Today’s episode is one of those instances, where he takes us out west to an idyllic location south of Perth. He lets us in on some of the west coast’s best kept secrets, including the ways in which it trumps our three biggest cities— and there’s more than one! If you’ve ever thought Western Australia was too far away from anything, Loo is here to remind you just how close it really is, and just how quickly investing there could bring you closer to your financial freedom goal.

Timestamps:
00:49 | Mining Perth’s Metaphorical Goldfields
03:20 | Why Go West?
03:03 | Rifling For Deals
06:36 | The Wild West
08:20 | It’s Madora Bay All the Way
11:32 | Crunching the Numbers
15:05 | Livin’ the Dream
20:43 | Wait, Where Am I?

Resources and Links:

[00:07:11] Number six, which was an almost identical house, sold for $682,000. So the ability to buy something literally next door, a very similar product that sold for $682,000 and for us to be able to get it for $510,000 was a complete no brainer. 

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

 

I’m Tyrone Shum and in this episode of Invest Like A Pro we’re chatting with founder and director of House Finder, Simon Loo. He takes us on a trip out west, where he found a stellar deal in a location that unearthed a whole new world of investment opportunities. With 6% rental yields and large homes for as low as $400,000, Perth doesn’t look like it will stay the sleepy city for long.

Tyrone Shum:   

While Loo still believes Brisbane has a lot of steam left, he’s zipped clear across the country to pan Perth’s golden shores for property diamonds. During the search he found that Perth and its fringes may be isolated geographically, but contain all the necessities— including the possibility of investment deals that could have east coast cities shaking in their boots. 

Simon Loo:   

[00:00:49] What we've been noticing in Perth is a couple of things. The first thing is it has started to come out of a 12 year cycle of just flatline. It's very similar to Brisbane about four years ago, when the boom just started taking off. 

  

[00:01:12] Prior to that there was about a 10 year period in Brisbane that did almost nothing from the last major flood event. I know there was one recently as well. 

  

[00:01:24] And the growth in Perth that we're noticing on the ground, or the start of the growth, is being driven by some of the basic fundamentals that's causing Brisbane to go a bit— or has gone a bit— crazy as well. 

  

[00:01:37] These are things like an influx of owner occupiers from other parts of Australia. Perth is seen as I guess, the next in line city in terms of size, in terms of economy, after Sydney, Melbourne and Brisbane. So obviously, the prices and everything are still quite suppressed, coming out of a 12 year cycle of nothingness. 

  

[00:02:13] People are still buying these houses. Whether you're in Perth or on the outskirts of Perth, for prices that sellers were paying 10 years ago sometimes. You're getting them most of the time below cost, considering building costs and everything have gone up. 

  

[00:02:33] To buy a standard four bedder on a 600 square metre block, [the] house being maybe only about 10 years old. Let's say we paid $400,000 for it. You wouldn't be able to build that product, even if you were given the land. 

Tyrone Shum:   

[00:02:48] Yeah, definitely not. 

Simon Loo:   

[00:02:49] So from that perspective, I think it's just so far below the true cost of the product, of the property. And people are starting to catch on to that. So that's another reason.

Tyrone Shum:   

[00:03:02] What's been the drive for people to move into Perth from interstate? I kind of know what it's like for Queensland, but that's on the eastern border. But we're jumping over the western border, which can be, what, [a] four to five, sometimes six hour flight depending on where you're coming from,

Simon Loo:   

[00:03:20] It's really mostly affordability driven, is what we're seeing. A lot of it as well is lifestyle. I don't know if you've ever been to Perth, but it's extremely pretty. The coastline, just the city itself. You know, the feel. We talk about Brisbane being laid back. But Perth is on a whole new level. 

  

[00:03:45] You're in the CBD, you're looking at... take office workers for example. Even in Brisbane there'd be [wearing a] shirt and tie and everything. Not that you don't see it at all [in Perth], but people just wear very casual clothes around. You know, everyone's in shorts.

Tyrone Shum:   

[00:04:05] It's a warmer climate by the sounds of it.

Simon Loo:   

[00:04:06] Warmer climate. In a lot of parts of Perth, people are very content with not having a lot of excess. They've got their house, they've got their job, they may have a boat or something to go fishing or whatever. And I think that lifestyle, which is and was what Brisbane was maybe four or five years ago, that appealed to a lot of people, is the reason why people are in Perth at the moment. 

