Speaker 1: Hello, and welcome to the Australians Money Puzzle Podcast. I'm
Speaker 1: James Kirby. Welcome aboard everybody. My guest today is a
Speaker 1: Nissa Cavallo of the Ida Property Group and she's been
Speaker 1: on the show actually more than once, and the last
Speaker 1: time we heard from her, I won't say a voice
Speaker 1: in the wilderness, but she did outdime with some confidence
Speaker 1: how Victorian property market, which she is an expert on,
Speaker 1: she had seen it as a bargain. Basically, this is
Speaker 1: when things were pretty pretty bleak and as you know
Speaker 1: that Melbourne was the worst market for some time on
Speaker 1: a national basis. Now most recently we see that basically
Speaker 1: Melbourne prices have been rising at an annualized rate something
Speaker 1: in the order of six percent and were probably gathering
Speaker 1: pace through this period. So I've invited Anissa back on
Speaker 1: the show to talk first of all about this area
Speaker 1: because I think from a nation my point of view,
Speaker 1: it's where everyone's looking as investors. But I also want
Speaker 1: her she does have an interesting story which I haven't
Speaker 1: put to you before for the simple reason I wanted
Speaker 1: to put her to you as a property expert first
Speaker 1: and foremost, But how she actually got into all this
Speaker 1: is very interesting, which we talk about in the second
Speaker 1: segment of the show. But first and foremost, and this
Speaker 1: is Cavallo, try not You could almost gloase there if
Speaker 1: you wished, but but they wouldn't come across on the podcast.
Speaker 1: But thank you. I mean, let's say it was going
Speaker 1: to happen, right, it was probably going to happen that
Speaker 1: Melbourne would turn. I didn't think it would turn quick.
Speaker 2: Absolutely well, firstly, thanks for having me back, James. I
Speaker 2: appreciate it to glow. And look, I think in many
Speaker 2: cases when you listen to economists, eventually, if you wait
Speaker 2: long enough, what they say is correct. Right, But we
Speaker 2: were talking about the next twelve months, so we did
Speaker 2: get it right. The fundamentals are just there and we've
Speaker 2: talked about it before. Population growth, we've got stronger wages growth.
Speaker 2: The population growth hasn't really changed other than that little
Speaker 2: period during COVID. There's just been so many positive characteristics
Speaker 2: about Melbourne and the last five years in particular have
Speaker 2: set us back ten And I know I've heard that
Speaker 2: you've spoken about this a lot on the show, that
Speaker 2: the numbers for the ten years is dire and that
Speaker 2: presents an incredible opportunity for investors that are willing to
Speaker 2: go against you, against the grain, which is really tricky.
Speaker 2: So yeah, I was right. It's not surprising. I don't
Speaker 2: think we're not celebrating it, right, We're not popping the champagne.
Speaker 2: But the first indicators are certainly there. And it's a
Speaker 2: bit of a relief, to be honest, for me, because
Speaker 2: I'm highly exposed and a lot of my clients are.
Speaker 1: I suppose, so you professionally put yourself out there. It
Speaker 1: wasn't just a notion and you would have acted upon it,
Speaker 1: so you wanted to see it happen. Look, well, take
Speaker 1: it that it is happening. It's not shooting the lights out.
Speaker 1: It's all it's doing so far, it would seem. And
Speaker 1: Calendar twenty five is coming back to something like a
Speaker 1: normal market what you would expect an Australian city. Five
Speaker 1: minions should be ticking away at least six percent parannum.
Speaker 1: So let's just take it down. Is the situation, and
Speaker 1: that it could get better. Now, before we talk about
Speaker 1: where and style and type of property that might be
Speaker 1: attractive in the city, can you tell us I think
Speaker 1: the tax the role of new taxes that were announced
Speaker 1: by the Victorian State government at the very depth of,
Speaker 1: you like, of the cycles, So when things were really
Speaker 1: at their agrimace, they went and really sort of kicked
Speaker 1: it in the head by adding new taxes, and they
Speaker 1: got a lot of attention. Is that still a risk
Speaker 1: from a broad point of view for people investing in
Speaker 1: this market?
Speaker 2: Well, as we've discussed, I think it presented an opportunity
Speaker 2: because if you had a look at the true impact
Speaker 2: on the majority of investors, I think it was it
Speaker 2: was for majority investor property investors. It came to seven
Speaker 2: hundred and fifty to nine hundred dollars extra a year
Speaker 2: that was tax deductible, and if you consider where interest
Speaker 2: rates have been in the past while property prices go up,
Speaker 2: that's not really a massive financial disincentive to invest. So
Speaker 2: for me and what we discussed was it was largely sentiment.
