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Join the 1% club
1% club

Would you like to join the 1% club? That is, the 1% of property investors in Australia who own five or more investment properties?

So many property investors start out with plans to build an investment portfolio, but then stop after just one or two properties.

Join Adviseable’s Kate Hill and Hotspotting’s (www.hotspotting.com.au) Terry Ryder as they discuss why so often property investors who plan to hold a lot of properties stop after just one or two, and how you can overcome those hurdles to join that elusive 1%.

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Today, I’m talking to Kate Hill from Adviseable, one of Australia’s very best buyer’s agents. And, we’re talking about why so few Australians who set out with the ambitions to be property investors actually become part of the one percent.

That’s the one percent of people who own five or more properties in real estate.

So Kate, you actually help people, find investment properties and, so that’s fairly safe assumption that you know quite a bit about property investment.

Can you remember your personally, your first investment and where it was, what you paid for it, and do you still own it?

I can.

I guess if I may, just as a little bit of background, I actually bought my first property in Australia, which was my home in two thousand and eight, in Adelaide. And it was always a property that I had planned to rent out, and it was one of those worst properties in a great street. Mhmm.

I but I was gonna rent it out when I moved back to Sydney. I paid four hundred and seventy five thousand dollars for that property. Nice blue chip area, like I say, it was in real need of renovation, which we then did, and it is probably worth, one point one, one point two million now.

So, that was two thousand and eight, but then quite soon after that as my, as a very nervous first time investor, two thousand eleven, I bought a property just outside of Newcastle here in New South Wales, and I paid two hundred and thirty seven thousand dollars for that, and I rented it out for three hundred and twenty a week. It’s magnificent.

I do still own it, and it is worth probably just under five hundred now. It’s about four ninety something.

Okay. Yeah. So what’s the what’s the basic philosophy that underpins your your personal property investing?

That has been from the start to buy as many properties as I could, long term buy and hold. Yeah. Strategy in the best growth areas I could find, and I would say with a cash flow that I could afford to hold them for the long term.

I was really never into getting rich quick. I knew I was gonna be in it for the long haul. Yeah.

I was very risk averse still kind of in a new country, and my husband’s starting his own business.

So I was cash flow conscious, but it wasn’t the be all and end all. And I didn’t want to be sort of too clever to try and beat the system, so it was just accumulating and buying for the long term kind of set and forget Yeah. Portfolio.

You’ve kind of answered my next question because Oh, have I?

I know there are some people who try to trade their way to success with property, then buy something, sell it for a profit, buy something better. Mhmm.

Clearly, you don’t think that’s the way to go. You’re a believer in the philosophy of accumulating good assets and building a portfolio?

As a general rule, yes.

But it is an interesting question because I generally, I don’t think there’s a one size fits all approach forever.

That was that’s that was my strategy certainly to start with, and it has continued to be so. But I think, look, different approaches can suit different people at different times in their lives.

So generally, I do like to say never sell, at least to start with, unless you have to.

I would say build a portfolio of solid bread and butter properties, hold them, pay down the debt, obviously talk to mortgage brokers about that, but pay down that debt as fast as you can.

And to me, that really is that builds true financial freedom that gives you your passive income.

But sometimes you do need to sell. Sometimes it makes sense to sell. You know, something can go wrong, there’s life changes. Yeah. Be open to your needs changing, but as a general rule, that is, that’s what I’d say. Yeah. Mhmm.

So, what we’re talking about today is how to become part of the one percent and that refers to the fact that of the more than two million Australians who own investment properties, less than one percent of them actually have five or more.

Most are stuck on one or two. Do you have any thoughts on why that is?

Why so few people who set out with ambition to, you know, accumulate, financial freedom for property investment? Why so many actually succeed with it?

I do.

I think there’s a number of reasons there. A really obvious one would just be buying at the wrong time and in the wrong area. They sound like two separate things, but follow, it boils down to really if you’re following the herd, and you’re then missing out on capital growth.

People are very fond of waiting for, let’s call it social validation, or confirmation from the herd that this is now a really good time to buy, they start reading about it in the press. And generally by the time that happens, they’ve missed the boat.

It’s you’re buying at a peak, which is often followed by a lull or even a bit of a correction. So the property doesn’t grow, you’re waiting a long time for equity to then be able to get into the next one.

And often that can then lead into, oh, property doesn’t work. I think the planning of things, and the buying and building of the portfolio isn’t given enough consideration either.

