EPISODE 32: HOW TO AVOID COMMON PROPERTY MISTAKES
Adrian Franklin (00:09):
Hey there, and welcome back here to Ticker Home, where each week we will dive in to the latest trends on the property market and answer the questions that you need to know. It’s great, as always, to have my co-host, Ian Ugarte, co-founder of ianugarte.com.au. Hello, mate. How are you today?
Ian Ugarte (00:23):
I’m awesome, thank you, thanks for asking. How about yourself?
Adrian Franklin (00:26):
Yeah, going well. What’s on the cards today? What are you looking forward to talking about?
Ian Ugarte (00:31):
I’m doing a wrap up of the last 31 weeks. We’re in week 32, and so I just want to wrap up all the important points we’ve talked about over the last, nearly, year.
Adrian Franklin (00:42):
Awesome. Let’s get into it. Ticker Home presented by our partners at ianugarte.com.au. They’re on a mission to create one million affordable homes in the next 10 years and help Aussies struggling with housing stress. Learn more at ianugarte.com.au.
All right, Ian, as you say, it’s now 32 episodes of Ticker Home today. Because your business is now attending to some things in New Zealand, I guess you could say, you can tell us more about that in a moment. You put Ticker Home on hold just for now, so we’ll continue on in future at some point.
But let’s go back and recap what we’ve talked about. It has been a whole lot. There’s been a lot of important points, but your job is to break down the most important. So, where do you want to start exactly?
Ian Ugarte (01:29):
For me, it’s about the mistakes that people make and I’m always about lowering your risk. Lower your risk as much as you can, and how do you do that? You get some people around you and I talk about the A-team and we spoke about the A-team. Not only an A-team, as far as getting deals together, as far as property deals are concerned, we’re talking a lawyer, accountant, whatever. We’re talking also A-team, as far as those people onsite that are helping you through that process. And the biggest thing that I talk about is something called the acronym of mistakes, all right? So, every one of those letters means something.
M is marketers, don’t buy from a marketer, a house and land package can hurt you a lot. The I is ineffective strategy. People just buy stuff for the sake of buying property, it doesn’t make any sense if you’re just buying for the sake of it. Securitization, don’t cross securitize. Don’t put the same loan with the same bank, if you’ve got an investment property, your own home or multiple properties. Make sure that you have asset protection if you’re buying investment properties. Don’t look for tax returns and kickbacks on the sake of losing money, it makes no sense at all. Education, people just don’t get educated. And then the S on mistakes is just start. Get something done and hopefully it’ll work out with all the other things fixed up.
Adrian Franklin (02:42):
So, in your 30 years of investing and having spoken to over 300,000 people about property education, what are the things that you see are most important when people are looking at buying a home or investing in one?
Ian Ugarte (02:55):
Yeah. For me, a home or a property investment of any sort, your home is a property investment. You need to manufacture growth or get manual growth out of the property. That is, you go into the property, do something to it so it elevates its property price. Now I’m not talking about renovation. It might be a subdivision, might be a strata, it might be the ability to put a granny flat on, something like that, that’ll increase its value.
Don’t buy in the hotspot, if you buy in the hotspot it’s a mistake. You should be buying in the warm spot and I remember introducing that theory to you and you thinking, “Wow, I’ve never heard about the warm spot.” But hotspots are done and dusted, you want to be in a spot where it’s getting warmer so that you get increasing capital growth.
The restless puppy dog is one of the things that we talked about as well. Someone who goes out, looking for everything everywhere and has no strategy and will get scared buying something because they want to buy something and they’ll be done, dusted and over.
And the most important thing we spoke about on a number of different occasions, positive cash flow is your number one priority when you’re buying a property. Because if you’re positive cashflow, then you’re okay. A lot of people in Australia go, “I don’t want positive cash flow. If I got positive cash flow, I have to pay tax.” And we used the example, and that example I said to you was, “If Aaron was going to give you a $10,000 pay rise”, you wouldn’t say, “No, no, I don’t want the pay rise because I’ll have to pay tax.” That’s exactly what property investors do all over Australia. Makes no sense.
Adrian Franklin (04:18):
So, over the past 15 years in particular, you’ve started to work towards what you’re calling an adaptable house. So, can you explain a bit more about why you’ve ended up in this area of property, becoming a specialist advisor to governments to create policy around adaptable housing? What is it exactly? Can you give us a bit more information around this?
Ian Ugarte (04:38):
Yeah. We realized that 60% to 80% of the people looking for accommodation to rent are singles and couples and 60% to 80% of the available properties on the marketplace are three, four and five bedroom houses. So, the adaptable home is actually about building a home or converting a home so that it can be adaptable when using smaller spaces within it, creating micro apartments for co-living. But that adaptable home is not only a co-living property, it’s a multi-generational home, it’s a disability home. It has a downsizing or up-lifing home as we call it. It could be a first home buyer that actually wanting to rent out parts of their property.
You’ve got so many avenues if you create the adaptable home. The adaptable home means you can rent it to a family, to singles, to couples, to younger people, older people. And that way you can actually secure your future by starting and renting and then as you grow in your portfolio from that. It’s a really, really big place to start and make sure that you get it right from the start.
Adrian Franklin (05:39):
So, you talked about this a couple of years ago and this specialized area and how you’re helping people so they don’t have to go it alone. That’s a big passion of course, of yours. So, you realize that not everyone can be a property professor overnight and some people just want to get it done for them. You talked about your new business called INVIDA. That’s the best way. Ah, yeah. No, you say it for me, you pronounce it for me.
Ian Ugarte (06:03):
Adrian Franklin (06:05):
Very good. So what does that mean? Tell us more about what that means and how did you come up with the name exactly?
Ian Ugarte (06:12):
Yeah. So, I’ve been a property educator for well over 12 years now and teaching people how to invest in property. And in vida is in life, it’s Spanish for life. So, in life you want to do better, you want to actually make sure that people live in your property, can afford it and actually pay rent at a lower cost base. At the same time you want to make an income out of it, you want to start creating community so that we can live life like we used to live.
And INVIDA is really that place where, people were getting educated, but I didn’t know how to pull the trigger. And we’ve stepped in, we’ve created a new business that says, “Okay, I know what I’m doing. I’ve got a team around me that knows what they’re doing. You want to take the risk out of what you’re doing,” it’s one of the first points I made today. “You want to take the risk out, come see us at invida.com.au and we will be able to help you move to the next level and get some positive cash flow so that you can secure the future for you and for your family.”
Adrian Franklin (07:03):
So, we’ve had some great times over the last 32 weeks. Of course, it’s been amazing to meet you and talk about property. So Ian, to finish, have you got anything just to wrap us up with?
Ian Ugarte (07:14):
Yeah. I’ve had a move across to New Zealand and I’ve met an amazing woman and I’ve started a new relationship here. At the same time, I’m building a business over here. So what I thought I would do is I’d get Josh, my amazing videographer, to put together a two or three minute show reel about all those little moments that you and I had, Adrian. I feel like we could be life partners really. So, here’s the show reel from Josh that he put together over the last 32 weeks.
Voy a empezar ahora, which means I’m going to start now. Like sitting on your three-seater couch and your parents at one end and they’ve got the portable heater sprayed straight on them so that they get hot. Investors get it wrong, they want to sit on mom and dad’s lap. If you sit at the end of the couch, you’ll get much better returns from the property perspective.
And more opportunity opens up when you think outside the box.
Adrian Franklin (08:04):
There you go. And I know you like that thinking outside of the box. That’s one of your things, right?
Ian Ugarte (08:08):
Run like Forrest Gump, because otherwise you’re going to succumb to the sizzle. And what you should be doing is actually building the barbecue yourself.
Adrian Franklin (08:16):
Can you do that one more time for us please?
Ian Ugarte (08:18):
How much cash?
Adrian Franklin (08:20):
Oh, I would’ve loved to have been a fly on the wall, listening to your conversations with your parents around the house that they made and just the tiles and all the things. Is there any vision of that somewhere that we can get?
Ian Ugarte (08:29):
Yes. This is the beautiful house that I grew up in in Sydney, quite close to the airport. And this only appeals to about 5% of the marketplace when you should be appealing to 70%. Look at those floor tiles and look at the tiles in this bathroom, right? We’re about the green bathroom with brown toilets and PC items. Like I told you, there’s not a skid mark inside in that toilet there.
My mom in her fantastic accent said, “I don’t know why people not buy my house it’s so beautiful.” But not many people thought it was beautiful, Adrian.
They dropped a good 20% in price to get an outcome. The new purchaser was coming in the door as we were walking out and she thought we were the removalist. And I said to her, “Are you happy with the house?” And she said, “Oh, I love the house, it’s so beautiful, I cannot believe I bought it so cheap.” There is a buyer for everything, you just got to find them.
If you go to a party and you double dip into the hummus, people look at you and say, “That was the wrong thing to do.” But if you double dip it in property, you’re going to have friends and family around you saying you have done really well for yourself.
Adrian Franklin (09:36):
So, we can double dip in property but when it comes to the homous or hummus, whichever way you go, no double dipping, I appreciate that. I love some hummus too with carrots, one of my favorites,
Ian Ugarte (09:46):
Let’s say that after this episode, Aaron comes into you and says, “Hey Adrian, I’m going to give you a $10,000 pay rise.” And you say, “No, no. I don’t want the pay rise, I’ll have to pay tax.” That’s what property investors in Australia have got to. They think that negative gearing, they think that you have to lose money and it’s just silly, it’s stupid. And I reckon that Aaron should give you the $10,000 pay rise by the way.
Adrian Franklin (10:10):
Well, he’s just there.
Ian Ugarte (10:11):
We’ve talked about this before Adrian and I said that Aaron was going to give you a $10,000 pay rise- [crosstalk 00:10:17]
Adrian Franklin (10:11):
It hasn’t come yet.
Ian Ugarte (10:17):
So, if you have got a positive… Well I’m still talking to him.
Well, firstly, let me explain the restless puppy dog syndrome and here’s one I prepared earlier. This is my little fox terrier, right? And this guy is nonstop energy, he runs all day long. So, we need to have more focus when we’re looking for property. And I don’t know if you know this Adrian, but before I was a plumber, I was a doctor. I wasn’t earning enough money and that’s why I went into plumbing.
Adrian Franklin (10:41):
I did not know… Are you serious? Is that a serious story?
Ian Ugarte (10:44):
No, I’m just joking. I’m just joking.
Adrian Franklin (10:46):
Hey, I’m gullible, you know that.
No jokes from you it’s a bit more of a serious one, but that’s fine. You can always feel the humor just bubbling behind.
Great episode. Love the passion as always, we’ll talk really soon. Okay?
Ian Ugarte (10:58):
Adrian Franklin (11:04):
Nicely done, that was beautiful. Did you feel good about watching that back?
Ian Ugarte (11:09):
Yeah. It’s so awesome. I don’t say this lightly, I’ve really, really enjoyed the last 32 weeks and I’m looking forward to coming back when I am back in Australia. I’ve loved being able to interact with you and build the friendship as we’ve gone along. And it’s been so awesome. And I just want to say thank you to you, Aaron, and the team and the guys in the background. I won’t be long, I’ll be back and un poco de tiempo, which means just a little bit of time and I’ll be back.
Adrian Franklin (11:36):
Okay. Very good. No. It’s been amazing, I don’t fake it on air, you know if I like you, you would probably know if I don’t and we’ve had a great relationship over this time. So, I can’t wait till you do your thing over there in New Zealand, but we’ll continue the relationship. We’re life partners, as you say, right? So we’re here forever.
Ian Ugarte (11:52):
I love you to pieces Adrian. I love you.
Adrian Franklin (11:57):
Very good mate. Great to meet you and all the best in New Zealand. Keep us up to date, we’ll have you back on Ticker News shortly, okay? We’ll chat soon.
