WEBVTT - How 'rentvesting' could work for you 0:00:10.000 --> 0:00:12.880 Hello, and welcome to the Australians Money Puzzle podcast. 0:00:12.920 --> 0:00:15.120 I'm James Kirby. Welcome aboard everybody. 0:00:15.600 --> 0:00:18.560 I don't think there's any segment actually of the residential 0:00:18.600 --> 0:00:22.639 property market that has less attention and is quite as 0:00:22.680 --> 0:00:27.520 significant as the concept of rent investing. You know, it's 0:00:27.560 --> 0:00:31.639 a major social trend for aspiring home buyers. They don't 0:00:31.640 --> 0:00:34.240 buy the home. They don't buy a home the first 0:00:34.280 --> 0:00:37.040 time they buy. What they do is they purchase an 0:00:37.080 --> 0:00:40.599 investment property. They get the tax deductions related to that, 0:00:40.680 --> 0:00:42.599 and then they build up equity and it allows them 0:00:42.680 --> 0:00:46.480 basically to lead frog into the house that the house 0:00:46.520 --> 0:00:48.639 of their dreams, there forever home, as they call it. 0:00:49.320 --> 0:00:51.240 I want to talk about this and I have someone 0:00:51.240 --> 0:00:55.960 who's ideal for it. It's our June Paliwal of the 0:00:56.320 --> 0:00:59.120 Investigate Group, which is a buyer's advocate group. First time 0:00:59.160 --> 0:01:01.200 on the show, but I know I've been listening to 0:01:01.240 --> 0:01:02.920 you on this issue. You're very good on it, so 0:01:02.960 --> 0:01:05.200 I was I thought would be ideal way to bring 0:01:05.200 --> 0:01:05.440 you in. 0:01:05.480 --> 0:01:06.000 How I are. 0:01:06.040 --> 0:01:08.800 June, Yes, great, my friend, and definitely a hot topic 0:01:08.840 --> 0:01:10.279 at the moment the world of rent festing. 0:01:10.480 --> 0:01:13.280 It is a hard topic and you know more than that. 0:01:13.400 --> 0:01:15.400 I mean, there's always been sort of anecdotal. One of 0:01:15.440 --> 0:01:17.240 the frustrating things I think is that there's a lot 0:01:17.240 --> 0:01:20.160 of anecdotal commentary about it. It's like the bank of 0:01:20.200 --> 0:01:22.000 Mom and Dad. You know, everyone talks about it, but 0:01:22.040 --> 0:01:24.560 it's very hard to get stats on it. But I 0:01:24.760 --> 0:01:27.039 was listening recently to one of the bank results, the 0:01:27.080 --> 0:01:30.560 Bendico Bank results, and the CEO there, in releasing the 0:01:30.560 --> 0:01:34.720 results actually, you know, made clear reference to Richard Fennell. 0:01:34.880 --> 0:01:36.200 He made clear reference to. 0:01:38.040 --> 0:01:40.880 Their observation as a bank of the number of people, 0:01:40.959 --> 0:01:45.600 younger people now doing this rent vesting the rent basically 0:01:45.920 --> 0:01:50.120 and own an investment property. And I think, intriguingly, there's 0:01:50.160 --> 0:01:52.720 also a speculation in the market that the banks, more 0:01:52.760 --> 0:01:55.240 than one are working on a product that will be 0:01:55.320 --> 0:01:58.440 like basically aimed at this area rent vesting mortgages, and 0:01:58.440 --> 0:02:00.440 that will really I think, move it up along the 0:02:00.440 --> 0:02:02.960 line whatever they come up with. But you've really had 0:02:02.960 --> 0:02:06.280 a look at it, and you, I mean broadly, you 0:02:06.320 --> 0:02:07.880 think it's pretty good for the right people in the 0:02:07.920 --> 0:02:09.760 right place. Is that would that be a fair comment? 0:02:10.919 --> 0:02:14.000 Absolutely, it can play a key part of people's journey 0:02:14.040 --> 0:02:16.919 to building wells and even transitioning to their end of 0:02:17.000 --> 0:02:20.200 goal of buying a home. I am a personal success 0:02:20.240 --> 0:02:22.440 story of that. I now live in my dream home. 0:02:22.520 --> 0:02:25.560 So you definitely here to say that you don't have 0:02:25.639 --> 0:02:28.400 to be a rent vestor forever, but it can be 0:02:28.440 --> 0:02:31.200 a transitional journey that's an absolute game changer. And I 0:02:31.200 --> 0:02:33.920 want to take you through very quickly some of my 0:02:34.320 --> 