S2E7 - Deep Dive On Diversification: Should You Buy One Expensive Property, Or Two Cheap Ones?

[00:00:00]

Imti: Should you buy one property or two cheaper properties? It's a question all three of us hear at least once a week, and the answer might surprise you. Today we're gonna break it down based on a real client scenario that we've got, and we're gonna do it in three parts. So we're gonna set you the scene. We're gonna give you the numbers and give you the nitty gritty as the client scenario. We're gonna jump into ego versus reality when it comes down to this decision between one or two cheaper, and we'll round it out with when it makes sense to do two. And you're probably thinking that's a bit of a spoiler as to where we're heading. It definitely is. But it doesn't mean that you shouldn't listen the whole way through. So let's dive into the client scenario. Pete, this is a mutual client of mine and yours that we're working on at the moment. Very, and I use the term loosely, standard household. Dual income household, 160k income between the two of them, two kids. And they're looking at either buying two properties at about the $400,000 mark, or they can do one at about [00:01:00] 800,000. And I think the key consideration here is that this is the one decision that they can make. Their incomes are fixed, they've got a family, there's no big financial change that's gonna happen. And this is the fork in the road where they need to make a decision around their investing journey. The first thing that I really want to cover off is understanding what they wanna achieve. When you were talking to this client, Pete, about their journey, why were they actually investing in property?

Pete: So those guys are keeping it really simple. All they want to do is build wealth and have the option to retire early.

Imti: Mm-hmm. it's really what most of our clients wanna do, right? It's nothing spectacular, it's just make the most with what they've got.

Pete: Yeah. It's not having 10 Lamborghinis.

Imti: Yeah. Fortunately or unfortunately, depending on how you wanna look at it I'm not interested in paying the fuel bill for a Lamborghini. I think the biggest thing when it comes down to this choice is understanding firstly, what someone right now can realistically get at those price points, [00:02:00] because most people will think more is better, but it is not always the case. So right now, based on the buying that you're doing, what are you realistically looking at, at that $400,000 price point and what are you looking at at the $800,000 price point?

Pete: Yeah, at the 400k you are looking at regional mining towns, like Mount Isa for example, where you can get properties dirt cheap.

They're single industry, yields are eight, 9% doesn't make sense from a capital growth point of view. So that's kinda the housing market. Or you could be buying in some of the major regional centers, which we love.

Imti: Mm-hmm.

Pete: Ballarat, Bendigo's as an example. But those houses are just super rundown, high maintenance. I wouldn't touch 'em, I wouldn't recommend them. Because all your money's gonna go into the maintenance side of things. You could buy a unit in a regional town, but often, again, you're not buying in a great suburb. You're really gonna compromise on quality of the unit, and also the location, or as some people are doing at the moment, they're buying units in Darwin, which again is just not something that I would personally do or recommend.

But that's what [00:03:00] you're looking at. That's the reality for a 400k purchase.

Imti: Mm-hmm.

Pete: But then when you look at 800k, well, pretty much most capital cities you can buy quality.

Imti: Mm-hmm.

Pete: For example, in Adelaide you can buy something 20 to 30 ks from the city. Three bed, two bath, four bed, two bath, 500, 600 square meters.

Same thing in Melbourne, same thing in Perth, same thing in Hobart. You can actually start to really look at quality and you're buying in owner occupied areas, things that are gonna see good capital growth, and that is actually what's gonna move the needle for your wealth building.

Imti: Mm-hmm. That's good little tidbit that we will pull on a little bit further down the line around the best choice for growth. The first thing that I wanna cover is the ego versus reality of it all. Right now there's this common thread where everyone assumes more is better. And when I say more, I mean having 3, 4, 5, 6 investment properties, but not really thinking about what that means for them.

It's all about ticking that status box and having a big portfolio and really [00:04:00] being able to say to yourself internally that oh, I've got all these properties and for someone listening to this, don't take this as us on a hill talking down to you. We've all been there ourselves. At the start of our journeys, we were all like, oh, I want 10, 15 properties. And, I don't care the quality of them and I just want lots. And over time, what we've probably realised is that doesn't actually make a lot of sense, and that more isn't always better. This is probably a good time to loop Skye in because Pete, you touched on those $400,000 properties and the limited selection that you have at that price point, but Skye, from a property management perspective, what are the repairs like, what's the maintenance like?

