Join us as we discuss the current property markets in Sydney, Melbourne and Brisbane amongst the COVID pandemic. Loo reveals details of a hot deal, how he secured it, as well as his predictions for the markets in the near future.

Timestamps:
02:30 | Money is Cheap Right Now
04:08 | Security, Please
06:16 | Why Pay $320,000 When You Can Pay $215,000?
08:42 | Sprucing Up an Original Doesn’t Have to Cost the Earth
11:22 | Think Outside the Square
14:35 | Cosmetics and Confidence
17:43 | Brisbane Had Done Nothing...
19:14 | ...Until it Started Growing
23:35 | Have Your Pre-Approval in Place

Resources and Links:
House Finder

Transcript:
Simon Loo:

[00:04:17] People are after security. Because of lockdowns, because potentially you have to stay indoors for an extended period of time, people are starting to realise that they need somewhere that they can stay in comfortably. 

This is Property Investory where we talk to successful property investors, find out more about their stories, mindset and strategy.

I’m Tyrone Shum and in this episode of Invest Like A Pro presented by House Finder, we are chatting with successful buyer’s agent Simon Loo. We discuss the current property markets in Sydney, Melbourne and Brisbane amongst the COVID pandemic. Loo reveals details of a hot deal, how he secured it, as well as his predictions for the markets in the near future. 

Loo tells us a little bit about what he’s been doing, and also shares with us a particular client that he’s been working with who landed an excellent deal.

[00:01:08] The stories are true! The market has gone a little bit crazy, since, I would say from about October last year. It's a combination of a couple of things, just low interest rates, a lot of confidence back in the market. Australia saved $110 billion last year, from COVID. They weren’t going on holidays, they weren’t spending money on going out on weekends, like for dinner and all that kind of stuff. And they’re pumping a lot of it into property. 

[00:01:47] Because they're seeing the hype, there has been a lot of hype since October, actually, that property prices are going to go up. People are just ending it. But what's interesting is there's also a bit of an element where the shift between investors and owner occupiers has changed quite a lot as well. So we're noticing a larger amount of people buying properties who are definitely first time buyers or owner occupiers. 

[00:02:19] Previously, it might be 50/50 investors and occupiers. But nowadays, the balance is definitely skewed towards people looking for a house to live in.

[00:02:30] Why do you think that's been the case? It's quite interesting.

[00:02:34] A couple of things, I think. One of the things is that money is very cheap right now. Interest rates are so low, people, when they're buying properties to live in— just a typical family, or a couple or a mum and dad kind of scenario— as sad as it is, the reality is they're not thinking very long term ahead. They're not realising that interest rates can one day increase, as well. 

[00:03:05] And it's probably not going to happen for some time based on what has happened. But when it does, it's really important to not just over leverage, overextend yourself. And I am seeing a lot of people doing that at the moment, in order to get into a ‘dream home’. So you kind of need to tread a little bit carefully, at this point in time, especially if you are a first time buyer or owner/occupier. Don't max out your maximum borrowing capacity, give yourself a bit of a buffer. 

[00:03:41] The other reason is there's a lot of government stimulus at the moment— first homebuyer grants, stamp duty being waived, if you're buying properties under a certain dollar value. There's still a lot of government incentive from an income perspective as well. So there's just a lot of help from the government that's helped in propping up confidence as well in the market. 

[00:04:08] I think another factor is, based on everything that's happened with COVID, and I think I mentioned this in a previous episode as well— people are after security. Because of lockdowns, because potentially you have to stay indoors for an extended period of time, people are starting to realise that they need somewhere that they can stay in comfortably. 

[00:04:436] And, most importantly, without a perceived risk of having to move or leave. So I think all these elements put together have kind of really pumped the property market, pretty much in all areas in Australia, Sydney, Melbourne, Brisbane. Even in some of the cities that have been a bit lagged behind, so Perth and Adelaide and those kinds of areas as well. 

[00:05:08] There's also been a noticeable shift to more affordable locations as well. 

