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Speaker 1: Hello and welcome to the Australians Money Puzzle podcast. I'm

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Speaker 1: James Kirkby. Welcome aboard everybody. It's that time where you're thinking,

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Speaker 1: if you're an active property investor, you might be a

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Speaker 1: little bit disturbed, or perhaps you might be greatly encouraged

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Speaker 1: by a trend in the property market for closed tenders.

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Speaker 1: If you don't know what they are, you'll be well

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Speaker 1: across what they are by the time we're finished this show.

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Speaker 1: We're also going to talk about curious properties, right the

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Speaker 1: irregular property, the converted church, the former shoe factory that's

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Speaker 1: in a very attractive, you think house, but is it

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Speaker 1: really for everybody? Should you ever go near an irregular

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Speaker 1: property as an investor. I also have some great questions,

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Speaker 1: including one on granny flats, which you would think is

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Speaker 1: the simplest issue, but let me tell you it is

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Speaker 1: like global trade negotiations, grannie flats absurd complexities around that. Also, folks,

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Speaker 1: we are planning to introduce audio questions, so when you

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Speaker 1: send your questions in you know, the email the Money

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Speaker 1: Puzzle at the Australian dot com dot au, you can

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Speaker 1: send in a voice note just as easy. You just

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Speaker 1: do a voice note on your phone and then you

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Speaker 1: share it with us and it becomes a recorded question

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Speaker 1: and we can have your voice asking your question on

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Speaker 1: the show. We've got some already, we need a few more.

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Speaker 1: Be the first, be an innovator. Let's have them now.

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Speaker 1: My guest today is a regular guest on the show.

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Speaker 1: It's Kate because she's a buyer's advocate and also something

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Speaker 1: of a media personality, active and multimedia. I see her writing,

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Speaker 1: I see her podcasting, I see her on social media.

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Speaker 1: Got a lot to say, always an always good value.

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Speaker 1: How are you, Kate?

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Speaker 2: Thanks? That's a lovely interrot things.

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Speaker 1: James, tell me you did something recently cut my eye

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Speaker 1: about close tenders. We had something on the show recently

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Speaker 1: about expressions of interest, and what is this about expressions

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Speaker 1: of interest? Once upont a time you only had expressions

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Speaker 1: of interest on something like factory or a landmark building.

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Speaker 1: Now you have it for the house around the corner.

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Speaker 1: So you find these innovations that come in on commercial

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Speaker 1: property eventually trick of their way through, first of all

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Speaker 1: at the top of the property market, residential property market,

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Speaker 1: and then they filter through and they become almost every

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Speaker 1: day tell us about close tenders what they are and

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Speaker 1: what you think of them.

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Speaker 2: As you said, otherwise known as expressions of interest, set

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Speaker 2: sale by set date. They've got a host of names.

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Speaker 2: What it really means is it's a bit of a

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Speaker 2: blind bidding process and in most cases the agents will

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Speaker 2: tell you that you get one chance and one chance only,

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Speaker 2: but there's lots of shades of gray depending on the

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Speaker 2: agency you're dealing with. In the number of other potential participants,

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Speaker 2: they often come back to you. So you need to

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Speaker 2: establish those rules before you put in your bid, because

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Speaker 2: there's nothing worse than exhausting yourself and putting in your

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Speaker 2: final bid and then the agent calls back and says,

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Speaker 2: you've got another opportunity.

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Speaker 1: Tell me I see you place. It says close tender

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Speaker 1: or expressions of interest. How is that different? It's a

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Speaker 1: private sale effectively with some particular rules. What are the

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Speaker 1: particular rules that distinguish it? Phone convention pay too.

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Speaker 2: Well, it's got no real rules so other than having

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Speaker 2: a set date. So like an auction where you've got

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Speaker 2: a set date, it will come to a head provided

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Speaker 2: that there's participants, But unlike an auction, you don't have

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Speaker 2: a requirement to be unconditional so these closed tenders can

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Speaker 2: work really well for the top end of the market,

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Speaker 2: where a property is really hard to price. You're looking

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Speaker 2: for that buyer that gets stars in their eyes and

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Speaker 2: just empties their pockets. It can work really well also though,

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Speaker 2: for entry level homes that attract first home buyers, because

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Speaker 2: as we know, first home buyers can get really nervous

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Speaker 2: about putting forward a bid that's unconditional. They're very nervous

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Speaker 2: about doing so. They're often told by their broker to

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Speaker 2: make sure that their offer is subject to finance. So

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Speaker 2: in a lot of cases, a clever agent might introduce

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Speaker 2: this kind of option where they can bring it to

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Speaker 2: a head within a certain period of time, but they

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Speaker 2: might be fielding some conditional offers. So it works across

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Speaker 2: the board. However, I don't always like it. In fact,

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Speaker 2: I really like.

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Speaker 1: It, right, So tell me what you don't like about it,

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Speaker 1: and I can guess, But you tell me. I presume

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Speaker 1: I think the buyer will be at a disadvantage sometimes.

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Speaker 2: Often it's very difficult to ask someone to give their

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Speaker 2: strongest offer for something when there's no social proof, and

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Speaker 2: we do rigorous analysis. We present them with our pricing analysis,

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Speaker 2: but you're still terrified of putting in a bid that's

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Speaker 2: fifty thousand dollars above someone else, yet you don't want

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Speaker 2: someone to beat you for one thousand dollars. It's one

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Speaker 2: of those really difficult situations. So you tend to find

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Speaker 2: that buyers will be really remorseful when they miss out,

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Speaker 2: or they'll be worried when they secure it, which is

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Speaker 2: quite different to an option.

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Speaker 1: Because they're worried that they've paid way too much.

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Speaker 2: Yeah, did I pay too much? There's no visibility, there's

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Speaker 2: no social proof.

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Speaker 1: So very much, so very much. What you put on

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Speaker 1: the property that you're terribly confident of sounds to me. Yes.

