Highlights from this week: What type of property will be in strong demand in the future? Three looming changes all investors must prepare for Why Friday settlements could be a mistake A warning about apartment blocks fire and safety risks What people will tolerate just to get into the market Transcripts: What people will sacrifice to get a property – Bessie Hassan Kevin:  As property becomes harder to get into, it’s only a matter of time before people start to put aside some of their prejudices, some of the reasons why they wouldn’t want to live in a certain area. That’s...

Peter O’Malley has written a book about the changes in the industry and how agents need to mold what they do to meet those changes, the major one being digital disruption.  Peter joins us to discuss the changes and the impacts we are already beginning to see.

Transcript:

Kevin:  I was interested to pick up a book the other day written by Peter O’Malley. Peter is a real estate agent. He is the principal of an agency called Harris Partners, and Peter’s been in the industry for quite a long time. It is an interesting read because it goes into a lot of things that are near and dear to my heart as well, particularly the changes in the industry and how agents need to mold what they do to meet those changes, the major one being digital disruption. Peter joins me.

Peter, thank you very much for your time, and congratulations on the book.

Peter:  Thank you, Kevin. And thanks for having me along.

Kevin:  It’s a pleasure. The book is called Inside Real Estate. I’ll tell you how you can get it a little bit later in the interview. Let’s talk about digital disruption because there is a lot of talk both within the industry and outside the industry. How has that changed the way agents work from your perspective, Peter?

Peter:  The way it’s changed the agents’ workings, Kevin, is they’ve become a lot more database-oriented than outright advertisers of real estate. Real estate is still advertised, of course, Kevin, but we’re seeing a lot of instances where agents nurture their database and are able to offer vendors an off-market transaction without the need to go to the open marketplace as such.

In some market conditions, I support that strategy, Kevin, and in other market conditions, I question that strategy. If the market is in a full-frontal boom – and the Sydney property market, for example, rose 20% in the last nine months – in those circumstances, I would always encourage an owner to expose their property to the open market because you never know how high the price can go.

But in a slow market – say, what you might have in Townsville at the moment – if you want to sell your house and an agent should happen to pop up with a qualified, ready-to-go, cash buyer off-market, you’re probably well-advised to sell off-market, because the open market is probably not going to be any more generous to you given that, say, Townsville is so flat at the moment.

Kevin:  Interesting, Peter, to hear you make that comment about marketing, particularly online. I don’t know whether you’re aware, but Australia is the most expensive country in the world to advertise on the Internet, and I think that’s a disgrace.

Peter:  I’m very aware of that point, Kevin. I’ve previously written a blog about that point as such. Consumers need to ask themselves what value are they getting for these expensive Internet ads? And that’s a topic that is covered in the book.

That is something that I believe has driven off-market trades in the industry, Kevin, as real estate agents are saying, “Hang on. Why am I going to spend thousands of dollars advertising to buyers who I already know? Why don’t I just cut the third-party provider out?” And that’s an understandable business strategy that agents are adopting to consumers’ benefit and one that I applaud.

Kevin:  Just to stretch that thinking a little bit further, here we’re talking about two major portals – RealEstate.com.au and Domain.com.au – that are charging extraordinary figures to advertise when you can go to the States and it’s next to nothing to advertise on the Internet. I sometimes wonder if there is room for a third player, a third serious player, who’s going to hold both of these websites to account, Peter?

Peter:  I think there is room for it but no one’s been able to execute it, as we all know, Kevin. A lot of heavy hitters have tried to be the third player in this space, and the industry at large has attempted to do so.

At the end of the day,

Successful people leave clues. It’s always interesting to ask a successful person what they would do differently if they started over again. Michael Yardney joins me to answer that question.

Transcript:

Kevin:  There’s an old saying I love to use, and that is that successful people leave clues. It’s always interesting to ask a successful person what they would do differently if they started over again. Michael Yardney joins me to answer that question.

Michael, if you had your time again, what would you do differently?

Michael:  That’s a good question, Kevin. I think in hindsight, I would have spent more time educating myself, so I wouldn’t have to make all those mistakes I made in the first 10 or 15 years of my property investing. I’m actually very fortunate, I built a substantial property portfolio now, but it would have been even bigger – much bigger – if I knew then what I know now.

I think for most people, the first step in the journey is to educate themselves, and that is what I still do today. I know you still do. It’s actually what all successful property investors do.

In my effort to achieve this, many years ago, I discovered that my own learnings, my own experiences really weren’t enough. So, I started reading books, going to teachers, getting mentors, even paying consultants for advice.

And interestingly, Kevin, they all pointed to one direction: you can learn from history. Books recount stories, teachers explained research, mentors taught from experience, consultants cited best practice.

I guess the big learning point, Kevin, was I didn’t have to start from the beginning myself; I could learn from other people’s mistakes, not my own.

Kevin:  Did you learn that lesson early in the piece?

Michael:  Unfortunately, Kevin, I didn’t. Initially, I guess I didn’t want to pay for advice, maybe for two reasons. One, I was cheap. I didn’t think I could afford it. I have now learned that advice isn’t an expense; it’s an investment.

