{"id":11022,"date":"2017-03-31T03:00:38","date_gmt":"2017-03-30T16:00:38","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=11022"},"modified":"2017-03-31T03:00:38","modified_gmt":"2017-03-30T16:00:38","slug":"margaret-lomas-on-housing-affordability-where-renovators-go-wrong-when-buying-a-property-why-capital-growth-wins-out-over-cash-flow","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/margaret-lomas-on-housing-affordability-where-renovators-go-wrong-when-buying-a-property-why-capital-growth-wins-out-over-cash-flow\/","title":{"rendered":"Margaret Lomas on housing affordability + Where renovators go wrong when buying a property + Why capital growth wins out over cash flow"},"content":{"rendered":"<p><b><i><span style=\"text-decoration: underline\">Highlights from this week:<\/span><\/i><\/b><\/p>\n<ul>\n<li>Learn from a master and get paid to do it<\/li>\n<li>Cash flow vs capital growth<\/li>\n<li>Is the money allocation to help affordability going into the wrong pockets?<\/li>\n<li>The wrong things to look at when buying a property to renovate<\/li>\n<li>TV property personality talks about his \u2018best deal\u2019<\/li>\n<\/ul>\n<h4><\/h4>\n<h4><strong>Transcripts:<\/strong><\/h4>\n<h2>What not to do when buying a renovator &#8211; Cherie Barber<\/h2>\n<p><b>Kevin<\/b>:\u00a0 Joining me now from Renovating For Profit, Cherie Barber.<br \/>\nCherie, welcome to the show. Thank you. I have a couple of key questions to ask you, strangely enough, about renovation. You\u2019re doing one right now, I believe, are you?<br \/>\n<b>Cherie<\/b>:\u00a0 I am right in the middle of one for Channel 10\u2019s <i>Living Room<\/i>, a low budget $15,000 whole house makeover.<br \/>\n<b>Kevin<\/b>:\u00a0 Well, there you go. The question I want to ask you \u2013 because I\u2019ve had a few questions posed of me, and Margaret especially asked me to ask you \u2013 is there anything in a renovation property especially that you look for, to pick one?<br \/>\n<b>Cherie<\/b>:\u00a0 In terms of buying the right unrenovated property?<br \/>\n<b>Kevin<\/b>:\u00a0 Absolutely.<br \/>\n<b>Cherie<\/b>:\u00a0 Yes, definitely the location I think is paramount. So, buying in a good capital-growth suburb to begin with. A lot of people nowadays have a buy, renovate and rent strategy. It is getting harder to make the buy, renovate, and sell strategy stack up, so obviously a lot of people now who are buy, renovating, and renting.<br \/>\nIf you\u2019re going to do that sort of renovation strategy, then you need to make sure that you\u2019re buying in a suburb where you can get a property that\u2019s going to get good capital growth moving forward.<br \/>\nIt\u2019s also right down to buying on the wrong and the right side of the suburbs. You have to buy not only in a good suburb but the right side of the suburb, and you need to buy on the right streets within that suburb, as well.<br \/>\nFor example, the property that I\u2019m renovating at the moment, on behalf of the homeowner, they bought an unrenovated property but it\u2019s on the bad side of the suburb where the property values aren\u2019t high enough to make a renovation profit. So, your suburb due diligence is pretty critical.<br \/>\nAnd then I think obviously in terms of the actual property itself, buying a property that is structurally fine, perfectly livable just cosmetically tired, and buying a property that has the right layout. Not all layouts are great; some layouts are fundamentally flawed. Yes, buying the right layout essentially.<br \/>\n<b>Kevin<\/b>:\u00a0 In Margaret\u2019s e-mail to me she actually posed a couple of other questions, and she gave me a scenario. She\u2019s obviously been to a seminar, and it wasn\u2019t yours, I must admit, Cherie. She said she\u2019s been to a seminar and she walked away rather confused after a day because there were too many things for her to consider.<br \/>\nShe wants to know, in your opinion, what are some of the wrong things that people look for in a project that they can discount?<br \/>\n<b>Cherie<\/b>:\u00a0 So what are some of the wrong things that they look for, or what are the wrong things they do?<br \/>\n<b>Kevin<\/b>:\u00a0 She\u2019s asking specifically, what are some of the wrong things, some of the things that aren\u2019t important? You\u2019ve given us lots of information about location. Other things, like the aspect of the sun. She\u2019s just given me a whole lot of information about the physical location of the property, and she found it rather confusing and hard to work her way through it. What are some of the pluses for you?<br \/>\n<b>Cherie<\/b>:\u00a0 I think some of the things that people don\u2019t necessarily need to be concerned about, for me, aspect or orientation is not a big thing when you\u2019re renovating for profit. Renovating for profit only works at certain price points, and it is the lower end of the market, not necessarily the higher end of the market. Obviously structural renovations are completely different, but things like orientation where the property is facing north, south, west, it doesn\u2019t really matter when you\u2019re renovating for profit.<br \/>\nI think a lot of people pour money into areas of their property that aren\u2019t going to add any value whatsoever. For example, the laundry. Laundry is one area that doesn\u2019t add a lot of value according to the bank valuer, so why would go and spend $2000 or $3000 buying tiles and investing in tiling labor if it\u2019s not going to bump up any property value?<br \/>\nI think a lot of people just inject their money into the wrong areas of the property and they therefore over capitalize and don\u2019t get that value back.<br \/>\n<b>Kevin<\/b>:\u00a0 Yes, I think that was the point that Margaret was trying to get to. So, thank you, you\u2019ve clarified that.<br \/>\nLet me ask you this question, though. If I were going to renovate a property that had some period features, how important is it that I retain those?