0:02:39.000 own journey in earlier parts of my career, jumping in 0:02:39.040 --> 0:02:43.160 and around different suburbs to essentially be living from a 0:02:43.200 --> 0:02:46.160 performance and lifestyle basis. And I'll give you some examples 0:02:46.200 --> 0:02:49.800 of performance performance being one of my properties that I 0:02:49.840 --> 0:02:51.880 was renting at in the suburb of Bella Vista and 0:02:51.919 --> 0:02:55.200 Sydney was about a thirty second walk from my office 0:02:55.280 --> 0:02:58.800 in Bellavista and Sydney, So it was a growing phase 0:02:58.840 --> 0:03:01.640 of career business things like that, So it allowed me 0:03:01.720 --> 0:03:05.600 to have proximity time there and those extra hours. If 0:03:05.639 --> 0:03:07.400 you do the math over a fifty weeks a year 0:03:07.520 --> 0:03:09.960 or fifty two weeks, takeaways the man you leave. But 0:03:10.120 --> 0:03:12.320 the key is that math of a few extra hours 0:03:12.320 --> 0:03:16.640 per day around your different audience rather than traveling and 0:03:16.680 --> 0:03:18.600 coming home, you're at the office and you're in and 0:03:18.600 --> 0:03:22.280 around places of people you have greater performance. 0:03:22.680 --> 0:03:26.639 It gives you that efficiency, both financial efficiency and living efficiency. 0:03:26.720 --> 0:03:27.679 Yeah. Absolutely. 0:03:27.960 --> 0:03:31.480 Now tell me you were talking particularly about the nature 0:03:31.600 --> 0:03:34.519 of revesting that most of our listeners obviously would be 0:03:34.560 --> 0:03:36.760 familiar with the broad term, and I'm sure it's worked 0:03:36.760 --> 0:03:38.840 well for you, that's why you're on the show. But 0:03:39.360 --> 0:03:42.520 you've made a particular observation that about reinvesting. You might 0:03:42.560 --> 0:03:44.840 explain this to our listeners who wouldn't have heard it before, 0:03:45.320 --> 0:03:48.080 the way it works with the yields being so low 0:03:49.160 --> 0:03:51.840 in big cities, the yels are two or three percent. 0:03:51.960 --> 0:03:54.400 Out in the bush, there are six seven eight percent 0:03:54.440 --> 0:03:58.000 in country towns. But would you explain to our listeners 0:03:58.000 --> 0:04:01.880 how it made your concept about where it makes more 0:04:01.960 --> 0:04:03.240 sense to do this. 0:04:04.760 --> 0:04:06.800 For sure, let's do the math on it. So before 0:04:06.840 --> 0:04:09.640 I talked about performance space for investing, of where proximity 0:04:09.640 --> 0:04:13.160 gives you performance in your home, your lifestyle, your business, 0:04:13.200 --> 0:04:16.800 your career. Now if you move that over to financial 0:04:17.400 --> 0:04:21.600 analysis of renvesting, let's take a three million dollar home 0:04:21.640 --> 0:04:23.120 and you might go, why is are you using a 0:04:23.120 --> 0:04:25.960 three million dollar home? It's intentional for a very specific reason. 0:04:26.440 --> 0:04:29.920 If someone was to have a eighty percent loan against 0:04:29.960 --> 0:04:31.960 that or even a ninety percent if someone wants to 0:04:31.960 --> 0:04:34.920 get there with lower deposits and an eighty percent loan 0:04:35.000 --> 0:04:37.920 is two point four million, and at today's interest rates 0:04:37.920 --> 0:04:40.400 of say five and a half percent, that's one hundred 0:04:40.440 --> 0:04:43.640 and thirty two thousand of interest. We're not talking principle 0:04:43.680 --> 0:04:46.120 where everyone talking about buying your place is pushing the 0:04:46.160 --> 0:04:49.320 loan down. We're just talking about the interest itself. Now, 0:04:49.360 --> 0:04:51.360 with that one hundred and thirty two thousand of interest, 0:04:51.400 --> 0:04:53.440 if you divide that by fifty two, that's two thousand, 0:04:53.680 --> 0:04:57.080 five hundred and thirty eight dollars a week. However, a 0:04:57.160 --> 0:05:01.680 three million dollar property does not cost you two and 0:05:01.720 --> 0:05:05.560 a half thousand dollars per week to rent. Usually, rental yields, 0:05:05.640 --> 