Transcript of our interview is here;
Clinton Waters: Hi, it's Clinton Waters here from Axton Finance, and today I'm here with Heath Bedford from Performance Property. Heath, thanks for your time.
Heath Bedford: Thanks, Clint, thanks for having me.
Clinton Waters: Yeah, no problems. Look, I thought I'd take this opportunity to ask about what it is that you guys do as professional buyers advocates. We've done quite a lot of work together over the last couple of years, and you've achieved some really good outcomes for our clients. Tell us about Performance Property.
Heath Bedford: Yeah, sure. Performance Property is a national independent advisory firm. We're a team of qualified property investment advisors. We sit on the board of PIPA, which is the Property Investment Professionals of Australia, promoting ethics within the property investment industry. We're a team of qualified property valuers. We're licenced estate agents, not that we sell. We need to be licenced in order to buy on our client's behalf. We're obviously property investors ourselves. Our core business is research, and then from that is acquiring, managing, and diversifying low risk property portfolios for our clients.
Clinton Waters: Absolutely, without going into specific case studies you guys have bought for a whole host of our client. Be it from first home buyers, to investors building and diversifying their portfolio, to expat clients as well. Australian's that are based overseas that are time poor and wanted to buy properties in Australia it's been a really good result for those clients. If we were sort of say it like, one of the things that a client say, "Why would I use an advocate? I can just go on line and I can find a property on Domain or RealEstate.com.au." Why would I appoint a professional such as yourself Heath.
Heath Bedford: Look, it's a question that we get asked quite a lot from prospective clients. There's probably three main reasons, its broad reasons that we look at. Firstly we can widen clients options so our extensive research, intimate market knowledge can place a client into suburbs, markets, cities, even different States that they may not have considered. We leverage off our extensive relationships with real estate agents. We can get the client at the front of the queue so to speak, giving them off market or pre market opportunities. Taking some of the competition out of the equation.
Most importantly in my eyes is risk mitigation and cost savings, so quite often we find a lot of investors strategy is around buying in a suburb that they all ready live in, or they know, or their family or friends have lived in. Or even worse they've been seduced you flashy marketing material and they've bought off the plan. We find that's quite often, obviously opening up different opportunities for them. Our research can get them into markets they wouldn't have considered otherwise. More importantly we're buying at or below market value, so we're never over paying for an asset.
We inspect hundreds of properties each year. We know the difference between an A grade asset in comparison to a B or C grade asset. We know, which locations are going to perform more better than, so we're stopping clients making mistakes from buying under performing assets or locations.
Clinton Waters: I mean, look that's a really important point about stopping clients making a mistake and we've seen it first hand. Where you guys have purchased a property for a client and it's looked great, you guys go to the extra effort of getting pre purchase inspection reports. You generate a lot of information around the metrics rather than the gut feel of saying, "Well this might represent fair market value."
Heath Bedford: Absolutely, it's got to come down to the fundamentals, and a thorough due diligence process.
Clinton Waters: Because buying the wrong property as an investment is insanely expensive right?
Heath Bedford: Well that's right, the costs, the entry and exit costs, the difference between an underperforming asset in comparison to a high performing asset could be over a 10, 15, 20 year period, hundreds of thousands of dollars.
Clinton Waters: Yeah, exactly. It's as much about, I guess, insurance and piece of mind that you're helping your clients validate their decision to maximise their likelihood of long term returns. Rather than just simply saying, "Look I'm being speculative." I think it's a good idea and you know I've been to a couple of auctions, it's not something that you want to get wrong is it?
Heath Bedford: No, not at all and you know all our decisions, purchasing decisions are based on thorough research. We've got research over the five major capital cities, the three minor capital cities, and the 25 most populated regional centres in the country as well. We can make a call on any market, at any point in time.
Clinton Waters: Absolutely, and I guess lastly as well. It's a great opportunity to ask yourself Heath as a professional in the market, we've gone through an incredible amount of growth in the last couple of years. There's been a lot of regulatory changes from the banking and finance side of things, which we can certainly attest to. What's your sort of take on the market? I mean obviously we're based here in Melbourne but you've also go access to the market in the broader sense inter State. What do you sort of see for the investor looking to buy around that five, 600,000 dollar mark, what opportunities are out there and what people should be looking for?
Heath Bedford: That's a good question. The markets are all at different points of the cycle across the country. Melbourne and Sydney have certainly been our strongest performing capital cities.
Clinton Waters: That's what's reported a lot.
Heath Bedford: That's right, yeah. In 16 years of property I've never seen so much noise in the media around property and the next hot spot. These areas up 10, 15% year on year and et cetera, et cetera, and the boom and the bust and all that sort of stuff. Sydney and Melbourne certainly have been the standout performers over the last four to five years. The best time for buying in those markets was probably three years ago, three, four years ago back in around 2013. The yields were too low for investors in both of those markets, they're getting closer to the peak of the pricing cycle. Look over an 11 year doubling cycle we generally see between five and seven years of growth. Then a period of pricing stagnation.
Clinton Waters: In Sydney was a prime example of that as well, it was stagnant for many years.
Heath Bedford: Eight years, 2003 to 2011 the market effectively only moved about 25%. We saw a great opportunity many years ago in that market, but we're seeing good opportunities in other States, particularly that price point that you're referring to. That low, or below $700,000 purchase price in Adelaide and Brisbane are representing good value within certain pockets and certain asset types. We're only focusing on character houses within those markets and within very close proximity to the CBD. Yields are a little bit better and we're looking at probably a percent higher from a gross yield perspective in comparison to an equivalent asset in Melbourne and Sydney. The serviceability is a little bit easier for the client.
Clinton Waters: As to is the price point, I mean you guys in just the last couple of weeks have bought two properties for clients of ours in Adelaide.
Heath Bedford: That's right.
Clinton Waters: It's quite amazing as far as when you look at the variables in your reports and the demographics of those particular markets, and as well as the yields as well. It's a great long term opportunity and you don't have to stretch yourself as much to enter those markets.
Heath Bedford: That's right and look, Melbourne, Sydney, Brisbane, Adelaide and Perth since the 1970's have performed in line with each other broadly compounding between eight and nine percent, that's house price growth. A lot of people ask the question, Adelaide really? It's just a lower price point, it's an improving market. We're seeing it first hand on the ground.
Clinton Waters: That's great. Well look thank you very much for your time today Heath we really appreciate it.
Heath Bedford: No problem at all.
Clinton Waters: Of course, if you would like to get in touch with Heath from Performance Property please feel free to email myself or there will be contact details hopefully in the bottom of this email, or Google Performance Property, or Axton Finance. I'm sure you'll be able to get in touch with myself or Heath. Thanks again Heath.