<\/p>\n
If Warren Buffett were to invest in property in Australia what would he do? How would he approach it?\u00a0Michael Yardney<\/b> <\/a>thinks he knows and he tells us today. Success leaves clues and there will be lots in this chat with Michael.<\/p>\n Also in today\u2019s show Shannon Davis<\/b> of Metropole Property Strategists in Brisbane <\/a>reveals the areas for best buys under $500,000 in Brisbane.<\/p>\n Nhan Nguyen<\/b> tells us some tips and traps to completing a profitable property development and Patrick Bright<\/b> answers a question from Monica about whether houses make better investments than apartment.<\/p>\n Zaki Ameer<\/strong> is a young property investor who at the age of 22 built a portfolio of 10 properties worth $10M on a very low income. Zaki shares his 7 tips for entering the investment property market on a modest salary.<\/p>\n And this week we talk to Eliza Owen<\/b> from onthehouse.com.au about the feature article in the latest API magazine that reveals the top rental return suburbs in Australia.<\/p>\n <\/p>\n Kevin<\/b>:\u00a0 We had a question sent in to us from Monica. Thank you for this. Monica is simply asking whether or not houses make better investments than apartments?<\/p>\n I\u2019m going to ask that question of Patrick Bright, who is a buyer\u2019s agent from EPS Property Search. What\u2019s your advice to Monica?<\/p>\n Patrick<\/b>:\u00a0 It\u2019s a good question, Kevin. I would say that yes and no would be the answer there, and in certain circumstances \u2013 because it depends on the market that you\u2019re buying in, and it also depends on what the public and the buyers are demanding in those markets.<\/p>\n Kevin<\/b>:\u00a0 Does it depend on not the type of market, but the<\/i> market \u2013 as in the suburb \u2013 as to what type of buyer or tenant you\u2019re going to be appealing to?<\/p>\n Patrick<\/b>:\u00a0 Yes, exactly. If you\u2019re looking in, say, a capital city, for instance \u2013 I know this because I know Sydney pretty well, I\u2019ve been working in it for over 15 years \u2013 the market in the inner ring over a third of the suburbs, the capital growth, for instance, is better with apartments than it is with houses. If you go back 30 years ago, that was not the case. The market has changed, and it\u2019s what the public and the demand is for, so you have got to have that aspect to it.<\/p>\n If you go out of a capital city, the majority of the stock out there is housing on larger land blocks. You\u2019ll find \u2013 because I\u2019ve looked at it \u2013 that those will do better than the apartments in a regional area.<\/p>\n Kevin<\/b>:\u00a0 Those inner-city suburbs you\u2019re talking about and some of the cap cities, we see they\u2019re changing them as they want more density into some of these. They\u2019re pulling down those houses and putting up apartment blocks. Obviously, that has contributed to that change as well, Patrick.<\/p>\n Patrick<\/b>:\u00a0 It would have had to contribute. Yes, for sure. It\u2019s the demand. It\u2019s what people want. They want to live closer in. If you\u2019ve traveled a bit and you\u2019ve seen places like, for instance, Hong Kong and Singapore, it\u2019s 90% apartments. People want the lock-and-leave lifestyle, they want views, they want all of that happening, and so if that\u2019s where the demand is, that\u2019s where the price pressure will be, and that\u2019s where the growth will be, and that\u2019s where the rents will be.<\/p>\n You have to have an awareness of the market you\u2019re buying into, and where that market is going and where the future is of that market.<\/p>\n Kevin<\/b>:\u00a0 Just to help Monica a little bit, is there a tipping point with the amount of stock? If you look at a particular suburb, for instance, and maybe it\u2019s got 40% units and 60% houses, but there tend to be more units coming up, would that be an indicator for you that maybe it\u2019s time to look at apartments, that that might be shifting a little bit?