June 17, 2025 • 31 mins
Buyer's advocates spend their entire time professionally working on the business of buying residential property: As our guest today suggests: "It's both a science and an art."
In fact, the secret is that you can make compromises to get what you want.
But those compromises can be quite different for the home buyer compared to the residential investor.
Jarrod McCabe of Wakelin Property Advisory joins Associate Editor - Wealth, James Kirby in this episode.
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In today's episode, we cover:
The compromises you can make in buying property
The mistakes to avoid in having a property managed for you
Making the big jump to owning more than one property
How does the First Home Buyer Guarantee scheme work?
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirkby. Welcome aboard. I hope you enjoyed some of
the recent shows and recent guests we've had. You know,
every now and again someone comes on the show with
what we might call a blinding insight. And I actually
thought Tonyo Doherty in the last show and his point
(00:31):
that when you are selling a property or selling your house,
the secret is not that you're selling your house. The
secret is that someone is buying a home and that
is so so I think that's terrific insight into the
dynamics of it all and really told us something that
would be very useful in the future. In today's show,
(00:54):
I want to develop some of those fundamental issues aren't
and properties and flip it over actually and we'll have
a look at buying this time and buying a property,
buying investment properly. And the ideal guest for such an
exercise is someone who's been on the show before. Jared
(01:16):
McCabe of the Weightling Group. Hi, Jared, how are you on?
Speaker 2 (01:20):
Very well? Jimes, thanks for having me on again.
Speaker 1 (01:21):
Oh great to have you on. Haven't heard from you
for a while. People will be very keen to catch
up with where you're coming from on the market especially
it's interesting, you know, insights, insights of commentary, hard to find,
to be honest, hard to find in any field, particularly
hard to find a property. And I thought, as I say,
Tony had already from from McGrath's up in Brisbane, who
(01:45):
was very good on that issue of how you sell.
Now your expertise as a buyer's advocate is in how
you buy. And one thing I wanted to talk to
you about straight away is this issue about when you're
buying somewhere and everyone's gone through this, and it doesn't
matter if you the listener, are buying a first home,
(02:05):
a first apartment, if you're an investor and you're buying
your third property. Same as she comes up every time
you have to make compromises, the perfect property is not.
There some things you can compromise on and maybe some
things you can't. What can you compromise on, Jared.
Speaker 2 (02:22):
There's a lot of things that you can compromise on.
There's not necessarily a lot of things that you should
compromise on. So I think the first question though, is
that you really need to determine what the purpose of
the purchase is, so and have a very clear understanding
as to what your objectives are and what you're looking
to gain out of the acquisition. So are you looking
to buy a home or are you looking to buy
(02:43):
an investment or are you looking to buy a lifestyle
property as a holiday destination, something on those lines, So
what's the reason for the purchase. And once you've got
an understanding as to what you're looking to achieve out
of that, you can then start to look at well,
perhaps I can compromise in certain areas, but there are
other areas where I really should. So if you're looking
to focus on capital growth because it's more of an investment,
(03:04):
or you're looking at more of a rental return, well,
then there's going to be aspects of a property that
you don't want to compromise on. And it's usually the
fundamentals around the things that you can't change about that property,
so that you can make improvements, and you can alter
things that perhaps aren't quite right, and that might be
as simple as paint, carpet, those sorts of things. But
things that you can't change about a property are the suburb,
(03:25):
the street that you're on the style of property, perhaps
that you've purchased, it's orientation and outlook that it might have,
or the adjoining uses that might be surrounding the property.
So those are the sorts of things that you probably
don't want to compromise on. But if you're looking at
it from a home point of view, then there might
be other reasons of why a certain property might be desirable,
and it may be particularly around Melbourne, there's a lot
(03:47):
of school zones that people are looking to try and
buy into.
Speaker 1 (03:50):
To get inside this catchment, yes, to.
Speaker 2 (03:52):
Get able to get children into that school. So in
order to get into that zone, you may need to
that's the priority, that's the objective of buy this property.
So there may be compromises that you might need to
make in terms of size of property or style of property,
or perhaps you need to be on a main road
in order to get in, which in a capital growth
investment focus you probably wouldn't do that. So understanding the objective,
(04:14):
I think is really important before you start worrying about
where you'll compromise.
Speaker 1 (04:18):
So the compromises might be slightly different for the home
buyer and the investment residential property investor. So that's a
good example. The home buyer might make a compromise they
would never think of, never want to make. But if
there's certain aspects like access to a school inside a
catchment zone which is going to see thousands and thousands
(04:39):
of year a year, then hey, they're winning, all right.
That's a good example of the home buyer's compromise allowable compromise.
What about investors and the compromise is that they might
be able to make that aren't crucial though we might
think they are.
Speaker 2 (04:55):
So you can look at things like moving and it's
a common term that we see around particularly and media
is around looking at bridesmaid suburbs where perhaps you might
be well, you can go to basically the suburb that
might be the next one out that might still have
a lot of attributes that the object or the suburb
that you were looking at still has, But by going
to the next suburb out you can still achieve all
(05:17):
of those objectives. There's still demands to be in that location.
Perhaps the land values are not quite as strong, so
if you and there's plenty of examples around that you
can use to do that. But by taking that step
for one suburb further out, the price has come down
a little bit, but you can still afford to get
a good quality house or a good quality apartment or
unit whatever you're looking to purchase in a nice, quiet street,
(05:38):
but that you make sure that it's still close to
public transport because the transport line still heads out through
that same suburb. It's still got good access to public
to a local village, it's still got good access to schools,
that sort of thing. So there can be ways in
means you can take that step out and still achieve
your objectives, but by compromising perhaps the suburb of not
(05:59):
being exactly where you thought you might need to be.
Speaker 1 (06:02):
Right, Yes, okay, that's really interesting. So the different compromises
that are for the home buyer and for the investor,
And notice you talk about the compromises are very much
around property, physical issues, around location, etc. What about on
financing or on other issues like that? Are there also
(06:24):
compromises that a person could make.
Speaker 2 (06:26):
You can look at whether or not. And again this
is probably more of a financial advisor type question than
a biased advocate properly advisor question, but it's probably you
can look at things like whether you pay principle and
interest or whether you only pay interest and there'll be
different philosophies and thoughts around that, but that might save
you some money. You can look at variable versus fixed
interest rates and there's ways and means to focus on that.
(06:47):
And again, depending upon what the expectation is around interest
rate movements, that may dictate your decision around that side
of things as well. So there's ways and means that
you can compromise or make alterations how much you want
to put down in terms of your deposit. You may
have gradic capacity, you might not.
Speaker 1 (07:02):
Yes, right, okay. And we mentioned in the last show
about you Know buying that in fact it was all
about the focus was the mistakes perhaps that people make
when they have their own property and they're selling it
and they're thinking about being a seller, and they're thinking
all with this frame of mind about selling to someone
when in fact, you know, our previous guest suggested that
(07:24):
the sort of breakthrough is to look at it the
other way around. The buyer wants a home. You're trying
to win the argument with someone that this could be
their home. So that was the sort of real estate
agent seller's insight. Now from your point of view, you're
the buyer's advocate. So what tell me when people are
(07:46):
someone's standing beside you, you meet them first time, they're
saying we want to buy extra y. I presume there's
common mistakes you come upon at that point. Is the
anything you could tell us on that front?
