Partner of Keshab Chartered Accountants, Jeremy Iannuzzelli, joins Phil Tarrant once again to discuss how his portfolio has grown from 9 to 15 properties on a modest income over the last 18 months since their last chat, and the challenges he faced along the way.
Jeremy also reveals how he views the current property market, how people are struggling with debt using equity to purchase a decreasing asset as opposed to reinvesting as well as the advice he gives to his clients with the current financial markets.
The accountant and investor also discusses the key cities which he has seen grow and decline over the last few years, and where he sees these cities going in the future.
You will also hear about how APRA changes and regulations are impacting investors, the key questions to ask your accountant and his goals for his portfolio.
SUBURBS MENTIONED IN THIS EPISODE:
RELATED AREAS OF INTEREST:
If you liked this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: Facebook, Twitter and LinkedIn. If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!
Announcer: Welcome to the Smart Property Investment Show with your host, Phil Tarran.
Phil Tarrant: Hey. G'day, everyone. It's Phil Tarrant here. I'm the host of the Smart Property Investment Show. How are you going? Thanks for joining us. I hope you're enjoying the Christmas, New Year period. Hopefully you'll spend some time relaxing with family, and that's always the idea. But I always like to use this period to think about property. I'm always thinking about property, but this time of the year is a good time to reflect and recharge. We're gonna have a bit of a chat today. Back to the future. I've got someone back in the studio who we haven't seen for well over a year and a half. He came in, in March 2016. A guy by the name of Jeremy Iannuzzelli, and... Did I get that right?
Jeremy Iannuzzelli: You did, mate. You did.
Phil Tarrant: Oh, that was good. And he was a reasonably popular podcast guest. The story back then, go and check it out. Adam, when was it? 16th of March 2016, or look for it on your iTunes and tune into it. At that point in time he was a young investor, under 30. He was on a modest income and he had nine properties to his name, and we had a chat about how a young, driven, passionate property investor can make such a good head-start in property irrespective of reasonably, sort of modest salary. But fortunate enough to be teamed to someone who... Or a few mentors, I guess, who got him into property, including his dad and my accountant, a guy called Munzurul Khan who, if you listen to the show a lot, you'll hear me talk about him. But Jeremy now works as a partner within that business with Munzurul called Keshab, and I've pulled him back into the studio to find out what he's been doing for the last year and a half. Has it been a good year and a half or...
Jeremy Iannuzzelli: Mate, it's definitely been a busy year and a half. Lots of things have happened and properties and getting engaged and moving into a partnership, obviously, within an accounting firm.
Phil Tarrant: So are you still on a modest income?
Jeremy Iannuzzelli: The income definitely has gone up. What people don't know is, with the income going up, the workload's increased about 10 times as well. So I suppose you've gotta work hard for your money. But that increase has taken me to another level and helped me get the property portfolio from nine closer to now 15, with a couple of things coming off building. So it's been a really, really busy year and a half. Life and investing as well.
Phil Tarrant: And relationships. It's all happening.
Jeremy Iannuzzelli: Relationships. It's all happening. Getting married in April to a beautiful young lady.
Phil Tarrant: A good Italian girl?
Jeremy Iannuzzelli: She's Australian, which is good. Mum and dad love her and the grandparents absolutely adore her as well, and she's a hard worker. She's a school teacher and she's another tax asset to have as well.
Phil Tarrant: There you go. Always thinking like an accountant. So you rocked up today in a fancy muscle car, so you're not struggling too much now with the dollars and cents. But you've gone from, what did you say? Nine to 15 properties in a year and a half. So you're not messing around either. Let's have a chat about that growth in your portfolio today and just also, you're an accountant so you do business stuff and you have SME clients and all that sort of stuff, but I know you also have a lot of Munzurul’s service, a lot of property investors.
So I'll just get some ideas from you or some observations around how you see the market and how people are sort of struggling or how they're going with securing debt at the moment and just some general stuff like that.
Jeremy Iannuzzelli: Yeah, it's been a big topic of conversation lately and I've been reviewing a lot of people's finances, I've always seemed to notice that during times of huge equity increases, I see some people live a little bit above their means. Yes, I went and bought a new car and I saved my pennies and paid cash for it.
Phil Tarrant: You paid cash did you?
Jeremy Iannuzzelli: I paid cash for it. I don't believe in getting a loan for a car that depreciates in value.
Phil Tarrant: So it's good debt versus bad debt.
Jeremy Iannuzzelli: Good debt versus bad debt always, but what I'm seeing and I have been really, really closely communicating with clients is as these equities increase so much over the last three or four years, I've seen them move where they had a lot of good debt into now a lot of bad debt.
Phil Tarrant: Or stupid debt.
Jeremy Iannuzzelli: Or stupid debt and I've seen a hell of a lot of Mercedes Benz being purchased lately, again using equity from their house because the interest rates are a lot cheaper than going out and getting say a normal car finance.
Phil Tarrant: So let's have a chat about that concept for a while. So what you are saying is that with interest rates, sort of principal interest or interest certainly ranging from very high threes to maybe low fives for interest only stuff. It's cheaper to use that money than using other debt facilities or finance facilities like a car loan or a credit card. You might be paying like 9% on a credit card where a car loan it might be sevens or eights right?
Jeremy Iannuzzelli: Correct.
Phil Tarrant: So people are seeing this increase in equity in their properties, they're going great, they'll redraw or refinance but instead of using that money to either go into a new property or leverage into a new property, they're going buy a car with it.
