S2E8 - Debunking 7 Property Myths: What First Time Investors Need to Know

Imti: [00:00:00] So today we're gonna jump into seven myths first time property investors need to know. Let's jump straight into it.

Myth #1

Imti: The first one is bigger land size is always better. This is one that we hear all the time. Pete, I know when you're helping people buy property, it's one of the first things out of their mouth is how big of a block can I buy? So bigger land size, is it always better or is it a myth?

Pete: I think it's a myth. It really depends on what you're gonna do with the block. If you're gonna go subdivide and develop it, then obviously yeah, sure. Bigger land size is actually gonna achieve you a much higher growth rate return in the future. But yeah, no, I think it's a big myth and it also comes down to location as well.

Imti: Mm-hmm. And I think reasonably on the development thing. A lot of first time property investors, myself included when I first started, you always think that you are gonna go do the development thing.

Pete: Yeah,

Imti: You're always just like, oh yeah, I'll subdivide it. I'll turn it into a duplex. I'll do all these weird and wonderful things to it. But in actual fact, if you were to put a [00:01:00] percentage to it, how often does that actually happen?

Skye: 10% if that. Ah,

Imti: 10. I think you're being generous. No,

Pete: I'll say lower than that. 2%.

Skye: Yeah. I say, I

Imti: was gonna say one.

Skye: Yeah. Yeah. People generally dispose of it before they get to that point.

Pete: Yeah.

Imti: Mm-hmm. But I think that's also a valid point where you can sell it for more based on potential as well. Right?

Pete: Yeah.

Imti: Because someone else then buys it and goes, oh, I'll develop it and I'll do all these weird, wonderful things to it. And the cycle repeats. No one actually develops on it.

Pete: Yeah.

Imti: When would be the situations where you wouldn't actually want it? So the other side of the fence, when would it be a situation where big land size doesn't actually make sense?

Pete: Ultimately, it comes down to the strategy, essentially. Like if you are just gonna buy the property and realistically you are not gonna sub divide. You don't want to have high maintenance because often when you buy these bigger blocks and you are still sticking within a restricted budget, you're gonna compromise on quality.

So it's gonna cost you a lot more to maintain. You're gonna have higher vacancies, you're gonna have higher turnover of tenants. Higher

Skye: repairs.

Pete: Yeah. Yeah. High turnover [00:02:00] tenants, higher leasing fees as well. So all the headaches

Imti: mm-hmm.

Pete: That comes with owning a property on a larger block of land if your strategy is not to subdivide.

Imti: Mm-hmm.

Pete: It doesn't make sense. I just don't see the value in doing that, because you can pay a lot more for a property just to capture something for 600 square meters as opposed to something on 500 square meters just because you have the potential to subdivide. But that 500 square meter property could be the same price or cheaper. But it's renovated, it's gonna get a high quality tenant. There's gonna be less dramas, less headaches over the term of actually owning the property. And by the time you actually go and sell the property on the bigger block and you never actually go and subdivide it, the return's not really there. When you actually work out the maths on the holding costs, the lower rental return that you're gonna get, and also the vacancies. The math doesn't often maths. It doesn't really actually make sense to do that. But hey, if you're gonna go subdivide, then sure do it. Yeah. But yeah, if not, no point.

Imti: Mm-hmm. And I think a lot of people also underestimate the cost involved with the development. Let's say it's [00:03:00] a lot, that's a million dollars, unless you only have about $500,000 worth of debt on there, then there's no chance you're gonna be developing it.

Pete: No.

Imti: Because you have to have such a big equity stake and cash in the bank to actually develop a property.

Pete: Hmm.

Imti: Complete episode on its own. But summarised really, really short version of it is people will go after those big blocks thinking that they'll subdivide or develop, but they won't actually have the capital required to do that at any point.

And it makes no sense. It boils down to what we talk about really often with our clients is location first, before looking at block size.

Pete: I've got one more thing to add to that actually.

Imti: Mm-hmm.

Pete: It's when you go and buy a big block and you can't even do anything with it anyway.

' cause you haven't checked your easements, you haven't checked all these different things around developments and zoning. You go out, you buy this big block with the intention to subdivide, but you can't actually do it. So you've just overpaid for something that the land's not usable. To summarise, it's basically when you can't even do anything with the block. The usability of the block doesn't actually allow you to develop it.

Imti: Mm-hmm.