Speaker 2: I mean, we could have been taxed twenty dollars and
Speaker 2: we wouldn't have been happy with it because we felt
Speaker 2: it wasn't our fault, right, Why are we tacked?
Speaker 1: Why we So you're saying that the dollar terms, it
Speaker 1: wasn't backbreaking, but it was, but it sure was in
Speaker 1: terms of sentiment wasn't it.
Speaker 2: I think that the sentiment was also partly because we thought, well,
Speaker 2: what are they going to do next? We'd had enough
Speaker 2: and interstate investors, Melbourne had a good run for many years.
Speaker 2: We were relatively oversupplied in supplied in some areas, not
Speaker 2: all areas, which isn't always a massive issue. But I
Speaker 2: think that it had a good run. That we dealt
Speaker 2: with COVID in a way that wasn't very popular, and
Speaker 2: then it was like what else is this government going
Speaker 2: to do? What else are they capable of? And it
Speaker 2: was almost like I like to liken it to the
Speaker 2: Carton Football Club, everybody almost really enjoyed the lot, you
Speaker 2: know Melbourne.
Speaker 1: Some Sydney siders enjoy seeing Melbourne's struggle in any fashion.
Speaker 1: I don't tell that for a moment. We know that
Speaker 1: we know that all too well. But let's rise above
Speaker 1: all that as investors and look strictly at the numbers.
Speaker 1: So I suppose what I'm asking you is that issue
Speaker 1: that seem government are still in power in Victoria, right,
Speaker 1: So is that risk still on the table?
Speaker 2: Well, okay, okay, So I think that we've seen this
Speaker 2: pan out now for a period of time and realized
Speaker 2: that not a lot has happened. We haven't had this
Speaker 2: huge despite what the media says, and even the headlines
Speaker 2: of people are leaving Victoria and drives, it's simply untrue.
Speaker 2: If you look at the ABS figures more people left
Speaker 2: Queensland last year than Victoria and that's on a numbers basis,
Speaker 2: so on a percentage basis, it's much greater. Right, So
Speaker 2: I think we've got it. People are starting to see
Speaker 2: the truth. There's not anything massive that's happened. We haven't
Speaker 2: grown hugely, but we've also become incredibly a foe audible
Speaker 2: and I know that whilst there are some talks about
Speaker 2: some additional taxes on property in general, it seems that
Speaker 2: the huge, the huge imposition to Victorians in particular, it
Speaker 2: has stopped, right, So we're not not quite sure that
Speaker 2: much more is coming. I think we've had We've watched
Speaker 2: it play out a bit. There's also been other states
Speaker 2: that have made very unpopular policy decisions, and you know
Speaker 2: that just hasn't been as as widely publicized.
Speaker 1: Actually, Hugh Robinson's The Financial Advisory based out of Brism
Speaker 1: was on the show sometime ago and him at the
Speaker 1: point that Land tax is actually and the way it's
Speaker 1: going on the forward estimates inside the budgets of the
Speaker 1: two states, land tax will be higher in Queensland than
Speaker 1: it will be in Victoria, and so the Victoria might
Speaker 1: have more taxes, but the one that really matters to
Speaker 1: most people is land tax and it's heading to be
Speaker 1: higher in Queensland. Okay, we've got those things on the table.
Speaker 1: Where in the city of Melbourne are the bargains and
Speaker 1: what are the type of properties that offer opportunity to
Speaker 1: our listeners.
Speaker 2: Well, my strong focus for most people that are trying
Speaker 2: to increase wealth, right, not drawing down on their income,
Speaker 2: but increasing wealth is capital growth and everyone's heard me
Speaker 2: talk about that a lot. I think that's where the
Speaker 2: magic is. You change your wealth position by through capital
Speaker 2: growth with property yield after all the costs associated with
Speaker 2: it rarely changes anything. Okay, it's a good way to
Speaker 2: pay for the asset while it grows in value. So
Speaker 2: my strong focus is how do we find there's nuggets
Speaker 2: of growth. And you've said affordable anyway, and affordable is
Speaker 2: actually a really important part of finding these nuggets. Those
Speaker 2: areas that are less affordable that have bigger supply issues
Speaker 2: have traditionally had a lot of volatility, so you've really
Speaker 2: got to ride the wave. So I'm really looking for
Speaker 2: those suburbs that are affordable because if you think about
Speaker 2: it just logically, there's a much greater percentage of the
Speaker 2: population that can afford it, so you've got more buyers.