0:05:08.000 like in some suburbs of Sydney, can be as low 0:05:08.120 --> 0:05:10.240 as two to three percent or even one point seven 0:05:10.279 --> 0:05:12.159 to two and a half percent. So if we took 0:05:12.160 --> 0:05:14.719 a two point two percent rental yield and divided that 0:05:14.760 --> 0:05:18.440 by fifty two, that's about twelve hundred and seventy dollars 0:05:18.440 --> 0:05:20.840 a week in rent versus you know, more than two 0:05:20.839 --> 0:05:22.719 and a half thousand an interest alone, and you're not 0:05:22.760 --> 0:05:25.000 talking council rates and other things I see. 0:05:25.040 --> 0:05:29.640 So is the concept basically that the Australian property has 0:05:29.640 --> 0:05:33.800 become so expensive in the metropolitan areas that the rental 0:05:33.880 --> 0:05:38.400 yields are so low that there's actually an opportunity for 0:05:38.600 --> 0:05:44.480 the agile investor property investor to exploit this. But because 0:05:44.839 --> 0:05:49.040 the yields are so poor for those very expensive subverbs 0:05:49.680 --> 0:05:52.000 that if you want to the way to play it 0:05:52.000 --> 0:05:54.760 is or to optimize that are exploited, is actually to 0:05:54.880 --> 0:05:56.960 rent in it because you're actually getting a better deal 0:05:57.000 --> 0:05:58.760 because rents have never kept pace with prices. 0:05:58.839 --> 0:06:00.400 Is that the underlying. 0:06:00.279 --> 0:06:04.560 Logic, absolutely the underlying logic. And so the thing here 0:06:04.640 --> 0:06:08.120 is that the more premium the suburb is, the greater 0:06:08.320 --> 0:06:12.600 the disparity between rental yield and actual interest on a 0:06:12.640 --> 0:06:16.000 mortgage if you're owning. So if you're going to live 0:06:16.200 --> 0:06:19.840 in a regional part of Australia in the most affordable 0:06:19.880 --> 0:06:23.120 suburb in a unit, it's likely that the rat was 0:06:23.200 --> 0:06:26.200 yields high, so rate vesting might not be for you 0:06:26.279 --> 0:06:28.600 if you plan to live in that location for some time. 0:06:29.120 --> 0:06:30.920 So that's the flip side of what we're saying. Right, 0:06:31.120 --> 0:06:33.640 there's the logical flip side of what we're saying. Absolutely, 0:06:33.880 --> 0:06:36.479 then in areas where the property prices are not so 0:06:36.600 --> 0:06:40.480 relatively high, the deal on rent isn't as good. And 0:06:40.520 --> 0:06:42.679 we know that because the rents are six seven percent 0:06:42.760 --> 0:06:44.320 or whatever, while in the middle of the city is 0:06:44.320 --> 0:06:46.760 there are two and three percent. It's a really good theory, 0:06:46.839 --> 0:06:49.599 not just theory. It's a really good I am sure 0:06:49.640 --> 0:06:53.280 for many people. It has a lot of pluses. Now 0:06:53.600 --> 0:06:55.480 let's go a little bit deeper. If the person is 0:06:55.560 --> 0:06:59.240 deciding to do this rent vest and they say, Okay, 0:06:59.279 --> 0:07:03.039 we know how we're we're going to buy a good 0:07:03.080 --> 0:07:05.800 investment property in their city, it's going to we know 0:07:05.920 --> 0:07:08.480 this suburb is on the rise. We don't actually want 0:07:08.480 --> 0:07:10.320 to live in that soburb. We want to live this 0:07:10.400 --> 0:07:13.360 other suburb which is more expensive and is also close 0:07:13.400 --> 0:07:15.160 to where we work, and we can cycle over something 0:07:15.200 --> 0:07:17.880 like that. Okay, that all makes sense, but let's just 0:07:18.000 --> 0:07:20.520 have a look at it more closely. Now, should the 0:07:21.000 --> 0:07:25.200 renvestor then should they do interest only? It would seem 0:07:25.240 --> 0:07:28.240 to me that that's probably on the table here. 0:07:28.600 --> 0:07:31.840 Absolutely, So, I think firstly, each financial position would be 0:07:31.840 --> 0:07:34.160 different betweening on the goals that they're after and seeking 0:07:34.160 --> 0:07:37.320 their own advice and guidance. But when you look at 0:07:37.320 --> 0:07:40.000 investment debt and the renvestor is now renting in that 0:07:40.080 --> 0:07:44.800 great premium location for performance, lifestyle and financially, the next 0:07:44.840 --> 0:07:46.600 thing is what they do with their money. Because they 0:07:46.680 --> 0:07:48.360 still have capital that isn't tied. 0:07:48.200 --> 0:07:50.840 Up, they must invest to make it work. I am 0:07:50.840 --> 0:07:53.400 acting our joy. Absolutely, they can't go and spend it 0:07:53.440 --> 0:07:55.680 on a boat. That blows your theory pretty quickly. 