Really not buying to suit your own circumstances.

And what I mean by that is putting in the wrong or incorrect loan structure that can also hold people back, can really stop you in your tracks, and again, building a portfolio.

Not planning and thinking ahead in terms of cash flow, so if the cash flow is too negative, your holding costs are too high, obviously you can’t hold it for long enough, you’ve got to sell it sooner than you need to.

And also the reverse, focusing too much on getting a great cash flow, which can often mean that you’re not in the best growth area.

So again, property doesn’t grow in value, and you are, then waiting a long time for, for growth. And then also, just things like getting stung by a property spruiker, buying in an area that’s overpriced, or you’re paying a premium for a property in an area that’s not gonna grow in value.

And again, people then often think, oh, property doesn’t work. So there’s a number of things.

Sometimes it’s a combination of those things. Yeah. That’s, partly Mhmm.

It seems to me that it partly that speaks to my next question, which is what we’ve observed in the reluctance of people to spend money on advice, from an accountant, mortgage broker, buyer’s agent, mentor, people who provide research.

There seems to be a philosophy, yes, we’ll borrow money and spend half a million dollars on the property, but we’re not gonna spend relatively small sums of money on the advice that might mean that we make a good choice with that property. Yeah.

Look, as a as a qualified property investment adviser, you’d think I’d sort of have a bit of a vested interest, because obviously I get paid to give advice in this field.

But I always say, why wouldn’t you pay for good advice or at least build that professional quality team around you when so much is at stake.

We’re talking about financial freedom in the future, and you’re spending hundreds of thousands of dollars on an asset or several assets that can get you there.

So the planning is important, like I said earlier, and getting the team around you and paying for quality advice to get you there is critical because it can literally mean it’s the difference between success and failure, or earlier success rather than, you know, what if you have to wait another fifteen years because you get it wrong, because you didn’t pay for quality advice. Yeah.

Having said that, there are industry groups that do get have a bit of a bad reputation. There’s there’s it’s a regulated business industry on one side, but also a heavily unregulated industry on the other, especially when it comes to investment property.

So, there are a lot of unethical operators out there that do give the whole industry a bit of a bad reputation and that is, you know, urge you that’s not the case.

So it’s hard for people to to be able to distinguish sometimes one from the other. Yes.

How do people, I mean, what we say to people is build your team before you build your portfolio.

Make sure you have around you, good advisers and all those different disciplines.

But how do people find those people?

So there’s lots of industry accreditations you can look for.

The organisation, PIPA, the Property Investment Professionals Australia, Australia would be a good really good starting point just if you’re getting advice, beyond just a, lowly old buyers agency.

But if you’re looking for good quality property investment advice, have a look on their website. They list everyone who has that qualification that at least, while not a requirement, shows that those people show an interest in providing sound and quality advice to clients.

And then you’re looking at other industry accreditations. There’s things like REBAA, the Real Estate Buyers Agents Association. There’s obviously Real Estate Institutes.

Look at people’s websites, look at Google reviews, they really, they show a lot. People tell the truth.

Yeah. So it’s a general start really that, you know, in your research into, how qualified somebody is and what kind of vested interests they have in providing that advice to you. And ask to speak to previous clients, get some testimonials.

I think that can work. Because it is so important, it seems to me, to get the first one right.

Would you agree that one of the reasons why the vast majority of Australians who attempt property investment get stuck on one, maybe two properties, is that they don’t get that first one right. Yeah.

Look, I’d say getting the first one right, it’s it’s fairly important but not critical. Property can be a fairly forgiving asset class, as they say, you know, unless you’ve made a really horrendous mistake.

If you hold it for long enough, it should come good.

It it does also depend on say the time of life that you’re doing this.

If you’re in your say, late fifties, even sixties, it’s not too late. But if you do make a big mistake there, you you do need to wait a long time for those mistakes to get ironed out. So So if you start when you’re when you’re in your twenties, which I always think is awesome, you’ve obviously got awesome. You’ve obviously got more time on your hands to make those mistakes.

So it is important to get it right, but if you start early enough, you get it right enough, it’s good enough, then at least you’ve made a start and you are already far ahead of the game. Yeah. So Yes.

Those references to, people in their twenties, if you could go back in time and give some advice to the young Kate Hill, the twenty five year old you, what what would you say?

