{"id":21457,"date":"2018-06-08T01:00:03","date_gmt":"2018-06-07T15:00:03","guid":{"rendered":"https:\/\/realestatetalk.com.au\/?p=21457"},"modified":"2018-06-08T01:00:03","modified_gmt":"2018-06-07T15:00:03","slug":"class-1b-buildings-offer-high-returns-the-8-golden-investment-rules-why-all-property-managers-are-not-the-same","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/class-1b-buildings-offer-high-returns-the-8-golden-investment-rules-why-all-property-managers-are-not-the-same\/","title":{"rendered":"Class 1B buildings offer high returns + The 8 golden investment rules + Why all property managers are not the same"},"content":{"rendered":"<p><strong><em><u>Highlights from this week: <\/u><\/em><\/strong><\/p>\n<ul>\n<li>An untapped area of investment<\/li>\n<li>Frenchs Forest picked as a boomer<\/li>\n<li>A book about the game that teaches great investment lessons<\/li>\n<li>3 styles of property management<\/li>\n<li>Emotions and property decisions \u2013 do they mix?<\/li>\n<\/ul>\n<p><strong>Transcripts:<\/strong><\/p>\n<h2>Emotions and property investment &#8211; do they mix? &#8211;\u00a0Veronica Morgan<\/h2>\n<p><strong>Kevin:\u00a0 <\/strong>My next guest on the show is Veronica Morgan. Veronica, of course, worked with Bryce Holdaway. You\u2019ll still see them both, in fact, on <em>Location, Location, Location<\/em>, a great show featuring buyer\u2019s agents helping people find properties in different parts of Australia. Veronica joins me.<\/p>\n<p>Good day, Veronica. Long time no speak, but lovely to talk to you again.<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Nice to be back. Hello.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Veronica has her own buyer\u2019s agency based in Sydney called Good Deeds Buyer\u2019s Agency, and I want to talk to you in this conversation \u2013 if I may \u2013 about emotions, property investing, and how some people say they probably don\u2019t go together. Do you agree with that?<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>No.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Okay, a one-word answer. Is it something we should avoid, though, getting too emotional about a property if it\u2019s going to be an investment?<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Look, I think that emotion plays a part, and I think the problem with people and how they address emotion in property investment is that we\u2019re all taught or were told you have to buy with the numbers, buy with your head, don\u2019t buy with your heart.<\/p>\n<p>But the problem is who and what drives up prices in property? It\u2019s not the head buyer; it\u2019s the heart buyer. So, if you\u2019re not buying a property with the idea in mind that this is a property that people are going to live in \u2013 and I\u2019m talking residential here, of course \u2013 then if you\u2019re forgetting or trying to forget the emotional part of that, then you are forgetting and omitting to consider a massive part of what drives capital growth.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Okay. I\u2019ll play devil\u2019s advocate for a moment, if I may. The emotional part of this, though \u2013 if you\u2019re not careful \u2013 can drive you to buy at any cost.<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Absolutely.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>And that is where the real danger lies, isn\u2019t it?<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Yes, absolutely. And so what I\u2019m coming at there is if you don\u2019t acknowledge that there are emotions at play\u2026 And also even investors \u2013 even the coldest, hardest investors \u2013 sometimes their emotions cause them not to buy a property that they should buy, or they refuse to pay $10,000 extra when, really, that would be a good investment.<\/p>\n<p>So, emotions go both ways. It\u2019s still emotion even if you\u2019re being hard and calculating. So, by acknowledging how emotions come into play \u2013 whether it be yourself or whether it be in future buyers or other buyers \u2013 then you\u2019re aware that they do play a part, and then you can be more conscious of whether they are impacting you in a negative way or not.<\/p>\n<p><strong>Kevin: <\/strong>\u00a0How do you work out if you\u2019re becoming too emotional about a property? And if so, how do you avoid it?<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>This is a really good question. Just last week, we launched a new podcast called <em>The Elephant in the Room<\/em>, and it is all about this. In the first episode, we actually interviewed a behavioral scientist who went along to his first-ever auction in Melbourne and observed all these subconscious biases that are being appealed to by not just the auctioneer but the whole auction process.<\/p>\n<p>What is really interesting\u2026 And I\u2019d encourage the listeners to go and check out the first episode of the podcast, because we outline a lot of the biases that are being appealed to. This is behavioral science. And so by acknowledging and recognizing how you can be impacted, that\u2019s the first step. Awareness is the first step in being able to do something about it. And I\u2019ll give you one example.<\/p>\n<p>If you go to an auction, for instance, the auctioneer will often use a technique called anchoring, and that\u2019s where they\u2019ll enter into their preamble, for instance, or throughout the auction process, they\u2019ll put in a number that is meant to draw your expectations up to it.<\/p>\n<p>So, it might be that the agent, for argument\u2019s sake, is quoted $500,000 for a property, and the auctioneer might be saying \u201cLook, properties around this area are going for $600,000.\u201d So, he or she is actually using an anchor to get buyers thinking a certain level.<\/p>\n<p>Now, this isn\u2019t conscious. The reactions that we have to these sort of anchors are not conscious; they\u2019re actually deeply in our subconscious, but they can often encourage us to actually go over what we initially thought we would at an auction.