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TPC Gold | 3 vs 4 Bedroom Homes: Which Do Renters Prefer?

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In today’s bonus episode, we’re digging into a question from listener Joel, who’s wondering if adding a fourth bedroom will make his place more attractive to Aussie renters. 

Bryce and Ben break down what renters really want in a property – and spoiler alert, it’s all about finding the right balance! They cover why extra bedrooms can be a win, but only if you’re not sacrificing too much living space.  

Plus, they share tips on how suburb trends and layout choices can make all the difference when it comes to attracting tenants. 

If you’re keen to know how to set your rental property up for success, this snippet is packed with insights to help you make the best choice! 

For the full Q&A episode, tune in here: Episode 178 | Q&A: Is that 4th Bedroom Such a Good Idea? APRA’s Effect on Credit Cards & What’s The Secret to a Career in Property Investment? 

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Now That You Know Renters’ Preferences for 3 Vs 4 Bedroom Homes…

We hope these insights help you on your journey to building an investment property portfolio! 

Whether you’re just starting out or looking to sharpen your skills, our book The Armchair Guide to Property Investing is packed with tips to guide you along the way. And the best part? You can grab it for FREE!

If You Enjoyed TPC Gold | 3 vs 4 Bedroom Homes: Which Do Renters Prefer? You Might Also Like:

Transcript

Bryce Holdaway
Today’s Q&A Day, we love it. SpeakPipe, we always want our listeners to come and leave us a message. So here, Ivise, is our first one.  

Joel
Hi Bryce, Ben and Stiggy. My name is Joel, I’m from Adelaide, South Australia. The question I’d like to ask is what types of rooms and features do Australians want in the rental market at the moment? The property that I’m looking at is a three-bedroom with an open living area and a large home entertainment room or cinema room. Now looking at the plans, I would probably convert that into a fourth bedroom, add some wardrobes, because it’s quite large. But I don’t know what other Australians would want. So I would live there for a few years before renting it out. But I don’t know, would Australians prefer the fourth bedroom or would they prefer to have a home living area, activities rooms, stuff like that? So any input would be great. Thanks.  

Bryce Holdaway
Very good question, Joel. I would say the first thing, Ben, is my number one rule within looking at something like this is context. What’s the context for the suburb right? If you’ve squeezed in a fourth bedroom and it’s meant a very tiny living area and there’s only one bathroom and the rest of the suburb provides you much better options than that, you’ve really limited your market.  

Ultimately, I took this from Bernard Salt. He wrote the book The Big Shift back in the 90s. I read that. And he goes, Australians, it’s not a Manhattan-isation. We value space. Whenever we have a public holiday, we get the kids in the car, we drive to nature, we go to the bush, the beach, whatever. So we value space. So for me, from the buyer’s end’s perspective, if you can add another bedroom, all things being equal and you haven’t seriously compromised on the living space, it’s just a proven fact that that actually creates value.  

I mean, we have bought properties for clients where there was a precedent where just down the road there was someone with an extra bedroom, made the change, automatically created some equity. So all things being equal, extra bedrooms make a difference, but as long as it’s not coming at the expense of four bedrooms, one bathroom. That’s a nightmare. Or the suburb norm does not support what you’ve done. They’re my two caveats around that.  

Ben Kingsley
Mate, if I lift your message up to the 30,000 (ft) view, look. I think of it like a pyramid, right? So I come back to this owner-occupier appeal piece, and I say this in terms of trying to explain it. If there was a, let’s say there was a glut of properties in the marketplace. I’m talking, for whatever reason, half of our population was wiped out tomorrow, right? And that would mean that obviously rents would be at a premium. I mean, everyone would worry about why the population got wiped out. Might have been a war, you know… 

Bryce Holdaway
Collingwood premiership. 

Ben Kingsley
But just think of it like this. It’s as simple for me as what would be my preference from an owner-occupier. So if the price came down on a Toorak mansion that I could rent for 500 bucks a week, would I rent it? Yep. Because it gives me convenience, it gives me access, it gives me everything. So I always, when I’m looking at buying property, think about the owner-occupier appeal for the renter because the renter wants all the things that an owner-occupier wants.  