Jeremy Iannuzzelli: Correct, yeah. Everyone feels quite rich because you know you look at the house value, it's gone from 700, modest 700 doubled to 1.4 million. The debt hasn't changed, if anything it has gone up, interest rates have come down obviously during that time, and repayments have come down and people feel like there is a bit more cash to throw around. They don't feel as much strain or pain as they did prior or just post UFC. So I've been really trying to communicate with clients that during this time it's a time to expand. Count the chickens and maybe try and get a couple more, but some people feel the need that because John down the road went and bought a Mercedes Benz... They're cheaper than they were, say, 20 years ago, or relatively the same price, why not use a bit of equity to reward yourself?
There's nothing wrong with that, always believed that there's a bit of balance in lifestyle but when we start to see some negative numbers just recently in the media, with property prices especially here in Sidney, coming down 1.3% and that's just as a median or as an average. Some areas have come down lower, like for instance Campbelltown, I haven't seen a five in front of a sale price for two, three years and now when I do monitor that market quite a bit quite closely because I got properties in that area, I'm starting to see a five in front of those purchase prices.
So this little bit of decline that comes through, people don't understand that that cycle as it has gone up it will come down and loading up your home loan with say a $100,000 finance for a brand new car...
Phil Tarrant: At the top of the market.
Jeremy Iannuzzelli: At the top of the market.
Phil Tarrant: When their money is at as cheap as it's ever going to be.
Jeremy Iannuzzelli: Correct, it may not be that way forever and then when it does come time to maybe refinancing their own home, with all these upper changes that have come in and the service ability calculators becoming tougher and harder. That's when we start to see a lot of, I suppose negative things happen to people as the positives have happened in the past.
Phil Tarrant: This concept of using debt to secure assets, which go down in value, I agree with you that people have gotta, you know. If you gonna have your cake you might as well have a nice slice of it, you want a nice car, get a nice car, that's cool.
But if things get worse, at least with the property, it's an asset that you can sell unless you gone really wrong-ish, you better sell it for more than what you bought for it but if you're trying to offload a new Mercedes that cost you a $100,000 today you will probably try and sell it next year, it might be worth 50 grand or 60 grand.
Jeremy Iannuzzelli: Correct.
Phil Tarrant: It's, it's, you know...
Jeremy Iannuzzelli: Well its not the property itself that goes up in value, you're securing debt against an investment which is returning some form of income.
Phil Tarrant: Absolutely.
Jeremy Iannuzzelli: A car unfortunately, well, I'd love my Mustang to give me a little bit of return, unfortunately it chews up a bit more petrol than I expected. If anything there is a deficiency at the end of the week as a result of driving.
Phil Tarrant: Would you say so, speaking about you being an accountant now and servicing people. Are most people responsible, do you think? Or do you think at the moment people are a bit carried away?
Jeremy Iannuzzelli: I feel like my existing clients I think have been quite responsible, I feel like some newer clients I get unfortunately haven't been responsible because maybe some direction that they've received in the past hasn't been great.
But I'm hoping the general public is being responsible in this time, but at the same time we can just be quite, we can just have a very small observation and see the amount of things people are throwing around in terms of expensive holidays and you know the rise of Facebook and Instagram keeps us all in terms of a reality check to see what everyone's doing and we feel like there's a bit of fear of missing out so...
Phil Tarrant: That whole FOMO thing and a lot of, now, backlash coming on to it where they're saying that people's reliance on getting sort of dopamine from social media is that the negative mental health impacts... It can be all-consuming of people to try and benchmark themselves against others on social media who, let's be honest, don't really portray their real lives.
Jeremy Iannuzzelli: Of course.
Phil Tarrant: It's horrible and if you're one of those people who are social media obsessed and you wanna share how successful you are or look at people who are really successful just be careful though because, I don't wanna bang on about negatives around social media but it's a horrible thing.
Jeremy Iannuzzelli: Its got its positives and negatives but I receive a phone call at least once a week without hesitation from a client saying, "John's got, how is John getting all this stuff, I know he only earns roughly the same amount as me." But what John's not telling him is that he may be increasing equity in terms of increasing the amount of loan that he's got to buy these things. And yeah, I just see it all the time and always tell people, "Be patient, you know don't throw your money away just willy-nilly. There's always got to be a purpose for it and again, a reward is always a good thing." And you know, I've rewarded myself and I do encourage a lot of clients to reward themselves along the way. It's just a way for the motivation to keep being strong, but things have balance and we'll see over the next one or two years as maybe the city market does go down a little bit further, what it does do to the sentiment and the overall consumer sentiment around finances.
Phil Tarrant: Hey, you putting a budget together for your wedding? As an accountant, I imagine that's a bit of a challenge.
Jeremy Iannuzzelli: I have a fantastic, fantastic fiance. She has put Excel spread sheets together and I have paid all the expenses so far and we keep things in line with our budget. We have, I would say, splurged a bit on the wedding but I believe in if I'm going to do it once, I'm going to do it right.
Phil Tarrant: You gotta do it right.
Jeremy Iannuzzelli: We're gonna have a lovely wedding and quite a lovely memory.
Phil Tarrant: That's cool. I actually never added up how much my wedding cost me, I just didn't worry about it and just went, "It will be whatever it will be." Good fun. Yeah it's cool.
But that, I guess the base of that is you gotta spend money where it's worthwhile spending and not everything can be viewed as a investment decision.
Jeremy Iannuzzelli: Correct.
