Episode 128 | Trends in property investment: What does the data say? | Mike Mortlock, MCG Quantity Surveyors

Data-stalking 1,500 individual investors: What are they buying and what are their property behaviours
Today’s episode is about data, data, and data with Mike Mortlock, who is returning from Episode 60. Mike is the managing director of MCG Quantity Surveyors which recently released granular data on the Australian property market that showcases the unique behaviours of over 1,500 property investors, including how they are investing, what types of property are they investing in, and what are their motivations to invest.

Here’s what we covered:

• What does micro level data say comparison to macro level data on property investors?

• How many investors live in their property before they rent it?

• What locations are people investing in the most?

• The disparity between what people want to live in, compared to what they invest in.

• What decisions have individual investors made before investing?

• How many units were being developed back in 2016?

• Why are developers moving towards more owner-occupier developments?

• Does depreciation on property matter?

• How people are getting sold into property that's glitter not gold.

• Why is capital growth the best reason to invest into property?

• What has increased in value more, houses or apartments?

This weeks Dumbo:

• The huge costs of buying property without seeking professional advice.

RELEVANT EPISODES:
Episode 60 | Mike Mortlock
Episode 79 | Cat Burgess
Episode 123 | Martin North

GUEST LINKS:
View the data and reports mentioned in todays episode:
https://mcgqs.com.au/elephantintheroom.php

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: info@gooddeeds.com.au

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Buy the book - AUCTION READY How to buy property at auction even though you’re scared s#!tless:
www.getauctionready.com.au
Use the coupon ELEPHANT for your 30% listener discount.

Send in your property questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT: 
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded on 21 April, 2020.

Veronica Morgan: You're listening to the elephant in the room property podcast where the big things that never get talked about actually get talked about. I'm Veronica Morgan real estate agent buyer's agent cohost of Foxtel's location, location, location Australia and author of a new book called auction ready, how to buy property at auction. Even though you're scared shitless.

Chris Bates: And I'm Chris Bates, financial planner, mortgage broker, and together we're going to uncover who's really making the decisions when you buy property.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website as well as download our free full or forecast to report which experts can you trust to get it right. The elephant in the room.com.edu.

Chris Bates: Please stick around for this week's elephant rider bootcamp and we have a cracking Dumbo of the week coming up

Chris Bates: Before we get started. Everything we talk about on this podcast is generally nature and should never be considered to be personal financial advice. If you're looking to get advice, please seek the help of a licensed financial advisor or buyer's agent. They will tailor and document their advice to your personal circumstances. Now let's get cracking today.

Veronica Morgan: Today we are going to discuss some newly released granular data on Australian property investors. It's a snapshot into the decisions that individual investors have been making and they are quite frankly a little alarming. The author of this work describes it as nuanced, measurable information on real life property investors and their holdings across both location and sector. The report is relevant and in depth in a way that big data sometimes struggles to be. Are you curious? Well, we certainly are. So we've asked the author Mike Mortlock to join us to discuss his research. Mike is a managing director of mcg quantity surveyors and he has completed thousands of residential and commercial schedules from units to hotels to trout farms through his work with clients over the years, he's been given unique access into the behavior and outcomes of a thousand property investors. You may remember Mike from episode 60 where he revealed his personal moral dilemma of having a business model that benefits from property investors being sucked in by spruikers. Thanks for coming along and bearing your soul again, Mike,

Mike Mortlock: Thank you for having me. I'm, gosh, what an intro. It's always good to write your own review, isn't it?

Veronica Morgan: Yeah,

Chris Bates: It is. Good to chat. Mike. we've been reading your a hundred thousand assets study. You told our listeners a little bit about what you've done and how you've come to put it together. Just to kind of cause a few interesting insights that are on the back of that you found out.

Mike Mortlock: Yeah. Well I'm a data nerd as you guys well know and anyone that's probably heard me speak before and the, the, the, when we started the business, what we wanted to do is we wanted to share data that had never been seen within our industry before. And we, we collect answers to questions that other places don't just by virtue of the work that we do. So the first real data release we did was we, we grabbed a thousand residential assets and we were the first depreciation company to say, Oh, well the average deductions for an investor are between five and $10,000. They're $9,193. Exactly right. And I gave a couple of decimal points just to show that I was really paying attention. Now we've got four lots of a thousand residential depreciation schedules from residential property investors and that has given us the ability to see the trends and have a look at what investors are purchasing and any changes in behavior over time.

Veronica Morgan: So you're looking at your clients, is there any sort of particular skew you think that might make it not that representative of the whole of Australia?

Mike Mortlock: Absolutely. And that's a great question. The data is only as good as the people that think we're pretty cool and they should work with us, right? And by virtue of the locations that we are more active in. So for example, when we break it down into some of our state by state analysis, we, we purposely leave a couple of States out because our data wasn't such that we thought it was telling an accurate enough story. So I've, I've certainly always been concerned about, look, how is this representative enough? Like yes, it's a thousand, it's a thousand people at a minimum. And that's kind of like the statistical minimum of what is enough to be able to tell a representative story. But when we had a look at the percentage of investors buying established properties versus new as part of the negative deep negative gearing debate, so you might remember mr bomb was saying that there was a 96% failure rate. So people were buying established. We, we actually found that figure to be 46% and that matched the data that came from the mortgage aggregators AFG and their data, it would be massive compared to ours. So we thought actually like they've got a proper sample compared to us and our figures were almost identical. So that gave me a little bit more confidence and I, and I, and I certainly take your point, but I think that based on that we were of the view that yes, this is valuable data.

Veronica Morgan: I remember that. Because you know, there was, we won't go and revisit the whole nearing argument, but certainly I was incensed at the time at the misuse of data. And that was a very, very good example. I don't know when that hit the press it was like, wow. So does this put into doubt everything else that you know labor have been claiming at the time and there were lots of other anomalies as well. But what are some of the things that you are finding out or you have been finding out through this, this exercise that is not or has not been captured in the big data?

Mike Mortlock: Yeah, so one, one question that we ask that you, I can't answer, I can't see where it would, it would be available elsewhere. It's the percentage of people that live in their investment property prior to renting it out. So if you think about when you, when we're engaged to do a depreciation schedule, someone has to buy or build a property and really either be an investment property from day one or they'll live in it and then they will engage us. So we have a pretty good idea of whether they've lived in the property or not because then of course they need to engage us and we can see the time between when they bought it and when they actually made it available to produce income because you can't claim deductions until the property's available to produce income, I. E. A rental. So we have to ask that question.

Mike Mortlock: I don't know any other industry that asked that question. So we actually found that 25.7% of landlords live in their investment property before they move out. And that was a bit of a surprise. If I had to guess, I might've said 10% and then there's the other side of it as well, right? People would say, Oh well that's just, you know, people trying to get their first home owner grant and you've got to live in it for six or 12 months. But we actually find that the average amount of time that people were spending living in the property was over four years. So there's, there's something else at play there.