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Speaker 2: The one time when those types of purchases work really

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Speaker 2: well is when you've done the analysis and you realize

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Speaker 2: with dread that you've targeted a property that you probably

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Speaker 2: can't afford. You can see that its value sits a

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Speaker 2: little bit above your budget. But if you're prepared to

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Speaker 2: go all in, put it all on the table and

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Speaker 2: hope for the best, sometimes that pays off. You can

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Speaker 2: secure it for price that you didn't imagine what was possible,

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Speaker 2: and you have no regrets.

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Speaker 1: It's interesting, I have assumed it was a top end thing.

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Speaker 1: You cop me with the nation that it apart from

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Speaker 1: being a top end sort of fashion if you like,

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Speaker 1: it's also with properties where the sellers know there's a

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Speaker 1: very high demand and a very particular type of demand. Yes,

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Speaker 1: so the person is sing, I want this as my

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Speaker 1: whole as I'm going to really try and get it.

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Speaker 1: So it's just a way of squeezing more out of

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Speaker 1: the bitter, isn't it really to me? It is?

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Speaker 2: Now there's closed tender advertised campaigns, but there's also private

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Speaker 2: sale campaign where multiple buyers have expressed an interest or

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Speaker 2: they've submitted an offer, and then the agents will call

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Speaker 2: everyone and say we're calling for best and highst which

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Speaker 2: is effectively the same thing, although it's a decision that

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Speaker 2: they've made on the run, and they might decide to

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Speaker 2: wind it all up by five pm tomorrow, for example.

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Speaker 2: So anyone that's shown some interest or is said to

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Speaker 2: the agent keep me posted, they've got their twenty four

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Speaker 2: hour opportunity to get the building inspection done and get

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Speaker 2: the contract reviewed. And again that's a closed tender process

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Speaker 2: because they're calling for the best offers. The quirks to

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Speaker 2: this kind of system, though, is when the agent says,

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Speaker 2: if you're the first person to put forward your offer,

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Speaker 2: we'll give you the last rite of refusal, will give

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Speaker 2: you a phone call and let you know if others

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Speaker 2: are above you, but we still won't give you a price.

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Speaker 2: A lot of buyers are very skeptical and very mistrusting because,

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Speaker 2: as I said earlier, there's no transparency, so you don't

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Speaker 2: know if you've been played or not. And sometimes people are.

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Speaker 1: I bet they are. Tell me the only sense of

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Speaker 1: portion of properties are now under this expression of insure

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Speaker 1: close tender arrangement will be ten percent, it be.

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Speaker 2: More than that. In terms of how the agents facilitate

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Speaker 2: competitive bidding, a very large number now turn to the

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Speaker 2: best and highest method, particularly in a hot market when

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Speaker 2: they're dealing with FOMO. They're working with buyers who have

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Speaker 2: that deep fear of missing out because they've already missed

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Speaker 2: out on one or two. They're the ones that are

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Speaker 2: more likely to go all in and stretch and the

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Speaker 2: agents know it.

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Speaker 1: Gee, that's very interesting. Again, I'm guessing, but I presume

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Speaker 1: that's happening mostly in certain pockets of the larger cities

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Speaker 1: Sydney and Melbourne, and then in the areas that are

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Speaker 1: running hot, which are unusual, not typically running hot on

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Speaker 1: a historical basis, I don't know parts of adelette probably.

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Speaker 2: Look even the regions, as long as the agent is

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Speaker 2: confident that everyone knows there's multiple offers. It really is

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Speaker 2: a multiple offer scenario when an agent turns to that

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Speaker 2: methodology and you know that you're in more of a

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Speaker 2: buyer's market. When the agent just wants to workshop your

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Speaker 2: offer with you exclusive and then bring it together with

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Speaker 2: an agreeable negotiation between you and the vendor, you can

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Speaker 2: be pretty sure that there's not a second or third

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Speaker 2: party when that happens.

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Speaker 1: Interesting, isn't it? How things flip? How do you hear

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Speaker 1: your flips on a die quickly? Yeah, on a dime,

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Speaker 1: depending on the tempo and the market. It's extraordinary, as

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Speaker 1: anyone will know who who's ever been in that area

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Speaker 1: to buy or trying to sell. Okay, also keate, and

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Speaker 1: I know I'm jumping around here, but another issue I've

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Speaker 1: seen you discuss and I wanted to give our listeners

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Speaker 1: a chance to hear you want it is the notion

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Speaker 1: of the irregular property. Many years ago, I was standing

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Speaker 1: on the street at an auction with a very well

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Speaker 1: known Melbourne real estate agent and one of the greats.

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Speaker 1: And it was a townhouse which was owned by a

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Speaker 1: fashion designer. And the townhouse was on Little La Troupe

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Speaker 1: Street in Melbourne, CBD. At that time there was probably

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Speaker 1: a thousand people living in CBD as opposed to one

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Speaker 1: hundred thousand or so now, and it was very unusual

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Speaker 1: to live in the city. It was also unusual to

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Speaker 1: have a house there. And I remember seeing the house,

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Speaker 1: absolutely charmed by it because it was, you know, as

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Speaker 1: you could imagine, it was a designer's house and it

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Speaker 1: was wonderful. And he said, I'm really worried about this.

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Speaker 1: It's a very unusual house. And I know you will,

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Speaker 1: he says, I know it looks attractive, but it doesn't

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Speaker 1: tick the boxes for many buyers. It's going to be

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Speaker 1: very hard to sell it, really through me, and it

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Speaker 1: was instructive about irregular properties. So you come across these

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Speaker 1: convert to churches, shee factories or whatever. How does it

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Speaker 1: work in reality? Is it more difficult than you might

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Speaker 1: expect to sell them?