Phil Tarrant: It's okay to have emotional decisions sometimes and not always thinking about how money is working for you from giving your dollar return or a yield, but investment in experiences is a cool thing as well. It's all about the balance right?
Jeremy Iannuzzelli: I agree, big balances and I've probably learned that over the last year and a half, maybe two years about balance. And that's balance of properties as well and balance of work and balance of time and balance of relationships. So I've actually grown up, I think, a lot in the last year and a half to two years. To see things from different perspective and I just feel that as I've grown and learned a bit more of that balance and having good mentors like Munzurul and like my father and like other people around me, It's given me actually a lot more.
Phil Tarrant: Yeah.
Jeremy Iannuzzelli: By expecting less, and I've actually got more.
Phil Tarrant: We spoke about, a little bit, when we got to hear the last time about your dad, who is a senior accountant. He's sort of ex, one of the big accounting firms, quite senior in there. And I know he's doing his own thing now but how much of your financial literacy and discipline and insights into just money in general has been influenced by your old man? Because, a fair amount?
Jeremy Iannuzzelli: Huge. Yeah, fair amount, we definitely talk about it even though I don't live at home and haven't been at home for quite a while. It's a conversation we always have at least once a week. I get him to review my budgets and my Excels and I get him to scrutinise and criticise everything that I do. Not necessarily do I follow everything that he says, but I definitely get his opinion.
He's just seen the world, many more times over than me, He's now close to 60 and been through numerous property cycles and been through 80% interest rates and had investments and has investments and dealt with the big end of the world and dealt with the smaller end. So his influence on me, as well as Munzurul, as a person I always go back to many times, has been a huge portion to my success and having that consistency that they provide me with their experience has been fantastic as well.
Phil Tarrant: Is your dad a property man? Is he, because I know a lot of accountants go, "Oh I don't touch property."
Jeremy Iannuzzelli: Yeah, he's definitely a property man. He's also a shares man, he loves anything...
Phil Tarrant: What? Big blue chip stuff?
Jeremy Iannuzzelli: He does some spec-y stuff, again his motto is, "Only put on it what you're willing to lose," in terms of the speculation stuff. The blue chip stuff is where he's chasing a bit more of the yields and as of late, with a little bit of the blue chips coming down over the last couple of years, they've been providing him some good yields. So he's a bit of a balanced man, he's definitely not all in on one thing, but at his stage in his life his property investment it's much larger. There's got to be a lot of potential for development properties, he's got a couple of properties where it's multiple unit sites. Some commercial properties, Italians always love their commercial properties.
Phil Tarrant: They do.
Jeremy Iannuzzelli: And he's in a lot of syndication, so he's got a lot of clients who are property syndicators who deal on the big end of town and Dad will invest his money with that and there's some really, really good returns over short periods of time, and again more money, more profit one can make, more risk one can take as well.
Phil Tarrant: Sure. And what's he think about the growth in your public portfolio, so any months since we last got together, from nine to 15. Is he, does he think you're being ambitious or aggressive or does he think you should be speeding up?
Jeremy Iannuzzelli: He's always been a bit more of a balance person so he definitely has said to me, "Jeremy, Brisbane is something that you maybe put a little bit too much in there," and there's about six or seven properties up in Brisbane, and he was probably right, they have slowed down a little bit as a huge amount of investors...
Phil Tarrant: It's like downing growth.
Jeremy Iannuzzelli: It's like downing growth. Yeah. It's a huge amount of investors that have went into that southeast region of Brisbane and just flooded the properties, they flooded the market with a lot of rental properties. Yields have come down a little bit, believe it or not, from where I was once renting the 300, 320. That's probably now 300 or 280.
So I have seen the yields drop, I have seen a little bit of the growth drop, purely because of the supply on the market. So I did diverse into Melbourne and looked around the cheaper areas such as Julong and the Albeans just west of Melbourne CBD. And I've seen some really good growth there, so where I've probably slowed down on the breezy stuff, my Melbourne have definitely picked up the slack and Sidney, I've definitely seen growth in the last two years, but probably in the last six months I can definitely say I've seen some stagnation at the same time. Especially with the newer properties that I've purchased.
Phil Tarrant: What sort of stuff have you been buying?
Jeremy Iannuzzelli: So I've been looking now at a lot of the newer, upcoming areas in the South West region. So recently I, just after we spoke in March...
Phil Tarrant: Southwest Melbourne?
Jeremy Iannuzzelli: No, southwest Sidney, and I'll go into the South West Melbourne stuff as well. So southwest Sidney, I've really looked at that growth corridor...
Phil Tarrant: So Campbelltown.
Jeremy Iannuzzelli: Campbelltown, but more so looking towards Hoxton Park all the way through to say Narellan.
There's obviously that corridor along Camden Valley Way, which is becoming very popular, especially with a lot of home occupiers and younger couples, so I've been looking more towards the Leppington area, which I've secured quite a large block, and this was actually going to be my family home. And believe it or not, I bought it in my partner's name before I got engaged to her and that wasn't the best decision in the sense from the family side of things, cause they said, "What are you doing? You're crazy putting everything a 100% in her name."
Phil Tarrant: No mate you can't fight love.
Jeremy Iannuzzelli: I knew she was the one and I needed the land tax rate shelf. So we bought it 100% in her name and obviously engaged not long thereafter, and it was quite a large block.
Phil Tarrant: Did you propose on the block?
Jeremy Iannuzzelli: No, I proposed in a hot air balloon.