Chris Bates: That's really what, you know what I mean? The interesting part of that is that 25% of property investors, a big chunk of them will be just accidental investors. They didn't actually buy that property as an investment. They potentially bought it as a home and then some point down the law and they decided to upgrade or move to another property and keep that property as an investment, you know, instead of selling it. That's conduct what that's alluding to. Do you agree?

Mike Mortlock: Yeah. In fact that was a, that was an article that we had in, in the courier mail that went through to news.com it was the rise of the accidental investors. Now they're not all going to be accidental. Sometimes this would be a strategic thing, but I think given by virtue of the fact that the average amount of days that people have have lived in the property, let's say in our last data sample, which was 1,537 see I told you I was a data nerd that's telling the story that there are people that must say, get a broker and say, I want to upgrade my property. And the broker says, you know, you probably don't have to sell this and you could keep it as an investment property. That that would be an example of where I would see an an accidental investor being created.

Veronica Morgan: Yeah, definitely. And also, I mean, if people get a transfer and they move into state or overseas there could be a real reason to think, well, I'm going to return and no, we'll keep that property for a period of time. But yeah, it is interesting that the accidental investor concept and I wonder how, because in a way, you know, I guess one of our arguments when we're in behind this podcast is we want people to be more conscious about the things that they're doing around property in particular. And you know, there are people buying property for all sorts of reasons and all sorts of motivations, all sorts of beliefs

Veronica Morgan: That aren't necessarily aligned with the outcome they're going to get. And I guess that whole idea of accidental investment is in tune with that. Right. Did you break down any of the reasons why they've actually become investors?

Mike Mortlock: We, we, we did speak to a couple of investors as part of the, the article that we prepared. So it's was a little bit of a media release but, but not really like a lot of the time it's data that we collect. We don't really maintain a great relationship with the clients. That sounds like I'm running a terrible business, but it's, it's actually a pretty quick process to get a depreciation schedule done. And often we're engaged by email or phone. We, we do the work and they go off into the big bad world. So it's not like going to see your account in each year. So we, we don't have a huge amount of background to it. One thing that we crunched a little bit harder. So say for example, in our five years of data for all the purchased properties, rather than say built by the client, the average rental value was just over $29,000. Now, where someone had not lived in the property, it was $23,000 and where they had lived in the property, it was $39,914 and 74 cents. So that's telling me that people are spending more money on their property when they're occupying, which must give, it gives me the idea that they intended to stay there longer. They're spending more money on it than someone that is purely having a tenant in mind.

Chris Bates: Hmm. So we, we get this situation quite a lot where quad, so come in and they'll have a property and they're thinking about upgrading or posting another property and they have this belief that you should never sell and you should always hold on. And you know, you look at the assets and the debt and you think actually from a tax point of view, from a structuring unit kind of debt point of view, it actually makes sense. Even though it's, if it's a poor property, it's generally going to be a great idea to sell it anyway. But you know, it's just about timing this out. But if it's a quality asset, you, you know, you really want to try to keep it, but a lot of the time because that property has grown in value and they've also didn't think they were going to ever move out of it, so they paid it off. From a tax and a loan point of view, it generally makes sense to actually sell, buy the new home and then go buy another investment property so you can have a much bigger tax deductible debt. So what this is kind of saying is that people are kind of kind of ignoring that or potentially their properties haven't grown. And they're just kind of just, I guess trying to hold onto it because of the belief that you should never sell rather than potentially something that's a, you know, a better strategy.

Mike Mortlock: Yeah. Well I think Veronica made a pretty adroit point about the accidental investor and investors really probably shouldn't be doing anything by accident. Right? There should be a strategy. They should be getting advice from experts such as you guys. So yeah, I completely agree with you. It might not necessarily be the right decision, but by just by virtue of the fact that we have found at least a reasonable chunk of people that are doing something by accident, then that sort of has wider implications for investment decisions, you know, across the whole properties sphere.

Chris Bates: Why are we there though? Do you, have you seen that there's a huge ah, like location bias. So you know, a lot of your property investors that say you're a Newcastle, so you know, they've, investors have got their properties in Newcastle, their investment properties. Have you, have you got any data on that or are we saying that I'm consistent? I think over the years. And your job?

Mike Mortlock: No. Like, so you're, you're asking the question, the, I guess the, the gap between where the people live and where they invest. Yeah, that's a, that's a great question. We're actually building that data. We, we don't have as accurate data on the actual location of the investors themselves that their postal details that's not as robust. That is in the works. But anecdotally we do find that your average investor is investing pretty close to where they live. You can sort of see that anecdotally when we, when we know where they, where they're actually located themselves and where their investment property is. That's something that I think is slowly changing over time. And it'll be interesting to see that the trend in the, in the data as that comes through our system. But certainly people want to invest in areas that they are familiar with themselves, especially if they're not using an advisor.

Veronica Morgan: So let's just sort of go back a minute to I guess, so our listeners can understand the process that a client might come to you and then you would do that work. So tell me if I've got this wrong. So somebody buys an investment property or they decide to move out of the poem that they've been living in and make an investment property. Their accountant normally I would think would suggest to them, look, you need to go and get a depreciation schedule because the depreciation will be tax deductible. They go and contact you or a company like yours and you go and inspect the property and then put together a schedule, which then they give back to their accountant and every year at the tax time they include whatever deductions they can. And so like you say, they engage with you often by email, you may not even talk to them and you would only do one. You would only do that with schedule once, right?

Mike Mortlock: Generally, yes. So the only time that we would revisit it if it would be, if they're undertaking major renovations and if they're doing minor things, they might have all of the costs so they don't need someone to estimate them, which is really our specialty. So yeah, most of the time it's a one off transaction. There's certainly some repeat investors in the sample, but as you know, 72% or thereabouts depending on the ATO tax sets are only buying one property. So the majority of people within our survey will be individual property owners.

Veronica Morgan: And so your data then is really capturing what decisions

Mike Mortlock: They've made at the point of purchasing a property? Yeah, so we know where they've bought. We know what type of property that they've bought, whether it's a unit, a house, or a townhouse. We know whether they're buying new and by virtue of questions that we need to ask or analysis that we need to do when we would, we would know whether the property was built after 1987. That's a very important cutoff date for us. We would know the renovations that they're doing. We would know the floor areas and of course the data that we collect, which is the total construction costs, which is our estimated costs and all of the deductions as well. And when we're talking unit developments, we also collect the number of units within that development and we've found some pretty interesting stuff on that as well.