<\/p>\n<p>If you ever go and ask people and talk to people, many people\u2026 Because I ask people after auctions, \u201cDid you bid higher than you thought you would?\u201d And quite often, they\u2019ll say yes. It\u2019s that sort of thing. They\u2019re open to the power of suggestion.<\/p>\n<p>And by being aware of that and being aware that that can happen very easily, you can counteract that by actually making a very conscious decision to do your research before you go to auction, be very clear on the value of that property and very clear on your walk-away price, and have the discipline to remind yourself throughout the auction of that.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Is there an opportunity at any time to use emotions to your advantage?<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Yes. I think if you are aware that other people are emotional, in an auction for instance, you can actually scare people off as well. So, yes, absolutely.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>And that is with the king bid? Is that what you\u2019re talking about?<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Yes. There are a number of different ways that you can use it. That\u2019s one. Another way, because of social proof \u2013 that\u2019s another one of these biases, for instance \u2013 people look to other people for reassurance.<\/p>\n<p>If you\u2019re at an auction, the whole process of an auction is very much along those lines of social proof. So, you look to other people. \u201cWell, they\u2019re bidding, so therefore it\u2019s a good idea to buy this property.\u201d<\/p>\n<p>Whereas in the current market, if things slow down, you might go to an auction and nobody else is bidding. And the lack of social proof is what other people are looking at, and they\u2019re taking a negative cue from that.<\/p>\n<p>But if you know it\u2019s actually a good property and you\u2019ve done your research and you know what it\u2019s worth, you can still act reticent \u2013 because you don\u2019t want to encourage anybody else \u2013 but you can be aware that others are being affected and impacted by that lack of social proof, and you can make a clearer decision yourself.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes, because that social proof is alive and well in things like open houses. When you go to an open house and you can see a queue of people going in, you know straightaway that this is a popular property, and it reinforces your decision to buy it.<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Exactly, yes. And you start that mental game in your own head of going up in price.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes, justifying why you may have to pay a higher price?<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Yes.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>It\u2019s amazing how at the end of an auction if someone has paid a premium price for a property, how quickly they can justify that to themselves. I\u2019ve seen it happen, and it constantly amazes me.<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>There is actually a word for that \u2013 probably bias or auspices bias or something like that.<\/p>\n<p>And it is about that thing. It\u2019s such a big decision that you will then look for positive reinforcement because the concept of admitting that you made a bad decision is just too painful to bear, so I\u2019m going to do everything I can to find reasons to reinforce why I made a good choice, why I acted well.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes. language is a funny thing, and I have seen on many occasions where someone sold a property, they may have wanted, say, $700,000 for it and they might have gotten $650,000. To their mind, they\u2019ve actually lost $50,000, but in the conversation with the neighbors, they\u2019ll say \u201cOh, yes, we got our price.\u201d They won\u2019t talk about the price, but once again, that\u2019s a case of justifying it, really.<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Yes. We don\u2019t want to look stupid, do we?<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>No. Language is a funny thing, how we justify these things. I also recall if I were having a conversation with a seller, as an example, and we were talking about figures, like a price range, if I said \u201c$600,000 to $700,000,\u201d I\u2019d guarantee you they\u2019d anchor themselves to the $700,000.<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Absolutely. In fact, this anchoring goes way back. It goes back to that appraisal process as well. There have been studies done with real estate agents where they\u2019ve blind tested. Some have gone in with no idea of what the vendor\u2019s expectations are and others have gone in with the understanding of what the vendor expected, and it absolutely impacts the appraisal the agent will give to those vendors as well.<\/p>\n<p>And, of course, that then starts that whole snowballing of the entire campaign. It goes back to the impact or drawing up of people\u2019s expectations or drawing down of them.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes, it\u2019s one of the reasons why in their training, agents are trained to try and get a price by saying \u201cCan you give me an idea of the price range you\u2019d be looking at?\u201d before they go to do the appraisal.<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Yes.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Fascinating. It\u2019s a great subject.<\/p>\n<p>My guest has been Veronica Morgan. Veronica is a buyer\u2019s agent out of Sydney from Good Deeds Buyer\u2019s Agents. You may have seen her on <em>Location, Location, Location<\/em> with Bryce Holdaway.<\/p>\n<p>Always great talking to you, Veronica. We\u2019ll get you back on the show more often, because I love talking to you. You just make a lot of sense.<\/p>\n<p><strong>Veronica:\u00a0 <\/strong>Thanks, Kevin.