Pete: [00:04:00] So you've just paid top dollar for essentially no real reason at all.

Imti: Yeah, a hundred percent. So bigger land size is always better. We're gonna put that in the myth bucket. Next myth Skye, I know this one will

Myth #2

Imti: get you going.

Property managers are all the same and I should make my decision based on fee.

Skye: Mm. Look, property managers essentially do the same work, but they don't do it the same way. Any property manager can do a routine inspection. Anyone can go take photos of a bedroom. But are they looking at, oh, that paint's peeling. Okay, we need to, Mr. Landlord, allow for repainting that ceiling in the coming Whereas the other property manager who perhaps is on the cheaper side of the fees is just taking the photo and sending it to you, leaving you with all the work to do. Another example I've seen quite frequently, and it blows my mind, an entry condition report is what protects your assets. So when the tenant leaves, you've got hopefully a lot of evidence showing the condition of the property when the tenant moved in. Seen a lot of paper forms lately with photos, [00:05:00] or photos not done. So to the landlord, they're going, well, yeah, the entry condition's done. Was it done well? Likely not. And therefore, when the tenant leaves, guess who's coming out pocket, not the agent. You as the landlord. It might look on the surface that they all do the same thing. You really need to dig deeper and find out where is this gonna benefit me in getting that cheaper fee or that cheaper service. Yes. It's the not done the same way.

Imti: Mm-hmm. And I guess the difficulty is for the first time property investor in general, is that a lot of property management is managed by big agencies, right?

Skye: Yeah.

Imti: And so for them, all they're exposed to is nine outta 10 property managers that might be on their short list or from real estate chains that all manage it the same way.

Skye: Mm-hmm.

Imti: And that kind of forms their opinion. No one's ever told us anything different.

Skye: Yeah. Landlords don't don't know what they don't know.

Imti: Mm-hmm.

Skye: Until it's too late and they're learning the hard way and that's the problem. And I dunno how to get that education out enough. Because yeah, that's where the landlord's sitting there going, yeah, well, I got the entry report, I got the [00:06:00] routine report, but is it telling you what you need to know? Likely not unless you have a property manager who understands property investment and understands what the ultimate goals are.

Imti: Mm-hmm. And I'd argue that for a first time property investor who is more inexperienced and has a lower risk tolerance the property manager's almost their biggest asset.

Skye: Correct.

Imti: Because they don't know what they don't know. They haven't worn all the battle scars.

Skye: Yeah.

Imti: And so working with someone who manages less listings at a higher management fee and is easier to access, probably works in their favor more, right?

Skye: Absolutely. Because particularly if you've got Sally managing 200 properties, she's only putting out fires.

Imti: Poor Sally.

Skye: She's not giving you any kind of service. And ultimately as an employee property manager, she doesn't really care about your outcomes. She's not paid to care. She's just paid to do the bare minimum, Monday to Friday. That's it. Your investment ticks on 24/7. Doesn't mean your property manager needs to work 24/7 but it means that [00:07:00] just because something happens on a Saturday, it should still be resolved on a Saturday, not on a Monday.

And therefore, let's say a leaking tap, you've then got bigger costs to deal with because emergency maintenance wasn't handled. I could go on and on

Imti: mm-hmm.

Skye: On this topic. Mm-hmm. But essentially cheaper isn't always better.

Rarely is. W hy would you trust your biggest asset with the cheapest agent?

Imti: Oh, it's the unfortunate truth that it happens a lot of the time.

Skye: And then I come to clean it up when it's all gone wrong

Imti: Everyone's second property manager.

Skye: Yes.

Imti: Coming in and cleaning up the mess.

Skye: There's a fee for that.

Imti: Yes. Just choose right the first time around. That's another myth that everyone going into their first investment property really needs to be across. Don't underestimate the property management decision.

Myth #3

Imti: let's roll to number three. So I think I'll jump on this one 'cause it's a conversation that I have probably two to three times a week is property is great for passive income. Now a lot of the times when speaking with clients, we're planning out their lending, their cash flow, looking at what they can do long [00:08:00] term.

I'll ask them, why do you wanna invest in property? And a lot of the time the answers will be I want to create wealth. I want additional cash flow, I want extra revenue stream in my life. And. In and amongst all of that, the term passive income gets thrown in a lot, and I don't think a lot of first time property investors realise that property is the opposite of a passive investment and there's almost no passive income that actually comes from property if you are on a real person wage.

