{"id":9307,"date":"2016-09-15T10:00:28","date_gmt":"2016-09-15T00:00:28","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=9307"},"modified":"2016-09-15T10:00:28","modified_gmt":"2016-09-15T00:00:28","slug":"why-70s-units-rock-its-not-smooth-sailing-for-a-flipping-expert","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/why-70s-units-rock-its-not-smooth-sailing-for-a-flipping-expert\/","title":{"rendered":"Why 70\u2019s units rock + It\u2019s not smooth sailing for a flipping expert"},"content":{"rendered":"

 
\nWe continue to follow the journey that Nhan Nguyen<\/strong> started 4 weeks ago where he is attempting to flip a property in 30 days and turn over a tidy profit. It has not been smooth sailing but boy, are we learning some lessons from his experience. Hear what progress has been made in the last week.
\nOur feature chat this week is with Brad Beer<\/strong> from BMT Tax Depreciation<\/a>. We find out what he looks for in an investment property, what and who moulded his property thinking, his first property and he gives us some finance tips. We talk about partnerships, the areas he likes and the struggles that most investors experience.
\nPresident of the Real Estate Buyers Agent\u2019s Association of Australia,\u00a0Rich Harvey<\/strong>, slams real estate companies misrepresenting themselves as buyer\u2019s agents and offering free services. He is angry at claims by a company called Seekology, that is out to disrupt Australasia\u2019s property market by offering a service to buyers that is free.
\nWe talk to Tim Godden<\/strong> from Seekology about why he would offer to work for no fee in helping buyers secure a suitable property.\u00a0 Just what is the business model and how is it going to work?
\nMichael Yardney<\/strong><\/a> reveals why why ’70s apartments rock <\/b>in his opinion. Is it the architecture, where they are located or is he just reminiscing about his youth? He gives us 5 reasons he likes them.
\nYou will find us at iTunes under podcasts as Real Estate Talk. Listen there for free, leave a review which helps us grow and tells us what you like and how we can improve the show. Don\u2019t forget to subscribe at the site as well \u2013even if you do get the show through iTunes – so that we can tell you about the bonus offers we make to subscribers. Your questions are welcome through the site as well.
\n <\/p>\n

Transcripts:<\/strong><\/h4>\n

Group threatens the status quo – Tim Godden<\/h2>\n

Kevin:<\/b>\u00a0 The term game-changer is quite often bandied around in the real estate industry, a lot of it lately because there are some changes occurring in how agents work. This one is particularly interesting because it came across my desk a couple of weeks ago. It\u2019s about a new business called Seekology. It\u2019s an organization that will help investors and owner-occupiers find the ideal property.
\nI won\u2019t spend too much time doing any more explanation other than that, but I want to introduce my guest, Tim Godden. Tim is the national director for Seekology, and he joins me.
\nTim, thanks for your time.
\nTim:<\/b>\u00a0 No problem Thanks very much, Kevin.
\nKevin:<\/b>\u00a0 When I received your first release, it told me that you were operating in an environment where you were not going to take a fee for investors; in fact, you were going to be achieving your income by taking a referral fee from agents. But that has since changed, I understand.
\nTim:<\/b>\u00a0 We have revisited that pricing model or the structure of the business in that reference and we did that because when we launched we found\u2026 As you said we initially said that we were going to receive a fee from the person selling the property. We revisited that because we found that there was firstly a bit <\/b>of skepticism around that and that is because there are people obviously within the industry that do receive a fee and perhaps give advice based on the fee they\u2019re receiving rather than what\u2019s in the best interest of the buyer. We didn\u2019t want to get confused with that.
\nWhat we actually have changed it to be is the fact that we are a free service for property investors \u2013 a free buyer\u2019s agent service for property investors \u2013 but we do charge for people that are looking for a property to live in.
\nThere\u2019s a number of reasons why we charge for owner-occupiers, and that comes a lot down to the fact that it\u2019s very much an emotional decision; from a buyer\u2019s agent\u2019s point of view, it\u2019s not such a matter of the facts and figures. For an investor, obviously, there\u2019s a lot of research that goes into it, but it does come down to the facts and the figures rather than an emotional attachment to a property.
\nBecause of the interest that we received initially, we found that we were able to run the business successfully with the income that we were receiving from owner-occupiers or people looking for their own property, and then it enables us to help clients find an investment property.
\nAnd when we do service those clients and they are extremely happy with their purchase and the end result and the capital gains they received from those purchases, they\u2019ll obviously tell their friends and family and we then develop clients for life. That allows us then to possibly assist them when they do want to buy a property to live in.
\nKevin:<\/b>\u00a0 One of the reasons, Tim, I was skeptical of these types of services \u2013 and we\u2019ve seen a number of them come across our desk. They all talk about being a disruption to the industry. One in particular is a company called Open Agent. We\u2019ve mentioned them before on the show and they are a company who purport to help a seller find the best agent when really it\u2019s only an agent who will pay them a commission. This is one of the problems that I have, and that\u2019s why I\u2019m pleased to hear what you say is that you\u2019ve moved away from that model.
\nThat\u2019s quite an adventurous move, Tim, because that\u2019s actually going to impact your income if you\u2019re not charging a fee for helping an investor find a property.
\nTim:<\/b>\u00a0 That\u2019s right. We do a few things differently to other buyer\u2019s agents, as well. Our employees are not commission based whereas a lot of other buyer\u2019s agents are. That then allows us obviously to generate more income from the owner-occupier property. That is a change compared to other buyer\u2019s agents.
\nBut we are also a part of a group that is called Australian Properties International, which is basically a one-stop shop for anybody looking to buy a property. They have other departments that we can refer clients to, be it finance or investment coaching, or partners that are accountants and advisors. So there are other options.
\nWe are going to create clients for life so that they will revisit us when they do want to purchase a property. That\u2019s our intent, and that\u2019s where we\u2019re coming from. But in saying that, when we\u2019re working for an investor it\u2019s very much research based and we\u2019re specialty in that regard, as well. It\u2019s not simply just a side avenue to build our client database or anything; we certainly know what we\u2019re doing in that regard, as well.
\nKevin:<\/b>\u00a0 When it comes to owner-occupiers, you\u2019ll be helping them. What is the fee if I want you to find me a property that suits me and my family and I\u2019m going to move into it? What would be the cost of doing that?
\nTim:<\/b>\u00a0 It\u2019s 2% of the sale price of the property. We go through the whole process with the buyer, so obviously we go through a full brief. This is slightly different from when we work with investors because we are talking more about facts and figures with investors, but with an owner-occupier, we go through a full property brief with them.
\nWe have access to properties that are off market. I heard statistics only last week that in Sydney particularly, almost 20% of properties are sold prior to them even being advertised on the Internet. We\u2019ve been able to put together a team of people who have a wealth of knowledge and experience but more importantly have built those relationships within the real estate industry so that we can have access to those types of properties and do receive contacts from agents that do have properties when people want to sell them discretely or who don\u2019t want to go through the hassle of marketing the property and we can gain access to those.
\nThat helps owner-occupiers, but it also helps investors because obviously if a property is going to auction or a property is being marketed, there\u2019s going to be more competition in the marketplace for that property and more competition or more buyers who want the property. Particularly if they\u2019re looking to live in the property, it can obviously push the value of the property up beyond what an investor would be prepared to pay or what\u2019s in the best interest of the investor, really.
\nKevin:<\/b>\u00a0 What sort of research can someone expect, like an investor who comes to you and says \u201cI want to buy an investment property.\u201d You take them through the analysis and analyze what they can afford, what sort of property they should be looking at. What sort of tools do you use to do that, and how can I be sure that you\u2019re giving me the best possible advice, especially if it\u2019s free?