I would say start now, Kate.

Don’t wait another fifteen years, and don’t be anxious. Over anxious about things like cash flow. I know that, like you say, if I could give myself that advice, I would at least have had the chance, or work make work choices sooner rather than later.

But that is easy to say in hindsight, of course. We are all ready when we’re ready, but it was it would just be start a lot sooner than you did. Yes. I I would probably give myself the same advice.

And also, if you’ve got good assets, assets, don’t sell them. Keep them.

Accumulate. Mhmm.

So, other I’ve never met anyone who has succeeded with property investment, who didn’t make mistakes along the way, that includes myself of course.

What major mistakes have you made that you would like young people starting out now to avoid?

So two things spring to mind really. Getting an area getting my area choice wrong because I was focusing too much on a cash flow, and that was at the expense of good capital growth. Mhmm.

Now I know why I did that. It was time of life.

I was obviously, like I said earlier, very cash flow conscious. My husband was starting his own business. But really I when I think back on that process, I talked myself into, that area being a good one because the yield and the cash flow outcome was so good.

And if I had just maybe just done a bit more research, I did do quite a bit of research, but if I’d have been a bit more honest with myself, I would have realized that that particular investment was actually way riskier than I thought it was.

And that amazing cash flow soon came crashing down when that area turned. So there’s that. So don’t focus too much on cash flow, and b, don’t talk yourself into areas that really are quite risky and think they’re good ones, they’re not. Get good advice around that.

And then also loan structure. It can, like I said earlier on, I was put into I wasn’t given advice, but I was put into a loan structure that was very hard to untangle, has still been very hard to untangle, and really being aware of the pros and cons of various types of loan structures, what can happen if this happens, having a good mortgage planner.

So, that, that was that it’s been major surgery trying to untangle us. Yeah.

So This comes back to one of our earlier points about the importance of getting really good advice before you make really big financial decisions. Correct. Yeah.

Those, just to expand on that answer, that high risk location, what sort of a place are we talking about there?

The sort of place that people should perhaps avoid?

Well, it was a more regional northern Queensland area that was heavily affected by the mining industry. Uh-huh.

And, a coastal one, not an inland one. But, it was it was it was still at a price point that I was comfortable with, but like I said, the yield was fantastic, and I bought right at the top of, of the cycle of it, it that that area doing really, really well. And then the moment all the construction, people left, there was an  oversupply of property and zero demand. Yeah.

So all the rents plummeted and it’s taken a long time for that to be coming good again, which it slowly is.

I’m very pleased to report. Yes.

But that does speak to something that I know we agree on from our many discussions, and that is the importance when you’re selecting a particularly regional location, for, not targeting a place that’s dependent wholly and solely on one industry, but finding locations that have multiple facets Yes.

To the economy. Yes.

And I think, and again, like I said, that was really my mistake. I talked myself into there being all these other industries, but when you dig deeper, you realize that all those industries are actually dependent on that big one.

And when that falls over, there’s nothing left.

It’s like, it’s like if you’re in a tourism town. When the tourists stop coming, everything else stops. Yeah. So And, over the holiday period twenty twenty three-twenty four, there was some diabolical weather, in Queensland. Correct. Yes. Decimated.

Yes. So those economies so dependent on that would be impacted, and the property markets there would also be impacted from that.

Yes. Yes. And again, that’s why I think it’s so important to do that, to really do deep dives into those industries, what supports what. If one of them falls over, do the other still stand up? You know?

Yeah. Where do people work? How are they spending their money?

It’s it’s just it’s crucial. Yeah. Yeah. Yep. And that they can still, support themselves that people don’t leave just because there is, for example, a weather event.

There can be really great areas that will stand the test of time despite that happening, because the that one industry isn’t decimated because of one event.

Mhmm. Okay. So, we know that real estate are bound with myths and misconceptions, thanks primarily to our beloved media.

Mhmm. What are what are some of the the big ones that people should be aware of and avoid making mistakes with?

Well, I guess segueing very nicely from our conversation just now that all property rises in value or doubles every ten years.

It does not. Contrary to popular belief, property does fluctuate wildly due to lots of different factors like we just discussed, economic conditions, supply and demand, location, it’s just not the same everywhere.

Which leads me to the next one, Australia being one single big property market, it’s not.

Hundreds of thousands of little micro markets. Another one I would say is that you must invest in or near a capital city to get really good, great capital growth. Again, I know you and I talk about this a lot.