Ian Ugarte (12:03):
Adrian Franklin (12:05):
Nicely done. Ticker Home presented by our great partners at ianugarte.com.au. They’re on a mission to create 1 million affordable homes in the next 10 years and help Aussies struggling with housing stress. Learn more at ianugarte.com.au. We’ll catch us at.
EPISODE 31: CHANGING THE WORK FROM HOME MODEL
Adrian Franklin (00:09):
Hey there, welcome back to Ticker Home, where each week we’ll dive into the latest trends on the property market, and answer the questions that you need to know. It’s great, as always, to have Ian Ugarte my co-host from ianugarte.com.au. now what’s on the cards for today? This is going to be a fun one.
Ian Ugarte (00:25):
Yeah, today I want to talk about not the home office, but the office home. We’re actually going to flip itself on its head and see how we go.
Adrian Franklin (00:32):
Look at that. Ticker Home, presented by our partners at ianugarte.com.au. They’re on a mission to create 1,000,000 affordable homes in the next 10 years, and help Aussies struggling with housing stress. We’ll put the website up throughout the show, ianugarte.com.au. All right, let’s get into what is trending, first of all. So we’re talking about turning empty office buildings into housing could potentially instantly transform post-COVID cities. What’s this one all about?
Ian Ugarte (00:58):
Yeah, this is from all over the world, okay. So we want to talk about what’s happening and trending around the world. Well, this is in the U.S., they’re talking about taking the existing office spaces and turning them into fast cities. So this is Fast Company, they talk about the 15-minutes city where no one will have cars, everyone will work close to where they live. All these commercial office spaces that are now sitting empty and vacant can be converted into housing so that they can end up with much more than just a city full of office. Where you can then have housing, and also create more business for those businesses around you that can start to produce and do well. I think it’s a great idea.
Adrian Franklin (01:36):
Let’s have a look at Canada now, tell us more about this office-to-residential conversion that’s occurring over there.
Ian Ugarte (01:44):
Yeah, so Calgary has pulled the trigger and said, if you’ve got existing office space and you want to convert it, then we will actually give you a grant or a subsidy to do that, for every square foot of a property that you convert from commercial to residential, they will pay you $75 per square foot. Currently there’s been $45 million allocated to the conversions. You can seek up to $10,000,000 for one building if you own one building. I think, again, great idea, great initiative, great incentive to use empty space, so that we can create more residential space. And especially in Canada, where housing is very much similar to Australia and very unaffordable.
Adrian Franklin (02:24):
Yeah. It’s always really interesting to see what other countries are doing, but let’s focus on Australia. Do you think, would Australia’s empty office towers be better off as housing?
Ian Ugarte (02:34):
Yeah. This is a guardian.com article basically saying, “Can we do it in Australia, because they are doing it overseas.” There are some implications that come up. One of the simplest things will be, will the state government support it from a planning level? Will they allow you to convert these spaces, because now we’ve got some parking issues. Most office towers and buildings don’t have openable windows, they have fixed windows with air conditioning, and for anyone to be living habitably, they need to be able to open a window and get some fresh air. So there’s some few problems there. They did talk about taking C-grade buildings, which are those older buildings that would have openable windows, that are really older office spaces, converting those and getting better out of it. I think it’s a great article, and I think it’s a great concept to look at the older buildings, converting those.
Adrian Franklin (03:19):
All right, let’s get into this conversation. We’re going to flip it on its head, as you say. So with more people than ever before working from home, many office buildings are left deserted, and the surrounding businesses suffer as workers are no longer an integral part of those commercial office neighborhoods. So, Ian, I think you’re about to mess with my brain here, because you’re going to talk about working from home, the way that we’ve all grown too familiar with throughout this pandemic. Instead, you’re talking about living where you work. What exactly are you on about here?
Ian Ugarte (03:48):
Okay, so we’ve had the home office. So we’re now designing homes, because of COVID, in different ways, but now you’ve got these empty office spaces all over the country. So if you take an office plan like this one right here, you’ve got all these office spaces. Let’s create a boardroom let’s then create some office spaces. So we need three or four key workers that had their own office spaces with private open space, so their own balcony off their office. but off their office space, we now create fully self-contained micro-apartments, which allows them to be able to be in the property, living there, and also working from their office. What does that do? There’s a huge amount of bonuses and benefits here. So the boardroom gets used for their monthly meetings, the little breakout rooms if they had staff need, or that they need to create little meetings amongst themselves. But more importantly, the four key staff not only have their own office, they then have subsidized ability to be able to live in the place that they work, and then have the office home rather than a home office.
Adrian Franklin (04:53):
So you’re talking about converting the traditional office space, so that it provides for apartment style living around the perimeter of the building, and then having the working space move to the internal space. But won’t this feel a little bit like people never leave work, and they can’t get away from their work colleagues? And goodness me, I can’t deal with these guys one more… No, I’m kidding, I’m kidding, they’re great. But tell us, how can you manage the balance?
Ian Ugarte (05:17):
Well, how many of us are actually taking our work home anyway? Effectively, with the way that COVID’s hit us, and we’re working from home, we have a huge amount of people just not buzzing off or turning off. Now, what we can do here, is we create self-contained areas where you can actually close your office door, just like you’re at home if you had your home office, and go into your own self-contained area. Which has access to external space, a balcony has access to openable windows, which means you can get some fresh air into the place, and your partners can live with you too. And all of a sudden we’ve got some really great privacy that no one really gets to, it’d be no different. Now you could also then say, well, rather than having it on the same floor, if there’s a business that has two floor levels, then one floor level becomes a living area for all the key component people that work in that business. And then they literally go up the stairs, or up one lift into the office for the day, back downstairs. Again, no different, zero travel, it’s an awesome concept for you to be able to save some money, and help the business out as well.
Adrian Franklin (06:24):
So do you say this option is being available to anyone who works at the company, or is it just for selected senior management?
Ian Ugarte (06:31):
Yeah. I’d suggest that someone that’s on probation doesn’t get the offer of living in one of those micro-apartments. I would suggest someone that’s core to the business. You’ve met Bianca and Joel in my business, if I had an office space that I was leasing, or that I owned, and I did this concept to that office space, Bianca and Joel would for sure have an opportunity to live in there. So to me, it’s the key talent in the business that really drives the business, that has strategic direction, and has the availability of being able to help out everyone. So that they can then help the business, the business helps them, they save some money, they can do so much more with that.
Adrian Franklin (07:10):
So of course, councils and their regulations can sometimes get in the way. So what sorts of changes do you think, to regulations or building regulations, would be needed for this sort of change of traditional office buildings, to then evolve into a new way of living in the future that you’re hoping for?
Ian Ugarte (07:27):
Yeah, councils will really have to come to the party with this, and they have to start thinking outside the box. Now, that’s the unfortunate stuff about planning departments, that they don’t think outside the box, or they’re very conservative. There are some issues that will come up for it. Let’s talk about fire rating, how are you going to fire rate these components in the building to stop fire spreading from one micro-apartment, into the other micro apartment, or from office to the living area. You then have parking, how much parking are you going to require? Because now you have people who live on site. Are they going to have their cars, do they need their cars? That has to be thought about as well. What about the plumbing and drainage services, is there other pipes big enough to be able to cope with full-time living? All of these things have to be thought about, and have to be thought forward with, but there are already councils thinking and talking about this.
Adrian Franklin (08:14):
So what do you see as some of the benefits then, of this sort of living? And I suppose, how likely are we to see this, and at what sort of timeframe are you looking at?
Oh, we’ll just pause here for a second. Sure, sure, sure. No worries.
And so what do you see as some of the benefits of this sort of living, and what sort of timeframe would you like to see this change start to come into play?
Ian Ugarte (08:52):
Planning changes can take as little as six weeks, I’ve just been through a advisory role to a state government that changed something within six weeks. So that can happen that quite quickly. And I know that this is a benefit to many people. If you’ve got commercial office space with a huge vacancy rate at the moment, and you own that building, and you want people in, well it’s incentive for company owners to be brought in so that they can start paying rent for their small offices, and then have the conversions happen outside that. So employers who are currently in long-term leases can benefit from this, landlords can benefit from it because they then can start filling space. Housing can get produced, which means we’re now got bigger, better, more housing, which then starts to fix the affordability issue.
You’ve got security of tenure for the staff member who says, “Well, clearly my boss wants me to stay in here for a long time.” And the boss then says, “Well, because they’re going to be in here for a long time, I’m also safe and secure as well, and they’re not going to jump ship.” You look at all the surrounding businesses, all these small coffee shops that are only open up for maybe six to eight hours a day, now have the ability to open up for longer. Those convenience stores that are in the city, they’ll start to get more business, you’ll have other businesses start to open up and open up around the fact that people are now becoming more residential in office towers. I just can’t see a downside to this.
Adrian Franklin (10:09):
All right, so let’s wrap us up with all of these benefits, the main points up on screen. The office home, your perfect future. What do we need to keep in mind here?
Ian Ugarte (10:20):
Yeah, let’s look at the vacancy rates out there, not going to get too much smaller. There are people starting to move into the city, but how many lockdowns are we going to get before we start to open up? This is a win-win-win across the board, no one loses out of doing this office home set up. We look at adaptive design that can be a micro apartment one day, but one day maybe it’ll turn back into an office space, and you don’t have to do much work to do that. You need to think about progressive changes, and that means that our bureaucrats are going to have to start thinking differently. And again, those businesses that are surrounding these conversions are going to benefit as well, it’s a really great outcome. As always Adrian, smallisthenewbig.com.au/tickerhome, and you get your cheat sheet for this week!
Adrian Franklin (11:01):
Great stuff. I love the fact that you’re trying to use space, come up with innovative ideas and yeah, you just hope, I mean, Australia in particular, is the sort of country we should be really being as innovative as possible here in so many ways. Wouldn’t you agree?
Ian Ugarte (11:16):
Oh, as long as we continue to want to dense and live in the same place, and we don’t want to de-centralize, we’re going to have to find ways to make better use of the space that we already have, especially in existing buildings, rather than building brand new. It’s just an easy outcome for everyone.
Adrian Franklin (11:30):
It is, agreed. All right, you’ll keep us up to date. Great to see you again, we’ll talk soon, man.
Ian Ugarte (11:33):
See you later.
Adrian Franklin (11:35):
Ticker Home presented by our great partners at ianugarte.com.au, they’re on a mission to create 1,000,000 affordable homes in the next 10 years, and help Aussies struggling with housing stress. Ianugarte.com.au, check it out, we’ll see you soon.
EPISODE 30: THE BENEFITS OF CO-LIVING WITH INVIDA
Adrian Franklin (00:09):
Hi there. Welcome into Ticker Home where each week we will dive into the latest trends on the property market and answer the questions that you need to know and me as well. It’s great as always to have my cohost, Ian Ugarte, co-founder of ianugarte.com.au. Hello there. What are you looking forward to chatting about today?
Ian Ugarte (00:26):
I’ll be talking about my Spanish heritage and how we’ve actually used that in one of my businesses.
Adrian Franklin (00:31):
Very good. So you are Spanish, is that right? I don’t think you’ve ever told me that before.
Ian Ugarte (00:35):
No. I’m Australian born. I was only just born in Australia. My parents migrated from the North of Spain in the early 70’s and I am actually Spanish. So when you hear my mother’s voice, it’s because I’m Spanish.
Adrian Franklin (00:48):
Very good. I actually have not been to Spain before, so I might get some tips from you when we can get there in seven to eight years time. But anyway, let’s get into this. Ticker Home presented by our partners at ianugarte.com.au, who are on a mission to create 1 million affordable homes in the next 10 years and help Aussies struggling with housing stress, learn more at ianugarte.com.au. We’ll pop that up throughout the show, but let’s get into what is trending. We want to start with why is co-living still a viable asset class? So why is it?