\nTim:<\/b>\u00a0 We\u2019re very transparent with what we do through the whole process. As you said, we sit down with the investor initially and we go through a strategy meeting, and that\u2019s basically asking them why they want to buy a property and what their desired outcome is. Often they may have already spoken to a financial advisor or somebody in that relation and they know what sort of property they want or they need.
\nThen we go through a property brief with them that specifies the type of property they want \u2013 its features, if they have any specific locations that they want. But often clients may not know the specific location; they simply may have a budget. They may need the property to be cash positive or they may just simply want the property to provide great capital growth over a long period of time. We can then obviously refer them to finance experts to assist with that.
\nThen we come down to our research side of things. We go through every point of research with the client so that they are understanding why we look at particular aspects \u2013 looking at things like, depending on budget, we prefer to buy in inner or middle ring suburbs around CBDs. We look at population growth.
\nEverything really, at the end of the day, comes down to basically the supply and demand of an area. So when we\u2019re looking at the supply and demand, we\u2019re looking at whether there\u2019s limited free space or limited areas for development in a particular area, whether there are a lot of properties that are very similar to the property that our client\u2019s looking for.
\nObviously, the buzz word is oversupply. If there are apartments \u2013 and we don\u2019t necessarily work with many apartments, but if there is a lot of one particular property in an area obviously that can affect the supply.
\nAlso when you\u2019re looking at demand, we have a look at areas and look at infrastructure and whether people will want to live there, whether there\u2019s planned infrastructure, whether there are neighboring suburbs that are having growth, whether there are employment options or whether there are going to be employment options and a variety of different employment options.
\nWe go through a whole lot of information with the investor and go through a whole lot of different categories \u2013 if you like \u2013 for us to consider and for them to understand so that they can be confident in the decision that they\u2019re making.
\nKevin:<\/b>\u00a0 It\u2019s a great topic. We are out of time unfortunately, Tim. I\u2019d love to be able to talk to you a little bit more, and I\u2019ll get you back into the show to do just that.
\nTim Godden has been my guest \u2013 national director of Seekology. Check it out for yourself. Tim, thanks for your time.
\nTim:<\/b>\u00a0 My pleasure.<\/b> Thanks very much, Kevin.
\n <\/p>\n

Buyers Agents Association hits back – Rich Harvey<\/h2>\n

Kevin:<\/b>\u00a0 As you heard just before the break there, talking to Tim Godden about his new model called Seekology where he is purporting to be a buyer\u2019s agent. This has caused grave concern to the Real Estate Buyer\u2019s Agents Association of Australia. Their President is on the phone to me, Rich Harvey.
\nRich, why are you so concerned about Seekology?
\nRich:<\/b>\u00a0 Good day, Kevin. Good to have a chat.
\nI guess any new company that comes into the buyer\u2019s agent field needs to be very careful about how they present themselves. If someone is going to call themselves an exclusive buyer\u2019s agent, one of the key things the consumer needs to be aware of is to ask the question \u201cHow are they remunerated? How are they paid for their service? If they\u2019re claiming it\u2019s a free service, which I believe it is, you have to ask the question why is it free? Are they being paid somewhere else? And is this a sustainable business model?\u201d
\nKevin, let me ask you this question. Would you use a free mechanic to fix your car? Would you use a free builder to build your house? I certainly wouldn\u2019t. I want to use the best builder or the best mechanic so that I know my car is safe and my house isn\u2019t going to fall in.
\nKevin:<\/b>\u00a0 It seems to be a model where one part of the business is going to be free of charge and the other part is where they\u2019re going to be charging a client to buy an owner-occupied property. I find it hard to work out how they\u2019re going to work that out.
\nRich:<\/b>\u00a0 That\u2019s right. I think good luck to that company if they wish to go down that road, but I guess the key thing is to make sure that they\u2019re doing the right thing by the client.
\nAs an Association, we have a very strict code of ethics and we like to make sure that all of our members follow a strict due diligence code that they put the best interest of the client at heart, that they\u2019re not receiving any secret kickbacks or any secret commissions along the way, and that they\u2019re providing the best possible advice.
\nYou have to just question how good free advice is, because it may end up costing the home buyer or the investor a lot of money down the track.
\nKevin:<\/b>\u00a0 Rich, do you think the Seekology model or what he\u2019s proposing is a risk to consumers?
\nRich:<\/b>\u00a0 I do think it is a risk in the sense that it\u2019s not proven. Like I said to you before, I don\u2019t know of too many other models or businesses that stay around for very long that offer a free service. It\u2019s not really a business. You can run a charity, but this is not a charity.
\nYou\u2019re talking about a major asset \u2013 at least half a million dollars when you\u2019re buying a property \u2013 and if you\u2019re going to have someone that\u2019s representing you for free you have to question how good a job are they going to do for you if you\u2019re not paying anything for it.
\nKevin:<\/b>\u00a0 Just on that point, Rich, if I could ask you then, if it is a possible threat or a danger to consumers, is there enough regulation around this? Why can someone come in and just open up a business like this?
\nRich:<\/b>\u00a0 First of all, Kevin, if they\u2019re going to operate as a buyer\u2019s agent, you must have a license to operate in the state that you\u2019re buying that property in. If you\u2019re going to engage a buyer\u2019s agent, check that they have a license to operate in Queensland, New South Wales, Victoria, Perth, wherever they\u2019re buying. Make sure they have a relevant license. That\u2019s number one.
\nThe other thing that needs to be improved, I believe, in the legislation is the licensing and education standards. At the moment, to become a selling agent, you can get a certificate of registration in about five days and then operate under a full licensee. That\u2019s not a long enough length of time to get all the skills you need to operate in this industry.
\nOne of the things I\u2019m advocating to government is that they need to really ramp up the requirements to become either a selling agent or a buying agent and jump through a few more hoops before you start representing people\u2019s biggest asset.
\nKevin:<\/b>\u00a0 Is that going to happen, Rich? There have been calls for that now for well over a decade and nothing seems to be happening.
\nRich:<\/b>\u00a0 In New South Wales, Kevin, I serve on a separate committee with the Institute and I\u2019m advocating to the Minister. They\u2019re actually doing a review of licensing as we speak. So there is a review going underway and they are looking at doing that. I\u2019m not sure if it\u2019s happening in Queensland or Victoria or the other states, but it\u2019s something that should definitely be happening.
\nKevin:<\/b>\u00a0 I know that in some of the states, they have been talking about it for some time, but governments seem to be reluctant to want to get into checking those qualifications.
\nRich:<\/b>\u00a0 I think one thing that should happen is that there should be some simple regulation around the definition of the term buyer\u2019s agent. We have to make a clear distinction between a buying agent and a selling agent. A buying agent is someone who works purely for the buyer and is paid by the buyer. It\u2019s as simple as that. A selling agent is someone who is paid by the vendor for selling their property. There\u2019s a thing called fiduciary duty, and there\u2019s a pretty clear line between the two.
\nKevin:\u00a0 <\/b>Well then clearly, Rich, you would have a problem with the current way real estate works broadly in Australia where an agent actually acts on behalf of the seller but also deals with the buyer, because that creates a conflict.
\nRich:<\/b>\u00a0 Yes, but it can be done well. That\u2019s why people should use more buyer\u2019s agents. Yes, the selling agent there is representing the vendor and they certainly have interaction with buyers, but that\u2019s where buyers need to be aware \u2013 not so much skeptical, but just be aware of who they\u2019re dealing with and how the agent is paid. That\u2019s what needs to happen.
