With property prices continuing to soar across the country, first home buyers and investors are looking for easier ways to enter the property market. In today’s show Chris Gray, one of Australia’s property thought leaders, looks at how they are doing it.
Kevin: With property prices continuing to soar across the country, first-home buyers and investors are looking for easier ways to enter the property market yet still build wealth for retirement. One of Australia’s property thought leaders, Chris Gray, has the answer. He says rent while building a property portfolio. He joins us.
Good day, Chris.
Chris: Hi. Good to see you again.
Kevin: Good to be talking, mate. Thank you.
Chris, this is an interesting topic, but it is one I have to say that I’ve heard a lot of young people are now doing. Are you seeing that, too?
Chris: Young people; even old people like me are doing it.
Kevin: You’re not old. I’m old. You’re not.
Chris: Look, it’s a classic thing. I was speaking to a bunch of Deloitte accountants yesterday, and I’m saying, “How many people want to go in the office and tell everyone, tell the world that they rent for a living?” Everyone’s going to look down at you and think you’re poor straightaway. It’s like driving an old secondhand car or something.
But it’s the way of the world these days. It doesn’t make any sense, especially if you want super luxury properties, like the $1 million, $2 million, $5 million, or $10 million properties. This is the perfect way to get in because it’s almost a third of the price.
Kevin: It’s been engrained in us, though, to go and buy a home as opposed to rent because, as you say, there is a bit of a stigma attached to it.
Chris: There’s a massive stigma. It’s like claiming the dole, or buying own-brand foods, or something like that. Our parents always told us rent money is dead money, and that is true, but the main exception is rent money isn’t dead money as long as you’re investing the equivalent amount of money into property, shares, or business, and that’s the key.
Kevin: Yes, that is the way to look at it, too. I guess the other thing, too, Chris, there are some restrictions when you rent. You don’t own the property, so therefore, it’s curtailed as to what you can do it with it.
Chris: That’s what everyone thinks, and that’s the mindset that we all have engrained. But if you think about it, if someone says, for instance, “I can’t paint it the color I want,” if you say to your landlord, “I’m going to get some professional painters in, we’re going to paint it a different color, and when we go to leave, if you don’t like it, we’ll pay the professionals to come in and repaint it again in any color you want, and suddenly you’ve got a brand new painted house or unit,” what landlord is going to complain about that?
Kevin: Not many, I wouldn’t have thought.
Chris: I have put in hot water systems into the pool to heat the pool systems. I’ve offered to put in new kitchens and new bathrooms, and people say, “Why would you spend $20,000 or $30,000 improving a landlord’s property when they can kick you out?” I say, “The first thing is if I give them a new kitchen, do you think they’re ever going to kick me out? Of course not, because I’ll give them a bathroom the next year.”
If I’m saving… As a good example, say a $5 million home and you’re paying, say, 7% interest on it, it costs you, $350,000 in interest. I can rent that home for maybe $150,000. I’m saving a few hundred thousand dollars, so why wouldn’t I spend $20,000 improving it? Because I’m still saving lots of money.
Kevin: Because you’re getting the lifestyle – aren’t you – and you’re actually being able to reuse your money much more wisely.
Chris: It is. It’s just like, I guess, going on holiday. You don’t need to buy the holiday resort; you just rent it for a couple of weeks because you only need it for that short time. Think of it as in housing. You only want to use that property for a year or two, so why spend all of that money buying a house, paying all of those in and out costs, whereas an investment, I’m happy keeping my investment for 30 or 40 years, and then I just go and rent wherever I’m comfortable living.
Kevin: The other thing, too, I guess is that by renting, as well, you’re able to really choose the sort of location that you’d like to live in, one that you may not want to invest in as your principal place of residence.
Chris: 100%. Look, I got married about eight years ago, and we have two young kids. We just thought when we’re a single couple, we’re going to want different things to when we have little kids, where you have a pram and things like that. Then when the kids are older, you want something different.
We don’t know… Because we haven’t tried that many houses or different suburbs, so how do we know which is the best one? Let’s try some really big houses, some old ones; let’s try some new houses.
We’re now living in a unit, which most people would think, “Why would you want to have a family in a unit?” But we’re in a round building. We have 360-degree views around Sydney. We get the whole floor, and you can see the Blue Mountains, you can see the Harbour Bridge, you can see Manly. We never thought we’d want to live in a unit but until you try, how do you know?
Kevin: Yes. Very good topic, and a very good thought, too, Chris. Chris is one of the speakers who will be on stage at the 2015 Property Buyer Expo. It’s on later this month, October 30 and November 1. It is actually at the Sydney Showground in Homebush.
You have some tickets to give away, as well.
Chris: Yes, exactly. I think it’s something like $15 or $20 to get in, if you just want to get on the website or pay on the door. But if you go PropertyBuyerExpo.com.au, there will be a promotional code in there. If you put in “Empire,” then they’ll e-mail you those tickets for free.
Kevin: That is fantastic. Well done, mate. Thank you.
Chris: My pleasure.
Kevin: I look forward to seeing you there, too, Chris.
Chris: Sounds great. Thanks a lot.