Mike Mortlock: So we found that development sizes Rose pretty rapidly and they peaked in our data in early 2018 then contracted to be slightly above the average number of units of five years ago. So I don't know, do you guys want to have a stab in the dark? If you're buying a strata titled investment property, how many units there would be in the development back in 2016 okay, I'm going to stab in the dark and say 35 Chris 20 I've got 2035 well it was 61.53 2016 so it's pretty big, right? It was big. If I had to guess, and this is, this is what sort of really is intoxicating for me about the data isn't it? Doesn't matter what you think, you don't tell you. Right. That's what I like. Marketing as well, you know, test things and you're like, I think this will work. And you know, the market tells you what's working.

Mike Mortlock: We, we, we found that that peaked at 96.91 units within a development in 2018 which is, that's a, that's a big development, right? That's, that's a very, yeah, it's a huge rise. Now, this, this one might to who you? The Opal towers incident was December, 2018 and the mascot towers incident was June, 2019 so for anyone that can't remember what happened there, we had some pretty major issues with those with those towers on the construction. Opal towers was evacuated over Christmas, made a lot of media. We found that our data dropped off fairly rapidly in 2019 it went from 96.9 to 83.3. So, and after that 2020, it went down to 72.38. So it, I can't, I can't prove that the, the sort of zeitgeisty of the investor pivoted around the fear of these bigger developments. But it's, it's, it's interesting sort of anecdotal evidence I would say.

Chris Bates: Probably aligns with what the developers are moving towards is you the investors start to building properties that soon owner occupies, which just say bigger in a smaller number of apartments in developments, you know, maybe targeting site downsizes and things like that rather than kind of lots of.

Veronica Morgan: That would have happened so quickly though would it, I mean that the developer lead time is so much longer to have that actual reaction in such a short period of time would be really unusual.

Mike Mortlock: Well yeah, I think that might not necessarily have made its way into the data, but certainly investor decisions cause they're a bit quicker than the lead time or development. But you, you have certainly got your finger on the pulse there to some degree, Chris, because the prevalence of townhouses has become really, really popular. So if we look at 2019, we found that 13.6% of investors were buying a townhouse. And in 2016 that was 6.3%. So it actually saw the biggest growth of property investment type of say houses, units and townhouses. Townhouses just soared ahead because it's, it's, it appeals a lot more to the downsizers and I think a lot of people have gotten sick of the shoe box style apartments. Yes. They're always going to be popular with with students. Certainly foreign students, obviously there's some Corona issues with that at the moment and some massive downside risks. But I think baby boomers that are downsizing, they want quality. They want a reasonable size, they want an extra bedroom so they can have people's sleep over. They, you know, they want to have a garage because they bought, you know, 1960s JAG with a red, you know, to sort of tie in with their midlife crisis. All that sort of,

Veronica Morgan: Anyone in particular, she sounds quite vivid. This description,

Mike Mortlock: My car is gray, so I won't go any further than that.

Chris Bates: Sovos talk about in terms of you think though that with all these Opal tower, you know, there's been lots of media around sort of new apartments you know, Greenfield tower, you know, in the, in the UK, you know, all the cladding issues. That's been in the papers for many years. You potentially had all low valuations off the plan risks have kind of been a lot in the papers the last few years. Would you say though, you know, you think that if you see all this media around new apartments that you think that people are buying less new properties, but is that the case you finding with your data?

Mike Mortlock: It is not the case. And I know you guys will probably be very, very upset to hear some of this data because you, you, you, you've got a very strong agenda in looking after people and not making mistakes. And one of the best or easiest ways to make a mistake is to buy off the plan in a big development without doing your due diligence and all that sort of stuff. So we actually found that outside of let's say units versus houses, the percentage of people buying a new dwelling in 2019, which is our last data set was 49.6% and back in 16, 17, it was 23.9%. And if you can, if you look at the people that are either building or buying a brand new property, so for example, if you're a property investor, you can engage a builder to build an investment property.

Mike Mortlock: So if you add those together, the percentage of people that are building and that are buying a new dwelling is 71.5%. So the vast majority of people are going for spanking brand new. Now that's, that's great from a depreciation point of view, you know, and, and this is where it's a bit interesting with the data. People might sort of say, well, my dad is, you know, advocating, buying brand new, that's not the case. I'm only doing what people bring to me. And there's no argument that depreciation on new properties is better. And people ask me all the time, what should I buy to get maximum depreciation? And it's the sort of investment that would make you guys terrified, right. And me as well, because it's going to have six levels of basement that's going to have, well, you know, why stop at 90 apartments in the complex, let's make it a thousand. Right? Because you get a share of the 10, $6 million lifts, you know, all that sort of stuff. That's what makes the depreciation grade in these big Highrise complexes.

Veronica Morgan: I don't know what to say. 70 over 70% of the investors that you've been that have been coming to you buying brand new or getting something built and it's horrific. It's absolutely horrific. Yeah. I'm speaking

Chris Bates: Lots of your clients through accountants. Yeah. Because this is, I mean, part of the problem, this is not a shot at accountants. It's just, I guess the ignorance of, or I'm not understanding the, you know, the ramifications of how different properties perform. And the impacts of that. The clients that are taped buying these properties, their decisions. But you know how, what percentage of your customers come via accounts. It's because a lot of investors don't even know depreciation reports exist, which is one of your problems that you're probably trying to solve. But you know, if most of yours come from accountants, can we kind of block, put a bit of blame there that accountants are potentially sending him down this rabbit hole where you know, that they're basically buying you because the tax deduction

Mike Mortlock: We, we could certainly try. And you're right that I've been trying to educate investors on their entitlements for more than a decade. A lot of the time you'll find that accountants will go and do their tax return with a client and they'll be surprised to hear that the client has purchased a new investment property, which is, which is never a good idea. If you're a property investor and you have an accountant will, well, if you don't get one and get a good one you should be saying, Oh look, mr or mrs accountant, I'm looking at an investment property. What structure should I buy it in as an absolute minimum? Right? Because that has huge implications for the amount of tax that you pay. And of course the, the safety of that asset depending on whether you're on a business and all that sort of stuff.

Mike Mortlock: So look, I think it would be a bit unfair to, to have a go at accountants for that because I think a lot of them would actually just be trying to sort of tidy up the mess of what's been purchased. Certainly there are accountants and financial planners that are plugged into networks with developers that can of course get a commission if they're placing people into, into certain assets. I think it's always a good question to say, you know, you're recommending this property, how does that work? What are you getting paid? Blah, blah, blah. But I think it just, it really just comes down to the education of the individual investor and we can't have, like we've built this society where we like shiny new things, right? You know, you've only got to look at the cues for the new iPhone and all that sort of stuff. I think people are attracted by the marketing that goes together with these, with these apartments and these new properties. We all like the new stuff.