\nKevin:<\/b>\u00a0 I know that in overseas countries they can\u2019t work out how we work in Australia in those areas of conflict because clearly it is a conflict. In America, they have very clear definitions between the seller\u2019s agent and the buyer\u2019s agent.
\nRich:<\/b>\u00a0 There\u2019s a different model in the U.S. In many cases, there\u2019s a much larger commission at stake \u2013 there\u2019s a 5% or 6% commission \u2013 and often they have buying and selling agents in the same office, which I think is a conflict of interest. So as much as you think we might have conflict of interest here, there they still have conflicts of interest. And again, they\u2019ve had the same sort of debate between buyer agent and exclusive<\/i> buyer agent.
\nI think the key thing here is that consumers need to be aware of the clear definitions of what a true buyer\u2019s agent is and how they\u2019re paid versus a buying agent who also gets cuts along the way.
\nKevin: <\/b>There is a lot of gray here. Just give us the parting message, Rich.
\nRich:<\/b>\u00a0 The parting message, Kevin, is buyer beware. Make sure that your buyer\u2019s agent is licensed, is experienced, has excellent local knowledge, and certainly is a member of REBAA \u2013 the Real Estate Buyer\u2019s Agent Association of Australia.
\nKevin:<\/b>\u00a0 Well said, my friend. Thank you very much. Rich Harvey is in fact the President of that organization REBAA. Thanks for your time, Rich.
\nRich:<\/b>\u00a0 Thanks, Kevin.
\n <\/p>\n

70’s units rock! – Michael Yardney<\/a><\/h2>\n

Kevin:\u00a0 <\/b>As more and more people are deciding to trade up their back yards for balconies \u2013 that is, move into units and apartments \u2013 we\u2019re seeing an increase in the popularity of this type of purchase, but what do you do? Do you go and buy one of those older ones, which quite frankly I love, because they have extra space in them, or are you going to look at one of the newer units?
\nMichael Yardney<\/a> from Metropole Property Strategists<\/a> is having a talk to me right now about the reasons why you might just want to have a look at some of those \u201970s apartments.
\nGood day, Michael.
\nMichael:\u00a0 <\/b>Hi, Kevin. Good morning.
\nKevin:\u00a0 <\/b>Yes, I love those older ones. They give you so much flexibility, don\u2019t they? I\u2019ve actually seen people turn their laundries \u2013 because they had quite big laundries \u2013 into an en-suite to add extra value.
\nMichael:\u00a0 <\/b>There are lots of reasons why \u201970s apartments rock. Sometimes they\u2019re a bit ugly from the outside, if we\u2019re talking about the \u201960s and \u201970s. If you go back a little bit further, if you go back a little bit further, if you\u2019re looking at established apartments, particularly in Melbourne and Sydney, they built them in an art deco style and they really have character, as well. So yes, I see lots of reasons to consider buying an established apartment rather than the ones that are new or a couple of years old.
\nKevin:\u00a0 <\/b>Is it just my imagination, Michael, or are those ones from the \u201960s and \u201970s a bit bigger?
\nMichael:\u00a0 <\/b>They are. The town planning regulations were different, the way we were living was different. They didn\u2019t squeeze as many on the block, so therefore, in general, the sizes of them are in the 70 to 80 square meters for a two-bedroom apartment, where often now it\u2019s 55 to 65 square meters. It\u2019s not just that, Kevin; it\u2019s also how they used the space. They had corridors, they had an entrance hall. You didn\u2019t walk straight in and fall over your lounge suite, so I like the floor plan of a lot of them, as well.
\nKevin:\u00a0 <\/b>Yes, and they had the balconies, as well. Some of the new units simply don\u2019t, or they just have those Juliette ones that you can\u2019t really use, anyway.
\nMichael:\u00a0 <\/b>That\u2019s right. I think another great thing about the established apartments is their location. In our major capital cities in the \u201960s and \u201970s, they were building these in the suburbs, and often within five to seven kilometers of the CBD. Today, we are also building them, but they\u2019re usually on main roads or they\u2019re in the CBD. So I think their location within the suburbs \u2013 and those nice, gentrifying suburbs \u2013 are good also.
\nIf you think about it, a lot of them that were built in those days, they were called flats, and they\u2019re what I\u2019d be distinguishing as a flat from what we now call apartments. Those were built, I guess, in general for tenants, but now, most of them are being bought up by investors or owner-occupiers wanting to live there because of the location and because of the size.
\nKevin:\u00a0 <\/b>And they\u2019re still very affordable, too, even though they\u2019re in, as you said, some of those now highly desirable areas.
\nMichael: \u00a0<\/b>If you do a price per square meter, you usually find that you couldn\u2019t replace the building at the cost you\u2019re buying established properties, and that\u2019s what I call buying below intrinsic value, below replacement value, which doesn\u2019t really occur when you\u2019re buying the new apartments. So you actually get really good bang for your buck buying established apartments, Kevin.
\nKevin:\u00a0 <\/b>A bit of history comes with them, too, doesn\u2019t it? They have really good bones.
\nMichael:\u00a0 <\/b>Yes, they do. first of all, they have good bones because they\u2019re not built with papier m\u00e2ch\u00e9. Now, I\u2019m saying that sarcastically, but when you have a look at the way some of the new ones are being built, they\u2019re not as solid, but the other thing is they have a history of resale values, so you can see how the property has performed over the years. Has it kept going up in value? Have there been problems with the owners\u2019 corporation? Are there disputes within the owners?
\nWhen you\u2019re buying a new property, you don\u2019t have that history; you\u2019re buying it based on what the developer has put on his sale price list, his schedule, rather than the resale values of established apartments, which in my mind, is a better way of putting a value on a property.
\nKevin:\u00a0 <\/b>Yes, Michael, and you made the point earlier, too, that these flats \u2013 as we used to call them \u2013 were built for tenants, but now, more and more people are coming and finding these that they can not so much turn them over, but add their extra bit to them, and become and owner-occupier, so the mix is much better, isn\u2019t it?
\nMichael:\u00a0 <\/b>There is definitely. There\u2019s no doubt about it. The other thing that you mentioned is they can add their own bit to it. That\u2019s one of the things I like. One of my strands of my five-stranded strategic approach is adding value. A lot of these ugly ducklings are ready to be improved, and improving the kitchens and bathrooms, which is the main area that sells the property and increases the value. That\u2019s pretty easy to do.
\nI\u2019m not suggesting you do structural renovations. They\u2019re actually difficult, and often unable to be done, because your ceiling is somebody else\u2019s floor, your wall is somebody else\u2019s, so you won\u2019t necessarily be able to knock out walls. But the comment you made a while ago about changing the laundry into an en-suite or changing a sunroom into another bedroom, you can reconfigure things and you can improve them, manufacturing some capital growth. You can\u2019t do that with newer apartments, Kevin.
\nKevin:\u00a0 <\/b>So there you go. Next time you drive around one of those ugly blocks of apartments, don\u2019t drive past; if you see one for sale, go ahead and have a look, and open your eyes to the possibilities. Michael, great talking to you, thanks for your time.
\nMichael:\u00a0 <\/b>My pleasure, Kevin.
\n <\/p>\n

It is OK to make mistakes – just learn from them – Brad Beer<\/h2>\n

Kevin:<\/b>\u00a0 My special feature guest this week is Brad Beer from BMT Tax Depreciation.
\nGood day, Brad. This is nice to be talking to you. We\u2019re not going to be talking about tax depreciation, although we might do. I\u2019m more interested in talking to you about your property journey. How are you?
\nBrad:<\/b>\u00a0 Great, Kevin, and great to be here. Love to talk about property, so here we are.
\nKevin:<\/b>\u00a0 It\u2019s our favorite subject. I don\u2019t think you\u2019ll have much trouble with this one. Why and when did you first get involved in property investment, Brad?