Speaker 2 (08:02):
There can be many mistakes around around those sorts at
that point in time, and it really Again I might
sound like a bit of a broken record here, James,
but I think the clear the conversation that we always
have at the start is trying to understand the objective
of the purchase, and everyone has different ones, and so
for a first time BUYO, as an instance, it might
be I need to get into the market, but this
is the first stage of my property journey, and I
(08:22):
want to take steps up the ladder. So they may
well have a mindset of, well, I just want to
get something. I want to get in. Whereas if you're
wanting to take steps up the ladder, there needs to
be other targets to hit in order to gain capital growth,
to build equity so that you can leverage off that
acquisition and take those steps up the ladder. So having
those sorts of conversations.
Speaker 1 (08:41):
So if I said to you, I just want to
get in. You don't like that approach. Obviously it's too simple,
is it.
Speaker 2 (08:46):
Yeah, it's too simple to just say I just want
to get into the market. I just need to get in.
It needs to be a lot more thought to it
than that around what you're looking to achieve out of that.
So and that conversation and that thought process is quite
often a conversation that first home buyers particularly have if
they've missed out on a number of properties. I'm sick
of missing out. I'm starting to get really down. I
(09:08):
just need to get into the market. And that's when
the risk of compromise probably becomes greatest, because it's not
a case of where should I compromise it. I just
need to get in, So I'll compromise anywhere in order
to just get into the market. And that's when people
start making mistakes.
Speaker 1 (09:22):
That must be so common just now with such a
tape market. What sort of mistakes do they make?
Speaker 2 (09:26):
Then?
Speaker 1 (09:27):
So they say, Okay, I've been to three options, we
got wiped out each time, and I'm tired, and I'm
fed up a bit, and I want to just I
just want to get something that sort of ticks a
couple of basic boxes and then what do you say
to that person.
Speaker 2 (09:41):
Some of the mistakes that they make are usually around
trying to focus on something that's lower priced in order
to make sure that they give. But usually that property
is lower priced for a reason, and you need to
be aware of what's made it compromised and why the
price point is a reduced level, so that you don't
make you don't make that stuck.
Speaker 1 (10:00):
So people come to you and say, we want you
to help us buying number twenty two rare by Cuttings.
Does it happen that you see it? No, you shouldn't
be buying that. Yep, yeah you do.
Speaker 2 (10:10):
Yeah, I've said, I've told many clients not to buy
certain properties.
Speaker 1 (10:14):
Absolutely right, And then they go and then the whole
conversation begins a pressure I expect.
Speaker 2 (10:20):
Yeah, it does, I mean, and it's important to be
able to say that. I mean, it's important to be
able to look at client in the eye and say, no,
look this is not the right property, and it's for
these and these reasons. Now it's not my decision at
the end of the day, but a client comes to
me and says, look, this is what I want to buy,
this is why I want to buy it. My role
initially is to point out the positives and the negatives
around the property so that if they do decide to
(10:42):
proceed with the purchase, they're doing it full informed. They've
got all of the information so that they can then say, Okay, well,
I am compromising here, but I understand it. I'm compromising here,
and I'm understanding why I'm compromising here in order to
achieve that original objective that we were discussing.
Speaker 1 (10:57):
Does it happen more often with the horn by us
a pose to the investor.
Speaker 2 (11:02):
Well, usually with the investor clients that we work with,
they're relying on us to determine the property that they
should purchase. So more so with the home buyers. They
home buyers obviously know what they do and don't like
and what they want to purchase and why. So yeah,
it's more a case of they can sometimes have rose
colored glasses on with certain properties, and once you point
out some of the perhaps flaws that are there, that
(11:24):
it starts to open them up and they realize that
perhaps it isn't the perfect property and then they may
need to look at alternatives.
Speaker 1 (11:30):
The home buyer is more intense, I imagine on each
property because they have to imagine.
Speaker 2 (11:34):
Far more emotional and because it's such a big decision,
and first home buy is probably even more so because
it's the first time they step into the market, so
it's a lot. You get a lot of enjoyment out
of working with first time was that can be tough
to work with because they don't necessarily know as much
as others, but you can get a lot of enjoyment
because it's such a big deal.
Speaker 1 (11:52):
Yes, yeah, when they cook and getting them across the lane. Okay,
we'll taking sure a break. One or two things I
really want to talk to you about you've covered recently
and I think it would be really interesting for our listeners.
And one of obviously the big jump in moving in
investment property and moving to investment property and moving beyond
a single investment property, which is what the majority of
(12:12):
investors in Australia have, and also how to manage that property.
We'll be back in a moment. Hello, Welcome back to
the Australians Money Puzzle podcast. James Kirby. Here, I'm talking
to Jared McCabe of the Wakelan Group. Jared is a
(12:36):
buyer's advocate. He's been on the show fairly regularly over
the years, always interesting on the street, taking the pulse
basically of the market and really having a nuts and
bolts understanding of the dynamics of the market we're in.
I wanted to ask you about managing property. First of all,
it's interesting. So sometimes I think people in their innocence
(12:59):
think that if you have a property manager, what that
means is that you pay someone and they're managed the property.
In my experience, stock its property managers all the time.
If they're manager property, I mean it's I would say,
obviously as hard as actually being in there and doing
it without a manager. But it's by no means set
and forget, is it.
Speaker 2 (13:20):
No, definitely not. And part of the role of owning
a property is then your role then is to manage
the property manager to make sure that you're getting a
level of service that you that you expect.
Speaker 1 (13:30):
Yeah, what mistakes do people make in that regard?
Speaker 2 (13:33):
Well, one of the bit there's a number, one of
the big ones is they something It can go both ways,
but people chase too much rent at different stages and
push too high, asking for significantly increased rental figures. And
you can have a property that can sit there vacant
for an extended period of time, and that extra twenty
to fifty dollars a week that you were chasing and
hoping to achieve when the property sits there vacant for
(13:55):
a number of weeks means that you've fullgone that anyway,
So that's a big one. I think people put too
much focus on property management fees at different stages too,
because if you've got the right property manager and they're
extremely experienced and they're looking after one of probably one
of your biggest investment assets going around, you want to
make sure that you're paying a reasonable rate to get
the best person there. And when you actually start running
(14:16):
the numbers on going from a seven percent to a
six and a half percent or six and a half
down to six whatever it might be, and it's over
the lifetime or the rate, it's actually not a significant amount.
And if you've got the right person looking after the property,
I think that's far more important to make sure that
your asset's being looked after and they're keeping in close
contact and working well with your tenant or your renter.
(14:38):
I think that makes a really big difference.
Speaker 1 (14:41):
Tell me, is that number seven percent or so? Does
it change in different states.
Speaker 2 (14:47):
I'm not sure. I mean it changes very dramatically in cities.
I mean property management fees can go from anywhere between
probably five percent up to there's i know some charge
over eight percent in terms of management fe So.
Speaker 1 (15:00):
It sounds like you're saying the ease is not necessarily
worse than the five It's a question of quality of.
Speaker 2 (15:09):
I think the bigger focus needs to be on the
manager and yet look once. And it's a bit like
when you buy the investment property in the first place, James,
the biggest thing needs to be on the asset selection
first and foremost. Then worry about the price you're going
to pay for it. So find the right property and
then worry about the price, find the right property manager,
then worry about the fee that you're going to pay them.