They don’t think necessarily like a renter. They don’t say, because I’m a renter, I don’t want this, I don’t want that. There might be an argument where they don’t want to do gardens, but that’s about it. But if you give me a four-bedroom, two-bathroom home for the same price I can do a unit in the same suburb, most people are gonna go for the four-bedroom home. Now that’s not possible because the four-bedroom home’s probably worth double and would charge a premium rent. Now that rent is set by demand and supply. And the only reason we can command a rent of that level is because of the appeal, the demand.  

So Joel, coming back to your question, if it’s got an extra room, that extra room could be a sewing room, it could be a storeroom, it could be a bedroom, it could be a study, it could be all of those things to those different people. So, Bryce summed it up beautifully by saying, we will take the extra space so long as it’s within our budget. Okay, and normally if you do get that extra space, you do get a little bit more extra rent because you’re providing more dwelling accommodation. You’re providing more residents under which you’re able to charge that out. So the bigger the property, the more bang for buck you’re going to get from a rental point of view and it’s as simple as that. So don’t try and get too caught up in: this is perfect for a single person with a dog or this is perfect for a couple who are studying at university.  

The big caveat for me, I always try and say, if you have to go and settle for an apartment, try and make sure that the toilet is outside of the bathroom. People think about that stuff. They think about the fact that if someone’s got a stomach-ache or whatever, but they’ve got to have a shower to get to work, they can’t go in there because someone’s ill on the toilet. Right. It’s little things like that that make all the difference. So a mandate for me is that.  

Bryce Holdaway
Including if you’re buying a one-bedroom apartment too, Ben.  

Ben Kingsley
Totally.  

Bryce Holdaway
Because imagine if you’ve got friends over for dinner and they’ve gotta go through your bedroom to actually go to the toilet. 

Ben Kingsley
Yeah, and you know if I’m looking at an apartment, I like apartments that really are more than 55 square meters in size because I want sort of a dining area. I want an area that I can put a table to sit down that’s not in my living room, that I’ve just got to sit on my sofa to watch the television. So that’s a big thing for me. The separate laundry is a big bonus and that’s what normally happens. The bigger space but that’s why you pay a premium for it. So it still comes back to the whole fundamental of you will get more rent for something that has more demand.  

Bryce Holdaway
The message here is don’t over-complicate it. If you can move something from a two to a three bedroom, that’s got enormous power. Three to four, it’s great for families. Four to five? Not so much, maybe.  

Ben Kingsley
No. But if you’re offering me the four to five, if you’re offering me a five-bedroom home at a four-bedroom price as a tenant, because the market might be soft at that time…guess what? The tenant’s more likely to take the five – better to put the surfboards in or to put the bikes in or to put whatever, because it’s more storage.  

Bryce Holdaway
But as the investor you want to appeal to the tenant, you also want to make it a return on investment.  

Ben Kingsley
Correct. So if you’ve paid an absolute premium for the fifth and sixth bedroom and you’re not going to get that return, that’s when it starts to taper off.  

Bryce Holdaway
Good question. We appreciate that, Joel. Thank you; hopefully that’s helped. Let us know. Send us an email. Let us know if that hit the mark for you. 

TPC Gold | Investment Stock vs. Investment Grade: Which Should You Choose?

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In today’s bonus snippet, Bryce and Ben revisit a classic topic: investment stock vs. investment grade.  

This is in response to a question from a listener asking if the insights from Episode 8 (recorded all the way back in April 2015!), still hold up in today’s market. Spoiler alert: they do! 🎙️ 

Bryce and Ben break down the evergreen principles behind these concepts, emphasizing that while the market may evolve, the fundamentals of property investment remain timeless. 

Tune in to learn why investment stock, despite its name, isn’t always the best choice for investors and how investment grade properties continue to outperform over the long term. 

Don’t miss this deep dive into one of the core concepts that have shaped The Property Couch’s approach to successful investing

Listen to the full episode here: Episode 339 | “Man, Can Politicians Spend Money!!” – ft Property Q&A 

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Find Out More About Investment Stock vs. Investment Grade

Ready to learn more about the fundamentals behind every successful property portfolio? 

Check out our FREE Masterclass on How to Retire on $2,000 per week. 

In six easily digestible episodes, Bryce & Ben reveal some of the critical lessons every (aspiring and current) property investor should know. 

Have a question of your own you’d like answered? Leave us a message here.

If it’s answered, we’ll gift you our Start & Build course (RRP $497)! 