<br \/>\n<b>Cherie<\/b>:\u00a0 It\u2019s really important. I\u2019ve always said all along, your house has to have one personality. It\u2019s either modern, or it\u2019s more a character house. The worst thing you can every do is strip away some of those period features and have a house that has some modern stuff in it mixed with period. It never looks right, so you have got to go one or the other, modern or heritage. It is important.<br \/>\nAgain, it comes down to suburb due diligence. Some suburbs, for example where I live personally, Balmain, it is full of beautiful little character cottages, and if you ripped out the ornate ceilings, the fretwork, you would actually devalue that property. So it is important, and it\u2019s also important at a suburb level.<br \/>\n<b>Kevin<\/b>:\u00a0 Cherie, thank you very much. I\u2019ll let you get back to your renovation. And also, Margaret, thank you for your question.<br \/>\nCherie, thank you once again, Cherie, of course from Renovating for Profit.<br \/>\n<b>Cherie<\/b>:\u00a0 Thanks, Kevin.<br \/>\n&nbsp;<\/p>\n<h2>Learn from a master and get paid &#8211; Bill Malouf<\/h2>\n<p><b>Kevin:<\/b>\u00a0 Here\u2019s an opportunity for you if you ever wanted to get into real estate. There\u2019s a great opportunity for you to work with one of the best agents in Australia, Bill Malouf, who is renowned right around Australia. He\u2019s from L.J. Hooker at Double Bay in Sydney, and he\u2019s offering an excellent opportunity to go and intern with him for a three-month period. He joins me to talk a bit more about it.<br \/>\nBill, thanks for your time.<br \/>\n<b>Bill:<\/b>\u00a0 Good morning, Kevin. How are you?<br \/>\n<b>Kevin:<\/b>\u00a0 Great, mate. This is a tremendous opportunity. Having joined real estate back in 1998, I would have walked over hot coals to work with someone like you and get that inside knowledge.<br \/>\nBill, what\u2019s behind this? Why are you doing it?<br \/>\n<b>Bill:<\/b>\u00a0 We sat down and spoke about this a number of times at head office, and we think there are a lot of young people or even people in the industry at the present moment with the go to break the shackles that they\u2019re currently in and get into a new industry, but nobody knows how to or nobody can get somebody to trust them to come in and trial it.<br \/>\nWe decided to do it as an internship because we\u2019re looking for young, vibrant, new people. We don\u2019t even mind if you\u2019re in your 20s or your 30s or 40s; it\u2019s about the drive. And we don\u2019t want to pick somebody up that\u2019s already tainted with certain old-fashioned, restricted ideas.<br \/>\nWe\u2019re looking for people who want to go into the 21st century plus with leadership ideas in regards to the way they operate, ethical responsibilities in the way that they talk to people because we believe this is like being a doctor in this industry \u2013 that we\u2019re there to give honest and direct information to the clients who are selling and without all the fluff and without all the time wasting and without taking money out of somebody\u2019s pocket and not being able to deliver.<br \/>\nAnd the way to do that is get fresh blood and people who can see the potential if they work with honesty, credibility, with good product knowledge. They could build themselves one hell of a future in this industry.<br \/>\n<b>Kevin:<\/b>\u00a0 We\u2019re going to tell you in a moment how you can take advantage of this opportunity, but I wanted to make a couple of points with you, and one is about great people industry make this industry look so easy, but the thing that I know, Bill, is that it\u2019ll make or break you. It depends on who you work with and how well you\u2019re trained.<br \/>\nWhat I like in particular about the internship idea is that they\u2019re going to get some really good training in that very critical three-month stage, that first three months.<br \/>\n<b>Bill:<\/b>\u00a0 Yes, they are. What they\u2019re going to get, which you can\u2019t do with a lot of offices\u2026 People come along and say, \u201cI\u2019d like to get into the industry,\u201d and you know what they do? They throw you a desk and say, \u201cHere\u2019s a territory. Now go work the territory.\u201d<br \/>\n<b>Kevin:<\/b>\u00a0 Yes. They throw you a desk and a phone book and say, \u201cHere you go. Here\u2019s you database.\u201d<br \/>\n<b>Bill:<\/b>\u00a0 Now how do you learn? What we\u2019re doing is they will come with me, they will come with Alan, my manager, my son, David, and listen to our presentations. They will also then see the negotiation skills at an auction room, and then they\u2019ll get to see an expression of interest, which is what I do a lot of, and they can see how we handle the buyers, how we handle the vendors, how do we get to that final result that\u2019s a successful result for the client? And these are the areas that under normal circumstances, they would never get to see.<br \/>\n<b>Kevin:<\/b>\u00a0 Now, let me tell you what\u2019s involved here. You can make the application. I\u2019ll tell you how to do that in just a moment, but what you actually get is a three-month internship with Bill. You get three months\u2019 salary, you get three months\u2019 accommodation in Double Bay, you get an Audi to drive around in, as well. Deck you out in business wardrobe and also then put you through the New South Wales Real Estate Certification Registration course.<br \/>\nDoes anyone who wants to join have to be in New South Wales, Bill?<br \/>\n<b>Bill:<\/b>\u00a0 They\u2019ve opened this up nationally. They will even fly the person down from interstate.<br \/>\n<b>Kevin:<\/b>\u00a0 So they make an application. Tell me how to get more information about this, Bill.<br \/>\n<b>Bill:<\/b>\u00a0 If they go to the Hooker website and all the Hooker offices will explain what they need to do. I believe the first initial step is to do a 60-second video on yourself selling something or anything. Then there will be a whole process over the next six months.<br \/>\nThis is a golden opportunity for somebody who wants a career change, and they\u2019ll get to see it in the hard coalface. They\u2019ll get training that under normal circumstances they would not be able to get.