What's the ongoing holding costs of a property at that price point look like? Mm.

Skye: Yeah, it's significantly higher because. You're buying a lower quality property that's probably been most likely an investment over the years and therefore hasn't had the same cash injection and TLC that an [00:05:00] own occupier property might have had.

So it's going to cost you more in the long run in terms of repairs and maintenance, but you also need to look at your quality of tenant.

Imti: Mm-hmm.

Skye: You are going to have a lower quality of tenant generally when you're buying in these riskier areas.

Imti: Mm-hmm. . Tell me more about the tenant quality and maintenance side of things.

Skye: What I've seen is probably not so much the quality of tenant because generally you get more long-term tenants with the cheaper, more rundown properties 'cause it's an affordability point. But what you get is more churn of tenants because we're looking at then quality of landlord because they don't want to necessarily maintain the property as if it was an $800,000 property.

Mm-hmm. They're not going, they're gonna be like, oh, that fly screen's damaged. That's fine, because they're money pits, like, where do you stop? You can't necessarily renovate the entire property, so some repairs don't get done and that results in tenants not being happy, they move out. Continues on forever more, until you decide to fully renovate the property. So most people don't at these [00:06:00] price points, and it just becomes an aged property that is hard to lease. So you have higher vacancy because it's not presented well. You need to, factor in the maintenance side of it in order to attract a quality tenant, to keep that cash flow coming in.

Imti: And that's the thing, if you don't do that, when these cheaper properties do come to market, they do have that poor maintenance history, and then they get pulled apart when it comes down to pest and building inspection or the amount of work that needs to get put into them. And then for you, Pete, you wouldn't even consider buying a lot of them.

Pete: No. 'cause it's all on paper. And this is what frustrates me when I see stuff like this. People will say they bought a 400k home in a regional town, weatherboard weatherboard, the stumps haven't been redone, but they're gonna get 500 bucks a week.

On paper, that looks like an amazing deal. But in reality, and I personally purchase d these myself, it costs a lot more to maintain that and I'm the type of landlord where I will spend the money on the maintenance and whatever the tenant needs. But a lot of people buying these deals are buying them because A, they don't have the capital to buy something else, which means they don't have the capital to do the maintenance and,

Skye: and they're stretched anyway.

Imti: [00:07:00] Mm-hmm.

Pete: Yeah. And they're relying on that property

Skye: income.

Pete: Yeah. Returning 500 bucks a week.

Imti: Nothing being vacant, nothing being wrong with it.

Pete: Yeah. And maybe factoring in 500 bucks a year for maintenance.

Imti: Mm-hmm.

Skye: Yeah.

Pete: It's not gonna happen. So on paper, those deals look amazing, but the reality is, and that's the ego versus reality thing we're trying to get through here.

Skye: Mm.

Pete: Is it's not that.

Imti: And that's the thing, right? Where in this situation where you are tossing up between one property or two, if you do go two that risk doubles up. You're stretching your capital to get into two purchases. You're stretching your borrowing capacity. You're stretching your savings. And then what that does is double the problems.

And it's probably a really good time to break down the cash flow of it all, because these cheaper properties are usually appealing to investors because the yields are better, the cashflow return is better, and on paper it can look that way. It's a five, 6% yield compared to maybe four to three and a half that you get at 800k. The key point here is that's the [00:08:00] gross yield, that's the top line figure. But when you dig into it, and Pete, I know that you are really passionate about this. On paper, they might look better cashflow wise, but they're not.

Pete: Yeah. ' cause the maintenance, it's always the maintenance, but also depends on what states you buy in. You've got land taxes. Some states will charge land tax significantly, like Vic as opposed to somewhere else like Queensland where it's minimal.

Skye: Depends on the property type you're buying, too.

Pete: Exactly right. Yeah. Yeah. Your insurance costs too, there's so many things and a lot of people make the mistake of, oh, if I buy two 400k properties. 500 bucks each for maintenance. There'll be no land tax on each, or the insurance costs will be the same when the reality is they're very, very different.

Imti: Mm-hmm.

Skye: Mm-hmm.

Imti: Well, you look at a market like far north Queensland. Cyclone heaven, right? You'll buy a property for $500,000, but your insurance might be year. Yeah.

Pete: And council rates and insurances there are double, triple than what you'd pay anywhere across Australia.

