WCC 10: Compared to what

Well, good morning, everybody. Welcome to another coffee and a chat. Jason here. Wandering up to the office this morning, so thought I’d quickly do the intros as I… Oh, look at this, I’ve got, I’ve got a couple of ducks in my pool. How cool is that? Anyway, what a wonderful morning. Morning, everybody. Morning Allen. Good to see you. Hey, welcome along to another coffee and a chat. I thought we’d just do a little bit of an outside chat today as we go along. I’m free-handing this. I’m free-handing my phone this morning, so we’ll see how we’re going. But hopefully everyone’s well. Hopefully you can hear me. Morning, Belinda. Everything’s doing okay, but hey listen, welcome along those who jumped on right now for the live. If you’re joining for the first time, Jason Whitton’s my name. Property investing 20 years. Coaching property investors across Australia and New Zealand for over 18 years. And each morning we get together, have a little coffee and a chat around about eight o’clock just quickly talk about the world of investing. The world in general, really sometimes, about keeping the momentum going as a property investor because this gig that we call property investing is a marathon, not a sprint. It’s about going the distance as a property investor and making it happen. So this morning, I thought I’d talk about the concept compared to what. And I get this question all the time, “Do you think this is a good property? Ah, do you think I should buy this house? Do you think I should buy this land? Do you think I should buy this apartment? Do you think I should buy this… Is this property any good?” And that question in itself is impossible to answer because you’re not giving me a compared to what. A compared to what and what do you want it to do. As a property investor, we’re always analyzing and considering the things that we’re purchasing. Why am I buying this one? Well, you should be anyway, if you’re not. But a really good question to have on the tip of your mind, on the tip of your tongue, every time you’re analyzing a property: compared to what? Compared to the average property, compared to another property in another city, compared to, compared to, compared to. And it gives you the opportunity to analyze and rationalize when you make decisions. Now, some of these questions I find all the time are things like this, okay? Oh, I got asked this one the other day. “Do think Bendigo in Victoria is a good place to invest? I can buy myself a nice brand new house out there for $489,000.” And I’m like, “Well, compared to what? Compared to where?” And then we did a bit of analysis. We did an analysis, so compared to what? What are you getting out of that property? Well, you’re getting a sub $500,000 brand new house, fine. The location, eh, it’s regional. It’s not necessarily strong. I don’t think that I’d put my money there. And then you say, “Well, what are the rents? And what’s the future growth possibilities? And what is the infrastructure possibilities of that location?” And then you compare it to, for example, I’ll give it in a comparison that I used, compared to you can buy the same property, the same size, the same price, the same construction of that house, you can buy that in Brisbane, in part of Brisbane. So, Bendigo is a city of 150,000 people, Brisbane’s a city of 1.6 million people. Ah, okay. Compared to what? It’s a really powerful question, gang, compared to what? So, you’d buy a property in Bendigo or you buy a property in Brisbane? And the comparison, 150,000 people, 1.6 million people. All right, well, now I’m listening. Infrastructure. The Brisbane City has over $6 billion worth of infrastructure projects planned and underway. So, massive amounts of infrastructure. Job growth and property growth. Income growth in that city, absolutely golden. Plenty of opportunity for incomes and values to increase in somewhere like Brisbane. And the population will blow up and explode and be amazing, compared to Bendigo where when are they going to spend $6 billion in Bendigo? They’re not, it’s not going to happen. Sure it might be a nice regional town. It might be a great place to live personally, however, compared to, compared to what? Compared to Brisbane, nah, wouldn’t do it. Let’s do another compared to. Let’s say compared to Melbourne or compared to Sydney. And then I said, “Well, you’re going to Bendigo ’cause you want a house, well, let’s compare this, let’s compare the same price, $480,000. I can get you a one bedroom apartment five kilometers from the CBD in Melbourne. Let’s compare that for the future.” Melbourne is the most lived in city in any state, 75% of the population of Victoria live in Melbourne, which is pretty cool. Incomes other than the Corona issues just recently the strongest economy in Australia. And it will be the strongest economy in Australia again. On track to be the largest population, largest city in Australia. And the biggest infrastructure projects ever in Australia’s history being launched and were launched prior to COVID in Melbourne. So, compared to what? Compared to a one bedroom apartment. For proximity and location, absolutely worlds apart. Now, this is where a lot of people get challenged. “Oh, a one bedroom apartment, doesn’t go up in value.” And that’s true in comparison to houses, they don’t grow as much, but the rents grow significantly in one bedroom apartments. They can be furnished and you can really get a far higher rental deal out of them. Now, I’m not telling you to buy a one bedroom apartment. What I’m saying today in the coffee conversation, the coffee and a chat, is you’ve got to ask yourself this, compared to what? What is the outcome? What is the thing that I’m trying to get? Because capital growth, the obsession with capital growth, gang, I’ve said this numerous times, the obsession with capital growth is a vanity metric, it’s vain, it makes you feel good. You don’t bloody use it, all right? You can’t use capital growth to live off. You can’t take it out and pay the bills. And