Speaker 1 (15:27):
You're looking for property managers, the people or the brand,
because it seems to.
Speaker 2 (15:31):
Me people always people.
Speaker 1 (15:32):
Yeah, the individual press is so important out there, but
my experience sometimes you sign up someone the griefs, but
they leave, and that's.
Speaker 2 (15:39):
A big issue with property management as an industry. It
can be a little bit that you don't there's not
a lot of property managers that are career property managers.
It can be a little transient, it can be a
career path to get into sales as well, so people
use they're not necessarily having it focused on this is
the career that I want to develop. And it's been
a really tough period over the particularly during the pandemic period.
(16:01):
Property managers had to deal with a huge amount of
issues and people were in really tight positions.
Speaker 1 (16:05):
Yes, it must have been so difficulty.
Speaker 2 (16:08):
Very difficult, and and a lot of times they weren't
able to get out and look at properties, and there
were people in financial difficulties, both landlords and tenants at
that point in time. So it's been a really tough
industry to be in. And I know from speaking to
owners of agencies and things, they've found it really difficult
to get good quality people to take up employment in
that industry as well, and there was a lot that
(16:28):
left the industry during that period because it was such
a tough time. So it's really so when you find
someone that's good at doing a good job, it's worth
paying them.
Speaker 1 (16:37):
Yeah, I believe that it's like financial advisors and the
whole population the shrinking for different reasons. But I didn't
know that about property managers that it doesn't surprise me
because though it's a tough the reason the sandwich really
aren't you as a property manager. And as you see,
many people do it on their way to doing something else.
And the difficulty is that you expect a lot, but
(16:59):
really you can of it. You really have to be
realistic in what you could reasonably expect from someone on
the deal there on. For the value of the property.
I imagine you'd like to think, as always general, that
the higher the value of the property, the better they are.
But I don't know if that's I don't know if
that's true.
Speaker 2 (17:15):
Not always the white case. Now it's definitely now, you're right,
definitely not.
Speaker 1 (17:18):
Just one last thing on the segment, the move to
owning a second investment property. Many people, the vast majority,
I can't remember what the status, but it's something like
eighty percent of those who own investment property just hold one.
Holding more than one puts you in a totally different frame,
and holding several demands a completely different approach. Just tell
(17:43):
us about that, and about that big jump. I mean,
I don't want you to scare people, obviously, but tell
us the reality of making that jump.
Speaker 2 (17:51):
Or even just what we were talking about in terms
of property management, you've potentially got because I mean we
talk about yeah, and not necessarily. I mean a lot
of people would like to use the same property manager
to manage both of their properties. But if you've gone
down a diversification path, and whether or not you own
another property on the other side of the city or
whether it's interstate, you've potentially then got as just as
a starting point, you've got two property managers to manage,
(18:12):
like we said, So there's that as a starting point.
But there's a lot of benefits too. Obviously, if you've selected, well,
you've got two properties building equity for you. It gives
you a degree of flexibility, and if there is some
financial uncertainty at some point in time, you can potentially
look to sell one to look after the other. It
can create extra equity by selling one to pay off
(18:33):
the other, and then you've got the income stream being
generated from that property to help with retirement. So there's
a lot of benefits. But yeah, there's you doubling or
tripling depending upon how much how many properties you own.
Speaker 1 (18:46):
The risk is there, Yeah, the economies of scale aren't
really obvious on this one, because as you say, even
if you they're both managers, two different managers, probably on
different time cycles. Everything's the bills come in at different times.
Is there a sort of oft the shelf system that
people can use or spreadsheets or programs that are popular.
Speaker 2 (19:06):
No, there's always standards and a lot of the property
managers have got their own software programs that they'll use
in terms of communication with investors, and so there's some
great apps and things that are coming through now too
to work with, so it keeps you up to date.
You can see when the rents come in those sorts
of things, so that works works really well, and it
gives you keeps it interactive and that sort of thing.
But that's that also goes back to that point we
(19:28):
said before about having the right property manager who's got
the right systems in place to support you as the
as the owner, to make sure that you're able to
keep everything up to date and up to standard to
maintain that property.
Speaker 1 (19:41):
Are the apps from the from the managers or are
there apps that the investor can have.
Speaker 2 (19:46):
No, it's usually the property managers that they've got and
different programs and software programs that they use, so you
usually have to work in with them. On that. I'm
sure there's there's different programs.
Speaker 1 (19:56):
There's sounds like there's an opportunity out there. I'm sure
there are. Yes, I'm sure they'd come through or tell us.
How could you not have mentioned a B or C.
But let's hear from you folks if you have something,
let's add to the conversation. You know, the email the
Money Puzzle at the Australian dot com dot you. Okay,
we have some really good questions this week. I want
to get to their on property. We'll be back in
a moment. Hello, Welcome back to The Australian's Money Puzzle podcast,
(20:33):
James Kirby with Jared McCabe. Okay, now it's a very
interesting correspondence. This is John in a recent article in
The Australian. You that's me if you know what I mean.
Quote from a report from accountants about the tax office
being incredulous with valuation valuations being the same for three years.
These must be city based accountants with no knowledge of
(20:56):
country towns. My brothers self managed super fund had a
commerce building in a town where there were no sales
commercial buildings for five years. Valuation started at one point
eight million and it's steadily reduced in value as and
when sales of other buildings happened. A better building sold
nearby for one million. When my brother's building was sold,
(21:18):
it only chieve nine hundred koch. The valuation had been
the same for three years. There is another story of
declining country towns and declining values, and it would be
interesting to see how the ATO handles is. Gee, that's
really interesting. I was being facetious in the peace, and
definitely I was pointing out that the ATO, in one
(21:38):
of their sort of endless crackdowns in this area on
property investment, had warned about people putting the same valuation
each year. And I will concede, living in the middle
of a large city, that's not something I would be
familiar with, that the valuations don't change. But obviously it's
different stokes, different folks.
Speaker 2 (21:56):
And I can speak from a loftime ago, James. My
career prior to getting into the buying service was as
a value That's what I used to do, and I
used to work in regional Victoria. So I know exactly
what John's talking about in terms of properties not moving
far and certainly in a lot of regional towns, not
just from a commercial sense, but from a residential sense too,
you can go through extended periods of time where there's
(22:18):
very limited sales evidence to be able to rely upon it.
And although there's been good market movement in a lot
of regional areas sort of pandemic and immediately post pandemic,
there's been a lot of reversions over the probably more
recent times too, where have left those regional areas or
those growth patterns haven't been sustainable because there hasn't been
the influx of population into those areas. So these absolutely
(22:41):
spot on in terms of they can very easily hold
it go backwards. In some regional locations, they can jump
significantly up too, though at different stages.
Speaker 1 (22:50):
Sounds like the commercial property in the regional and locations
is a different story than the residential property.
Speaker 2 (22:58):
Very much so. I mean it's the yields and things
on commercial property in regional areas are very different to
what they are in metropolitan areas as well.
Speaker 1 (23:05):
Right, I see, Are they higher?
Speaker 2 (23:08):
Yeah? Because they're a riskier asset, So there's typically it's
typically your yield is typically higher, yeah, of.
Speaker 1 (23:13):
Course because because your your spectrum of potential tenants.
