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First Time Property Investor is for Australians who want to invest in property but feel stuck between too much information, conflicting advice, and the fear of getting it wrong. Get honest conversations, practical insights, and clear strategy to help you avoid costly mistakes and move forward with confidence.
Hosted by: Imtiyaz Rather from Hack Mortgages, Pete Theodorou from Mindset Property and Skye Taylor from Taylored Property. You get get the full picture from Mortgage Broking, Buyers Agency and Property Management.
Want to connect with us? ➜ https://linktr.ee/ftpi.pod
[00:00:00] Imti: In part one, we looked at strategy, portfolio size, and owner-occupier decisions. As well as that, we covered new builds and loan structures, and this is all about tackling the top 10 questions we're getting asked at the moment about the tax law changes in the property investment space. Ultimately, should you do it?
In this episode, we're looking at the bigger market and the decision-making questions. So part one was more tactical. This is gonna be all strategy. Is it worth it to invest in property after the changes? What types of property are likely to perform? Are rents going to keep rising? Is now a good time to buy with prices dropping?
And are buyer's agents even still worth using anymore? These are the questions that people are firing at us at the moment because they're just confused about what their next move looks like in the new world. So today, we're gonna keep it practical. We'll fire through this as quick as we can while giving you as much info as we can, what to look for, what to be careful of, and just how to make an informed decision moving forward.
So let's start with the broadest question, but it's also the question we're getting thrown at us the most. Is property still worth it? Pete, why don't you lead us off?
[00:01:14] Pete: Yeah, It's been a question on everyone's mind for years, but definitely now it's every second question I'm getting. But 100% it is still worth it.
[00:01:21] Imti: Mm-hmm.
[00:01:22] Pete: Does come with a high level of risk, but it's still the safest asset class to leverage against.
[00:01:27] Imti: Mm-hmm. Talk to us about leverage and why that's probably the reason for your answer. Assume someone doesn't even know what leverage even means and why it makes a difference. Why is it important?
[00:01:38] Pete: Yeah, so you're basically leveraging the money against a higher valued asset.
So let's say you've got $100,000 to spend.
[00:01:45] Imti: Mm-hmm.
[00:01:46] Pete: You can either put that into the share market, the value's $100,000.
[00:01:49] Imti: Mm-hmm.
[00:01:50] Pete: As opposed to property, you'll use that money to borrow and buy a $600,000 property, and essentially the growth that you get will be on the $600,000 as opposed to the sitting in the share market as an example. Let's say both do 10%.
[00:02:05] Imti: Mm-hmm.
[00:02:05] Pete: Your $100,000 in shares goes up to 110.
[00:02:08] Imti: Yep.
[00:02:08] Pete: But in property, it's 660, so there's about a 50 grand difference there.
[00:02:12] Imti: Yep. That's where people get really excited about property, but people also lose sight of what the actual cash return would be-
[00:02:19] Pete: Yeah
[00:02:19] Imti: to them as well, right? They see that initial 60 grand and they get really excited. When you're looking at another investment vehicle, you may not be paying stamp duty, interest on a loan, all of these costs that almost eat up the first year's worth of growth if you do 10%, and then people sell out early and then realise, "Oh, I didn't actually make 60 grand, I made 3"-
[00:02:39] Pete: Yeah
[00:02:39] Imti: once all the costs are accounted for. It's also important for the person listening to this to understand that between the three of us, we're juggling this question a bit ourselves, and when we were planning this episode and going through these questions, we probably all hit a point where we're like, we need to unpack that in more detail at a later date, but it'd be fair to say that we've all had our moments as well through these changes, right?
Where we've all sat back and gone-
[00:03:06] Skye: Mm ... "
[00:03:06] Imti: Is it?"
[00:03:07] Skye: And thinking about who it's suitable for ... a lot of people have gotten away with property investment by the bones of their ass, quite frankly.
[00:03:15] Imti: Mm-hmm.
[00:03:16] Skye: And now I think it's only suitable for those who can actually afford it. The people just scraping by shouldn't be doing it.
[00:03:22] Imti: Mm-hmm. part of that as well comes down to there's been a lot of accidental investors in the last- ... two to three years, let's call it. They've never seen a downtrend in a cycle, and the only thing that they know is that property, quote unquote, "always goes up," which, spoiler, it does not. Negative equity does exist, and leverage, although it's a big superpower like you touched on, Pete, it can also work in reverse.
So when you're taking on debt and utilising leverage, yes, your returns can be higher, but so can your losses if you go backwards.
[00:03:54] Pete: Yeah, massively. Yep.
[00:03:55] Skye: And one thing that you have in property that you don't have in, say, shares, is increased cost.
[00:04:00] Imti: Yes.
[00:04:00] Skye: That cost point doesn't change-
[00:04:02] Imti: Mm-hmm ...
[00:04:03] Skye: with some other asset classes.
