This is one of the best property investment seminars Perth has to offer. This property seminar is a superb introduction to property investment providing you with the opportunity to familiarise yourself with the ABN Group and the team at Investor Assist. It covers a broad range of topics and may assist you to identify which specific topics are most relevant to you and what seminars you wish to attend in the future.
This Perth property investment seminar is light and informative, giving you plenty to think about. It also takes a broad look at the current state of the property market and addresses three of the most popular property investment questions – when to buy, what to buy and where to buy.
This property seminar is suited to everyone from first time to experienced investors and numbers are strictly limited. It’s a great way to check if your investment strategy is ‘on track’ so book your spot today.
Transcript: Peter Gianoli gives his Perth property investment seminar
Peter: Tonight, we're going to go through who is here, why Investor Assist, the key ingredients for property investment and how you can get involved. So these are the types of clients that we've been helping under the Investor Assist banner. This is not the only clients but these are the general types of clients that are considering an investment property.
We've got Graham and Sandra. "Our house is almost paid off, It's time to start thinking seriously about our financial future. We've done well out of our house, we think property is a much safer option than the share market. We need some good advice." By and large, people in this situation have found that the best decision they ever made was to own their own home or to move towards owning their own home. With the process of time, property has served them particularly well. And now they're at that time in their life, they're thinking, well, we've got kids off our hands. We've got a little more disposable income. If we can just get one more asset to perform well for us, one that we can rely upon, one that's unlikely to go up and down like shares, then we'll be set into our retirement. So that's one group that we see a fair bit of.
The other types we see a fair bit of, affectionately known as Jason and Kelly. "We’ve been living in our home for four years now. We’ve managed our mortgage to the point where we both have equity and savings. By purchasing an investment property, we’ll pay less tax and have our money working for us better than our savings. We like the fact that a tenant will assist us in paying off our investment." This group are probably looking at ultimately a third and a fourth during their working career. So they’re the other type of people that we see a fair bit of.
And there's this lot, well this individual. Doesn't need to be Nicole, can be Nick. They think, she thinks or he thinks."I've got a good job that pays well. I'd like to set myself up financially. More rich list participants started their wealth creation through property than anything else. What's more, by investing in property I'll pay less tax."
So we're finding a lot of young professionals are coming to us who are now at the point where they think we'd like to do something with our money better than have it in the bank. We’d like to do something with their money other than spend it. We’d like to put it aside for some sort of investment and property investment starting to tick their box. So as I said, they're not the only clients we get, but by and large, they're the three groups of clients that we get, and oddly enough, appear to be represented in this room tonight.
Well, we're backed by the ABN Group. The ABN Group is Dale Alcock, Garry Brown-Neaves who own it, started it and have built it to the stage it is today. Within that group is our advisory panel which is Dale, Garry, myself, Damien Eves, Jeff Miller, Don who's here tonight, Andrew Auret and Max Pirone. There's about 200 years of property experience covering all of the disciplines, from building through to finance, through to architecture which is Max, through to development which Andrew Auret, through to sales and marketing and property in general.
So it's a great backing that we have. We've been fortunate enough to secure their services and there's a consequence of that. We've put together our offerings and our deals. The first thing we did was write a book. It's out, available, free. It's a downloadable e-book. Hopefully most of you have downloaded it. If you haven't, you'll be sent a complimentary copy tomorrow morning in a follow-up email, which if you've already got it, you can forward onto someone else. We don't mind that. But it's a general introduction to property investment. Tonight's the abridged version, the 60-minute version as opposed to the 150-page version, which is the e-book.
So as indicated, we've got our panel of advisors representing 200 years of experience. We've then got a live to air experiment that occurs every day of the week. These building companies from the Homebuyers Centre, to Celebration Homes, to Dale Alcock Homes, Dale Alcock Home Improvement Boutique, APG and Webb and Brown-Neaves pretty well cover the entire spectrum of price points, from first home buyers, through to the exclusive luxury home at Webb and Brown-Neaves. So everyday, we have day-to-day contact with clients, owner-occupiers that are in these price points. So we sell indicatively 4,000 homes per year. We've built 45,000 homes in its entirety, which is all of Bunbury plus a bit. We haven't built all the houses in Bunbury, but if you put 45,000 in one spot, it'd be all of Bunbury plus a bit.
