X

TPC Gold | What Makes Vendors Sell Before Auction?

Ever wonder why a vendor would choose to sell before auction day? 🤔 

If you’re a buyer looking to understand the psychology behind pre-auction sales, today’s bonus episode is for you! 

From agent strategies designed to create urgency, to sentimental sellers seeking the comfort of a quick sale, this episode reveals it all.  

You’ll also get the scoop on how market conditions, interest rates, and emotions can tip the scales in your favour! 

For the full episode, tune in here: Episode 145 | 8 Reasons Why Vendors Sell Before Auction 

__________________

Buying Before Auction? We’ve Got You Covered!

We hope this snippet helps you strategise your pre-auction offer with confidence! 

But if the auction day showdown is unavoidable, why not bring in the experts? 

Experienced Buyers Agents from our sister company Empower Wealth can guide you through every step, helping you: 

✅ Save Time – We handle the research, inspections, and negotiations.
✅ Gain Market Insight – Get insider knowledge on property values and trends.
✅ Reduce Stress – We’ll bid on your behalf, so you don’t have to!
✅ Avoid Overpaying – Secure the best deal with expert negotiation strategies. 

Buyers Agents can take the pressure off, so you can focus on landing your dream property! 🏡 Book in a free initial consultation today >> 

 

If You Enjoyed TPC Gold | What Makes Vendors Sell Before Auction, You Might Also Like:


Transcript

Bryce Holdaway
Ben, we’ve got a framework. We’ve got a framework.  

Ben Kingsley
No, are we unpacking a framework today?  

Bryce Holdaway
We’re going to unpack a framework. Here’s the deal, right? The amount of times that someone comes up to me and says: Bryce, tell us a strategy about buying properties prior to auction. And so there’s a bit of a technique. And then they say to me: why would someone sell prior to auction? And I’ve given up trying to come up with all the answers that people do, because sometimes it’s just you know, circumstance. So we decided that we’d actually give a framework. 

Ben Kingsley
Brainstorm it, yeah, brainstorm it, throw a few ideas out.  

Bryce Holdaway
So we threw a few around.  

Ben Kingsley
So you want me to lead off?  

Bryce Holdaway
I do.  

Ben Kingsley
Mate, I’m gonna start with an actually marketing ploy.  

Bryce Holdaway
Ooh. 

Ben Kingsley
So this is a little bit different. I sort of look at it like this where I’m basically talking about if for whatever reason there’s a time issue, and we’ll talk some about some other time issues as well I reckon, but this one is about marketing. Okay, so auctions are about creating scarcity and creating an outcome by a set time in a competition sense. So I actually think that agents might say: look, let’s put this under, you know, forthcoming auction or auction set date by this or offers before. So all of a sudden it’s actually a means by which the vendor, and they might be traveling overseas, they might have other commitments, but that’s the sort of thing for me if it is a marketing ploy to basically create that interest and get a result sooner rather than later. So I’m saying the number one is because it is an agent-led ploy to get an outcome quickly.  

Bryce Holdaway
I like it. There’s actually an agent, can’t think of his or her name, I think it was a him, on the central coast of New South Wales has a market that’s around $400 to $450 as typical sale price. And that market’s not typically where you’d expect auctions. He goes to auction, I’m pretty sure it’s a he, he goes to auction on 95% of his listings, right? And in a market that’s not known for going to auctions. Because what it does is it actually timestamps the marketing campaign, which is what you’re talking about if the listener thinks the real estate agent only gets paid for their time. So if they have a private sale arrangement, that could go for eight weeks, it could go for 12 weeks, whereas an auction campaign has got usually a finite time.  

Ben Kingsley
Because we know, don’t we, that when a property’s been hanging on the market for a while: What’s wrong with it? If it stays on too long, and we know it happens in Queensland as well, doesn’t it?  

Bryce Holdaway
The power shifts, doesn’t it?  

Ben Kingsley
Yeah, yeah. 

Bryce Holdaway
To the buyer. But this particular agent uses that as a timeframe to create scarcity, to create urgency, so that they can get through all their campaigns. So I think you’re absolutely spot on. You gotta think about: it’s not just does the vendor wanna sell to me? It’s the agent whose got ambition and goals and they’re trying, because if they do private sales all year, their income will probably be a third of what they’ve done, because they’ve got these rolling campaigns. They get the deal done before the auction, but it creates the urgency in the time frame.  

Ben Kingsley
I love it, I love it. 

