Property Hub - Investment Insights & Inspiration - Realty Talk: The final piece of the puzzle

Episode Date: January 27, 2024

Over the last 3 weeks, Scott Aggett from Hello Haus has helped us discover how to find, analyse and negotiate the best property purchase.  Now - it is time to get down to business and Scott does that by taking a broad brush approach to help us negotiate the entire journey. NEW – join our Facebook group, The Property Hub Collective: https://www.facebook.com/groups/1857513011165686 Join the Property Hub community on Substack! Sign up to get Australian property news, opinion, and episodes in your inbox: https://propertyhubau.substack.com/ 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.

Hi, once again, and welcome to this week's Realty Talk show. Well, over the last three weeks, Scott Agate from Hello House has helped us to discover how to find, how to analyze, and negotiate the best property purchase. Well, now it's time to get down to business, and Scott does that by taking a broad brush approach to help us negotiate the entire journey. Scott joins Bushy in just a moment. Hey, if this is your first time with us, welcome. You're going to find us on all podcast players and through the Southern Cross Oz Stereo Network.

If you like the show, please make sure you hit that subscribe button. Help us to continue to bring you the best guests every week. You can join the conversation too anytime on Facebook at the Property Hub Collective. We'll be back in just a moment as Bushy kicks off this week's show. property deductions can save you thousands of dollars each year to make sure you maximize 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 1-300-728-7000 226 today for an obligation free quote. Realty Talk and your host Bushy Martin. Do you know how to navigate the sales process from offer to settlement and secure your dream property with confidence? And do you understand the role of your bank conveyancer and real estate agent in the contract and funding process and understand your rights for the pre-settlement inspection and property handover? Well that's exactly what we're going to share with you today In the last three parts of our special Buy Ready series, Hello House have helped you to find, analyse and negotiate

the best property for you. And in our final concluding fourth session, expert negotiator and Hello House co-founder Scott Agat joins me again to focus on the meat and potatoes of property transactions. So welcome back, Scott. G'day, Bushy. Thanks for having me. Scott, this is what a lot of people perceive

as the boring part of the process, but I know it's a very important part of the process. So let's start with what you define in your buy-ready course as how ownership works. Yeah, well, you need to understand, Bushy, how you're going to set the contract up. So are you buying it in your self-managed super fund, for example? Are you buying it in a trust?

Are you buying it in a personal name? Are you buying it in a company name? Are you buying it with a co-tenant or a co-purchaser? There's so many different ways you can set that up. So you really need to be clear on the entity up front and you should be working definitely with your mortgage broker or your accountant and your mortgage broker to understand how to set that up because it has big legal ramifications later. It affects capital gains. It can be difficult to, you know, transfer properties. There's a whole heap of, you know, different issues that can arise if you set it up incorrectly and it can be much more tax effective if it's done right in certain ways as well.

so i know you probably spend a lot of time with your clients making sure the setup is right how long do you think it takes your clients to set up some of these things self-managed super fund is it the longest well i can take three to six months for a self-managed super fund exercise just to get the ducks in a row before you're even ready to to pull the trigger so yeah and you know if you're talking to your accountant you're getting the because there's a whole bunch of trusses that bear trust and there's a whole bunch of others up the the financing of self-managed super properties is much more protracted than the normal buying process. So it's absolutely getting really clear on what entity you're buying the property in because you only get one bite of

the cherry when it comes to the entity ownership structure. So it's worth making sure that as part of that early research, you work that out well in advance of before you're starting to actually look at property so i love love the way you were introduced that um what mistakes do you see buyers making at this property transaction stage um not being aware of what's available to negotiate in or out of a contract i think is really important so inexperienced buyers you'll see um just absolutely be stuck like a deer in a headlight when they read a contract and they'll get certain contract review points back from their conveyancer or solicitor and have no idea what to do so So it's not uncommon for us to have to coach people through this transaction stage and really talk them off the ledge or talk them over the ledge if you like to say you should have confidence to move forward with the contract in its current form or you should absolutely go back and renegotiate around these points.

