Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirkby, the Wealth editor at the Australian. Welcome aboard everybody. Now before we start the show, you need to know a few things in case you missed it. Don't worry any longer about the government changing negative gearing or changing the rules around capital gains tax. The treasure Jim Chalmers has explicitly ruled that out and said that the government
is not going down that path. There's a bit of a cloud over the market about that for some time. By the way, when he rules these things out, he rules them out until the next election. So let's see they're ruled out. They're ruled out for half for six months or so, but he has dropped it for the moment. To keep that in mind. Similarly, all this talk about the mortgage buffer, the three percent extra that you have
to when you go for a mortgage. You want to get a mortgage at six percent, the bank has to assess you at nine percent. Because that's the mortgage buffer rule, they have to add three percent to the assessment of you. There's been an attempt by two banks basically to get rid of that and the regulator came out in Parliament on Friday and said, no way are they changing that. And more than that, John Lonsday, who's the CEO of APRA,
made the point that it's not linked with rates. The argument was greats are going to come down, so that buffer should come down, and he's tried to decouple that and said no, it's actually got to do with a lot more than rates. Has got to do with the possibility of economic shocks. So I wouldn't be waiting for the mortgage buffer to change, so as you were basically
on the rules around tax and property. Now, one of the things I wanted to talk to you about today was the show regularly has buyer's agents on, and I've expressed enthusiasm really for buyers agents because I like their perspective on the market, which is different than real estate
agents sometimes or developers or investors. And also I've used buyer's agents, which I personally use them every time I ever bought anything, and I found them to be terrific, particularly at auction, because I'm completely hamp fisted or whatever at auctions and you think you can do it, but when you stand there on a Saturday morning, you can't do it right because you can't do it as well
as a professional. However, there are issues and our guest is though our guest is a buyer's agent, she has not a fan of a lot of the things that go on inside the industry. She is a buyer's agent and she's a real estate educators. It's going to make a very interesting exchange. It's Veronica Morgan. How are you, Veronica?
I'm very good.
Thank you, James, lovely to have you on. I suppose buyers agents we think of them as the assistant that stands beside you at the auction, and that's it, at their golden moment. That's the mat the very best, isn't it. But there's a lot of things you don't like about them. They've arrived and they've become almost baked in. Haven't theyated the industry? And if you go to an auction and there's four bidders and three of them have a buyer's agent standing beside them in you don't have one, is
it probably in trouble? Am I wrong about that?
I've got a slightly more contrarian view of that, And usually when I go to an auction, that's unusual to see a buias agent, and I guess that's symptomatic of one of the issues in the industry. At the moment, we had an influx of new people joining the industry. The barrier to entry is very low, and a lot of new buias agents are very interested in transactions because the more people they buy for, the more money they make.
And so if you go to an auction where there are a lot of buyers agents, I'd be thinking, Oh, these bias agents think this is an easy property to buy, which is actually problematic because I want to buy a property that is a cracker asset. There's actually quite difficult to buy because the properties are difficult to buy long term, easy to sell. And if I see a lot of bias agents, I'm usually worried that I've actually inadvertently chosen an asset that's not as good as I thought it was.
This little barrier to entry. Is it harder to become a realisted agent than a bios agent?
You No, it's exactly the same process. And so we've got eight different jurisdictions in this country. Each state and territory has its own legislation around the process to becoming a licensed real estate agent, so the process is exactly the same, and so buyers agents in a way tacked on to the process that has been long in place to become qualified to become eether a property management or
a sales agent. And the problem with that is that the buyers agent really to do a great job, needs to know a hell of a lot more about property than a sales agent or a property manager even needs to know. And so we're tacked on. Because we're a smaller part of the industry. It doesn't seem feasible or economical to develop a whole new educational regime or licensing
regime for buyers agents. It's more more convenient if you're like expedient to lump us in with the rest, and that whole education and qualification process is woefully and adequate for churning out really competent buyers agents.
Tell me what's the worst stuff that's going on among buyers agents? The bad ones, the.
Worst all right. In Queensland, it's currently the easiest state to become licensed, so you need a full license to be able to operate a business in real estate. So most sales agents would all property managers. They wouldn't go and get qualified and then immediately set up an agency.
They would get qualified and go and work in an agency, and that's one of the barriers to entry on that side of the equation because it costs quite a lot of money to set up a real estate agency and they're sort of forced by the nature of the industry to go and get experience. And in some states and territories that is baked into the qualification process that you need to have work experience in order to go up the ranks if you're like in terms of your license.
