers and agents differently. Hi, and welcome to this week's Realty Talk show. Your property hubs go to home for property investment insights, inspiration and stories from Australia's top property experts, leaders and analysts. I'm your anchor Bushy Martin from Know How Property Finance and this week we answer more of your key questions on what's really going to happen with property in the times ahead,

how can you improve project profitability for duplex developments and do you really need advisors to secure A-grade properties. Leading property analyst Simon Presley from Propertyology kicks things off by dispelling negative fiction with the cold hard facts with his expert deep dive into the year that was and the year that will be with property around the country including his read on interest rate movements and his insights on good and bad potential locations across the nation so make sure you listen out for that. To switch gears we then enjoy a great chat with Tom Pettifer from Polici Property who reinforces the benefits of creating value in soft property conditions by building duplex developments, along with the critical importance of a variety

of financing alternatives to improve your profitability. And to close out the show, PK Gupta bucks the trend by revealing how you can search and secure A-grade properties without needing to engage a buyer's agent. Now, before we get into it, if you're really enjoying the show, I want to thank you for tuning in. And I need to ask you a very small personal favor because we really need your help in order to continue to attract great guests and enjoy great conversations by hitting the like button as well as the subscribe button wherever you're listening to or watching the show because we're on a mission to get to 1 million subscribers in order to continue to attract the best of the best and by helping me to help you together we're

going to help those that are less fortunate that have no voice and have no choice because for every new subscriber together we're going to save lives as we donate a day's worth of life-saving water to families in Tigray Ethiopia so do everyone a massive favor and take a couple of seconds to subscribe now and make sure you also sign up on the realty.com.au homepage where you'll also get a free copy of my award-winning book, Get Invested, just for making the effort. We've got lots of property insights to share, so let's get on with the show. Now that we've all settled into the rhythm of the year and we've become pretty numb to the perpetual diuretic diet of fear-driven gloom and doom about property conditions that are

being peddled by nightly news desks, it's actually about time to get a reality check and what's really going on in the world of property and in order to help you make some much better informed decisions. And there's no better person to give you a balanced view on the facts versus the fiction of both property past and future than today's show favourite, Simon Presley from Propertyology. Because if Warren Buffett's the Oracle of Omaha, then Simon's our very own Cockpit of Property.

And his role is Australia's number one property analyst and three times Australian Buyers' Agents of the Year. so welcome back to the show simon get on your bushy jeans mate every time we have a chat um yeah you put pressure on with intros like that but thank you good always good to talk no pressure mate and i only talk the truth simon for those that like me long enough i'm not not into the bs i'll call it how i see it and uh always uh really enjoy not only the quality of your information simon but the way you communicate it it's it's always really easy for us to understand exactly what you're talking about and it's all based on facts so we're going to have

more fun today but to kick into that i'd love for you to start by looking back at the year that was with a bit of a wrap on what happened with property conditions last year and your read on the reasons why if we can yeah it's probably well worth it because um it sort of felt like 2022 was that was the worst year you know australian real estate history because every five minutes that's what the headlines told us right but um yeah if we have a have a look at Australia, it was led, the downturn, the national downturn, as it kept being called, was led by Sydney, median house prices down about $150,000 in the last calendar year, Melbourne down by about $100,000, worked out roughly 10% each for our two biggest cities, and as

I said, that led the national commentary. But Australia didn't have an entire downturn, Brisbane, minus 3%, in fact, all of that was in the last quarter of the year, and that's all sentiment related, Canberra down 5%, Hobart down six percent after growing 120 percent the last six or seven years so um you know nothing really um adelaide up 10 camber up five perth up four so only got eight capital cities bushy and you know three out of three to five um had positive growth um right throughout regional australia many of them had double digit growth i'm certainly not saying they all are but here's some examples in new south wales double digit growth armadale cox harbour muscle brook orange

Parks, Tamworth, Dubbo and Wagga, just in New South Wales, Victoria, Bairnsdale, Shepparton, Faroag and Wangaratta, Queensland, double-digit growth in Bundaberg, Bow Desert, Cairns, Rockhampton, Gladstone, Fraser Coast and Toowoomba. So it's crap that you read in the media, but that's what really happened. Yeah, well, that sums it up pretty clearly. And you've got a great slide, which will now show that sort of summarises that of a map of Australia and what's happened in that regard. But while we're taking that in, how did the generally downbeat mainstream media commentary line up with the actual property results you just mentioned then, Simon?