Bryce Holdaway
So I think opening with that one’s a good one.  

Ben Kingsley
What do you got?  

Bryce Holdaway
For me I’m gonna go, massively, telescope, big picture. Sort of the external micro factors. Think about talk of sentiment change, think about interest rates, think about government changing, think about last year when the negative gearing debate came up. All those things create anxiety and uncertainty in the mind of the vendor and so therefore if any of that exists, I think that’s often one of the reasons why a vendor would be keen to take an offer and accept any reasonable offer.  

Ben Kingsley
We’ve already seen the Sydney market come off and that is changing the sentiment in that market. I mean, we were there a couple of weeks ago and speaking to the people there, they all said, definitely, market’s definitely slowing. So if you are that, you’re sort of thinking, your macro might only be your state or your city, and you’re starting to think well, all right, just if, you know, a bird in the hand as opposed to potentially a couple in the bush, I’ll grab that offer. All led by that particular macro factors that is changing the view and the media, you know. All the sort of boom, bust types cycles we go through in the media, so I think that’s a cracker. Alright.  

Bryce Holdaway
Alright, got another one for me?  

Ben Kingsley
Well yeah, probably the nervous seller. I mean that’s a classic one where you know they’re not familiar with auctions, they don’t understand the process. They don’t want to go through this anxiety burn that’s going to happen when they’re on the day of the auction. You know and usually you know they may be an older vendor or deceased vendor, and they don’t have their partner there anymore with them to sort of give them the confidence and the security. And even though the agent is going to hopefully reinforce that, if they’re still a little bit sceptical about agents, that can certainly be a place in that. I reckon that’s the nervous seller, the one who’s willing to sort of say, all right, well again, if I’ve got a fair price and that’s all I was looking for, that’s gonna be enough to get me moving. I’ll probably move on the sale.  

Bryce Holdaway
Yeah, well, if you think about the auction process, as you know, Ben, the person who wants the auction is the agent. The buyer doesn’t want it. In fact, a lot of the time, the seller actually doesn’t want it because, like you say, it just gives them that internal churn and that internal burn. Yeah, often they get a little bit of stage fright. And the agent is so used to the auction process that it’s so desensitized to them that they will happily take them. They know it’s worth it get it out.  

Ben Kingsley
And it’s amazing to think that some vendors are just happy to get a fair price. I mean, the vast majority and the job of the selling agent is to get the best possible outcome. But in some cases, we’ve talked about this before, where a vendor has sold to the couple that they prefer better. That they’ve got a connection with and this is a beautiful family home and I want you to create your memories there. I don’t care if someone’s gonna offer me more, because we always naturally go to that position that everyone wants the most and if this thing’s gonna sell for $400,000 above reserve, I’m gonna be doing cartwheels because that sets me up financially. But there are some vendors out there who may be nervous and who are saying, you just get me that, because that’s all I need and the job’s done.  

Bryce Holdaway
I think you raised a really good point there because if you’ve got someone who’s got a family home. It’s been their family home for 30 years and they would just love to see another family get that property, versus a developer who’s hanging around at auction.  

Ben Kingsley
Yeah, that’s another reason. Yeah, could be sold before auction.  

Bryce Holdaway
You picked up on a very good point. So I’m nervous or a sentimental seller.  

Ben Kingsley
Yeah, sentimental seller.  

Bryce Holdaway
Yeah. All right. Okay. I reckon this one’s a bit of a no-brainer, but they’re committed elsewhere. 

Ben Kingsley
Forced sales.  

Bryce Holdaway
Whenever given the choice between certainty and uncertainty, they will take it every day of the week. And of course, if they then translate that uncertainty into certainty, they can then maybe line up settlement dates as well. So, you know the classic they’ve bought somewhere else, is one of the reasons that bird in the hand is worth two in the bush.  

Ben Kingsley
Yeah, yeah, and you know in a moving market a lot of people were forced to do that, you know. They were sort of saying I just need to get in and then I’m reasonably confident that my property will get a certain value. So if they’re upsizing, you know they were forced certainly in the Sydney market It’s happening a little bit in the Melbourne market as well as opposed to going the other way around, because we would always say if you’re a conservative person you should sell first and then buy. But if the market’s moving too quickly, you might just jump in. And so obviously, if they have done that and they haven’t sold their property, guess what? Again, a good strong offer early in the campaign could potentially get that property off the market. 

