Episode 295: Are All Perth Units a Bad Investment? Here’s Why I Don’t Think So...

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Perth property investors are often told to avoid units.

But the right apartment, villa, or townhouse can outperform the "safe" house strategy (when you know how to stack up the full picture).

In this episode of Perth Property Insider, Jarrad Mahon and buyer's agent Justine Destura challenge one of the most stubborn beliefs in property investing: that houses always beat units.

Using a real client's portfolio projection, they compare buying one $850,000 property against two units at around $600,000 each - with surprising results.

But let's be clear, this is not a green light to buy any unit you can find.

There are specific criteria you must get right. Miss just one, and a promising investment can turn into a long, expensive headache.

Tune in to discover:

✅ How the end of negative gearing changed the units vs houses debate

✅ The layer of research almost every investor skips before buying a strata property

✅ Why a very low strata fee can be a red flag, not a bargain

✅ How to properly assess the suburb, pocket, complex, property, and purchase price

✅ How Perth CBD, West Leederville, Maylands, and Wembley stack up

✅ The simple “$1,000 offer” strategy that keeps winning properties at the $600K stamp duty threshold

✅ How to compete for in-demand Perth units without overpaying or getting caught up in the heat of a bidding war

Whether you're building your first investment strategy or expanding a Perth property portfolio on limited borrowing capacity, this episode gives you the framework to judge any unit before you spend a dollar.

Let’s go inside 👇🎙️

Episode Highlights:

1. 00:00:00 Intro
2. 00:04:20 Strategic portfolio projections explained
3. 00:07:20 One house versus two units
4. 00:11:40 The implementation challenges
5. 00:15:00 Perth CBD warning signs
6. 00:18:40 Good suburb, bad property
7. 00:21:40 Shock historical growth rates
8. 00:24:40 Vic Park bidding frenzy
9. 00:28:00 Winning offer strategies
10. 00:32:40 The low strata trap

Our Services:

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✅Get clear on your current property’s outlook and the best strategy for you? Email Jarrad for your Strategic Property Review: jarrad@investorsedge.com.au 

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✅For more info on how our Property Sales services can ensure you get the best selling price while handling all the stress for you https://www.investorsedge.com.au/selling-your-perth-property/

Tools & Insights:

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Episode Transcript

[00:00:00] Good day, and welcome to Perth Property Insider. I'm your host, Jarrad Mahon, and today I'm going into a bit of a topic That when many investors hear the word unit, their immediate response is often, "I wouldn't touch one," or they have probably [00:00:20] heard that units do not grow, strata fees destroy cashflow, and oversupply can leave your property being really difficult to sell or rent.

[00:00:29] And sometimes those concerns are definitely justified. But does that mean that all units are bad investments? I don't think so. In fact, some [00:00:40] of the strategic portfolio projections that I've been preparing for clients lately may surprise you and show you, uh, you know, that they are worth considering. So they can show that, uh, an investor's actually better off buying two properties at around 600,000 each, [00:01:00] rather than purchasing one property at 850, which is very often the case now when you run the numbers.

[00:01:07] So does that mean you should rush out and buy any two units you can find? Well, no. The projections are only a starting point, and the real challenge is finding properties capable of delivering the [00:01:20] yield and growth assumptions in this strategy without exposing investors to excessive strata costs, oversupply, or major unexpected expenses.

[00:01:29] Now, that's a long intro, but today I've got Justine, our buyer's agent, on the show. Finally dragged her on after three or four years of working with us. [00:01:40] Kicking and screaming. You've remained in the background doing great work for our clients, getting some awesome deals every week and month, and we now need to share your insights.

[00:01:50] So thanks for joining us, Justine. No problemo, Jared. By force. Kicking and screaming, I might add. Well, [00:02:00] it'll be worth it. So why… When you're chatting to investors all the time, what are some of those concerns or assumptions, I guess, you commonly hear about buying units? Uh, what, w- what do you have coming up from them?

[00:02:13] Well, I guess many investors begin with a blanket rule that they only want land, and the common [00:02:20] concerns include, you know, poor capital growth, high strata fees, special levies, too much competing supply, limited control over the building as you're dealing with other owners, um, difficulty renovating or adding value because you're, you know, trying to get approval sometimes.