Veronica Morgan: It's very true. We actually did an episode sometime back and I'm trying to remember the number with what was her name, Chris. So from the, from a company that actually does the marketing cat, Burgess, and where we really talked about all, all the marketing around this these new complexes. And it's true. I mean, it's, it's that creating that FOMO, it's creating that the dream, you know, selling the dream basically. And the reality is it's all very nice to sell a dream, but particularly if you're buying an investment, it's gotta deliver. And, and so many of them don't, which is really, really hard.

Chris Bates: Horrible. But I want to blame. I think that the state government's also a massive to blame here, unfortunately, in every state. I mean, we've got a client just this week where they, you know, he admitted it. He's been, he's a podcast listener. And you know, he's bought it off the planet in Adelaide. It was kind of a one bed sorta two bath and you know, you openly admits that he fell for all the state government, you know things that we're throwing at him. You know, the first time owner grant tend to stamp duty exemptions, et cetera. So unfortunately a lot of investors, the state government courage, all this because I, you know, they pushed people down the wrong sort of stream

Veronica Morgan: I bet to say. Oh, I always astounds me why you'd actually built a one bedroom, two bathroom apartment.

Mike Mortlock: That's true through the week. You go to one toilet and then you save one for Sunday best.

Veronica Morgan: That's for D. I think it's for differentiation, isn't it? Yeah.

Mike Mortlock: Okay. Well, you know, the bathroom areas are pretty good because there's a cost per square meter. There's so much tile and waterproofing. It's, it's good. But I'm in, you know, like you've, you've heard me prattle on about the nerdy stuff already. 

Veronica Morgan: Well, I'm just wondering whether the market is actually, they really, it's such a big push that you get great depreciation is if you put two bathrooms in, it actually does increase it.

Mike Mortlock: That's a, that's an interesting conspiracy theory. I can't tell you that I've looked behind the curtain and can give you a categorical evidence, although maybe if I have in my industry I couldn't tell you. I think you, you touched on a really interesting point there, Chris, because you, you, you, you look at construction and the government has sort of said very, very recently that they're looking at giving people 50 grand if they're, if they're getting a brand new property. I think with the construction industry, they're, they're a big employer, right? And there, the construction industry is very important for the economy. And of course the affordable housing debate always comes up around election time. I don't know that the government is necessarily pushing people to new property, but by trying to stimulate the construction industry, that just kind of happens by proxy or do you think that there's, that there is something more at play?

Veronica Morgan: I think they're pushing particularly first home buyers and investors towards new property. I mean, you look at policy, you look at the fact that they've got first home buyer grants that, that they get more money if they buy a new than they do if they're by existing. And the same with investors, you know, negative gearing and the way that depreciation is, is currently set up is heavily skewed to new. And even when you look at labor who were planning to abolish negative gearing except for you. You know, I mean, so, so I think policy is, is very much weighed up to encourage those two groups in particular to buy a brand new property and keep the economy going. And I'm, I'm personally conflicted. I like a good economy. I really do. But I also realize that individual purchases are the foundation of our economy. And that's a bit unfair because they generally are the ones that lose money through the whole exercise.

Chris Bates: You got individuals, you know, first time buyers, people were buying their first investment property and taking all the risks they're putting in all the money that they've worked hard to save, then they're going to a bank and borrowing, you know, 80, 90, even potentially the whole amount. So they're going into a lot of debt to basically buy an asset to support a construction industry. But also, what does that mean?

Veronica Morgan: Oh, the bad, bad construction industry because we all benefit from this.

Chris Bates: Yeah. And then I think the cost of an apartment, if you break down what that cost, where that money goes, some of it goes to the construction company, but a lot of it goes in taxes to the government. You know, a lot of it's attacks on the development attacks on you've got stamp duty, land tax, you've got profits of the construction company. So this all is when you break it. Yeah, rates. And then at the end of it all, you got stamp duty on top of it. So they tax tax. It's a cutting ruse,

Mike Mortlock: Isn't it? But you know, that's an interesting point about how we're incentivized towards new. And here I am maybe even disagreeing with myself from, from earlier, but you know, when you, when you consider the, the major depreciation changes, which I think we talked about on the podcast last time. So on the 9th of May, 2017, they yanked away planting equipment deductions for established property. So you basically have to buy a new, now we found that the average deductions were actually were, were quite adversely impacted by that change. So the deductions dropped, you know, around about 60%. I don't have the exact data in front of me, which is a surprise, I know, but the data that I do have is, is that the depreciation deductions over the last four years have gone up in total at 23.72% across that four years. So we've actually found that even though the deductions less than there's less available than what there was, people have adjusted and they've shifted towards new because there are more incentives. There are better to that tax reductions by going new. So it kind of, it kind of perverts the investor's decision when the government offers an incentive for one type of property and not the other. So they are very, very interested in stimulating new housing, supply. And as you said Veronica, there's a lot of tax out there so it works very well.

Veronica Morgan: `It's a shame isn't it? Because you know it's a bit like, it's actually worse than making a decision based on yield. You know, this is making investment decisions based on tax, which obviously impacts your yield. But the reality is that if you're going to buy a property as what we bang on over and over and over again, so don't tune out this news cause you've heard it all before, but you know, property is big and lumpy and risky and you're borrowing a lot of money and so therefore you really need to be focused on capital growth because if you want yield, there's other things you can invest in that are not as big and lumpy and rich and risky and you don't have to borrow as much money for. And so it beggars belief really, that people are still taking such enormous risks with blindfolds on really purely so they can get more tax deduction and actually in reality so they can lose money because they have to spend a dollar to get back 47 cents at, at most. And so they get back in 47 cents and if they don't get capital growth, they haven't made up the other 53 cents plus actual return on investment. And they're not thinking about that

Mike Mortlock: Losing money is the new making money but big part of it as well.

Chris Bates: It's just the ease of buying a new property is much easier than trying to battle it out at auction or go to the market. And do your research and deal with agents and, and I do a building and pest and check the contract and miss out. Like all that work is, you know, exhausting versus walking into a display suite, having a chat, getting given a free coffee, maybe free lunch and then, you know, signing a contract. And that's, I think a big part of it as well is that it's actually just an easiest, simple way to tick the box. I've got an investment property rather than having to, you know, the risk of having to do all this research and figure out what's the right property. And so I think a lot of investors just take the easy option and just, she'll be right, mate. It's just, you know, how bad can it be? So I think that plays a lot into it as well. Do you see that mic?

Mike Mortlock: Yeah, I think so. And you've, you've obviously got the security of the, of the warranty on buying a new home as well. So you're not sort of necessarily worried about maintenance and you being facetious, I thought, I thought I'd throw something out there just to see if I give it to land. But so one thing that I, I've thought about a lot is like, let's say you, you want to buy a new house to live in, you're, you're, you're at the mercy of what is available for sale at that time, right? Like, if you do it six months later, the house that you would be living in is completely different. Like, it's kind of a weird thing. Like it's just this limited stock and it's never the same from one month to the next and sometimes one one day to the next. It's a bit of a sort of a lottery.

