Property Update with Dave Robbins

Episode 58

Podcast – Property Update With Dave Robbins

 

In the latest episode of The Wealth Collective Podcast we talk to Dave Robbins from Performance Property Advisory and BuyerX about all things property. In particular we discuss the concept of rentvesting, general property market update and buying outside of your neighbourhood.

If you want to get in contact with Dave you can go to their website at www.performanceproperty.com.au or www.buyerx.com.au or you can email him at d.robbins@performanceproperty.com.au

 

Transcript:

Pete Pennicott:
Hi guys, and welcome back to another episode of the wealth collective podcast. Pete Pennicott here and I’m joined by my co-host as always Zac Masters.

Zac Masters:
Hey Pete, how are you going?

Pete Pennicott:
Very good. And we’ve got a special guest in the studio, not that you’re not special. So Dave Robbins from Performance Property and BuyerX.

Dave Robbins:
Thanks Pete. And thanks Zac for having me.

Pete Pennicott:
Yeah, so we thought really, really good timing to kick off, so with good note as well. So property is having a little bit of a little bit of a recovery, almost like a very sharp recovery since mid last year.

Dave Robbins:
It is, it’s rebounded quite well obviously with, um, the federal election probably getting the result that, uh, property investors were seeking and obviously interest rates coming off from sort of August onwards, uh, has really, um, brought some activity back to the market nationwide.

Pete Pennicott:
So we’re seeing a lot of inquiries from our clients and listeners just sort of checking in going, all right, is this the time to buy or have I missed the boat again? So the people that were sort of sitting on the sidelines, and I think that was sort of sickly hoping that it went further down so they could sort of get in and um, you know, perhaps they might have missed that opportunity or there might be different pockets of places to actually invest in. But in some of the other things we wanted to talk about today is awkward sort of rent vesting as well. So for people trying to enter the property market, especially in metropolitan Melbourne, it’s getting tougher and tougher. Um, and I’m hoping you’ll sort of cover off on why that’s difficult and hopefully is that going to end at any point?

Dave Robbins:
Sure. So we, we, uh, there’s 40 different metrics for us to, um, position a market somewhere on the property cycle, on the property clock. One of those is, the price to income ratio. Uh, and at Melbourne at the moment, uh, Melbourne house prices are 10 times the average income. So that makes it extremely difficult for first home buyers to save for a deposit to enter into a market. With still being able to live. So if you’re, if you’re having 50% of your average wage going to the average mortgage without any living expenses, it makes it extremely difficult to, to enter the market unless you’re gifted a lot of money from parents or guarantor loans and obviously, uh, the whole, um, market at the moment, is very sensitive. So not too many parents are willing to loan four or 500,000 to their kids to get into the market.

Dave Robbins:
Um, and, and it, it’s a bit of a compromise as well because if all your borrowing capacity gets you is 500,000, you have to compromise on either the quality of the asset, the location of that asset and are you going to travel an hour and a half to work every day if, if that’s what your 500,000 can buy or do you buy a one bedroom apartment in the city because that’s what your $500,000 can buy.

Pete Pennicott:
Yeah. And that, and then you might be sort of, there’s the trade off of what’s the longterm capital growth prospects for those different properties as well. Yeah. Um, and then, so a lot of people just look in the location where they live, so they only think of, I want to get into the property market. Um, I live in Melbourne, work in Melbourne, so I want to have, I think about that commute that you were talking about earlier. So are there other ways or sort of, how else can people, I guess, manage that compromise? So they are getting a toe in the water so that building an asset in property and something, hopefully what we’re, we like your service helps people sort of cut through the noise and actually put some, I guess, real research behind their decisions and make really good investment decisions, um, when purchasing the property. So can they do that without sacrificing all of their lifestyle or remortgaging their parents’ house?

Dave Robbins:
So rentvesting is a, is a property terminology, and that is, um, becoming more and more apparent as prices get further and further away. So a great example would be, a 24 year old, living with a renting with a girlfriend or, or mates or whatever it is. Um, let’s say they are renting in Richmond, obviously Richmond house prices at the moment, uh, far in excess of what a first time home owner can afford. So they may be working in the city or going to uni, um, somewhere in the city. Yeah. Um, so the idea of rentvesting is that you continue to rent in an area that is suitable to your lifestyle, your work, your family, wherever it may be.