Phil Tarrant: Oh, did you?
Jeremy Iannuzzelli: About probably, give or take a half a kilometre in the air so, and I'm terrified of heights. So I overcome it and got on one knee...
Phil Tarrant: How did you work out the budget to, isn't there some very complicated algorithmic formula of what you're supposed to spend on an engagement ring? I could never work that out...
Jeremy Iannuzzelli: Well during that stage I was lucky and I probably did the at the right time, because I wasn't made a partner until July and I got engaged in February, so...
Phil Tarrant: Is that your excuse, is it?
Jeremy Iannuzzelli: That was the excuse, but no, I bought her the ring she wanted and the ring I thought she dreamt of and it was lovely. But yeah, we bought a 676 square metre block in June of 2016, registered in July of 2017. We paid about 476 for it, 676 square metres, which was one of the larger blocks in the Denham Court, Willowdale region.
Phil Tarrant: I know Denham Court, yeah.
Jeremy Iannuzzelli: Yeah, and I've known that area for a long time...
Phil Tarrant: That's up on the hill, right? That's really nice.
Jeremy Iannuzzelli: Yeah, back on the hill. And just, you know...
Phil Tarrant: Some pretty fancy joints up there.
Jeremy Iannuzzelli: Yeah, around the corner you've got multimillion dollar homes sitting on two or three acre lots, probably one road there, Denham Court Road, every house'd be worth anywhere between two and upwards of five or six million dollars.
Phil Tarrant: Yeah, nice vistas from up there.
Jeremy Iannuzzelli: Yeah, beautiful views and it's just a lovely culture there as well. But was supposed to be our dream mansion with the white lines at the front, the typical Italian things. But I found out through doing a bit of research I could built a duplex, so once I found out that, I had to do it to maximise the land value. And yeah, we're going through the process of the build as we speak.
Phil Tarrant: Are you going to live in one of them?
Jeremy Iannuzzelli: The idea is to live in one of them, which will be fantastic because if we can get about $550, $600 a week rent on the other side, it virtually pays our mortgage. So we're living I would say mortgage-free, and we've done it in a way where I've put a bit of cash in and allocated that cash to one side, so our unoccupied debt is as low as possibly can, and our investment debt is where it should be.
Phil Tarrant: Okay, that's an interesting way to frame it. So when will you construct? Okay, so when you move in?
Jeremy Iannuzzelli: It's going through the construction as we speak, and it should be finished I would say by June of next year.
Phil Tarrant: Okay, and because it's a new build you get all the depreciation benefits associated with it...
Jeremy Iannuzzelli: On one half.
Phil Tarrant: One one half, which is the investment side. And on the one that you live. So do you think you'll stick around there?
Jeremy Iannuzzelli: The goal was to be, we're supposed to build our dream home and I think that is still part of our goal, so I think it might be while there's no kids and relatively fresh...
Phil Tarrant: A good interim step.
Jeremy Iannuzzelli: Yeah, be three or four years at most. Her mother's around the corner which is good, and my family's not too far away so it's kind of central. But the goal will be to have our own home, whether we build or buy preexisting, but I'm really looking forward to a couple more negative numbers in the Sidney market because it might be an opportunity for us to jump in into a home that we love, and maybe at a reduced price where it is today.
Phil Tarrant: And you'll buy in that area, around...
Jeremy Iannuzzelli: I think we'll buy around that area, yeah. Just to be close and centralised to the family.
Phil Tarrant: That's good. So where'd you get the money from to pay for the block of land, and what did you finance the land at? And then how are you going about sort of building the property, obviously construction lines have torched through that.
Jeremy Iannuzzelli: Yeah, so I... We spoke in March and I said my goal was to utilise the equity that I've built up over the years to buy my own home, and we went in with the land being at about 476, the overall line on it at the moment's 150. So we've put...
Phil Tarrant: So you put a big chunk in.
Jeremy Iannuzzelli: We put a big chunk, and that big chunk came from a lot of my equity...
Phil Tarrant: Okay, so did you sell anything? Or you just drew down the...
Jeremy Iannuzzelli: I drew down, I drew down...
Phil Tarrant: So you increased the debt on everything else?
Jeremy Iannuzzelli: I increased the debt, unfortunately that debt, a portion of it will be non-deductible, but it was just a decision...
Phil Tarrant: Because it's your family...
Jeremy Iannuzzelli: Because it's, yeah. I've used it not for investing purposes, I've used it for personal purposes. So similar to that of buying a car, for instance. So I do realise a portion of it will be non-deductible, and then I've obviously saved quite hard and used a portion of my own savings as well as Shinead's savings as well. So that was a way of us trying to reduce as much of the debt as we possibly can, although I've still got some non-deductible debt unfortunately, which I'm paying interest on, which I can't claim the interest on it. But such is life.
Phil Tarrant: It's not a huge amount, though.
Jeremy Iannuzzelli: Yeah, not a big amount, not a big amount. Just enough to bring down the loan enough on the land so I don't have to put any contribution towards the construction loan.
Phil Tarrant: Okay, and the construction loan is 100%, is it?
Jeremy Iannuzzelli: The construction loan will be 100% for the time being.
Phil Tarrant: And did you just go through a standard lender with that?
Jeremy Iannuzzelli: Standard lender, standard lender CBA. And both the numbers combined warranted us to get a principle in interest and be able to be assisted at a under-occupier rate as well.