So having education around what is available for you to include or exclude is a big one, and that's a mistake. I think getting an understanding around the big ticket items like deposit release and the impact that that might have on your risk in the deal, understanding your rights to pre-settlement inspections, understanding your rights for access between exchange and settlement. people think bushy that they can buy a property and then they can just keep turning up every every couple of days to measure up and you know move some furniture in early we've got you know people that were selling properties that would rip tvs and cords out of walls and leave giant holes there what's the recourse for that so you've got to understand all these things so that when you go into contract that you can actually cover your butt and say okay well those tvs look like they're going to be an inclusion in the contract they're not stated in the contract at all are

they going to be removed if they're going to be removed are they going to be patched up and repainted at your cost as the seller or how that's going to be presented so you just got to know these things so that you're aware of what the contract looks like the other the other big one that we come across is things left behind so it's not uncommon for us to buy often in regional properties as well or acreage and things and you know you inherit a shed that's falling down you inherit an old tractor that's broken and car parts and tons of old timber that's, you know, riddled with white ants and snakes. All these things that should have been dealt with by the seller, but because there was no obligation in the contract for them to do anything about it,

they just packed their bags and left it all behind there. And of course, you inherit that mess. So yeah, there's a lot to be wary of when you're about to sign a contract and you should make sure it's all triple checked by your conveyance or solicitor and by state to state there's big variations on these things as well so you know if you are buying interstate as an investor for you know for example or you're buying your principal place of residence in a different state it's employing someone that's licensed to act in those states understands the intimate details of those contracts and can protect you beautifully said now in our previous session on negotiation You touched on some of the minutiae in contracts that people can focus on unnecessarily and end up either losing the opportunity.

So in that context, what we're now talking about, what are the, in your experience, some of the things that are worth focusing on and some of those that aren't that important in relation to contract terms, et cetera? Yeah, well, I mean, a conveyance or a solicitor will tell you how important these things are. And sometimes they want to get, they get across to you that they're really earning their money or they're trying to earn more money by creating more negotiation points where they've got to liaise with the alternate side, some conveyance rules solicitor. So you've got to be careful about that. Like we'd sometimes enter into a contract negotiation with a buyer when I was an agent

and the, you know, the buyer solicitor couldn't help themselves. There's a laundry list of contract changes, all of which are just tiny little dots and crosses here and there. and it's like this is just, you know, picking a fight just for fight's sake and you don't need that and we could just really negotiate around these things and keep it much cleaner and simpler. The other thing I'd be conscious of is you talk about small things. So it's things like penalty interest.

You know, it seems small, but if you don't settle on time, I had a contract review today, the penalty interest was 18%. Normally it's 8%. So, you know, if you're paying 18% interest on the funds that are overdue because you settled five days later or 10 days later because the bank messed things up at CommBank or ANZ, that's a lot of money, right, that you could have otherwise negotiated around. So you either reduce that right down to 4% or 8% or you take your solicitor's advice. So there's lots of little nuances like that in the contract that I think you need to be aware of and take their lead. but be cautious of the solicitor or conveyance that can find 50 points that they want to renegotiate around

because I think that is just a money dig opportunity on their behalf. And it puts the whole contract at risk for things that probably aren't that important at the end of the day, need to be considered obviously. And again, I want to stress that neither you or I are solicitors or conveyances, so the comments we're making are based on our general experience and we're not advising you on these particular aspects.

But when we – I guess I've seen a similar exercise, Scott, when it comes to building inspection reports where to the uneducated, anything that's put in that building inspection report can be taken as a major issue and as a reason to either walk away or try and slice dollars off the contract when in reality some of those things are pretty minor and don't really give the leverage a buyer needs to try and negotiate. What's your read on that?

Yeah, building a pest is really interesting. So one of the things that will come up a lot as well is should I trust the building and pest that the agent has supplied? And at the end of the day, it's been outsourced to an independent third party who's taking that legal risk to give you the advice. So I think, yes, you can, but if you can organise your own one and you know who the building inspectors are or you've had

a recommendation to use them, then that might be a good situation if time permits. But it's a really interesting point around the building of pests because they're full of disclaimers. They will often say you should seek, you know, a deeper electrical view or a deeper plumbing view or roofing view or subsidence view or whatever it might be where you've got to go and employ other specialists to come in.