<\/p>\n Patrick<\/b>:\u00a0 Maybe. Again, I would look at it carefully. Let\u2019s pick on a suburb, for instance, Dee Why, which is on Sydney\u2019s northern beaches. Now, apartments in that market, about 85% of that market is apartments, and about 15% houses. In that market, houses do better than apartments because there are too many apartments for the demand that you really want to be there.<\/p>\n There really isn\u2019t a blanket rule that you can put to it. You have to really study the market, the type of people who want to be in that market, the demographics of it now and where it\u2019s likely to go, and then make your decision based on that.<\/p>\n Is it like the Inner West? There are a lot of apartments being built in the Inner West, but still, terraces tend to outperform. Where you\u2019re going to generally get better performance with an apartment is in an area often with views and some uniquenesses about it, and so that\u2019s something you have to weigh in.<\/p>\n Kevin<\/b>:\u00a0 Yes, history, of course, leaves great clues \u2013 doesn\u2019t it \u2013 if you go back and look at the history of an area and analyze it. Over what period should you go back, do you think? Is it good enough to go back, say, three to five years?<\/p>\n Patrick<\/b>:\u00a0 At least. Look, when I\u2019m buying a property, I look at it this way. I look back even 20, 30, 40, or 50 years, and I say, \u201cWhat was the prime real estate 30 or 40 years ago?\u201d It\u2019s generally the prime stuff today, and \u2013 guess what \u2013 it\u2019s probably going to be the prime stuff in the next 30 or 40 years. That\u2019s how I like to make my investment decision.<\/p>\n Yes, history leaves clues, but you also have to factor in where the future is going. If the future is going towards that type of product \u2013 say, a more apartment-style product \u2013 and you\u2019re in the right location, you should do very well. Particularly, if you\u2019re in a land-locked location, and you have something unique about it \u2013 you have got water views \u2013 that sort of thing is very appealing to the market.<\/p>\n Kevin<\/b>:\u00a0 Yes, very interesting, mate. Thank you, and that\u2019s certainly answered Monica\u2019s question. Once again, Monica, thank you very much for your question.<\/p>\n Patrick, to you, thank you for joining us today.<\/p>\n Patrick<\/b>:\u00a0 Pleasure, thanks, as always, Kevin.<\/p>\n <\/p>\n Kevin:\u00a0 <\/b>One of the big challenges for anyone wanting to get into property, of course, is how do you do it on a low income? My next guest is a man who did exactly that. Real estate expert, author, and Dream Design Property founder Zaki Ameer found himself in a foreign country with very little income and some quite hefty international university fee debts, yet he still went about building a ten-property portfolio totaling over $10 million. How did he do that at such a young age? He joins me.<\/p>\n Hi, Zaki. Thank you very much for your time.<\/p>\n Zaki:\u00a0 <\/b>Hi, Kevin. Good to be here.<\/p>\n Kevin:\u00a0 <\/b>Based on your experiences, you\u2019re going to have some great tips for people wanting to do exactly what you did. I\u2019ve read a little bit about what you did. One of the tips you say is go soul-searching. What do you mean by that?<\/p>\n Zaki:\u00a0 <\/b>It\u2019s important that everyone starting a journey \u2013 and that could be a property investor \u2013 needs to know exactly why they\u2019re getting into property investing and be clear that they\u2019re going to work through it during the tough times. It\u2019s important to know exactly why. That could be simply to get out of debt.<\/p>\n Kevin:\u00a0 <\/b>You mention also about having a mentor, and you mention a quote from Richard Branson, which is the link between average people and really successful people is that they\u2019re those who have a mentor. Who has been the great mentor for you?<\/p>\n Zaki:\u00a0 <\/b>I\u2019d been introduced to a few around the age of 25, where they had very large property investing portfolios. When I looked at them, they didn\u2019t have much of a background, so I thought, \u201cIf they can do it, so can I.\u201d I learned from them, and that included an accountant and a property-investing developer who had large portfolios.