Realty Talk: When to buy + Renovation Success + Window of Opportunity
00:00 Welcome to Realty Talk, the show that brings together the country's most authoritative and respected property experts. Follow us on all the socials and subscribe for updates and exclusive offers. Realty Talk is powered by realty.com.au, connecting buyers, sellers and agents differently. Greetings and welcome to Realty Talk, your go-to place for all things property. I'm Bushy Martin from Know How Property Finance, and this week's show helps you answer the age-old question, when is the right time to buy property. Steve Polisi from Polisi Property Buyers Agents kicks things off by looking at when commercial property is right and wrong for you. Lloyd Edge from Oz Property Professionals then answers the question, is now the time to invest in residential
00:48 property based on his new book, Buy Now? And as property values soften in some areas, it may be the time to consider more active ways to manufacture equity. So Belinda Smith from Renovate and Real Estate, or the Rare Consultancy for short, joins us to reveal what makes a successful renovator. And to close out the show, I open your eyes to a rare window of opportunity that's currently around for property buyers. So before we get into it, to make sure you stay at the leading edge of property opportunities, just jump on channels.realty.com.au forward slash Realty Talk and hit the subscribe now button so that you don't miss another episode by getting every show in your inbox every week. And for taking the time, I'll give you a free copy of
01:36 my award-winning book, Get Invested. We've got some very timely insights to unpack. So let's get on with the show. Greetings and welcome. Now, given the flurry and frenzy of activity in residential property markets in recent times, where rising values are reducing rental yields, there's been a lot of renewed interest in commercial property. But when's the best time to buy commercial? To help you with this, we're joined again by our show favourite, Steve Polisi, a successful property investor, author, and commercial buyers agent with PolisiProperty.com. So welcome back to Realty Talk, Steve. Hey, Bushy. Thanks for having me back on great to see you again mate uh now sort of kick the subject off uh on you know when to
02:24 buy commercial what if it's commercial property wrong to look at okay that's probably the best way to pose it as well because i can give you all the benefits but when it's wrong for you is the right way to look at it so first one is when it's too early in your portfolio so with commercial you generally need a 20% to 35% minimum deposit. So you miss out on the leveraging side of it. The whole benefit of property is leveraging. So I'd rather go buy an early investor, three residential properties versus one commercial property
02:57 because if we get the same capital growth, we can make three times as much. So that's the first one. The other one is it doesn't suit your risk profile. So we'll talk about this later on another episode. There are risks with commercial and you need to be able to handle those risks. So if you're like a single parent with lots of kids
03:14 and you're struggling day-to-day, you may not be able to support like a vacancy period or something like that. So it doesn't suit your risk profile. Another one is the capital because if you don't have the required capital, that 30% is a big chunk of change. That's just going to wipe you off
03:31 the kind of commercial ladder as well. And then the other one, probably the most important, if you don't understand commercial property, don't buy it. It's a lot more complicated than residential. Residential, as long as you buy in a good suburb and you don't do something silly like buying a flood zone or a termite ridden house, you'll be okay. But with commercial, there's leases, tenants,
03:51 foot traffic, road traffic, demand, future developments, lots of things that can kind of turn it into a bad investment quickly. So you need to understand the due diligence on a commercial property very, very well before you jump into it. Yeah, no, very good points. Well, let's flip the tables then
04:06 and have a look at when commercial property is right for you then, Steve. Okay, so the first one is if you're getting towards your serviceability limit with residential property, you can then jump into commercial because the commercial is higher cashflow. Like you buy a million dollar commercial,
04:21 you're talking 35, 40 grand a year, sometimes passive income. So when the banks apply their criteria, the 1.5% interest, the vacancy periods and things like that, it's still in the green. So you can keep moving forward that way. So if you hit that glass ceiling in terms of lending,
04:36 commercial can get you into the next property sooner rather than later the next one is if you want a passive income quickly so like i mentioned million dollar purchase 40 grand a year positive you're looking to build a passive income it gets you there instantly so if you're looking retirement bushy and we've had this chat privately as well commercial is right over the right round time frame and then the last one is probably shouldn't say this on a podcast but if you're a business owner that's cash rich, but poor in regards to the tax man, there's some benefits there because you've got the cash to get into it. And then you can obviously bring the benefits that way with the income that property generates. Yeah, extremely well done. And you've touched on