Yeah, well, I think this, well, at the start of 2022, I, like a number of people, released their property market outlook reports. I can't remember the exact figures, but I was certainly very, very bullish on 2022, as I still am now, quite frankly. but the RBA at that time at the start of 2022 the RBA's latest commentary said we're likely to keep rates on hold you know for as long as 2024 so a lot changed we then we then had eight um the last eight months of the calendar year were actually interest rate rises and we weren't expecting to have any so but all that really did mate was affect sentiment more than anything else when you're reading about you know the negative nature of media as it is but then every we're then given an excuse to each and every month talk about interest rates going up. Now, I'm not saying

that that didn't affect people, but we've still got today, the total home loan arrears in this country is a piddly 0.76%. So don't ever tell me, and I know you don't, but don't ever tell me that people can't afford the rate rises. A big chunk of what the RBA did has put rates back to where they were before they started cutting. And they've gone a little bit further than that because of inflation i'm a glass half full person the fact that they've done it much better than what we expected is great because now we can get on with life but it affected sentiments um so buyers have more financial capacity now than in their lifetime but they're sitting on their hands because they've been told every five minutes that now's not a good time now's not a good time um there's probably a

boom ahead mate a bit because of the financial capacity and the job market totally and with all of the fundamentals that we're about to talk about now certainly sets it up for that so let's sort of jump into the future then I'd love for you to give your rundown on the sort of key lift and drag factors that you think are going to influence on property conditions this year and with a fact a focus on the facts that actually matter as opposed to the media's metric at the moment that we constantly get belted over the head with yeah so while we're doing that well we'll pull up a graphic which is going to visually highlight one of the facts that matter as I'm talking through.

So the things that are kind of going to have the biggest drag effect on property prices this year include the interest rate sentiment. But however much longer the RBA rate rise itself will continue. I don't think that will be much longer, by the way. But that's a sentiment thing for the time being. Some borrowers, a small percentage,

but some borrowers, there's a drag effect in regards to they want to borrow money to either upgrade their home or invest. But the way banks assess things by adding a 3% buffer on top of the current rate their loan might be declined we might see APRA address that you know in a year or so who knows that's a dragging effect to some borrowers at the moment and some investors have the capacity to invest in their future but are just fed up with being bashed by everybody and you know treated

like they're the villains I say to all those people if you're listening to this interview you're only harming yourself if you throw your toys out of the cot well although we understand how you feel the positives rent rental supply let's not forget that one in three australians or eight million people require rental accommodation um here and now today this country with 26 million people only has 31 000 properties advertised for rent the lowest ever in this nation's history, and 56% less than just three years ago. That's rental supply. Resale supply, so that's the number of properties,

established properties that a buyer can contend for. Resale supply. So Sydney and Melbourne, this time three years ago, had 55,000 properties for sale. Today, 54,000. So they're at equilibrium. We bundle up all of the rest of Australia together, This time three years ago, 240,000 properties

listed for sale. Today, 160,000, 33% left. Mate, there is so much underlying pressure in property markets. People don't realise it though, because as I said, buyers are sitting on the seats at the moment. The only thing you ever get from sitting

on seats is splinters in your ass. Construction constraints, the cost to build, the confidence to do it, and the legislative support to do it, is low so it's not like australia is going to be swamped with all this extra housing stock so that's the supply situation on the demand side of things we've got 200 000 skilled migrants that the federal government have committed to that's the minimum have committed to letting in this next four months on top of that about a further 500 000 international students so

we've got no supply and the people in the wisdom aside we're going to let an extra 700 000 people over the next 12 months. Also on demand. These are the financial capacity things that are very important to the property market. Equity. If we look at all of Australia's capital cities and regions, the 150 largest of the 400 townships in Australia,

of those 150 biggest ones, there's 130 of them, that the standard house today is worth more than 40% than three years ago. Substantial increase. So about 8 million of our 11 million households, they're more equity than they've ever seen in their lifetime. That's capacity number one.

Capacity number two, during the last three years, we created 780,000 jobs in this country. I would argue that everyone who's still in the workforce, your job has never been more stable. And that's very important for buying real estate. Capacity number three, our income. in addition to us having the lowest unemployment rate in more than 50 years we have a further 400,000 jobs advertised today that we can't fill which is why there's intense upward pressure on wages

some have already had a significant pay increase and those who haven't I would suggest you just around the corner so income is a good thing for property markets so you you add all those things up and probably contradicting what the mainstream media has been telling you right but they're the facts absolutely right and and and talking about the mainstream media we keep getting hit over the head with the the fear factor around the interest rate movements and the so-called mortgage cliff that's uh coming towards us what's your what's your read on all of that um well interest rates first um i mean the rba they honestly don't know when they'll stop doing what they're doing but what we do know because they've admitted it um where interest rates now

is already higher than where they'd be comfortable with them being so that says to me that the only reason that you know they went up last month and maybe a couple more is because they just want to get on top of inflation and we need to remember that the rba's responsibility is not property markets it's the economy so everything they're doing i'm 100 applauding because they're looking after our nation and at the end of the day when you've got a healthy economy you've got healthy property markets so um i you know but i guess the global readings about the global economy is in placing is certainly improving i wouldn't be surprised if within the next six months um broadly the rba is happy with inflation um and then therefore don't be surprised if we see some