 

[00:04:53] Some of the reasons why I think people are moving to Perth as well is the industries are starting to change quite a bit. I think for the past 10 or 20 or 30 years, Perth has always been a very mining-focused location. And what we're noticing at the moment is there's a lot more new businesses coming in, a lot more industry is being more established there, existing companies setting up shop there as well. 

  

[00:05:23] And I think that in turn is providing more work opportunities to make it viable for people to move, or to relocate there. Because your ability, anyone's ability to find a job forms as a basis as to whether they can live anywhere, really, to get an income. So I think that that's definitely changing as well. 

[00:00:04] I think one of the big factors that a lot of people are overlooking— and this is what I'm hearing on the ground from a lot of real estate agents that we interact with— is that there's a lot more interest and money coming in from Southeast Asia off the back of COVID. 

 

[00:00:18] These are average people just looking for a safety plan. If things get bad again, there's a lot of economy uncertainty in a lot of these Asian countries at the moment. And people are looking for an escape route. And Perth being four [or] five hours away from a lot of these Asian countries, I think presents itself as quite an attractive option. 

  

[00:00:54] The safety of Australia and so many things that people love about Australia is also one of those things that's attracting a lot of investment into into areas like Perth. 

  

[00:10:10] Affordability. Sydney, Melbourne, and even Brisbane now for many are more or less priced out. So to be able to buy, like, a four bedroom house near the city, near the beaches, on a decent block of land for $400,000 or less, in many cases, is an incredibly attractive investment.

Tyrone Shum:   

[00:01:44] Now I can see why a lot of people are considering Perth for investment because of the affordability factor. I don't know much about Perth, and I don't know much about WA, [but] the beautiful thing about technology and where we are currently in our climate [is that] we can access all that data and rely on people who are on the ground like yourself to be able to actually come back to us and say, 'Look, this is the reason'. 

  

[00:02:06] And if you take that motion and look at just the numbers alone, it seems like it's a very, very good return on your investment and also seems like a very secure asset as well, too. It has potential for that. Which leads me to why you've been talking about that, because there's a fantastic case study that you've recently happened over there. So tell us a little bit about that. You recently purchased something for one of your clients.

Simon Loo:   

[00:02:30] One of the things that is attractive to a lot of my existing clients is that Perth is presenting numbers that Brisbane presented four years ago. These are things like really good cash flow, the fact that you can nab great deals, you're getting [in] at the bottom of the market. Like I said before, we buy properties for quite often less than what the seller paid for them 10 years ago [or] seven years ago. 

  

[00:03:03] The name of the game in Perth— anywhere really, but in Perth in particular right now— is to hunt for deals. Is to hunt for the sellers that need to sell really urgently or really quietly. And in doing that we're getting bargains. 

  

[00:03:24] We're very active, and a lot of listeners I'm sure will be well aware of a bit of a hype train at the moment with the Rockingham area. We've been focusing a lot of our efforts into not only Rockingham but the pocket between Rockingham all the way down to even as far down as Dawesville. 

  

[00:03:45] Now this entire stretch, why we're here, comes back to a lot of what we talked about before. So owner occupiers, first time buyers getting hit in these areas hard. And this particular property we bought in a suburb called Madora Bay, which is actually quite far south. But don't let that jade investors or listeners. 

  

[00:04:10] In fact in Perth— let's use Rockingham as an example compared to some of these suburbs further out— they're actually a lot more desirable in some of these more southern suburbs. Whereas Rockingham is often seen as a fringe area of Perth. So with that comes a bit of low socio economic stigma. And as a result of that, the desirability to live in these areas is actually not as much as some of the more further away suburbs. 

  

[00:04:49] So anyway, Madora Bay. [It's a] nice family friendly area, quiet, a beautiful stretch of beach. And this particular property we bought, which was off market, the seller selling the property had committed to the purchase of another property elsewhere. It was actually a commercial property. And this property was close to Cecily. And he needed funds urgently. 

  

[00:05:15] So we were told about this deal, that this is the situation. The seller is so desperate to sell this property so he can close this commercial property that he's not even looking to make any money out of it. He doesn't really care about what he can get for it, blah blah blah, all that kind of stuff. For me, that's like music to my ears. 

  

[00:05:41] First of all, we ran some comparables, comparable sales with the property. And we noticed that a lot of these more modern four [bedroom], two [bathroom] two [garage] houses [were] selling for mid $600,000 in this particular area. And when we had the opportunity to buy this house, ultimately, for $510,000, that, to me was like a genuine bargain. $510,000. 

