21 Aug Flipping & renovating houses for profit | 5 ways to boost property value | Suburb due diligence | About granny flats | Getting your next property | Ticking time bomb for “Off The Plan” Property Investors
Speaking from his years of experience, Ben Kingsley from Empower Wealth tells us the 5 things you can do that will add real value to a property.
Michael Yardney tells us about the ticking time bomb for “Off The Plan” Property Investors that could see thousands of investor face financial ruin because they won’t be able to settle the apartments they have signed up to buy.
We talk to Belinda Smith who decided to develop a business out of her passion for property. She teamed up with another Belinda and together they have been successfully renovating and flipping property for over 30 years.
Michael Beresford has been helping people build property portfolios for many years and he talks about how a lack of a finance strategy has held many investors back.
Bryce Yardney helps us with the suburb due diligence you need to do before committing to a development project and Jo Chivers tells us what to look for in assessing if an investment property is suitable for a granny flat. There are some that suit and some that don’t. We find out which is which.
Kevin: A few weeks ago, I had the pleasure of talking to Belinda Smith, one half of a dynamic duo. She and her best mate, Belinda Westblade, both share the same first name and about 30 years ago, decided to get in to developing property, their passion. They’ve done a lot of flipping over the time, along with their husbands, too.
You might recall that interview that I did with Belinda. It was back in early August. Go back and have a listen. You can get it on our website, of course, so you can go back, and have a listen and look at the transcript, as well.
Belinda joins me again. Hi, Belinda.
Belinda: Yes. Hi, Kevin.
Kevin: Now the Website is oohm.com.au. You pronounce “Oohm.”
Belinda: “Oohm,” I pronounce it, just like the mantra, or just Google “the two Belindas,” we do come up.
Kevin: Just Google “the two Belindas.” You’ll find them.
Belinda, I’m going to take our conversation a bit further. Last time, we talked about whether women look at property differently from men, but I want to get into the real guts of it, which is the flipping. How does someone actually get started in property renovation or property development?
Belinda: I just like the idea of starting small. I’ll always advise somebody they ask Belinda or me just to start with something that’s manageable and achievable, and that might not necessarily be in your own hometown. You can renovate a place very easily at a distance; you just have to work harder, put a few strategies in place. They can always contact us, and we’ll tell them how to get it.
Kevin: Yes. There’s a great amount of information available at the website, oohm.com.au. You’ve also got some Facebook pages, as well.
Belinda: Yes, under Oohm Homewares, you’ll find us on Facebook. We have quite a following on Facebook. It’s quite fun. It’s something we attend to all day long so that we can answer quick questions from people on renovating.
But I do advise that people start small, mainly because I hate to see people in financial trouble. I think to start with your first one, you might make a few little errors. Renovating is something… I know that there are people who teach courses, who make it sound like you can just quit your job and turn it into a career.
And that is absolutely possible. Belinda and I have actually done it with our husbands. We’ve done it as a source of building equity. Belinda has done it really as a lifestyle choice. She and Rod have not worked for a boss full time for 30 years. So it’s absolutely achievable that you can renovate for profit, for income.
But starting small is key – keeping risk level low, getting good at keeping costs down, and sometimes that doesn’t mean tradies costs. There’s not a lot of cost-cutting you can do with plumbers, electricians, and the guys who you need to call onsite to do the official work, the licensed work. But there’s absolutely cost cutting that you can do when you get clever enough at creating a really nice-looking home, but being mindful of your spend – and that’s key.
The key is to buy low, to do your renovation well within your budget, and to stick to that budget, and just to work really hard on selecting tiles and finishes that look fantastic but they just don’t cost as much as the highly-advertised ones, and to sell as best you can, to tweak the emotions of the buyer so that you sell at a premium price.
Kevin: Yes. I mentioned at the outset there, too, that you both flip and you buy and hold. How do you decide which category the property is going to actually fit into?
