Portfolio Update: The best Australian state to invest in revealed
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Portfolio Update: The best Australian state to invest in revealed

By Demii Kalavritinos
Steve Waters, Right Property Group and Michael Johnson, accountant

After the much-anticipated reveal of the secretive location of their most recent properties, Phil Tarrant is joined once again by Right Property Group’s Steve Waters and accountant Michael Johnson to discuss their investment plans, and how their properties have performed since the purchase.

Tune in as they answer questions asked by listeners and discuss each Australian state market in detail, including the performance of investments in these areas, where they see these markets in the future and where they are considering to purchase their next investment.  

You’ll hear all of this and much, much more in this episode of The Smart Property Investment Show!

 

Make sure you never miss an episode by subscribing to us now on iTunes! 

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: FacebookTwitter 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!

 

SUBURBS MENTIONED IN THIS EPISODE:

Sydney
Melbourne
Adelaide
Brisbane
Darwin
Perth
Petrie
Lawnton
Port Kembla
Wollongong
Newcastle
Mount Druitt
Cairns
Dubbo
Geelong
Orange
Wagga Wagga
Ballarat
Bendigo
Port Hedland
Logan Shire
Kingston

 

RELATED AREAS OF INTEREST:

Gold Coast benefits from mining boom
Quality stock hard to find in Melbourne
Sydney property has its 'best years ahead'
Interstate investment: Don’t just look at the price

 

Speaker 1: Welcome to the Smart Property Investment Show with your host, Phil Tarrant.

Phil Tarrant: G’Day, everyone, it's Phil Tarrant here, I'm the host of the Smart Property Investments Show. Thanks for joining us today. We're going to do a bit of a portfolio update, so something which is really popular, and thanks for the feedback coming in. To all our listeners who are intrigued about how we're building this portfolio, and if you're new to the podcast, welcome.

            One of the reasons why we launched Smart Property Investment, originally, was to show what, and all how, to go about building a portfolio, and like I say, they've been reasonably successful at it. And you've listened beforehand, you'll know where we've stuffed up along the way. So, if you are new, go back and listen to those, just look for anywhere it says Portfolio Update in the feed you're looking at on iTunes on the website right now, smartpropertyinvestment.com.au. Go check it out and you'll get a good background about where we are.

            But, we like to catch up on a monthly basis, just with our buyer's agent, Steve Waters from Right Property Group. Just to get a bit of a feel for how we're tracking at the moment. An update on what we're buying, what we're not buying, any pain points in the portfolio in terms of management, and just where we're going next.

            I also use this as a bit of an opportunity, me personally, to get a bit of a read on the market ... take on how's it progressing right now, and how it might change the way in which we approach investing in property, within this portfolio, and where we might be investing in property. Steve, how're you going?

Steve Waters: Well, mate, how are you?

Phil Tarrant: Good, thanks for coming in.

Steve Waters: No problems.

Phil Tarrant: I also have with me, in the studio, Michael Johnson and he works with me here within Smart Property Investment, and he's my eyes and ears and the administration guru associated with our portfolio. I don't like using the word administration because it sounds like it's not adding a lot of value, but admin by way of keeping this thing moving ... the cogs oiled ... and making sure that I know what's going on. Michael, how're you going?

Michael Johnson: Good thanks, Phil. Thanks for having me.

Phil Tarrant: No, it's good to see you back here. So, Steve?

Steve Waters: Yeah.

Phil Tarrant: So, today we've got about 20 minutes or so, and I'm just going to have a chat with you about where we are, and you can give me some counsel on-

Steve Waters: Some counsel? Love it.

Phil Tarrant: Some counsel. Advice. Are you allowed to give advice as a-

Steve Waters: I don't like the word but, you we can go with counsel.

Phil Tarrant: Yeah. Counsel. You can help to give me more information so I can be responsible for my own decisions, right?

Steve Waters: That's it. Disclaimer.

Phil Tarrant: Yeah, and Michael, I'm going to be turning to you and I need details, mate. I know our portfolio pretty well, ins and outs, so I often ... because it's getting larger, I might not know the exact rent on a particular property at any particular given time. I sort of know, but we've got a pretty good way to map and manage this so we've always got the information close at hand, and that's the important thing to have, right?

Michael Johnson: Mm-hmm.

Phil Tarrant: So, that's good. Right. So, Steve, where are we at the moment in our portfolio? We just ... about a month ago, now, we settled on those properties that we bought up in south of Petrie.

Steve Waters: I'm watching your face to see if you remember the suburb.