0:07:55.720 --> 0:07:59.880 I imagine you're spot on right. Renting has its advantages, 0:08:00.160 --> 0:08:02.040 but the money needs to go to work, right and 0:08:02.160 --> 0:08:04.800 when you're going to work with that money. Yes, the 0:08:04.960 --> 0:08:09.440 interest on those investment related debts can be deductible, and 0:08:09.480 --> 0:08:14.040 so if they're deductible, then making sure you're not just 0:08:14.120 --> 0:08:17.800 pushing down that repayment in those early Welsh building stages 0:08:18.280 --> 0:08:20.400 is actually, you know, not in your favor. You want 0:08:20.400 --> 0:08:23.840 to actually have the debt that's there and focus on 0:08:23.880 --> 0:08:27.160 every bit of dollar towards acquiring more assets, whether there 0:08:27.240 --> 0:08:29.880 be in other vehicles or property or so forth. You 0:08:29.880 --> 0:08:31.720 don't want to go and focus on taking all your 0:08:31.720 --> 0:08:34.000 cash flow just to pay down debts whilst you're in 0:08:34.040 --> 0:08:36.679 what I call an acquisition phase. The Welsh building phase. 0:08:37.040 --> 0:08:40.160 Right, Yes, okay, so there's two things then in its favor. 0:08:40.400 --> 0:08:41.080 It seems to me. 0:08:41.200 --> 0:08:44.720 One is a natural market issue, as you mentioned about 0:08:44.800 --> 0:08:53.080 the basically for investing, the value is explicit in expensive 0:08:53.600 --> 0:08:57.160 what we call relatively expensive parts of the market because 0:08:57.160 --> 0:08:58.960 the user a little. The second part then is the 0:08:59.000 --> 0:09:06.319 tax advantage. How dependent on tax advantages specifically negative gearing 0:09:06.800 --> 0:09:08.959 is the whole rent vesting notion. 0:09:10.880 --> 0:09:13.560 It plays a part. But even if there was no 0:09:13.679 --> 0:09:17.760 tax advantages in favor from that negative gearing, there is 0:09:17.760 --> 0:09:21.840 the wealth building advantage because the location that you're in 0:09:22.040 --> 0:09:24.400 to live in from a lifestyle or maybe live in 0:09:24.440 --> 0:09:26.840 what you can afford, because you can't live in that 0:09:26.920 --> 0:09:29.120 premium location at all times. If you feel that that 0:09:29.240 --> 0:09:31.760 cost is too high, ins why you're investing there. But 0:09:31.840 --> 0:09:34.360 if you now went to another suburb and you decided 0:09:34.400 --> 0:09:36.360 to pull all your money into buying a home to 0:09:36.400 --> 0:09:38.680 live in, you've got to take a moment to question 0:09:39.040 --> 0:09:43.960 tax advantages aside. Is there a location in Australia where 0:09:43.960 --> 0:09:47.280 the data is better for me to actually invest in 0:09:47.600 --> 0:09:49.440 than the place I'm going to sink money in, which 0:09:49.480 --> 0:09:53.240 is the home And if that is better, you're now 0:09:53.280 --> 0:09:56.679 actually onto something and renvesting can build your wealth faster 0:09:56.960 --> 0:10:00.400 than the home you're in because that tax advantage does matter. 