[00:04:04] Imti: Yeah. The biggest thing here for me, with the conversations that I've been having around is property still worth it, to both of your points, the leverage piece, the cash flow piece and, being prepared to stomach some expenses. The other thing that I would really highlight is that you can't do it by accident anymore, and there's gonna be a bigger gap between good investments and bad. And the middle ground-
[00:04:28] Skye: It's less forgiving.
[00:04:29] Imti: Yeah, the middle ground that used to be there where you're like, "Oh, yeah, I'll get, 7%, even if it's not the best investment property in the world." I feel like that's just gonna disappear, and you're gonna have two sides of the fence where there's gonna be really, really slow growth on one side of the fence, and then you're gonna have the things that have always performed, perform even better because they're in higher demand. That's a great segue into question two, 'cause Pete, at the moment, this would be top of mind for you. What properties will perform best?
[00:04:58] Pete: The properties that have been performing best for the past 50, 60, 70 years. Those that have the fundamentals, location, proximity, amenities, all of those things that I we kinda start to take for granted a little bit as well.
[00:05:09] Imti: Mm-hmm.
[00:05:10] Pete: I- it's close to all of that, then I don't think you can go wrong long term. It just gets dangerous when you start to look on the outskirts of suburbs and in those newer developments there where there's just nothing around.
[00:05:20] Imti: Mm-hmm. That's where that decision becomes even more crucial now, right?
Where the margin for error has dropped quite significantly, and if you do buy in the outer rings, you're not running the risk of just not having growth, you're actually running the risk of potentially going backwards.
[00:05:37] Pete: Yeah, definitely. Yep.
[00:05:38] Imti: One more strategy that I guess when it comes down to the properties that will perform the best is looking at the growth potential through a couple lenses. Like you said, Pete, around the fundamental piece, infrastructure, hospitals, roads, good schools, all the things that we talk about regularly, and not hotspot hunting.
[00:05:57] Pete: Should we touch on that, just in case people don't know what that means?
[00:05:59] Imti: Mm-hmm. Yeah.
[00:06:00] Pete: Yeah.
[00:06:00] Imti: Go.
[00:06:00] Pete: So I guess the hotspot hunting is where people are trying to pick markets which are gonna boom, essentially.
[00:06:06] Imti: Mm.
[00:06:06] Pete: So do 20, 30% in a year or two.
[00:06:08] Imti: Yeah.
[00:06:09] Pete: And then essentially they don't care about after that. it's a really
[00:06:12] Imti: Yeah, yeah ...
[00:06:12] Pete: you get in and you make your 20 or 30%, you take the equity out and you buy something else.
[00:06:16] Imti: Yep.
[00:06:16] Pete: Those days are gone. It worked in the past, and it won't work going forward, but that's essentially what- the hotspot approach is. Particularly in some of these regional towns as well, where investors will flood particular markets of, less than 20 or 30,000 people.
[00:06:29] Imti: Mm-hmm.
[00:06:30] Pete: And essentially just, manufacture their own growth really.
[00:06:33] Imti: Yeah.
[00:06:34] Pete: And then yeah, like I said, strip the equity out and go for into another property.
That's the hot spotting approach.
[00:06:38] Imti: Yeah. That's a great breakdown, and the other contributing factor to that is we've seen the tax law changes, but we've also seen a lot of changes in the lending space that makes access to money a lot harder. I won't dive into full complexities, but changes in the trust lending space, changes with negative gearing, changes with lender appetite around certain policies, SMSF lending going, the market's got less money available, which then creates in a supply and demand , I wouldn't say imbalance, but it slows it down, right?
[00:07:07] Pete: Yeah.
[00:07:07] Imti: You can't go out and buy 10 regional properties that are 400 grand anymore because you can't get access to that cash anymore unless you're super high income. When it comes down to properties that are gonna perform the best, instead of using that approach of, we'll get 30% growth and then roll it into another purchase, I'm interested to get both of your thoughts on this, I think manufacturing equity is what's going to be the next tactical shift.
And when I say manufacturing equity, I mean buying a property that might be able to do a three to four bedroom conversion for relatively cheap. Or maybe it's a granny flat, maybe it's an extension, maybe it's a bathroom kitchen reno. But instead of using the equity that they would to go and purchase another property, they might take the 50 grand out, add a bedroom, and add 150 grand to their property's value and more rent coming in instead, because that's the safer move.
What do you guys think about that moving forward?
[00:08:06] Skye: Well, I'm just thinking under the current environment, yes. If that environment changes, then obviously this all changes again, but that does seem to be the way forward, under the current scheme.
[00:08:18] Pete: Yeah. I mean, we try and target particular properties with the room conversion play.
[00:08:22] Imti: Mm-hmm.
[00:08:23] Pete: the bigger 2000, 2002 builds, sitting on like 500, 600 square meters, and floor plans are well, not modern, but they're pretty much what we want today.
[00:08:30] Skye: Mm.
[00:08:31] Pete: The open plan living and all that, but you can convert one of those livings into that fourth or even fifth bedroom.
So yeah, that's a lot of value there.