 

If You Enjoyed TPC Gold | Investment Stock vs. Investment Grade: Which Should You Choose, You Might Also Like:

 

Transcript

Bryce Holdaway
This question is coming from The Property Couch’s Facebook Messenger. It’s from Al Knight Lewis and the topic is investment stock and investment grade. Question: Is it still relevant?

“Good afternoon. I’ve just started listening to your podcast and I’m finding them so interesting. Episode 8 talks about investment stock versus investment grade. And I’m wondering if the info in this episode is still current and relevant six years later. I’m looking for our first investment in Brisbane.”

So just to build up some context Ben, back in April of 2015, you and I recorded the investment grade versus investment stock, which is part of the vernacular now. I reckon it’s really embedded in the industry. There’s a lot of our peers who we’re very grateful and thankful that they listen to our podcast and incorporate (it) into their dialogues that they’re having with their own clients within their own businesses. But investment stock versus investment grade wasn’t that well known back then in 2015, so we spent a bit of time differentiating between the two.

And so the good news is that, well, I cannot remember what we said, I’ll be totally honest Ben, but what I do know is the principles that we talk about at a framework level are always (let’s throw a number) 98.3% evergreen, Ben. They are evergreen principles because we rarely talk about topics that are fads or Johnny on the Spot or not timeless principles. So the idea of there being investment grade and there being investment stock is still as relevant today as it ever was and will still be relevant going into the future.

So the good news that we can give Al Knight Lewis, and for everyone who’s listening, who might be in a similar journey where they’ve just started with us: Yes, the timeless evergreen principles that we talked about back in April 2015 still do exist. So like I said, I can’t remember what we said then, but I do feel 100% confident that the actual framework that we talked about is well and truly relevant today. So I just want to qualify that. I’m not dismissing that; I hope I’ve said the right thing. I just can’t remember word for word what we said, but I do know that the framework is absolutely still relevant.

Ben Kingsley
Yep, supply is the enemy of capital growth. Investment grade versus investment stock moves on the principle that investment stock is built on mass volumes of that homogenous stock, so there’s no point of difference. There’s no relevance to it. And our argument around investment grade is that combination of land, well-located land, because at the end of the day, it’s the land that appreciates but you can also get some improvements on that land that have high desirability, high emotional content. And that rings true anywhere.

Now, what we are seeing with low interest rates is that it means that the rising tide is again, lifting all ships. So the argument’s going to be is who gets the long-term income growth? And that will revert back to even some of those more important areas that I believe will still continue to outperform based on the desirability and the demand for those areas, as opposed to the investment stock. So it’s been proven; there’s some data that’s floating around now around what performs better. Old houses perform better than any other compounding return over a long period of analysis, and the most underperforming asset has been medium and high-density apartment stock. So it’s true to form and we think that will continue.

Bryce Holdaway
Two things: there’s a paradoxical thing, a paradoxical concept of investment stock is not good for investors. So let that land. It’s paradoxical. Hang on a second, you just said investment stock is not good for investors. That’s right, because as an experienced investor you want to chase stock that owner-occupiers like. We have documented that multiple times on this podcast. So circle back to that if you need to. So that’s number one.

And number two: where it has a slight difference is in the inner Sydney market, because a bit of that medium density stock has actually performed quite well for a lot of people. I’ve had a lot of Sydney folks go, hang on a second. Well, that city is probably the only city that actually has a little bit of a higher performance on some of that because it’s got such a huge population. The geography in Sydney is barriered by a national park south. They’ve got a mountain range to the side. They’ve got ocean and then they’ve got all these waterways. It just makes it so geographically tough so therefore it’s such a high density city.

But I still wouldn’t be loose in Sydney. I’d still go back to the fundamentals of making sure that if you are going to buy, (buy) in a proven performing block, not the massive high rises that are under enormous stress, both from a PR perspective, from an engineering perspective, from a body corporate perspective. So medium density stock works a bit better in that city. But I still would ignore the fundamentals that we talked about at your peril in that city.

Ben Kingsley
Yeah, in Sydney’s case, you get these mega designed density areas: Paramatta, the CBD, Willow Creek…where there’s just literally thousands that are going to be built over a period of time and they’re all relatively homogenous, (and) they underperform. So I think the context there that Bryce is saying is those 20 to 30 older blocks and the density there, they’ve actually delivered capital growth and our clients are also pretty happy about the ones that we bought for them during the times that we bought them there.