Speaker 2: You know, always so looking for affordability, and there's different
Speaker 2: ways to do that. There's going into those sort of
Speaker 2: those growth corridors, which I do like. Some of those
Speaker 2: growth corridors that can sometimes appear like they've got a
Speaker 2: lot of land available, also present the opportunity to build
Speaker 2: more hospitals, to build more schools, to build better roads,
Speaker 2: and so the Victorian State government has done a very
Speaker 2: good job of building what we call employment clusters. We
Speaker 2: don't build commuter suburbs where you have to commute to
Speaker 2: get to work. I think it's something like seventy percent
Speaker 2: of the people that live in the Melton that work
Speaker 2: and live in melton Shire actually work locally. They don't commute,
Speaker 2: which is a huge number of local workers. So I'm
Speaker 2: looking for if I'm looking for growth corridors, I'm looking
Speaker 2: for a lot of local employment. Could be southeast your Cranburns.
Speaker 2: A lot of that is now getting quite expensive. And
Speaker 2: I can tell you fifteen years ago people looked at
Speaker 2: Cranburn and said it's all land, there's too much available,
Speaker 2: and yet it's been an incredible performer against other inner
Speaker 2: urban suburbs.
Speaker 1: Of interesting straight away that when you're looking at the city,
Speaker 1: you're looking at you were looking at middle to alto suburbs.
Speaker 1: You didn't do you mention them first?
Speaker 2: Yeah, I'm mentioning them first.
Speaker 1: These are growth, these are new housing estates basically.
Speaker 2: It sometimes new housing estates, sometimes we get a bit
Speaker 2: closer to the suburb. Right now, I'm talking about new
Speaker 2: housing estates. We've done a lot in Melton, a lot
Speaker 2: in Deanside, a lot in Werribe. I mean, Weerriby is
Speaker 2: an established area, but it has a few little infill
Speaker 2: sites that we've invested in. So that's one way to
Speaker 2: do it. And the good thing about that is that
Speaker 2: you're getting the benefit of a lot of migration, a
Speaker 2: lot of population growth, but a lot of a lot
Speaker 2: of infrastructure growth. There are new jobs going in which
Speaker 2: creates household income growth, which in the end is a
Speaker 2: lead indicator for price growth. Right So I love that
Speaker 2: then there's another way to find affordability, but without investing
Speaker 2: in units and townhouses which are unlikely to give you
Speaker 2: the same effects in terms of capital growth. Because we're
Speaker 2: focusing on capital growth, we want as much land as possible,
Speaker 2: and that's going to those regentrifying suburbs. You know, your Coburgs,
Speaker 2: your sunshines going towards the Monash, further out from the Monash,
Speaker 2: even your seafrets are very expensive now. But finding those
Speaker 2: suburbs that are still a little affordable the problem is
Speaker 2: one of the things that a lot of that in
Speaker 2: my experience, that I've learned the hard way, and that
Speaker 2: a lot of people don't take into consideration when they're investing,
Speaker 2: is one thing, is this property doubling in ten years
Speaker 2: or doing more right? Capital growth great, but you have
Speaker 2: to be able to hold it, and the holding costs
Speaker 2: is often the killer, just like cash flow in a business.
Speaker 2: And if you are buying older properties, because you want
Speaker 2: to spend seven hundred and fifty which is the average
Speaker 2: investment price, so average investor in Australia will want to
Speaker 2: spend about seven hundred and fifty to eight hundred. There's
Speaker 2: not a lot of brand new, beautiful properties that you
Speaker 2: can buy in the inner urban ring for that price.
Speaker 2: So you're often if you're going in an urban, you're
Speaker 2: often buying something that may may cost you a lot
Speaker 2: in terms of you know, constantly doing it up, et cetera.
Speaker 2: And often the yields can be a little bit lower,
Speaker 2: and so if it's hard to cash flow and it's
Speaker 2: hard to hold, then you may not be in a
Speaker 2: position to hold it long term. So I've had a
Speaker 2: lot of it's James that have purchased older properties. I
Speaker 2: did it myself, It's what I used to do, and
Speaker 2: they've just said, we just simply can't afford it because
Speaker 2: every cent that we get from the tenant just goes
Speaker 2: and in repairs.
Speaker 1: Because he used our relatively low, very long. So the
Speaker 1: red lincome is con considering what they've paid out and
Speaker 1: come considering what the mortgage is, what's coming in is
Speaker 1: relatively low. So they get caught in that sort of trap,
Speaker 1: and that's more common in the inner city older style properties.
Speaker 1: Is it, Yes, absolutely absolutely so. Are the only better
Speaker 1: in the subject of the subverbs that you've mentioned, Is
Speaker 1: the yield any better?