Speaker 2 (23:17):
Correct commercial property. Without getting into the nitty gritty. But
commercial property is a lot in a lot of instances
heavily reliant on the lease that's in place, whereas residential property,
because the turnover is a lot greater, the least plays
a far less important role in the value of the property.
Speaker 1 (23:33):
Right, Very interesting, Very interesting? Okay, just a quick one.
No value on valuations and valuers and all that. Are
they still crucial in the piece? And is that business
As a leman, I would have told you know, a
lot of the work they have valuablely used to do
can be done quite quickly with AI at this stage
or whatever. Is that the key.
Speaker 2 (23:52):
Is becoming a bit like that? But I mean we
talk about valuing properties in our business, and valuing properties
are parts ofcience, and AI can do the science. I
don't think AI can do the art. And I think
there's a lot of human nature that needs to add
the art side of things to be able to interpret
things in different ways. So I still think that there's
absolutely a place for value. Is they need to be there.
(24:14):
It's a bit unfortunately. It can be a little bit
like property management too. It can be a thankless task.
Speaker 1 (24:19):
Yes, And I noticed that the range that it's still
the case that people will put up prices on properties
and you will just look at it and you'll go,
that is just so far off. There's no way that
estimate is right. How does that still happen.
Speaker 2 (24:33):
It's a very good question, and it happens. It does
happen a lot that there's no way that the property
is going to sell within that range. More often than
not it's on a conservative side, and more often than
not it's when the property is going to auction rather
than private sale. But it happens in reverse too. There's
properties that have been pitched, particularly on expressions of interest
or private sale, that are pitched far too high and
(24:54):
properties sit there for months and months.
Speaker 1 (24:56):
The overest may well be where do you have expressions
of interest and properties that are seen to be in
some way special, and the underestimates on routine properties at auction.
Speaker 2 (25:08):
It's the method of style, so that the auction process
you're trying to build and garner interest to create competition,
whereas the private style typically the price is more of
a target price, and so you work you're starting from
that and potentially having to work backwards.
Speaker 1 (25:22):
That's really interesting. That's really interesting, okay, Paul. Final question,
A prominent economist is saying that lower deposits paid under
the home guarantee scheme would necessitate higher interest payments over
the life of the loan. Paul asks, if the taxpayer
is paying the other fifteen percent of the deposit, why
would the loan recipient be paying more? Perhaps I've misread
(25:45):
this article, Perhaps you have, Paul, and none of this
is advice information only, But you know those government guarantee
schemes they don't hand over, so as you know, the
new home loan guarantee scheme, which is now going to
be universal, basically that is it. There's no limited number
of places anyone can use the home loan guarantee scheme
buying a first home, which is very interesting dynamic in
(26:07):
the market. Now. The terms of that is that you
can have a five percent deposit and the government will
cover the twenty percent deposit by guaranteeing the fifteen percent
you don't have. They don't hand the bank the fifteen percent,
if I've got this right, Jarred. They're just saying that
should everything go awry in the future, they would guarantee
(26:29):
the bank that if it was necessary, they would stump
up that money if it was necessary, and ninety nine
times out of one hundred, it won't be necessary. So
in fact, what the flip side of this home guarantee
scheme is that we're going to have all these first
home buyers and they're actually on ninety five percent mortgages,
and that is why they have higher dollar payments. Have
(26:49):
I got that?
Speaker 2 (26:50):
Yes, that's my understanding too. That's my understanding is that
instead of having a twenty percent deposit so you don't
have to pieland as mortgage insurance, you can have five
percent and the government will cover the lender's mortgage insurance
for that extra fifteen percent. But you've still got to
come up with that yourself. The banks, the government's not
giving you the extra fifteen percent.
Speaker 1 (27:09):
Yeah, So in fact, ninety five percent of the value
of the house on the day you buy it is
you have only put down a five percent deposit, so
your mortgage covers ninety five percent, which means it's bigger,
much bigger than it might have been and will take
a lot longer to pay off. Maths would suggest have
you seen that there's a theory abroad obviously that this first,
this big scheme now signature scheme from the new government
(27:34):
will create intense competition at that level of the market
that's inside the scheme. And then if you're just schooll
tiny bit higher than where everybody is chasing, that that
scheme is better value. What do you think of that period.
Speaker 2 (27:47):
Well, I mean the scheme's been in place for a while,
it has expanded further so rather than I think there
was a fifty thousand that it was limited.
Speaker 1 (27:55):
To and now that's right places.
Speaker 2 (27:56):
Yeah, and then obviously the I think the price limits
have bad going to be increased, and this all starts
as off first of January next year, is my understanding
twenty twenty six is from what I can remember. So look,
I think it will have a bit of an impact.
I don't think it's going to have as much of
an impact as what say, some of the previous ones
have had in that regard where there was a perhaps
a limit. I know at one stage that the limit
(28:18):
was six hundred thousand dollars and it was a hard limit,
and as soon as you paid six hundred and one
thousand dollars you were no longer entitled to any benefits.
And so there was I went to a number of
auctions and this was probably ten plus years ago, James,
but a number of auctions where the auction ran up
to six hundred and as soon. It was basically a
race to who could hit six hundred first and as
(28:40):
soon as an investor at the time, because investors were
quite active putting six poht one, but just stopped.
Speaker 1 (28:45):
Dead because the investor knew that they were all.
Speaker 2 (28:49):
That they wouldn't pay more because they were focus so
focused on the free money or whatever. So whether it
was a stamp duty exemption or whether it was a
twenty five thousand dollar cash bonus, whatever it was, at
the time, it well, I can't pay up. And we
had a lot of conversations at that point in time,
particularly with first home buyers in that because what we
were seeing was properties that were worth in the early
five hundreds were being run up to six hundred, and
(29:11):
properties that were worth six fifty to six eighty you
could pick up in the early six hundreds because there
wasn't the same level of competition, So you were better
off for going that little bit of extra free money,
so to speak, and buying a better property at a
cheaper price than you were paying above the odds for
this lesser quality.
Speaker 1 (29:29):
But of course the person had to be to basically
give up forego that the grant. Yeah, that was obviously
going to happen again.
Speaker 2 (29:38):
Now this is hard to get people's head around that,
but once they could, people could understand that it made sense.
Speaker 1 (29:44):
Yeah, very interesting. So that's interesting folks that aspect that
if you were aware of these schemes, particularly the first
time guarantee scheme and the range that it has and
basically that first time buyer market. Take a look at
the tables because as Jared alulded to, it's laddered right,
so every state no cap on the number of places.
It's now a universal scheme, which means anyone who wants
to can put down five percent and that would allow
(30:07):
them to buy their first home. But there are limits
dollar limits, and they link their links with the values
in the states, so each state is different. Quite easy
to find out and have a look at, but once
you do, you'll get an idea of what the cutoff
point is for those type of buyers. And as you say,
if nothing else, Jared, the value is probably better just
above that limit in the state each time.
Speaker 2 (30:28):
It can be. But obviously for some people too though
that it's in order to get up to that limit.
In the first instance, they needed that money, whereas if
they don't have that money then they might need to
be a lower right and so that you've got to
take all of that into consideration before making those decisions.
Speaker 1 (30:42):
That's right. Well, that's called getting to know the market,
and the more you know, the better you will fare,
I imagine terrific. Hey, thanks Jared, love you to have
you on the show again.
Speaker 2 (30:50):
Great to be Thanks very much, Jones.