\nBrad:<\/b>\u00a0 Why? I started my job at BMT Tax Depreciation and probably didn\u2019t have much knowledge then about investing in property, but I started probably dealing with clients who were investing in property and making money from them. I thought that was probably a good idea.
\nWhen I say a good idea, a good way to probably make some wealth over time. I also had a fair bit of interest in the building side of things \u2013 doing a building degree, as well \u2013 so the concept of renovating \u2013 which I did a bit of \u2013 was all pretty good.
\nKevin:<\/b>\u00a0 How old were you at the time when you started?
\nBrad:<\/b>\u00a0 The first property I bought, I think, was in 2001. That would make me about 23.
\nKevin:<\/b>\u00a0 I wasn\u2019t probing to see how old you are now; I was just keen to know what your age was then. Whereabouts was that first purchase?
\nBrad:<\/b>\u00a0 The first purchase was a suburb in Newcastle called Georgetown. It was a very old, very bad condition four-bedroom house with a big shed out in the back, almost an industrial style shed. I love that shed. I still own that property.
\nKevin:<\/b>\u00a0 I was going to ask you whether you still own it.
\nBrad:<\/b>\u00a0 Yes, I still own it.
\nKevin:<\/b>\u00a0 Did you ever live in it?
\nBrad:<\/b>\u00a0 I did for a period of time, yes. I did renovations on it. I didn\u2019t at the start, while I was at uni, which I did at Newcastle Uni, which I had just finished. BMT had a strong office in Newcastle \u2013 started at Newcastle, actually.
\nI paid $170,000 for it at the time. It needed a lot of work. I found underneath the carpet, newspapers dating back to about 1910, 1912 or something.
\nKevin:<\/b>\u00a0 Wow, isn\u2019t that fascinating?
\nBrad:<\/b>\u00a0 I worked very hard renovating on nights, weekends to turn it into something better.
\nKevin:<\/b>\u00a0 When you found those old newspapers, did you do what most of us do and go and look at what the price of real estate was back then?
\nBrad:<\/b>\u00a0 I don\u2019t know I found real estate pages and I don\u2019t know if I was in the mentality. I found some very interesting ads in them and some very interesting stories, though. It was quite interesting.
\nKevin:<\/b>\u00a0 I remember going to a really old house once we were renovating ,and I dug up some newspapers and found some old Ray White advertising, which I shared with Alan White, who is now sadly passed away. Some of them were actually featuring Ray himself so that\u2019s how old they were.
\nIt\u2019s fascinating to go back and look at what was happening at the time when they put this paper down on the ground. Typically, though, I think they put it under linoleum, didn\u2019t they?
\nBrad:<\/b>\u00a0 Yes. There was newspaper, lino, I think another level of lino, and a couple levels of carpet in that property. They just kept laying it on top.
\nKevin:<\/b>\u00a0 As a young guy going to uni, you would have had a lot of fun rolling up your sleeves and doing a lot of reno yourself, did you?
\nBrad:<\/b>\u00a0 I had just pretty much finished uni. I was working at BMT. I actually started at BMT in \u201998, and I was very hands-on. I also had no money, so I had to be hands-on. After work and on weekends, I was crawling through the ceiling. My dad was an electrician helping me. I had other building mates pulling floors out with me, ripping up carpets, pulling it to bits.
\nI did a bit of renovating with my father when I was younger, but I learned a lot on that job, and I worked very hard after hours to get it done.
\nKevin:<\/b>\u00a0 You said earlier that you love the shed that was in the backyard. What was so special about that?
\nBrad:<\/b>\u00a0 It was big.
\nKevin:<\/b>\u00a0 Okay, a man shed.
\nBrad:<\/b>\u00a0 It\u2019s actually not the nicest looking shed in any ways, but it\u2019s a very large shed that I could rent part of in the past to use and store things in my life. It\u2019s been fantastic for that. When you need somewhere to store that boat that you don\u2019t have any storage for, or campers, or additional cars or parts, four-drive bits, it\u2019s fantastic for that, or renovation materials for people who do some renovation for me. It\u2019s been very handy.
\nKevin:<\/b>\u00a0 Has that been a good property for you over the years?
\nBrad:<\/b>\u00a0 That property has performed very well. I probably spent about $20,000 on it initially, maybe even a bit less because I did a lot of work myself. It probably leapfrogged <\/b>me\u2026 Being the time late 2001, the New South Wales market moving helped me to leapfrog onto the second property, which we will get on to later.
\nI did some renovations straight away. I think I got a valuation in less than six months after doing a renovation of about $240,000, and it has rented quite consistently ever since. It\u2019s right near a bus stop, right near a shopping center. It\u2019s not far from the uni.
\nI\u2019ve done another couple of incarnations of minor size renovations since. I\u2019ve had a valuation recently of about $575,000, I think. It rents for about $500 a week, $495 or something like that. Over that time, it\u2019s performed very well. I\u2019ve renovated it and made it fairly nice where it was.
\nThat area has had good growth over time. Even though New South Wales had some quiet periods after 2003, I suppose, until the late 2000s, overall, that property has performed very well, rented very well, and been a very good property.
\nKevin:<\/b>\u00a0 From there, you went on to your next purchase. Did you use the gearing or the growth in that property to help you get into the next one?
\nBrad:<\/b>\u00a0 I spent on renovations, so I needed to get some money back. In the early days, when you did run out of money, I probably put some of it on my credit card. Because to buy the first property, cash was always a bit of a problem. Then I had to renovate, and running out of money there was tough. I revalued to get some of that renovation money back, but also the deposit for the next one, which I also bought only six months or so later.
\nIt was the equity that I had gained out of that. Really, I bought it for $170,000. I think the first valuation I did after spending some money came in at $240,000. I borrowed that equity as the equity for the next property and leapfrogged fairly quickly into the next one, and I went headlong back <\/b>into renovating into the next one, which was interesting, doing the same thing again basically. So that enabled me to get back in fairly quickly to the market.
\nKevin:<\/b>\u00a0 Where was the second one?
\nBrad:<\/b>\u00a0 The second one was in a suburb only a couple across, in a place called Mayfield and probably didn\u2019t have the best stigma as an area \u2013 BHB, lots of black things falling on your clothes overnight. [7:52 inaudible]<\/b> didn\u2019t like living there for that reason sometimes.
\nThat one, I think I paid about $200,000. It might have been $210,000. It\u2019s a long time ago now. I instantly renovated that up with a $20,000 or $30,000 spend fairly quickly. I think the valuation at the end of the process came in at about $300,000.
\nI just did another major renovation on that only in the last six months, where I added another bathroom and managed to reconfigure inside to get another bedroom. Its valuation just came in at $600,000, so it\u2019s performed quite well by manufacturing equity and some growth along the way, as well, and has always rented for amounts of money that were pretty good throughout.
\nI think having owned it for some time and being where it was, it\u2019s had some good growth over time but it also has rented consistently for good returns on the way through, as well. I think it rents for $500 or $550 a week at the moment.
\nKevin:<\/b>\u00a0 You\u2019ve learned a few good lessons along the way, haven\u2019t you? You\u2019ve told us about two properties so far, which are both still in your portfolio, Brad.
\nBrad:<\/b>\u00a0 Yes, both still in my portfolio. That one, as I said, I\u2019ve just gone through. The first time I renovated, I actually didn\u2019t replace the kitchen, so I probably didn\u2019t quite spend that much the first time but I did rip up carpets, knock out a couple of walls. This time, I actually made a fair bit of change. I got an additional bathroom into the property and with some wall changes and things, an additional bedroom and opened up.
