The Property Trio Cate Bakos, David Johnston and Mike Mortlock

The March 2024 data is out, and Cate concedes she got it wrong with her March data predictions. She's considered the reasons why, and Cate sheds light on a possible reason for this, and it relates to bias.

Dave overviews the last twelve months of growth, and he points out that the last year has delivered almost 10% growth for the combined capitals; something very few would have predicted.

Cate sheds light on some of the enquiry she's getting, and some of the reasons why investors are turning away from ultra-hot markets. Perth is one example of a hot market, and the Trio explore how much steam remains in the Perth market.

Cate recalls a great article from Pete Koulizos in the recent PIPA Newsletter... he believes that Adelaide will continue to perform. Tune in to hear more...

Mike segues into rental performance. Median rents as a function of income highlight the expensive cities for tenants. Cate's insights into house versus unit rents is interesting also. Is there a correlation between increased land tax and increasing house rents? Mike explores.

Mike dares to broach the question Perth's climbing rents and tight vacancy rates; surely this signals that Perth is not at the top of the cycle.

Sales data is showing volumes above the five year average; although the Trio plead with CoreLogic to reinstate listing numbers and agent appraisal activity.

Distressed listings are showing an uptick in a few states, however. Are any jungle drums beating in Victoria? Cate delves into the data and asks the hard questions, although Dave wonders if distressed listings paint a picture of the overall health of a given market. Is there a correlation?

The Westpac consumer sentiment index isn't showing a dramatically different outlook since last month, but at a state level the indices aren't all aligned. Dave hints at the cities that are showing a more optimistic outlook.

Investment lending has increased despite headwinds such as interest rates, additional taxes and onerous rental reforms.

This state breakdown of investment activity is intriguing, particularly the disparity between Vic/Tas and the other, hotter states.

And... time for our gold nuggets...

Cate Bakos's gold nugget: Cate considers how we interpret data, and how bias can be introduced.
 
Dave Johnston's gold nugget: "n order to avoid FOMO, understand the right price point for yourself. Work out your strategy and match up the property location and type to your strategy. Look at the long term when you're making your property decision.

Mike Mortlock's gold nugget: "You can't buy the data, you can only buy the property."

Shownotes: https://www.propertytrio.com.au/2024/04/15/ep-253-march-market-update/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

Sally is about to purchase her first home. She has a deposit of $300K and is targeting a purchase price of $700K - $800K. Sally wants to live in the home, but is feeling that her borrowing capacity as an owner occupier is holding her back. She asks the Trio whether she should initially purchase as an investor in order to borrow more. Dave breaks down Sally's initial strategy with a few clever questions.

Sally is targeting Melbourne and she works in town. She is thinking of living in it for 5-10 years, and then upgrading to a larger family home when the time comes, keeping this initial property as an investment. Five to ten years is a long time though, and Sally is keen to find a property that will be adequate for her for a 5-10 year period. Cate has some thought-provoking ideas for Sally to consider. Cate also talks about tenure, and the importance of buyers making sure they have at least five years of tenure in their plan. 

Sally has indeed stated that she has done some homework and she’s identified that 2BR townhouses and villa units might be the ideal purchase. Cate demystifies villa units and recalls the conversations she had in previous eps with Pete about dwelling description variations around the nation. 

Sally has made a deliberate decision to avoid apartments. But.. not all apartments are equal. 

"There's apartments, and then there are apartments". 

Which are the variety that Cate thinks are absolute out-performers? Tune in to find out. 

Given townhouses aren’t all equal, the Trio unpack the various types of townhouses. 

Sally notes that the market conditions have changed a bit over the last couple of years in Melbourne.

How can Sally best navigate the Melbourne market over the coming months?  Sally circles back to her original suggestion about getting an investment loan for a property that she wants to live in. But as Dave explains, it’s not that easy.  How do the banks regulate this?

Lastly, Sally is unclear on whether she gets the stamp duty benefits if it’s an investment loan. Dave sheds light on some great tips for our loyal listener. 

.....and the gold nuggets:

Cate Bakos’s gold nugget: Sally can use the ‘sold’ tab on the property search engine to get a great peg in the sand.

Dave Johnston’s gold nugget: “Make sure you can purchase a property that you can see yourself living in for 5-7, even 10 years. Can you get a better quality asset in a better location, even if it means forgoing stamp duty savings?”

Mike Mortlock’s gold nugget: Mike congratulates Sally for saving $300,000 for a deposit, and he assures Sally not to worry about Melbourne’s slow performance.