[00:02:38] Um, you know, every property in the [00:02:40] complex, this is probably the main thing, every com- you know, property in the complex coming onto the market as direct competition when the time comes. So these are all legitimate risks, but they are not present to the same degree in every strata property. Mm. Remember, there's a major difference between a [00:03:00] generic apartment and a high supply precinct versus an older unit in a small well-maintained complex or a tightly held villa and town home.

[00:03:09] And a property in a des- desirable city fringe suburb with constrained future supply. Ultimately, property selection matters more than the label placed on the [00:03:20] property type. Mm, well, that distinction's really important, and we're not saying that these concerns are wrong. Uh, it just means that you need to b- have even more expertise, I think, in navigating them.

[00:03:33] And that's where a lot of people sort of fall into traps, and they come and ask us after they've bought something, "Hey, uh, [00:03:40] can you guys rent it out for us? And what did you think of the investment?" And, and it's usually better that we don't look, uh, too hard because, uh, we can be dashing, uh, dashing dreams.

[00:03:52] So- Um, so you definitely need to investigate at both the, the suburb, the pocket, and [00:04:00] the, well, the extra layer is the complex, um, as you just mentioned, and then the property. It's almost like a, a trifecta review with an extra layer, um, put into it, because I think a lot of people, uh, skip over the complex and just sort of think, "Oh, she'll be right.

[00:04:14] Um- Yeah … must be okay." But, um, there's a lot of hidden, uh, traps in there, which we'll go into a few more [00:04:20] of a bit later. So I wanted to actually unpack the portfolio projections because, um, each month, I guess, you get to review a lot of potential investment properties, and I review them when we're doing a strategic portfolio plan for people.

[00:04:37] And, uh, when I go and create that plan, of [00:04:40] course, you have to be the one that goes and implements it and finds the property in the real world. So we, w- we can't just be all pie in the sky about this amazing unit that delivers incredible performance, um, and then not be able to, to f- to find it. And of course, when I run my projections, um, if, if anyone that knows me would know I'm super [00:05:00] conservative, so I'm only projecting with a, a 4.5%, uh, growth over the long term.

[00:05:06] And, uh, and, and in return for that lower growth than what a house might get, I'm projecting a higher rental yield, typically at 5.5% rental yield, and it's a bit more the opposite way now. So for a house in a fairly average [00:05:20] area, we might project a 4.5% rental yield and a 5.5% growth. So it's just switched the other way, and you might think, "Oh, well, what difference does a 1% make towards growth instead of rental yield?"

[00:05:31] But it does make a big difference over the, the long run, and that's why historically, we've sort of preferred to buy a house if we can afford to. [00:05:40] But as negative gearing has changed the game, well, it's not available anymore for established properties. The positive thing is you get to carry forward that loss, and you can offset it against future gains, and when we run the projections, we can actually see those losses accruing and then offsetting when your property does turn positive, but it doesn't help you as much in the [00:06:00] front end.

[00:06:00] So there's greater im- implications now for your borrowing capacity, for your holding ability, and for the size of the asset base that you can ultimately hold. And that's why when I run the strategy, you can actually, for most people, if you, if, if your biggest constraint is your cash flow, then you can [00:06:20] typically buy two 600K units versus one 850 unit.

[00:06:25] And where things get exciting is you, 'cause you're controlling a larger asset base of $1.2 million versus 850 for the house, even though y- you may get a lesser growth rate, you've got a, a [00:06:40] lesser growth rate on a bigger asset base, and that's where, you know, y- it's hard to run these numbers in your head.

[00:06:45] It's almost impossible, um, without having a strategic portfolio plan because you wanna make it specific to your situation And the other, uh, thing we need to carefully look at is, okay, so what? You can buy a bigger asset base to begin with, but [00:07:00] when can you make your next purchase, and how long are you delayed in doing that?

[00:07:04] So that's another key, because we're not just looking at the first one or two steps in front of us, we're looking beyond that to multiple steps. And that's where investors also… You can't do that in your head. How, how on earth do you run that, uh, when you're driving to work, giving it some thought? You can't.

[00:07:19] [00:07:20] So, um, that's why I think a lot of people now are getting strategy and get- getting a strategic portfolio plan more than ever because it helps to see the numbers, see the projections, run the scenarios, and then decide. So let's unpack some of these numbers. So at an 850K purchase, 4.5% yield, 5.5% growth, the [00:07:40] shortfall was projected to be around 24K per year.

[00:07:43] We don't have negative gearing to help with that now. And when I project forward, this was for a specific client, so he was, uh, 33 years old, looking to have a goal cashflow at 60 years old. Whether he retires or not, he just wanted to be in a, in a position to have [00:08:00] choices then. So that was 27 years later.

