Adrian (00:09): Hello, and welcome to Ticker Home where each week we dive into the latest trends on the property market and answer the questions you need to know. It’s great as always to bring in, I reckon he’s almost my number one here at Ticker News, Ian Ugarte, co-founder of Small is the New Big. Ian, do you like being my number one here? Does that feel good to you?

Ian Ugarte (00:27): Actually, that’s probably one of the first times I’ve ever got a first prize, so it’s awesome to be your number one.

Adrian (00:32): Hey, don’t cry. Don’t you cry.

Ian Ugarte (00:35): No, I won’t. I promise.

Adrian (00:36): Okay. Hey, what are you excited to talk about today in particular?

Ian Ugarte (00:42): Yeah, we’ve been talking last couple of weeks about renovation, and I just wanted to get the details of the types of renovations you can do, the purchasing, what money you should be spending and then contracting and the right contracts. Hopefully, you’d be making a profit out of it.

Then I want to make sure that you can see the house that I grew up in because I did say that I’d show you last week.

Adrian (01:03): Very good. Producers, get that ready to go. Can’t wait for it. Let’s get into this Ticker Home, of course, presented by our partners at Small is the New Big, who are on a mission to create 1 million affordable homes in the next 10 years and help Aussies struggling with housing stress, as we do learn more at sitnbdev.wpengine.com.

Okay, let’s get into what’s trending, Ian. What’s off the start? What have you got? We’ve got three points to hit. What’s number one?

Ian Ugarte (01:28): Yeah, Master Builders South Australia, an article by Elizabeth Henson in The Advertiser, they’ve asked the federal government to extend the HomeBuilder Grant start date by an extra six months to take it from six months to 12 months. Essentially, the rules are that if they’re going to use the HomeBuilder Grant, the purchaser, they have six months from the date of the contract being signed for the builder to turn soil, basically start the excavation and the slab.

Well, we’ve got huge holdups and delays around the world on materials. There’s a shortage on trusses and frames that are throwing builders three to four months out. 73% of the businesses in South Australia that are building businesses are on delays right now, and they’re asking to ship it out to 12 months.

Now, look, I think if I look at this and I think if I was a man, that’s probably how I’d handle it. But if females ran the building construction trades, they’d simply say, “Well, the rules are that I need to turn an excavator and I need to turn some soil and build a sandcastle before we get the grant okay. So why don’t you just say to your clients, ‘Let’s shift the contract date out so that we’ve got along the build contract, and let’s get the excavators onsite so they can pay it.'”

I sometimes look at this and I wonder, “Are they being smart about this, and they could probably do it in a better way?”

Adrian (02:43): Yeah. Well said.

Let’s move on to the next point. Developers rush to beat the clock on affordable housing rule changes. What’s this about?

Ian Ugarte (02:52): As you know, Adrian, this is my specialty area. We’re talking about boarding houses in particular, in new South Wales. It’s three state planning policies that are in relation to housing, and they’re pulling it together into one.

This is generally because of the community backlash, which means councils will then back the community about the developers out there just getting a little bit… Well, they’re taking the mickey a little bit. They’re building these massive boarding houses of 100 and 200 and 300 rooms using the current new generation boarding house policy. Of course, that means the council will fight it. There’s not enough housing being put out. It’s a vicious circle because not enough housing means an increase to housing, which meant affordability gets worse.

So I’m actually on the coalface on this one. We’re currently working with the New South Wales State Government, and we should see some changes in the next three to six months of policy that will be a great outcome for those people that are needing to rent houses at an affordable rate.

Adrian (03:48):

Yeah, nice. Just finally, our building watchdog finds a patio builder. What’s going on here?

Ian Ugarte (03:54): Yeah. Queensland Building Construction Commission has just fined a Brisbane building company $13,000 after they were warned to not continue doing the trading because they weren’t licensed to do the work that they were doing. Because you don’t listen, you get fined.

They also fined a termite management business that did $40,000 worth of work that was not licensed. It was faulty, and it was defective. So the Queensland Building Construction Commission Commissioner Brett Bassett basically says those people out there that have a license have to use that license correctly, and you as the consumer should be protected to make sure that you check on those as well. We’ll talk about that today as well.

Adrian (04:38): Let’s get stuck into that, our main conversation for today.

Last week we discussed renovating for reality, rather than reality TV, which I can’t remember if you like it or not. I don’t even have a TV, so I don’t like it, but that’s not the point. You mentioned a cosmetic renovation being like putting makeup on a property, so following that episode, we’ve got some questions about the different types of renovations.

Can you go into a bit more detail about the different types, including the ins and outs on how much people should be spending? This is the question, and the types of returns they should be aiming for.

Ian Ugarte (05:09): Yeah. Again, I do not like reality TV because it’s not real. It’s about tidying the place up for cosmetic renovation, like you’re going out and you’re just making it look nice and giving it a fresh, modern look, door handles, mulching gardens, paint the gutter.

Let’s take an example. We take a property, we purchase it for $500,000. There’s actually costs coming in, which is about 9%. That’s the building and pest inspection stamp duty, some legal, paying the selling agent on the way out.

I think you should spend no more than 9% of the purchase price towards a cosmetic renovation, which means you start to look at it and say, “What’s my entire amount of spend on this renovation?” That means that you’ll end up spending about $590,000. Now I’m all for people making a profit. You should sell it for 135% of the original price, which means that you should make 17% of the purchase price as a profit, so that profit will come in at about $85,000 for the work that you’re doing. Now that doesn’t include interest and costs, but that’s a good way to go and have a look at how you can make money out of property, especially cosmetic.

Now I’ll show you a couple of examples of ours. Here’s one of our properties here that we simply just did a paint job over the top of it. We then staged the furniture, made it look nice. We changed some door handles in the kitchen, and we just gave it a fresh lift and a fresh feel. Sometimes it doesn’t take much at all. We’re talking a small amount of furnishing and a better outcome.

Here we’ve got a dated 1980s home, older curtains, not looking that great. What we then did was we just gave it a freshen-up. We got some lighter colors in there, some lighter curtains, and we just gave it something that people could see, and they could appeal to the major part of the marketplace.

Adrian (06:58): Okay. You’ve talked about a code-assessable renovation. Can you elaborate a little bit more on this type of renovation as well?

Ian Ugarte (07:05): Yeah. When we talk about code assessment, it’s about keeping the roof light, same purchase price, $500,000. Then we go off, and we’ve got that purchase costs are going to be about 10% now. So we now got $50,000 of legals, building and pests, and the other costs that are associated to putting these type of properties together when we do code assessment. We’ve got to certify that we need to pay, then spend 16% of the purchase price.

In this one here, we would spend $80,000. Previously it was 45, now we’re spending more money. Total cost goes up now, so we’ve got $630,000 worth of costs. So you should be selling this for about 150% more than what the original buy price was, so 500 times 150 is $750,000. Now, again, we want to make sure we make a profit. In this one here we’ll make a 24% profit of about $120,000.

Adrian (07:57): You said the third type of renovation was a major or structural-

Ian Ugarte (08:00): Oh, sorry. I’ll just come back to you, Adrian.

Adrian (08:00): Yeah, go ahead.

Ian Ugarte (08:03): This is one of these properties that we did.

Adrian (08:03): Go ahead.

Ian Ugarte (08:05): This is a beautiful… I hate A-frame houses, then I thought, why not? Let’s get stuck into one of these. You could see the difference here, where we’ve got the brick work and open plan and it’s not that nice. We simply put some kitchen in. Look at that difference in there.

Adrian (08:22): Wow.

Ian Ugarte (08:22): Just by putting some paint, changing the curtains, putting some furniture in and a nice feature above the bed then, again, just gives it so much difference.

This one here, we added a couple bathrooms, too, but we didn’t change the externals of the building at all. So we just gave the outside a paint and look at the difference in the lounge room alone. Would you really want to walk into that one there? So that’s a really great outcome for that property.

Adrian (08:45): Yeah. The front of those two is incredible, so you’ve done an awesome job there. Nicely done.

As you said, the third type of renovation was a major or structural renovation. Can you explain more about this, what’s involved when it comes to carrying out one of these?

Ian Ugarte (09:00):

Yeah. You can’t live through a structural renovation. It’s like pulling a Rubik’s cube apart, and then putting it back together again.

Again, in this one, purchase price of 500,000, we’ve got an increased cost of the purchase costs in and out. About 31% is what you need to spend on that renovation so that you’ll have to spend $155,000 on renovations cost there. That’s a big reno when you start talking about renovating a property. That’s a total cost of $710,000.

Now, again, we have to make a profit so your selling price is important. You make your money when you buy, not when you sell so you know what the sell price has to be. At $900,000, 180% of the original purchase price means that you’ll make a profit of 38%. In this one that’s $190,000, but this is hard work and hard yakka, and you certainly don’t want to be stuck in that place.

Here’s actually the last house we lived in Sydney before we moved to Queensland. You can see the difference between the two there. You’ve got this older dated house on the left. All we needed to do with just tart it up, make it look nice. We threw some LED lights in the backyard.

Adrian (10:05): Wow.

Ian Ugarte (10:05): You can see the difference there. We extended out. We almost doubled the footprint of this building. We made sure that we had a really nice kitchen because that wallpaper was probably something I grew up with, and it’s just about making the place feel modern and not dated.

When you start doing this, again, you’re appealing to the major marketplace. If I start putting featured colored walls in and bits and pieces into those, it’s not going to cut it. People aren’t going to like it, and it’s not going to sell quickly and easily.

Adrian (10:38): Amazing. So that was your home previously? That one we just showed?

Ian Ugarte (10:42): No. That was our home, yeah. The home we lived in-

Adrian (10:44): Way back.

Ian Ugarte (10:44): … before we moved to Queensland, yeah. Oh, we’re talking probably 10 years ago now. Yeah.

Adrian (10:49): Nicely done. We’ll get to another one in just a moment.

But, finally, what about contracts? I imagine it’s important for homeowners to have a clear contract in place with the tradie doing the work. What are some of the things to look out for when it comes to negotiating contracts?

Ian Ugarte (11:03): Yeah. Nobody likes contracts, nobody likes the fine print. You should learn to like the fine print because if you don’t, it’ll come back to bite you in the bum. So don’t work off assumptions and presumptions. Any verbal contract will come back and hurt you financially and also create huge anxiety, so I’ve got three basic tips.

Firstly, make sure that you check the contractor’s licensed for the actual work that they’re going to do and that they have insurance. Secondly, most people don’t know that for a project that goes over as little as $3,000, so if you pay a tradie in some states above $3,000, you actually have to put a contract in place. It has to be written, and you have to read the fine print. Lastly, for any work above as little as $12,000 in some states, you need home warranty insurance. Now that home warranty insurance gets paid for by the contractor, and you need to get a copy of the receipt. That means that you’re protected for somewhere between three to seven years for any faulty work or anything that goes wrong for you.

So you’re going to make sure that you understand every state’s policy. Every state has a great website through Fair Trading or through the licensing authority, and it’s simple and easy to use. You really need to be educated when you start employing tradespeople to start doing work on your property.

Adrian (12:20): Now last week you said you should always renovate for the market, not for yourself, and you describe your parents’ renovation as an example of this mistake. You promised pictures, Ian, as well. Do you have some pictures for us? Yes you do.

Ian Ugarte (12:33): 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 building for 70%.

Adrian (12:33): Whoa.

Ian Ugarte (12:44): I mean, look at those floor tiles. The best room in the house really was the bathroom. You look at all those arches, the copper range hood, the brick work-

Adrian (12:44):

Oh, boy.

Ian Ugarte (12:56): … 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.

Adrian (13:07):

You did say that.

Ian Ugarte (13:08): Then look inside the shower. Oh yeah, it’s amazing.

But I’ve got a funny story about this. My parents put it on the marketplace. I think they put it on for about, it was like years and years ago in Sydney, $510,000. They had to drop price, drop price. My mom says, “I don’t know why they not sell.” Then they ended up selling it for 436,000 so they dropped a good 20% in price to get an outcome.

There was this big fridge in there. My brother and I had to go in and help move the fridge when the rest of the house was empty. The new purchaser was coming in the door as we were walking out, and she thought we were the removalist. I said to her, “Are you happy with the house?” She said, “Oh, I love the house. It’s so beautiful. I cannot believe I bought it so cheap.” So there is a buyer for everything. You just got to find them.

Adrian (13:58): Very, very good. I love the fact that you dropped in your mother’s accent. That can be every single week.

We’ve got about 45 seconds to go. Let’s just tick through the need-to-knows for renovation just nice and quickly.