TPC Gold | How to Buy Property Like A Pro: A Simple, Step-by-Step Process

Ever wondered exactly how to buy property in Australia?  

In today’s bonus episode, Bryce and Ben answer a listener’s question and walk you through the step-by-step process! 🔍✨ 

It all starts with getting clear on your goals—Do you need a growth asset? A balanced one? Or maybe something with a higher yield? They then dive into the full journey, from checking your finances to navigating state-specific property market regulations.  

Plus, find out how being proactive—whether it’s with due diligence, understanding local regulations, or reverse engineering your property purchase—will set you up for a smoother and more confident buying experience! 

For the full Q&A episode, tune in here: Episode 186 | Q&A – Should You Pay Down the Principal Loan When Interest Rates are Low? Are Multiple Offset Accounts a Good Idea? PLUS The Step-by-Step Process to Buying an Investment Property! 

__________________

Additional Resources on How to Buy Property in Australia

FREE Book: If you want to learn more about building a successful property portfolio, grab a copy of our bestselling book The Armchair Guide to Property Investing. 

FREE Property Report: Our comprehensive 39-page property report is a treasure trove of data insights! Pick a suburb of your choice and learn all about the dynamics of its properties PLUS 20 vital key statistics covering long-term growth, market cycle timing, days on market, and more. 

FREE Initial Consultation: If you’re looking for a buyers agent, property investment advisor, mortgage broker, accountant, or financial planner, book in a free initial consultation with our sister company Empower Wealth Advisory.

If You Enjoyed TPC Gold | How to Buy Property: A Simple, Step-by-Step Process, You Might Also Like:


Transcript

Ben Kingsley
Now, Bryce, your last one.  

Bryce Holdaway
Now, the process for the purchase is very simple. You’ve got to overlay a couple of the frameworks we talked about, Ben, the five steps. So we’ve got: Clarify, Evaluate, Plan, Implement, and Manage.  

Ben Kingsley
Yes. 

Bryce Holdaway
That’s still the same. So first of all, if we go way back, we clarify what it is that you want. Because people say to us, do you buy just capital growth properties?  

Ben Kingsley
No.  

Bryce Holdaway
No. We are not a one-trick pony. It is whatever you require. Do you need a growth asset? Do you need a balanced asset? Do you need a yield asset? And the only way we’re gonna know the answer to that is if we clarify what you want first, okay? So when you’re buying an investment property Ben…clarify, evaluate, plan, implement, and manage.  

I’m gonna go straight to implement here because that’s what we’re talking about. In terms of the implement, I’ll tell you what a buyers agent does. They do four things. They further clarify the brief, they go and find it, they then go and assess it. Then they go and negotiate it. So what they do is they clarify what it is that you want based on what we just talked about.  

So is it a: Do I need a higher yielding brief? (Or) I’ve got land tax issues in New South Wales, I need to buy outside of that. There’s a whole range of things that form the foundation of what we do. We then go and find them – whether they’re on market, Ben, which is easy through the portals, and then the other one is off market, which comes from relationships. And buyers agents have relationships that the general buyer doesn’t necessarily enjoy.  

Then we’ve got to assess it, Ben, against what we’ve found, against what we’ve clarified. So, okay, sure, this is a great property that will grow in value, but is the shortfall so great that I won’t be able hold the property longer than 18 months before I tip over? Or vice versa, am I a shoo-in with the cashflow that I’ve got? And then the final thing is, do you then negotiate whether it’s at private treaty or at auction?  

So if we flow that through, all right? So first of all, we always say to the client, we’re never in a hurry to find a property, but when we find a property, we are in a hurry, all right? Because there’s a window of time where the anxiety is really high, where the agent’s back and forth, we might be up against competition. So anticipating that there’s two parts of anxiety in the whole timeline, that’s one, and one’s a bit later, which I’ll talk about in a sec. So what we need to do is reverse engineer all of the things that are going to happen in that 48-hour window and make sure we’ve got it prepped.  

What name’s gonna go on the contract, Ben? Have we asked our accountant? Is it in our trust? Have we got our pre-approval in place? Is our equity released? What are we gonna do for a deposit? Are we at high LVR, which means we’ve gotta be conscious of the fact that if we’re at LMI, are there certain properties that we need to avoid? So we need to be asking lots of key questions that are happening during that anxiety period, way back nice and early to make sure that we’ve got that sussed.  