\nIt\u2019s always good to look at getting more space into the property. A lot of these old houses have really big laundries that aren\u2019t necessary and you can fit a decent sized bathroom and a laundry in a smaller area, which I\u2019ve done a number of times, and that was one of those.
\nI\u2019ve been continually a holder of property. I don\u2019t think it\u2019s always the right thing to do, but selling if you need to for a reason of \u201cI can\u2019t invest in more property because of this and I think there are better growth opportunities\u201d is probably okay, but they weren\u2019t stopping me from investing in other things. They\u2019re performing okay.
\nThere are a couple of properties in the portfolio that I don\u2019t know that I\u2019d buy if I had my time again, but I haven\u2019t necessarily needed to sell them, either. I\u2019ve only ever sold one property, and it was one that I was in partners with and I was getting the partners who were in other things together. We were getting out of partners, it seems, so we sold that building because no one in particular wanted to take it on. It was the only reason, really, for selling it.
\nKevin:<\/b>\u00a0 I\u2019ll talk to you about partnerships in just a moment because that\u2019s a whole different story. Are there any other properties in your portfolio that you can tell us about that you might have learned some lessons from?
\nBrad:<\/b>\u00a0 I\u2019d say there were ones that have done really well; there are some that I\u2019ve learned some lessons from. My strategy was often \u2013 and I have a lot of properties around the Newcastle area \u2013 buying what I could manufacture equity because I didn\u2019t have enough equity to keep buying investment properties. You have to watch to make sure that what you\u2019re buying gives you the cash flow, as well.
\nIn an overall strategy, you need a bit of both, but for me, I was kind of equity hungry, so I was buying. I\u2019d buy these properties around the Newcastle area for around $250,000 to $300,000. What I would do is I\u2019d be looking for a bad house in a good street and I\u2019d do renovations. I\u2019d look for things that I could get an additional bedroom out of and make better, revalue, refinance, push my finance really hard.
\nI\u2019m sure we\u2019ll get into some finance in this interview later. I pushed the finance really hard to free up as much equity as possible so that I could keep going in again.
\nI have others that you\u2019ve paid that $250,000 or $300,000 and then spent the $30,000 or $40,000 looking for the valuation close to $350,000 to $400,000 so that you could re-free up some of that equity and get your cash back out of that renovation, I suppose you\u2019d say, so you could use it to fund the next purchase and the next renovation.
\nSome of those properties now \u2013 and I still hold them \u2013 I look and I have one that I bought probably about eight years ago. I had a valuation done the other day. I think I paid $240,000 for it. I\u2019ve actually done nothing to that one and I have a valuation at $450,000 now. It needs a renovation, and I\u2019m going to do that very soon.
\nBut holding the property and relying on the growth is something that\u2019s definitely worked well for me. But in those early days especially, what I was doing was looking to manufacture equity through renovation, through extra bedrooms, through simply getting my cash back so that I could actually use it again.
\nKevin:<\/b>\u00a0 That\u2019s very interesting. I\u2019m gathering from the conversation that a large part of your portfolio is in Newcastle \u2013 or was. Was that because you were comfortable with that area? Did you know it or is it just strategically well placed for you?
\nBrad:<\/b>\u00a0 I knew the area. I started there. I have a number of properties outside of that area now. Look, one of the problems with that is I pay too much land tax, but it was an area I knew. I think overall, looking at what areas you actually look at should be things that have growth drivers that are going to drive growth in property.
\nLong term, I like that Hunter area but it has its slow and its better times. I\u2019ve held through those and been able to hold through those, but why I started there, I guess, was because I needed to be able to manufacture equity.
\nI needed to be able to renovate these properties. I needed to be able to change these properties. I needed to do a fair bit of looking at what I can do with it, which means I haven\u2019t looked at every property I\u2019ve ever bought, but in order to go, \u201cI can change this, change that, and make my big laundry into a nice second bathroom out the back,\u201d it\u2019s a bit harder to do that without looking at that property, so that\u2019s why I probably ended up with a lot of them in the early days there, but I\u2019ve widened since and gone to other states.
\nKevin:<\/b>\u00a0 Where else have you favored?
\nBrad:<\/b>\u00a0 I have Victoria, and it was fairly early on in Victoria. I bought an apartment, so it was little houses. I bought an apartment in St. Kilda. I paid $360,000 for it, and I would say that\u2019s about ten years ago now.
\nThe thing was it was about 18 months old and someone had overpaid off-the-plan on that particular apartment. It had been oversold. It was very close to Acland Street. I think $430,000 was the original purchase price. I actually bought it for $360,000. It was furnished, and it has consistently rented. It was about $450 or $475 back then. It\u2019s been consistently $500. It\u2019s furnished so it goes up and down a little bit and changes over tenants a little bit more.
\nI think I re-leased it for $550 a week the other day, which is a little bit light. The furniture is getting a bit older and probably needs updating a little bit, and the market was a bit slow at the time when looking to re-rent it.
\nBut that one has actually performed really well because it\u2019s worth circa about $600,000 now. In that time, it\u2019s performed quite well, that one in particular.
\nI have another unit in Victoria in a suburb called Glenroy, which is a lower socio-economic area and very close to Essendon, in-between the city and the airport. I\u2019ve only had that for a couple of years, paid mid-$300,000s. It was only a couple of years old, and it\u2019s a townhouse, not a house. It\u2019s been performing quite well. I think the valuation is already 10% above at the time, but the way I bought that was with some other people, so it was already making some money on the way in buy, which I suppose is a good point.
\nYou\u2019re always looking to make some money at the buy point. You don\u2019t want to be there buying something from someone when the new, big first-home owners grants come out because I have too much competition. I want to be there when there aren\u2019t many people there, the house that needs that work, because I think there\u2019s a definite necessity to make some money on the way in as you buy.
\nI have some property in South East Queensland, as well. That\u2019s been later additions.
\nKevin:<\/b>\u00a0 What\u2019s the mix there of units to houses? Is there a bit of an equal mix?
\nBrad:<\/b>\u00a0 I would say that it\u2019s mostly houses. Probably 75% would be approximately the case. I\u2019m just building a block of units, so that\u2019s probably going to change that percentage at the moment.
\nKevin:<\/b>\u00a0 Where are you doing that?
\nBrad:<\/b>\u00a0 That\u2019s in a suburb in Newcastle called Adamstown. I\u2019m actually in partnership on that one. It\u2019s a block of 12 units, so I\u2019ll retain six of those at the end. That\u2019ll change the percentage a little bit, but 75% or 80%. Over the last couple of years, it was more like 90% or 95%, but I bought a couple more units in that later time.
\nKevin:<\/b>\u00a0 Did you acquire the site in the partnership for that development you\u2019re doing in Newcastle?
\nBrad:<\/b>\u00a0 I did. It\u2019s a good point the way that was acquired. It was a site that was two houses that had a development application approved. Because I\u2019m a property investor, not necessarily a developer, and I purchased it some time ago, I looked at the fact is I bought it as two houses. Developers need to develop to continue their cash flow. It was around the point of the GFC. We paid less for those two houses than the previous people had because they bought it to make it into a development site.
\nThe GFC comes, and it\u2019s pretty hard to get money from banks to do developments. I didn\u2019t have to do developments. I bought them as properties in a partnership and I\u2019m still developing those in the same partnership. Because they actually stacked okay as investments as property, if I wasn\u2019t to develop it, I was happy to hold it, so we ended up with a better situation in the end. It\u2019s probably one of the best property deals I guess I\u2019ve done in time.
\nKevin:<\/b>\u00a0 Partnerships can be difficult \u2013 can\u2019t they \u2013 if you go into something, especially like the development side of that and something happens in the partnership and then you have to divide it up, so you have to be very careful who you go into partnership with.