0:10:00.480 --> 0:10:03.319 Now you already are going to actually focus on building 0:10:03.400 --> 0:10:06.280 wealth with data, not just the tax advantage behind it. 0:10:06.880 --> 0:10:08.640 Very good, and we're going to have a look at 0:10:08.679 --> 0:10:11.800 that broad issue of the data you need in the 0:10:11.800 --> 0:10:14.600 second segment of the show. But just to play Devil's 0:10:14.600 --> 0:10:18.360 Advocate with you on manfesting, the criticism of it is 0:10:18.400 --> 0:10:22.079 that sooner or later, right when you're renfesting, it sounds 0:10:22.080 --> 0:10:23.680 like it's good at the start, but it seems to 0:10:23.720 --> 0:10:27.280 me if a few years later, as time passes, your 0:10:27.320 --> 0:10:31.480 rents rise and if you had a mortgage then you 0:10:31.520 --> 0:10:33.760 would have been basically even inflation will be helping you 0:10:33.800 --> 0:10:36.800 as you because you own the home, So does it 0:10:36.920 --> 0:10:39.520 weaken as time goes by? That initial sort of sugar 0:10:39.600 --> 0:10:43.120 hit you get from the renfesting idea. 0:10:44.320 --> 0:10:47.040 It's a really good point to raise and the short 0:10:47.080 --> 0:10:50.240 answers know with the right moves made. So I want 0:10:50.280 --> 0:10:52.840 to give you a live example of the right moves, 0:10:53.440 --> 0:10:55.720 but the numbers behind it. If I go through three 0:10:55.760 --> 0:10:59.680 core reasons will help explain. The first core reason is 0:10:59.760 --> 0:11:02.880 you usually when someone has a desire for a home 0:11:02.920 --> 0:11:05.000 that they feel is better than what they can afford. 0:11:06.480 --> 0:11:11.280 That particular part is what creates this satisfaction between, oh, look, 0:11:11.320 --> 0:11:14.840 home is unaffordable. I can't go and achieve what I 0:11:14.840 --> 0:11:18.120 want because it's not exactly what I desire versus the 0:11:18.160 --> 0:11:21.800 position I'm in. And so with rent vesting, the step 0:11:21.840 --> 0:11:25.200 one that you're doing is you're matching the desire to 0:11:25.280 --> 0:11:27.880 the position that you're in. And it starts to have 0:11:27.960 --> 0:11:30.040 a perfect match now because now you can have this 0:11:30.160 --> 0:11:33.080 performance upsides, I can rent somewhere where I wanted to 0:11:33.080 --> 0:11:36.400 live in. That first part is there for you. The 0:11:36.440 --> 0:11:39.240 second part coming to now is your career and time. 0:11:40.040 --> 0:11:45.280 As you map out income and age, it's close correlation 0:11:45.440 --> 0:11:48.320 that is age and time and workforce and experience in 0:11:48.400 --> 0:11:53.040 workforce builds income tends to as well. And so as 0:11:53.080 --> 0:11:56.120 you're growing on the rent vesting journey and maybe you're 0:11:56.160 --> 0:11:58.560 now getting the lifestyle upside that you didn't once have 0:11:58.679 --> 0:12:01.679 and you're now investing in money, there is growth occurring, 0:12:01.760 --> 0:12:05.400 not just financially in your actual investment, but there's growth 0:12:05.440 --> 0:12:08.960 also occurring professionally. So now when you are returning to 0:12:09.400 --> 0:12:12.080 the home buying goal, of the future. It's not the 0:12:12.120 --> 0:12:15.840 same argent that was there at twenty five as he 0:12:15.920 --> 0:12:18.560 is in thirty five and forty five, and so your 0:12:18.559 --> 0:12:22.000 different capability allows you to now get closer match to 0:12:22.080 --> 0:12:24.560 your preference and the home you want to live in. 0:12:25.240 --> 0:12:28.880 The third part is rent vesting involves building wealth through 0:12:28.920 --> 0:12:32.800 property across Australia with data, not by emotion or things 0:12:32.840 --> 0:12:33.720 that feel comfortable. 0:12:34.080 --> 0:12:36.800 I imagine since you're a buyer's agent that your notion of 0:12:37.000 --> 0:12:39.679 the afteromen way to spend the money that becomes available 0:12:40.120 --> 0:12:42.600 as a renvestor is to put it back into property. 0:12:42.960 --> 0:12:45.680 You don't suggest to go outside property where we know 0:12:45.720 --> 0:12:48.120 there's very good turns, for instance in the market of 0:12:48.160 --> 0:12:50.040 double digits every year in recent times. 