Once we’ve got the equity released, once we’ve got the finance pre-approved, we are in a very strong position of strength, Ben. So for example, in Melbourne you have to be pre-approved. In Brisbane you don’t, in Adelaide you don’t. So it’s important to know, if you’re buying in Melbourne, you need to have your ducks lined up beforehand. If you’re buying in Sydney, you need to have your ducks lined up beforehand. If you’re buying in Brisbane, you can do your due diligence afterwards.  

But in a competitive market, we would say bring Melbourne and Sydney paradigms into that market, because you wanna be able to make an offer on a property, make it attractive to the vendor, because if you’re one of three offers, make sure you do that.  

In Adelaide, for example, you make an offer, and you don’t even have to make it subject to any conditions, because they give you what’s called a Form 1, which means you have a certain period of time on the spot; you have like three days, you’ve got midnight on the third day. If it’s not three, it’s five, because there’s so many around the country, I’ll double check that. But as soon as you’ve been issued that Form 1, Ben, that’s when the cooling off period starts. So what they normally do, it’s actually two days, Ben. It’s two days. Two days. That’s just come back to me.  

Ben Kingsley
48 hours.   

Bryce Holdaway
So then what happens is what you do is you ring up your builder and you say, right, I need you to get through in the first two days. It’s a culture over there. They know. And if there’s something wrong with the building, you cool off, Ben. So you’ve got to make sure that during that window of time when you’re about to buy, there’s lots of anxiety. So you need to reverse engineer lots of key questions back at the very beginning.  

Are you someone that likes detail? Are you someone that likes to get it done? Are you comfortable with auctions? You need to know all this sort of stuff. Once you’ve got a deal done, Ben, you gotta have your builder lined up, because if it’s in Brisbane, it’s subject to building and pest. If it’s in Melbourne or Sydney, you gotta have the builder lined up beforehand. You gotta have your solicitor in place to make sure that you get the contract checked out beforehand. If it’s in the other cities, you get the contract done afterwards. So making sure that we have these things in place so that we know.  

Now, you need to know how to put some clauses in and in some states you need a licensed person to put some clauses in, so make sure you’ve got that in place. Then as you get closer to unconditional, the property goes unconditional, you’ve satisfied building and pest, you’ve satisfied finance…you then move into overdrive, which becomes the second most anxious part of the whole timeline is, okay, we’ve got an unconditional, Ben, now I’m nervous about whether we’re gonna get a tenant. What happens if we don’t get a tenant?  

So you need to be interviewing property managers in advance of settlement. If you’ve done the negotiation well, you’ve negotiated to get access to the property prior to settlement with the property manager so they can get a bit of a run-up in, so that you can minimise the window that you have as a vacancy. You need to interview property managers. You need to ask them key questions to make sure that they’re not just giving you lip service as to the fact that they are going to give you a good service. What you do is you give them a call and wait for how long it’s going to take for them to call you back, because that’s indicative of their service levels.  

So you’ve got the property manager in place, you’ve got that lined up before you settle. Ben, you’ve put out the call to make sure that you’ve got landlords protection insurance in place. So that’s in place. And you’ve given the guys, the quantity surveyors a heads up and say, hey look, I need a depreciation schedule done. Now the reality is a depreciation schedule doesn’t need to be done until 24 hours, it doesn’t need to be in your hand until 24 hours before you’re gonna meet with your accountant and lodge your tax return.  

But I always say get it in early Ben, because it’s a nice little surprise if you’re a first-time property investor to see, wow, I’m getting all these non-cash deductions. It’s pretty cool. I can actually get some tax back from paper deductions, which is nice. If you’re an experienced investor, Ben, keep the money in your offset account. Get it at the last minute.  

Ben Kingsley
Love it. Just make sure you get it before 30th June. Because that obviously will give you that year or the year that you bought it in will secure that so that’s a good one. 

Bryce Holdaway
That’s about lodging a tax return not when you get the report.  

Ben Kingsley
Yeah, that’s right. You can get the report but as long as it’s before that end of that financial year it helps you because it can go two years backwards depending on how long you’ve had it for.  

So I’ve just made some notes whilst you’ve been going through that, but I’ve also been listening intently in terms of what you’ve been saying, right? So in different states, it’s obviously different timing for different things, but I’ve just gone and said right.  