Phil Tarrant: Lawnton. I know where we are go, up in Lawnton. So, Lawnton is one suburb south on the railway line from Petrie, and Petrie is right where the new Sunshine Coast University precinct's getting built.

Steve Waters: Correct.

Phil Tarrant: So it's going be a good area moving forward.

Steve Waters: It's a good area now, but it'll continue to get better.

Phil Tarrant: Yeah. It'll continue to get better, and so we bought five properties all in one block, for about 200 grand each, about a million bucks purchase. All individually strata-ed, so we control the whole block, but we have five different loans against the property, so, really good buy. Go back and listen to the podcast ... I think we reordered it ... it was out on the 19th of October. We're pretty happy with that, right? No real pain points. What's been going on since?

Steve Waters: It's going well. Look, four of the five tenants have come off their lease period, and all four of those five just re-signed up, straight away, so it's a really strong market there.

Phil Tarrant: For the same price? Did we try and push it up? We just-

Steve Waters: Nah, not at this time of the year. I'm not a big fan of really increasing rent around Christmas. It's the worst time of the year so I like to keep everything as it is, and for the sake of $5 a week versus a month of vacancy ... not worth the risk.

Phil Tarrant: Okay. So, money's coming in. We're all cool?

Steve Waters: Yep.

Phil Tarrant: No worries, alright.

Steve Waters: Little bit of maintenance here and there but-

Phil Tarrant: What sort of maintenances have we got to get done?

Steve Waters: Just some dripping taps, and we've gotta organise the common areas to be taken care of-

Phil Tarrant: Yeah.

Steve Waters: ... that small patch of lawn to be mowed on a regular basis. Especially now in summer, because you don't want it looking-

Phil Tarrant: Tardy.

Steve Waters: Yeah, overgrown and what have you, so we'll get that organised and apart from that, I don't think there's been any really big ticket items, or any big dollar items to spend yet.

Phil Tarrant: I saw a quote come through from the property manager, and it was all pretty reasonable, right? I think it was a couple of fly-screens, or something or other, leaking taps. Michael, that was about the extent of it, wasn't it?

Michael Johnson: Yeah. All pretty basic stuff, really.

Phil Tarrant: So, hundreds of bucks rather than thousands of bucks for-

Steve Waters: Yeah, and over five properties, that's a really good head start.

Phil Tarrant: Mm-hmm. So, for our listeners, everyone is now insured correctly, we've paid all the insurance, haven't we Michael?

Michael Johnson: Of course.

Phil Tarrant: Yep. Good. We've gotta go through the process still to notify for, and I know our agent's doing this to make sure that all the council rates are coming through, all the water stuff, all the electricity stuff. There's a whole bunch of admin associated with that.

Michael Johnson: All happening. Agents look after that for us, so it's good.

Phil Tarrant: So, from our end, nothing?

Michael Johnson: Yeah, pretty straightforward, really.

Phil Tarrant: Keep going?

Steve Waters: Sit back, relax.

Phil Tarrant: Sit back and relax. Yeah. So, it was a good investment, then?

Steve Waters: Well, I hope so.

Phil Tarrant: Yeah. So what do you reckon, what's our plan with it? I know that it's within ... up in Queensland, they call it a neighbourhood zone, right? So, means that it can be zoned for high-density over time, and obviously the Queensland government's looking to create the infrastructure, and facilitate greater density of living, along these sort of main belts of communications. So, train lines ... I think Bruce Highway cuts up there, doesn't it? It's zoned, so we can do something with it in the future, and I think we can probably knock that down and build a bigger-

Steve Waters: Yeah, and not that we're even entertaining that idea at the moment, because it was bought really to give that accommodation with what's coming up in 2020, being the university, even though there's a really good balance of supply and demand there at the moment, and a good example of that is how quick your tenants re-signed-

Phil Tarrant: Yeah.

Steve Waters: ... we'll take advantage in that sort of 2020, 2025, somewhere in there ... depending on what the cycle's doing, of course, but to have that up your sleeve, is a pretty good exit strategy and it's a bonus, as well.

Phil Tarrant: That's good. So, what's next for us, then? We on the lookout right now? We buying, Steve? Are we?

Steve Waters: How's your finance, mate?

Phil Tarrant: It's alright. It's actually pretty good at the moment. That said, we're going through a process of refinancing one of our properties right now, to free up some cash ...

Steve Waters: Liquidity.