Mike Mortlock: And of course all the properties are different. Yes, there are some suburbs where everything was kind of built at the same time in a master plan. But if you're buying in the, in the city, you know, there's this, there's such a, there's such an array of different types and you've gotta make the decision on which is, which is best. You gotta look at the way that it's facing you and look at the age, the style of construction individually, they all need their own inspections as to the quality of the termites or the building and all that sort of stuff. So, yeah, I think, I think new property takes some of that concern away, but it's also the psychology of, of the carrot versus the stick. And I think a lot of people, I'm more fearful of the stick than they are interested in the carrot.

Mike Mortlock: I think we probably need to update the name of the carer. I know anyone that that actually really sort of covers carrots anymore. But yeah, the sticker caramel a bit because people go to their accountants still and they say, mr account, Mrs. Cannon, I want to buy an investment property. And they go, Oh that's, that's good. Why do you want to do that? And the answer is I'm paying too much tax capital growth doesn't come into that conversation for these people. And it sounds very silly, but it definitely does happen. People are worried about paying too much tax more than they're excited about growing an asset that's going to help them retire or help their cash flow down the track.

Veronica Morgan: Yeah. It's that short term thinking, isn't it? And property is a longterm game. And so when you're buying with a short term property to solve a short term problem, Oh my goal, what you're creating for yourself down the track. But what is some of the other stuff that you, surprising stuff that you have uncovered through this research?

Mike Mortlock: Yeah, look, I think the, the townhouses was the most interesting one for me is that people are moving away from the Highrise and they wanting slightly bigger properties. We've found that property investors are becoming a little bit savvier about their, their tax depreciation deductions, which is good. Like my last team has been completely wasted. Well, the time that they're taking to order a report, that's a, that's a really big one, right? Because if you wait too long to order a depreciation schedule, you can miss out on potential deductions. So you can back claim two financial years. But if you're buying a property and you're waiting more than two financial years, you will miss deductions.

Veronica Morgan: Okay. But here we go because you've got more people buying you that's on the increase. Then they are advised when they buy obviously that they know in advance that that is something that they need to do. Whereas if they're buying established properties, they may not know that. So that could be that they're not necessarily making better decisions around that. They're actually just being, that's part of the marketing spiel.

Mike Mortlock: Yeah, absolutely. I think that would definitely be at play. But again, a bit like the living in the property and that must be the first home owner grant. The average time from, from purchasing a property to ordering a report is 524 days. So yeah, even allowing for people to buy brand new and they get one straight away. I still think that a lot of people are holding off and we did find 6.7% of our investors had waited more than the two years and the average amount of missed deductions was $20,000. So that could be seven grand in your pocket. And if someone sort of says $7,000 to me in my head I've already spent it. Right? Like that's, and we should think about it as, as real money. Like there's a weird psychological effect where, you know, the people win the lotto and they blow it within a couple of months cause it's kinda not real. Or they gamble and they double the money and they go, Oh well I didn't come in with that. So it's not sort of real anyway. No leave. If you're up,

Chris Bates: Get out. What are you going to buy with that mic? That red JAG or the rest

Mike Mortlock: Red JAG. Yeah. I need my receding hairline is, is, is kicking into full gear. And yeah, I think we're, I think I'm going to probably peak a little bit earlier on my midnight midlife crisis.

Veronica Morgan: Don't buy a Harley.

Mike Mortlock: No, no, I don't think that's my style.

Chris Bates: That we're the Mo man style.

Veronica Morgan: Let me tell you, Mike,

Chris Bates: Have you got any idea though of what percentage of investors have actually got a depreciation report? Because a lot of established investors, you know, just have no idea that they should have one. Like it's, you know, the cost of, you know, I think you do it for a $50 each day and you're just joking. But you know, the cost of, you know, five, 600 bucks or whatever it is, right. Or even less to potentially claim thousands and thousands, thousands of dollars of deductions for however long you hold this property. A lot of investors just don't know they should do that. And a lot of new property or yeah, they might know that they needed appreciation should have cause that's the reason they bought it for these depreciation deduction. So do you have any idea what percentage of investors don't have a depreciation report? Yeah.

Mike Mortlock: Yeah. Look, that's an interesting point. Like if people buy a new, they probably more likely to understand they needed appreciation schedule. But I remember one poor lady in our study who bought an apartment off the plan and contacted us 16 years later for a depreciation schedule and it's been rented out and the amount of deductions that she lost, like it was, it was a good news story. But for her, because she, she, she paid our fee and we got two years worth of back claim and we sort of suggested she checked her accountant to see if she can get a private ruling to go back. But it was like $60,000 of lost deductions. And even in that sort of that 6% that I talked about before of people waiting too long, if you extrapolate that over the investor population, it's two point $9 billion worth of unclaimed deductions out there.

Mike Mortlock: I mean that's a bit of sort of maybe a click bait that we ran with, but it's significant to answer the question about the percentage of people that have a depreciation schedule, it's very, very difficult to tell that. So the best that we've got is the ATO tax stats, which come out every year, but they're delayed, right? Because a lot of people wait quite a few years to do their tax. So they're normally two or three years behind. And we can see the number of investors that are claiming capital works or plant and equipment deductions. And certainly we've had, I've seen other companies say, well look, the average amount of claim by the investors is X, but we on average get X in our first year. So people are missing out by this much. But I think they're failing to consider that these are people that may be had a depreciation schedule 10 years ago and we're talking about, or what's the residual value that they're claiming today.

Mike Mortlock: So we don't know the exact percentage of people that have a depreciation schedule for their investment property. And there's certainly some types of properties that are rented out that aren't worthwhile to have a depreciation schedule done on. Now, well let's, let's say I talked about 1987 as a key date before. So if the property was built prior to 1987 you've got no depreciation claim on the original structure. So then we're looking at improvements. So renovations, new bathroom, new kitchen, new roof, carpet, whatever. So if a property was built in 1981 and has never had anything done to it and it's rented out, there'll be zero depreciation in that. That's a little bit unusual because if you spend a little bit of money it, you can probably double your rent. Like who wants to be living in a house for the kitchen from 1981 or bathroom. So it's not a huge chunk, but that also is another gap in us being able to tell the percentage of people that actually have a depreciation schedule compared to the investors.