Step one: Cash flow affordability, that’s the first thing you wanna make sure. Step two: Get your finance in order. Step two: Get your finance and borrowing power sorted out. Step three: Know which name you’re gonna put the title on. So if it is an investment property, there might be tax consequences around that. So you wanna have a chat with your accountant in terms of what their views are in terms of ownership and what that looks like. Step four is effectively finding the property in terms of making sure that once you’ve found it, you also talked about a building inspection there.  

You also talked about a contract review with your conveyancer or legal person. You’ve also talked about when you’re negotiating, you wanna have those contract terms to make sure that they’re in the contract before you buy it. After you buy it, you’ve then got the property manager, and then you’ve got the defence, which is the insurances around that property, and then you talked about the depreciation. So there was, and some of those are slightly nuanced in different states, which is what you were trying to highlight there, but that’s probably not a bad little framework in terms of stepping through that. 

Bryce Holdaway
Love it, and between step two-and-a-half and step three on your page there, it’s location does 80% of the heavy lifting. Make sure you focus on suburb first before you go to property. If you’ve made the decision, I’m going to buy a house and I will buy a house that no matter what the cost is, I think you’re.. 

Ben Kingsley
…you’re barking up the wrong tree. Thank you…  

Bryce Holdaway
Kyrillos.  

Ben Kingsley
Kyrillos, thank you for those questions. They were terrific.  

Folks, we hope you find that helpful. If you want to learn more about building a successful property portfolio, grab a free copy of our book The Armchair Guide to Property Investing at www.thearmchairguide.com.au. Of course, please know that everything we said in this show is general advice only, so please consult an experienced professional before making any investment decisions.  

If you are looking for an investment savvy professional and not sure where to go, check out our award-winning company Empower Wealth. The details are in the show notes and remember, knowledge is empowering but only if you act on it. 

 

TPC Gold | Lenders Mortgage Insurance (LMI): What It Is and When You Need It

In today’s bonus episode, Bryce and Ben dive into a listener’s question about the mechanics of lenders mortgage insurance (LMI).  

Find out what LMI is and how it relates to your loan-to-value ratio (LVR), as well as whether the premiums are refundable or transferable.  

Ben shares his frustration with the system but also explains how, in some cases, paying LMI can be a strategic move to unlocking more property investment opportunities.  

Tune in to hear their insights on whether you should embrace or avoid lenders mortgage insurance (LMI)! 

For the full Q&A episode, tune in here: Episode 97 | Q&A – Mechanics of LMI, Purchasing Foreclosed Property, Stretching Your Investing Budget and more 

__________________

Did You Enjoy Learning More About Lenders Mortgage Insurance (LMI)?

If you have further queries about your mortgage or want to have it reviewed, book in a free initial consultation with our sister company Empower Wealth. 

Have a burning question of your own?  

We’d love to hear from you! If your question is answered, you’ll get our premium Start & Build course (RRP $497) for FREE! 

 

If You Enjoyed TPC Gold | Lenders Mortgage Insurance (LMI): What It Is and When You Need It, You Might Also Like:


Transcript

Bryce Holdaway
So there you go listeners, we don’t really prep, we just come in here and riff it, but we’re very fortunate to get lots of really cool questions.  

Ben Kingsley
What are we doing?  

Bryce Holdaway
I’ve got a question from Volkswagen.  

Ben Kingsley
Bang, straight into it.  

Bryce Holdaway
Volkswagen.  

Ben Kingsley
Volkswagen.  

Bryce Holdaway
On Facebook. “Good afternoon gents, thanks for the gold that you provide. It’s both educational and inspiring. I enjoy listening to your show on my commute to and from work each day. And now that I’m fully up to date with your shows, I enjoy the footy banter, so keep it coming.” Mate, we gotta wait for footy season. 

Ben Kingsley
I know, bring it on!  

Bryce Holdaway
“I have a quick question. How would you tackle this situation? I’m 33 years old and married with two young kids with plans for number three in the future.” 

Ben Kingsley
Well, there’s one way to do it…probably invest in property and not have that third kid. Just kidding of course, children are beautiful.  

Bryce Holdaway
We’re not the family planning podcast. “I’m currently rentvesting. I have subsidized housing thanks to my career, with one investment property in Warner, north of Brisbane. (I bought this before I started to listen to your podcast). I bought off the plan and in hindsight now, armed with the information provided by your podcast and other books on investment property, I would have steered away from that investment and bought based on location. Hopefully this property will do some heavy lifting in the future.”  

Ben Kingsley
Maybe.  