Phil Tarrant: ... and get us ready for the next one. We're also looking, too, for property that we've got, and go and check it out on smartpropertyinvestment.com.au, it's a property we have down in Port Kembla, which is just south of Wollongong. We're looking to get a line of credit put against that to free up some liquidity, as well, so rather than refinancing it in inverted commas and pulling out a chunk of cash, we're just going to leave it parked in a facility to ... If we're not drawing down on it, it's not costing-

Steve Waters: Not costing you any money. Free

Phil Tarrant: ... But it means that we can strike when the opportunity arises, and that property we have down in Port Kembla's done pretty well in terms of capital growth. It settled back in December '14, we purchased it, Michael, for $320,000, that's right. And it's probably gone up, you know, 50-60% since then, right?

Michael Johnson:      Significantly.

Steve Waters: Yeah, and I'd probably say a little bit more. Because, it's a good size of land, duplex pair, so the income-

Phil Tarrant: It's not very pretty, though.

Steve Waters: Oh, look, it's not the prettiest property in the world by any means, but it's done its job, and the reason that was bought was for growth and instant equity, and it's done that.

Phil Tarrant: Yeah.

Steve Waters: Wollongong at the time was probably the underdog of areas. Everybody was talking about Sydney, everybody was talking about the Central Coast, and Newcastle, but everyone was forgetting about Wollongong, and so we took advantage of that, and bought as much as we could, including this.

Phil Tarrant: Oh, I'm really happy with that buy and ... It's actually been pretty good, there's been a couple of headaches with tenants, and as I said, it's not the most glamorous property in the world, and the property you have and its condition often dictates the type of tenant you're going to get into it in the area, and all of that sort of stuff. And, this particularly property was pitched towards, I'd say, the lower end of the market rather than topper end of the market in terms of Port Kembla. Which is all cool, and we've had some great tenants in there who pay the rent, but we haven't had to spend a lot on that joint to-

Steve Waters: Just general maintenance and repairs, I think, and a little bit of common area mowing because it is two properties.

Phil Tarrant: We've got that asbestos shed in the back that I think we've had to get rid of.

Steve Waters: Yeah, so there will from time to time be things to do, but we don't want to spend a lot because eventually we are going to bowl it over and build something else.

Phil Tarrant: Yeah.

Steve Waters: The least we spend on it now, the better.

Phil Tarrant: That's good. So, that's okay and we're freeing ourselves up with some cash so we can keep buying, and I think the premise is that we're going to keep looking for opportunities in a market. We're not going to buy everything that comes our way, we're looking for stuff with X factor.

Steve Waters: Yeah, well the portfolio now is at a size where we don't need the bread and butter, and just growth and good locations and fundamentals, and what have you. We need to be looking for strong growth, or chunk opportunities, where with can add value. Whether that be by subdivision, building ... a massive renovation, as such ... something that gives a really good input to the equity position. But as long as it's got sufficient cashflow to accommodate it, as well.

Phil Tarrant: So, we've still got about a couple of pallets of tiles ... a kitchen, a sink, a vanity ... ovens-

Steve Waters: Yeah, yeah.

Phil Tarrant: Sitting in storage out here in Sydney, and when am I going to get to use this stuff because you know, are we buying in Sydney? Are we going to try and find a reno opportunity in Sydney?

Steve Waters: I was gonna say, if you wanna freight it interstate, well, we could possibly use it, but look, at the moment in Sydney, all of the numbers are showing that it is cooling of and that was bound to happen. We're probably going to have a period of minimal growth. So, it's not a matter of, "Will it grow, is it worth investing?" It's, "Is it going to be the place where your dollars are going to work the hardest for you?" and at this stage, I don't believe so. So, dust the tiles off, keep the ovens covered-

Phil Tarrant: That's alright, well the tiles last forever, right?

Steve Waters: Yeah, well I'll have them, I've gotta do a renovation out at Mount Druitt, so-

Phil Tarrant: Mate, they're for sale, rather than put them on eBay ... put 'em on smartpropertyinvestment.com.au.

            So, on that basis, then, if we go through a period of no growth, or low growth, in the Sydney market, at a point in time, then, it's going to be making sense for us to start looking back in the Sydney market-

Steve Waters: And it might be-

Phil Tarrant: ... and that might be five years ago, though, right?

Steve Waters: Yeah, and there will always come a time, so to speak, it's just a matter of being patient and not having that whole geographical reference, "Well, I need to invest in Sydney, because that's where I live," it ... I just don't believe, at the moment is the time to do it. Now, having said that, I still think there are opportunities and especially if we get a little bit of an interest rate rise, or if they tighten up on serviceability, I think there'll be more opportunities. But, it's just not the best place for the dollars at the moment.

Phil Tarrant: So, while we're here, let's have a chat about the markets, then, and-

Steve Waters: Sure.

