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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 | Bank Valuations vs Market Value: What’s the Difference?

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What is the best way to assess the value of your investment property?  

In this week’s bonus snippet, we delve into a question from our listener Laura, who wants to know which is the more reliable method for evaluating capital growth: relying on a real estate agent’s sales appraisal or opting for a proper bank valuation?

Join us as we explore the nuances of each approach and discover why the purpose of your valuation—whether it’s for portfolio building or something else—can influence which method to choose. 

For more tips on how to make informed decisions about your property investments, tune in to the full episode here: Episode 122 | Q&A – A Transitioning Market, Money, Habits, Tax Deductions and What It’s Really Costing You. 

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Bank Valuations vs Market Value – Which Do I Rely On? 

Now that you know the difference between bank valuations and market valuations, you are better equipped to know which to rely on when assessing your investment property! 

Here’s something that might also be of interest: our Masterclass on How to Build a Property Portfolio and Retire on $2,000 a Week. Discover how you can avoid making costly investment mistakes and start optimising your 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! 

 

Similar Episodes to TPC Gold | Bank Valuations vs Market Value: What’s the Difference?

 

Transcript

Ben Kingsley
All right, next (question) here from Laura. “Hello. I have a question which you may like to answer on your podcast. When monitoring an existing investment property’s capital growth, and trying to do this in an objective, non-biased, and reliable method, can you please compare and contrast just relying on a real estate agent’s sales appraisal versus a proper bank valuation? Thanks in advance for your time and expertise, love the podcast and have recommended it to numerous people.” Thanks, Laura.  

Bryce Holdaway
There’s a few moving parts in that. I spoke to a real estate agent this week in a suburb that we’re looking to go to find a property (in) this week. I’ve done some deals with him to build up a professional relationship and I just said, “Hey, Smith Street in Smith Suburb, what do you think?” And he goes, “I know it, it’s on 691 square metres, it’s with one of the competitors.” Intimately knew it and goes and gave me an indication of price within sort of a $30,000 price gap, but reckoned he gave me a number. So, when you’ve got the local real estate agent who knows their patch, they know the streets (such) that if I say 22 Smith Street, they can visualize what it looks like and they are subject matter experts in four, five, (or) six suburbs. So they’re at the top of their game (and) if you get an appraisal from a real estate agent who’s not trying to buy the business, they’re usually bang on because they are so on the spot.  

Ben Kingsley
They’re in the market daily.  

Bryce Holdaway
The reason I say it’s got moving parts is because from that perspective, (the agent has) got no agenda to buy the listing.  

Ben Kingsley
Whereas if it’s a listing that I’m chasing… 

Bryce Holdaway
Yeah, he may have a different dialogue. Versus the valuer who quite often has a much larger patch, who then has to go and do the same thing. Now, we’ve probably got some valuers listening to this and going, back off Bryce! But the point is that the valuers are doing a terrific job, but they go out and do some comparable analysis on properties and to determine their market. And they throw in some environmental risks and economic risks and all those sorts of things, and they’re also ultimately responsible to the bank. So for me it depends on what they actually need the valuation for, because if they’re just a portfolio builder and they want an idea, then the local real estate agent would work. If it’s you know, a bit more formal and for bank lending (then go with a valuer). But there are pros and cons for both. Ultimately just the person who’s on the spot does have that intimate local knowledge of knowing exactly what it’s going to be, whereas a valuer might just have to come in a bit more blind.  

Ben Kingsley
I agree. If I wasn’t interested in selling my property and I was just looking to get a fair appraisal, I would front foot that with a couple of agents and say, “Hey, it’s Ben here, I’ve got this property in Flemington, can you give me an indication of what the sort of market’s doing in this area?” Now they’re going to give me a ballpark, and if they know that there’s not a listing behind it, you probably think they’re going to be a little bit more realistic in terms of what they’ve seen and evidence of sales in that area. Coming back to the valuer, if you were to engage a valuer where you paid the professional fee, the reality for that valuer is there is a different bias. And I want to explain this, Bryce mentioned it a minute ago, but if I’m paying $300 or $400 for a valuation on a property (or more depending on the value of the property), I’m getting an independent appraisal, which in a way, the valuer is not technically fully liable for as much as they are when it comes to getting a bank valuation. The bank asks the valuer to value the property subject to a distress sale or a quick sale. So their job is to assess the market. Now naturally, they’re also on the hook for that. Let’s say the valuer says the property’s worth $600,000 and then it sells for $550,000 three months later and the bank doesn’t get their money returned to them, (then) the valuer is on the hook for the difference. They’ll be called in on their professional indemnity. The reality is that even if the valuer is trying to do the best professional job, it’s for bank valuation purposes and they put that down based on the conditions that the bank is asking for that valuation. If I’m getting a valuation based on the market at that time, it might be a relationship separation or whatever, effectively the valuer is sort of saying, “Well, I can be a bit more bullish and subtly bullish on the valuation of that.” So you can potentially get two different valuations from a valuer as well. So that’s why I would do the appraisal with the local market expert, and I would sit on that as a good indication for now. I wouldn’t necessarily pay for a valuer unless I had some need for a contract or a separation or whatever.  