0:12:51.960 --> 0:12:54.600 No, you can actually do that. Even then, that could 0:12:54.600 --> 0:12:57.920 still work under the rent vesting umbrella because you have 0:12:58.280 --> 0:13:01.280 cash that's there that wasn't there before because it would 0:13:01.280 --> 0:13:03.600 have gone into your own mortgage. Now you have a 0:13:03.679 --> 0:13:06.640 lifestyle upside of the performance upside, and you have the 0:13:06.679 --> 0:13:08.520 free flowing cash flow if you wanted to put it 0:13:08.559 --> 0:13:11.280 to indexes and other things, and you still live the 0:13:11.280 --> 0:13:14.160 same lifestyle of that multimillion dollar home, but not the 0:13:14.240 --> 0:13:16.920 multimillion dollar mortgage. You can do that. At the end 0:13:16.920 --> 0:13:18.840 of the day, rent vesting is your choice of where 0:13:18.880 --> 0:13:21.160 you invest the money. But the main thing here is 0:13:21.200 --> 0:13:24.319 this third part is as home prices have gone up, 0:13:24.640 --> 0:13:28.240 rents have increased because you were a performance driven not 0:13:28.440 --> 0:13:30.040 I'm going to get the best home I can in 0:13:30.080 --> 0:13:32.200 my twenties or thirties for the income I have today. 0:13:32.720 --> 0:13:35.880 You're able to have an outperformance and that outperformance will 0:13:35.880 --> 0:13:38.200 come back and help you. And an example I can 0:13:38.240 --> 0:13:40.040 think of with that is a couple i'd met by 0:13:40.080 --> 0:13:42.720 the name of Danny and Ron. They were in banking 0:13:42.760 --> 0:13:45.760 as she's an executive in the Big Four and if 0:13:45.800 --> 0:13:48.559 you'd wind the clock back to twenty twenty, her budget 0:13:48.559 --> 0:13:50.480 would have allowed her a unit to live in the 0:13:50.480 --> 0:13:53.559 inner West of Sydney. Now that budget itself, whilst it 0:13:53.559 --> 0:13:55.840 would have gotten her unit, that wasn't her ideal home 0:13:55.880 --> 0:13:58.000 that she wanted. That it wasn't the ideal location that 0:13:58.040 --> 0:14:01.280 she wanted, so she could have parked them in that way. Instead, 0:14:01.559 --> 0:14:03.839 we purchased a property in Brisbane for five hundred and 0:14:03.880 --> 0:14:06.120 sixty thousand, which has doubled in value in the five 0:14:06.200 --> 0:14:08.960 years later. And then she'd use the equity to go 0:14:09.040 --> 0:14:11.760 to three other locations. Now built over one point one 0:14:11.800 --> 0:14:14.400 million dollars in equity across three point five million dollars 0:14:14.440 --> 0:14:18.000 worth of assets in four different properties. So all of 0:14:18.040 --> 0:14:19.680 this wealth building allows you to do that. 0:14:20.480 --> 0:14:21.000 Interesting. 0:14:21.040 --> 0:14:24.880 Now what we must do is let our listeners hear 0:14:25.000 --> 0:14:28.560 what Arjen has to say about using data to optimize 0:14:28.600 --> 0:14:39.680 the notion of rent investing back in a moment. Hello, 0:14:39.840 --> 0:14:43.600 Welcome back to The Australian's Money Puzzle podcast. Today's guest 0:14:43.680 --> 0:14:46.800 is Arju and Padival, who is head of Investor Kit, 0:14:46.960 --> 0:14:50.560 which is a buyer's advocate agency. He operates out of Sydney, 0:14:50.560 --> 0:14:54.880 but it's a nationwide operation and I'm going to resist 0:14:54.920 --> 0:14:58.240 asking you which is your favorite. I certainly wouldn't spend 0:14:58.240 --> 0:15:00.720 a whole segment on it, but just quick before we 0:15:00.760 --> 0:15:03.160 go into the issue of data. Everyone i'm on the 0:15:03.160 --> 0:15:05.440 show in recent weeks has been asked one single question, 0:15:05.720 --> 0:15:08.320 what city is the best value in the country at 0:15:08.320 --> 0:15:10.200 the moment and the answer is. 0:15:10.840 --> 0:15:12.800 I would say the answer is Melbourne. 0:15:14.480 --> 0:15:14.920 Very good. 0:15:16.440 --> 0:15:20.000 And you are now adding to the majority week by week. Yeah, 0:15:20.080 --> 0:15:24.320 that's interesting. We're building a consensus here now about data 0:15:24.360 --> 0:15:26.120 and collection of data the point I think in the 0:15:26.120 --> 0:15:28.120 first part of the show, which was really interesting folks 0:15:28.200 --> 0:15:30.520 with Arjun, was this notion of the perfect match in 0:15:30.560 --> 0:15:33.120 the property. And if I've got it right, I mean, 0:15:33.160 --> 0:15:37.120 I think what he's driving at is it's not just 0:15:37.160 --> 0:15:39.280 the notion of re investing, and it's not just the 0:15:39.320 --> 0:15:42.520 notion that you rent and you buy an investment property, 0:15:42.560 --> 0:15:46.800 but because you're buying the property on strictly investment criteria, 0:15:48.160 --> 0:15:51.320 you optimize your possibility of making the very best investment. 