rate cuts as soon as 12 months right but i really don't care because there's no suggestion at all that australians can't afford their mortgage some people might need to you know make a few cuts to discretionary expenses so um now the cliff give me strength the mortgage fixed rate cliff okay so here's my thoughts on that it's not as if fixed rates are a brand new thing they've been around for as long as mortgage has been around right 200 years um it's not as if the borrowers who have a fixed rate have an inability to budget it's not as if they were just told yesterday hey your fixed rate's expiring when they apply when they tick the box and said i want fixed i don't want variable they knew back then when it was expiring so they got plenty of time to prepare

that's what i'm saying it's not as if their home is a discretionary thing we're not talking about a suit or a mule or a wrestler. It's the roof over their bloody head. Like, are they going to do what they need to do to keep the roof over their head? So, mate, I think it's more likely that we'll see snow in the Sahara than on-mouse people throwing their keys back at banks. But don't, you know, don't let the media get in the way of talking

about a six-rate cliff all the time. Well, as you said, there's almost an assumption with the statement of a cliff that we're all idiots. and people have had plenty of time. They know what's going on. They've been war-chessing. They're putting stuff away. Yes, the repayments will go up, but we're not total dummies.

We are preparing for it. So we're another beat up. Mate, let's get back to some more positive subjects then. I'd love for you to sort of take us around the grounds and share your thoughts on the good, bad and ugly of growth or otherwise across property locations in the year ahead and a bit of reasoning behind all of that? Yeah, okay.

Well, some broad reasons. I can't emphasise enough the importance of a lack of housing supply to purchase and to rent. Now, some parts of Australia are all-time record low stuff and it will underpin the growth. Local economic conditions, the mainstream stuff always, when it talks about economy, it tends to talk about Australia this or Queensland that or New South Wales.

well that's not a property market you can't buy um the queensland property index right you've got to buy into a part of queensland or you know a township somewhere so um other than supply what has the biggest thing on the demand side of things is local economic conditions so that the job market in town x and town y um so that's an overarching why it's your question there's 400 townships in australia so i'm not the list is too long for me to say these are all the ones that have a healthy outlook but let me let me have a have a crack at 40 or so in alphabetical order i'm going to speak fast early beach albany albury armadale bathurst bow desert banala bundaberg bustleton devonport dubbo echuca esperance harvey bay gold coast goulburn

griffith gimpy kempsey lithgow manjara maribor mount barker mount gambier park port douglas Rockhampton, Shepparton, Sunshine Coast, Swan Hill, Tamworth, Toowoomba, Townsville, Victor Harbour, Wangaratta, Warwick, Wodonga and Yippoon. Long enough lists. If you have financial capacity and if you care about your financial future, you've got lots to choose from. Get the splinters out of your ass and take action for your future. And what I just, sorry to jump in there,

but sort of listening to that list as you walk through it, there's a lot of really good regional opportunities. So, again, there's been a fair bit of media activity around the boomerang effect and how the flash in the pan of people moving to the regions was just a short-term exercise. again the fundamentals that you've been talking about with us today in influencing on those sort of regional hubs that have got that critical mass and diversity of industry and employment opportunities plus the continued exodus to lifestyle that's been going for way before COVID is really reinforcing that there's still plenty of opportunities for those that are prepared to get out there and do the homework. Absolutely mate there's been a misconception

about regions I guess because for a lot of people they've never paid any attention to regions until they were locked up in their homes and it's like I want to get the hell out of here and I can't go overseas so they've discovered regional Australia but let me tell you again facts not the crap that people believe the fact is every single year the best for as far back as we've had homes the best of four property markets every single year have been among the 400 regions not among the eight capital cities it's basic odds and in terms of migration yes it accelerated from capital cities to regions during the two strong years of COVID but for as far back as internal data goes the official ABS stuff which goes back 21 years every single year more people exit the

concrete jungle to various corners of regional Australia than going the other way and now what COVID's done is it's created greater awareness of the wonderful places we can live and it's taught us that we don't we no longer have to live in the city that we work some people like to do that still and some people don't so yeah it's not it's not as if all of a sudden everyone's going to leave the reasons to come to the capital cities mate if anything the trend that's been there for 21 years will get greater there are a couple of markets that i think have signs of weakness but i'm not talking you know bang crash you know dramatic headlines type stuff you might be talking 5% decline in a calendar year.

