Is Right Now A Great Opportunity To Invest In The Property?

Transcription:

Ryan 0:00
the market is developing really quickly right now at the moment with obviously a lot of hysteria happening in the media and a lot of negativity out there and we kind of want to provide you with what kind of opportunities to this present in the market and why this could actually be one of the best times for you to buy hi i’m ryan from onproperty helping you achieve financial freedom and today i’m joined by ben everingham buyer’s agent from pumped on property we just released a video or talking commentary about what is happening globally what’s happening locally in the economy and how that may affect property prices so if you haven’t checked that out we’ll link it down below but ben is on the road looking at different properties for clients as is the people that work over pumped on property and they’ve been seeing a big kind of shift in the market being able to close on better properties and more properties and so we wanted to bring that information to you today because that’s something that 60 minutes isn’t going to cover current affairs not going to talk about this so if you got your head screwed on right if you’re an investor who actually has a long term vision and a long term plan this can actually be a good opportunity so off camera ben you’re talking about you know what’s happening right now

Ben 1:18
yeah so if we look at the last 12 months right because like i’m right on the pointy end of the needle in terms of feeling the economic impacts directly in our business because you know leads ebb and flow and the number of people reaching out to us and you know you can even see it in our comments the amount of love if it’s a good economy or the amount of hate if it’s a bad one it’s like a good gauge of what’s going on so at the start of last year the first half of the year people were freaking out then the election happened then interest rates dropped and then paper went absolutely feral and then we got into the new year people have been going absolutely feral for the first two months of the year and then all of a sudden we get news that there’s a deadly virus you know killing one out of every two people if you listen to some of the news channels and you know all of a sudden the stock market which should have starts getting bumpy and people go back into their shells so what that means is that eight out of the 10 people that you would have seen in your open home at sydney melbourne or brisbane right now aren’t showing up because they don’t want to get coughed on or because they’re too fearful which creates an insane opportunity for the two people out of every 10 that still want to continue to move forward with their dream

Ryan 2:41
yeah and we’re saying off camera that when you’re investing in property it’s really important to have that long term plan in mind and to understand how this current property purchase actually fits into that long term plan how short term it can work for you with growth and cash flow but how you can hold that for long term i can help you achieve your goals because that’s eventually what we’re aiming for it’s not just the next 12 months but it’s the next 12 years 24 years etc and one of the things that can happen in a really hot and really frantic market is that if you’re going to an open home and there’s 70 other people there and they’re doing a silent auction secretly in the backyard between four different couples then that can be really overwhelming it can lead you to actually compromise on the type of property you want compromise on the price of the property compromise on your cash flow and compromise on all of your long term goals because the pressures there that i’ve just got to buy something quickly and when the market changes like it may be doing at the moment we’re not sure we don’t have a crystal ball of exactly how this will play out but when it changes and ben’s now got real estate agents emailing him saying you know have you got any clients that this would be suitable for and reaching out to you more rather than when it’s hot and you now have opportunity to look at what is exactly right for you what’s going to fit into your long term plan and then you also have the time to negotiate and to get the property for the right price

Ben 4:13
i love that man like can i just unpack my mindset which you know isn’t the same as every other investors in the world like i can be highly emotional i can also be highly logical i can be overly analytic i can be scared i can be like is it the right time i can have confidence i can lose confidence like i sometimes my wife’s on board sometimes she’s like hey just chill the hell out sometimes my friends are positive about shit sometimes they’re you know talking rubbish about stuff they don’t know and so all of the same things that influence everyone else the media influences me too but i’ve got three different ways of looking at the market in the next 12 months my honest expectation in my stock portfolio and my property portfolio is I could lose 20% this year. And I think that every year starting the year, I could go flat, or I could make 20%, or anything in between that. And that’s my 12 month expectation, always that I could lose money. My five year expectation is that I have no idea what’s going to happen. But if I actually understand timing, and really rip apart markets, I can probably choose a better market over a worse one like Brisbane right now versus Sydney, for example. Over 15 years, I am fully bullish. I know that people figure out solutions to things like viruses, I know that we’ve we get smarter with the way that we manage the global economy. I know that we learn and we want a better future for our kids. And I know that over 15 years, there’ll be bumpy years, but the average of me investing in stocks or property over that time will be a positive one. So that’s what a lot of people don’t have, like when these short term bonds come up, they lose confidence in the big picture, the big.

