Wealthi's co-founder Domenic Nesci speaks with Avari Capital's chief investment officer, Alan Liao, to share insights into the Australian property investment sector.  

Avari Capital Partners is a Sydney-based real estate fund management and private equity lending firm that oversees over $1bn in assets under management.  

Alan shares insights into Avari Capital's investment principles, strategies, and outlook for finding key investment opportunities in the market.   

Both Domenic and Alan also discuss what makes the Australian property market an attractive investment for investors and why property investments are among the best assets to build wealth.

This is an excellent episode with many insights, delivered in a unique and upfront format.   

Episode transcript highlights

Domenic Nesci: (14:00)

That's interesting. So there's two... You're paying attention to the office market, commercial, and then you're also paying attention to industrial. And the things that stood out to me is that the asset value, the prices are going up, but effectively the underlying asset really hasn't changed. Rental growth isn't there. Do you feel like we are going into a bit of a bubble or a boom, and do you anticipate there will be some kind of fall or crash in asset prices in the future?

Alan Liao: (14:29)

We don't know. These bubble type of thing... It's a bit hard to call it, what is a bubble, what is not a bubble. But these types of things can last for years. This means that we just going to be a little bit more careful than buying something at 3% and hoping this trend will continue. And I don't think this trend will just keep continuing.So if people are happy with just keep collecting the 3% over the next 10, 20 years, then that's probably an okay investment. But certainly, we're not anticipating, okay if we buy an industrial warehouse at 4%, the cap rate is going to keep compressing and the cap... Which means the capital value is going to keep growing.Another thing that people probably pay too much attention is the profile of the tenant, the lease profile.So if it's got a strong lease, the property tends to trade at a very, very significant premium to something that has a weaker tenancy profile. But people always forget, end of the day we buy the land, we buy the property. So, we always say, there are three components. One is the land? The other is the property. The third component is the lease. Lease and property are actually depreciating assets. Over time they go down in value. The only thing that really goes up in value is the land. And a lot of time that when investors buy properties, they pay too much attention to lease.I'm not saying that you shouldn't pay attention to the lease, but the lease isn't the only thing that dictates the value of the property. So a lot of times people forget about what's the underlying asset, what's the underlying property they're actually buying. And that's also dangerous from our point of view.