Property Hub - Investment Insights & Inspiration - Realty Talk: Where we have gone wrong with affordability

Episode Date: April 6, 2024

We have a blockbuster for our 600th show.  This week we help if you are actively invested in residential property and interested in diversifying into commercial property. Bushy is joined by Mish Daniel the founder of commercial buyers agency Revolve Commercial to discuss the differences between resi and commercial and why it is important to understand them before getting started.  Also Bushy asks Dr Cameron Murray, Chief Economist at Fresh Economic Thinking, what’s really going on with housing affordability and what needs to change. 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, I'm Kevin Turner and welcome to our 600th Real Estate Talk show. It's hard to believe that 12 years ago we started a podcast in audio that would continue, would evolve and grow to be the longest running and we believe the first of its kind as a regular weekly show to educate, help and encourage people who want to invest in property as an owner-occupier or an investor. Look, there are so many people that I want to thank for their support over the 12 years. Too many, in fact, to do so right now. But I would like to express my personal gratitude to the show's current team, especially Bushy Martin, who contributes a huge amount each week. And of course, to our sponsors, Realty, BMT, Know How Property, Get Rare and also Apiro

marketing. We look forward to the next 600 shows. It's daunting, isn't it? Well, kicking off this our 600th show, Bushy poses a very good question. How is it that at the richest point in human history, we no longer appear to be achieving improvements in desirable housing outcomes and instead actually appear to be going backwards on many metrics. Well, in an attempt to unearth what's really going on with housing and what needs to change, Bushy talks to a leading housing commentator, Dr Cameron Murray, who's the chief economist at Fresh Economic Thinking. That'll be up shortly. And then Mish Daniel, the founder of commercial property buyers agency Revolve Commercial, sets out to answer questions posed by residential investors wanting to diversify

into commercial property. Hey, if this is your first time with us, welcome. If you like the show, please hit the subscribe button, help us to continue to bring you the best guests every week. And you can join the conversation anytime on Facebook at the Property Hub Collective. We'll be back in just a moment as Bushy is joined by Dr. Cameron Murray. 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

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 realty talk and your host bushy martin now albert einstein is often quoted as saying that the definition of insanity is doing the same thing over and over and expecting different results. And from where I sit, this pretty much sums up our approach to Australia's everlasting housing affordability and accessibility debate. For as long as I can remember, and I'm sad to say that's quite a long time, we've been continuously complaining about housing affordability. Now the fashion and the lingo may change, but the housing mannequin of affordability remains the same and it feels like it's getting worse. So how is it that at the

richest point in our human history we no longer appear to be achieving improvements in desirable housing outcomes and instead actually appear to be going backwards on many metrics. So what's really going on with housing and how can we affect meaningful change? Well to get to the heart of the matter of this enduring situation which affects each and every one of us we're joined by leading housing commentator Dr Cameron Murray, Chief Economist at Fresh Economic Thinking who recently appeared for a two-part deep dive on episodes 314 and 315 of our Property Hubs Get Invested podcast and he's recently published his second book, The Great Housing Hijack, the hoaxes and mix and miss that keep prices high for renters and buyers in Australia. So welcome to Realty

Talk Cameron. Thanks for having me. We had a great chat before Christmas but now the book's out and about and a great time given what's being talked about in the media of recent. So to get straight into the book, what are the key messages of the great housing hijack? Right. Well, I think the big one is that housing problems are not new. Every time someone tells me there's a housing crisis in 2024, I go, what about 2014? What about 2004? We had reviews and inquiries all that time. And my favorite quote is from back in 1836, when Charles Darwin, the biologist, arrived in Sydney and his diary entry for the first day says, the number of homes recently built is truly surprising. Nevertheless, everyone complains of the high rents and difficulty in

procuring a house. Of course, the population of New South Wales in 1836 was 20,000. And we've had multiple multiple reviews and inquiries for 200 years into this problem so the message is simply that housing markets are probably doing what they've always done and when we look at the long arc of history we can see the the tension uh that makes solving housing so difficult because someone's rental cost is another person's you know asset return and this is what i call the symmetry of property markets in the book and it's that economic tension that uh invades our political debate and what i say you know there's a housing cheer squad who stands on the sidelines to distract us all from this core economic reality of housing and so we do a lot of talking

