In this week’s show Chris Gray from Sky Business’ “Your Property Empire” shares his top 3 ways to make sure you get maximum capital growth from your properties.
We also feature:
Cate Bakos, who is a buyers Agent, makes her living by going toe to toe with sellers agents to make sure her clients get the best possible deal when they buy. In our show she shares some of her thoughts on how you can buy better.
Michael Yardney who reflects on the 7 significant traits Dr. Stephen Covey says successful people habitually exhibit. Have you noticed how some people seem to rise to the top of their chosen field, or journey ever higher up the property ladder, while others consistently achieve the same “average” results? Michael explains why.
Finance expert Andrew Mirams who gives us his top 5 refinancing pitfalls and explains when refinancing makes sense.
Matt Jones who set up his own network group of investors that has now grown to thousands of like-minded people who share a passion for property. Hear his story.
Transcript
Andrew Mirams
Kevin Turner: Of course, we talk about the Real Estate Talk being just the show. You’re listening to the show now. If you go to the website, you’re going to find that we’ve got sponsored channels. There you will see a sponsored channel for Andrew Mirams from Intuitive Finance. A lot of fantastic content there. Andrew writes a lot of blogs, does videos, and a lot of audios, as well, apart from on our show. He joins me now. Good day, Andrew. Thank you for your time.
Andrew Mirams: Pleasure, Kevin. Great to catch up again.
Kevin Turner: Thanks for all your great content on Real Estate Talk, too. Really appreciating that. Andrew, I wanted to talk to you about refinancing because I know you wrote a blog article recently that’s up on our site. Let’s talk about refinancing. When should you do it? What are the things that an investor should be considering when they’re doing it?
Andrew Mirams: At the moment, and over the recent times, Kevin, people always say to me that when interest rates are coming down it must be great for business. It’s actually a little bit funny. It’s actually better for business when rates are going up. The reason for that is people actually look at their interest rates when they’re going up. this is when they’re coming down, people tend to get complacent. At the moment, we are suggesting that just about all people, again circumstantial, should have a four in front of their rate. Fives are the old 7% nowadays. We’re pretty adamant that everyone should be reviewing and looking at their situation as it reads.
Kevin Turner: Are there any pitfalls to this. That is a fairly simplistic view, isn’t it, to say you’ve got to go and refinance? What are some of the pitfalls?
Andrew Mirams: I think people often think that refinance you have to drop everything and go to a new lender. That couldn’t be further from the truth. We are very strong advocates of the devil you know versus the one you don’t. If we can potentially get you a better deal at the current lender by rearranging some things and taking some new loans or getting some equity released or positioning you for that next purchase, we can often get you as good a deal in the marketplace staying where we are. There’s a few tricks and strategies that go around that, but we always try and keep a client at their current lender.
The other thing is people always assume that refinancing is just to get you a lower rate. It has to look at what the end goal, as well. If you’re looking to buy another investment property or your first investment property and your current bank, Bank A won’t do it but Bank B will, then there’s a very clear reason for why we have to do it. You got to be careful while you’re doing it but there has to be the end goal in mind.
Another one is people tend to sit and go, “My bank will match that rate or come down.” They give their banks way too much credit in actually thinking there is someone sitting there behind their desk that actually, really wants to look after you. They are big businesses. They are money-making machines. There’s not someone looking at your loans every day. By getting in a professional mortgage broker or someone else to review your whole situation is the best thing.
People look at their house insurance or their life insurance or things like that every year and they’ll quibble about $50 on a car insurance. We can save people thousands of dollars by actually reviewing their interest rates. It’s funny, isn’t it, what people will argue over?
Kevin Turner: It is. What about credit ratings? If you blunder into this on your own without some trusted advice, is there a risk there that you could damage your credit rating?
Andrew Mirams: Absolutely. That’s where we’re very strong. We’re not rate chasers. The interest rates are very, very important but they’re the last thing we actually address when looking at a client’s situation. We’ll look at why have they come in and what are they trying to achieve. We’ll then position them and look to structure them, and actually then assign a lender and an interest rate that we think is the best in the market.