Ian Ugarte (01:17):
Yeah. It’s becoming a new viable asset class and here’s on the Urban Developer. They’ve actually written a story about it and how the actual viability is coming about because there’s a better return for the investors and they’re looking at different aspects of it. Now, co-living has always been frowned upon as far as boarding houses are concerned, or it might be student accommodation. But there’s a new demographic existing now that comes out and says, basically I’m young, I’m single. I might be a couple and I’m going through that. Now in this article, they talked about the New South Wales State Environmental Planning Policy, which is going through some changes at planning levels and the viability of whether these changes will make a difference or not. It’s a great article, well-worth the read. And in there, there’s some expert commentary from a guy called Ian Ugarte and his piece on what he thinks should happen as opposed to what they are going to do.
Adrian Franklin (02:10):
Very very good. I like how you snuck that in there. It wasn’t obvious at all. Now talk to us about this alternative plan to boost affordability. I think it involves two of your favorite types of people, hippies and hipsters.
Ian Ugarte (02:22):
Yeah. This is in the Sydney Morning Herald, Angus Thompson talking about, again, the State Environmental Planning Policy and how a new cohort of strategy and planning called co-living has been put on the table and essentially will be those inner city dwellers that want to live near the city and they look hipster will have their own little studio spaces in one home. And so that’ll be a lot of these 6, 10, 12 in one home where these hipsters and hanger outers will go out and they’ll be able to live in a new town and all those inner city suburbs around New South Wales where it’ll bring a lot more to the table. So it’s again another interesting article and hopefully the planning policy will get through.
Adrian Franklin (03:07):
Now, this one’s a serious issue of course. Talk to us about the latest data that revolves around females and being homeless in particular.
Ian Ugarte (03:15):
Yeah, certainly. This Urban Development or another article from it. There’re great, great articles in the Urban Developer, specifically for those of the investors that want to know more about the market. A report from the Australian Institute of Health and Welfare for Women have put out that up to two thirds of those people that put in application for help with homelessness are now over the age of 45 females. Now, this is a huge, enormous statistic, which I’ve been talking about for 10 years now. Especially those women, older women, 45 plus that have children. There’s a huge demand for them to get accommodation, but they just can’t find it.
Ian Ugarte (03:48):
So out of the 200… It says 260 and inquiries per day that are being turned away from homelessness centers in particular, the older women. And there’s estimated that for those people over the age of 45 that are female, there’s a 405,000 of them at risk in Australia right now. Women have less income. They have less Super, they have less availability in getting a job and less opportunity to do anything. And it isn’t because there’s not enough housing out there and we have to make a change and we have to make a difference. And especially with the 45, 50, 55 plus single females, they are the people that need to be looked over after most at the moment.
Adrian Franklin (04:32):
Let’s get into the main conversation today. We’re talking again about the topic that I know you’re most passionate about of course, housing affordability. Now this time last week we spoke about how many people you’ve helped to get into stable housing, thanks to micro apartment. But let’s flip that around and talk about how investors can benefit from building them as well. And the producers have told me, you want to teach me a bit of Spanish to begin. So go on then.
Ian Ugarte (04:57):
Okay. [foreign language 00:04:58], which means I’m going to start now. I come from a Spanish heritage and we started a business called En Vida, which is in life. And on screen right now, you see second from the left is my auntie [Carmel 00:05:09]. Now my life and the way that I’ve been has been based around this woman here. This is an Australian Anglo-Saxon woman who I grew up next to in this beautiful house and her house didn’t look anything like that. But this is a house that I grew up with and I would make my way next door to auntie Carmel every morning. And she’d get me clothed, she’d get me dressed and she’d get me off to school. And this was my life.
Ian Ugarte (05:35):
It wasn’t until the age of about 11… And then my parents there. It wasn’t until the age of 11 that I realized that the woman next door that I called auntie Carmel, wasn’t actually my real auntie. And from that, I gathered that my life was based and brought up by her and for her, what I’ve said, and she passed away probably six or seven years ago. And I wrote a letter to her daughter. And to me that woman there is closer to me than any of my blood aunties. And she gave me life. And that’s the start of this business, which helps investors is Invader. In life, we want to actually get people back into investment in the right way, and we want to get people living in houses in the right way as well.
Adrian Franklin (06:15):
Beautiful story. So in simple terms, I’ll give it a crack. En Vida, En Vida is done for you?
Ian Ugarte (06:22):
Adrian Franklin (06:23):
You do it for me, do it for me.
Ian Ugarte (06:27):
Adrian Franklin (06:28):
En Vida. So it’s not really the D. So it’s a done for you service, isn’t it? So take us through exactly what you and the team are now offering.
Ian Ugarte (06:37):
So as you know Adrian, I’ve been educating people in property investment for over 10 years now. And the one thing that I’ve seen over the 10 years is as much information as I give them, they don’t have the confidence, or they don’t have the ability to understand whether a project is going to do well for them. And they probably just don’t have any time anyway. So what we decided was for those people that were educated, that weren’t pulling the trigger. We said, how about we go out, we use my team. I’ve got a great team around me and I don’t have to do a 1,000 property deals to be happy. I’m over in New Zealand and I’m happy as ever with a great team in Australia helping out. And that same team is now helping investors find double digit returns that get great returns for them. But more importantly, start providing more housing for Australia. And it’s a win-win all around.
Adrian Franklin (07:23):
And there really is a huge market out there of people that are looking for and excited about building these co-living properties. So take us through some of the benefits from an investor point of view.
Ian Ugarte (07:34):
Yeah. From an investor point of view is you don’t have to go in negative gear. Negative gearing is such a stupid strategy. I’m going to lose money on purpose so that I can get my tax back. Just go out and make a profit and pay the tax, right? So for me, you don’t lose money. You’re fixing the marketplace. You’re getting a return on your investment. You’re helping the government out by providing more housing. The very problem that we created, which we talked about last week was the private industry in investment in housing has created an affordability issue. And it’s the same industry and the private investors that can fix it. So for me, this is a win-win all way around, and it keeps the hassle away from someone of been able to invest with security. That’s what we do on your behalf so that you don’t have to worry.
Adrian Franklin (08:14):
So some people will get a bit nervous when they hear the term positive gearing because of the tax ramifications. But you say that thinking is flawed.
Ian Ugarte (08:23):
Well, we’ve talked about this before Adrian and I said that Aaron was going to give you a $10,000 pay rise. So if you-
Adrian Franklin (08:29):
That hasn’t come yet.
Ian Ugarte (08:31):
Well, I’m still talking to him. If you’ve got a positive cashflow property that’s earning you $10,000, you should just earn the 10,000 and pay the tax. It’s like turning up and Aaron saying to you, “Hey Adrian, I’m going to give you a $10,000 pay rise.” And you say, “No, no, Adrian. I don’t want that because I’m going to have to start paying more tax.” Get over the fact that you’ll have to pay tax because you’re paying tax, you’re making money. It’s always a good thing.
Adrian Franklin (08:55):
While where’s no denying you’re passionate about it. We can see it in every single episode, but why is it do you think that more people don’t know about or perhaps embrace this clearly life-changing property strategy?
Ian Ugarte (09:06):
Look, I think I’m going to make a documentary called assumptions and presumptions, right? People have always invested in a particular way. And because there are unused and unknown policies out there, and I’ve been doing this for 10 years. When I first started talking about this 10 years ago, everyone thought I was absolutely nut bags. But now 10 years later, people are starting to realize that these things are out there. They’re just not quite sure how to do it. So when you don’t know how to use a policy, when you don’t know it exists and you need to get approval to do these. And most of the time, it’s a approval that happens privately, which then the certifier or surveyor then takes to the council and says, “I’m doing this on behalf of Ian’s team.” You can get them through really quickly. And all of a sudden everyone’s happy. You’ve got a great return on your investment. People are saving themselves one third or one half of [inaudible 00:09:53]. And you’re fixing the housing market by default, just by you getting a return and fixing up your family’s future as well.
Adrian Franklin (09:59):
All right. So let’s wrap up with all the benefits of co-living for people that don’t know. Take us through. What have we got? We’ve got five. Take us through it.
Ian Ugarte (10:07):
Yeah. So we’ve got investors that should be getting positive cash flow. If you get something in Sydney right now, you’re probably getting a 2% to 3% return. We want you to get a 10% plus return, which is what we provide when you use our service. Investors helping affordability by creating more housing out there, and you create genuine community connection, just like we had in the 60’s and 70’s, by providing smaller micro apartments inside houses. And this can also help the residents inside your properties because while they’re saving themselves one third or one half off the normal weekly rent, including utilities, they’re saving themselves a deposit. So they can also go and buy the great Australian dream of owning their own home. As always, with any of our information here, you can go to smallisthenewbig.com.au/tickerhome.
Adrian Franklin (10:49):
Nicely done Mr. Ugarte. Take care of yourself. Great episode, love the passion as always. We’ll talk really soon, okay?
Ian Ugarte (10:57):
[foreign language 00:10:57].
Adrian Franklin (10:59):
Ticker Home presented by a great partners at ianugarte.com.au, who are on a mission to create 1 million affordable homes in the next 10 years and help Aussies struggling with housing stress, learn more at ianugarte.com.au.
EPISODE 29: INVESTING IN AFFORDABLE HOUSING
Adrian Franklin (00:09):
Hey there, welcome back to Ticker HOME where each week we will dive into the latest trends on the property market and answer the questions that you need to know, and that I need to know. It is great as always to have my Co-Host Ian Ugarte, Co-Founder of Ianugarte.com.au. Hello there, mate. How are you today?
Ian Ugarte (00:24):
Good. How are you, mate?
Adrian Franklin (00:25):
Going very well. Going well. What are you looking forward to getting stuck into today?
Ian Ugarte (00:30):
Today, I’m talking about the one passionate thing of my life and that’s affordable accommodation. And I’ll make no excuses and I’ll apologize not at all because I’m very passionate about this area of housing.
Adrian Franklin (00:43):
Very, very good. It is topical right now so I can’t wait to get into that. And I’ll think of some questions of my own. Ticker HOME presented by our partners at ianugarte.com.au, who are on a mission to create one million affordable homes in the next 10 years and help Aussies struggling with housing stress. Learn more at ianugarte.com.au. All right, let’s get into what is trending, firstly. So, where would you like to kick off?
Ian Ugarte (01:07):
Yeah, look, we’ve got a [inaudible 00:01:09] in the newdaily.com.au by Andrea Hamblin. This is about tiny houses and how the tiny house fraternity think that the housing solution is actually to build more tiny houses and put them all over the country. Now, I started to go down the track of becoming the tiny house guy, and I quickly pulled myself away from it.
Ian Ugarte (01:26):
Simply because I mean, this article, it says that [inaudible 00:01:31] who’s a woman who lives and has a tiny house in St Kilda, which is listed as the first approved tiny house on a block of land in Australia, which is not true. There’s actually a few others. But the article basically says there’s a whole set of rules and policies that are required for you to be able to live in a house. There’s been a couple of councils that have said to people, “You can’t live in a tiny house because it’s just a caravan.” It’s been challenged a few times. It’s been one on gray areas.
Ian Ugarte (02:00):
And the basic thing here is that when it comes to a tiny house, what you’re doing is you’re living in a caravan on a block of land. And the council’s main objective is to protect the community. So if big cyclone comes along and blows the thing over, because it’s not tied down to the ground, well, the council has a responsibility of making sure that that doesn’t happen, in which case they come up. Now, interestingly enough, in the article, Byron Bay mayor is saying, “Yeah, no we think we should do this.” I’ve actually advised the Byron Bay planning department and they’re dead set against it. And the same thing and it actually mentioned the Surf Coast as well. Which again, we’ve got another council that I’ve worked with, that are dead set against smaller housing. It’s interesting to see how politics plays when media comes into line.
Adrian Franklin (02:42):
Yeah, there’s no doubt about that. There’s also calls for more affordable housing to combat the growing homelessness issue in Australia. What’s going on here?