Ryan 6:04
Often people don’t have a big picture. And then it’s like, I want to invest in stocks. So I won’t invest in property to make money. And that’s kind of like as far as I think. So like, yeah, so when it’s going up, they’re like, Okay, good. I’m making money. And when there’s going down, they’re like, I’m not making money, I’m losing money, that’s bad, which is obviously not good. But if you’ve looked at it, 15 years down the track, and you’re like, my focus is on acquiring a high quality asset that in, you know, 1520 years, however long your plan is, is still going to be rented out, maybe it’s going to be completely paid off, I might have added a granny flat to it. So I’ve got even more cash flow coming in. But if you’re like, I want to focus on acquiring the best asset that I can for the long term, when you enter a market that’s not frantic and everyone’s staying home, or everyone’s lining up at Kohl’s to buy some more toilet paper. Instead of looking at property. I’m gonna buy

Ben 6:55
some toilet paper, like toilet papers in people’s houses that bought the toilet paper.

Ryan 7:01
But yeah, if you’re in that situation, then you know, you can look at Okay, what is the best asset is going to be for me, and you’ve got an opportunity to go out there and find it and maybe even get it at a distressed price.

Ben 7:13
It’s completely right man, like, you know, the best investors being the Warren Buffett’s the Ray Dalio is the Benjamin Franklin’s all have quotes online. And so do you know the Georgia’s like all of the best guys of all time, have the same philosophy, which is like almost do the exact opposite of what like the mainstream is doing because we know where the mainstream ends, and that’s broke, generally on the pension, or with a little bit of super and not many options, retiring at 70 nm living life. It’s like, if you want to do that, that’s cool like that, for me, you know, I want something so different, I want choices. I want to spend time with my family, I want to do like life enriching positive work, I want to contribute volunteer travel, start cool businesses invest in assets. And I want to do it young, like I want to be financially free before I’m 50 years of age. So that means, you know, when everyone else is looking here, on here, like I’m trying to do something different, because you know, the same people that are freaking out now, we’re the same idiots a couple years ago, buying Bitcoin at $20,000. In our domain, it’s just the same mentality of chasing short term returns, and then retreating as soon as things get bad. There are people that live in fight and flight mode constantly where like, I think people like watching this and you and I sit in the uncomfortableness, collect data to make good decisions, trade a long term plan, and then slowly and safely execute one foot in front of the other.

Ryan 8:42
Yeah. And I think taking in all those data points, and making an educated decision in this time is really important as well. It’s not just doing the opposite of what everyone else is doing. Because sometimes the market might still go down, as Ben said, who knows what’s going to happen in the next 12 months, but it’s looking at all the data and all the stuff, all of this stuff we’ve talked about in the past, looking at the data that’s saying over the long term, Metro markets tend to perform outperform regional markets, investing closer to the city or on the beaches tends to outperform the kind of the outer rings of an area looking at,

Ben 9:18
like rain sizes, like lower vacancy rates, higher incomes, like smart fundamentals, and then going what’s happened in the last year cool. What’s happened in the last 10 years? What’s happened in the last 50 and making better decisions based on timeframes?

Ryan 9:34
Yeah, and then also looking at even potentially going to the mid cycle slowdown. Now, how does Sydney and Melbourne tend to perform after Jesse? And how do they tend to perform after mid cycle slowdown versus a smaller city or like Brisbane, which after a GFC with the data that you overlaid, Ben doesn’t seem to perform as well. But after these mid cycle slowdown, that’s when Brisbane seems to shine. even just looking at the data and saying okay well sydney and melbourne over the last four or five years have grown what percent and how much has brisbane grown over that time brisbane factoring in inflation is now cheaper than it was something like 13 years ago and so to say okay given the current economic circumstances if one city has like skyrocketed in terms of price how much of a risk does that pose versus one city where the incomes actually quite similar to sydney and i think even higher than melbourne has just like plateaued does that what is the risk profile of that city versus each other and so becoming an interstate investor to find those opportunities and who knows in in seven or eight years we might be saying the opposite to what we’re saying today but as i look at that data and to say what is the risk profile of this city in terms of potential price decline in terms of what cash flow you’re going to get as well like it’s all sort of data points you can look at to make an educated decision to buy that right asset that’s going to serve you in the long term