and very little action on housing because we know for every winner there's a loser and that that just makes it so difficult and if we you know if we look at history the times where we did make radical changes involved wars or new you know if we look abroad new nations being formed and only then is the crisis really big enough to make radical change so yeah it sort of lays out the incentives uh for different people and why the debate continues and looks at what what's worked elsewhere yeah okay well uh one of the things i'd like uh in the book is your discussion around the supply myth so can you talk to us about that and the sort of associated distractions that goes with it yeah so the idea is and you'll hear it every single day uh at the moment that

there's not enough housing of course if you just go back 18 months before this rapid population increase in the last 18 months we had more bigger better houses per capita than any point in human history we just had closed borders for a couple of years and we had this pipeline of new construction and you know what people were complaining about housing then too so it's really not a supply issue and i think there's a key um key message i would i would put and that is that people confuse density and supply and i spend a lot of time in the book laying out the economics of housing and how the incentives work and what we can expect markets to do and it lays out that yes supply is about how quickly new housing at any density gets taken up each period of time right the density

is distraction when people say oh look that one house converted to 100 apartments so 100 extra they're measuring on the wrong dimension they're measuring on the density not the supply dimension yeah and so it becomes this great big elaborate political game of supply supply supply and in the process of changing planning laws you're picking winners with all these new property rights and Where are you going to invest in new train lines? And so, of course, lots of property owners are happy to have that debate, knowing that no one's forcing them to flood the market with new homes and bring the price down.

They're just getting these windfall property rights. And so, you know, that fits really neatly in the hijack debate of something we can talk about a lot. We can promise more supply, more supply, more supply. And on the other hand, promise we're not going to crash prices, we're not going to crash prices, we're not going to crash prices, and we can ignore the contradiction. yeah extremely well said well you you touched on uh history from way back when we first settled

round that out a little bit with what history is actually teaching us around the whole housing issue yeah so i think i spent a lot of time looking around the world historically where and when have people stopped complaining about housing uh very rarely let's just say and you know a couple of good examples come to mind so pre-world war ii australian home ownership was in the low 40 percent in the cities it's higher in the in the country because of land grants and you know after the first world war soldier settlements and and other grants but in the cities very very low so the majority were renters in the cities by 1971 we'd got home ownership up to 71 percent in the city so we took a quarter of people out of private rental into home ownership

with bigger better dwellings than ever before and we did that by basically subsidizing them into homes and building them with public money and we also had a lot of rent controls during that period which made landlords sell because they weren't making a good return they'd get better returns elsewhere and people many people became homeowners and if i look at that experience and i look at every country i could find uh it is these big public efforts to offer people non-market rentals or non-market housing that have really changed the face of the housing debate now whether that's um you know in europe after the second world war with the million homes program in sweden or whether it's singapore's uh housing development board which is a public

home ownership system that got home ownership from 20 in 1965 to 88 at the end of the 1980s these are the transformational things we've done in the past and i think perversely we now assume that if we let the market rip we'll get all those outcomes that we got in the past when we really offered a great big you know had a huge public hand in orchestrating better housing outcomes and i think that's part of the hijacked debate is we expect markets to deliver something they've never done and i want to sort of transform the debate and go yeah markets great they work for most people in australia home ownership is 67 we don't have to fix anything for them we've just got to take this sliver of renters and give them better options whether that's public home ownership

subsidized rental or some form and we'll build it up over time so next time in the property cycle if rents rise 40 in two years well guess what instead of 33 being affected we're down to 15 okay we've solved most of the problem and especially those people most squeezed so i i think that's a totally reasonable approach um it's what's worked historically but it's really not on the policy radar at the moment well it's funny you mentioned that because i guess i as i mentioned in the opening i'm old and crusty enough to remember the days back in the 60s and 70s when public housing really was a safety net that that took all the heat out of the exercise and because of thatcherism and the the flow on to the privatization debate where

government's now pretty good at pointing the fingers to the private sector to have responsibility for everything and a private sector that is always going to be just in time or just after time actually because it's about profits it's about shareholders so there's a built-in issue that flows from that and it clearly there's a need for governments to step up and and take some accountability for actual public housing provision is what what i'm hearing but uh yeah rather than me say that can you sort of summarize then what's the real true nature of the underlying problem and then flow into perhaps an expansion on yeah your suggestion of housemate that may well be the solution to it so underlying problem is to we're competing with each other for locations and the