<\/p>\n<p>&nbsp;<\/p>\n<h2>Class 1B &#8211; first class investment &#8211;\u00a0Frank Days<\/h2>\n<p><strong>Kevin:\u00a0 <\/strong>More investors are becoming aware of the great investment opportunities offered in property, but there is an area that remains largely overlooked that can deliver impressive returns to investors.<\/p>\n<p>Defined as a boarding house, guest house, hostel, or the like by the Australian Building Codes Board, Class 1B category buildings require far less paperwork and planning compared to traditional dwellings, so investors are able to circumnavigate the reams of red tape that is often associated with property development.<\/p>\n<p>Frank Days is a property specialist, he\u2019s from Modo Project Builders. He\u2019s an expert in the field, and he talks about that in the latest <em>Your Investment Property<\/em> magazine. He joins me.<\/p>\n<p>Hi, Frank. Thanks, and welcome to the show.<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Thank you for having me, Kevin.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>This is something that very few investors are aware of, to my knowledge. Tell us a little bit more about the benefits of this, Frank.<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Absolutely, Kevin. And I do believe it\u2019s one of the untapped areas of investment, and not just from a providing affordable housing perspective but also for the investors themselves returning fantastic yields.<\/p>\n<p>There\u2019s a growing demographic of Australians out there looking for this type of accommodation, which means that our uptake\u2026 We can have these built within six months from breaking ground, and once they\u2019re completed, hand over the keys. We can typically have these fully tenantable in four to five weeks.<\/p>\n<p>They offer incredible yields, positive-cashflow properties, deriving multiple streams of income from the one asset, which means reducing your risk of vacancies, and the overall timeframe is really condensed compared to most of your projects that would return this type of yield.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes. The moment we say things like boarding house\u2026 My memories of boarding houses are that they were very problematic in terms of maintenance and the type of tenant that they attracted, but that was largely because they were just old homes that were converted into boarding houses.<\/p>\n<p>How has that changed, Frank?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Good question, Kevin. And that\u2019s not an uncommon perception. We\u2019ve taken that old concept of a boarding house and brought it into the 21<sup>st<\/sup> century. As you\u2019d mentioned, the old-school way of doing these was taking an old property, slicing and dicing it. We\u2019ve actually built these built for purpose.<\/p>\n<p>We\u2019re a small boutique building and design team that specializes in the shared housing space, and I do prefer to call it shared housing or shared accommodation as opposed to boarding houses because it does give it that back of the mind <strong>[2:52 inaudible]<\/strong> when you do hear that word \u201cboarding house.\u201d<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>It\u2019s a bit of a stigma. In fact, in your article in <em>Your Investment Property<\/em> magazine is a really good example of the layout, which we\u2019ll get into in just a moment.<\/p>\n<p>Frank, can I just ask you, is this type of development being encouraged by state and local governments? And if so, what sort of incentives are on offer for investors?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>At this point in time, they are being encouraged by state and federal governments through land tax incentives, but I personally believe that we\u2019ll see more incentives come along as the pressure for affordable housing comes upon us.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes, it\u2019s a very practical way for people to live, especially people who don\u2019t mind living in shard accommodation. But there are some great benefits, because each of these accommodation places is pretty much self-contained in a sense, aren\u2019t they?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Absolutely. Each room is self-contained with its own living area, bedroom area, and its own en suite, and we include a wet bar, which is effectively a small kitchenette setup as well.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>It all sounds fantastic, but there are always pros and cons with all of these things. Take me through some of the pros and some of the cons as well that we should be aware of before we jump into this.<\/p>\n<p><strong>Frank:\u00a0 <\/strong>I could list a large number of the pros \u2013 we\u2019ve already talked about a couple \u2013 minimizing your risk with multiple streams of income, the yield that\u2019s available, the fact that it\u2019s a zoned res 1, so your red tape through council is reduced dramatically, so the timeframes are reduced, there\u2019s no middle man, so you\u2019re dealing directly with the builder, so there are no commissions involved with your real estate agencies as such.<\/p>\n<p>The only con I can think of off the top of my head is at this point in time, we\u2019ve been doing this for six years and we don\u2019t have any resales yet, so it\u2019s a little bit of an unknown quantity what these will look like as a resale product.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>My experience with boarding houses \u2013 and I use the term \u201cboarding houses\u201d because that\u2019s exactly what they were, not shared accommodation like what we\u2019re talking about now \u2013 the take up on those for investors is quite good because the returns are quite high. So, if you\u2019re valuing it on return and you\u2019re getting a better quality tenant, I would have thought the resale value is going to be fairly good.