[00:08:37] Skye: Mm. Mm. Like how many conversations have you had around granny flats in the last 12 months-
[00:08:41] Imti: Mm ...
[00:08:42] Skye: we wouldn't have had five years ago.
[00:08:43] Imti: Yeah. That's one of those things where it comes and goes, the granny flats. That strategy's probably been around for, like, 20 years, right?
[00:08:50] Pete: Mm. Mm.
[00:08:50] Skye: But a difference in the type-
[00:08:51] Imti: But-
[00:08:51] Skye: ... of granny flat.
[00:08:52] Imti: Yes.
[00:08:52] Skye: Like now we're talking proper full spec-
[00:08:54] Imti: Standalone ...
[00:08:55] Skye: actual house-
[00:08:56] Imti: Looks like a house
[00:08:57] Skye: ... on top of the land.
[00:08:57] Imti: Yeah.
[00:08:57] Skye: Yeah. As opposed to an eco hut that someone's gonna rent that out and get some- Yeah ... extra cash.
[00:09:02] Imti: We'll convert the garage.
[00:09:03] Skye: Yeah.
[00:09:04] Imti: And tying it back to the properties that are going to perform, now the play is quality over quantity more than anything.
[00:09:10] Skye: Mm.
[00:09:10] Imti: Because spending a little bit more on that first purchase deliberately, and it might be your only purchase- Your returns are potentially gonna be on that side of the fence where they are on the good side and they don't fall into that abyss in the middle.
And then the two to three-bedroom conversion or the granny flat or the cosmetics get you a better return compared to even purchasing a second property when you factor in stamp duty, interest on the second property
[00:09:36] Skye: CGT ...
[00:09:37] Imti: CGT, and buying a worse property, full stop.
[00:09:40] Skye: Mm.
[00:09:41] Imti: Bringing it back to what properties will perform best, and is property still worth it?
I think it's a yes, but you've gotta double down on the fundamentals, and there's no room for accidents anymore.
[00:09:51] Skye: There's no forgiveness. Yeah.
[00:09:52] Imti: Yeah. There's no forgiveness.
[00:09:53] Skye: And that's the thing, I think a lot of people have had that forgiveness in the market because of what it's done since COVID.
[00:09:58] Imti: That ties into our next two questions really, really well.
So the other one that, Skye, I know you're getting a fair bit, I'm also getting a fair bit: are rents going to go up, and if so, why?
[00:10:10] Skye: Yes, and the government's $2 a week modeling is ludicrous, and I don't know anyone who agrees with that, not even tenants. I think they're hopeful, but they're wildly misinformed.
Essentially though, what's driving rent increases is housing supply.
[00:10:23] Imti: Mm.
[00:10:23] Skye: At the end of the day, it's always going to be that, and if we look at the numbers, we simply don't have enough houses. Add in all the drama over the last six months with, landlords being in a worse position, and I wanna say two years actually, since all the reforms started rolling out nationally-
[00:10:39] Imti: Mm-hmm
[00:10:39] Skye: that's when the unrest became like, "What do you mean I can't evict a tenant in my own property? What?" So there's that side of it that we've seen landlords exiting the market, which has reduced supply, cause then owner occupiers are coming and buying those properties. That has been consistent for years.
But what's coming is just a bigger divide between the haves and the have-nots really, Well, what I see in South Australia, the median rent's $630 a week. There's a lot of people who simply cannot afford that.
[00:11:08] Imti: Mm-hmm.
[00:11:08] Skye: There's not enough units in the market to support underneath that. So that market will be very strong always until that reaches our median, and that's only gonna push the house up further.
What's happening already in the marketplace is general feedback around people needing to prepare for the coming 12 months, and they're taking that into their rent increase conversations. But it also doesn't mean that a property that's worth $600 a week is suddenly gonna be worth 800. It will be a slight increase because salaries still haven't kept up.
[00:11:36] Imti: Mm-hmm.
[00:11:37] Skye: But the demand will push up the pricing at the end of the day.
[00:11:41] Imti: Mm-hmm. Pete, off the back of what Skye just touched on, would it be safe to say that all rents are gonna go up, or do you think that that's too optimistic, or there's assumptions around rental growth that are probably-
[00:11:52] Skye: That's too broad.
[00:11:52] Imti: Too broad. Yeah.
[00:11:53] Skye: Probably I could have gone on on that one because it's not all areas and it's not all houses.
[00:11:57] Imti: Mm-hmm.
[00:11:58] Skye: And that's the assumption that I think a lot of investors make-
[00:12:01] Imti: Mm-hmm ...
[00:12:02] Skye: that 'cause they're hearing it in the media.
[00:12:03] Imti: Yeah. Rents are going up.
[00:12:05] Skye: Mm. But you can ask for the rent and get terrible tenants and have a horrible experience.
[00:12:11] Imti: Mm.
[00:12:11] Skye: If you're reasonable about it, you attract the quality tenants, and you have a much more pleasant experience. But it's that assumption that it's all going up across the board, and when we talk about estates, that's not the case at all. Significant vacancies.