Unless you are on 750 grand a year and you're putting down 30, 40, 50% deposits on property, you're actually probably getting no passive income and your growth is coming from the increase in the value of the property, AKA capital growth, and it's actually horrible for passive income.

Is there anything that either of you two would add to that? Oh,

Skye: is there anything passive about your investments, Pete? Feel like they all require at least a level of decision making. That [00:09:00] keeps it the opposite of passive.

Pete: Yeah. It's definitely not passive. I fell for that trap too.

Skye: Yeah.

Said

Pete: I'm gonna build this portfolio and it's gonna gimme a hundred grand a year.

Imti: Oh yeah we all kind of got into it for that reason, right?

Pete: Yeah.

Skye: But it's also tangible, that's why people choose property.

Imti: Yeah.

Pete: Yeah.

Skye: You can see it

Imti: because the rent hits their account at the end of the month.

Pete: Yeah.

Imti: And they're

Skye: like, you could drive past it potentially.

Imti: Don't buy something you can drive past

Skye: People do that all the time.

Pete: And then they're, I'll go out and do the repairs myself and they never will. That's another story. Yeah. Yeah. If you think about it, if you're getting like 25 grand a year in rent after tax, council rates, property management fees, insurances, repairs, maintenance, there's not much left

Imti: after interest repayments?

Pete: Yeah. Yeah. Even if you had it outright though, that 25 is probably like

Imti: 15?

Pete: Yeah. And then you got tax.

Imti: And then you got tax.

Pete: So it's like, well, I need 10 of them paid off or something like that.

So really it's not, and income is the sole purpose of the rental income is just to hold the property, to get the capital growth. That's it.

Imti: Yeah. And in your example where it is $15,000 cashflow positive at the end of the year. What does that work out to? Pretty much nothing.

Pete: Yeah.

Imti: In the grand scheme of things.

Pete: Yeah. And you could sink that into the property next year with [00:10:00] repairs,

Skye: probably get that return on something else.

Pete: Yeah.

Skye: Without the level of headaches.

Pete: Yeah, that's right. Yeah.

Imti: Mm-hmm.

Pete: That's your sole focus, just to get that passive income. To

Skye: get cash. Yeah. Yeah. We don't say property.

Imti: Yeah. Yeah. If you're worried about cash, you'd be better off just chucking it in a savings account.

Pete: Yeah.

Imti: Yeah. But then you don't get the capital growth. Property being great for passive income. Massive myth, especially for first time property investors. Where your wind's gonna come from is going to be capital growth over the long term, and there's much better asset classes for higher cash flow.

And especially when it comes to passive income. The closest thing to passive income you're looking at is investing in ETFs in the stock market and just putting the cash in and then never seeing it again, basically. But definitely resi property, not the place to be if you want passive income. On that note also, as three business owners, we can have a good little chuckle about this. Don't start a business for passive income either

Skye: or freedom

Imti: Or freedom or any of that sort of stuff.

Pete: Exit the nine to five.

Imti: Yeah.

Skye: Yeah. And then work the 24/7

Imti: yeah. It's like I get to pick my nine to nine now.

All right, moving [00:11:00] along.

Myth #4

Imti: Number four on our seven myths that FTPIs need to know is, inner city performs better than regional. This one's really interesting for you to unpack, Pete, especially with everything that's going at the moment, because every early stage property investor that we speak to, they wanna be within 10 to 15k's of the CBD, and a lot of the time that doesn't work in their favour, right?

Pete: No. The prices are outta reach and then for them to buy something that might be within reach, they're buying an inferior kind of asset there. So yeah, huge myth. Historically, regional properties have pretty well outperformed, they are at the moment.

Imti: Pretty sure they have. Yeah.

Pete: Yeah. I would say they have, yeah, over the last 20 years. I think regional Tassie or something like that was the best performing market in the last 20 years, but, look, I'm a big advocate for regional markets, but again, not talking the stuff that's sitting remote with no capital cities around the stuff that we like to buy and the stuff that we see that outperforms are those regional markets which have pretty much the [00:12:00] equivalent industries of a capital city.

You got over 80, 90,000 people living there. Lots of jobs, lots of infrastructure, and you basically go there and you pretty much think to yourself, it's just a mini Adelaide, for example. Yeah, historically regional markets do outperform. It's just a matter of which ones you are buying in because it's very much like the capital cities, there's so many regional markets.