<\/p>\n<p><strong>Frank:\u00a0 <\/strong>The closest we\u2019ve had is one of our early adopters was able to complete his project for $900,000. He did take it to market and got an offer as much as $1.3 million. And he knocked it back because he felt like he was better off keeping the product for himself and cashing in.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Of course, one of the cons in the old days was that it was very hard to get insurance, but I understand now that that\u2019s totally changed and there are insurance companies who will take on these shared accommodation properties.<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Absolutely. And I think it\u2019s much more tightly regulated these days, which has made things a lot easier for both insurance companies and financers to look at the product.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>You mentioned about no commissions, but does that mean that to get your help, we\u2019d have to come to you to get the site as well? What about if I had a site that I thought was suitable and just brought that to you?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Most of our clients do come to us with a site in mind. They may already own it or they\u2019re looking at a particular site. If that\u2019s not the case, we do have a network of agents who will come to us with off-market properties, suitable properties they think we could use for our projects, and we then put that out to our database.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Frank, what makes an ideal site?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Ideally, Kevin, the perfect site is 600 square meters \u2013 so 15 meters across the front edge and 40 deep \u2013 and flat. That is ideal. We can do the most. We can fit the most car parks. The site costs are reduced dramatically by making sure that it is flat. We can work with any size block. We will look at alternatives, but that will be the ideal block.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>You mentioned zoning. What sort of zoning would you need for this?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Res 1. That\u2019s it. We don\u2019t need any special permissions through council. There are no zoning requirements. It\u2019s just a res 1, same as building a family home.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Let me ask you then, from start to finish, once a site is found, to finish it, to complete construction and ready for tenants, is there an indicative timeframe? I think you mentioned a number of weeks, but what would it be from the word go?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Once the planning is completed, the build time is six months, so completely determined by the planning stage, which could take a month or two depending on the individual\u2019s requirements. But yes, a soil test, survey, and we\u2019re into it.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>So, we\u2019re looking at about eight, maybe nine months if you have a site.<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Absolutely.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>You mentioned there about the experience you\u2019d had. In closing, are there any other successful 1B developments that you\u2019d like to mention?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>The only thing I could say is they\u2019ve all been successful. They all maintain over 95% occupancy rates. They all provide exceptional returns. Each one is specifically built for the owner, so they reflect their requirements. But they do continue to evolve, so if we were to say what was the most successful recently, you\u2019d always say the last one, because they are evolving.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Well done, mate. Okay. Frank Days has been my guest. Frank is a specialist in this at Modo Project Builders. We\u2019ll put a link, I think, in this commentary as well. Your website?<\/p>\n<p><strong>Frank:\u00a0 <\/strong>ModoBuilders.com.au.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Frank Days has been my guest, and you can read a lot more about it of course in the current issue of <em>Your Investment Property<\/em> magazine.<\/p>\n<p>Frank, thanks for your time, mate. Catch you again soon.<\/p>\n<p><strong>Frank:\u00a0 <\/strong>Thanks for having me, Kevin.<\/p>\n<p>&nbsp;<\/p>\n<h2>8 golden rules of investment &#8211;\u00a0Stuart Wemyss<\/h2>\n<p><strong>Kevin:\u00a0 <\/strong>Like me, you might have grown up playing Monopoly, a fantastic game. I can\u2019t think of a better game to teach young people about money management and investing in property. We\u2019d teach our grandkids. We\u2019d play it with them. That\u2019s why I was delighted to receive a copy of a book written by Stuart Wemyss called <em>Investopoly<\/em>, a very creative name.<\/p>\n<p>In the book, Stuart details the eight golden rules to help you win at the game of building personal wealth. Stuart is a Melbourne-based financial advisor with over 20 years of experience. He joins me to talk about the book and his experiences.<\/p>\n<p>Good day, Stuart. How are you?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>Very well, Kevin, and thank you very much for having me.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Congratulations on the book; it\u2019s a really good read. In the first few pages, you make a great point about questions and answers. Sometimes, it\u2019s not knowing the answers but more importantly the questions to ask. Let\u2019s talk about that.<\/p>\n<p>What\u2019s the most powerful question that we should be asking as property investors, Stuart?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>Without a doubt, Kevin, I think it\u2019s the question \u201cWhat actions can I take today so that I\u2019m far better off financially in 20 years\u2019 time?\u201d I know that seems like a long time and a lot can change over 20 years, but what it really does is force you to think long-term.<\/p>\n<p>And I think not only property investors but human beings tend to think too short a term, particularly with regards to finances.