But the other is I think I was taught by my parents to learn from experience, learn on your own. And boy, Kevin, that’s a very hard way of doing things. The market teaches you lessons that are costly in many ways – financially and emotionally.

I guess what I’ve learned is experience is an expensive teacher. I love that saying. I heard that experience is what you get two minutes after you need it.

Kevin:  I guess we’re also restricted by our internal wealth programing, aren’t we?

Michael:  Exactly right. What this means is that you can only grow your wealth to the extent that your internal financial thermostat is there. At Wealth Retreats and doing my big seminars, I talk about this concept of imagine yourself as a cup. If a cup is very small, you can only accumulate a small amount of money, and any extra just spills over and you lose it. You simply can’t have more money than the size of your cup. The answer is to grow yourself into a bigger cup so that you attract and keep more wealth.

I’ve heard somebody else say that you can’t drive a Lamborghini with the engine of a Mini Minor. So, what you really have to do is upgrade your wealth programming, the way you think and the way you react about money.

As we often spoken about in our chats, Kevin, successful investing has a lot to do with property, finance and tax, but it has just as much to do with your own internal wealth programming. And that’s a lesson I learned a bit late in the piece, but boy, has it changed the way I move forward.

Kevin:  While there may be no guarantees to success, Michael, there are proven ways for you to be successful, aren’t there? Which is really what you’re talking about.

Michael:  Yes, it is. I guess I learned that concept from Tony Robins. He called it modeling. In other words, what you do is he describes the process of finding proven models, saying that you should look at the very best people in any field that you’re in, how they behave and how they think,

Borrowers are constantly asking the questions about interest-only loans.  Maybe they should be splitting their loans up and paying principal and interest as well as interest only.   We focus on the good, the bad, and the ugly with interest-only borrowi...

We look at property asking prices nationally with Dr Andrew Wilson. What are we learning from the asking prices?

Transcript: 

Kevin:  My guest is Dr. Andrew Wilson from the Domain Group.

Andrew, let’s talk about asking prices nationally. What are we learning from the asking prices?

Andrew:  Interesting; we had some press last week with some sales price data that was released, which was a little perplexing at a number of levels because it showed that prices had actually fallen over May.

Kevin:  Is the gap between the list and the sale price increasing?

Andrew:  It can. According to the cycle, of course, or reflecting the cycle, it can move, but the relativities actually remain the same. There’s no doubt, of course, that asking prices are always higher than sale prices, because why would you ask something, unless you’re in a trough of a market?

Kevin:  It’s an indicator if it’s the other way around. Then you know you’re in a booming market.

Andrew:  That’s right, but asking prices… And of course, these are properties that are listed for private treaty, so they’re part of them, and for most capital city markets, that’s the vast majority. Even in Melbourne, which has 30% of its marketed properties under the hammer, you still have 70% that are listed for private treaty.

Kevin:  There’s an interesting point I want to pick up on, because we so often look at the auction market and talk about clearance rates and how the market is going, but in one of the biggest auction markets in Australia, it only represents 30% of the market.

Andrew:  Three out of ten sales, Kevin, and in Sydney it’s two and a half sales out of ten, and that’s up from 15% of the market. And in Brisbane, it’s only 7%.

Kevin:  Why aren’t we tracking clearance rates on private treaty sales, and also days on market? Because you look at days on market at an auction, it’s going to be around about 30 days, give or take a few days, because that’s an auction campaign. Days on market for private treaty are sometimes up to 45 days, and 45 days is a fairly normal market.

Andrew:  Yes, and the point with days on market is you have to have a sale. But with listings data, it’s here and now. Nothing changes, because this is properties that are for sale. And people don’t make mistakes, because we can get mistakes in some of the official sales data.

Kevin:  It depends. Garbage in, garbage out.

Andrew:  Yes, that’s right. But listings people make sure they’re not advertising the wrong price.

Kevin:  Well, they’re publicly listed.

Andrew:  Yes, that’s exactly right. And the point is it’s here and now, it’s not relying upon a sale, so it’s real-time data. I’m now focusing more and more now on asking price data as being a robust insight for the market. As you said, Kevin, it does reflect the vast majority of activity…

Kevin:  More so than auctions, and we try to determine where the market is going by the auction numbers.

Andrew:  We can’t. Not necessarily a pass in; I don’t think it’s the same.

Kevin:  But it’s part of the sales cycle.

Andrew:  That’s right. There’s not the same sort of impetus to sell under the hammer as there is down south. It can, in fact, be an entry point into the sale. So, those 50% clearance rates – which is typically what you do see in Brisbane – in Melbourne or Sydney, you’d be saying that’s definitely a buyer’s market. But no, not in Brisbane, because it’s just a very small snapshot, and not really a reflective snapshot of what’s happening in the wider market, because the wider market is basically 95% of the market.