\nBrad:<\/b>\u00a0 I think one of the really important things is that even if you have a good relationship with the partners, should certain things happen, there needs to be a proper \u201cWhat happens if\u2026\u201d in place, not \u201cWe\u2019ll just work it out.\u201d
\nIf one decides they don\u2019t want to develop and wants to sell, what\u2019s the mechanism for everybody to be happy at the end of this? If one doesn\u2019t want to do the development and one does, what\u2019s the mechanism to deal with that problem? Is it that someone buys someone else out? Is it that if one wants to sell, we all have to sell?
\nWhatever the things that are said, you probably need to draw up a bit of a contract \u2013 get the solicitors involved \u2013 with \u201cIf this happens, this is what our memorandum of understanding between us is. That\u2019s what we do,\u201d and stick to it, both of you.
\nKevin:<\/b>\u00a0 It\u2019s good to have a solicitor to do that too because sometimes they can ask those really tough questions that in a partnership, as you\u2019re forming that relationship, there are subjects you don\u2019t really want to broach. But a solicitor can broach them and you can talk them through.
\nBrad:<\/b>\u00a0 That\u2019s exactly right. When you\u2019re in and you\u2019re getting in to that partnership, we\u2019re all friends, we\u2019re going to do this development, it\u2019s going to be really great, we\u2019re all going to make some money, enthusiastic, we\u2019re all good friends. But it\u2019s almost like a contract is just in case it goes pear-shaped, these are the rules.
\nReally, that contract, you want to put it away in the drawer and never get it out again. It\u2019s just if it goes pear-shaped, we know what our expectations are.
\nKevin:<\/b>\u00a0 You mentioned earlier in our chat that you were in another partnership. Did you learn that lesson from that partnership?
\nBrad:<\/b>\u00a0 Some of those were the same partners in that partnership, so there was no angst in that. I bought one property early in my time that I bought with a partner. That partner decided he didn\u2019t want to be in that property, so I bought him out of the other half of that.
\nAfter that, I bought with partners who were actually my partners in BMT so I was already married to them from the partnership perspective, so we had these things in place. I have done it outside of that, but only once \u2013 and I didn\u2019t have any problems with that.
\nI didn\u2019t really have something to learn from doing that probably other than watching in my job, getting involved sometimes at a [21:44 inaudible]<\/b> as an expert witness in the past. So looking at the way that when things did go pear-shaped, how bad they can get and how people get caught up in those things.
\nIt\u2019s just important to make sure you have \u201cWhat we are going to do\u2026\u201d set pretty solidly on paper at the start \u201c\u2026if this or this happens?\u201d
\nKevin:<\/b>\u00a0 You mentioned earlier about buying sight unseen. Have you done much of that?
\nBrad:<\/b>\u00a0 I haven\u2019t done a lot. I think it depends on the type of thing you buy. I think generally for investors, it can actually definitely be done, should be able to be done. I probably have a little block of units and another unit and another unit that I haven\u2019t actually seen. One of them, I\u2019ve driven past out of those.
\nI actually bought a small block of units in the last few months without having seen it. The thing is it\u2019s out of my area, and for me, probably for mostly time reasons. I actually had a buyer\u2019s agent who bought that for me, so they\u2019ve seen it. Someone has seen it.
\nI don\u2019t necessarily think it\u2019s always necessary because I\u2019m not looking to do renovations and looking to manufacture equity. I just like the investment. I like the drivers and the growth in the area and I\u2019ve had someone who\u2019s had a look at the property and recommended it.
\nKevin:<\/b>\u00a0 A trusted advisor, really, isn\u2019t it?
\nBrad:<\/b>\u00a0 Yes. It\u2019s important to have plenty of those around you. Absolutely.
\nKevin:<\/b>\u00a0 As a successful property investor, Brad, what\u2019s the most common question you get asked?
\nBrad:<\/b>\u00a0 I think about that and there are probably a couple of answers to that, more than just one. \u201cHow did you get started?\u201d is probably the most common, followed by \u201cHow did you keep going?\u201d Probably normally the younger person would say, \u201cHow did you get started?\u201d Probably the person who has invested would say, \u201cHow did you keep going?\u201d
\nA large percentage of investors in Australia only ever buy one investment property, and it\u2019s because they either had a not so great experience or through lack of, really, the education on the way property investments should be done, they don\u2019t push that next level. So probably mostly those two.
\nKevin:<\/b>\u00a0 First to second property is the toughest, and you said most people never get past their first. They probably get into two or three, then have to settle down because they\u2019ve made some big mistakes along the way. Were there any points for you along the way where you went, \u201cOh, I think I might have gone too fast, too quick here\u201d?
\nBrad:<\/b>\u00a0 Absolutely.
\nKevin:<\/b>\u00a0 Can you remember when that was?
\nBrad:<\/b>\u00a0 It was probably one situation. The first one was very hard, as you say, and one of my biggest mistakes was probably saving for longer to get a 20% deposit. That wasn\u2019t the question. I leapfrogged to the second one fairly quickly and the third and the fourth, and then I slowed a little, but then I really went hard and I had renovations going on all over the place \u2013 and you can burn cash really fast when you do that.
\nThat was really one of those times when I had settlements and refinances. If you don\u2019t really plan and make sure you\u2019ve finished that one, you revalue it, you get your cash so that you\u2019re ready for your next one, you can run out of cash very quickly in that situation. It\u2019s a bit like developing; you run out of cash in that situation fairly fast.
\nMaking sure you\u2019re on top of the things, that you really have a plan of what you\u2019re going to do. Yes, I came pretty close once because I had about three renovations going at once. I had a big one that I just finished and I was a bit slow refinancing a couple that I had done not long before that. All of a sudden, you have $50,000 out there on that renovation and $50,000 on that one, etc. That just compounds so fast.
\nI got myself into a point where I was like \u201cI actually need to go back and calculate how quickly I need this refinance to come through in order to make sure I have the cash to do the things that I\u2019m doing at the moment.\u201d
\nYou should never put yourself in that position; you should always be ahead.
\nKevin:<\/b>\u00a0 Nothing wrong with making mistakes in anything in life as long as you learn from them.
\nBrad:<\/b>\u00a0 I did, absolutely.
\nKevin:<\/b>\u00a0 Would you buy overseas, or have you ever bought a property overseas?
\nBrad:<\/b>\u00a0 I haven\u2019t. It doesn\u2019t mean I never would. I have probably looked into it, especially probably the U.S. around five, seven, eight years ago or maybe even a little longer, about that time after GFC where there were lots of cheap properties, etc. I never made the jump. I was never convinced it was the right idea completely. It doesn\u2019t mean I never would but no, I haven\u2019t at this stage.
\nKevin:<\/b>\u00a0 Do you have a mentor or someone you follow or you think is a particularly good example or role model?
\nBrad:<\/b>\u00a0 I don\u2019t have one in particular. A lot of my learning came from being across the industry very heavily within my job, and it would mean that I would listen to many. I don\u2019t have a particular mentor in life, but what I do is actually surround myself with people who are good at it, have done a lot of it, are better at it than I am so that I can actually learn from them all the time. I think it\u2019s very important to learn, but I don\u2019t have a particular mentor.
\nKevin:<\/b>\u00a0 Are you looking around for another property now? If so, what are you looking for?
\nBrad:<\/b>\u00a0 I\u2019ve changed what I\u2019ve been doing. I\u2019ve probably been a bit slower in the buying at the moment because I\u2019ve been building a block of units and a couple of houses on things that I\u2019ve done DAs for in the past.
