March 17, 2025 • 32 mins
One of the most popular features of the Money Puzzle podcast has been listener questions which we read on air: Now we want to hear you asking your questions! We're asking listeners to send in a voice memo from their phone and share it on the show to themoneypuzzle@theaustralian.com.au.
Also in today's show, we cover the problem with quirky properties. Buyer's advocate Cate Bakos warns lovers of converted churches and renovated show factories that standing out from the crowd is not always profitable. Bakos explains what makes a property valuable : It appeals to the widest possible audience.
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In today's show, we cover:
- Irregular properties - quirky can be costly
- Closed tenders - Good or bad?
- Tricky tax arrangements around 'granny flats'
- Why lending rates will keep falling
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 Australians Money Puzzle podcast. I'm
James Kirkby. Welcome aboard everybody. It's that time where you're thinking,
if you're an active property investor, you might be a
little bit disturbed, or perhaps you might be greatly encouraged
by a trend in the property market for closed tenders.
If you don't know what they are, you'll be well
across what they are by the time we're finished this show.
(00:32):
We're also going to talk about curious properties, right the
irregular property, the converted church, the former shoe factory that's
in a very attractive, you think house, but is it
really for everybody? Should you ever go near an irregular
property as an investor. I also have some great questions,
including one on granny flats, which you would think is
(00:53):
the simplest issue, but let me tell you it is
like global trade negotiations, grannie flats absurd complexities around that. Also, folks,
we are planning to introduce audio questions, so when you
send your questions in you know, the email the Money
Puzzle at the Australian dot com dot au, you can
send in a voice note just as easy. You just
(01:14):
do a voice note on your phone and then you
share it with us and it becomes a recorded question
and we can have your voice asking your question on
the show. We've got some already, we need a few more.
Be the first, be an innovator. Let's have them now.
My guest today is a regular guest on the show.
It's Kate because she's a buyer's advocate and also something
(01:36):
of a media personality, active and multimedia. I see her writing,
I see her podcasting, I see her on social media.
Got a lot to say, always an always good value.
How are you, Kate?
Speaker 2 (01:46):
Thanks? That's a lovely interrot things.
Speaker 1 (01:47):
James, tell me you did something recently cut my eye
about close tenders. We had something on the show recently
about expressions of interest, and what is this about expressions
of interest? Once upont a time you only had expressions
of interest on something like factory or a landmark building.
Now you have it for the house around the corner.
So you find these innovations that come in on commercial
(02:07):
property eventually trick of their way through, first of all
at the top of the property market, residential property market,
and then they filter through and they become almost every
day tell us about close tenders what they are and
what you think of them.
Speaker 2 (02:20):
As you said, otherwise known as expressions of interest, set
sale by set date. They've got a host of names.
What it really means is it's a bit of a
blind bidding process and in most cases the agents will
tell you that you get one chance and one chance only,
but there's lots of shades of gray depending on the
agency you're dealing with. In the number of other potential participants,
they often come back to you. So you need to
(02:42):
establish those rules before you put in your bid, because
there's nothing worse than exhausting yourself and putting in your
final bid and then the agent calls back and says,
you've got another opportunity.
Speaker 1 (02:51):
Tell me I see you place. It says close tender
or expressions of interest. How is that different? It's a
private sale effectively with some particular rules. What are the
particular rules that distinguish it? Phone convention pay too.
Speaker 2 (03:06):
Well, it's got no real rules so other than having
a set date. So like an auction where you've got
a set date, it will come to a head provided
that there's participants, But unlike an auction, you don't have
a requirement to be unconditional so these closed tenders can
(03:26):
work really well for the top end of the market,
where a property is really hard to price. You're looking
for that buyer that gets stars in their eyes and
just empties their pockets. It can work really well also though,
for entry level homes that attract first home buyers, because
as we know, first home buyers can get really nervous
about putting forward a bid that's unconditional. They're very nervous
(03:47):
about doing so. They're often told by their broker to
make sure that their offer is subject to finance. So
in a lot of cases, a clever agent might introduce
this kind of option where they can bring it to
a head within a certain period of time, but they
might be fielding some conditional offers. So it works across
the board. However, I don't always like it. In fact,
I really like.
Speaker 1 (04:07):
It, right, So tell me what you don't like about it,
and I can guess, But you tell me. I presume
I think the buyer will be at a disadvantage sometimes.
Speaker 2 (04:16):
Often it's very difficult to ask someone to give their
strongest offer for something when there's no social proof, and
we do rigorous analysis. We present them with our pricing analysis,
but you're still terrified of putting in a bid that's
fifty thousand dollars above someone else, yet you don't want
someone to beat you for one thousand dollars. It's one
of those really difficult situations. So you tend to find
(04:40):
that buyers will be really remorseful when they miss out,
or they'll be worried when they secure it, which is
quite different to an option.
Speaker 1 (04:47):
Because they're worried that they've paid way too much.
Speaker 2 (04:50):
Yeah, did I pay too much? There's no visibility, there's
no social proof.
Speaker 1 (04:53):
So very much, so very much. What you put on
the property that you're terribly confident of sounds to me. Yes.
Speaker 2 (05:00):
The one time when those types of purchases work really
well is when you've done the analysis and you realize
with dread that you've targeted a property that you probably
can't afford. You can see that its value sits a
little bit above your budget. But if you're prepared to
go all in, put it all on the table and
hope for the best, sometimes that pays off. You can
(05:20):
secure it for price that you didn't imagine what was possible,
and you have no regrets.
Speaker 1 (05:26):
It's interesting, I have assumed it was a top end thing.
You cop me with the nation that it apart from
being a top end sort of fashion if you like,
it's also with properties where the sellers know there's a
very high demand and a very particular type of demand. Yes,
so the person is sing, I want this as my
(05:48):
whole as I'm going to really try and get it.
So it's just a way of squeezing more out of
the bitter, isn't it really to me? It is?
Speaker 2 (05:54):
Now there's closed tender advertised campaigns, but there's also private
sale campaign where multiple buyers have expressed an interest or
they've submitted an offer, and then the agents will call
everyone and say we're calling for best and highst which
is effectively the same thing, although it's a decision that
they've made on the run, and they might decide to
wind it all up by five pm tomorrow, for example.
(06:17):
So anyone that's shown some interest or is said to
the agent keep me posted, they've got their twenty four
hour opportunity to get the building inspection done and get
the contract reviewed. And again that's a closed tender process
because they're calling for the best offers. The quirks to
this kind of system, though, is when the agent says,
if you're the first person to put forward your offer,
we'll give you the last rite of refusal, will give
(06:39):
you a phone call and let you know if others
are above you, but we still won't give you a price.
A lot of buyers are very skeptical and very mistrusting because,
as I said earlier, there's no transparency, so you don't
know if you've been played or not. And sometimes people are.
Speaker 1 (06:53):
I bet they are. Tell me the only sense of
portion of properties are now under this expression of insure
close tender arrangement will be ten percent, it be.
Speaker 2 (07:03):
More than that. In terms of how the agents facilitate
competitive bidding, a very large number now turn to the
best and highest method, particularly in a hot market when
they're dealing with FOMO. They're working with buyers who have
that deep fear of missing out because they've already missed
out on one or two. They're the ones that are
more likely to go all in and stretch and the
agents know it.