So we have a fair understanding of what all of the buying segments of the market are doing and are interested in. Why is that important to you? As a property investor, that's particularly important. Because number one, when you buy an investment property, you'll want tenants who'll look like each of these price points. And number two, you'd want to ultimately on-sell your property to preferably an owner-occupier or another investor who will look like these guy's clients. So by us having the access of all of these building companies, to get their intellect, to get their buyer feedback, we're able to put the best offerings to you, property investors.
The other thing the group has, the supply businesses which are Kitchen Maker, Ceiling Solutions, Concretus, Hi-Point Roofing and Boeing Plumbing. Why is that important? Two reasons. One, if you do decide to do something with us, we can guarantee that your house will be built promptly and on time. From a property investor's point of view, the last thing you want is own a block of land and take for ages for the house to be built on it. You want income to come in off that block of land as quickly as possible. So by the group owning supply businesses such as these, the crucial supply businesses, we can make sure that your property gets built quickly.
Number two, they are a flow on savings. Example, the Kitchen Maker tells us the best possible dimensions for a slab of Caesarstone, happens to be this by this. So if you build your kitchen bench at that particular size, they can build the kitchen faster, quicker and cheaper than if we go for one that might be slightly too wide or slightly too long. From an operating functionality point of view, no difference. It's still a sizable kitchen bench. But with their intellect, they check our plans first. We can make sure we don't draw something in a room that's going to, A, end up being more expensive, B, take more time and, C, have a joint in it that can lead to maintenance issues down the track. So that sort of intellect is flowed on to us and our design team as a consequence of what we learn.
The other support businesses that we have are ABN developments who produce land, Resolve who are a mortgage broking business, Axiom, that's a settlement business, and Bluebay who put together financial products specifically for property. So we also own those in the group. You can see now by having these guys behind it, these businesses that are touching real clients every day, these businesses that can supply both time, skills and intellect, and these businesses that start to bolt on a property company that can do nothing else but be good value for property investors.
Then we parallel that with our land developers that we have good relationships with. Obviously by us doing 4,000 houses per year, we've got great buying power, with not only these land developers, but the major land developers. So if you put all that together and we do our job properly, you've got Investor Assist.
So our job is to harness all of that intellect, harness all those opportunities, harness all that skill set and help you, property investors, get the best outcome as a property investment. That's why we, Investor Assist, have been put on earth. And if we do our job right, we should produce the best quality investment products available in the Perth and Melbourne marketplace, which is the marketplaces that we specialize in.
What are the key ingredients of a property investment? I'm sure you all know this. It’s land plus build plus finance and legal. Now, we'll go through each of these. Just about every book you've read on property investment, just about every seminar you've gone to on property investment, if you like to frequent these things, will tell you that land appreciates. And as a consequence of that, they say just buy land. Things can't go wrong.
Well, tonight, you might hear it for the first time that land doesn't always appreciate. It's meant to, it will if it's got the right ingredients, but if you buy a block of land and a freeway resumption comes along, then your block of land may not go up in value. If you buy a block of land and it's too close to the coast in a receding coastline, and it constantly gets flooded, your block of land probably won't go up in value. So it doesn't happen all the time. Don't just buy a block of land and think you're safe.
What the philosophy is, is if you buy land with the right ingredients, it's likely to go up in value. And the right ingredients are scarcity, that is, try and buy a block of land where there isn't going to be lots of other blocks of land available. So if you're a first home buyer, then yes, you might go to Alkimos or further north and buy a block of land. It might suit you fine. But if you're a property investor, I'd probably say it's not the smartest place to buy a block of land. Reason? There's a bucket loads of other block of lands up there. They've got to start to minimise in quantity before you're going to get any massive appreciation in capital gain. So if you can buy a block of land in Cottesloe and you sit on it long enough, you'll probably do all right, because the scarcity value means the only way you can get another block of land in Cottesloe is to buy a house and land, knock over the house, so the replacement cost will mean your block of land will go up.
