Get the tenants you want | Start up investor advice | Capital Gains Tax | Properties with asbestos | Property Investment Principles | Bias in successful property investing

Get the tenants you want | Start up investor advice | Capital Gains Tax | Properties with asbestos | Property Investment Principles | Bias in successful property investing

Smart investors target the tenants they want and make sure the property fits their needs. Find out how best to do that.
As property investors we can sometimes be our own worst enemy. It’s not because of the decisions we make, the opportunities we consider or the investments we miss out on, but rather, it’s due to the way we think.
Michael Yardney asks the question – “Are you too biased to be a successful property investor?”  What does that mean?
We hear about the good property investment principals – some golden rules I guess from Sky TV’s Chris Gray – star of ‘Your Property Empire’.

If you are a start up investor – buyers agent Josh Masters says start small, focus on a single outcome and only settle for the best. Josh joins us to explain more.
Ken Raiss responds to Victor’s question about Capital Gains Tax and when it is applied if he wants to rent out his principal place of residence and then move back before he sells it.
Our renovation expert Cherie Barber is in the show as well and I want to find out from Cherie what she sees as the risks and opportunities of buying a property with asbestos.


Kevin:  I have a real treat for you over the next few weeks. Michael Yardney is going to be joining me. We’ll be talking about the psychology of success – what are some of the things that hold us up? As we go through this, there might be a few aha moments for you – there were for me when we were looking at the notes that Michael gave me.
Good day, Michael.
Michael:  Hi, Kevin.
Kevin:  Good to be talking again, mate. Some of these things, we’re sometimes our own worst enemy, aren’t we?
Michael:  Yes, we are. That’s one of the things that holds us back.
Kevin:  Okay. Can we run through a few of the things that you’ve observed?
Michael:  Sure, Kevin. It’s actually not because of the decisions we make, the opportunities we consider as investments, or what we miss out on. It’s actually just in what we think, how we think.
That’s because, as humans, we are subject to something psychologists call cognitive biases. That’s what I’d like to spend some time talking about in the series of four programs we’re going to do together.
Kevin, they’re fancy words for how our brains sneakily convince us to make decisions that aren’t necessarily in our best interest. These cognitive biases sometimes convince us to spend more, maybe to save less, to feel confident in our decisions – maybe more confident than we should be.
The scary thing, for the most part, though, is we’re powerless against them because they’re subconscious, they’re unconscious.
Kevin:  Okay. All right. But sometimes having it explained to us makes us more aware of it?
Michael:  Well, you have to, to start with. I’ve been able to study this because as I’ve been dealing with some very successful property investors – and also some who are not as successful – I’ve noticed that it’s the mindset, it’s the psychology, that is the biggest difference between those who outperform regularly in all areas of life and the average Australian.
One of the big ones I come across in property is something psychologists like calling “confirmation bias.” You see, people tend to search for information that confirms their views of the world, and then we get to ignore the bits that don’t fit in.
In an uncertain world, we love to be right, because it helps us make sense of things. But we do this automatically, usually without realizing, partly because it’s easier to see where these new pieces fit into a picture puzzle we’re currently working on rather than imagining a new picture.
Kevin:  How do we counter that, Michael?
Michael:  What it really means, I think, is that if you believe in investing in a certain region, what you’re going to keep doing is you’re going to keep reading about the stuff that suits you. You tend to seek out news that will confirm what you think, and you actually don’t pay attention to other things.
During the mining town area booms, everyone kept reading everything that could be said about that, just like you tend to about your football team or the political party you like, and you ignore the others.
You asked a really good question, Kevin: how do we counter this? I would be suggesting you do this by reading things you’re going to disagree with. It sounds counterintuitive, but I’d be looking for reasons why your strategies could be wrong rather than why you could be right. That’s one way to do it, Kevin.
Kevin:  Certainly broadening your horizons really, isn’t it?
Michael:  It is, isn’t it? That’s right.
Kevin:  What’s another one, Michael?
Michael:  Psychologists like to say that we’ve got something called anchoring bias. We have a tendency to use anchors or reference points to make decisions or evaluations – something that could sometimes lead us astray. Can I give you an example?
Kevin:  Please.
Michael:  If you’re going to go car parking in the middle of town, you’ll pay $6 per hour happily if you’ve driven past a car park that actually says $10 per hour down the street. The first number we see, especially when it comes to prices about things, actually colors what comes after it.
This is used often in negotiation. It’s often used in negotiation with property. You’ll notice it with estate agents, as well. High anchors influence you to spend more than you normally would.
Kevin:  We call it conditioning, actually.
Michael:  It is in some ways, isn’t it? Property marketers, estate agents, car salespeople, they use this principle all the time, Kevin. They start with a high asking price, and you feel good when you suddenly extract a discount from them.
This is because the initial price set for that off-the-plan apartment is actually higher than they were ever going to expect anyway. But it makes you feel good. Whether you like the number or not, your mind is referring to that initial number, and you think, “Hey, I’ve done a good job.”
Kevin:  It’s rationalizing it, isn’t it, to yourself?
Michael:  It is. This is the way our mind plays tricks with us.
Kevin:  Oh yes – obvious. All right, mate, we’re going to have to leave it there. We’ll come back with more of these in the weeks to come.
We’re talking about the psychology of success with Michael Yardney. Thanks, Michael.
Michael:  My pleasure, Kevin.