Ian Ugarte (14:09): Sure. No worries. Top of reno, you need to understand what level are you going to go to, cosmetic-assessable or structural. Make sure you understand your target market and the cost of getting in and out. Every cent and every dollar should be put in writing about variation. Make sure you need to get approval for all of these and get the contracts right.

As always, Adrian, sitnbdev.wpengine.com/tickerhome, and we’ve got a sheet of quick tips and information for you right there. Thank you again for having me this week.

Adrian (14:39): Of course, mate, always a pleasure. We’ll chat soon, okay?

Ian Ugarte (14:43): Cheers. See you.

Adrian (14:43): Ticker Home is presented by our partners at Small is the New Big, who are on a mission to create 1 million affordable homes in the next 10 years and help Aussies struggling with the stress. Learn more at sitnbdev.wpengine.com. Catch us soon.

Adrian (00:06): Hello. Welcome back to the 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 co-host in the house, Ian Ugarte, co-founder of Small Is The New Big. Hey, mate, how are you today?

Ian Ugarte (00:21): Hi, Adrian. How are you?

Adrian (00:22): Going very well. What are you looking forward to talking about today exactly?

Ian Ugarte (00:26): Today, we’re going to talk about what is not reality TV, we’re talking about real stuff today, so about not being emotional when you’re looking at spending money and I can tell you that renovation is not a fun game. I’ve had plenty of renovation and I’ll start with saying, don’t do feature walls, I don’t like feature walls.

Adrian (00:45): All right. Very good. Straight into it. I like it. I like ticker HOME presented by our partners at Small Is The New Big, who are on a mission to create 1 million affordable homes in the next 10 years and help Ozzie struggling with housing stress, but no feature walls. Learn more at sitnbdev.wpengine.com. Let’s go. What’s trending? First of all, our first topic for you, Ian, what do you got?

Ian Ugarte (01:07): Well, we’ve got three articles today about renovation and this one, first one here is by Melissa Hackney and domain. This is a classic case of overcapitalizing probably extreme case. Not Australia, it’s in Oregon, in the U.S. the Hollywood video entrepreneur, whatever that means, bought a property for $1.6 million, spent $15 million on this thing, got in trouble with the council for doing the wrong thing and ended up selling it for $5 million. Good loss. Right. And he suggested that he may have gone overboard building the house the size of the White House. No crap. Right? So the next buyer bought it, has now turned it into a Tuscan Villa, but again, unfinished, they did get the approvals for it. And it’s back on the market. No one really knows how much was spent on it. I hope [inaudible 00:01:55] Ticker TV today. Australian experts like myself have said, adding things to properties may not be a good thing. Adding a pool in Victoria might be nice, but it won’t increase the price of the property. Always appeal to the masses, is basically what this article says.

Adrian (02:09):Interesting. So, we’ll get more into the renovation side of things, which is going to be a fascinating conversation. So the next one, renovate or sell up, what have you got here for us?

Ian Ugarte (02:20): So this is the thing, do you renovate before you sell? Michael Smart, the director of Ray White Cannington in his article by Eric Lopez of the Reflections on the state of Australia has said that, he himself being in real estate overcapitalized on his property, but he was happy to do so. They spent $440,000 for property worth $350,000 but they knew they were going to be there for 20 years. So it really didn’t matter to them. So they always say in the property game that time fixes everything. So, the difference between a good deal and a bad deal is about five years. So if you wait, the market will meet you eventually, you just don’t want to have to be in a bad spot. So, always make your property saleable. And I’m not sure if I’ve mentioned this, but I don’t really like feature walls Adrian.

Adrian (03:00): Got you, got you loud and clear. I’m never going to do it in my life. I don’t know what they are, to be honest, so whatever. And the last one in terms of what’s trending, what’s the riskiest renovation and how homeowners can avoid the headache?

Ian Ugarte (03:13): Yeah. This is a Queensland man who engaged a painter for $23,000 to paint the house, now Edwina Seselja and Kate O’Toole from ABC News have basically put this article together. And this guy just wants everyone to be aware because the paint started peeling, he made the complaint to the painter, the painter sort of fluffed around. Eventually he went to the Queensland Building Construction Commission, and they said,” we can’t help you because you should have seen us within the first seven months of the problem starting. Now, you’re going to have to go to QCAT.” So QBCC, the top five renovation complaints for the year were; painting 1,641 complaints, joinery 720 complaints, wall and ceiling finishes 451, tiling 417 and roof cladding at number five at 317 complaints.

When you’re choosing tradies, always look for red flags, make sure you do a license check on them, make sure you get everything in writing, any contract over a certain value will need a written contract. Make sure that they don’t ask for too much deposit that usually 20% or a little bit over 20%, if you’ve got a problem, always make sure that a non-structural defect is reported straight away as a complaint, a structural defect within three months. Really, it’s all just about protecting yourself and making sure you’re well aware of your rights as a consumer when you in place.

Adrian (04:30): Yeah, that would be an absolute nightmare spending that much money on such a big job and then what happens next? Goodness, me. All right. Let’s get into our main conversation today. Now we’ve talked in recent weeks, of course, about manufacturing growth, which means doing some sort of modification or renovation to the property to increase its value, simple stuff. But I can imagine there are some people that go all out and maybe over the top in terms of overcapitalizing. So what is that? What does it mean exactly? And how can people avoid the trap?

Ian Ugarte (04:58): I think where it starts is these reality TV shows right now, are showing incredible features in properties like curbed walls and sinking baths and floating beds. And everyone thinks, well, I’ve got to do that to be able to appeal to the market. That would be overcapitalizing. So overcapitalizing in the simplest form is spending more on a property than what it ends up being worth. And it’s not just renovation where people do that. Some people go and buy these blocks of land that have got huge potential to be subdivided and they go and put a house smack bang in the middle of it, move the house to the side, use the house for now, if you want to, but in the future, you’ve got the opportunity to subdivide.

And so the risk is that if you follow these trends, these ideas that are shoved in front of your face, then you may not be appealing to the major population. And whilst many people like the spa or the curved walls, they’re not willing to pay the extra money that cost you to put it in. So don’t do it. And how do you avoid the issues, you research the market, and by understanding the comparables in the market place that you’ve got your property, that will be a better outcome for you.

Adrian (06:03): So you recommend the people who are looking to do some sort of renovation on their property to check out the sold price figures for their area rather than for sale asking amounts. But why is the sold section so much more important in helping people not to overcapitalize?

Ian Ugarte (06:19):

Yeah. So when you go looking for comparable sales and you go to the bisection of real estate.com or domain, what you’re looking at is what people are dreaming to sell the house full. When you got to the sold section, that’s the realistic sold price. You have real data that you can work off. So you want to look for properties that are unrenovated just like yours in an area in the sold section that will give you the price of your property. Then what you want to do is go off and find the renovated properties so that you can see the difference from where yours is and where you’re all going to take your property to.

I’ll give you an example. If you go off and you’ve got a three bedroom, one bathroom property, and you find that renovated properties similar to yours are selling for $30,000 more. It’s probably not worth doing the renovation because for $30,000, you’re not going to be able to do much, but you might find that in the same area, a four bedroom, two bathroom property is selling for $150,000 more. That means that you can go in, spend a hundred thousand dollars, add a bedroom and a bathroom. And now you’re in a place where you’ve actually got some real numbers working in your favor rather than the emotion of just wanting to do a renovation.

Adrian (07:28):

So it sounds like the three keywords which were spoken about many times before, but when looking at doing some sort of property renovation is in terms of increasing its value research, research and then also the word researcher. You’re really big on researching the numbers with feasibility calculations. But the question is, how does the average person do a decent feasibility on their proposed renovations?

Ian Ugarte (07:51): Look, research has never been more important than right now. So I would say in the home builders grant stimulate the construction industry, Chinese are busier than ever been before, which means their prices are going up. Secondly, we’ve got some issues of shortage of materials across the country. China, COVID stopped importing a lot of importing and we’ve also got a shortage of timber. So timber and hardware is really hard to come by. So prices are going up there as well. So now more than ever, you must do a feasibility study to make sure that it works. And the way that you do this is you have to start with a scope of works. That’s just a fancy term that says, what are the jobs that I have to do? And what are the materials we need for this job?

And then you go off and you get three trade prices from every trait. Now I’ll tell you a little secret in the industry. Adrian, if you want three quotes from one trade, you’re going to need to talk to 15 tradies to get three quotes. So that means you’re going to talk to a lot of tradies. Now that you’ve got a cost of the tribes, now that you’ve got a cost of all the materials. Now you’ve got real value, you’ve got your comparables and now you can actually start to work out what the fixed renovation cost of the property that you’re going to renovate is and truly and really understand your profit.

Adrian (09:05): So what sort of percentage return should people be aiming for when they are renovating for manual or manufactured growth?

Ian Ugarte (09:11):

I think that people should aim at a minimum of 15%. Now, the thing when you’re aiming at a minimum of 15% is that people think, well, I’ll buy a property for $500,000. Now, if you bought a property for $500,000 today and you sold it tomorrow for $500,000 you would lose money because in the buy and in the sale, you’ve got some extra costs. You’ve got to pay for stamp duty. You’ve got to pay for legals building and pest inspections. And if you’re going to sell this property, you’re also going to have to pay a selling agent. So realistically that $500,000 property has cost you $550,000.

Now, if you’re going to do a renovation for a cosmetic renovation which is literally putting makeup on a property, you will probably spend about 10%. So that’s $50,000 of the buyer price. So now our true cost is $600,000. So for me to be able to make a profit of 15% on that $600,000, I’m going to have to sell it for a minimum of $690,000. And then that why I know I’ve actually made a profit, I’ve paid for all my costs and I’ve also paid for the purchase of the property. And it makes simple sense to look at it in that way.

Adrian (10:24): So finally when renovating for manual growth, your advice is for people to ignore their own personal preferences. So why is it important that they don’t simply renovate the property to cater for their own tastes or wants?

Ian Ugarte (10:38):

People make the mistake of following their own taste. And I’ve got a classic example for you. I Adrian, my parents’ first house in Australia, it had white speckle window, brown bowels on all the windows, it had different floor tiles all the way through the house, arches everywhere, a green bathroom, we’ve got brown toilet, Adrian. There wasn’t a skim Octa. We stayed inside and I couldn’t understand why their house wouldn’t sell. Right. And that’s because that house would sell in Spain every day of the week. But in Australia it was actually a very small limited amount of people that would buy it. So always renovate to the majority of the marketplace.

And if we look at a bell curve, it’s basically the top of the middle market is where you want to renovate to because that’s where the majority of buyers are looking. That’s just above the median house price for the whole entire suburb because the majority of buyers that are looking at, some are looking at it on the average price. So make sure you go to the top of the middle of the market appeal to 70% of the buyers and that means you’ll get a quick effective sale. And that will mean that you’ll be a legend amongst your family and friends and your neighbors because you got in and got out real quick.

Adrian (11:45): I would have loved to abate 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 (11:55): There is actually, I might bring it up next week because we want to do a little bit of renovation next week. My mum in her fantastic accent said,” I don’t know why people know by my couch is so beautiful, but not many people thought it was beautiful.” Adrian.

Adrian (12:11): I’m definitely going to ask you to do that accent again, every single show but that’s okay. To finish, let’s just put up the graphic on screen and we’ll tick through just these major renovating for reality points. Take us through it.

Ian Ugarte (12:23): Research the sole prices in the area and not the full sale prices. Make sure investigate an area and ask all the locals. It’s always a lot of information that comes out of them. Crunching numbers make sure you do a feasibility plan and budget and don’t break that budget, be realistic on how much growth is possible in an area. And don’t even rely on growth. You should be working on today’s figures, renovate for the market. Make sure you hit the 70% and done to your own taste. And I’ll add a six one done to feature walls.

Adrian (12:50): So what, and just to finish, what’s the biggest mistake people make, is it on that list there? What’s the one thing that you just look at and go, it happens all the time too often.

Ian Ugarte (13:01): I’m not crunching the numbers. Thinking that I renovation is going to cost about $30,000 when realistically it costs $150,000. And the reason I think that is they watch reality TV and reality TV doesn’t give you some real numbers. The experience will give you real numbers that’s for certain

Adrian (13:16): Great, great stuff. I don’t watch any reality TV. So this is my reality TV. You and me Ian. This is it for me.

Ian Ugarte (13:24): I’m as real as it can be. Adrian. I am like my mother said, “she’s made it realize well okay.”