Ian Ugarte (02:51):
Yeah. Look, I’m not a heartless person and you’ll hear that for me today. But I think, housing is always an issue. And this is an article sbs.com.au by [inaudible 00:03:01]. And basically that’s showing the figures. So there’s a huge amount of issues. We’ve got an increase in homelessness of 254,000 to 290,000 since 2013. There’s a couple of charities. One in particularly, Homelessness Australia, is turning away 250 people per day. And COVID made that even worse. In the last 10 years, government spending well over a billion dollars per year towards making housing affordable. And the problem here, and we’ll talk about this later, is the state governments and actually what they are really doing to it.
Ian Ugarte (03:34):
Women are the biggest issue right now, especially women over the age of 45. There’s a 16% growth in the property prices in this year alone. There’s a huge amount of rough sleepers going on right now. And this is not going to get any better. And I can tell you the one thing for sure, is that throwing more money at it is not the answer. It never has been the answer; we need to think more strategically.
Adrian Franklin (03:58):
So tell us more about this new concept to see older women living together to avoid this issue of homelessness and loneliness as well.
Ian Ugarte (04:07):
Yeah. Interestingly, I bought this type of strategy to the market about 10 years ago. This is abc.net.au with [inaudible 00:04:15]. This was a really, really big article and it hit a number of publications across the country. Essentially, men end up retiring with $270,000 on average worth of Super and women end up with $157,000. So we were a bit out of kilter here.
Ian Ugarte (04:32):
There’s a model that’s been brought to the table here by an architect named Eloise Atkinson. Her model, which is actually my model, is about getting an 800 square meter block. Five women putting in $120,000 each. They end up with their own pods on the block, plus a communal area that they share.
Ian Ugarte (04:50):
Now, having been in this industry for a long while, especially dealing with the 50 plus single female, the one thing I can tell you is that it’s very… This is going to sound heartless. It’s all right to put one over 50 year old in a house with a mixture of other people. But if you put two in the same house, they actually tear each other apart. So for me, the model in principle works, the charity status is trying to be achieved for this model. And hopefully it does get through and hopefully it does work because my fingers across for it.
Adrian Franklin (05:18):
All right, let’s go and into our main conversation today. Now, according to a recent study of the top 20 cities in the world, Australia is the third of the most unaffordable cities in the world every year. And with a global pandemic also impacting people’s livelihoods, housing affordability has never been more dire. Ian, let’s bring you back in. I know you’re a huge advocate of more affordable housing. Tell me how have things gotten so out of control when it comes to people being able to afford to not only buy a property, but even rent?
Ian Ugarte (05:46):
Look, the problem starts back in 1881. And so this problem back in 1881 wasn’t really a problem. Because in 1881, we had the average sized house was 35 square meters. And inside that house lived 5.5 people. In 1960, everyone owned a two bedroom, one bathroom house. Most of those houses were built by a guy called LJ Hooker before he became a real estate agent. And then in that house, it was 3.8 people. We fast forward to 2011, Australia builds the largest houses in the world at 242 square meters. And in each one of those houses, 2.38 people. So when I started speaking about this 10 years ago, there were 12 million empty bedrooms every night in Australia. We now have 13 and a half million empty bedrooms every night in Australia.
Ian Ugarte (06:30):
Sixty to eighty percent of the people looking for accommodation are singles and couples. And yet 60 to 80% of the houses that are available to rent right now are three, four and five bedrooms. So we’ve got this upside down marketplace, which is not quite working. So the government actually shows that the average four bedroom house across metropolitan area rents for about $420 and a two bedroom house rents for $415. So there’s $5 difference in rent between a four bedroom and a two bedroom. And the reason is there’s not enough two-bedders and there’s too many four bedroom houses. We’re not talking about units here. So the issue is that we build too many large houses in Australia. And we need to start thinking smarter.
Adrian Franklin (07:11):
So this upside down marketplace that you’re talking about, how has this happened exactly? And then we’ll start there and then talk about if we can fix it and how we can do that.
Ian Ugarte (07:22):
Well, certainly the problem has started with the investment market. Now, I’m not saying that people shouldn’t invest in property, but what I am saying is that those people that are selling investment properties have put this four bedroom, two bathroom house as the number one thing that you should invest in. And they give them all these falsified figures about how our area is going to grow and they actually, all they’re doing is selling them really overpriced land that won’t go up in value for long period of time. So when we look at this, we look back at center census data. And the reality is that we’ve got huge issues with these four bedroom houses.
Ian Ugarte (07:58):
And if we took each one of those four bedroom houses and we use the policies that are unused and unknown, which is the policies that I use, and convert them into four or five micro apartments, where each person has their own bathroom, their own kitchenette, their own sitting area, their own sleeping area, we’ve now turned one front door into five front doors. Now, when you’ve actually increased the amount of front doors by 400, 500% on each property, you’re now starting to make a real dent on the market.
Ian Ugarte (08:25):
Now, think about the advantages here. We’ve produced homes that are smaller for the upside down marketplace. The person living in the house saves themselves one third to one half off their normal, weekly rent and has utilities included. The person that owns the property has now got more rent coming in. So it’s a bonus to them. And what we’ve done is produced more housing. So we can now start thinking strategically, let the government deal with the low socio or the bottom end of the market, which is what they have to deal with the housing, and let the private market fix the middle of the market, because that’s what we can do.
Adrian Franklin (08:57):
So according to a recent study by Anglicare, homelessness is on the rise, which we’ve touched on. But you say that homelessness is not about the people on the street; it’s often about the people you’re working next to every day. These are the invisible homeless who are everywhere. Tell us a bit more about the demographic of this growing homeless sector.
Ian Ugarte (09:16):
Yeah. So firstly, the definition of affordability means that you’re not spending more than 30% of your gross wage. So in essence, if I earn $50,000 a year before tax, and I’m paying more than $300 a week, I’m actually under housing stress. If I earn a $100,000 and I’m paying more than $600 a week, I’m under housing stress. It’s actually not a figure. So people need to understand that. So the study that was done showed that in one weekend, with 75,000 houses available to rent, only three of them were affordable to those people that were on a new start allowance. So think about this: only three properties out of 75,000. And ironically, exactly the properties I talked about; micro apartments. Because every other market… like we have zero vacancy at the moment because of that.
Ian Ugarte (10:04):
Now, when we talk about the hidden homeless, homelessness in Australia right now, we’re talking about the biggest growing demographic of homelessness, which is the 50-55 plus single [inaudible 00:10:15] family. And to me, this is a woman that was told at the age of 20 or 30 years old, marry a man with a good job and you’ll be right for life. They had children, they stopped working. They didn’t accrue any Super. They get to the end of their life of looking after with kids. They want to move on to the next period of their life. They actually divorce and end up with a really crappy settlement. And they find that they can’t get a job because apparently they haven’t got any qualifications or experience, which is beyond me. Secondly, the pricing is just over the top for housing. So they ended up chewing into their savings and they end up with almost nothing.
Ian Ugarte (10:50):
And this really hits home to me, Adrian. Because Rebecca, who’s my EA, my PA, she’s my gatekeeper. She’s our Mary Poppins. She’s everything in our family. And we advertise for someone about six years ago to come in and help us out with our four daughters. And Rebecca turned up at the front door. Nine months into working for me, the very problem I’d been trying to fix was living under my nose. Rebecca, dressed impeccably with a hair done every day, had lost a business during the GFC. Her mother went into dementia. She had to look after her mother. She lost her home. And she ended up actually in a really vulnerable situation. And I didn’t know that for nine months. And you can see how devastated I was to find out that that was the case. And that shouldn’t be the way; Australia needs to really fix this problem. And we need to start acting now and governments need to do it.
Adrian Franklin (11:37):
Yeah, no, I think that’s beautifully said, mate. Thank you so much for your honesty. It is interesting. Do you think, because it could feel perhaps a bit personal, some people might be embarrassed by it? It makes it so difficult to reach out and say to someone, “Hey, this is the position I’m in.” Do you think there’s a bit of almost embarrassment around this, which is so tragic in many ways?
Ian Ugarte (12:00):
We would never have found out about Rebecca’s story; it was only because of a conversation that had arisen where I saw that something was not right and I had to inquire some more. She was never going to tell us. She was never going to tell us that she was in that position. And thankfully for her, we got her into one of our micro-apartments. She’s paid off a debt. She’s in a better position now. She’s in love. And she’s now bought her first property again, a small little property, but a property nonetheless. And she’s back into the marketplace. And it just takes a little bit of direction and a little bit of a hand up to get someone like that. These are women that are incredibly, incredibly talented and skilled. They do finances. They look after houses. They look after home. They handle timetables. And yet they can’t get a job. It’s beyond me that. And when we COVID hits, they’re the most expensive employees. So they’re the first to go because they’re the best bang for buck. And that destroys me. It absolutely takes so much out of my heart.
Adrian Franklin (12:58):
No, of course, mate. It’s beautifully said. Let’s just wrap up by throwing up the most key points in terms of trying to fix this housing crisis. Take us through some of what we can do and who can control this mess at the moment.
Ian Ugarte (13:12):
Yeah. At the moment, everyone can play a role in this. Government needs to help create policy and get out of the way. The private market has created this problem, the private market can fix it. Co-living is the key right now. We need more co-living housing. That means people can have their own space and they can stay to themselves if they want to. Otherwise, they can share the communal space and be social, especially during lockdown. Housing policy much must match the need. So once we’ve got enough co-living properties and we’ve balanced out the marketplace, what we’ve done in the number of areas actually lowered the rent across the board because of co-living. And that will help into the future. And make sure you follow all your local council policies. That’s not a matter of just getting into a house and putting front doors in. There are policies that are required that have applications, approvals, and get the works done and signed off correctly. As always, [inaudible 00:14:05]. And you can get the cheat sheet for today. And as always, I want to thank you, over from New Zealand, for having me on again.
Adrian Franklin (14:12):
Great stuff, mate. Good to see you. Hopefully you’re well and keep fighting the good fight. We’ll talk to you again really soon. Okay?
Ian Ugarte (14:18):
Adrian Franklin (14:19):
Good stuff. Ticker HOME presented by our great partners ianugarte.com.au who are on a mission to create 1 million affordable homes in the next 10 years and help all of those Aussies that he just touched on, struggling with housing stress. Learn more at ianugarte.com.au.
EPISODE 28: RENTVESTING HACKS TO START YOUR PROPERTY JOURNEY
Welcome back to Ticker HOME, where each week we will dive into the latest trends on the property market, and answer the questions you need to know and I need to know. It’s great as always to have my main man, my co-host, Ian Ugarte. Hello, sir.
Hi. How are you?
Going well, how are you?
Good, awesome weekend.
Now, who’s that? Yeah. Yeah, always a good weekend. Who is our very special guests today? Please introduce.
This is Tim Hart. Tim Hart I’ve known for quite a few years now.
Good. How’d you meet? Can we ask that?
Well, actually, we love each other. No, we met through property, and at the time, I was speaking on stage and Tim was speaking about another strategy, and has done amazing at that strategy, and then has gone off in different directions. To watch his journey has been awesome.
Thank you. Thank you.
What are we’re talking about? Rentvesting today. Yeah.
That’s it. Yeah. Yeah.
That’s part of your world?
It is, yeah. I’m a property investor by sort of background. For me, rentvesting is all about, instead of buying a house, you’re renting the house and using those funds to go on and invest elsewhere. That’s personally what I’ve done, and I’m a big advocate for it. I think there’s a lot of value in doing it. Yeah, sort of chat to you guys about it, and…
Totally, we’ll get further into that in just a moment. Ticker HOME presented by Ian Ugarte, who’s reshaping housing, so it’s affordable again. Learn email@example.com.
Let’s go back in it, and further into rentvesting. I think it’s something people have heard about, but what is it by definition, and why is it more popular now, do you think?
I think it’s just that people are starting to look at it now. Australia’s got that culture of you have to buy a home and you own it, and that’s it. There’s no-
No other option.