Phil Tarrant: So you're paying off, so one loan for the construction across both properties?
Jeremy Iannuzzelli: Correct, across the duplex.
Phil Tarrant: Across the duplex. So you can't split it and have it on separate titles, it's just one title...
Jeremy Iannuzzelli: Yeah, I'm not looking to turns-title it, because if I turns-title it now I'm paying two lots of council rates and so I'm, still got the accounting brain thinking. I'll leave it as just one lot for the time being, as one property and then if I'm ready to sell later on down the track, I might turns-title it.
Phil Tarrant: And you've checked out the local council regulations around it, and you can split it?
Jeremy Iannuzzelli: Yeah we can, so I've got the builder to do everything as if it's going to be turns-titled, but not obviously action that until a day that we want to sell it, if we want to sell them individually. But I think that's what we wanted, we wanted to have a duplex, I've always wanted one. And it was just good to go through the build process. And the rent combined should be between 1200 and 1350, 1400.
Phil Tarrant: Okay, that's not a bad strategy.
Jeremy Iannuzzelli: Yeah, not bad.
Phil Tarrant: So is this going to stop you from investing for a while?
Jeremy Iannuzzelli: Definitely, yes. It has. There's no doubt about it, so that's kind of been the last property that we've, well in my mind, that we'll do. In terms of when the build's being finished. I will try to go back to the existing portfolio and see things that I can improve on, so if I talk about now southwest Melbourne...
Phil Tarrant: Would you say capital value, or more yield play?
Jeremy Iannuzzelli: Capital value... Yield play, capital value as well as subdivisions. So the last purchases that I've bought in that year and a half since we last spoke, I've been, blocks where I can subdivide, corner blocks where I can subdivide as well. So I'll try to go back to that portfolio and regenerate it or rejuvenate it, and hopefully that might give me a little bit more equity, might give me a little bit more service ability with additional rental income. But if it doesn't happen, I know it's something along the line that will happen, but I've been just doing a lot in-between while I haven't been able to service any more debt, a lot of options. So optioning properties...
Phil Tarrant: So talk us through that, what is that?
Jeremy Iannuzzelli: So optioning properties is essentially a right, not obligation. We'll go through the definition. What I'm saying to a vendor, we'll make it nice, short, and sweet is that I'm saying, "I will buy your property for, let's say for instance, $800,000." I give them an option fee of, say, maybe $10,000 and I say, "I want it six months. In that time, in six months, I'm going to try and sell your property to somebody else for a higher price." So I met this, I've known this young gentlemen for quite a while, and we've been speaking about this for years. We finally got it over the line about a year ago, and we've been doing one every couple months. We found a developer who said, "You know what boys, you find me a site that I can do a duplex or a triplex on, make sure it's a fair price obviously, and I'll pay."
So we've been, he's been door-knocking, I've been putting feasibilities together to make sure the numbers work. Generally we give ourselves about six months, we've found that vendors don't want to be locked in any longer than that. We've tried 12 and eighteen months but they just say no. But six months, within that six months we do a feasibility, we may do the DA, pay for the DA, and then call up this builder that we know, the developer and he says, "Not a problem, I'll pay that price." And we may walk out with, say, $50,000 after all expenses.
Phil Tarrant: So, easy sum. So $400,000 for the house, you guys do the heavy lifting, so to get a DA, development approval to say that, "Yes you can build three properties." Sometimes you might go as far as actually getting the plans drawn up and all that sort of stuff...
Jeremy Iannuzzelli: Correct, yep.
Phil Tarrant: And then you would sell that to the developer for...
Jeremy Iannuzzelli: A premium.
Phil Tarrant: 600, say, for example.
Jeremy Iannuzzelli: Let's say 700, it might cost us $100,000 in architectural drawings and development approvals and fees and council contributions, but what we've done is we've packaged up a property for him where he can start a build...
Phil Tarrant: So he can do what he's good at, and that is building stuff rather than having to acquire the asset, take all the risk on to go through the DA process and also share the cost, and potentially not be able to do anything with it. So the vendor gets what, ten grand or so for the sake of doing it, or...
Jeremy Iannuzzelli: Yeah, so what happens is we normally pay a little bit more than what the market says, so for instance, we'll just use 500 as an example. The market says that it's worth 500, we've got to make it sweet. That $10,000 option fee's generally non-refundable. So after six months, if we can't find someone to buy his property...
Phil Tarrant: You pay him ten anyway.
Jeremy Iannuzzelli: He keeps his house and gets $10,000. So why not? But we'll generally pay a little bit more than what market says as the house itself, where we add the value is through the development approval. Where we add the value's maybe through being able to do a subdivision while the property, while they're still living in the property.
Phil Tarrant: So you take on all the risk associated with any fees to create a package that is going to be attractive to a developer?
Jeremy Iannuzzelli: Correct. It doesn't always have to be that way, there's different arrangements, but we've gone ahead and done it that way because we felt it's far and it's viable for a vendor and potentially for a builder as well.
Phil Tarrant: So do you just concentrate on one particular area, because to try and be knowledgeable of all the different local council acts in relation to developments, sub developments, splitting blocks or whatever, like are you concentrating on one particular zone?
Jeremy Iannuzzelli: Yeah, we've got about five areas we concentrate on and no more. So we've sat down, we've done a lot of brainstorming nights, brought out LEPs, land environmental plan, looked at council websites and obviously state government, they release their plans as well. So we've brought it down to five areas, so we look towards the Campbelltown and Austral District, we look at Blacktown, Blacktown's been our piggy bank lately.