<br \/>\n<b>Kevin:<\/b>\u00a0 It\u2019s a great opportunity. I strongly suggest you go and do it. Just go and check out the L.J. Hooker Website, LJHooker.com.au. All the information is there for you.<br \/>\nBill, I\u2019d love to track this with you, too. When you make the decision about the person who\u2019s going to join, I\u2019d like to talk to them, and then I\u2019d like to shadow them over that three-month period to find out what they\u2019re learning.<br \/>\n<b>Bill:<\/b>\u00a0 That would be a fantastic thing to do, Kevin, and I\u2019d be more than happy for you to ring. You can talk to me and you\u2019ll probably be able to talk to the intern and say, \u201cRight. What have you learned? How\u2019s the process?\u201d<br \/>\n<b>Kevin:<\/b>\u00a0 It\u2019s going to be a great learning experience. Thanks, Bill. All the best, mate. Hats off to you, mate. I think it\u2019s great.<br \/>\n<b>Bill:<\/b>\u00a0 Pleasure. Bye.<br \/>\n&nbsp;<\/p>\n<h2>Why capital growth trumps cashflow &#8211; <a href=\"http:\/\/realestatetalk.com.au\/featured-channel\/michael-yardney\/\" target=\"_blank\" rel=\"noopener noreferrer\">Michael Yardney<\/a><\/h2>\n<p><b>Kevin<\/b>:\u00a0 Here\u2019s a question we\u2019re asked from time to time: how do you decide between capital growth and cash flow? I\u2019m going to ask Michael Yardney to make a comment.<br \/>\nI think I know what you\u2019re going to say, Michael, but I want to hear it anyway, then I want to be able to discuss the pros and cons with you. Michael Yardney from Metropole Property Strategists.<br \/>\nHi, Michael.<br \/>\n<b>Michael<\/b>:\u00a0 Hello, Kevin.<br \/>\n<b>Kevin<\/b>:\u00a0 Michael, I want to ask you that question. How do we decide between capital growth and cash flow?<br \/>\n<b>Michael<\/b>:\u00a0 Well, Kevin, there are clearly two camps, aren\u2019t there? There are the cash flow followers, and they suggest you should invest in property that returns more cash than it expends. In other words, they want rental returns that give them some cash in their pocket every month.<br \/>\nAnd then of course, there\u2019s the capital growth crew. They favor investing in capital growth over cash flow. In other words, you buy properties that produce above-average capital growth in value, and usually you have to carry some negative gearing along the way.<br \/>\nBut, Kevin, I guess if there was only one way to do it, both wouldn\u2019t exist. So there probably is room for both of them.<br \/>\nIn my mind, I think there are three phases of your property journey. The first one is the accumulation phase. That\u2019s the stage where you build up a high-growth portfolio of investment-grade properties. Kevin, that\u2019s building your assets \u2013 asset accumulation \u2013 and that takes 10 or 15 years. That\u2019s why I believe capital growth comes first.<br \/>\nThen there\u2019s the consolidation phase, where you slowly lower your loan-to-value ratios, and conversely, that increases your cash flow.<br \/>\nThen the lifestyle phase. This is where you live the life you want to live using the proceeds of your cash machine.<br \/>\nBut Kevin, most people get it the wrong way around and they look for cash flow first.<br \/>\nA really good example, Kevin, was a couple of weeks ago a new investor \u2013 somebody who hadn\u2019t invested before but picked up one of my books at the airport \u2013 came along and said to us, \u201cMichael, I want to buy an investment property because I\u2019m actually cutting back my hours, I\u2019m going to have another baby, and I want the property to pay for the school fees for my first child.\u201d She assumed, from a thing she\u2019d read in the magazines that she could actually buy property and it would spit out enough money to pay for school. Then others say, \u201cI\u2019d like to buy an investment property because it\u2019ll pay for my holidays.\u201d<br \/>\nResidential real estate doesn\u2019t work that way. In my mind, residential real estate is a high-growth, relatively low-yield investment, and if you do get some cash slow, Kevin, it\u2019s not hundreds of dollars a week, it\u2019s not enough to change your lifestyle<br \/>\n<b>Kevin<\/b>:\u00a0 Michael, that makes so much sense to me. You\u2019ve actually swung that whole argument around. But I can really understand why someone who\u2019s just starting out, maybe limited cash flow, looking at it and saying, \u201cWell, I have to make this thing pay off so that I can actually let it grow.\u201d But you\u2019re saying it\u2019s the other way around.<br \/>\n<b>Michael<\/b>:\u00a0 You\u2019re right, Kevin. The common philosophy is that \u201cI need more cash flow.\u201d That\u2019s what most Australians say, because the money runs out before the month does. But the trouble is if you look at the result of most investors, you\u2019re going to find that half sell up in the first five years, and of those who stay in the property game, less than 8% own more than two properties \u2013 92% never get past their second property \u2013 which means that if you do what everyone else does, if you listen to what everyone else says, you\u2019re going to end up getting the same results.<br \/>\nKevin, it\u2019s just too hard to get the deposit for your next property out of a<b> <\/b>couple of dollars a week positive cash flow or out of your savings. So, the way you grow a substantial portfolio is through capital growth.<br \/>\nBut, Kevin, you actually can have your cake and eat it too. What I\u2019ve been proposing is that you buy a high-growth property, a property in an area where it\u2019s going to have substantial capital growth and over time, rental return, and then you make it a high-yield property by adding value.<br \/>\nYou\u2019re going to increase the value of your property, but more importantly you\u2019re going to increase the rent because it\u2019s more attractive. It\u2019s going to give you good depreciation allowances. And it\u2019s very likely that you\u2019re going to find a property that had a reasonable amount of negative gearing could well be cash flow neutral, or even a little bit cash flow positive, because you\u2019ve manufactured the rental returns and the capital growth.