Chris Gray

Kevin:  I’m just catching up now with Chris Gray from Empire,
Good day, Chris.
Chris:  Hi there. How are you doing?
Kevin:  Good, mate. Good to be talking to you again. I wanted to talk to you, Chris. I’ve noticed a lot of your blogs, and I’ve been watching you on Sky TV too. I thought it might be good to pick up on some of the good property investment principals that I know you follow.
One that’s near and dear to my heart is “don’t buy from your heart.”
Chris:  Exactly. I used to be an accountant. Technically, I still am. There are not many great advantages to being an accountant, but one of the best ones I say is the easy way for a lot of property investors who are accountants to invest is we have no emotion so it’s very easy to make decisions based on the facts rather than the emotions.
Kevin:  Yes. Use your head rather than your heart.
Chris:  Exactly. It’s hard because properties look beautiful. We look down the street, and a lot of the time, we want to be able to live in them ourselves. But that doesn’t necessarily make financial sense.
Kevin:  How important is it for someone to develop or understand their own risk profile when they’re developing a plan, Chris?
Chris:  It’s really important, because there are a lot of companies out there and a lot of people that say, “You have to do this strategy; this is the only way.” There’s no way it can be right, because some people earn $50,000, some people earn $500; some people are 18, some people are 85. There is no way that there can be one strategy that suits everyone based on their income, their risk profiles, their family situations, and what they’re going through emotionally or work-wise.
Your strategy may well change over the decades, as well, so you really have to look at the pros and cons of every strategy. There are financial pros and cons, and there are emotional ones, as well. Then you have got to develop what’s right for you at that point in time.
Kevin:  Yes. Timing the market: I know quite a few people talk about this but I’ve heard you say, too, that’s nowhere near as important as time in the market.
Chris:  Exactly. We just look at the stock exchange, and if you try and pick the peaks and the troughs, you have absolutely no hope. I speak to the great guys at places like Reserve X, SQM Research, or AccuData, and those guys spend their whole lives studying the market and even they don’t profess to be able to do it inside-out and with any kind of guarantee.
The best thing I did is started investing at 22, and no matter what price I would have paid, almost no matter what property I would have bought – within reason – I would have made money on 20 years later.
Sure, it is important to get the right property. Sure, it’s important to get it at the right price, and a lot of people say you make your money when you buy. Sure, that is true, but the bottom line is if you’ve held something for 20 years rather than 10 years, chances are you’re going to make a lot more money.
Kevin:  Have you ever been guilty of chasing hot spots at all, Chris?
Chris:  No, generally I haven’t. I’m the kind of boring strategy, in a way. When the magazines say, “What are your tips for next year?” I’ll say, “It’s the same as last year. It’s the same as 10 years ago. It’s the same as 10 years’ time.”
My kind of investing strategy is go for a guarantee. I typically go for the blue chip inner city suburbs, without going for the CBD, because generally they’ve always been good, and I believe they’ll always be good in the future. The down side is it costs more money to get into them, the negative gearing is a bit more because the rent is less.
If you reckon you can take the next suburb that doubles from $200 to $400, good on you, but it’s unlikely to be the best suburb for the next 30 years. My strategy is to buy the property, always buy a good one, then sit on the beach, and I’m happy until next year comes around or even the year after until it’s grown, and then I just keep repeating.
Kevin:  Always makes sense. Chris Gray, thank you so much for your time. Chris, of course, is a regular on Sky TV, and you can contact him through the website,
Chris, thanks for your time, mate.
Chris:  Thanks a lot. Cheers.