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes, sometimes it\u2019s important who you ask that question of, too, isn\u2019t it? There are so many advisors and each one of them has a system or a theory about the best investment strategies. Is there one strategy that you think fits all situations?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>Probably not, but I guess one methodology fits all situations, and that would be an evidence-based approached. When I talk about evidence-based approach, I think most financial strategies \u2013 so if someone is recommended a particular course of action \u2013 can be proven or disproven \u2013 more importantly \u2013 with simple math and logic.<\/p>\n<p>Nothing is too difficult that can\u2019t be explained with simple math and logic. And if it can\u2019t be explained, then that\u2019s a red flag.<\/p>\n<p>If you\u2019re thinking about investing in a particular type of property or location or property investment strategy, it\u2019s really a case of just sitting down and doing the numbers, and do they all add up? Is it actually going to help you stop work one day and generate a passive income?<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes, it could be a problem if you, one, didn\u2019t understand and you\u2019re just willing to take another person\u2019s advice. You really have to make that proof yourself, don\u2019t you?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>Exactly right, or ask the advisor to prove it to you. Again, if a strategy is fundamentally flawed \u2013 that is that there\u2019s no evidence it\u2019s going to work \u2013 they\u2019re going to struggle to be able to do that. And if that\u2019s the case, my advice would be just walk in the other direction.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>This is a property show, of course, and your book deals with investment and assets such as cash, shares, bonds, and property. How do you advise people going about developing a mixed portfolio of assets?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>At the risk of losing some of the listeners, I\u2019d like to draw a golfing analogy. Obviously, a golf bag will have a whole bunch of different clubs, and the different clubs will do different things depending on what you need. And the same is true with investing. Property and shares and bonds and cash are all different assets and you need them at different times and they all do different things.<\/p>\n<p>So, it really depends on what stage you\u2019re at in the investment cycle, how close you are or how far away you are from retirement. Also, as I discuss in the book, different assets have different risk profiles, and one thing that I found while writing the book is there really wasn\u2019t much discussion around volatility in property.<\/p>\n<p>Volatility is the amount the price of an asset will change over time. We all understand the share market is relatively volatile, and it has a 20% volatility rate or risk rate, if you like. Property has\u2026 And what I did is took the average of Melbourne and Sydney as they\u2019re both very diversified and developed markets. Property has a volatility rate of 10%, half of that of shares. And bonds have a volatility rate of somewhere between 5% and 7%.<\/p>\n<p>So, if you\u2019re a risk adverse investor, that would suggest that property is probably a better asset depending on your life cycle and stage of life than shares.<\/p>\n<p>Also, different assets have different correlations. When property rises, interest rates are going down, and vice versa. I found that there\u2019s no correlation between Australian residential property and the share market, so you can invest in those two assets and that\u2019s okay, but there\u2019s a strong negative correlation between bonds and property prices, which makes sense because bonds are really about interest rates.<\/p>\n<p>So, that says to me that if you\u2019re a property investor and you\u2019re heavily invested in property, then probably you should have a more conservative asset allocation in super \u2013 so there\u2019s more exposure to bonds \u2013 because that will work at a portfolio level.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Talking about property, developing a portfolio, we do know that very few people get past one or two investment properties. What stops them, Stuart?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>I\u2019m not sure. Maybe failure to think longer term. I think we all over-estimate how much time we have left before retirement, and time just seems to get away from us.<\/p>\n<p>So, I think it\u2019s just about sitting down and developing a bit of a strategy. What does it look like? Is it buy one or two or three investment properties and then contribute to super, or something along those lines? Develop a strategy and then just go about implementing it rather than thinking \u201cOh, it\u2019s something I\u2019ll get to at some stage,\u201d and one day you wake up in your 50s and you think \u201cOh, well. I have to retire at some point.\u201d<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>In rule number three in your book, you deal with cashflow. What are your golden rules for good cashflow management?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>It\u2019s actually really simple, Kevin. It\u2019s the old adage: you can\u2019t manage what you don\u2019t measure. So, it\u2019s really just about measuring it, understanding where your cashflow is going, and then you\u2019re able to make deliberate decisions.<\/p>\n<p>And I find people mostly waste money. My definition of wasting money is spending money on things that really don\u2019t matter, that really don\u2019t add to your standard of living. And you\u2019ll find that if you don\u2019t measure your money, you will be spending on things that actually don\u2019t add to your standard of living, which you can cut out and you don\u2019t actually feel it.