So be careful. Don't just say land equals increasing value. That's not the case. Will increase in value if scarcity kicks in. It will increase in value if the replacement costs are dearer. It will definitely increase in value if the quality of amenities around the block, like across from a park, or a schools are being built, or some major infrastructure play is in place, then you will get capital gain in your block. And obviously timing is another factor. If you buy a block of land at the top of the market, and the market changes and nothing else occurs on that graph, then you'll be waiting before you get appreciation in land. So yes, land appreciates but not always. You have to be savvy as to where you buy.
An example of one of the areas of land we like is Woodvale. Woodvale is really an infill. It's an old market garden, in this case, the one we're talking about, old market garden surrounded by houses, one of the last opportunities. We like Woodvale because of its proximity to the beach, its proximity to Joondalup, Airport and CBD. But we really like Woodvale because historically… And you can get this data on any suburb you like. It's based on the census. But we take the trouble of analysing the suburbs we like, and you'll see that as far as Woodvale is concerned, there is more migration into Woodvale than there is people out. So that means it's a sought-after suburb.
They're coming from north of the suburb. They're coming from northeast of the suburb, but they're also coming from overseas and over east. So it's a sought-after location. Turns out it's got one of the best public schools. It has one of the best schools. It also has good transport routes, it also has good shopping. So a suburb like Woodvale ticks most of the boxes. There aren't many other blocks The only way to get a block would be to knock down a house. It has got good amenities and it has got timing on its side. So something like Woodvale ticks the box. We're not saying they're the only places, but that's the analysis you should give it.
Also at the moment, you'll see that the weak spot in the market is the land developers. They've got too much land. They can't sell their land as well as they'd like. So they're offering deal after deal after deal. So at the moment, if you're a property investor, the mob to put pressure on are the land developers. It won't always be this way, by the way. But right at the moment, they're the weakest link in the chain.
So working with someone like us, or anyone else for that matter, what you should do as a property investor is get your finance sorted first, know exactly what you can buy, get your house design under control, second, and then go along and screw the developer down to make the deal stack. Because they, at the moment, have the appetite to do deals. We know that because we buy lots off them, but we also know by the amount of marketing that they're doing at the moment, that they're pretty desperate to move stock.
So right now, our role at Investor Assist is to get people properly qualified so they can go and put a serious offer in. Not a subject to offer, but a serious one. Have their house well and truly sorted right upfront, so that if the deal needs some sweetening, the people to act on at the moment is this sector in the market. So we can play a buyer's advocate role with you at the moment because they are the vulnerable party in the transaction. It won't always be the case, but at the moment, that's where they're at. The other thing to ask yourself about land is what block am I buying? Why am I buying it? Because lot size and shape is important. Because if you get talked into an odd-shape block at an incorrect size, it'll cost you a hell of a lot more to build a house. So don't just go for the bargain block. Have your house in mind well and truly before you start. If it looks flat, it might not necessarily be flat. It's worth understanding what the soil and slope conditions of the block are. Because obviously a slopping block yields to retaining walls of some description, which increases cost on your house. As a property investor, you don't want to do those things. You want to make it as generic, as bread and butter as you possibly can.
As an owner-occupier, a different story. You might love that aspect, love that block, prepared to spend the extra. That's different. But as a property investor, you should go for the block with the least amount of downside. You should buy the block that's the most vanilla block you can find because then you can get your house on quicker, up faster, cheaper and earning money for you.
The other thing is the aspect. Is the block facing north or is a large part of the living area of the house on the block got a northern aspect? If it has, go for it. If it doesn't have, don't go for it. Because you want to find tenants and ultimately you want to find people that buy the house off of you for a capital gain. Houses that have got good northern aspect will always do better.
When developers price blocks of land, they don't charge you any extra for a northern aspect. Developers tend to go block, size, times a square-meter rate, pops out at this price. They don't normally take slope, shape and aspect into account. So with a good sales rep beside you, you can get some decent bargains and get the right and the most appropriate block. Rebates are important. Developers give rebates – fencing, landscaping, whatever the case may be. Then proximity to parks or other infrastructure. These are the real questions you should ask when you're considering the land equation.