Speaker 1 (07:24):
Gee, that's very interesting. Again, I'm guessing, but I presume
that's happening mostly in certain pockets of the larger cities
Sydney and Melbourne, and then in the areas that are
running hot, which are unusual, not typically running hot on
a historical basis, I don't know parts of adelette probably.
Speaker 2 (07:43):
Look even the regions, as long as the agent is
confident that everyone knows there's multiple offers. It really is
a multiple offer scenario when an agent turns to that
methodology and you know that you're in more of a
buyer's market. When the agent just wants to workshop your
offer with you exclusive and then bring it together with
an agreeable negotiation between you and the vendor, you can
(08:05):
be pretty sure that there's not a second or third
party when that happens.
Speaker 1 (08:10):
Interesting, isn't it? How things flip? How do you hear
your flips on a die quickly? Yeah, on a dime,
depending on the tempo and the market. It's extraordinary, as
anyone will know who who's ever been in that area
to buy or trying to sell. Okay, also keate, and
I know I'm jumping around here, but another issue I've
seen you discuss and I wanted to give our listeners
(08:31):
a chance to hear you want it is the notion
of the irregular property. Many years ago, I was standing
on the street at an auction with a very well
known Melbourne real estate agent and one of the greats.
And it was a townhouse which was owned by a
fashion designer. And the townhouse was on Little La Troupe
(08:53):
Street in Melbourne, CBD. At that time there was probably
a thousand people living in CBD as opposed to one
hundred thousand or so now, and it was very unusual
to live in the city. It was also unusual to
have a house there. And I remember seeing the house,
absolutely charmed by it because it was, you know, as
you could imagine, it was a designer's house and it
(09:15):
was wonderful. And he said, I'm really worried about this.
It's a very unusual house. And I know you will,
he says, I know it looks attractive, but it doesn't
tick the boxes for many buyers. It's going to be
very hard to sell it, really through me, and it
was instructive about irregular properties. So you come across these
convert to churches, shee factories or whatever. How does it
(09:37):
work in reality? Is it more difficult than you might
expect to sell them?
Speaker 2 (09:42):
Yeah, this sounds a bit crude, but there's either quirky
good or quirky weed. When it's weird, it can be
really problem any times.
Speaker 1 (09:51):
What do you mean, weird painted black inside and out
or what?
Speaker 2 (09:55):
Oh, possibly, as you said, something that's really only suited
to a very tiny few. If it's suited to a
particular type of buyer or demographic or whatever or style,
that might be enough because, as you know, we only
need two people to make an auction viable. When you've
got a property that's really struggling to find, it's one
(10:17):
buyer out there, so it could be crazy in interior design,
or something that really polarizes most people. That can be
a hard property to sell. And renovated churches, converted warehouses.
What you often find there is you've got these lofty spaces,
but you might have insufficient bedrooms to suit a regular family.
So it's sometimes really targeted to that single or that couple.
(10:40):
And that's okay because we've got a lot of singles
and couples with money who want something that's quirky good.
When it's quirky weird, it might be in a compromised
kind of layout or location or compromises a really important
word to think about, because if every buyer looks at
it and says, yeah, it's compromised, you'll struggle to find
your buyer with these odd property, the odd properties, the
(11:02):
unusual ones. The biggest challenge isn't always the layout and
the look and the feel. It's often the invisibles, like
the zoning, or it could be the owners corporation fees,
because these fabulously converted churches cost a lot to maintain.
So those are the things that can put buyers off
and make property a really hard proposition to sell, particularly
(11:24):
when it's industrially zoned or commercially zoned. That zoning really
means that a buyer must be prepared to have a
forty percent deposit on hand and turn to a commercial
loan setup, and they might find that they don't service
that because you're amortizing the line over fifteen years as
opposed to twenty five or thirty, and all of a sudden,
(11:44):
you don't service the debt that irresidential loan product would
happily have your service. So it's the invisibles that can
really pull apart these odd properties.
Speaker 1 (11:52):
Oh that's really interesting. So and you say oder a
regular I'm just thinking in simple terms of the unusual
property that doesn't typical. But you're saying that irregularities on
zoning or title or anything like that. Yeah.
Speaker 2 (12:07):
Yeah, sometimes they're impractical. Sometimes they're just really expensive to run.
I remember looking at a beautiful converted warehouse that was
essentially like a two and a half story interior, but
the cost to run the heating would have been eyewatering.
Speaker 1 (12:24):
Yeah, because there was no doors. Probably that's right.
Speaker 2 (12:27):
And the other challenges we've had is a lot of
people that are targeting these beautiful properties, particularly the expensive ones,
like the idea of having a vehicle, and usually an
electric vehicle. Now in some of those properties, you haven't
got that option to have the right electricals to power
an AV or in the case of a converted church,
sitting at the church car park won't cut it for
(12:49):
someone with an av That's really interesting.
Speaker 1 (12:51):
I suppose the flip side of this is a fairly
prosaic point that the more regular is it necessarily the case,
then the more regular, anonymous, broadly appealing property from a
commercial point of view is better.
Speaker 2 (13:07):
Yes, without a doubt. If we think about a stunning
family home with the perfect floor plan, a converted space
at the back where you've got an open plan leading
out onto an al fresco in a decent yard. They
always attract a lot of buyers.
Speaker 1 (13:23):
Yeah, so supply and demand again.
Speaker 2 (13:25):
Yeah, less of a risk for an agent for sure.
Speaker 1 (13:27):
Very interesting stuff with Take Shore Break. We'll be back
in a moment. Hello, Welcome back to The Australian's Money
Puzzle podcast James Kirby with Kate Bakos, buyer's advocate, regular
(13:49):
on the show, Kat, I and you are not alone?
Can I say on the show where you are examining
the tea leaves in relation to Melbourne property, Probably because
most experienced property people are aware that it may well
be a bargain right. Because how on earth do we
(14:10):
have a situation where a city of five mayion that
it's growing, that is the second biggest city in Australia
has the weakest numbers on almost any measure, the weakest yields,
the weakest price growth, negative price growth at times last year,
and other issues, absence of investors, a lot of negatives
(14:32):
of leap. If you believe in property cycles. Stuart Wims
was on, and he's a real believer of property cycles,
then he believes it will turn. The question is when
two things do you think it's turning already? On what
you've seen I want to say yes.
Speaker 2 (14:47):
If you'd asked me this a month ago, I would
have said, let me hang in there and determine whether
it's a dead cat bounce, whether it's the February factor,
or whether things are really starting to move. I believe
that they are, and it's not just the Februar factor.
We're now well into the next month and we're getting
(15:07):
a lot of investors from interstate and that's always a
bit of a sign. Why are they coming to Melbourne.
Some of them think that there's an opportunity there to
get in before the rest of the herd. They've obviously
subscribed to the mean reversion theory, while others are looking
at our yields and they're saying rental yield isn't too bad.
It really does help with the land tax burden. We
(15:30):
can chat about that at another time. But I think
a lot of them are just seeing value. They're looking
at the value proposition.
Speaker 1 (15:36):
I did say the years were but you're saying admitted
because the prices have been static, if not going backwards,
the years have improved. Is that they have.