Phil Tarrant: ... I sometimes ... I like constructive feedback on the Smart Property Investment Show, so you have any, email in at [email protected] and we're always looking for more ways to make this podcast even better than what it is, and look, it's pretty good but I'm always looking to improve it, and one of the comments I had the other day was ... Someone said, "I absolutely love the podcast, but it seems to be a bit Sydney and Melbourne or Brisbane-centric." So, we don't talk about other markets enough, and I get that, and I acknowledge the point. What I would say about that is that we typically talk about the markets where it's best to be buying in. So, we're not really going to be talking about markets which we don't think we should be buying in.

Steve Waters: Yeah-

Phil Tarrant: Because by saying, "Don't buy there," so. So, if we're talking about it, it typically means that it's probably worth talking about it. If we're not talking about, it's probably a good reason why we're not talking about it.

Steve Waters: Yeah.

Phil Tarrant: But, anyway, let's talk about other markets.

Steve Waters: Let's talk about the other markets.

Phil Tarrant: Let's around the state. Around the country. And I know you do a really good update, and I've sat in it beforehand when you do your stuff on a Tuesday night out in Parra with Right Property Group, what do you call it?

Steve Waters: Open Forum.

Phil Tarrant: Yeah, Open Forum stuff.

Steve Waters: Yep.

Phil Tarrant: And that's really good. So, you don't have any numbers in front of you, so I'm going to-

Steve Waters: No, no numbers, I'm going to wing it.

Phil Tarrant: ... a bit of pressure on this. Alright.

            You've got a thing on tonight, out there, right?

Steve Waters: We do, yeah.

Phil Tarrant: Okay, right, so are you prepared? Are you ... Do you know what's going on? He's nodding.

Steve Waters: I'll find out soon, I'm sure.

Phil Tarrant: Okay, that's good. Okay, let's start up in Queensland.

Steve Waters: Alright, we'll go Far North Queensland at the moment, and typically when we talk about that we ... People tend to talk or focus on Cairns, and the surrounds. It's been no secret over the years, I've never been a fan of that area because it's mainly tourist-driven. There was a lot of talk about the Chinese building a casino up there, so a lot of people jumped in on the basis that there was going to be billions of dollars of infrastructure spent. But it wasn't cement, it was more of a rumour more so than anything. Anyway, as it turns out, the Chinese aren't doing a casino and there's going to be a lot of people there, I believe, hurt.

            Now, on the surface, yields up there are quite attractive, but the cost to operate is also high. And when I talk about the cost of operate, we're talking about council rates, management, trades, all that strata. It's very, very high. It's not an area for me, it's more of a market that you need to time impeccably, otherwise you'll lose money. The growth over long term has been no good.

            Central Queensland, pretty much the same thing. Better places for your dollars.

Phil Tarrant: So, Central Queensland, what ...

Steve Waters: More mining. More mining areas, and there's a still a lot of over-supply in the big regional areas over there, and that will take some time before it's taken up. So, once again, not in the top five.

            Brisbane which we've talked about so we won't go into that, because we always talk about Brisbane. Other than, keep away from the CBD because it will be over-supplied. Well, it is over-supplied.

Phil Tarrant: With new build units?

Steve Waters: With new build units. And we've been talking about that for a couple of years, that will happen, it's now rearing its ugly head.

            Probably the other area to talk about which is getting a lot of media attention is the Gold Coast. Now, the Gold Coast is one of those really fickle markets, a little bit like Cairns perhaps, where if you time it and you time it well, you'll make a lot of money, but it's also the area that goes from boom to bust very, very quickly.

Phil Tarrant: Very sentiment-driven, isn't it?

Steve Waters: Massively. And, never forget that developers are very good at what they do, and their systems and processes are very quick. So, they can build a lot of accommodation very, very quickly. And, the Gold Coast lurches from under-supply ... Well, not even under-supply, probably a point of equilibrium to over-supply very, very quickly. But on your point about consumer sentiment, which is true, I'd say the media also has a lot to do with that market. Being that, everyone's talking about the Light Rail and the Commonwealth Games, and what have you. So, some people who perhaps got into the market three years ago, may have done alright, but for us it's a market where, if we're in there, we're out. We'll take our money, we'll run. Yields aren't that attractive, and the cost to operate there are very, very high. Especially in the unit complexes.

            Brisbane we just talked about. There's some pretty good areas-

Phil Tarrant: So, come down the coast, what about New South Wales, North Coast or Mid Coast?

Steve Waters: Look, some of the North Coasts of New South Wales, we're going to classify those as regional areas ... They're doing okay, because the whole affordability scenario is kicking in. Yields ... cashflow is pretty good in relation to the purchase prices.