So the key that's there include places like Ballarat, Ballina, Byron, Canberra, Kiama, Melbourne, Noosa, the surf coast in Victoria, Sydney, and Warragul. Not doom and gloom stuff, but they are the weakest market. Well, I mean, again, just listening to that list, Simon, when you see times of very rapid escalation in values, it's normal. I mean, you and I have been in the industry long enough to know that to see a 5% cooling off

and then a flattening out for a period after that, I absolutely expect that to happen. So it's not like this is unusual. This is exactly how it's happened in every cycle that I've been part of for the last 35 odd years. So it's just getting back to normal, which is exactly where it needs to be, mate. So look, I really want to thank you

for your always refreshing analysis and insight, Simon. And thanks again for sharing this with us on the show today. Always a pleasure. Invest in your future, folks. Thanks, Simon. Well, as you've just heard, we currently enjoy a very powerful combination of quite strong property fundamentals with an all-time record low volume of housing supply, a national economy that's still near full employment, and continued strong financial capacity for a large proportion of Australian households, despite the mainstream media's fear fiction. And this provides a very positive foundation for the times ahead. so if Simon's message resonates with you and you'd like to learn more reach out to him and

his national buyers agency team at propertyology.com.au and after hearing our conversation today let me leave you with a very critical question that you need to be asking yourself will you remain among the many who continue to fall victim to fear-driven groupthink and stay trapped in the land of mediocrity or do you have the courage to ignore the lemming sucking negative nevels and nellies, as you would say, Simon, and instead focus on the key facts and do something positive for your future. Because it's those that swim against the tide of popular opinion and take action that always achieve sustainable success. Stay with us for more on your Property Hub's Realty Talk, your trusted voice for all things property. Property deductions can save

you thousands of dollars each year. To make sure you 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 guaranteed 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 in current times where many areas are experiencing softening values there's a need to focus on creating and manufacturing value in order to build your nest egg and duplex development so it can be a really good way to achieve this but unlike normal residential purchases there's a raft of

different ways to finance a duplex development that can have a significant impact on your profitability. So to dig into this, we're joined by Duplex and Developments Manager Tom Pettifer from leading commercial and residential buyers agency, Polisi Property. So welcome to the show, Tom. Hi, Bushy. Thanks very much for having me. Tom, looking forward to diving into this subject because I think there's a lot of people who restrict themselves to the normal resi lending sort of principles, but there's a lot more to it than this. So what are the different ways of financing a duplex development yeah well certainly we'll um as we discussed that in a previous uh podcast um with the it's very much lending lending focused um and if you have full service

ability well then a standard resi lend is a very viable option at 80 90 lbr and um generally it's very you know just a standard resi lend but when you run the service abilities when children come to play and other factors, limited income, there are other options for such as you can, believe it or not, you can get a lend on the end value, so on the gross realisable value or the net realisable value, which is the gross realisable value, XGST. And also on the total development costs, generally 65% to 70% and a range of 60% to 70%.

But yeah, there's definitely other options other than a standard residential lend with development projects because you're manufacturing equity. A lender, a private lender, particularly a private lender, a second or third tier lender will assess the risk and price of risk based on it. But generally, if a deal stacks up, there are hundreds of lenders out there that are willing to offer this type of product. Yeah, absolutely. So how does the financing method then have an impact on both the overall profitability and the return on equity then, Tom? Yes, certainly. Now, that's a really good point, Bushy. Generally, with the LVR, even though the LVR is lower and you're going to essentially pay more in interest costs because it's more risk associated, your return on total development costs will be slightly lower.

However, when you look at the return on equity, it really comes down to the amount of equity or cash that you contribute to the deal against the profit. And in some instances, for instance, for a gross realisable value lend, if it's a 65% of the value and you've had land that's had appreciation, you can actually put in less equity than what you would on a standard resi deal.

So your effective loan to valuation ratio is actually higher, even though it's a 65% on the gross realisable value. So it really comes down to there's a myriad of factors to determine, but ultimately, yeah, that definitely comes into play. You look at the return on equity based on the two different scenarios and you really compare apples by comparing the effective LVR on each product. Yeah, well, let's dip into that because I'd like you to get your thoughts

on the difference between soft costs and hard costs and their actual impact on that effective LVR or loan-to-evaluation ratio for those who aren't familiar with it? Yes, certainly. So when most standard residential lender, obviously if you're lending 80%, the lender will typically lend on the hard costs. So your land, your build, the soft costs,

the costs that you may not necessarily account for, your legals, your consultant costs, also stamp duties, the costs you're going to have to come up front and the main one is interest. some lenders capitalise interest as we others don't but these are factors that you all need to need to consider as part of it's really knowing the bank's policy as to what they determine hard and soft costs because it has a big impact on the overall cash or equity that you need to contribute towards the deal and then obviously that has an impact on the overall return

on your equity uh contribute as well yeah very good point mate so uh you touched on this earlier but what's the benefit of not going through a major lender for a development project then? Well, look, as I mentioned, the profitability won't be the same because there will be a slightly higher risk margin factored into it, so the overall profit of the deal will be less. However, if the metrics still stack up and you perform a detailed feasibility and the deal still stacks up, it literally can be like for myself,

it's literally the difference between doing something or not doing anything at all and sitting on the sidelines. So I can actually show you a quick example. I just ran a couple of scenarios on the same deal, Bushy. But this is a 485K land deal, 512K build cost. The first scenario with an 80% LVR, the overall profit was $235,000 with a total development equity contribution of $250,000, giving you a circa 94% return on your cash.