[00:12:25] Imti: Mm-hmm.
[00:12:26] Pete: Yeah, and if you're buying based on fundamentals though, the rent will go up.
[00:12:29] Imti: Yeah.
[00:12:29] Pete: Yeah. if you come back to question, two, what's gonna perform best, when you layer the risk of buying with fundamentals and then-
[00:12:35] Skye: Mm
[00:12:35] Pete: ... if you need to manufacture equity, you can by doing a broom conversion or granny flat to increase your rent. If you've taken that risk-based approach-
[00:12:41] Imti: Mm
[00:12:41] Pete: then I think it's fair to say rents will go up.
[00:12:44] Skye: Yes.
[00:12:44] Pete: But, yeah.
[00:12:45] Skye: But it's wrong to assume it will go up everywhere.
[00:12:47] Pete: That's right, yeah. But if you're buying on the outskirts where the supply is high-
[00:12:50] Skye: Mm ...
[00:12:51] Pete: and the vacancy rates are probably above 10%-
[00:12:53] Imti: Mm.
[00:12:53] Skye: Mm ...
[00:12:53] Pete: the rent's actually gonna be less than what it was 12 months ago-
[00:12:56] Skye: Correct.
[00:12:56] Pete: Yeah.
[00:12:56] Skye: And I think that's what we're gonna see in some of the ones we've talked about.
[00:12:59] Pete: Yeah.
[00:13:00] Imti: Yeah.
[00:13:00] Skye: That will actually start to slide as those supply areas increase.
[00:13:04] Imti: Mm-hmm. 'Cause the bottom line is people wanna live close to infrastructure, right?
[00:13:07] Skye: Mm.
[00:13:08] Imti: If they have a choice between a 45-minute commute and a 15-minute commute-
[00:13:11] Skye: Mm-hmm
[00:13:12] Imti: they're gonna go after the place that has the 15-minute commute, even if the rent's more expensive.
[00:13:15] Skye: That's what I've been saying for years. The fact that your average rent in, let's talk about it, Elizabeth, Munno Para, is hitting 650, but you can also rent a property in Prospect for that.
[00:13:26] Imti: Mm.
[00:13:26] Skye: Why would you live out there?
[00:13:27] Imti: Yep.
[00:13:28] Skye: Think about it from what you would do
[00:13:29] Imti: Yeah. From a livability perspective, get me as central and in the best area possible.
[00:13:33] Skye: Absolutely.
[00:13:34] Imti: And so we're gonna see this split again, where-
-
[00:13:37] Imti: Really, really, quote unquote, "good" areas, properties that are landlocked-
[00:13:42] Skye: They'll be tighter
[00:13:43] Imti: they'll be tighter.
[00:13:43] Skye: Yep.
[00:13:44] Imti: And the other side of the fence might be a little bit looser. And for anyone listening to this who might be a little bit confused about, well, if the property market's softening, which is part of question four around is now being a good time to buy, if the property market's softening and there's more properties on the market, why are rents going up?
Because the spiel that everyone gets sold is if more property investors leave the market, rents will go down because more renters will become owner occupiers. The problem with that math is, let's say you've got 50 houses, right? Think of a Monopoly board. 50 houses. You got your greens and you got your reds.
Your greens are owner occupiers, your reds are rentals. If all that happens is a red, which is a rental, becomes a green house-
[00:14:32] Skye: Mm ...
[00:14:33] Imti: and there's still just 100 properties between the two, and we've got an aging population and more people coming into the country-
[00:14:39] Skye: Yes
[00:14:40] Imti: so people needing housing, outstripping the 100 that's there, what's gonna happen to the red houses?
The price of the red houses goes up.
[00:14:48] Skye: Mm-hmm.
[00:14:49] Imti: Because more people are trying to get into the red houses. And bringing it back to your point, Skye, the fundamental issue is always has been supply. And that's why for the really high-demand areas, I think rents are gonna continue to tick up.
[00:15:03] Skye: Yeah.
[00:15:03] Imti: I think the government's 2% modeling is optimistic. but I think what will happen is that we might see rents slow down or drop in all those outer markets.
[00:15:14] Skye: Yeah.
[00:15:14] Imti: And so the figure won't look as bad on paper.
[00:15:17] Skye: Mm.
[00:15:17] Imti: So it might be, oh, rents only went up 5%.
[00:15:20] Skye: Yeah. I can agree with that, that they're talking state or national level.
[00:15:24] Imti: Everything combined, right?
[00:15:25] Skye: Sure.
[00:15:26] Imti: But the property market isn't the property market. The property market is micro markets.
And it's little pockets everywhere, and so you're gonna see surges in high-demand areas and then cooling off in not so high-demand areas.
[00:15:38] Skye: Yeah. And 'cause if you think about the supply and demand issue, the red versus green, and I'm now confused which one meant which, but let's take, the more desirable areas.
[00:15:47] Imti: Mm.
