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Webinar - Your Perfect Introduction to Property Investment (Transcript)

Learn the fundamentals of property investment in Perth with this pre-recorded property seminar, or "webinar", hosted by Peter Gianoli, General Manager of Investor Assist.

This Perth property investment seminar is ideally suited for any savvy professional with an interest in property, including first time or experienced investors.

Kick-start your property investment journey and seek financial security through property; you have the potential to generate a lifetime of wealth creation and rewards.

Transcript: Webinar - Your Perfect Introduction to Property Investment

Good evening and welcome everybody. Welcome to our webinar, "Financial Security Through Property." My name's Peter Gianoli and I'm the General Manager of Investor Assist, and this afternoon I'm going to take you through this introduction to property investment. Just a little bit of housekeeping. If you'd like to communicate with us, just having some trouble with my Powerpoint, please bear with me. There we go. If you'd like to communicate with us, please type your messages in the chat box down below the administrator panel and we'll do our best to answer your queries and get back to you right away.

So when we're considering property investment, we're generally contacted by three types of clients, and clients looking similar to Graham and Sandra. They currently think that now that their house is almost paid off it's time to start thinking seriously about their financial future. They’ve done well out of their house they think property is a safer option than the share market, and they feel they need some good advice.

Our solution for clients such as Graham and Sandra is generally to select an investment where they can get capital growth on their investment, a safe and secure investment, and rewards for their contributions.

The other type of client that we have coming to us is a client similar to Jason and Kelly. They've been living in their own home for the last four years and they're in a position now where they're managing their mortgage quite comfortably, and they have both equity and savings. And they feel that by purchasing investment property they'll pay less tax and have their money working better for them, and what’s more they like the fact that a tenant will be assisting them in paying for their investment.

The type of solution we came up with for Jason and Kelly is an investment that gives them the maximum depreciation allowance, a negative gearing scenario, albeit not terribly strenuous, capital growth from their investment that they can re-invest, and make sure that we don't put them into an investment that there is some financial stress should one or two things go wrong with their situation.

And increasingly we're seeing more and more of this type of client, Nicole, or you could even call Nicole "Nic", and these are young professionals or young labourers who have a good income and they've got a good job that pays well. They'd like to set themselves up financially. They're attracted to property because they can see that more rich list participants started their wealth creation through property than anything else, and they feel what's more, by investing in property that they'll pay less tax.

Our solution for someone like Nicole, or "Nic", is a disciplined savings plan, in particular that will help them get their deposit, and an investment that's got maximum depreciation, modest negative gearing, and capital growth from the investment that they can re-invest because they're young enough that they can start to develop a portfolio.

So who is Investor Assist? Investor Assist is owned by the ABN Group. The ABN Group is owned by Dale Alcock and Garry Brown-Neaves and on the top we have a graph of all our senior managers who have had a wealth of experience in property, some 200 years in fact if you combine the amount. We've put together an advisory panel that help us put together the best possible investment for our property investments.

Within the group, we have these building companies which start from First Home Buyers at this end all the way to our more elite builder for more high end homes. As a consequence of that, we have a really good feel for what people are with regards home ownership in particular Western Australia but also our Melbourne and Victorian markets.

To help us supply our 4000 homes a year we build, we also own some more businesses like a kitchen maker, ceiling provider, concrete provider, roofing provider, plumbing provider. The advantage here to a property investor is come along with us and we’ll commit to build your home. We don’t have any unnecessary delays because all of the core trades belong to our crew and we’ll definitely make sure our homes  are built expediently and quickly, so that your investment can start working sooner rather than later.

Also within the group, we own these support businesses, ABN Development to produce land, Resolve Finance who are mortgage brokers, a conveyance business and a boutique bank. On top of that, we have great relationships with the major land developers, principally because of our size and the amount that we build. The Mirvacs and Satterlys and Peets of this world, so that we can actually negotiate and get the best possible price on land, one of the crucial ingredients when trying to put together a property investment. Bring all that together and it’s Investor Assist’s role to bring offerings to property investors so they can benefit by investing in property.

We’ve written an eBook, Financial Security Through Property. If you go to our website, investorasssit.com.au, and you can download that eBook free of charge and it’s a great read.

What are the key ingredients of a property investment? Well basically there are three. It’s land plus build plus finance and legal and if you can get each of those three ingredients right, your investment is going to perform well as a property investment. If you got two out of three right, then there’s some risk in your investment.

Let’s have a look at land. It’s a well known adage that land appreciates. At least that’s what most property investors will let you believe. We concur that land appreciates, but it definitely only appreciates if scarcity comes in place, if the replacement cost of the land is higher than the normal cost. If the quality of amenities of that land are high and worthwhile, and if the timing of that subdivision is right.

