Heath Bassett and AJ of Capital Edge on buying property

Meeting Capital Edge in Scarborough Beach

Capital Edge: property education specialists

G’Day everyone it’s Heath from You&Me Personalised Property Services. And here we are today in the beautiful Scarborough. I’ve got a special guest, AJ King, from Capital Edge. Now, Capital Edge is a company, a property education specialist company, and they’re based in Melbourne, but they do work all the way around Australia. But the best person to have a chat about that is AJ himself.

So thanks for joining me and tell us a bit about the company.

Helping clients buy in WA

Thanks. Hey, such awesome to be over here in WA where we’re predominately putting a lot of our clients at the moment and Capital Edge was born about seven years ago for the needs with Johnno, the director. He was in the property management sector and he was watching these wealth creation groups really I guess taking advantage of clients and putting some extra fees on and adding a bit more.

All about bringing value to the property buyer

And then I guess the valuations didn’t add up. So predominantly, we love valuations. It’s all about the valuations for the client. The client is protected because we are boutique. So yeah, like you said, we operate all over Australia predominately at the moment in WA due to the fact that some lovely sunshine, we’ve got some bright spots all along the beach, a really good price point, the rental returns are fantastic and I guess a bit more of my background as well is that I bought my first house around eight years ago and I’m from the Mornington Peninsula.

Property market in Victoria

Somewhere that you’ve been and I guess it’s a very affluent area of Melbourne and over the last few years especially, property prices have just soared. I guess I was very lucky to buy my property eight years ago for relatively cheap and, and now it’s sort of, like I said, gone through the roof and I see people around my age now at 32 where they they’re still renting.

And they’re, they say to me, you know I’ve got to save for a deposit. And then I say to them, say, you realize that you’ve got to save for the deposit and you’ve also got to save probably the same amount for stamp duty. Yeah, that’s something that doesn’t get factored in throughout people’s thinking when they want to go and buy a house.

Mornington Peninsula’s average property price

So, let’s put it into real terms. So let’s use the Mornington Peninsula. What are you looking at average for House.

Yeah. So to be honest where I bought in Capel Sound probably before it was really renamed Capel Sound, it used to be Rosebud West was probably more the, the lower end of the peninsula if you’re looking in Portsea and in Sorrento you’re probably looking at 3 million to start.

Really? So let’s do that back a little bit for first time owners. Yeah, let’s call it 1.4.

I was going to move up the peninsula, like when you get to Rosebud now that’s where you’ve got to start looking I guess when probably I was looking through it was Rye and also Tootgarook and Rosebud, but now you’re looking at it in Capel Sound, you’re probably not going to pick up something, you know, with a with something starting with a six or seven, it’s probably high sevens through the eight hundreds for your first house.

High stamp duty prices and high deposit

So on top of that you know you’re going to probably made a very sizable deposit, but you also go to stump up probably 40 or so grand in stamp duty.

Stamp duty is a killer, obviously goes to the government. We don’t see anything of it. And, you know, it goes into the wilderness some way. But, you know, 10% deposit on 800,000, you’re looking at $80,000. Go again for $40,000. You’re looking at 120. Yeah. Any little bits and pieces and you’re talking the average house. You’re not talking, a mansion, you’re not talking a seven bedroom, three bathroom. You know, overlooking the water.

No you’re not. You’re talking your standard three or four bedroom on probably 400 square meters. And what you’re probably getting over here for $500,000 to $600,000.

Current prices in Western Australia

So currently right now we’re buying, you know, your four bedroom, two bathroom, over 500 square meters of land built in the mid 2000. Minus the rent return stuff. We’ll talk about that later. But if you wanted to live in it, we’re picking it up for, for the good part of $450,000 to $550,000 and then they’re decent house is there over 170 square meters internal living.

Half price compared to Victoria’s property market

So you know when you’re comparing the difference it’s half price. At least. So when we’re talking about stamp duty, half price when we’re talking about your 10% deposit, half price and that’s why everyone from Australia is starting to take notice in Perth. Because of the low entry points and what you get bang for buck.