[00:08:03] I thought I'd rather give you an actual client's projections than just make, make shit up. Um, so the cashflow in 27 years' time was projected to be 86K per annum. Um, so helping towards his goals there and, and giving a pretty re- uh, you [00:08:20] know, reasonable cashflow. And keep in mind, we've gotta take into account inflation and th- th- the dollar's not worth as much in the future as it is today.

[00:08:27] But 86K is what the projection would be. That's allowing a 4% increase to rent ongoing, uh, goingly per year, which is… We've, we've got our assumptions underneath all of this that we try to have as being [00:08:40] conservative And then the projected equity at that point was two point eight million dollars. So pretty decent.

[00:08:46] Gives you a lot of o-other choices, a lot of other options to either transition in your work or, uh, if you've got other investments as well, move to replacing your income fully. And with [00:09:00] his situation, he would be able to potentially buy again then at twenty thirty-one. So his borrowing capacity was the constraint, and part of that constraint comes from his income, uh, not being able to fund too much contribution to the portfolio.

[00:09:15] So initially buying one property at eight fifty was first [00:09:20] scenario, eighty-six K per annum cash flow at age sixty, two point eight million equity projection. Now let's take a look at the second option of buying two units. Well, that had the yield of five and a half percent. We may be able to exceed that.

[00:09:35] It had the growth of four and a half percent, and as you'll find out in a minute, we may be able to [00:09:40] exceed that strongly too, but we don't wanna count on it. That's the point. We, we wanna over-engineer this thing to be conservative and stand up even if, you know, markets don't perform as well as they have in the past or, or properties don't perform as well as they have in the past.

[00:09:55] So the, the projections here, to give you a taste of it, was twelve K per year [00:10:00] shortfall, and that's reminding the two properties Versus the 24K per year shortfall for that one property at 850. So substantially better holding cost. 211,000 per annum cashflow at age 60, so considerably extra passive income.

[00:10:16] So that was two, 211K versus 86K. [00:10:20] And interestingly enough, the same level of equity at 2.8 million for both scenarios. So just on the numbers alone, you'd say, "Yeah, l- sign me up for two units. Um, I'll have nearly, nearly triple the cashflow and, uh, same level of equity." But of course, the trouble is in the detail, [00:10:40] isn't it, Justine?

[00:10:40] Um, when you actually come to implement it, you're the one that needs to do that. Yes. So the summary of these projections really is that the equity position in 27 years' time was the same. You'd have a stronger cashflow, you'd have greater diversification [00:11:00] of two assets. That gives you some optionality. You might be able to sell one asset when you need to without selling both of them, w- in the case of having the two units.

[00:11:08] Um, you have a larger total asset base from the beginning when you, when you buy the two units, and you have a stronger cashflow at that sort of goal age as well. [00:11:20] But there's some differences, because there can be more headaches at the lower price point sometimes. There can be more headaches from strata, like we've mentioned, especially if you buy into the wrong complex.

[00:11:33] And because you don't have full control, there can be some headaches in, in that too. So [00:11:40] now let's take a look at some of the deeper parts to, to unpack around the practicalities to this. So when a plan actually tells us to buy two more affordable properties that could deliver a better long-term result, let's go through some of these challenges that arise when we start to implement this.

[00:11:59] Let's, [00:12:00] lay, lay some of them on me, Justine. Oh, well, lower price points, you know, at lower price points there can be intense buyer competition, you know, compromised locations- Hmm … poor quality complexes, as we said, high strata expenses. Um, you know, there's a bunch. Uh, very small internal areas, [00:12:20] restrictive bylaws, which is something that you really need to, you know, um, keep an eye on.

[00:12:24] Parking or access problems, or large amounts of similar future supply. Hmm. The goal is not to really simply spend 600,000 twice. The goal is to find two properties that have credible chance of de- delivering the yield, growth, [00:12:40] and holding cost assumptions within the strategy. Hmm. Well, that's why I like our trifecta criteria, 'cause it takes away the guessing, doesn't it?

[00:12:48] And really, someone that's buying their first investment can look at it and say, "This makes sense," or, "This doesn't stack up." And it also removes a lot of the effort because we're the [00:13:00] ones that are going through and seeing if hundreds of properties will fit the trifecta, and only presenting to you those that fully pass it.