People that go out and see rates on-line and rate chase because this is great thing and then fall foul of those things or they don’t meet their credit criteria. Often they end up with two or three marks as inquiries on their credit rating. That can be, by the time we do get you to the right lender, there will be all these credit inquiries. People and lenders have a funny way of then going, “What am I missing? What has someone else looked at that I’m not seeing?” That might be enough, a few inquiries might be enough to make a deal not get over the line.
Kevin Turner: Of course, there are a lot of honeymoon rates or those sweet deals to get you in that could be quite tempting for some people.
Andrew Mirams: Absolutely. They’re everywhere, especially in a really low interest rate environment that we’re in. The banks have never been more competitive in my over 27 years of being in the financing industry. It’s never been as manic as what it is right now with banks competing harder. It all starts with honeymoon rates, or I tend to call them sucker rates, that gives you a six-month or a one-year intro. Over the term of say the next three, four, five years, it will actually cost you a lot more than getting someone to review it and getting a rate assigned or a rate discount assigned to your loan for the life of your loan. That’s far more important, Kevin, that just that quick fix.
Kevin Turner: Refinancing, of course too, Andrew, is not always about getting a lower interest rate. It could be that you might want to free up some money, too.
Andrew Mirams: Most of the clients that we see that actually we do refinance, whether at their current lender or into another lender, is all about the end goal. It’s about how do we help them release equity, buy that car, go on a holiday, more importantly start to build their investment portfolio or add another property to their investment property portfolio, and things like that. Very rarely, I would say less than 1% of our clients end up coming in just, “I want to refinance,” because they have something else in mind. That’s where a good and strategic mortgage broker or lender will actually sit with you and work through, “What do you want to achieve? How do you want to achieve it? What are the goals?” Then assign a strategy that fits in behind that.
Kevin Turner: If this sounds like what you’d like, then we’d strongly suggest you contact Andrew and his team, Andrew Mirams at Intuitive Finance. Of course, you can contact him by having a look at their sponsored channel at Real Estate Talk. Lots of really great advice there, too. You contact Andrew directly. Andrew, thank you very much for your time today.
Andrew Mirams: Thanks, Kevin, great please. I’d love to help anyone that’s out there that thinks they might benefit from being in contact with us.
Kevin Turner: Thanks, Andrew.
Andrew Mirams: Cheers.
Matt Jones
Kevin Turner: You’ve heard us talk on the show before about the opportunities that lay before property investors. They’re all saying that you’ll make your money out of investing in property when you’re buying, not necessarily when you sell. I’m going to be talking … My next guest is Matt Jones who is from the properyresourceshop.com, who also runs a number of networking groups of investors who get together to share ideas.
This is probably one of the learnings as well from all of this Matt, in that the opportunities that lie in front of us … You got to make sure that you actually secure the property at the right price.
Matt Jones: Absolutely, Kevin, yeah. I find a lot of people jump in a little bit too early or some don’t take action at all. I find one of the key things for investors is just to be surrounded by good people.
That comes in two parts: firstly, having the right team around you – a good accountant, mortgage broker, people that can advise you – but then also having support, other investors around you that can really lift you up and help you with referrals and contacts and just learning from each other. Yeah, that’s pretty much what we do at the networking groups.
Kevin Turner: What was behind putting these together? Was this more for you own benefit or did you see a need in the market?
Matt Jones: Yeah, it was very much a selfish thing, I guess, in the beginning. When I started adding property, I did a mentorship which was based in Melbourne. I was in Brisbane at the time, so I just took the Brisbane contingency of that group. We just went out to dinner and had a chat. I figured we could all learn off each other and leverage off each other, and 10 grew from 20 to 30, 50, 100.
There’s a couple thousand in there now and it’s just grown and evolved organically. It was never supposed to be anything this big, but definitely I’m finding there is this niche in the market where people want to be around other people and support each other, because you don’t always have that in your own family or friends, those networks. That’s important to have those active investors that are doing the same thing as you or on the same path around you.
Kevin Turner: Have you seen a situation where someone may have come into your network group who had some fixed ideas on what they were going to do and they were obviously on the wrong track, and through the momentum of the group, they were able to swing that around?
Matt Jones: Yeah, most people that come in … It’s kind of you don’t know what you don’t know. It’s such a broad, skill range that comes to the group. Some people are just brand new that just read a book and want to start investing. Others have done a couple of deals and then there’s a professional contingency as well.