Adrian (13:31): Oh my goodness. I was not asleep before, but I’m certainly awake after we chat with you every single episode of ticker HOME. Great stuff. Enjoy your day, we’ll talk soon. Okay.

Ian Ugarte (13:42): Thank you. So Adrian.

Adrian (13:44): There you go. Couple words to that, but I’ll try, ticker HOME presented by our partners@smallisthenewbig who are on a mission to create one million affordable homes in the next ten years and help Ozzie struggling with housing stress learn more at smallisthenewbig.com.edu that is ticker HOME for another week. I’m not going to try and do the accent. I was thinking of it. I’m not going to. I’ll see you very soon.

Adrian (00:09): Hello, and welcome 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 a pleasure as always to welcome my cohost, Ian Ugarte, co-founder of Small is the New Big. Hello mate, what are you looking forward to chatting about today exactly?

Ian Ugarte (00:25): Yeah, today Adrian, we’re going to talk about the mortgage minefield and do you know what a TLA and an FLA is?

Adrian (00:33): I have no idea what that means. Please tell me more.

Ian Ugarte (00:36): That’s a three-letter acronym and a four-letter acronym. And this whole mortgage industry is full of those acronyms that we want to get rid of the jargon. But firstly, let me start with mortgage is actually a Latin word where mort means death and gage means pledge. So it’s a pledge till death and hopefully at the end of today, you won’t feel like that.

Adrian (00:58): Is that actually true?

Ian Ugarte (01:00): Absolutely.

Adrian (01:02): My goodness me, that’s amazing. There we go, straight off the top I’ve learnt something bizarre and new. Anyway, we’ll get back into that in just a moment. Ticker Home of course, presented by our partners at Small is the New Big 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 sitnbdev.wpengine.com. All right my man, come back in, you can tell us more about mortgage and dying and all the things if you want, or not. But what is trending this week on Ticker Home exactly?

Ian Ugarte (01:31): Yeah, Shane Wright in the Sydney Morning Herald has an article in here where he’s quoting the RBA governor Philip Lowe. Phillip Lowe suggesting that there’s not going to be any change to interest rates in the next three years until 2024, until they see some wage growth happening. Interest rates are at 0.1% so there’s a lot of economists that are predicting that the interest rates will go up earlier than that because of the rebound of the economy. Wage growth is at 1.4% so Dr. Lowe wants to see it at 3% and unemployment below 4% before interest rates get moved. The property market has definitely been a major mover and the proposed lending changes that the government announced may not come through because of the strength of that. The OECD has actually had a prediction that Australia will grow by 4.5% this year. And the wondering here is, was it the fiscal policy that did that? Only time will tell on that one.

Adrian (02:25): Let’s look at Westpac and St. George who I believe have cut to the lowest ever home loan rates. What’s going on here?

Ian Ugarte (02:34): Harrison Astbury from savings.com.au talking about Westpac at its lowest ever home loan rate at a 1.79% principal and interest. I mean years gone by, 1.79% of the savings rate you would be upset. So this is a really good outcome. They dropped it by 20 basis points and so did their subsidiaries now. Their subsidiaries are St. George, Bank of Melbourne and the Bank of South Australia. For investors, not far off the 2% at 2.19%, but again, understanding of the lending jargon and how it works is what we’ll be working on today and will make more sense as we go through.

Adrian (03:11): Let’s talk about just to wrap what’s trending, mortgage trouble. A lot of people I think last year were wondering after the pandemic in coming years whether people would have a bit of trouble with their mortgage. It seems like some are, tell us more about this.

Ian Ugarte (03:26): Yeah, look, it’s not often that I get a little bit upset by the media. I’m not a fan of this story. It’s in Yahoo Finance where the headline says 1.5 million households in mortgage trouble, and that’s a scary headlight. And it goes on to say that 4 in 10 households are actually under mortgage stress and when jobseeker and jobkeeper gets wound back it’s going to get worse. There’s someone in [inaudible 00:03:51] that’s saying that the figures of mortgage stress has increased from 32% to 41% and that 899,000 Australians are looking at mortgage stress.

What I want to say here is that it’s very much a scaremongering article and I don’t agree with a lot of the figures in there, especially when that 899,000 figure was derived from a survey of 446 people. That’s not a good quantitative survey. I think what we’ve got to look at here is that housing stress means paying more than 30% of your income towards mortgage repayments, which doesn’t mean that you’re in arrears, it just means that you’re suffering and you’re not saving as much as you should be every week. Again, it really upsets me when articles are put out into the media to create the scare mongering, when people need to be confident about what they’re doing in investing and understanding what mortgages mean and how much you should be budgeting for every week.

Adrian (04:46): No, I think that’s a great call and I appreciate you calling that out. Yeah, that’s what they do and you’ve looked at the figures and the numbers and how many people are surveyed and you’re calling it out, which is a very good thing to do. Let’s get into our main conversation today. So Ian, when someone is looking to buy a property, either to live in or as an investment, the idea of going cap in hand to a bank can be intimidating of course. You’ve done this many times in your investing career so what’s one of the first things buyers need to understand before they ask the bank for cash?

Ian Ugarte (05:15): Yeah. 30 years ago Adrian I walked into the bank for the first time to see the bank manager. That’s what you did back then. I felt intimidated, anxious, and I felt like I was pleading and begging for money. Now it doesn’t have to be like that if you understand the process. So it’s important to understand and know how much deposit you have because that’s one of the factors that’ll allow you to be able to borrow, to be able to purchase a property. Now, the deposit will impact known as the loan to value ratio or TLA-1, LVR. Now the loan to value ratio is the amount of deposit the borrower has versus the amount they’re going to borrow. So if you’re buying a property for $500,000 and you’ve got a $100,000 dollar deposit, you’ll be borrowing $400,000. Now that’s 80% LVR because you’ve got a 20% deposit. Now, the lower the LVR, the better off you are because it gives you more flexibility and the banks like you more because it de-risks their area and their risk department says we really like that person.

Adrian (06:18): So what happens if someone doesn’t have the 20% deposit? Are there additional fees that they need to pay in this case to ensure that the bank lends them the money?

Ian Ugarte (06:29): Yeah. TLA-2 is LMI or loan mortgage insurance. Now, if you have less than 20%, the bank wants to lend you 80%, but because you have less than that, they want to protect themselves. So let’s say in that same example you were buying that property for $500,000 and you had $50,000 as a deposit. They would say, well, that’s a 90% LVR. In which case, we want you to pay insurance to protect us as the bank, because the bank is literally saying, you are putting us at risk and if you stop paying, we need something to back us up. So if you have an LVR of greater than 85%, you will pay LMI. The LMI fee is about 1.5% of the loan value. And it’s not an actual fee up front, they put it onto your loan and you’ll pay it off over 25 or 30 years.

Adrian (07:16): Okay. So armed with all of this information, many people then question what type of loan they should ask for either principal or interest, or then interest only. What’s your view on what’s best in terms of how to structure a loan, or is it very much a case by case, property by property decision?

Ian Ugarte (07:33): Yeah, as always, we’re talking in general terms and you need to get specific advice. When you’re purchasing an interest only loan for your investment property, that’s the way I think you should go. The reason I say that is when we’re doing investment properties, we’re looking at manufacturing growth, like we said in the last couple of episodes, and at the end of that you’ll be refinancing or revaluing. And generally every three to five years, you revalue in your building stage of your investment properties. Now if you’re paying down that loan, it doesn’t make any sense to refinance at the end of it anyway.

However, when you’re talking about principal place of residence or your PPR, the home that you live in, then you really should be paying down the principal as much as you possibly can. I’ll explain soon about the difference of good debt and bad debt. Now, earning your home outright is a very fulfilling position to be in. And it also puts you in a really strong position because the banks then start looking at you and saying, very handy saver, has actually paid down their house and I’m willing to give them more money to be able to go off and buy more investment properties.

Adrian (08:35): So are all mortgages pretty much created equal, or are there some features that people should look out for in particular, like I’ve heard of terms like offset accounts, redraw facility, what do these terms mean and are they right for everyone do you think?

Ian Ugarte (08:50): Yeah, look, there’s place and purpose for a lot of these, let’s start with a redraw facility or what someone might call a line of credit. It’s essentially a facility where people that are good savers will start to pay down the debt on that property. They might get to a point where they’re paid off a hundred thousand dollars more, then I can go back to the bank and say, “Hey, that hundred thousand dollars, can I redraw that because I want to go off and buy an investment property?” Now that type of loan is not a good loan for those people that are the now generation. “I want to go and buy a car. I want to go and have a holiday. I want to go and spend money on clothes.” That’s the sort of thing you don’t want to spend money on when you’ve got a redraw facility.

Now the offset account is a slightly different loan. Offset account is like, instead of having a savings account where your income comes into every week, your income comes into your mortgage account. Now the interest rate is calculated on a daily basis. So if you’ve got more money sitting against your mortgage, that means that you’ve got lower interest. That means that from that account, you would just go off and pay your bills. Now, the first reason you do that is because of that calculation every day. The second reason you do that is your savings account may only be earning you 2%, but when you put it against your mortgage, you’re actually saving yourself 4%, which is a better outcome. Now the offset account allows you to pay all those bills, but more effectively what it does is it reduces your term and you can save up to seven years off a full 25 year term on your mortgage if you use that offset account

Adrian (10:23): And let’s talk about interest rates, it’s what people are looking at closely at the moment. It’s so low so it’s tempting for people probably to look at fixing their interest rate in at the moment for a period of time. So what do you think about this? Is it the best option right now, or is a mixed or fixed variable of all of these options? What’s your opinion?

Ian Ugarte (10:44): It’s really tempting right now with interest rates the lowest they’ve ever been to fix interest rates, but I can say one thing, in the last 30 years, I fixed two loans and I lost out twice. The first one because interest rates dropped out so I was paying a higher interest rate. And the second one is I wanted to break the fixed period, which meant they charged me for that break. Now I’ve heard of a case and I know of a case of a woman who only last year almost lost everything. She had locked her interest rate in for 10 years, she thought she was on a good deal, but that was 10 years at 8.9% and from last week she was cross securitized. So she got close to losing everything and they would have taken her own home as well.

So for me, I look at it, the banks pay economists hundreds of thousands of dollars, I’m not willing to bet against them. If they were weather forecasters, I might bet against them. But for me, I don’t fix. If you want to take the road of anxiety reduction, then you might fix half your loan to variable and half of it to interest only.

Adrian (11:51): And let’s talk about debt, just to wrap up. You talk about the fact that not all debt is created equal. So is there some kind of good debt out there? What do we need to know here?

Ian Ugarte (12:01): Yeah. Look, I’ll explain the difference between the two. Bad debt is debt that regardless of your situation, you have to pay bills, and you can’t get any income from it. So the interest and the principal on your own home, you’ve got no income coming in. Credit cards, personal loans, that’s what we refer to as bad debt. Now, good debt is debt that gives you income. So if I took money from my home and I used a redraw facility to go and buy an investment property, I know that I could be sitting on a beach in The Bahamas and that investment property is producing income and paying for the interest while I’m sitting on that beach. Now, here’s the kicker. The kicker with this is that interest for an investment property is tax deductible, where interest on your own home is not. Which is why there’s a whole bunch of investors that don’t buy their own home and they do what they call rentvesting. They rent a house and they go off and they buy investment properties and that income pays for their cost of living. Now that’s a completely different topic for another day, but certainly it’s a good way to start thinking about investing.

Adrian (13:08): Yeah, nicely done. Great wrap from you. We’ll finish with putting up just some of the key points up on the screen now and you can just tick through these to finish off. What have you got? Let’s have a look at these key points here.

Ian Ugarte (13:19): Yeah. As usual, if you understand all the jargon it’ll make your anxiety levels drop out. Understand what an LVR is, your loan to value ratio. If you need to go to LMI, understand what that means. Set up an investment property loan as interest only if you can. Remember, all mortgages are not created equal. And pay down all your bad debt so that at the end of the day, you know regardless of what you do, you’ve got a good outcome for your personal situation. As always, sitnbdev.wpengine.com/tickerhome is where you can get the special [inaudible 00:13:47] that we’ve created for you so that you’ve got an understanding of everything we’ve talked about today.

Adrian (13:55): Nicely done. Such important information and displayed so well again. Ian, we’ll talk really soon, enjoy the rest of your day.

Ian Ugarte (14:02): Thanks Adrian, same.

Adrian (14:03): Ticker Home of course presented by our partners at Small is the New Big 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 sitnbdev.wpengine.com. Catch you soon.