<br \/>\nThat\u2019s, in my mind, having your cake and eating it too.<br \/>\n<b>Kevin<\/b>:\u00a0 Michael, many people will just look at it and ignore the fact that as a property grows, or you get good capital growth, you therefore get a lot more equity in it. You can then use that equity to gear, to help you get into the next property.<br \/>\n<b>Michael<\/b>:\u00a0 Exactly right, Kevin. And the other thing, of course, is as the property goes up in value, so does the rental. A high-growth property, over time, will have higher returns than a lower-growth property that isn\u2019t growing as fast, even though it starts with a better return.<br \/>\nI think the other point, Kevin, is that you make your money in property in four ways. You make it out of capital growth, you make it out of rental returns, you make it out of the tax depreciation and other benefits \u2013 not that that\u2019s a reason to invest in it \u2013 and you make it out of forced appreciation by manufacturing some capital growth.<br \/>\nBut capital growth <i>is <\/i>income. Sure you can\u2019t bank it in the short term, you can\u2019t eat it, but capital growth is income because you can borrow against it, and in turn, you can use it to make more money.<br \/>\n<b>Kevin<\/b>:\u00a0 Great talking to you. Michael Yardney from Metropole Property Strategists.<br \/>\nThanks for your time, Michael.<br \/>\n<b>Michael<\/b>:\u00a0 My pleasure, Kevin.<br \/>\n&nbsp;<\/p>\n<h2>&#8220;Why I love property&#8221; &#8211; Bryce Holdaway<\/h2>\n<p><b>Kevin:\u00a0 <\/b>I\u2019m delighted this week that our special guest is Bryce Holdaway. Bryce, of course, is from Empower Wealth, and we\u2019ve spoken many occasions on this show about your television appearances on location but also your podcast, The Property Couch.<br \/>\nIt\u2019s great to have you on the show.<br \/>\n<b>Bryce:\u00a0 <\/b>Yes, thanks for having me, Kevin. I always like having a<b> <\/b>chat with you.<br \/>\n<b>Kevin:\u00a0 <\/b>Thanks, mate. In this chat, I want to talk a little bit about you, Bryce, what you\u2019ve done with property and so on, and that journey. What got you involved or interested in property to start with?<br \/>\n<b>Bryce:\u00a0 <\/b>I wrote it in the book. There was an interview with Jan Somers on Ray Martin\u2019s show back in the 1990s. She got up and just scratched a few things up on a whiteboard about the tenant and the taxman paying most if not all of your bills, and if they go up in value, you create some wealth for yourself. I remember that being a massive lightbulb moment for me.<br \/>\nPreviously, my best made at high school went and worked for his father in retail, and I went and did the well-worn path of trying to get a university degree. At 18, he bought an investment property, and he just said, \u201cLook, I don\u2019t really know why I\u2019ve done it. Dad said, \u2018Do it, it\u2019ll go up in value, and I\u2019ll make some money.\u2019\u201d That planted the seed of the idea.<br \/>\nHe really couldn\u2019t answer too many of my queries, so as soon as I saw that interview on TV and just saw it explained \u2013 and it was really simple; it was a \u201cback of a napkin\u201d chat<b> <\/b>up on the whiteboard \u2013 I had two thoughts at that point. \u201cAh, I get what\u2019s going on here now, and to me that sounds terrific.\u201d And the other one was \u201cWhy isn\u2019t every single person on the planet doing this?\u201d<br \/>\nIt\u2019s not since I\u2019ve matured a bit that I understand that there\u2019s human mindset and psychology that gets thrown into it. But at the time, it was a massive lightbulb moment for me, and I was hooked.<br \/>\nI was studying accounting at university at the time. It was one of those things where I didn\u2019t know what I wanted to do. I wanted to be an electrical engineer and I stuffed around too much at high school and didn\u2019t get the grades. So I stumbled into commerce at uni, and my father was an accountant, so I was just heading down that path, but I wasn\u2019t passionate about it.<br \/>\nBut as soon as I found out about property, it felt like it was for me, I was in my flow, and I just loved talking to anyone who would listen.<br \/>\n<b>Kevin:\u00a0 <\/b>Interesting you talk about your mate there whose father encouraged him to buy property, didn\u2019t really know why he was doing it, but just thought, \u201cWell, if dad said it, I should do it.\u201d You mentioned there about your dad being an accountant, too.<br \/>\nWhat were the conversations like around your table? Did your parents encourage you into property?<br \/>\n<b>Bryce:\u00a0 <\/b>Interesting story. No, because my dad was born in 1939, so he was born in the shadows of the Great Depression and also War years, as you know. So for him, he was very much the traditionalist that you get a good, safe, secure job, you pay off the home as quickly as you can, and you don\u2019t get yourself in over your head.<br \/>\nMy dad\u2019s been very encouraging for me \u2013 my number one supporter \u2013 but there were some very robust discussions early on. Dad thought that it was better for me to not leverage and to not get into debt, to just go down the path, finish your university degree, buy your first home, and pay it off.<br \/>\nHe\u2019s really proud of what I\u2019ve done today, but at the time, he probably would have been very concerned because I took the opposite of what he said to do. I wanted to leverage myself into property, I wanted to take risks, I wanted to get into business for myself, and everything that he valued, I was bucking against.<br \/>\nBut ultimately, there were no kitchen-table discussions about property, hence me just trying to find as much information as I could in external sources. But he\u2019s always been encouraging of me.<br \/>\n<b>Kevin:\u00a0 <\/b>Interesting that story you told about Jan Somers. I\u2019ve interviewed Jan on a number of occasions, and I know you have spoken to her too. Nothing much has changed. You could still get Jan up and she\u2019d still scratch on the whiteboard nowadays probably the same scenario. It hasn\u2019t really changed, Bryce, has it?