Veronica Morgan: What else do you think, or what are the myths or fallacies do you think that your research sort of uncovers as being missile fallacies? Well,

Mike Mortlock: I think the, the lived in one the number of units within a development, they were all very surprising. The percentage of people that buy new, they're probably the biggest takeaways. We're, we're finding a lot of people are spending more on renovations to their properties than before. So I think it's, it's, it's, it's, it's reasonable to extrapolate. The people are holding a little bit longer than they did before and they're, they're trying to sort of build equity themselves by renovating or, or getting a yield uplift by doing cosmetic renovations and that sort of stuff. So the rise in average Renno spend has gone up 62.88% in our, in our sample. So yeah,

Veronica Morgan: And that's interesting too because obviously there that's a, in terms of depreciation, that's where people holding established stock will get more depreciation. Right. Because of the change to the ruling back in 2017 so is it, does it correlate with that change and then accountants are suggesting that perhaps,

Mike Mortlock: Yeah, I mean you, you couldn't look at the data and silo that is the obvious motivator. But again, it's one of those anecdotal, it's happened and it seems to match. So that's sort of good enough as at least a discussion point. What's, what's interesting as well as the, the, the four year change on renovation spend across the, across the major Eastern seaboard States. So new South Wales, Victoria and Queensland, the new South Wales Sherman have have increased by a hundred percent Victoria, 22% in Queensland down negative 2% so that kind of leads me to believe that there is a little bit more available equity for redraw to spend on the renters. And in our last data set the average renovation spend after purchase in new South Wales was 50 grand and in Victoria 24 and Queensland 22 so I know Victoria has had a reasonable run and certainly in the, in, in Melbourne for, for house prices, but we're seeing a lot more people spending money or at least people spending a lot more money in new South Wales and Queensland basically is flat.

Veronica Morgan: Do you have a split on houses versus apartments? Cause I would add, I'm just making a bit of an assumption here that a lot of people that have invested in Brisbane in particular or Southeast Queensland, if they're from the Southern States would have been buying brand new, in which case they're not going to be renovating, are they?

Mike Mortlock: Yeah. So I can have a look at our last data set here. Just see what I've got. Hot off the press for you. So the percentage of people living in properties in Queensland is actually only 16%. The percentage of properties with post-purchase improvements is 39.39% in Queensland. The, the renovations on houses versus units. I don't have that data in front of me, but that's something that I can crunch for you. I think last time I came on I had a little page on our website with some data that I shared last time. I'll revive that, which is just our mcg Q s.com. Forward slash elephant in the room. Dot PHP. I don't even need that PHP, but yeah, check that in the show notes and I will I will I'll crunch that for you. And that'll be like a little show bag for any listeners to pop the link for your, this report we've been talking about in there as well. I will. Yes. Anyone listening thanks to Veronica and Chris, you can get a copy of our shiny PDF, which will help you nod off to sleep for a good couple of months. It's great isolation reading.

Chris Bates: So Mark you said here about that there's about roughly 50 grand of renovation costs is the average that people are spending on their own in terms of, let's say you've bought a property and you bought it say five years ago. And you're, you know, especially in this current climate, you're potentially having problems with tenants you know, vacancy. And so, you know, the best way to get a good tenant is to renovate it. How does it actually work from a tax point of view, you know, if some of those repairs are for repairs rather than some are actually improving the value of the asset. And how does that work with depreciation report?

Mike Mortlock: Yeah, well, repairs and maintenance is one of those perennial topics that the tax office talk about, you know, being the thing that they're going to be ordering investors for. And in their recent sort of published sample size, they said there was a nine out of 10 failure rate on deductions not being claimed correctly. So repairs and maintenance is the key thing to get right. People love repairs and maintenance because it's an immediate deduction. So you can claim a hundred percent of what you spent as a deduction in the year that you incur that cost. But it's important to consider that that has to be a replay, a repair to something that stays in place. So if you have, say a hot water system and you, you install a new widget inside it, like a solenoid, that would be a repair. The property has got to be income producing at the time, so you can't sort of be living in it, do the repair and then rent it out.

Mike Mortlock: But if you replace like for like, so the hot water system dies and you put a new one in, then that's not repairs that can't be claimed as repairs and maintenance. It's a depreciable asset. So in a renovation, most of the work is probably going to be depreciable assets rather than repairing things that stay in place. And with the depreciation in May, 2017 the government said you can only claim plant and equipment items if you buy a brand new property or you install that item yourself. So the structural part, if we say a kitchen, it's the cupboards, it's the benchtop, you can climb two and a half percent of what you spend on that each year for 40 years. And then you tease out the plant and equipment items. So again, in the kitchen and cook top Brainshark dishwasher, if you're installing them brand new, you can claim those plant and equipment deduction. So there is that incentive to do that renovation yourself. It's the only way that you can claim planting equipment in an established property is by checking in the new assets yourself.

Veronica Morgan: And then you go to the $300 limit, right?

Mike Mortlock: Is the $300 or less immediate deduction. So you can actually claim a hundred percent of all assets that cost $300 or less if they're not part of a set. So if you've got a dining suite and the chairs are a hundred dollars each, but the whole thing is $600 you can't do it. But yeah, you can write off anything that has a value under $301 that's a planting equipment item.

Veronica Morgan: So if you put fans in ceiling fans in for instance, or something like that or blind you blinds, right?

Mike Mortlock: Yeah. Depends on the, on the value of the blind blinds normally would, would drop into the low value pools. So individually under a thousand dollars, which gives you an 18.75% first year claim and then 37.5 each year until it runs out. There you go. I can't, I can't help it, you know, I toss and turn at night just seeing figures. It's like rain man without the actual intelligence. I've got I've got something that might actually warm your hearts a little bit because we've talked about all of this off the plan and the unit purchases and all the stuff that I, that I know is going to have certainly you, you guys tossing and turning at night. It's the increase in purchase prices for houses versus units over this, over our sample size. So we actually found that the, the price people are paying for houses went up 21.33% and the price people were paying for units went up 10.3%. So that is just what people are spending. It doesn't necessarily mean that that's the increase in the value of the house, but it's pretty close. Right. So it's saying that people that buy houses, I'm making more money on their houses.

Veronica Morgan: Wow. That is interesting. Yeah. I don't know quite what to do with that. I mean, sorry, because there's, you know, when you're buying a property particular if you're buying established and let's forget house and land packages and brand new for a minute, but you, you are limited to being able to buy what I said sir out there what is available for purchase on the market and then obviously you've got the rest of the market could to contend with within to compete with. So it is rather interesting that that's been the case cause I would imagine that investors haven't gone out suddenly and change the type of, that they'd be looking at buying as an investment. It would be somewhat homogenous. Ly, D you know, are you able to tell that?

Mike Mortlock: Well, what we can tell is the floor area changes. So in, in, in our F our four year trend, we found that houses, the floor area grew by 12.61%, whereas units was practically flat. So the houses have gotten a little bit bigger, whereas units actually went down around about a quarter of a percent. So that could influence it. But that's not, that's not a huge change. Like it might be an extra 16, 17 square meters. It's maybe that's one of those little study nooks or you know, half a theater room or something like that.