Shownotes: https://www.propertytrio.com.au/2024/04/08/listener-question-owner-occupier-versus-investor-dilemma/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM


For today's episode, Dave throws it out to Mike... the paper that Mike's business has uncovered relates to growth of rents in units, contrasted to house rental price growth. Median rental growth for units have eclipsed that of houses, but why?

The Trio unpack their theories. Are investors pushing rents up or is the supply/demand equation speaking up? Mike hands the wooden spoon to the Victorian Parliament "People always want to be close to the action".

Mike ponders the pull of the city. And Cate mentions traffic congestion... is it an issue?  Labour shortage is challenging our economy. As Mike and Dave point out, "Anyone who wants a job, can have one."

Cate sheds light on unit performance in Melbourne and the investors who feel disenfranchised. We now have an undersupply issue that has challenged units in Melbourne.

But what is Mike's data telling us?  "How is our aging population likely to challenge this data?", asks Dave. Mike shares his thoughts. And why is WA outperforming? The Trio shed light on this outperformance.
 
And our gold nuggets:

Dave Johnston's gold nugget: Dave looks forward to the pub!

Mike Mortlock's gold nugget: Unit yields may outperform houses. Mike ponders affordability and concludes that units should be considered. 

Cate Bakos's gold nugget: "There are markets within markets. It's pockets, it's streets, it's orientation. You have to remember to use the data wisely when you have a specific wish list." 

Show notes: https://www.propertytrio.com.au/2024/04/01/median-rental-gap-between-houses-and-units-closing/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

For today's episode, the Trio are diving into the sophisticated world of investment borrowing and they'll unpack the nuances of leveraging borrowed funds to not just acquire investment properties, but also to optimise the financial structure surrounding your investment to legally optimise deductions.

Despite accountants being tax expertes, they are not mortgage strategists and so it is important that investors understand these strategies and are able to impliment them with their strategic mortgage broker.

Whether our listeners are seasoned investors or just starting out, today's masterclass with Dave will equip buyers with the insights to navigate the complex landscape of investment borrowing.


Dave launches into the ep with the first tip about investment borrowing. But he confuses Mike about good debt versus bad debt. Cate defines good debt, bad debt and terrible debt!

Should buyers try to borrow the full purchase price plus all purchase costs? Surely this could feel alarming for those who are debt averse, but the Trio shed light on when this is a great idea, and why it's so beneficial for investors. 

Cate raises the concept of 106% Loan to Value Ratio and Dave distils how this works, and why it's not an uncommon LVR.

Why is 80% LVR such a well-versed figure though, and what lender benefits to some professionals get to enjoy in relation to higher LVRs?  "If you read in the media, it's all about the cost you have to save for a deposit, but who really saves 20%?", asks Mike. Good question, Mike. The Trio shed light on the reality of this claim.

Is there any reason to set up the investment loan limit for more than the full purchase price plus costs? And when is this a dangerous play? Mike delves a bit deeper... From cash-out policies to drawdown processes, Dave walks our listeners through this complex question. 

"The true cost of your interest rate after the tax deduction is cheaper than the cost of your interest on your home loan (as long as you're above the tax free threshold with your earnings." What does Dave mean by this, and why is this so critical to understand in relation to 'good debt'? 

Which tricky scenarios might fall outside of that general rule of paying interest-only on investment, and P&I on your home loan? Dave has three scenarios, and Cate excitedly recognises that her own personal journey currently fits one of these quirks. 

And lastly, Dave has some general advice for listeners who are planning to upgrade their home and retain their old home as an investment. 

.... and our Gold Nuggets! 

Dave Johnston's gold nugget: "If you're getting strategic mortgage advice, make notes." The retention rate of detailed information isn't often compromised, and it's important for borrowers to be clear on their mortgage strategy and set up.

Mike Mortlock's gold nugget: Number one rule - investment debt is what you want to maximise, and home loan debt should be minimised. 


Cate Bakos's gold nugget: Not being afraid of good debt is important. But being aware of the worst kind of debt is also very important too. Unsecured, expensive and short-amortised debt can be problematic. "I highly recommend you talk to a strategic mortgage advisor if you have that kind of debt." 

Show notes: https://www.propertytrio.com.au/2024/03/25/mortgage-masterclass/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

The February 2024 data is out, and the Trio circle the headline; the ridiculously tight vacancy rates nationally. Mike compares houses and unit performance and ponders the drivers for unit purchasers. Dave delves into Perth's outperformance and notes the predictions he and Pete made eighteen months' prior.