\nThe answer is I\u2019m always looking. I\u2019m always open to the concept of\u2026 The relationships I have with many agents throughout the country is \u201cCall me if you have the screamer deal.\u201d Am I actively out there looking for the screamer deal? No, but I do have the ability to finance these things fairly quickly based on the way I\u2019ve structured my finance. If they have what they believe a screamer deal is, I\u2019m always open to suggestions.
\nKevin:<\/b>\u00a0 There\u2019s a call-out for agents if ever I heard one.
\nWhat\u2019s the worst property investment you\u2019ve ever made?
\nBrad:<\/b>\u00a0 That\u2019s very simple. I bought land in a holiday area.
\nKevin:<\/b>\u00a0 Me, too.
\nBrad:<\/b>\u00a0 The thing is I actually still own the land.
\nKevin:<\/b>\u00a0 Do you? I got rid of mine.
\nBrad:<\/b>\u00a0 Because it hasn\u2019t stopped me from investing in other things.
\nKevin:<\/b>\u00a0 Is it still vacant land?
\nBrad:<\/b>\u00a0 It\u2019s still vacant land, yes. I probably will build on it eventually. It kind of stacks okay but not enough for me to get interested in spending the time. The thing it doesn\u2019t do is stop me from investing in other things, and it was also quite inexpensive in the scheme of things.
\nBut at the time, it was fairly early in my investing \u2013 I think it was the third property I bought, or it might have been the fourth \u2013 and it wasn\u2019t the right time. I did have a long time for settlement, so it didn\u2019t necessarily slow me down necessarily but it still was a bad decision in hindsight.
\nVery simple, and it\u2019s often the mistake. As far as lifestyle properties, I just think you should buy property for an investment that\u2019s good for investment. Make money. Go on holidays where you want to go on holidays with that money.
\nKevin:<\/b>\u00a0 Yes, and that\u2019s going to make you some money along the way. The block of land we bought was in an area like you, a holiday area where there was tons of land coming on. The only way we could ever get rid of it, of course \u2013 we were competing with all the other blocks \u2013 was to do a JV with a builder who built it, and then we sold it as a house\/land package, and we just took out the land value. That\u2019s the only way we could get out of that one.
\nBrad:<\/b>\u00a0 I could do that. If another local agent, someone really came with decent money and wanted it, I\u2019d probably sell it, but they also don\u2019t need to. I think I\u2019ve probably taken all the slow period of no growth. I think there\u2019s probably more potential for it in the future. I\u2019ve taken the hurt, so I continue to hold on.
\nKevin:<\/b>\u00a0 Fair enough.
\nWhat\u2019s the most important piece of property advice anyone has ever given you? Was it your father?
\nBrad:<\/b>\u00a0 No, my father wasn\u2019t a property investor, and I think that\u2019s a piece of the learning. I grew up in a country town with one of four children, and my dad was an electrician. My mum didn\u2019t work, which I think was fantastic \u2013 not that that\u2019s right for everybody but it was good for our family. In that age bracket, they bought their house and they paid it off. That was how it went.
\nMy dad wasn\u2019t the property investment advice person. I love him to death; don\u2019t get me wrong. But I think the best piece of advice was to probably learn as much as you can about what you\u2019re doing. And I didn\u2019t up until when I bought the first property.
\nThe benefit is I became a depreciation expert and I went to lots of property seminars and everything under the sun on property, often talking about depreciation, just as one expertise piece. But I listened to many people over that time to learn what I could learn.
\nAnd I still do. I still go to things and listen to what else I can pick up. I also get motivated and excited then and start going back and thinking about my portfolio again, which is something you need to do on a more regular basis sometimes than you do.
\nLook at someone who does it well and learn from them probably is some of the best advice I think you could give.
\nKevin:<\/b>\u00a0 It\u2019s interesting, because I think you\u2019ve probably been to every property seminar in Australia. I think every one that I\u2019ve been to I\u2019ve seen you at, so you\u2019ve had that opportunity to learn many, many times.
\nBrad:<\/b>\u00a0 I\u2019ve been to way more than most.
\nKevin:<\/b>\u00a0 It\u2019s interesting, though. Every one you go to, if you\u2019re clever, you\u2019ll always pick something up from every one.
\nBrad:<\/b>\u00a0 I still do. One is run by the same people who I\u2019ve been to before, I often like to sit through. Firstly, when I give a depreciation presentation, it\u2019s good for it to connect. Secondly, I can always pick up a couple of little bits of things in learning for myself out of them.
\nKevin:<\/b>\u00a0 Before I let you go, the biggest lessons you\u2019ve learned along the way, some things that we can learn from now.
\nBrad:<\/b>\u00a0 I think read and learn about property investment as much as you can. If you think you\u2019ve found the right properties and you\u2019ve looked to buy those, crunched numbers, and things, I think one of the biggest keys to being able to continually buy property really is to actually learn about finance \u2013 learning how to use finance to take away a lot of the risk in investing in property, learning how to put some pressure on the lenders, to structure the finance the right way so that it covers your risk.
\nI can\u2019t stress enough how important knowledge about finance is and knowledge about how to get what you want out of that can actually reduce the risk in investing.
\nWe talked earlier about my father and that generation. You grow up, you buy your house, you pay it off and that\u2019s really great. You get old, retire, and you have your house as an asset. Often, that\u2019s a lot of what is there. Now, finance enables you to do something different to that, which you can, but you need to learn how to harness it, use it to take a lot of the risk out of property investing. That\u2019s what I\u2019ve continued to do and have a big belief in financing things correctly.
\nKevin:<\/b>\u00a0 We\u2019re about to wrap this up, so let\u2019s get a nice little plug in there for BMT Tax Depreciation, one of our great supporters. We thank you for that, Brad, and all of the team at BMT.
\nThe best piece of advice you can give any property investor would be\u2026?
\nBrad:<\/b>\u00a0 Make sure you get a depreciation schedule because 80% of people are missing out on money and leaving it at the tax office.
\nKevin:<\/b>\u00a0 Does that ever amaze you, that there are so many people who don\u2019t do it?
\nBrad:<\/b>\u00a0 Every single day. And I\u2019m just blown away, all of the things about investing in property, about learning how to do it well, learning how to make sure you buy the right property, do all these things \u2013 and depreciation, so many people don\u2019t learn and therefore miss out on money. You\u2019re investing in property to make money, so I don\u2019t know why. It\u2019s like telling the tenants that instead of paying $500 a week, you should pay $400 and we don\u2019t do that, do we?
\nKevin:<\/b>\u00a0 That\u2019s right. Brad, it\u2019s been great talking to you, mate. Thank you for sharing so much information about yourself. It\u2019s been wonderful to get to know you in a different sense. Thank you for all of your support, too.
\nBrad Beer from BMT Tax Depreciation. Thanks, mate.
\nBrad:<\/b>\u00a0 Great, Kevin. Glad to be here.
\n <\/p>\n

Week 4 of the flipping challenge. \u00a0Has it worked? – Nhan Nguyen<\/h2>\n

Kevin:\u00a0 <\/b>Here we are in what is now week four, probably, in fairness, jumping over to week five, as well \u2013 a bit of a combination over the last couple of weeks \u2013 of our journey with Nhan Ngyuen, where we\u2019re looking at the flipping exercise where he\u2019s secured a property and is looking at flipping it and making it profit in a 30-day period.
\nNhan, welcome to the show once again.
\nNhan:\u00a0 <\/b>Good day, Kevin. How are you doing?
\nKevin:\u00a0 <\/b>Good, mate. Just a very quick summary for those who are probably needing to catch up: Nhan found a property on the Southside a few weeks ago, he put it under contract for $320,000, and in no time at all secured a contract for $410,000. That crashed on a termite inspection.