Adrian (00:00):

Hello welcome back into Ticker Home, where each week we will dive into the latest trends on the property market and answer the questions you need to know. It’s a pleasure, as always, to welcome my cohost ian Ugarte, co-founder of Small is the New Big. Mate, good to see you. How was your weekend?

Ian Ugarte (00:21):

It was awesome, actually, I did a big cleanup at home and sat on a mower for about an hour. So it was good.

Adrian (00:26):

Sometimes that feels good, doesn’t it? Just to make a bit of a change, clean up everywhere.

Ian Ugarte (00:31):

It does. It feels like you’re cleansing your soul at the same time.

Adrian (00:35):

It really does. Something about cleaning, you never want to do it, but when you do it, it’s actually not too bad. Hey, what are you looking forward to talking about today?

Ian Ugarte (00:46):

I’m going to go through today the six mistakes that property investors make, and the six mistakes that I made, that actually got me in a really precarious situation. And learning from someone who’s already made the mistakes is much better than making the mistakes yourself.

Adrian (00:59):

Absolutely, I look forward to going through and analyzing some of your mistakes. I like the fact that you can be open about that. Let’s get into that in just a moment, but firstly, Ticker Home presented by our partners at Small is the New Big, 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 sitnbdev.wpengine.com.

All right, let’s get into it. I’ve got about two or three talking points off the top. What’s trending this week, Ian, for you on Ticker Home?

Ian Ugarte (01:27):

Yeah, we’ve got an article here from Richard Ferguson and Greg Brown in the Australian about labor and the policies that they took into their election, that essentially lost them the election. Our confusion always equals no, so capital gains tax, franking credits and winding back of negative gearing. You know, the NBA and the property council of Australia have said that you really shouldn’t be targeting property, because property is really the backbone of the economy. So Dr. Jim Charmers, the shadow treasurer has quoted saying that the next elections policies will be very clear and they actually are backing away from those promises that may have actually winding back property.

End of this month is the national labor conference, which is usually a very rowdy affair, but this time it’s being held online for the first time. So it’ll be interesting to see how many people get muted and are told that their internet connection is not good when they’re yelling and screaming.

Adrian (02:23):

Very, very good. Yeah, labor, what a massive mistake that was for them. And it’s going to be interesting to see how conscious they will be in elections moving forward, because most people say that’s why they lost it, as you say. Let’s look at housing prices, you’ve seen another piece or an article on the housing prices. We know they’re booming in Australia, what’s the latest here?

Ian Ugarte (02:44):

David Adams in Business Insider, talking about the mortgage cliff. We had 900,000 households in Australia put deferral on their mortgages, so essentially stopped paying their mortgage for the year. They were talking about this huge cliff of fall, that come to the end of this month when that 12 month comes up and they have to start paying their mortgage again, but really, the housing pricing and the strength of the housing economy is quite strong. In February we had a 0.4% rise in the median house price across Australia, which means we’ve now up to a 5.9% growth from the beginning of this year to where we are nationally right now. So that’s an extraordinary amount of growth for a short period of time.

The winding back of the job keeping job’s sake, it doesn’t look like it’s going to affect property too hard. And out of the 900,000 deferrals that happened a year ago, we’re only down to a 101,342 households that come the end of March had the choice of extending the deferral if they need to, but more importantly, if they’ve got themselves in a really bad spot or bother, they can sell their property. We’ve got low amount of stock on the market and it’s quite likely they’ll sell at a profit, anyway.

Adrian (03:53):

Let’s look at Brisbane now just to finish, in terms of house prices and also units and apartments. What are you seeing here?

Ian Ugarte (04:02):

Yeah, so this is Sophie Roster and real estate.com.au reporting on an RBA survey of 40 experts in housing. Brisbane came up quite well, effectively out of the 40 experts that were saying that it’s three times more risky to buy a unit ahead of a house, Brisbane actually emerged with the best confidence level with only 14% of the experts saying that it was risky. At the top of the risk list was Perth for housing at 30%, we then had Melbourne at 24%, Sydney at 23%. Adelaide’s actually quite strong at only a 15% risk factor, but Brisbane and Melbourne also came out the worst when it came to units. So Brisbane has the strongest for housing, but also the worst for units, with out of the 40 experts, 68% of them saying that the unit market is certainly a market you don’t want to be in.

Adrian (04:53):

Interesting. All right, that is what’s trending off the top. Let’s get into our main conversation and you’ve introduced it already, some of the mistakes that you’ve made. So my first question over to you, you’ve been involved in property investing for many years. So you’ve made mistakes, we know that. Why do you think people make so many mistakes when it comes to buying property?

Ian Ugarte (05:11):

Yeah, Adrian, experts come out of armchairs when these times of periods come along, and we are making decisions based on the dentist and the taxi driver, and that’s certainly not a time or a place to be making decisions. And, it’s fundamentally a lack of strategy which is actually driving the problems and people are going into FOMO. They need to buy a property, but you need to learn from someone who’s done it before. It’s like starting a skydiving business, right? You get a red balloon skydive, you go out, you’re skydiving, you think it’s amazing. So I’m going to start a business based off that emotional feel. You haven’t got a plan, you haven’t got a license, you have got an airport. You actually don’t know if there’s actually a business structure behind it. And even if you could get that business off the ground and pardon the pun there, it’s quite likely that it’s going to drop very quickly. And property’s exactly the same. You go out without strategy, you’re going to get yourself in a lot of trouble.

Adrian (06:01):

So you talk about strategy as you’ve touched on there. Most people I know buy a property so they can negatively gear it. But you say this is the wrong approach entirely. Why is that exactly?

Ian Ugarte (06:13):

Yeah, Adrian, negative gearing is as simple as buying a property and going out on purpose to make a loss so you can get your tax back. It’s a crazy strategy, and it’s a crazy myth that people should do it. I’m sure Aaron, when he started Ticker, didn’t start a business plan with the fact that he wanted to lose money, right? No one in their right mind starts a business to lose money. And property is a business and you should profit. So negative gearing means that you’re actually pulling money out of your pocket every week, every month, every year to make up for the short floor fall. And it’s just to get your tax back, and it’s a flawed strategy.

So it’s the same as someone pulling out a hundred dollars in their pocket, giving it to me and then me giving them back $30. It doesn’t make any monetary sense. And you know, I hear the argument from brainwashed investors that they don’t want positive gearing. So 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 (07:30):

Well, he’s just there. He’s just behind us, so I’m going to ask him straight after this. So thank you. Let’s do this every episode, okay? Let’s do this every episode. Another mistake you say, when people make, in terms of buying property, is buying multiple properties and then they’re looking at sticking with the same bank for all of their loans. So on the surface, this seems to make some sense. If they’ve given you money once, they probably will again. When you talk about the fact that this is risky, what are the risks of having all of your loans with one lender?

Ian Ugarte (08:00):

Yeah, look, you do your banking with the same bank. You go to the same bank and you get a loan for your property, and after a while you decide you want to buy an investment property, so you go back to the same bank. And it makes it simple. They’ve got your figures, they know your spending habits, which is scary by the way, and then they say, “Yeah, yeah, we’ll just cross securitize you. We will get you that property over there by linking the loans together.” Now, even if the loans are separate, they’ve actually got an all monies clause. So effectively they are tied together.

The downside of that is that you have no control. They can actually start to dictate what you can and can’t do when you want to move forward in investing. And as soon as you want to do something with those assets effectively, they control those decisions, and that means you can’t manufacture growth, which is what we talked about last week.

You know, it’s a really big galactic mistake if you go down the line of going and cross securitizing or going to the same lender. And often, they give you a .2% reduction in interest rate. I would rather pay more interest and go to different lenders and get a better outcome for myself. Now, I even have my personal savings accounts with a different bank that I have no loans for. Now, this is not a conspiracy theory, but there is a credit rating score across Australia right now, where they look at your spending habits. And if you’ve got your mortgage with a bank where your savings accounts are also held, they’re watching your income coming in, they’re watching your spending habits. And let’s say that your wife has just had a baby, they’re now watching that your income has been reduced. It’s a very, very scary situation where a bank can control your decision, moving forward,

Adrian (09:34):

Interesting stuff. And I’ve heard that issues can also arise when your investment properties are purchased in your own name. Tell us more about what you’re thinking here.

Ian Ugarte (09:44):

You know, as always Adrian, everything we speak about, you need to go out and get qualified advice. And when we talk about buying properties in structures, you’d need to do that. Now, the first thing I’ll say is that your principal place of residence, the home that you live in, you should purchase in your own name because there is a hundred percent tax exemption on that. Now, any property you purchase as an investment property should be in a structure, because Australia is actually the second highest litigated country in the world. And most people don’t know that. And you might think, oh, well, what’s the big deal about that? I’ll never get sued, so I’m not really worried about my assets. Well, you’ve got showing on the screen right now, an unknown guy called Mark Shanahan who went down and played a charity golf day, hit the ball down the fairway, hit a guy. Unfortunately, that person has now got brain damage and needs care for the rest of their life.

The litigation lawyers came in after 10 years of fighting in court, $2.6 million handed against him. He went bankrupt, lost all the assets and all he did was play golf. And you know, there’s no upside to this story. If he had been protected by buying instructors and in asset protection structures, he would have had at least the ability to continue living his life in the standard everyday way without having to lose everything.

Adrian (10:58):

And these days, there are so many real estate agents out there, as we know, and it seems there’s a big developer spruiking a new house and land package every week, so there’s a lot of noise for prospective buyers. So how can they sort through this, cut through the noise to find a property that actually suits their needs?

Ian Ugarte (11:14):

Yeah, I’m just smiling, myself. It seems like I bang on about this every week, but just be aware of snake oil sales.

Adrian (11:21):

It’s important, though.

I

an Ugarte (11:22):

Well, it is. The snake oil salespeople that are selling a property to you are making huge commissions and fees, and they’re not really interested in your future income. They’re interested in their income, today. So again, last week we talked about manufactured growth. You are buying profit when you buy a house and land package. And the capital growth is likely to be limited, because you’re buying around farm land, which is not going to go up in price too much, right? So you need to be aware of the property spruiker, the all singing, all dancing, all fixtures included type outcomes. If it’s too good to true, it’s likely to be.

So be very cautious. Do your own research, don’t use their research. And there’s a simple way to protect yourself, Adrian. Ask the person selling you a property whether they’ve bought one in the same estate. And if they haven’t, then 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 (12:15):

Very good. And just finally, what would you say is the one thing that people neglect when it comes to buying property?

Ian Ugarte (12:23):

Yeah, you know Adrian, when I was young, and I know I still look young, but when I was younger, I thought I was a big deal. If you’d met me at a barbecue, I would have told you I’m a property investor and I’ve got seven properties. And my big ego would have said that you probably wouldn’t want to be my friend. Now the fact was, that those seven properties almost sent me under. I was cross securitized, I’d bought them in my own name, I’d done everything wrong. I’d negative geared it, I was $36,000, negative geared with seven properties. To put that into context, that was $692 coming out of my pocket every Monday morning, before I even got out of bed. And that was actually, I had my ghoulies in a vice and the bank was slowly tightening them up just so I could prolong the pain.

So I had to sell down. It was the only way I could get myself out of trouble. I lost 50% of my wealth by doing that, but what I did do was the one big mistake that people do. And I went and got some education, because I thought I knew it all. And by getting educated, I set myself a goal. 13 months to the day after I set my goal, I was out of paid employment. So essentially, I earned enough money to pay for myself to not need to work. And that’s what I want people to do. You know, I actually have a degree. I’m a plumber and a builder and I actually have a degree in adult education. So teaching is my passion. I love teaching people, and more importantly, I love teaching people what not to do because then they’d have to go through the same pain that I went through all those years ago.

Adrian (13:54):

I love the honesty. I love the fact that you can just tell us how it is. I’ve made mistakes, I’ve learned from it, it’s the best way to do it. Let’s wrap up. We’re going to show the six property investment mistakes to avoid. So just tick through these, just to wrap up there, Ian.

Ian Ugarte (14:09):

Sure, yeah. Always have a clear strategy. You need to know why you’re buying a property and have a better outcome at the back end. Don’t buy a property just so you can get negative gearing. Don’t let banks control you. Investments, never buy them in your own name. Don’t succumb to the sizzle, get the BBQ, and always get educated and stay informed.

As always, Adrian, all of this information is available at sitnbdev.wpengine.com/tickerhome. And thanks for having me back on again.

Adrian (14:36):

Great stuff. We’ll totally get really soon, okay? As Ian said, Ticker Home presented by our partners at Small is the New Big, who are on a mission to create 1 million affordable homes in the next 10 years and help Aussies struggling with stress. Learn at sitnbdev.wpengine.com

Adrian Franklin (00:09):

Hello, and 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. It’s a pleasure, as always, to welcome my cohost Ian Ugarte, co-founder of Small Is The New Big. Hello, mate. How are you today? 