<\/p>\n<p>The simple answer is to really just know where it\u2019s going, and there are lots of different apps, and the banks are providing different data and facilities there for Internet banking to help you do that.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>You\u2019re talking there about banks. The Banking Royal Commission has unearthed some astounding facts about our relationship with lenders. Do you think that\u2019s going to drive more and more people to brokers?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>I think so, Kevin. And look, I might have a conflict of interest here, obviously. My business is part mortgage broking as well. But I think there are probably three things that people can consider. The first one is that most brokers offer whole of market advice, which means they\u2019ll typically have more than 30 lenders on their panel, which would represent probably 99% of the mortgage market.<\/p>\n<p>The second thing is that it doesn\u2019t cost people anymore to use a broker than going direct. More often, a broker would negotiate a better deal.<\/p>\n<p>And lastly, if you find a broker who\u2019s an investor themselves, it\u2019ll actually pay a lot of dividends, because if they\u2019re investing themselves, they would have been faced with the same challenges that they\u2019re trying to help you with, and they\u2019ll be able to give you good quality advice into how to structure and really how to maximize your property portfolio.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Yes. Great advice. Stuart Wemyss is the author of a book called <em>Investopoly<\/em>. Have a look for it. It\u2019s available at all book stores, Stuart, is it?<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>Yes, absolutely.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Excellent. Okay, and Stuart\u2019s company is ProSolution.com.au. Stuart Wemyss has been my guest. Stuart, thank you. Congratulations on the book, I look forward to talking again soon.<\/p>\n<p><strong>Stuart:\u00a0 <\/strong>Thanks very much, Kevin.<\/p>\n<p>&nbsp;<\/p>\n<h2>Not all property managers are the same &#8211;\u00a0Tara Bradbury<\/h2>\n<p><strong>Kevin:\u00a0 <\/strong>As property investors, we quite often think of property managers all being the same. But you see, inside each property management, there are different systems \u2013 different management systems. There are three main ones: portfolio, task, and pod management.<\/p>\n<p>Joining me to talk about all three, and to give you a bit of an insight as to how they work and maybe help you decide \u2013 next time you have to pick a property manager, you can ask them what kind of management system they use \u2013 Tara Bradbury is one of Australia\u2019s best property management trainers. She works with great property management businesses in Australia and overseas, and she joins me now to talk about these three.<\/p>\n<p>Tara, thank you very much for your time.<\/p>\n<p><strong>Tara:\u00a0 <\/strong>My pleasure as always, Kevin.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Let\u2019s have a look at these three: portfolio, task, and pod. Just tell me the differences between each one.<\/p>\n<p><strong>Tara:\u00a0 <\/strong>Absolutely. And I agree that it\u2019s a great question for everyone to know and ask about, because there are lots of different dynamics as to how the property can sit within a department. It\u2019s important for everybody to know.<\/p>\n<p>The task-based side is where as a landlord, you\u2019re going into a business and you\u2019re focusing more individually on the specific task, which means that you can have someone in that key area who is very talented in that area.<\/p>\n<p>So, they could be a strong communicator, and then they\u2019ll be put in a role that\u2019s more communication-based, which could be during the routine inspection with the tenant and having those strong conversations \u2013 it could be around rent arrears \u2013 and they could have heavier strengths within that communication side and that could be really relevant.<\/p>\n<p>However, once you separate all those roles, then there are quite a few people to be talking to, and that can sometimes be confusing for the client.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>So, from an investor\u2019s point of view, if they\u2019re dealing with a property management business where they\u2019re getting input from a number of people, it\u2019s a possibility that it is a task management-style operation?<\/p>\n<p><strong>Tara:\u00a0 <\/strong>Yes, absolutely. And sometimes, businesses do need to do that \u2013 if they\u2019ve had a staff member maybe leave, if they\u2019ve gone on maternity leave, or they\u2019ve had maybe a sudden sickness that nobody expected. So, the best situation for them to do might be to get a certain person or another assistant person to help solve that problem in the interim, and both heavily qualified, but sometimes you might need to then talk to more than one person.<\/p>\n<p>I don\u2019t say that it\u2019s not the way to go in the way of how you should set up a property management business, but it is certainly one that I found very more popular in the areas of up to that first 200 properties.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>The portfolio style is typically where an investor will be dealing with one person who covers off everything for them, but I guess the frustration here is that if that person leaves, then you get the feeling that \u201cOh, goodness, here we go. Here\u2019s another one,\u201d you get the feeling of a lot of change in a property management business.<\/p>\n<p><strong>Tara:\u00a0 <\/strong>Yes, that\u2019s right. I find that it\u2019s a mixture of feelings around the portfolio. To me, it\u2019s still definitely a popular way to go, and people like to know who they\u2019re talking to and feel that ownership of that one person to talk to. Because many other industry providers, you have to go through call centers just to get to a person in the beginning, so there\u2019s always that frustration there.