Cate Bakos

Kevin:  One of the key things when you buy an investment property is to think of the end game. I’m not talking here about what the property is going to be like, but who is it going to appeal to? You must have, in your mind, the ideal tenant. You get a great tenant and you’ve got yourself a very good investment property.
Cate Bakos is the person who first talked to me about this. Cate Bakos is a buyer’s agent from Melbourne. Her website, of course, is She joins me.
Good day, Cate.
Cate:  Hi, Kevin. How are you going?
Kevin:  Good. I really appreciated you telling me about this because it made so much sense to have that end tenant in mind when I’m selecting an investment property. Tell me a little bit more about that.
Cate:  Basically, lots of different areas will cater to lots of different tenants. It doesn’t need to be as dramatic as regional versus metro. There are certain locations within the metro city that have completely different target tenants. It might mean that we’re near a hospital and we’re catering to contracts, medicos, doctors, nurses. It might mean that we’re in a regional town where families really value a particular attribute to the property.
But if you don’t understand what the target tenant wants, then we often get it wrong and it means that you might have a higher propensity to tenant turnover or you might not be able to easily get a tenant every time the property is up for rent.
Kevin:  I was talking to Cherie Barber who is the renovation queen and she was telling me that when she does a renovation, she thinks about the end user in mind. I know you’re talking about an investment property, but it’s the same principle really, isn’t it?
Cate:  It is.
Kevin:  You wouldn’t put into a house something that’s not going to appeal to your target market.
Cate:  I recently had an example where I put an investment property forward to an investor client of mine and his query was that it didn’t have a large enough dining area. It did have room for a small table in the kitchen, but it didn’t have a separate dining area.
This property was in a really hot little location where cafés were abundant and the tenant could just walk out the door and pick from a range of restaurants and cafés. I had to point that out to him that young people who are living in the environment like that are paying the premium to live amongst all of that, and they’re not necessarily chefs.
In fact, another client that I placed in the same suburb, interestingly, went back to do their final inspection a year later and the new oven still had the stickers inside it.
Kevin:  That’s a pretty telling point, isn’t it? I guess “Walk a mile in my shoes” is the lesson if you’re going to be an investor. Take off your own preference hat and look at it through the eyes of the person who you’re going to be wanting in there as a tenant, Cate?
Cate:  That’s so true. It’s absolutely true. I go to regional areas with clients, and understanding what the families in those regional areas want is vital because if you get it wrong, you’re facing with the prospect of having a property that you’ve bought for yield not actually renting quickly and not delivering the yield that you intended it to.
Just by understanding those target tenants… For example, in Ballarat, an area that I’m quite fond of, a large powered shed and a house with ducted heating can make the difference of $50 extra per week if you have both of those items.
Understanding what little changes can be made or what aspects that you should be looking for when you’re selecting the property are important. That can really make the difference between having it instantly tenanted and getting a return as strong as $300 a week versus $250 if you haven’t got those items.
Kevin:  Cate Bakos, thanks so much again for your time.
Cate:  Thanks a lot, Kevin.