            We've got some up there, and it's not an area that we go all in on, as we do and exploit other areas, but it's more of a direct purpose for the portfolio, to balance it up in terms of cashflow or something like.

Phil Tarrant: Yep.

Steve Waters: Some of the other regional New South Wales areas, and Central New South Wales ... We're starting to get into that point of the cycle as cashflow decreases because of purchase prices in the major metro areas, that we'd look to some of the strong, fundamentally driven regional areas. Now, I'm not saying us as in that's what we're going to do, but we're always looking. So, if we go back to the beginning to this cycle, or to the end of the GFC areas, such as Dubbo performed very well for us. It's given us 100% growth, great, strong 8% yield cashflow and then everyone sort of jumped in and we went out. So it's those major regional areas that have multiple streams of income-

Phil Tarrant: Are you talking your Dubbos, your Bathursts-

Steve Waters: Dubbo and Bathurst, yeah.

Phil Tarrant: ... your Orange, your Armidales-

Steve Waters: Yeah, but you gotta be very careful with places and, like, Armidale, that it is not on the back of say the university campuses, and what have you, that that's the reason people are going there to invest. Pretty much the same as Orange. Orange had a really good run in terms of consumer sentiment, because I think it was the Arcadia Mine was given the go-ahead, the gold mine there, and it went really, really well, and we got in there just before that. We rode that wave, we got out.

            So, there's not a lot of reasons why I wanna go back there at the moment. Vacancies are pretty high, as well.

Phil Tarrant: Okay. So, Sydney we've really touched on quickly, we don't need to really go too much further into that. Okay, let's go south of the border, let's not worry about south New South Wales. People always bring up somewhere like a Wagga or somewhere or other, and-

Steve Waters: Mm-hmm.

Phil Tarrant: ... we've spoken about that at length. Anything on the coastline, it's outside of what we normally invest in. So, let's have a look at Melbourne.

Steve Waters: Yeah, Melbourne I believe there's still pockets there, however, the cashflow is quite poor. 4%, 3%, those sorts of areas. We've done really well out of Geelong. We're purchasing there, say, 18 months ago, and we've ... We got in there before, perhaps, the market went crazy for it. Now it just, in my opinion, doesn't make a lot of sense. There's still a scattering of opportunities there-

Phil Tarrant: Do you classify Geelong as regional?

Steve Waters: Look, I don't. They do.

Phil Tarrant: Okay. So, you sort assume ... Metro-ish?

Steve Waters: Yeah. And, I don't want to be slammed for this, but for those who live Melbourne, anything that's 40 minutes outside of the CBD they classify as regional. I say that tongue in cheek. But, for us, it's not. It's an hour and a bit down the road, so it's like going to Wollongong, and I don't classify Wollongong as regional for New South Wales. But it's done really, really well. Just be aware that I think Melbourne has perhaps more growth coming. Not a lot. Not like we've seen there, because immigration numbers are very, very big, but they cashflow is poor. So, you can have all the growth in the world, but if you haven't got the cashflow to support-

Phil Tarrant: You've gotta be able to hold onto your assets.

Steve Waters: ... you've got nothing. Yep, correct. And I'd probably concentrate on detached dwellings rather than units unless you can buy the block, or a duplex pair or something like that, and add value.

Phil Tarrant: What about regional Victoria, like Ballarat or Bendigo?

Steve Waters: There's a scattering of opportunities down there as well. Because as this whole affordability scenario pushes further and further out from the metropolitan areas, and as infrastructure such as transport and rail gets better, and the economies get better, there's more accommodation needed, because the money wheel spins so to speak. There are some lower entry points, which is also good, because Melbourne is quite expensive now. So, there is some opportunities there.

            Down into South Australia, once again, there is a scattering of opportunities down there. We've done alright out of that too, over the last 18 months. But it's more stuff closer to the CBD, so that ... probably about 15 to 20 minutes max ring out of the CBD. And consumer confidence down there is really starting to perpetuate as well, as is the media attention, so that's so that's going to almost self-perpetuate to a degree, but the fundamentals still have to be correct. So, that's done very well for us. Nice entry point in terms of price, and the cashflow's are 6.5 sometimes 7%-

Phil Tarrant: That's what we've ... With investing in Adelaide, it's never going to set the world on fire, but-

Steve Waters: Never. Never.

Phil Tarrant: ... it's a reasonably safe bet. It's slow and steady.

Steve Waters: Yeah, yeah. Look, it's consistent, I think is the key word there.

Phil Tarrant: Yeah.