Speaker 2 (15:42):
Indeed, Melbourne's rental rates have climbed dramatically. In fact, we've
had one of the biggest overall surgeres since COVID, and
we came off a low base. Melbourne was always traditionally
the city that had pretty awful rental yields, along with Sydney,
and we've come up now to a ridge yield of
three point seven which has us on par with Brisbane
(16:03):
and Adelaide. In fact, I think we've just marginally overtaken
both of them. So that's a big turnaround for Melbourne.
And the reason for it is we've had a lot
of our rental stock decaying, we've had investors getting out,
we've had static price movement or slightly negative, and the
supply and demand equation has kicked into gear with our rents.
(16:25):
We've had a lot more tenants than the landlords and
you can spot an advertised property for rent because the
queue that goes around the corner is generally longer than
that of a house that's for sale. So we've caught up.
Speaker 1 (16:37):
That's been a case for some time.
Speaker 2 (16:39):
It has.
Speaker 1 (16:40):
Yeah, three point seven yield gross, that's right, Yeah, yeah,
for all dwellings, yes, okey.
Speaker 2 (16:48):
So we're starting now to say three percent for houses,
which I haven't seen that for a very long time
in Melbourne.
Speaker 1 (16:54):
Yeah, and then you have mortgage or even investment mortgage
it's dropping as well. Ever so small your mortgages dropping
here is improving an improved outlook? Have we any hard
evidence of it? I know you may be anecdotally seeing this.
Have we any numbers yet on investors coming back to
(17:15):
the great southern state of Victoria.
Speaker 2 (17:18):
Only very early data. The challenge that we have is
we source that data. If it's not directly from the banks,
we get it from the ABS and we have a
three month lag on that. So we've only recently got
the December data that's showing a slide uptick for Victoria
as a state. But still we've been underdone on the
investment front for the last few years because we've not
(17:38):
been the city or the state that's been the most attractive.
Agents are certainly reporting a change, and we've also seen
our rental rates, our rate of growth almost plateau, and
the managing agents are also reporting that they're getting a
few more investment properties added to the rent roles. I
think that rate of rental growth isn't likely a high
(18:00):
cup again, because we do have investors.
Speaker 1 (18:02):
Back interesting and there's a point at which you don't
want rented growths. It's a two edged sword, isn't. You
want real growth, but you don't want it to run
too high because obviously then there's problems inside the system. Okay,
very interesting. I was very keen to see what you
had to say about that. And it's one of the
questions of the year, really because if we get this right,
(18:24):
it investors get it right, obviously it will be it
will definitely be the opportunity of the year. It's the
potential opportunity of the year.
Speaker 2 (18:34):
So yeah, we've got to see another month or two.
As they say, one data point doesn't make a trend line,
but at the cold face, it's certainly quite different, and
we can see it in our auction clearance rates. We've
got some pretty aggressive bidding. We're eclipsing our reserves by
quite a margin in a lot of places, and our
auction attendance was very different, vastly different to twenty twenty four.
Speaker 1 (18:56):
Do the same stay government, of course, which what do
all those new taxes? But let's see if the market
will actually rise above.
Speaker 2 (19:02):
That or November twenty twenty six isn't too far away.
Speaker 1 (19:05):
Is it. Okay, we'll take a break and we'll be
back in a moment with some very interesting questions. Hello
and welcome back to the Australians Money Puzzle Podcast James
Kirby with Kate Bakos. Here we are talking property. We
are talking investment property in particular cases. A iers advocacy
(19:28):
operates out of Yarraville, very trendy, fashionable Yarraville in the
center of Melbourne. I've got some great questions I thought
we have. First of all, let's have a look at
what we had from car loss, which is an old chestnut,
and we won't go too far down this because we
could have a whole show. We could have a whole
series of show one. Carlos's question, but just in any event,
(19:51):
to give it to you and read it out to you.
He asks, in terms of property versus shares debate, what's best?
As with politics, you can find an answer you want
to hear easily enough, which makes it hard for newcomers
to understand. I want to suggest you'd run a case study,
or you can be as objective as possible, helping people
see what it's like to either buy an investment property
(20:15):
or to invest in the share market. Well, Carlos would
love to do that, and we could put say half
a million on the share market today, and we put
half a million on a very good property, advised by
a very good buyer's advocate like Kate, and then we'd
run it for what five years, three years and come
back to you. You'd have a sample of one one
property versus the entire market. I think the issue would
(20:37):
be revealed then that all property is individual, so you
could do fabulously property that wouldn't necessarily tell you how
property did. But markets obviously are generics, so if you
just bought an ETF, you would know how markets did.
What do you think, Kate?
Speaker 2 (20:52):
I completely agree with you, James. I think if we
look at a median value, or we pick a particular market,
we could get a rounded out set of statistics there
as well and prove this point nicely for Carlos and
dare I say it. In recent years there are some
markets like my own, in particular in Melbourne, the shares
(21:12):
would have won every day of the week. But this
debate has been run to death by so many people,
and there are books about it. There are real life
case studies and you can get your hands on that.
The reality is, though people would turn to property investment
because it has one benefit that share investing doesn't have,
and that is how much you can leverage. So it's
(21:33):
important to keep that in mind. Because if someone started
with some seed capital at a young age, and they
were consistent in their approach and they leveraged with it
a reasonably i won't say aggressive, but a very dedicated approach,
they leveraged into property. So let's even say eighty percent lvrs,
which the bank's particularly like. That means you're put in
(21:54):
down twenty percent of your own money and you're borrowing
eighty percent. You will find over time that property will
outperform shares when you're leveraging and you have time. I
think where shares start to come into their own is
when you don't have time. So let's take someone who
is ten years off retirement, five years off retirement, or
even in retirement. They're not wanting to settle up for
(22:16):
a property to start with. They won't want to take
on a large debt and then be burdened with having
to pay that debt because they'll have in most cases
a negatively get asset, and they won't want to deal
with the maintenance, and they probably won't want to deal
with the property taxes either. So it really does depend
on what stage in life you're at, how long you've
got on your working treadmill to run before you can stop,
(22:40):
So there's no debate about it. Shares is much easier
as that class when it comes to maintenance and taxes,
but there's also volatility there as well, and good advisors
will talk to you about diversification. It's for that reason.
Speaker 1 (22:54):
Yes, absolutely, I agree with you to a point. Academically,
you can see over a long period of time, you
go back over one hundred years, so that there isn't
really much in it that is between the average property
outcomes and average market outcomes. The thing is that you
can buy an average market outcome through an exchange traded fund.
You can just buy the ASEX. You can put fifty
grand into an ax ETF, close your eyes and come
(23:16):
back in ten years and you will have the average
return of the market. Now, that is not the case
with property, so every property is individual. So I can
tell you what the average increaseable was this year, last
year or whatever for Australian property, but it really doesn't
tell you much between say some little village in Tazi
and an north shore suburban Sydney, for instance, they don't
really have much in common, so the averages are quite misleading.
(23:38):
Car loss. However, as Kate is saying, there's a couple
of things of property leverage that you can leave rich shares,
of course, but most people most of the time are
wary of doing that. They are comfortable in leveraging against property.