But in Queensland you can go and get the first qualification, which is a certificate for you can get that and then you can do one additional subject which is one of the Diploma of Agency Management subjects, and with that as the most minor qualification in the entire country, you can get a full license. And what some operate, some new operators in the industry are doing it going and getting a service office up there. They're going and finding an RTO that has the easiest and cheapest way to
get the license. They get their life, they get their full license up there, and then they apply for mutual recognition in another state or territory they don't always get it, but they often do.
Okay, But that in itself is unimpressive, right, that someone can get in so easy, And that's always the case. There was a time when financial planners could do a multiple choice question with another planner helping them and they'd qualify. I witnessed that, but I want to ask you, Okay, so we'll take it. That's not great. But how was it transparent to be a problem? Then? How is it? How is that a problem for anyone who uses them?
The problem for anyone who uses them is that quite often, so you go and do that qualification, and even if you manage to do it at a reputable RTO or organization, there are no modules in that course that teach you due diligence, for example, And you would expect if someone is going to hire a buyers agent, you would expect that buyers agent is equipped and educated and experienced enough to know the red flags that you should be avoiding
when you buy that property. But these people often have zero property experience zero, a real sad experience, and particularly if they're getting qualified in one state, and then they're going to apply that learning, if you want to call it that in another state which has a completely different regime of vendal disclosure and the documents in which you would expect to get from the agent versus those you don't get from the agent, and knowing what you get and what you need to then go and find out
yourself and what is discoverable. But if you don't know what you don't know, you won't even go through that process. So that is very alarming. And I run a mentoring program for new buyers agents, and I have a Facebook group and I'm talking with people who are in the process of becoming bias agents or even that those who have set up business and actually taking on paid clients and helping them. And I ask them of the most basic questions and they don't know how to and to them, that is alarming.
It is alarming, is it because it's a boom business basically, and maybe ten fifteen years ago there was a very small amount of them, and now there's many more because basically trickle down. Basically the people used to buy them when they were buying trophy homes, et cetera. But now it's like middle of the world exercise.
Yeah, it's a little bit, you know, on the sales side of things. When I first started selling real estate twenty five years ago, nobody used a property stylist. Now everybody does it. It maybe a little bit similar.
Exactly same sort of thing, that's right, And then there's a sort of you must mustn't you because because that's the competition, then isn't it a little bit?
But I think there's a lot of proponents to say, this is the booming industry, this is the future. There's so much money to be made by becoming a buyers agent. They turned to America and say, look in America, everybody's represented. But in America, until very recently, it was that the vendor the sales half of that equation. They would charge something like six percent commission, and then that was split between the brokers for the buyer and the broker for
the seller. And it's not the same here. It's vendor, it's user pays here. And so I think that's that's a natural barrier to becoming something everybody would use as a buyer's agent. And look, to be honest, I see buyers agency in action often at auctions, and I watch what they're doing, and I see how there's their processes they're going through, and I think that buyer actually has lost out because they've employed somebody who knows not enough,
you know what I mean. I can see that the buyer probably would have been better off doing it themselves in many cases. So it's pretty horrible.
Well, I have to change my language on the sill, and I have to talk about good buyers agents, right, because there's good ones obviously very interesting. Okay, just one last thing before we move off from this segment. What would be a giveaway of a buyer's agent that is not qualified or capable in your eyes to the lead person? What would be a signal for someone who was choosing one.
There's a few things that I encourage people to look for, and one is look for a local specialist. Now, I know that there's a problem with going to a local specialist buyers agent, because if you ask them for investment of ice as to where should I invest, they've only got one tool they've got and every problem is going to be a nail if the only tool they have is a hammer. So I get that there's an elementation in that, and so that's the wrong question to us
that type of buyers agent. But a local specialist will actually help you buy the best possible asset in that area if they really are very good at what they're doing. Whereas if you go to one of these we jokingly call them fly in flya uts borderless buyers agents. They don't fly anywhere anymore. They buy property sight unseen across
the country. They don't know how to choose good assets and in fact, sales agents and I routinely hear the story of sales agents in regional areas and other capital cities sort of sniggering at the stock that they sell to these buyers agents and the prices that they get
for them. So you need a local specialist. You also need to have somebody who I say has got ten years experience, and the reason I say ten years or they work within a team that has where they're mentored by people that have good ten years, because you need someone who's seen that market through up cycles and down cycles, because the sorts of competition you get in an up cycle, everybody competes for everything, and that means that C grade properties are getting competition as well as A grade So
you need discernment to be able to sort that out and really behave accordingly in terms of what the market conditions are, but also have that healthy regard for the risks that you're taking and that healthy yeah, that concern for what could happen when the market does turn, and you want that. You want somebody who's got more experience than you do. And the other thing that I would say, you really want them to care and communicate with you
throughout the entire due diligence process. I would ask any bias agent, what is your due diligence process? And you want something in that that they disclosed to you, and they show you how they actually present that information that surprises you. That is not something that you would have done or you would have assumed would be done, but something beyond that.