Imti: Mm-hmm.

Pete: So if you look at regional Australia as a whole, maybe it's not outperforming, but if you look at individual regions, a lot of those outperforming the capital cities.

Imti: Well, it's applying the whole 80/20 rule, right? The 20% of regions that are performing extremely well are outperforming 80% of the market.

Pete: Yeah.

Imti: And I think the scary thing for first timers looking at buying an investment property is that inner city feels a lot safer compared to regional. Right? Yeah. Because the. The risk in their eyes is a lot higher of going regional because they don't know what they're looking for.

Mm.

But also, if you pick the wrong region, you look at Whyalla, for example, over the last 10, 15, 20 years. I had a [00:13:00] client who came to me and wanted to talk about their investment property that they had there. They bought it for 300 grand 10 years ago. It had gone up to 330 grand by now, and because you're so emotionally attached to it, they just couldn't let go of it.

Even though the hard line in the sand for me is that they need to let go. It's been a bad investment. You need to cut loose, but they were sold the dream of cheap, regional, strong industry backing. Good yield. And that's the other side of the regional equation that puts off a lot of first time property investors, is that horror story.

Pete: Yeah.

Imti: Of the regional property that never does grow and so they do go with the inner city because it feels safer.

Pete: Yep.

Imti: To that person, Pete, what would you recommend that they do? If they are considering looking at a regional market, what are the things that they should be looking for?

Pete: Yeah, sure. Just one quick thing is, I think we're very protected as well for living in capital cities and we assume regions are remote and there's no one around.

Imti: Yeah. There's no power,

Pete: There's nothing there

Imti: There's a tumbleweed going through the middle of the [00:14:00] city. Yeah.

Pete: But just to take it back to your question. It's really looking at what the population is now. Our threshold is minimum 80,000 within a commutable distance. So within two hours drive to a capital city. You look at the industry base and then you put what the top 10 industries are in that region. Compare that to a capital city. It should pretty much mirror it. It should be a very diverse industry base. And then lots of infrastructure projects going in. Hospitals, roads, trains, all that kind of stuff. Airports, a lot of the areas that we buy in from a regional point of view have airports. Yeah. They've got universities. You don't need to leave the town.

Imti: Mm.

Pete: To get the capital city amenities and lifestyle.

Skye: That's a good point.

Pete: Yeah.

Skye: Yeah. Yeah, if you have to leave the town for major things, that's maybe not

Pete: that's

Skye: a big enough town. Yeah.

Pete: Yeah if you have to travel another hour, that to me is a regional location we won't even look at.

Skye: Mm-hmm.

Pete: Yeah.

Imti: You almost pretend like you're gonna move there, right?

Pete: Mm-hmm.

Imti: And you go, look, if I was putting my kids in school, how long could they stay there? Could they go to uni and graduate there? Is there a hospital nearby as I get older, is

Pete: there

Imti: Yes.

Aged care [00:15:00] facilities? Sounds morbid, but almost play it out until your death if you were living there. If you could actually access everything that you needed to.

Pete: Yeah.

Imti: It's probably got that infrastructure underpinning, right?

Pete: Yeah.

Imti: Because at the end of the day, that's what is actually gonna make people want to live there. Yeah. Because it's owner occupier appeal that drives property values along with supply shortages, it's the places with a high owner occupied percentage that outperform

Pete: Definitely. Yep. In comparison. Yep.

Imti: The crux of it is, is that regions can be scary, but they still do outperform inner city.

Pete: Definitely. And just one more thing too, if they're in proximity to a Melbourne or an Adelaide for example, they're gonna get the flow on effect from that capital city's growth as well.

Imti: Mm-hmm.

Pete: And they're gonna get people moving there because the capital city's too expensive.

They can go to a regional town like Bendigo at Ballarat.

Imti: I was gonna say, Melbourne's probably the best example, right?

Pete: Yeah, we're heavily buying Geelong as well. And I look at it like, can they go on a Saturday to the footy.

Imti: Mm-hmm.

Pete: In the city. To the MCG for example.

Imti: Yeah.

And do a day trip.

Pete: Can they do that then?

Yeah. Makes sense.

Imti: [00:16:00] Similar example is with Adelaide, right? With a lot of the skilled migration that's happening at the moment. A lot of the doctors and engineers and things like that, they have to take a regional posting.