Is buyer confidence up? Cate sheds light on her own experience at the coalface. But how does data lag impact the figures, and will Cate's prediction match the March data? Only time will tell... 

What is happening with the regions? For the quarter, combined regions have outperformed the combined cities, but why? The Trio unpack this.

Mike dares to broach the question... "Where is Melbourne at?" The Novocastrian dares to challenge the proud Melburnians with this question, but they rise to the challenge and shed light on what is going on in their home city with investors.  And have the regions suffered to the detriment of Melbourne's recovery? Not at all, but Cate explains the dynamics post-COVID. Cate also shares the value-proposition of houses in nearby regions versus apartments in Melbourne's inner-east. 

Vacancy rates are so tough on tenants right now and the Trio note that vacancies have tightened even further. From changed planning laws to talk of investor incentives, the jungle drums are beating. But sadly the Trio concur that conditions will continue to deteriorate until governments make a different kind of change. 

Listing activity is higher, yet sales volumes reflect that buyer demand is meeting supply and this coming weekend is set to be a stand-out weekend for auction numbers. But what will post Easter, and early winter look like?

"We only need to talk about rate decreases and people go crazy"

Rental values have re-accelerated in 2024. Feb recorded the highest rental reading for the last eleven months.

Will rent growth outpace capital growth? The Trio weigh in... and they don't all agree. 

The three year bonds curve shows that the money markets are predicting three rate reductions as an average cash rate. 

And... time for our gold nuggets...

Cate Bakos's gold nugget: For any prospective tenants out there, you have to be prepared to differentiate yourself in this tight vacancy rate environment.

Dave Johnston's gold nugget: This month suggests that so many data points are pointing towards a property price rebound this year, so if you are considering buying property, it's time to get your ducks in a row. Narrow in on your strategy, arrange your pre-approval and be clear on the plan. 

Shownotes: https://www.propertytrio.com.au/2024/03/18/ep-249-february-market-update/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

Dave and Cate man the fort this week while Mike does his charity ride... and the duo decided to tackle a great listener question about lending policy, loan structuring and the critical decisions that arise for many.

Jim and his partner have a very important scenario to run past the Trio. They are particularly high income earners with $500,000+ combined incomes, but there are some critical messages here that apply to all home owners and investors. The challenges they face have been exacerbated by increased interest rates, but they also have had second thoughts about the home that they selected in 2019.  The dilemmas are very real... how do Cate and Dave address them?

Our listeners chose to buy a house that had less appeal than some of the others that they were missing out on in the lofty hot market of Sydney. Why do people go for the lower hanging fruit? And what are the risks? Dave and Cate share their thoughts, from fatigue to FOMO.  Should they sell and rent-vest, re-purchase in another location, or hold their home? "They need to nail the big rock in the jar, which is where they'd like to live long-term to raise their kids." Dave's ever-pragmatic insights shine through... tune in to hear more.

Cate discusses the importance of partners being on the same page as each other, and this is a fantastic case in point in relation to rent-vesting. Rent-vesting is often a particularly challenging strategy for couples and Cate explains why. She also shares a personal experience dating back to 2008 that derailed hers and Ian's rent-vesting strategy. 

Jim asks, "Should we purchase a B grade property in an A grade suburb, or an A grade property in a B grade suburb?" Dave and Cate don't necessarily agree, but they each share their answers openly and Cate cites a great recent example.  Dave takes up the challenge to help Jim and his partner with the cashflow challenge. How can they ease the pressure, and what are some of the options? Dave and Cate enjoy a good banter about investment strategy, and in particular, retirement strategy... and this is what it's all about!

And lastly, can Jim and his partner achieve $140,000pa passive income? Dave uncovers the answer. 

.... and our Gold Nuggets! 

Dave Johnston's gold nugget: "If you do plan to purchase a family home, don't put off deciding what that looks like. Start planning for it!"

Cate Bakos's gold nugget: "I wish everyone could afford a property plan. If you can get that right from the start, you can establish things from the ground up". And when you're a high income earner, it really does carry some weight.

Mike Mortlock's gold nugget: Mike talks about the importance of being quite discerning when it comes to buying the family home, and not compromising on the key element.

Show notes: https://www.propertytrio.com.au/2024/03/11/listener-question-dilemma/