Where are we on the property clock? In this week’s show Michael Yardney answers a question from Carrie about how to identify where we are on the property clock.
This week Louis Christopher shares some good and bad news – some markets are in decline while others are booming.
Cross-collateralisation is a subject that we have discussed quite openly in recent weeks and it is one that draws differing views. This week Rob Balanda puts his legal brain to the topic.
Master renovator Jane Slack-Smith explains why so many renovations, especially those done for a quick profit, can become a disaster.
Also leading agent John McGrath gives us some questions you should ask your agent when your property is not selling.
Recently we spoke to one of Australasia’s top auctioneers – Andrew Cooley – about what advice he has for anyone wanting to bid on a property or a property owner contemplating selling by auction. Andrew’s thoughts appeared in a feature article in API Magazine and we talk to Nicola McDougall the editor about the lessons we can learn from that chat.
Transcripts
Jane Slack-Smith
Kevin Turner: As people build property portfolios, one of the temptations that come along is to flip the property. That is where you buy, you renovate it and you flip it over for a good profit.
We hear of some tremendous stories about people who do this and they do it very successfully. But when does a flip become a flop. Let’s find out.
Jane Slack-Smith: who is the Director of Investor’s Choice Mortgages and Your Property Success joins us to explain why.
Have you ever had a flop out of a flip Jane?
Jane Slack-Smith: No. In actual [inaudible 00:00:30], I’ve always kept my renovations. But I do work with a lot of people who do flip.
Kevin Turner: And then flop?
Jane Slack-Smith: Well, some of them flop. I think it’s kind of like the fisherman’s story. You only hear about the successes.
Kevin Turner: That’s true.
Jane Slack-Smith: The sexy stories of the block and some of the big money that people make is often a cautionary tale about how you can get it right and the real numbers behind it.
Kevin Turner: Let’s look at some of the lessons we can learn from people who’ve made the mistakes. I think they’re the best lessons we can learn. Rather than watching a block which is really where they all seem to get it right.
Jane Slack-Smith: That’s right. I guess structural renovations is usually the type of renovations that people do when they’re looking at flipping a property. They’re talking about significant change. Usually this involves maybe building on the back or making an extension and going to council. There’s usually a bit of a time delay as well in a structural renovation when we look at the norm which is rejuvenation. I do the kitchen, the cosmetic in the bathroom renovation.
Kevin Turner: Okay. Obviously, you would have done renovations. Time heals all wounds. If you do make a mistake and your planning to hold on to it, Jane, that is one way around it, isn’t it?
Jane Slack-Smith: Yeah. I think that’s the really important thing about structural renovations and flipping a property. I’m examining the basics before you actually commit to buying the property or going about doing a flip strategy on a current property you have. That’s understanding exactly what the end product is going to look like and how much you’re going to get for it.
If you’re looking for a property to flip, my suggestion would be for every eight properties that you look at to buy, you’d be looking at at least two properties, a total of ten properties, that actually at the stage of the finished products that you want to achieve. So you have an idea what the end value looks like and what those [inaudible 00:02:30] and fixtures and fittings look like so you can come back and say, okay, how much is it going to cost me to get my property to look like that and is there really a profit in it for me.
Kevin Turner: It’s part of the due diligence process. I suppose it would be difficult for someone who’s doing their first renovation to actually understand all those pitfalls though Jane, wouldn’t it?
Jane Slack-Smith: It is. It’s very important to actually have a structured step by step way to evaluate a property. I do say that due diligence is really where people come unstuck. Buying the wrong property or renovating the wrong property because there is profits to be made. There’s some sensational success stories around flipping properties.
As long as your in, you do it quickly, you do it to the budget, you understand what the end value’s going to be and you can achieve that. If you don’t, then you have a plan B, which as you say rightly, you possibly rent it out for a period time till the market could pick up and heal the wounds that time can often heal for you.
Kevin Turner: Yeah. Sometimes some people have said you shouldn’t have a plan B. But I think the plan B that you’re suggesting there is just in case you do make a mistake, makes it even more important to make sure that in your strategy you’re not only just focused on flipping it quickly. You might end up having to hold it for a year or two.
Jane Slack-Smith: Yeah. I do speak to a lot of people who have bought property and for one reason or another the market may have changed, there might of been some employment changes in the area that they’ve bought. They have not done their due diligence to understand correctly that the demographic that they’re targeting usually for a flip is unoccupied.
That’s certainly straight from the [inaudible 00:04:07]. It’s not always straight from the [inaudible 00:04:08]. You can find this information out.