Bryce Holdaway
So I’m also talking about medium. I’m not talking about high density, I’m talking about medium density where you’ve just got slightly bigger apartment blocks that do have some of the facilities actually done okay, because Sydney has been through a boom since we went through that episode. And then obviously we’ve had this post-COVID.

So that could be a little confusing for some of the Sydney folk, but I’d still dive super deep in the principles that we talked about. So that if you are going to buy medium density, low to medium density in that city. Notice I didn’t say medium to high density, low to medium density in that city that you’re still leaning in on the fundamentals. Did that help Al? Let us know: go back to us on socials, send us an email, let us know, we’d love to know if that was helpful. And it’s obviously a good one to revisit for our community.

 

How To Pick The Right Investment Property: “Know Thy Quadrant…”

By in Podcast, The Armchair Guide to Property Investing

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So, what makes for the RIGHT investment property… and how do you pick it?

Well, let’s be honest… most of us can’t tick all the boxes on our property wish-list. We’d like to, sure, but often this isn’t an accurate depiction of reality. We can’t all afford the best house in the best street in a blue-chip, capital-growth-centric location every time we invest in property! So, chances are you’ve had, or will have, a conversation about what you might have to compromise in the buying process.

… And this is where our “Buyer’s Decision Quadrant” comes in!

This is a framework that can help you with the asset selection process and help you make an informed decision so you are NOT compromising where it matters most. Because there is something that is absolutely non-negotiable.

So in today’s episode, we’re going to take a deep dive on the four areas — the “Quadrants”  — of our Buyer’s Decision Quadrant so you can sleep well knowing you’ve picked the right investment property with the money you have and the ambitions you seek!

Listen now to learn how to pick the right investment property by using our Buyer’s Decision Quadrant to weigh up the “wins” and “loses” of what you compromise on!

Don’t forget, get further insights and “play along at home” by picking up a FREE physical copy of our book here: http://www.thearmchairguide.com.au/

 

Here’s a bit of what we cover in today’s episode…

  • What is “The Buyers Decision Quadrant” and how can you use it to purchase your next investment property?
  • What is The One Thing you should NEVER compromise on?
  • Should you buy “Smaller, Closer In” OR “Bigger, Further Out?”
  • What can you compromise on if you have a smaller budget?
  • How to recognise which investment property will work for your own circumstances…
  • Is a property that “ticks all boxes” – AKA the perfect property – really a myth?
  • Is “Uglier” always better?
  • Land size considerations…
  • What should you quickly overlook?

 

Free Resources

  • Free Book – The Armchair Guide To Property Investing: How to Retire on $2,000 A Week (please just pay for postage – we’ll pay for the book and send it anywhere in Australia for you.)
  • The Property Couch Podcast – The Insider’s Guide to Property Finance and Money Management (This is Australia’s #1 Property Podcast with over 307+ episodes that features HEAPS of simple and actionable frameworks, countless interviews with the best minds in the Australian property and finance industry and a ridiculous number of free resources to help you at any stage of the property investment journey)

 

Episodes from The Property Couch to Further Support You…

  

The #1 Reason Why These Properties Soar In Value… While Others DON’T!

By in Podcast, The Armchair Guide to Property Investing

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Not all properties are created equal. And there is a specific reason for this – what we like to call “The Psychology Behind The Price”. And this has EVERYTHING to do with human interest and human behaviour – something that can indeed be measured and, almost always, stays exactly the same… no matter who you are or where you live.

Here’s the deal… there are two “types” of properties – Investment Grade and Investment Stock. And most investors are often tricked into thinking – or falsely assume – that what they think is a good investment is going to turn out to be, well, a good investment. And this is NOT the case. In fact, it’s often the complete opposite.

This may come as a surprise to you… but the greatest investments – what we call “investment grade” properties – actually target the owner-occupier (that is, the home owner)… NOT the investor!

And in today’s episode we’re going to tell you exactly why this is and give you the science behind what makes for an Investment Grade property and how to recognise one using the golden rule that underpins the value of property – Supply and Demand!

Listen now to learn how to get a return on your investment property and keep it… simply by identifying high demand in the property market.

 

Remember…

Investment Grade = Great.

Investment Stock = No good.