Bryce Holdaway
“My question is in reference to LMI and LVR.” LMI of course is lenders mortgage insurance and LVR is loan-to-valuation ratio. “Is the LMI attached to a loan dissipated over time as your LVR approaches the 80% sweet spot or does it remain until the whole loan is paid off? And given I’ve saved up a good cash reserve, would it make sense to pay just enough to make my LVR 80%? Thanks again for your time.” Really good question about the mechanics of lenders mortgage insurance.  

Ben Kingsley
Okay, so we’ll start from the top. What is lenders mortgage insurance? Lenders mortgage insurance is an insurance policy that the banks take out against you in the event that you don’t repay them their money.  

So if you think about it in a comical sense, the insurance has knocked on the bank store one day and said, “I know you only lend to 80%, but how about we put something together, a JV together where you lend up to 90% (and in some cases back in the old days) 100% of the value of the property, and we’ll insure the risk of you doing that…but guess what, we’ll make the borrower pay for it, okay.”  

And so in some cases you can capitalise that insurance premium, which means you can add it to the loan and in other cases, depending on some lending criteria, it might cap out at say 90% or 95%. It’s very hard to get 100% lending. There are some house-and-land package companies that work in with the banks to do 100% lending, but it’s unusual. Alright, so that’s the concept. Now, so it doesn’t protect you as the borrower.  

Bryce Holdaway
What?! Come on…

Ben Kingsley
It doesn’t protect you as the borrower. It only protects the bank, but they get you to pay it. So that’s the sneakiness of it. In fact, I’m a bit angry about the amount of lenders mortgage insurance that gets paid out there because I think it is absolutely money for jam for these insurance companies.  

Bryce Holdaway
Yeah, let’s get all of our listeners to…we’ll pool our money so we can all go to capital base. Then we can become the third LMI provider in the country. 

Ben Kingsley
Wouldn’t that be good?  

Bryce Holdaway
Yeah, because you sit in the back room counting checks, don’t you?  

Ben Kingsley
Postcode protect it, and you’d knock back certain types of properties and you’d be…yeah, anyway, we’re not here to make money that way, but all right. Now the question you’re asking is how long does the premium last for? Well, this is what the insurers argue, that the premium is for the life of that loan. Okay, so it means that for the 30 years you’re protected…but you make a great point Volkswagen, in terms of coming back to when your value of your property grows beyond the loan-to-value ratio of 80%, then technically there’s really nothing that they’re insuring.

They can almost go to the bank with that cash. So that is where it becomes really frustrating because unlike car insurance and house insurance premiums, if you do choose to change lenders in terms of refinancing your car loan or whatever, you get a rebate. But these lenders mortgage insurers do not give a rebate. And it’s non-transferable, Bryce, and now I’m getting angry.  

Bryce Holdaway
You’ve got your angry voice on.  

Ben Kingsley
I’ve got my angry voice on because it should be transferable and there should be a rebate. It’s bulldust. Call it bulldust. There you go.  

Bryce Holdaway
It is a moment in time, isn’t it Ben? You’re paying a premium in a moment in time, and therefore, as you said, there’s no money back at any point. There’s no pro rata-ing. You’ve paid it, move on. So the LVR becomes irrelevant after that moment in time.  

Ben Kingsley
Correct. So let’s say you buy a 95% LVR, okay, and you pay your lenders mortgage insurance, and then you see a bank who’s got a better deal. Well, if you want to refinance them and let’s say your LVR (loan to value ratio) is 85%…which LVR is basically measured by the loan amount divided by the value of the property as a percentage. So that’s the loan amount divided by the value of property, just repeating that, just so you got that right.  

Bryce Holdaway
So a loan of $800,000 against a property worth $1,000,000 (is) 80%.  

Ben Kingsley
Correct. Okay. So the reality here is if I then say, okay, I want to refinance to another lender, but I’ve got to pay a brand new premium and I don’t get a rebate on the old premium that I’ve paid…it’s a rort. I’m calling it, it’s a rort.  

Bryce Holdaway
It’s a privilege. We just get the opportunity to pay it twice, mate. If we want to revalue it to a better opportunity, we get to pay it twice. 

Ben Kingsley
Well then obviously then you think the interest rate’s better, but ultimately once you put them all together, no, you may not be better off financially. Now one good thing about lenders mortgage insurance, and it’s got nothing to do with the insurance companies or the banks, but the ATO does recognise it as tax deductible. So effectively you can claim the lenders mortgage insurance premium over five years. So it can be written off over five years as a tax deduction.  