Imti: Mm-hmm. And doing some quick math, let's say that property rented for 700 bucks a week, but then you've got an additional 12 grand in expenses [00:09:00] annually. Really, renting for what, 480?

Pete: Yeah.

Imti: It's not 700.

Pete: Your yield is like three to 4%, which is what you can get in a capital city.

Skye: That the difference of this on paper, yeah. It looks good.

Imti: Mm-hmm.

Skye: But the reality most people don't consider.

Imti: Mm-hmm. We're hitting a common theme here, where the 400k... it's either an ego play or you don't have the right team or the information available to you to confront you with these things because the assumptions are that 400k twice, I've got two properties, I'm gonna grow quicker. Cash flows gonna be better. But if we unpack it, we've already covered the cash flow aspect of it, that the cash flow isn't actually gonna be any better, even if the yield is better. Pete, talk to me about the capital growth of it all. That's where the money is, right? That's why we look to invest in residential property. It's not because of cash flow and if you're looking at making a choice between two properties at 400, one at 800, what are you seeing in real time as the capital growth impacts of that [00:10:00] decision?

Pete: Yeah, I can even talk to my own portfolio. What am I, nine years in now? And I've done both. I've bought the cheapies and I bought the more high quality. And what I've noticed is the cheaper ones, they often have a bit of a spike in growth. And I look back on the growth trends the first year or two. Yeah, sure there's a big spike. But then that readjusts and it comes backwards.

Skye: Takes longer.

Pete: Yeah. it might do 20% or 30% in a year or two. Then it's just come back 10%, 15%, then it'll do it again. Then it comes back. It goes up and down, up and down. But then when I'm looking at the quality stuff, 700, 800k also in regional towns as well, but in quality regional towns, it just ticks along. You'll get your spikes

Skye: more conservative.

Pete: Yeah, yeah. You're just gonna keep getting that nice increase every single year you'll have a bit of a spike where it will do probably double the growth that it has done previously in terms of that year on year average but a t the end of the day, it's just ticking along nicely.

Skye: But what are you getting throughout that nine years? You're getting stable tenants.

Pete: Exactly.

Skye: Less repairs.

Pete: Yeah, less headaches. Yep.

Imti: Mm-hmm.

Pete: Yep. And then knowing that your growth is just slowly going up.

Skye: Going up

Pete: as opposed [00:11:00] to having a big growth in the cheaper areas. And then you look at the growth trends and you're like, oh shit, the market's moved back 10%.

Imti: Mm-hmm.

Pete: And then you stress out, then you sell.

Imti: I think The thing to call out about your portfolio personally though, is that it's all made up of freestanding houses, right?

Pete: Yeah. Yeah.

Imti: And so if we're looking at now, and unfortunately not 10 years ago when we all should have just been collecting property like Monopoly, 400 k, you're probably looking at a unit or a townhouse, so you've got that natural split in growth.

Pete: Mm.

Imti: Just based off asset class.

Pete: Oh, exactly. it's, It's a good point. They're all houses.

Looking at units and townhouses, then that spike is gonna be even worse.

Imti: Mm-hmm.

Pete: In terms of buying in those really remote areas, buying your unit or even a house in a really remote area like Mount Isa. That is tenfold spikes ups and downs.

Skye: Mm-hmm.

Pete: It's even worse. The capital growth is just really not there.

Imti: Mm.

Pete: It might be there temporarily, but it does quickly fade. And really, if you're doing stuff like that, should be trading property, which is just a different ball game altogether. You get in

Skye: talking about

Pete: you get out.

Yeah. It's not what we're [00:12:00] talking about. Yeah.

Imti: Mm-hmm. Exactly right. The trading of property. You could make a killing.

Pete: Oh, you could, yeah.

Imti: But it's

Skye: riskier.

Imti: It's a hundred times riskier, no one wants that headache. And also for this sort of client who, they're looking to make one or two decisions, it doesn't make sense because they're just consistently gonna be anxious and reviewing the market every six to 12 months going, do I need to sell now? Do I need to hold?

Pete: Yeah.

Imti: Having all these additional decisions where the three of us are all on the same page in terms of the best strategy is the one that just helps you go to sleep at night.

Pete: Mm-hmm.

Imti: What's the simplest, lowest risk, easy route to the goal that you want to achieve, and being extremely active as an investor, unless it's your full-time job, that's not the route that you want to go down.