[00:15:48] Skye: That's where your supply is shrinking because that's where people want to live. If they're going to commit to a 30-year mortgage, that's where they're wanting to buy. They're not buying on the outer ring.
[00:15:56] Imti: Mm.
[00:15:56] Skye: Unless they have no other choice, but it's actually all just shrinking everywhere except the outer ring really.
[00:16:02] Imti: Mm-hmm. Which actually, funnily enough, probably presents an opportunity for people to buy right now. And get into the market, pay down some debt, build up some equity while the market's cooling.
[00:16:13] Pete: Mm.
[00:16:14] Imti: And then when the next uptick happens, which it will, we still don't have enough supply, so the math is gonna math.
They can then take advantage of the fact that they were brave now, ' cause question four is actually, is now a good time to buy? Especially with property prices either stalling or dropping in some markets. Pete, you're the person negotiating every day. What do you think? Yeah, I think
[00:16:37] Pete: it's a great time to buy. What is that quote? Warren Buffett.
[00:16:40] Imti: Oh. The quote about how when stuff's on sale, you go shopping-
[00:16:43] Pete: That's right ...
[00:16:44] Imti: essentially.
[00:16:45] Pete: Yeah. A- it's just so true at the moment. I mean, in Adelaide, the clearance rates are, what, 43%, which is the lowest levels in years.
[00:16:51] Skye: Years.
[00:16:52] Pete: I think this time last year it was above 60.
And you can't ask for better conditions than right now. The problem that people are having though is they're trying to time the bottom of the market.
[00:17:00] Imti: Yes.
[00:17:00] Skye: Mm.
[00:17:00] Pete: And it's owner occupiers and it's investors, they don't wanna jump in and have negative equity. But if you're buying the right property, you might have negative equity-
[00:17:08] Skye: It's unlikely.
[00:17:09] Pete: Well, yeah, but It'll be temporary.
[00:17:10] Skye: Yeah.
[00:17:10] Pete: It'll be very, very quick turnaround and bounce back to equilibrium. But that's where people are getting wrapped up at the moment, is they don't wanna go in and buy property and it goes backwards a little bit.
[00:17:18] Skye: Mm.
[00:17:19] Pete: But they're not taking that longer term view.
You're not gonna care about that in the next 10 years.
[00:17:22] Skye: No.
[00:17:23] Pete: Because once the market does turn, competition comes back, prices start to sell above price guides, auctions are firing.
[00:17:29] Skye: And that's the bigger picture that-
[00:17:29] Pete: Yeah
[00:17:30] Skye: ... a lot of people are missing, that, yes, okay, it's cooling, softening, whatever you wanna call it, but it's not going to be permanent.
[00:17:37] Pete: No. And it will happen real quick too. Cause everyone's so reluctant now.
[00:17:40] Skye: Mm.
[00:17:41] Pete: People will take months again to even think about it.
[00:17:43] Skye: Mm.
[00:17:44] Pete: But after those couple of months, the market's probably back up again and not firing, but-
[00:17:48] Skye: Mm
[00:17:49] Pete: ... that money you tried to save, you now have to probably spend more than that and compete with other buyers.
[00:17:53] Skye: Yeah. Correct.
[00:17:54] Pete: So in terms of like, how you'd assess it, it just depends on how long the property's been up on the market. I think that's a really good indicator-
[00:18:00] Imti: Mm
[00:18:01] Pete: ... at the moment. If there's been a couple of open homes, like a couple of weeks, you know it's a bit of an opportunity there to not necessarily lowball, but get the property at the lower end of the price guide.
[00:18:09] Imti: Mm-hmm.
[00:18:09] Pete: I think that would be the big one. Talking to agents as well, particularly if it's an auction market, and seeing if properties are selling.
[00:18:15] Skye: Mm.
[00:18:15] Pete: I spoke to one not long ago, a Ray White. All they did was auctions, right? And they had about 10 auctions on the weekend, they Only sold two. Which is a big indicator in terms of, that particular market, but obviously your negotiation power as well. Because vendors-
[00:18:27] Skye: I think it, it weakens-
[00:18:28] Pete: Yeah
[00:18:28] Skye: ... as a seller, it weakens your position-
[00:18:31] Pete: Yeah, you're hurting ...
[00:18:31] Skye: if you're passed in.
[00:18:32] Pete: The seller's hurting, And they're keen to do a deal quickly.
[00:18:34] Skye: That's why I'm not a fan of auction.
[00:18:35] Pete: Yeah, yeah. It's-
[00:18:36] Skye: It might go well, but the downside is higher.
[00:18:39] Pete: But agents still bring it to auction, which is crazy to me. A good agent will not even take it to auction. They'll do an auction campaign, they'll be like, "You know what? There's no interest here."
[00:18:47] Imti: Yeah.
[00:18:47] Skye: Mm.
[00:18:47] Pete: "Let's not bother."
[00:18:48] Imti: We'll pull the plug.
[00:18:48] Pete: But a lot of agents still will just take it just because they-
[00:18:51] Skye: It's also an education process for the vendor.