<\/p>\n Kevin:\u00a0 <\/b>You developed these people into a team. Do you still have a team?<\/p>\n Zaki:\u00a0 <\/b>Yes. Our accountant is definitely on our team, and he advises all our clients on tax planning.<\/p>\n Kevin:\u00a0 <\/b>I notice, too \u2014 and we\u2019ve done a number of stories on this in recent times \u2014 about Gen-Ys and how they\u2019re continuing to live at home, save up, and get into a property that way. Do you believe in that as a good way for young people to get into property?<\/p>\n Zaki:\u00a0 <\/b>Yes. There is the aura out there that Gen-Ys might not ever be able to buy their first home because of the rising prices. Staying at home and avoiding rent and other expenses while you live off the family money is definitely one way to get into the property market.<\/p>\n Kevin:\u00a0 <\/b>What do you think about partnering up with a friend or relation and going into a partnership in a property? Is that a good idea?<\/p>\n Zaki:\u00a0 <\/b>In my personal view, Kevin, I would tend to stay away from it in terms of any partnerships, only because I see property investing as a long-term partnership. If you\u2019re doing something to flip in the sense that you\u2019re going to buy, renovate, and sell, which is a short-term arrangement, I\u2019d have a strict, legal business agreement. However, in the long run, I would tend to avoid it, because there are so many changes and variables that could happen that will involve multiple people having to agree to make a decision on it.<\/p>\n Kevin:\u00a0 <\/b>That\u2019s very good advice. Just to round us out, I wonder if you\u2019d tell me about your 50\/30\/20 rule, please.<\/p>\n Zaki:\u00a0 <\/b>What I\u2019m trying to say there is that from your salaried income, 50% needs to go into your essentials \u2013 and that could be your living expenses and day-to-day compulsory living expenses \u2013 and 30% should be little luxuries. It\u2019s important that you spoil yourself and not go into living below the poverty line, so you want to have little luxuries. However, 20% of your income should be separated and going to a separate bank account that you don\u2019t really have access to. That 20% is what you\u2019re going to use in the future to start your investing journey.<\/p>\n Kevin:\u00a0 <\/b>Zaki, I want to thank you for spending some time with us today. You certainly are an inspiration. I wish you success in the future. We look forward to talking with you again soon. Thank you for your time.<\/p>\n Zaki:\u00a0 <\/b>Thank you, Kevin.<\/p>\n <\/p>\n Kevin<\/b>:\u00a0 There is an old saying that success leaves clues, and there\u2019s no greater successful person in the world when it comes to investing than Warren Buffett. He\u2019s 84-years-old, he\u2019s consistently ranked amongst the world\u2019s richest people, so let\u2019s have a hypothetical look. If Warren Buffett were to become involved in investment in Australian property, what would he do? How would he go about it?<\/p>\n Interesting question. I\u2019m going to pose that of Michael Yardney from Metropole Property Strategists. Michael, I know this must be something you\u2019ve thought about, as well.<\/p>\n Michael<\/b>:\u00a0 It\u2019s a hypothetical question, and Warren Buffett clearly is one of my mentors. Nobody I\u2019ve met personally, but I\u2019ve followed his systems, I\u2019ve followed his strategies. I think he would invest a little bit like I do. I know that\u2019s being vain, but I\u2019d like to explain why, Kevin.<\/p>\n Kevin<\/b>:\u00a0 Please do.<\/p>\n Michael<\/b>:\u00a0 Kevin, he has his own investment philosophy, which is very clearly defined. He tells people there\u2019s no secret. He has a set of strict selection criteria:<\/p>\n Can you see some common threads there, Kevin?<\/p>\n Kevin<\/b>:\u00a0 Yes, I can. In fact, I\u2019ve listened to you on a number of occasions talk about your strategy, so let\u2019s apply what his investment philosophy is to Australian property.