And by the way, you can get negatively geared chairs
just as easy. It's just very quick people to do it.
The other thing, as Kate pointed out, control and work.
(24:02):
You can't do anything about your share portfolio once you've boted.
You can't make HP Gupperdell. But with a property you can.
You can improve that property, you can work on it,
and I think that's the enormous difference really. First of all,
you can choose the individual property, but you've no choice. Unfortunately,
you can't buy the average, but you choose the in
(24:23):
visual property and you can make it better, which is
something you can't do, and I think that's something you're
doing to more work. We recently, in our family, we
recently sold an ETF that we had outside of super
and we just made a point that you're so easy,
and did it on your phone, tick so gone, never
did any work, Never spend two minutes on this and
(24:43):
thinking about selling a property. The documentation alone will take
a day longer than selling an ETF. So these are
points really worth thinking about, Carlos. And that's really I
don't want to simplify and give you an answer and
say once better than the other, except to say they
are very different. Average performances can be achieved on shares,
but all properties individual. Okay, Claire, I have a female
(25:06):
listener here. Thank you, Claire, thanks so much for the podcast.
She says, I have just hit the big five. Zo
and I have hatched a cunning plan to help fund
reduce working hours and my retirement. I am selling our
family home. I'm planning to build a new house with
a granny flat, which I hope to rent out to
generate an ongoing income. This is this is really good
for all the crazy fifty somethings out there hatching such
(25:29):
a plan. Could you please offer some information on the
potential CEEGT implications if the granny flat has rented out
on a commercial basis, and she has other related questions
on that, Okay, you might think this is unbelievable, Claire C.
L A I R E. You would think that this
is all easy enough. The granny flat thing is absurd.
(25:52):
It's absurdly complicated. It shouldn't be. Don't let it stop
you what it is. And I met someone last night
who said that they were at a confidence and it
was a two hour session on the technicals around granni flats.
And then someone has tracked a joke. But I think
it's true that you can get around a lot of
these problems if the granny flats on wheels, because you
can classify it as something different than the property. That's unofficial,
(26:14):
not advice, never is okay. Now for a formal official answer,
Kate and I are referring to James Gerard of Financial
Advisor dot com dot who you know regular guests on
the show, and this is what James says about Granni
flats not the worst plan. Building a house with the
granny flat has a couple of benefits. You create an
income stream that can help fund part of your retirement
(26:35):
income and have a place for a family or a
care if you need it down the track. The disadvantage
is you will have to clear the net rent in
your personal tax return if your income is above a
tax free threshold in retirement. In addition, okay, this is important,
(26:56):
if you ever sell the property, you will need to
pay capital gainst. Will you hear this? And a portion
the floor area and land between principal residents which is
CGT three. Write your palm with CGT three exam from
capital gains tax and the granny flat which is subject
to capital gains tax. Right, So, yeah, they don't make
(27:17):
it easy, That's all I have to say to you, Claire,
But you can do it.
Speaker 2 (27:22):
There is one more little tax implication there, and that's
land tax. So there'll be an a portion amount there
as well. And I'll stay in my line and leave
it at that. Granni flats are a challenge though.
Speaker 1 (27:34):
It shouldn't be that. We're talking about dentsification. We're talking
about and you know, why do they have to make
it so damn difficult?
Speaker 2 (27:40):
Really, if you're in my home state, you've got to
get a permit for grunny flat, and most tits and
territories will have some kind of permitting process. In addition,
if you don't have separate water meters and electricity meters,
you can't pass on usage to your tenant, which means
you're paying for it, so that needs to be incorporated.
The next point that I'll make is if you ever
(28:03):
go to sell the property, you've potentially diminished its appeal
because not every buyer out there wants a backyard with
a granny flat unit. So if you've lessened your number
of potential buyers, you've lessened your competition, you've possibly lessened
your selling price. So that's something to bear in mind
as well.
Speaker 1 (28:20):
I did have a friend who had the marvelous I
would you call it like a not a prefab but
kind of a little model, perfect retirement unit for hard
dad in the back garden. But it was really good,
and I do recall it had wheels, not that they
ever mold it, but I think it has week No advice, right, something?
What exploring? All?
Speaker 2 (28:39):
Right?
Speaker 1 (28:40):
Okay, pat asks at the top. At the average interest
rate's been offered by thirty two banks, it's four point
sixty three percent. Since the RBA lowered its interest rates
in February, the average among the thirty two banks now
is four four percent. Given the fairly dramatic decrease. This
(29:02):
is about term deposits, Folcus. This is what you can
get for your money pass sets. Given the dramatic decrease
in term depositibly since the RBA decision, do you think
it would be predictable with more rate cuts like to
come next year that by the end of next year
financial year that rates on offer on deposits could have
(29:23):
dropped even in the three percent three percent, that is,
you will only get three percent for your money compared
to four and a half now, absolutely entirely feasible. If
the economists say there's two to three more cuts coming
and into two to three more cuts are the same
quantum of the ones we're used to, which are always
these days a quarter percent and ago, then it would
(29:44):
be entirely feasible that you'd have a three in front
of the number, even if you lock it away. I
think that can't have it both ways, even the rate
to coming down, rates coming down, do you think, Kate?
Speaker 2 (29:56):
I think k Stree gives us that answer that the
lenders are very good at adapting quick when there's a
right movement.
Speaker 1 (30:01):
They move like lightning. Yeah, they're so efficient.
Speaker 2 (30:04):
Or they're really slow on the other side.
Speaker 1 (30:07):
Very slow on the other side. It's strange, isn't there
two different departments, one's very good and one's very slow
and sleepy.
Speaker 2 (30:12):
It comes to term deposits, you've got a few options
with other lenders, and obviously risk and reward is something
that every investigates to cape in mind. You can say
some really stunning returns that are being pitched, but you've
got to understand what's happening with your money and what
the risk might be.
Speaker 1 (30:27):
That's been very careful here, folks. We're talking about and Patasfian,
we term deposits in banks right locked away for a
period of time. No games approved deposit taking institutions government
guaranteed do not. And I think Kate tell me about misleading,
but I think what you're alluding to is advertisements that
say they say the word deposit and they say the
(30:49):
word rate, etc. But it's not a term deposit. It's
lending to builders or something, and it's completely different, and
so you get two percent more, but you're taking much
much greater risk. I'm talking here about risk free rates
always distinguished. Is that what you were driving at completely? Yes, Yeah,
it's something people should be very careful of. And I
(31:11):
find it very frustrating that you can perhaps accidentally mislead
people with advertising so easily. All right, we will leave
it there. You can see that as something we could
go into another day. But thank you very much Kate
Bakos for coming on the show. Lovely to have you
on again, been a pleasure.
Speaker 2 (31:28):
Thank you.
Speaker 1 (31:29):
Always interesting to talk to you. Great to get that
feeling from the street, basically from the floor of what's
going on in the property market. We don't want to
ever talk too much from a helicopter point of view.
It's all very interesting about what's going on demographically, et cetera.