Speaker 2: Well, they are. You can you can get something relatively new,
Speaker 2: a couple of years old. We're often looking for something
Speaker 2: no more than five years old if we can, right,
Speaker 2: because we want as much as possible to just buy
Speaker 2: this asset and get on with that day job and
Speaker 2: let it go up in value. I just don't even
Speaker 2: want to know about it, I say to some of
Speaker 2: my clients. If my life depended on driving it to
Speaker 2: some of my suburbs, I wouldn't even know where they are,
Speaker 2: which is a good thing. I don't want to worry
Speaker 2: about them.
Speaker 1: Well, that's the Warren Buffett line. You know that he
Speaker 1: should be able to go to the movies for the
Speaker 1: afternoon care of what the share market is doing, if
Speaker 1: he's made the right.
Speaker 2: Decisions, Yes, exactly. Just let them do their thing without
Speaker 2: me worrying about them. And so in some of these
Speaker 2: suburbs you can still purchase things that aren't necessarily units.
Speaker 2: If I am looking at a unit for a client,
Speaker 2: I'll be looking for something that's on as much land
Speaker 2: as possible, and obviously I will rely heavily on site
Speaker 2: inspections and professional building inspections, et cetera to make sure
Speaker 2: there's no underlying issue. But I'm always looking for as
Speaker 2: much land as I can get, and also as much
Speaker 2: house as I can get because you need to tenant it.
Speaker 2: So some of these outer suburbs that have got, in
Speaker 2: particular new hospitals, new infrastructure that is under construction, because
Speaker 2: you know, a promise of a hospital could be twenty
Speaker 2: years away, right, So I'm looking for a Footscray Sunshine
Speaker 2: has got an existing hospital. Melton's Hospital has commenced, and I.
Speaker 1: Just ask you, as an investor, is that just a
Speaker 1: signal or is it literally that you will be able
Speaker 1: to rent to people who work in those big areas, hops,
Speaker 1: et cetera.
Speaker 2: Yeah, I'm using hospital probably unfairly, but I love hospitals
Speaker 2: because they create long term growth and they bring in
Speaker 2: other professionals, and they're bringing in a relatively high income.
Speaker 2: And if you're talking about so remember I said that
Speaker 2: in our experience, the most important factor and characteristic for
Speaker 2: future price growth in Australia globally is something family income growth,
Speaker 2: household income growth. And if a new hospital is going
Speaker 2: in then you're often particularly in these outer rings or
Speaker 2: the inner urban ring, but right on the borders, you're
Speaker 2: often increasing the employment the household employment income as a
Speaker 2: result of having a lot of health workers. In some
Speaker 2: of the suburbs we're looking at, there's new legal facilities
Speaker 2: going in, new courts, et cetera, which is also a
Speaker 2: great thing because what you're looking for is the sort
Speaker 2: of infrastructure that is going to bring a lot of
Speaker 2: employment and long term employment. Schools are wonderful because it
Speaker 2: will bring people looking to house their children in a
Speaker 2: good quality school, and certainly a good quality high school
Speaker 2: can be unbelievable for a suburb. There are many suburbs
Speaker 2: that people just buy or rent just to get their
Speaker 2: children into these really great public schools. But it doesn't
Speaker 2: necessarily create a lot of jobs, whereas there are other
Speaker 2: types of infrastructure that will create a lot of jobs
Speaker 2: and also entice other workers to come in and service
Speaker 2: the local health workers, et cetera. So it's sort of
Speaker 2: a you know, snipall effect.
Speaker 1: Just something I really want to put to you, and
Speaker 1: I mean, obviously I'm thinking is very strong and it's
Speaker 1: interesting and it's interesting how you are looking. Obviously, it
Speaker 1: turns out we're talking about city of Melbourne being a bargain,
Speaker 1: so which areas. But your theme and you're largely could
Speaker 1: be applied at any city. Let's come back in a moment.
Speaker 1: I want to ask you about one thing that sort
Speaker 1: of hangs over all that that just me threaten it
Speaker 1: back in a moment. Hello, Welcome back to the Australians
Speaker 1: Money Puzzle Podcast. James Kirby here with the Nisa Cavello.
Speaker 1: We left you with a cliffhanger. What is it that
Speaker 1: possibly go wrong with Anissa's concept of the opportunities? Can
Speaker 1: I put words in you about and say, in any
Speaker 1: city and it just happens to be Melbourne being the
Speaker 1: one that you are expert in and from a nationwide
Speaker 1: perspective is clearly the bargain state at the moment. But
Speaker 1: you and you outline how you like these new areas,
Speaker 1: new clusters, new growth developments, for they have new hospitals
Speaker 1: and they have you're really focusing on houses and alone
Speaker 1: houses with land. The only thing that I would from
Speaker 1: an economic point of view, the challenge might be supply.