Pete Pennicott:
You might be share housing as well to sort of spread those costs.

Dave Robbins:
Yep. Um, and then you, you, you still want to build an asset base so you can enter a more affordable market. And that may be regional Victoria at the moment where, let’s say it’s Ballarat or Bendigo, uh, average house price is around 400,000, and you’re going to get close to a four and a half, 5% yield on that. So by the time you put your, let’s say it’s an $80,000 deposit down, which is roughly 20% of the purchase price, um, the, the rental income is almost going to be servicing the debt, so close to cashflow neutral or very slightly negatively geared . Um, and entering a an $80,000 deposit in Melbourne, it doesn’t really get you anything. Um,

Pete Pennicott:
You might get a shoe box somewhere in one of those dodgy built, you know, one in Docklands that had the fire. Yeah. Literally fire sale process.

Dave Robbins:
So, so with rentvesting it’s not a get in get out two years later and try to take your money and put it on a bigger deposit in Melbourne, you really need to commit, the short to medium term, which could be anywhere from five to seven, eight years. Um, and the idea is that you’ve got an asset, in a growing market that is more affordable in a confident market where demand is exceeding supply. Um, and that isn’t costing you an arm and a leg to service the debt because we’ve got someone renting the property. You continue the, or you have the freedom or, choice to rent wherever you want to do. And it may be in five years time that you’re sick of the rental market and you want to buy a principal place of residence in Melbourne. But you can do that by, the asset that you have in, let’s say it’s Bendigo for example. That will have grown in that five to seven years and you can use that a deposit to reenter the Melbourne market and it hasn’t cost you anything. It’s only costs you the initial deposit, not the servicing of the debt along the way.

Pete Pennicott:
Yeah. And that’s good. And one of our listeners lives in Bendigo, so he’ll be very happy to hear the Bendigo one. So, yeah. Um, and in terms of timeframes, you mentioned sort of five years ish as a reasonable timeframe. Look where all about longterm investing. So is it something that can be part of a longterm portfolio as well to actually build? Or are you seeing most people actually using that as a stepping stone in selling that property?

Dave Robbins:
It’s all comes back to the individual client. But um, if you’ve got a growing asset in a market like that, the vacancy rate, the event, the rental vacancy rate at the moment in Bendigo is less than 1%. So it means there is a huge demand for people wanting to rent properties in Bendigo. So if you’ve got that, that puts upward pressure on rental pricing, it may be that you don’t need to get,

Pete Pennicott:
why sell this great asset, like what’s the rush in terms of turning over bomb properties and we see the same on other types of investments as well. So, um, if it can be built into a portfolio and you have got a cashflow positive, a property that’s growing in value and you can potentially use some equity, you’re not too sure leverage into the next property. Um, yeah, that sounds pretty well.

Dave Robbins:
The, the advice would only be to sell if you’re going to use the money for something immediately. So if you’re not going to use it on a principle place of residence where you’re not going to use it to pay back debt or whatever it may be you hold, because obviously there’s entry costs, stamp duty, et cetera, getting into the property and there’s also taxes getting out of it, through capital gains and agent’s fees, et cetera. So unless you’re going to use the money, absolutely. You hang onto the property.

Pete Pennicott:
I’m just thinking out loud, like in terms of you’ve got a few, you know, your cohort of people would be in this sort of, this zone could even sort of do even better if you’re living at home and no rent at all, so home investing.

Zac Masters
Yeah. Yeah, I was literally having this discussion, um, with a client the other day of going, you know, he’s in the position where he can potentially buy somewhere near the city but he’s going, is that going to be the best investment longterm? If I hold is this the best area to be buying, buying an hour? Am I better to just rent? So not even for the sake of, um, could he afford the property? It’s, is that the best investment decision for him as well?

Dave Robbins:
It all comes back to affordability. As I said, we’re, we’re, we’re 10 times a average house price to the average income in Melbourne. Um, how much further that can grow is really dependent on interest rates at the moment with Melbourne. Melbourne can really only grow if interest rates stagnate or fall. And when we’re roughly 3% at the moment with an RBA rate of 0.75. How much further can we go lower? Obviously the banks know better than us, but if you’ve got, in a more affordable market, like a Victorian regional, even if interest rates go up, those markets still have the ability to grow because of how cheap they are. They’re four times income. Um, and if you have a look at it from a, let’s say you’re in the public service, an ambo, a doctor, a police officer, you’re on the same wage in regional Victoria, and you can have a completely different lifestyle house, et cetera, for $600,000, as opposed to a house and land package in Melbourne, an hour from where you work for the same price.