ammunition for that competition is our wealth and income and so that you know low-income people who need accessible urban locations are always going to be squeezed that's why low-income people cluster at the urban fringe they pay they pay a toll in terms of the time to commute to places because they can't afford that premium location yeah and so it's a combination of location and income in conflict and yeah so we solve that by subsidizing people into homes and and i have an example in the book i mean imagine if we only had private toll roads every road was owned by someone different they could set prices wherever they want i i would imagine we'd have a movelessness crisis not a homelessness crisis because people wouldn't want to move because they'd have to pay

a toll to get anywhere and you know how we made transportation cheap we just got a public option anyone can commute on these roads whenever they feel like and we funded it collectively in a variety of ways as we do with everything you know what we did with public hospitals are exactly the same thing it's a yeah exactly people tell me i'm crazy oh governments can't build houses i'm like you know we just expect them to build schools in every suburb nationwide cities country and people move and they have kids at different ages and then they have to build more schools and they have to hire the teachers it's a big complex thing and you know what it's so boring that it's you know it's controversial in certain locations but imagine going and i mentioned public schools

and when we decided oh every kid should have the right to school and people go that's crazy that's student politics that's so uh ideological that's communism and then we did it now everyone loves it and we expect it and we offer and it's universal right the elite students from our capital cities often go to public schools yeah it's not it's not clear to me why we can build and manage schools roads and everything else and not go oh well you know what having housing options in the city for people of various income levels is just not something that the market's incentivize to do why don't we create that option and you know it's it's not rocket science i i just i feel like um it's just not on the agenda but it's the only thing i could find that worked

right so if up zoning and supply would work i would have just written a book about why don't we up zone but i couldn't find the evidence for that right because that would be so easy so it's actually a slow burn difficult thing and it's controversial and it takes time out you're going to be really bad at it at first but unfortunately that's the reality so what i propose is what i call housemate which is you know job seeker job keeper housemate medicare it's just the aussie policy program these days but it's essentially copy what singapore did yeah right because um over 80 percent of singaporeans live in public housing right the free trade mecca of singapore is essentially everyone does public housing and that just involves like schools building housing

options or in all the suburbs of our cities and our big regional towns and people who don't have homes which is already only 30 and people who can you know we we address the very poor and the homeless you know and we find places for them but out of that group we give people the option to rent or buy from the public housing provider at a heavy discount and if they're happy in their luxury unit and they've got two dual income people and they want a fancy pool and a you know shared tesla in their new apartment block they can do it i'm not forcing anyone but you know everyone will have that option and in singapore when you're 21 years old you rock up to hdb and you could apply for a home from the public housing developer and unless we're talking about that or some variation

of that we are trying to like pull this lever on this root goldberg machine of economic incentives that have never worked before to get this outcome when there's nothing stopping governments building houses and giving them to people who don't have them at any price they want at any time and and if there was a different way to do it i would have proposed it but you know all the tax tweaks all the supply regulation all of this you know we didn't have any of that when charles darwin arrived we didn't have any of that in 1911 when we had the first new south wales inquiry into rising rents and the first fair rents act of 1915 and so and that's where i end up and i think you know if we can talk about houses more like roads and schools and just having the option out there

for anyone is a normal thing we do without forcing you know anyone to change without trying to orchestrate a collapse in the private market then i think we're we're a long way ahead of of getting to a more sensible outcome and a more sensible debate 100 agree and i think the the core issue for me is responsibility and accountability in real terms, Cameron, because we have a history now of a political environment where there's a bunch of finger pointers that are always criticising someone else, but not really stepping into the space and saying, right, we're going to take control of this. So I guess my challenge to politicians and policymakers out there is to actually step up step in uh take control of this because there's no losers in what you're suggesting