… sort of looking at another option. Actually, if I rented and put all that money, instead of putting a 20% deposit in, plus stamp duty, plus all the costs, all the rest of the stuff of buying a house, what if I put that money into something else that earnt me an income? That’s what we sort of specialize, is looking at, where can I put that those funds into? Something that’s going to grow over time, rather than putting it all into just the one house, because it’s quite an emotional purchase, your own home, coupling with an investment decision. Never usually quite works out too well, so it’s much better if you make that business decision, yep, here’s the best house to buy, because it’s got all these things, but I’m going to live here. They’re totally two separate total things. I don’t know. That’s what reinvesting is, I guess, and that’s why I’ve done it. Just the numbers make sense, but there’s a few other things to take into consideration as well.
To be clear, I mean, rentvesting is quite simply… We’ve been taught in Australia that we have to own our own home, and you live in the home that you own. There are plenty of property investors out there that see their own home as a bad investment, because they can make a higher percentage return out of their money somewhere else, which would mean that they could just rent wherever they want to.
I mean, Tim’s a classic example of that. He lives and rents in a really big, nice area of Victoria. Whereas the money invested in that property, would be three or $4 million.
Yeah. It’s probably about two, two and a half.
Two and a half million dollars. What can Tim do with two and a half million dollars and get a 6, 7, 8, 10, 12% return, whilst the owner of that property is only getting a three or 4% return? It sort of weighs itself out to say it’s better actually sometimes to go… Well, most of the time it’s actually better off to go and rent a place somewhere else, because that person’s not getting a gain, and you can make money with your own money somewhere else as an investment.
Do you look at the strategy yourself, and do you like to recommend, because we haven’t spoken about this too much.
No, we haven’t. I was waiting for Tim to come in. He’s a classic example of how you can make money somewhere else and pay for rent, and choose to where you want to. Like we said before, if you don’t like your neighbors just go and rent somewhere else, right?
I personally couldn’t do it, and the reason that I couldn’t do it, is because I’m a builder and I’m a tradie, and I couldn’t sit in a house and say, “All right, I can’t touch the walls here.” I’d be sitting there and redesigning and saying, I need to move that wall and open that one up, so it gives me the flexibility in that, and every property deal that I do as my principal place of residence is also a business deal, because I want to make sure I manufacture growth, which we talked about before.
I would suggest for a lot of investors that it’s a good way to go. That perhaps your first investment property should be an investment and not a principal place of residence.
Interesting. What else have you got for Tim? What would you like to know from him at the moment?
I’ve heard you say that rentvesting gives you the opportunity to be able to get a foothold in the property, and on the ladder of property, so with your experience, does it give you a leg up into buying?
Absolutely. I mean, it allows you to pick where you want to invest, so you can live where you want to live, but when you’re investing, whether or not you want to buy residential, you want to buy commercial property, industrial, whatever, you can invest in whatever you want rather than, I have to invest in this house, because it’s where I want to be and in this particular area.
It’s a real different thing, and I guess it’s just people need to look at the numbers really, and look and say… One of the things you can’t put a number on is, like for yourself, what does it feel like to own your own home or to know that I want to be able to renovate it, and for those people, it will never make sense to do it, because most people, the numbers make sense to rentvest, but it’s how much is it worth that you know you never have to move again? Or that you don’t have to rent for your life or whatever it is. There’s a mentality thing there. No one knows what’s that worth to you, and that’s different for every single person.
I’m not going to say rentvesting is good for everyone. It really depends on your circumstances, but definitely, yeah, do the numbers. Most of the time it works out to be a lot more profitable to rent and then invest your funds elsewhere.
Yeah. I think when rentvesting too, there is a number of people doing it in different ways. There are people buying investment properties and a motor home, and actually using that as an income for them to be able to sustain their life while they’re driving around the place. That’s a classic rentvesting thing to do.
Joel and Bianca, which we met a few weeks ago, that worked for me, they’ve just bought themselves a motor home while they’re doing an investment property PPR deal, and they’re going to be in their motor home for six months while this build’s getting done. That’s a great way to go for them.
What are the things that people need to look out for when they’re doing rentvesting?
Well, the biggest one is just looking out for that little nest egg. Instead of you putting your hundreds of thousands of dollars, or your 20% into your own home, you’re investing it somewhere. Don’t go and spend that money. Make sure you’re looking after it. That’s probably the biggest thing. Just make sure you’re not going and spending it on a new car or a holiday. Make sure you’re diligent, putting that money aside and investing it wisely for the future. That’s probably the biggest thing. That’s the big one with rentvest.
If people are adopting a rentvesting strategy, do they just have one investment property and then buy a place to live? Or is this something they should do for the long haul, and then accumulate many properties while they’re still renting where they live?
It’s a personal thing, I guess, in terms of renting. They’re two separate things, investing and renting, and I think that’s what people, they sort of mix the two together. You can rentvest and you don’t have to go and buy property even. You can buy shares, you can buy crypto, you can buy whatever you want, and that gives you that flexibility also, to diversify, as opposed to, hey, I’ve got 200 grand, that’s just enough to buy one house and I’ve got all my eggs in one basket. It can be anything. It depends on what makes sense for you. A lot of people these days are a lot more transient. They want to be able to move around, and you don’t like your neighbor, hey, I’m going to move. They don’t want to buy and then be stuck there for 10 years, and hey, if I want to move, I’ve got to go and pay stamp duty again, and real estate agent fees, and all the rest of the stuff.
And look, and find it, and all the stuff.
Yeah. Yeah, true. It doesn’t suit people sometimes, does it?
No, exactly. Yeah.
That way of doing it.
Tim, you obviously use this strategy to not have to buy your own home, and you’ve decided to go down the commercial route of buying commercial properties.
Is there any specialist property that you’d look at? You decided on a $1 million property or $10 million properties? What do you look for?
In terms of commercial, we specialize in bigger properties, so in that three to $20 million price bracket where there is no competition. We’ll go and buy a shopping center, and then we make it available to multiple investors. We’ll have 20, 30 investors that come in and they’ve got a small share of a bigger asset. That’s what we really like. Bigger assets, multiple tenants, rather than having all your eggs in one particular basket.
Can we talk about a property deal?
Wait to hear this one. You bought a strip of shops, not, not a strip shop, a strip of shops. Tell us about that. I mean, it had-
Which one are we…
Jaycar’s in there.
Yes. The first one I ever bought. Yeah. There’s a property I bought, what’s it, five, six years ago now? Eight shops up in Shepparton, and it was about a 13% yield that I bought for. I bought it for $3 million, and it was a returning about, whatever that is, 400 or four, 390, I think it was. It was about a $240,000 positive cash flow.
$240,000 leftover after paying for all your costs, sitting in a bank account at the end of the year, and pay tax on it. Whatever.
Of course. Yeah. Whatever you’ve got to do. But that’s when we actually rolled into a trust, so we had all other investors coming on board, and they all owned a share of that sort of thing. That’s what we specialize in. Some properties that people typically couldn’t get access to, unless you had literally millions of dollars to get access to.
Rentvesting gave you access to be able to purchase that.
Had that money been tied up in a two and a half million dollar home, then you wouldn’t be able to do that.
I love it. It’s a fascinating world. Let’s put up some of the top tips in terms of rentvesting hacks now. Who wants to run through? Ian, show us.
I will. Rent for love, buy for returns, right? That’s Tim’s mantra. I’m sure he says that all day long.
Every property deal is a business deal, and I even said that with my own principal place of residence. It’s a sub-dividable block, and you want to manufacture growth.
Plan for… Make sure your tax benefits are in there, because you get tax benefits out of investment properties, but you don’t out of your own home, other than the capital gains free.
Research your areas, and Tim just talked about a 13% yield. That’s a pretty awesome outcome when you’re looking for property deals, and
Make sure you get expert advice, because there’s experts around the place that can help you out. Mentors that have been there and done that before, and that’s a great outcome for everyone
That wraps us up, those tips. Do you want to add anything, just to finish, if people do want to learn a bit more?
In terms of investing, they can head to activepropertygroup.com.au. If they want to find out more about where to put that money. If you’re going to be rentvesting, where you’re actually going to put those funds and get them working hard. Yeah. Check us out.
Awesome work. It’s pretty fascinating. This is your decision. This is what you want to do with your investment. This is your focus basically.
That’s right, yeah, yeah. Yeah. It’s sort of too expensive to put the money into a house, compared to where else you could put it.
No, I like it. Good stuff. Thanks for coming in. We’ll talk to you both again really soon.
Thanks. Thanks for having me.
Ticker Home presented by Ian Ugarte, who’s reshaping housing, so it’s affordable again. Learn firstname.lastname@example.org.
EPISODE 27: AVOIDING PROPERTY PORTFOLIO KILLERS
Adrian Franklin (00:09):
Hey there, welcome to Ticker Home where each week we will dive in the latest trends on the property market and answer the questions you need to know. We’ve got our notes, we’ve got our glasses, we’ve got our water, we’ve got our co-host, Ian Ugarte. Welcome back to you. How are you?
Ian Ugarte (00:20):
Hi! Good. How are you?
Adrian Franklin (00:21):
Going very well. As always, can you introduce … I mean, you’re friends. Can you introduce our very special guest right here?
Ian Ugarte (00:27):
It’s Jane Slack-Smith who you met quite a few years ago. Amazing what she does. She’s great data analyst and her background sort of edges towards data and she loves it.
Jane Slack Smith (00:37):
That’s a [crosstalk 00:00:38].
Adrian Franklin (00:37):
Is that a good introduction trend? Happy with that?
Jane Slack Smith (00:40):
That’s right. I love it. I love it.
Adrian Franklin (00:41):
Slack by name but-
Jane Slack Smith (00:42):
And not by nature.
Adrian Franklin (00:44):
Look at us go. We’ve just met. This is incredible stuff. All right. Let’s get into a Ticker Home presented by Ian Ugarte who’s reshaping housing so it’s affordable again. Learn more at ianugarte.com.au. Jane, I might just get you to maybe introduce yourself a bit further and talk a bit about the work that you’re involved in right now.
Jane Slack Smith (01:02):
Sure. Look, I have a number of companies. I started as an engineer and became a property investor and created the dream for myself, my family, my friends, and then I needed more friends. So I started-
Adrian Franklin (01:14):
And now you’re here.
Jane Slack Smith (01:15):
Yeah, exactly. Right. Then, I met Ian. But started a mortgage brokering company and started an online education business and wrote a book. Ticked all the things you’re supposed to do. Tick, tick.
Adrian Franklin (01:27):
Ian Ugarte (01:28):
Adrian Franklin (01:28):
Ian Ugarte (01:29):
Yeah, yeah, pretty good. Pretty, yeah.
Adrian Franklin (01:30):
Pretty special. You got a bunch of pretty cool friends.
Ian Ugarte (01:31):
Yeah, I do. I have some amazing friends and amazing contacts in the industry and people that we can talk to as well. Just not professional stuff, outside of that we can have friendships as well.
Adrian Franklin (01:41):
Amazing. We’re friends now as well. We’re all friends.
Jane Slack Smith (01:43):
Adrian Franklin (01:44):
You can give me property tips. I need them. Now, Jane, we’ll start with. We want to talk about the myth of hot spots. We’ve spoken about that before. Hots pots and warm spots, I believe, but tell us about the idea of a portfolio killer. What does that mean exactly and how can this happen?
Jane Slack Smith (02:00):
Well, I’m probably revealing a big secret here because they are stealth like, these portfolio killers. Most people don’t even know that they have one in their portfolio. They sit on a property, it hides in their portfolio, and over a number of years, it’s kind of chewing up borrowing capacity. It’s not doing what people want it to do. At the end of the day, we buy property for either cash flow or capital growth. Cash flow helps us hold the properties. Capital growth helps us get out and live the life that we want to have. I’m a bit greedy. I like to have both.