Speaker 1: That scarcity isn't there and that Melbourne and Victoria actually
Speaker 1: has the best supply in the country. There's a variety
Speaker 1: of reasons for that, but the main one is that
Speaker 1: you can keep building forever. There's no parks, lakes or
Speaker 1: the ocean. To get in the way like other cities.
Speaker 1: What do you say to that if I said to you,
Speaker 1: I love your thinking. I'm ready, I've got my checkbook
Speaker 1: half opened, but I'm worried about supply.
Speaker 2: Well, we don't. I'm not only investing in these growth areas,
Speaker 2: but it is an area that we do like. It
Speaker 2: is one of our themes. Okay, just to say that,
Speaker 2: just a bit clear, but if you looked at it,
Speaker 2: I think I use the example before a Cranburn fifteen
Speaker 2: years ago was just paddocks and many people said, why
Speaker 2: would I invest there? There is so much supply. Now
Speaker 2: there is nothing. And so often when you have these
Speaker 2: large land supplies and you have these huge population growth
Speaker 2: to go with it, it's the chicken and the egg.
Speaker 2: Why are we getting the population growth? Because there is
Speaker 2: job opportunity because there is land to build new roads,
Speaker 2: There is land to build new hospitals and new schools,
Speaker 2: so we are able, we have the capacity to build
Speaker 2: these employment clusters which will then bring the population. So
Speaker 2: that's one thing. Sometimes this presents opportunities. And sometimes when
Speaker 2: you drive out to suburbs like towards Caroline Springs and
Speaker 2: you go on the Western Ring Road, and then you
Speaker 2: end up on the I've forgotten the name. I think
Speaker 2: it's EMA, and just you go past vacant Land, huge
Speaker 2: industrial estates in vacant Land. A lot of that is
Speaker 2: not rezoned residential, a lot of it is commercial, and
Speaker 2: so there are huge pockets of future employment in these areas,
Speaker 2: which is exciting. So some of it is actually an
Speaker 2: opportunity for Victoria because we have the land to create jobs,
Speaker 2: to create employment clusters. The other thing that people don't
Speaker 2: take into consideration is we've had a lag in building
Speaker 2: approvals and construction, a massive lag, and yet our population
Speaker 2: growth has accelerated, and so we are now way behind
Speaker 2: where we need to be.
Speaker 1: Okay, So it sounds like excepploint doesn't disturb you really
Speaker 1: because you're coming in with a it's a more optimistic
Speaker 1: view rather than saying no, we need a bit of serciosity,
Speaker 1: forget the price. You're coming in a different point of view, really,
Speaker 1: which is like top down. You're saying no, there's population growth,
Speaker 1: so there's going to be literally new towns, and these
Speaker 1: new towns the values will improve. And I suppose what's
Speaker 1: interesting with your approaches that century level, Like you said
Speaker 1: seven fifty, which is, if someone's listening in Sydney, what
Speaker 1: can they buy for seven fifty I have?
Speaker 2: Again, they're lucky, that's right.
Speaker 1: Very little. There's something I wanted to bring in here,
Speaker 1: which is we have lots of people on the show
Speaker 1: and they're coming with different perspectives on property to us
Speaker 1: just a little bit. I wanted to tell the listeners,
Speaker 1: now that we know you know that we know your expertise,
Speaker 1: now that we know what you have to see, it's
Speaker 1: interesting how you started in property, and you might just
Speaker 1: synopsize it for us as to how you got to
Speaker 1: where you are, and just before you do in how
Speaker 1: many properties are you running now?
Speaker 2: So I'm under my peak. So and I hate answering
Speaker 2: this question because I say all the time to media,
Speaker 2: I don't want everybody to go up by seventeen properties.
Speaker 2: I think it's ridiculous for most people. Right, yeah, I
Speaker 2: think you know, two, three, four really good place properties
Speaker 2: is all you need. But I'm in the industry, so
Speaker 2: I buy and sell. I'm now under fifteen. I'm about
Speaker 2: to start buying up again. So I've gone down and
Speaker 2: I go up, and again I don't recommend other people
Speaker 2: do that because the cost of transaction is so high with.
Speaker 1: Property, you're in it all day long. You're a professionally,
Speaker 1: it's right. So you're taking three or four properties for
Speaker 1: the serious investor. It's interesting because we talked about stocks
Speaker 1: and we see ten. If you're serious, ten to fifteen,
Speaker 1: you should be able to name them, remember them and
Speaker 1: know how much they are on the d If you've
Speaker 1: got forty stuction, probably not able to do that. So
Speaker 1: something similar with the properties had to concentrate. So tell
Speaker 1: us how did you get to this point? How did
Speaker 1: you get into property?