Let’s see how that comes into play. One of the investments we are very happy to promote at the moment is in a south eastern Metropolitan area of Perth. It’s call Piara Waters. It’s a Stockland development. It’s indicated here, highlighted in blue. You can see from the aerial photograph it’s proximity to the ocean. Please don’t be deceived that’s at least a good fifteen to twenty minute drive, but it is well within reach. It’s got good links to the CBD of Perth via the transport networks of the freeway and the train. It’s got good access to Fremantle, which is the secondary recreation area. It’s got good access to the international and domestic airports and probably more importantly, it’s on the edge of how the expanding precinct has gone for the area, yet there is more growth going on beyond. So it’s kind of an infill located southeast metropolitan area. As a consequence of that, we feel it’s got the right the right ingredients for land to appreciate over time.

The other thing we like about this investment is if you have a look at it, the residential vacancy rates, which at the end of the day are the people who will be renting the properties that are complete and bringing you revenue, are at an all time low in the history of the area. You can see when it was at its highest when people were looking for tenants and gradually as is most the case in Western Australia, the area is almost dried up with availability of rental housing.

The other thing to look at is how has this suburb been tracking from a media house price. You can see after the lull of the GFC, it’s gradually gone upward. It also performs much much better than the neighbouring surrounds, the Armadale local authority, it’s considerably higher than that. It has gradually edged its way up so the average investment is 550,000, 560,000, 570,000. So that’s pretty good for this particular area. Our offerings in this area are around $540,000, around 80% of the median house price, which is a good adage to get in around that level.

The real question with land is yes it appreciates but the types of thing you need to keep under consideration are the lot sizes you’re buying and shape. The more awkward the shape the more expensive it is to build on the land. Is the land flat or is there a slop on your site or are the soil conditions untoward? If that’s the case then it’s considerably more expensive to build on the block. The aspect of the block, is it north facing or does it have the opportunity to introduce some north-facing elements? If that’s the case it’s going to be considerably better. Are there any rebates you can pick up off the developer? Is it close to a park, etc? If that sort of answer is yes yes yes, then yes land does appreciate.

The second part of the equation is buildings and knowing that buildings depreciate. That’s actually a good thing because the Australian Tax Office also agree that buildings depreciate. So age of the building, suitability of purpose of the building and renovation potential of the building is also something you can consider. Yes, buildings depreciate and therefore you can claim depreciation on your tax return, but if at the end of the period you still have a very suitable house or a house that can be renovated easily, then even though it may have depreciated, it’s still got considerable life left for you as a decent investment property.

The types of offerings that we offer are obviously modern type housing, well finished, neutral appliances and neutral finishes. We look at our 4000 homes we build a year mainly for owner-occupiers. We find out what people are choosing and even though we give them the whole length and breadth of choices to make, 80% of people choose basically three schemes.

It’s our role in advising property investors that they should go for the more common schemes. A, it’s easier to attract a tenant, and B it’ll be a lot easier to on-sell a home at the completion if you haven’t got poor finishes or poorly chosen finishes.

What we like to do with property investment is consider who are the most likely people to rent your product and ultimately buy your product off you. If you consider what they need and you service their needs properly, then the property investor will go well. So what we feel, in particular in a suburb such as Piara Waters but we do this analysis of all the suburbs with which we recommend, iwho are the most likely people to live there? The most likely are double income no kids, empty nesters who have kids who’ve left the family, and families with slightly older children who are eight to eighteen years of age. So if you can get those three markets right, then you the property investor should be fine in a suburb like this.

So what do families want out of a house in Piara Waters? Both to rent or to own. Well, the most common thing they want is good schooling, good recreation and a flexible home. If you can get a home that is four bedroom, where the extra bedroom can become a home office, a study, a friend’s hangout room, then it’s a serviceable home. If you get these kids into a suburb that has great schooling such as Piara Waters, the chances are they don’t want to move. As a tenant, they’ll be there longer for you than if the school was a lousy school.

Empty nesters are interested in security in particular. They want a house they can lock up and leave and go on holidays. They don’t want a large yard that they’re stuck in the front and back yards maintaining all the time. They want central kitchens so they can do some entertaining. And they want, once again, a flexible home so that they can have guests stay, family members come and stay or they can have adaptable rooms that can use as home offices and theatre rooms.

 

Double income no kids, they want modern appliances, they want it brand new and they want it now. They don’t particularly want to wait forever. To get their dream home. Let’s not forget people who rent houses choose to rent for lifestyle purposes, while people who own houses tend to own houses that they can afford. This clientele want houses that are connected. They want coffee shops close-by, they want shopping close-by they want transport routes close-by. We think investments such as Piara Waters ticks those boxes.

So as I said, if you get all of that right, then for you the property investor, it should be smooth sailing. If we have a look at the offerings that we have on offer in Piara Waters, here’s a classic house, it’s called the Fremantle. As you can see it’s a four bedroom two bathroom home plus study. It’s got all the features we believe ticks the boxes for our clients. You can see it’s got a large entertainment area and a central kitchen. Particularly good for families but also good for double income no kids and empty nesters. It’s deemed a secure home because really there’s only one door in and basically has one door out and a sliding door here with almost boundary to boundary walls. If you got that tidied up, empty nesters feel quite secure. It’s going to placed on a 300m square block, so we’re not talking a large area of land. There is room to play in the gardens and have alfresco but you’re not forever deemed to be a slave to your garden. We got this fourth bedroom which could operate as a cinema room or a study room or a hobby room. We also have a study in this configuration as well. So bang for your buck. A $200,000 dollar home can be built pretty comfortably, and then when you fit it out to its full extent to perform very well in a suburb such as Piara Waters.