Pete: They do, yeah.

Imti: And when you're in Adelaide, a regional posting is actually only 35 minutes out of a city.

Skye: Yeah,

Imti: It's not that far. And so a lot of them are ending up in the northern pockets of Adelaide because it's the middle point of Adelaide CBD, and where they need to commute to for work. And that's where I think a lot of the growth is happening with the Adelaide's of the world at the moment, compared to if that person wanted to migrate to Sydney, for example, regional in Sydney is three, four hours away.

Pete: And very expensive still,

Imti: and still very expensive.

Yeah. But definitely don't be scared of the regions. Just do your homework when it comes to them because they are high risk, high reward or just hit up

Myth #5

Imti: Fifth one that I have on our list is more properties equals more wealth. If you haven't listened to the episode before this one, I would say go back and listen to that for a deep dive on that, but essentially [00:17:00] not always the case, if anything can be wrong, a lot of the time, it ultimately comes down to your total asset base. So whether it's two properties at 400,000 or a property at 800,000, your asset base is 800,000, and so then it's what is your return on that 800,000 look like? If the property's not as good quality, higher maintenance, and costs you more for having, on paper, more properties 'cause you've got two instead of one. They're gonna cost you more overall, your return's actually gonna be worse. You're not gonna have more wealth. That's actually gonna draw that process back, that's why we're very bullish on for the average Australian who wants to create financial flexibility for themselves, they really just need to make one or two really, really good decisions in the property space, and then just let time do its thing. The pursuit of 10 properties that are all inferior is this sales game being played [00:18:00] by a lot of people in the property space where they get you excited to buy 10 properties. But who are you buying the properties from? You're buying the properties from them. Who's setting up the accounting structures? Oh it's someone attached to their business who's doing the finance? Oh, it's someone attached to their business. But if you compared that situation to, and you'd feel good about yourself, right?

You'd be like, yeah, I've got 10 properties. I'm gonna have a lot of wealth. But then when you strip away the costs, the headaches, everything that goes along with it, you might have someone else who has two properties and is completely outperforming you.

Skye: Yeah. 'cause it comes back to the time you have to play in the market, Take your situation with, say, someone in their fifties. They don't have 20 years in the market with what they're trying to achieve, but they are the ripe target customer for what you are talking about. 'cause they have the equity and the means to do so.

Imti: Mm-hmm.

Skye: They go and get sold this dream.

Imti: Of let's collect $300,000 units

Skye: Correct.

Imti: And get 10 of them.

Skye: Yep. And suddenly the dream is an nightmare.

Imti: Mm-hmm.

Skye: When it comes time to [00:19:00] exit out,

Imti: especially when you're paying a buyer's agent.

Skye: Mm.

Imti: When it turns into I can see Pete glaring at me across the table, but if you're paying 10, 15, 20 grand to someone, irrespective of the sale price for a $300,000 unit, if you're paying a BA 20 grand. You need two to three years of capital growth just to make their fee back.

Skye: Yuck. That's bleak,

Imti: let alone anything else. That is bleak.

Pete: Yeah.

Imti: And that's when it just, it doesn't make sense. Right.

Pete: You're pretty much paying the BA fee off over for a number of years.

Imti: Yeah.

Pete: Cash because

you're gonna get more cash flow from it.

Skye: Mm-hmm.

Pete: no capital growth. You're basically taking out a loan for the BA.

Imti: Yeah.

Pete: In a way. And you're slowly paying off their fee for the 10 properties. That's why it's crazy.

Imti: That's why Pete will never buy anyone anything for 300 grand.

Pete: No. Wouldn't even touch it.

Imti: But the big one there, more properties does not equal more wealth. A lot of the time it can just equal more headaches. And if you do want a deeper dive on it, I would definitely recommend going to the episode before this, where we unpack it in full detail.

Myth #6

Imti: Number six, outta seven. Property always goes up. This is one of the ones that I hear probably most frequently, I'm not sure [00:20:00] about you guys, but again, bringing it back to that conversation as to oh, why do you wanna invest in property? Oh, it always goes up and does really, really well, doesn't it?

Pete, you're about to burst. Go.

Skye: I'm, I've got a controversial topic on this one.

Pete: Oh, look, it

Skye: Pete, go first.

Pete: I think if you're in the market long enough, sure. It will go up.

Skye: That's my argument.

Pete: Yeah. Okay. It, will go up.

