Property Hub - Investment Insights & Inspiration - Realty Talk Vault: What and where to buy

Episode Date: November 9, 2022

We bring you another classic Realty Talk episode from the vault, which was originally published on May 11, 2021, but is still just as relevant today. As a property investor, WHAT you buy is just as important as WHERE you buy but with the current buyer frenzy that is easier said than done. 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.

In the current property market fever that's gripping most parts of the country at the moment, property buyers seem to be falling over themselves to get properties in the best locations. But if you're a property investor, what you buy is just as important as where you buy. Now to discuss this, I'm joined by Goose McGrath of Dash.Buyers Agents, who are very good at helping to build prolific, profitable property portfolios using the unique Holy Trinity formula. So welcome and great to have a chat to you here on Real Estate Talk, Matt. It's an absolute pleasure to be here. Thanks for having me, Bushy.

As an investor, why is what you buy just as important as where you buy? Yeah, I think this is a really big fundamental shift that a lot of investors need to make because we all get caught up in this idea of trying to chase suburbs and locations and where's the latest hotspot. But the problem is just knowing the suburb, for example, is not necessarily going to steer you towards success. And there's a few reasons for that. So number one, just simply buying on the wrong street can affect your growth by up to 1.8% on an annual compounding basis, which can actually cost you hundreds of thousands of dollars. So you've really got to start digging down to the granular details of it. Now, there's a couple of ways to think about this.

So firstly, you've got to think about property types. You've got to think about property strategy and all of this kind of stuff because there are a lot of people who have bought in good locations but have bought the wrong assets and subsequently have either lost money or underperformed. So fundamentally, I think from a principles level, there's three things that every investor needs to think about and it's what we call the holy trinity. And this guides your decision-making process in any market. So first and foremost, you want to identify locations that are primed for growth because you want to get good capital growth. You also want to identify assets that are going to that are going to outperform in growth so typically you're going to find that it's going

to be houses not apartments in most markets all of that kind of stuff you want to buy assets which are also cash flow positive and you want to buy assets which i have value add potential and if you can get those three components working together that's going to help you to decide what you're buying so rather than just ad hoc going should i buy anything in this location you can really start to pin down okay what are the characteristics of the specific assets that are going to make this a good investment within those locations so i mentioned they're the holy trinity and you would have heard it yourself in the industry. People talk about, well, you can either go capital growth or cashflow. But what you're suggesting is that

using your unique approach, you're able to achieve capital growth and cashflow and potentially value adding. I would take that on a slightly different angle. I would say that it's not the approach that allows us to get both. That's what you must do, right? So any investor who wants to be successful must make a choice to achieve both. Because if you know that you can, and so I have a motto that you should always strive for greatness because to aim for anything less is to aim for mediocrity and we're much better than that, right? So if you know that you can get capital growth and cashflow at the same time, why would you make a choice between the two? It doesn't really make a lot of sense. Now, understanding how to get both is a case of when as much as it is where.

So you've got these like, where's the hotspot location? Where's the hotspot location? But just because a location might be booming. So for example, I'm in Newcastle right now. It's booming. It's great. There's lots of growth. The problem is it's the wrong time. So when and what actually play, I would even say, I would go as far as say a much bigger role in the decision-making process about investing than even where. Because if you can get the right time in the market, you're going to get the opportunity to get cashflow and growth at the same time. And then within, if you can identify the right time to get into a market then you can select assets within that within that suburb or that location that are going to give you the combination of right returns so cash flow

growth and the ability to add value so it all kind of winds into each other so listeners out there that are really uh picking up their ears and eyes to this right so how can they go about it well that's a that is a great question so fundamentally i think the biggest mistake that um investors make when they're trying to identify the location i know we started this with what is just as important as where. But when, as I say, is just as important as what and when and where. So if you imagine that most growth cycles in a location go for about three to five years. So we can average that and say four. And then if you think that you can divide that into quarters, just like any kind of sporting match or football game or whatever, you got the first quarter, second quarter, third

quarter, fourth quarter. Most of the time when we're hearing about hotspots, we're at halftime. And so people are jumping into markets and they're just getting the third quarter and the fourth quarter worth of growth. Now, an interesting thing happens in the first and second quarter, particularly in the first quarter, is that often rents are rising before prices. And that's caused by the fact that typically there's growth drivers in an area, people move there first, they start renting, rents go up, all of that kind of stuff. Then the growth transfers over to the property market. So identifying emerging markets is actually going to allow you to accelerate your return on investment, which is a huge big thing, which means that for every dollar you spend,

you're going to get a much higher return and that's through a combination of cash flow and growth that you're going to get you're going to get the full growth cycle so four out of four out of the five years or three out of three out of the three out of the four years and on top of that you're going to have cash flow so the properties are going to be self-supporting and taking care of themselves so i would suggest that identifying emerging markets not current markets which are currently in the throes of an overheated growth spurt is where people need to start to target thanks for your time today mate my pleasure thanks for having me