Belinda: We’ll work that out before we actually do the purchase in the first place. We already know. If it doesn’t fit into our plan, we just don’t bother with that particular property. At this point, my husband and I are very underleveraged, and there’s a reason for that.
But, really, when we’re looking at something, I’ll think, “Okay, this is going to be a great one for tenants. The rental return is going to be fantastic.” Some of the properties we hold have rental returns of 10% here and beyond that, in New Zealand, and they’re the ones that we’ll always hold because they don’t hurt cash flow-wise.
I mentioned in our interview last time, that we actually haven’t been on big incomes – my husband and me, nor Rod and Belinda – in that our trades and our background history in employment didn’t offer big salaries, so we can’t afford to make mistakes, and we really haven’t. We’ve been very carefully selecting our properties along the way.
Kevin: How differently do you approach a reno on a property as opposed to one that you’re going to flip?
Belinda: We still renovate nicely. In saying that when we go to flip a property, I believe that you leave a reputation behind you, so we do make sure that we paint properly and we do proper finishes. We don’t want properties just to look pretty and sell them off and have the paint peeling off the guttering and people ringing us up with problems when we’ve left.
We still take the same amount of care, but I’ll choose decor according to who the prospective tenants are. For example, we have a commercial property in a small country town in New South Wales, and upstairs, I knew that the flats were going to be tenanted by guys who work in the railways, and they’re miners, and the gritty working men. So when I chose the kitchen, I didn’t choose white; I chose a gray-colored kitchen, because I knew that if I chose white, then every time between tenants, either I would be up there or I’d have to pay cleaners to scrub the scuffs off the cupboards and the flooring, and little things like that.
I do really know the demographic. It’s so important to know the demographic of who your tenants are likely to be, and you renovate according to that. Because if you renovate to appeal to a mass market, then you’ll always get higher rents and you’ll always get a higher sale price at the end, and you’ll always get higher valuations.
Kevin: Belinda, we’ll have to leave it there, but thank you very much. If you want to contact Belinda, either one of the Belindas, just Google “the two Belindas.”
You’ll find them. Belinda Smith, I’ve been talking to from oohm.com.au. You can also find them there on Instagram, Twitter. Is it Pinterest? Is that how you say it? Pinterest?
Belinda: Pinterest. Yes.
Kevin: Pinterest. They’re at Facebook. They’re everywhere. Just go and find them, and have a chat to them.
Belinda, great talking to you. Thanks again. We’ll catch you again soon.
Belinda: You, too, Kevin. Thank you.
Kevin: I asked Ben Kingsley from Empower Wealth to tell me the things that he’s seen in his experience that will add true value to a property. Was it a big mission for you, Ben?
Ben: No. I think it was pretty straightforward, Kevin. There’s a lot of common sense, hopefully, in what I’m about to give to you and the listeners.
Kevin: Yes. Let’s get into it. What are they?
Ben: I think the number one is paint. The easiest and safest bet is to paint it. To get some cosmetic improvement, painting is the first step – both internal and external painting – and it’s certainly the cheapest way in which you can get more bang for your buck.
Kevin: It certainly freshens everything up, doesn’t it?
Ben: It does. Even on the pictures to get inquiries coming in, you can’t see all those little inconsistencies in the property. Basically, the photos come up great, so that gets an audience, and when you get an audience, you have a chance to [0:51 inaudible] if you’re looking to sell, but also, from the valuer’s point of view, he’s going to go out and first impressions are always important.
Kevin: Yes. Don’t make it anything too garish, either, when you’re picking colors.
Ben: No. Go basics. Don’t go your pastels, don’t go your styles. Just keep it to your shades, your whites, your light grays, and those types of things.
Kevin: Yes. You can actually bring color in with some of the accessories – cushions, and so on – can’t you?