Ian Ugarte (00:24):

Hi, how are you? I’m well.

Adrian Franklin (00:25):

Very well. What are you looking forward to talking about today?

Ian Ugarte (00:30):

Yeah, today I want to show people how they can create and not wait for growth. And effectively, what I want to talk about is people being active in their growth strategy rather than just a passive sit back and wait and hope for capital growth.

Adrian Franklin (00:44):

Nicely done. I’ve already had a look at some of the questions and I’m very excited about this conversation. Firstly, Ticker Home is presented by our partners at Small Is The New Big, 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 SmallIsTheNewBig.com.au. Let’s get him back in, my man, Ian. For what is trending, we’ve got three talking points. What’s first for you this week?

Ian Ugarte (01:11):

Yeah, I got an article here from Greta Andrews-Taylor in the West Australian, and this article is about Western Australians using the ability to be able to subdivide their blocks close to the city more than they ever have before. It’s what they call infield development across the country, and Western Australians are taking it up in droves. Effectively over there, they’ve got a really great planning system. And they’re creating what they call the battle ax blocks. So rather than building two houses side by side on a block, they’re actually creating the concrete driveway, which is the ax handle, and then the backyard becomes the ax head, which is what they call it a battle ax.

But you end up with a smaller block. But these downsizes are looking at design. Design’s come a long way in the last few years, especially with the open plan living area so you can actually have a smaller house and be quite comfortable. What’s important here is block shape, the size and the zoning. And these are important aspects of choosing a property to buy, and it’s something that we’re going to be talking about today.

Adrian Franklin (02:10):

Nicely done. Second point, you’ve mentioned the regional areas of Australia over recent weeks, but there’s a bit of a moment here for our regional renaissance. What have you got here?

Ian Ugarte (02:21):

Yeah. Tom Dusevic in The Australian has brought up Dubbo and it’s a great story in New South Wales where unemployment actually fell during COVID to 1.4%, when the national average at its worst was 7.6%. There’s actually 90% more jobs being advertised this month than last month in the Dubbo region. Out of the 37 regions that the national skills commission looks at, it’s the best performing region. The mayor’s saying, “Come on in, we’ve got plenty of space.”

They’ve already got 80% of occupancy in hotels, local attractions, like the Dubbo Zoo are doubling in numbers and some businesses, Adrian, instead of opening up five days are now open up seven days. So this is a place that, 18 months ago, was devastated by drought. They almost ran out of water, which would have been a very harsh thing for the whole city.

It’s a thriving city. Now we’ve got the deputy PM announcing some regional awareness programs. There’s other associations and Farmers Federation announcing regional programs. In the next 10 years, the federal governments are spending $110 billion in regional centers. As always, the opposition is saying that they shouldn’t be doing that, but that’s their job. Regional is a really great area to be in with property right now.

Adrian Franklin (03:39):

And just finally, to wrap up what’s trending, let’s talk about the red hot property market as a whole and prices. Do you think it’s out of control at the moment, would you say? Or what are you thinking?

Ian Ugarte (03:52):

I think it’s something that happens once in a generation, sometimes twice in a generation. And this is Martin Farrer in The Guardian. And prices are going up high than ever. We’ve got low interest rates, we’ve got government stimulus, and lifestyle changes that people are looking forward to doing because of COVID. So core logic has said that we’re now showing a 2.3% increase nationally for all the median house prices, which means we’re only 0.1% of our all time high in October 2017.

Domain has revealed that Sydney has its highest ever median at $1,211,488 dollars, a 4.8% increase in December quarter in Sydney. The central coast had a 12.7% increase, which we talked about. The Northern beaches of Sydney, a 10.7% increase over the last 12 months. Units and apartments are suffering, which means that Melbourne particularly, with the COVID lock downs, people are generally in a negative position if they bought just before COVID.

But it is recovering and there are some outliers like the Mornington peninsula. And after the first recession in 30 years, recovery has been pretty quick. They’re all looking to see what happens with Europe in the US, and what happens when the job seeker stops. If the job seeker does stop and create an impact, we’ll see property prices impacted. But if it doesn’t, we’ll see property prices go in an upward direction, like the likes of 1985 to ’88, where property prices almost doubled for over a three year period.

Adrian Franklin (05:22):

Yeah. It’s going to be a talking point all throughout this year, of course. Let’s get into our main conversation right now. One of the things you mentioned last week was manufacturing growth in properties. You touched on it earlier. So this got me thinking, so I wanted to explore this a little bit more with you this week. What do you mean when you talk about manufacturing growth, and how does this differ from the more commonly known form of growth, which is capital growth, of course?

Ian Ugarte (05:45):

Yeah. Last week I got a lot of questions and feedback about wanting to know more about manufactured growth. Fundamentally, there’s two ways that you can get growth: you can sit back and be passive and hope for capital growth and be a lazy investor or lazy home owner, and you can use what they call the BHP strategy, which is buy, hope, and pray that it’s going to go in an upward direction.

But I much prefer a proactive approach to growth. And this is the strategy that we call manual or manufactured growth. And this is where you look at various aspects of property and where you can add value to the property. And the proactive way is to spend a little and end up with a higher value property. And it’s much, much better than buying, hoping, and praying because you’re in control, Adrian. And no one is in control of capital growth. So if you’ve got control, then you’re in a much better position.

Adrian Franklin (06:36):

So what you’re talking about here is property owners being really proactive about increasing the value of their assets. So what are some of the ways that property owners can actually do this?

Ian Ugarte (06:45):

Well, you can look at it and say, well, let’s look at the one that most people would think about and that’s renovation. So you could do a cosmetic renovation where you simply just change some door handles, do some painting, fix up the gardens, and then increase its value. Or you could do a structure innovation where you go out, you knock out walls, and you do a whole bunch of things to the property. You can’t live in it. And by doing that, you increase the value of the property.

A lot of people are starting to do granny flats around the country. Now, in some areas of the country, you can rank the granny flat to a second party, which means it increases value because you’ve got more rent. The granny flats around the country are either called an ancillary dwelling or an auxiliary dwelling or a secondary dwelling. You could possibly build a duplex. So that is where you build two houses side by side where they used to only be one. And because you’ve got two properties, it increases in value.

Subdivision, like we talked about that in the first article there, where you take a block of land and essentially create smaller parcels out of it. And a lot of people would say, “Oh, look, I just want to be passive, and that it’s way too complex to do this.” But you know what? If you just follow a system and process and follow in the people that have already paved the way ahead of you, it’s actually not that complex, and it’s something that you really shouldn’t be thinking about.

Adrian Franklin (08:03):

So with all of those different options, I’m assuming that not every property is suitable for all of those strategies you’ve touched on. So should buyers perhaps have some of these strategies in mind when they are looking to purchase?

Ian Ugarte (08:16):

Yeah, absolutely. If you’re looking at purchasing, look for a big block, because there’s quite a good potential that you’d be able to chop the block in half. If it’s a larger house that you’re looking at, can you actually create a co-living property where you can get more rent and create more housing for more people? Maybe you’re looking at properties and you drive down the road and you see a duplex on one side or the other. If there’s a duplex in that street already, it’s quite likely you can do the same thing.

And you really should have a shopping list of strategies when you’re going out to look for a property. And you want to be able to do one, if not two, if not all of the strategies. And were always looking for the unicorn, and the unicorn is where a whole bunch of strategies are on a list and I can tick off and do all of those strategies in one property. But as long as you can do one preferred strategy, and your thought process is around being an active investor, then at the end of the day, you should end up better off.

Adrian Franklin (09:10):

And in your 30 years of probably experience, what’s one of the most successful ways that you’re found to reliably and consistently manufacture or create growth in a property? What’s the one thing that sticks out to you?

Ian Ugarte (09:23):

Yeah, Adrian. Like I just said, if you can stack strategies or put all the strategies in one, and here’s an example of a strategy that was completely stacked. This is a property that was subdivided. They went and … This was in a warm spot, not in a hot spot, so they had capital growth around it. And on each one of those blocks, they built a duplex.

So effectively, what they did was I took one dwelling, turned it into four dwellings, put co-living property on top of that, and had a really great outcome. The stocking strategies is the way that you can do this. And the more strategies you stack, the better off you are in your active investing.

Adrian Franklin (10:05):

And just to finish, having said all of this. With all this talk of property prices setting to rise to record highs this year, do you think it’s safer, potentially, to just purchase and then sit on the property and then just wait for the growth?

Ian Ugarte (10:20):

Yeah, look, it would be really easy to think that, Adrian. “I’m just going to sit back and everyone else is growing.” But FOMO is kicking in, so people are buying stuff for the sake of buying it, and they really shouldn’t do the buy high price strategy. It’s not a good way to invest. They may end up worse off than when they started.

And I talk about double dipping. You shouldn’t double dip at a party, but certainly in property, you can. Buying a property is going to be the most significant capital investment that someone will ever make. And the difference at the end of your working life is huge. And it’s always interesting to compare the two, if you did the passive versus the active. Get the capital growth that you really want out of your property, but also get the manual growth.

The manual growth strategies are huge. 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, and we’re so happy for you.” What would you rather? Get 10% capital growth on one property, or turn a property into four and getting capital growth on top of those of 10%, and on top of that, have the manual growth strategy? Why not double dip? You can get your capital growth and also get your manufactured growth by using really great manual growth strategies.

Adrian Franklin (11:39):

Loving these analogies. You brought it this episode, there’s no doubt about that. So just to wrap, I’m hearing a lot of, have a strategy, be proactive, have something in place, have a plan moving forward, don’t just sit back and around and hope for the best, in a way. Would that be the best way to summarize this chat?

Ian Ugarte (11:58):

Yeah. I think the five ways you can create growth is by not waiting for capital growth. Create it. Make sure you investigate the ability to subdivide or explore partial internal conversions. Make sure you can build additional external buildings, and always look to increase density wherever you can. And as always, there’s a free download for this episode at SmallIsTheNewBig.com.au/tickerhome. Adrian?

Adrian Franklin (12:24):

Of course there is. So we can double dip in property, but when it comes to the hummus or hummus, whichever way you go, no, double-dipping. I appreciate that. I love some hummus too, with carrots. One of my favorites. What are you like with hummus, Ian? To finish, what’s your favorite go-to?

Ian Ugarte (12:38):

I’m not a hummus man. I’m actually a pumpkin and cashew nut dip, man. I’m sorry. Or a beet root man. That’s me.

Adrian Franklin (12:47):

I can see that. I can see that, actually. Make great conversation, learn plenty. As always. Talk soon, okay?

Ian Ugarte (12:53):

Thanks, Adrian. See you next week.

Adrian Franklin (12:55):

Ticker Home presented by our partners at Small Is The New Big, 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 SmallIs TheNewBig.com.au. Catch you soon.

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Adrian (00:07):

Hi there. Welcome to Ticker HOME where each week we’ll dive into the latest trends on the property market and answer the questions you need to know. It’s a pleasure as always to welcome my cohost, Ian Ugarte, Co-founder of Small Is The New Big. Mate, good to see you. What are you looking forward to talking about today?

Ian Ugarte (00:25):

Looking forward to talking about first-time purchases and how maybe I’ll be able to do a bit of a quantum shift on how people think about purchasing property.

Adrian (00:33):

I like it. That’s a great topic. Let’s get into it. Ticker HOME presented by our partners, that’s Small Is The New Big, 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 Smallisthenewbig.com.au. All right, let’s get into this, Ian. And I am fascinated by all of these topics that you bring every week, but what is trending this week on Ticker HOME? What have you got for us?

Ian Ugarte (00:58):

Yeah, I’ve got an article from Kate Burke on Domain. It’s now cheaper to buy in 11 suburbs of Sydney, that’s cheaper to buy than to rent. You know, there was only one suburb in 2019 where that was the case. So, we’ve had a good increase in affordability as far as that’s concerned. Now this is based on principal and interest payments, and that doesn’t include things like council rates and a few things on that. But hitting the top of the box is Box Hill where mortgage repayments are $424 and to rent is $575. So, that’s $151 difference. Coming in second was Kanwal on the Central Coast with only $29 of difference between the two. Interesting, eight of the 11 suburbs are on the Central Coast. There might be some good buying in there. The unit market, Warwick Farm was at $29 difference between owning versus renting, and that could be for a number of different reasons, but most of the units were scattered all around the Western and Southwestern Sydney.