Speaker 1 (30:52):
That was Jared McCabe of the Weakland Property Advisory Group
buyer's advocate and always good on that issue of needless
to say, buying home. Some of the things I think
we cover there we haven't covered before. Very elementary, very useful.
I hope to you keep the emails rolling the money
puzzle at the Australian dot com dot au. Talk to
you soon.
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirkby. Welcome aboard. I hope you enjoyed some of
the recent shows and recent guests we've had. You know,
every now and again someone comes on the show with
what we might call a blinding insight. And I actually
thought Tonyo Doherty in the last show and his point
(00:31):
that when you are selling a property or selling your house,
the secret is not that you're selling your house. The
secret is that someone is buying a home and that
is so so I think that's terrific insight into the
dynamics of it all and really told us something that
would be very useful in the future. In today's show,
(00:54):
I want to develop some of those fundamental issues aren't
and properties and flip it over actually and we'll have
a look at buying this time and buying a property,
buying investment properly. And the ideal guest for such an
exercise is someone who's been on the show before. Jared
(01:16):
McCabe of the Weightling Group. Hi, Jared, how are you on?
Speaker 2 (01:20):
Very well? Jimes, thanks for having me on again.
Speaker 1 (01:21):
Oh great to have you on. Haven't heard from you
for a while. People will be very keen to catch
up with where you're coming from on the market especially
it's interesting, you know, insights, insights of commentary, hard to find,
to be honest, hard to find in any field, particularly
hard to find a property. And I thought, as I say,
Tony had already from from McGrath's up in Brisbane, who
(01:45):
was very good on that issue of how you sell.
Now your expertise as a buyer's advocate is in how
you buy. And one thing I wanted to talk to
you about straight away is this issue about when you're
buying somewhere and everyone's gone through this, and it doesn't
matter if you the listener, are buying a first home,
(02:05):
a first apartment, if you're an investor and you're buying
your third property. Same as she comes up every time
you have to make compromises, the perfect property is not.
There some things you can compromise on and maybe some
things you can't. What can you compromise on, Jared.
Speaker 2 (02:22):
There's a lot of things that you can compromise on.
There's not necessarily a lot of things that you should
compromise on. So I think the first question though, is
that you really need to determine what the purpose of
the purchase is, so and have a very clear understanding
as to what your objectives are and what you're looking
to gain out of the acquisition. So are you looking
to buy a home or are you looking to buy
(02:43):
an investment or are you looking to buy a lifestyle
property as a holiday destination, something on those lines, So
what's the reason for the purchase. And once you've got
an understanding as to what you're looking to achieve out
of that, you can then start to look at well,
perhaps I can compromise in certain areas, but there are
other areas where I really should. So if you're looking
to focus on capital growth because it's more of an investment,
(03:04):
or you're looking at more of a rental return, well,
then there's going to be aspects of a property that
you don't want to compromise on. And it's usually the
fundamentals around the things that you can't change about that property,
so that you can make improvements, and you can alter
things that perhaps aren't quite right, and that might be
as simple as paint, carpet, those sorts of things. But
things that you can't change about a property are the suburb,
(03:25):
the street that you're on the style of property, perhaps
that you've purchased, it's orientation and outlook that it might have,
or the adjoining uses that might be surrounding the property.
So those are the sorts of things that you probably
don't want to compromise on. But if you're looking at
it from a home point of view, then there might
be other reasons of why a certain property might be desirable,
and it may be particularly around Melbourne, there's a lot
(03:47):
of school zones that people are looking to try and
buy into.
Speaker 1 (03:50):
To get inside this catchment, yes, to.
Speaker 2 (03:52):
Get able to get children into that school. So in
order to get into that zone, you may need to
that's the priority, that's the objective of buy this property.
So there may be compromises that you might need to
make in terms of size of property or style of property,
or perhaps you need to be on a main road
in order to get in, which in a capital growth
investment focus you probably wouldn't do that. So understanding the objective,
(04:14):
I think is really important before you start worrying about
where you'll compromise.
Speaker 1 (04:18):
So the compromises might be slightly different for the home
buyer and the investment residential property investor. So that's a
good example. The home buyer might make a compromise they
would never think of, never want to make. But if
there's certain aspects like access to a school inside a
catchment zone which is going to see thousands and thousands
(04:39):
of year a year, then hey, they're winning, all right.
That's a good example of the home buyer's compromise allowable compromise.
What about investors and the compromise is that they might
be able to make that aren't crucial though we might
think they are.
Speaker 2 (04:55):
So you can look at things like moving and it's
a common term that we see around particularly and media
is around looking at bridesmaid suburbs where perhaps you might
be well, you can go to basically the suburb that
might be the next one out that might still have
a lot of attributes that the object or the suburb
that you were looking at still has, But by going
to the next suburb out you can still achieve all
(05:17):
of those objectives. There's still demands to be in that location.
Perhaps the land values are not quite as strong, so
if you and there's plenty of examples around that you
can use to do that. But by taking that step
for one suburb further out, the price has come down
a little bit, but you can still afford to get
a good quality house or a good quality apartment or
unit whatever you're looking to purchase in a nice, quiet street,
(05:38):
but that you make sure that it's still close to
public transport because the transport line still heads out through
that same suburb. It's still got good access to public
to a local village, it's still got good access to schools,
that sort of thing. So there can be ways in
means you can take that step out and still achieve
your objectives, but by compromising perhaps the suburb of not
(05:59):
being exactly where you thought you might need to be.
Speaker 1 (06:02):
Right, Yes, okay, that's really interesting. So the different compromises
that are for the home buyer and for the investor,
And notice you talk about the compromises are very much
around property, physical issues, around location, etc. What about on
financing or on other issues like that? Are there also
(06:24):
compromises that a person could make.
Speaker 2 (06:26):
You can look at whether or not. And again this
is probably more of a financial advisor type question than
a biased advocate properly advisor question, but it's probably you
can look at things like whether you pay principle and
interest or whether you only pay interest and there'll be
different philosophies and thoughts around that, but that might save
you some money. You can look at variable versus fixed
interest rates and there's ways and means to focus on that.
(06:47):
And again, depending upon what the expectation is around interest
rate movements, that may dictate your decision around that side
of things as well. So there's ways and means that
you can compromise or make alterations how much you want
to put down in terms of your deposit. You may
have gradic capacity, you might not.
Speaker 1 (07:02):
Yes, right, okay. And we mentioned in the last show
about you Know buying that in fact it was all
about the focus was the mistakes perhaps that people make
when they have their own property and they're selling it
and they're thinking about being a seller, and they're thinking
all with this frame of mind about selling to someone
when in fact, you know, our previous guest suggested that
(07:24):
the sort of breakthrough is to look at it the
other way around. The buyer wants a home. You're trying
to win the argument with someone that this could be
their home. So that was the sort of real estate
agent seller's insight. Now from your point of view, you're
the buyer's advocate. So what tell me when people are
(07:46):
someone's standing beside you, you meet them first time, they're
saying we want to buy extra y. I presume there's
common mistakes you come upon at that point. Is the
anything you could tell us on that front?