Adrian Franklin (02:34):
Jane Slack Smith (02:34):
These portfolio killers, I speak to people all the time. They’re like, “You know, I bought it for $400,000. It’s worth $600,000 now. This is a real gem.” But they bought it 20 years ago and their growth is like 1% a year. I’m like, “Dude, it’s not even keeping up with inflation,” right? I think these, I’ve got a portfolio killer calculator and people put their portfolio into the calculator and they’re like, “Really, I’m doing two and a half percent? How am I going to retire on that?” I think sometimes, it’s just a real shock, and they look there, they don’t provide the growth and they don’t provide the income that people want.
Adrian Franklin (03:11):
Ian Ugarte (03:12):
Location is a portfolio killer here. You also say that focus is probably number two. Tell us why focus is important. Why is it that an investor should be focusing on what they’re doing in property?
Jane Slack Smith (03:27):
Look, I think the thing, I’ve been working with people for over 20 years in property investing in educating them and those that are actually achieving the results that they want to achieve, start with a clear vision. They understand the end result that they’re trying to achieve. Some of the exercises I do with my clients, I step into that end life. How much does it cost? Who are you doing it with? What are you doing? What’s your day made up of? Then, we come back and do a gap analysis like, how much does that life cost and how much do you, are you on track now to achieve the income that you want to achieve? When there’s that gap and we understand the gap, you may not need 20 properties. Maybe it’s one or two well-placed properties that are going to get you to that desired result.
Jane Slack Smith (04:12):
But unless you have the end result, what happens? You end up with a property in the wrong location, that doesn’t go up in value. A property that people don’t want to rent. You’ve got vacancies, you’re not making money. And at the end of the day, you may not have a team set up to assist you to actually manage that property. So you can lose on three ways. You could maybe buy under the market as a plan because you think you’re going to get a good deal but in actual fact, you’re buying the wrong location or you don’t understand the market. Every other property is on 600 square meters and you’re buying 300 square meters thinking you’re getting a deal of a lifetime because it’s 50 grand shorter. I think by having that focus of the end result, and most people I speak to think they need a 100 to $150,000 a year to live off. The reality is when we actually do the numbers, it’s a lot closer to 60, 80 grand. It’s not that big to get there. I make a lot of my clients cry because they’re happy. [crosstalk 00:05:08]
Ian Ugarte (05:08):
When you work out exactly what you need to be able to live in life, to do whatever you want to do, sometimes it’s not 70, 80 hundreds. Some people say to me 120K. If you need $120,000 to live your life, you’re living way beyond the need.
Adrian Franklin (05:23):
Pushing it down a little bit.
Ian Ugarte (05:25):
I think the one thing that I’ve also noted is that on a whole bunch of Facebook pages, there are people saying, “Oh, I’m investing in this area,” and there’s some areas that I really dislike because of the research that we do. I say to people, “Yeah, you might be able to buy in that area, but if you spend` $500,000 in there and $500,000 in an area where, what you say is a good area, in 10 years time is that going to be worth 750 and this one going to be worth a million? Quite likely and sometimes they go down in value. So, it’s really important.
Jane Slack Smith (05:49):
Adrian Franklin (05:50):
Can I ask you about that point you make where you need to decide where you would like to go?
Jane Slack Smith (05:55):
Adrian Franklin (05:55):
Have that focus? Because when I think of Australians in particular, sometimes that can be a hard thing to kind of go look at the numbers. It’s confronting in a way, right?
Jane Slack Smith (06:03):
Adrian Franklin (06:04):
Can you tell us about how much of an issue that is, but also how can we get past that confronting thing? Because I think some people go, “Oh, that’s a bit too much for me.” Does that make sense?
Jane Slack Smith (06:12):
Absolutely. I think first of all, we need to treat property investing as a business. It’s not emotional, right? When we take that off the table and we don’t have to pop around the corner when we’re walking the dog to see our house and we can be agnostic geographically about where to buy the best possible property you can buy that you can afford at the time, you then have all of Australia to play with. To give you an idea, every single month I take the data from SQM Research, I take of the 16,565 suburbs in Australia, I take about eight and a half thousand suburbs of the main cities and regional areas. I run them through my algorithm and I put in my low-risk filters and put on the pricing pressure filters, there are 120 suburbs fallout that I would start my research in.
Jane Slack Smith (06:57):
But the thing is they’re in every state, they’re in every city. So there are opportunities out there. But the thing is, it’s the location that is important for your strategy. So if your strategy is around having a 15-year hold period and capital growth, you’re going to look in a certain area. If your strategy is going to be flipping, developing, multi res, granny flats, cashflow, renovation like what I do with my properties, then you’re looking in a different area and the property itself has a different characteristic.
Jane Slack Smith (07:33):
I think the problem is you might have people who look in Yarraville, for instance, and they’re like, “I’ve done all this research” and they’ve got the right percentage of renters and vacancy rates and they know the streets that people want to live. Then, all of a sudden we turn it around and they go, “I can’t afford it now. I won’t buy the three bedroom typical house that most people want. I’ll buy a unit.” So they’ve all of a sudden done all these great research for their strategy, which was to buy, maybe hold a house, a typical property in a great area. Then, they flipped it just because fear of missing out, emotional, it’s all too much. So yeah, there’s a way to locate the properties.
Adrian Franklin (08:09):
Gotcha. Confidence, we want to talk about that as well as part of this strategy. Tell us a bit more about confidence or lack of confidence, I suppose, as well.
Jane Slack Smith (08:19):
Look, I think with competence comes confidence and it’s around the confidence. For me, that’s around data research. That’s around understanding the numbers. Looking historically, and we’ve got information back to 1880 now on property sales, but we’ve had changes in economics and everything that has happened over the period of time. But if we look at the smoothing effect and we say, “Well, what has always happened in the past?” We will put that as the basis, but we need to add on what’s happening now and what’s happening in the future.
Jane Slack Smith (08:51):
So when we get to the research component of gaining your confidence, it makes it a strategy. You have a process, you have an end result and you have a strategy. You’re not buying the property in the wrong entity. You’re not buying the property with the wrong finance where they won’t let you do multi-res or granny flats or developments. You’re buying with the strategy known upfront. Then, with the confidence, you can make the decisions. Because it’s an easy filter. Does it fit? No. Does it fit? Yes. You can assess. But here’s the thing on that, and that is, that when you actually have the confidence, a lot of people then get to the point where they’re like, “I’m running out of time. I’m going to miss out. I should time the market.” Then, they’re out of the market and then they miss the opportunities
Adrian Franklin (09:38):
[crosstalk 00:09:38] That happens, doesn’t it? What have you got, Ian? Finish this off.
Ian Ugarte (09:41):
Well, the rest is puppy dog stuff. We talk about-
Adrian Franklin (09:45):
Yes, but what’s this about?
Ian Ugarte (09:46):
The rest of puppy dog is the one that sits on the backstage. These are the people that go to a live event and they’re sold a free, turn up and we’ll tell you everything about property. Then, they go home and they go, “I’m going to look at this over in WI, and I’m going to look at that property over there and that over there.” It’s like taking my dog out for a run in the bush and he’s just across the backseat for the two hours of driving. You finally give him this acreage to walk, run across and he’s so done. He’s asleep on the back seat. The confidence comes into knowing that you’re in a better position so that you are educated, you know exactly what you’re looking for, and you’re focused on exactly what you’re going to purchase, why you’re going to purchase it, and the outcome from that.
Adrian Franklin (10:26):
Interesting. Makes sense to you?
Jane Slack Smith (10:28):
Adrian Franklin (10:30):
You’ve heard it before?
Jane Slack Smith (10:31):
Agree, yeah. I haven’t heard about the puppy, but I’m into it.
Adrian Franklin (10:36):
Jane, you’re a former engineer, of course. You mentioned that, whose decisions are very driven by the numbers. We’re getting that loud and clear. What tools are available then for viewers out there that perhaps you use that can help us out in this space?
Jane Slack Smith (10:48):
Look, there’s usually a lot of free tools. We know this website. You can go and spend hours. I have domain, real estate, SQM. You could go to the census data. I’m a firm believer in looking at census and looking to understand the demographic of your area. I’m very excited. We’ve got a census coming up in Australia this year.
Adrian Franklin (11:06):
Jane Slack Smith (11:07):
Waiting for that. I’ll be waiting up.
Ian Ugarte (11:08):
Hopefully your computer won’t crash.
Jane Slack Smith (11:09):
I know. There’s all this free data cyber view. There’s a lot of sites you can go to, but it takes time and effort. Or you can pay for a shortcut and get there quicker. So, you can pay for things. For instance, I pay for RP data. You can pay for Investar. You can pay for all of these different opportunities and tools. I created the suburb, select a software in my location master class with the census data and the ATO data and all that information because I personally was sick of going to all the different websites. The thing is you can go at alone and do it yourself. You can go with a coach or a mentor, and they actually have that knowledge and experience and opportunity to teach and coach you and guide you as well. So, there’s a number of ways that people can do it. Do it by themselves, do it with someone like a buyer’s agent, or have someone do it for them.
Adrian Franklin (12:02):
All right, let’s go through the portfolio killers to finish off. Ian, what have we got here?
Ian Ugarte (12:07):
Top tips for me is pay for the shortcut. If you can get away to be able to get yourself into a better place, then do that. Educate towards competence, so that leads to confidence as well. Focus, focus, focus.
Adrian Franklin (12:19):
Ian Ugarte (12:19):
Make sure you get it right. Use the data and trust the numbers. Don’t make decisions on emotion. I talked about this the other week. A neutral pendulum with no emotion makes good money decisions, a negative emotion or a positive emotion when making money decisions, it will always turn out not that good.
Adrian Franklin (12:36):
Doesn’t help us out. Jane, thank you so much for coming in.
Jane Slack Smith (12:39):
Adrian Franklin (12:39):
How can we reach out and learn more about the work that you’re up to?
Jane Slack Smith (12:41):
Sure. It’s easy. Just go to janeslacksmith.com.au/ticker.
Adrian Franklin (12:46):
Amazing stuff. Thank you. Hopefully we can chat once again. Ian, you’ve just got, you’ve got better friends than me. Hopefully my friends aren’t watching.
Ian Ugarte (12:53):
You are my friend.
Adrian Franklin (12:53):
Yeah, sure. We’re going to be friends. Thank you, both. We’ll chat real soon.
Jane Slack Smith (12:56):
Adrian Franklin (12:58):
Ticker Home, presented by our great partners at ianugarte.com.au. They’re on a mission to create one million affordable homes in the next 10 years. But head to ianugarte.com.au. You got to do it. We’re learning. I’ve got to buy myself a property. Catch you soon.
EPISODE 26: FINANCIAL FREEDOM THROUGH PROPERTY
Adrian Franklin (00:09):
Welcome to Ticker Home, where each week we will dive into the latest trends on the property market and answer the questions you need to know, and that I need to know. It’s great as always to have my cohost Ian Ugarte, founder of ianugarte.com.au. Hello, welcome back. I like the jacket.
Ian Ugarte (00:23):
Yeah, I spruced it up. Found it next door.
Adrian Franklin (00:25):
Perfect size, too.
Ian Ugarte (00:26):
Jumped into a bin and grabbed it.
Adrian Franklin (00:28):
Look at you. Hey, what are you looking forward to getting into today?
Ian Ugarte (00:30):
You know, for me, property is the thing that I talk about all the time and how you can gain financial freedom from that. And that’s what we’re going to be talking about today. And I’m going to bring a mate in who’s awesome and really well known. And you’re really going to enjoy Steve.
Adrian Franklin (00:44):
You’re very connected in this industry, aren’t you? Ticker Home, presented by Ian Ugarte, who’s reshaping housing, so it’s affordable again. Learn more at ianugarte.com.au. All right. This is what I like to do. This is your moment. Who is our very special guest today?