Ben: Kevin, you just led me into the second one, which is basically internal cosmetic tidy-up – things like the floors, the blinds, and those types of things where you can bring a bit of color and a bit of style in. Sometimes, light fittings, but just don’t go over the top.
You have to remember this is an investment property. We’re going to hold on to it, and then, ultimately, you don’t want to go over the top. But certainly, those types of things where you can bring the cushion covers and those types of things for the first impressions for the tenant when they’re looking to come hopefully let your property.
Kevin: Yes, and don’t over-clutter and don’t make it too eclectic, either, I’d imagine.
Ben: True. That’s exactly right. It’s keeping it simple, and by over-cluttering, what you’re talking about there is give a sense of space. Even if it’s small, the classic case of when selling agents are trying to impress potential buyers coming through, those smaller second bedrooms sometimes in the unit blocks and, certainly, some of the pokey bedrooms, they’re smart; they put a single bed in there rather than trying to clutter in a double bed or something along those lines. The same principles apply for value-adding.
Kevin: Your next one?
Ben: Structural. If we are going to spend a little bit of money, always as an absolute minimum rule of thumb, every dollar spent, we want to get a $2 return. But if you’re going to do structural, I have a couple of little tips here. The first one is add a bedroom. At the end of the day, if you have a very large one-bedroom apartment and you can potentially fit a second bedroom in, that’s an additional income generator because you can, obviously, get the rent based on a two-bedder rather than a one-bedder.
If you can put some stud walls in and get a second bedroom in, that’s always a good one. And even on a house, if you have some large living zones and you can separate those into a bedroom, that’s where you’re going to get that cash flow coming through.
If you’re looking to do the broader structural stuff, then focus on this. Try to convert the older style properties whereby the kitchen wasn’t a focal point to convert that into an open plane kitchen/living, and the latest move and trend is having that indoor/outdoor alfresco space.
If you’re going to put some of that structural stuff in place, don’t overcapitalize, but make sure that if you are going to do it, it’s all about adding space and openness, and open plan, and having that sort of kitchen as part of that conversation space.
Kevin: Yes. That’s the new way to live, isn’t it? In those great indoor/outdoor areas. What else have you got for us?
Ben: Yes. The fourth one there is external appeal – in terms of first impressions, again, are really important. Things like when you’ve got busy gardens and cluttered gardens and overgrown lawns, it’s all about reducing clutter. Keep the lawns mowed.
One of the best ways you can add value is some of the local councils have free mulching that you can go and pick up. Go and throw that on the garden beds. This doesn’t cost you anything other than your time to go and get a load of woodchips, and then throw them down on the garden beds.
Again, paint fences and keep the exterior of the building looking really presentable at that most important time, whether it’s when you’re getting it valued or whether you’re bringing it up for re-let.
Ben: Finally, the big one, subdivision. Even though this might not relate to the actual property itself, if you want to pick up an equity harvest, you may have a significant block of land, you may have existing dwelling where there’s a three-meter clearance between the dwelling and the fence line, and a large backyard. Well, a battle-axe subdivision is certainly going to be one of the best ways to add value to your investment portfolio, whether you decide to sell that block off or put a second dwelling on that to increase your cash flows. All of those, it’s a larger investment, but it’s a big one. That final one was equity harvest.
Kevin: A wealth of experience coming through, Ben. Thank you so much for your time. Ben Kingsley from Empower Wealth with his five things that you can do to add true value to a property.
Ben, thanks again for your time.
Ben: Absolute pleasure, Kevin. Thank you.
Kevin: Last weekend in the show, I was talking to Bryce Yardney about the due diligence you need to do to find the right suburb to do a development, and we’re particularly talking about developments now. Bryce returns with me once again.
Bryce, this time, I want to pick up on the conversation about once we’ve decided on that suburb, what due diligence do we need to do to make sure we’re getting the right property?
Bryce: Absolutely. The first thing I do when I’m looking for a development is I start with the physical characteristics – with the size, the shape, the slope, the existing house on there, trees, power poles, driveways, all these physical things that can come in to play and restrict what you can do with a site.