<br \/>\n<b>Bryce:\u00a0 <\/b>No. It was a terrific trill for me. I met her about six weeks ago, we interviewed her on The Property Couch, and it was a terrific chat from someone who is incredibly humble, who has been investing for 45 years, who didn\u2019t complicate it.<br \/>\nI feel she was one of the pioneer educators in the country, and she\u2019s the original independent voice where she never took any kickbacks, she never took commissions, she was never seduced by any of the outside influences and the influence that she had.<br \/>\nShe said, \u201cBuying property, correctly financed, held for the long term, is my philosophy. It\u2019s been my philosophy from day one. It\u2019s still my philosophy 45 years later.\u201d And for me, it was a nice circle, completing of the loop for me, but also just to remind myself that for her, she\u2019s created a very significant level of financial independence but she\u2019s remained humble. You\u2019d never know.<br \/>\nI like the story where she says she\u2019ll indulge on a couple of things, she likes to have a nice, comfortable place to live in, but she drives an old, 2004 BMW. She actually flies business class to Europe, but once she gets there, she stays in a $20 a night accommodation that might not even have a shower.<br \/>\nJust keeping it really real and not getting seduced by some of the trappings that come from her wealth, but just looking to get her time back and her experiences back, which she\u2019s done in spades.<br \/>\n<b>Kevin:\u00a0 <\/b>Jan, of course, was one of the first pioneers of educating investors. I know there\u2019s a lot of that goes on. We like to think we do on this show, and certainly you guys do on yours as well. There are a number of other podcasts that do exactly the same thing. But when you think about it, property investors are really at a great risk because of a lack of protection. They don\u2019t really have a voice, and there are many people who attack them and try and think \u201cOh, these guys are wealthy; let\u2019s try and rip them off.\u201d<br \/>\nA lot of dangers there for property investors, aren\u2019t there? And a lack of protection.<br \/>\n<b>Bryce:\u00a0 <\/b>Yes, absolutely. It\u2019s an unregulated environment, and the challenge is that the investment class is largely an emotional investment class. It\u2019s an essential need with shelter, so for you to try and regulate residential real estate is going against some very powerful lobby groups.<br \/>\nFor example, the Real Estate Institute in each state and across the country, because a real estate agent earns a living from transacting in real estate, and of course, they have a discussion around whether or not it makes for a great investment or to have a yield discussion. It\u2019s hard to say to those guys that you can\u2019t talk about investing because it\u2019s their bread and butter, but as you point out, it makes people very vulnerable.<br \/>\nI always say the barriers to entry are pretty low to be in the property investment sales game where all you need is a haircut and a suit and if you have a silver tongue, and with lots of people wanting to outsource their understanding when it comes to money.<br \/>\nI don\u2019t think there is a problem with outsourcing the execution, but a lot of people outsource the understanding and leave it in the hands of someone else and someone else\u2019s agenda. I\u2019ve been an advisor now for pretty close to 20 years helping people buy investment properties, and I\u2019ve seen some roadkill in that time \u2013 and it\u2019s largely where people have, as you say, been in a vulnerable position and people have taken advantage of that.<br \/>\n<b>Kevin:\u00a0 <\/b>What was the first property deal you ever did?<br \/>\n<b>Bryce:\u00a0 <\/b>It was a property in Vic Park in Perth back in 1999. I paid $199,940 for a three-bedroom apartment. I went into partnership with someone else because I was 23 at the time. I was so super excited. But Kevin, the funny thing is $199,000 sounds like nothing now, but the median price for Perth at the time for a house was $158,000, so I got massive buyer\u2019s remorse after that. But what I know now is I was three kilometers from the city, I was in a high land value area.<br \/>\nIt was a scary time, but I reckon that\u2019s the best decision I\u2019ve ever made, because I know that most people struggle. Only 1 in 12 people in Australia buy an investment property, and of that small percentage, nine out of ten don\u2019t buy more than two. Despite what the magazines say and the people you get to interview, they\u2019re the minority. The majority of people don\u2019t feel comfortable buying investment properties and going into debt.<br \/>\nI always think that that first one is the best deal I\u2019ve ever done, because it took me over the line. Every deal I\u2019ve ever done since has been so much easier. But that one, the adrenaline was up, the learning curve was high, and I certainly was nervous for a long, long time.<br \/>\n<b>Kevin:\u00a0 <\/b>Well, that\u2019s the one you measure all the others against I guess. You mentioned there that the learning was high. Did you actually heavily research that, or was that a lucky purchase?<br \/>\n<b>Bryce:\u00a0 <\/b>No, I was really young. I\u2019d like to say that I was one of those guys who compared all asset classes, but I just loved property and I had a mentor who said, \u201cLet\u2019s buy a property together,\u201d and I just absolutely jumped at it.<br \/>\nYou learn how to play a few songs and then you learn how to read music later on. I was the guy who wanted to play a few songs before I learned the big picture. I just wanted to get into it. I just knew it was something that I wanted to get involved in.<br \/>\nBut I learned the hard way about joint and several liability, because I bought this property with this other mentor of mine, but what I didn\u2019t realize is that I only owned half the property but as far as the banks were concerned, I had 100% of the liability. So they considered me to be responsible for 100% of the loan even though I only owned a portion of the property.