Bryce Holdaway
As you know Ben, when we travel around the country talking to audiences, I ask the question, who’s the most important if you’re a buy-and-hold property investor versus a buy-and-sell? If you’re a buy-and-hold, who is the most important person in the entire equation? I get (answers like) the tenant, the tax man, the property manager, the accountant. But ultimately in my view, the most important person is the valuer. Because if I’m a buy-and-hold, ultimately I’m playing the finance game, I’m playing the harvest equity game, and the valuer is the person that stands in between me and getting my outcomes. So ultimately, think about the valuer being the most important person in the entire equation, and then reverse engineer that every time you make a decision on what to buy. Remember, a person who’s a valuer is going to walk into your property, and they’re going to assess that with comparable sales around the area. They’re going to make a determination, and as you said, send it off to the bank, which will determine how much money you can actually get. So make no mistake, they are, without a doubt in my view, the most critical person for someone who’s building a portfolio for a buy-and-hold strategy.  

Ben Kingsley
100%. And if we are talking about some markets that are coming to the top of their cycle, this is probably a time you need to go back to your mortgage broker or your banker and potentially look to get a valuation on the property at the top of the cycle. So you can lock in that value and potentially release some of that equity for future opportunities. Because as Bryce was saying, the tide is swinging in the buyer’s interests. So over the course of the next couple years, there could be some phenomenal opportunities. You want to be poised to be able to take action on those opportunities.  

Bryce Holdaway
And as Dean said in our training yesterday, Ben, he said, “The question to ask an investor is: do they have a borrowing capacity or do they have a lending strategy?” And the difference is enormous. Because the people coming to our Buyers Agency team (are saying), “Yeah, I’ve got the finance covered.” Well, okay, let’s unpack that a little bit. Do you have a borrowing capacity or do you actually have a strategy that’s looking at the big picture when it comes to lending?  

Ben Kingsley
Dean’s one of our mortgage brokers, just for everyone’s benefit.  

Bryce Holdaway
Very subtle point that Dean made, but a very crucial point. Very, very important point.  

Ben Kingsley
So thank you, Laura, that’s a great question. 

TPC Gold | What’s the Ideal Cash Reserve for Investors?

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Today’s bonus snippet is from a previous episode where we answer listeners’ burning questions on property investing. 

Tune in to the full episode here: Episode 44 | Q&A – Building Cash Reserve Buffers, Buying at a Premium & Renovating for Profit 

In this TPC Gold soundbite, Bryce & Ben explore the dynamics of aggressive vs passive investing, as well as how to incorporate cash reserve buffers into your property investment plan! 

Discover why having a six-month cash reserve is crucial, how to manage unexpected costs, and the importance of insurance protections. They also discuss finding the balance between exercising caution and maximising your cash flow for property investment.  

Tune in for expert advice on choosing the best property investment strategy for you. 

Free Stuff 

Recent Q&A Episodes

P.S. Have a question you want answered? We’d love to hear from you! 

 

013 | Q&A – Buy an Investment Property and Continue Renting OR Buy a Home?

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Right off the bat folks, a big THANK YOU to our listeners for all the questions they’ve sent in!  

We’re excited to be answering a BUNCH of great questions in our FIRST EVER Q&A session!

We’ll be covering a lot of ground; from the crucial conversations you should be having before making ANY decisions to the type of research and data that’ll help you determine the best options for you. 📈

We’re also sharing our thoughts on the Government’s policies when it comes to negative and positive gearing, and explaining why removing negative gearing is a terrible idea! 

Once again thank you to everyone who has submitted a question! We’re glad this podcast has inspired you and we had tons of fun recording this episode.   

Listen in now folks; plenty of gold to help you make the right decisions…  

P.S. In the future we are hoping to answer ALL of your questions, so please keep sending them in!  

 

The Questions

Dan and Ryan:  

“Should we buy an investment property in a high growth location and keep renting, or move a bit further out and get something we can afford?” 

Leah:  

“Do you think the tax rules around negative gearing will change in the future, so as not to benefit those investing in multiple properties and how do you diversify your portfolio?” 

Mark:  

“How do you identify high disposable income suburbs and if you’re buying in a block of units, how do you work out if there are more owner-occupiers than renters in the building and area? Also, what do you think about dual living homes i.e. granny flats?”

 

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  • Just starting your property investing journey? Check out our FREE Binge Guide to the Foundations of Property, Finance and Money Management, which covers all the episodes you need to understand the basics! Or fill in the form below and we’ll email it to you right away! 






 

Here’s some of the gold we cover…

  • 0:37 – Dan and Ryan’s question  
  • 2:15 – What you need to analyse first!  
  • 4:00 – Why you SHOULD consider renting in a lifestyle location  
  • 5:25 – The conversation you need to have… 
  • 6:21 – Leah’s question  
  • 7:07 – The fundamentals of gearing  
  • 8:35 – What we predict for the future of negative gearing policy… 
  • 9:10 – How the Government gets its revenue 
  • 9:42 – Our questions to the Government on positive gearing tax  
  • 10:35 – Why removing negative gearing doesn’t work!  
  • 12:50 – How do you diversify your portfolio?  
  • 15:03 – Mark’s question  
  • 15:45 – Where and how you can find the income story!  
  • 17:00 – Why you should focus on small blocks  
  • 18:29 – ALL the data we use  
  • 20:00 – When is it best to have a granny flat?  
  • 21:23 – Some gold from Bryce!  

 

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