it's not going it's not materially going to affect the uh investors and the private market from that perspective but it's it's definitely going to underpin and provide a safety net for those that are economically challenged to get into housing so i i see it as a as a complete solution in that regard it just requires government to spend money on bricks and mortar rather than incentives and other places they're still spending the money they're just not doing it in areas that are going to have the right sort of impact yeah that's right there's a big attitude and it frustrates me no end that if your government owns so the public housing stock of new south wales was worth 32 billion in 2012 it's worth 54 billion in 2017 what a great asset i'll call it a housing

fund but because it's a non-current asset on the balance sheet we get to pretend oh it's so expensive and costly i'm like you just made 20 billion dollars for nothing right when you go home from work right you take off your work you know public service employee hat all of a sudden investing in housing in new south wales is the best thing ever you get on the phone to the mortgage breaker can i have a million bucks to buy a house in sydney what a great investment but then when it's on the balance sheet of the public sector oh it's a terrible cost in position what are we going to do and that's a mindset shift that's you know part of the hijack debate um you know we build homes for defense personnel we make sure if you have to live somewhere because you're in the

military you have somewhere to live well we people have to live in the cities right um or in commuting catchments and do you know what why don't we just treat like treat it like everyone's in the army and give them an option it's i don't know it makes sense to me but it does annoy people um because it involves the government doing things and as you say being accountable for actually implementing something which is very i think politically risky yes but it's worked before It's not like this is new. All we're doing is really doing full circle back to what we were doing when the baby boomers started driving the market post-World War II.

It worked very effectively then. Why wouldn't it do so now when we've got much better access to information and technology to make that happen? So it comes down to political will. But, look, I know we've only just touched on this. We'll get you back to talk more about some of the great subjects that you've unpacked in the book. I just want to thank you for these really quite revelational insights Cameron and I certainly

want to encourage everyone who's serious about really understanding the true nature of what's driving housing and property in Australia to grab a copy of your book Cameron from all good book stores and probably a few bad ones as well as well as keeping up to speed with housing movements on your fresh economic thinking think tank by clicking the link in the show notes so thanks for joining Thanks, Cameron. Thanks, Bushy. 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 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 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. This is Realty Talk, powered by realty.com.au. Now, since COVID's turned the world of property upside down in recent times, there's been a lot of increased talk and growing interest in commercial property, particularly from investors in terms of the pros, cons and differences with other property options.

So for those of you that have invested in residential property and are interested in diversifying or transitioning into the wonderful world of commercial, or you're trying to work out whether to invest in residential versus commercial, you need to know what are the differences that matter and the ones that you need to know about when it comes to comparing residential with commercial property investment. Now, to help you with this, we're joined by Commercial Real Estate Buyers Agent, Mentor, thought leader and fellow podcaster, Mish Daniel, the founder of Revolve Commercial. So welcome to Realty Talk, Mish. Hey, Bushy, thank you very much. Lovely to be on your show.

Thank you. Absolutely. Yeah, looking forward to jumping into this because I know it's an area that's near and dear to your heart. And I guess let's cut straight to the chase and get into the meat and potatoes of what we're going to talk about. And I'd love for you to start by just outlining what are the distinct differences between investing in commercial properties versus residential properties? Look, I think basically what we're talking about is two different, completely different asset classes. And despite the fact that they're bricks and mortar, they both are buildings on land, people often make the huge mistake that trying to do residential property or adopt the same mechanisms that you would use for residential property and applying

them to, sorry, commercial property, they're worlds apart. Now, the massive differences would be you're looking at residential, which is for moms and pops and everybody to go to sleep at night and have a good roof over their head, whereas commercial is really where you're going to go and earn your keep where you you know you're going to go and make your money so often what I what we recognize is you know and this doesn't sound great but I'm going to say it anyway you know you can live in a slum but but where you work you want your your workplace to look amazing because that is your front of place and that is that is where you're representing yourself to the world you know so often we see and there's there's a lot of nuances around that we won't get

into it right now because that will that will take us another three hours to talk about um but it's it's basically you've got your three sectors in um commercial where you've got retail um you've got industrial and then you've got office commercial and in those sectors you've got your sub-sectors as well so um there's so many differences i'm just i'm literally just just this is the tip of the iceberg yes I absolutely agree and I think the the key take home that I'd really like to reinforce is that there's certainly a world of opportunity in commercial but don't start looking at commercial from a residential set of glasses because everything's different and not only the types of properties different but the way it's financed