 Josh Masters

Kevin:  You’ve been to those seminars, you’ve read heaps of books, and you’re all fired up. Maybe you’ve got your plan together, but quite often, the temptation is to not start in gently – in other words, just bound in. I’ve actually seen people who want to become developers overnight.
Josh Masters has written a bit about this. Josh is from He joins me.
Good day, Josh.
Josh:  Good day, Kevin. Thanks for having me.
Kevin:  You see this reasonably often, do you, that people want to get in, boots and all?
Josh:  I do see it often. When people get involved in property, they’re very passionate about it, and that’s fair enough. I think I have to be guilty about jumping in boots and all before. I think I’ve probably had eyes bigger than my belly and wanted to get in, learn all the courses, and learn all the ways that you can make money.
Sometimes you really can miss the fundamentals of what it really takes to grow a portfolio. Start small and just really understand the process, understand really how to buy property, how to get in and do the due diligence and really assess, or even just the basics to get started before you really get out there and start working on more advanced strategies.
Kevin:  Yes. I’ve heard the saying, “Bite off what you can and chew like hell” but it doesn’t really work. I think the other thing, too, Josh, is that I’ve been to many seminars and read lots of books, and they’re all written by very talented people. You go out and hear these speakers and the temptation is, “Gee, they make it look so easy; I can do this.”
Josh:  Yes, absolutely. You find the experts out there are experts because they have gone into their field and they did start small, but they developed along the way and they went very deep into a particular strategy. If you go deep into any strategy that makes money, eventually you will do well and you’ll become the expert in that field.
They do make it look easy. All the marketing material is fantastic, and what I’ve found is that a lot of people get glitter in the eye and then they realize how much work actually goes into something like this. With all due respect to the teachers out there, they’re doing a great job in the property markets, but knowing it and learning it can be two very different things.
Kevin:  Yes. Another confusing thing, too, I find is that there are so many strategies for making money and they’re all relevant but they fit different people, like buying hold options, renovating, flipping, developing and selling. How do you find the right focus?
Josh:  That’s a good question. Sometimes, without getting a little bit woo-woo, it’s about what calls to you at that time. I know some people love renovations. I was an interior designer before this, so it really made sense to me to do renovations. That really appealed to me, and I loved it. I’ve done Cherie Barber’s course. I know Cherie’s coming on later on. It was just fantastic, and that really resonated with me.
There will be other people out there who really love the contract side of it and they’ll be able to look at things and get a town planner involved and maybe do what it takes on paper to maybe subdivide a block or do an option. That’s a strategy in itself. But I think it has to suit your lifestyle at the end of the day.
Kevin:  Yes, it does, and it’s got to fit your risk profile, as well. The other thing too, I find – and Michael Yardney, who is a regular on our show, talks about this all the time – is about buying the best. Just make sure that you’re hold out. Do you agree with that?
Josh:  I absolutely do agree with that. Property is not like the share market. It’s very much a long-term game, and if you’re going to buy a property, you really need to be looking at least 10 years in advance. When I look at properties – and my clients, as well – I say, “Would I be happy to own this in 10 years’ time? Would I be proud to own this? Is this an area that’s going to be still up and coming, it’s not a flash in the pan?”
That’s where you really make your money because if you can hold it for 10 years and then the next 10 years following, the leverage that you get, the compounding growth, that’s where it really starts to take hold, and you really build wealth from that.
Kevin:  Yeah. Josh, great talking to you as always, mate. I appreciate you giving us your time.
Josh:  My pleasure, Kevin.
Kevin:  Josh is from the website Josh, thanks again for your time, mate.
Josh:  Thanks for having me.