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Speaker 2: Yeah, this sounds a bit crude, but there's either quirky

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Speaker 2: good or quirky weed. When it's weird, it can be

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Speaker 2: really problem any times.

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Speaker 1: What do you mean, weird painted black inside and out

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Speaker 1: or what?

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Speaker 2: Oh, possibly, as you said, something that's really only suited

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Speaker 2: to a very tiny few. If it's suited to a

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Speaker 2: particular type of buyer or demographic or whatever or style,

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Speaker 2: that might be enough because, as you know, we only

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Speaker 2: need two people to make an auction viable. When you've

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Speaker 2: got a property that's really struggling to find, it's one

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Speaker 2: buyer out there, so it could be crazy in interior design,

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Speaker 2: or something that really polarizes most people. That can be

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Speaker 2: a hard property to sell. And renovated churches, converted warehouses.

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Speaker 2: What you often find there is you've got these lofty spaces,

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Speaker 2: but you might have insufficient bedrooms to suit a regular family.

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Speaker 2: So it's sometimes really targeted to that single or that couple.

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Speaker 2: And that's okay because we've got a lot of singles

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Speaker 2: and couples with money who want something that's quirky good.

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Speaker 2: When it's quirky weird, it might be in a compromised

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Speaker 2: kind of layout or location or compromises a really important

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Speaker 2: word to think about, because if every buyer looks at

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Speaker 2: it and says, yeah, it's compromised, you'll struggle to find

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Speaker 2: your buyer with these odd property, the odd properties, the

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Speaker 2: unusual ones. The biggest challenge isn't always the layout and

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Speaker 2: the look and the feel. It's often the invisibles, like

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Speaker 2: the zoning, or it could be the owners corporation fees,

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Speaker 2: because these fabulously converted churches cost a lot to maintain.

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Speaker 2: So those are the things that can put buyers off

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Speaker 2: and make property a really hard proposition to sell, particularly

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Speaker 2: when it's industrially zoned or commercially zoned. That zoning really

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Speaker 2: means that a buyer must be prepared to have a

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Speaker 2: forty percent deposit on hand and turn to a commercial

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Speaker 2: loan setup, and they might find that they don't service

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Speaker 2: that because you're amortizing the line over fifteen years as

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Speaker 2: opposed to twenty five or thirty, and all of a sudden,

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Speaker 2: you don't service the debt that irresidential loan product would

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Speaker 2: happily have your service. So it's the invisibles that can

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Speaker 2: really pull apart these odd properties.

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Speaker 1: Oh that's really interesting. So and you say oder a

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Speaker 1: regular I'm just thinking in simple terms of the unusual

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Speaker 1: property that doesn't typical. But you're saying that irregularities on

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Speaker 1: zoning or title or anything like that. Yeah.

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Speaker 2: Yeah, sometimes they're impractical. Sometimes they're just really expensive to run.

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Speaker 2: I remember looking at a beautiful converted warehouse that was

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Speaker 2: essentially like a two and a half story interior, but

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Speaker 2: the cost to run the heating would have been eyewatering.

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Speaker 1: Yeah, because there was no doors. Probably that's right.

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Speaker 2: And the other challenges we've had is a lot of

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Speaker 2: people that are targeting these beautiful properties, particularly the expensive ones,

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Speaker 2: like the idea of having a vehicle, and usually an

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Speaker 2: electric vehicle. Now in some of those properties, you haven't

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Speaker 2: got that option to have the right electricals to power

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Speaker 2: an AV or in the case of a converted church,

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Speaker 2: sitting at the church car park won't cut it for

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Speaker 2: someone with an av That's really interesting.

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Speaker 1: I suppose the flip side of this is a fairly

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Speaker 1: prosaic point that the more regular is it necessarily the case,

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Speaker 1: then the more regular, anonymous, broadly appealing property from a

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Speaker 1: commercial point of view is better.

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Speaker 2: Yes, without a doubt. If we think about a stunning

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Speaker 2: family home with the perfect floor plan, a converted space

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Speaker 2: at the back where you've got an open plan leading

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Speaker 2: out onto an al fresco in a decent yard. They

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Speaker 2: always attract a lot of buyers.

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Speaker 1: Yeah, so supply and demand again.

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Speaker 2: Yeah, less of a risk for an agent for sure.

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Speaker 1: Very interesting stuff with Take Shore Break. We'll be back

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Speaker 1: in a moment. Hello, Welcome back to The Australian's Money

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Speaker 1: Puzzle podcast James Kirby with Kate Bakos, buyer's advocate, regular

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Speaker 1: on the show, Kat, I and you are not alone?

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Speaker 1: Can I say on the show where you are examining

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Speaker 1: the tea leaves in relation to Melbourne property, Probably because

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Speaker 1: most experienced property people are aware that it may well

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Speaker 1: be a bargain right. Because how on earth do we

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Speaker 1: have a situation where a city of five mayion that

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Speaker 1: it's growing, that is the second biggest city in Australia

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Speaker 1: has the weakest numbers on almost any measure, the weakest yields,

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Speaker 1: the weakest price growth, negative price growth at times last year,

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Speaker 1: and other issues, absence of investors, a lot of negatives

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Speaker 1: of leap. If you believe in property cycles. Stuart Wims

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Speaker 1: was on, and he's a real believer of property cycles,

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Speaker 1: then he believes it will turn. The question is when

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Speaker 1: two things do you think it's turning already? On what

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Speaker 1: you've seen I want to say yes.

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Speaker 2: If you'd asked me this a month ago, I would

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Speaker 2: have said, let me hang in there and determine whether

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Speaker 2: it's a dead cat bounce, whether it's the February factor,

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Speaker 2: or whether things are really starting to move. I believe

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Speaker 2: that they are, and it's not just the Februar factor.

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Speaker 2: We're now well into the next month and we're getting

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Speaker 2: a lot of investors from interstate and that's always a

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Speaker 2: bit of a sign. Why are they coming to Melbourne.