Bryce Holdaway
Subject to your accountant’s advice.  

Ben Kingsley
Yes, well I think that is tax policy so I don’t think we need to go there but you’re right, you’re right. We’ll protect ourselves.  

Bryce Holdaway
Exactly, so there you go, Volkswagen.  

Ben Kingsley
Volkswagen. Do you have a diesel or do you have a petrol? You might be able to get your money back on your Volkswagen.  

Bryce Holdaway
They might get a rebate there. “And given I’ve saved up a good cash reserve would it make sense to pay just enough to make my LVR 80%.” I’ve got a rule on mortgage insurance. Most people say to me…  

Ben Kingsley
Listen to this because it’s gold.  

Bryce Holdaway
We’ve said it before on the podcast: embrace it when you have to, avoid it when you can. And embrace it when you have to is largely if it means that you can control a better quality asset and the benefit outweighs the cost. Lock and load. Knock yourself out.  

Ben Kingsley
Case in point, we’re going back probably to 2010. I was able to release $110,000 by paying I think it cost me $8,000. So it cost me $8,000 to get access to $110,000. Now I still need to service all the loans and so forth, so I might not have had the equity in that property, but I thought what an opportunity this is in terms of my gearing. Obviously I’m in the accumulation phase of building out my portfolio, so at that time I’ve gone: that $110,000 could form a deposit for another property that I could buy, and so it made sense for me playing the long game to embrace it.  

Bryce Holdaway
Mate, love it. There you go, Volkswagen. Two very good concepts there, LMI and LVR. Very, very good. 

 

TPC Gold | 3 FOMO Mistakes Property Investors Make!

In today’s bonus episode, Bryce & Ben explore some of the mistakes property investors make due to FOMO! 

FOMO = Fear of Missing Out, and as you will find out, is extremely detrimental when it comes to investing. 

FOMO can push investors into impulsive decisions…but on the other hand being overly cautious can also lead to missed opportunities. Finding the right balance—acting confidently but after thorough research—is key to success in a hot property market. 

Tune in to find out what mistakes #6 to #8 are…and start making smarter and more confident property decisions! 

For the full episode, tune in here: Episode 330 | Top 10 FOMO Mistakes Investors Make 

__________________

Don’t Give in to FOMO When It Comes to Property Investing!

For the full list of FOMO Mistakes (#1 to #10) investors tend to make in a hot property market, fill in the form below and we’ll send you the report right away 😉 







 

If You Enjoyed TPC Gold | 3 FOMO Mistakes Property Investors Make, You Might Also Like:


Transcript

Bryce Holdaway
Number six is you buy without a finance strategy in place and the differentiator here is a borrowing capacity and a finance strategy. They’re two different things. We’ve said that property is a game of finance; not just a game of bricks and mortar. And if you don’t have a finance strategy in place, don’t buy just for FOMO reasons. It is such a significant part of it that you cannot skip here at all, Ben.  

Ben Kingsley
No, Bryce, I can give you some examples around rentvesting versus owner-occupier, right? So in a very simple context, if you get rent on top of your income, that constitutes the overall income that you’ve got coming in and that allows you to borrow more, right? So ultimately, if you’re ever buying for owner-occupier purposes, you might be able to borrow say half a million dollars. But if you go and buy an investment property, you can actually borrow $650,000 or $700,000 based on the fact that you’ve got this rental income coming in. Now the banks do some throttling or reduced assumptions on the percentage of rent that you’re going to receive down to 70% or in some cases 80% of the rent that’s going to be received. So this is all part of the decision making that you’re doing around what strategy, right? So that’s one simple example of being able to borrow more.  

Others could be if you’re on a yield strategy or an income strategy, you might buy two lower valued properties because you need some cash cows. And with those lower borrowing properties, you’ll got a 5% or 6% yield as opposed to a 2% or 2.5% yield on what we would consider scarce capital growth assets. So it is about combining those ideas and then working out where your borrowings can allow you to go. And that strategy and structure around lending. It’s not just a simple: I’ve gone on to a website and I’ve looked at a borrowing calculator and it says I can borrow X. The other part of that story for us is about shopping your lending. We have countless examples where some lender A will basically allow you to borrow a higher amount which based on our modellings can also work from a cash flow point of view. So it’s still responsible, but other banks and lenders and credit unions and all that might be really conservative. And there might be a $200,000 or a $100,000 difference in terms of the allowance of borrowing power. All of those things are considerations that need due diligence and due consideration.  