Work from home is a reality now. And there's a lot of people moving into more affordable areas. For example, migration from Melbourne and Sydney to Brisbane, which is another reason why Brisbane has been moving up significantly. So those are some of the changes that I'm seeing in the market at the moment, and in the past few months. 

[00:06:16] Looking at your recent purchases, because you're helping so many of your clients achieve great results, you still continue to be able to find fantastic opportunities. Share with us one of [those] that you've recently found for one of your clients, because I like to know what's happening in the market as well.

[00:06:34] One of the interesting things is that because of a hot market, there's a lot of people out there, either your standard investor, or even professionals, claiming that you can't get good deals anymore because the market is just too hot. There is definitely more competition out there. 

[00:06:57] But the good deals are definitely out there. And this particular example, I think, proves that they still exist. It's a property that we bought for a client in Brisbane, around about 27 [or] 28 kilometres from the CBD. It's a three bedroom house, an older house, on 887 square metres. So it's a massive block of land. The land value for this property was $260,000. The actual value of the house itself is probably around the $320,000-ish mark. And we paid $215,000 for this house.

[00:07:44] That is phenomenal.

[00:07:46] It was off market. The guy came from a selling agent, he was a very old guy that was selling the property. And he just wanted a certain figure for the house to move on. He didn't want to market it because he was actually still living there at the time. So he didn't want to do open inspections and all this kind of stuff. So he wasn't really after the absolute top dollar, like, he bought the property years and years ago. 

[00:08:18] And he just wanted to not necessarily make too much money out of it. He just wanted a fair price and he just wanted to get out. So he called me up and I said, 'It's a no brainer.' So I sent it to a client of mine and we went for it. Now there is a bit of a catch with this house. 

[00:08:42] It's been lived in by a gentleman that is extremely well into his years. And the house is original. When we did the inspections, when we did the due diligence, there was nothing major that came up from a structural perspective. But the house was... you can imagine a house that's around about 40 years old, that hasn't really had any changes to it. There's wear and tear, it needed a good cosmetic makeover. 

[00:09:14] So at the price that we paid for it, again, absolutely a no brainer to put a bit of money into it to freshen it up. All that [it] really needed was new walls in terms of a new paint, new floors, new carpets. We updated the kitchen as well. We updated the bathroom, and did a little bit of yard work. And the cost was around the sort of $10,000, maybe a little bit more mark. 

[00:09:49] So [it] wasn't wasn't overly overly expensive or anything like that. And this is a good example of where people can still find good deals, because I mentioned before that a lot of people in the market at the moment are first time buyers and owner occupiers, they're wanting to buy a place to live in. And these are the kinds of properties where it's not very appealing to them. 

[00:10:13] Money is cheap. If people can afford to even borrow a little bit more money to buy a product that's a little bit more polished, that they can see themselves moving in immediately, then they're not hesitant to do that, to borrow more and pay a little bit more for it. Which in the world of property investing is an absolute no-no.

[00:10:38] Whether the market’s hot, whether the market’s flat, whether the market’s going down, it's in every investor's duty to find deals, to think outside the square and think, 'Okay, how can I make $1 from this property, without relying on the fact that it's going to go up in value?' It will go up in value eventually, all properties after peaks and troughs, and sideways action, the trend is always going to be up.

[00:11:06] But like I say all the time, it's about ‘what can I do? How can I use this property to help me buy the next property to leverage up?’ And the simple answer is buy a house for $250,000 that's worth close to $300,000 in value. 

[00:11:22] Yeah, exactly. It's a no brainer. And I think that's exactly true. Because when you think about it, if money is cheap, then people actually spend that little bit extra, because it's only going to cost them maybe $100 extra per month to have everything already done.

[00:11:36] Because no one really— especially if they're time poor— wants to actually go and spend that time to do all these repairs, changes and cosmetic makeup, but that's basically from a first time buyer, or maybe a homeowner perspective, because it's all emotionally charged. But when we're looking at an investment, we would be very much looking at going ‘How can we actually add value to a property that is original?’ And as you've just talked about, original doesn't mean that it's rundown that badly, all it means is that it just needs an uplift, as you said, replacing carpets, making it cosmetically look clean. 