But you as listeners, I sure want to know what's
going on out there and buyer's advocates are really good
for that. Oh, Kate, Thanks a lot, Kate, and thanks
(31:50):
lot everybody for listening. The Money Puzzle at the Australian
dot Com dot au is your email for your email
or for your voice recording your voice member, which we
do love to have. Today's show was produced by Leah
Samma Gloom. Talk to you soon. Talk to you later
in the week with our annual rich List edition with
the editor of The Richness John Stensuld, who will be
(32:12):
releasing all the goodies to us ahead of the pack
Hello and welcome to the Australians Money Puzzle podcast. I'm
James Kirkby. Welcome aboard everybody. It's that time where you're thinking,
if you're an active property investor, you might be a
little bit disturbed, or perhaps you might be greatly encouraged
by a trend in the property market for closed tenders.
If you don't know what they are, you'll be well
across what they are by the time we're finished this show.
(00:32):
We're also going to talk about curious properties, right the
irregular property, the converted church, the former shoe factory that's
in a very attractive, you think house, but is it
really for everybody? Should you ever go near an irregular
property as an investor. I also have some great questions,
including one on granny flats, which you would think is
(00:53):
the simplest issue, but let me tell you it is
like global trade negotiations, grannie flats absurd complexities around that. Also, folks,
we are planning to introduce audio questions, so when you
send your questions in you know, the email the Money
Puzzle at the Australian dot com dot au, you can
send in a voice note just as easy. You just
(01:14):
do a voice note on your phone and then you
share it with us and it becomes a recorded question
and we can have your voice asking your question on
the show. We've got some already, we need a few more.
Be the first, be an innovator. Let's have them now.
My guest today is a regular guest on the show.
It's Kate because she's a buyer's advocate and also something
(01:36):
of a media personality, active and multimedia. I see her writing,
I see her podcasting, I see her on social media.
Got a lot to say, always an always good value.
How are you, Kate?
Speaker 2 (01:46):
Thanks? That's a lovely interrot things.
Speaker 1 (01:47):
James, tell me you did something recently cut my eye
about close tenders. We had something on the show recently
about expressions of interest, and what is this about expressions
of interest? Once upont a time you only had expressions
of interest on something like factory or a landmark building.
Now you have it for the house around the corner.
So you find these innovations that come in on commercial
(02:07):
property eventually trick of their way through, first of all
at the top of the property market, residential property market,
and then they filter through and they become almost every
day tell us about close tenders what they are and
what you think of them.
Speaker 2 (02:20):
As you said, otherwise known as expressions of interest, set
sale by set date. They've got a host of names.
What it really means is it's a bit of a
blind bidding process and in most cases the agents will
tell you that you get one chance and one chance only,
but there's lots of shades of gray depending on the
agency you're dealing with. In the number of other potential participants,
they often come back to you. So you need to
(02:42):
establish those rules before you put in your bid, because
there's nothing worse than exhausting yourself and putting in your
final bid and then the agent calls back and says,
you've got another opportunity.
Speaker 1 (02:51):
Tell me I see you place. It says close tender
or expressions of interest. How is that different? It's a
private sale effectively with some particular rules. What are the
particular rules that distinguish it? Phone convention pay too.
Speaker 2 (03:06):
Well, it's got no real rules so other than having
a set date. So like an auction where you've got
a set date, it will come to a head provided
that there's participants, But unlike an auction, you don't have
a requirement to be unconditional so these closed tenders can
(03:26):
work really well for the top end of the market,
where a property is really hard to price. You're looking
for that buyer that gets stars in their eyes and
just empties their pockets. It can work really well also though,
for entry level homes that attract first home buyers, because
as we know, first home buyers can get really nervous
about putting forward a bid that's unconditional. They're very nervous
(03:47):
about doing so. They're often told by their broker to
make sure that their offer is subject to finance. So
in a lot of cases, a clever agent might introduce
this kind of option where they can bring it to
a head within a certain period of time, but they
might be fielding some conditional offers. So it works across
the board. However, I don't always like it. In fact,
I really like.
Speaker 1 (04:07):
It, right, So tell me what you don't like about it,
and I can guess, But you tell me. I presume
I think the buyer will be at a disadvantage sometimes.
Speaker 2 (04:16):
Often it's very difficult to ask someone to give their
strongest offer for something when there's no social proof, and
we do rigorous analysis. We present them with our pricing analysis,
but you're still terrified of putting in a bid that's
fifty thousand dollars above someone else, yet you don't want
someone to beat you for one thousand dollars. It's one
of those really difficult situations. So you tend to find
(04:40):
that buyers will be really remorseful when they miss out,
or they'll be worried when they secure it, which is
quite different to an option.
Speaker 1 (04:47):
Because they're worried that they've paid way too much.
Speaker 2 (04:50):
Yeah, did I pay too much? There's no visibility, there's
no social proof.
Speaker 1 (04:53):
So very much, so very much. What you put on
the property that you're terribly confident of sounds to me. Yes.
Speaker 2 (05:00):
The one time when those types of purchases work really
well is when you've done the analysis and you realize
with dread that you've targeted a property that you probably
can't afford. You can see that its value sits a
little bit above your budget. But if you're prepared to
go all in, put it all on the table and
hope for the best, sometimes that pays off. You can
(05:20):
secure it for price that you didn't imagine what was possible,
and you have no regrets.
Speaker 1 (05:26):
It's interesting, I have assumed it was a top end thing.
You cop me with the nation that it apart from
being a top end sort of fashion if you like,
it's also with properties where the sellers know there's a
very high demand and a very particular type of demand. Yes,
so the person is sing, I want this as my
(05:48):
whole as I'm going to really try and get it.
So it's just a way of squeezing more out of
the bitter, isn't it really to me? It is?
Speaker 2 (05:54):
Now there's closed tender advertised campaigns, but there's also private
sale campaign where multiple buyers have expressed an interest or
they've submitted an offer, and then the agents will call
everyone and say we're calling for best and highst which
is effectively the same thing, although it's a decision that
they've made on the run, and they might decide to
wind it all up by five pm tomorrow, for example.
(06:17):
So anyone that's shown some interest or is said to
the agent keep me posted, they've got their twenty four
hour opportunity to get the building inspection done and get
the contract reviewed. And again that's a closed tender process
because they're calling for the best offers. The quirks to
this kind of system, though, is when the agent says,
if you're the first person to put forward your offer,
we'll give you the last rite of refusal, will give
(06:39):
you a phone call and let you know if others
are above you, but we still won't give you a price.
A lot of buyers are very skeptical and very mistrusting because,
as I said earlier, there's no transparency, so you don't
know if you've been played or not. And sometimes people are.
Speaker 1 (06:53):
I bet they are. Tell me the only sense of
portion of properties are now under this expression of insure
close tender arrangement will be ten percent, it be.
Speaker 2 (07:03):
More than that. In terms of how the agents facilitate
competitive bidding, a very large number now turn to the
best and highest method, particularly in a hot market when
they're dealing with FOMO. They're working with buyers who have
that deep fear of missing out because they've already missed
out on one or two. They're the ones that are
more likely to go all in and stretch and the
agents know it.
Speaker 1 (07:24):
Gee, that's very interesting. Again, I'm guessing, but I presume
that's happening mostly in certain pockets of the larger cities
Sydney and Melbourne, and then in the areas that are
running hot, which are unusual, not typically running hot on
a historical basis, I don't know parts of adelette probably.