 

Don’t forget, get further insights and “play along at home” by picking up a FREE physical copy of our book here: http://www.thearmchairguide.com.au/

 

Here’s a bit of what we cover in today’s episode…

  • What types of properties almost always outperform others?
  • What do we mean by “Supply and Demand” and how can property investors use this to get a return on investment?
  • Investment Grade vs Investment Stock
  • What is “Owner-Occupier Appeal”?
  • How To Identify REAL High Demand in The Property Market!
  • Critical Supply Considerations and How to Identify “Scarcity” in the market
  • The Three Biggies: Human Behaviour, Human Interest and Economic Activity
  • What Property Indicators should property investors assess?
  • Why does the Demographic of a property market have such an impact on property prices?
  • What areas will grow most in value?
  • What is gentrification?
  • Tips for Investing in Apartments

 

Free Resources

  • Free Book – The Armchair Guide To Property Investing: How to Retire on $2,000 A Week (please just pay for postage – we’ll pay for the book and send it anywhere in Australia for you.)
  • The Property Couch Podcast – The Insider’s Guide to Property Finance and Money Management (This is Australia’s #1 Property Podcast with over 307+ episodes that features HEAPS of simple and actionable frameworks, countless interviews with the best minds in the Australian property and finance industry and a ridiculous number of free resources to help you at any stage of the property investment journey)

 

 Episodes from The Property Couch to Further Support You…

 

409 | Having It All: How To Make Every Move A Winner!

By in Case Study, Podcast

Folks often believe that it isn’t possible to achieve everything they want in life.  

But what if, with the right sequencing and frameworks…

It was possible to tick off everything on your bucket list?! 

What if you could make every investment decision a “winner”, helping you to achieve your dream lifestyle? 🤯

This is what we’re uncovering today with a real case study featuring Kevin & Bernadette (Not their real names): a young couple who are planning to achieve it all:  

👉 Start a family with 2 (or 3) kids, 

👉 Continue to build an impressive property portfolio that’ll earn them an $80K passive income, and  

👉 Have a comfortable transition into retirement. 

Starting off with an investment property that isn’t faring so well but with 2 steady incomes, we uncover how – through the power of frameworks, sequencing and paper trading – they can achieve ALL their life goals. 

So how will they do it?!   

Listen now to find out! 🤸‍♀️🤸‍♀️🤸‍♀️ 

 

Free Stuff Mentioned… 

 

Want to work with Bryce & Ben’s Award-Winning Team? 

 

Here’s some of the gold we cover… 

  • 0:00 – The gold this week!  
  • 1:07 – What’s New: A homage to the Queen, PIPA’s Breakfast & the Premier of NSW is coming on the couch?!  
  • 7:57 – Something HUGE is coming!!  
  • 9:36 – The 3 Critical Things That Help With Luck  
  • 11:07 – Today’s Case Study… 
  • 13:02 – Let’s just acknowledge this… 
  • 13:19 – Where are Kevin & Bernadette in life??  
  • 16:07 – So, why did they seek help?? 
  • 18:22 – The Google Maps Analogy!  
  • 21:20 – Their Goals: Retiring, Passive Income & Their Plan!!  
  • 23:04 – What were their big-ticket items?!  
  • 24:16 – We actually recommended THIS (We never do this!)  
  • 25:18 – …and this is why we recommended it.  
  • 28:20 – Why NOW is a good time to invest or upgrade to your dream home!!  
  • 29:25 – The problem with their set-up…  
  • 31:14 – This is a classic example of the Buyers Quadrant!  
  • 31:50 – What sequence this couple should follow!  
  • 34:25 – The Third Kid: The value of stress testing your buffers! 
  • 36:05 – What are the challenges this couple is facing??  
  • 37:07 – Maternity Leave & Cash Flow!  
  • 42:42 – What to consider when thinking about having children!  
  • 45:44 – Split Loans: How to tidy up money structures!!  
  • 48:10 – What does their final plan contain?  
  • 51:06 – The Essential Frameworks  
  • 52:40 – The 4 Steps To Build A Property Portfolio  
  • 55:30 – Come join us on the couch! Be our next Summer Series Guest!  

And… 

  • 57:12 – Ever wanted to “Google” where an image is from?! Try this life hack… 
  • 58:56 – Super and Build-To-Rent – will it happen??  
  • 1:01:03 – A Downward Spiral… 
  • 1:02:14 – Auction Clearance Rates: the future not so clear?! 
  • 1:03:07 – Ben’s predictions on RBA’s Interest Rates  

 

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