[00:13:08] And that's what takes the time, um, in sifting down and, and really finding something that's g- have a, an even greater chance of stacking up than, than just sh- throwing darts at a board like many investors have done [00:13:20] over the last five years and still done well. Yeah, it's definitely a more educated decision.

[00:13:24] Mm-hmm. As opposed to, "Let's hope." That's it. So let's now go into four real units that we've reviewed lately, because I think it's gonna paint a stark [00:13:40] comparison as to where a property can be set for performance, where a unit can be set for performance, and where it's gonna be set for lackluster returns, tying up your capital, wasting your opportunity cost, and, uh, potentially giving you lots of headaches.

[00:13:57] I, I know that, that sentence [00:14:00] doesn't make me too excited about making a wrong choice here. So the four units that we've reviewed over the, the last week that stuck out is we had, uh, one in the Perth CBD, we had one in West Leederville, we had one in Maylands, and we had one in Wembley. So all four could broadly be described, I guess, as [00:14:20] well-located Perth units.

[00:14:21] Uh, they've, they've got lots of amenities around them. Uh, people immediately think, "Oh, lots of, uh, restaurants, lots of, uh, transport. Oh, it's, it's two minutes for people to get to work. Must be a good investment, right?" Is that what, uh, you find? Yep. Yep. I even had someone asking [00:14:40] me, um, yesterday saying, "Jarrad, we're thinking of buying a, a, a property in Cockburn Central 'cause it's got the, the train, and the shops, and the, and everything close there."

[00:14:49] And I was like, "Please speak to us, like, before you do this." Like, call me tomorrow. This is- I get a lot of those. Yeah. I've just seen how much of a rollercoaster ride that, that area is and, [00:15:00] and I think will continue to be. So I digress, but let's talk about the Perth CBD. So overall fundamentals of Perth CBD, for me, are, are never gonna stack up under our trifecta criteria because, uh, well, in the case of this individual property that I reviewed, it had a really poor historical growth rate of [00:15:20] 2.4%.

[00:15:21] So in my projections that I was running, I was trying to get at least a 4.5%. This is half that return. It's really bad. And, uh, in previous periods when the WA economy struggled, uh, all we hear from our, um, property managers is how difficult a CBD property [00:15:40] is to rent, and I've had my fair share of struggled, struggling sales in there, uh, over the years.

[00:15:46] And, um, and I, I used to grimace whenever someone says, "I wanna sell my Perth CBD unit," and I'd be like, "Oh, no, like we're, we're gonna be in for a real battle here." Um, so much more of a rollercoaster [00:16:00] ride when the market is down. Is that… That's what you would've seen as well, Justine? Yeah. So much more challenging to rent when it is challenging to rent.

[00:16:08] And that doesn't mean no one's ever made money from a Perth CBD apartment. Sometimes you can get in, you can fluke your timing, you can pick something up when the market's absolutely down in that gutter, as some [00:16:20] investors did, and then you can choose your timing and fluke it because it's so hard to choose the top of the market, uh, with how quick that market can fall out from people.

[00:16:29] And the biggest challenge with Perth CBD is they can come and put another big, uh, tower in right next to you at any point, and you can see how much they're trying to add density with the [00:16:40] new, you know, university and everything in there, and I think it's wonderful what they're doing to transform the city, but doesn't mean it's where I wanna own an investment.

[00:16:48] So that historical growth rate really low, potential for supply coming on really high, and, you know, it just doesn't stack up in our trifecta review in lots of different areas. And [00:17:00] especially th- it's got a much higher, uh, percentage of investor ownership too, which is partly why it makes it so volatile.

[00:17:07] Cool. So West Leedy, do you wanna talk to this or are you happy to let me unpack it? You can unpack it. Well, West Leedy is quite different. The suburb has a stronger [00:17:20] fundamentals and more limited supply. And, uh, you know, we have looked at property, at buying properties in there. I don't know if we've ever bought one, uh, over the last three or four years.

[00:17:29] Have we? No. No. So but the individual building that I was looking at was approximately 15 years old, and it had very high strata fees considering its age, [00:17:40] which is always a bit of a concern. And often with these newer buildings, you know, you're paying for a swimming pool, you're paying for amenities that a lot of people don't even use.

[00:17:49] When stuff starts to go wrong with them, which is probably the case with this one, that's where the big strata fees can come from, the special levies that everyone, you know, dreads going to, [00:18:00] has nightmares about at night about. So now the historical growth rate for this one had been three point four five percent, so not terrible, but certainly when you see some of the returns that there has been in other properties, you can do a lot better with your money.