Wow. Yeah, and the effect of LVR, this is the key one here, the kicker is the LVR was 76%. It's not 80% because it accounts for some of the soft costs. Now, if we come across and have a look at the 65%, the exact same deal, 65% of the gross realisable value, the exact same specifications, you do give away some profit. So you've gone from 235 to 201, and your development margin on cost is now 18%, not 22%.

However, your developer's equity contribution is 253,000, still giving you a cash-on-cash return of 80%. So your cash-on-cash has only changed from 80% to 90%. So you can look at it and go, oh, damn, there's 30 to 40-odd K less profit. But if the deal still stacks up, I still see the $200K, 80% return on the development margin cost, 80% return on my cash. And believe it or not, their effective LVR is 76.9 or the same. So they're 76% effective LVR. So that's just a little bit of perspective as to some of the numbers behind it. Because a lot of people, myself personally, before I started looking at development deals, I didn't really know that the products existed.

But there's many options out there. There's solutions for everybody if you need a solution. Yeah, very well said, mate, and some good perspective with that comparison. I appreciate you sharing that with us, and I really want to thank you for opening your eyes to these different approaches to the exercise, Tom, and thanks for joining us on the show today. Thanks very much for having me, Bushy. Great to be here. Thanks, Tom. Well, as you can see, there's more than one way that's going to cap when it comes to duplex

development finance that can have a significant impact on your profitability and your return on equity and actually your ability to do a deal. So if you want to find out more, have a listen to Tom and my recent deep dive conversation on the Property Hubs Get Invested podcast, or reach out to Tom and the Polisi Property team at PolisiProperty.com. That's Polisi, P-A-L-I-S-I, property.com. You're watching Realty Talk. your property hub's go-to place for all things property.

KnowHow 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. It only seems like a few years ago that if you mentioned the term buyers agent, most people would look at you puzzled and ask, what are you talking about? even though buyer's agents have actually been around since the mid-1970s.

But in the space of just a few years, awareness of buyer's agents has become commonplace, and the number of buyer's agents has actually exploded exponentially, following in the footsteps of the USA, where buyer's agents are involved in nearly 50% of property transactions, where the selling agent and the buyer's agent share the sales commission. And according to a recent Real Estate Buyer's Agent Association, or REBA, Property Talk Australia Buy Barometer Survey,

almost a third of buyers would now engage an external buyer's agent when purchasing a property. Now, it's fair to say that I have been an advocate of good proven buyer's agents, particularly for first-time or experienced, time-poor, hard-working Aussie investors who can afford them, and that's an important point, and they're looking to buy site-unseen properties in a state. But my emphasis here is on good and proven buyer's agents, because unfortunately, there's very low barriers of entry. And like many fledgling industries, it could be a panel beater yesterday and a buyer's agent tomorrow. So you need to be very selective about engaging buyer's agents who actually walk their talk and have proven and demonstrated experience and

expertise in searching, finding, negotiating, and securing above average performing properties at or below market value. And let's face it, there's a lot of smoke and mirrors in the buyer's agency space. So you really need to do your due diligence and be very selective and fussy on if and who you choose. So the obvious question arises, do you really need a buyer's agent, particularly if you're adding another 15k or more in fees to your property purchase cost? Well, to answer this from a position of authority, we're joined by Paul Gupta, or PK as he likes to refer to himself, who's an active property investor and educator and the Managing Director of Consulting by PK who helps investors from all over Australia to buy property all over Australia by accessing

a unique data-led strategy that combines high growth, high cash flow residential property alongside high profitable property development projects to help accelerate your passive income. So welcome to Realty Talk, PK. So good to be here, Bushy. Thanks so much for that. Looking forward to this for quite a while, Matt. And let's start by saying that it feels a bit like the tables have turned in recent times and that buyer's agents now seem to be at the centre of just about every discussion on purchasing property. So I want to really test this paradigm and investigate all aspects of the property buying process. And let's start by asking you, how do you develop a strategy without a buyer's agent?