If you actually buy in the wrong area where owners don’t want to own and they’re surrounded by renters, there may be a different demographic to what they’re used to. It might be harder to sell the property.
Having a plan B which is my property market ready to rent. Is it in an area that people want to rent in as well can actually assist you if everything doesn’t go to plan and you can’t sell the property quickly.
Kevin Turner: For great tips on renovation and property generally at Jane Slack-Smith’s website, YourPropertySuccess.com.au.
Jane thank you very much for your time.
Jane Slack-Smith: Thanks Kevin.
John McGrath
Kevin Turner: If your property hasn’t sold, there’s got to be some obvious reasons why, but when you’re in the middle of it it’s hard to work it out. I caught up with John McGrath from John McGrath Estate Agents, probably one of the most highly respected agents in Australia, and asked him what advice he gives people when they ask him “Hey, why hasn’t my place sold?” Here’s what he had to say.
John McGrath: There’s three in particular that we look at as abusiness and we think price, presentation, and marketing are really critical. At the end of the day, price is probably the most critical because even a property that’s poorly marketed and poorly presented, if it’s priced right, it will transact. We think that pricing is so critical and ironically or perhaps paradoxically, to get a premium price you’ve actually got to start at a price that the market deems attractive an unarguable. When we got out there, if we think a property’s worth 8 to 850,000 well of course we try and get the 850 plus but you’ve got to start in that 8 to 850 to really generate the inquiry. Price is really critical and it’s probably the one that people get wrong most often.
Kevin Turner: John, when we’re looking at price, and we also talked about market segmentation, and one of the things we’ve seen over the last 12 months or so is we’ve seen that top end slow down a bit, so sometimes it could be a slowing market and it’s certain price segment. Would you agree with that?
John McGrath: There’s no doubt that any marketplace is different price segments and different geographies. At the moment we’ve seen Australia-wide, we’ve had a boom in the bottom end of the market of the first homebuyer, lower price stuff, and the middle and upper ends have been more or less sluggish. You’ve got to be pragmatic and you’ve really got to look at in real time over the last 3 months properties in your price range and your area, what have they been transacting before because it’s no good saying the market’s good or the market’s bad because the only market that’s relevant to you and your sale is exactly the sort of properties that you’re going to be competing with.
Kevin Turner: If your property’s not moving you may have to sit down with your agent and ask them some really tough questions. Put the shoe on the other foot, John. If you were a seller and your property wasn’t moving, what would you be saying to your agent?
John McGrath: If you’re a seller there I think you’ve got to go to your agent. You’ve got to say to them “Look, we’ve now had it on the marketplace 60 days,” because I think any property that’s on the market 60 days in most markets it hasn’t sold and there’s a problem. Ask for, look for, some constructive, practical advice. One of the issues is often that agents don’t want to give clients what they deem is the bad news. We don’t see it as good or bad news, but we see feedback from the market as really critical. Perhaps the agent is trying to protect your feelings but by doing that they’re really not going to help you get your end result, which is the sale of your property at the best price.
I think you’ve got to encourage your agent to be brutally honest, Kevin, and really say to them “What are the two or three things we have to do to really get this property to move?” Just ask them and run through price presentation marketing and say “Look, do you think it’s price? Do you think it’s the way that we’re presenting it? Are we not accessible enough to the public? Should we be doing open for inspection? Should we consider an option campaign? Do we need to put more dollars into marketing?”
Because again, a lot of agents go in and they don’t want to ask a vendor for a check for 1,000 or for 4,000 dollars for marketing but often that’s the answer to generate the buyer inquiries and to generate the sale at a premium. You’ve really just got to drill into the three or five chips and just look at each one of them a little bit forensically and try and be objective and say “Which one of these elements do you think we are out of the picture on?”
Kevin Turner: John, thank you very much for your time.
John McGrath: Pleasure, Kevin.
Louis Christopher
Kevin Turner: Well the ABS house price series has been released, figures around Australia, let’s find out what they’re showing, as Louie Christopher from SQM Research joins us. Good day Louie.
Louis Christopher: Good day to you Kevin.
Kevin Turner: What are we see when these figures are released, what’s happening with prices?
Louis Christopher: For the March quarter, house prices did rise around the country. The ABS has the rise as being at 2 percent for the quarter and over the year, house prices nationwide are lifted by 11.4 percent. Now, Kevin, to be fair that 11.4 percent number has been greatly influenced by what happened in Sydney, where the ABS says house prices have now risen by 16 points, 6 percent for the past 12 months. The cities if you strip out Sydney, you would actually get price rises really in the order of about 5 to 6 percent for the last 12 months.