Steve Waters: There's never these high peaks and bottoms, so to speak. But for mine, the key to South Australia or Adelaide in particular, is buying well.

Phil Tarrant: Yeah.

Steve Waters: Buying better than everybody else. It just gives you that little bit of mitigation, it gives you a kick along, in terms of your equity position as well.

Phil Tarrant: And I'm going to straddle two different markets here, for our listeners. We do a lot in the Defence space as well, and if you're not aware of what's happening ... particularly in the Adelaide market ... The government's spending 195 billion dollars in Defence spending in 10 years, and a lot of it is going to be building submarines and warships, which are going to be happening out of Adelaide.

Steve Waters: Correct.

Phil Tarrant: So, huge job growth out there at least keeping people employed ... keeping people employed-

Steve Waters: I think that's the key, keeping people employed.

Phil Tarrant: And there will be job growth, there is some really strong ... They don't know yet who is going to be building some of these things, but ...

Steve Waters: But there'll be the follow on at the very worst-

Phil Tarrant: There's going to be the follow-on effect.

Steve Waters: Yeah. Which is one of the reasons, that's one spoke in the wheel, so to speak, that why we've invested quite heavily there over the last 18 months.

Phil Tarrant: Mm-hmm.

Steve Waters: ... 18 months thereabouts. But on the other side of the coin, they're also losing a lot of jobs in terms of the car plants, actually, the manufacturing plants closing-

Phil Tarrant: They are, so looking at transitioning these people over into building-

Steve Waters: Correct.

Phil Tarrant: ... submarines and frigates and stuff. Anyway, we're going to run out ... So, Perth we did a big thing on Perth recently, and you and your business partner, Victor, are out there and getting a lie of the land, and go and tune into that, so we're not going to cover that. It hasn't changed much since we last spoke about it-

Steve Waters: No, it's-

Phil Tarrant: ... about a month or so ago we had that chat.

Steve Waters: Yeah, it's not what it seems, is probably the phrase there. So go back and listen to that podcast perhaps, and you'll get more of the details-

Phil Tarrant: More of the same.

Steve Waters: ... about it.

Phil Tarrant: So, we're going to jump up ... We sort of went from Cairns down to Victoria, and we stopped at all of the places along the way, but I think we're going to go from Perth to Darwin. The only one we can go past, probably Port Hedland, if we look at that at as an investment hotspot.

Steve Waters: Nah, look Darwin-

Phil Tarrant: Not really a hotspot?

Steve Waters: Nah, nah. Look, Northern Territory, for me, Darwin, you know, they've got some problems up there, as well, in terms of vacancy rates and what have you. It's not my kind of a market. And there's Tasmania ... Although, Tasmania has got some really good figures, in terms of growth and cashflow and what it's done. My opinion is that it's just trying to catch up what it hasn't had for 10 years, and my problem with Tasmania, even though we do get the odd one down there, but it's very, very specific, is that you only need half a dozen transactions and the numbers change.

Phil Tarrant: Yeah.

Steve Waters: And I say that like I'm exaggerating a little bit, but it's ... You need to be very, very careful down there. It's not a blanket approach.

Phil Tarrant: Yeah. Okay, so we're just going around the ground, and-

Steve Waters: Yeah.

Phil Tarrant: ... and that was the real big, broad brush stroke we just pulled over Australia-

Steve Waters: Yeah, very broad.

Phil Tarrant: There is so much info out there.

Steve Waters: Yeah.

Phil Tarrant: Go to smartpropertyinvestment.com.au, go and check it out. We write on all these areas all the time. But, so we're in the market. Based on your analysis, your research, your opinions, which I value: Where should we be investing at the moment? Where's going to be next for us?

Steve Waters: In terms of the state?

Phil Tarrant: In terms of the state and the location? Should we stay in Brissy, or is it a secret?

Steve Waters: There's never any secrets. Look, I think being opportunistic is the key, here, because we do need that kickstart ... or that capital input, so to speak, in terms of growth and equity position and what have you, because the cashflow's okay. So, I think opportunistic is the key word here. If you were to really pin my arm behind my back and, what were the chances-

Phil Tarrant: Be opportunistic.

Steve Waters: Yeah.

Phil Tarrant: Because, the assets we're looking for isn't ... we're not looking for a nice house that's going to deliver consistent growth and yield, we're looking for stuff with other things associated-

Steve Waters: With a twist.

Phil Tarrant: So we need to be a bit opportunistic with that.

Steve Waters: Yeah, absolutely. Because they don't come up every day, and it's-

Phil Tarrant: Yeah. So, for us to be doing this ourselves, and I always revert back to this, it'd be impossible for us to do it right. To find these assets. So, we essentially ... We pay you, you're a buyer’s agent, we pay you good money and then it means we're in the game, right?