  

[00:06:11] And we have to be very, very selective of the specs of a lot of these houses, because there are houses in Madora Bay that are selling for $500,000 or less, and there are ones selling for $600,000 [or] $700,000 [or] $800,000, up to $1 million. Because the proximity to the beach makes a big difference. But also the condition of the house, the inclusions, how it looks, how new it is. The land size also makes it really big difference. 

Coming up after the break, Loo shares more about Madora Bay and what draws owner occupiers and investors alike to its shores…

[00:08:35] It's got everything that you need, like your local shops, your restaurants and cafes. I mean, one of the major appeals of the Medora Bay area is its proximity to the beach. 

Why this particular client had already invested out west and why the numbers there stack up so well…

[00:11:08] This client has already five or six properties in Brisbane. This actually wasn't his first property in Perth either. 

He explains how although Western Australia is a part of Australia, its property purchasing laws can feel like you’re worlds away.

[00:20:43] WA is like... from a buying property perspective, is a completely different process than New South Wales or Queensland or Victoria.  

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

The deal south of Perth ticked all the boxes when it came to price, block size, and location. Although it was missing one main amenity nearby, Loo is confident that that small detail is no more than a grain of sand in this dream lifestyle location.

Simon Loo:   

[00:06:36] This particular house was literally four streets away from the beach. So very close to the beach. Now, I won't name the street name, because I don't have permission from the client or buyer to talk about this publicly. But the property that we bought was number seven. And we bought this property in May of 2022. 

  

[00:07:07] Now in March 2022, number six, which was an almost identical house, sold for $682,000. So the ability to buy something literally next door, a very similar product that sold for $682,000 and for us to be able to get it for $510,000 was a complete no brainer. 

  

[00:07:31] That's what I mean when I say right now in Perth, these are where the opportunities are. Similar to what Brisbane was at the start of the boom cycle. 

  

[00:07:42] Now, on top of that, [with] this house being near new, [it] didn't require any renovations at all. The market rent at the moment is anywhere between $570 to $600 a week. So at a $510,000 purchase, the yield is quite high. You're past 6% rental yield just off the bat. No dual living, no weird multiple room setups. It's just a standard four bedroom house that appeals to families, renters, owner occupiers, everybody.

Tyrone Shum:   

[00:08:20] Can you tell me a little bit more about the area, Simon, that is around there? Does it have its major shopping centres? Does it have easy access into Perth city and all that? I'm just trying to picture what this suburb looks like.

Simon Loo:   

[00:08:35] It's got everything that you need, like your local shops, your restaurants and cafes. I mean, one of the major appeals of the Madora Bay area is its proximity to the beach. So if you ever go down there, the feeling is is almost like a holiday feel kind of area. 

  

[00:09:00] It's about 45 minutes south of Perth. So it's not near Perth by any means. But I think the appeal for an area like this for a lot of the owner occupiers that we're seeing is that it's got that holiday feel lifestyle, but you're also in relatively close proximity to a major capital city and all its perks. 

  

[00:09:21] It's quite a hot area at the moment. From what I can see, it's kind of near a tipping point of experiencing quite a lot of growth due to gentrification. It's been one of those sleepy coastal suburbs for a very long time. You're quite close to a Murdoch University campus there. There's quite a lot of good schools there as well. There's a shopping centre called Lakelands Shopping Centre, and things like a golf club, Meadow Springs Golf Club. Everything is there, basically, from an amenities perspective.

Tyrone Shum:   

[00:10:05] It's well established then. So it's not like as though it's starting to grow, but it's already established enough. And when you think about it, 50 kilometres from Perth, I mean, most people— and people from South Australia, no offense to you, too, South Australia— is that yes, it's kind of like typically, that's how long it would take us to get to the city or even longer sometimes, if you're living in the outskirts of Sydney, and Melbourne and stuff like that. 

  

[00:10:29] So for us, now I can see why there's the appeal, because you go over there, and it's very, very affordable. To buy anything in Sydney for under $1 million is really unheard of most of the time now that's got a block of land. 

 

[00:10:44] Especially when you're saying it's comparable to four or five years ago back in Queensland, where prices were still relatively low and the yield was still very good. This seems like [a] very good buy and hold kind of asset. 