I find that people come in and they hear some of the content and just talk to other everyday investors. They just realize how many options there are out there to make it work for themselves. It just brings confidence, I think, with each other, knowing that others are doing the same thing and just having a crack themselves. Everyday investors, who deal with a full-time job, wanting to maybe get out of the rat race and just being able to implement some simple strategies, they can take away from the night.
Kevin Turner: One of the dynamic things that I’ve seen with great people in any industry, and it does relate to the property industry as well, is that they never stop learning, Matt. I mean, you’ve probably seen this in your own group where people have come along, and you think probably their net worth is extremely high. They know it all anyway, but you never stop learning, do you?
Matt Jones: Oh, absolutely right, Kevin. I mean, I have a number of different mentors for different parts of my life. It’s just something I accepted years ago that, it’s cliché, but it’s about the journey. You’re always going to learn. You’re always going to have a bit of fear of something that you don’t know, and as long as you stay open to those learnings, you really do become more sophisticated in what you’re trying to do.
Kevin Turner: We get a lot of listeners to this show who are probably first-time investors, who maybe are going to take that first step. What would be your advice to them? What are the three key things you’d tell them to get started, Matt?
Matt Jones: Yeah, three key things. I mean, all I could say to people that come along to the meetings, just take your time – three to six months in focusing on a few things – and firstly, getting a good group of people around you, which I’ve already covered; having that support group and building that team because you can’t do it by yourself. You need a good accountant, a good mortgage broker, a good solicitor, a town planner if you’re doing development. Getting that team in place, and that takes some time, but you can leverage off the groups if you do that.
The second thing is you can really get to know your area. I find there’s deals in every suburb and it’s more about knowing what’s going on in your area. So often, you invest close to home because it’s easier and just getting to know every property that’s on the market, everything’s that sold, what the market wants. Getting really clear on what that is, so you know it better than the agents. So that when a deal comes along, you’re really aware of it.
Then, a third thing would be education. A lot of people tend to abdicate, I suppose, or they don’t have the time to get in there. But really, the best way to become a good investor is to educate yourself, and there’s many different levels you can go. It could be as simple as just going to the library and getting a book or buying a $30 book or spending a bit of time and coming along to groups like mine.
There’s plenty of them all around Australia, or actually paying a bit of money and getting a mentor and someone to hold your hand along the way. By the way, you need to be doing some sort of ongoing education to continue to grow as an investor.
Kevin Turner: Very good words of advice. Matt, it’s been great talking to you. I love your work and congratulations on what you’re doing with your network groups as well.
If you want to contact Matt and find out a little bit more: Matt Jones, you’ll find him at propertyresourceshop.com and his email address is matthew@propertyresourceshop.com. Matt, thank you very much for your time.
Matt Jones: My pleasure, Kevin; great to be here.
Cate Bakos
Kevin Turner: Well, if you want to know what you should and shouldn’t do as a buyer of property, best you talk to a buyer’s agent. That’s exactly what we’re going to do now, Cate Bakos from CateBakos.com.au, a buyer’s agent in Melbourne joins us today. Good day Cate.
Cate Bakos: Hi Kevin, how are you going?
Kevin Turner: Good, congratulations on the new business too.
Cate Bakos: Thank you very much.
Kevin Turner: Good bold move, but certainly I know you’ve got a lot of people behind you Cate, so all the best in the future. Cate, I want to talk to you about what you see as some of the classic mistakes that buyers make when they’re dealing with a real estate agent.
Cate Bakos: Yes, of course. Look, I’ve got a few Kevin, they’re all the classic mistakes and I’m happy to elaborate on them and maybe give you tips.
Kevin Turner: Okay. Let’s go.
Cate Bakos: The first one is letting the agents know your budget. Sometimes this is unavoidable, especially if you’re participating in a negotiation or an auction situation where there’s competing buyer activity. If you’re the under bidder then clearly, you’re showing your cards and those agents will know exactly what city you’re out on. But that doesn’t necessarily mean that that’s the edge of your budget. That might have been a price that you set for that property based on these where you see the values at.