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Speaker 2: Some of them think that there's an opportunity there to

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Speaker 2: get in before the rest of the herd. They've obviously

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Speaker 2: subscribed to the mean reversion theory, while others are looking

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Speaker 2: at our yields and they're saying rental yield isn't too bad.

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Speaker 2: It really does help with the land tax burden. We

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Speaker 2: can chat about that at another time. But I think

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Speaker 2: a lot of them are just seeing value. They're looking

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Speaker 2: at the value proposition.

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Speaker 1: I did say the years were but you're saying admitted

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Speaker 1: because the prices have been static, if not going backwards,

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Speaker 1: the years have improved. Is that they have.

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Speaker 2: Indeed, Melbourne's rental rates have climbed dramatically. In fact, we've

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Speaker 2: had one of the biggest overall surgeres since COVID, and

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Speaker 2: we came off a low base. Melbourne was always traditionally

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Speaker 2: the city that had pretty awful rental yields, along with Sydney,

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Speaker 2: and we've come up now to a ridge yield of

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Speaker 2: three point seven which has us on par with Brisbane

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Speaker 2: and Adelaide. In fact, I think we've just marginally overtaken

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Speaker 2: both of them. So that's a big turnaround for Melbourne.

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Speaker 2: And the reason for it is we've had a lot

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Speaker 2: of our rental stock decaying, we've had investors getting out,

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Speaker 2: we've had static price movement or slightly negative, and the

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Speaker 2: supply and demand equation has kicked into gear with our rents.

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Speaker 2: We've had a lot more tenants than the landlords and

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Speaker 2: you can spot an advertised property for rent because the

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Speaker 2: queue that goes around the corner is generally longer than

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Speaker 2: that of a house that's for sale. So we've caught up.

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Speaker 1: That's been a case for some time.

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Speaker 2: It has.

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Speaker 1: Yeah, three point seven yield gross, that's right, Yeah, yeah,

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Speaker 1: for all dwellings, yes, okey.

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Speaker 2: So we're starting now to say three percent for houses,

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Speaker 2: which I haven't seen that for a very long time

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Speaker 2: in Melbourne.

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Speaker 1: Yeah, and then you have mortgage or even investment mortgage

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Speaker 1: it's dropping as well. Ever so small your mortgages dropping

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Speaker 1: here is improving an improved outlook? Have we any hard

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Speaker 1: evidence of it? I know you may be anecdotally seeing this.

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Speaker 1: Have we any numbers yet on investors coming back to

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Speaker 1: the great southern state of Victoria.

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Speaker 2: Only very early data. The challenge that we have is

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Speaker 2: we source that data. If it's not directly from the banks,

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Speaker 2: we get it from the ABS and we have a

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Speaker 2: three month lag on that. So we've only recently got

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Speaker 2: the December data that's showing a slide uptick for Victoria

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Speaker 2: as a state. But still we've been underdone on the

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Speaker 2: investment front for the last few years because we've not

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Speaker 2: been the city or the state that's been the most attractive.

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Speaker 2: Agents are certainly reporting a change, and we've also seen

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Speaker 2: our rental rates, our rate of growth almost plateau, and

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Speaker 2: the managing agents are also reporting that they're getting a

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Speaker 2: few more investment properties added to the rent roles. I

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Speaker 2: think that rate of rental growth isn't likely a high

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Speaker 2: cup again, because we do have investors.

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Speaker 1: Back interesting and there's a point at which you don't

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Speaker 1: want rented growths. It's a two edged sword, isn't. You

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Speaker 1: want real growth, but you don't want it to run

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Speaker 1: too high because obviously then there's problems inside the system. Okay,

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Speaker 1: very interesting. I was very keen to see what you

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Speaker 1: had to say about that. And it's one of the

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Speaker 1: questions of the year, really because if we get this right,

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Speaker 1: it investors get it right, obviously it will be it

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Speaker 1: will definitely be the opportunity of the year. It's the

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Speaker 1: potential opportunity of the year.

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Speaker 2: So yeah, we've got to see another month or two.

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Speaker 2: As they say, one data point doesn't make a trend line,

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Speaker 2: but at the cold face, it's certainly quite different, and

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Speaker 2: we can see it in our auction clearance rates. We've

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Speaker 2: got some pretty aggressive bidding. We're eclipsing our reserves by

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Speaker 2: quite a margin in a lot of places, and our

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Speaker 2: auction attendance was very different, vastly different to twenty twenty four.

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Speaker 1: Do the same stay government, of course, which what do

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Speaker 1: all those new taxes? But let's see if the market

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Speaker 1: will actually rise above.

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Speaker 2: That or November twenty twenty six isn't too far away.

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Speaker 1: Is it. Okay, we'll take a break and we'll be

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Speaker 1: back in a moment with some very interesting questions. Hello

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Speaker 1: and welcome back to the Australians Money Puzzle Podcast James

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Speaker 1: Kirby with Kate Bakos. Here we are talking property. We

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Speaker 1: are talking investment property in particular cases. A iers advocacy

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Speaker 1: operates out of Yarraville, very trendy, fashionable Yarraville in the

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Speaker 1: center of Melbourne. I've got some great questions I thought

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Speaker 1: we have. First of all, let's have a look at

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Speaker 1: what we had from car loss, which is an old chestnut,

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Speaker 1: and we won't go too far down this because we

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Speaker 1: could have a whole show. We could have a whole

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Speaker 1: series of show one. Carlos's question, but just in any event,

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Speaker 1: to give it to you and read it out to you.

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Speaker 1: He asks, in terms of property versus shares debate, what's best?