<\/p>\n Michael<\/b>:\u00a0 This is, again, a hypothetical exercise, as you say, but I\u2019m guessing what he\u2019d do if he was to buy properties in Australia is he\u2019s likely to look for five things:<\/p>\n Interestingly, there are some similarities between what Warren Buffett would probably do and what a lot of the successful people you have on Real Estate Talk do, Kevin.<\/p>\n Kevin<\/b>:\u00a0 Yes. One of the things that stands out, for me, Michael, is that he doesn\u2019t take a short-term view to it. You talked there about not flipping properties quickly, not looking for the latest hot spots, so therefore, not chasing the latest fads.<\/p>\n Michael<\/b>:\u00a0 Right. Now, he also is a counter-cyclical investor, and that\u2019s definitely one of my philosophies also. But once you become a substantial investor like he does, he doesn\u2019t only wait for the counter-cyclical opportunities; what he actually waits for is the right opportunity, realizing that he makes his money not by buying a property or a share cheaply, but by buying the right ones.<\/p>\n Some really good lessons there for property investors, Kevin.<\/p>\n Kevin<\/b>:\u00a0 One underlying lesson, Michael, is that you need to develop a strategy, and then you need to stick with it.<\/p>\n Michael<\/b>:\u00a0 Can I finish with a good quote from Warren Buffett?<\/p>\n Kevin<\/b>:\u00a0 Please.<\/p>\n Michael<\/b>:\u00a0 He said, \u201cI\u2019m a better investor because I\u2019m a businessman, and a better businessman because I\u2019m an investor.\u201d I think that shows that a strategic approach that property investors should take \u2013 as I\u2019ve often said \u2013 is treat your properties like a business.<\/p>\n Kevin<\/b>:\u00a0 Indeed. Wonderful talking to you, Michael.<\/p>\n Michael Yardney <\/a>from Metropole Property Strategists, a well-known author, of course, and you can follow him at his blog site, which is PropertyUpdate.com.au.<\/a><\/p>\n Michael, thank you so much for your time.<\/p>\n Michael<\/b>:\u00a0 My pleasure, Kevin.<\/p>\n <\/p>\n Kevin<\/b>:\u00a0 About four or five weeks ago, we were talking to Nhan Nguyen from Advanced Property Strategies about what you need to know when you get started out as a developer. Many people want to move from just being a property investor with a portfolio to maybe developing your own stock. A great move, but there are some things that you need to be aware of.<\/p>\n Nhan Nguyen joins us again. Nhan, one of the things you said last time we spoke was think big but start small. Assuming we\u2019ve done that and we\u2019re now into it, what are some of the complications that we\u2019re going to come up against and how do we make sure that we actually are on track to do a profitable property development?<\/p>\n Nhan<\/b>:\u00a0 Thanks, Kevin. Thanks for having me.<\/p>\n Look, the word property development and being a property developer is a very widely used word, and there are so many ways that we could cover, whether we\u2019re talking about a block of five units, three townhouses, or just building five new houses.<\/p>\n I\u2019m going to just use an example of, let\u2019s say, we\u2019re going to build one house and sell it \u2013 what we call a spec home or a speculative home. In that instance, some of the examples of complications that you\u2019re going to have to deal with is choosing what kind of design that you\u2019re going to build. Is it going to be three bedrooms, four bedrooms, single story, two story?<\/p>\n Part of that is really going to come down to your market research on the local area, because if the area is a less expensive area, most people may probably only be able to afford a single-story home, which is cheaper, versus a two-story executive home. That\u2019s the first thing.<\/p>\n Part of that is there are some many layers to consider, one of which is what is the layout? Do you do open plan? Do you put an office at the front? Is it single garage, double garage? What kind of tiles do you use? What kind of materials do you use on the roof? Is it corrugated iron or tile. Firstly, you have to consider the end target market and the product that you\u2019re going to supply.