You can invest in regional areas with fantastic growth potential, that that also yield really good profitable returns.

It it really challenges to me that notion that you have to invest in a capital city or say an apartment in a capital city.

Coming back to our beloved media, they tend to talk about the capital cities the most because that’s where most of their readers are.

So, amongst other things, right, it’s clickbait, so everybody wants to know about the Sydney, Melbourne, Brisbane market because that’s where all their readers are, and all these other awesome areas just don’t even get a look in.

Mhmm. As I said earlier on, I think another myth, cash flow is king. It’s not, it’s important, yes, but, if you focus too much on it, you can, run a cropper on that one.

Another one would be that only wealthy people invest.

You need a lot of money to invest, you don’t. I guess that ties in a little bit to the you must invest in a capital city. You can make really good property investments at the moment for five hundred, five fifty, five hundred and fifty thousand dollars get a very reasonable rental return. So it’s not it’s not just something for the wealthy.

And perhaps just to finish off, I hear it sometimes that debt is bad.

Again, I don’t think that’s true. Obviously, excessive debt can be risky, but you you’ve probably heard before, you know, there’s good debt and there’s bad debt, but investment debt to me when managed  properly is never bad, because it means you’ve got assets that you can pay that debt down, they’re  income producing assets, so not all debt is bad.

There’s there’s another one there that, you’ve alluded to a number a number of times in the discussion. It’s about, you know, an over emphasis on good cash flow.

Mhmm. And I think there’s a belief that you’ve got to make a choice between a location that has good cash flow or one that has good capital growth. Yes.

You can’t have both. But I think that’s not true, is that you can as you choose your location well, you can have a nice balance of both.

That’s absolutely right. And also, the cash flow outcome is is very individual. So if, you know, you and I bought the same investment property, Terry, the cash flow outcomes, I’m sure, would be quite different because of our personal circumstances.

It will come down to the age of the property, your marginal tax rates, all those all those things.

And one person’s neutral cash flow can be another one’s, you know, it’s it’s a different cash flow for for that other person.

But if you if you sacrifice growth for cash flow, the that, especially at the moment, that minimal cash flow is not gonna support your financial freedom.

The growth in the property will, you just need to be able to afford it long enough for it to to to work its magic.

But what your affordable cash flow is will be very different to the next person’s. So, you know, it’s not it’s again, it comes back to this not being a one size fits all approach.

You need a cash flow that you can afford to hold for the long term. And sometimes that may involve making minor compromises to current lifestyle, but that will it will change your life in a few years’ time.

Yeah. And I think it’s worth it. It is an important point about, there’s no one size fits all.

I often get asked questions like, where’s the best place to buy in Australia? And of course, and I sound like I’m being evasive, but my answer is genuine. It depends on the individual. You could have ten people lined up before you and there could be ten different answers depending on their circumstances. Yeah.

And as a buyer’s agent, the first thing you need to do, I think, is to find out as much as you can about the, the your client’s circumstances. Absolutely. Only then can you answer the question for them, where’s the best place to find?

That’s right. They might have an existing portfolio, they might have four children running around, you know, it depends on their work situation. There’s there’s obviously their purchase price, so lots of  different factors will go into the recommendations that I might make when it comes to a good growth area.

They are all different.

There’s different there’s different property type that we’re buying. A different depending on their price point as well.

So the age of the property will make a difference.

There’s their personal risk profile of what they are happy to hold for the long term.

So you’re matching a really, really good growth area with that investor’s personal circumstances, and absolutely that can you can get ten different answers for the ten different ten different people you’re talking to. Yeah.

Yeah. Absolutely. Yeah. It’s a great argument for, the importance of having a good buyer’s agent on the team.

I think it sometimes surprises people, who who know something about me.

And think, well, why do you need a buyer’s agent?

Surely you have all the knowledge you need. Well, it’s not about knowledge. It’s also about saving time. It’s also about having another voice on your team. Yes.

There’s lots of reasons I think why everybody should, be willing to, you know, spend the money and have a good buyer’s agent as part of the equation of getting it right.

Well, that’s very nice of you to say. Thank you. But I would also right back at you, you know, say to people that your the research, the level of research that you do, that I use, you know, in my day to day business, to help make decisions on areas that are good is invaluable.