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Speaker 1: As with politics, you can find an answer you want

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Speaker 1: to hear easily enough, which makes it hard for newcomers

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Speaker 1: to understand. I want to suggest you'd run a case study,

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Speaker 1: or you can be as objective as possible, helping people

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Speaker 1: see what it's like to either buy an investment property

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Speaker 1: or to invest in the share market. Well, Carlos would

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Speaker 1: love to do that, and we could put say half

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Speaker 1: a million on the share market today, and we put

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Speaker 1: half a million on a very good property, advised by

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Speaker 1: a very good buyer's advocate like Kate, and then we'd

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Speaker 1: run it for what five years, three years and come

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Speaker 1: back to you. You'd have a sample of one one

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Speaker 1: property versus the entire market. I think the issue would

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Speaker 1: be revealed then that all property is individual, so you

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Speaker 1: could do fabulously property that wouldn't necessarily tell you how

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Speaker 1: property did. But markets obviously are generics, so if you

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Speaker 1: just bought an ETF, you would know how markets did.

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Speaker 1: What do you think, Kate?

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Speaker 2: I completely agree with you, James. I think if we

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Speaker 2: look at a median value, or we pick a particular market,

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Speaker 2: we could get a rounded out set of statistics there

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Speaker 2: as well and prove this point nicely for Carlos and

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Speaker 2: dare I say it. In recent years there are some

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Speaker 2: markets like my own, in particular in Melbourne, the shares

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Speaker 2: would have won every day of the week. But this

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Speaker 2: debate has been run to death by so many people,

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Speaker 2: and there are books about it. There are real life

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Speaker 2: case studies and you can get your hands on that.

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Speaker 2: The reality is, though people would turn to property investment

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Speaker 2: because it has one benefit that share investing doesn't have,

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Speaker 2: and that is how much you can leverage. So it's

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Speaker 2: important to keep that in mind. Because if someone started

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Speaker 2: with some seed capital at a young age, and they

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Speaker 2: were consistent in their approach and they leveraged with it

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Speaker 2: a reasonably i won't say aggressive, but a very dedicated approach,

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Speaker 2: they leveraged into property. So let's even say eighty percent lvrs,

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Speaker 2: which the bank's particularly like. That means you're put in

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Speaker 2: down twenty percent of your own money and you're borrowing

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Speaker 2: eighty percent. You will find over time that property will

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Speaker 2: outperform shares when you're leveraging and you have time. I

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Speaker 2: think where shares start to come into their own is

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Speaker 2: when you don't have time. So let's take someone who

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Speaker 2: is ten years off retirement, five years off retirement, or

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Speaker 2: even in retirement. They're not wanting to settle up for

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Speaker 2: a property to start with. They won't want to take

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Speaker 2: on a large debt and then be burdened with having

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Speaker 2: to pay that debt because they'll have in most cases

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Speaker 2: a negatively get asset, and they won't want to deal

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Speaker 2: with the maintenance, and they probably won't want to deal

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Speaker 2: with the property taxes either. So it really does depend

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Speaker 2: on what stage in life you're at, how long you've

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Speaker 2: got on your working treadmill to run before you can stop,

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Speaker 2: So there's no debate about it. Shares is much easier

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Speaker 2: as that class when it comes to maintenance and taxes,

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Speaker 2: but there's also volatility there as well, and good advisors

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Speaker 2: will talk to you about diversification. It's for that reason.

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Speaker 1: Yes, absolutely, I agree with you to a point. Academically,

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Speaker 1: you can see over a long period of time, you

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Speaker 1: go back over one hundred years, so that there isn't

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Speaker 1: really much in it that is between the average property

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Speaker 1: outcomes and average market outcomes. The thing is that you

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Speaker 1: can buy an average market outcome through an exchange traded fund.

434
00:23:10,600 --> 00:23:13,240
Speaker 1: You can just buy the ASEX. You can put fifty

435
00:23:13,240 --> 00:23:16,080
Speaker 1: grand into an ax ETF, close your eyes and come

436
00:23:16,119 --> 00:23:18,160
Speaker 1: back in ten years and you will have the average

437
00:23:18,160 --> 00:23:20,840
Speaker 1: return of the market. Now, that is not the case

438
00:23:20,880 --> 00:23:25,040
Speaker 1: with property, so every property is individual. So I can

439
00:23:25,040 --> 00:23:27,320
Speaker 1: tell you what the average increaseable was this year, last

440
00:23:27,359 --> 00:23:29,480
Speaker 1: year or whatever for Australian property, but it really doesn't

441
00:23:29,520 --> 00:23:32,679
Speaker 1: tell you much between say some little village in Tazi

442
00:23:32,960 --> 00:23:35,520
Speaker 1: and an north shore suburban Sydney, for instance, they don't

443
00:23:35,560 --> 00:23:38,119
Speaker 1: really have much in common, so the averages are quite misleading.

444
00:23:38,400 --> 00:23:41,880
Speaker 1: Car loss. However, as Kate is saying, there's a couple

445
00:23:41,920 --> 00:23:44,760
Speaker 1: of things of property leverage that you can leave rich shares,

446
00:23:44,760 --> 00:23:48,760
Speaker 1: of course, but most people most of the time are

447
00:23:49,240 --> 00:23:53,959
Speaker 1: wary of doing that. They are comfortable in leveraging against property.

448
00:23:54,000 --> 00:23:56,200
Speaker 1: And by the way, you can get negatively geared chairs

449
00:23:56,280 --> 00:23:58,040
Speaker 1: just as easy. It's just very quick people to do it.

450
00:23:58,400 --> 00:24:02,399
Speaker 1: The other thing, as Kate pointed out, control and work.

451
00:24:02,640 --> 00:24:06,800
Speaker 1: You can't do anything about your share portfolio once you've boted.

452
00:24:06,920 --> 00:24:11,640
Speaker 1: You can't make HP Gupperdell. But with a property you can.