Kevin Turner: It just shows you how much the prices have improved in Sydney, I mean they’ve dominated that national market, isn’t it?
Louis Christopher: They have indeed. I mean, there has and continues to be a housing boom in Sydney. It’s been going on now really since the start of 2013 and it still persists today, Kevin.
Kevin Turner: Yeah. So let’s have a look around at the other areas. What about some of these smaller, what about Canberra, what’s happened there?
Louis Christopher: Yeah, look Canberra is one city where we believe house prices are falling at this point in time. The ABS said that Canberra house prices were flat for the March quarter and over the year for Canberra, it’s up by 0.8 percent, so quite clearly the slash and burn that’s going on at the federal level has been affecting the Canberra housing market and given the most recent news on the budget, we’re expecting the down turn in Canberra to continue for the foreseeable future.
Kevin Turner: What about Perth?
Louis Christopher: Perth house prices for the past 12 months are up by 7.7 percent, Kevin. Over the last quarter though, they rose by 1.3 percent. The Perth market is clearly slowing down. We’ve been putting a couple warnings also out there on the rental market, where rents are falling at this point in time. We are concerned that later in the year, it’s quite probable that house prices will start to officially record falls for Perth.
Kevin Turner: Yeah, do you think that’s going to be reflected across the country, given that Sydney continues to, well there’s no sign that that’s going to end any time soon?
Louis Christopher: No, the data, it’s pretty evident that what the data is telling us is that each capital city has got it’s own story to tell. So yes, Sydney is still booming, Canberra’s falling, Perth is slowing, Brisbane is starting to actually accelerate, Melbourne’s slowing and so it’s really wrong for anyone to say, we’ll talk about the overall national market going one direction or the other. It’s really quite varied in the sense of what’s happening around the country, Kevin, when it comes to the housing market.
Kevin Turner: Just to round out our series for today, Louie, what are you seeing with listing numbers?
Louis Christopher: Yes, so listings have actually been falling in the month of April. We just had a slight decline effectively of about 3 percent for the month, but we were expecting a little bit more of a decline in April, you must remember of course that we have holidays during that month, we’ve [inaudible 00:03:40] Day in the Easter break. So normally listings fall more than what they did for that month.
Kevin Turner: Yep.
Louis Christopher: It’s early days but it might actually imply that perhaps the listing side of the market is actually starting to bottom out, and that we may well see an increase in listings as the year progresses.
Kevin Turner: All good news. Well, it always is when we get a better insight into what the market’s doing and we always get that from Louie Christopher. You can get the detailed reports too at their website SQM Research.com.au. Go and check it out for yourself. Louie, thanks for your time.
Louis Christopher: Thank you Kevin.
Michael Yardney
Kevin Turner: I received an email from Keri, Keri Burney, who asks a very good question I want to share with you and I’m going to get that question answered by Michael Yardley from Metropole Property Strategies. Keri, thank you for the questions, very good, in fact we’re going to give you a special prize. We’ll tell you in just a moment what that is. Michael, Keri’s question which I’ve sent through to you is nice and simple, but probably the answer’s not going to be. Keri says, can you please advise how I find out where an area is on the property clock? Michael, welcome to the show.
Michael Yardney: Hello Kevin. Well Keri, good question because you don’t want to get in too late in the cycle and currently there’s lots of talk where maybe it’s a bit too late in some regions. I’m not sure that’s correct, there’s not one web site you can go to, or one place you can look at where things are in the cycle. Kevin, to do it, you’ve got to actually dig down and do quite a bit of research to see what’s going on.
Kevin Turner: Yeah, it’s even more confusing for some people because I think they think there is like one cycle and somewhere, everywhere in Australia is somewhere in that clock at the same time. It doesn’t really work that way.
Michael Yardney: No, it doesn’t. There’s multiple cycles, even in each state there are different cycles relating to you graphically and different price points. For example, the first time home buyer market is running at a different pace to the middle ring of established homes and then the prestige end of the market is very much driven by other things like the stock market, Kevin. So it’s partly price points, partly geographic, but there is some research one can do to try to work out where we are.
Kevin Turner: Well, let’s try and help Keri. Where would you go if you were trying to find out if a particular area was, or where it was in that cycle?