Pete: And just bringing it back to your point about playing Monopoly.

A lot of people will think the way to win at monopoly is to acquire as many properties as possible.

Imti: Mm.

Pete: But the reality is that's not how you win Monopoly. Like It's a different strategy, and that's the [00:13:00] reality

Imti: Yeah, a hundred percent. Whenever I play Monopoly, I'm buying Mayfair, Park Lane and I'm putting two hotels on them, and I'm just hoping that someone lands on it and that's it.

Pete: Yeah.

Imti: It's two quality assets and then off we go.

Pete: Exactly.

Skye: Depends whether you played with me. 'cause I was a cheater as a kid.

Imti: I can picture you stealing the cash from pocketing it. It does not surprise me.

Pete: You were the banker,

Imti: So that's the ego side of it. And really unpacking the media stories, the myths, even the books though, right? You got Zero To 120 Properties, Rich Dad, Poor Dad, They're all about stacking numbers of assets. But all that really does in the current market for the average property investor is put them in a worse scenario.

Skye: Accumulate problems.

Imti: Yeah. You accumulate headaches, right?

Skye: So.

Imti: Let's talk about the reality of the situation and what sort of strategy we recommended to this client moving forward. Pete, do you wanna lead on, obviously we've steered them towards the 800k purchase price, but what does their [00:14:00] strategy look like in practice and their asset selection?

Instead of going down the route of purchasing two units in the middle of nowhere that aren't gonna do any good.

Pete: Yeah. So it really comes down to showing them the data basically, and rolling through, Hey, this is what your portfolio will look like if you're buying this quality property.

Imti: Mm-hmm.

Pete: And it's gonna be a capital city purchase. It's gonna be in a really strong location as well. So we're not gonna be buying in low demographic areas or anything like that. Not that there's anything wrong with that, but if you really wanna play that safety strategy.

Imti: Mm-hmm.

Pete: You're looking in your capital cities or your regional markets, high demographic area. Areas that have shown historically really, really strong growth trends. So I can put it to the client and say, Hey, this is what it's done in the past. This is what it's likely gonna do in the future.

These are the reasons why, and it's just a whole different ball game for them. And it kind of also sets them up possibly for a second property in the future. ' cause I'm sure their incomes will increase but they don't have to rush and do it right now. And also looking at the capital growth trends as well, it's [00:15:00] actually going to do so much more for them.

Skye: Mm-hmm.

Pete: It's just gonna take a little longer to get the two properties, but at the end of the day, they've still got $800,000 in the market. You're gonna get your strong growth on that $800,000. From a cashflow point of view as well, it's not gonna make a difference if you go out and buy the two 400ks, you got two problems. So cashflow is not gonna be any different

Skye: any better.

Pete: Mm-hmm. Yeah. All that's gonna matter is they're gonna have high quality property in a high quality location, which is going to outperform and also sleep at night factor. Less headaches.

Imti: Mm-hmm. That's something that you touched on that was really important there. Someone listening to this might actually think, well, isn't buying two properties lower risk than buying one.

Pete: Ah, diversification.

Imti: Diversification, yeah. Right. And in a lot of instances, diversifying is good, but if you're diversifying into two worse assets, it's not good.

Mm-hmm.

Pete: Yeah. You're diversifying into high risk markets, basically. Yeah,

Imti: and that's something that, if you're listening to this, it's probably good to take away, diversification is important. But if you are diversifying into two [00:16:00] riskier markets and two worse assets, you are actually having the opposite effect of what you're looking to do. Skye, I'm sure you could touch on the experience from a landlord's perspective around having two or three cheaper properties versus just having one that they basically never speak to you about, right?

Skye: Yeah, exactly. And I tend to not attract the clients that have the two or three cheaper properties generally because they're a lower quality of property and a lower quality of landlord generally, if I'm perfectly honest. Because they won't put the money into them and I won't work with clients who won't maintain their properties 'cause that's bad experience for the tenant, bad experience for my business.

Imti: Mm-hmm.

Skye: So, it's really important to me that I have clients who can maintain their properties. And that's my little piece into we're not trying to set up the slum lords, that's not what we want to see in the marketplace in general. So those clients that have the two or three cheaper properties are generally self-managing, or they're with the cheap and [00:17:00] nasty agent and nothing's happening the way that it should.