Pete Pennicott:
Yeah. And that’s what we wasted a few people do that several years ago with Geelong. So in terms of the commute there is similar from a train experience, if you can get the right train. Coming into Melbourne and they’ve sort of got a property with a backyard. They’ve got sort of space in the house and they were living sort of, you know, quite cramped up and they had kids and stuff in inner city. Melbourne just wasn’t working for them. So they, their lifestyle is amazing and I think they’ve sort of loudly campaigning to get everyone to move down there as well. Probably just the drive up prices for themselves. So, um, so in terms of other stuff, Zac, what do we want to be covering off today?

Zac Masters
Yeah. So we’re going to be looking at hopefully just getting a basic property market update from you as well. So we’ve spoken a bit about Melbourne being quite high but probably a majority of the listeners sit around the Melbourne um, area. So if you could give your thoughts on that at the moment.

Dave Robbins:
So, so Melbourne’s last growth cycle began in 2012 and it ran to virtually the end of 2017 very beginning of 2018. Um, overall that was just shy of an 80% growth, um, through 2018 and 2019. Obviously with the, with the federal election, Royal commission, APRA changes, it was a world of negativity that went through finance and property. So prices actually came off in most of the blue chip suburbs in Melbourne. They’ve come off anywhere from 15 to 20%. Um, so that was a really good opportunity for people to buy. Then, if they had the ability to service the debt, which a lot of people didn’t.

Pete Pennicott:
Or even get the debt as well as it was getting harder and harder to get the funding.

Dave Robbins:
yeah. But as soon as the, the federal election decision was made, uh, and interest rates, were virtually 25%, 30% cheaper than what they were a year ago. It Melbourne, it made Melbourne more affordable. Um, but we, we believe it performance property that we didn’t go back to the start of the next cycle. A typical cycle in Melbourne lasts anywhere from six to nine years and it’s typically a 100% total growth. Okay. As I said before, it was a six year run and 80% growth. Um, we believe as soon as interest rates were made cheaper back to roughly 3%, it gave Melbourne the ability to run, we believe to finish off the last 20 to 30% of its last run. Obviously we can’t predict it to exactly what percentage that will be, but you can even see basically since, August or September, there’s been some, um, uh, cases where properties have gone back from an auction market, were we weren’t an auction market a year ago. The auction market is back and property prices are going two or 300,000 above the reserve.

Pete Pennicott:
And when you say was more private sales, is that sort of how they’re getting transacted on?

Dave Robbins:
Yeah, so, so real estate agents were, they would advertise a property, let’s say it’s on a 900 to 990 that they’d be accepting offers under 900. Okay. Now if that if it’s that same range, 900 to 990 at auction, they’re hitting 1.2, 1.3, and even more in some .

Pete Pennicott:
There’s going to be a lot of people are a bit worried that they might’ve missed the boat.

Dave Robbins:
Well, yes or no, but it’s all fragmented. Blue-chip suburbs are really, really flying and others are yet to get that, that influx of people.

Pete Pennicott:
And you mentioned the Bluechip. Like, what makes a property, suburb blue chip, are their certain sort of like a tick a box checklist that people can go through without engaging your services.