[00:18:15] And, uh, the strata fees alone, if you're not, if you're not also getting the cash flow [00:18:20] benefit from a unit and you're relying purely then on the growth, well, that doesn't fill me with confidence with that sort of, uh, growth rate when we've been through a pretty, um, decent growth period. So the suburb was definitely worth considering, but this particular property is not something that, uh, I'd wanna hold for the long term, and I'd [00:18:40] expect I'd really be wanting a better growth performance to offset that risk of, uh, all those other things that we've touched on today.

[00:18:48] So now let's take a look at something that you regularly encounter, and that's investors correctly identifying a good suburb, but assuming every property [00:19:00] within it must therefore be a good investment. Um, that's the classic one, isn't it? It's like, "Oh, my friend told me to buy here. The suburb is decent.

[00:19:07] Let's go blindly forth." Yeah. And you know, like, as you've already kind of illustrated and explained, a strong postcode cannot rescue every property. You still need to [00:19:20] assess and consider certain points like, you know, where that property is and the ex- you know, what the exact pocket within that suburb is, distance from amenities, road and noise exposure is a big one.

[00:19:33] Oh, that's a big one. You know, building design, internal size, obviously. You know, how much natural light is coming [00:19:40] through the property. Parking is another big one- Oh, massive one … especially in these high-density areas. Strata costs from the, you know, pools and the elevators and the, you know, all these things.

[00:19:52] Owner-occupier appeal as well. You know, a buyer can pay too much even for a good property. One thing you have to [00:20:00] remember is the entry price affects future performance and your ability to refinance, so therefore, we need to really ensure that the suburb, location, the complex, the property, and the price all work together.

[00:20:14] Makes sense Well, let's now unpack our other two suburbs. So these ones we have [00:20:20] purchased more properties in over the last few years and, um, and that was Maylands and Wembley. So these are certainly much more encouraging when we look at, uh, performance. Both had experienced, uh, stable, more long-term growth patterns as opposed to West Perth, East Perth and Perth, uh, but you [00:20:40] ride the rollercoaster with those.

[00:20:40] But when you start go- going a little bit further out on the fringe of the city, the growth pattern's usually a lot more stable and we don't see the rollercoaster that we do in those inner areas. So that would be my first sort of point, and that's why West Leedey actually looks reasonable because of it, it's not riding that same pattern.

[00:20:59] But when we [00:21:00] look at, uh, these particular, uh, properties, they were in older, well-maintained complexes and that's where part of the trap can be because people s- sort of think, "Oh, it's older, it's got a, it's got a land component, it must be, must be good." But if the complex isn't maintained well, then they can hit you- Hit you

[00:21:19] all [00:21:20] of a sudden with a big strata levy and that can just destroy, you know, years of cashflow. So you've seen that too, haven't you? So when I completed our trifecta review, the fundamentals of both the suburbs is particularly good and the pockets, um, stood out that they were in, that stacked up really solid.

[00:21:38] It gave me much greater [00:21:40] confidence in their short, medium and long-term prospects 'cause the fundamentals were all good. And then most importantly, when I looked back at the historical growth rate of each of these properties, I was pretty gobsmacked b- and, and I said it to Justine, but she sort of says, "Oh, you know, of course, Jarrad, you don't look at as many properties as I do and, uh, and we see this all the [00:22:00] time for a lot of the properties we've, we've bought."

[00:22:01] So this is one of the things that really gives us confidence. So first property had a 7.23% growth rate over 30 years, which was awesome, and the other one had a 6.4% growth rate over 37 years. That's how, how the [00:22:20] property itself had performed historically based on the oldest known sale price and today's appraisal.

[00:22:26] So if anyone had achieved those growth rates on a house, they'd be exceptionally happy And anything above a 6% is, is really good, is, is solid investment grade. So it [00:22:40] demonstrates that the property type alone doesn't determine performance. It's how the suburb, the pocket, the complex, the individual property.

[00:22:49] I know I might be sounding a little bit like a broken record here, but, uh, I'm, I'm trying to drive it home. Yep. Those things, how they all interplay between one another [00:23:00] either gives us confidence in its future prospects or rules it out, and it's a big explanation as to why something has performed well in the past.