453
00:24:11,960 --> 00:24:14,399
Speaker 1: You can improve that property, you can work on it,

454
00:24:15,080 --> 00:24:18,000
Speaker 1: and I think that's the enormous difference really. First of all,

455
00:24:18,000 --> 00:24:20,560
Speaker 1: you can choose the individual property, but you've no choice. Unfortunately,

456
00:24:20,560 --> 00:24:23,320
Speaker 1: you can't buy the average, but you choose the in

457
00:24:23,480 --> 00:24:26,480
Speaker 1: visual property and you can make it better, which is

458
00:24:26,480 --> 00:24:28,200
Speaker 1: something you can't do, and I think that's something you're

459
00:24:28,240 --> 00:24:31,000
Speaker 1: doing to more work. We recently, in our family, we

460
00:24:31,080 --> 00:24:34,080
Speaker 1: recently sold an ETF that we had outside of super

461
00:24:35,080 --> 00:24:37,159
Speaker 1: and we just made a point that you're so easy,

462
00:24:37,400 --> 00:24:40,040
Speaker 1: and did it on your phone, tick so gone, never

463
00:24:40,080 --> 00:24:43,439
Speaker 1: did any work, Never spend two minutes on this and

464
00:24:43,520 --> 00:24:47,120
Speaker 1: thinking about selling a property. The documentation alone will take

465
00:24:47,359 --> 00:24:49,840
Speaker 1: a day longer than selling an ETF. So these are

466
00:24:49,880 --> 00:24:53,439
Speaker 1: points really worth thinking about, Carlos. And that's really I

467
00:24:53,440 --> 00:24:55,760
Speaker 1: don't want to simplify and give you an answer and

468
00:24:55,840 --> 00:24:58,000
Speaker 1: say once better than the other, except to say they

469
00:24:58,040 --> 00:25:01,800
Speaker 1: are very different. Average performances can be achieved on shares,

470
00:25:03,040 --> 00:25:06,879
Speaker 1: but all properties individual. Okay, Claire, I have a female

471
00:25:06,920 --> 00:25:09,360
Speaker 1: listener here. Thank you, Claire, thanks so much for the podcast.

472
00:25:09,359 --> 00:25:11,520
Speaker 1: She says, I have just hit the big five. Zo

473
00:25:11,680 --> 00:25:13,840
Speaker 1: and I have hatched a cunning plan to help fund

474
00:25:13,880 --> 00:25:16,959
Speaker 1: reduce working hours and my retirement. I am selling our

475
00:25:17,040 --> 00:25:20,520
Speaker 1: family home. I'm planning to build a new house with

476
00:25:20,560 --> 00:25:22,720
Speaker 1: a granny flat, which I hope to rent out to

477
00:25:22,800 --> 00:25:26,080
Speaker 1: generate an ongoing income. This is this is really good

478
00:25:26,320 --> 00:25:29,320
Speaker 1: for all the crazy fifty somethings out there hatching such

479
00:25:29,320 --> 00:25:33,040
Speaker 1: a plan. Could you please offer some information on the

480
00:25:33,080 --> 00:25:36,320
Speaker 1: potential CEEGT implications if the granny flat has rented out

481
00:25:36,359 --> 00:25:39,240
Speaker 1: on a commercial basis, and she has other related questions

482
00:25:39,640 --> 00:25:43,960
Speaker 1: on that, Okay, you might think this is unbelievable, Claire C.

483
00:25:44,240 --> 00:25:48,000
Speaker 1: L A I R E. You would think that this

484
00:25:48,119 --> 00:25:52,400
Speaker 1: is all easy enough. The granny flat thing is absurd.

485
00:25:52,520 --> 00:25:55,879
Speaker 1: It's absurdly complicated. It shouldn't be. Don't let it stop

486
00:25:55,920 --> 00:25:58,480
Speaker 1: you what it is. And I met someone last night

487
00:25:58,480 --> 00:26:00,040
Speaker 1: who said that they were at a confidence and it

488
00:26:00,160 --> 00:26:02,919
Speaker 1: was a two hour session on the technicals around granni flats.

489
00:26:03,080 --> 00:26:05,040
Speaker 1: And then someone has tracked a joke. But I think

490
00:26:05,080 --> 00:26:07,080
Speaker 1: it's true that you can get around a lot of

491
00:26:07,080 --> 00:26:10,800
Speaker 1: these problems if the granny flats on wheels, because you

492
00:26:10,880 --> 00:26:14,680
Speaker 1: can classify it as something different than the property. That's unofficial,

493
00:26:14,800 --> 00:26:19,440
Speaker 1: not advice, never is okay. Now for a formal official answer,

494
00:26:19,560 --> 00:26:23,160
Speaker 1: Kate and I are referring to James Gerard of Financial

495
00:26:23,200 --> 00:26:25,720
Speaker 1: Advisor dot com dot who you know regular guests on

496
00:26:25,720 --> 00:26:28,320
Speaker 1: the show, and this is what James says about Granni

497
00:26:28,359 --> 00:26:30,840
Speaker 1: flats not the worst plan. Building a house with the

498
00:26:30,840 --> 00:26:32,760
Speaker 1: granny flat has a couple of benefits. You create an

499
00:26:32,800 --> 00:26:35,880
Speaker 1: income stream that can help fund part of your retirement

500
00:26:35,880 --> 00:26:38,719
Speaker 1: income and have a place for a family or a

501
00:26:38,760 --> 00:26:42,119
Speaker 1: care if you need it down the track. The disadvantage

502
00:26:42,160 --> 00:26:45,359
Speaker 1: is you will have to clear the net rent in

503
00:26:45,400 --> 00:26:49,119
Speaker 1: your personal tax return if your income is above a

504
00:26:49,280 --> 00:26:56,280
Speaker 1: tax free threshold in retirement. In addition, okay, this is important,

505
00:26:56,320 --> 00:26:58,679
Speaker 1: if you ever sell the property, you will need to

506
00:26:58,680 --> 00:27:01,719
Speaker 1: pay capital gainst. Will you hear this? And a portion

507
00:27:01,920 --> 00:27:06,080
Speaker 1: the floor area and land between principal residents which is

508
00:27:06,119 --> 00:27:10,560
Speaker 1: CGT three. Write your palm with CGT three exam from

509
00:27:10,600 --> 00:27:13,680
Speaker 1: capital gains tax and the granny flat which is subject

510
00:27:13,760 --> 00:27:17,760
Speaker 1: to capital gains tax. Right, So, yeah, they don't make

511
00:27:17,800 --> 00:27:20,600
Speaker 1: it easy, That's all I have to say to you, Claire,

512
00:27:20,880 --> 00:27:21,880
Speaker 1: But you can do it.