<\/p>\n<p>But again, we always want to try to make sure that who we are talking to is the right person, and I found that portfolio is good for that because they\u2019re going to be the main set of eyes on your investment property consistently through the entire process. So, from the very beginning, doing the initial condition report, routine inspections, that maintenance conversation with you, all that process is done with them one on one.<\/p>\n<p>Again, yes, there\u2019ll be times when they\u2019re out of the office and they won\u2019t be there for you to have access to them because they\u2019ll be in other meetings or appointments, which is fair. It\u2019s not just the one property that they look after for yourself.<\/p>\n<p>So, that can sometimes have its moments because we all like to have answers for everything yesterday. But at the same time, there\u2019s certainly value in knowing you\u2019ve got that one person to speak to.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Okay. Then the final one is pod management. Tell me how that works.<\/p>\n<p><strong>Tara:\u00a0 <\/strong>It\u2019s probably something that\u2019s come in the last couple of years and I\u2019m finding appears to be a bit more of a popular structure because there is more than one person. So, you\u2019ll find that if your property is involved in a pod situation, it can tend to be a larger portfolio but it has multiple staff.<\/p>\n<p>Most will have at least up to two working in a pod, and sometimes they might attract an assistant as well, if need be, and you then are talking to two different people. It could be that one might have had a bit more experience in the business and the industry and then they\u2019re inviting someone into that pod who\u2019s in training, and that\u2019s a really good training model to teach them along the way what needs to be expected of them rather than putting them straight into a portfolio and having to go from start to finish in the early stages, which can be quite eye-opening for that person.<\/p>\n<p>But the communication side I found is one area that the client is really enjoying, because they know if one is out and about doing routine inspections or they might go on leave \u2013 which we do do; we have our four weeks throughout the year like everybody else \u2013 they know that there\u2019s somebody in that pod who will know what\u2019s going on.<\/p>\n<p>There\u2019s always going to be one who might know a little bit more and is retained in the trust program to be able to share information of conversation points that have happened, but you have two people to talk to.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>So, the experience that an investor would have in a pod style is more the team relationship, so you\u2019d be getting experience across a team. It could only be a couple of people.<\/p>\n<p>Tara, it\u2019s been fantastic talking to you. Thank you.<\/p>\n<p>Portfolio, task, and pod are the three management styles we\u2019ve talked about today with Tara Bradbury. Tara is from BDM Academy. You probably won\u2019t be dealing with her if you\u2019re an investor, but I\u2019ll tell you what, if you talk to a property manager, they\u2019ll know about Tara Bradbury, I can tell you.<\/p>\n<p>Good on you, Tara. Great talking to you.<\/p>\n<p><strong>Tara:\u00a0 <\/strong>My pleasure. Thanks, Kevin.<\/p>\n<p>&nbsp;<\/p>\n<h2>Sydney hidden gem &#8211;\u00a0Michael Ossitt<\/h2>\n<p><strong>Kevin:\u00a0 <\/strong>As we know and we\u2019ve identified many times in the show, there are different markets all around Australia. It\u2019s very easy to put all your eggs in one basket, to say that the Sydney market is tanking or the Sydney market is going to be improving, but once we dig deeper, we find that even though a market may be slowing down a little bit \u2013 which are all the signs coming out of Sydney \u2013 there are markets within markets. And one of those that we\u2019re going to feature today in the show and talk to a buyer\u2019s agent about is Frenchs Forest.<\/p>\n<p>I\u2019m going to introduce Strand Property Group director and Sydney buyer\u2019s agent Michael Ossitt, who joins me.<\/p>\n<p>Michael, it\u2019s interesting, isn\u2019t it, when we dig deeper into an area like Frenchs Forest to find that there are some absolute hidden gems in amongst what could be a declining market.<\/p>\n<p><strong>Michael:\u00a0 <\/strong>Absolutely, Kevin. This is the thing about what\u2019s reported in the media about the strength of the Sydney market \u2013 or not the strength of the market, as the case may be \u2013 and when you dig deep into smaller markets, you actually see demand still outstripping supply, which I believe is the case in this area.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>One of the indicators we like to look at in the show is how long it takes to sell a property, and looking at your figures \u2013 or I think the figures that may have come out of Location School \u2013 it takes on average 52 days to sell a house in Sydney, but in Frenchs Forest, it\u2019s only seven days. What\u2019s behind that? Is it a shortage of stock? Is it realistic prices?<\/p>\n<p><strong>Michael:\u00a0 <\/strong>It\u2019s definitely a shortage of stock. What we\u2019ve had in Frenchs Forest over the last couple of years is a proposed rezoning of the area. Many people might know there\u2019s a brand-new hospital under construction at the moment, which will open at the end of the year, and the council and now the state government have actually proposed to rezone the area around the hospital to create more dwellings.<\/p>\n<p>What\u2019s happened is existing residents around the area are sitting on their hands to see what happens, because there\u2019s potentially obviously an uplift in valuation of their property if it does get rezoned to medium density housing.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Just a couple of points come out of that, and one is I wonder what the reaction is of locals who don\u2019t want to sell. Always when you get an indication that the council are going to put more density in, you get a lot of objections to that.