Kevin Turner: I think that’s the best way to look at it, that rather than have a budget, it’s what am I prepared to pay for this property, what is it really worth? It’s not a matter of what a bottom I’m prepared to pay for it. Which is really what it’s worth.
Cate Bakos: That’s right and a lot of agents will ask buyers, tell me what sort of budget you’ve got or questions along those lines, which are always questions to catch the buyers out and to really understand their top end. As a buyer’s agent, I’m trying not to full price those questions and sometimes I’ll say to the agents, look I don’t have a budget, I’ll pay what I believe the property is worth. That can be a really strong playing card, because it means you have the option to go for other properties down the track. If you have missed out, you’re not necessarily giving the game away.
Kevin Turner: Yeah. It would be pretty easy in this situation too Cate, wouldn’t it, to upset or annoy the agent. I guess that’s something you’ve got to avoid as well?
Cate Bakos: Always. I never, ever forget that the agent can be really key to helping me get the best results for my buyers. So upsetting them, disturbing them, irritating them, whatever the trick or tactic might be, not a good move. Because not only can the agent turn to other buyers and give them more assistance, going forward, if you’ve upset an agent and you’ve missed out on a property, chances are they won’t be calling you with off market opportunities or getting you through the door of a brand new listing.
Kevin Turner: Yeah, I guess too, in those negotiations you’ve got to bear that in mind as well, and make sure that you keep up the communication with the agent.
Cate Bakos: Always. There’s no point in going quiet during a negotiation. This is probably my third favorite mistake that people make. They feel that the agents bluffing or lying and while sometimes that does happen, you can’t assume that with every agent, because when an agent calls and says, look I’ve got another offer on this property and it looks like it might sell tomorrow, that’s a pretty serious bluff, if it is a bluff. Chances are, it’s not and if you do go quiet, or you think that you’ll teach the agent a lesson, you might log on to realestate.com and find out tomorrow that the properties under contract. So you’re better off listening to them and engaging them and understanding, if they genuinely do have an update for you that is critical information for you.
Kevin Turner: I guess it’s getting back to that first point that you made about having a figure in mind that you think that property is worth. It’s irrelevant really, if you’re at that figure or if you’re not at that figure and you are prepared to pay more, no matter what the agent says about a second offer, you certainly know where you stand in your own negotiation.
Cate Bakos: That’s right. You do need to have a good understanding of what properties in your market are selling for if you’re about to buy. I say to every client, we don’t rely on what the agent’s telling us, you don’t rely on the auction quote ranges, we do our own due diligence and we look at recently sold properties that are similar and by saying recently sold, I try to find records of sales that don’t go any further back than six months. But understanding what you’re prepared to pay, and setting a realistic limit, even a slight stretch, your due diligence is done and then you’ve got every chance of getting the property on the right iterms at the right price.
Kevin Turner: In your negotiations Cate, and you’ve done your due diligence there and you know what’s sold in the area and for how much, are you prepared to disclose that to the agent and say, look this is my intelligence, this is what I’ve found and this is why I think the property is worth this?
Cate Bakos: Look, sometimes I am and it does depend on the negotiation. If I’m making a move to buy the property price at auction, that actually involves quite a lot of conversation and trust between the agent and myself, because the agent has a vendor who’s been through a four or five grade campaign, they’ve spent money on the campaign, they’ve probably got staging furniture and if I’m talking about making an offer that would buy that property, first and foremost, I need the agent to back it and I need to know that they will be comfortable enough with the offer that I’m thinking about giving them and they’ll be able to talk to the vendor and encourage them to seriously consider or take that offer. So yes, sometimes you do have to disclose what you’ve got, and obviously if I’m going straight on to auction, and I’m not planning on buying the property prior, then I won’t let the agent know where I’m at at all. If I’m the under-bidder, then they’ll know.
Kevin Turner: Yeah, there’s a lot of skill in this negotiation game and I guess, bearing in mind too that most people only do it once or twice in their life, but if you’re an investor, it’s well worth engaging a buyer’s agent to help you through the process. I’ve been talking to a very good one, in fact Cate Bakos. Cate, thank you very much for your time.
Cate Bakos: Thanks for talking to me Kevin.
Chris Gray
Kevin: Joining me this time the host of Your Property Empire on Sky News Business every Friday night at 6:30 none other than Chris Gray. Chris, thank you for your time.