The tenancy exercises are different. It's really, I encourage people to, one, have a good listen to your podcast to start getting familiar with the terminology and the paradigms that will shape how you need to start looking at commercial property and learn that language. It's very much like learning another language. And once you're proficient and fluent in it, then and only then really start looking seriously at what are the key opportunities that flow out of commercial property. So I want to transition now, Mish, into getting you to talk about and really illustrate the key benefits of investing in commercial property. Look, let's just shoot straight through the heart over here. Everybody loves cash flow. so your biggest takeaway in commercial real estate is cash flow and the reason

for that is you've got a higher yielding assets now there's risk and reward with regards that yes commercial is a little bit more risky however if you're using the right mitigation principles you can you can use that to your your you know to your benefit. So what do we do in using your skills or basically knowledge? I'm going to say education. You need to be educated to know what you're doing and how you can leverage on commercial. So the biggest would be, you know, in residential, you earning a gross income, gross yield. So you're still going to take off all your outgoings before you're actually earning that that cash flow whereas in commercial we work on a net basis so we look at all the outgoings and we say okay let's

put those aside but if you are yielding let's say six or seven percent net then you know that that's what you're putting in your pocket okay so that's the huge advantage the other difference is in commercial you've got incremental increases on your on your leases you've got long leases you've got a lot of stability in those leases knowing now something that a lot of people don't know about is the difference between a residential lease and a commercial lease they are two completely different animals all right in a residential lease somebody can break the lease in a commercial lease it's very difficult to break that lease okay it's a legal binding document that holds them there should they break that lease they are still liable for the balance of their

lease term financially so there's a massive difference with with how you deal with that commercial is it's called commercial because it is a commercial acquisition it is a commercial is business you know so you're doing your business in commercial and your your your legals your documents your entire package you need to understand the the commercial side of it so the legal side of it is is paramount to the success of your journey in commercial yeah extremely well said and i think it's important for those that are starting to look into this area to recognize that even from a legal perspective if we're dipping into the commercial arena versus the residential arena where the residential generally uh the legislation is

favouring the tenant particularly in the the current mode of things and it's increasingly so as respective state governments start to tighten up on the residential tenancy legislation my read and correct me if i'm wrong here mish but in the commercial arena it's it's more an even playing field and potentially giving more power to a landlord or be the owner of the commercial property than the tenant maybe maybe not uh but one of the things i i love being a an outsider looking into the commercial space is that you mentioned those sort of net rental yields in that sort of six to eight percent mark well if we if we look at even a high yielding property in the residential space net once you take out all the costs because most of the costs are being absorbed by the

landlord in residential versus pushing a lot of those on costs onto the tenant in the commercial space we're comparing sort of two to three percent net yields with six to eight percent net yield so coming back to your point around cash flow there's a very clear opportunity there so when I want to switch now because everyone in property that doesn't matter what shape or form it is focuses on the rewards you've touched on a couple of these already you know it's we need to look at what are the risks and you can you talk us about some of the risks associated in the commercial arena okay well i think when people think about commercial the biggest risk that they think of is vacancy okay um and what we do in commercial is you want to mitigate as

much risk up front so when we're purchasing commercial properties we're having a look at various different factors now i don't think i've mentioned the difference between doing the due diligence on a residential versus the due diligence on a commercial in residential you're looking at two areas you're looking at the building the structure and the area okay in commercial you're looking at about five minimum five areas you're looking at the building the structure you're looking at the area you're looking at the lease you're looking at the tenant you're looking at the the um the certainty of the tenants are the type of tenant what kind of tenant are they are they going to be a tenant that's going to be staying there for a long time

you're looking at the the fundamentals of the property itself so in other words the fit out um very very important and i think this is is where a lot of people make a mistake is if you're going to let's let's call an office for instance you go into an office and they've got a whole lot of glass offices and beautiful carpeted floors and beautiful ducted air conditioning going through well the first question that i would ask is who paid for that fit out okay because if your tenant paid for that for that what does it tell you your tenant is very invested in staying in that building if your landlord paid for that fit out your next question you'd want to ask is did the landlord offset the cost of that fit out to the tenant so inadvertently the tenant