Chris Bates: So I was always thinking about strategies, Mike and I think you highlighted a very good one. There were existing property investors buying existing property, so established properties on the market, not new properties. Sometimes they're better off buying properties that are un-renovated and then doing the renovation after for two reasons. One, they might be able to add value to the property and B, there'll be able to claim the depreciation on those renovations rather than buying the fully renovated apartment. And, and not going through the hassle of the renovation. But another strategy I'd love to get your thoughts on is let's say you're thinking about building a dream house and you want to basically, you know, reduce the cost of that dream house by climbing depreciation. How would you, how could you eat basically, you know, buy a block of land, build your dream house, you know, what's the kind of optimal time to kind of rent it out, claim in most, you know, the vast chunk of the depreciation benefits. And then you move into it, say, you know, three to five, six years later, what, you know, is there a strategy day you think?

Mike Mortlock: Yeah, that's a really good question. And I wrote an article on how to renovate your property a little while ago and I wasn't talking about, you know, how to pull up the tiles and all that sort of stuff. It's just kind of like what not to do from a tax perspective. And one example of that is don't put tiles in it, put carpet in it because Charles is two and a half percent depreciation, right? Whereas carbon has a an eight year effective loss. Those 200 divided by eight gives you the depreciation rate, so it's much better for tiles. But if, if you decide that you do want to move into this investment property, it's better to do it later rather than sooner. Because if, let's say you're buying a brand new property, most of the plant and equipment deductions will be gone by six or seven years.

Mike Mortlock: So that would be the optimum time to move in. And it used to be the case that it was a great strategy to buy an over capitalized property from a depreciation point of view because the market value kind of didn't really reflect what was done, right. Because people just look at it and they say, what's over capitalized? That doesn't meet the area. The owner spent a fortune. But you're the beneficiary of that when you buy that. But that's kind of changed now because yes, you are the beneficiary of the structural work. So that might be the, the gyprock might be the roof, the concreting, the cupboards and joinery and that sort of stuff. But all the plant and equipment on them is, you can't, you can't claim them unless you've, you've purchased them brand new or you put them in yourself. So my advice when you're in how to renovate a property is don't be living in it while you're renovating it.

Mike Mortlock: It's much better to, to renovate between, say a tenancy. Because if you, if you renovate a property and you occupy it for some time, you can kill off all those plant and equipment deductions. And when the the prime minister who was in the treasurer said, look, if you're, if you're buying a brand new property, you can claim those plant and equipment items. So, you know, nothing's changed. What, what definitely has changed as if you bought after the 9th of May, 2017 brand new and then you decide to live in the property at the point that you start living in it, you will kill all those plant and equipment deductions. So if you are going to do that, I would get the tax benefit first. Now not everyone sort of makes their lifestyle decisions based on the best tax treatment, right? So if you have an a family emergency, you're not going to sort of go, now we can move into that house. We're staying in the tent because we're not going to get the cooktop and the oven deductions, but all things being equal, you probably need to have a strategy and think about the best way to do it if you've got those options.

Veronica Morgan: It used very true. But the thing that I'm, this is one of the sting in the tail of getting depreciation or claiming depreciation is when you go to sell it though, right?

Chris Bates: Well, I guess if it's your home then I guess that's the, so I guess there's a strategy there where you potentially, you buy an older house, you live in it for a period so it's growing for you tax-free, and then you've got six years and then you knock it down and build your dream house on it. And then you basically just rent it out for six years and you climb all the depreciation on the build tax free when you sell it, while you got used the six year rule on that property, how does that work, Mike?

Mike Mortlock: Yeah. Look I'm not going to jump into the, into the the CGT ass aspects of, of claiming your own residence, but of course your own residents will be CGT exempt, but the moment that you start claiming depreciation deductions, then you're going to have that CGT issue. And on that point that, that you rise in paying it back. I think often this is the question that I sort of get heckled at a presentation. So if I'm asked to present for a property group or something like that, there's always sort of someone at the end that sort of says, Oh, why would you do it? Cause you've got to pay it back. Well it's only really the structural part that you need to worry about. So let's say you buy a property that was built in the nineties for, this is just going to be easy for my mass.

Mike Mortlock: A hundred thousand dollars, you sell it for $200,000 that you've made a hundred thousand dollars capital gain. If you claim $20,000 worth of the division, 43 deductions. So structural deductions over that point, then you've made $120,000 capital gain. But if you have the property for more than a year, you've got the 50% exemption. So you're only worried about half of that tax and then it's at your margin. All right? So it's more than half again. So we, we, we sort of model that and we can't see a reason why someone would avoid depreciation because of the CGT implications because it gets cut in half and more than cut in half again. And it depends on the time horizon as well. Like a dollar today is worth a lot more to you than it will be in 20, 30 or 40 years. You never know environment, but it's

Veronica Morgan: Well a true, the thing is also that you've got the cash flow, but you know, from an investors point of view, you've got that cash flow boost while your, you know, in the early years of owning that property. But there's also, I just think that that's one of the things that if you, if someone is looking at a strategy to try to maximize any deductions, if they're gonna renovate their own homes, as you know, the scenario that Chris put forward, they also have to understand that, that that's it. You don't just draw a line in the sand and say, well that's eat you. Then when you sell your home down the track, we'll have to actually pay a bit of tax.

Mike Mortlock: Yeah. Yeah. And that's why I always recommend an accountant. So we collect accountant's details when we're doing a report because often we, we want to have a chat to them because we can some, we can sometimes change our approach to, to the benefit of the client. It's a little bit harder with the depreciation changes that have come in with the plant and equipment, but, but we could sort of massage it based on what the goals of the investor was. So if they were only going to hold the property for three or four years, then the deductions that we're getting in year 35 mean absolutely nothing to them. So w we, we, when we come across property investors that, you know, use a tax or, or do their own thing, we, we definitely encourage them to have an accountant and not all accountants are created equal as you know.

Mike Mortlock: So it's important to get one that is specialist with the, with the property stuff and ask them the question, here's what I'm thinking of. Here's what I'm afraid of. The big bad tax man. What can we do? How can we structure it to get the best possible benefit? I mean, building, building a team around you as a, as a property investor, I think just in general in life is, is, is a worthwhile experience just from your own learning and because you're going to avoid making the mistakes that experts will be able to spot from miles away

Veronica Morgan: Preaching to the converted here. I think it takes a village. It takes a village to build a house, to to buy a house or buy an apartment

Chris Bates: Every week. We hear incredible stories of the dumb things, property buyers do dumb things. It ended up costing a whole lot of money and, or a whole lot of stress mistakes that can be avoided. Please, Mike, can you give us an example of a property Dumbo? We can all learn what not to do from these stories.