It's such a good question. I think I'll preface this by saying that a lot of content these days is dominated, for better or worse, by a buyer's agent. So it's almost like the default for someone who's working a nine to five to say, I don't know anything about property, therefore I must have a buyer's agent to develop a strategy for me. Now, the reality is that a true long-term portfolio strategy or property strategy answers questions like, what is your goal in 10, 15, 20 years time is that goal as good as it is to have actually achievable based on your current income your future income potential your husband or wife and how that couples on to the financial story how many properties you'll need what is the frequency of those purchases you know what is the

yield what is the purchase price of that portfolio build up how long that's going to take in the accumulation phase? How long do you hold it, sell it? There's a lot of moving parts. It's not a simple download my free ebook, 10 properties in 10 years. That's not quite how it works. And you'd be forgiven if you're new to thinking like that is achievable, but the reality, and I'm not saying it's not achievable, reality is that for most people, it's not as simple as let's just get a property every year and we're retiring 10 years with 10 properties. And my contention with bias agents although as you said a good bias agent is very good is that a bias agent typically doesn't play the role of building a strategy insofar as they don't sit down with you

and answer each of these questions that i've just mentioned rather they'll bring that long-term strategy if it even exists into a more narrower i don't want to use the word myopic but let's say short-term view and say, all right, PK, or all right, Bushy, what state do you want to buy in next? What's your yield that you're charging, that you're chasing, sorry, and what's your budget? All right. And maybe you have some other brief inclusions like I want a corner block, I want this or that. That's really the extent to which the buyer's agent will develop a strategy for you or with you, and then they'll go off and try to fulfill it. But really, is that a strategy? And my answer to that question, my humble self, I sort of say that a true strategy, whether it's

long-term or short-term is built with the conjunction or with the help of a good mortgage broker, a good accountant as well. Okay. So a good mortgage broker, for example, will sit down and say, look, PK, you know, right now you have an income of $90,000 per year. Now that's not going to get you too many properties, but let's see how many dependents you have at the moment, how that dependents or kids story will unfold? What's your plans? What's your spouse's income? How's the career progression going to go? There's a long term model that needs to be built up. And then in the long term, you know, they'll say, all right, for you to get to this portfolio value, you probably need properties that yield above X, or at least between X and Y. And therefore, PK,

you know, you probably need to be buying properties that are under 500, under 600, under 700k because if you buy that blue chip quote unquote property in sydney well you never will come to me again because you'll be capped out of your borrowing capacity so these conversations i'm simplifying here but these conversations need to be had with a really good mortgage broker who's kind of been there and done that hopefully they're an investor themselves and then you marry that up with a good accountant and say okay for me to maximize my borrowing capacity for me to protect my assets for me to actually be most efficient in my tax structure no one likes paying tax you know how do i buy this maybe for the first one or two i buy in my own name then i look to

more complex structures like trusts or whatever but these things need to be done with these three parties yourself the mortgage broken accountant at a virtual table let's say and hashing it out It's a three-way conversation, not a one-hour strategy call, quote-unquote, with a buyer's agent. Those are pretty some heavy words, but I think it needs to be said. You're absolutely spot on and always said that a strategy, when we're talking in property terms, needs to look at lifestyle strategy. It needs to look at finance strategy and capability. And then the property strategy falls out of the bottom of that if you've answered all those questions appropriately. what you've just been talking about in relation to the very short-term reactive

what sort of property am I going to buy now that's a tactic not a strategy so a very big difference between the two and I guess the unfortunate thing PK is that a lot of people are so focused on just the property solution but they don't see the benefit of those bigger questions that you've just talked about so I absolutely reinforce in conjunction with you the need to get those three key players around the table. And perhaps a qualified property investment advisor out of PIPA who has that strategic outlook and the ability to actually put those strategies together. So very well said. Sort of moving beyond that then, again, revolving around the buyer's agency piece, how do you buy properties in a state without a buyer's

agency? Yeah. So obviously the next sort of thing is, all right, PK, okay, I get it. You need to be more wholesome in your strategy development but i live in sydney i live in melbourne you know i don't want to buy in sydney and melbourne it's just too expensive on to buy interstate perth brisbane and regional some other place i just i don't have time i don't want to be catching flight i don't have that sort of appetite i need a buyer's agent well this is definitely the traditional type of thinking however in my own experience like what i found and this was an aha moment for me and that i've now tested with thousands of people is that there's these people that you can find they're called property managers now i might annoy someone or many people but i sincerely think that

a property manager is the most critical part of a property team okay of course property team includes quantity surveyors accountants mortgage brokers etc but a property manager for me is the most important the reason is and i still think bushy like nine times out of ten people don't know this if I'm living here in the Gold Coast, which I am, and I want to buy an Adelaide, if I can use data to find the right location, the right sub location within a suburb, the right street, the right property, there are numerous property managers that are happy for me to give them a call. They will inspect the property and tell me if it's worth buying from a rental due diligence perspective. So what does that mean? That means that they'll check for things like drainage, cosmetic appeal,