Whenever we talk, land goes up. Most people tell you that so you don't buy an apartment. They'll say apartment doesn't have any land or very little land, therefore don't buy one. We're not going to say that. Some apartments right now, because people are hurting out there, can turn out to be very good investments if you buy right. The thing you have to watch with an apartment is you can buy one but there's no guarantee that they can't knock over a couple of buildings next door and build a bolder, better, grander, better apartment. That's the land equation. It doesn't always pan out the same.
But right now, if you're older in age and you want a return on investment, forget capital gain, but you actually want yield, then you might be more inclined to go down the apartment route. If you've got time on your side, 10, 12, 15 years, then you don't only want yield, you want yield and capital gain. Then, you've got to be careful about the type of apartment that you buy. So once again, don't necessarily believe apartments are bad, houses are good because of the land component. That's not necessarily the case. There are always gems in every one of these market sectors.
Probably the critical question to ask as a property investor about an apartment is how much are the strata fees. You get seduced in apartments because they've got swimming pools, gyms, saunas and spas. It's great to sell apartments and myself and my team have sold hundreds of millions of dollars of apartments over the years. However, as a property investment, they can often not be that good because your one month of your income goes, per annum, in strata fees generally. Particularly if they've got all the fruit. If they've got the spa, the gym, the pool, the cinema, strata fees are very high. And as a property investment, if you've got to take away one month of your income, that's not going to do you all that well.
The other thing to look at is the sinking fund. Strata fees are made up of two parts. One part to pay for the cleaner and the pool and the likes, and the other part, the sinking fund, to replace the pool or the lift when it breaks down or to paint the outside of the building. Western Australia hasn't experienced this yet because apartments aren't that old in Western Australia. But right now in Sydney, there is a major nightmare. There are apartments that are 50- and 60-years-old now, and there is insufficient funds in the sinking fund to replace lifts, to do the serious stuff that the buildings require.
That means the owners have to put their hand in their pocket and fork out quite a lot more money to do things, even though they've been paying their fees. So if you're thinking of buying an apartment, you really need to see the size and health of the sinking fund, particularly if it's an older building, to make sure that it's got sufficient in there to keep the building in a good shape with which you want it to be.
You also need to look at strata company’s profit and loss and balance sheets. Annoying painful things, but if you're thinking of buying one, you must ask those questions. Because there are many strata companies out there that… Strata companies are the owners of the building that are actually broke. They haven't been able to collect fees, haven't charged sufficient fees, and they can't keep up with the rising cost of power, labour for cleaning and the like. So they are the questions you should ask.
Then if you're going to buy an apartment off the plan, you need to ask the question, how many apartments do you need to sell before this building will actually be built? And how far away are you from reaching that level? Because if you put your deposit down, you won't lose your deposit.
But it could take two, three years before a developer deems that they can't get enough sales. They won't go ahead with the building and then they'll pay you back your deposit. But in that time, you've lost any other opportunity that you could have done with your 10% deposit. And you end up not having a property. You'll get your money back, no doubt, there's no question mark about that because it's held in trust, but you've lost that opportunity. And then you're going to be three years down the track looking for an investment property.
So if you're going to buy an apartment off the plan, do so but ask the serious question. How many do you need to sell? Because they need to get normally 80% presales so they can go to a bank and get the funding to build the building. If they don't get it, they can't get the funding, they've got to put the money in themselves which they generally don't have, or they try and on-sell the project which is often difficult, or it falls over, and that's when they give back deposits. And that's the last thing they want to do. So they're the questions you should ask about apartments.
So that's land, we've talked about land. Now, we're talking buildings. Everyone says to you, land appreciates and we've discussed that, buildings depreciate. Yes, they do, buildings depreciate. And the Australian tax office acknowledges that buildings depreciate. They acknowledge it so much so that they allow you to depreciate properties every year. Five years for the fixtures and fittings component of a house or an apartment or whatever you buy, and 40 years for the structure. So as far as the tax office is concerned, buildings definitely depreciate. And that means you as a property investor, and I'll show you that on the next slide, get free money from the government in terms of taking it off your income before you have to pay tax. So yes, buildings depreciate, but that's actually a good thing as far as the tax office is concerned.