if you do, you’re stupid, right? ‘Cause that’s not the point. You don’t use your capital growth to live off. You use that capital growth to recycle your equity, to buy another deposit. All right, that’s what you do. And the moment that property has given you back your money, if you put $80,000 into property and it grows enough in value to give you that $80,000 back, gang, once it’s given you back your capital, you now have an infinity return. Let me say that again. An infinity return on that property, because the amount of money that you have in that property is zero, zero, zip, . None, nothing. It’s fully 100% totally self-funded. And I don’t care what property you own at that point, whether it’s a one bedroom apartment or a four-bedroom house, who bloody cares? The property is completely self-sustainable. It has returned its capital to you, and now you own a property for nothing. And into the future, it will grow in value, you can use tax deductions, you can get income from it, okay? Concentrating on capital growth is vanity, and it will actually ruin your experience as a property investor. Now, it is important, don’t get me wrong. Don’t get me wrong, you want your properties to grow in value. You want your properties to give you your deposit back. But if you measure your success as a property investor by the capital growth of your portfolio you will be 99% of the time solely disappointed because capital growth is not a linear process. And some days it’s good and some days it’s not. Every single property in the whole entire of Australia has gone up in value at some point and gone down in value at some point. They have, right? Growth is not like it goes up and never goes back down. And if you ever bloody jump on Onthehouse or RP Data or whatever, and you try and check your property values like you check the stock market, it’s bloody insane. So, a really good question as a property investor, gang, is compared to what? Compared to what and what am I trying to achieve, okay? At the end of the day, in my world it’s about momentum and acquisition as fast as possible, okay? If you can purchase your properties in five to seven years, rather than seven to 10, then get on with it, crack on. And that, that for you as a property investor it’s about momentum. There you go, that’s the way Alison, that is exactly right. The property has given you back your capital. It’s done its job. Now, stop treating it unfairly. Once the property has given you the capital back, then leave it alone and let it run. And if it doesn’t give you your capital back, it’s probably a piece of shit, ditch it, move on, all right? Like sometimes, listen I’ve bought some rubbish properties, and sometimes you just got to take that one on the chin and move on. These days, … And to be honest, I did that when I was chasing things like cashflow was the only important thing and all that sort of stuff and it led me down some fool’s gold paths. These days, I believe our coaching and our property acquisition and strategies are so robust in comparison to 15 years ago. So anyway, gang. So gang, hopefully that made sense this morning. Compared to what? And it’s never been easier to compare across different markets, but the fundamentals are always true. Where is the strength of jobs? Where is the strength of incomes? Where is the strengths of infrastructure and future growth of that location? Because I certainly wouldn’t encourage anyone to buy a substandard location that longterm is going to be quite weak, because really at the end of the day, we’re going to live off our rents. Our rents are the things that we’re going to live off and the cities are going to have more ability to produce higher rents and more consistent rent than other locations, okay? That’s just the way it’s going to be. That’s just the way it’s going to be. And ultimately, if you do want your properties to have some pretty consistent growth, then the right locations in the cities are going to be far more powerful than regional locations. And there’s a few caveats like the Byrons and the Noosas and those sort of extensions of the cities, they’re the cities’ holiday locations, but they’re a bit volatile as well. Probably overpriced to be honest. But yeah, let’s stick with the straighty-180 stuff and build a good property portfolio. Anyway, gang, there it is, compared to what? Good question to ask. Hopefully, everyone is awesome and having a great day. Already off to a cracking start. Always start the day with a nice coffee and a chat, and I really enjoy having a yarn to you guys. So, great to have everyone on. If there’s something you guys want to ask or you’ve got a question, chuck it in the chat and I’ll have a bit of a look later on and I can maybe talk about that tomorrow with another coffee and a chat. Have an awesome day, enjoy the rest of it. The start of it, the best of it, whatever it might be and join me tomorrow for another coffee and a chat. Hey, listen, my podcast, my interview with Trevor Hendy dropped yesterday, which is pretty cool. So, crack onto that one, track it down. Give us a rating and a star and a whatever. So, love you guys to do that. And Sam, my business partner, Sam Saggers, the best property investor in the country. He is an absolute genius. His podcast drops on Wednesday, which is tomorrow. So track that one down, which is awesome as well, gang. So, both on iTunes. His is called The Urban Property Investor. Mine’s called The Wealth Faculty. Love it if you give it a listen, give it a rating, give it a thumbs up, give it a comment, whatever it might be on the iTunes. All right, gang, have an awesome day. I’m off, I’m done and dusted, coffee and a chat done. You guys be awesome and join me tomorrow for another coffee and a chat. Adios.


About the Author
From a small town boy growing up in the remote outback of rural Queensland, to becoming the founder of Australasia’s most powerful property wealth creation engine – Positive Real Estate Group CEO Jason Whitton is on a mission to change the way we look at wealth.