Speaker 2 (07:43):
Look even the regions, as long as the agent is
confident that everyone knows there's multiple offers. It really is
a multiple offer scenario when an agent turns to that
methodology and you know that you're in more of a
buyer's market. When the agent just wants to workshop your
offer with you exclusive and then bring it together with
an agreeable negotiation between you and the vendor, you can
(08:05):
be pretty sure that there's not a second or third
party when that happens.
Speaker 1 (08:10):
Interesting, isn't it? How things flip? How do you hear
your flips on a die quickly? Yeah, on a dime,
depending on the tempo and the market. It's extraordinary, as
anyone will know who who's ever been in that area
to buy or trying to sell. Okay, also keate, and
I know I'm jumping around here, but another issue I've
seen you discuss and I wanted to give our listeners
(08:31):
a chance to hear you want it is the notion
of the irregular property. Many years ago, I was standing
on the street at an auction with a very well
known Melbourne real estate agent and one of the greats.
And it was a townhouse which was owned by a
fashion designer. And the townhouse was on Little La Troupe
(08:53):
Street in Melbourne, CBD. At that time there was probably
a thousand people living in CBD as opposed to one
hundred thousand or so now, and it was very unusual
to live in the city. It was also unusual to
have a house there. And I remember seeing the house,
absolutely charmed by it because it was, you know, as
you could imagine, it was a designer's house and it
(09:15):
was wonderful. And he said, I'm really worried about this.
It's a very unusual house. And I know you will,
he says, I know it looks attractive, but it doesn't
tick the boxes for many buyers. It's going to be
very hard to sell it, really through me, and it
was instructive about irregular properties. So you come across these
convert to churches, shee factories or whatever. How does it
(09:37):
work in reality? Is it more difficult than you might
expect to sell them?
Speaker 2 (09:42):
Yeah, this sounds a bit crude, but there's either quirky
good or quirky weed. When it's weird, it can be
really problem any times.
Speaker 1 (09:51):
What do you mean, weird painted black inside and out
or what?
Speaker 2 (09:55):
Oh, possibly, as you said, something that's really only suited
to a very tiny few. If it's suited to a
particular type of buyer or demographic or whatever or style,
that might be enough because, as you know, we only
need two people to make an auction viable. When you've
got a property that's really struggling to find, it's one
(10:17):
buyer out there, so it could be crazy in interior design,
or something that really polarizes most people. That can be
a hard property to sell. And renovated churches, converted warehouses.
What you often find there is you've got these lofty spaces,
but you might have insufficient bedrooms to suit a regular family.
So it's sometimes really targeted to that single or that couple.
(10:40):
And that's okay because we've got a lot of singles
and couples with money who want something that's quirky good.
When it's quirky weird, it might be in a compromised
kind of layout or location or compromises a really important
word to think about, because if every buyer looks at
it and says, yeah, it's compromised, you'll struggle to find
your buyer with these odd property, the odd properties, the
(11:02):
unusual ones. The biggest challenge isn't always the layout and
the look and the feel. It's often the invisibles, like
the zoning, or it could be the owners corporation fees,
because these fabulously converted churches cost a lot to maintain.
So those are the things that can put buyers off
and make property a really hard proposition to sell, particularly
(11:24):
when it's industrially zoned or commercially zoned. That zoning really
means that a buyer must be prepared to have a
forty percent deposit on hand and turn to a commercial
loan setup, and they might find that they don't service
that because you're amortizing the line over fifteen years as
opposed to twenty five or thirty, and all of a sudden,
(11:44):
you don't service the debt that irresidential loan product would
happily have your service. So it's the invisibles that can
really pull apart these odd properties.
Speaker 1 (11:52):
Oh that's really interesting. So and you say oder a
regular I'm just thinking in simple terms of the unusual
property that doesn't typical. But you're saying that irregularities on
zoning or title or anything like that. Yeah.
Speaker 2 (12:07):
Yeah, sometimes they're impractical. Sometimes they're just really expensive to run.
I remember looking at a beautiful converted warehouse that was
essentially like a two and a half story interior, but
the cost to run the heating would have been eyewatering.
Speaker 1 (12:24):
Yeah, because there was no doors. Probably that's right.
Speaker 2 (12:27):
And the other challenges we've had is a lot of
people that are targeting these beautiful properties, particularly the expensive ones,
like the idea of having a vehicle, and usually an
electric vehicle. Now in some of those properties, you haven't
got that option to have the right electricals to power
an AV or in the case of a converted church,
sitting at the church car park won't cut it for
(12:49):
someone with an av That's really interesting.
Speaker 1 (12:51):
I suppose the flip side of this is a fairly
prosaic point that the more regular is it necessarily the case,
then the more regular, anonymous, broadly appealing property from a
commercial point of view is better.
Speaker 2 (13:07):
Yes, without a doubt. If we think about a stunning
family home with the perfect floor plan, a converted space
at the back where you've got an open plan leading
out onto an al fresco in a decent yard. They
always attract a lot of buyers.
Speaker 1 (13:23):
Yeah, so supply and demand again.
Speaker 2 (13:25):
Yeah, less of a risk for an agent for sure.
Speaker 1 (13:27):
Very interesting stuff with Take Shore Break. We'll be back
in a moment. Hello, Welcome back to The Australian's Money
Puzzle podcast James Kirby with Kate Bakos, buyer's advocate, regular
(13:49):
on the show, Kat, I and you are not alone?
Can I say on the show where you are examining
the tea leaves in relation to Melbourne property, Probably because
most experienced property people are aware that it may well
be a bargain right. Because how on earth do we
(14:10):
have a situation where a city of five mayion that
it's growing, that is the second biggest city in Australia
has the weakest numbers on almost any measure, the weakest yields,
the weakest price growth, negative price growth at times last year,
and other issues, absence of investors, a lot of negatives
(14:32):
of leap. If you believe in property cycles. Stuart Wims
was on, and he's a real believer of property cycles,
then he believes it will turn. The question is when
two things do you think it's turning already? On what
you've seen I want to say yes.
Speaker 2 (14:47):
If you'd asked me this a month ago, I would
have said, let me hang in there and determine whether
it's a dead cat bounce, whether it's the February factor,
or whether things are really starting to move. I believe
that they are, and it's not just the Februar factor.
We're now well into the next month and we're getting
(15:07):
a lot of investors from interstate and that's always a
bit of a sign. Why are they coming to Melbourne.
Some of them think that there's an opportunity there to
get in before the rest of the herd. They've obviously
subscribed to the mean reversion theory, while others are looking
at our yields and they're saying rental yield isn't too bad.
It really does help with the land tax burden. We
(15:30):
can chat about that at another time. But I think
a lot of them are just seeing value. They're looking
at the value proposition.
Speaker 1 (15:36):
I did say the years were but you're saying admitted
because the prices have been static, if not going backwards,
the years have improved. Is that they have.
Speaker 2 (15:42):
Indeed, Melbourne's rental rates have climbed dramatically. In fact, we've
had one of the biggest overall surgeres since COVID, and
we came off a low base. Melbourne was always traditionally
the city that had pretty awful rental yields, along with Sydney,
and we've come up now to a ridge yield of
three point seven which has us on par with Brisbane
(16:03):
and Adelaide. In fact, I think we've just marginally overtaken
both of them. So that's a big turnaround for Melbourne.