But even though buildings may depreciate, it doesn't mean their suitability of purpose is lousy. Try telling someone that inherited an apartment in the center of London that could be 100-,150-years-old that it has no more purpose. That's not the case. Try telling someone who's got a building on King Street in Perth that's 60-years-old that it's got no purpose. That's not the case. So yes, they depreciate, as far as the tax office is concerned, but if you buy well and you buy something that's been properly designed, its suitability of purpose can last a hell of a lot longer than the depreciation that the tax office might acknowledge. So once again, don't just fall for the fact that buildings depreciate, land goes up, I'll only buy land. No. Think about the balance on the equation.
We'll go back to that Woodvale example again. This is telling us that the amount of available land that can be produced finishes in 2025. And at the moment, where are we, 2012, there is really only that much left of brand new land that can be produced. In other words, there's about three to four more market gardens that can be converted into building blocks. That's all there is. So as an investor, you should look around for areas that start to exhibit traits like this. Because what does that mean? It means scarcity is going to kick in a lot sooner than if you were to have bought, let's say, back here when there was a bucket load more that could have been produced. So that's the sort of research you should start to do.
Ditto with the types of houses. Once again, you can get this information from the census. It's just how you interpret it and weave it. It's the sort of thing that our guys will do for you if you have somewhere that you're interested in. But if we have a look at the Madeley-Wangara-Woodvale, and this is just the example I've chosen, it tells us that in 2006… And this is the census figures we're still using. You know we all completed a census last year, but the data hasn't been made publicly available as yet. So it'll be updated as we go. But back then, 2006 is the black, 2021 is the prognosis in the darker purple, and 2031 is the light purple. And what it says is households in these municipalities are going to be predominantly couples without dependents and couple's families with dependents.
So it tells you if you're going to buy a block in this municipality, and you're going to build a house… Going to build a house – to the people that are listening to me virtually as opposed to “gonna,” going to build a house. Build a house that caters for that and its suitability of purpose is going to be great. It's going to go for a while. Now that may seem simple, may seem obvious, but trust me, lots of people don't make these obvious calls.
So in this situation, we say look after your core audience. So in this case, it's a lifetime DINK – that's a double income no kids – for those who aren't sure what that is. A double income no pre-kids, empty nesters or families with slightly older children. You look after those guys, by and large, in most suburbs of Western Australia and you, the property investor, are going to go well. You're going to be looked after well.
So what are those people like? Empty nesters? What do they look for? Think about this, we're thinking about potential tenants. What do they want in a house as a tenant? And what do they want in a house when it comes time for you to sell? Do you want them to be able to buy your home as well? So if you're trying to cater for these guys… And I'm not making this up. This is what we hear from day in, day out activities in a hundred, and you probably know this better than myself, it's about 125 display homes open every weekend, every Monday, Wednesday, Saturday, Sunday. So this is real life data. So these guys, their single most important thing is security. It's their most important thing they really want out of a home. They want to make sure it's both financially secure but more importantly, physically secure.
So security is a big button for these guys. So too is lock-up-and-leave. They've worked hard, done all the miles, it's time for them to enjoy their life. They want to be able to lock up, know that their house is under some semblance of control and go away on holiday. That's why a lot of these guys go for apartments. It's that lock-up-and-leave mentality.
The other thing that these guys particularly want is low maintenance. They don't want 600 square meter blocks of land. They've had that. They're now looking at 340s, 350s, even smaller. So they're looking for houses that have got all the amenities in there, but not necessarily the massive front or backyards. They do want a bit of a backyard, they like to tinker, they like to look after orchids, whatever they are, but by and large, they don't want much to do in backyards. So that's the hot buttons for this group.
These are double income no kids. These guys want it and want it now. They're not prepared to wait much for anything. They want to be connected. So most importantly to them is, are there coffee shops in the precinct? Are there restaurants close by? Are there bus routes if I have to catch a bus? Are there proximity to the beach, proximity to the airport, proximity to shopping centers, proximity to movie cinemas? It's all about lifestyle. Remember in rental ville, people rent where they want to live, as opposed to ownerville, people buy where they can afford to buy. Given a choice, renters, they think, well, I'm wasting money renting anyway, I might as well have the lifestyle. That's what they think. As opposed to a homeowner that says it's time I stop wasting my money renting, and I own something, or I'll own where I can actually afford to own.