\nLast time we spoke, you had another offer in your in-tray for $405,000 \u2013 a bit less, $5000 less \u2013 that came with a building and pest inspection and a finance clause, as well. I think last time we spoke, Nhan, you told me that you were going to go ahead and do the pest treatment. Is that right?
\nNhan:\u00a0 <\/b>Yes, absolutely. We ended up doing the pest treatment just to cover our backsides, and we supplied the building and pest report to the buyer, as well, just to let them know that this is where we at and there are some termites on the property \u2013 not a lot, but there are \u2013 and we\u2019ve treated the termites, as well.
\nKevin:\u00a0 <\/b>So have you now gone through that building and pest and those finance clauses on that contract?
\nNhan:\u00a0 <\/b>Yes, we have. With the building and pest, they didn\u2019t even do their own building and pest report, they just used ours, the one that we supplied, and I was really happy with that. He rang up the building and pest inspector just to verify the report, what the concerns and the issues were, and they were all cosmetic.
\nEspecially with the property being 50 or 60 years old, as a lot of properties are in Brisbane and Queensland, it\u2019s not uncommon to have some dry rot and issues there. But yes, they\u2019re not structural issues, just cosmetic issues. And in the meantime, the finance has been approved with the Commonwealth Bank. They did the valuation, and yes, they\u2019ve gone unconditional, which is really exciting.
\nKevin:\u00a0 <\/b>That\u2019s good. I\u2019ll ask you about settlement in just a moment, but I just want to stay on that building and pest report, because there\u2019s a big lesson in that. I think last time we spoke, I asked you if you were going to share that report, and you said you didn\u2019t really have to, but obviously, you made that decision that that\u2019s what you\u2019d do, and that probably helped you get this across the line a bit quicker.
\nNhan:\u00a0 <\/b>Yes, I think so. With the buyer there, I just did an open-book, transparent situation where I said, \u201cYou know what, this is our building and pest situation, and if you have any questions or concerns, please tell me now, because I don\u2019t want you crashing the contract two weeks or one week into the process. Just let me know now and we can put it back on the market.\u201d
\nThat\u2019s one of the risks you take when you\u2019re selling a property. You sign a contract, most of the time you take the property off the market for a week, two weeks, three weeks.
\nKevin:\u00a0 <\/b>Last time we spoke, you were about to settle on the property yourself, which meant that you\u2019d have to use your own funds to get you through to when it settles with this now purchaser we know about, who we didn\u2019t fully know about last time we spoke. So you have settled on the property, that\u2019s correct, isn\u2019t it?
\nNhan:\u00a0 <\/b>Yes, that\u2019s right. We settled on the property recently, and I just used my own funds; I actually didn\u2019t use any bank funding. The reason for that was this contract was coming through thick and fast, and I just settled with cash. The bank funding has been in the background and ready to go, however, now that we know definitely that the buyer is going to go ahead, we\u2019re not going to require that bank financing any longer.
\nKevin:\u00a0 <\/b>Very good. Okay, let\u2019s look at a couple of dates now. As we said, you have settled; you now know this is an unconditional contract. How long will your finance have to be in the property? What period of weeks?
\nNhan: \u00a0<\/b>Originally, the contract of sale was 60 days, and that was going to be about seven weeks that my funds were going to be in there. However, I\u2019ve negotiated with the buyer now to give him a small discount to cover him with one month\u2019s interest.
\nThe situation there was he\u2019s going on holiday for a few weeks, and the property was going to be vacant with him being away, so he definitely wanted a 60-day settlement. I\u2019ve been able to negotiate with him to get a shorter settlement and me subsidizing, let\u2019s say, $1500 of the purchase price so that he can cover that interest, and he\u2019s really happy with that.
\nKevin:\u00a0 <\/b>That\u2019s a win-win all around, isn\u2019t it? You\u2019re going to get a quicker settlement, which means you can pull your funds out, and you\u2019re going to pay the additional funds he would have cost in that period of time. So that\u2019s a win-win; that\u2019s a great negotiation.
\nNhan:\u00a0 <\/b>Yes, it\u2019s really a win-win. He\u2019s really happy with that. From settlement to settlement, with my funds in to my funds back out, we\u2019re looking at actually 21 days. I know that this 30-day challenge is something that\u2019s artificial, from settlement to settlement was my original parameters, but if I can do it within 21 days, I\u2019m really happy with that.
\nI know it\u2019s not the full $410,000 that we originally sold at, but you know what? We bought it for $320,000. I say to people that you make your money when you buy, not when you sell, and that\u2019s where I created the equity and gave me a whole stack of room to be able to negotiate and turn the property around in a really short period of time.
\nKevin:\u00a0 <\/b>You\u2019ve had a few extra costs here that you didn\u2019t budget for. One was fixing up the termites, and then paying the purchaser $1500 or whatever it was to cover his interest payments. Have you done the calculations now? Do you know what you\u2019ll end up with at the end of it?
\nNhan:\u00a0 <\/b>I haven\u2019t done the final calculations, but we\u2019re looking at roughly $70,000 net. A purchase price of $320,000, plus tax duty, legals, advertising. I think we spent originally $200-300 on advertising. We bumped that up when the first contract crashed to I think $1000 on RealEstate.com.au.
\nIt\u2019s going to be somewhere between $68,000 and $70,000 \u2013 because we didn\u2019t sell via an agent, as well; we sold privately \u2013 from that $405,000, and there are going to be some legal costs on the other end. Luckily, we don\u2019t have any bank fees to pay, so I would say we\u2019re looking at somewhere between $68,000 and $70,000 net before tax.
\nKevin:\u00a0 <\/b>And you\u2019d calculate putting your own money in there too; you\u2019re taking that out, as well?
\nNhan:\u00a0 <\/b>Yes, the cost of that money will come out to about $1000 or so with interest, maybe $1500. Look, I\u2019m not too concerned about that; it\u2019s just not having that access to those funds.
\nKevin:\u00a0 <\/b>A cost of business, isn\u2019t it? Yes.
\nNhan, on with the next deal, I guess. I might just touch base with you when this all does finalize, just to see what the final wash-up was once it settles, and then we might talk about your next deal.
\nThank you for sharing this journey with us over the last three or four weeks, and we\u2019ll catch up with you as soon as the property does actually settle.
\nNhan:\u00a0 <\/b>Yes, I\u2019m really excited about it. I know when I originally launched the challenge to the public and the people in my circle, I thought \u201cYou know what? This could fly or this could fail,\u201d and I\u2019m really pleased that it has come together. I am looking at putting together a $100,000 challenge in maybe a 30 or 60-day period. We\u2019ll see if that comes along, and then we can float it and see what people can do.
\nKevin:\u00a0 <\/b>Good. I look forward to talking to you about that as it comes up. I\u2019ve been talking to Nhan Nguyen from Advanced Property Strategies. Nhan, we\u2019ll talk to you in the next week or two. Thanks, mate.
\nNhan:\u00a0 <\/b>Thanks so much, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  We continue to follow the journey that Nhan Nguyen started 4 weeks ago where he is attempting to flip a property in 30 days and turn over a tidy profit. It has not been smooth sailing but boy, are we learning some lessons from…<\/p>\n","protected":false},"author":176692471,"featured_media":9308,"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-9307","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":"\nWhy 70\u2019s units rock + It\u2019s not smooth sailing for a flipping expert - 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\/why-70s-units-rock-its-not-smooth-sailing-for-a-flipping-expert\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why 70\u2019s units rock + It\u2019s not smooth sailing for a flipping expert - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  We continue to follow the journey that Nhan Nguyen started 4 weeks ago where he is attempting to flip a property in 30 days and turn over a tidy profit. 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