And the reason for it is we've had a lot
of our rental stock decaying, we've had investors getting out,
we've had static price movement or slightly negative, and the
supply and demand equation has kicked into gear with our rents.
(16:25):
We've had a lot more tenants than the landlords and
you can spot an advertised property for rent because the
queue that goes around the corner is generally longer than
that of a house that's for sale. So we've caught up.
Speaker 1 (16:37):
That's been a case for some time.
Speaker 2 (16:39):
It has.
Speaker 1 (16:40):
Yeah, three point seven yield gross, that's right, Yeah, yeah,
for all dwellings, yes, okey.
Speaker 2 (16:48):
So we're starting now to say three percent for houses,
which I haven't seen that for a very long time
in Melbourne.
Speaker 1 (16:54):
Yeah, and then you have mortgage or even investment mortgage
it's dropping as well. Ever so small your mortgages dropping
here is improving an improved outlook? Have we any hard
evidence of it? I know you may be anecdotally seeing this.
Have we any numbers yet on investors coming back to
(17:15):
the great southern state of Victoria.
Speaker 2 (17:18):
Only very early data. The challenge that we have is
we source that data. If it's not directly from the banks,
we get it from the ABS and we have a
three month lag on that. So we've only recently got
the December data that's showing a slide uptick for Victoria
as a state. But still we've been underdone on the
investment front for the last few years because we've not
(17:38):
been the city or the state that's been the most attractive.
Agents are certainly reporting a change, and we've also seen
our rental rates, our rate of growth almost plateau, and
the managing agents are also reporting that they're getting a
few more investment properties added to the rent roles. I
think that rate of rental growth isn't likely a high
(18:00):
cup again, because we do have investors.
Speaker 1 (18:02):
Back interesting and there's a point at which you don't
want rented growths. It's a two edged sword, isn't. You
want real growth, but you don't want it to run
too high because obviously then there's problems inside the system. Okay,
very interesting. I was very keen to see what you
had to say about that. And it's one of the
questions of the year, really because if we get this right,
(18:24):
it investors get it right, obviously it will be it
will definitely be the opportunity of the year. It's the
potential opportunity of the year.
Speaker 2 (18:34):
So yeah, we've got to see another month or two.
As they say, one data point doesn't make a trend line,
but at the cold face, it's certainly quite different, and
we can see it in our auction clearance rates. We've
got some pretty aggressive bidding. We're eclipsing our reserves by
quite a margin in a lot of places, and our
auction attendance was very different, vastly different to twenty twenty four.
Speaker 1 (18:56):
Do the same stay government, of course, which what do
all those new taxes? But let's see if the market
will actually rise above.
Speaker 2 (19:02):
That or November twenty twenty six isn't too far away.
Speaker 1 (19:05):
Is it. Okay, we'll take a break and we'll be
back in a moment with some very interesting questions. Hello
and welcome back to the Australians Money Puzzle Podcast James
Kirby with Kate Bakos. Here we are talking property. We
are talking investment property in particular cases. A iers advocacy
(19:28):
operates out of Yarraville, very trendy, fashionable Yarraville in the
center of Melbourne. I've got some great questions I thought
we have. First of all, let's have a look at
what we had from car loss, which is an old chestnut,
and we won't go too far down this because we
could have a whole show. We could have a whole
series of show one. Carlos's question, but just in any event,
(19:51):
to give it to you and read it out to you.
He asks, in terms of property versus shares debate, what's best?
As with politics, you can find an answer you want
to hear easily enough, which makes it hard for newcomers
to understand. I want to suggest you'd run a case study,
or you can be as objective as possible, helping people
see what it's like to either buy an investment property
(20:15):
or to invest in the share market. Well, Carlos would
love to do that, and we could put say half
a million on the share market today, and we put
half a million on a very good property, advised by
a very good buyer's advocate like Kate, and then we'd
run it for what five years, three years and come
back to you. You'd have a sample of one one
property versus the entire market. I think the issue would
(20:37):
be revealed then that all property is individual, so you
could do fabulously property that wouldn't necessarily tell you how
property did. But markets obviously are generics, so if you
just bought an ETF, you would know how markets did.
What do you think, Kate?
Speaker 2 (20:52):
I completely agree with you, James. I think if we
look at a median value, or we pick a particular market,
we could get a rounded out set of statistics there
as well and prove this point nicely for Carlos and
dare I say it. In recent years there are some
markets like my own, in particular in Melbourne, the shares
(21:12):
would have won every day of the week. But this
debate has been run to death by so many people,
and there are books about it. There are real life
case studies and you can get your hands on that.
The reality is, though people would turn to property investment
because it has one benefit that share investing doesn't have,
and that is how much you can leverage. So it's
(21:33):
important to keep that in mind. Because if someone started
with some seed capital at a young age, and they
were consistent in their approach and they leveraged with it
a reasonably i won't say aggressive, but a very dedicated approach,
they leveraged into property. So let's even say eighty percent lvrs,
which the bank's particularly like. That means you're put in
(21:54):
down twenty percent of your own money and you're borrowing
eighty percent. You will find over time that property will
outperform shares when you're leveraging and you have time. I
think where shares start to come into their own is
when you don't have time. So let's take someone who
is ten years off retirement, five years off retirement, or
even in retirement. They're not wanting to settle up for
(22:16):
a property to start with. They won't want to take
on a large debt and then be burdened with having
to pay that debt because they'll have in most cases
a negatively get asset, and they won't want to deal
with the maintenance, and they probably won't want to deal
with the property taxes either. So it really does depend
on what stage in life you're at, how long you've
got on your working treadmill to run before you can stop,
(22:40):
So there's no debate about it. Shares is much easier
as that class when it comes to maintenance and taxes,
but there's also volatility there as well, and good advisors
will talk to you about diversification. It's for that reason.
Speaker 1 (22:54):
Yes, absolutely, I agree with you to a point. Academically,
you can see over a long period of time, you
go back over one hundred years, so that there isn't
really much in it that is between the average property
outcomes and average market outcomes. The thing is that you
can buy an average market outcome through an exchange traded fund.
You can just buy the ASEX. You can put fifty
grand into an ax ETF, close your eyes and come
(23:16):
back in ten years and you will have the average
return of the market. Now, that is not the case
with property, so every property is individual. So I can
tell you what the average increaseable was this year, last
year or whatever for Australian property, but it really doesn't
tell you much between say some little village in Tazi
and an north shore suburban Sydney, for instance, they don't
really have much in common, so the averages are quite misleading.
(23:38):
Car loss. However, as Kate is saying, there's a couple
of things of property leverage that you can leave rich shares,
of course, but most people most of the time are
wary of doing that. They are comfortable in leveraging against property.
And by the way, you can get negatively geared chairs
just as easy. It's just very quick people to do it.
The other thing, as Kate pointed out, control and work.
(24:02):
You can't do anything about your share portfolio once you've boted.
You can't make HP Gupperdell. But with a property you can.