How are they adding value to you as a buyer? Really good? Okay, terrific, We'll take short break. That was very interesting and dimensioned that I suppose to the problem for me has been that the ones I used were good. We're talking a minute. Hello, Welcome back to the Australians Money Puzzle podcast. I'm James Kirkby talking to Veronica Morgan. She hasn't been on the show before. It nice to
have her on. She's a buyer's agent, she's a properly educator podcaster herself, and she has good individual perspective on the buyer's agents, which I think perhaps part of the problem is they're all too polite and they don't they don't actually tell us what they're up against, the good ones, because I only have good ones on the show, folks, as you would know, and I'm pretty selective as to who I have on myself. I think I've only had
maybe four and I know all four. Okay, Now the other thing talking, we're talking about auctions, and I was talking about how you haven't a clue. You think you have. You think you'd be good at an auction, even if you've done it before, you've done it for friends, but when you do it for yourself, you go to an auction, you think I can do this. I can certainly, I know what I want. I'm very clear, I've done my homework.
But it happens so fast sometimes, and it's such a game that if you are up against peple who are very good, you're at a disadvantage. You're going to tellus about some of the mistakes that people make when bidding at auction, and I'm really key to hear what they are Ronika.
Oh, I love going to auctions, not only when I'm bidding. In fact, I prefer to go when I'm being a spectator. I find them fascinating and you can really put to down the entire all the mistakes that buyers make to really one core mistake, and that is that they don't prepare properly. And the reason they don't prepare properly has got no idea what they're in for, or they make various assumptions such as, oh, I'm good at public speaking, so I'll be fine at auction. It's a completely different
kettle of fish, particularly when it's your money. As you've mentioned in there in the intro. Even I see people bidding on behalf of other people, and again they've made the assumptions about what it takes to be good at auctions, and they've got it all wrong. So the preparation, I say, is a number of areas that people really fail to do, and one of them is to literally go to auctions and observe the amount of times I've met and spoken to people. The first time they've actually bid has the
first time they've been to an auction. So they go to an auction for the first ever time and bid and they've got no idea what they're in for. So that's the first thing.
Yes, okay, do your homework and get out there and witness actions at least several times.
Yeah, that's exactly right. And there's three different main sort of forums for auctions. If you're like, there's in so that's where there's a whole lineup. It's usually on an evening. The agency will have a whole bunch of properties lined up, one auctioneer. Everyone's bundled in a room. If you're in the States where you're registered for auction, you'll be lining up first to register, but you won't know which property
you're registering or other people are registering for. And if you're in Melbourne or Victoria, of course you don't need to register, so you've got Buckley's there. So that's the in rooms auction. A very popular one is on site and so that's an individual performance if you're like per property, usually on a Saturday, and the auctioneer will be in the car whizzing around all around the city popping up
whatever the next thing property is on their agenda. And the third one is online, which there's still a little bit of a hangover of that from COVID that became a thing in COVID. It's not that common, but again you need it to work out. If you're going to go for a property that is being marketed for auction, you need to understand which of those three forums is it going to take? Or forums is it going to take, and then do some research as to those forms as well, because they're all very different.
Do you think any of the formats is more useful to the buyer than another?
Now, they've all got pros and cons. To be honest, they've all got pros and cons, and also a lot of it depends on the competition of that particular property as well, so you can't necessarily judge that or guess that. I know that most auction is actually have a YouTube channel now, so you can usually check them and their
form out. But what you're not going to check for that is you're not going to understand what the other bidders are doing, because what they that's the the I love it when I got to an auction, the auction he has got to be able to see me. I don't really care what the auctioneer is doing. I care what the other bidders are doing. Most buyers will look at the auctioneer, not the other bidders, but the other thing.