Michael Yardney: Well, I’d start with a top down approach and have a look at how’s the whole Australian economy going and where are we in our economic cycle and how we’re likely to be affected by the macro-economics factors that are occurring overseas and locally. Things like inflation, things like unemployment, which has a lot to do with consumer sentiment. Things like inflation and interest rates, so they’re going to affect all of Australia, but then once we understand where we are in the cycle, we then start to dig down and have a look at each state. Because as we’ve already said, each state has it’s own stages of property cycle. I’d dig down to some local factors, Kevin.
Kevin Turner: So we’re look nationally first, then we start to go into state demographics. Where would you look at to pick it up on a state wide basis?
Michael Yardney: Kevin, my philosophy of property investment is to buy high growth properties, ones that are going to out perform the averages, so it actually has a lot to do with demographics and how people live and where people want to live in household formation. We actually have a look at things like, and then we actually have a look at what’s for sale. I like looking at how many properties are for sale at the moment and what our level of housing stock theory is. One place one can do it is at web sites like SQM Research, which gives you an indication of availability of stock, [inaudible 00:02:52] and Price Finder has those things as well. I want to see how much is available for sale in relation to how many people are looking and also then how long is it taking to sell properties.
Kevin Turner: That’s days on market, I think, they’re also the amount of stock on the market?
Michael Yardney: We’re looking for decreasing stock on the market to see that the property prices are going to increase and we’re also looking for decreasing time to sell a property. You’re right, Kevin, days on market because that’s the indication that there are lots of buyers interested and properties are selling quickly. Another factor we could look at is not just selling prices, because that’s a sign of what’s already happened, but SQM Research has asking prices which interestingly are an advance indicator, they show what vendor’s confidence is, what sellers think they’re going to get. Interestingly when you look at it three, four months later when the Australian Bureau statistics figures come out, what properties have sold for, they correlate very well.
So what we’re really talking about Kevin, is some of the research I tend to do and at Metropol do is to try and find areas that are about to, or are going to continue to increase in value so that we can do our research and see where it is in the cycles. We dig even deeper Kevin.
Kevin Turner: What else do you look for Michael?
Michael Yardney: I like looking at auction clearance rates particularly in Melbourne and Sydney, they’re not always relevant in some of the other states where auction aren’t as high, but clearly they’re an indication of what’s happening with consumer sentiment, with buyer sentiment and how strong that is. Getting to be also as investors look at things like vacancy rates, in other words, is there a over supply of rental properties on the market. Not that that’s necessarily going to affect capital growth, but it gives an indication of what’s going on and so we also look at what’s happening to rentals. When we start identifying localities, suburbs that we want to invest in, we look for things like what sort of people are living there, what sort of jobs are they doing, what’s happening to their wages, is there a change in the suburbs such as infrastructure changes, population growth occurring in the area and things like confidence in the area.
Often there’s local areas of confidence or local areas of lack of confidence. For example, take the [Galong 00:05:11] region of Victoria, which has been battered and hammered by a number of industries leaving. Even though some of the real estate fundamentals are good there, when consumer confidence is down because people are worried about their job security, that’s not a good sign for the property market there.
Kevin Turner: So Michael, there’s a lot of information in there, and it’s been fantastic to go through a lot of it, but I wonder if you would just summarize it for us and just give us maybe in dot point the things we should be looking at.
Michael Yardney: First of all, we start with the macro-economic factors of how Australia is going, and then we look at the micro-economic factors of the local markets. Things like stock level, house time on market, auction clearance rates, asking prices, median prices and local factors like vacancy rates, the amount of confidence in the area, new industries and population growth. But Kevin, they’re all numbers. What’s really more important is to see the trend in which way they’re going, and often when they’re all heading in the right direction, that area is still rising. Does that tell us where we are in the cycle? That’s actually not so easy to say where you are today. Boy is it easy to look in retrospect, Kevin. Obviously it’s not so easy to tell where you are today, otherwise there wouldn’t be all the conflicting opinion, would there.
Kevin Turner: So Keri, there’s an excellent summary from Michael about what to look for to work out where particular properties or areas are in that cycle. A great question Keri, and I want to thank you for that and Michael, we’re going to give Keri a copy of your new book too, if you don’t mind.
Michael Yardney: My pleasure, Kevin.
Kevin Turner: The book is called, The Rules of Property. There is a website for it, so you can go and have a look at it yourself, and if you’re interested in picking up a copy, you can do it at that website. It’s called The Rules of Property.com.au. So Keri, that book is on it’s way to you. Thanks for the question, and Michael, thank you for your comprehensive answer.