You know, your your insights to the the research that you do about what makes an area worthy of investment is invaluable to me, and I think, you know, everyone out there who who reads your reports. Okay.

Well, thank you Kate. Kate Hill from Adviseable.

Thanks very much for talking to us. A pleasure. Thank you, Terry.

Today, I’m talking to Kate Hill from Adviseable, one of Australia’s very best buyer’s agents. And, we’re talking about why so few Australians who set out with the ambitions to be property investors actually become part of the one percent.

That’s the one percent of people who own five or more properties in real estate.

So Kate, you actually help people, find investment properties and, so that’s fairly safe assumption that you know quite a bit about property investment.

Can you remember your personally, your first investment and where it was, what you paid for it, and do you still own it?

I can.

I guess if I may, just as a little bit of background, I actually bought my first property in Australia, which was my home in two thousand and eight, in Adelaide. And it was always a property that I had planned to rent out, and it was one of those worst properties in a great street. Mhmm.

I but I was gonna rent it out when I moved back to Sydney. I paid four hundred and seventy five thousand dollars for that property. Nice blue chip area, like I say, it was in real need of renovation, which we then did, and it is probably worth, one point one, one point two million now.

So, that was two thousand and eight, but then quite soon after that as my, as a very nervous first time investor, two thousand eleven, I bought a property just outside of Newcastle here in New South Wales, and I paid two hundred and thirty seven thousand dollars for that, and I rented it out for three hundred and twenty a week. It’s magnificent.

I do still own it, and it is worth probably just under five hundred now. It’s about four ninety something.

Okay. Yeah. So what’s the what’s the basic philosophy that underpins your your personal property investing?

That has been from the start to buy as many properties as I could, long term buy and hold. Yeah. Strategy in the best growth areas I could find, and I would say with a cash flow that I could afford to hold them for the long term.

I was really never into getting rich quick. I knew I was gonna be in it for the long haul. Yeah.

I was very risk averse still kind of in a new country, and my husband’s starting his own business.

So I was cash flow conscious, but it wasn’t the be all and end all. And I didn’t want to be sort of too clever to try and beat the system, so it was just accumulating and buying for the long term kind of set and forget Yeah. Portfolio.

You’ve kind of answered my next question because Oh, have I?

I know there are some people who try to trade their way to success with property, then buy something, sell it for a profit, buy something better. Mhmm.

Clearly, you don’t think that’s the way to go. You’re a believer in the philosophy of accumulating good assets and building a portfolio?

As a general rule, yes.

But it is an interesting question because I generally, I don’t think there’s a one size fits all approach forever.

That was that’s that was my strategy certainly to start with, and it has continued to be so. But I think, look, different approaches can suit different people at different times in their lives.

So generally, I do like to say never sell, at least to start with, unless you have to.

I would say build a portfolio of solid bread and butter properties, hold them, pay down the debt, obviously talk to mortgage brokers about that, but pay down that debt as fast as you can.

And to me, that really is that builds true financial freedom that gives you your passive income.

But sometimes you do need to sell. Sometimes it makes sense to sell. You know, something can go wrong, there’s life changes. Yeah. Be open to your needs changing, but as a general rule, that is, that’s what I’d say. Yeah. Mhmm.

So, what we’re talking about today is how to become part of the one percent and that refers to the fact that of the more than two million Australians who own investment properties, less than one percent of them actually have five or more.

Most are stuck on one or two. Do you have any thoughts on why that is?

Why so few people who set out with ambition to, you know, accumulate, financial freedom for property investment? Why so many actually succeed with it?

I do.

I think there’s a number of reasons there. A really obvious one would just be buying at the wrong time and in the wrong area. They sound like two separate things, but follow, it boils down to really if you’re following the herd, and you’re then missing out on capital growth.

People are very fond of waiting for, let’s call it social validation, or confirmation from the herd that this is now a really good time to buy, they start reading about it in the press. And generally by the time that happens, they’ve missed the boat.

It’s you’re buying at a peak, which is often followed by a lull or even a bit of a correction. So the property doesn’t grow, you’re waiting a long time for equity to then be able to get into the next one.

And often that can then lead into, oh, property doesn’t work. I think the planning of things, and the buying and building of the portfolio isn’t given enough consideration either.

Really not buying to suit your own circumstances.

And what I mean by that is putting in the wrong or incorrect loan structure that can also hold people back, can really stop you in your tracks, and again, building a portfolio.