Ben 11:04
you know like last year sydney and melbourne did 10% ah last year brisbane did like 2% in the last 10 years sydney and melbourne have done depending on the suburb between 60 and 150% again in brisbane depending on the suburb between zero and 50% and then if we look at the last 50 years brisbane is done an average of 9.7% a year sydney is done 9.6 melvin’s done 9.5 so when people say to me like you know brisbane doesn’t look good why would you buy outside of sydney or melbourne i know immediately that they don’t have the entire picture they don’t know how many people are moving here they don’t understand how high incomes have grown and they don’t understand the long term performance and they’re looking at it from a purely

Ryan 11:52
yeah so now can be a very good time to buy if you are in a good position so do you want to talk about you know who sort of should be looking at the market at the moment and who may be shonin

Ben 12:05
so really good point man like you shouldn’t be looking at the market if you’ve got negative cash flow right now and you don’t have a really good savings base that even after you buy an asset is going to be in place if you are in an unstable industry that’s going to be affected in the next two years or a job or a company then chill out like get that security in place if you’ve got a business that is heavily affected at the moment like i’ve got a client who works for a guy that owns a skydiving company and cannes bookings went from 100% booked in a year advanced and not a single booking now you know what i mean but um you know if you’re not in a good financial position then now’s not the time to do stuff if you’re the complete opposite of that you’re saving more money every week than you’re spending if you’ve been squirreling money away for the last five years like i haven’t 90% of our clients have waiting for this market if you’ve got good equity in your assets if you’ve got a good business or good cash flow or if you’ve even got a combined income so the pressures less if one of you loses your job you know if you’ve got assets that you know go close to covering themselves and you can comfortably stomach the cashflow this is a once in a decade opportunity and i want people to know this because i want to play this back in two years time and go fuck you guys missed the bottom you know what i mean like we are here and there’s nothing wrong with buying in two or five years time in brisbane or sydney or melbourne but if you’re a bottom investor and you like to you know buy in a bearish way like i do when stuffs not good man this year represents opportunity

Ryan 13:49
and i think something that we haven’t talked about is cash flow and how that plays into things and also looking at how low interest rates are at the moment and obviously there’s a high chance that they’re going to go even lower and how does that play on cash flow and how can you minimize your risks when you’re investing because of such low interest rates

Ben 14:12
i’ll say this on record because i love to be like held accountable for what i’m saying there is 100% chance that interest rates are going to drop again before the end of this financial year and if i’m wrong there’s a 3,000% chance they’re going to drop in australia before the end of the year like looking at the futures markets this is what’s common i was on i was unfortunately watching the news or not the news but the ads the other night while i was watching married at first sight don’t judge me but i’m fully hooked it’s like a cliche but i am dead bank came on and they offered a 2.6% interest rate like interest rates not anything meaningful for the next year two years while we get through this bumpy part huge really meaningful in seven or eight years time when all of that excess cash that was going in paying interest goes into the stock market in the property markets around the world. So I’m hugely bullish on the future. What was your question? Again,

Ryan 15:13
we’re just talking about cash flow, I just, I think it’s, it’s really interesting how cash flow actually affects the risk of your investment, because we don’t know what’s going to happen in the next 12 months. And we’ll be honest about that saying, we don’t have a crystal ball, we don’t know the property markets gonna stay flat, if it’s gonna go up, if it’s gonna go down, because of everything that’s happening. But if you’re investing in a position where you’re buying bread and butter properties, and you’re renting them out, or maybe you’re doing the two properties to financial freedom strategy we’ve been talking about for years, and you go ahead and build a granny flat on that property. And you’re looking at interest rates in the 2%. Mark, there’s like how positive cash flow Are you gonna be when we were talking about two properties to financial freedom strategy, we’re looking at interest rates of 5%, but more historically, interest rates of around 7%. And so to be in a position where the entire loan of that property, you’re getting hundreds of 1000s of dollars, you’re paying 2% on that, and how much cash flow can you get in for that Sydney and Melbourne, so don’t have great rental years, Melbourne, you know, you can’t really build a granny flat and rent it out legally. But looking at Brisbane and looking at the rental yields, they’re looking at granny flats, if you build them in the right area, and how much they can rent for building a granny flat for 120 grand renting it out for you know, 300 or 320 a week, what’s the yield on that some somewhere between?