513
00:27:22,560 --> 00:27:25,200
Speaker 2: There is one more little tax implication there, and that's

514
00:27:25,280 --> 00:27:29,359
Speaker 2: land tax. So there'll be an a portion amount there

515
00:27:29,400 --> 00:27:31,560
Speaker 2: as well. And I'll stay in my line and leave

516
00:27:31,600 --> 00:27:34,760
Speaker 2: it at that. Granni flats are a challenge though.

517
00:27:34,760 --> 00:27:37,040
Speaker 1: It shouldn't be that. We're talking about dentsification. We're talking

518
00:27:37,040 --> 00:27:39,400
Speaker 1: about and you know, why do they have to make

519
00:27:39,440 --> 00:27:40,560
Speaker 1: it so damn difficult?

520
00:27:40,680 --> 00:27:43,600
Speaker 2: Really, if you're in my home state, you've got to

521
00:27:43,600 --> 00:27:46,359
Speaker 2: get a permit for grunny flat, and most tits and

522
00:27:46,440 --> 00:27:50,000
Speaker 2: territories will have some kind of permitting process. In addition,

523
00:27:50,520 --> 00:27:53,080
Speaker 2: if you don't have separate water meters and electricity meters,

524
00:27:53,520 --> 00:27:57,000
Speaker 2: you can't pass on usage to your tenant, which means

525
00:27:57,000 --> 00:27:59,840
Speaker 2: you're paying for it, so that needs to be incorporated.

526
00:28:00,480 --> 00:28:03,080
Speaker 2: The next point that I'll make is if you ever

527
00:28:03,080 --> 00:28:06,400
Speaker 2: go to sell the property, you've potentially diminished its appeal

528
00:28:06,880 --> 00:28:09,320
Speaker 2: because not every buyer out there wants a backyard with

529
00:28:09,320 --> 00:28:12,720
Speaker 2: a granny flat unit. So if you've lessened your number

530
00:28:12,720 --> 00:28:16,800
Speaker 2: of potential buyers, you've lessened your competition, you've possibly lessened

531
00:28:16,840 --> 00:28:19,720
Speaker 2: your selling price. So that's something to bear in mind

532
00:28:19,720 --> 00:28:20,040
Speaker 2: as well.

533
00:28:20,080 --> 00:28:22,520
Speaker 1: I did have a friend who had the marvelous I

534
00:28:22,560 --> 00:28:26,159
Speaker 1: would you call it like a not a prefab but

535
00:28:26,680 --> 00:28:30,000
Speaker 1: kind of a little model, perfect retirement unit for hard

536
00:28:30,200 --> 00:28:33,200
Speaker 1: dad in the back garden. But it was really good,

537
00:28:33,320 --> 00:28:35,600
Speaker 1: and I do recall it had wheels, not that they

538
00:28:35,680 --> 00:28:38,600
Speaker 1: ever mold it, but I think it has week No advice, right, something?

539
00:28:38,680 --> 00:28:39,880
Speaker 1: What exploring? All?

540
00:28:39,960 --> 00:28:40,160
Speaker 2: Right?

541
00:28:40,280 --> 00:28:44,200
Speaker 1: Okay, pat asks at the top. At the average interest

542
00:28:44,240 --> 00:28:46,840
Speaker 1: rate's been offered by thirty two banks, it's four point

543
00:28:46,880 --> 00:28:52,160
Speaker 1: sixty three percent. Since the RBA lowered its interest rates

544
00:28:52,200 --> 00:28:56,080
Speaker 1: in February, the average among the thirty two banks now

545
00:28:57,800 --> 00:29:02,840
Speaker 1: is four four percent. Given the fairly dramatic decrease. This

546
00:29:02,880 --> 00:29:04,840
Speaker 1: is about term deposits, Folcus. This is what you can

547
00:29:04,880 --> 00:29:08,520
Speaker 1: get for your money pass sets. Given the dramatic decrease

548
00:29:08,560 --> 00:29:11,480
Speaker 1: in term depositibly since the RBA decision, do you think

549
00:29:11,520 --> 00:29:14,920
Speaker 1: it would be predictable with more rate cuts like to

550
00:29:15,040 --> 00:29:17,640
Speaker 1: come next year that by the end of next year

551
00:29:17,960 --> 00:29:23,080
Speaker 1: financial year that rates on offer on deposits could have

552
00:29:23,160 --> 00:29:26,640
Speaker 1: dropped even in the three percent three percent, that is,

553
00:29:26,680 --> 00:29:29,000
Speaker 1: you will only get three percent for your money compared

554
00:29:29,040 --> 00:29:33,040
Speaker 1: to four and a half now, absolutely entirely feasible. If

555
00:29:33,280 --> 00:29:36,080
Speaker 1: the economists say there's two to three more cuts coming

556
00:29:36,400 --> 00:29:38,560
Speaker 1: and into two to three more cuts are the same

557
00:29:39,400 --> 00:29:41,840
Speaker 1: quantum of the ones we're used to, which are always

558
00:29:41,840 --> 00:29:44,880
Speaker 1: these days a quarter percent and ago, then it would

559
00:29:44,880 --> 00:29:47,720
Speaker 1: be entirely feasible that you'd have a three in front

560
00:29:47,720 --> 00:29:51,280
Speaker 1: of the number, even if you lock it away. I

561
00:29:51,280 --> 00:29:53,080
Speaker 1: think that can't have it both ways, even the rate

562
00:29:53,160 --> 00:29:55,640
Speaker 1: to coming down, rates coming down, do you think, Kate?