Not planning and thinking ahead in terms of cash flow, so if the cash flow is too negative, your holding costs are too high, obviously you can’t hold it for long enough, you’ve got to sell it sooner than you need to.

And also the reverse, focusing too much on getting a great cash flow, which can often mean that you’re not in the best growth area.

So again, property doesn’t grow in value, and you are, then waiting a long time for, for growth. And then also, just things like getting stung by a property spruiker, buying in an area that’s overpriced, or you’re paying a premium for a property in an area that’s not gonna grow in value.

And again, people then often think, oh, property doesn’t work. So there’s a number of things.

Sometimes it’s a combination of those things. Yeah. That’s, partly Mhmm.

It seems to me that it partly that speaks to my next question, which is what we’ve observed in the reluctance of people to spend money on advice, from an accountant, mortgage broker, buyer’s agent, mentor, people who provide research.

There seems to be a philosophy, yes, we’ll borrow money and spend half a million dollars on the property, but we’re not gonna spend relatively small sums of money on the advice that might mean that we make a good choice with that property. Yeah.

Look, as a as a qualified property investment adviser, you’d think I’d sort of have a bit of a vested interest, because obviously I get paid to give advice in this field.

But I always say, why wouldn’t you pay for good advice or at least build that professional quality team around you when so much is at stake.

We’re talking about financial freedom in the future, and you’re spending hundreds of thousands of dollars on an asset or several assets that can get you there.

So the planning is important, like I said earlier, and getting the team around you and paying for quality advice to get you there is critical because it can literally mean it’s the difference between success and failure, or earlier success rather than, you know, what if you have to wait another fifteen years because you get it wrong, because you didn’t pay for quality advice. Yeah.

Having said that, there are industry groups that do get have a bit of a bad reputation. There’s there’s it’s a regulated business industry on one side, but also a heavily unregulated industry on the other, especially when it comes to investment property.

So, there are a lot of unethical operators out there that do give the whole industry a bit of a bad reputation and that is, you know, urge you that’s not the case.

So it’s hard for people to to be able to distinguish sometimes one from the other. Yes.

How do people, I mean, what we say to people is build your team before you build your portfolio.

Make sure you have around you, good advisers and all those different disciplines.

But how do people find those people?

So there’s lots of industry accreditations you can look for.

The organisation, PIPA, the Property Investment Professionals Australia, Australia would be a good really good starting point just if you’re getting advice, beyond just a, lowly old buyers agency.

But if you’re looking for good quality property investment advice, have a look on their website. They list everyone who has that qualification that at least, while not a requirement, shows that those people show an interest in providing sound and quality advice to clients.

And then you’re looking at other industry accreditations. There’s things like REBAA, the Real Estate Buyers Agents Association. There’s obviously Real Estate Institutes.

Look at people’s websites, look at Google reviews, they really, they show a lot. People tell the truth.

Yeah. So it’s a general start really that, you know, in your research into, how qualified somebody is and what kind of vested interests they have in providing that advice to you. And ask to speak to previous clients, get some testimonials.

I think that can work. Because it is so important, it seems to me, to get the first one right.

Would you agree that one of the reasons why the vast majority of Australians who attempt property investment get stuck on one, maybe two properties, is that they don’t get that first one right. Yeah.

Look, I’d say getting the first one right, it’s it’s fairly important but not critical. Property can be a fairly forgiving asset class, as they say, you know, unless you’ve made a really horrendous mistake.

If you hold it for long enough, it should come good.

It it does also depend on say the time of life that you’re doing this.

If you’re in your say, late fifties, even sixties, it’s not too late. But if you do make a big mistake there, you you do need to wait a long time for those mistakes to get ironed out. So So if you start when you’re when you’re in your twenties, which I always think is awesome, you’ve obviously got awesome. You’ve obviously got more time on your hands to make those mistakes.

So it is important to get it right, but if you start early enough, you get it right enough, it’s good enough, then at least you’ve made a start and you are already far ahead of the game. Yeah. So Yes.

Those references to, people in their twenties, if you could go back in time and give some advice to the young Kate Hill, the twenty five year old you, what what would you say?

I would say start now, Kate.

Don’t wait another fifteen years, and don’t be anxious. Over anxious about things like cash flow. I know that, like you say, if I could give myself that advice, I would at least have had the chance, or work make work choices sooner rather than later.