Steve Waters: Good money?

Phil Tarrant: Good money. Good money. But what it does, it buys us accessibility to markets, it means that we've got a sentinel who's out there, always looking for stuff for us, who's always patrolling and policing and looking for that property which suits our needs and our portfolio, and that's what we have in you, right? If I was going to do that myself, it'd just be impossible, right?

Steve Waters: Well, look, I think to a degree, anyone can do it, but it's just about how much time you want to invest-

Phil Tarrant: Yeah, I got no time.

Steve Waters: Yeah.

Phil Tarrant: Yeah, so there you go.

Steve Waters: Exactly. So you're out.

Phil Tarrant: Happy to do it. But, anyway. So, for our listeners, that's where we're at. We're out there, we're looking. We're looking to refinance at the moment.

Steve Waters: Got a renovation on the run.

Phil Tarrant: Got a reno on the run. And, I just want to touch on a property that we secured a little bit earlier this year, and go back and have a look at it. It was around July, I think, we announced that property in Kingston, which is part of the Logan Shire in Brisbane in Queensland. We picked it up for 290 grand back in May, we settled, actually. We've had tenants in it since then, it's quite a large house, but I think it's in a ... When we bought it we knew it was in a bit of a state of ... In need of some love and TLC.

Steve Waters: Yeah.

Phil Tarrant: And we were able to drive down the price on it a little bit after some building to accommodate for that.

Steve Waters: Yeah.

Phil Tarrant: The tenants have moved out. We're going to do some work on this.

Steve Waters: Yeah, they've now vacated, probably the worst time of the year. We tried to keep them in there to perhaps Jan, Feb, but they needed to go elsewhere. So the property does need a little bit of love and maintenance and repairs now, so ... Just to recap what the property is, it's an upstairs downstairs scenario, auxiliary rooms downstairs, large block-

Phil Tarrant: It's a three-bedroom property-

Steve Waters: Yeah.

Phil Tarrant: ... because you can't have bedrooms downstairs because…

Steve Waters: Correct, and it just happens to have another bathroom and kitchenette downstairs.

Phil Tarrant: Yeah.

Steve Waters: So, all of that downstairs area needs some love. At the moment there's a bit of a flea problem.

Phil Tarrant: Did you hear about this flea problem, Michael?

Michael Johnson: No.

Steve Waters: Oh, so you don't know. So, the reno team, property managers have organised-

Phil Tarrant: That makes my hair go instantly itchy.

Steve Waters: I know, I start scratching! The tenants have been out of it now for five or six days, or whatever it may be. So, the agent organised the guys to go in and quote it, but they had to turn around pretty quickly.

Phil Tarrant: Do you reckon the fleas were always there, or they only sort of came in ... that's why they moved out?

Steve Waters: I don't know.

Phil Tarrant: You can get rid of fleas pretty easy, right?

Steve Waters: Yeah.

Phil Tarrant: Just fumigate it.

Steve Waters: I believe so. And Queensland's hot and humid, and fleas love that sort of stuff for breeding, and what have you, I think.

Phil Tarrant: Yeah.

Steve Waters: So, that'll be taken care of and then the guys will go in there and they'll quote pretty quickly and get into it.

            The $64,000,000 question is: Can they get it done and dusted, back on the market, for rent before the worst possible time, being December-

Phil Tarrant: Yeah.

Steve Waters: ... through 'til-

Phil Tarrant: So, people don't look for properties in December?

Steve Waters: Traditionally, they don't wanna move. Everyone's thinking more so about holidays and Christmastimes and what have you, and they usually wait until the beginning of the year. It may be prudent to drop the rent just slightly below market to get someone in there, and then have a ratchet clause in there, somewhere in that six-month mark.

Phil Tarrant: Okay. So it's one of the headaches we've got. Any other headaches, Michael? What's taking up your time at the moment? Looking after the portfolio.

Michael Johnson: Oh, nothing. There's been nothing major. We've had a bit of bank dramas at the moment, just getting all the documentation they need to be able to do the refinancing. As you mentioned earlier, we're also looking at putting a line of credit on one of the properties. I think that'd be a good little thing to get across the Smart Property Investment Show as well, because I don't think it's something we've done before.

Phil Tarrant: Yeah, we normally just refinance.

Michael Johnson: Yeah, exactly. And just to explain to people: This is another option you might have. Rather than refinancing, which is quite a significant undertaking.

Phil Tarrant: Yeah.