So there's two psychologies that play here. So given their choice, they want it and they want it now. In the house, they want the modern appliances. They don't like renting old places, they really like renting new. They want the modern appliances. They also want connectivity in terms of high-speed internet or telecommunications. Probably they're the biggest driver of them all. And the reason I throw that up as well is there's a lot of apartments in the city of Perth that aren't wired because it wasn't around. But when they were built, let's say five years ago, no one thought of national broadband five years ago. So they've been wired principally for old time telecommunication.
When modern telecommunication comes along, if there's 100 apartments, you're going to need 100 people ticking the box say, yes, we're prepared to upgrade this building to modern technology. I’ll hazard a guess that in every apartment block in the city of Perth, that's 100 people, there will be one person who'll say no. Just because they won’t want it, just because that's what they say. Just because they don't want that bloody computer, whatever it might be.
So that's another thing about apartments, you need to make sure that they're upgradable. That the strata companies rules allow it to be upgradable. Not on a 100% resolution, but at least a unanimous resolution. Now in new houseville, that's not an issue. But rapidly, we're going to get to the point where we'll have the haves and have-nots based on technology. And that's something as a proper investor, you want to be in the haves side not the have-nots’ side.
Then we have families. Families, what do they want in their houses? They want flexibility. One room could become a nursery, which could become a study, which could become a bedroom. They need flexibility. They also want amenities. They're very interested in schooling obviously, transport routes, shopping centers, particularly important to them.
I'll ask you a question now. If you had a choice, these guys line up to rent your property. These guys are prepared to pay just the same amount to rent your property. And these guys are also prepared to rent your property at the same amount. Who'd take the older couple, show of hands, anyone? Okay. No one is right or wrong here, by the way. Who'd take the double income no kids? Anyone? All right. Who'd take the family? I'd take the family. Reason?
Audience member: They're more like to stay there longer.
Peter: They're more likely to stay there longer. Once you've got the kids, and the kids have got friends, that will be a main motivator in not leaving. But it's interesting because most renters say, “oh, I don't want kids because they'll damage my walls”. You know what? It's just a coat of paint. A coat of paint versus two months looking for a new tenant. Because the double income no kids, they'll flick you pretty fast. They're probably thinking of home ownership. These guys are pretty loyal who hang in there, but if they have a life-altering event, like one of them has a heart attack, more likely than anyone else in this group, but if one of them has a life-altering event, a disability of some description, they're looking for somewhere else to live, so you'll lose them.
These guys, as I said, will probably look to home ownership. And these guys, once you've got the kids, you're stuck with them, they're stuck with you. They're a good mob to have. But that's an aside. I'm sure there are some families you'd rather not have in your house. But that's where property management comes into play and having the correct property managers. And then as I said, if you look after all of those other guys… That's meant to create tranquil feelings that want you to stay back later and have one of my sales people talk with you. That's how easy it is being a property investor.
Let's have a look at a sample house. So one of the things we've been able to do because of the stable of houses that we have is pick the best sellers. So we've been able to grab the Rio family home at the Dale Alcock Homes, and we've been able to grab the Orion at the Celebration Homes. Of the 4,000 homes we build a year, probably Cele’s do 600 a year, Dale’s would do much the same, I suppose. So 1200-odd homes would come out of two companies, and they’re basically from this family of homes. So we've chosen that template of the family for our investment offerings.
The reason we've chosen them are, number one, they stack pretty well, and I'll show you why from a renters point of view. But number two, they're particularly attractive homes for someone else to buy off you in the used market because they come from the family of the best possible sellers. That's how we harness the ability or the acumen of the group to help property investors. But they're an efficient design, quicker to build, no prestart required, maximum land usage, they're these popular designs and they've been researched for the rental market.