Now wait for this one, Adrian. If you were to go outside of Sydney, Mollymook Beach, your rental repayments would be $615 with a median rent at 1,260. That’s $645 difference mostly based on the fact that it’s a seaside location with short stay rentals and a lot of people that are now looking for rentals because they want to get out of the Sydney because of COVID.

Adrian (02:14):

Wow. That is a huge gap indeed. What was it called again? Molly?

Ian Ugarte (02:19):

Mollymook Beach.

Adrian (02:20):

Mollymook Beach.

Ian Ugarte (02:20):

Down on the south coast.

Adrian (02:21):

I’m going to type that in here and I’m going to look it up after the show. Hey, our next topic to talk about Australia’s housing market is boosted by policies designed to ensure prices keep rising. Tell us more about this.

Ian Ugarte (02:33):

Yeah. Greg Jericho in the Guardian. You know, he’s basically saying the government’s only really there look to look after property investors and homeowners. This year in 2020, so sorry, in 2020, there was $243 billion of lending. That’s the third largest years, which was only beaten by 2017 and 2015, but we had a recession in the middle of 2020. So that’s a pretty good thing. He was a bit tongue-in-cheek because he was one of the people predicting a huge drop in the prices. And he says, “Well, how silly of me? You know, when I look back, we’ve got an LNP government that was really not going to allow that to drop.” Property prices actually dropped by 11% May last year, but now has had a huge increase. The owner-occupier market increased lending by 37%. And in Western Australia, there’s been an 83% increase in financing for purchasing property in an area, 87% increase since the same time last year for first home buyers, which is an incredible increase.

Phillip Lowe is not too concerned about prices rising because they’re only just above what they were four years ago. Although Sydney’s huge rides four years ago made them actually tweak the median house price across the whole country. But yeah, it’s interesting to see that the government is supporting with interest rates and grants, to be able to make sure that property market doesn’t dive.

Adrian (03:51):

And just finally apartments there, it’s an interesting conversation in Melbourne right now when it comes to buying apartments. What do you see?

Ian Ugarte (03:59):

Yeah, we’ve seen similar things in Sydney with the sinking buildings and concrete foundations falling apart. This one’s now in Melbourne, Lauren Bird who purchased a property, did everything right. She got a legal team in to make sure her contractor was right. She got a building and pest inspection done. The mistake she made was that she didn’t get the building and pest inspector to look outside her box into the common areas. And her legal team really should have actually asked for a strata report, which would have picked up some issues during the body corporate meetings about all the money being spent. So, she’s effectively now having to pay money towards special levies to fix things around the property that had nothing to do with her. They’re builder’s issue. So now she’s paying legal fees with the rest of the people and the body corporate. And this is one of the reasons I suggest you never buy a unit or anything that’s got a strata over the top of it.

Adrian (04:46):

Interesting stuff. Okay. That is what is trending. Let’s get into our conversation for today. So, we’re going to talk about people investing in their first property. That’s today. So whether to live in or as an investment. In your 30 years of experience, helping people get into and stay in the property market, I’m sure you’ve seen some winners, but also some losers in the decision-making process. Broadly speaking, what’s your one piece of advice for people looking to get into the property market?

Ian Ugarte (05:13):

Yeah. The first investment into property should be strong enough to lead you into a second investment. And so you don’t want to fall into that trap of being emotionally attached to the dream home as your first purchase, but rather a stepping stone to get to your dream home eventually. After 30 years of investing in property, I only just finished building my dream home. And that dream home is actually a business decision. It can be used as a home, can be used as co-living, can be used as a wedding venue. So, you’ve always going to think about what’s the purpose and the outcome. What we want to do is take the emotional filter off, and we want to put an investment filter on, even though it’s on your own home. And we want to make sure you leverage that to get to a better home, and then another better home, and then another better home.

I mean the average hold on a first home or any home in Australia is about 11.8 years. When I first started investing, it was only seven years before you flipped onto the next property. So, the first purchase is the base ingredient of your portfolio cake, Adrian. You want to make sure that the butter and the flour, the base ingredient, is what’s going to make the make or break the bake. And the icing is actually the dream home at the end. So broadly speaking, my advices to look at this as a first investment of many, and that this is not your first home, this is your first investment property and will fundamentally mean that it changes the thinking of the first time buyer.

Adrian (06:32):

Yeah. And I guess that’s all about mindset and thinking what you’re talking about and then also having a plan in some ways. Maybe some people probably don’t have that plan, but that’s what you’re talking about, to be ready and to be thinking future planning forward. So, if we take the view that the first property should also be the first investment, what does this mean for buyers in terms of any government grants that might be available?

Ian Ugarte (06:55):

Yeah. Look, grants at the moment are huge. There’s a lot of money out there at the moment, but the first thing to say about grants, Adrian, is that not all grants are created equal. And just because you can get a grant doesn’t mean that you should be using it. You know, I’ve seen people use a $25,000 grant and spend $50,000 too much on a property. You need to be strategic as we’ve been talking about. And it means that the first property may not be the one that you live in. So think long and hard about grants before you use them because a cash grab may not be the best thing outcome, best outcome for you.

What I can say is that most States in Australia will allow you to buy an investment property first. And if you don’t live in it, still have the ability to be able to use first time owner grants and concessions for stamp duty moving forward. So, it doesn’t necessarily mean that you have to buy your first home first, you can buy an investment property and then do what we call rent vesting as always.

Adrian (07:50):

Right. Really interesting. I think for people that’d be fascinating to learn about because, yeah, a lot of people talk about grants, but you’ve just outlined what’s good and sometimes what to look out for. So, just on the point of looking at what property to buy, what sort of properties make a good first investment, would you say?

Ian Ugarte (08:07):

Yeah, let me start with what not to buy. Never buy in a greenfield estate, near farm land. We talked about the last week. And again, if you can get away from strata and body corporates, that’s also a good thing to stay away from. But effectively there are two types of growth. The capital growth and there’s manufactured growth. Capital growth, we have no control of. Manufactured growth is buying a property that has the ability for you to be able to do something to it to increase its value.

So, if we look on the screen right now, if you’re going to build or buy a large home as a partner, a young couple would move into this, they would be able to buy this and live in a smaller area and legally rent out two sections, have one child, move into a larger area, have another child, they can then move into the two bedroom area. And from there, they may be crazy like me, they’re still getting two rentals. If they have a third child, they can then take up another part of the house, which means that they’re now using two thirds of the property and crazy like me, four daughters and off and use the same all of the property. And then when one of the daughters or children starts to move out, you then start to remove that backwards.

So effectively there’s again, some rental income coming on, paying down debt. Then, you’re back to two children in the house, one child in the house, and then you’re a retiree couples sitting in there with a driveway and a caravan in the driveway, back into the studio, having two-thirds of the rental property. People young, especially millennials, need to right now think about the affordability and how they can pay their home off quicker by using that type of strategy.

Adrian (09:39):

And you, I mean, I was listening to everything there, but one point you write, do you have four daughters, Ian, did you say?

Ian Ugarte (09:45):

I do. God blessed me with four daughters and it’s absolutely awesome. There’s plenty of learning in that.

Adrian (09:50):

For sure. My goodness, man. You are just the man for the job though, there’s no doubt about that. Anyway, let’s stay on track. So you say no units. You mentioned that a couple of times. Why is this given that a lot of people new to property buying think this is the logical and obvious first step to buy a unit?

Ian Ugarte (10:08):

Firstly, Australians aren’t actually ready to live vertically. They actually want to live horizontally with grass on their toes when they step outside. So, that’s the first thing. We’re still about 15 years away from that type of thinking in Australia. But houses, more importantly, houses give you control and units don’t. So, if you talk about an off-the-plan purchase. The danger with an off-the-plan purchase is that you’re signing up on a contract for a property that hasn’t been built yet and the builder or developer usually relies on those signatures to be able to get funding to build the property, and that’s a scary thing to start with. The price could end up lower than what you paid for it. So, you buy off-the-plan at $400,000. When it settles, it’s worth $300,000. You’ve got to come up with $100,000.

So buying any unit, new or existing, is not a good investment for that reason also that you’ve got no control. If you want to change your floor plan, you need to get permission from the rest of the people in there. If you want to do anything, it’s controlled by a committee. There are rules and there are rules and there are rules and everyone is enforcing those rules. And that’s just not a good place to live.

Strata frees aren’t as cheap as what people think and the only way to manufacture growth is to renovate the property and in my opinion, renovation’s not a great strategy. More importantly, the special levies are the killer. When something goes wrong on the entire building, you’re going to have to pull money out of your pocket, along with everyone else, to come up and fix that problem and here’s the worst of it all. When someone sells a unit in your complex and sells it cheap because they get themselves in financial stress, your unit is now worth exactly the same as that unit, regardless of what condition your unit is in. It’s just not a good thing to buy anything with the body corporate.

Adrian (11:48):

Wow, I didn’t realize that. That’s one to watch out for, for sure. Before we finish with the five traps to avoid buying your first property, just briefly to finish, so if you’re planning on buying a house and not a unit, what are some of the key things you look for in the property to ensure it’s also operating as a sound first investment?

Ian Ugarte (12:05):

Yeah, your first home you should buy should always be an income earner, right? It’ll set you up for life. I’ve got Joel and Bianca, an amazing couple. They’re a talented couple that work in my business and they’re great listeners because everything that I’ve been saying, they’ve been implementing themselves. This year, they’re about to start a build on a property that they’re buying, they bought as their own home. So we talked about manufactured growth. They’ve bought a property with an old house on it. It’s the right zoning. They’ve got approval to subdivide the block. They’re putting a duplex on one side of it. On the other side, they’re putting a three-story, co-living property where they’ll have the top floor and the rooftop garden. That’s a hundred square meters to be able to look at the beach. They’ll be able to rent out underneath there.

Let’s consider the increased value of their property is going up because of what they’ve spent and the end value is much higher. The end value. But more importantly, they’ll be getting paid $1,000 per week to live in their own home. So, effectively instead of paying for rent, they’re actually getting money in pocket. So, they’re getting over and above what it costs them to live into their pocket, to be able to do other things and go off and do other investments. So, it’s an absolutely amazing way to be able to kickstart your first home.

Adrian (13:25):

Sounds pretty good to me. Let’s wrap. We’ll give you 45 seconds. The five traps to avoid when buying your first property. Go for it.

Ian Ugarte (13:32):

Yeah, absolutely. Our first property is not your first home. It should be your first investment. No need to live in your first property if it means that you’re going to end up better off in the long run. Don’t claim every grant. It’s not worth it if it’s not worth it, but if it is use it. Avoid buying a restricted zone area. So, make sure you can do more to the property and how adaptable leads your property to be able to fix the property so that it can be used by different demographics in there. As always, all of this information and some downloads are available at sitnbdev.wpengine.com/tickerhome. Adrian.

Adrian (14:06):

Nicely done mate. Great chat. I’m learning. I mean, I’m learning too much from you. I got to go back and watch this episode a number of times, get my notepad out, and just list some of these points. It’s awesome again to talk. Enjoy your day. Okay. We’ll talk soon.

Ian Ugarte (14:18):

Same Adrian. See you later.

Adrian (14:21):

Great stuff. Ticker HOME presented by our partners at Small Is The New Big 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 sitnbdev.wpengine.com. Nice and simple. Catch you soon.

Adrian (00:08):

Hi there. 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. It’s a pleasure every week to welcome my co-host, Ian Ugarte, co-founder of Small is the New Big. Hello mate, good to see you. 

Ian Ugarte (00:23):

Hi, Adrian, how are you? Another week, it’s been pretty good for the last week in property.

Adrian (00:27):

Absolutely. Well, we’re going to get to that in just a moment with our talking points first. Ticker Home of course is presented by our partners at Small is the New Big who are on a mission to create one million affordable homes in the next 10 years and help Aussies struggling with housing stress. So learn more at sitnbdev.wpengine.com. All right Ian, what have we got in terms of what is trending this week on Ticker Home?

Ian Ugarte (00:51):

Yeah. I look at a news article from Malcolm Sutton ABC News talking about working from home and how COVID has actually brought a new complication, occupational health and safety. What’s going to happen if someone trips over a cord or spills coffee on themselves while they’re sitting at home at work and do we need to have to start assessing individual workplaces as your home to make sure that you’ve got insurance cover on there? And does there have to be an audit done? And interestingly enough, the Property Council of Australia did some research from January 20 to 21. 9.6% was the vacancy rate in commercial property, now up to 11.7% year on year, and that’s the largest jump since 1997. So this trend was not only just in metro offices, but it was also regional. And a survey done amongst workers have said that even post pandemic they actually don’t want to go into work. They want to spend a maximum amount of two days at work and possibly the rest of the time in their home office.