And the huge mistake that people make, and this comes back to prep as well, is understanding what that property is worth in a market sense. So doing your research on really what the value should be in terms of fair value for that property in the current market. And there's a process you need to go through to really look at other properties and compare hinge. It don't just add ten percent to what the agent is guiding, because that is completely the wrong way to work out what
you should pay for property. So you work out, okay, where does that property really sit, And then you've got to think where will I push myself if I have to with competition in order to buy that property. And what I see is that people go into auctions really with their limit in their head is what they like to buy it for, not what they will pay if
they have to. And so what actually happens and I often see there's really confident bidding up to the point where people have reached there, I would like to pay it at limit yeap. Then they look at it. If they're in a couple, they look at each other absolutely give the game away. That's why I look at buyers, not at the auctioneer. They give the game away. The auctioneer works on that, they play on that, they work on that, all that body language and so this and
this is for me. And then I know when I'm bidding against somebody, if they're over there, I wanted to pay it limit, then I've got to try. I've got my tactics as a bidder will change if I'm against somebody like that, And the auctioneer is also working them in a certain way. And that's that is the biggest mistake that I see buyers make, that lack of preparedness to think it's a competition and at what price will I go to versus what price will I walk away? So yeah, that's the number one mistake.
Yes, can I ask you one thing, how do you what's your assessment of all the games that go on auctions, which are as you said, they're fascinating. The person pulls up in any type jag and parks it in the parks it in the driveway of the house, They're only a bidder. I've seen that done. I've seen someone come around the corner on a bicycle, start bidding and win the auction. I don't know what are there psychological games? I think they were, But how does a buyer respond to this sort of thing.
I don't know about the bicycle, but the e type jag and such games, I think, what a joke. If you need to do that, you probably don't have enough money. You know. The real games come in to the actual bidding, and there's different sort of avatars I have for different types of bitters. And I hate coming up against the testosterone bidder because that's where the ego kicks in, and that's where it's it's just a desire to win it. The price is secondary. That always bothers me when I
see that sort of behavior. But this sort of posturing and fluffing your puffing out your feathers and all that sort of p lava, does it not work? It's naive. I think most people just think wanka. I don't think. I don't think it works.
Oh it's a thing, right, So there's ten people there. Let's say it's a frostal homeoction. The six couples, they are more or less to say, and someone very clearly arrives with their rich dad. The of that. What would you do in that situation? Do you ignore the rich dad?
Ah, look that I clock everybody. I clock everybody because and the rich dad's or even just dad's full stop are dangerous at auction. And I've been at auctions where I've seen the adult children turned to dad and say, Dad, I don't want to pay that. Don't worry.
I got.
Yeah, there's an ego and pride that goes on with that, and that's way more dangerous than somebody tried to show up with the flashy car.
Yeah right, okay, very interesting.
Sometimes I think the thing is sometimes you just can't. There are some people you cannot compete with. And there's luck involved with auctions. That's lucky for the vendor, it's unlucky for every other buyer.
Yeah, okay, information as power is that it's very interesting, very interesting. Yes, Yes, I think I told the story of an auction in my neighborhood where there was a very contested auction, and there was there was basically a little old lady and I knew that her daughter and family lived around the corner, and I knew that this woman was going to pay. It didn't matter, she was going to be until she got to the points where she was brought. Basically, she was going to take whatever
that house cast. She was going to buy it because she wanted to be there. And if you knew that then you would have really changed. Information is so important. Okay, terrific. We'll take a short break. We'll be back in a moment with some questions. Hello, welcome back to the money Puzzle. James Kirby with Veronica Morgan. Now, folks, we had great fun.