Speaker 2: Well, it's a long I won't go back all the way,
Speaker 2: but I bought property when I was very young, not
Speaker 2: knowing what I was doing. I was in financial services
Speaker 2: for many years. But I'm Italian and if you know
Speaker 2: anything about Talian parents, they make you buy property or
Speaker 2: you're not a good girl, right or a good boy.
Speaker 2: So you do what you're told. You do what you're told, and.
Speaker 1: So I thought, I think that.
Speaker 2: It's a lot of helt. So I bought a couple
Speaker 2: of properties, and I unfortunately listened to my parents. I
Speaker 2: didn't do what I wanted to do because I wanted
Speaker 2: to buy a property in footscram my mother said, oh,
Speaker 2: no way, not Footscrad. This is in when I was
Speaker 2: in my twenties and I'm nearly fifty and so, and
Speaker 2: I wish I bought the property in Footscrad. Tell you what.
Speaker 2: I bought an apartment in Sint Kilda and then I
Speaker 2: bought a house with my brother and Cremawn Richmond. And
Speaker 2: I eventually realized that I was working very hard. I
Speaker 2: was virtually a single mum, and I was nowhere near
Speaker 2: being able to replace my working income. So what I
Speaker 2: wanted to do was sell these properties, increase my income
Speaker 2: and have a bit of a break. I was absolutely exhausted,
Speaker 2: and I worked out by going to sell them because
Speaker 2: I just sort of left them and didn't think about them.
Speaker 2: That these two properties had made me more money in
Speaker 2: five years than Assex said my portfolio was going to
Speaker 2: do in something like fifteen, right, And so I had
Speaker 2: a light bulb moment and thought, I haven't even performed
Speaker 2: wealth it compared to other property markets because I don't
Speaker 2: know anything about it. So I set out to become
Speaker 2: very serious about it. And I actually did work with
Speaker 2: Louis Christopher from SQM Research, who's just a legend and
Speaker 2: a knew end from the industry, and we built a
Speaker 2: methodology to understand those suburbs most likely to outperform over
Speaker 2: the long term. And I started to follow that and
Speaker 2: in a very short period of time I did really well,
Speaker 2: and I went to areas that The first place I
Speaker 2: invested was Werribe And I can tell you twelve years
Speaker 2: ago when I drive out to wear Abe and wind
Speaker 2: and Veil, I thought, what am I doing, you know?
Speaker 2: But I did yet that beyond the paddocks and thought, really,
Speaker 2: where where are all the people?
Speaker 1: You know?
Speaker 2: But I listened, I said, because I'd been in financial services,
Speaker 2: I built financial products. I understood how to listen to
Speaker 2: the numbers and not listen to my heart. So I
Speaker 2: did it. And the two these properties that I bought,
Speaker 2: the first ones that I started with, performed a lot
Speaker 2: better than the ones that I bought in urban and
Speaker 2: they cost me less. It was easier to hold them,
Speaker 2: you know, all of those things that I'm now teaching
Speaker 2: my clients. I was able to get a second one
Speaker 2: a year later and build my portfolio very quickly.
Speaker 1: So you change your nature of risk. And the first
Speaker 1: ones you went into well worn, established city suburbs where
Speaker 1: you knew people lived there already, and you moved to
Speaker 1: a different type of thing where you went to somewhere
Speaker 1: you didn't know, yes, possibly had never been. And that's
Speaker 1: been the case ever since, has it.
Speaker 2: That has well? I held on to my older properties
Speaker 2: for a while, and then my personal story is that
Speaker 2: I had marriage breakdown and I had to start again.
Speaker 2: That was about six years ago now, And this time
Speaker 2: what I did was I got rid of I had nothing,
Speaker 2: no old properties, and I just listened to the advice
Speaker 2: that I gave my clients, because some of them had
Speaker 2: got to the point where they were doing better than me,
Speaker 2: and I thought, well, why don't I just listen to them?
Speaker 2: And I actually took a little bit of risk and
Speaker 2: I started to buy untitled land. So I put small
Speaker 2: deposits towards untitled land, and in most cases, after twelve
Speaker 2: months that land had appreciated significantly and I'd put ten
Speaker 2: to fifteen thousand dollars down and made fifty to one
Speaker 2: hundred grand.
Speaker 1: What untitled land is.