Phil Tarrant: Really, Blacktown?
Jeremy Iannuzzelli: Blacktown's been very good for us. Seven Hills, Toongabbie, that whole corridor along…
Phil Tarrant: I'd like to just chat with you about, I know you've got something in Seven Hills, but anyway...
Jeremy Iannuzzelli: Right, Seven Hills is definitely, there's big blocks there and there's lots of things you can do.
Phil Tarrant: That's where I grew up, so my mum's still got an asset out there...
Jeremy Iannuzzelli: Yeah, a lot of R4 zonings in Seven Hills and you can build up towards, depending on the land size, upwards of 1508 and 20, 30 metres, which is good depending on the lot sizes. We've done a little bit in Queensland, splitter blocks, very easy stuff on the northern side of Brisbane. So that's been pretty good to us. Melbourne at the moment, I've just personally done my own stuff in Melbourne, but there's huge amounts of opportunities in Melbourne. Huge amounts, it's just a matter of getting your feet on the ground.
Phil Tarrant: So when you get paid, so you've had a few paydays, so... Which is cool. Do you just count that as just income, like from conducting business?
Jeremy Iannuzzelli: Yeah, it will be treated purely as a business. So both of us, both myself and this other gentleman, younger guy as well, we come by. The banks have just said, "Jeremy we'll tap you out, wait til your income grows," and obviously moving into the partnership I'll acquire at least 12 months' worth of trading minimum to start showing the banks that I'm healthy again, that I can start borrowing. But for me, it was just, "Well I can't just sit on my hands and wait for things to happen. I've learned, spent time, a lot of long nights, and I'm going to use the knowledge, the intellectual property that I've gained over the research of the couple years."
Phil Tarrant: So it's not for the faint of heart, what you're doing?
Jeremy Iannuzzelli: Look, to be very honest, anyone can do it. If you're prepared to put in the time and understand councils, state government, LEPs, if you understand all that, contours, you find the right developer, the builders at the moment are crying for sites. They are crying for sites, smaller stuff I don't deal with...
Phil Tarrant: See I thought it was the other way around where it's impossible to get something built, they say, it's because every builder's too busy.
Jeremy Iannuzzelli: Yeah, the builders are busy, builders are busy but there's a lot of builders out there who are doing stuff for themselves as well. And this is their, they might do the frames Monday to Friday and on the side they might have one or two properties being built at the same time. So I feel it's, what I've felt with the guys I deal with, is they're crying for sites, it's just they're so time poor because they're building so many things, they actually haven't got the time to go out there and package the sites.
So they're happy to give us a little bit on top as a premium for our time, for our effort, for our knowledge, so they can walk in and...
Phil Tarrant: So you've put all sweat equity into preparing these things for, just so they can rock up one day and just start building something, right?
Jeremy Iannuzzelli: Correct.
Phil Tarrant: Got the plans, got all the approvals.
Jeremy Iannuzzelli: Council contributions are being paid, the DA's in our hand, and it's a matter of passing that on on the sale to the builder and he's right to go straightaway as long as his finances are obviously ready.
Phil Tarrant: It all sounds very glamorous, doing that, that's cool. But you know, my coronary, not for the faint-hearted. You say it's easy, but it's pretty bloody heard, right? To actually understand how to go about doing this, so I wouldn't be recommending people who to rush into...
Jeremy Iannuzzelli: No, I wouldn't recommend to run into it, no. And I wouldn't, there's a lot of time...
Phil Tarrant: And you've got, you're an accountant for a living, right? So you know that.
Jeremy Iannuzzelli: There's a lot of time I've spent, I'm not going to lie, I've spent a lot of time. But it's one of those things, it's like riding a bike. Once you've done it once, twice, three times, it's you actually kind of look at a property and say, "Yep I know I can do that, it's just a matter now of getting the price right."
Phil Tarrant: That's cool.
Jeremy Iannuzzelli: Yeah, it's been fun.
Phil Tarrant: So as you say, you've been tapped out by the banks in terms of serviceability and those, that will change in the future and it will change because hopefully you'll make more money because you're a partner now and you're also generating income doing what you're doing. That said, also markets change, regulations change, banks, that applies towards lending changes. At the moment they're servicing at 7%+ in terms of...
Jeremy Iannuzzelli: PNI, it's nasty...
Phil Tarrant: PNI, it's nasty...
Jeremy Iannuzzelli: So you can do the options, or investing big coin. And I just, unfortunately I haven't got the heart to invest in Bitcoin. I actually find optioning less riskier than Bitcoin.
Phil Tarrant: Yeah, don't start me on Bitcoin. It's... So much noise around Bitcoin at the moment... Absolute mad.
Jeremy Iannuzzelli: Again, I get phone calls every day about Bitcoin, and when I try to explain to people that it's very emotional in the sense of it's just a digital currency which exists on a platform, and there's nothing backing it in the sense, it's not like it's a share in a business which generates revenue and provides jobs, it's more just you and I saying, "Yeah I want it and I'm happy to pay whatever I want to pay for it." So it's, it's definitely a funny thing and I get a lot of people to research a thing called "Tulip Mania." And once they read that a little bit, they're either well-equipped to invest in Bitcoin and understand when to get in, when to get out, or get out.
Phil Tarrant: Tulip Mania, I've read about that...
Jeremy Iannuzzelli: Yeah, it's tulips. People buying tulips.
Phil Tarrant: Tulip prices, yeah.