Kevin:  I used to think that it was a reflection on agents, that agents in Queensland were not as good at the auction market. But I don’t think it is. I think it is a culture and I think in the southern market, Sydney and Melbourne, people are used to buying at auctions. They’re a lot more aggressive about their offers, they try to secure before,

Highlights from this week: The good points about interest-only borrowing The downsides and should there be a combination of interest only and P & I The most expensive country in the world to get a property on the internet is Australia Are auction results a real barometer of the market? Dr Andrew Wilson checks the pulse of the market What is really happening in the regions The choices being made because of unaffordability What Michael Yardney would do differently When to market a property and when to sell ‘off market’   Transcripts: What we can learn from asking prices – Dr Andrew...

Highlights from this week: We catch up with 2 young skilled property experts who happen to be brothers How to build your team A great tip about how to keep your property tenanted How auctions have changed and why it is a great opportunity for buyers A commonly missed opportunity for investors What strategy is right for you The questions you should ask yourself before investing Transcripts: Make bidding at auction fun – Haesley Cush Kevin:  Haesley Cush is a second-generation real estate agent, having worked in the industry with his family for many years and now owns and operates his own...

Highlights from this week: The facts about housing affordability in Australia Where the bargains are for under $400,000 Why the market is set to continue to rise The correct level of gearing Changes to legislation that will impact vast numbers of buyers and sellers Getting your gearing right Transcripts: Take what the media says with a grain of salt – Chris Gray Kevin:  Joining me in the show now, Chris Gray from Your Empire buyer’s agents. Chris, you’ve just returned from an overseas trip. It doesn’t hurt to leave the country occasionally to get a bit of a perspective about what’s...

Highlights from this week: How a transport construction project in WA will impact the market there. How much can you manipulate or influence a bank valuation. Everything you need to know about renovation How money CAN make you happy Where to buy in the USA to get great returns Transcripts: Getting the best bank valuation – Andrew Mirams Kevin:  Just how much can you manipulate or influence a bank valuation? My thinking was always very little, but maybe not. How can you actually get the best bank valuation? Andrew Mirams, I want to ask you that question. Andrew is of course a...

Highlights from this week:

Dr Andrew Wilson’s mid-term 2017 property report card

Would you rely on a property report generated by the seller?

What we can learn from President Trump.  Yes there are some things!

The formula to successful property investing

We tell you about ‘fractional financing’

Transcripts:

Some 'invisible' property investment issues – Cate Bakos

Kevin:  A property investment – or any investment, for that matter – is only as good as how it returns for you. What are some of the invisible issues that can undermine the returns on a property investment? Joining me to talk about that is Cate Bakos from Cate Bakos Property buyer’s agents based in Melbourne.

Hi, Cate. Nice to have you on the show again. Thanks for your time.

Cate:  It’s great to be here, Kevin.

Kevin:  Give me some of those invisible issues. What have you found, generally, that people tend to overlook that can impact their returns?

Cate:  Sometimes it’s not even overlooking or not being aware of them, but the invisible issues are the things that need to be done once you’ve purchased that property – and they can be quite costly. So you went into this investment thinking you had a 3.5% or 4% gross rental return, by the time you’ve fixed those invisible issues, you could be significantly down to early 3%s, and that can really hurt.

They’re typically things that you can’t see, and without due diligence, you might not know about them until the problem occurs.

Kevin:  List a few of them for me, Cate.

Cate:  For example, electrical: re-wiring, the need to re-wire or spend significant money on a property that has unsafe electricals. There are a few little hints that we can sometimes see, but it certainly doesn’t guarantee anything.

I think that having a qualified building inspection on the property, asking them to point out any concerns, is a start, but it’s important to note that a building inspector isn’t an electrician. So, they might see more warning signs than a normal buyer can see, and that’s a start.

Another one is plumbing. If you have some significant plumbing and drainage issues, they can certainly add to the cost base of the purchase, because works will need to be done to fix that up. They can range from hundreds of dollars to tens of thousands of dollars, depending on where the issue sits, so it’s a really important one to consider.

One of the most expensive invisible issues isn’t so invisible that people often underestimate them; it’s when you have significant movement on a property that needs more than just re-stumping; it might need soil engineers. The whole problem might be something that spirals into hundreds of thousands of dollars and that’s more than just re-blocking; it’s substantial works on a period home, for example.

Kevin:  It can be a lot of underpinning. Therein lies another problem, because those structural defects or the need for underpinning and how a building can drop sometimes can be hidden depending on weather conditions.

As an example, we found, in different parts of Australia, when the climate is moist or when there’s a lot of rain around, those cracks that could emerge actually close up because the moisture in the soil will impact on the foundation. So, you really do need a highly qualified person to give you an insight about the foundations, Cate, is what I’ve found.

Cate:  That’s right. I think if a normal building inspector suggested there might be an issue that needs a little bit of specialization, someone to have a closer look, I don’t think you can ignore that. We’ve walked away from many a property that has proven to be too expensive with all of the rectification work for investors.

Kevin:  What you’re suggesting is as well as a building inspection or report, you have to have one done on electrical, one on plumbing, and one on the structural integrity of the building. Is that right?

Cate:  It’s a hard one, Kevin, because if you get all of that done,