Speaker 2: So untitled land is where land has been approved for subdivision,
Speaker 2: but it hasn't titled because the developer hasn't yet built
Speaker 2: the roads, et cetera. So you can that developer is
Speaker 2: only allowed to take a ten percent deposit as a
Speaker 2: maximum on a piece of untitled land, and you can
Speaker 2: often negotiate five percent. So I had paid small amounts
Speaker 2: anything that I was getting in from my income. I
Speaker 2: was putting towards taking massive risks. I don't recommend other
Speaker 2: people do this, putting towards this untitled land in areas
Speaker 2: in very strategic positions that I felt would perform well.
Speaker 2: And you know, I did six in the first year,
Speaker 2: and then did a few others in the second year
Speaker 2: and built a portfolio very quickly, and luckily it all
Speaker 2: went in my favor.
Speaker 1: H I see, Okay, So that was and I presume
Speaker 1: that was when you in terms of risk, that was
Speaker 1: the most that was the most risk exposed activity compared
Speaker 1: to what you do now.
Speaker 2: Well, well, now I probably take a bit more relatively speaking,
Speaker 2: you know, I'm probably not taking more risk because I'm
Speaker 2: in a much better position. But I will do things
Speaker 2: now where I'll test market So I, for example, am
Speaker 2: trialing and NDIS property. I'm really I've got a lot
Speaker 2: of clients that ask me about it, but I won't
Speaker 2: allow a client to invest in something that I haven't
Speaker 2: been prepared to invest in myself. So I want to
Speaker 2: trial it. I want to work it out and then
Speaker 2: come back and say, look, I found that too difficult,
Speaker 2: don't bother, you know. And I'm aligned with some great
Speaker 2: advisors on it. But so I'm testing that, and that
Speaker 2: to me is a big risk. I see a lot
Speaker 2: of risk in that type of really high yield property.
Speaker 2: That's very specialized. It's a very small market.
Speaker 1: It's very high regulation risk. There is the government team,
Speaker 1: it is very high and there's a lot of intermediaries
Speaker 1: in between.
Speaker 2: Look, there's a lot of issues with oversupply with something
Speaker 2: like that. When there's such high yields. There are a
Speaker 2: lot of property spookers will say that we'll go out
Speaker 2: and talk about the guaranteed returns and government backed, which
Speaker 2: is actually not correct at all. There's nothing guaranteed. It's
Speaker 2: not government back to the you, it's government back for
Speaker 2: the tenant. And so there's a lot of misinformation out there.
Speaker 2: And unfortunately, the property industry is not regulated like the
Speaker 2: financial services industry, so you can get away with saying
Speaker 2: a lot of things that aren't that can be misleading.
Speaker 1: Okay, I think it's a really good point, and we
Speaker 1: would take a break here of some questions I want
Speaker 1: on Lissa to cover their property questions. Really interesting about
Speaker 1: the NDIS property I didn't want. I didn't even know
Speaker 1: we were going to bring that up in Nissa. Everything
Speaker 1: I've read about them suggests don't go near them. But
Speaker 1: that doesn't mean that you can't that you and Nissa
Speaker 1: can navigate your way through it. But I would be
Speaker 1: very careful for the inexperienced investor on that one. All right,
Speaker 1: back in a moment. Hello, Welcome back to The Australian's
Speaker 1: Money Puzzled podcast. I'm James Kirby talking to a Nissa
Speaker 1: Cavallo regular on the show from the Ida EDA property group. Okay,
Speaker 1: there is a question. It's very good. It's also very long.
Speaker 1: From Michael. I'm going to just cut it in half
Speaker 1: and hopefully it all makes sense, he says. My partner
Speaker 1: and I bought our first home, a villa that'd be
Speaker 1: a villa unit I imagine in Canberra at the height
Speaker 1: of the previous peak, which is twenty twenty one. We're
Speaker 1: at the point now of looking to upgrade to something bigger.
Speaker 1: Thankfully don't need to sell our current home in order
Speaker 1: to purchase the next one. The property is a good
Speaker 1: asset in terms of quality, etcetera. But as a recent
Speaker 1: guest suggested, you make your profit when you buy, and
Speaker 1: we bought high. We're unsure what to do when we
Speaker 1: buy our next home. Should we sell the old one
Speaker 1: immediately and invest elsewhere? Perhaps? Okay, I'll stop it right there,
Speaker 1: and I'd put it to it. And they said, this
Speaker 1: is not advice, it's information only for all the Michaels
Speaker 1: in the world. But I like what I like. My
Speaker 1: imagination is captured by the essential feature of Michael's question
Speaker 1: is when they bought Camber, they bought the top of
Speaker 1: the cycle, and Camber really ran high there at one stage,
Speaker 1: having done nothing for years. This happens in Australian cities.
Speaker 1: Part really ran high recently having done nothing for years.