Mike Mortlock: Oh, look, I always feels like mean-spirited with these Dumbos because last time I think I might've even picked on that woman that waited 16 years to get a depreciation schedule. And I think I think I'm gonna make it that the person that doesn't consult with an encounter in or an advisor in their purchasing decisions and just does something like buying brand new or buying off the plan. I think really for all the excitement of the shiny brochure or the brand new special splashbacks this could be something that you're stuck with for a long time or forced to sell at a loss on the opportunity value that you are missing out could be huge. So let's make them the Dumbo. I want to thank you. Do you want me to just point at, you know, Scott Morrison, he's the Dumbo.

Chris Bates: Oh, you can do it right. And then I think the solicitors are a big part of that decision as well. Like I think you know, a lot of people don't really understand that it's an unconditional contract that there's no way that they can potentially, they can just walk away with just a 10% deposit. A lot of them believe that you know, there's a lot of people, you know, their understanding of contracts is a big part of it as well. And you can't just walk away. It's just gonna hurt a lot of people at the moment, especially who have lost their jobs, who potentially can't settle on apartments, you know, or and then there they think, Oh, I can just walk away from the contract with, no, technically you can't. So it's going to be some, see what happens there.

Mike Mortlock: Yeah, you just got of, you've got to value the experts. They're the people that, that value our time and expertise. You can just sort of tell that that's their approach. They know what they know and they are pretty educated on what they don't know and they value the expertise of others and that, and in most cases, that value is worth paying for.

Veronica Morgan: Yes, it's a, but it is interesting because with Australians, we all are property experts aren't we? And most of us can't keep our opinions to ourselves and we all think we should be able to know how to do this. And that's one of the, I love it when I go out to a dinner party and of course people who don't know me will ask, you know, what do you do? And I tell them what I do and Oh my God, the amount of advice I get, Justin's downs me. Anyway, bit of fun. I guess exactly. Not going to dinner parties. Thank you so much Mike for coming and joining us. We look forward to putting those links in the show notes as well. For listeners who want to get into some of that data, who enjoy being a bit of a data nerd as do you, and we do appreciate you bringing that nudity. Is that a word along and sharing with us?

Mike Mortlock: Yeah, it's an absolute pleasure. I mean there's a real labor of labor of love for us. We really enjoy that and yeah, if anyone's interested they can get a copy of that report and we'll, we'll build a community and perhaps I'll be sort of a data cult leader who knows

Veronica Morgan: The grand Puba, the fees of the Pew bar or whatever they call you.

Mike Mortlock: We just need to loosen up these restrictions.

Chris Bates: Thank you, Mike. Cheers. Chris. We want to make you a better elephant rider and this week's elephant rider training here.

Veronica Morgan: Well, we talked about the importance of what I call a village to help you buy a property. And Mike certainly discussed at length about the importance of actually having the right advisors on your team and how to get those right. Advisors is challenged though because you do need to ask them the right questions. I mean, if you get your accountant on board and you say, Oh, how do I save money on tax? Well that's not really the right question. So really this bootcamp is around thinking about what are the questions you should be asking. And so that is really taking yourself away from what is their area of expertise and saying, well, I want to longterm achieve X and how am I going to get there? How can what you do and what your area of expertise is that will get me there. What would you say about that, Chris?

Chris Bates: I do think it's, it's about the quality versus the quantities. No point. Just saying you've got a broker or a financial planner or a buyer's agent you know, there's good, bad and ugly in every industry and you know, really if you want the best results, you've got to get the top quality advisors in those areas at the problem. Like you say that you want to solve, you know, there's no point going to I, you know, for example, it's never going to a financial advisor that specializes in retirees. If you're 30, you know, is no point going to a, a buyer's agent that buys investment properties if you want to buy a home in Sydney that say so I think it's all about getting the best professional. And it takes time and, and part of that due diligence would be asking good questions and figuring out if they're the best and doing the hard yards. I'd much rather see five or six professionals to figure out which is the right one. Then kind of wishful thinking, picking one professional and then five years later saying, Oh, actually that wasn't a great call.

Veronica Morgan: So I, what I find is that, you know, we certainly see it in our business where people will come to us and say, right, well I want to buy an investment property and this is the sort of property I want to buy. And I'm like, okay, can we just park that for a minute? I don't want to ignore what you said, but I want to understand what you want to achieve because that might not be the type of property that will actually help you achieve that. For instance, and I'll give you an example. So a lot of people come to me saying, I want to buy a house because the value is in the house, in the land. Sorry. and so therefore that's going to be the best investment. But I really want to talk about, well, how much money have you got to invest?

Veronica Morgan: Because that's going to decide whether you determine whether you can afford it and a great quality house versus apartment. B, how long do you expect to own that property? See, are you a renovator? How much, how hands on do you want to be in the actual management of that property, et cetera, et cetera. There's a whole bunch of questions. You know, what's your cash flow? How do you have the ability to withstand the fact you're going to get a lesser rent on a house? There's so many more questions that really needs to be blown out of that because then if I can understand, tease those things out with the future in mind, which is what property has to be, then we're going to get a better outcome. And that client may not necessarily buy what they thought they were going to buy when they came to us.

Veronica Morgan: But that's the benefit of getting an expert that actually says, hang on a minute, you got a tax problem. That's actually a good thing to have. You know, if you're in accountant, rather than fix the tax problem and then create a whole another problem, let's look at where do we want to go in life? What decisions do we want to make to go in that right direction? And so, and certainly the same with a mortgage broker. It's like asking a mortgage broker, I want, I want the broker that gets me the best rates. It's filing to understand how the real, where the real value lies in the advice that a specialist and an expert in their field can give you. So I guess this boot camp is really around not going to that expert and telling them what you want, but going to the expert and saying, this is our longterm plan. What are the pitfalls? What are the what? What would you do if I gave you a clean sheet of paper? What can you advise me in this area? And make sure they're only advising you specifically to their area of expertise. So when an accountant says you should buy brand new so that you can save tax, that's advising you outside of their area of expertise because they're advising you on the type of property to buy.

Chris Bates: Yeah, a hundred percent I think it's going if you want to be, do you want to go to an advisor? Then just to get validation about what you're doing is the right thing. When you walk in the door, they completely agree with you. They tell you what you're doing it's the best thing for you. And then they just facilitate what your bad decision. That's tax advice, whether that's buying a property, whether that's a mortgage, whether that's financial advice, you know, whatever insurance, et cetera. So, I mean, I guess it really comes down to you really want to go to see an advisor that will actually advise you and give you what is actually best practice and the optimal thing for you and your future. And sometimes it might be difficult to hear and completely different to what you're thinking. Or do you actually just want to go and get validated and just be proven that what you were thinking was right? And unfortunately, I think a lot of people do want the latter and actually just want validation. They don't actually want to hear the best advice.