How Postcode Risk and Margins Cap Borrowing Power

Virginia Graham Riches: I'm Virginia Graham, author of Flirting with Finance and host of the podcast. Today I'm joined again by Julianne Zammit, a senior broker at Finance on the Coast, to explore the finance side of property risk. Hello again, Julianne.

Julianne Zammit: Hello again.

Virginia: After listening to Lachlan and Luke, has anything changed your view on investment property?

Julianne: No — as I mentioned to them, there are clients, especially in New South Wales, who are buying their first property but, based on their income, can't afford the location they'd like. So they start looking at the investment route — single people or families living in, say, the eastern suburbs who just can't buy there — and instead buy one or two properties interstate to get a foot in the door.

Virginia: What sort of properties suit an investment portfolio?

Julianne: Often they'll use a buyer's agent for interstate purchases, because you really shouldn't buy sight unseen. Mostly they're looking at an established house rather than an apartment, townhouse, or house-and-land — something tangible they can see, where they know the rent and it's available now. And they might do it twice, depending on borrowing capacity.

Virginia: And these are people already living in Australia?

Julianne: Yes. If they're in Sydney, anything half-decent as a house here is around a million dollars; the same budget as an investment might buy interstate, and maybe two properties — so they're hedging their risk with two lots of rent and two potentially different growth markets.

Virginia: What about buying in super with a buyer's agent?

Julianne: That happens too, with a financial planner and accountant involved. Often they've already set up a self-managed super fund, or are in the process — that takes a few weeks. Based on their planner's advice they'll decide whether to buy one or two, usually residential, unless they're self-employed and look at a commercial property they operate from. I'm actually doing a residential one right now.

Virginia: Are any of these first-home buyers doing rentvesting?

Julianne: It depends where they're based and where they are in life — married with kids changes the budget. If they can't buy where they want, I'll raise the idea of buying an investment first to get a foot in the door, maybe once or twice, before buying their own home. I had a client with three kids in the eastern suburbs who couldn't afford a home there; they bought two properties in Queensland over the last few years, and that put them in a position to recently buy in Sydney.

Virginia: Anything I should have asked Luke and Lachlan? I was curious why they don't do property developments, and why they don't help with first owner-occupier purchases.

Julianne: With Atlas, I haven't seen them deal with property developers — it's mainly established homes in pockets that have achieved substantial growth, with partners around Australia who source for them. And on owner-occupiers, Lachlan answered it well: if you're investing, you don't want the decision blurred by 'maybe I could live in it one day,' because that makes the decision harder.

Virginia: Fantastic — thanks, Julianne. Brilliant advice for getting your finance structure right from the beginning.

Julianne: My pleasure — thank you for having me.