Ben 16:39
Well, last, it’s gone

Ryan 16:41
12 to 15% on the granny flat on the granny flat, like build construction, you know, you can like make that cash flow, which can support the property, yes. So you don’t have to wave you lose your job, but also can support you. And so if you’re currently sitting there in a really good financial position, and there is the potential to invest in distressed assets, and to buy the ones that are right for you long term, but then also get that cash flow. Like if you lose your job, you could move into one of the granny flats like or if you lose your job, then you’ve got that extra cash flow coming in, that like can help to pay for a couple rolls of toilet paper at 100 bucks a roll as we get through this sort of thing so they can actually feed you and support you if bad things are to happen to you during a recession. So

Ben 17:28
can I can I do something that’s super geeky. And I hope everyone listening to this can sort of persevere for the next two minutes. Well, Ryan, and I do this to get to where we want to be. Because I think a lot of people don’t connect, how strong cash flow can be on a property from day one. If I give you some numbers, man, can you please help me add some stuff up just so that we’re as I’m talking through it? We’re doing it? Yeah, sure. Um, so let’s say that literally not let’s say, let’s, I worked with a guy called Fisher, we bought a property for him three weeks ago. I’m talking to him next week about the property. We paid $400,000 for his home. And that home is going to rent for $390 a week. Then he’s going to build a granny flat on that home for $120,000. And it’s gonna rent the granny flat for a further 300 bucks away. So effectively spent 520 grand and he’s getting $690 a week in rent. Now, can you do a number for me, which is 50 weeks times 300 $690? Is this okay to do this man, because I really want people to see the actual numbers on this stuff right now,

Ryan 18:40
Germany 250 weeks or 5250?

Ben 18:43
Because I’m being conservative, the vacancy rate in the suburbs below 1%. It will be 52 weeks, but we’ll take two weeks off the top of the

Ryan 18:51
number on that as a load is 19,500.

Ben 18:56
Sorry, including the granny flat it should be 34,500.

Ryan 19:00
Are you mean, including 690?

Ben 19:03
Yep, 690 times 50 weeks?

Ryan 19:05
34 or 500? Yep.

Ben 19:07
Now he put down a 10% deposit on $520,000, which means he was left with $468,000 of debt for the house and the granny flat.

Ryan 19:19
So you say 468?

Ben 19:21
Yeah. And now he’s going to get a 3.5% interest rate on that, which means he’s paying $16,380 a year in interest. Now let’s, you know, be conservative here, let’s say on top of the 16,380. He’s doing $2,000 a year in management. He’s doing $1,000 a year in insurance, which is way more than he should be paying. He’s doing $1,000 a year in water. And he’s doing $1,000 a year in maintenance. What’s that $21,380

Ryan 19:59
we might have some counsel writes in there as well

Ben 20:02
sorry we’ll add 15 $100 a year of counsel writes

so i’ve got 22,880 and what do we say the income was

Ryan 20:18
34,500

Ben 20:21
minus 34,500 minus that is $11,620 a year of passive cash flow based on those numbers and those assumptions on an interest on the loan divided by 52 weeks a year is $220 a week of passive cash flow from day one and you’re going to get the depreciation benefit to like i just want people to recognize like based on these low interest rates and those assumptions how you know that’s a good buffer that’s 10 grand a year that you can put in the offset account to pay off debt 10 grand a year that you can put towards your lifestyle or 10 grand a year that you can put as a buffer for a rainy day to protect yourself like shits good right now and i just people aren’t recognizing that enough

Ryan 21:09
yeah so you had high quality assets you can get that cash flow as well which just puts you in a better situation and i think i want to contrast that with something that could be more high risk and that’s like let’s look at something that’s really expensive that’s not renting for as much and then that you’re hoping to get growth on if the market does go backwards then that can be a bad situation so

Ben 21:35
if you invest in something in sydney for example for a million dollars and an eye let’s say like directly comparable this is 19 suffocation the city in the best part of brisbane they get the same distance from the city of sydney looking at 1.3 mil but 1 million bucks lock the lock just isn’t gonna do it so let’s just do these numbers for fun

Ryan 21:57
yeah we can do it for fun

Ben 21:58
let’s go ahead okay so got $1.3 million of house value and then what we’re going to build a granny flat on it to just to like make the numbers like the like