rental appeal whether there's housing commission nearby etc etc etc i have no idea let's say about adelaide they will tell me if it's a worthwhile property to buy not from a capital growth perspective that's out of their remit but rather the due diligence on the property itself and its owner-occupier appeal and its rental appeal okay so that automatically gives me the local on the ground boots on the ground as it were knowledge that i couldn't gather myself in five minutes for even a year because i'm not a local to adelaide right and do you need a buyers agent to do that no that's the property manager having done that for you and here's a little cheeky thing more than five times out of ten national buyers agents will use or employ the same strategy they'll use local

property managers so you can skip the middleman so to speak and these property managers are they reliable like why are they doing this for free is the obvious question well everyone no one no one there's no free lunch these days, but they have an incentive because if they find the right property for you, do the right due diligence, you're going to give them the management for the next 5, 10, 15, 20 years. All right. So that's the carrot on the stick. And therefore they'll do these inspections completely free of cost. So then the next rebuttal becomes, well, then you're saying, there is some incentivization conflict of interest, but let's think about it. Whereas with a buyer's agent, it's a transaction. They're going to get paid as soon as you settle that

property. With a property manager, if they've lied, if they've overlooked something, if they've misled you, that's going to come up. Maybe not in the first year, maybe not in the second year, five years, 10 years from now, that property is going to bubble up with problems and you'll know who to point fingers at. So there's not a perfect alignment of interest, but it's more perfect than with a buyer's agent. And of course, goes without saying, following the property manager inspection, you get a building and pest inspector to do more of those structural solidarity checks and everything. So that two hurdle system, the two due diligence checkpoints, I've bought more than 10 properties with the same method.

Yeah, I love that. And just reinforcing your point there, 100% agree that property managers are essential, not just managing the property long term, but in the decision making upfront and early. And there's a couple of reasons for that that are worth noting, I think. And that is that, you know, anything can look good on the desktop. But what doesn't come through with that is the local community perceptions of a particular area or precinct, which does have an influence on its property performance, both in terms of capital growth and rentability, as far as that goes. But the thing I like about property managers, and we engage exactly the same process, and I think I've said to you previously, my good wife and I owned and ran a property management business for that

exact reason is that if a property manager is talking about a property and inspects a property they don't want the headaches either because if it's a bad property it's going to be become a headache for them as well as you so really good advice as far as that goes and they are the true litmus test both initially and ongoing as far as that goes so beautifully said let's now move into another area how do you uh buy an off-market property or the under market value property without a buyer's agent then pk yeah let's let's go through that deductive logic okay so you don't need them for strategy you don't need them to buy interstate but this is the common argument that i hear right that oh look you know they have access to these mystical unicorn deals that are never

listed on real estate or domain you know it's uh they're completely privy to the things that you and I aren't. To be honest with you, it doesn't require a course or a $10,000 education product or $2,000 education product to get off market deals yourself. Quickly, of course, there's more detail to it, but all you need to do is be a nice person and develop a relationship with local real estate agents. Local real estate agents get a bad rap, but at the end of the day, they're just people and if you treat them nicely and if you have the right professionalism you can say you can commit that you know you are committed you have a pre-approval you're sincere about buying a property you can just call them once let's say a week every monday two minutes you find the top

five or ten real estate agents off ratemyagent.com.au and you find you know some time maybe 10-15 minutes every monday and just say hey bushy um how's your weekend i called you last week you know my my budget's this i'm looking for this kind of property if you have anything that's maybe pre-market or the owner the vendor is super motivated to sell or whatever like i've got my pre-approval i'm ready to go i'm going to be a very seamless client so to speak of yours bushy i'll um anything comes through let me know otherwise i have a great week and how's the kids by the way you know that kind of thing and you just do that a few weeks then they're in the back of your mind of course the buyers agents are doing the exact same thing it just comes down to

who they like more. They really have the power in their hands. And you might think, oh, PK, but you know, the buyers agents, they're giving these guys so much business. Why would they ever entertain your phone call? That's true. The buyers agents are giving them a lot of business. But if you can demonstrate that you're sincere, and you're actually nice, you develop a rapport with them. Once again, like I said, they're just people. If you can develop a rapport, you can become friendly with them. They'll send you properties. And we've had so many instances of this happening. The other thing that I'd like to mention real quick as well, Bushy, is just because it's an off-market deal, that doesn't mean it's a good deal. There's so many instances where

buyer's agents, really good friends, even better than you and I can be with a sales agent, and they're just getting off-market deal after off-market deal. The buyer's agent's barely looking at it. They're sending it to their client saying, oh, look, exclusive off-market deal. As a new client, a new property investor, your eyes bright. You're like, oh my God, this is something special like the buyer's agent's really doing me a good job and you know all of a sudden you've bought this property for 500 000 and the sales agent back in their office is sort of thinking guys that was only worth 450 high fives all around and the buyer's agent doesn't know because they didn't do their due diligence properly they just wanted to get through another