Speaker 2 (08:02):
There can be many mistakes around around those sorts at
that point in time, and it really Again I might
sound like a bit of a broken record here, James,
but I think the clear the conversation that we always
have at the start is trying to understand the objective
of the purchase, and everyone has different ones, and so
for a first time BUYO, as an instance, it might
be I need to get into the market, but this
is the first stage of my property journey, and I
(08:22):
want to take steps up the ladder. So they may
well have a mindset of, well, I just want to
get something. I want to get in. Whereas if you're
wanting to take steps up the ladder, there needs to
be other targets to hit in order to gain capital growth,
to build equity so that you can leverage off that
acquisition and take those steps up the ladder. So having
those sorts of conversations.
Speaker 1 (08:41):
So if I said to you, I just want to
get in. You don't like that approach. Obviously it's too simple,
is it.
Speaker 2 (08:46):
Yeah, it's too simple to just say I just want
to get into the market. I just need to get in.
It needs to be a lot more thought to it
than that around what you're looking to achieve out of that.
So and that conversation and that thought process is quite
often a conversation that first home buyers particularly have if
they've missed out on a number of properties. I'm sick
of missing out. I'm starting to get really down. I
(09:08):
just need to get into the market. And that's when
the risk of compromise probably becomes greatest, because it's not
a case of where should I compromise it. I just
need to get in, So I'll compromise anywhere in order
to just get into the market. And that's when people
start making mistakes.
Speaker 1 (09:22):
That must be so common just now with such a
tape market. What sort of mistakes do they make?
Speaker 2 (09:26):
Then?
Speaker 1 (09:27):
So they say, Okay, I've been to three options, we
got wiped out each time, and I'm tired, and I'm
fed up a bit, and I want to just I
just want to get something that sort of ticks a
couple of basic boxes and then what do you say
to that person.
Speaker 2 (09:41):
Some of the mistakes that they make are usually around
trying to focus on something that's lower priced in order
to make sure that they give. But usually that property
is lower priced for a reason, and you need to
be aware of what's made it compromised and why the
price point is a reduced level, so that you don't
make you don't make that stuck.
Speaker 1 (10:00):
So people come to you and say, we want you
to help us buying number twenty two rare by Cuttings.
Does it happen that you see it? No, you shouldn't
be buying that. Yep, yeah you do.
Speaker 2 (10:10):
Yeah, I've said, I've told many clients not to buy
certain properties.
Speaker 1 (10:14):
Absolutely right, And then they go and then the whole
conversation begins a pressure I expect.
Speaker 2 (10:20):
Yeah, it does, I mean, and it's important to be
able to say that. I mean, it's important to be
able to look at client in the eye and say, no,
look this is not the right property, and it's for
these and these reasons. Now it's not my decision at
the end of the day, but a client comes to
me and says, look, this is what I want to buy,
this is why I want to buy it. My role
initially is to point out the positives and the negatives
around the property so that if they do decide to
(10:42):
proceed with the purchase, they're doing it full informed. They've
got all of the information so that they can then say, Okay, well,
I am compromising here, but I understand it. I'm compromising here,
and I'm understanding why I'm compromising here in order to
achieve that original objective that we were discussing.
Speaker 1 (10:57):
Does it happen more often with the horn by us
a pose to the investor.
Speaker 2 (11:02):
Well, usually with the investor clients that we work with,
they're relying on us to determine the property that they
should purchase. So more so with the home buyers. They
home buyers obviously know what they do and don't like
and what they want to purchase and why. So yeah,
it's more a case of they can sometimes have rose
colored glasses on with certain properties, and once you point
out some of the perhaps flaws that are there, that
(11:24):
it starts to open them up and they realize that
perhaps it isn't the perfect property and then they may
need to look at alternatives.
Speaker 1 (11:30):
The home buyer is more intense, I imagine on each
property because they have to imagine.
Speaker 2 (11:34):
Far more emotional and because it's such a big decision,
and first home buy is probably even more so because
it's the first time they step into the market, so
it's a lot. You get a lot of enjoyment out
of working with first time was that can be tough
to work with because they don't necessarily know as much
as others, but you can get a lot of enjoyment
because it's such a big deal.
Speaker 1 (11:52):
Yes, yeah, when they cook and getting them across the lane. Okay,
we'll taking sure a break. One or two things I
really want to talk to you about you've covered recently
and I think it would be really interesting for our listeners.
And one of obviously the big jump in moving in
investment property and moving to investment property and moving beyond
a single investment property, which is what the majority of
(12:12):
investors in Australia have, and also how to manage that property.
We'll be back in a moment. Hello, Welcome back to
the Australians Money Puzzle podcast. James Kirby. Here, I'm talking
to Jared McCabe of the Wakelan Group. Jared is a
(12:36):
buyer's advocate. He's been on the show fairly regularly over
the years, always interesting on the street, taking the pulse
basically of the market and really having a nuts and
bolts understanding of the dynamics of the market we're in.
I wanted to ask you about managing property. First of all,
it's interesting. So sometimes I think people in their innocence
(12:59):
think that if you have a property manager, what that
means is that you pay someone and they're managed the property.
In my experience, stock its property managers all the time.
If they're manager property, I mean it's I would say,
obviously as hard as actually being in there and doing
it without a manager. But it's by no means set
and forget, is it.
Speaker 2 (13:20):
No, definitely not. And part of the role of owning
a property is then your role then is to manage
the property manager to make sure that you're getting a
level of service that you that you expect.
Speaker 1 (13:30):
Yeah, what mistakes do people make in that regard?
Speaker 2 (13:33):
Well, one of the bit there's a number, one of
the big ones is they something It can go both ways,
but people chase too much rent at different stages and
push too high, asking for significantly increased rental figures. And
you can have a property that can sit there vacant
for an extended period of time, and that extra twenty
to fifty dollars a week that you were chasing and
hoping to achieve when the property sits there vacant for
(13:55):
a number of weeks means that you've fullgone that anyway,
So that's a big one. I think people put too
much focus on property management fees at different stages too,
because if you've got the right property manager and they're
extremely experienced and they're looking after one of probably one
of your biggest investment assets going around, you want to
make sure that you're paying a reasonable rate to get
the best person there. And when you actually start running
(14:16):
the numbers on going from a seven percent to a
six and a half percent or six and a half
down to six whatever it might be, and it's over
the lifetime or the rate, it's actually not a significant amount.
And if you've got the right person looking after the property,
I think that's far more important to make sure that
your asset's being looked after and they're keeping in close
contact and working well with your tenant or your renter.
(14:38):
I think that makes a really big difference.
Speaker 1 (14:41):
Tell me, is that number seven percent or so? Does
it change in different states.
Speaker 2 (14:47):
I'm not sure. I mean it changes very dramatically in cities.
I mean property management fees can go from anywhere between
probably five percent up to there's i know some charge
over eight percent in terms of management fe So.
Speaker 1 (15:00):
It sounds like you're saying the ease is not necessarily
worse than the five It's a question of quality of.
Speaker 2 (15:09):
I think the bigger focus needs to be on the
manager and yet look once. And it's a bit like
when you buy the investment property in the first place, James,
the biggest thing needs to be on the asset selection
first and foremost. Then worry about the price you're going
to pay for it. So find the right property and
then worry about the price, find the right property manager,
then worry about the fee that you're going to pay them.
Speaker 1 (15:27):
You're looking for property managers, the people or the brand,
because it seems to.
Speaker 2 (15:31):
Me people always people.
Speaker 1 (15:32):
Yeah, the individual press is so important out there, but
my experience sometimes you sign up someone the griefs, but
they leave, and that's.