Dave Robbins:
Well you think about where all the private schools are, typically the character homes built before anything else. You’ve got better infrastructure. Obviously proximity to the CBD or work or whatever it may be and they’re all affluent suburbs with affluent people living in it and the idea is if, if you’re unable to purchase in those, the rental will still get a, you’ll get a really good rental because that gets people into the schools. So yeah, we believe Melbourne’s got roughly 20 to 30% left to run. Um, and then after that we believe we’re into a longer stagnation because the interest rate lever can’t be pulled much more because we’re going to be down to under 3%. We believe the only thing to allow the market to recover is wage growth. Where that’s going to take some time to catch back up to how quickly the property prices have moved. So Sydney, so as I said before, Melbourne is 10 times income. Um, Sydney is 13 times income, so that’s even further away from reality for a lot of people. I will. Yeah. It’s quite unique Sydney, cause obviously half of it is water and what’s left is just blue-chip real estate. So anything with a view to the Harbor is just gold. If we go around the country, we have a look, we’re doing a lot of buying in Brisbane at the moment. Brisbane is around seven and a half times price to income and since interest rates have come off that the, the auction market there is really gaining legs as well. So as investors we’re missing out by up to a hundred thousand, 120,000 on properties that we were able to buy six months ago with, with a lot of confidence. So it’s great for the people that we’ve purchased for because the market is doing exactly what had hoped. Um, but for people to get into Brisbane, it is time is of the essence, in another six months, another year it’s going to be too late. We’re doing a lot of buying in Adelaide as well and have continued to do that for for quite some time. Um, and Adelaide is just that, that, that slow burn, but, but a more sustainable, consistent burn. Um, Melbourne and Sydney have grown up to 12, 13% in some years. You’re not going to get that in Adelaide, but it’s going to consistently perform at its longterm average, uh, which is in the low 8%, which is great for great for clients. Ballarat that’s, that’s a market that grew extremely quickly from Melbourne buyers heading up there in 2018 but as I said before, when Melbourne peaked, that ripple effects sort of went out to Geelong, Ballarat, Bendigo. but, it is back. It’s recovered as I said, Interest rates have come off, and the market is really starting to go again. Um, it didn’t pull back like Melbourne did and the regionals don’t typically do that, but it certainly just slowed from the aggressive growth that was happening. Having a, and it’s now back to where it should be. Um, Bendigo, as I said before, that that’s really moving. And the buyer advocate interest there has just gone phenomenal. Yeah, it’s, it’s going, it’s going really well.

Zac Masters:
So you spoke a bit about there, um, around how you’re operating all over Australia and look all over Australia. Um, can you speak a bit more about you guys at performance property? You’ve got a different data driven methodology than we’ve seen to a lot of other property type of people so can you run us through a bit about that.

Dave Robbins:
Sure. So, yeah, if, if people want to log onto the website to have a look at that, um, or booking a meeting, we can do so. But basically the, the, the, the data and the research drives their advice. So, um, we have to have factual information to make a call on a market. It’s not a hunch. We’re not telling people to buy Docklands apartments because, the real estate agent told me it was a good deal or the financial planner or whoever it was. So without the research and data were nothing. So we need that and there’s, there’s 40 different indicators to be able to position a market on the cycle. And you can’t look at one in isolation and say, based on unemployment, you know, Adelaide is doing well or not doing well or, or based on, you know, last year’s growth, we need to be here or we don’t need to be there. So we take all the data back to 1980 because that’s when everyone was included and obviously there are patterns and cycles that form, for us to fit the data, those patterns and cycles and work at where a market is. Um, so there’s an investment team, within our company and they are fantastic, heated, robust discussions on where we should and shouldn’t be but it all always comes back to the data and without that we can’t make a call. It’s raw data that we get from abs core logic, local government, anywhere we can get data, um, airport arrivals in Perth cause they’re, they’re a really good indicator.

Zac Masters:
So that’s the performance property side, but you’ve also got the buyer X side as well. So what’s the difference between the two?

Dave Robbins:
Okay, so buyerX is our prestige home-buying service, um, predominantly operating in Melbourne and Sydney and really million dollar plus homes. So the main difference between buyer X, the home buying and performance property, the investment arm is the emotional attachment to it. So when we are home buying, obviously we have to be emotionally attached because we are going to live in it. We’re going to raise our kids there. It’s gotta be close to schools, work, whatever it may be. Our real focus there is busy professionals that, um, don’t have the time cause it could take six months to find the right house for some people if you’re lucky and in that time the market is getting away from you and that’s prevalent right now in Melbourne and Sydney. So if, if you’ve got a professional that on the ground that he’s able to perform that service for you, um, has access to off-market sales or pre-market sales, where it hasn’t even hit the market. Where in some cases we can get a deal done before it hits the market. Obviously with no competition from outside parties, only competing against the vendor or agent, we’re going to potentially buy it a better price or beat the market to it and definitely buy it a better price.

Zac Masters:
Because how do you have a percentage on how much properties you’re buying off market? Cause I think that’s the big one that especially when I first learned about buyers advocates and things like that is how much just as not on real estate.com.