[00:12:05] I stay away from structural defects. When there's slab issues, when there's roofing truss issues, when there's those kinds of things that are tens of thousands of dollars to repair, definitely stay away from those. But a simple cosmetic reno, where you spend $5,000 or $10,000 or even up $15,000 to spruce up a property visually, and then within six months time, you can potentially get, 50 [or] 60 [or] 70 [or] $80,000 of equity out to help you buy your next one.

[00:12:43] That's so important. If your goal is to build a portfolio of properties, that's super, super important. So that's always what we tend to look for, whether we're looking in million dollar suburbs in a city, whether we're looking at cheaper suburbs a little bit further out, it all comes down to the deal at the end of the day. And they're still out there, even in a hot market, they definitely exist. But it's just about being able to spot them and being able to think outside the square to realise them.

Coming up next, Loo shares some more on the recent purchase in Brisbane...

[00:14:12] Only about a seven minute walk to a train station, so close to shops and parks and transport and all that kind of stuff. So all those fundamentals have been ticked. But most importantly we could get it for the price that we got it at. So when I sent that to my client, he got super excited.

We hear his thoughts on the Brisbane boom…

[00:19:14] For every house that's being listed they're getting, like, 20 people rocking up [at] a minimum to first opens. Properties are selling within days a day in some cases. So these are all the telltale signs that the boom in Brisbane is starting to happen.

He shares his advice for preparing to get into the maret during a boom.

[00:25:23] Because if you don't do it, someone else will. I know it's very difficult for investors out there to commit to hundreds of thousands of dollars worth of purchase, without doing due diligence, without doing inspections and things like that. But there are things that you can do on a contract that will still give you the flexibility, or the luxury to conduct these inspections, whilst you’ve also secured the property.

And that’s after the break. I’m Tyrone Shum and you’re listening to Property Investory.

Loo tells us how this particular property came onto the market, and if there was much competition to actually purchase it.

[00:13:26] There was no competition because it was off market. The agent just called me about it— because me and this agent, we've done quite a lot of deals together. So he knew that I could produce a buyer that was not going to stuff him around too much and stuff his seller around too much, from a timing perspective, from a finance perspective or anything like that. So he called me and told me about the specs, told me about the potential price and I was like, 'You know what, no brainer.'

[00:13:51] I put the property together, I researched it, made sure there were no flood zones, no bushfire zones, no power lines, no main roads— none of that kind of stuff that you obviously don't want. Making sure that it's in a decent area, a decent street. It was actually in a cul-de-sac, so very quiet family friendly suburban street, it was actually a walk to the station as well. 

[00:14:12] Only about a seven minute walk to a train station, so close to shops and parks and transport and all that kind of stuff. So all those fundamentals have been ticked. But most importantly we could get it for the price that we got it at. So when I sent that to my client, he got super excited.

[00:14:35] We secured the property, we secured it with the contract first. And we had the 14 day finance and building and pest periods where we did the inspections. And we did the inspections, they came out with the issues that it had which were all cosmetic. We also found out most importantly, that there weren't any major issues. 

[00:15:03] So that gave us the confidence to go ahead. Part of the inspection was me getting one of the handymen that we work closely with to go out and do a bit of a quote, to find out roughly how much it was going to cost to fix everything up. So once he gave us that idea, it gave us a lot more confidence to go ahead as well. 

[00:15:24] So once done we're kind of just going to be sitting on it now for a couple of months, but we are going to obviously refinance it, pull out the equity. And like I do with a lot of my purchases, using that equity to help buy the next property. And that's how a lot of my clients, including myself, that's how we built our initial portfolios to create that passive income.

[00:15:49] I'm just also wondering, with this particular property, you mentioned it was like 800 square metres, which is quite a big block. Are there any potential development opportunities on it, that you could add something else to add more value and increase the equity on this property?