You can improve that property, you can work on it,
and I think that's the enormous difference really. First of all,
you can choose the individual property, but you've no choice. Unfortunately,
you can't buy the average, but you choose the in
(24:23):
visual property and you can make it better, which is
something you can't do, and I think that's something you're
doing to more work. We recently, in our family, we
recently sold an ETF that we had outside of super
and we just made a point that you're so easy,
and did it on your phone, tick so gone, never
did any work, Never spend two minutes on this and
(24:43):
thinking about selling a property. The documentation alone will take
a day longer than selling an ETF. So these are
points really worth thinking about, Carlos. And that's really I
don't want to simplify and give you an answer and
say once better than the other, except to say they
are very different. Average performances can be achieved on shares,
but all properties individual. Okay, Claire, I have a female
(25:06):
listener here. Thank you, Claire, thanks so much for the podcast.
She says, I have just hit the big five. Zo
and I have hatched a cunning plan to help fund
reduce working hours and my retirement. I am selling our
family home. I'm planning to build a new house with
a granny flat, which I hope to rent out to
generate an ongoing income. This is this is really good
for all the crazy fifty somethings out there hatching such
(25:29):
a plan. Could you please offer some information on the
potential CEEGT implications if the granny flat has rented out
on a commercial basis, and she has other related questions
on that, Okay, you might think this is unbelievable, Claire C.
L A I R E. You would think that this
is all easy enough. The granny flat thing is absurd.
(25:52):
It's absurdly complicated. It shouldn't be. Don't let it stop
you what it is. And I met someone last night
who said that they were at a confidence and it
was a two hour session on the technicals around granni flats.
And then someone has tracked a joke. But I think
it's true that you can get around a lot of
these problems if the granny flats on wheels, because you
can classify it as something different than the property. That's unofficial,
(26:14):
not advice, never is okay. Now for a formal official answer,
Kate and I are referring to James Gerard of Financial
Advisor dot com dot who you know regular guests on
the show, and this is what James says about Granni
flats not the worst plan. Building a house with the
granny flat has a couple of benefits. You create an
income stream that can help fund part of your retirement
(26:35):
income and have a place for a family or a
care if you need it down the track. The disadvantage
is you will have to clear the net rent in
your personal tax return if your income is above a
tax free threshold in retirement. In addition, okay, this is important,
(26:56):
if you ever sell the property, you will need to
pay capital gainst. Will you hear this? And a portion
the floor area and land between principal residents which is
CGT three. Write your palm with CGT three exam from
capital gains tax and the granny flat which is subject
to capital gains tax. Right, So, yeah, they don't make
(27:17):
it easy, That's all I have to say to you, Claire,
But you can do it.
Speaker 2 (27:22):
There is one more little tax implication there, and that's
land tax. So there'll be an a portion amount there
as well. And I'll stay in my line and leave
it at that. Granni flats are a challenge though.
Speaker 1 (27:34):
It shouldn't be that. We're talking about dentsification. We're talking
about and you know, why do they have to make
it so damn difficult?
Speaker 2 (27:40):
Really, if you're in my home state, you've got to
get a permit for grunny flat, and most tits and
territories will have some kind of permitting process. In addition,
if you don't have separate water meters and electricity meters,
you can't pass on usage to your tenant, which means
you're paying for it, so that needs to be incorporated.
The next point that I'll make is if you ever
(28:03):
go to sell the property, you've potentially diminished its appeal
because not every buyer out there wants a backyard with
a granny flat unit. So if you've lessened your number
of potential buyers, you've lessened your competition, you've possibly lessened
your selling price. So that's something to bear in mind
as well.
Speaker 1 (28:20):
I did have a friend who had the marvelous I
would you call it like a not a prefab but
kind of a little model, perfect retirement unit for hard
dad in the back garden. But it was really good,
and I do recall it had wheels, not that they
ever mold it, but I think it has week No advice, right, something?
What exploring? All?
Speaker 2 (28:39):
Right?
Speaker 1 (28:40):
Okay, pat asks at the top. At the average interest
rate's been offered by thirty two banks, it's four point
sixty three percent. Since the RBA lowered its interest rates
in February, the average among the thirty two banks now
is four four percent. Given the fairly dramatic decrease. This
(29:02):
is about term deposits, Folcus. This is what you can
get for your money pass sets. Given the dramatic decrease
in term depositibly since the RBA decision, do you think
it would be predictable with more rate cuts like to
come next year that by the end of next year
financial year that rates on offer on deposits could have
(29:23):
dropped even in the three percent three percent, that is,
you will only get three percent for your money compared
to four and a half now, absolutely entirely feasible. If
the economists say there's two to three more cuts coming
and into two to three more cuts are the same
quantum of the ones we're used to, which are always
these days a quarter percent and ago, then it would
(29:44):
be entirely feasible that you'd have a three in front
of the number, even if you lock it away. I
think that can't have it both ways, even the rate
to coming down, rates coming down, do you think, Kate?
Speaker 2 (29:56):
I think k Stree gives us that answer that the
lenders are very good at adapting quick when there's a
right movement.
Speaker 1 (30:01):
They move like lightning. Yeah, they're so efficient.
Speaker 2 (30:04):
Or they're really slow on the other side.
Speaker 1 (30:07):
Very slow on the other side. It's strange, isn't there
two different departments, one's very good and one's very slow
and sleepy.
Speaker 2 (30:12):
It comes to term deposits, you've got a few options
with other lenders, and obviously risk and reward is something
that every investigates to cape in mind. You can say
some really stunning returns that are being pitched, but you've
got to understand what's happening with your money and what
the risk might be.
Speaker 1 (30:27):
That's been very careful here, folks. We're talking about and Patasfian,
we term deposits in banks right locked away for a
period of time. No games approved deposit taking institutions government
guaranteed do not. And I think Kate tell me about misleading,
but I think what you're alluding to is advertisements that
say they say the word deposit and they say the
(30:49):
word rate, etc. But it's not a term deposit. It's
lending to builders or something, and it's completely different, and
so you get two percent more, but you're taking much
much greater risk. I'm talking here about risk free rates
always distinguished. Is that what you were driving at completely? Yes, Yeah,
it's something people should be very careful of. And I
(31:11):
find it very frustrating that you can perhaps accidentally mislead
people with advertising so easily. All right, we will leave
it there. You can see that as something we could
go into another day. But thank you very much Kate
Bakos for coming on the show. Lovely to have you
on again, been a pleasure.
Speaker 2 (31:28):
Thank you.
Speaker 1 (31:29):
Always interesting to talk to you. Great to get that
feeling from the street, basically from the floor of what's
going on in the property market. We don't want to
ever talk too much from a helicopter point of view.
It's all very interesting about what's going on demographically, et cetera.
But you as listeners, I sure want to know what's
going on out there and buyer's advocates are really good
for that. Oh, Kate, Thanks a lot, Kate, and thanks
(31:50):
lot everybody for listening. The Money Puzzle at the Australian
dot Com dot au is your email for your email
or for your voice recording your voice member, which we
do love to have. Today's show was produced by Leah
Samma Gloom. Talk to you soon. Talk to you later
in the week with our annual rich List edition with
the editor of The Richness John Stensuld, who will be
(32:12):
releasing all the goodies to us ahead of the pack
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