563
00:29:56,200 --> 00:29:58,400
Speaker 2: I think k Stree gives us that answer that the

564
00:29:58,440 --> 00:30:00,480
Speaker 2: lenders are very good at adapting quick when there's a

565
00:30:00,560 --> 00:30:01,560
Speaker 2: right movement.

566
00:30:01,680 --> 00:30:04,600
Speaker 1: They move like lightning. Yeah, they're so efficient.

567
00:30:04,960 --> 00:30:07,200
Speaker 2: Or they're really slow on the other side.

568
00:30:07,120 --> 00:30:08,719
Speaker 1: Very slow on the other side. It's strange, isn't there

569
00:30:08,720 --> 00:30:11,240
Speaker 1: two different departments, one's very good and one's very slow

570
00:30:11,280 --> 00:30:11,920
Speaker 1: and sleepy.

571
00:30:12,200 --> 00:30:15,080
Speaker 2: It comes to term deposits, you've got a few options

572
00:30:15,120 --> 00:30:18,800
Speaker 2: with other lenders, and obviously risk and reward is something

573
00:30:18,800 --> 00:30:21,640
Speaker 2: that every investigates to cape in mind. You can say

574
00:30:21,640 --> 00:30:24,400
Speaker 2: some really stunning returns that are being pitched, but you've

575
00:30:24,400 --> 00:30:26,200
Speaker 2: got to understand what's happening with your money and what

576
00:30:26,240 --> 00:30:26,920
Speaker 2: the risk might be.

577
00:30:27,480 --> 00:30:31,080
Speaker 1: That's been very careful here, folks. We're talking about and Patasfian,

578
00:30:31,080 --> 00:30:34,280
Speaker 1: we term deposits in banks right locked away for a

579
00:30:34,280 --> 00:30:40,200
Speaker 1: period of time. No games approved deposit taking institutions government

580
00:30:40,280 --> 00:30:44,360
Speaker 1: guaranteed do not. And I think Kate tell me about misleading,

581
00:30:44,400 --> 00:30:47,120
Speaker 1: but I think what you're alluding to is advertisements that

582
00:30:47,280 --> 00:30:49,920
Speaker 1: say they say the word deposit and they say the

583
00:30:49,920 --> 00:30:52,800
Speaker 1: word rate, etc. But it's not a term deposit. It's

584
00:30:53,120 --> 00:30:56,280
Speaker 1: lending to builders or something, and it's completely different, and

585
00:30:56,320 --> 00:30:59,040
Speaker 1: so you get two percent more, but you're taking much

586
00:30:59,120 --> 00:31:02,520
Speaker 1: much greater risk. I'm talking here about risk free rates

587
00:31:03,080 --> 00:31:08,880
Speaker 1: always distinguished. Is that what you were driving at completely? Yes, Yeah,

588
00:31:08,960 --> 00:31:11,720
Speaker 1: it's something people should be very careful of. And I

589
00:31:11,760 --> 00:31:17,120
Speaker 1: find it very frustrating that you can perhaps accidentally mislead

590
00:31:17,120 --> 00:31:20,600
Speaker 1: people with advertising so easily. All right, we will leave

591
00:31:20,640 --> 00:31:22,400
Speaker 1: it there. You can see that as something we could

592
00:31:22,480 --> 00:31:24,960
Speaker 1: go into another day. But thank you very much Kate

593
00:31:25,000 --> 00:31:26,680
Speaker 1: Bakos for coming on the show. Lovely to have you

594
00:31:26,720 --> 00:31:28,320
Speaker 1: on again, been a pleasure.

595
00:31:28,360 --> 00:31:28,760
Speaker 2: Thank you.

596
00:31:29,240 --> 00:31:31,920
Speaker 1: Always interesting to talk to you. Great to get that

597
00:31:32,080 --> 00:31:34,320
Speaker 1: feeling from the street, basically from the floor of what's

598
00:31:34,360 --> 00:31:36,160
Speaker 1: going on in the property market. We don't want to

599
00:31:36,200 --> 00:31:39,160
Speaker 1: ever talk too much from a helicopter point of view.

600
00:31:39,160 --> 00:31:42,600
Speaker 1: It's all very interesting about what's going on demographically, et cetera.

601
00:31:42,680 --> 00:31:44,880
Speaker 1: But you as listeners, I sure want to know what's

602
00:31:44,880 --> 00:31:47,560
Speaker 1: going on out there and buyer's advocates are really good

603
00:31:48,000 --> 00:31:50,720
Speaker 1: for that. Oh, Kate, Thanks a lot, Kate, and thanks

604
00:31:50,800 --> 00:31:54,240
Speaker 1: lot everybody for listening. The Money Puzzle at the Australian

605
00:31:54,280 --> 00:31:57,200
Speaker 1: dot Com dot au is your email for your email

606
00:31:57,400 --> 00:31:59,800
Speaker 1: or for your voice recording your voice member, which we

607
00:31:59,880 --> 00:32:02,520
Speaker 1: do love to have. Today's show was produced by Leah

608
00:32:02,560 --> 00:32:05,880
Speaker 1: Samma Gloom. Talk to you soon. Talk to you later

609
00:32:05,920 --> 00:32:09,280
Speaker 1: in the week with our annual rich List edition with

610
00:32:09,360 --> 00:32:12,040
Speaker 1: the editor of The Richness John Stensuld, who will be

611
00:32:12,200 --> 00:32:14,920
Speaker 1: releasing all the goodies to us ahead of the pack