But that is easy to say in hindsight, of course. We are all ready when we’re ready, but it was it would just be start a lot sooner than you did. Yes. I I would probably give myself the same advice.

And also, if you’ve got good assets, assets, don’t sell them. Keep them.

Accumulate. Mhmm.

So, other I’ve never met anyone who has succeeded with property investment, who didn’t make mistakes along the way, that includes myself of course.

What major mistakes have you made that you would like young people starting out now to avoid?

So two things spring to mind really. Getting an area getting my area choice wrong because I was focusing too much on a cash flow, and that was at the expense of good capital growth. Mhmm.

Now I know why I did that. It was time of life.

I was obviously, like I said earlier, very cash flow conscious. My husband was starting his own business. But really I when I think back on that process, I talked myself into, that area being a good one because the yield and the cash flow outcome was so good.

And if I had just maybe just done a bit more research, I did do quite a bit of research, but if I’d have been a bit more honest with myself, I would have realized that that particular investment was actually way riskier than I thought it was.

And that amazing cash flow soon came crashing down when that area turned. So there’s that. So don’t focus too much on cash flow, and b, don’t talk yourself into areas that really are quite risky and think they’re good ones, they’re not. Get good advice around that.

And then also loan structure. It can, like I said earlier on, I was put into I wasn’t given advice, but I was put into a loan structure that was very hard to untangle, has still been very hard to untangle, and really being aware of the pros and cons of various types of loan structures, what can happen if this happens, having a good mortgage planner.

So, that, that was that it’s been major surgery trying to untangle us. Yeah.

So This comes back to one of our earlier points about the importance of getting really good advice before you make really big financial decisions. Correct. Yeah.

Those, just to expand on that answer, that high risk location, what sort of a place are we talking about there?

The sort of place that people should perhaps avoid?

Well, it was a more regional northern Queensland area that was heavily affected by the mining industry. Uh-huh.

And, a coastal one, not an inland one. But, it was it was it was still at a price point that I was comfortable with, but like I said, the yield was fantastic, and I bought right at the top of, of the cycle of it, it that that area doing really, really well. And then the moment all the construction, people left, there was an  oversupply of property and zero demand. Yeah.

So all the rents plummeted and it’s taken a long time for that to be coming good again, which it slowly is.

I’m very pleased to report. Yes.

But that does speak to something that I know we agree on from our many discussions, and that is the importance when you’re selecting a particularly regional location, for, not targeting a place that’s dependent wholly and solely on one industry, but finding locations that have multiple facets Yes.

To the economy. Yes.

And I think, and again, like I said, that was really my mistake. I talked myself into there being all these other industries, but when you dig deeper, you realize that all those industries are actually dependent on that big one.

And when that falls over, there’s nothing left.

It’s like, it’s like if you’re in a tourism town. When the tourists stop coming, everything else stops. Yeah. So And, over the holiday period twenty twenty three-twenty four, there was some diabolical weather, in Queensland. Correct. Yes. Decimated.

Yes. So those economies so dependent on that would be impacted, and the property markets there would also be impacted from that.

Yes. Yes. And again, that’s why I think it’s so important to do that, to really do deep dives into those industries, what supports what. If one of them falls over, do the other still stand up? You know?

Yeah. Where do people work? How are they spending their money?

It’s it’s just it’s crucial. Yeah. Yeah. Yep. And that they can still, support themselves that people don’t leave just because there is, for example, a weather event.

There can be really great areas that will stand the test of time despite that happening, because the that one industry isn’t decimated because of one event.

Mhmm. Okay. So, we know that real estate are bound with myths and misconceptions, thanks primarily to our beloved media.

Mhmm. What are what are some of the the big ones that people should be aware of and avoid making mistakes with?

Well, I guess segueing very nicely from our conversation just now that all property rises in value or doubles every ten years.

It does not. Contrary to popular belief, property does fluctuate wildly due to lots of different factors like we just discussed, economic conditions, supply and demand, location, it’s just not the same everywhere.

Which leads me to the next one, Australia being one single big property market, it’s not.

Hundreds of thousands of little micro markets. Another one I would say is that you must invest in or near a capital city to get really good, great capital growth. Again, I know you and I talk about this a lot.

You can invest in regional areas with fantastic growth potential, that that also yield really good profitable returns.

It it really challenges to me that notion that you have to invest in a capital city or say an apartment in a capital city.