There really isn't a lot to look at. It's just that the inspector couldn't get access to it or it was slightly above their pay rate in terms of their knowledge of how something works. So you've got to take an educated view on that and be commercial about it, I think, as well. So if they're big ticket items, if they're things that are going to create problems for you to undo, that could be rising dam, might be subsidence. Those things can be really expensive to fix or be problematic long term. If it's damage in a roof, it might be as simple as replacing a sheet that stops a leak that was coming through in the laundry or whatever.

You've got to get to the bottom of what the problem is and be commercial about it. and then that puts you in a position where yes you can negotiate around it or do you just push on and buy the property to not put yourself at risk that you're going to delay further and potentially miss the property if it wasn't you know subject to the building pest in the original negotiation that you exchanged on yeah so it's a the building pest is an interesting one it is a constant battle bushy for us with buyers in terms of um people buying their own home are willing to trade off on certain things because they're buying a house that they've fallen in love with and it's a particular school zone or lifestyle region those same problems for an investor they'll walk away

from because they don't want the headache of you know rising damp or a problem that uh flaking paint or gutters that are rusted or something like that it's very interesting to see the dynamics of play between an investor and a home buyer i've seen a lot of people walk away from deals where they should have bought the home because they were inexperienced and didn't know what they're looking for and were put off by a building and press report that i thought was fine yeah and it's it's just a matter of if you've seen hundreds of them or thousands of them you're better educated in that situation so i think it's well worth running it by your conveyance for all your solicitor and saying these are some red flag areas of concerns for me with your you know

professional hat on here can you advise me on whether or not there's a problem here that we should look into further or should we fold up our deck chairs and put them in the car and drive away and leave that one behind so yeah that's where a professional negotiator and someone that's um you know highly skilled and and experienced that it's going to be able to do the same thing i'll often um you know get a gauge of how bad something is and explain to them well actually this is a reasonable fix the reasonable fix is this you would you know send it back establish what's there you know it's at best it's just repainting it repatching it at worst it's digging in for a little bit more of an explore explain people how these things work and it gives them

some comfort around it yeah absolutely knowledge is power in that regard and knowing who else who's got the expertise if you don't have it they can give you the outsource it right really really key successful property investment is a game of finance do you have the right team and the right game plan realty talk is brought to you by know how property more than mortgage brokers bushy martin and his team of investment architects set you up with a sustainable strategy structured to lower your costs tax risk and stress while increasing your capacity for growth know how has helped over 1900 homeowners and investors secure more than 800 million dollars in property wealth so get set to live more work less and live your legacy want to know how to

invest in your freedom visit knowhowproperty.com.au this is realty talk powered by realty.com.au you know a lot of people once they sign the contract they think apart from getting the bank to pay the money the job's done again in your buy ready course you go through the preparation that's required in the run-up to property settlement. Can you sort of just scratch the surface there on the things that we need to be aware of? Yeah, well, the first thing we do as soon as the contracts are exchanged or signed and dated,

we get it to the mortgage broker if you're borrowing funds because they've got a job to do now that really kicks into gear. So they're going to get you through all your application, your paperwork, sign off everything, make sure you've got a deposit ready to pay and all the checks and balances in place there. So the mortgage broker is someone that you're going to do a lot of work with

between exchange and settlement, make sure that all ticks off nicely. you need to set up a pre-settlement inspection so if you haven't got extra inspection times already arranged to go through and measure up or take back friends and family to look at it then you've got one pre-settlement inspection to go through and double check the property is left in the same condition at which you committed to purchase the property and you should definitely do that you should take your time at that inspection as well and make sure that it's not rushed that the property has been completely cleared out or if it still is tenanted or occupied