Once they all check out, then you have to start looking at all the other things – like your easements, your overlays, your title restrictions, covenants, planning restrictions, planning zones. You have to look at all these other things because, unfortunately, any one of them can be a deal breaker for developments, so you have to cover them all.
Kevin: In your opinion, what are the biggest restrictions to properties that will make them undevelopable, if there’s such a word?
Bryce: One of the biggest things I come into – and it’s something that is, I guess, a little bit unpredictable and sometimes people miss – is trees. Certain councils are not too bad, but for a lot of them, trees become sacred.
There’s a completely different set of rules. If you’re going to buy this property to build your own home on, you can do whatever you want to it. You can knock down trees and build your home. As soon as you’re putting two or more units on a single lot, it’s a completely different set of rules. Now you have to go through council, now you have to get a planning permit, and now it’s completely set of rules when it comes to trees and what you can remove.
It’s not just trees in your own property, either. You have to look at trees on neighboring properties, because they’re all going to have a tree protection zone around them. You can’t build inside that tree protection zone, so you’ve got to keep in mind neighboring trees, as well, street tress, as well. Strictly, they’re council property, they’re not yours, in certain councils, street trees are scared. You have to be really, really careful. Probably get your arborist in there before you buy the property, as well, to get it all double checked.
Kevin: Bryce, if you see a development coming up down the road, or you see one, in fact, in the area that you’re looking at developing that’s been recently completed, is that a good sign for you?
Bryce: It’s a good sign, but it’s not the be all, end all. Especially in Victoria is a perfect example. We went through some planning changes just over 12 months ago. A development that’s being built even right now, they could have got planning approval for that four or five years ago under the old set of rules. If you went and bought a property today and tried to get the same planning approval for that kind of development, you’re now working under a completely different set of rules. You have to know the new rules inside and out before you get into anything.
Kevin: What are the site attributes that you look for when you’re doing your due diligence?
Bryce: I guess you really got to have the end goal in mind. You have to know what you want to put on there, and then work backwards. You have to look at what’s going to restrict you. Is it going to be the size? Is it going to be a tree on the property or the neighboring property? Is it going to be an overlay? Is it going to be a flood zone where you have to suddenly build up? And then your height restrictions are going to come in to play. That’s the way I do. You have to have the end goal in mind, and then work backwards.
Kevin: Okay. Just to round us out, what are the biggest mistakes you see budding developers make when they’re looking for a development site?
Bryce: Probably the biggest mistake is not having the right team around them, not doing their due diligence at the start and having someone on their team who can help them with that, can help them through their planning approval, can help them with their designs and their construction – I guess, trying to do it themselves.
It’s probably the biggest investment people are going to make in their lives – we’re talking a couple of million dollars – so you have to have the right team around you to help you to get through it.
Kevin: Yes. If you want to contact Bryce and his team, you can do it through the website Metropole Property Strategists.
Bryce Yardney has been my guest. Bryce, thanks for your time.
Bryce: Thank you, Kevin.
Kevin: My guest this time is Jo Chivers. Jo is from Property Bloom. They are property development project managers.
Jo, welcome to the show. How are you?
Jo: Hi, Kevin. I’m great, thanks. How you going?
Kevin: Good, thank you. I know you’re written a lot about granny flats, and that’s what I want to talk to you about. What makes a good granny flat site? What are the attributes you look for?
Jo: We run a lot of granny flat projects for our clients. The benefit of a granny flat project is a high yield strategy. What we’re looking for in a property is a house on a large piece of land with plenty of room to build a granny flat.
Specifically, with the house itself, we always look for a three- or four-bedroom home, or a home that we can add a bedroom to. It’s important to get the most rental return from that initial dwelling that is on the land.