They've got entertaining, which is attractive to double income no kids families and empty nesters for that matter. They're flexible so that room has got multi purpose. Security, there's really only one door in and one door out. It's got the retreat, which means you can have a principal couple renting in there, but they could also have someone else stay in the place, which helps the system from a rental income point of view. And minimal maintenance, obviously, because ideally they'll be placed on, I think, this is 15-meter frontage, they'll be placed on a 340 to 400 square meter lot of land.
Should you buy new versus old in housing? If you can get an old house for a bargain, I'd say buy. But if you're comparing a brand new to an old, probably the main thing that kicks you towards going, as a property investor, why you should consider brand new is that maximum depreciation. Let's see what that means. If you buy a brand new house, forget the land component. So let's say it's a $430,000 total buy, $230,000 of it is land. So we're just talking about the building component, the house component. So it costs $200,000 to build this house. Of that, $40,000 are deemed fixtures and fittings and $160,000 is deemed structure.
So that means, according to the tax office, you're allowed to depreciate $40,000 over five years. That means $8,000 a year. Say you get your income, less your expenses, and $8,000 is a legitimate expense on the fixtures and fittings, it comes straight off your income. Then your structure of $160,000, $40,000 and $160,000 is $4,000, so that's another $4,000 a year. So now it's $8,000 and $4,000 is $12,000 a year, you can take off your income from a brand new house. Remember, you haven't paid this $12,000 out. The tax office allows you just to take it off your income. So that means in the first five years, you've got $12,000 a year that you can take off.
So if you buy a home that's six-years-old, you're saying no to $60,000 worth of deductions. You follow me here on the maths? So new wins on depreciation, new also wins on the fact that they're easier to rent out because people prefer to rent a new home than an older home. But old can win if you get a bargain, that's well under market price, that's going to get good capital gain. The other reason we like to advocate new is the typical peace of mind. There’s 25 years structure guarantee, there's six months service period, and so on and so forth. But depreciation is the real winner there.
The other thing we like to tell property investors, and this isn't necessarily with us, but if you decide to go house and land, and you are looking at the deal, and someone tries to tell you to save $1,500 by not putting in the latest in getting it up-to-date for whatever network, don't save the money. Do it during build time. It's, A, cheaper, it's, B, possible to do. You can retro-engineer but that involves quite a bit later. But more importantly, it'll enhance your ability to on-sell, but it'll certainly enhance the type of tenants you're getting.
As you sit and I stand here today, there's absolutely no way we can predict what you'll be able to do with this or it's derivative into the future. Who'd know? So I think to fireproof your investment, you should make sure you up-spec it to include that. I think that's a no-brainer really. You tend to save but that's not going to help you, I don't think, in the long run.
The other thing we've done with our group in the houses that we've chosen and the changes we've made is we've gone for what we deem most maintenance-friendly. So we've been able to get all of our maintenance supervisors from all of our building companies into one room and they can tell the things that have traditionally gone wrong. We've tried to minimise as many of those things in our house plans. Most of that is like beneath the walls, difficult to actually ascertain. Our sales reps will go through that with you if you're interested in that sort of thing. We're not saying that you won't have a defect or a maintenance item, but we think we've minimised as many as we possibly can learning from the 4,000-odd houses a year that we build. So we’ve tried to minimise those issues as much as possible.
Now onto our final component, which is really where from a property investor's point of view, the rubber hits the road, the finance and legal. In this area, it's very difficult to generalize. This is where one-on-one is really what it's about because your finance and your finance are likely to be completely different. And this is what one-on-one service is principally about. Now, there's two services that we have are Resolve. They've been working for ABN for the past 18 years. Owned by ABN, I might add. They have a unique understanding of the process that saves times and money. Finance already arranged? Let them confirm there are no better options.
But then more importantly we've got this group called Bluebay which, as I said, produces products specifically for property lenders. So wherever the mainstream banks may have a gap in what they're offering, Bluebay can invent and design and make available to our group. Because don't forget, our group just wants to keep building. So whether banks have got an appetite for building or not, Bluebay will come to the party should there be some sort of gap.