[00:18:53] Imti: Yes.
[00:18:53] Skye: That's why.
[00:18:54] Imti: Yes.
[00:18:54] Pete: That's right. Yeah. I also think it's a good opportunity- And this is diving into the deep weeds of it, so I won't go into it in too much depth.
But Skye, you got plenty of runs on the board in terms of years in the industry as an agent. There's a lot of inexperienced agents who have been in the market for the last few years, right? And-
[00:19:09] Skye: For now, yeah.
[00:19:10] Imti: For now. But while they're around, they're probably not used to these market conditions, which gives purchasers who have the support-
[00:19:16] Skye: Mm
[00:19:17] Imti: let's say for example, of a BA-
[00:19:19] Skye: Dream opportunity.
[00:19:19] Imti: Yeah.
[00:19:19] Skye: Because they haven't actually developed negotiation skills.
[00:19:22] Imti: Mm-hmm.
[00:19:22] Pete: They just don't know what to do ...
[00:19:23] Skye: most of them just all they know-
[00:19:24] Imti: Yeah
[00:19:24] Skye: ... open a door, property sells.
[00:19:26] Imti: Yeah.
[00:19:26] Skye: Happy days. they literally have no idea-
[00:19:29] Pete: Post it on Instagram
[00:19:29] Skye: ... how to psychologically-
[00:19:30] Imti: Yeah, post it on Instagram
[00:19:31] Skye: change a situation. And this is the market that I started out selling in. Average days on market were 80 to 90 days in good areas.
[00:19:40] Imti: most people don't realise-
[00:19:41] Skye: That was normal
[00:19:41] Imti: ... that's normal.
[00:19:42] Skye: Yeah. What we've had hasn't been normal.
[00:19:43] Imti: We've just been hot. We've been running hot for years.
[00:19:45] Skye: Yeah. And I don't think that we will actually get back to that point because we've still got a supply-demand issue.
[00:19:50] Imti: Mm-hmm.
[00:19:51] Skye: But the potential of not pausing now and taking advantage of those fast food agents who have no idea what they're doing sucks for the vendor, but if you're looking to buy-
[00:20:01] Imti: If you're buying ...
[00:20:01] Skye: they're the ones you wanna target.
[00:20:02] Imti: Yeah.
[00:20:02] Skye: Find those rookie agents.
[00:20:04] Imti: get your deposit together, speak to your broker, get an application going and go nuts.
[00:20:07] Pete: Put the best offer forward and- terms and conditions as well, you can negotiate right now.
[00:20:11] Imti: Yeah.
[00:20:11] Skye: Mm.
[00:20:11] Pete: 90-day settlements or-
[00:20:13] Imti: We're having subject to sales accepted.
[00:20:15] Pete: Subject to sale, yeah, that's a big one. Yep.
[00:20:16] Imti: That would never have been accepted. We've had clients who've been able to negotiate down price point and be subject to sale.
[00:20:22] Skye: Mm.
[00:20:22] Imti: Which, unheard of, the last three years. For the person who's listening to this and probably latched onto Pete's earlier comment about negative equity the thing that I would say is that if you're going into this, A, you don't go into a purchase for 24 months.
[00:20:35] Skye: Yeah.
[00:20:36] Imti: You go into a purchase with five plus years as your timeframe as a minimum, otherwise just don't do it. When you zoom out over 5, 10, 15 years, the little dip that you had in month three for six months, you won't care about. And this is coming from personal experience as well, where I've ridden out a couple market freezes, backward steps, whatever it is, where you do see the value drop 100 grand in six months.
[00:21:02] Pete: Yeah.
[00:21:02] Imti: And it is scary. But you've gotta know that if you've got the fundamentals in place and you've got a long-term time horizon, eventually it's a blip on a graph and you won't care about it. That brings us to number five actually in a roundabout way, because we've talked about conditions for agents changing and the market softening and it potentially being a really good opportunity to buy.
But something that's popped up recently as a hot topic is what's gonna happen in the buyer's agency space. We've seen high-profile businesses go under, a lot of businesses pivot to try and, get people to all of a sudden buy house and land packages because they're amazing. Pete, gonna put you on the spot. You run a buyer's agency business day-to-day, what do you think's gonna happen after these tax changes, especially because most of the buyer's agency space is dominated by property investors?
[00:21:50] Pete: Yeah, I think there'll be a consolidation. A lot of the solo operators out there that just didn't quite get off the ground, 'cause it's not that hard to open up a buyer's agency.
[00:21:57] Imti: Yeah.
[00:21:58] Pete: You know, just do your real estate license and away you go, depending on the state, and there's loopholes as well where... Anyway, I won't get into that.
[00:22:04] Imti: But- Yeah. For, for, like for someone listening-
[00:22:05] Pete: Like-
[00:22:05] Imti: ... four-day course, hire a Lambo, chuck up an Instagram post
[00:22:09] Pete: Pretty much, yeah. That's how you could start.
[00:22:10] Imti: You're BA of the year.