I think fun is probably the right word about the Prime Minister and he's ill timed purchase of his beach house for four point three million on Copa Cabana Beach up there on the Central Coast, and we talked all about holiday homes and were they good and were they bad last week and whatever else it costs the Prime Minister. Do keep in mind that he paid less than the person who boarded prior, so he paid three hundred thousand less than the person who had bought that house four
years ago. So as an investor, no problem with the PMS moves there at Central Coast. As a politician, it was badly tapped as we all know. Okay, Sean says, I have a holiday home for twenty five years. I use it for children' sool holidays, used by them now for free. I rented out to people I know. Six hundred percent capital growth. Six hundred percent capital growth, says sean sort of place is not being created anymore. I use it twice a year, and basically he says, yes,
but tradees are a problem. So there you are. That's one person's view of the holiday home, and that's when it goes very well. I imagine nothing like staying in the market for a long time. Now. On questions, Carl says, I caught up with a mate who is a self employed builder and I asked him two questions, how's work he said? He answered that he knows some people who don't have work and are running out of work. These
are tradees. And he asked our building products still going up and this person said, yes, they are still going up in price, and he blamed the price of energy for manufacturings, especially concrete, which is very energy and tensive. Is he right, that's very simply answered. Actually, yes, he is right. You know, the inflation rate's about three and a half percent, and the building materials inflation is considerably higher than that. It's up at five and six percent.
The cost of building a new home is up about forty percent over four years years according to some builders, and I'm quoting the managing director of Garth Chapman Queenslanders, Stephen Havas, who has said that the exponential rise in the cost of construction. He's not the only one US of builders have talked about that. It is particularly to do with materials and it must be said topic for
another day. But regulations and standards, which both environmentally and just generally ESG standards are definitely definitely putting extra costs on builders, so their inflation rate is much higher than the general public. Yes, cal that is how it goes. Okay, Sally, you would be dealing mostly, I'm sure Veronica with existing properties rather than new ones, aren't you when you work in your area, correct, so that issue wouldn't be a big thing for you.
Correct, Although we do have clients that are buying to renovate, but yeah, we don't buy brand new.
Do you find people are more worried than usual or scared than usual to renovate at the moment?
Absolutely, and that's one of the reasons you've seen a real disparity with the old renovator's delight. I know we're near as popular as I used to be.
Are they, as a result, potentially better value than they used to be?
Possibly? And I think that if you have the skills and know what you're doing with renovating, then there's some good opportunities there. But I think the reality is that most people are pretty much more aware of the risks around that costs blowouts with renovating now than they potentially were beforehand.
Yes, that's right, because there's both the inflation issue that we know the building inflation is higher than normal than general inflation, and then we know that there is a shortage. Also, it would seem of some tradees. Okay, Sally says, My partner and I are looking to buy a regional investment property with the money that we have saved. My personal
income is substantially less than my partners is. Around the advantage and buying the property in my name only instead of having a joint ownership with my partner, and will
this have an impact tax wise? Okay, we don't answer individual questions and it's never advised only information, but I did put this to our regular guest financial advisor James Gerard sally about this whole thing about what do you do if there's a big gap in income between the two partners, and he says, on income tax, it generally makes sense to purchase investment property in the highest income earner's name. Okay, if the property will be negatively geared.
If the property is neutrallly geared, joint names is common, and it is cash flow positive, then the lower income earner typically buys the property to minimize the tax on the net rent. Okay, hope that's clear. So you can see that. Obviously, if someone is making a lot more, they pay a lot more tax. So then if it's negatively geared, you'd use you with the person with the hiring, but would be the buyer. On land tax, it's a state based tax, and although the family home is excluded,
investment property and holiday homes are included. So best to go to the state revenue website and see what allowance you can have before land tax will apply. And he says, finally, this is James Gerard Financial advisor dot com dot you. Land tax will be assessed based on the percentage ownership split. Okay, very interesting. Keep all that in mind it's not easy property investment is. It becomes complex tax wise, particularly complex on new regulations, which makes it all dearer.
Can I add something there, James, Yes, you can. Yeah, the borrowing. They said that they're saving using their savings, but if unless they've saved up the entire purchase price, in which case the cent there won't be negative gearing, they will be borrowing and they need income to borrow. It's nice to think you can actually set up the ownership, the naming of or whoever the owner is based on
income and tax decisions. But if you can't borrow the money because you're setting up with the lower income earners as the owner, then that might have an you might not be able to buy the property in the first place.
Very true, Very true. Yes, But Sally and all the salies out there, get the structure right, that's for sure. Get the structure right before you move. It can really make a difference long term. Okay, terrific. But it's been really good to talk to you, Veronica, and you got a lot in there, you got a lot into the thirty minutes. Thank you very much. Great to talk to you, Veronica Morgan, my pleasure.
Thank you.
James love you to have Veronica on the show. She'd be on again for sure. Okay, folks, keep those emails rolling in. Talk to you soon.