Speaker 2 (15:39):
A big issue with property management as an industry. It
can be a little bit that you don't there's not
a lot of property managers that are career property managers.
It can be a little transient, it can be a
career path to get into sales as well, so people
use they're not necessarily having it focused on this is
the career that I want to develop. And it's been
a really tough period over the particularly during the pandemic period.
(16:01):
Property managers had to deal with a huge amount of
issues and people were in really tight positions.
Speaker 1 (16:05):
Yes, it must have been so difficulty.
Speaker 2 (16:08):
Very difficult, and and a lot of times they weren't
able to get out and look at properties, and there
were people in financial difficulties, both landlords and tenants at
that point in time. So it's been a really tough
industry to be in. And I know from speaking to
owners of agencies and things, they've found it really difficult
to get good quality people to take up employment in
that industry as well, and there was a lot that
(16:28):
left the industry during that period because it was such
a tough time. So it's really so when you find
someone that's good at doing a good job, it's worth
paying them.
Speaker 1 (16:37):
Yeah, I believe that it's like financial advisors and the
whole population the shrinking for different reasons. But I didn't
know that about property managers that it doesn't surprise me
because though it's a tough the reason the sandwich really
aren't you as a property manager. And as you see,
many people do it on their way to doing something else.
And the difficulty is that you expect a lot, but
(16:59):
really you can of it. You really have to be
realistic in what you could reasonably expect from someone on
the deal there on. For the value of the property.
I imagine you'd like to think, as always general, that
the higher the value of the property, the better they are.
But I don't know if that's I don't know if
that's true.
Speaker 2 (17:15):
Not always the white case. Now it's definitely now, you're right,
definitely not.
Speaker 1 (17:18):
Just one last thing on the segment, the move to
owning a second investment property. Many people, the vast majority,
I can't remember what the status, but it's something like
eighty percent of those who own investment property just hold one.
Holding more than one puts you in a totally different frame,
and holding several demands a completely different approach. Just tell
(17:43):
us about that, and about that big jump. I mean,
I don't want you to scare people, obviously, but tell
us the reality of making that jump.
Speaker 2 (17:51):
Or even just what we were talking about in terms
of property management, you've potentially got because I mean we
talk about yeah, and not necessarily. I mean a lot
of people would like to use the same property manager
to manage both of their properties. But if you've gone
down a diversification path, and whether or not you own
another property on the other side of the city or
whether it's interstate, you've potentially then got as just as
a starting point, you've got two property managers to manage,
(18:12):
like we said, So there's that as a starting point.
But there's a lot of benefits too. Obviously, if you've selected, well,
you've got two properties building equity for you. It gives
you a degree of flexibility, and if there is some
financial uncertainty at some point in time, you can potentially
look to sell one to look after the other. It
can create extra equity by selling one to pay off
(18:33):
the other, and then you've got the income stream being
generated from that property to help with retirement. So there's
a lot of benefits. But yeah, there's you doubling or
tripling depending upon how much how many properties you own.
Speaker 1 (18:46):
The risk is there, Yeah, the economies of scale aren't
really obvious on this one, because as you say, even
if you they're both managers, two different managers, probably on
different time cycles. Everything's the bills come in at different times.
Is there a sort of oft the shelf system that
people can use or spreadsheets or programs that are popular.
Speaker 2 (19:06):
No, there's always standards and a lot of the property
managers have got their own software programs that they'll use
in terms of communication with investors, and so there's some
great apps and things that are coming through now too
to work with, so it keeps you up to date.
You can see when the rents come in those sorts
of things, so that works works really well, and it
gives you keeps it interactive and that sort of thing.
But that's that also goes back to that point we
(19:28):
said before about having the right property manager who's got
the right systems in place to support you as the
as the owner, to make sure that you're able to
keep everything up to date and up to standard to
maintain that property.
Speaker 1 (19:41):
Are the apps from the from the managers or are
there apps that the investor can have.
Speaker 2 (19:46):
No, it's usually the property managers that they've got and
different programs and software programs that they use, so you
usually have to work in with them. On that. I'm
sure there's there's different programs.
Speaker 1 (19:56):
There's sounds like there's an opportunity out there. I'm sure
there are. Yes, I'm sure they'd come through or tell us.
How could you not have mentioned a B or C.
But let's hear from you folks if you have something,
let's add to the conversation. You know, the email the
Money Puzzle at the Australian dot com dot you. Okay,
we have some really good questions this week. I want
to get to their on property. We'll be back in
a moment. Hello, Welcome back to The Australian's Money Puzzle podcast,
(20:33):
James Kirby with Jared McCabe. Okay, now it's a very
interesting correspondence. This is John in a recent article in
The Australian. You that's me if you know what I mean.
Quote from a report from accountants about the tax office
being incredulous with valuation valuations being the same for three years.
These must be city based accountants with no knowledge of
(20:56):
country towns. My brothers self managed super fund had a
commerce building in a town where there were no sales
commercial buildings for five years. Valuation started at one point
eight million and it's steadily reduced in value as and
when sales of other buildings happened. A better building sold
nearby for one million. When my brother's building was sold,
(21:18):
it only chieve nine hundred koch. The valuation had been
the same for three years. There is another story of
declining country towns and declining values, and it would be
interesting to see how the ATO handles is. Gee, that's
really interesting. I was being facetious in the peace, and
definitely I was pointing out that the ATO, in one
(21:38):
of their sort of endless crackdowns in this area on
property investment, had warned about people putting the same valuation
each year. And I will concede, living in the middle
of a large city, that's not something I would be
familiar with, that the valuations don't change. But obviously it's
different stokes, different folks.
Speaker 2 (21:56):
And I can speak from a loftime ago, James. My
career prior to getting into the buying service was as
a value That's what I used to do, and I
used to work in regional Victoria. So I know exactly
what John's talking about in terms of properties not moving
far and certainly in a lot of regional towns, not
just from a commercial sense, but from a residential sense too,
you can go through extended periods of time where there's
(22:18):
very limited sales evidence to be able to rely upon it.
And although there's been good market movement in a lot
of regional areas sort of pandemic and immediately post pandemic,
there's been a lot of reversions over the probably more
recent times too, where have left those regional areas or
those growth patterns haven't been sustainable because there hasn't been
the influx of population into those areas. So these absolutely
(22:41):
spot on in terms of they can very easily hold
it go backwards. In some regional locations, they can jump
significantly up too, though at different stages.
Speaker 1 (22:50):
Sounds like the commercial property in the regional and locations
is a different story than the residential property.
Speaker 2 (22:58):
Very much so. I mean it's the yields and things
on commercial property in regional areas are very different to
what they are in metropolitan areas as well.
Speaker 1 (23:05):
Right, I see, Are they higher?
Speaker 2 (23:08):
Yeah? Because they're a riskier asset, So there's typically it's
typically your yield is typically higher, yeah, of.
Speaker 1 (23:13):
Course because because your your spectrum of potential tenants.
Speaker 2 (23:17):
Correct commercial property. Without getting into the nitty gritty. But
commercial property is a lot in a lot of instances
heavily reliant on the lease that's in place, whereas residential property,
because the turnover is a lot greater, the least plays
a far less important role in the value of the property.
Speaker 1 (23:33):
Right, Very interesting, Very interesting? Okay, just a quick one.