So they're an alternative to major lenders, they're funded by strong industry partners, they'll come up with competitive home loan packages, but they look at unique product niches. So in particular, self-managed super funds. If you're interested in going down the self-managed super funds path to purchase property, you know now you can borrow, but the mainstream banks, not all but some mainstream banks, are receptive to it, some are difficult to it. Bluebay have identified that and we believe we've brought out a particular competitive package.
Visa Cards at home loan rates. There's a reason for that and it's normally to do with mortgage insurance. If you borrow 95%-plus, you need to take out mortgage insurance. So often, what happens is you don't borrow that amount, you borrow below the 95%, but you get a Visa card that comes along with it that's at the same rate as your home loan, which you can use to extend your credit, but not having to trigger mortgage insurance. That's a product that's been put on earth by Bluebay principally to help people in that situation, mainly first home buyers would be fair in that situation.
But because they understand property, they condense approval times. There is a product available home to home finance. That's for a client who needs to sell a home to move into a brand new home. They believe the current home would go up in value in time, so rather than sell it today, this is if this client thinks like that, they're able to do a home to home finance where they hang on to their current home, build their new home, then sell their current home because they believe the market condition will have improved. That finance package is in place for those people.
But more importantly for our area, getting a loan with limited recourse. The last thing you want to do is tie up all of your properties because you want to buy an investment property. A big bank will try and grab your principal place of residence as well. But if you then want to move your investment property and sell it or do something with, it it's tied up with your main home, that's not a good move. You should try and have limited recourse.
You should also, particularly in the types of products we're advocating, you should be able to count the rent as part of your income. Not all banks will do that. Some banks will say, yeah, that's great. But that's just icing on the cake. We’re not going to count it. If you're actually bought well, built a property that is well-credentialed from an investment point of view, you should be able to have the income counted or the rent counted as part of your income.
So these are the sorts of things that we've worked on or Bluebay works on to make sure it has receptive products. But as I said, there are things that could be done or they need to be done on a one-to-one basis. And today, right here and now, in this buying cycle, it's actually the first step you should make, is find out how much money you do have to invest. You should get that bit sorted today. Because with that, you've got buying power because today is a buyer's market. You've got the money and you can sign a strong contract, then we can go with you and bargain really hard, or you can go and bargain yourself. But I'm going to tell you, no one bargains better than an Italian.
And then of course rental is important. So the suburbs you're choosing, make sure it's really good if the surrounding suburbs are older properties as rental options, and you've got the brand new one. So that's that supply of land story again. It's also good to just go to realestate.com and check out what is the availability on the market. Although today, I can tell you to look anywhere and you'll see there's not much on the market because rent is going nicely at the moment.
Strong interest from downsizers and professionals looking to rent. If you find a suburb that's got those flow-ins of migration, that's who you're going to be attracting, and what's the proximity to amenities and transport. Make sure you've got those in the portfolio and your investment will do quite nicely.
So what we like to do with clients for no obligation as a property investment analysis is sit down with them, get some information from them, and produce a report similar to this that basically says what you can afford to buy, and what type of area should we look at for you. Then armed with that, it's simply a matter of getting together with someone at Resolve and finding out exactly what the bank would think. This is what our analysis thinks, then we find out what the bank then think. Once we've got that together, then you can go shopping. Most of us go shopping first and then try and find out whether we can afford it. Today in this market, I'd encourage you to go get your money first and then go shopping next because you'll buy better.
We've got a range of investment offerings at the moment, but they change constantly, and they're updated constantly. What's your next step? Well, you can come and listen to this again. But if you want a specific topic like self-managed super funds, next Thursday night in Booragoon, we have an accountant presenting just on the value of a self-managed super fund, and in particular, looking at buying display homes with a self-managed super fund. If you've got money in your super, that's a particularly good way to go.
Read our e-book, if you haven't. Visit our website. We're forever updating the resources. Have a one-on-one so you can do a property investment analysis. Visit one of our projects. Give us feedback so that we can get our hits higher, or whatever, our likes higher. Please follow us on Facebook and we'll keep you up to date with the latest happenings. Please feel free to have some food, drink and otherwise. Or if you'd like to book a one-on-one, grab Becky and she'd be happy to take the call, or otherwise, Chad, Simon, myself, or Becky are around to help you out. Thanks very much for your attendance.
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