0:15:51.800 --> 0:15:53.720 So a lot of it comes down to what and 0:15:53.760 --> 0:15:55.520 where will I buy, which is nothing to do with 0:15:55.560 --> 0:15:57.760 where I want to live? Is not it basically arguent? 0:15:57.840 --> 0:16:00.240 So how do you approach that? And what data? You've 0:16:00.240 --> 0:16:02.800 mentioned data a few times, what do you mean and 0:16:02.840 --> 0:16:05.800 what do people look for for sure? 0:16:05.880 --> 0:16:10.000 So from a data perspective, the key thing to point 0:16:10.040 --> 0:16:13.040 out that I believe in property is true is that 0:16:13.440 --> 0:16:17.960 capital growth does not exist without competition. Capital growth as 0:16:18.000 --> 0:16:21.720 an outcome is simply there because competition in a fewer 0:16:21.800 --> 0:16:26.120 amount of houses for sale has created growth and someone 0:16:26.160 --> 0:16:29.440 willing to pay more. And this multiple events happen again 0:16:29.480 --> 0:16:32.600 and again, and new comparable sales arise at high amounts 0:16:33.040 --> 0:16:36.200 and So when you understand that concept without any data 0:16:36.240 --> 0:16:40.520 points or KEYAI terms, machine learning, or anything fancy behind it, 0:16:40.600 --> 0:16:43.240 you now realize that what you're really looking for is 0:16:43.320 --> 0:16:47.320 signals of data that points to high competition occurring, which 0:16:47.360 --> 0:16:51.920 increases the likelihood of property prices to grow. Right, And 0:16:51.960 --> 0:16:55.640 so when you're looking at that, there are really competition 0:16:55.960 --> 0:16:59.000 in two parts of housing markets. One is the rental 0:16:59.040 --> 0:17:02.240 market and one is the established market for sale. So 0:17:02.400 --> 0:17:05.720 competition and the rental market can be shown by is 0:17:05.720 --> 0:17:08.879 there a low amount of rental vacancy so vacancy rates 0:17:08.920 --> 0:17:15.280 are low? Or secondly, is there are decreasing speed which 0:17:15.400 --> 0:17:18.480 is increasing speed which is decreasing days on markets, which 0:17:18.520 --> 0:17:20.800 means rental properties don't take on average two weeks to 0:17:20.800 --> 0:17:22.840 find a tenant, they take on average one week to 0:17:22.840 --> 0:17:25.040 find a tenant. Then, if we move on to the 0:17:25.160 --> 0:17:29.600 sales data, is how many properties are there for sale 0:17:30.080 --> 0:17:33.119 and the trend of those properties for sale. Is it 0:17:33.160 --> 0:17:36.040 a decreasing trend of properties for sale at any one 0:17:36.080 --> 0:17:40.200 point because there is more buying occurring, sales volumes increasing, 0:17:41.000 --> 0:17:44.040 Is there a decreasing days on market because people don't 0:17:44.080 --> 0:17:46.119 take two weeks to make a deal, they do it 0:17:46.160 --> 0:17:49.240 in the first open or they don't take three or 0:17:49.240 --> 0:17:52.880 four inspections, they're doing the first inspection. And is there 0:17:53.240 --> 0:17:56.479 a listing price that now has far less discounts or 0:17:56.560 --> 0:18:00.600 are having sales occur beyond the listing price. So there 0:18:00.600 --> 0:18:02.760 are over thirty different data points we look at, but 0:18:02.760 --> 0:18:05.800 if you just simplify to these three to five, you 0:18:05.920 --> 0:18:09.320 have found competition and competition equals capital. 0:18:08.960 --> 0:18:11.239 Growth, right, So maybe we just go through them. 0:18:11.280 --> 0:18:15.520 The obvious thing obviously in price days on market, that's 0:18:15.560 --> 0:18:17.159 something you're looking at some of the sounds of it 0:18:17.240 --> 0:18:20.399 very closely. What are the signals for you that this 0:18:20.520 --> 0:18:23.840 suburb is going to fly basically or outperform. 