Dave Robbins:
Yeah well every market is different. Um, but at the moment, if I am a, an active agent in a, in a rising market and I’d be taking it to auction because we’ve got, we know we’ve got buyers, we know we’re going to get above our reserve or our asking range and why sell to someone like us if we know we’ve got four or five buyers wanting to buy this property. If it was six months ago, before interest rates were cut and when we were still sort of getting out of the, the, the election out and Royal Commission, a whole hot mess, we had more, more opportunities for off market because people didn’t know how much further property prices were going to fall and some, some vendors want a discreet sale. It could be a marriage bust up a deceased estate or they just don’t want to tell their neighbors that they’re selling their property.

Pete Pennicott:
And that’s a common one. Once you get into the sort of one and a half mil plus sort of property range, I don’t want every older neighbors coming in and looking through their stuff.

Dave Robbins:
And it’s an invasion of privacy. Like you’ve got to have your house spotless for a month. As you say, you’ve got your neighbors walking through at the open for inspection and you’ve got other people coming through that who knows, you know, they may see something that they like and come back when you’re on holidays and take off markets that they do vary. Um, in terms of the investment arm you asked before, that is we remove the emotion from that and it all comes back to the data. The data tells us where we should be and why we are there at that point in time. And it’s all cashflow driven. So if, if, if the strategy of the client is all about growth, but they have to have consideration to cashflow, um, we need to be in this market and we need to be here now because it’s experienced a stagnation phase. Rents have risen, um, vacancy rates have fallen, we should be buying. And it really comes back to that if, if it’s under the client’s budget, if they’ve gone to their broker and their, um, approval in principle is for 500,000, um, we’re purchasing a property for 420,000. It’s going to rent for $380 $390 a week. Is it under the client’s budget? Yes. Does it meet their servicing requirements? Yes. Is it, you know, is the data telling us to buy the, yes. Let’s buy, and it should, obviously it’s not that simple, but it should be.

Pete Pennicott:
And the same fundamental principles, do they, that we apply with the share market and other types of investments, does that apply with property on diversification? So, you know, should people, if they’re trying to build a property portfolio, which that sounds like a good thing to have. So you know, assets that are going to grow in value produce some form of income. Um, and yeah, it’s gonna sort of give you some discipline as well cause you’re gonna have to be paying these debts down as well when you buying them. Are your best property investors or the people that have built property portfolios over several years, are they doing so all in one capital city or are they spreading sort of their properties around Australia or they’ve been spreading risk? Yeah.

Dave Robbins:
Yeah. So it’s exactly like you guys, if you, if you have a client that comes in and everything they’ve got is all on one one share or one one form of equity, it’s not, it’s not smart.

Pete Pennicott:
So you can get it really wrong if you sort of bought into the right market, but we’re seeing it go horribly wrong as well. So, and even when we look, we like to think, yeah, property shares, managed funds, cash, bonds can all work together. And they all have their place. Sure. But what we get nervous about is people have their family home and yeah, it might be Glen Waverley, then they’ll buy an investment property next street down. Cause they;re familiar with it. They know the area and they’ll, yeah. Oh that worked. So the next property decision, they then go back to the well and go, Hey, should I buy again in that same area?

Dave Robbins:
Yeah. It’s all timing because if you look at Melbourne right now on our property clock, we’ve got Melbourne at around 10 o’clock and with 12 o’clock being the peak. Yeah. So the best buying is done at six o’clock on, on the property clock because at that time you’ve got the longest run left in that cycle. Yields are at their lowest when the property is at six o’clock and yields are at their lowest when the property is at 12 o’clock because the price growth is going to outperform the rental growth. It also comes back to land tax as well. So if you’ve got, if you own your principal place of residence in Glen Waverley, you’ve got a investment in Glen Waverley, potentially another one in Victoria. You’re going to be up for land tax and obviously that’s going to cut into any income that you’re going to make from it.

Dave Robbins:
So at the, the ideal portfolio is a diverse one and one in every state. Um, now if you had 10 properties in Melbourne, um, you’re going to be up for land tax. And then what tends to happen is that the client, micro managers, they drive past the place and they say that lawn looks a little bit long for me and then it’s just too much and then all you’re doing instead of worried about going to work and focusing on family and everything, you’re driving past all these properties and not liking what you see because, well, let’s face it, tenants don’t look after properties as well as homeowners know. So it’s not to say that we don’t want to know what’s going on, but we allow the property managers to do their job and don’t micro manage the property. So when we say the land tax part of it about, you don’t avoid land tax by going interstate. You certainly minimize it because the States don’t talk to each other. You can have something in Adelaide, something in Brisbane, something in Perth, um, and it not affect your Melbourne Mount Waverley home.