Jeremy Iannuzzelli: Tulip prices.
Phil Tarrant: In Holland, right?
Jeremy Iannuzzelli: It went 6,000% and everybody wanted to buy tulips, and then as quick as that six month or 12 month period went, it crashed down and tulips came back to their price of probably 50 cents a stem, so...
Phil Tarrant: Yeah, madness. So I haven't seen you for a year and a half, I've obviously gone out with you in the interim, and sort of keep an eye on what you're up to. So that's eight months ago. So at eight months in the future, you'll be happily married, what else is going to be happening?
Jeremy Iannuzzelli: April happily married, I'll obviously get the permission from the missus to start using her income...
Phil Tarrant: Oh, there you go.
Jeremy Iannuzzelli: So there's always, there's always...
Phil Tarrant: You're just a rational person
Jeremy Iannuzzelli: No, it's...
Phil Tarrant: For better, for worse, for PO1 income statements...
Jeremy Iannuzzelli: I tell my friends that to be cool, but I really do love her, so different things. But no, I'll start to utilise her income...
Phil Tarrant: Does she get what you do?
Jeremy Iannuzzelli: She understands it on a level, she's not as much into it as I am.
Phil Tarrant: Does she care that much, do you think she'll want to learn more about it? Or do you think she'll just be like, "Go on, do it."
Jeremy Iannuzzelli: I think she trusts me enough just do just do it, which is cool...
Phil Tarrant: That's a good thing, you're getting married, so...
Jeremy Iannuzzelli: She trusts me enough just to say, "Jeremy this is something you love doing, go ahead go nuts." I run through things with her, she says she understands, which is a good thing. And we go from there, so she's, there's lots of cool things. There's land tax thresholds that I get under her name, and serviceability. I've been able to use her, maybe some negative gearing benefit from her income, because...
Phil Tarrant: Did you get the first homebuyer's grant? You get a portion of it?
Jeremy Iannuzzelli: We didn't, no. We didn't. Unfortunately, the price that we purchased at was above that 450 at that stage, so we couldn't. And she actually bought a property with her mother. So she couldn't get into that unfortunately.
Phil Tarrant: Doesn't qualify, fair enough. So a few more properties then? Anything else, what else is going on?
Jeremy Iannuzzelli: Well, properties-wise, so I'll talk about a little bit more of the Melbourne area. So I saw Brisbane starting to get very heavily influx with investors, and a couple of my properties took a bit more than two weeks that I was used to to get rented, it took longer. And talking to a couple people, talking to a couple agents and I just started to see that there was a, southeast region especially, just huge amounts of development, investors. I started to look in the northern parts of Brisbane, so anything north of, say, Nundah, looking at Deception Bay, Redcliffe, Petrie Basin, Morton Bay area obviously, all those areas. And started to really heavily focus on them, but the prices I felt, I wish I bought a year ago, mind you. The prices have gone up quite a bit, but I just felt that it was a little too much mitigating. A little bit too much.
And hindsight is painful, I won't use the other word that I was going to use, but painful to see where they were, I could've bought where they are now. So I made a decision to go buy in that southwestern part in Melbourne, towards Geelong, so took a drive down... Took a plane then took a drive through the streets and realised quite quickly it was a bit of a Mount Druitt by the water. But I saw potential in it, I saw larger blocks, I saw...
Phil Tarrant: Mount Druitt by the water being an investor's eye towards potential for growth, these... Gentrification's not the word, but the fundamental dynamics that we saw in Mount Druitt and St Mary’s sort of four, five years ago, what you were there for...
Jeremy Iannuzzelli: Blue collar workers, and to be humble and not to be mean or anything like that...
Phil Tarrant: You grew up in Casula right?
Jeremy Iannuzzelli: I'm a southwest and suburbs boy, so I've seen, I've lived in a blue collar work area, but everyone worked, it's a lower socioeconomic area. And since probably the average income would be anywhere between 50 to 60, 70 grand a year. Family-wise, there's a mixture of old and mixture of young. But what I saw was, we were going through a housing affordability crisis. Two years ago on every single newspaper and every single media article I read, it was all about housing affordability crises. How do young people get into the market? There's nothing affordable. But I went down there, I took the drive down the freeway, 40 minutes, 45 minutes it took me from Melbourne CBD, which was fantastic. I drive from Campbelltown to Parramatta everyday and that's an hour and a half there, hour and a half back.
Phil Tarrant: It's an hour and a half, is it?
Jeremy Iannuzzelli: And hour and a half, mate. As I've seen more development in Liverpool, just to go through that stretch...
Phil Tarrant: Like through Smithfield.
Jeremy Iannuzzelli: Yeah, through Hume Highway and then Woodville Road, but I've just seen with all the development, all the units, more people. More cars. So it was good to get down to Melbourne and be on a four-lane freeway and be there in 40 minutes.
Phil Tarrant: So many speed cameras on that freeway.
Jeremy Iannuzzelli: There is, and there's no signs either. So I'm lucky, I was going 90 ks the whole way, but I saw a lot of potential there. Big blocks, ex-housing commission homes built all the way to the front. Huge backyards all the way to the left-hand side of the property. Researched a lot on the council, they call their growth zone and I was like, "Wow. The things that you can do on a 600, 700 metre square block there you could only dream about in Sidney."