Nicola McDougall
Kevin Turner: My guest this time is the new editor of Australian Property Investor magazine, Nicola McDougall::. Hi, Nicola.
Nicola McDougall: Good morning, Kevin.
Kevin Turner: Nice to be talking to you, and thank you for your time. The first edition that you are the editor of has come out this week. Congratulations. It’s a great edition. I want to talk to you about an article in there that deals with, and talks to, auctioneers. Tell us a little bit about that. Who are the auctioneers?
Nicola McDougall: Thanks, Kevin. Yeah, it was a great edition, I must say, my first real one as the editor, so …
Kevin Turner: Well done.
Nicola McDougall: … a wonderful experience. Look, the article that we have in this month’s edition is called Playing for Keeps. What it was is, we have, actually have, a section in the magazine each month which is behind the scenes. We delve into those people, the property professionals, that work in the real estate sector.
This month, we look at auctioneers. One of our journalists has interviewed Andrew Cooley, he’s the New South Wales Auctioneer of the Year, and also Jason Andrew, the REIQ Auctioneer of the Year, and a former Australasian Auctioneer of the Year as well.
What the story is, it’s just really looking into a day in the life, I guess, of auctioneers, what makes a great auctioneer, and also provide some tips for those of us on the other side of the coin, if we’re going to be a bidder at auction.
Kevin Turner: I did actually catch up with Andrew Cooley. We did a special Skype interview which I think’s available in one of the newsletters. It may even be a link out of that article, I’m not quite sure. We just actually dug a little bit deeper into some of the not so much tricks, but the [whys 00:01:29] that you can actually work with the auctioneer to get the best result, both as a buyer and a seller, Nicola.
Nicola McDougall: Yes, that’s right. Actually, you’re right, Kevin. That interview that you did with Andrew is actually a QI code to the interview, and the actual link in the story in the magazine, so people can access that that way. Also, in the magazine, we have another link to Jason Andrew and his winning performance last year in the 2014 REIQ Auctioneer of the Year competition.
Kevin Turner: Of course, in your previous life, with the Real Estate Institute of Queensland, you were responsible for running these competitions. On the grand experience you had through that, Nicola, would have helped you understand how you can actually work with the auctioneer to get a good result, both as a buyer and a seller.
Nicola McDougall: That’s right, Kevin. The auctioneer, as well as the agent, is there to work for the seller, but also, they obviously are there to provide as much information to the buyers as possible. Auctioneers shouldn’t be seen as the scary person in the transaction. They’re actually there to act as, I guess, real estate’s MC in that environment.
In the competition that these people are involved in, really, really, really tough, puts them through their paces, really tests their ability to think on their feet, their understanding especially of the specific real estate and auction legislation, which is so very important in today’s society. Also, the competitions that they’re involved in, they have to think on their feet, but they also are often in situations where the unexpected happens, and it’s about their reaction to that, while also keeping their cool — and also, at the end of the day, getting the best result for everyone concerned.
Kevin Turner: Yeah, there is a lot of skill in the auctioneering, and we’re seeing that, too. The point of my interview with Andrew Cooley was to try and demystify that process a little bit, especially for buyers, because you can face the auction process and be very, very scared of it. But really, and you pointed it out, too, the auctioneer, while they work for the seller, they also are very willing to help a buyer to secure the sale. That’s really what they’re there for, Nicola, isn’t it?
Nicola McDougall: That’s what I mean. Without a buyer, there is no sale.
Kevin Turner: That’s right.
Nicola McDougall: Of course, that’s what they’re there to do on the day. Those auctioneers, and certainly Andrew Cooley and Jason Andrew are in this league, they are wonderful showmen. It’s a great experience to watch them, whether it’s in a competition or in a real-life auction. I think of, as a buyer, I personally haven’t actually bought at auction yet myself, but I feel that I’ll be more than capable of doing it, I guess because of my background clearly.
One thing that I would suggest, if anyone’s considering either selling or buying by auction, is just go along. Go along on a Saturday morning. There’s auctions, especially, and certainly in Sidney and Melbourne are a huge part of the market in those areas, and Queensland, they’re a growing part of the market.
Go along on Saturday mornings. Just be one of the crowd. Make sure that you understand the process is really nothing to be scared of. The more experience that you have, the more times that you’ve been to these types of events, the more calm you will feel if you decide to buy or sell at auction yourself.
Kevin Turner: Yeah, certainly, the advice I’ve had from both Andrew and Jason, in the number of times I’ve spoken to them, is that, go to the, and witness the, auctioneer who will be doing the auction you’ll be bidding at, to understand how they work and how the flow is. Even go and approach them and ask them, “How can I go about bidding?”