05:18 this a little bit already. But as you and I know, property is always a game of finance. So walk us through the major differences between commercial lending and resi for us, please, mate. so you do have the same resi options you've got the full dock loans and the interest only loans they're generally slightly a period like they're not 30 years they're generally 15 to 25 years but there are a couple lenders doing 30 so that's you can get the same one then you'll move into things called like lease dock loans which most most investors haven't heard of a lease dock loan is a loan based on the strength of the lease so if you buy a five-year lease property you get a five-year loan. And then at the end of the five years, when they renew the lease, you get another
05:59 five-year loan. They're very good because it doesn't take into account your serviceability because it's based on the property itself. Normally have a bigger deposit. You're not going to get an 80% loan. You're probably going to have a 70% or a 65% loan. And that's just risk mitigating for the banks because if you stop paying repayments or the tenant leaves, they can offload it for 30% discount and still get their money back. So that's really useful for someone like me who's got a large portfolio you can then keep buying properties based on the properties themselves and then there's no dock loans which we all know but they're normally a 50 to 65 percent deposit they just give you the money as long as the valuation stacks up but leave stock loans are
06:40 probably the most interesting one worth researching the listeners on yeah now well said and just for some relativity for those that aren't familiar with commercial lending space that's and you've mentioned the shorter uh durations uh term the sort of people are getting their head around what how did how are you seeing it relating to the resi fear and the differences between the two on that front so actually the commercial is becoming more of a thing so like the most lenders are actually opening up now most most of them actually giving bigger borrowing capacities for commercial now and it's it's all about with the lenders balancing their books they want to have a certain amount of assets in certain states. And sometimes I've actually had clients not get
07:21 financed with a certain lender because they're too highly leveraged in that state, which just baffles me because it should have to do with the property, not its location. And then we go to a different lender. I would do it worth saying though, make sure you speak with a commercial broker who understands commercial. A residential broker will fumble about and probably get the job done with one of the big four. But like I said, there's lease stock loans. There's even commercial only lenders like think tanks and ones like that so ensure that you speak with someone who's got some runs on the board they've been doing commercial for a long time because because it is more complicated in terms of the lending sphere totally agree and the end of the worst
07:57 thing you should do is go directly to a to a bank it get a specialist in the space and get not just a broker but a commercial broker i think you've made it made a really good point there because they're very different skill sets and very very different worlds mate so look uh mate as always I want to thank you for these very timely reminders, Steve, and we appreciate you taking the time to join us on the show today. No problem. Thanks, Bushy. Thanks, Steve.
08:21 Well, if commercial property is right for you and you're interested in knowing more, grab yourself a copy of Steve's book, Commercial Property Investing Explained Simply. Or if resi is more your thing, he's recently released his follow-up book, Residential Property Investing Explained Simply, which you can get directly on his website at policyproperty.com or all good and bad bookstores. Stay with us for more here on Realty Talk. Successful property investment is a game of finance. Do you have the right team and the right game plan?
08:53 Realty Talk is brought to you by KnowHow Property. More than mortgage brokers, Bushy Martin and his team of investment architects set you up with a sustainable strategy structured to lower your costs, tax, risk and stress while increasing your capacity for growth. 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. Hi and welcome. When's the right time to invest in property? Should you be looking to buy now or wait until the uncertainty subsides? Now, these are questions that we constantly hear from potential new investors because the
09:45 mainstream media is constantly keeping us scared about the future, which often paralyzes us and prevents us from taking action. So if you're a new investor wondering what to do when, you're going to enjoy part two of my chat with Lloyd Edge, the Managing Director of Oz Property Professionals Buyers Agency, and the author of his recently released second book, Buy Now, which helps you to answer these and many other property questions. So welcome back to Realty Talk, Lloyd. Hi, Bushy. Great to see you again, mate. Now, to kick things off and to help potential investors adopt the right mindset, what's the difference between investing in a home versus becoming an investor as you see it? Well, essentially, when you're investing in a home,
10:25 that basically means you're buying somewhere that you want to live in. Now, that may or may not be a good location that's going to get you capital growth and things in the property plus it's also a liability so you're not really getting any tax benefits and any income from the property when you're an investor you're essentially looking to firstly buy in the best location that you can find that makes sense for you so you look at where the infrastructure is where the population is moving to where the good demographics are and you know you look for income coming from the property You can claim everything on tax, including depreciation and any maintenance on the property. Build your portfolio like that.