[00:23:10] So I now wanted to run through that there's markets within markets. At the moment, if you turn on the news, you're gonna think that property is all going down the [00:23:20] toilet, every suburb is crashing, especially when Sydney and Melbourne dominate our news, and that's why a lot of buyers are particularly scared.

[00:23:27] But, you know, houses, for the most part, are coming back anywhere from 5 to 10% in many suburbs. So that doesn't mean all, and it certainly doesn't mean that the, the unit market is-- [00:23:40] we can't say that it- the same thing is happening everywhere because it just isn't. And we can't say that Perth units are a poor investment just because the, the unit that we might have bought was a bad investment, and I've made my fair share of them, believe me.

[00:23:55] I could, I could fill up a whole episode of, uh, bad mistakes, and I think I [00:24:00] probably will again coming up. But that's how we learn. That's how we also s- understand that selection matters more than anything. So different locations, different price points, different property types are all performing very differently and that's-- And most importantly, with affordability still being a challenge, [00:24:20] the demand is getting pushed down to the more affordable price points and price brackets And that's gonna really support growth moving forward over the next one to two years.

[00:24:32] Th- that's, that'd be what you're seeing as well, isn't it, Justine? Yes, definitely. Now, I had, um, I was selling a property in Vic Park [00:24:40] the other week. It was a one-bedroom, and this is another fringe area that is definitely worth looking at. I was advertised at from 499. I had 54 buyers attend the home open, and 16 offers, and it sold for 96,000 above asking price at 595, and people are saying that it's a [00:25:00] really bad market.

[00:25:01] So markets within markets, and, uh, and I'm not saying that you should go out and, and overpay for something either. You need to be even more savvy when something has demand and has lots of competition. Does that mean that you should rule it out because it has competition? No. It tells me that's six… 15 other people that still wanna go and [00:25:20] make an offer on something, and potentially 53 other buyers that are still gonna go and, you know, now realize they need to pay more for a unit in Vic Park to live there.

[00:25:30] And getting in front of that demand is ideal. We don't wanna overpay, but it c- it's also worth looking at where the demand is. The alternative to that [00:25:40] is go buy something that no one wants to own. No, no, there's no other offers. And this is where, uh, buyers often sort of get their heads wrong. I worry if there's no- no one else at the home open.

[00:25:52] It, it, it doesn't necessarily mean a bargain. It, it could mean you're setting yourself up for bad performance. So you gotta know [00:26:00] what's, uh, worth, uh, competing for and when to walk away, basically, and y- that's what you help people do a lot, isn't it? Yeah. Ultimately, it's, you know, the details within that property and just knowing to check All of those things and kinda stack them up against each other.

[00:26:17] You know, so y- trade-offs, we [00:26:20] always talk about this. Yes. There's always trade-offs. So you just gotta make sure, you know, the, I guess the weights that certain aspects of a property has and what you wanna put more importance on. Yeah. More. Well, definitely. When we go lower in price, there's bound to be more trade-offs.

[00:26:37] And I think that's where a lot of investors struggle [00:26:40] because they don't know, they just keep trying to make it a perfect purchase. Yes. And there is no perfect, not at, at any price point, which is the crazy thing. If I went and even gave you 2 million, 3 million, 4 million and you look in those price points, there's still gonna be trade-offs to each of those purchases.

[00:26:58] Yes. So it's about knowing which [00:27:00] ones matter. Yep. Exactly. Across the board for all price points, for sure. Unless you're, like, boatloads of money and you're building your own property Yeah … you're never gonna get everything you want. Yeah. Well, I did touch on affordability driving the market, and that's why I'm, I'm also more in [00:27:20] favor of tilting our purchases, purchases towards lower price points because I th- feel like the stage of the cycle that we're in, the pressure's gonna be there.

[00:27:28] And I s- I'm still not ruling out an 850 purchase. For, for many people, that's, that's very affordable still, and sitting within the first home buyer demand and, and potentially worth considering if you've got a, a [00:27:40] strong enough cashflow. If you can go and buy two houses at 850, the numbers might stack up better, uh, for you because you're then controlling a, a larger asset base again that's have a, gotting a, got a higher overall growth rate.

[00:27:52] So it needs to be case by case. How do you think, um, the demand in this price point is gonna affect your approach when you're looking to [00:28:00] buy in there? 'Cause it is competitive. Like, what's some of the things that buyers need to know to, to ultimately compete and win in here? Well, you the one thing you gotta remember for really well-priced properties and well-presented properties, there's going to be a lot of interest, you know, um, especially if it's in desirable [00:28:20] locations.