that there's an undertaking and knowing when that property is out and get notified by the agent to confirm that before settlement the property is now vacant even if you don't go back and check that yourself that you've got that in writing from the agent you want to know about the tvs and things on the wall as i said you want to know about all the inclusions and exclusions have they left behind the sofa they promised to leave behind have they left behind the artwork they told you all the light fitting have they taken the broken down car that was out the back and all the rubbish that was underneath the house so you just want to make sure they're all checked off and you want to speak to your solicitor and conveyancer to understand your final check

amounts that are going to get paid make sure you've got the correct amount of money in your bank the deposit has obviously already been paid up front the interest of that is typically split 50 50 in the agent's trust account to the buyer and the seller so your conveyancer solicitor or your mortgage broker will give you an up-to-date number as to what it's going to cost in terms of the handover funds at the end it's going to take into account balancing up all the utilities as well so council rates water rates um any other um you know land tax amounts that are outstanding that are against that lot um so you'll know that when you do purchase the property it's clear of any debt and uh that it's ready for your bank to take over and for your mortgage to be in play or

if you're buying it in cash obviously that it's also nice and clear great advice a couple of uh other things there uh i think just to take on board we from the finance breaking business we generally suggest that purchasers put an extra $500 over and above what the conveyance suggests needs to be in their trust account pre-settlement because you've only got to have an adjustment to a loan account that exceeds it by 20 cents as much and that can hold up the process. So we often suggest a little bit of a buffer and then the conveyance will just any surplus left over we'll send it straight back to your account. So that's one key exercise.

And then if you're buying an investment property and it's tenanted, and it's likely to still be tenanted when you take possession, make sure you get to see the tenancy agreement to know exactly what has been agreed with that tenant. So you're going in with all eyes open and there's no surprises that might occur

in terms of rate increases or the duration or whatnot. So that you're crystal clear on that. so again that's a really good one actually yeah it should be in the contract um initially i think in terms of the lease documents but you definitely want to see the inspection reports photos and things and how well um the ledger as well in terms of have the tenants been good payers previously and that is actually something that we often like to do before we even make an offer we want to make sure that the tenancy is tickety-boo and it's all nice and clean um and we've had issues with this stuff before for example we just bought a property for an investor in gladstone in queensland

And the owner, the seller, engaged the property manager on her behalf to release, renew the tenant's lease for six months at the same price they were paying when the selling agent had told us that the lease was ending in November when we were settling and that we could put the rent up by $40 a week, which was about 12%. so we were locked into a situation where without any authority the property managers leased it for an owner that's no longer going to own the property and the tenants were locked into a new lease which was not able to be undone so as a professional negotiator I had to negotiate the whole thing again so I went back and said well this isn't settling until you shortfall the difference that we're out in rent so we had 40 bucks a week for six months the owner actually put that money into the settlement funds so that we had to come up with whatever it was, $2,600 less or whatever it was from memory. And we covered that. But otherwise, we would have

been stuck with a lease in place at $40 a week less. So you've got to be really careful with these things and make sure it's all nice and tight before you settle on it and commit to owning it. 100%. I mean, you and I both know that, you know, I've just seen too many people who make an offer and the property is going to be leased beyond the settlement date. And they just take it as read what the agents told them in relation to how much the rent is, et cetera. Actually, see the whites of the eyes in relation to the details of those agreements.

And as you well see, look at the rental repayment history and everything else that's associated with it before you're 100% committed and the settlement goes through. Beautifully said. Absolutely. I guess the final thing that we haven't touched on is property insurance. So I'd love your thoughts on that one. Well, you have to be insured between exchange and settlement. So we have to put that in place. And you can ask your conveyancer or solicitor for advice around that, or possibly even your mortgage broker. Who do you go to, Bushy? Do you advise your clients on the property insurance? Or would you rather go through their conveyancer?