<\/p>\n<p>Are you seeing that at all, Michael?<\/p>\n<p><strong>Michael:\u00a0 <\/strong>Absolutely. There\u2019s definitely quite a bit of tension in the area, just the uncertainty of what\u2019s going to happen. You have residents who have been there since the 1960s when the suburb was first established. These people have grown up in the houses, had families there, and now with the introduction of new development, it has shaken things up a little bit. And some people don\u2019t necessarily want to sell, and so it has been forced upon people somewhat.<\/p>\n<p>So, yes, there are definitely two sides to it in that respect.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Those people who are holding on, waiting for a better time to put it on the market, maybe when things get a little further down the track\u2026 I think the hospital is due to open in October this year; is that right?<\/p>\n<p><strong>Michael:\u00a0 <\/strong>Yes, end of October.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>I think it\u2019s a false premise \u2013 isn\u2019t it \u2013 to think \u201cI\u2019ll sit on my hands and wait,\u201d when probably the best time to be selling is right now when the demand is so high and stock levels are low.<\/p>\n<p><strong>Michael:\u00a0 <\/strong>Yes, you definitely have more buyers than there are sellers, so to negotiate a good price is certainly a good opportunity.<\/p>\n<p>I think what\u2019s happened in reality is that you have vendors with maybe too high an expectation at the moment because of that. They\u2019re taking sentiment from the rest of the Sydney market. You probably have a case of vendor expectations being too high, and maybe buyers looking at the moment a little lower, although things are obviously moving a lot quicker than the rest of Sydney.<\/p>\n<p>But in terms of the long-term projection, I think it\u2019s a good opportunity for both sides, really, certainly buyers.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Is there still talk of a second harbor crossing?<\/p>\n<p><strong>Michael:\u00a0 <\/strong>That\u2019s on the cards for the long-term. I know the state government wants to make that happen. I don\u2019t expect anything to actually come to fruition for maybe another ten years. It would take that long to build it.<\/p>\n<p>But if that does happen, it certainly opens this area up in terms of much quicker access into the city. The proposal is for a tunnel to go under Middle Harbor, which would bypass the notorious Spit Bridge, which is obviously a bit of a bottleneck.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>That\u2019s a bottleneck that one, for sure. I\u2019ve been caught on that one for a few occasions.<\/p>\n<p>Of course, Frenchs Forest is pretty close to the city, isn\u2019t it? We\u2019re only like 10 or 12 kilometers away.<\/p>\n<p><strong>Michael:\u00a0 <\/strong>Yes, probably 13 kilometers from the CBD. So, it\u2019s been under the radar in terms of people\u2019s knowledge of the area, but you still have close proximity to the city. You\u2019re probably less than five kilometers from the beaches, Dee Why, Manly and Queenscliff, those areas.<\/p>\n<p>Yes, we find that a lot of people are looking at the area now from close to the city or close to the beaches and actually seeing more value in that area.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>The median has grown a bit too, I think, just looking at some of the stats, from $1.5 million up to just a touch over $1.6 million this year.<\/p>\n<p><strong>Michael:\u00a0 <\/strong>Yes, and that\u2019s what we\u2019re seeing. We\u2019re definitely seeing a trend in the Sydney average median. It certainly peaked at the start of last year, and it has slowly eased back through the end of last year and again in the beginning of this year, but what we\u2019re seeing in the data is that the median in Frenchs Forest has gone up from $1.58 million in March last year to $1.65 million at the beginning of this year.<\/p>\n<p>So, it\u2019s actually continued to strengthen while the rest of the Sydney market has cooled off. I think that just goes to show that demand that\u2019s there.<\/p>\n<p><strong>Kevin:\u00a0 <\/strong>Good work, Michael. You enjoy your time in Frenchs Forest. Happy selling, and thank you very much for joining us.<\/p>\n<p>Michael Ossitt has been my guest, and Michael is from a company called Strand Property Group. He is the director and buyer\u2019s agent for them.<\/p>\n<p>Michael, thanks for your time.<\/p>\n<p><strong>Michael:\u00a0 <\/strong>Thank you, Kevin. Have a good day.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Highlights from this week: An untapped area of investment Frenchs Forest picked as a boomer A book about the game that teaches great investment lessons 3 styles of property management Emotions and property decisions \u2013 do they mix? Transcripts: Emotions and property investment &#8211; do&#8230;<\/p>\n","protected":false},"author":176692473,"featured_media":21458,"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-21457","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 v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Class 1B buildings offer high returns + The 8 golden investment rules + Why all property managers are not the same - 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\/class-1b-buildings-offer-high-returns-the-8-golden-investment-rules-why-all-property-managers-are-not-the-same\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Class 1B buildings offer high returns + The 8 golden investment rules + Why all property managers are not the same - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Highlights from this week: An untapped area of investment Frenchs Forest picked as a boomer A book about the game that teaches great investment lessons 3 styles of property management Emotions and property decisions \u2013 do they mix? 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