<br \/>\nThat was an interesting exercise to understand the lending game, and it also made me realize that investing in property is not a game of bricks and mortar; it\u2019s a game of finance. So I had to quickly understand how finance worked.<br \/>\n<b>Kevin:\u00a0 <\/b>Yes, it\u2019s a game of strategy, too. Have you used the same strategy all the way through, Bryce?<br \/>\n<b>Bryce:\u00a0 <\/b>No, I\u2019ve made some mistakes, Kevin. Because I had some success young, I thought I was a bit of a legend way too early and with another couple of guys, we bought two houses in Tugun on option to do a development. We were going to knock them over and build 21 apartments just near the Coolangatta airport.<br \/>\nIt was around the time that Schapelle Corby was in the headlines. The house next door was actually her father\u2019s house. I remember we were trying to talk to him about taking that so that we could actually build more. But that was just an exercise in taking your eye off the ball, not doing the Jan Somers method of sticking to your knitting and knowing what you should do.<br \/>\nI tried to make a lot of money from being a property developer, and long story short, two years of my life I was out of the market, I burned a lot of cash to get the DA approved, and because of something in council that was outside of our control, we didn\u2019t actually get the application to go ahead. So we lost a bit of money.<br \/>\nUltimately if I had just stayed true to the process of buying good assets, holding them long term, correctly financed, I would have done a hell of a lot better in that time.<br \/>\nI\u2019ve done some speculative stuff, but now I\u2019m pretty clear on where I want to buy, and I\u2019m also clear on the fact that I have a very conservative approach now, so it\u2019s about debt retirement. I don\u2019t need to have ten properties, I don\u2019t need to have a renovation exercise; I just want to finance them correctly, buy the right ones that grow in value in growth locations, and put a lot of my debt structure around retirement debt.<br \/>\nSo ultimately I can retire with a passive income. As I said, I want to get my time back and my experiences back, and I want some freedom that comes from having that passive income. I\u2019m pretty close to my goal, which is good.<br \/>\n<b>Kevin:\u00a0 <\/b>Good on you, mate.<b> <\/b>Is your portfolio a mixture of houses and apartments, or have you specialized?<br \/>\n<b>Bryce:\u00a0 <\/b>Yes, I\u2019ve had everything, and I\u2019ve been across WA, New South Wales, Queensland, so I haven\u2019t been afraid to go across borders. If you talk to my father about apartments\u2026 I like to think of what I buy as flats rather than apartments, and the distinction being the old school 1960s and 1970s versus the new stuff. But if you talk to him about flats, he just thinks that\u2019s low socioeconomic and you\u2019d be mad. So he\u2019s just quarter-acre blocks with a detached house surrounded by a garden with a Hills hoist and a barbecue.<br \/>\nBut as we know, Baby Boomers will soon be at the tipping point where they\u2019ll no longer be the dominant force in the workforce and Gen X will take over and then Gen Y. What we do know about different generation types is they value things differently.<br \/>\nFor me, I\u2019ve gone from land content is king to land value is king. I\u2019d rather have a two-bedroom apartment four kilometers out from the CBD where the land value is high and the percentage of the purchase price of the building is low, versus some land where I have to go 30 or 35 kilometers out, where as a percentage of the purchase price, the land is really low and the building is really high.<br \/>\nI often see a lot of people saying \u201cIt\u2019s all about the land, I must buy land,\u201d and I think you have it around the wrong way. For me, you have to get the suburb first and the property second, whereas I see a lot of people go property first, suburb second.<br \/>\n<b>Kevin:\u00a0 <\/b>Yes, buying the wrong way around.<br \/>\nYou mentioned there that you do buy across borders. Would you buy outside of Australia?<br \/>\n<b>Bryce:\u00a0 <\/b>I don\u2019t see the need for it, personally. I know people do. My personal view is that you need to be a sophisticated investor because you\u2019re throwing in exchange rate risk, you\u2019re throwing in different economy risk, you\u2019re throwing in geography risk, you\u2019re throwing in different legislation risks.<br \/>\nIf I go back to the fact that not many people buy an investment property and of those who actually do, a very small percentage buy more than two, let\u2019s just get our own back yard sorted first. If you can get your portfolio up to $4 or $5 million worth of value and you have significant amount of equity, you probably have a good enough base to then consider other markets.<br \/>\nLet\u2019s be honest, you can make money all around the world, but you don\u2019t want to add complexity in the early days while you\u2019re still trying to go through that accumulation phase to build up some equity and build up some cash flow.<br \/>\nFor me, it\u2019s not an ambition, but I do know that some people do. My caution would be for the beginner and the intermediate investor to probably really consider whether you do it, and then for the sophisticated investor, that\u2019s a different kettle of fish.<br \/>\n<b>Kevin:\u00a0 <\/b>You\u2019ve given us a lot of great advice in our chat together. Just to sum it up for me, Bryce, what advice would you give someone who\u2019s thinking about starting an investment property portfolio?<br \/>\n<b>Bryce:\u00a0 <\/b>My number one advice is cash flows will tell the story. For me, I don\u2019t want for someone to get into a property purely based on an equity play where they\u2019re servicing debt with debt. I\u2019d like to see that there\u2019s some surplus at the end of the month, which shows that they have good financial discipline.