So I think from that point of view, that’s all we’re trying to highlight here is if you don’t do that preparation work, you don’t know what you don’t know. We also talk about offsets and the benefits of those types of things. We’ve done that plenty of times through other episodes. So you can just get a sense of if you don’t have a strategy, a finance strategy that’s well formed, you could be missing out on opportunity cost.  

Bryce Holdaway
Exactly. Even 80% versus 90%; all those sorts of things. So mistake number six is you buy without a finance strategy in place. Mistake number seven: you underestimate what it actually takes to play in the big leagues in a hot market. Now, this was so big that we did three episodes on it. But, because they lead onto the next one, which we could probably combine, which is number eight: you’re too impulsive or you’re too cautious. But if you don’t know how to play in a hot market, you’re going to get burnt in some way, which is really important. So we’re going to go on a learning curve that’s steep and expensive. 

Ben Kingsley
Yeah, you’re gonna need to understand the strategies to win in playing in a hot market. And as you said, we did those three episodes covering that just recently.  

Bryce Holdaway
So check that out, folks. So number eight, you’re too impulsive or too cautious. So this probably counts to the FOMO discussion that we’re having, but it is there. There (are) two ends of the spectrum here…that you’re just so gung-ho versus you’re too analytical and you don’t get in. But the idea that you just rush the process…getting through, getting through, getting through just to get into the market. And then it’s in the postmortem where you look back and see how well you’ve done during that rush. And that’s where you can uncover some of the mistakes that you’ve made.  

Ben Kingsley
Yeah, again, it’s just about levelheadedness. And you may need to lose before you win. Those people who try, you know, who are too competitive and try to win before they absolutely understand the market could be paying too much. They could be paying overs and they’ve got nothing to potentially benchmark that against.  

So we’ve talked about this Bryce, I mean, we talk about it often, but we were having a conversation earlier this week where I said there’s a strong correlation between the returns that you get and the effort that you put in. And when we sit down and we do a lot of seller hold reviews on existing portfolios for our clients. And we ask a simple question is: okay, which property do you think is underperforming and you want to sell? It’s this one here. Well, tell us the backstory on that property. Well, it isn’t really much. We were told for tax reasons we needed to buy a property. Here’s that story. Or, you know, we went and saw someone and they said, buy that or the other classic one as well. We know the area, we felt familiar with it…so we bought the house across the street in the same suburb and it hasn’t done anything. Or we bought an apartment because we wanted a place for our kids to go to university later on. That’s a classic one for me. You know, it’s like, and it’s just done nothing. So there’s all of these just little examples of not a lot of thinking; not a lot of strategy around that particular thing and it’s just impulsive or just: I just wanted to get it out of the way.  

Or the classic one is too cautious. I’ve actually been trying to buy a property for the last seven years. And I listened to all of the naysayers and the doomsdayers. And so they’ve put me into a fear of not doing anything. And now that everything is absolutely moving, I then have the confidence to move with the rest of the sheep to get into the market. So you know, there is some mindset work that needs to go on here. And there’s also some opportunity to outsource some of that knowledge to a professional. But if you’re not going to do that, you’re going to absolutely have to put the hard yards in, in my opinion, to get to a confidence level to know what you’re doing and you’re not paying too much.  

Bryce Holdaway
Yeah, I mean, you could think you’re paying market price, but the asset or the land is inferior. You know, or you could be buying stuff that’s not the norm for the suburb or is too small for the suburb, but in the FOMO-induced hysteria that’s out there, you just go, well, you know, isn’t the game just to get my name on the title? It’s well, it’s not until the dust settles…water finds its own level again. And you realize that you’ve made decisions that aren’t in the best interests of what you’re trying to do. Folks, it happens a lot. It’s exuberance. It’s just this…whatever it takes to get into the market. And it’s just not okay if you’re playing this for the long go.  

Ben Kingsley
It’s an awesome segue into number nine, Bryce.  

Bryce Holdaway
Go for it. 

 

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

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 

__________________

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.

 

Instagram

Free Resources

What to be notified when there are
new updates & free resources?

  • This field is for validation purposes and should be left unchanged.

×

MONEY SMARTS SYSTEM

Plus We Will Also Notify You When We Release New Episodes

We Only Send You Awesome Stuff

×

SUGGEST A GUEST!

We Only Send You Awesome Stuff

×