[00:22:11] Pete: Yeah.
[00:22:11] Imti: Yeah.
[00:22:12] Pete: and that's the scary thing. Yeah. same thing as fast food buyer's agents. You're gonna see less and less people.
[00:22:16] Imti: Mm-hmm.
[00:22:17] Pete: But what we are gonna see is, and what we are seeing now, is more and more advertising around guarantees, I don't know if people have seen that.
[00:22:24] Imti: Hmm.
[00:22:24] Pete: Yeah. there's a bit of an air-
[00:22:25] Imti: Controversial space?
[00:22:26] Pete: Yeah, a bit of an air of desperation in the buyer's agency space, at the moment.
[00:22:29] Skye: Hmm.
[00:22:29] Pete: Particularly those that are running really, high overheads in terms of, A, staff, but ad spends as well.
[00:22:36] Imti: Mm.
[00:22:36] Skye: Mm.
[00:22:36] Pete: So online you'll see-
[00:22:37] Skye: That's how they built the business ...
[00:22:38] Pete: Yeah ...
[00:22:38] Skye: yeah.
[00:22:38] Pete: Instagram spend and on ads you'll see all these buyer's agents jumping up and down, now about "Guaranteed 10% growth. If we don't see that, then you'll get your money back."
Problem is, the general buyer doesn't understand how any of that works.
[00:22:49] Imti: how do you even guarantee 10% growth?
[00:22:50] Pete: Yeah, I mean, do financial planners guarantee?
[00:22:52] Imti: Yeah. No.
[00:22:53] Pete: Exactly. So it's just very much a-
[00:22:55] Skye: Hm
[00:22:55] Pete: ... a spruiker behavior, and something I just can't stand at the moment, 'cause a lot of these BAs would, talk down to other property spruikers who would sell-
[00:23:03] Imti: Mm
[00:23:03] Pete: off the plans and guaranteed growth rates and stuff like that. And now all of a sudden they're talking about-
[00:23:07] Skye: They're doing it too
[00:23:08] Pete: ... Yeah, that's right. Yeah. Yeah. It's come full circle. There's gonna be a lot of desperation in this space, and people just need to be very careful. But yeah, like I said, also consolidation too.
So you see less agencies around, but you will see the bigger ones, particularly those bigger investor-based agencies-
[00:23:24] Skye: Mm
[00:23:24] Pete: ... continue.
They're throwing ads around and-
[00:23:26] Skye: Pivoting ...
[00:23:26] Pete: Yeah, yeah, guarantees and all this kind of stuff to-
[00:23:29] Skye: Mm
[00:23:29] Pete: ... help people feel a bit more confident about the market.
[00:23:31] Skye: Whereas all the real estate agents have done is drop their pants, 'cause that's all they know how to do.
[00:23:35] Pete: Yeah, they-
[00:23:36] Skye: They can't negotiate on behalf of the clients, and they're quite happily negotiating away their own income.
[00:23:41] Pete: Yeah.
[00:23:42] Skye: It'll be the same story.
[00:23:43] Pete: Yeah, and that too, that will be the next step, right? It's gonna be, discounting on buyer's agent fees and stuff like that.
[00:23:47] Skye: That's what I was- I think, yeah ... wondering, like will that then be the flow on effect- Oh ... when their pivots don't work-
[00:23:52] Pete: Yeah
[00:23:52] Skye: ... the guarantees don't work, suddenly you're then seeing this mass exodus on- Oh ... what you've all been able to, no offense-
[00:24:01] Pete: Yeah
[00:24:01] Skye: but get a reasonably good fee.
[00:24:01] Imti: Yeah, yeah. Because-
[00:24:01] Pete: Yeah, yeah ...
[00:24:02] Imti: well, you think about it, right? if your first purchase isn't going up by 50 to 100 grand in the first year, how can you justify spending 25 grand on a buyer's agent?
[00:24:10] Pete: Mm.
[00:24:10] Skye: Mm.
[00:24:11] Imti: Oh, I paid 25 grand for a BA, and my property didn't go up in 12 months. Ugh,
[00:24:15] Pete: yeah.
[00:24:15] Skye: Questions will be asked. The average comm for real estate agents is not bad.
[00:24:19] Pete: No.
[00:24:19] Imti: Mm.
[00:24:19] Skye: And that's because the real estate agents have been through this, and the fee hemorrhage has already happened-
[00:24:24] Pete: Mm
[00:24:25] Skye: ... 30 years ago.
[00:24:25] Imti: Yeah. And the value in the BA space is going to actually be the BAs who identify those long-term holds that are going to do the double and more over seven years.
And the first 12 months won't be sexy.
[00:24:39] Pete: Yeah. Yeah. '
[00:24:41] Imti: Cause the next-
Mm
... 12 months in the market won't be. But where people will see value is being able to secure somewhere that everyone wants-
[00:24:50] Skye: Entirely held areas ...
[00:24:52] Imti: and being able to hold it over the long term. Or a BA that can help them execute a manufacturing equity strategy.