<br \/>\nWe want to be in the investment game for a minimum of ten years to get some maturity out of this investment. It\u2019s a high-value transaction, high entry cost, high exit costs, so if you have to turn over too quickly, that\u2019s going to destroy your wealth rather than grow it.<br \/>\nWe have to plan our cash flows, take a bit of a look to the horizon and see what\u2019s happening in our life. Are we at the early stages of life and we may have to plan for maternity leave and being on one income? Are our kids at a stage of life where they\u2019re going to leave the nest? What\u2019s my attitude to risk?<br \/>\nAll these factors come into play as to what my next step would be, but my fundamental suggestion to anyone who\u2019s starting is be a farmer not a hunter. So multi-season outlook, know that you have a plan, reap and sow at some point in the future. It\u2019s not going to be a quick kill, whereas the hunter is looking for all those quick kills.<br \/>\nLet\u2019s be honest, the television industry that I\u2019m a part of doesn\u2019t<b> <\/b>help, because everyone can sit in their lounge room and watch people make what\u2019s perceived an enormous amount of money, but there\u2019s a lot of risk involved.<br \/>\n<b>Kevin:\u00a0 <\/b>Of course, there is. It\u2019s great talking to you, Bryce. Bryce Holdaway, of course, from Empower Wealth, <i>Location, Location, Location,<\/i> and also that podcast, Property Couch.<br \/>\nBryce, thank you so much for your time. Great talking to you, mate. I look forward to catching up again soon.<br \/>\n<b>Bryce:\u00a0 <\/b>Thanks, Kevin.<br \/>\n&nbsp;<\/p>\n<h2>The hidden key to housing affordability &#8211;\u00a0Margaret Lomas<\/h2>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 We talk in the show a reasonable amount about housing affordability. In fact, last week in the show, I was talking to Nerida Conisbee about that in relation to what happened in Victoria. I want to get Margaret Lomas\u2019s view on that in terms of how do we make housing more affordable? Is it really a big issue?<\/p>\n<p class=\"MsoNormal\">Margaret, thank you very much for joining us. How are you?<\/p>\n<p class=\"MsoNormal\"><b>Margaret:<\/b>\u00a0 I\u2019m good. It\u2019s a very important subject to me. I obviously have children of my own, and you\u2019ll probably even hear in the background from time to time, a baby. I\u2019m on grandma duties today.<\/p>\n<p class=\"MsoNormal\">I\u2019m watching them all struggling to get into the market and wanting to help as much as I can, but I think it\u2019s very, very important that governments look at what they can do, and I, frankly, think they can do more.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 There are two things, I guess. It\u2019s getting people into housing but also making housing more affordable from a rental point of view, too. But let\u2019s deal with buying a property. Do you think that the moves the Victorian government have made are good? Are they going to achieve good results, Margaret?<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0Let\u2019s say they\u2019re a start. I guess the biggest problem at the moment, really, is that each state has a different amount of grant, different rules around their grants, and what I\u2019m seeing at the moment is that the states that need it the most have the worst grants available and the states that need it the least, because their housing isn\u2019t unaffordable, have the best grants available.<\/p>\n<p class=\"MsoNormal\">I wonder if there\u2019s a correlation there that having those grants available has also assisted to keep a lid on housing. I don\u2019t know. There\u2019s an argument for and against that. A lot of people think that first-home owner grants do nothing but boost prices, but I don\u2019t know that we necessarily have empirical evidence to prove that.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 In some states \u2013 let\u2019s have a look at Queensland as an example \u2013 they\u2019ve made the first-home owner grant applicable only for new homes, and I think sometimes that\u2019s actually forcing young buyers to buy properties in areas where there\u2019s no infrastructure or very little infrastructure anyway.<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0Agreed entirely. It\u2019s actually every state now. Every state has now shifted over to only providing grants for new homes, and I think that\u2019s very unfortunate because the moment someone buys a new home, it becomes a used home anyway, so the next first-home owner can\u2019t buy it off them. Those people are buying those homes in areas that are otherwise affordable, but suddenly they\u2019re not available for the next first-home owner because the grant excludes them, and I think that\u2019s unfortunate.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 I\u2019ve also heard people talk about making boosts available for regional properties only, to get people out of more of the regional areas, but I think whenever you manipulate some of these grants to get people to do things that you want them to do and live in areas that you want them to live in, it\u2019s the wrong way to go, Margaret.<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0I\u2019m not sure what the whole outcome would be there or why they would even want to do that. Regional areas are already affordable, and it\u2019s not the property prices that are stopping people moving there; it\u2019s the infrastructure, the lifestyle, and the access to services.<\/p>\n<p class=\"MsoNormal\">The governments would be far better offering grants to government bodies and other people to actually build the right kind of infrastructure, even to private providers of things like childcare and sporting and other things like that, to make them go to those areas so that it\u2019s more attractive to people that live there.<\/p>\n<p class=\"MsoNormal\">It\u2019s not the house prices that are preventing people from going to the regions.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 The Prime Minister has said that he believes the answer to housing affordability is more supply. We know it\u2019s all about a supply-and-demand argument, but is it that simple, Margaret?