Property Hub - Investment Insights & Inspiration - Realty Talk Vault: Forcing Value

Episode Date: May 24, 2023

We bring you another classic Realty Talk episode from the vault, which was originally published on November 19, 2022, but is still just as relevant today. Under current flat property conditions around the country, you need to force value and Joe Tucker from Property Principles and the Aus Property Investors forum joins us to show you how with his low cost yet high value tips. 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.

Hi and welcome. Now, given that Australia is just coming out of the second biggest property boom in the history of the nation, where property values in many areas are now likely to actually soften and plateau for an extended period of time, how can you continue to grow value in flat conditions? Well, to open your eyes to low cost yet high results options that give you the best bang for your bucks, we're joined by Joe Tucker, the founder of Property Principles Buyers Agency, as well as the co-founder of the rapidly growing Oz Property Investors Facebook community that now boasts over 28,000 plus members. So welcome back to the show, Joe. Thanks for having me, Bushy. Great to be back. Yeah, love it, mate. You've always got

some great insights to share. So diving into this subject, what mistakes do investors make when it comes to increasing property value as you say it? Well, I mean, the typical way to go about increasing property values is through renovation. That is typically speaking, the easiest and most affordable way to go about. So that's the way I like to go about increasing the value. There's also subdivisions and developments, but that takes a lot of time, skill and effort. And not a lot of the people have a lot of those resources. So cosmetic renovation is the way to go. But some of the mistakes people make is pretty isn't profit. Just because it's the most beautiful end product that's what people see and that's what they want so they buy based on the beautiful

styling and the amazing tap wear and all of that thing so people one buy that bad product because it's already been hard the value has already been created what you want to do is buy what we call an ugly duckling and that's something where it's got good bones it's solid it's fundamentally an amazing property it just needs a little bit of work it's a little bit ugly and you get to pay you're able to buy that property at a premium price because it is a little bit ugly. But when you increase, we call it equity harvest, right? You can harvest the equity in there by spending a little bit of money, but really it doesn't actually take too much work. If you have a good team behind you, we do cosmetic renovations all the time for clients. They haven't even been to

the property, haven't even been to the state. You don't need to go there. You can have a good property manager that will be able to help you through getting the painting done, the floor we can cover off a little bit more in detail of that but those are some of the mistakes people just getting the prettiest thing possible and not looking at not seeing the potential of the ugly duckling yeah okay well you've touched on your thoughts on what is the lowest cost biggest impact way to force this value and equity harvest as as you say in flat market conditions but when you say a cosmetic reno let's break that down a little bit because that sounds like sounds like putting lipstick on a pig to some degree. Joe, for those that are listening in, what does a

cosmetic reno actually mean? And what sort of things can you do to the property? We'll perhaps get to some examples in a minute, but let's break that down to start with. Yeah. I mean, one of the best ways to add value to a property, and this could be one of those beautiful properties, right? If you don't have any renovation skills or expertise, don't do it. But how are you going to add value. One of the best ways to do that is to change the profile of the property. And what I mean by that is turning a two-bedroom home into a three-bedroom home or a three-bedroom home into a four-bedroom home. By adding just a wall and a door, you can all of a sudden take your property from the price of a three-bedroom to the price of a four-bedroom. So those are some of the things

that you can kind of look out for to add value to a property. Another one is adding an extra bathroom. If you can go from three bed, one bath to four bed, two bath, just have a look on realestate.com at the different prices between those two assets. Spruce up the property a little bit with some paint as well. If you want to go a little bit extra, but don't do that even. Just do an extra wall and convert that from a three bed to a four bed

and you'll make a big, big difference to the property. Yeah, I think you've uncovered a good one there because you're essentially changing the profile of the property. And we know that bank valuers and others are looking at, well, is it a three-bed, one-bath, or was it a four-bed, two-bath? If you've got the opportunity to create and change that profile, you're suddenly putting in a different price bracket. That's a really good way to harvest that equity that you spoke about.

so i guess the the the real art with this though is being uh able to actually see uh ahead of time how you can create those opportunities what what's the best way for investors to be able to do that as you say well the the easiest way to do it really for anybody is to go onto domain.com go to suburb profiles and in that it tells you what is the medium what the average price the price of a two bedroom, generally speaking, or the price for a three bedroom, I believe they use median, but we don't have to go down what the negative size of what medium price is. But you can just see a two bedroom goes for this, a three bedroom goes for this, whatever a three bedroom, should I be looking at a three bedroom to a four bedroom? So there's markets where I look that it's

got a $20,000 difference between a two bed and a three bed. I'm not going to make money there. So oh, I'm not going to go there. There are other suburbs where there's $120,000, $150,000 by doing that. And it really depends on your outcome for your property. If you are looking to get your deposit back, right? You put a deposit into this house. I want that money back in the form of equity. So what I'm going to do is renovate it, add a wall, and then get my deposit out so I can then go again onto my next property. So you want to look for those fat, chunky markets where a three bed and a four bed are in different places and and look for extra living rooms and extra laundries because that all of a sudden turns into that extra bedroom and turns into that extra

bathroom those are some of the things that you can actually go out there and do but it takes time and energy and effort right you do have to go out there and do the research and make sure that you can actually get these things done but it is possible so jump on that's my top tip go to domain sub profiles look at the difference in prices and then look on the actual buy side of things and can i afford this type of property is this going to work looks like it is let's go for it take some action and make it happen yeah i love that mate but good news now with with you know apps like domain and realestate.com most of them actually have the floor plans of the properties on the listings and it's pretty easy once you start looking at floor plans to be able to

identify well this living room is big enough for me to carve off a bedroom and put an extra wall on the door in uh it's you know you can do a lot of that desktop even these days before you even jump in the car and go and check the property out and what i also love about what you're suggesting is you know one of the major trends that we're seeing as a result of the post-pandemic activity is that people are now we've actually seen a reversal of house sizes shrinking to people looking for bigger houses with the exodus lifestyle and the need for remote working in offices in a location so if you can pick up some of those older properties that have a big footprint but you can actually create those spaces then that's an awesome way in a flat market to actually

manufacturing i love your term harvest the equity mate so look uh thanks for opening our eyes to these high impact value creation opportunities joan and thanks again for your time on the show today thank you very much bushy have a great one thanks mate well as you can see there's always low-cost opportunities to force and manufacture value on property regardless of the prevailing conditions. And if you want to rub shoulders with other like-minded investors where you get exposure to the full spectrum of all investment options in a very safe and friendly environment, make sure you join Joe's Oz Property Investors Facebook community. And if you want to hear more from Joe, have a listen to the deep dive conversation that we enjoyed on the Property

Hubs Get Invested episode, or you can reach out to him direct at propertyprinciples.com.au. Stay with us for more, here on your trusted voice in property, Realty Talk.