Imti: I'm happy to fight you both on that one, but continue.

Pete: No, I think it will go up, but it won't keep up with inflation. So the idea is when you're investing is that you'd beat inflation.

Imti: Does it actually go up then?

Pete: No, no. Technically, but on paper it does. On paper you might buy some shitty place for 300 grand in a remote regional town, and then it's worth, let's say 350 in 10 years

Imti: or 330

Pete: or 330

Imti: we just talked about.

Pete: On paper it's gone up. Right? On paper it's done 10% over 10 years, which is terrible, but it hasn't because inflation has been two or 3%. It's cost you much during you money. Time. Plus your outgoings and that. So, yes, on paper it goes up, but in reality it doesn't.

Imti: That's a great point. Stop and go, does property at a numerical level go up? Yes. It went up from 300,000 to 330,000. [00:21:00] When you account for inflation, which is two to 3% annually. If you bought it for 300,000, it's probably actually worth $250,000 in that day's dollar.

Pete: Yep.

Imti: And so on paper it's gone up, but in real terms, it's gone backwards.

Pete: And opportunity cost, which is not on paper, is just huge.

Imti: We definitely need to dive into opportunity cost in more detail. But Skye, what were you gonna add? Because I feel like you're about to Yes.

Skye: Yeah. Is that we buy well and never sell. So it comes back to the strategy side, though, that if someone does have a 10 year strategy, then yeah, this is a wrong mindset to have. But you hold it long enough, it'll forgive you.

Pete: Yeah. You can recoup your initial cost.

Skye: Yeah.

Pete: But yeah. I

Imti: could see you jump at each other.

Skye: Look, I do agree, you need to buy well, right. My mantra being buy well never sell.

Pete: Mm-hmm.

Skye: Once you sell, you've sold the golden goose.

Pete: Yeah.

Skye: You're done. You capped out any future capital growth.

Pete: Yeah.

Skye: At that point.

Pete: Mm-hmm.

Skye: But

Pete: I agree,

Skye: unless you have an exit strategy that is specific for you in your stage of life, that's a different story.

Pete: It just [00:22:00] depends on where you bought, based on what you are saying.

Skye: Mm-hmm.

Pete: This client of Imti's should never have sold.

Skye: That would be my theory.

Imti: That would've been the worst possible situation.

Skye: Hang on.

Pete: Yeah.

Skye: for dear life and it will forgive you eventually, but

Pete: might forgive them in the grave

Skye: again, depends on their age and their strategy.

Pete: Yeah, yeah, definitely. Yeah. Yeah.

Skye: And how much time they have to burn. Mm. They may not have that time.

Pete: Yeah. If they're young enough though. Get rid of it and buy something better. Like

Imti: just get out,

Pete: get out and buy something. 'cause you know you could do that. And then you get in the right market, it goes up by 15% in a year.

Skye: To be fair, I've made more out of my purchase than I purchased three years ago versus the ones I held for 13 years.

Imti: Yeah.

Skye: That did not meet those regional markets.

Imti: Can't. 'cause you didn't buy Well, yeah,

Skye: not that's the I did not, and I didn't use a buyer's agent and I thought I knew best, which is

Pete: a lot of people like that though it was gonna be great for passive income,

Skye: I was just gonna hold it forever when I saw that it wasn't going up.

Imti: Yeah, and that's the whole sunk cost fallacy thing, that we see in our space, is that,

Skye: mm-hmm.

Imti: The further down the path you get of a bad property decision, the more [00:23:00] emotionally invested you get, the less likely you are to actually cut ties with it.

Pete: Yeah,

Skye: sounds like every boyfriend I've ever had.

Imti: Because you sit there and you go, maybe next year,

Skye: Maybe they'll change.

Imti: But yeah, does it always go up? Yes, but.

And the but is the big part.

Skye: It's big

Imti: Because if it's not hedging inflation, in true terms, it's not going up.

But to Skye's point as well, sometimes you might just be looking at selling too early, and if you're holding it through a more difficult part of a cycle, you can end up on the sunny side of the horizon.

Pete: Two years later, it could be very different story. Yeah. Had you held for sure. Oh hundred percent.

Imti: But you've gotta have the stomach for it.

Skye: Yep.

Imti: Which is difficult.

Skye: Yes.