Imti: Mm-hmm. And if anyone's been listening to us for any period of time, you all know that we're anti being a cheap landlord. There's no benefit in it. And also it's understanding the fact that you are in a privileged position where you do get to invest in property, but at the end of the day, what you're investing in is also someone's house. It's the roof over their head and it's about respecting that.

Skye: Yeah. And understanding that responsibility

Imti: A hundred percent. Because a lot of people don't understand that responsibility, and then it turns into I've got all these repairs that I need to deal with and investing in property is expensive.

Yes, investing in property is expensive,

Skye: And then they sell it because they're going, this is not the experience I thought it was.

Imti: Mm-hmm. And again, it comes down to that first choice. Bringing it back to the very, very top of, do I pick two subpar lower quality properties, verse one. It's the one you know because as much as I'm sure you love talking to your landlords, a lot of the time, your landlords probably don't want to hear from you.

Skye: No.

Imti: Because a lot of the time it's with a bill. Right?

Skye: Absolutely. Every [00:18:00] time my name appears on their phone, I have to warn some of them and go, actually, I don't have bad news. I'm calling to give you good news. 'cause they expect every time. I'm sure you're the same Pete I'm every time thinking, just call you.

You're like, oh, what now?

Pete: I'm okay now, but at the beginning, my heart would sink. I'd get all stressed and like, oh fuck. Now what's gonna be the next issue?

Skye: What's the problem?

Pete: Because I bought those properties that had high maintenance.

Skye: Mm-hmm.

Pete: But, but one more quick point, you don't have to compromise on your lifestyle. If you're buying a quality property with a quality tenant, not significant maintenance or anything like that, your lifestyle shouldn't have to change much.

Imti: No. No. Mm-hmm. Because it just, your expenses tick along more predictably.

Pete: Yeah.

Imti: It's something that we're really passionate about when we're working with clients is making sure that they've got the right foundations from day one.

Skye: Mm-hmm.

Imti: And so if they've got the six months worth of expenses in the bank, if they've got the right landlord insurance, if they've made the right property selection,

Skye: it's all proactive.

Imti: Yeah.

Skye: Rather than reactive.

Imti: Exactly. It's all proactive. There's no reactive and. It just ticks along.

Pete: Yeah.

Imti: Which is what you want.

Pete: Yeah.

Imti: And I know [00:19:00] we've all been in this scenario, you don't wanna be speaking to your property manager bimonthly.

Pete: No.

Imti: All for the sake of an

Skye: offended now

Imti: extra.

Skye: Why, who wouldn't wanna speak to me

Imti: all for the sake of an extra thousand dollars a year on paper.

Pete: Yeah.

Imti: That you don't actually get, because your property manager has to go and spend it to fix your property.

Pete: Yeah.

Skye: Yeah.

Pete: Well, that's it. Whatever you write on paper and we budget for clients is I can hand on heart say, this is what's gonna cost you.

Skye: Yeah, yeah.

Imti: Or even looking at those older properties, right? General rule of thumb for a newer property, you might account for 0.5 to 1% of the capital value of the property.

Pete: Mm-hmm.

Imti: In terms of maintenance and repairs. $500,000 property, you might budget five grand a year for maintenance and repairs and just keep that extra in the bank on top of your buffer.

But if you're looking at a more expensive property, that very quickly becomes two, 3% a year and straight away, that's where your extra quote unquote rental income goes. Yeah.

Skye: Well, there's other costs to this too that I don't think people, landlords in particular consider. But relenting costs are a massive impact on your end of line revenue.

[00:20:00] I do have one property that is slightly older. It's a unit. It's in a really good suburb, but it's slightly older. I've managed it for four years. We are now on our fourth tenant, no tenant has stayed longer than 12 months. And so that's looking like a letting fee every year. That's a significant chunk at two weeks rent out of that revenue every year. As opposed to if she fully renovated it, I don't think we would see that churn.

Imti: Hmm. That's where, again, it all ties back to the common theme of it may look like it's high yield on paper. But once you account for all the expenses,

Skye: mm.

Imti: It's the same as the more expensive property. Or it could even be less and quite a bit less.

And that blows a lot of people's minds.

Skye: Yeah, I just think the assumption that tenants are gonna stay long term is a really false one.