<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0I think more supply is one thing, but the problem is supply isn\u2019t going into the right places. We have a lot of areas that are oversupplied in housing and they\u2019re just areas that people aren\u2019t wanting to live in just yet. Eventually, people do feel like they can commute a lot further.<\/p>\n<p class=\"MsoNormal\">I always use Perth as a really, really good example. While people in Sydney are quite prepared to live on the Central Coast and travel what can be an hour and 45 minutes on the train to get to work, people who live in Perth, that\u2019s inconceivable to them that they would do that. To them, anything longer than a 20- to 30-minute commute is just out of the question.<\/p>\n<p class=\"MsoNormal\">Now in 20 years\u2019 time, that will all change, of course, but at the moment, the housing supply in Perth \u2013 the best supply and the oversupply \u2013 exists in those areas that are further than 30 minutes away, and therefore, people don\u2019t want to buy them. They\u2019re not boosting supply in the parts that they should do.<\/p>\n<p class=\"MsoNormal\">And places like Perth can easily do that because they have plenty of closer to the city areas where they still have houses sitting on 700-square-meter blocks and 1000-square-meter blocks, but the local councils refuse to change planning laws and allow people to subdivide into smaller blocks.<\/p>\n<p class=\"MsoNormal\">I think that\u2019s a good start. If councils can recognize that they may be in areas that are commutable distance to the city and have a lot of people on very large blocks of land, then why not allow those people to begin to actually subdivide into smaller blocks and increase the supply that way?<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 Yes. You\u2019re very right. Even in some of the outlying areas in many of the capital cities, we see houses on big blocks of land that could quite easily be subdivided.<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0Absolutely, but the government and the local governments just don\u2019t want to do that.<\/p>\n<p class=\"MsoNormal\">Of course, the other problem there is that all of the levies and the charges that councils charge to subdivide prohibits a lot of people from going ahead with it. So let\u2019s make that process easier \u2013 the process of subdivision easier.<\/p>\n<p class=\"MsoNormal\">I can think of dozens of people who have their own homes on big blocks of land and would only be too happy to add another dwelling to the black of it if it was easier to do so. Let\u2019s make it easier. Let\u2019s stop restricting those second dwellings to 60 square meters that people don\u2019t want to have. Let\u2019s allow them to chop off their backyards easily and cheaply and build the houses there.<\/p>\n<p class=\"MsoNormal\">And then let\u2019s take it all one step further and think about things other than first-home owner grants to help those first-home owners \u2013 things like loan schemes that aren\u2019t prohibitive. I\u2019ve seen a lot of cheap loan schemes but they\u2019re no good. They end up with people paying more than they borrowed at the end of the whole thing and going backwards.<\/p>\n<p class=\"MsoNormal\">Let\u2019s think of different ways to deliver grants in a way that it won\u2019t impact on the price of housing and it\u2019ll really help people over the longer term rather than the short-term.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 Always great talking to you, Margaret. We can catch Margaret every week, of course, on Sky TV on <i>Property Success with Margaret Lomas<\/i>. The channel I think is 602. Is that right?<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0602. That\u2019s it.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 Got it, okay. Margaret, lovely talking to you. Thank you for giving us your time. I\u2019ll let you get back to your grandchild now. Is it a boy or\u2026?<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0A little girl and she\u2019s gorgeous.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 They\u2019re all gorgeous. Well done.<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0I\u2019m just trying to teach her to say \u201cgranny\u201d today, but it\u2019s not working.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 Okay. Well good luck. Let me know if you succeed.<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0I will. Thank you.<\/p>\n<p class=\"MsoNormal\"><b>Kevin:<\/b>\u00a0 Thanks, Margaret. Bye.<\/p>\n<p class=\"MsoNormal\"><b>Margaret: <\/b>\u00a0Bye-bye.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Highlights from this week: Learn from a master and get paid to do it Cash flow vs capital growth Is the money allocation to help affordability going into the wrong pockets? The wrong things to look at when buying a property to renovate TV property&#8230;<\/p>\n","protected":false},"author":176692471,"featured_media":11024,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,11,13,24],"tags":[101],"class_list":["post-11022","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-shows","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Margaret Lomas on housing affordability + Where renovators go wrong when buying a property + Why capital growth wins out over cash flow - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/margaret-lomas-on-housing-affordability-where-renovators-go-wrong-when-buying-a-property-why-capital-growth-wins-out-over-cash-flow\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Margaret Lomas on housing affordability + Where renovators go wrong when buying a property + Why capital growth wins out over cash flow - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Highlights from this week: Learn from a master and get paid to do it Cash flow vs capital growth Is the money allocation to help affordability going into the wrong pockets? 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