Often we’re asked, should I buy a brand new or a second hand investment property? Well our answer is, because of depreciation, you’re well and truly encouraged to buy a brand new home. Main reason for that you can depreciate fixtures and fittings at a higher level over five years and you depreciate structure over forty years. So if the house was a $200,000 home and it had its fixtures and fittings included, over the first five years you can depreciate $45,000 worth of the home. Over the forty years, you’ve got $200,000 to depreciate.

So a home such as the one we’re suggesting in Piara Waters gives you $14,000 p.a. over the first five years, that you can depreciate. If you got this home that was six years old, you would miss out on this $45,000 worth of depreciation, and it was completely limited to some $5000 a year in deprecation. The value of depreciation is it’s a non-cash outlay. It simply means you can take that amount from your income rent plus your job if that’s the case you’re in, before you have to pay tax on your proceeds. Sitting down with a property investment specialist, we can easily show you the advantages of buying new over old.

Obviously buying brand new gives you substantial piece of mind. With a brand new home obviously you’ve got structural guarantees, warranties, licenses, etc. Another thing to consider nowadays is, is the home you’re moving into geared to handle national broadband when it comes past your doorstep. In Piara Waters, we’ve gone to the trouble of spending the extra money. It’s around $1200 dollars, but we like to make sure our homes are future-proofed so that you do have fast connectivity via national broadband.

We’ve looked at our designs, we’ve looked at our building construction protocols and we’ve learnt a lot. We’ve really come up with what we believe are maintenance friendly homes, which we believe are particularly important to a property investor. Obviously there are modern appliances that are brand new, which means they come with warranties. Our gardens aren’t huge so there’s less garden maintenance but more particularly the plants and the aspects we’ve chosen for the gardens are very water wise. All the modern utilities, gas, power, national broadband or if not national broadband high-speed connectivity is possible. We’ve done a fair bit of work to put bulkheads in corners in the house to eliminate cracking, which tends to happen in most new homes and is quite easily patched. But with clever use of design you can actually minimise the amount of cracking in a brand new home. And obviously water proofing is highly critical, there’s nothing worse than trying to find a leak in a house. We go to extra trouble to make sure the water proofing is done to the extreme.

Inside the ABN Network, we also have a very important company called Resolve Finance. Resolve Finance is owned by the ABN Group, we have a relationship with them. We don’t receive commissions from Resolve Finance. They are simply there to assist our clients to get into property and more particularly from our point of view, helping us to do builds for them. They’ve been engaged by the ABN Group for the past eighteen years, they have a unique understanding of the process that saves time and money. In most cases they’ve looked at our options and finance has already been arranged. They don’t have to go to a bank and start again.You don’t have to use Resolve Finance. You can make your own enquiries, but they certainly provide a lot of advantages to our property investor clients and we like to at least make it available to clients should they consider an investment.

The considerations by using any financier is do they understand how to get approval times fast, do they understand options such as home to home finance. More particularly from a property investor point of view, have they got products that’s got limited recourse, in other words, preventing you tying up all your assets in one investment property, do they allow you to build your portfolio as you need it? Do they count, do they assess the rate as part of your income when they're looking at your borrowability? That's particularly important.

Now look, everybody's different, everybody's unique. We've talked about the three main features of property investment being land, build, finance, and legal. And that's the fundamentals that you should consider and you should look at carefully. But to be brutally honest, property investment is a very individual game. Every person's situation is different. And what we encourage all our of clients to do, well before they go out and fall in love with a property, is that they should do a hardcore property investment analysis about where they sit, what's the best type of investment for them. And once that's been done, then by all means, you go out and you fall in love with the property and you get yourself involved in purchasing or building that particular property.

So we encourage you at no obligation to get in, to come and speak to us, to get in touch with us via our phone number, our website, or our email which I'll explain shortly and sit down for a no obligation property investment analysis. It takes about half an hour. We can do it in the comfort of your own home, at the local coffee shop, in one of our display homes, or you can come and visit us in our office, or sit down and go through with a property investment is actually the type of thing that will help you get to the need, or the needs, and your wants and desires that you want out of investment.

How to get in touch with us? Well call now on 08 for Perth, 9200 7200 and we'll help you book for a PIA as we call it, a property investment analysis, or go to our website investorassist.com.au. You must have already been there before because you've booked for this webinar via our website. Or send us an email info@investorassist.com.au and one of our property investment specialists will be in touch with you.

Don't forget, if you've got any queries, you can type messages into us and we will handle those on a one-to-one basis.

I'd like to thank you for attending this webinar. I hope you found it informative. We're going to be recording this webinar, we have recorded this webinar. We're going to be collecting the link and we'll send you an email copy of it so you can refer to it from time to time. So on behalf of Investor Assist, this is Peter Gianoli signing off and saying thank you very, very much for your participation. Bye for now.

22 min 37 seconds

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