<\/p>\n Moving on from that, one of the other things you\u2019re going to deal with is choosing a builder. There are many display homes out there and many display villages, and going and investigating and getting referrals from your colleagues who may have built before is a very important step to find out which builder would be most suitable for you. There are a lot of builders out there, and some of them are shonky and some of them are great. It\u2019s up to your due diligence to choose that.<\/p>\n Then the step after that is getting a build contract, getting finance, and making sure that you have enough funding for the project. Also, things go wrong \u2013 because being a developer, I know there\u2019s a lot of upside, but there\u2019s also downside if you get things wrong \u2013 so during the construction process, you do need to manage that, even though you may have never been on site before. You need to check out the builder, make sure he\u2019s doing the project and on time.<\/p>\n Kevin<\/b>:\u00a0 Nhan, a couple of excellent points you\u2019ve made so far, and I think the one I want to pick up on is the selection of the builder. In fact, we\u2019ve had some time put aside in this show to talk about what happens when you get a bad builder. That builder selection is absolutely critical to make sure that the development is going to come in on time and actually make you some money.<\/p>\n Nhan<\/b>:\u00a0 Yes, it\u2019s so critical. There are many builders every year who go broke, and the reason that they do go broke is that construction is not an easy process. I say it\u2019s a 10,000-piece puzzle put together by 20 different people with blindfolds on, because oftentimes, they don\u2019t talk to each other. They don\u2019t communicate with each other.<\/p>\n They turn up. The tiler might turn up, and then this thing\u2019s not ready. The electrician turns up, and the previous tradespeople didn\u2019t tell him that they\u2019re behind, and then they come back a week later. It\u2019s a puzzle that\u2019s put together, and you really need to look for a builder who\u2019s been around five, 10, 20 years and has those teams and systems in place.<\/p>\n Kevin<\/b>:\u00a0 And not accept, too, that the builder is going to be able to project manage the whole thing. I\u2019ve seen many, many TV shows where people think, \u201cOh. I\u2019m just going to project manage this myself. It can\u2019t be all that difficult,\u201d and within a matter of weeks, it comes unstuck because you don\u2019t really understand what\u2019s involved in managing a project of that size.<\/p>\n Nhan<\/b>:\u00a0 Exactly. Part of it is that with working with a builder, you cannot control what is happening in the background. I\u2019ve worked with a builder before, and he went bankrupt because he was spending the money on other frivolous things. He had money coming in, and in the first year, I think he signed up 20 to 30 build contracts, and he just got greedy and he misspent the money internally. His tradespeople were fine, his plans were fine, and his business ideas were fine. However, he mismanaged his cash flow.<\/p>\n When you\u2019re choosing a builder, you cannot control what happens internally or behind closed doors and with his other projects. He might be a developer, and the bank might foreclose on his other projects.<\/p>\n I\u2019m not saying this to scare people. I\u2019ve just seen the dark side, and I\u2019ve nearly been caught myself being involved with builders. For example, with the extension of our house, I watched the builder for ten years, literally, one suburb over to see how they would go through the GFC. Did they make it? Did they go broke? They\u2019ve done well. Especially, because we\u2019re extending our own place, I wanted to make sure that my wife was happy, and I wouldn\u2019t get any long-term complaints.<\/p>\n Kevin<\/b>:\u00a0 I guess one of the things is knowing what questions to ask or knowing what to look for. Perhaps that\u2019s a subject for another conversation, I would think. We are out of time now, Nhan.<\/p>\n I guess the bottom line here is I know we\u2019re sounding a note of caution, but it is something that you have to be experienced at, it\u2019s not something you should take for granted, and make sure you do your homework.