11:03 You're already investing then. And of course, you aren't investing where you live either. You can invest anywhere in the country that makes sense to you. Yeah, and I had some very good points there because it really is a massive difference between the emotion-driven exercise of buying a home that you want to live in versus a more number-driven rational side of the equation as far as an investment. And I often see investors who, because they think they live in a home, they're going to be immediately become good investors, but it's a completely different mindset and a completely different approach. So very well said.
11:38 So in that context, then, what are some of the most common investor mistakes that you see then, Lloyd? Well, following on from what I just said, one of the most common mistakes is actually buying close to where you live because people think that they know the area. I always ask this question of people, you know, people come to me, they live in a certain area, and I ask them, what is the vacancy rate in the area? What has the growth rates been in the last five years and so on? They don't really know the area. People think they should invest there so that they can, you know, drive past and check on the property and things like that. But in reality, wherever you end up investing, you'll end up knowing that much better than where you live anyway, because you'll do a lot of research. You'll find out about what's driving the town, the city, what the vacancy rates are.
12:20 you know, where are the infrastructures and everything. So that's, you know, that in itself is really, really important. Yeah, I totally agree with you. And, you know, let's face it, the chances of your suburb amongst the 15,000 of that are around the country being the highest growth, best performing area are pretty slim. So if you were limiting yourself to your backyard rather than becoming borderless, then you're really clipping your wings. So I totally agree. So once you become an investor then, Lloyd, what are some of the most important responsibilities that people need to be aware of as a landlord? Well, I think one of the things that people really do need to do is keep on top of the maintenance of their property.
12:59 So, for example, for me, when my property manager comes to me and says that they need to get a plumber around or, you know, there's a light bulb out or, you know, there's an issue in the bathroom, something like that, I address it straight away. So you don't want to have a property that, you know, may have some issues because that might cost you more later on, but it can also potentially put the tenants at a bit of risk, but also, you know, it's not going to keep the tenants long-term in terms of being happy. So that in itself, I think is the number one thing that, you know, is very important.
13:31 Yeah, no, well said. Now, as I've said many times on the show, the quality of property management can make or break your investment success. So what are the pros and cons of having a property manager then, Lloyd? as you say. I think most of it is pros. There's not many cons to having a property manager. I'm a real advocate for that. Obviously, you pay them a commission, which comes out of the rent,
13:52 but they will collect the rent on your behalf. They'll attend to repairs. And again, if your property is not near where you live, then it's really hard for you to manage it because you need to be there to let traders in to fix any problems. When you're leasing the place out, you need to be able to open it up and show prospective tenants and things like that. If there's any issues, with rent not being paid then your property manager uh yeah can go after that uh and and yeah then they can if they need to go to the tribunal stuff they can look after that for you so so that's all um very important and it's all tax deductible as well so i think it's really important to to have that one one sort of advice i would give people is try not to negotiate too
14:31 much on a property manager so uh you know we always want to get a good deal but it is about quality better than just getting the cheapest rate as well so you really compare what you're actually getting and make sure that you're getting good quality property management not just the cheapest rates. I totally agree I mean the difference between a property manager charging 8.8% and 11% for example on an average rental property is about a cup of coffee a week so if you're prepared to put your highest cost and biggest risk asset in danger for a cup of coffee then you've got to ask yourself the question and also if you're if you're not seriously about getting a good quality property manager and you're absolutely right mate there's a diversity there
15:17 but uh if you're creating a second job when you buy an investment property then uh as an investor you've missed the point so uh some really good points there but uh really want to thank you for these very timely thoughts and reminders lloyd and thanks again for joining us on the show today Yeah, thanks. Thanks, Lloyd. Well, if you're currently wondering when and how to start investing in property and how to do it all properly, grab yourself a copy of Lloyd's new book, Buy Now, which you can get from all good bookstores as well as a few bad ones, because the best time to buy property is every time you can. You're watching Realty Talk, your trusted voice for all things property. property deductions can save you thousands of dollars each year to make sure you maximize
15:59 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 1-300-728 726 today for an obligation free quote. Hi and welcome. Now, have you ever dreamed of transforming your property into something beautiful? Or perhaps you've imagined yourself upgrading and flipping homes for quick cash injections, experiencing the excitement that you often see on the makeover reality TV shows. Or maybe you're just looking for new ways to add