[00:28:21] They are becoming more willing, you know, the buyers are becoming more willing to compromise on property type to remain in their preferred locations. Mm. So, you know, some buyers who initially wanted a house are now shifting towards villas, you know, townhouses, and apartments. I, I know I've been recommending that to my clients that have lower [00:28:40] budgets.

[00:28:40] Um, and properties with, as we said before, you know, the details, good natural light, parking, practical layouts, you know, lower strata costs, attracts s- significantly more interest. So you need to be prepared with that, you know. Inferior properties may still sell, but that doesn't make them good long-term [00:29:00] investments.

[00:29:00] Yeah. You know? And therefore, competition makes preparation and purchasing strategy extremely important. Well, one of the things I've seen is, 'cause this new stamp duty threshold is 600,000, that's why these 16 offers that I was competing off against each other capped out at 595, because the moment someone goes-[00:29:20]

[00:29:20] a dollar over 600,000, the perception is, oh, I have to start paying … I don't get free stamp duty. And- Yeah … and so investors, a lot … I mean, in, not investors, but home buyers, a lot of them are just setting their, their max budget at 600. So how are you playing that out if we're, we've got an investor that it doesn't matter whether they [00:29:40] get

[00:29:40] I mean, they're not getting free s- zero stamp duty regardless of the, the purchase, um, price. So, so how does that come into strategy then? Well, I mean, what you have to remember, you know, the investor still pays a normal applicable transfer duty. First home buyers purchasing over 600,000 may still qualify for a concession up [00:30:00] to 800,000, and paying above 600,000 is only sensible when supported by, you know, comparable sales and the property investment fundamentals.

[00:30:08] So therefore, your offer strategy should really include things like, you know, having your finance fully prepared and ready to go. Mm. Complete your due digi- diligence early, like, you know, [00:30:20] your building and pest and all that stuff. Uh, you know, understanding the selling agent's process, particularly in the offer and negotiation stage.

[00:30:27] You know, presenting clean and appropriate terms, not being too, you know, crazy with your demands. Mm. Knowing the walkaway price is a really important part, and that's, you know, most of the time that's where I [00:30:40] come into play. And, you know, most importantly, not getting emotionally caught up in the competition and the heat of it all when you're bidding or- submitting your offers.

[00:30:51] Yeah, well, I even find when I'm buying my own properties that I, I make, start making the objective to win and, uh, and just I don't want to, to [00:31:00] lose in that negotiation. So it's good to have someone to no- say, "No, let's just move on from this one. It's gotten too overheated." Take the emotions out of it. Yeah.

[00:31:08] And, and I know one of the offer strategies that you take a lot at both 600,000 and, well, the next barrier up is 850 and 860 for, um, or mainly 850 [00:31:20] for the first home buyer's deposit scheme, is if we even go $1,000 over that, 601 at the moment seems to be securing us a lot of properties. 851, you know, our finance broker, um, that we deal with a lot- laughs every time he sees a, sees that come through on a contract, and he sends me, sends me a text message saying, "Oh, another one, Jarrad.

[00:31:37] I see you just beat out the, the [00:31:40] people that had that as their limit." So- Yeah, and I- You, you need to use those things … we've won a lot of properties off of $1,000. Yeah. Like And look, it applies, uh, at, not just at those major barriers for first-time buyers at the 600 and the 850, but it ap- it applies all the time at the round numbers that most buyers [00:32:00] make an offer at.

[00:32:00] The 900,000. Uh, why not offer 901? Uh- Yeah … 950. Why not offer 951? Uh, if there's another offer that there, is there, and the, the sales agent has more confidence in you and your ability to proceed with finance, and that's why having a buyer's agent also translates a lot of confidence, that these [00:32:20] guys aren't messing around.

[00:32:21] Exactly. They… I, I find that, you know, a lot of agents really prefer to work with buyer's agents because they know there's not going to be any hiccups. It's gonna be smooth sailing. You know, we've done our due diligence with our clients ourselves to ensure that everything is tickety-boo, [00:32:40] and, um, it's just pretty much, you know, all the settlement process and procedures that we have to take care of afterwards.

[00:32:47] Mm-hmm. Awesome. So final things before we wrap up. Uh, what are some of the signs that a low strata fee may actually be a warning rather than an advantage? Because I, I see investors [00:33:00] also running around and thinking, "Oh, I, I, I won't buy that if it, unless it's got a super low strata fee, or if it's got no strata fee."