Imti: Mm. And let's fast forward to the end of the strategy. Comparing the two properties versus the one. When it comes down to an exit. What does that look like, Pete, in terms of potential capital growth differences, but [00:21:00] also costs and resell?

Pete: From a resell point of view, you've got two sets of selling agent fees.

Imti: Mm-hmm.

Pete: So you're going to incur double the costs. From a capital growth point of view. For what we're talking about in terms of what you could buy, you'd be just beating inflation. That's for the cheaper properties. Your money would probably be better just sitting idle in the bank, to be honest. By the time you take into account all the maintenance as well, people get wrapped up on what the final number is.

Imti: Mm-hmm.

Pete: But when you actually think about all the maintenance through the years, what's, and the vacancies for the years, you're just probably beating inflation as opposed to that high quality asset where you're definitely gonna get a double on it in seven to 10 years. If you've bought well, you can then leverage that money buy your commercial property or buy something that's gonna have a high income and effectively do the whole monopoly strategy where you buy your quality properties and then end game is to sell those down, pay off capital gains and whatnot, and be able to leverage into something that's actually gonna produce cash flow for you, for quite some time.

Imti: Mm. That's something that a lot of people don't quite understand when they're a first time property investor or even experienced investors. We've had this conversation with them around [00:22:00] residential property is actually a very bad cashflow asset. Mm. And there's this ongoing story around, you'll own 10 rental properties and the rent will be $150,000 a year once everything's paid off and it replaces your income.

That's actually A very unlikely, but B, also one of the worst possible strategies you could go after. Because to your point just now, Pete, a lot of the time, residential property is great to build an asset base. It's great for capital growth. What you then do with that capital growth is where you'll get the cash flow. Whether you put it into shares, you put it into a commercial property, put it into something that returns 7% net. But you'll have a bigger asset base to start with. That's the main difference between why a lot of people will pick property instead of shares, for example, is the fact that you can get that capital growth quicker.

And that's something that really we need to challenge daily around [00:23:00] the fact that if you're looking to invest in residential property for cash flow, you just shouldn't invest in residential property.

Skye: Yeah.

Imti: Yeah.

Skye: I have that conversation on the daily.

Imti: Mm-hmm. That's probably a good place to round out the ego versus reality of it all. In summary, it's the ego drives you around more, more, more, and collect the whole Monopoly board. Whereas the reality of it is you're probably better off just buying Mayfair, Park Lane sitting on them both and going to sleep at night and collecting your $200 pass go.

The one thing that I quickly wanted to cover though is when does it make sense to buy two properties? In this client scenario, their choices were two properties at 400,000 or one at 800,000 because of their income and their living situation. But at what point, Pete, based on what you are seeing at the moment in the market, doesn't make sense to do two properties?

Pete: You'd be wanting to work with a minimum 550 to 600 per property. That's gonna get you a house. You're looking regional, but I'm talking big [00:24:00] regionals. I'm talking those types of regionals that are effectively small capital cities. They're not reliant on single industries.

You can still get your five, 600 square meter property or a newer property in a high demographic area as well. We've done that for clients. But the minimum you want is 550 to 600.

Imti: Mm-hmm.

Pete: That would be the only time, and I've done it with clients in the past where I've said, actually, this probably makes more sense to buy two.

Imti: Mm-hmm. And that most likely will change over time though, right? The way that the regions are moving at the moment, 12 to 24 months from now, that 550 to 600 could change to, what do you think, Pete? Like 650?

Pete: Yeah. 650 to seven. Yeah. Yep.

Imti: Mm-hmm.

Pete: Especially in these markets where they're moving very quickly and they commute to a capital city.

People are exiting capital cities 'cause they're more expensive. Investors are hitting up the capital cities. There's new jobs. Yeah, we wouldn't even be having a conversation in 12 months, about 550 to 600. That would be the new 400.

Imti: Mm-hmm. The reason why I wanted to touch on that is that if you're listening to this and you're on the sidelines going, oh, should [00:25:00] I, shouldn't I, it's probably worth having a conversation and building out your team sooner rather than later. Even if it's just to make an informed decision not to do something, but the boat's gonna get going the way the things are going, and so I think it's important, if you think that you're 12, 18, 24 months away, a lot of the conversations that we have every single day is people who think that they're 12 to 24 months away are actually three months away. With the right structure, with the right plan, because rarely is it time that makes people feel more comfortable. It's clarity around a plan that makes people more comfortable. Their situation doesn't actually change materially in that 12 months. They don't save that much more money. Their salary doesn't change that much more. It's just that they felt more comfortable 'cause they collected more information. And all that information does is lead to clarity.