Form the land’s perspective, we obviously look at location first. We do a lot of research on the suburbs we work in. We focus just in the Hunter region of New South Wales, as you know. We’re experts in that area. We look for location, firstly, and once we find a good property in that suburb we will drill down and look at various other factors. The factors are large block size.
Kevin: How large, Jo?
Jo: We’re looking from 800 square meters plus. I know that in a lot of the capital cities, people are putting a granny flat on smaller block of land, which is fine as long as it works. But up in the bigger regional cities where we work, we don’t want to cram our tenants. We want to make sure there is enough private outdoor living space for the house tenant and also for the granny flat tenant.
There’s nothing worse than trying to put a granny flat onto a piece of land if it’s just not big enough. I know some people are doing that in Sydney on 400 or 500 square meters of land, but I just think that in the future, when the rental market may not be so strong, they’re going to get in trouble and the demand might drop on those types of dwellings.
Kevin: How important is it to have separate access, as well?
Jo: Yes. Separate access for the tenants is fantastic, and that’s one of the things that we must have in a site for our Property Bloom clients. We always look for land that has either a rear lane access, or is a corner site, or it’s a two-road frontage. That way, the granny flat tenants can access their dwelling from the back, and they don’t have to walk down the side of the existing house.
We also make sure there’s enough off street parking space, as well. You don’t have to put off street parking for the granny flat as part of the requirements, however we find tenants do want to park as close as they can. They don’t want to be parking too far away.
Kevin: What’s the cost of putting on a granny flat?
Jo: The cost for us at the moment, with the builder we’re using, is around $109,000. There are some additional costs such as the service connection and the upgrade if the electrical system of the existing home is not adequate to support the granny flat. That’s an area that some people forget to check. If there’s an upgrade required, we always budget that in.
Also, the council section 94 contribution. That’s at the discretion of the local councils in New South Wales to charge. Most of them are charging it now, so you have to make sure that you allow for that, as well.
Kevin: What are you finding? Is this mostly a strategy being used by people who want to get more income out of an existing rental property, or is this a good option for people who want to buy something, add to it, and then sell it on?
Jo: I believe it’s more of a medium-term hold strategy. When you have got a good decent yield – we’re seeing around 7% to 8% gross yield, and if you’re borrowing at 4% or 4.5%, that’s a really nice yield at the moment – I think it’s a long-term hold.
It’s really not a strategy that you can use to flip – what some people refer to as flipping, which is to build and then sell. I don’t think you’re going to make enough equity out of that, purely because you can’t subdivide off that granny flat. When you do sell it, you obviously have to stay on the same title as the house, so it’s not really what we would call an equity creation strategy; it’s more a high-yield strategy.
I think it’s a medium- to long-term hold strategy, where you can sit on it, get it tenanted, and then the rent is really going to cover your outgoing in most cases.
Kevin: If you want to know a little more and you want to contact Jo, you can do that through the website PropertyBloom.com.au
Jo Chivers from Property Bloom, thank you so much for your time.
Jo: You’re welcome, Kevin. Thank you.
Kevin: My next guest is Michael Beresford. Michael is the Senior Investment Consultant and Executive Director at Open Wealth Creation, a part of Open Corporation. They’ve been helping people build property portfolios for decades – $4 billion worth, in fact, and over 7000 properties in their portfolios.
Michael has personally guided his clients in acquiring over $100 million worth of investment property using the same strategies that he has used to develop his own portfolio.
Hi, Michael. Thanks for your time.
Michael: No worries at all, Kevin. It’s good to talk to you.
Kevin: In your experience that I mentioned about how many people you’ve helped, you must have seen a few lessons along the way?
Michael: Lots of them. What we teach our clients is what we’ve done ourselves, so unfortunately, most of the mistakes have been made by us to start with.
Kevin: I suppose we’re all in that boat, that’s for sure. Can you just answer one question for me: what do you think it is that holds most people back from getting their second or even third property?