Myth #7

Imti: Let's bring us home. Number seven, and this one is gonna be fun. Real estate agents need to disclose everything that's wrong with the property. Now, this is something that I think every first home buyer or first time property investor believes, even experienced people believe that it's true.

Skye: [00:24:00] Mm. Myth. Hugely, because it all comes down to the questions you ask.

Imti: Okay?

Skye: If you are not asking that right question guarantee you the agent is not telling you

Imti: Why not?

Skye: It's not in their best interest. They act for the the vendor. So they have one job and that is to sell the property for the highest amount of money possible. If they are disclosing things that might impact that sales price, it's literally their job to not disclose it if they can help it. And again, how you ask those questions, just because the agent has answered it. You still need to be careful. It doesn't mean that they've answered it to its full extent or to its full capacity.

Imti: Oh, "I don't think so" is very different to a "no", right?

Skye: Correct. Yep, exactly. A response isn't always a response.

Imti: Or "I'll check and I'll get back to you."

Skye: Yes. And will they commit that response in writing? Because there's lots of ways you can say something without saying anything at all.

Imti: Mm-hmm.

Skye: That is the art of sales.

Imti: Say the it's the art of [00:25:00] sales full stop, right?

Skye: Yeah.

Imti: People who are in sales are selling and that's the reality. It's the

Skye: and you have to overcome objections

Imti: yeah.

Skye: Yeah.

Imti: People are gonna be listening to this and being like, oh, agents lie and they're horrible

Skye: Agents are the worst.

Imti: Worst.

Skye: I think that perception's already there, right?

Imti: It is there, but it's also like, okay, well, if you're a vegan and you go to a barbecue festival, you can't get angry at everyone for eating meat. Right? You gotta understand the context of the scenario that you,

Skye: correct. Yes. And that's where, yeah, there's a lot of rubbish agents, but if you take it back to what is it that they're being paid to do? It's not act in the buyer's best interest,

Imti: sell the property at top dollar. Yeah.

Skye: Yes.

Imti: Well, on that note, Pete, I'm sure you've got examples where agents have either deliberately withheld information or gone out of their way to not find something out, right?

Pete: Yeah, definitely. One quick example would be, 'cause we're talking about land size, just put yourself in the agent's shoes. They're not gonna stand there and say, Hey, this property's on 800 square meters, but it's got an easement down the middle, so you can't develop it.

Skye: That's for you to find out because

Pete: Yeah, exactly.

Skye: They relying on that one numpty who'll buy it.

Pete: Yeah.

Skye: And won't [00:26:00] check.

Pete: Yeah. And that happened, not that we bought it, but I remember going to one and it was flooded with people. Mm. But after I did my checks, there was all these easements on the property and it just wasn't worth it.

Skye: Mm.

Pete: But the agent did not mention that to any buyer.

Skye: No.

Pete: At all.

Imti: Why would they?

Skye: Why would they?

Pete: Exactly. It's not in their best interests. Right. Yes, exactly. And that's just something people need to remember. If the agent was working for you, would you want them to disclose that? Hell no.

Skye: Yeah.

Pete: I wouldn't.

Skye: But if you were in that position,

Pete: yeah.

Skye: Yes, you wanna buy it for the best possible price, but when it comes time to sell,

Pete: yeah.

Skye: You want the highest possible price.

Imti: Yeah. When you're selling, you want top dollar.

Pete: Yeah.

Imti: Also, no one ever sells a property that's a hundred percent perfect.

Skye: No, no such thing. Even brand new,

there's

Imti: no such thing

Skye: has multiple problems.

Imti: And I think the thing there is that, there's this misconception that real estate agents are actually legally bound to disclose everything that's wrong with the property.

Skye: No, we're legally bound to tell the truth, but the truth can be manipulated by not answering it in its full entirety. Yes, there's easements, but where are they?

Pete: Yeah, yeah, exactly

That's

Skye: up to you to find out.

Pete: Yeah.

Imti: If you don't have a title search on the property, you don't [00:27:00] know the easements exist.

Skye: Yeah. They're required to give you the form ones with the titles, with the easements. You are required to read that information. It's not up to the agent to tell you that, and I come across that all the time that people expect that the agent has to tell you those things. No, that's the whole point of the property documentation.

Imti: That's one thing that SA has that's very unique. So for anyone who's listening, who's wondering what a form one is. A form one is basically a full disclosure document.

Skye: It's the history documents of the property.