0:18:24.000 --> 0:18:26.360 Of course we'll do it as a dock point signals then, 0:18:26.440 --> 0:18:31.760 So the first one is listing levels below five year averages, 0:18:32.119 --> 0:18:36.200 so substantially lower levels of property listings in comparison to 0:18:36.240 --> 0:18:41.720 what's normal. The second one is surging sales volumes, so 0:18:41.880 --> 0:18:46.960 increasing number of deals happening. The third one is depending 0:18:46.960 --> 0:18:51.800 on which cities, increasing auction clearance rates and above sixty 0:18:51.840 --> 0:18:54.639 five percent auction clearance rates as a clear benchmark, but 0:18:54.880 --> 0:18:59.880 increasing trainings as well. Then the fourth one is decrease 0:19:00.240 --> 0:19:02.960 days on market, and if I had already mentioned that 0:19:03.000 --> 0:19:05.560 when prior, this is just the time to sell and 0:19:05.600 --> 0:19:09.240 it's getting faster or quite low. And then the fifth 0:19:09.280 --> 0:19:14.120 one here is having lower levels of vendor discounting. They're 0:19:14.200 --> 0:19:17.240 listing price in what percentage comes off it or a 0:19:17.280 --> 0:19:20.200 positive vendor discount event the listing price, and how much 0:19:20.240 --> 0:19:22.240 more it sells than it. And so if you just 0:19:22.320 --> 0:19:25.600 use these five as a blanket statement, it's basically one paragraph. 0:19:25.720 --> 0:19:28.800 Someone over the barbecue at the sausage ses are saying, hey, mate, 0:19:28.840 --> 0:19:30.960 I'm at this market and I saw that it doesn't 0:19:31.000 --> 0:19:33.360 have a lot of properties for sale. There's less properties 0:19:33.400 --> 0:19:36.000 for sale today than there was five years ago. A 0:19:36.040 --> 0:19:38.520 lot of people are buying properties in the suburb, and 0:19:38.520 --> 0:19:40.840 they're actually buying it twenty percent more than there were 0:19:40.920 --> 0:19:43.400 last year. And then on top of that, it used 0:19:43.400 --> 0:19:45.600 to take a month to sell, it only takes two 0:19:45.600 --> 0:19:48.840 weeks to sell property here on average. And then looking 0:19:48.920 --> 0:19:51.560 at properties in this area, they used to have list 0:19:51.640 --> 0:19:53.960 prices of eight hundred K and that often sell at 0:19:54.000 --> 0:19:56.760 seven point fifty. But now the eight hundred k listings 0:19:56.800 --> 0:19:58.600 are there and they're often selling at eight fifty to 0:19:58.680 --> 0:20:01.960 nine hundred. So that's someone having a casual chat. 0:20:02.000 --> 0:20:04.440 I wonder I had doubt, but I would be skeptical 0:20:04.520 --> 0:20:10.760 about obviously says above the reserve, since there is underculting 0:20:11.080 --> 0:20:13.119 in the market, and we know there is across the market, 0:20:13.320 --> 0:20:15.600 and it's always a problem, especially when the market's starting 0:20:15.640 --> 0:20:18.160 to lift. Which of your data points do you, at 0:20:18.160 --> 0:20:20.240 the moment think is the most powerful. 0:20:21.560 --> 0:20:24.360 The most powerful data points? I would say it's an 0:20:24.440 --> 0:20:28.359 equal tie between listings and sales volumes. But if I 0:20:28.440 --> 0:20:31.879 was to use listings as an example, here's where that's important. 0:20:32.280 --> 0:20:35.240 If you have listings well below a five year average 0:20:35.359 --> 0:20:39.639 and it's extremely low levels, it means any sort of 0:20:39.680 --> 0:20:43.480 interest or any sort of sales volumes or insights from 0:20:43.520 --> 0:20:47.600 elsewhere will showcase that there's a lot of demand that 0:20:47.680 --> 0:20:50.880 is showing against the supply that's there. Because it's all 0:20:50.920 --> 0:20:54.240 relative to each other, you could have listings come down, 0:20:54.320 --> 0:20:57.360 but if there is still a lot of transactions not happening, 0:20:57.600 --> 0:20:59.560 then all of a sudden, that's still considered a lot 0:20:59.600 --> 0:21:01.440