Pete Pennicott:
Yeah. And that’s good as well cause the economies will go at different speeds at different times as we saw like WA had its time in the sun years ago and it’s all cycle. So I think that diversification one, that’s a good message to get through.

Dave Robbins:
And if for whatever reason you need to reduce debt for whatever reason, you need to reduce debt with the, uh, from the property that has grown the much and ground them and also the one that’s closest to 12 on your property. And if you’ve got everything, let’s say Glen Waverley, if everything’s there and they’re all down at six o’clock. Yup. Um, why would you sell when we when we anticipate that growing market over the next five years.

Zac Masters:
So you spoke a little bit there on the fact that you’ve got property managers in each place. So that’s the big thing that some people would probably be worried about is going well, how do I know then who’s looking after the property and things like that. But you’ve got contacts in each, each area around Australia.

Dave Robbins:
Yeah. So that’s another arm to our business. So pathway asset management is our property management team. So we operate in the five major capitals, Brisbane, Sydney, Melbourne, Adelaide, Perth and they look after the properties. So they look after the investment properties that we buy, in the regional markets where we’re buying. Uh, it’s an overprescribed industry anyway, and there’s almost more real estate agents in Ballarat and Bendigo than there are normal people. So, so for us to go into those regional markets, it’s just going to upset the buying team and is not good for the relationships there. With the agents. Um, but yes, in the capital cities, you know, you’re going to go through a turnover of staff within that role. So you might have a fantastic property manager that either gets promoted or moved on or whatever it may be. Um, but there’s always alternatives. Um, we believe like all the staff that we’ve got in pathway, they don’t manage the amount of properties that a Ray white or a whoever would, um, because it’s all about quality of service and when you’ve got a problem, you need to act on it. Um, and there’s always problems. Um, so if you’re managing 300 properties, there’s no way you can offer the level of service needed to, to have confidence from a landlord.

Pete Pennicott:
So I think the big one that a lot of our clients are getting, spruiked at the moment. So in terms of people trying to, um, sell the benefits and very, very well put together marketing material with spreadsheet showing how much money they’re going to make, how much tax they’re going to get back on new developments. Um, in terms of historical at night, there’s no crystal bowl for how they sort of play out. But historically speaking, I guess the difference between buying an established home in a, in one of those blue chip or regional centers or sort of a quality location versus buying these new developments. So new estates or even sort of the ones that are happening within CBD. Are you buying into those markets, number one, or any other sort of red flags that people or checklists that people should be looking at going, Hey, is this gonna make my desire for capital growth? Is it gonna make my desire for income? The tax is attractive. So the tax deductions, but what we try and educate clients on is if this tax deduction means you’re losing money consistently and sort of, I know we just, you mentioned before about the rental income meeting your, um, all your outgoings. Yes. That’s a good place to be cause you can just hold that property in perpetuity if you need to.

Dave Robbins:
Absolutely. So we’ve talked about blue chip suburbs before. Yeah. In a capital city that is typically within a 10 to 12 kilometer radius of the CBD. Yeah. So people investing outside of that. It’s not to say that you won’t or can’t make money, but we focus on that because that’s where the, the major employment is. Um, and typically where people are making more money, therefore putting upward pressure on the prices. With the depreciation part of it and things like that, we, we are more focused and obviously every client’s different. And that’s what we’re all about with getting the right strategy for that client. Um, with a growth asse if we’re in a, uh, there’s 15,000 suburbs across the country and we grade them into a triple A, triple B, triple C, triple D, triple A’s, growing with, with a longterm compounding growth rate of above seven and a half percent. So if you’ve got money on the table in a triple D suburb, which is compounding at 4%, um, where would you rather put your money? Because I’d rather put it in somewhere that’s good. We’re not, that I know has got a better growth rate than something that potentially is an hour and a half from here, um, and is only growing at 4%. Now that 4% asset may have a fantastic yield on it that might have a 5% 6% yield on it. But typically those sorts of properties have a higher turnover of tenants. Therefore you have to have releasing fees and all your 6% yield can get gobbled up with releasing and having a tenant go in arrears with rent and things like that. Um, so we are more focused on the growth assets, um, to get our clients to whatever the next step may be.