Ian Ugarte (00:59):
Our very special guest today is a guy called Steve McKnight and he’s become very well known in the property market because he has a book, written a book. 130 properties in three and a half years is what they accumulated, he and his partner. But more importantly for me, Steve, and you know, when you get to that point in your relationship, when you’ve got a girlfriend, boyfriend and do we call each other girlfriend, boyfriend? Steve’s not my boyfriend, but Steve to me is my best mate. He’s a great person to be able to talk to. He’s someone that I can sound and put some boards towards and he comes back with some information and he’s always looking out for me. And so I really love Steve. He’s amazing to me in my life.
Adrian Franklin (01:37):
All right, well, let’s bring him in. What an introduction that is. Welcome in to Ticker News. How are you?
Steve McKnight (01:42):
Hey, and I think Ian and I call each other big spoon, little spoon and he’s always little spoon. And for those of you watching, yes, I’m up in cyberspace where it’s raining. So apologies for being a bit pixelated. But I’m sure what I say will be much more important than how I look.
Adrian Franklin (01:59):
All right. I’m looking forward to getting into this. So Ian, firstly, you’ve known Steve for a while now. You just mentioned you’ve become best mates pretty much. And you recently spent time on his legacy project in Gippsland. So why was it important for you to bring Steve and his knowledge to our Ticker audience today?
Ian Ugarte (02:14):
I think for me what’s important is that property gives you a position to be able to be financial enough to do and choose what you want to do, and watching Steve’s project roll out and his legacy project, is what I see and what he calls it, is something that’s really amazing. It’s something that he wants to do and he chooses to do. And the freedom of choice to do what you want to do on a daily basis is really important.
Adrian Franklin (02:38):
Unbelievable. So we’ve got to get into this number of properties. This blows my mind. I don’t have one property and there are 130 properties here, apparently. So let’s talk about that, Steve. 130, in just three and a half years. That’s fairly impressive. But you also say not everyone needs to do that to enjoy financial freedom. So, what are your two tips for people who want to build their financial freedom through property?
Steve McKnight (03:02):
All right. Before giving the two, must know tips, perhaps, a little bit of background might help.
Adrian Franklin (03:07):
Of course. Go for it.
Steve McKnight (03:08):
So, I was working as an accountant and deeply unhappy doing it, and really felt that I had to find another way and a different way forward to be able to live the life that I want without having to sell my time. And whether you’re a professional or something else, ultimately in a job we’re all selling our time and expertise for money. And instead of doing that, I wanted to create income streams, and by creating income streams, work, but then get paid into perpetuity for that work rather than on an hourly basis. And I looked at various different wealth creation schemes, everything from blue gums, ostriches, share trading, negative gearing, and I settled on positive gearing, which was buying properties where the income that came in was more than the expenses that went out, left a little bit of surplus cashflow, and it became a numbers game.
How many properties did I have to buy where that surplus cashflow accumulated to be more than the money I was making, selling my time in accounting, in which case I would become financially free. And the answer was, I was with a business partner and together we needed to buy 130 properties. And then we said, let’s go and do it. So we bought 130 positive cashflow properties in three and a half years. And I’ve been financially free for the past 18 years, living the dream.
Adrian Franklin (04:34):
Unbelievable. All right. What have you got for him?
Ian Ugarte (04:37):
So, Steve is really well known. He knows a lot of people. He’s taught a lot of people how to invest. And for Steve, he’s got a mantra and the mantra is that you’ve basically got to make it, manage it and multiply it and then make it matter.
So Steve, tell everyone why it’s so important, those few things.
Steve McKnight (05:00):
All right. Well, coming back to Adrian’s question about what were the two tips and then moving on to that. I guess the two best tips that I could offer anyone were only invest in real estate that makes money. That seems obvious, but a lot of the time people get hooked into buying properties that lose money for tax benefits or other… If I said I’ve got a great business opportunity and you’re like, “Oh, okay, tell me about it.” And I’m like, “It’s going to lose money.” I mean, it fails at the first hurdle and real estate shouldn’t be any different. If it’s not going to make money, then don’t get into it. And if the number one reason for getting into it is so-called tax benefits from losing money. Well, no.
And then the second tip that I would give people is don’t just buy anything, buy something. A little Steve McKnight mantras that I’ve come up with over time is, our goal as investors is not just to buy something and hatch it, but there’s four parts to it. Want to make the most money in the quickest time for the least risk and the lowest aggravation. And that’s what I constantly ask myself, even today, when I’m looking at buying an investment property. Does it make money? Yes or no. And if no, you don’t even get to part two. And then part two, most money, quickest time, least risk, lowest aggravation.
Now coming on to Ian’s point, sometimes wealth creation seems all too hard. People are like, “Oh, I want to get better at money, but I just don’t know how.” And I’ve realized that really there’s three main parts to becoming a master of money and then a fourth part, which is how you actually make the most of money. So, the first three parts are you’ve got to make it. Then you’ve got to learn to manage it. And then lastly, you’ve got to learn to multiply it. And if you can’t make it, there’s no point managing it. And if you can’t manage it, there’s no point multiplying it. And this make, manage, multiply is really the space that I work in now in empowering investors to be able to get the money to invest with, to begin with.
So the two parts to life that people walk are, first of all, they want enough money to survive. And that might be own a house, have enough money in the bank, work if they want to work, whatever it looks like. And it’s a very selfish me centered conversation. I want this so I can do that. All right, great. No worries.
The second part of wealth creation then becomes significance, which is how can I make my life matter? How can I make money matter? And a lot of people don’t get to significance because they never get to survival.
And there’s always a constant, “Oh, I don’t have enough. I don’t have enough. I don’t have enough.” So therefore they live a life which is a constant grind, struggle and effectively get to a point at the end of their life where they’ve got to try and survive on what they’ve got without necessarily having the wherewithal to be significant. And what I’m doing with my money now is I’m blessed to have enough. I want to then allocate it towards significance, which is this legacy project we’ve been talking about earlier. So before you can really get into significance, I mean, high level human beings do significance, then survival. But the rest of us do survival, then significance. Once you’ve got enough, because you’ve learned how to make it, manage it and multiply it, you can then figure out how to make it matter by supporting and getting involved in causes that add meaning to [inaudible 00:08:25].
Adrian Franklin (08:27):
It all sounds very impressive. So let’s break it down for people out there. Is this something that anyone can do, Steve? And Ian, you can chip in here as well. And if so, what sort of properties should people look for when they are about to embark on the property journey? We’ll start, Steve, with you, and then Ian can chip in as well.
Steve McKnight (08:44):
Well, I think anyone can improve and the desire to improve is the beginning point. And the more you do of what you’ve done, the more you get of what you’ve got. So if you’re not happy with what you have at the moment, then add scale to it. And if you’re still not happy, you’re like, “Oh crikey, I couldn’t handle more of that.” Then you need to embrace change. And that’s going and finding someone who you would like to learn from, who hopefully has success in the areas that you would like to emulate. And whether that is investing, real estate, shares or basic money management, it’s up to you to decide to change and to do better and to find someone who can help you.
I always like to say, if you’re being sucked out in a financial rip and you’re too proud to put up your hand, well, no one’s going to come and rescue you. But if you can put up your hand and attract the attention of the lifesaver on the beach, then that lifesaver can come and grab you. Well, if you need help ask for it. And I know Ian for instance, is a fantastic person to seek help from when it comes to acquiring positive cashflow properties, high yielding, positive cashflow properties. And certainly if I lost all my money and had to start again, I would be pursuing Ian’s strategy. I’m lucky enough to have bought those properties, as we’ve mentioned before, and now in a situation where I’m typically in the commercial property space, but that’s what I would say. If you need help, first of all, don’t be too proud to ask for it. And then second of all, find someone who’s got the success and experience and runs on the board, that you want to emulate and then cozy up next to them.
Ian Ugarte (10:20):
You hit it spot on. I mean, that’s exactly the thing that you would say. You would say that if you can follow someone who’s already done it before, it’s going to make your life much easier because you can learn from your mistakes, but it’s actually better to learn from someone else’s mistakes that they’ve already done before.
Steve, you’ve got your legacy project. Both of us are very big about using our wealth to create legacy. What would you say to people out there? Why is it important for you to be able to use your wealth for a legacy project?
Steve McKnight (10:49):
Well, I always like to say that money doesn’t hug you back. So there’s lots of people out there hugging money, but it’s a bit empty and something very interesting happens along the road to financial freedom. You start off trying to get to this mythical number where you think you’ve got enough. And then along the way you start becoming a bit worried that you’re going to lose what you’ve already got. And that’s this double-edged sword to wealth creation. How much do you need to have enough? And then how can you overcome the need of not losing what you’ve already got? And the answer to the second question is to make your money matter, to give money a purpose, because money has no purpose in and of itself. It’s just a figure on a bank statement, or on a spreadsheet. But if you can start making your money matter, if you can start getting involved with your time or your resources, and then experiencing what it’s like to, as a mentor of mine, Brendan Nichols says, “Get a life or give a life.”
Then you can start feeling like you’re contributing, that you can touch, move and inspire other people, to be able to help them in ways which matter to you. And it might be saving the starving cats of Sydney, or it might be whales, or it might be a cause that’s deep to my heart, about trying to help rescue people who are in sex slavery in Southeast Asia and give them new skills or retrain them. Or it might be planting 300,000 trees up here in Northeast Victoria, where I am at the moment, to create a massive carbon sink forest that’ll never be chopped down, because the government isn’t doing what they should be doing and showing leadership in this space. Well, I don’t have to wait for the government. I can use my own time and my own money to pursue a cause or causes that are deeply important to me because I can self-fund it, and hence that’s making my money matter and adding meaning to my life.
Ian Ugarte (12:51):
You can see why I love my mate, Steve. He’s so amazing and passionate about helping people out and he’s in a position to be able to do that, and I just love that.
Adrian Franklin (13:00):
No, I love that link too. Yeah. I mean, because you can make money, but as you say, it doesn’t really mean that much, unless you attach a meaning to it and then it means whatever you want it to.
Ian, we’ll get you to finish up and wrap up the most important steps to gaining financial freedom through property. Take us through these ones.
Ian Ugarte (13:14):
Yeah. Firstly, to gain financial freedom, you’ve got to make it, get money. You’ve got to manage it, then multiply it and then make sure that you’ve got a mentor with you, that can help you be able to master that moving forward, all through the ways that you are starting from beginning to end.
Steve, just for your legacy project, what’s the website?
Steve McKnight (13:36):
If people want to find out more, just head to treechange.com.
Adrian Franklin (13:40):
So good. Really great to have you. It was very inspirational and motivating to have you on Ticker today, so hopefully we can talk again in future. All the best until next time. Hopefully you guys catch up really soon as well.
Great work. Awesome. Amazing.
Ian Ugarte (13:56):
Adrian Franklin (13:56):
Not a bad friend to have.
Ian Ugarte (13:57):
Well, he’s a great friend to have, and the one thing that I’ll say about Steve is that he would not normally come on and do a segment like this, because he likes to stay in the background now, and he’s done that as a favor to me and you. So, I thank you, Steve.
Adrian Franklin (14:08):
Amazing. Yeah, that was incredible stuff. Well done. Thank you for bringing him on. Really appreciate it.
Ian Ugarte (14:08):
Adrian Franklin (14:13):
Ticker Home, presented by Ian Ugarte, who’s reshaping housing so it’s affordable again. Learn more at ianugarte.com.au.
EPISODE 25: MAKING THE MOST OF THE POST-COVID BOOM
Adrian Franklin (00:08):
Hi there. Welcome here to Ticker Home where each week we will dive into the latest trends on the property market and answer the questions that you need to know. It’s great as always to have my cohost Ian Ugarte, co-founder of Small Is The New Big, in person, ladies and gentlemen.
Ian Ugarte (00:23):
In studio finally. COVID almost stopped as again, a few weeks ago, so it’s good to be here.
Adrian Franklin (00:29):
It’s great to have you here. How are you?
Ian Ugarte (00:31):
It’s awesome. Really awesome.
Adrian Franklin (00:32):
Awesome. We’re going to get started here today. We’ve got a special guest in a moment, but what are you looking forward to talking about today exactly?