would still be paying that fit out and what does it look like on the lease again you know when people go and they spend a hundred thousand dollars on a fit out or two hundred and fifty thousand dollars plus on a fit out it really tells you that they're invested in that building they don't want to go anywhere okay um the other thing that we have a look at is incremental increases so we want to make sure that there are incremental increases that's going to give you that added rental to a certain extent um and this again it's part of that mitigation of risk now we do that a

lot of people say but yeah what about if the if the tenant moves out at the end of their term you've got to understand that in commercial you are earning a higher cash flow um and one of the reasons for earning that higher cash flow is that i call it gray funds that you want to keep a little a little um gray funds that would basically get you over the line for the next six months should the tenant vacate generally in the lease you've got between three to six months notice so you can start marketing your property well ahead of time but by the time they do vacate you can have somebody else lined up i call it gray funds because those are the funds that you're going to use as an incentive to get a new tenant in and or pay your your bills your mortgage whatever it is

and you don't really want to go longer than about two to three months so it's a matter of being super active working with a good managing um agent that's doing that for you and there we go you tell me bushy where's the risk yes yeah and then what i'm also hearing uh with that mish is that just just in touching on the things that you've mentioned there's a lot more flexibility and and correct me if i'm wrong again here but potential to actually influence the outcome in commercial uh versus that a fairly restrictive environment uh that's involved in the residential space am i right in saying that 100 you know you've got um we do a lot of change of use um in buildings so in other words um we've got a building um let's let's take a pizza restaurant

for instance the tenant moved out they've been there for 20 odd years they've moved out well you can change the use of that building to office use okay um and the tenant that's moved in there is a physiotherapist you know so in doing that you're doing a an uplift on the fit out again um change of use and you've got a multitude of different types of tenants that go in there next door you've got a bicycle shop you know they could have gone into the same sort of premise so um you've got a a huge variation of what you can do with that space and it's not what you do it's how you do it that determines what your outcome is going to be yeah commercial let's let's not kid ourselves commercial is a lot more work than residential you're going to be thinking you're

got to know you've got to have the the education and the and the thought of mind to see what is required in the area um so that you can target that type of business yeah you know or an opportunity where there's where there's there isn't a physiotherapist or whatever it is you know and you target that business to get them in there and that's where you add your value absolutely now beautifully said now i i've often said that uh property is a game of finance and i I know there are very distinct differences between the residential and commercial arena in that regard.

So can you talk us through some of the differences in the financing, deposits, equity contributions, LVRs, loan terms, et cetera, so that we can get an appreciation of that? Great, great question. So let's talk about the barrier to entry firstly. Okay, in residential, your barrier to entry is very low. I think you need a 10% to go into a residential property.

Your barrier of entry in commercial, and I think this is probably the area that stumps a lot of people, is I would say, first off, you need between 30 and 40%. So your LVR is gonna be 60, 65, 70, average 65%, okay? And again, that is very much tied into the type of asset that you're buying and your serviceability. So they're gonna look at everything.

The types of loans that you're looking at, essentially it's three different types of loans. We've got a lease dock loan, which I'll come back to. You've got a low dock loan and you've got a no dock loan. Okay, I'm sorry, a full dock loan. Yeah. So your full dock loan is where they're looking at the asset, the leases, the stability of the asset,

as well as your serviceability, everything in the kitchen sink. We do very, very, very few of those, okay? Then you've got your no-doc loan, which is the loans that we absolutely love and we throw those out as much as possible, where they're looking 100% at the asset, the bones, the structure, the lease, the tenant,

the security around the building and the asset itself, and very little on your serviceability and what you need. Now, the beauty about that is if you are unemployed or you don't have constant income, but you do have, let's say 400,000 in cash that you're sitting on. It's burning under your backside. You're only earning 2% out of the bank.

Take that cash, put it into commercial property. That will give you a property of between a million to 1.2 million. That is gonna give you a 67% return, happy days. Now you can do that on a no-doc loan, okay? And then the third one that I mentioned is a low dock where they look at your serviceability. They also look at the structure, the lease, the tenant.