16:44 value to your properties and manufacture equity in an otherwise flat and softening real estate market. Now, if any of these ring true, then renovation may be your answer. Now, I can hear you thinking that you just don't have the time or the expertise to do this justice, but is this really true? Well, to dive into the exciting world of renovation, we're joined by the founder of Renovate and Real Estate, or the Rare Consultancy Collective for short, and that's Belinda Smith, who's a very highly respected and proven renovation coach. So, welcome back to Realty Talk, Belinda. Oh, thank you for having me. I'm excited to be here. Likewise. It's a subject that we haven't really covered in much detail in recent times,
17:26 and it's certainly an area that's going to enjoy a strong growth exercise given where the market's heading. So tell me, just to kick things off around the whole renovation area, what's the difference between someone enjoying renovating and someone else stressing over the whole process? I think the difference is someone enjoying renovating by that I mean not getting tangled up emotionally and focusing on every little tiny part of the process like walking in after the tilers of being there and trying to pick fault and just being hard to deal with and being hard on yourself and being hard on the expectations of the results that you might have set for yourself just allowing it just
18:13 allowing yourself to enjoy the whole process in the present in the moment and understand come into it with an understanding that not every day is going to be easy and there are going to be some things that you're not very happy with and that it's just part of the game and learning to roll with the punches yeah no well said now there's a lot of talk around people sort of getting out of their day jobs and becoming full-time property developers property investors property renovators So in your view, how can someone transition reasonably quickly from their day job to renovating full time? Oh, they can transition very, very quickly if they're starting with a nice financial backing. If they're starting from a healthy financial position, obviously,
18:57 it's much, much easier. But for somebody starting with nothing, then I really like to say, allow a couple of years, two years at least, set up properly in a proper structure so that you and treat renovating like a business every moment every day matters and make progress and make good progress and make good profit and just move forward from there and then um off you go honing your craft along the way is really important and understanding that as a beginner renovator it might take a little while to really settle in and uh and and get to full speed and um and and just be determined to keep moving through it and forward until you make enough profit from your deals to quit your day job. Yeah, I think the biggest challenge in the early days is if you're
19:46 relying on bank money to actually get into the game, then you need an income to be able to borrow the debt. So I've seen a lot of people where one partner will continue to work and pay the bills and have that income while the other starts to get into the renovation and property process itself. Has that been your experience over the years? Yeah, that absolutely works. And the other thing is, yeah, definitely don't quit your job and then say, I'm going to do this, hang on to your job. Understand that there's going to be a period of discomfort, I like to call it, not torture, discomfort, where, you know, you're going to be busy, you're going to be maintaining your day job, you might have kids, you've got everyday life
20:27 in front of you. And at the same time, you'll be renovating on the side as a side hustle until you can transition across. And yeah, being able to obtain finance via the bank or some kind of alternative lender or being prepared to jump into a joint venture with somebody else really helps. Being open to doing something differently than you always thought also helps. But yeah, it can definitely be done. Yeah, awesome. So most people get into renovation either to upgrade their property or if you're investing, you're looking to maximise your profit. So what's been the biggest impact on profit and what can be done to prevent it? I think that people get very tied up in their renovations emotionally. And so they make emotionally charged decisions
21:17 about what product fixtures and fittings. They'll listen to people outside of what they know to be true themselves. I'll start to listen to outside influences about perhaps getting a custom built kitchen when an IKEA kitchen might do the job for a flip and just putting too much money into that project and not really doing the feasibility studies and really calculating what your profit is likely to be before you start and sticking to that budget all the way along the line as well as sticking to a really nice tight time frame as well. Yeah, so overcapitalization is a big mistake and I still see it. Yeah, and you hit the nail on my head. Once the emotion starts to drive the decisions and the checkbook goes out the window and that's both in terms of time and cost, which
22:03 are both the same thing effectively. So very good points. So tell me then, why do some people only get around to renovating one property while others go on to do many? I think perfectionism And I think allowing yourself to be really stressed through the process, taking it on board like it's a big drama, you know, and also not choosing a really nice profitable project to do that's within your own capabilities as your first project. So some people take on way more than they should or great big structural renovations that take ages to reach, you know, from beginning to a profitable sale, fighting with spouses, not just, you know, it's not about who's right or who's wrong. It is renovating is really a whole bunch of decisions that need to be made one after the other in the calmest manner that you can and, you know, with your eye on the prize always. And so I see some people do that very, very well. They just, you know, they hit their flow and they get a really good trade team together and they'll go from one project to the next, whereas some people will be really caught up in the moment and they're just, they won't, they might not naturally be wired for it, but they won't allow themselves to really grow in the capacities of a pro renovator. And that is to be a little bit easygoing and get organised and not be really hard on the tradies and just keep, you know, keep that motion.