Michael: I’d have to put that down to two key things, Kevin. The first is an understanding of why a plan and a strategy to be able to get more than one property is important. But assuming that you have that motivation and that clarity, by far the key point would be not having finance set up in the right way.
What I mean by that is having a set up where you typically go back to the bank you feel you have a relationship with, but that results in having too many eggs in the one basket. The bank has all of the control, and it doesn’t allow you the flexibility to be able to pull the equity out when you want it and need it to be able to get the next property and so on.
Kevin: You’re talking there about cross-collateralization?
Michael: Yes, it’s a hard one to say, isn’t it? That’s exactly right.
Kevin: Is that the biggest mistake you think people make with their finance?
Michael: By far, yes. It just comes down to control, because if the bank has the control, then they can be overly conservative on valuations, they can restrict LVRs, and they’ll try to get you into a fixed interest rate that’s very expensive to break. All of those scenarios basically end up with the bank holding all of the cards and not giving you any flexibility to control that process.
Kevin: One of the most common questions that I’m asked is: who should I take advice from?
How do you know when you’re dealing with a good property advisor?
Michael: If I use my own experience, like anything in life, I take advice from people that are doing it themselves. Then it’s not second-hand information, it’s not theory; it’s actual experience. The best way to be able to avoid mistakes you might encounter is to learn from people who have made them already.
Kevin: Just getting back to finance for a moment, finance can be daunting. If someone is struggling with that, where do you think they should start?
Michael: That’s a great question. The first step that anyone needs to take is to actually understand their position. The calculators the banks use are forever changing, so what might have been the situation three or four months ago might be very different compared with today. So always understand your borrowing capacity as the first step. Unless you can actually understand what you can borrow, there’s no point in looking at properties or starting to implement a strategy if you don’t know what you can get from the bank to start with.
Kevin: How important do you think it is for people to monitor interest rates?
Michael: Definitely important, because the lower the interest rate, typically the more it helps your borrowing capacity. It’s very important from that perspective. But the banks love to market their products based on a low rate, and one of the big key things to avoid is focusing too much on interest rates.
I’m not saying you want to have an expensive loan product – it needs to be within reason – but ensuring that you’re taking a structural focus – i.e. having different properties with different banks and avoiding cross-collateralization – is going to be far more effective in the big picture of your portfolio than saving 0.1% or 0.2% here and there.
Kevin: Good advice. Michael, I want to thank you for your time. Thank you for being with us, and I look forward to talking to you again soon.
Michael: You’re welcome, Kevin. Thanks for having me.
Kevin: In a quite alarming story, thousands of investors face financial ruin because they won’t be able to settle the off-the-plan apartments they signed up to buy.
With a bit more on this, we have Michael Yardney from Metropole Property Strategists. Hi, Michael.
Michael: Hello, Kevin.
Kevin: It’s pretty terrifying for people buying off-the-plan. Tell me what’s going on.
Michael: It’s nothing new – it’s happened in previous property cycles, as well – but it’s going to come as a bit of a shock to investors, while the industry insiders know what’s happening.
Apparently, there are 90,000 investors who have currently purchased properties off-the-plan but have not yet settled. Most of those were bought with small deposits – 10% or 20% deposits – but they haven’t obtained pre-approval for the balance of the finance, because you can’t obtain it for more than 90 days. They’ve purchased now on the promise that over the next year or two, the value of their properties will increase, so some of them hoped they wouldn’t put any more money in at all.
A couple of months ago that was possibly likely. The banks would have lent you 90%. But with the new regulations enforced by APRA on many of the banks, it’s actually going to be hard to even get 80% loan-to-value ratio, which means that many of these investors just won’t have the finance to settle their purchases.
Kevin: You mentioned there are 90,000 people. That’s the number of contracts we know, but how many of those are exposed in this way?
Michael: According to CoreLogic RP Data, the suggestion is about 18,000 of them have only put down a 10% deposit, so clearly it’s not all of them. Interestingly, it’s more the Australians; the overseas investors have put down bigger deposits – often about 30%.