[00:24:59] Skye: Sure.
[00:25:00] Imti: For me- The strategic play, right?
Yeah. The advisory stuff. Which is very much where the mortgage broking, space has gone as well, it's definitely more advisory-led now to the point where it can be. The red flags for me is if a BA is offering guaranteed growth- And if you're listening to this a little bit after these changes have come out, your social media feed would've gone from BAs telling you regional is terrific to you should buy in your SMSF because it's the best way to do it, to you should now buy house and land because the tax concessions are in your favour. If you rewind those three things, regional was cheap, so it was easy for them to find properties in regional and engage more clients at a BA level. SMSF overcame the borrowing capacity issues, again, easier for the buyer's agents to position properties with clients. And then the third part, everyone's worried about the tax changes and the negative gearing, and borrowing's more accessible for new stock. They've just gone to talking about that. If that's been the timeline of the BA that you're thinking of working with, I'd probably run in the other direction. If it's someone who's been talking about underpinning fundamentals, that's who you wanna work with.
[00:26:10] Skye: And long-term views.
[00:26:11] Imti: Mm-hmm.
[00:26:12] Pete: Yeah.
[00:26:12] Skye: the get rich quick thing is it's not specifically sold as get rich quick, but that's what they're selling.
[00:26:18] Imti: That's what they imply. They're not like, "Oh, get rich quick."
[00:26:20] Skye: It's a fast result.
[00:26:21] Imti: But-
[00:26:21] Pete: Yeah
[00:26:21] Imti: ... all their social media is, "Oh, we got 200 grand uplift in this property in 12 months."
[00:26:25] Pete: Yeah. You could get that in a great location a couple of years ago. But now , you're definitely buying in the inferior locations. And to get into some of the great locations at the moment, those markets aren't growing. They are softening. So there may be a time where, you might buy a property and it hasn't moved in 12 months, and you bought it through a BA. But if it's in a great location, it shouldn't matter 'cause you got that long-term view. People need to get very careful about that because when people are guaranteeing these numbers, they're not in the best locations. They're very short-term lens.
[00:26:50] Skye: Mm.
[00:26:50] Pete: So you'll get that quick uplift. You might get the quick uplift. Mm. It might be a bank val, but that's okay.
[00:26:55] Skye: Mm-hmm.
[00:26:55] Pete: You get the quick uplift, what's gonna happen in year three, four, five, six, up to 10?
[00:26:59] Imti: Mm-hmm. Skye, to bring us home on this point, you're on the other side of the transaction, right? You're selling properties. Are BAs still gonna be worth it?
[00:27:06] Skye: Yes, because at the end of the day, it is a significant purchase.
[00:27:11] Imti: Mm-hmm.
[00:27:11] Skye: And obviously the right BA is it's not all BAs. But there will always be a need for that advisory strategic service and, I'm glad that the BAs have exploded the way they have.
It's been around forever, but in the last five years it's become a thing, and it's enabled most people to go and consider a BA that they wouldn't have 20 years ago. So that's great, but people taking the wrong advice from the wrong people is gonna be catastrophic now if they don't take their time to research the right BA, which is kind of what we've talked about this entire episode.
[00:27:45] Imti: Mm-hmm. Fast food.
[00:27:46] Skye: Fast food, yeah.
[00:27:47] Imti: It's bad for you. Don't do it. Bring us home. If you give one take out to someone who listened to this episode and you wanted one thing to be burning in their mind when they walked away, Pete, what would yours be?
[00:27:59] Pete: Oh, just be fundamentals. Buy based on fundamentals. That's it.
Like, it sounds so simple, but -
[00:28:03] Skye: Mm
[00:28:03] Pete: ... you can't go wrong if you get that right. You might have a year of no growth or a little bit of backwards growth, but over 10 years it will do its thing.
[00:28:09] Imti: Mm-hmm. Yep. Definitely agree. For me it's, boring is sexy.
[00:28:13] Pete: Yeah.
[00:28:13] Imti: If it doesn't get you too high or too low, and it takes a long time, that's probably the right move.
[00:28:18] Skye: Mm.
[00:28:18] Imti: Skye, what would yours be?
[00:28:19] Skye: And that's not sexy.
[00:28:20] Imti: No.
[00:28:21] Skye: No one wants anything to take a long time.
[00:28:22] Imti: No.
[00:28:23] Skye: And so mine is exercise caution.
[00:28:25] Imti: Mm-hmm.
[00:28:25] Skye: If it sounds amazing, is it? Because we're talking that, yeah, property's still great with a long-term view and the fundamentals, but if you're hearing that, "Oh, this could be..." You might well luck it in three years, but you can't be banking on that.
[00:28:38] Imti: Cool. I'm gonna bring us to a close there. If you've made it this far, hopefully you've gotten value out of this episode. If you have, reach out to us on socials. We're always open to questions, comments, and a lot of these episodes just come from client conversations that we think you'd benefit from.
So if there's anything you'd like us to cover, always feel free to reach out and our details will be in the show notes