Michael Johnson: Line of credit gives us more of a continual thing to use. That's really what's on my plate at the moment. But other than that, all good.

Phil Tarrant: Yeah, our super duper spreadsheet here, we need to update it with our-

Michael Johnson: Needs a bit of TLC as well, I think.

Phil Tarrant: ... properties. Yeah, needs a bit of a reno I think. Just a cosmetic reno, probably.

Michael Johnson: Yeah, just the cosmetics.

Phil Tarrant: We've got to add to it. And, this is just really an insight for our listeners. You don't have to do stuff absolutely immediately, but as long as you keep up enough with the administration portfolio so you've got the numbers, so you can make decisions when you need to make them, and right now ... Can we go out and make decisions about refinancing, yeah, we can do all that sort of stuff. But, we need to get this thing updated to include the new properties we purchased. Those five, which all will be their own individual thing on this spreadsheet, because they're all their own individual income producing properties, even though they all sit on one block. But for our listeners, our value of our portfolio is about seven million bucks as of today, and we'll probably go back and do a bit of reassessment.

Steve Waters: Yep.

Phil Tarrant: We like ... I like doing it.

Steve Waters: Oh, I love it. It's the best.

Phil Tarrant: We always go through and go, "What do you think about this, Steve?" And we'll look around and we'll ... So, we've got some firm bank valuations on a number of our properties, or probably a lot of them ... which is good, and we use them as the value, even though they're typically conservative. And then we don't have bank valuations, we do a pretty conservative assessment on where they are. So, at the moment, it's about seven million, we've got about four million bucks in debt, there's about three million bucks in equity, and there’s an LVR position of high-60%-

Michael Johnson: A 65-ish.

Phil Tarrant: Yeah. 65%. Something we're comfortable with. But, that's three million bucks of equity in there that we can use to keep growing-

Steve Waters: That's pretty good going.

Phil Tarrant: ... and the sentiment is keep growing. If you haven't listened to it yet, I had a really good chat with Bernard Salt who, if you don't know, is a key property demographer, the other day. Go check it out, go listen to it, you'll really enjoy it, and we had a chat about the market and this bubble, and all this sort of stuff. All these different dynamics and even though there's a lot of talk about slow downs of markets, and Sydney coming off et cetera, et cetera ... it's always a good time to invest in property if you're investing in the right place, and you can invest in property

Steve Waters: There's always a market somewhere.

Phil Tarrant: There's always a market somewhere to be investing in. And we're always looking for that market, so we'll continue to keep pushing ahead and share the story with you guys. If you've got any questions of our portfolio, get in touch. I think I was on Twitter last night with someone, just having a chat about it. They wanted to see some things in our portfolio, so I'm happy to share it, warts and all and we'll get it published as well. It's all on smartpropertyinvestment.com.au. You can email the team at [email protected]

            We're going to have to wind up, we've got to run, don't we Steve?

Steve Waters: We do.

Phil Tarrant: We've got to be somewhere, but if you're not yet receiving every single morning our daily market intelligence news around property investment, so you're the first to know what's happening in investing, smartpropertyinvestment.com.au/subscribe. Go there, subscribe to it, and you'll get plenty of good info about what's going on in the market and also what we're doing, and what we thinking about stuff.

            If you're not following us on social, we do plenty of posts. Just search Smart Property. Also, please keep those reviews coming in on iTunes, we do appreciate them. If you're on iTunes, you just scroll to the bottom and it says, "Leave a review," and you can put a review in there and leave some remarks, it's who really likes it and enjoys them. Remember, also, subscribe on iTunes. If you're not subscribing, and you're looking each time, just press the subscribe button, or wherever else you choose to listen to these podcasts, just subscribe so it comes in automatically and you can enjoy.

            Alright, we'll be back. Michael, thank you. We'll be back in a month's time, so we'll have our spreadsheet updated by then.

Michael Johnson: Sounds good.

Steve Waters: Look at that, that's how you hold people responsible.

Phil Tarrant: What am I going to hold myself responsible for, Steve? Give me a bit of a hard time.

Steve Waters: Get your paperwork ready for your finance.

Phil Tarrant: Okay.

Steve Waters: Push hard.

Michael Johnson: Was that just a dig at me, Steve?

Steve Waters: It was.

Michael Johnson: Yeah, it was quite a-

Phil Tarrant: Michael, I need our paperwork done!

Michael Johnson: Geez.

Steve Waters: That's delegation, right?

Phil Tarrant: Alright. See how we go. Thanks for joining us, guys.

Michael Johnson: Thanks.

Steve Waters: Thanks

Phil Tarrant: We'll be back 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.

 

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