Coming back to our beloved media, they tend to talk about the capital cities the most because that’s where most of their readers are.

So, amongst other things, right, it’s clickbait, so everybody wants to know about the Sydney, Melbourne, Brisbane market because that’s where all their readers are, and all these other awesome areas just don’t even get a look in.

Mhmm. As I said earlier on, I think another myth, cash flow is king. It’s not, it’s important, yes, but, if you focus too much on it, you can, run a cropper on that one.

Another one would be that only wealthy people invest.

You need a lot of money to invest, you don’t. I guess that ties in a little bit to the you must invest in a capital city. You can make really good property investments at the moment for five hundred, five fifty, five hundred and fifty thousand dollars get a very reasonable rental return. So it’s not it’s not just something for the wealthy.

And perhaps just to finish off, I hear it sometimes that debt is bad.

Again, I don’t think that’s true. Obviously, excessive debt can be risky, but you you’ve probably heard before, you know, there’s good debt and there’s bad debt, but investment debt to me when managed  properly is never bad, because it means you’ve got assets that you can pay that debt down, they’re  income producing assets, so not all debt is bad.

There’s there’s another one there that, you’ve alluded to a number a number of times in the discussion. It’s about, you know, an over emphasis on good cash flow.

Mhmm. And I think there’s a belief that you’ve got to make a choice between a location that has good cash flow or one that has good capital growth. Yes.

You can’t have both. But I think that’s not true, is that you can as you choose your location well, you can have a nice balance of both.

That’s absolutely right. And also, the cash flow outcome is is very individual. So if, you know, you and I bought the same investment property, Terry, the cash flow outcomes, I’m sure, would be quite different because of our personal circumstances.

It will come down to the age of the property, your marginal tax rates, all those all those things.

And one person’s neutral cash flow can be another one’s, you know, it’s it’s a different cash flow for for that other person.

But if you if you sacrifice growth for cash flow, the that, especially at the moment, that minimal cash flow is not gonna support your financial freedom.

The growth in the property will, you just need to be able to afford it long enough for it to to to work its magic.

But what your affordable cash flow is will be very different to the next person’s. So, you know, it’s not it’s again, it comes back to this not being a one size fits all approach.

You need a cash flow that you can afford to hold for the long term. And sometimes that may involve making minor compromises to current lifestyle, but that will it will change your life in a few years’ time.

Yeah. And I think it’s worth it. It is an important point about, there’s no one size fits all.

I often get asked questions like, where’s the best place to buy in Australia? And of course, and I sound like I’m being evasive, but my answer is genuine. It depends on the individual. You could have ten people lined up before you and there could be ten different answers depending on their circumstances. Yeah.

And as a buyer’s agent, the first thing you need to do, I think, is to find out as much as you can about the, the your client’s circumstances. Absolutely. Only then can you answer the question for them, where’s the best place to find?

That’s right. They might have an existing portfolio, they might have four children running around, you know, it depends on their work situation. There’s there’s obviously their purchase price, so lots of  different factors will go into the recommendations that I might make when it comes to a good growth area.

They are all different.

There’s different there’s different property type that we’re buying. A different depending on their price point as well.

So the age of the property will make a difference.

There’s their personal risk profile of what they are happy to hold for the long term.

So you’re matching a really, really good growth area with that investor’s personal circumstances, and absolutely that can you can get ten different answers for the ten different ten different people you’re talking to. Yeah.

Yeah. Absolutely. Yeah. It’s a great argument for, the importance of having a good buyer’s agent on the team.

I think it sometimes surprises people, who who know something about me.

And think, well, why do you need a buyer’s agent?

Surely you have all the knowledge you need. Well, it’s not about knowledge. It’s also about saving time. It’s also about having another voice on your team. Yes.

There’s lots of reasons I think why everybody should, be willing to, you know, spend the money and have a good buyer’s agent as part of the equation of getting it right.

Well, that’s very nice of you to say. Thank you. But I would also right back at you, you know, say to people that your the research, the level of research that you do, that I use, you know, in my day to day business, to help make decisions on areas that are good is invaluable.

You know, your your insights to the the research that you do about what makes an area worthy of investment is invaluable to me, and I think, you know, everyone out there who who reads your reports. Okay.

Well, thank you Kate. Kate Hill from Adviseable.

Thanks very much for talking to us. A pleasure. Thank you, Terry.

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