  

[00:10:57] So talking about this particular client who has purchased it, what was the intention behind buying a property in Perth? And why? Why did he say, 'Okay, yep, Perth seems good'?

Simon Loo:   

[00:11:08] This client has already five or six properties in Brisbane. This actually wasn't his first property in Perth either. A lot of my clients are just after good deals. They're on their journey of growing a portfolio of properties that's going to ultimately achieve them passive income. And that requires buying deals like this, so that they can continue buying more houses. 

Simon Loo:  

[00:11:32] So when you buy something for $500,000 [or] $510,000, and the evidence suggests that it's worth $600,000 or more, just tapping into that equity almost immediately, $100,000 ish plus equity is what's necessary, especially for buyers like my clients who are not just relying on savings for deposits for their next houses. They're already well established, they've got quite a lot of borrowing already. 

  

[00:12:05] And that leads me to the cash flow, because when you reach a certain point, you do present yourself as riskier to banks, especially when you accumulate more debt. Now, even though banks don't necessarily take rental income as much importance, but showing them that your houses or the properties that you're buying have such high yields or high cash flow positions will help you progress on to more houses as well. 

  

[00:12:37] So for this particular buyer, it was quite simple. A lot of the properties that we've bought for this particular buyer had similar characteristics. Houses only, areas and the property itself being high in demand from a rental perspective, low vacancy rates. But most importantly, a bargain that we can leverage off and use the equity from. And also good cash flow that will obviously keep the property positive for if he decides to hold it for the next five or 10 years as it grows. 

  

[00:13:16] So he's a very established investor. But I think a house like this appeals to almost everybody. Whether you've got 10 properties or no properties, it's just one of those properties where: Number one, you buy and it just looks after itself completely, but also, it's a very easy property. 

  

[00:13:37] Like, I know I can't tell you guys the exact address, but just think of like a really standard single storey 10 year old modern house. The square metreage on the block was about 550 square metres. So it's kind of like a tank. 

  

[00:13:57] And I think that's also important because this particular investor is actually from Sydney. So being several thousand kilometres away, on the other side of Australia. I think just having a bit of peace of mind that very little can go wrong with a house like this physically, also helps mentally move forward, if that makes sense.

Tyrone Shum:   

[00:14:20] I think that's the thing. Because, as a property investor, you and I know,  the thing that we find challenging in building a portfolio and especially having many, many properties in the portfolio is the maintenance. The last thing you want to hear is constantly a tenant calling saying, 'I want to change this and this'. And it becomes a headache. 

 

[00:14:37] But if you've got something that is relatively... not new new, but relatively in good condition, is modern, and it can look after itself, the maintenance should be quite low. And hence the reason why you have a property manager to look after it. 

  

[00:14:51] But the thing is you want longevity behind this. Because the last thing you want to do is buy something that has a lot of issues in it, and then there's a lot of maintenance and repairs and so forth that needs to be happening on a regular basis, then it becomes a headache. And I've experienced that. You don't want any of those.

Simon Loo:   

[00:15:05] I've experienced it a lot. I think also, just on the topic of the point as well of why people are here, I think it's just the pure blood fact that it's right near a beach. And these are proper beaches. They're not like those beaches near a bay where there's no waves or anything like that, or maybe the water's a bit dirty. These are really nice, beautiful sunset, good waves, like proper, proper beaches. 

  

[00:15:32] And I just can't think of anywhere in Australia where you are in that proximity to a large capital city, and also streets away from a beach, where you can still pick up these houses for $400,000 [or] $500,000, or even $600,000, depending on how close to the beach you are, and obviously which suburb you're in. 

  

[00:15:50] So I think there's a bit of a scarcity factor there as well. I mean, just the level of demand here. When we did ran the numbers, the vacancy rate was less than 1% at the time in Madora Bay. So there's a huge amount of people wanting to rent there, not only just wanting to buy there. And it just ticks all those kind of fundamental boxes at the end of the day.

Tyrone Shum:   

[00:16:16] [A] question [I have] for you is [about] public transport. Do they have a train line and buses and all that down there as well, too?

Simon Loo:  

[00:16:23] In Madora Bay specifically, there are no train stations per se. But it's quite on the buses and motorways and freeways that connect straight up to Perth are very close. 

  

[00:16:41] It's one of those areas where having a train station is not necessarily a massive consideration for the people that live there. Think of areas like if you're in New South Wales, or if you're in Victoria, a lot of the suburbs and areas that have a bit of a holiday feel, even though they might be in proximity to the city, aren't necessarily where train lines exist. 