23:35 Yeah, no, very well said. It's all about the mindset and the outlook as well as the dollars. So, look, I really want to thank you for these timely, refreshing insights, Belinda, and thanks again for joining us on the show today. Oh, thank you. It's been a pleasure. Thanks, Belinda. Well, it's clear that clever renovation executed properly can definitely be profitable. So if renovation is something you've been thinking about or you've been doing,
24:00 but it's just not working for you, reach out to Belinda and her rare team at renovateandrealestate.com.au to learn more. You're watching Realty Talk, your trusted voice for all things property. Successful property investment is a game of finance. Do you have the right team and the right game plan? Realty Talk is brought to you by KnowHow Property. More than mortgage brokers, Bushy Martin and his team of investment architects
24:28 set you up with a sustainable strategy structured to lower your costs, tax, risk and stress while increasing your capacity for growth. 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.
24:59 Hi and welcome. Today, I just wanted to make you aware that we're currently in a very small window of opportunity for savvy property buyers and investors. Why do I say this? Because in the short to medium term, interest rates are on the rise, which means that your buying capacity on your purchasing power is dropping accordingly. and property values are coming down in some areas as well. And if many of the bank and other economists are right, rates will rise progressively over the next six to 12 months in an attempt to
25:29 get inflation back within the 2% to 3% range. And as a rule of thumb, for every 1% increase in rates on an average $600,000 home loan, your buying capacity will drop by roughly $100,000. But here's the kicker. Late next year to early 2024, interest rates may well start dropping again to avoid a recession. And all of this just at the time when a large influx of migrants are moving to our safe and sunny shores that will put upward pressure on rentals and property prices against the backdrop of housing shortages exacerbated by construction industry challenges. So over this period, property values may come back initially by 5% to 10% and or plateau in some areas over the next 12 months or so, before starting to increase again as interest rates drop and migration
26:21 pressures spike. Now, if this proves to be correct, and no one can give you any guarantees on this, then the next few months will be a great time to secure property in advance of the next growth phase in some areas in 12 to 18 months time. So this is where the rare window of opportunity arises. There's now a very short term sweet spot when savvy property buyers can secure properties on better terms before rate increased borrowing capacity falls, reduces their purchase price power and prevents them from doing so. Now to find out what you can do and what impact rising rates will have on your buying capacity and your purchase price power, reach out to a savvy investment specialist mortgage broker like our team at KnowHow. So the key here is not to leave it too
27:11 long because the best time to invest in property is actually every time you can, while the majority sit on the fear fence and do nothing. Because as a contrarian, times of change like this create the best property opportunities. That's more food for thought. I'm Bushy Martin from Know How Property Finance and remember to always get invested and stay tuned for more. 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
27:52 fined residential investors almost $9,000 in first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. Well, that brings us to the close of this week's special show. Another big thanks to Steve Polisi, Lloyd Edge and Belinda Smith
28:13 for bringing us up to speed. And before we go, make sure you don't miss another episode of your trusted voice for all things property by subscribing to Realty Talk Now on Apple Podcasts, Google Podcasts, Spotify, YouTube, or wherever you listen. And make sure you jump on channels.realty.com.au forward slash Realty Talk and click on the subscribe now button to get a free copy of my award-winning book, Get Invested. And while you're there, make sure you check out one of Australia's most extensive range of properties for sale from over 7,000 agents
28:47 nationally, where you'll even find properties that aren't listed anywhere else. Thanks again to realty.com.au and BMT Tax Depreciation for their ongoing support. I'm Bushy Martin from KnowHow Property Finance. Remember to always get invested and I look forward to seeing you again next week. Miss something in this week's show or want to catch up on past shows? Do it anytime at realty.com.au where we connect buyers, sellers and agents differently. Thank you.
There aren't comments yet for this episode. Click any sentence in the transcript to leave one.