yeah it varies from the finance uh perspective uh the only thing that we are red hot on is for investors to make sure they get specialized landlord insurance because yeah sadly uh the uh landlord insurance policies offered by most of the general uh insurers just aren't worth the paper they've written on uh and give give their investors very little protection when there's an issue because it's not a matter of if it's just a matter of when when it comes to investing in property so we'd certainly make pretty strong suggestions on that but coming back to what we talked about in the due diligence stage of one of our previous episodes what we are noticing in that capacity is that a lot of the specialist landlord insurers now

are actually cancelling policies and not offering new policies in areas that have flood or bushfire risk uh so yes again for anyone buying a home or an investment property is really important now to do that homework well and truly in advance to make sure you're not in a situation where you can't physically insure the property and therefore that's a really good good um spot actually to raise that because that's actually happened to us recently in bundaberg where we were looking in certain suburbs and we had honed in on those for investors for particular reasons and then at one point we had no problems getting insurance and within a week with obviously no one going to tell us it's going to be a change it was uninsurable in those suburbs so we you know we

we very quickly backed off looking in those locations and it's all to do with you know certain flood ratings and the rest of it and we of course do huge due diligence on the flood or fire but they were just blocking out postcodes absolutely houses within those areas were at risk of not being able to get adequately insured so yeah it's a really good thing to check up front for landlords. And I think a growing challenge in that regard, given the climate change exercise and the fact that a lot of insurers have got research way beyond what you

and I could put our hands on. So well worth making that an early part of the checking process as far as that goes. So, look, again, we could talk about this for hours. Scotty, I want to thank you for all of these insights and thanks again for all of your generous time throughout this very special buy ready series for those who've really resonated with all of your words of wisdom and want to learn more by doing your in-depth buy ready course please i encourage

everyone to reach out to scott and his team by clicking on the hello house.co that's h-e-l-l-o-h-a-u-s the german form of house hello house.co that you'll see in the show notes where you'll get access to 44 micro lessons and over three hours of scott's unique expert content and for others who've taken all of this on board and still don't feel like they have the time and skill or it's just too overwhelming and stressful how else can hello house help them scott well you can reach out for analysis and negotiation help and for pre and off market strategies so we work with clients nationwide at any price price range so yeah you can find us across all the social medias or even me on linkedin if they want to reach out directly unfortunately for me sometimes bushy my phone

number is very easy to find online no rest for you then scott now before we go if anyone's got any further questions or comments on this vital buyer ready subject make sure you join us on the property hub collective facebook community by clicking on the link in the show notes where you can openly share your thoughts uh safely and gain the wisdom and shared experience from other like-minded property players and industry leaders without fear or favour. So thanks again, Scott, and let's keep the buyer conversation going.

Thanks, Bushy. Have a good day. Hi, just before we go back to the show, I want to spend a few seconds and tell you about a book that was sent to me that's now become my go-to reference when I'm looking for inspiration about property investment. You know, sometimes it's not about

knowing all the answers. It's certainly more important to know what questions to ask. This book by Rasty is called The Property Wealth Blueprint. And it's one that you don't read just once and then put it away. It stays out as a reference. It's a book that you go back to time and time again, as I do, because it's packed with personal experience

and with great examples of how to get property investment right. It's very frank. It's to the point. And as you can see here, I've needed to bookmark several points. And I can tell you that it's a constant companion on my desk here. The remarkable thing is that it's absolutely free on Rasty's website, getrare.com.au. Get Rare.

It's a gateway to a richer life. The website there for you again, getrare.com.au. So get this book. Get it for yourself. Realty Talk exclusive to The Property Hub. Well, this has been a journey over the last four weeks to look at every aspect of getting buyer ready. Over the last four weeks, Bushy's guest has been Scott Agate from Hello House, and we

thank him sincerely for his tremendous contribution. We'll be back again next week, so watch out for us in your inbox and make sure that you don't miss a single episode of Realty Talk or Bushy's Get Invested podcast delivered to you each week by subscribing to the Property Hub now on your favourite podcast player or wherever you're listening to or watching this show. Also join the conversation anytime on Facebook at the Property Hub Collective. Thanks to our supporters and content partners, Realty.com.au, BMT,

Tax Depreciation, Know How Property Finance, Get Rare Property and DePiro Marketing. I'm Kevin Turner and on behalf of Bushy and the Property Hub team. We look forward to seeing you again next week.