Adrian (01:47):

Yeah. That will be one to watch. We’re hearing all sides of that conversation. People talking about whether they work from home and put the cat up on the screen accidentally through their Zoom camera. Not sure if you saw that one recently. That was absolutely hilarious. Don’t do that to us. Okay, Ian. Don’t do that to us.

Ian Ugarte (02:01):

I haven’t got that filter, but I’ve got the Oompa Loompa filter with green eyebrows.

Adrian (02:08):

We’ll have to drop that in at some point. Maybe not this time around. In terms of there was that one as well. There’s a lot of YouTube clips we can look at of course. Let’s talk about Australian property prices potentially rising. There’s some lending laws that might be relaxed here that experts are talking about. What have you got?

Ian Ugarte (02:26):

Yeah, [inaudible 00:02:28]. During the middle of COVID, there will be concern about the property cycle and what was going to happen to it. So they’re talking about relaxation of lending laws. We’ll talk a little bit more about it in this episode as well, but essentially the average borrow, we’ll probably be able to get $70,000 of extra finance to be able to kick in and do more. Now, this is in April last year, I was one of the very few predicting an up slide, not a down slide, in property cycle. And CBA was talking about 10% doom and gloom and then there was someone up to 30%. low and behold, December quarter hit last year, we’ve now hit the highest median house prices across most of the metro cities. Sydney well above $1.2 million. Melbourne above $900,000. Brisbane, the little shy think country town, which is actually turning into a bigger country town now is well over $700,000.

I think there’s great value in there. CBA is predicting an 8% rise this year and the doom and gloom is gone. The easing of lending is really going to stimulate the market again. And the rest of the article is commentary about people putting themselves at risk with the lending criteria changing, but more importantly right now, quicker application process is a better for lenders to be able to get loans approved. There’s one lender at the moment that’s taking 17 days to pick up your file 17 days after you put in an application and that needs to change so that we can get some stimulation into the marketplace.

Adrian (03:51):

Yeah. Well, this might lead us into our final one about into state rushing into Queensland during the COVID-19 pandemic. You had another point on that one.

Ian Ugarte (03:59):

Yeah. This article here by Michael Way and Sheila Pain, Queensland is absolutely booming right now. And so to get it into context, the net migration to Western Australia was 681 people. So they were in second place. In first place was Queensland at 7,237 people entering as a net migration. Victoria lost 3,749 of them just under 4,000 from New South Wales. Nationally, we had 76,200 people moving into state. That’s the lowest number since 2014 and really bolt border restrictions is a culprit to all of this. 11,200 people have left the big smoke and gone out to regional Australia. And it’s an interesting trend to follow that one.

Adrian (04:45):

Well, just on that just briefly, I mean, it’s hard to answer in a way, but do you think that sort of trend is only going to continue over coming years?

Ian Ugarte (04:55):

Oh for sure. I mean, what we’ll talk about today and the bits and pieces that are coming through right now, we’ve certainly got an ability to see that regional Australia has been undervalued for the last 20 years. Metro has gone gangbusters and it’s now catch up time for regional.

Adrian (05:11):

Yeah. Fascinating. We’ll get into that now. So yeah, this is our extended conversation. There our news topics, and now we get right into it. So to begin, we’re all pretty much accustomed to the home office by now as we know. And for some people, this means their kitchen table, Ian. What do you see this as the new trends in the home office space for 2021?

Ian Ugarte (05:30):

Yeah. Short term, people thought the kitchen table, the dining table was going to cut it, but unfortunately COVID has gone on and that’s not no longer a feasible place to be able to hold your home office from. So we’re now seeing a dedicated office space. And my market intelligence is that people are now adding to the wishlist for their dream home a space that’s separated from the rest of the house. So they’re looking for the extra spare bedroom, a granny flat or a studio, an attached garage that they can actually convert and use that as office space. And in some states, there’s actually processes that you can follow without needing to get council approval. For an example, there’s an exempt develop in New South Wales where you can put a 10 square meter studio in your backyard. As long as you use a qualified carpenter to put it together and you meet all the codes, you can do it without getting approval.

And so why do we want a dedicated space? Well, we’ve all seen those Zoom fails that you see in the background there right now, naked partners and kids infiltrating and their cat. And interestingly the lawyer saying, “Judge, I’m not a cat.” Well, clearly cats don’t talk. And add to that the safety issues we talked about earlier, but more importantly, there’s also a tax deductibility to be able to work from home. It does affect your capital gains tax if you do so into the future, but it’s another great outcome where you’d actually be saving yourself some money or at least saving some tax by working from home.

Adrian (06:55):

So with the working from home situation people are now exploring, what’s possible regionally given they no longer need to be close to the company’s office? So how has people’s wishlist of what they needed to enable them to move to regional Australia changed in the past 12 months or so?

Ian Ugarte (07:12):

Yeah, it’s changed dramatically. And traditionally employers have always based living close to their employment. So that’s either am I on a train line or where am I within 45 minutes driving of the front door of my office space? And so they’ve clustered their living according to where they work. So now they’re only needing to travel sometimes a week, once a week, once a fortnight, once a month for some employees, some never. So we’re now seeing the doors of regional Australia opening up with the flexibility of the home office given the expanded relief of not needing to travel to dedicated office spaces every day, which means we’re now seeing the movement of people one to two hours away from the metro areas or the major cities and it’s cheaper to buy.

And there was less competition for purchasing in regional. It’s now increased, but not only are you working from home, you’ve got lifestyle. It’s not as busy as the big smoke. And there’s a real community feel about a lot of these regional centers. And that’s well away from the bustling city. And I know that because I moved well away from the bustling city of Sydney about 10 years ago now. And it’s been absolutely awesome for myself and my family.

Adrian (08:23):

Yeah. I mean, I can speak to that, Ian. I went to a friend’s place over New Year’s Eve and they just bought a place about an hour and 20 outside of Melbourne. So all of us, we live within five K’s of the city here in Melbourne. They bought a place down there for I think about 1.2 million, an unbelievable place, four bedroom, which you could never get close to the city. And it’s only about an hour’s drive and they come up once or twice during the week, but that has to be something we need to look at more. Don’t you think? My goodness, it felt so different to be out there.

Ian Ugarte (08:54):

And I’ll give you my scenario.

Adrian (08:57):

Yeah, go for it.

Ian Ugarte (08:58):

We moved out of Sydney. There’s a point in time where you realize you don’t need to be in Sydney. So we moved out. We moved to the sunshine coast. I’m here in my recording studio that’s built in a 12 by nine meter shed. And not only do I get to work home, I’ve got two acres. I’ve got a waterfront teach. I have my home down here. I’ve got an office space as well. And we’ve got our general manager and her family that lives on site. We’ve got the most. You just cannot believe how nice it is to live regionally. I’m 15 minutes from the beach. I’m 15 minutes from everywhere else that I need to be. And I can get to a major airport if I need to travel around the country. It’s absolutely awesome.

Adrian (09:35):

No, I love it. No, I love that sort of story. I think we need to talk more about it so people get these ideas in their head in some ways. All right, moving on. There’s always been this search for the sun in Australia of course. Have the recent moves to the Northern States been about the sun chasers or in your view, is there something more at play with these moves?

Ian Ugarte (09:53):

Yeah, look, the sun still plays a big role, but the bigger role here is that there’s border insecurity. And so whereas people have been stuck or might get stuck or they feel like it’s stuck, whether their business may get shut down. And you look at the fitness industry that’s been shut down a few times in different areas, where the opportunities lie is where people are going to. And so people may have watched what’s happened across Australia and they’ve made their choices and picked their choices. And Queensland has fared fairly well during the whole of COVID.

So people have moved their lives, families, and businesses 10 years earlier. So those ones who said, “You know, we’ll just live here for 10 years more and then we’ll go to the sunshine.” Well, they’re now saying, “You know what? I’ve had enough of having the border insecurity of what’s going on. Let’s move right now.” And that pent up demand has now triggered something big, especially in Southeast Queensland. We’ve got some regional parts last week. We talked about days on market where we’ve now down to below 40 days on the market as far as listings things. And that is a very peak area when property prices are uncontrollable and the property market up here is in its stride. And it’s not a market that I like buying in, but it’s certainly reacting in a strong way.

Adrian (11:04):

And one of the big shifts in the housing and property markets has of course being the move by banks to adjust the way they assess and lend money for homes, shifting the owners from them to ensure the borrower can make repayments back to the borrower themselves to ensure they can meet these repayments. So what are the impacts of this shift by the banks?

Ian Ugarte (11:23):

Oh, there’s going to be a huge impact on the market when we’re shifting from lender responsibility to borrower responsibility. And if we look at the early 2000s, that’s where we had the stat deck low doc loans. So that essentially meant you’d put a signature on a piece of paper and you’d tell me how much you earn and we will give you the money. Now, thankfully, the Australian Prudential Regulatory Authority or APRA saw the writing on the wall that that was too dangerous and they started to pull back and put the facility onto the lender to make sure that the lender was responsible in giving money out.

The Americans didn’t do that, which is why the GFC happened and people in America just walked away from their loan. So here we’ve got the Australian government stimulating the marketplace to say, “Let’s get some more out there.” Will we go back to the past of where we had those stat deck low doc loans? I don’t think so, but what I think you will see is the Aussie John Simon or Mark Boris or serial entrepreneurs similar to them coming back into the market and creating a lending frontier or a second tier lending facility that will be very, very aggressive in being able to pick up the investor market in property.

Adrian (12:28):

And one of the things that I know you talk a lot about that I’ve not heard of before is the emergence of the office home. So what is an office home and how does it differ from a home office?

Ian Ugarte (12:39):

Well, look, you look back at research and Roy Morgan research in June 2020 showed that there are 4.3 million extra Australians working from home. Owners of businesses have long-term leases. And if you look at a property like this one here with 50 offices, let’s put a boardroom in, let’s create four key offices for the key workers, the people that really run this business for the owner. And let’s then make sure that those offices have the extra one bedroom apartment attached through the backend. The office space isn’t being used anymore so they have a kitchen and a bathroom in there. They have a one bedder and then they have some key meeting rooms. The boardroom acts as the place where once a month, the whole company comes together and they make sure they have their monthly meeting. But in between all of that, you’ve got these four key personnel that run this business that have got close proximity to the office.

Now, let’s look at the advantages of this. They’re now not needing to travel every day. Yes, they’re closer to the work. And you might say, “Well, they work more. They’re probably are already working long hours and millennials know what this is like.” But what if we said to them the owner of this business who now has got empty floor space says to this four key workers, “Please come in and rent. I’m going to give you really little rent. So you’re going to save yourself half your weekly rent. I’m going to include utilities, save yourself some money because I want you to buy a house in the next three to five years because you’ve really influenced my business in a positive way and that’s how I want you to get into the property market.” And so the office home is certainly going to be something you’ll see in the next five years.

Adrian (14:08):

Mate, I love it. Sounds good to me. Let’s hope our governments and policymakers can get on board. Maybe you need to become one of them, Ian Ugarte, because I love the way you speak.

Ian Ugarte (14:17):

I’m not sure I hate myself enough, but let’s see where we go.

Adrian (14:20):

Mate, great stuff from you. I learn something every time as do our viewers. We’ll talk to you again next week, okay.

Ian Ugarte (14:26):

Thanks Adrian.

Adrian (14:27):

Awesome stuff. Ticker Home of course presented by our partners at Small is the New Big who are on a mission to create 1 million affordable homes in the next 10 years and help Aussies struggling with housing stress. They provide unique property education programs, and services for socially conscious property investors. Together, they’re changing the housing landscape in Australia one co-living cashflow positive property at a time. Learn more at sitnbdev.wpengine.com. What an episode that was. That’s the website you need to go to. Oh, I learn something every single week. Catch you soon.

Adrian (00:08):

Hi there. 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. It’s a pleasure every week to welcome my co-host, Ian Ugarte, co-founder of Small is the New Big. Hello mate, good to see you. 

Ian Ugarte (00:23):

Hi, Adrian, how are you? Another week, it’s been pretty good for the last week in property.

Adrian (00:27):

Absolutely. Well, we’re going to get to that in just a moment with our talking points first. Ticker Home of course is presented by our partners at Small is the New Big who are on a mission to create one million affordable homes in the next 10 years and help Aussies struggling with housing stress. So learn more at sitnbdev.wpengine.com. All right Ian, what have we got in terms of what is trending this week on Ticker Home?