[00:33:07] There's always this, a bit of a, a flip side to this, isn't there? Yes. I mean, it's definitely a, a double-edged sword. Like, you're like, "Yes, great. It's a, it's a really low strata fee," but, you [00:33:20] know, behind the scenes, you know, the scheme may be, may be underfunded for mainten- you know, they're underfunding maintenance.

[00:33:26] You know, necessary work may be continually deferred, where owners are, like, kicking the can down the road. Yeah. Maybe the reserve fund might, might be inadequate. Owners might be resisting levy increases. The [00:33:40] building may look expensive to hold today but require a substantial, you know, special levy later on.

[00:33:46] Yeah. Really, the objective is not to necessarily find the lowest strata fee. Ultimately, it is to find a reasonable and sustainable fee for well-run complexes. It's like owning a house, right? And- Yeah … yeah, I can make [00:34:00] my two or three years' worth of expenses really low if I just do little to no maintenance on it.

[00:34:05] But the next time your tenant moves out and you've gotta fix 20 or 30,000 worth of stuff because you haven't kept up with it just so you can attract a decent quality tenant, it's the same with strata. Like, there's no such thing as a free, a free [00:34:20] lunch. Um, and you end up paying for it one way or another.

[00:34:23] So- … I'd rather it be sustainable and spread out and well-maintained and prevent small things from becoming big things than I would about getting hit with a surprise special levy, um, where I need to come up with 20 grand in, in a year, which we've s- I've seen happen a lot. So [00:34:40] when do you think, uh, what sort of characteristics, I know we've touched on it, but let's wrap with when do you think you'd feel comfortable recommending that a unit goes, you know, in someone's portfolio?

[00:34:51] I'm probably more doing that at the strategic point, but when, when you're looking at the purchase, is there any things that you didn't mention? I think you've covered a lot today, [00:35:00] haven't we? Yeah. Well, you know, again, location within the location is probably important. You know, how, what are the … Is there d- diverse demand drivers within that micro location?

[00:35:13] Is there limited supply or comp- directly competing supply that's available? Yeah. We wanna look at the building approval ratio, don't we? See what's coming up. [00:35:20] Yeah Um, not just what's getting built, but what's development approval, f- so that we can see out to 18 to 24 months and, and make sure there's not too much supply.

[00:35:29] But the other thing that come, that I, I just thought I'd mention with supply, 'cause I've been giving this a lot of thought, right? 'Cause I had someone ask me the other day. Brand-new supply doesn't necessarily [00:35:40] disrupt and destroy demand for your unit. So take Wembley for instance. If someone comes and puts a new complex in there, the older complex is still gonna be at a relatively affordable price point to both purchase and to rent.

[00:35:54] So it doesn't necessarily destroy the whole market. Supply of the [00:36:00] same sort of year of or, or s- similar type of dwelling is what destroys supply. So just a little subtlety there that I've been, I've been thinking on because, uh, it's not supply i- in itself, it's, it's direct competition if, if that makes sense.

[00:36:16] Yeah. Apples to apples. Yeah. Awesome. [00:36:20] So hopefully we've changed some people's minds because I think the perception of units being, uh, bad investments is definitely not the case. But if you're not careful, y- there's certainly more risk of getting burnt, and I think, um, people could have just thrown darts at a board previously.

[00:36:38] Now we've gotta be a lot more selective, [00:36:40] don't we? Cool. So if you haven't got a strategic portfolio plan, I recommend that you start with that because that's gonna guide. Strategy should always be first before you look at your property type, and then we can go deeper to actually implement the strategy and make sure we're executing that with the least degree of [00:37:00] risk, most potential for upside.

[00:37:02] And, uh, I'm glad you finally came on my pod to explain to people what you do.

[00:37:11] Thanks for joining us. Thanks for having me, Jared. I'll be getting you on again. I've g- I know you've been doing a lot of great work with home buyers lately too. So, uh, we've [00:37:20] got our home buying, um, and transition service, which couples in really well with our sales service. So people are selling. Market might be hard, but if you can sell well and buy well, buy even better in the market, you can actually make decent money in your trade over.

[00:37:36] There's more to choose from at the moment. So we'll, we'll g- we'll go into that and unpack [00:37:40] that in a future episode too. Thank you for joining us, Ketcha. Yeah