Pete: Yep.

Imti: And the quickest way to get clarity is just to plug into a team.

Pete: Yep. Or they feel that they've accumulated more savings. But you can't outsave the property market

Skye: can't save the market.

Pete: You can't.

Imti: Mm-hmm. We've touched on that [00:26:00] 400k being a rougher price point. If the decision is two properties at 400 or one at 800, but to the person who's listening to this, who their only option is to get into the market at 400, Pete, would you tell 'em to not bother or would you still say that it's a worthwhile exercise for them? Oh,

Pete: that's a good question.

Skye: Mm.

Pete: I think it's good to have your money in the market, but I would have to be trying to change their beliefs around the type of property. 'cause I do find people want a house.

Imti: Mm-hmm.

Pete: So if they're willing to really compromise and we can get 'em a high quality unit somewhere, then sure. But I'd almost say it's probably not worth it. To be honest, I sometimes it's just not worth to get into the market, especially if you're buying in these high risk areas.

Imti: Mm-hmm. Skye, what would you say?

Skye: Yeah, I was really curious to hear what Pete was gonna say, on that one. Probably the only thing I would add on to that was depending on the person, how long they've got, their life stage.

Imti: Mm-hmm.

Skye: And whether their income's gonna change. Yeah. Whether they've got scope to add more down the track, or if they're adding more kids, [00:27:00] which is gonna decrease borrowing capacity. Like if they're at that life stage, then no, it doesn't really make sense. But if they're maybe 25, maybe you've got time in the market that you could.

Pete: Good point.

Skye: Increase from there.

Pete: Yeah, definitely. If you're strapped and you've got no capacity to increase or whatever

Skye: Yeah. If your situation isn't gonna change,

Pete: yeah.

Skye: You're doing that as a buy and hold, maybe shares

Pete: and thinking that's gonna be that life changing decision.

Imti: Mm-hmm.

Skye: Yeah.

Imti: For me, the person who's looking in that decision probably hasn't got a lot of financial wriggle room in general.

Skye: Mm.

Imti: If they're starting really early, to your point, Skye, I think time in the market will still forgive them a little bit, and they'll get a better return compared to doing nothing. But to your point, Pete, it then comes down to making an informed compromise on asset. Yeah. So if you're going in at that price point. Not chasing a house that's in the middle of nowhere, that's not gonna grow and going, you know what, maybe I'll get a unit or a townhouse on the outskirts of a regional center.

Pete: Yep.

Imti: Because that's gonna perform better capital growth [00:28:00] wise, because the infrastructure's better.

Pete: Yeah.

Imti: Is it gonna perform as well as a property at 600 or 650? No. Is it gonna perform better than just doing nothing? Probably.

Yeah.

Skye: Does it look like a 20 year plan instead of a 10 year plan?

Imti: Yes.

Pete: What's the time horizon?

Imti: Definitely.

Skye: Yeah.

Imti: And I think that's a great point is that it is definitely a, 15-20 year plan as opposed to a 10 year plan. 10

Skye: Yep.

Imti: But over that sort of timeline, they'd be debt free, hopefully for their sake, 2x on their purchase price, where they would've ended up would still be significantly different.

Yep.

Mm. Cool.

we've unpacked a lot, but to summarize, I think the biggest. Takeouts if you're listening to this, when it comes down to the should you buy one property or two cheaper properties, it's don't let your ego drive the decision and look at the logical side of the equation and the numbers.

When you unpack it all, you'll probably realize that one will perform better for you long term, and it's actually less of a gigantic pain in the ass over the holding time as well. Before we wrap up, was there anything that either of you two wanted to add?

Pete: No, I think we've covered it. [00:29:00] Aside from try and play Monopoly, effectively. Accumulate quality, accumulate what you can, and have an end game as well in terms of looking at that sell down piece and what you actually wanna achieve.

Imti: Cool. Perfect. Well, I'll put a pin in us there. And as always guys, it's always great to catch up and if you're a first timer, great to have you on board.

If you are back again, great to have you back, and we'll catch up with you guys next time.