{"id":11391,"date":"2017-04-20T03:00:01","date_gmt":"2017-04-19T17:00:01","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=11391"},"modified":"2017-04-20T03:00:01","modified_gmt":"2017-04-19T17:00:01","slug":"the-smart-money-is-on-growth-rates-stephen-vick","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/the-smart-money-is-on-growth-rates-stephen-vick\/","title":{"rendered":"The smart money is on growth rates – Stephen Vick"},"content":{"rendered":"

Financial planner Stephen Vick<\/strong> outlines what makes investment grade property and why a focus on growth rates will outperform most other strategies including renovation.
\nTranscript:<\/strong>
\nKevin:<\/b>\u00a0 My guest in studio is Steve Vick. Steve is the managing director of Nexus Private Wealth Management. Steve from a financial planner\u2019s perspective, what constitutes good or investment-grade property?
\nSteve:<\/b>\u00a0 Investing is really a lesson in mathematics. You might be surprised to know that the difference between, say, 4% growth and 6% growth on a $500,000 property is over half a million dollars in net profit. If I hold a $ 500,000 property for 20 years, if I compare somebody who got a 4% return versus somebody who got a 6% return, the person who got a 6% return would earn more than half a million dollars more than the person who got the 4% return. So, you can see that the growth is incredibly important.
\nNow another thing that the research tells us is that there is a very high correlation \u2013 or relationship \u2013 between properties that are close into the capital cities and higher growth rates. So, the closer you come in, generally the higher the growth rate. There are always outliers to that data and you have the hotspots and all that sort of thing, but my firm belief is that property is a long-term hold strategy.
\nYou can see from those numbers that people who try to make their money in the acquisition process or even in the renovation-type process, the numbers that they make are completely insignificant when they compare it to just focusing on very good growth rates.
\nKevin:<\/b>\u00a0 And when you do look at renovation and you look at how much effort and energy and risk has to go into getting that property for what sometimes \u2013 by the time you look at the taxes and other things \u2013 can be relatively a small amount of money, you have to do it quite a lot during the year to make it even come anywhere near the kind of growth you can get out of a passive well-positioned property that\u2019s going to earn, say, over 20 years, isn\u2019t it?
\nSteve:<\/b>\u00a0\u00a0Yes, I talk to clients about this all the time, and I hear a lot of experiences. Most people generally say they put the first three renovations down to the experience. It\u2019s like anything; if you become very good at something, then you can add genuine value. But unless you are extremely good at that and you like spending your weekends doing that and you have the capacity to be able to make a couple of mistakes in that area and you love doing that, then that\u2019s fantastic. But if not, you\u2019re perhaps better off using your efforts to do what you do best.
\nKevin:<\/b>\u00a0 It comes down once again to looking at this as a business. If you are going to go into renovation, don\u2019t think you can do it and make a lot of money by being a part-time renovator while you continue with your job. It needs to become a full-time position: this is what you focus on, this is your business.
\nWe talk to Cherie Barber quite often in the show, and she will say you need to look at it as a business. It\u2019s her business, she makes a lot of money out of it, but that\u2019s all she does. Seven days a week, in some cases. I don\u2019t think she works seven days a week, but she\u2019s at it full time.
\nSteve:<\/b>\u00a0 A lot of people that I see who make money during renovations, they\u2019ve usually made money because the way they have bought very well in the first place or they\u2019re in a rising market anyway. It usually has very little to do with a brilliant design skills.
\nKevin:<\/b>\u00a0 You\u2019ve done some research into this area about high growth rates, low maintenance, and so on. You know what constitutes a good investment property? Is it about position?
\nSteve:<\/b>\u00a0\u00a0Certainly, location is incredibly important. We see employment as one of the primary drivers. People don\u2019t want to send an hour or two hours in their car every single day. The RBA has recently put out a paper, and they show that there is a widening gap between the premium that the people would pay to be closer into the CBD. And that gap is getting wider \u2013 they say this in their paper \u2013 and a lot of that has to do with the aging population.
\nThey can\u2019t afford to look after the quarter acre block anymore. They\u2019re moving into apartments, they\u2019re moving closer in, and they need to be closer in because they need a life. They need to be able to go to restaurants and caf\u00e9s and theatres, and if they\u2019re more than about 10 minutes out or so, you\u2019re basically living in a cul-de-sac.
\nThey indicate that the Baby Boomers the next 20 years will be one of the primary drivers for why that gap between being further out and closer in will widen over the next 20 years.
\nKevin:<\/b>\u00a0 Is this one of the things you think that will hold the property market back \u2013 this lack of infrastructure, not enough tunnels, not enough way to move people around?
\nSteve:<\/b>\u00a0 It depends on your perspective. If you\u2019re an investor and you\u2019ve bought well, it won\u2019t hold you back at all. Like Sidney and every other capital city around the world, it will be quite annoying for those people who are forced to leave further out of the city. The services and the amount of time that they have to spend in their car each day is going to get longer, of course. But certainly, it provides also a great opportunity for investors.
\nAnother mistake that I see people making quite often is mistaking growth for capital growth. They might have an area where there\u2019s fantastic infrastructure, there\u2019s a lot of migration, there\u2019s a lot of population growth, but there\u2019s also a lot of supply.
\nIf you go out on the fringes of the city, there\u2019s enough land out there to keep going for the next 50 years or so. They don\u2019t have that restraint of supply, and that keeps capital growth down. Whereas, of course, the closer you come into the CBD, whether it\u2019s apartments or houses, you have a limitation of space available, and that is what drives prices up over time.
\nKevin:<\/b>\u00a0 Just before I let you go, if I could, your take on what the banks are doing to dampen enthusiasm for property investors \u2013 driven largely by the fact of what\u2019s happening in Sydney and the fact that they are saying that property is now quite unaffordable. Is this just a Sydney problem?
\nSteve:<\/b>\u00a0\u00a0Anecdotally, we are hearing from vendors out there that now if raising interest rates and raising serviceability criteria wasn\u2019t enough, now there seems to be anecdote evidence to say that some of the banks are instructing their valuers to lowball valuations depending on whether it\u2019s an investor and an owner-occupier.
\nOf course, that\u2019s seriously harming some people\u2019s lives. Some people who have gone into contracts a bit on the margin, those people are losing deposits, losing $40,000 or $50,000 if they can\u2019t complete on the a project.
\nKevin:<\/b>\u00a0 Thank you very much for joining us, Steve. Steve Vick was my guest, managing director of the Nexus Private Wealth Management.
\nSteve:<\/b>\u00a0\u00a0Thanks, so much Kevin.
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

Financial planner Stephen Vick outlines what makes investment grade property and why a focus on growth rates will outperform most other strategies including renovation. Transcript: Kevin:\u00a0 My guest in studio is Steve Vick. Steve is the managing director of Nexus Private Wealth Management. Steve from…<\/p>\n","protected":false},"author":176692471,"featured_media":11392,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,11,13,36,21,22,25],"tags":[101],"class_list":["post-11391","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-renovation-topic","category-research-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nThe smart money is on growth rates - Stephen Vick - 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\/the-smart-money-is-on-growth-rates-stephen-vick\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The smart money is on growth rates - Stephen Vick - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Financial planner Stephen Vick outlines what makes investment grade property and why a focus on growth rates will outperform most other strategies including renovation. 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