Ian Ugarte (00:51):

Yeah. I look at a news article from Malcolm Sutton ABC News talking about working from home and how COVID has actually brought a new complication, occupational health and safety. What’s going to happen if someone trips over a cord or spills coffee on themselves while they’re sitting at home at work and do we need to have to start assessing individual workplaces as your home to make sure that you’ve got insurance cover on there? And does there have to be an audit done? And interestingly enough, the Property Council of Australia did some research from January 20 to 21. 9.6% was the vacancy rate in commercial property, now up to 11.7% year on year, and that’s the largest jump since 1997. So this trend was not only just in metro offices, but it was also regional. And a survey done amongst workers have said that even post pandemic they actually don’t want to go into work. They want to spend a maximum amount of two days at work and possibly the rest of the time in their home office.

Adrian (01:47):

Yeah. That will be one to watch. We’re hearing all sides of that conversation. People talking about whether they work from home and put the cat up on the screen accidentally through their Zoom camera. Not sure if you saw that one recently. That was absolutely hilarious. Don’t do that to us. Okay, Ian. Don’t do that to us.

Ian Ugarte (02:01):

I haven’t got that filter, but I’ve got the Oompa Loompa filter with green eyebrows.

Adrian (02:08):

We’ll have to drop that in at some point. Maybe not this time around. In terms of there was that one as well. There’s a lot of YouTube clips we can look at of course. Let’s talk about Australian property prices potentially rising. There’s some lending laws that might be relaxed here that experts are talking about. What have you got?

Ian Ugarte (02:26):

Yeah, [inaudible 00:02:28]. During the middle of COVID, there will be concern about the property cycle and what was going to happen to it. So they’re talking about relaxation of lending laws. We’ll talk a little bit more about it in this episode as well, but essentially the average borrow, we’ll probably be able to get $70,000 of extra finance to be able to kick in and do more. Now, this is in April last year, I was one of the very few predicting an up slide, not a down slide, in property cycle. And CBA was talking about 10% doom and gloom and then there was someone up to 30%. low and behold, December quarter hit last year, we’ve now hit the highest median house prices across most of the metro cities. Sydney well above $1.2 million. Melbourne above $900,000. Brisbane, the little shy think country town, which is actually turning into a bigger country town now is well over $700,000.

I think there’s great value in there. CBA is predicting an 8% rise this year and the doom and gloom is gone. The easing of lending is really going to stimulate the market again. And the rest of the article is commentary about people putting themselves at risk with the lending criteria changing, but more importantly right now, quicker application process is a better for lenders to be able to get loans approved. There’s one lender at the moment that’s taking 17 days to pick up your file 17 days after you put in an application and that needs to change so that we can get some stimulation into the marketplace.

Adrian (03:51):

Yeah. Well, this might lead us into our final one about into state rushing into Queensland during the COVID-19 pandemic. You had another point on that one.

Ian Ugarte (03:59):

Yeah. This article here by Michael Way and Sheila Pain, Queensland is absolutely booming right now. And so to get it into context, the net migration to Western Australia was 681 people. So they were in second place. In first place was Queensland at 7,237 people entering as a net migration. Victoria lost 3,749 of them just under 4,000 from New South Wales. Nationally, we had 76,200 people moving into state. That’s the lowest number since 2014 and really bolt border restrictions is a culprit to all of this. 11,200 people have left the big smoke and gone out to regional Australia. And it’s an interesting trend to follow that one.

Adrian (04:45):

Well, just on that just briefly, I mean, it’s hard to answer in a way, but do you think that sort of trend is only going to continue over coming years?

Ian Ugarte (04:55):

Oh for sure. I mean, what we’ll talk about today and the bits and pieces that are coming through right now, we’ve certainly got an ability to see that regional Australia has been undervalued for the last 20 years. Metro has gone gangbusters and it’s now catch up time for regional.

Adrian (05:11):

Yeah. Fascinating. We’ll get into that now. So yeah, this is our extended conversation. There our news topics, and now we get right into it. So to begin, we’re all pretty much accustomed to the home office by now as we know. And for some people, this means their kitchen table, Ian. What do you see this as the new trends in the home office space for 2021?

Ian Ugarte (05:30):

Yeah. Short term, people thought the kitchen table, the dining table was going to cut it, but unfortunately COVID has gone on and that’s not no longer a feasible place to be able to hold your home office from. So we’re now seeing a dedicated office space. And my market intelligence is that people are now adding to the wishlist for their dream home a space that’s separated from the rest of the house. So they’re looking for the extra spare bedroom, a granny flat or a studio, an attached garage that they can actually convert and use that as office space. And in some states, there’s actually processes that you can follow without needing to get council approval. For an example, there’s an exempt develop in New South Wales where you can put a 10 square meter studio in your backyard. As long as you use a qualified carpenter to put it together and you meet all the codes, you can do it without getting approval.

And so why do we want a dedicated space? Well, we’ve all seen those Zoom fails that you see in the background there right now, naked partners and kids infiltrating and their cat. And interestingly the lawyer saying, “Judge, I’m not a cat.” Well, clearly cats don’t talk. And add to that the safety issues we talked about earlier, but more importantly, there’s also a tax deductibility to be able to work from home. It does affect your capital gains tax if you do so into the future, but it’s another great outcome where you’d actually be saving yourself some money or at least saving some tax by working from home.

Adrian (06:55):

So with the working from home situation people are now exploring, what’s possible regionally given they no longer need to be close to the company’s office? So how has people’s wishlist of what they needed to enable them to move to regional Australia changed in the past 12 months or so?

Ian Ugarte (07:12):

Yeah, it’s changed dramatically. And traditionally employers have always based living close to their employment. So that’s either am I on a train line or where am I within 45 minutes driving of the front door of my office space? And so they’ve clustered their living according to where they work. So now they’re only needing to travel sometimes a week, once a week, once a fortnight, once a month for some employees, some never. So we’re now seeing the doors of regional Australia opening up with the flexibility of the home office given the expanded relief of not needing to travel to dedicated office spaces every day, which means we’re now seeing the movement of people one to two hours away from the metro areas or the major cities and it’s cheaper to buy.

And there was less competition for purchasing in regional. It’s now increased, but not only are you working from home, you’ve got lifestyle. It’s not as busy as the big smoke. And there’s a real community feel about a lot of these regional centers. And that’s well away from the bustling city. And I know that because I moved well away from the bustling city of Sydney about 10 years ago now. And it’s been absolutely awesome for myself and my family.

Adrian (08:23):

Yeah. I mean, I can speak to that, Ian. I went to a friend’s place over New Year’s Eve and they just bought a place about an hour and 20 outside of Melbourne. So all of us, we live within five K’s of the city here in Melbourne. They bought a place down there for I think about 1.2 million, an unbelievable place, four bedroom, which you could never get close to the city. And it’s only about an hour’s drive and they come up once or twice during the week, but that has to be something we need to look at more. Don’t you think? My goodness, it felt so different to be out there.

Ian Ugarte (08:54):

And I’ll give you my scenario.

Adrian (08:57):

Yeah, go for it.

Ian Ugarte (08:58):

We moved out of Sydney. There’s a point in time where you realize you don’t need to be in Sydney. So we moved out. We moved to the sunshine coast. I’m here in my recording studio that’s built in a 12 by nine meter shed. And not only do I get to work home, I’ve got two acres. I’ve got a waterfront teach. I have my home down here. I’ve got an office space as well. And we’ve got our general manager and her family that lives on site. We’ve got the most. You just cannot believe how nice it is to live regionally. I’m 15 minutes from the beach. I’m 15 minutes from everywhere else that I need to be. And I can get to a major airport if I need to travel around the country. It’s absolutely awesome.

Adrian (09:35):

No, I love it. No, I love that sort of story. I think we need to talk more about it so people get these ideas in their head in some ways. All right, moving on. There’s always been this search for the sun in Australia of course. Have the recent moves to the Northern States been about the sun chasers or in your view, is there something more at play with these moves?

Ian Ugarte (09:53):

Yeah, look, the sun still plays a big role, but the bigger role here is that there’s border insecurity. And so whereas people have been stuck or might get stuck or they feel like it’s stuck, whether their business may get shut down. And you look at the fitness industry that’s been shut down a few times in different areas, where the opportunities lie is where people are going to. And so people may have watched what’s happened across Australia and they’ve made their choices and picked their choices. And Queensland has fared fairly well during the whole of COVID.

So people have moved their lives, families, and businesses 10 years earlier. So those ones who said, “You know, we’ll just live here for 10 years more and then we’ll go to the sunshine.” Well, they’re now saying, “You know what? I’ve had enough of having the border insecurity of what’s going on. Let’s move right now.” And that pent up demand has now triggered something big, especially in Southeast Queensland. We’ve got some regional parts last week. We talked about days on market where we’ve now down to below 40 days on the market as far as listings things. And that is a very peak area when property prices are uncontrollable and the property market up here is in its stride. And it’s not a market that I like buying in, but it’s certainly reacting in a strong way.

Adrian (11:04):

And one of the big shifts in the housing and property markets has of course being the move by banks to adjust the way they assess and lend money for homes, shifting the owners from them to ensure the borrower can make repayments back to the borrower themselves to ensure they can meet these repayments. So what are the impacts of this shift by the banks?

Ian Ugarte (11:23):

Oh, there’s going to be a huge impact on the market when we’re shifting from lender responsibility to borrower responsibility. And if we look at the early 2000s, that’s where we had the stat deck low doc loans. So that essentially meant you’d put a signature on a piece of paper and you’d tell me how much you earn and we will give you the money. Now, thankfully, the Australian Prudential Regulatory Authority or APRA saw the writing on the wall that that was too dangerous and they started to pull back and put the facility onto the lender to make sure that the lender was responsible in giving money out.

The Americans didn’t do that, which is why the GFC happened and people in America just walked away from their loan. So here we’ve got the Australian government stimulating the marketplace to say, “Let’s get some more out there.” Will we go back to the past of where we had those stat deck low doc loans? I don’t think so, but what I think you will see is the Aussie John Simon or Mark Boris or serial entrepreneurs similar to them coming back into the market and creating a lending frontier or a second tier lending facility that will be very, very aggressive in being able to pick up the investor market in property.

Adrian (12:28):

And one of the things that I know you talk a lot about that I’ve not heard of before is the emergence of the office home. So what is an office home and how does it differ from a home office?

Ian Ugarte (12:39):

Well, look, you look back at research and Roy Morgan research in June 2020 showed that there are 4.3 million extra Australians working from home. Owners of businesses have long-term leases. And if you look at a property like this one here with 50 offices, let’s put a boardroom in, let’s create four key offices for the key workers, the people that really run this business for the owner. And let’s then make sure that those offices have the extra one bedroom apartment attached through the backend. The office space isn’t being used anymore so they have a kitchen and a bathroom in there. They have a one bedder and then they have some key meeting rooms. The boardroom acts as the place where once a month, the whole company comes together and they make sure they have their monthly meeting. But in between all of that, you’ve got these four key personnel that run this business that have got close proximity to the office.

Now, let’s look at the advantages of this. They’re now not needing to travel every day. Yes, they’re closer to the work. And you might say, “Well, they work more. They’re probably are already working long hours and millennials know what this is like.” But what if we said to them the owner of this business who now has got empty floor space says to this four key workers, “Please come in and rent. I’m going to give you really little rent. So you’re going to save yourself half your weekly rent. I’m going to include utilities, save yourself some money because I want you to buy a house in the next three to five years because you’ve really influenced my business in a positive way and that’s how I want you to get into the property market.” And so the office home is certainly going to be something you’ll see in the next five years.

Adrian (14:08):

Mate, I love it. Sounds good to me. Let’s hope our governments and policymakers can get on board. Maybe you need to become one of them, Ian Ugarte, because I love the way you speak.

Ian Ugarte (14:17):

I’m not sure I hate myself enough, but let’s see where we go.

Adrian (14:20):

Mate, great stuff from you. I learn something every time as do our viewers. We’ll talk to you again next week, okay.

Ian Ugarte (14:26):

Thanks Adrian.

Adrian (14:27):

Awesome stuff. Ticker Home of course presented by our partners at Small is the New Big who are on a mission to create 1 million affordable homes in the next 10 years and help Aussies struggling with housing stress. They provide unique property education programs, and services for socially conscious property investors. Together, they’re changing the housing landscape in Australia one co-living cashflow positive property at a time. Learn more at sitnbdev.wpengine.com. What an episode that was. That’s the website you need to go to. Oh, I learn something every single week. Catch you soon.