client because the massive pipeline of work so of course this is not everyone you know there's always good people and bad people in every industry but i myself my experience and my clients experience most off-market deals are really not worth pursuing. I totally agree. And the real issue there with off-market properties, which are quite often properties that they're just trying to sell quickly without going to market, there's no market testing in that. So how are you getting a sense of the property in the context of other buyers? You're not. So I think you've hit on a really good point there. The smokes and mirrors that I talked about earlier often revolves around this off-market special properties that no one else is getting access to. Great point. I now want to move

to the pointy end of the whole property transaction, and that's the negotiation, because that's where the stress often emerges. And your thoughts then, how do you negotiate with an advisor? So like the old school method, I think that if you've never bought a property before, you probably are in the mindset that negotiation is hard work. It's confrontational. there's a lot of friction there. I need to go to the office of the sales agent and really like beef it out with him or her. It couldn't be further from the truth. The best deals are done when there's no one unhappy party, but rather it's a win-win situation. So it's very clear, you get the property, whether it's off market or on market, you value it. Now don't rely

on automatic valuation tools online, regardless of which bank it's coming from. They're all wrong, right for various reasons i won't get into it but value it yourself based on true comparables and once you know what it's truly worth you pick up the phone with the real estate agent once again this can be done interstate and you ask some questions simply to try to break down the wall of information asymmetry in any negotiation whether i don't know it's a ransom deal in some 007 film or whatever it is you're just simply trying to understand or get the knowledge which is on the other side of the wall and you might ask questions like are they motivated to sell or what price would sell it today or you might ask you know why are they really selling it do they

want a long settlement terms or do they appreciate time or is it really just about price okay and if you ask these pointed questions in the right way to the sales agent you get an idea of what they're actually looking for and if you can fit yourself in that jigsaw you can be the the party the the buyer that most appeals to the to the sales agent to the vendor then you can often get the property at a better price okay because your terms are better or you can get it with better terms because your price is better depending on what the two parts so it's a it's actually a fun thing you know you go back and forth and you just try to please each other of course if the price goes beyond your true valuation you just walk away but once again a bit like getting off market deals

it's just about developing a bit of rapport, not being confrontational and trying to satisfy the need of the opposing party. You know, it doesn't exist where you negotiate something 30% under market value. It doesn't exist that in a hot market, you can get 15% under market value. Those things are advertising gimmicks. If it's truly a good market where demand is more than supply, buying it at or just below its true valuation is actually a really amazing outcome. everything can be done via email via phone call interstate yeah extremely well said and it's probably like anything's all about relationships and uh the better you can build relationships the better the outcome is going to be because the mutual understanding is there so look uh

pk it's been a great conversation we're just really scatting across the uh the top of this exercise so we'll we'll dive into this at a future point but i really want to thank you for these very refreshing insights, PK, and thanks for joining us on the show today. Thanks, Bushy. Hopefully it was a bit different and useful to everyone. Yeah, thanks, PK. It certainly was. Well, as we repeatedly say here on Realty Talk, it's always about horses for courses when it comes to making proper decisions because everyone's situation is different. So your decision on whether you need a good proven buyer's agent or not needs to be driven around your level of expertise and property knowledge, the time you've

got available, your affordability, and of course, your sleep at night factor. So with PK's self-driven data-led approach of securing properties without wasting months of doing research or spending all of your weekends in the car looking at property inspections, or costing you thousands of dollars on buyers agents, if this has all resonated with you and you'd like to find out more, you can check out consultingpk.com.au, where you can explore his property investment accelerator course, or jump on YouTube to watch his very informative Australian Property Mastery with P.K. Gupta videos. Stay with us for more on your Property Hub's go-to place for all things property here on Realty Talk. Property depreciation is the natural wear and tear of a building and its

assets. Property investors can claim depreciation as a tax deduction each financial year. Depreciation 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 1-300-728-726 today for an obligation-free quote. Well, that brings us to the end of another great show. Another big thanks to our guests, Simon Presley, Tom Pettifer and P.K. Gupta. And before we go, make sure you don't miss another episode

of your trusted voice for all things property by subscribing to The Property Hub on your favourite podcast player now, where you'll also enjoy the Get Invested podcast delivered to you each and every week. Thanks again to realty.com.au, BMT Tax Appreciation, Appiro Marketing,

DM Media, and Southern Cross Austereo for their ongoing support. I'm Bushy Martin from Know How Property Finance, and along with Kevin Turner and the entire Property Hub Realty Talk team, we thank you for getting invested in yourself, by investing in us and we 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