Phil Tarrant: So that's within the Julong council areas... As well as property stuff, I work quite a lot... The defence place and I was down at the Avalon Airshow earlier this year and I spent a lot of time with Julong development people, and they're obviously trying to attract a lot of defence business into Julong, they've got an airport and stuff there. And Avalon, but yeah that's a pretty proactive council, they are open for, they've got the right mindset open for expansion because as you point out, it's close to the city, you can commute from Julong quite easily without a lot of the headaches of an M2 or an M5 here in Sidney.
And they're open towards development and being, I guess, development-friendly or development inclined is very good.
Jeremy Iannuzzelli: It was very relaxed, very relaxed. I found a great town planted down there as well, a gentlemen, and I'll put his name out there, he's a good guy. Robert Pascolini, and he's definitely helped me quite a bit, so that's a gentleman who I spoke to prior to buying these properties, he let me and filled me in on all the knowledge he had about that council, that area, that property, what you could do. And I kind of went in buying these things, knowing...
Phil Tarrant: Did you pay him for that advice?
Jeremy Iannuzzelli: Well, I was lucky enough to give him my word that I would go through him to get all the approvals being done, so that's where he got his fee. And I went through with that, and yeah he's been a big guidance in my portfolio, especially down there. And he's a good man, and really got me a lot of insight. I learned a lot from him as well, so used him as a bit of a mentor and his knowledge. And yeah, everything I bought down there has potential to build a house at the back, I've got a corner block there, 650 square metres with a house right at the front. The block behind me has already built two houses on their block, but I, upset that they built that mind you. Because they could have done a lot more, but I can actually build three on mine.
So the idea at the moment is to keep them there, get through this duplex that I'm building here in Sidney, and then build there. And hopefully get the rewards of the rental income.
Phil Tarrant: So let's get you back in then, let's not leave it at eight months. Let's do another year, see how you're getting on. You know?
Jeremy Iannuzzelli: Definitely.
Phil Tarrant: That's marriage plus honeymoon, honeymoon?
Jeremy Iannuzzelli: Yeah, we've moved into a home by then and honeymoon...
Phil Tarrant: Where are you going for a honeymoon?
Jeremy Iannuzzelli: We're doing a very small trip to the Hamilton Islands just after we get married, to kind of relax. She's done a lot of hard work so it's more for her. And then do a Europe trip, she's a schoolteacher so that time off in December, school holidays, we're going to do a Europe trip.
Phil Tarrant: Is she primary school?
Jeremy Iannuzzelli: Primary school teacher, yeah. She's the assistant principal there at the primary school, so she's a high achiever herself on a good income, and it's going to be a huge advantage to us. Especially later on as the property portfolio grows.
Phil Tarrant: I'm really happy for you, it's good to hear it's tracking the right way.
Jeremy Iannuzzelli: It is, everything's doing really well.
Phil Tarrant: I'll keep an eye on you, see what you're up to, my people like to hear, I'm always giving reports on you as you know. It's good, but mate thanks for coming in.
Jeremy Iannuzzelli: A pleasure.
Phil Tarrant: It's good enjoyment mate, and... This big car of yours, that's mad.
Jeremy Iannuzzelli: Yeah, it's definitely something that, it's definitely a novelty with all the friends...
Phil Tarrant: How much do you, how many Ks you get out of the tank on it? If you've got your foot down?
Jeremy Iannuzzelli: Well I've had it for just under a year now, it's only got about 4,000 kilometres on it, but I'd be lucky to maybe get 400 kilometres out of a tank. I've just recently done a trip, I took a bunch of children from Campbellfield Public School, which is a special needs autistic school, and took it to their formal. So it's definitely maxed out about 20 litres driving 15 kilometres that day...
Phil Tarrant: Is there still a currency, and I've spoken about about this, I went to school in Seven Hills, Blacktown area, and you had to turn up in a really cool car and hack the biggest burnout possible when you get in, does that still happen? I'm sure you weren't doing it...
Jeremy Iannuzzelli: Mate, there was a hell of a lot of noise that day, I went in a bit of a motorcade with some other Mustang owners from a group, and we definitely gave these kids a memory, a year six memory for their farewell. But I definitely won't go on public on the show and say there was any smoking rubber.
Phil Tarrant: Anyway, that's not about property investment, that's just about the stuff. Alright, thanks mate.
Jeremy Iannuzzelli: Really enjoyed it.
Phil Tarrant: Cool. Remember, check out SmartPropertyInvestment.com.au and if you want to listen to the first podcast we did with Jeremy back in March 2016, go and track it down and it was a good chat then and, like today, interesting. It's good to see young people, you're younger than me so I'll call you young, doing good stuff. If you're not subscribing to our Morning Market Intelligence, SmartPropertyInvestment.com.au/subscribe. You've got any questions for me or for Jeremy, email the team editor at smartpropertyinvestment.com.au and we will get back to you.
If you like to get your stuff from social media, I know I was speaking about the ills of social media beforehand, but if that's how you like to get your information, search any of the social platforms for Smart Property HQ, you'll track us down. Like us, follow us, and please keep those reviews coming on iTunes, we do appreciate them. Just hit five stars and if you'd like to leave a review, please do, because the team really do enjoy the feedback that we get.
We'll be back again next time, until then bye bye.
Speaker 1: The information featured in this podcast is general in nature, and does not take into consideration your financial situation or individual needs, and should not be relied upon. Before making any investment, insurance, tax, property, or financial planning decision, you should consult a licenced professional who can advise whether your decision is appropriate for you. Guests appearing on this podcast may have a commercial relationship with the companies mentioned.