[00:16:03] Yeah, 887 square metres. Unfortunately, the property is in a cul-de-sac. So it's one of those properties that are shaped a little bit oddly, it's kind of like a rhombus shape. So you can't really subdivide it per se… actually, that's a lie. I haven't really explored that option to be completely honest with you. We bought it with the premise that you couldn't subdivide it or do anything of that nature. If you did want to do it, you'd have to knock down the main house, which would not be a viable exercise at this point in time.

[00:16:39] But there is definitely more than enough land to build a proper granny flat. When I say proper, it has its own access, it has its own yards, it's separate away enough from the main house for it to be to be lived in separately. So the land is definitely there. It's definitely got that potential. There were no trees— there were a few little shrubs, but no massive trees on the block as well.

[00:17:04] So it's a pretty low maintenance kind of block. There was a massive shed on it as well, which is actually good from a rental perspective. So we'll come in and my client is not looking to do anything like that in the near future. It's really just to buy it, rent it out, to strip the equity and use it to move on. Because we just bought it to wait for that kind of money. 

[00:17:43] And down the track, if he wants to increase the cash flow further there, then yeah, build a granny flat. And that will definitely boost for sure. It's just additional strategies down the track.

[00:17:54] And there's opportunities to do more things for that, which is fantastic. So it sounds like there are still great opportunities out there. You’ve just gotta look out for it. And from your experience, what do you think is really happening in the Brisbane market at the moment, since the pandemic has hit?

[00:18:13] I think it's really important to answer that in two parts. Before COVID, Brisbane had done nothing. And there were a lot of people saying, 'Why would I buy in Brisbane, because I'm buying to achieve zero growth, it hasn't done much for the past almost 10 years, whereas Sydney and Melbourne have just taken off.' Right? And, for me, that's exactly the reason why we were buying up heavily for myself and my clients in Brisbane, because we were buying at the very bottom of the market. 

[00:18:47] And since COVID happened, bizarrely, we were all expecting maybe even a pullback, if not nothing happening in the Brisbane market. But the exact opposite has happened. The boom is actually just starting. I don't have a crystal ball. Like I always say, I don't know what's going to happen in the next week or month or year. But the evidence is that properties are selling for way more money than there were 12 months ago. 

[00:19:14] For every house that's being listed they're getting, like, 20 people rocking up [at] a minimum to first opens. Properties are selling within days a day in some cases. So these are all the telltale signs that the boom in Brisbane is starting to happen. And there's a saying where ‘A rising tide lifts all boats’. There are definitely markets within markets within Brisbane. 

[00:19:41] There are good areas, bad areas. But at the end of the day, growth happens in percentages. You can't have one part of Brisbane go up significantly and another area get lagged behind and does nothing. The disparity in prices already exists. And it's only natural that at some point one will catch up to another. 

[00:20:05] So my suggestion to investors and clients in these kinds of markets is don't get carried away. Don't get caught up in the hype, don't just pay whatever just to buy a property and hope that it's going to go up and and you're going to ride the wave of the boom, and you will, but it's uncertain. 

[00:20:28] So you don't want to put yourself in that position. Buy properties which still offer deals and the deals that we're looking for at the moment, you kind of have to think a little bit deeper. Most of the people are owner occupiers and first time buyers looking in the market at the moment. So what aren't they looking for?

[00:20:47] Like I said, in that example, they're not looking for houses that might need a bit of work, they're not looking for houses that already have a tenant. Because if they're wanting to buy a house to live in, they want to move in immediately, they don't want to have to give six months notice for a tenant to leave. So that's actually more conducive to my investors— if they buy a house, and it's already rented, that's like a massive bonus. 

[00:21:11] So there are certain things that we can look for that will play in your favour, definitely off market deals. I would say most of my deals that I'm doing right now have not even hit realestate.com.au. Don't forget that there are still a lot of reasons why people sell, even though what you're seeing being marketed on ads and domain.com.au, on realestate.com.au, you think that people are still just selling and getting the maximum price and property’s unaffordable. 