Kevin: So the situation is they’ll either have to come up with more money or the upshot will be that they can’t settle, in which case, what would happen to the deposit that they have put in, Michael?
Michael: We’ve seen this back in the 1980s when a lot of people bought off-the-plan on the Gold Coast and couldn’t settle. They forfeited their deposits and thought, “That’s okay. I’m just going to walk away.”
The trouble is the developer, who you’ve signed a legally binding contact with, has the right to sue you for any loss he makes. They’re then going to have to on-sell the properties at whatever price they can get, and then they can come and pursue you for the difference, plus their legal costs.
You may end up losing more than 10% of your deposit.
Kevin: The impact could be quite high, especially if –in the worst-case scenario – we get 19,000 new pieces of stock coming onto the market. That’s going to flood it a bit.
Michael: It will, and that will make it hard for those who had the financial discipline to be able to settle, because if you bought a property today, and let’s say your contract is for $500,000 and in two years time when you settled, you’d hope it rose to $550,000, the property may only be worth $450,000 or $480,000 because there’s going to be that flood that you were just talking about.
The banks are only going to lend you 80% not on your contract price but on the valuation they give at that time in the future, which will be based on the prevailing market conditions.
Kevin: Paint the picture for me, Michael. What do you believe is going to happen as the upshot of this?
Michael: There’s going to be a downfall of properties in those areas where there’s large complexes of off-the-plan properties, particularly in the Melbourne CBD area and Brisbane CBD area, and there will be some around the areas of Alexandria in Sydney where there’s been a lot of off-the-plan properties, as well. But not only in those areas; there will have to be a bit of a ripple effect in the surrounding suburbs, as well, when property values will plummet.
For those who bought off-the-plan in their self-managed super fund – which unfortunately is a scheme that a number of promoters have been pushing – it’s even worse because at the moment there’s no lender who is going to lend more than 70% for self-managed super funds. Those people are going to have to come up with even more money, and they’re unlikely to have it in their SMSFs.
Kevin: What about developers? What do you see on the landscape for them?
Michael: The developers are planning to get all these funds coming in. Some developers are going to have a little bit of trouble because they’re not going to be able to easily sell all this excess stock, because once the news gets out and the confidence is lowered, there’s not going the swag of investors buying. This is really investor stock. It’s not the sort of property that owner-occupiers tend to purchase.
There could be a bit of a fallout with developers having financial troubles, just like what happened in the past, Kevin.
Kevin: This really is what APRA has been about though, trying to dampen that enthusiasm within the market, Michael?
Michael: Their plan was to stop the investor frenzy that has occurred. I don’t think they planned to have a crash in a certain segment of property prices. That’s not really good for anyone, Kevin.
Kevin: It’s interesting to read during the week, too, that first-home buyers are now making up an even bigger proportion of investors, as well.
Michael: A lot of people have swapped from looking to buy their first home to continuing renting where they can afford to rent and where they like to live but can’t afford to buy, and instead getting into the market. This is actually going to hit the financial pockets of some people who would in the future have been first-home buyers. You’re right, Kevin.
Kevin: Okay, advice from you about people who have purchased off-they-plan, what should they be doing? Talking to their bank rather urgently, I’d imagine?
Michael: They can’t get pre-approval for three, six, or nine months – and definitely not a couple of years – in advance, so I guess if you have some time up your sleeve, number one, try to get out of your contract if you can. Don’t ask the solicitor from the developer. The question to ask your solicitor is not “Can I get out of the contracts?” but “How can I?”
Then, be diligent with your savings to make sure that you have the financial wherewithal to complete your purchase if these are the conditions that are going to be prevailing when you’re eventually going to settle.
Kevin: Good advice. Michael Yardney from Metropole Property Strategists.
Michael: My pleasure, Kevin.