Ryan 22:13
okay well we can build a granny flat but i think more realistically is probably if you look at his total investment of 520 if you look at that in sydney you’re probably buying a unit

Ben 22:24
yeah you are you buying a shitbox one bedroom unit

Ryan 22:27
yeah so you know 520 you know you’d be lucky to get 500 bucks a week rent for that in sydney i think rental yields across sydney are like three to 4% or something

Ben 22:40
yeah the vacancy rates in most of these areas are 3% now so you’re only going to get 45 weeks a year of rent

Ryan 22:47
yeah

Ben 22:49
you’ve got $100 a week at least at extra costs on top of what we added which is your structure and body corporate plus sinking fund phase

like yeah

Ryan 23:00
then yeah like that’s that can end up in a real negative situation

Ben 23:05
that that property like without going all the way through that is going to be negative 10 grand a year without a doubt

Ryan 23:12
and you’re hoping for the market to go up in turbulent times

Ben 23:16
yeah loss just before you even breakeven market you know but if you go like the like man it’s a $1.45 million spend that’s what i want people to get like it’s a third of the price to do this right now in brisbane compared to sydney and people that did this in sydney 20 years ago have the same numbers of brisbane they’ve just got the high values people trying to do it now on the $1.4 million option a losing literally 5040 grand 30 grand a year before they even start making $1 just it’s insanity bro

Ryan 23:52
yeah and i think what i wanted to highlight there is no that sydney or melbourne are bad investments because they still can be great investments look at sydney over the last six months look at melbourne over the last six months you can still make money in those markets by just looking at the risk factor in that given that we don’t know what’s going to happen over the next 12 months if you’re putting yourself in a negative cash flow position if you need to pay 10 grand a year just to keep your property afloat and to be able to pay your mortgage because you’re not getting enough rent coming in then what happens if you lose your job then what happens if you do get sick then what happens if you know your partner loses their job and so you get down to half the income you’re on before what happens to that property when you can’t afford to pay that $10,000 in the short term and our we didn’t predict it but the property market actually dropped by 5% and now it’s worth less than what we paid for it then you’re putting yourself in a real predicament and a real risky situation so you’re just hoping for the best but you have no plan for the worst whereas i think with the cash flow opportunity as i you’re still hoping for the best we’re still hoping for growth we’re trying to pick good market peak good suburbs get that long term growth and ideally get short term growth as well but we’ve got to plan for the worst and if things happen and the market does decline then it’s like we’ve still got that cash flow coming in we’re still making money in the short term we can hold that for the long term as things recover and things always tend to recover you know

Ben 25:22
we’ve been through some stuff as humans in the last 200 years and it’s always come good long term and it will always come good long term because of this beautiful thing called inflation and because of an economic model that’s 100% built off the back of constant growth you know because the population size is going to be 10 billion people you know there’s just so many good things happening long term around the world like think about a billion people in china and india becoming middle class white even if those people go from earning $10,000 a year to 50 grand a year in the next 20 years imagine the global buying power as a result of that like i’m so excited about the future bumps come in the road and bumps represent big opportunity or big risk for people that aren’t managing that downside with a plan bay as you said so some people shouldn’t even be considering anything now other people you know this is a literally they call it a mid cycle slowdown because it is a once in a 10 year buying opportunity

Ryan 26:26
yeah and so if you are one of those people that have been sitting on the fence and you’re ready to invest but you’re not exactly sure how what your long term plan is or how the short term property purchase can fit into a longer term plan and how to mitigate your risk in this market but also buy something high quality then ben and the team over pumped on property do offer free strategy session so you can actually get on the phone to them talk about where you’re at your situation your goals they can help you to actually create that longer term plan and to see what the best steps are for you in the current market and what the best opportunities are as well so head over to onproperty com au forward slash strategy and you can book in a time that suits you over there get clear on your long term vision get clear on your long term goals and get clear on how to actually take advantage of the current market that we’re in so that you can set yourself up for that long term success and that ideally financial freedom for a lot of people or whatever your goals may be so again go to onproperty com au forward slash strategy to check that out any final words then

Ben 27:35
no i think we’ve said it all

Ryan 27:37
was everything that now that was really good and if you want to check out our commentary on what’s happening in the market right now we did a video on that i’ll link up to that over here or in the description down below go ahead check it out otherwise until next time stay positive