[00:21:42] There's a lot that happens in the background that you're not seeing where properties are being sold for still decent prices, there are still good deals. So getting access to those off market deals is definitely paramount.

[00:21:58] Yeah, I agree with you. And this is where I think we're going to shift the mentality and the strategy on how to approach it, because it's very easy to hear about other people saying— in the media in particular— there's going to be a big boom, and there's going to be lack of supply and huge demand. Yes, that's part of it. 

[00:22:18] But I think as you said, if you look deeper, and find out what the motivations are— going back to people, that's when you can actually find the best opportunities. We’ve said this time and time again, property investment is a people's business. And if you actually do right by the people that you work with, whether it be the vendor, or the agent, or whoever, the deals will actually show itself.

[00:22:41] 100%, I completely agree. It's not about taking advantage of people at all, like there are genuine situations where people don't necessarily care about getting the highest price. So getting yourself into those situations is going to work in your favour as an investor. 

[00:23:05] The other thing I will mention is I've been Brisbane-heavy for a very long time, but once it gets to a point where it becomes like Sydney or Melbourne, I'll be moving elsewhere. And I'll be taking my clients with me as well. I'm not 100% sure where that is at the moment. We're doing a lot of research in a couple of different cities, a couple of different areas. But right now Brisbane is still where the action is.

[00:23:35] Yeah, I remember when I first had the conversation with you going back a number of years, because I was also looking at Brisbane a while ago. And I haven't been buying anything in there since then. I think it was very, very underpriced. And it still is, compared to, say, for example, Sydney, and Melbourne. And it is going to be a time where you’ve just gotta wait for the right timing. 

[00:23:56] And usually cycles happen every 10 years. And it sounds like with all that's been happening around with the pandemic, and all the demand that's been pushing things into place, it might be these next few years that things will start to actually increase quite substantially. Only time will tell, but I guess it's just being prepared. And I think maybe what the question is, then, for our listeners out there is how can they actually get prepared in times like this?

[00:24:23] Because so much is changing. And there was so much uncertainty, initially, for the last eight months. And there still is. I think there's a lot more clearer message and clearer picture of what's happening. What do you think investors should be doing right now to prepare for things like this? Prepare for a boom. Should they get into the market? What would you do in circumstances like this?

[00:24:51] First of all, have your pre approval in place, but that goes without saying. Whether you're in a quiet market or in a busy market, just make sure you're prepared to move, because when the right deal comes up, it's a very, very short window. If the deal is definitely good, all the numbers stack up to below market value, good cash flow, good value potential, all those kinds of stuff that we talk about, you have to be prepared to move almost immediately. 

[00:25:23] Because if you don't do it, someone else will. I know it's very difficult for investors out there to commit to hundreds of thousands of dollars worth of purchase, without doing due diligence, without doing inspections and things like that. But there are things that you can do on a contract that will still give you the flexibility, or the luxury to conduct these inspections, whilst you’ve also secured the property.

[00:25:58] If you don't like what you see, you can terminate the contract. And many times there'll be no cost to you— if you do it properly. So it's about educating yourself on that process, on the whole buying process. It's about having the confidence to just strike while the iron is hot. Not being too hesitant. And it's just about remaining unemotional as well, I think I'll always drive that point home. 

[00:26:29] Emotionality is not just about what property that you want, it also means not getting carried away with [fear of missing out]. I'm seeing that a lot at the moment, there are people thinking they're going to miss out. Just wait for the right deal, wait for the right opportunity, go at your own pace. I know it's a bit contradictory, but at the same time, if the right thing comes along, you know it ticks your boxes, you know it's a good investment property, then make a move, that's what I that's what I'd be suggesting.

Thank you to buyer’s agent Simon Loo, our guest on this special episode of Invest Like A Pro presented by House Finder. 

Also, for being a loyal listener of the podcast, I’ve asked Simon to offer a free 1 hour strategy session normally valued at $500 to help you put together an actionable property plan.

To get your free strategy session, simply visit housefinder.com.au and fill out the contact form, or call Simon directly on 0415 626 342 and quote “Property Investory”.