I guess the other thing, too, that came out of my chat with Andrew was to make sure that you have a plan and you stick to it, Nicola. Very, very important if you’re a bidder at an auction.
Nicola McDougall: That’s right, exactly. I mean, look, an auction is, from a seller’s point of view, probably the best way to determine what the market price of your property is. Of course, there’s a number of factors involved in an auction, and the key one is getting people along on the day. There’s that sense of excitement, the auctioneer’s there, they’re doing a wonderful job. Unfortunately, sometimes people might get carried away.
What you need to do is, have a game plan, know your numbers in regards to how much you can afford, and stick to it. Don’t try not to get carried away with it, because, as the end of the day, what you bid is what you buy. You don’t really want to have overextended yourself or anything like that, but you just really enjoy the moment and have a game plan and stick to it.
If the bidding gets above where you’re comfortable at, just walk away, because that property may be not the one for you, and maybe the next auction that you go to, that’s the property that is supposed to be your home.
Kevin Turner: There is always another property, and it’s great talking to you, too, Nicola. We’re out of time. Thank you very much. Congratulations on the latest edition, the July edition, of Australian Property Investor magazine. It is out right now. Look for it on the stand. Great reading, and we look forward to talking to you next month. Thanks, Nicola.
Nicola McDougall: Thanks, Kevin.
Rob Balanda
Kevin Turner: Over the last couple of weeks we’ve talked about cross-collateralization. Rob Balanda from MBA Lawyers has been in touch with me and said that he wants to make a point about it because he feels that we may have missed one of the major benefits. Rob, thanks for your time. Tell me what it is you think we’ve missed.
Rob Balanda: G’day, Kevin. I’ve listened with real interest over the last few episodes to some famous Australians, Kevin, talking dialoguing about the pros and cons of cross-collateralization, yes. No one’s mentioned one very important benefit and it’s important that listeners have the benefit of all the pros and cons. That is the benefit that you get from using it in terms of asset protection.
Those Australians looking to build wealth or as a business operator, we all live under that fear that one day someone is going to have a go at us and what in the world is the point of doing all this if someone’s just going to have a go and take a big hunk of it from you. Australians very carefully now consider asset protection in terms of their investment.
Cross-collaterlization is a pretty cunning strategy in terms of asset protection. It allows you as an investor to create an impression that you are a man of straw and therefore you’re effectively worthless. The plan starts early in your property investment days when you fund the purchase of your second and any subsequent properties by drawing down on your equity on the first one. Instead of drawing the money down and giving it to the seller of the property you’re buying, the second and third property, what you instead do is provide that first property, to provide it back to the lender on the purchase of your second and third property, give it to them as cross-collateralized security.
That way, anyone looking to have a go at you, what they’ll instruct their lawyer to do is do a search, a real property index search at the titles office to see what properties you’ve got and they’ll find that you’ve got multiple properties and they’re all interlinked, all coupled in favor of a string of loans to this one lender. It’s very powerful indeed and so a lot of people do it. Some people do it just for that purpose alone. That’s a major benefit.
You’ve got to use it with discernment, though. It’s got great stamp duty benefits and capital gains benefits – that is, there is none when you implement this strategy for asset protection. You’ve got to have a clear mind when you implement it because it can be your downfall, because what it involves is over time all of these properties being tied up and linked to the one lender. If they have a change of heart, they don’t like a couple of the postcodes in your portfolio a property is given, they can just call all the loans in. More likely what they’ll do is they’ll call upon you to inject some more money. If you’ve got all your properties tied up with that lender that can cause you some real grief.
There’s the asset protection benefit. It’s real and a lot of people do it just for that, but use it with discernment, balance up all those pros and cons that other famous Australians have mentioned, and decide whether it’s best for you. My personal take on it is, yeah it’s okay but not if all your loans are with just one lender. You’d want to have two or three lenders before you did something like this. Then if one of them changed their strategies and stuff then the risk management, and the call monies in for example, you’ve got another lender to call back on.
Kevin Turner: You’d likely divide your portfolio up a little bit amongst a couple of lenders, but certainly cross-collateralization cross a few lenders is not a bad thing, Rob, is what you’re saying.
Rob Balanda: Yes, it can be for a lot of people, Kevin. Food for thought.
Kevin Turner: Rob Balanda from MBA Lawyers. Thanks for your time, mate.
Rob Balanda: G’day to you Kevin.