Dave Robbins:
And that next step may be just to reduce debt off their principal place of residence with a, a large chunk. Uh, now if we’re growing at 4%, uh, and we’re, we’re, we’re banking on depreciation and things going down in value, that’s not a growth asset. Um, where there’s horses for courses. Obviously if we’re chasing the cashflow asset, we would more look at commercial where you could have, you know, 10% returns, so 7% net yield, but only 3% growth. And then if we’re looking at residential, we might have 7% growth but only a net 3% yield. And that’s the balance. So it’s regardless of whether it is residential or commercial, it’s going for the blue chip style.

Pete Pennicott:
Yeah, exactly. I think there’s that uniqueness factor as well, that you don’t get in a giant apartment block where’s you have something that’s sort of built and got a beautiful facade. Yeah. People want to live there. And that’s what drives growth.

Dave Robbins:
So, so if there is, um, a demand exceeding supply and, and a scarce product, that’s what’s gonna make people buy or pay more for it. And when we’re buying residential, we’re not buying investor spec only rentals. We’re buying something that has that owner occupier appeal. So even when it comes time to sell the property, we have five or six buyers wanting to buy it, not just the next investor going oh yeah. It’s got a great yield. Don’t like the look of it.

Pete Pennicott:
yeah cause you’re cutting out part of your market as well. So yeah. No that’s really good. And that’s way I look. I, I’d encourage anyone who’s ready to look at property investment, always engage us. We’ll have a chat with a property specialist, property advocate because I can help on both the buy and sell side. So yeah, if people do need to do that. And I’ve done that every time I’ve sold a property. I wish I had have engaged someone like yourself early

Pete Pennicott:
on because my first property decision was not a great investment but you know, still got out of there with a little bit of growth. But um, yeah really good cause you can get those insights. You’ve got all the data to support it. Um, and you have that a different mindset when you’re looking at it cause you can, you can remove the emotion. The hardest thing to do when you’re, you know, throwing over half a million dollars is to remove emotion out of that decision. Um, and it is a lot of the times that’s an investment decision. So you need it to tick the box on capital growth and income.

Dave Robbins:
And obviously, uh, there are people in clients that, um, don’t want to pay a fee for something that really, that they can do themselves. But it’s a full time job for us. We, we have area specific experts that know what streets to buy on. We know where the housing commission is, we know what streets to avoid. Um, and it’s, it’s an, I guess it’s an insurance policy not to make a bad decision cause the property’s not that liquid that you can just go, Oh no, this isn’t working and we can turn it around.

Pete Pennicott:
Even the stamp duty alone. The entry and exit costs are high, the time’s high. And I’ve had the privilege and benefit of saying that what you provide to clients when you’re doing an analysis on a property, it is super granular detail about he is okay, this is if you’re walking through here, this is how far it is to all these amenities. You’ve done that analysis for someone else to do that themselves. It’s taking time out of, you know, family time, work time and then they still cannot possibly do that on a scale of what’s best across the country.

Dave Robbins:
That’s right. And obviously people spend a lot of time trolling on Facebook and obviously we do that all day, every day on real estate.com and domain. And it’s a full time job as I said. So, you know, if you come home from work for after a 10 hour day at work and have the ability to spend four hours on, on those two platforms, that’s great. Um, but as I said before, if we’ve got the off market opportunity before it even hits those sites, because every one within our team, um, depending on their buying area, they’ve got the agent relationships and can get it done. So yeah, that matters as well.

Pete Pennicott:
Those agent relationships do carry something cause they want to work with you again cause they know you’ve got stock of property that, you know, if they look after you and then, you know, they’re sort of carry themselves.

Pete Pennicott:
Well, there’s potential for future business. Whereas for most people, if you’re dealing with an agent, you’re probably only going to deal with that agent maybe once, maybe twice, um, in your life. So, um, there’s a little bit more skin in the game when you’ve got the professionals that sort of, um, have a mutual benefits of doing that. So yeah. Um, that’s all good. But we might wrap it up there. That’s a lot of really good insights. So, um, we’ll put your contact details in the show notes, so if people want to reach out and engage your services, so yeah, but thanks for your time.