 Ken Raiss

Kevin:  In today’s show, we’re going to answer a couple of questions from listeners. Thanks for sending them in. Just send them in anytime through the website. Even if we don’t answer them in the show, we will always get an answer for you.
Victor wrote to us and said, “I moved out of my principal place of residence, which I’ve been in for seven years, and then rented it out for three years. I plan to sell it. Do I have to pay capital gains tax? Do I need to move back in to sell it so I can get some exemption? The main reason I want to sell it is to avoid capital gains tax and minimize my yearly land tax. I plan to put some of the money into my self-funded superannuation fund so I can buy under that scheme.”
A number of questions in there, but I’m going to refer them all now to Ken Raiss from Chan & Naylor.
Ken:  In summary, you can retain your main residence exemption for up to six years once you move out unless, of course, you’ve identified another property as your main residence. You can only have one residence for tax exemption at a time.
The beauty of it is you don’t have to identify which residence until you sell one. Then you do the numbers and you work out which property gives you the best tax advantage. The ATO in this regard is pretty good at it.
To calculate the tax, what we need to do is go back and determine the market value of the property at the time you moved out. That sets up, if you like, the cost base to determine the profit on the sale. You get the selling price less any costs, of course, and you compare it back to the market value on the date you moved out and rented the property. That creates the profit that we then look at to see how much is taxable.
The way we calculate what’s taxable is we look at the number of days you’ve owned it in total and you compare that to the number of days you had a tenant in there, while taking into account up to six years, you can have it as tax-free. So it’s a proportion of the number of days you had a tenant versus the number of days you owned it, but you only multiply that against the profit based on the market value at the time you sold.
Kevin:  In Victor’s case, because he’s only been renting it out for three years, it’s not going to apply to him, is it?
Ken:  Correct, but there will be a small amount of tax involved. There is still a 50% reduction on the tax because you’ve had that more than 12 months, and you actually can put part of that profit into super. Super is taxed at 15% compared to Victor’s maybe higher marginal tax rate.
But if you’re an employee, you can only put that money into super via a salary sacrifice, and the only way you can do a salary sacrifice is by advising your employer before you’ve earned the money. You can’t call in on June 30th and say, “Last month’s money that I haven’t received yet, I want to salary sacrifice that.” You have to salary sacrifice prior to earning the income.
If you’re self-employed, obviously that doesn’t come into the equation.
Kevin:  There you go, Victor. That’s answered your question. Ken Raiss, of course, is from Chan & Naylor. Thanks for your time, Ken.
Ken:  Thank you, and I hope that satisfies Victor.