Chris: My pleasure.
Kevin: Chris, I wanted to talk to you because I know that you’ve written a little bit about this, but making sure that we maximum capital growth on our properties, what are your tips?
Chris: I think that the first thing is really look at where you’re buying. I think there are two schools of thought here. Obviously there’s no guarantee in property, but I think if you really want to try and maximize your return on capital growth, going in the inner cities is probably the best thing you can do because say you’ve got a CBD, quite often they say there is no limit to why you can keep building tall towers, but when you go 5 to 15 kilometers from most capital cities, there’s a height restriction of say three levels. This is the place where everyone wants to be close to work, be close to the beaches, the cafes and the restaurants and there’s no more supply. The people at Residex say well, prices can only increase. No matter what’s going in the economy, prices will increase because it’s basic economic. There’s no more of the things that people want to buy, lots more people want it so the price rises.
Kevin: As you’re looking around Australia, Chris, does it vary city to city that radius, the 5 to 15 kilometer radius?
Chris: Yeah, it probably does because … I mean say for something like Sydney then it’s technically maybe 4 to 15 kilometers. I think if you go to something like Brisbane then the height restrictions and where the houses are are a lot closer. I think if you’re in places like Adelaide, there are houses right in the middle of the city center. It’s really trying to go where there’s that limited supply. Other places might be two or three kilometers for instance. It’s more the thought of don’t get direct in the CBD.
Kevin: I suppose the best place to start is actually just doing your local due diligence with the Councils and looking at those height restrictions, Chris.
Chris: Exactly. A lot of things are just known. If you speak to the agents, say “where are there so few properties around” and it’s met their demands and they’ll tell you pretty much straight away.
Kevin: Okay.
Chris: I think the other train of thought is then to go to the regional areas. Those in the city areas, they’re not going to double overnight. They’re not the hidden secrets that no one knows about whereas I think if you want that kind of thing it’s then going to the regional areas and to try and say, what infrastructures are suddenly going to change? Is there a Westfield coming in? Are there big roads or hospitals or things like that? I think to try to get that information is maybe going to companies like Residex that predict capital growth or Terry Ryder, he’s got a company I think called Hotspotting and the whole idea is to try and hotspot what is the next area that’s suddenly going to take off. Say for someone like me that doesn’t know that many places around Australia, rather than trying to spend 5 to 10 years trying to be a genius to this, why not go to someone like Terry or John Edwards of Residex that have spent 50 years doing it and just tap in and buy their information to get that knowledge.
Kevin: Yeah, those reports are readilly available both of those sites, you mentioned Residex which is John Edwards and Hotspotting with Terry Ryder.
Chris: They’re cheap. They’re a couple of hundred bucks. I know with John Edwards I use Residex a lot and you can buy the top 100 suburbs. Why would you try and second guess something whereas for 200 bucks you can tap into John’s information?
Kevin: It comes down to research which is what you’re saying here, the first two tips you’ve given us are about research. What are the other areas you look at Chris?
Chris: The other thing that I like in terms of my property investing strategy is buying secondhand and renovating because that potentially gives you capital growth or equity even if the markets slack and nothing else is rising. Turn that ugly duckling into something absolutely pristine. I did it on … I bought a block of units in GFC I think 2007-2008 for $1.9 million. We put $600,000 into it so it’s cost me $2.5 million all out and three and a half months later the bank revalued it at $3.5 million, so that’s a million dollars capital growth. Sure it took some work, but the rest of the market was flat at the time.
Kevin: You mentioned there a block of flats or a block of units, have you got a preference for units over houses?
Chris: Yes. I typically go for what the medium price buys in that area. Typically if I’m buying in Sydney or Melbourne in that 5 to 15 kilometer radius, I generally buy units because for the average price of say $600,000 to $800,000 that’s what it buys you and that’s what most people live in whereas pretty much anywhere else in Australia I’ll buy a house because again, that’s what the typical person lives in for the average price in that area.
Kevin: Chris thanks very much for your time. I appreciate it. You can catch Chris on Sky News Business’ Your Property Empire Friday nights at 6:30. Chris thanks for your time.
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Chris: My pleasure. Thanks.