Now bearing in mind with all three of these loans, you're gonna get different LVRs. So if you're throwing your serviceability into it and you're a little bit tight on budget, which would be your deposit, you could maybe push that up to around about 70%, okay? Your 70% LVR. Whereas if it's a lease dock,

probably going to push close to about 65 maybe 60. so there are variations um right across the board yeah and i think the exciting thing there given we're in an environment in the residential sphere where people are really struggling with borrowing capacities given the the rate rises and all the lender restrictions that go with it the opportunity if the quality of the asset is good enough and the quality of the tenant and the lease is good enough so that the the property will virtually stand on on its own from a servicing perspective, providing an investor's got equity that they can tap into. It's a way of leveraging into an asset class

that they won't be able to enjoy in the residential sphere. So I love that. All very interesting. And again, we're only just scratching the surface today and we'll talk to you more about these subjects in more detail in the future. But for those that are pricking up their ears and their eyes are glued to the screen with interest,

what are currently the sort of ideal commercial property investment vehicles for first-time investors at the moment mish um bushy it's very dependent on the type of person that's coming through um so you know ideally you don't really want it wanting to be buying anything under 800 000 you know uh i always say if you haven't bought residential before go and and and cut a teeth on residential buy that property for 800 000 in residential buying a property a commercial property around about that that sub 800 yes they are out there but i'm going to be 100 often honest they're expensive okay when once you've gone through all your fees and your rates and whatever you know you're paying a lot of money for that so you really want to be above that that

million um two million is really where you want to be and leverage as hard as you can so using lines of credit using equity out of your your current properties that sort of thing not to say that it can't be done it can be done um but you know you want to leverage as hard as possible in terms of type of property um look we go we we chase numbers so when when somebody comes to me and they say they want a particular type of property i always ask if there's a little bit of leeway with it everybody at the moment the sweetheart at the moment is industrial everybody wants industrial however there are a lot of good opportunities in the other two sectors in office as well as in retail and again when we look at an asset we look at the full gestalt of the asset so

what it is, what the leases are, who the tenant is, what the longevity is. And the most important thing when looking at an asset is exit strategies. So in other words, like I mentioned, the pizza shop. So in purchasing a property like that, you want to be thinking to yourself, what else can go in there? What other types of businesses can be serviced in that area and under that roof? yeah beautifully said it really is if you're getting into commercial you've really got to treat your investment as a business in every aspect of the exercise from the due diligence

you mentioned right through to being really clear on what the options of that property are long term so it's certainly not something for the faint-hearted or the beginners and certainly a need to be working with someone like yourself who understands the ins and outs of the of the sector and can guide them through that so that they've got an elite team around them stepping through things that they may not be aware of unless they're dealing with someone like you who understands what works and what doesn't in that regard. So look, I really want to thank you for these quite enlightening insights on the differences and benefits of investing in commercial real estate, Mish. And now that you've whet our appetites, we're really looking forward to deep

diving with you on this growing investment class during our upcoming two-part special on the property hubs long form get invested podcast so i want to mention for everyone to keep their ears and eyes out for that and i recommend that they also tune into your revolve commercial property podcast and for those that are real eager beavers having listened to us today i encourage them to reach out to you at revolve commercial at revolvecommercial.com.au and we'll have the show in the the link in the show notes so thanks again for sharing all of this with us on the show today, Mish. Thank you, Bushy. It's been lovely being here and chatting to you. Thank you very much.

independent buyer's agency, GetRare Properties. This masterclass unravels strategic property investment using your self-managed superannuation fund. You know, it's not just about learning. It's about transforming your financial future through education. So embrace this opportunity to enrich your investing acumen. Enroll now in the free masterclass and begin a journey that marries insight with action,

leading to a financially empowered tomorrow. Unlock bonus content now as a premium subscriber. And that brings us to the end of this week's show. It's our 600th show. Once again, I say thanks to all those people who have contributed over those so many years. It's a really great milestone. 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 favorite podcast player or wherever you're listening to or watching this show. Also, you can join the conversation anytime on Facebook by going to the Property Hub Collective. Thanks once again to our supporters and content partners, realty.com.au bmt tax depreciation who i might mention have been with us almost right from the very start of our show so thanks to brad and the team also know how property finance get rare property and the piro marketing on that note i'm kevin turner and on behalf of bushy and the whole property hub team we look forward to seeing you again next week