Cherie Barber

Kevin:  It’s time to say hello to the renovation queen and the person we turn to for any renovation advice, Cherie Barber.
Hi, Cherie.
Cherie:  Hi, Kevin.
Kevin:  Great to be talking to you again. You’ve just finished another project for The Living Room on Channel 10, I believe.
Cherie:  I have. I’m officially covered in paint right now, so yes.
Kevin:  Well, thank you for pulling up and having a chat to us. I was keen to talk to you because I’ve had a few people comment to me about the fears they have about getting a property that has asbestos in it, especially first-time buyers, because they’re afraid about the renovation requirements. Tell me what your experience is with this, Cherie.
Cherie:  Wow. Where do I start? First of all, I’m a national brand ambassador for asbestos awareness, so I am actually quite passionate about trying to educate as many home renovators about the perils of working with asbestos. The reality is that any house that was built prior to 1987 – let’s face it, that’s the bulk of housing across Australia – is very likely to contain asbestos in one way, shape, or form.
What the asbestos organizations are saying now is that the third wave of asbestos victims is coming, and that third waves of victims is actually called the home renovators. We have to try and get the message out as much as possible for people not to stop renovating – we don’t want people to stop renovating – but we want them to just to be aware of the dangers of asbestos when renovating old homes.
Kevin:  You can buy one as long as you don’t disturb it. It’s okay if you seal it up. Is that right?
Cherie:  Yes. Basically, asbestos, if you were to go and touch it, put your hand on it, you’re not going to die. It’s only when it’s broken, when the fiber of asbestos is actually broken, scraped, drilled into – basically damaged or disturbed in any way.
We don’t exactly know whether it takes one fiber or more, but any of those airborne fibers that are inhaled can actually become mesothelioma in anywhere from 10 to 20 or 30 years’ time.
Kevin:  I was quite surprised recently – it would have been five or six years ago. We bought a property to renovate. We quite often think of asbestos being in walls, roofs and things like that, but we actually found, when we had an asbestos inspection done, that we had asbestos tiles that were down in the kitchen. I didn’t know that they existed, Cherie.
Cherie:  Yes, absolutely. That’s a common mistake. There are a lot of renovators out there who have absolutely no idea. They’re renovating amongst asbestos and don’t know it. Most people think it’s in the walls, or on the ceiling linings, or in the bathroom – that’s one area where it typically tends to be. But it can be under carpet tiles, even in carpet underlay.
People knock out their walls and they see this white knitting around all of their hot water pipes: that’s actually asbestos. I was talking to my dad about it just last week and she said, “Cherie, do you know that all the old rollaway sleepers are riddled with asbestos from the train brakes that are asbestos.
Kevin:  Oh goodness.
Cherie:  We’re actually surrounded by it everywhere, so we just have to make sure we do it safely. My advice to people is don’t remove it yourself; bring in the professionals. To me, no amount of profit is worth dying for.
Unfortunately, it’s an issue close to my heart because my grandfather died of asbestosis ten years ago, and I was actually there on his last breath. I tell you, it’s a very horrible disease to die of asbestos-related poisoning. We want less people to die from it.
Kevin:  As you said earlier, you don’t have to be afraid of it; just be aware of it. It shouldn’t stop you from buying a property with asbestos, either, should it, Cherie?
Cherie:  Absolutely not. To be honest, I buy a lot of properties that are asbestos. I buy a lot of old fiber houses that I get in and cosmetically renovate. They tend to be houses that people run away from, because people freak out about asbestos. It’s one of those big building, no-noes. It’s up there with termites, concrete cancer, rising damp, and asbestos.
At the end of the day, there is a solution to asbestos. The question you have to ask yourself is, “Okay, I can buy a property with asbestos, but how much is it going to cost me to get the professionals in to actually remove it safely?” so that you’re not exposing yourself as a renovator, you’re not exposing your tradespeople, you’re not exposing your next door neighbors. Then negotiate the cost of that removal off the purchase price.
Kevin:  Indeed.
Cherie:  That’s how I typically look at it.
Kevin:  That’s right. As we say, there are opportunities; you shouldn’t run away from them.
Cherie, we’re out of time unfortunately, but thank you so much and all the best. Look forward to seeing you on Channel 10’s The Living Room soon. If you want to contact Cherie, you can do it through her website,
Cherie, thank you so much for your time.
Cherie:  You’re welcome. Thank you.

  • steve weingarth
    Posted at 09:48h, 14 February Reply

    Could you advise on when it is best to minimise capital gains tax in retirement by selling properties. If a person had 3 houses with loans still on them would it be best to sell say one each of three years in a row which would then add each capital gain to income/pension each year reducing the total CG tax over 3 years? also is it best to make sure ones own home is not used as security for the loans as I believe this reduces the CG exemption and therefore increases CG tax . Also what do you think of selling two houses and use all after CG tax to pay off half the loan on the third and newest house and keep it as an investment?

    • Michael Yardney
      Posted at 07:17h, 15 June Reply

      Why sell off the houses in retirement – that’s an old fashioned concept – what would you do with the money then?
      Wouldn’t it be better to keep them and live off their increasing equity and rents?

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