  

[00:17:12] But the appeal of it isn't really diminished because the type of people that live there aren't travelling to Perth every day to go to work. They typically work locally, or maybe even further down the coast. But I guess the ability to travel, whether by car or by bus or whatever to Perth itself, is not a massive task.

Tyrone Shum:   

[00:17:36] And with the change with the pandemic and COVID, I think a lot of people are working from home. So really, the location they go back into work in the city isn't very high in demand. I mean, it still is, [there's] people working in the city. But in my opinion, just from what I've seen and what I've heard, a lot of people are choosing lifestyle, and hence the reason why they're moving further away from a city or main capital city, to stay in somewhere that has the features like a lifestyle, so that they can enjoy more with family. 

Simon Loo:   

[00:18:10] That point is really important. It's not necessarily working from home. People are still travelling to their offices or wherever they are, needing to go to work. But that shift towards finding properties that [have] a more balanced lifestyle or a more relaxed lifestyle has definitely increased. Wherever you are. 

  

[00:18:37] No longer are people making sacrifices. Especially in places like Sydney, for example, where they're settling for a two bedroom unit shoebox close to the city. A lot of them are opting to live further away, out west, close to the mountains, or close to the beaches, or close to water, whatever, as a lifestyle choice. 

  

[00:19:02] Because they're realising post-COVID that not only [do] they have the ability to work from home, but I think enjoying their life in the now— this is getting more existentialism kind of conversation!— is more important. 

  

[00:19:22] And also the uncertainties of having that job, or having that lifestyle that they made those kinds of sacrifices for, like living in a two bedroom unit is actually not certain at all. So I think there's that realisation as well. 

  

[00:19:38] We buy all the way from Rockingham down to Dawesville. And there's several dozen suburbs that we focus on. The reason why we landed in Madora Bay for this particular property was really the deal itself. Madora Bay is a good suburb, it ticks all those boxes that we talked about, being family friendly, good amenities, close to the beaches and all that kind of stuff. 

  

[00:20:02] But really, as an investor, the real reason or the money made is how much we paid for the house versus how much it's worth. And also the cash flow as well. 6% plus rental yield. So that's definitely a factor.

Tyrone Shum:   

[00:20:17] So these are really good strong fundamentals, especially when building a property portfolio with a buy and hold strategy as well, too. I guess probably—this will probably be for another episode— is the differences between buying in different states. Because the thing is, every state has its own different rules and different factors and stuff like that. So that's something we'll probably need to look at delving in[to], because I'm going, 'It sounds great. I love to jump over there, because the numbers make sense. But what else am I missing here?'

Simon Loo:   

[00:20:43] WA is like... from a buying property perspective, is a completely different process than New South Wales or Queensland or Victoria. So people really need to realise that. And these differences can make or break a deal. 

  

[00:21:02] So just to rattle off a few things, really quick things off the top of my head. In WA, they don't have conveyancers, they have settlement agents. So you can't use your conveyancer or your solicitor from Sydney or Melbourne to facilitate the purchase of the property. 

  

[00:21:20] In Queensland, for example, let's say you do a building and pest inspection, and something horrible comes up. You've got the option to walk away and terminate the contract. In WA, you don't have that ability. That's not strictly true, you do have that ability, but you are obliged to give the seller the option to fix whatever was found. And if they decide not to fix it, then you can terminate. 

  

[00:21:56] So there's these little differences where people can get caught up. Especially when you're in the midst of negotiating a property or a deal. And naturally, especially if there's a bit of competition, you might find yourself giving yourself a bit of pressure to lock a property in, secure a property under contract without realising that in WA, once you sign that piece of paper, it's a done deal. 

  

[00:22:25] One other thing really quickly as well that catches a lot of people out potentially, is [the] names they that they put on the contract. So as soon as the contract is done and dusted, they get sent to a land title's offices where they calculate stamp duty almost immediately. So if there's a slight discrepancy in your name, and without without doing a variation to the contract, you want to let's say terminate it and do a new contract up with a new name, the risk of you exposing yourself to double stamp duty is quite high. Then it becomes a legal nightmare to try and prove that you're the same buyer, there wasn't anything dodgy going on and all this kind of stuff. So they're just a lot more stringent out there at the end of the day.

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”.