<\/p>\n Nhan<\/b>:\u00a0 Yes. It\u2019s very critical that you do your homework. I\u2019ll write down a couple of points that we can go through maybe next week on how to choose a great builder.<\/p>\n Kevin<\/b>:\u00a0 Okay, Mate. If you do that, we\u2019ll come back next week with Nhan Nguyen from Advanced Property Strategies, and we will give you his tips on how you select a good builder.<\/p>\n Thanks, Nhan. Talk to you next week.<\/p>\n Nhan<\/b>:\u00a0 Thanks for having me, Kevin. Talk to you next time.<\/p>\n <\/p>\n Kevin<\/b>:\u00a0 A regular feature in the show and \u2013 I know \u2013 one that\u2019s very popular is where we look at different suburbs around Australia that are moving or where you can get the best buys. We\u2019re going to look at SouthEast Queensland, specifically, into Brisbane. Where are the best buys under $500,000?<\/p>\n Joining us is Shannon Davis from Metropole Properties in Brisbane<\/a>. Okay, our shopping list, Shannon, what can you recommend we look at buying under $500,000 in Brisbane?<\/p>\n Shannon<\/b>:\u00a0 Kevin, the first one I\u2019d say is just a New Farm apartment. I think if you can get a New Farm, say, a special one bedder, or you might sneak a two bedder still, there\u2019s a really high owner-occupier demand. The market share always has more people wanting to buy than sell, and for people moving interstate, New Farm is always one at the top of their lists as a suburb to move into. It matches their type of living [0:47 inaudible]<\/b>.<\/p>\n For that reason, our investors have enjoyed great capital growth in those areas, and it\u2019s still amazing to see its run this year, as well.<\/p>\n Kevin<\/b>:\u00a0 What sort of profile are we looking at in that area for a tenant?<\/p>\n Shannon<\/b>:\u00a0 You have young professionals, some empty-nesters that don\u2019t want to move away, and you have lots of people in shares. They\u2019re either walking to the CBD or driving and perhaps catching a ferry. But more importantly, it has everything that they want in recreation, such as green space, restaurants, pubs, and even clubs not far, as well.<\/p>\n Kevin<\/b>:\u00a0 Okay, New Farm apartments. Where\u2019s another area in Brisbane for under $500,000?<\/p>\n Shannon<\/b>:\u00a0 I would move a little bit further out. If we wanted to get a house, a suburb such as Aspley, you can get something perhaps with renovation potential and a slightly larger block \u2013 607. There\u2019s still really great capital growth in that suburb. It\u2019s well located to the airport, the freeway, and good schools, as well.<\/p>\n Kevin<\/b>:\u00a0 Anything in townhouses?<\/p>\n Shannon<\/b>:\u00a0 Townhouses: we have a really good track on it right now. They\u2019re capturing people upsizing and capturing people downsizing. You can get a three-bedroom, two-bathroom, one-car park. A suburb like Coorparoo offers great value, has the upgrade from the Eastern Busway and the old Myer Center there. Really popular, again, with the demographics without kids. You have a strong lineup of tenants.<\/p>\n Kevin<\/b>:\u00a0 Anything a little bit closer in, Shannon?<\/p>\n Shannon<\/b>:\u00a0 Likewise, on the north side, Wooloowin is a suburb with plenty of upside. It\u2019s a train station suburb. It halves the distance between the airport and the CBD, and that\u2019s really popular. It has a good school catchment and some excellent green spaces around the Melrose vicinity in Kalinga Park there.<\/p>\n Kevin<\/b>:\u00a0 Okay, a New Farm apartment, a Wooloowin townhouse, also a Coorparoo townhouse, and an Aspley house \u2013 good buying under $500,000 in Brisbane. Our man on the ground there has been Shannon Davis from Metropole Properties.<\/a><\/p>\n Thanks, Shannon. Thanks for your time.<\/p>\n Shannon<\/b>:\u00a0 No worries, Kevin. Any time.<\/p>\n <\/p>\nTranscripts:<\/h4>\n
Patrick Bright<\/h3>\n
Zaki Ameer<\/h3>\n
Michael Yardney<\/a><\/h3>\n
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Nhan Nguyen<\/h3>\n
Shannon Davis<\/a><\/h3>\n
Eliza Owen<\/h3>\n