Imti: Yeah, that gives you the ins and outs. But Pete, as you would know, buying in multiple states around the country, SA's level of disclosure is actually quite high compared to everything else that's out there.

Right?

Pete: Oh, it's significantly higher. Queensland is a bit different now, but not that long ago actually, they got new disclosure changes where you have to disclose information about the property before you sell it.

But before that you didn't get anything really. You had to actually go out and do your own research. You had a seven day due diligence clause, if you actually included it in there. And you had to run all your searches and stuff like that. SA's a [00:28:00] walk in the park, you get the form one and it's all there.

Skye: Yeah.

Pete: Now people don't read it though.

Skye: People don't read them.

Pete: No.

Imti: People should read it.

Pete: That's where the conveyancer comes into it though.

Imti: Yeah,

Pete: you need to check with your conveyancer and it's not just a conveyancer who's going to give you high level advice, copy and paste from a AI chat bot. Some conveyancers these days will just run the contract through

Imti: their version of a chat GPT

Pete: Yeah.

Imti: And rely on what it says,

Pete: and it then pushes it out in their template, their format. And that's no use at all. It doesn't pick up on all the little discrepancies that some properties do have.

Imti: Even the big discrepancies. Right. I mean, think about the stuff that you ask Chat GPT now, it's just a hundred percent wrong.

Pete: Yeah, exactly right.

Imti: And then they rely on running the contract through it for due diligence.

Pete: Yeah.

Imti: It's very dangerous territory.

Pete: All they're really doing is to check that the names are right, the address, the amount, the contract date. That's just small shit that should be done, yes, but it's all the other stuff that comes with it. Are there easements? Are all the additions on the property being approved and got council approval

Skye: was it previously a dumping ground

Pete: The contamination of the land, [00:29:00] that's all in there.

Skye: Yes but most people wouldn't know to look for it.

Pete: No. But again, that's where the conveyancer comes into it. But,

Skye: and as a sales agent, I'm not gonna tell you.

Imti: Yeah, you're not gonna sit there and go through a form one with them.

Pete: No,

Skye: God no.

Pete: You just say, it's in the form one. That's a common thing I'll get, that's when I know there's a bit of an issue. If an agent, if you

Imti: don't get a straight answer

Pete: and they

Imti: go, it's in the form one.

Pete: Yeah. 'cause I'll be like, oh, is there easements on here? I already know there are or not. That agent goes, oh nah, nah, definitely not. That's okay, you can do, don't wanna take that hand on heart.

But they're most likely right. But if they say, check the form one. I'm not sure that's when it's a big red flag.

Imti: Mm-hmm. I think it ties into real estate agents needing to disclose everything wrong. Obviously we've covered that they don't have to.

Bonus Myth #8

Imti: The side tangent and the bonus number eight that I wanna chuck in is that the real estate agent is your friend through the transaction.

Skye: Yeah,

Imti: Unfortunately for first time property investors in general, they'll get treated one of two ways by sales agents.

One is they'll be completely dismissed and ignored because they're tons of work. Or the [00:30:00] second part of that is they magically think that the agent is actually their best friend but is really just trying to juice up an offer.

Skye: Yeah.

Correct.

Pete: Unconditional offer.

Imti: Yeah, unconditional offer. Don't worry about it. Now everyone removes their finance clause. Don't worry about it.

Skye: That's fine. So normal.

Pete: Remove the cooling off.

Imti: Yeah, that's fine. Don't worry. If anything's wrong we'll look after you.

Pete: Yeah.

Imti: Famous last words. Don't believe it.

Pete: Then they go missing after the contract's signed.

Imti: Yep, a hundred percent. So the seven myths that first time property investors need to know. One, bigger land size isn't always battle. Two, property managers are all the same. They're not. Number three, property is great for passive income. It is not. Four, inner city performs better than regional. Five, more properties equals more wealth. Six, property always goes up. And seven, real estate agents need to disclose everything wrong. I'll bring us to a close, unless either of you want to add anything that you don't think that we covered off.

Skye: No,

Pete: no,

Imti: No. I would just say to anyone who's looking at getting [00:31:00] into property investment, is very early in their journey to bookmark or save this for later on in your journey when you're actively going to have a look ' cause it will definitely help frame a lot of the decisions that you make along the way. But besides that Skye, Pete, Anyone who's listening, first timers, welcome aboard. Repeats, thank you again, and we will catch up with you next episode.