Speaker 1: Melbourne has done nothing for years, and the earlier part
Speaker 1: of our conversation suggests it will now run. How do
Speaker 1: you get around that when you have a bit of
Speaker 1: bad look at the very first property you buy because
Speaker 1: it just happened to be top of the cycle.
Speaker 2: Well, I was buying at the top of the cycle
Speaker 2: two years ago with several clients, so I've done it.
Speaker 2: My mantra is, don't try and time the markets. Economists
Speaker 2: get it wrong all the time. Investment professionals get it
Speaker 2: wrong all the time. So what hope do we have
Speaker 2: of getting it right. There's a saying that we say
Speaker 2: in the property that you'd never bought too high, you
Speaker 2: just bought too soon. So hang in there, right, But
Speaker 2: my only qualification of that is if you're in an
Speaker 2: asset that you don't think is going to perform and recover,
Speaker 2: and you're missing out on something that's going to do
Speaker 2: a lot better for you than you, by all means,
Speaker 2: get out of it. But I'm European. I'm a traditional
Speaker 2: investor that likes to hold by and hold unless my
Speaker 2: asset isn't performing. So I mean the risk is that
Speaker 2: he gets out of it, and not just Michael, that
Speaker 2: an investor gets out of it an asset at the
Speaker 2: peak and then buys another one at the peak. You know,
Speaker 2: if you're timing markets, if you're timed it wrong once,
Speaker 2: you could time it wrong again, So potentially hanging that particularly,
Speaker 2: as we've mentioned before, due to the transaction costs, James,
Speaker 2: you know, they're so high that you really need to
Speaker 2: make significant increases in property in particular in order not
Speaker 2: to sell it a loss. And so I think you've
Speaker 2: got to look at what is it likely to do
Speaker 2: over the next five years. Is it worth hanging in
Speaker 2: there or could I do so much better in another
Speaker 2: asset and therefore risk a slight loss in sale.
Speaker 1: Yes, okay, very good, Well, thank you for that answer it.
Speaker 1: And I think it's it's a very good point in this.
Speaker 1: And Meeks, I mean timing and share is a totally
Speaker 1: different thing. In property. You have that thing that you
Speaker 1: just cannot move in and out easily in the short
Speaker 1: period of time. I mean, what do you think is
Speaker 1: a question without notice like rock bottom shortest time cycle
Speaker 1: someone should have an investment property for in any market,
Speaker 1: all things being even, Look.
Speaker 2: If somebody is if it's really underperforming, cut your losses. Right.
Speaker 2: So I have had clients that have had it for
Speaker 2: a year and to at least save on CGT, you'd
Speaker 2: hang on to it for a year, right, Well, you
Speaker 2: won't have any capital gains if it's really underperforming. But
Speaker 2: let's say that it's underperforming in the sense that you
Speaker 2: just can't afford it. You've got to get out of it.
Speaker 2: Et cetera. But I would say that if you've got
Speaker 2: the capacity to make six percent a year, hang in
Speaker 2: there for a few years. You know, if you've got
Speaker 2: the capacity to make a lot less than that three
Speaker 2: percent four percent, then maybe cut your losses as soon
Speaker 2: as possible. So I think it's not a timing issue,
Speaker 2: it's a prospect issue. I mean, often clients are going
Speaker 2: to units to tell me that, but I'm going to
Speaker 2: get good yield and it'll cover the mortgage, right. But
Speaker 2: if you if it's just covering the mortgage and you
Speaker 2: and as a result of that, you're missing out on
Speaker 2: potentially getting six to seven percent capital growth and another asset,
Speaker 2: just forget about it, get out of it, cut your
Speaker 2: losses and get into something that's going to make you
Speaker 2: six to seven percent that will make up for the
Speaker 2: loss in that one year.
Speaker 1: Okay, and one in five mediourne apartments that salt in
Speaker 1: the last year, so to the loss. So we know
Speaker 1: who we're talking to. It's terrific. That is probably the
Speaker 1: perfect place to leave it for the moment. And this
Speaker 1: Thanks very much for coming on the show.
Speaker 2: Pleasure James. Thank you very much for having me.
Speaker 1: Great to have you on as always a Nissa Cavallo
Speaker 1: there of the IDA property group. I hope you found
Speaker 1: that interesting. It was only meant to be a show
Speaker 1: that looked at whether Melbourne was well, we know, I
Speaker 1: think it's ticking very nicely. What I wanted Danissa to
Speaker 1: do was to talk about where the opportunities are in
Speaker 1: their city. But she brought a lot more to the
Speaker 1: table than that, which was really good. Okay, let's have
Speaker 1: some more emails the money puzzle at the Australian dot
Speaker 1: com dot au. Talk to you soon.