Ian Ugarte (00:38):
Today about making the most of the post COVID boom in property. And really there was only three people, commentators in property talking about a boom about 18 months ago, and that was myself, this guest and someone else. And so I’m pretty happy about that.
Adrian Franklin (00:54):
Awesome. We’re going to get into that in just a moment. Ticker Home presented by our partners at Small Is The New Big, they’re on a mission to create one million affordable homes in the next 10 years and help Aussies struggling with housing stress. Learn more at smallisthenewbig.com.au. All right, well usually it’s my job to introduce the guests, but you’ve known each other longer. So who is our very special guest for this episode?
Ian Ugarte (01:14):
Yeah so, our guest this episode is Terry Ryder Ryder from Hotspotting and he’s got a massive following. He’s been in the industry for a long time and really knows his stuff, puts out some great reports and lives just up the road from me. So good to have him in from the sunshine coast.
Adrian Franklin (01:30):
Terry Ryder welcome in, how are you?
Terry Ryder (01:33):
Very, very well. It’s great, well, beautiful day on the sunshine coast as always.
Adrian Franklin (01:39):
So we want to talk about this growth and he’s already given us a bit of a clue, Mr. Ugarte. He might’ve been one of the first to predict it, but Ian, is that true? Is Terry Ryder one, and who’s the third? The fact that we’ve seen this huge growth post pandemic, I guess I got to say it like that, don’t I?
Ian Ugarte (01:54):
Yeah and except for me, Simon Presley was the other one. So the self [inaudible 00:01:57] Simon Presley, the ones that I could see. You know, I had a dollar bet with one of my mates who will be on an episode very soon, and I won that bet. He paid me back in 5 cent coins. So the reason I saw that there was going to be movement was there’s already a shortage of housings. We’ve got demographics that had, not matching the housing style. We did have a lot of people leave, but we did have a lot of people come back. There was some factors in the market that just felt right and generationally, they hadn’t been the move that we’d seen, like back in ’85 to ’88. And so for me, it was what’s going to happen now. So from here, Terry Ryder, let’s just drill down a little bit on there.
Terry Ryder (02:34):
Let’s do it.
Ian Ugarte (02:35):
Yeah. You said that this growth has been fueled by multiple factors. What do you reckon is your top three factors that you are seeing fueled or is going to fuel the growth continuing moving forward?
Terry Ryder (02:48):
Well, I’ve actually got a list of them with which has got 16 dot points on it. In fact the list is growing. There’s actually [crosstalk 00:02:56]. Yeah. And I think that’s really important for people to understand because every day in the media, for some reason, media thinks that the place to go for analysis of real estate markets is a gaggle of chattering economists who don’t really collectively understand too much about residential property. And they’re one line answer to why we’re having a property boom is record low interest rates, which is sort of kindergarten analysis and just plain wrong. So yeah, I’ve got 16 dot points. There’s so many different factors feeding into this, but if you asked me to nominate my top three, well the first one will be what I think is the biggest single force impacting residential property in the 21st century, which is the one I call the exodus or affordable lifestyle, which means that Australians increasingly are leaving the two biggest cities and hitting for the smaller cities or the regional areas because I’ve learnt over the last few years that they can effectively work remotely.
Terry Ryder (03:53):
That’s one of the main drivers and having made that realization, they’ve asked themselves the question, do we need to be in the big expense of congested city? And if the answer is no, many, many Australian individuals and families are moving to places like where Ian live and I live in the sunshine coast inter land, but many, many parts of Australia are benefiting from this trend and we’re seeing massive uplift, firstly, in sales activity, in these places. And secondly, it’s translating into big, big price growth, the like of which I haven’t seen in the 35 years I’ve been researching and writing about residential property. So that’ll be the first one.
Adrian Franklin (04:31):
So can we go further into the comment you made and we’ll bring Ian in on this as well, I like the fact that you talk about how we’re getting it wrong, how, I wrote down, did you say chattering economists? I don’t think I’ve heard of that, but what does that actually mean?
Terry Ryder (04:43):
Well look, economists love to be in front of, some of them, of notable media tasks. They just liked to be front of the cameras as regularly as possible. And so they’re not afraid to make comment on things that are outside their area of specialty and which includes residential property. For me getting an economist to analyze what’s going on in the housing market is kind of like asking a hockey expert to provide expert commentary for the AFL grand final. I mean, you just wouldn’t do it. So why media feels that economists are the go-to people for housing analysis, I don’t know. And as Ian has pointed out, now 12 or 15 months ago all those people that I call the chattering economists were forecasting, massive decline in property prices. And the only people who were saying, no, we’re actually going to have the opposite, actually going to have a property boom were Ian, myself, and as he mentioned, Solomon Presley of Propertyology. And the difference that we bring to the table is that we’re actual specialists. Every day we’re at the coalface of the housing market researching and gathering information, which isn’t the case with those chattering economists, unfortunately.
Adrian Franklin (05:52):
So I’ve got to get Mr. Ugarte’s thoughts on this chattering economist, but how in all seriousness, how do get it wrong in maybe the mainstream media and what are we looking at that we’re getting wrong here?
Ian Ugarte (06:01):
I think that the property, that the tarts is where we’re looking at, like there they’re out there to get their face in there to get the next big job, to get something else. So fingers crossed, hopefully that they can make a prediction, not based on any data or figures or outcomes. And that will then mean that they’ll get more notoriety if they get it right. But you never hear from them when they get it wrong. You only hear their rightness, which is, what do they say, a clock is right twice a day. Twice a day, if you get it wrong and you know, the clock is going to hit the same point. So I think it’s just more, it’s chatter is the perfect word for it.
Adrian Franklin (06:37):
Interesting. All right Terry Ryder back to you. Tell us about how much you think the government incentives, stimulus measures and also tax cuts have played into this growth or not.
Terry Ryder (06:48):
No, I think it’s been massive and certainly a number of those things, factors are on my dot point list for why we’re having this extraordinary property boom and why I think that property boom has longevity. Firstly, because this tax cuts in the system, there are direct measures to help first-time buyers and others in the market, both federal and state measures. In fact, I’d say there’s never been a time in the history of this nation where there’s been a better time to be a first-time buyer, contrary to what you hear in media a lot as well, because there’s never been such a high level of assistance to first-time buyers, as we’re currently seeing. And at the same time, interest rates have never been lower. So it’s a great combination effect for first-time buyers, but also others there’s was other stimulus measures out there, including what we’re currently seeing announced to help businesses and workers that have been affected by the lockdown in Sydney.
Terry Ryder (07:44):
And we’ve seen that right the way through we’ve seen job seeker and job keeper, those kinds of packages. My business has benefited from that now 12 months ago, when things are looking a bit dire and that’s helped businesses, stay afloat, people maintain their incomes. And also we’ve had the fact that where people in lockdown or with borders closed, have had time to reassess their priorities and might make new decisions, but also save a lot of money because for example, if the borders were open, I’d be spending a lot of money on overseas travel like I normally do, but I can’t. So I’m saving a lot. I’m using that as seed capital for property investment, and a lot of people have been doing that. But probably the biggest single factor under the general heading of government stimulus is the one that’s just getting underway.
Terry Ryder (08:35):
We’re going to be feeling it for years and it’s going to create longevity in this boom. And that is the big infrastructure spend. It’s really clear that state and federal governments intend for us to have an infrastructure led economic recovery. And we’re talking about multi-billion dollar projects and dozens and dozens of them across the country, that the projects that have horizons of multiple years, for example, the inland rail link, which has already under construction, that’s a $13 billion project, hugely influential for the towns along the route, but we’ve got so much more in the mix. And that’s just going to, because that really does pump up economies, it creates jobs and from that comes to mind for real estate. So I think that’s one of the big factors.
Adrian Franklin (09:18):
So Ian I’ll bring you in, how can we take advantage of this, people out there, the boom, given that many people might feel like they missed the boat? How can we take advantage of it?
Ian Ugarte (09:26):
First thing they going to do is get onto hotspotting.com because Terry Ryder does some amazing reports and has done well for a lot of people. And understand that there’s areas in growths that are moving at different paces differently and we’ve talked about, even though it’s called hotspotting, we remember the woman spotting.com. I do check whether it’s available, it’s not available, but it’s certainly a hotspot, and is about making sure that you’re in the right place at the right time.
Adrian Franklin (09:52):
All right. Nice. So finally, Terry Ryder, do you share Ian’s view that this growth will continue? Or do you see a bit of a dip on the horizon?
Terry Ryder (10:01):
No, I think I agree with Ian. I think it’s got considerable longevity. Typically we don’t have these national, truly national, property booms very often in Australia, maybe once every 20 years. And we know from history, they tend to run for three or more years. But beyond that, the reason why I am confident that it’s going to roll on into next year and beyond is because there are so many factors feeding into it. It’s not like the chattering economists say, it’s not about the low level of interest rates at all. And therefore if interest rates do at some point in the next few years rise, it’s not going to actually slow down the runaway train. We’ve got all these other factors and some of them haven’t really come into play yet. Investors are only just coming into the market. The growth we’ve had to date has largely been driven by home buyers and first home buyers without a lot of competition from investors, but that’s changing there.
Terry Ryder (10:51):
We’re also seeing evidence that foreign investors are targeting Australia because it’s seen as a safe haven. The infrastructure spend is going to roll out for many years and it’s going to continue to have an impact. And then when our borders do finally eventually open, we hope we’re going to see an influx of migrants because again, Australia is seen as a safe haven and that’s going to have another wave of demand for real estate. So I think this is going to go on, maybe not at the same current level of price growth, but we are going to see prices growing strongly well into next year and beyond I believe.
Adrian Franklin (11:23):
Fascinating stuff. All right. Let’s put up some key points, and Ian I’ll let you finish with just the final tips for how we can get involved. This is all important.
Ian Ugarte (11:31):
Sorry. Let’s make sure you invest in smaller regional cities. That’s where the movement’s happening the most look for major infrastructure projects that Terry Ryder talked about. Explore low cost finance options. Sometimes you can make a phone call to the bank and they will drop your interest rate over the phone if they say, make sure you do that. And when they do that, make sure that you take those savings and put it in the bank because at some point in time, interest rates are going to rise, and it’s nice to have a little buffer or a war chest sitting there for you.
Adrian Franklin (11:56):
And finally, Terry Ryder, that all works for you. Is there one point there that you’d like to really focus on or are they all as important as each other?
Terry Ryder (12:04):
Look, they’re all important. But what I would like to say to people out there, investors are starting to pile in to the market now. And what I would say to people is please be careful, please select your location wisely. What we’re seeing increasingly is people doing some really silly things because they think they can throw a dart at their map of Australia and buy where it lands, and anywhere is going to give them growth. Maybe that’s true in the short term, but in the long term they want to be in those places that have intrinsic growth drivers, identifiable drivers for future growth. And the other point is pay local prices. People out of Sydney think that they’re buying cheap because the pay is cheap compared to Sydney, but it’s quite often they’re paying silly prices and that will come back to bite them, if they’re not sensible.
Adrian Franklin (12:48):
Very wise words indeed. I know why Mr. Ugarte brought you on the show, that was really enjoyable and very insightful Terry Ryder. We’ll hopefully talk to you again soon, all the best and until next time.
Terry Ryder (12:58):
Okay. My pleasure. Thanks a lot.
Adrian Franklin (13:00):
Great stuff. Great stuff from you as well. He’s a wise man. Isn’t he?
Ian Ugarte (13:04):
He’s been around for a long time. I’ve done a podcast with him, a really interesting in podcast on how he got started in property.
Adrian Franklin (13:11):
You got to let us know about that podcast. Maybe we’ll get it up on the website. All right. Great stuff from you. We’ll talk really soon. Okay. Awesome. Ticker Home presented by our great partners at Small Is The New Big, they’re on a mission to create one million affordable homes in the next 10 years and help Aussies struggling with housing stress. Learn more at smallisthenewbig.com.au.
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