No value on valuations and valuers and all that. Are
they still crucial in the piece? And is that business
As a leman, I would have told you know, a
lot of the work they have valuablely used to do
can be done quite quickly with AI at this stage
or whatever. Is that the key.
Speaker 2 (23:52):
Is becoming a bit like that? But I mean we
talk about valuing properties in our business, and valuing properties
are parts ofcience, and AI can do the science. I
don't think AI can do the art. And I think
there's a lot of human nature that needs to add
the art side of things to be able to interpret
things in different ways. So I still think that there's
absolutely a place for value. Is they need to be there.
(24:14):
It's a bit unfortunately. It can be a little bit
like property management too. It can be a thankless task.
Speaker 1 (24:19):
Yes, And I noticed that the range that it's still
the case that people will put up prices on properties
and you will just look at it and you'll go,
that is just so far off. There's no way that
estimate is right. How does that still happen.
Speaker 2 (24:33):
It's a very good question, and it happens. It does
happen a lot that there's no way that the property
is going to sell within that range. More often than
not it's on a conservative side, and more often than
not it's when the property is going to auction rather
than private sale. But it happens in reverse too. There's
properties that have been pitched, particularly on expressions of interest
or private sale, that are pitched far too high and
(24:54):
properties sit there for months and months.
Speaker 1 (24:56):
The overest may well be where do you have expressions
of interest and properties that are seen to be in
some way special, and the underestimates on routine properties at auction.
Speaker 2 (25:08):
It's the method of style, so that the auction process
you're trying to build and garner interest to create competition,
whereas the private style typically the price is more of
a target price, and so you work you're starting from
that and potentially having to work backwards.
Speaker 1 (25:22):
That's really interesting. That's really interesting, okay, Paul. Final question,
A prominent economist is saying that lower deposits paid under
the home guarantee scheme would necessitate higher interest payments over
the life of the loan. Paul asks, if the taxpayer
is paying the other fifteen percent of the deposit, why
would the loan recipient be paying more? Perhaps I've misread
(25:45):
this article, Perhaps you have, Paul, and none of this
is advice information only, But you know those government guarantee
schemes they don't hand over, so as you know, the
new home loan guarantee scheme, which is now going to
be universal, basically that is it. There's no limited number
of places anyone can use the home loan guarantee scheme
buying a first home, which is very interesting dynamic in
(26:07):
the market. Now. The terms of that is that you
can have a five percent deposit and the government will
cover the twenty percent deposit by guaranteeing the fifteen percent
you don't have. They don't hand the bank the fifteen percent,
if I've got this right, Jarred. They're just saying that
should everything go awry in the future, they would guarantee
(26:29):
the bank that if it was necessary, they would stump
up that money if it was necessary, and ninety nine
times out of one hundred, it won't be necessary. So
in fact, what the flip side of this home guarantee
scheme is that we're going to have all these first
home buyers and they're actually on ninety five percent mortgages,
and that is why they have higher dollar payments. Have
(26:49):
I got that?
Speaker 2 (26:50):
Yes, that's my understanding too. That's my understanding is that
instead of having a twenty percent deposit so you don't
have to pieland as mortgage insurance, you can have five
percent and the government will cover the lender's mortgage insurance
for that extra fifteen percent. But you've still got to
come up with that yourself. The banks, the government's not
giving you the extra fifteen percent.
Speaker 1 (27:09):
Yeah, So in fact, ninety five percent of the value
of the house on the day you buy it is
you have only put down a five percent deposit, so
your mortgage covers ninety five percent, which means it's bigger,
much bigger than it might have been and will take
a lot longer to pay off. Maths would suggest have
you seen that there's a theory abroad obviously that this first,
this big scheme now signature scheme from the new government
(27:34):
will create intense competition at that level of the market
that's inside the scheme. And then if you're just schooll
tiny bit higher than where everybody is chasing, that that
scheme is better value. What do you think of that period.
Speaker 2 (27:47):
Well, I mean the scheme's been in place for a while,
it has expanded further so rather than I think there
was a fifty thousand that it was limited.
Speaker 1 (27:55):
To and now that's right places.
Speaker 2 (27:56):
Yeah, and then obviously the I think the price limits
have bad going to be increased, and this all starts
as off first of January next year, is my understanding
twenty twenty six is from what I can remember. So look,
I think it will have a bit of an impact.
I don't think it's going to have as much of
an impact as what say, some of the previous ones
have had in that regard where there was a perhaps
a limit. I know at one stage that the limit
(28:18):
was six hundred thousand dollars and it was a hard limit,
and as soon as you paid six hundred and one
thousand dollars you were no longer entitled to any benefits.
And so there was I went to a number of
auctions and this was probably ten plus years ago, James,
but a number of auctions where the auction ran up
to six hundred and as soon. It was basically a
race to who could hit six hundred first and as
(28:40):
soon as an investor at the time, because investors were
quite active putting six poht one, but just stopped.
Speaker 1 (28:45):
Dead because the investor knew that they were all.
Speaker 2 (28:49):
That they wouldn't pay more because they were focus so
focused on the free money or whatever. So whether it
was a stamp duty exemption or whether it was a
twenty five thousand dollar cash bonus, whatever it was, at
the time, it well, I can't pay up. And we
had a lot of conversations at that point in time,
particularly with first home buyers in that because what we
were seeing was properties that were worth in the early
five hundreds were being run up to six hundred, and
(29:11):
properties that were worth six fifty to six eighty you
could pick up in the early six hundreds because there
wasn't the same level of competition, So you were better
off for going that little bit of extra free money,
so to speak, and buying a better property at a
cheaper price than you were paying above the odds for
this lesser quality.
Speaker 1 (29:29):
But of course the person had to be to basically
give up forego that the grant. Yeah, that was obviously
going to happen again.
Speaker 2 (29:38):
Now this is hard to get people's head around that,
but once they could, people could understand that it made sense.
Speaker 1 (29:44):
Yeah, very interesting. So that's interesting folks that aspect that
if you were aware of these schemes, particularly the first
time guarantee scheme and the range that it has and
basically that first time buyer market. Take a look at
the tables because as Jared alulded to, it's laddered right,
so every state no cap on the number of places.
It's now a universal scheme, which means anyone who wants
to can put down five percent and that would allow
(30:07):
them to buy their first home. But there are limits
dollar limits, and they link their links with the values
in the states, so each state is different. Quite easy
to find out and have a look at, but once
you do, you'll get an idea of what the cutoff
point is for those type of buyers. And as you say,
if nothing else, Jared, the value is probably better just
above that limit in the state each time.
Speaker 2 (30:28):
It can be. But obviously for some people too though
that it's in order to get up to that limit.
In the first instance, they needed that money, whereas if
they don't have that money then they might need to
be a lower right and so that you've got to
take all of that into consideration before making those decisions.
Speaker 1 (30:42):
That's right. Well, that's called getting to know the market,
and the more you know, the better you will fare,
I imagine terrific. Hey, thanks Jared, love you to have
you on the show again.
Speaker 2 (30:50):
Great to be Thanks very much, Jones.
Speaker 1 (30:52):
That was Jared McCabe of the Weakland Property Advisory Group
buyer's advocate and always good on that issue of needless
to say, buying home. Some of the things I think
we cover there we haven't covered before. Very elementary, very useful.
I hope to you keep the emails rolling the money
puzzle at the Australian dot com dot au. Talk to
you soon.
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