Rentvesting in WA

So and then you know, some people say, well you know, I don’t want to live there, cool no drama. So then we talk about rent vesting and I’ll talk about what rent vesting is and what it means in real terms.

Yeah absolutely. So rentvesting will be, you know, become very prominent from where I’m from on the Mornington Peninsula, as I mentioned, I’ve got a lot of mates probably, you know, they’ve hit their thirties now and they renting around the area and they’re probably paying, you know, $500 to $600 a week rent, which isn’t so bad, especially when you’re living potentially a kilometer from the beach.

And we know that it’s one of the most sought-after areas in Victoria. So rent vesting is where you rent where you want to live and invest in somewhere where you can afford, especially like Perth here at the moment we’re getting some 200 square homes with some house and land packages in the five hundreds. And like I said, you probably are only picking up $500,000 properties in Victoria.

It would be a one or only max, a two bedroom unit somewhere.

So, I mean when, when we talk again, we’ll talk real terms. You know, they are spaced out along the coast. We love coast here. Obviously, we’re out at the coast now. You’re not going to get that in. Scarborough But, you know, 40-ish minutes from the city is where we’re going to pick up them for, you know, a $500,000 to $600,000.

And I think with the the investors as well. A big point that I say and we have spoken about it a lot that I guess a lot of people live pretty close around the CBD  in Perth because it’s quite close, whereas in Melbourne, everyone’s used to, you know, driving the 40 to 50 minutes to work and it’s no problem.

Locations 40 to 50 minutes from the CBD are not a problem

So when we say investors from Melbourne investing in other states, they’re not too worried about the distance away from the CBD because they’re used to it.

And that’s what we’re finding. You know, like we’re putting a lot of investors from the Sydney, Canberra and Victoria. I say Melbourne, yeah, we’re putting them in the, you know, the 40 minutes away from Perth because the rent yields, we’re getting a five and a half per cent to six and a half per cent. Yeah. The money to get into there, you’re looking at between 450 and $550,000, you know, and they look at that and I almost laugh at us.

Incredible opportunities in WA for interstate buyers

What do you mean we can pick up a house? Within a kilometer to the beach, within, you know, a couple of kilometers of major amenity schools, shops, trains, busses, everything for $500,000. Yeah, absolutely.

Property prices went up in Victoria

Now, obviously, when we go into that rent vesting side of things, what you’re trying to say there is you rent where you want to live.

And you buy an investment because obviously you just told me you picked up your house for $390,000. It’s worth close to a million.

Close to a million. So, let’s call it a two and a half times that value because someone didn’t get in early enough and now they can’t get in.

So yeah. 100% and that’s, and that’s what people are facing. I actually spoke to one of my close mates the other day and he goes: I’ve got to get a deposit together for a house. So now I’m going to have to pay overs to live on the Mornington Peninsula and buy my first house. And I said to him, Mate, like you, pretty happy where you are.

He’s literally 500 meters from the beach and took a walk, walking distances, five-minute drive to his work in Rye. So I said to him, just keep, keep renting this mate and get a deposit up and you know, let’s invest somewhere else. Where are you going to get that really good rental returns and you’re not going to have to pay the stamp duty that you’d probably have to pay on your purchase and you’re going to be able to enjoy life.

Yeah, especially with these interest rate rises. You’ve got the tenants paying your mortgage off.

Exactly.

Whereas you’re not under the stress of having to pay your mortgage off for a premium. On your first purchase.

The evolution of property prices

So myself and Simon always go on about it and it’s a passive income. You’re 30 years old now. 60 years time. Let’s work on history of property and property double every ten years. So let’s say it’s it doubles and doubles and doubles again. So that $500,000 property here in Perth now, or $1 million in Victoria, you know, without doing the math, and jingles in my head.

You’re looking at, you know, something worth $1.5 million here by doing absolutely nothing except coming up with the deposit and letting the tenant pay it off.

Exactly right.

So your mates from eight years ago when they should have bought, could have, should have woulda, you know, they’d be now either living in a house where they’ve got equity, which again another subject, but they can pool that equity out and start investing in other areas or the same area or whatever they want to do. But now they have, they’ve been left in the dust and they’re going to have to collect, you know, 100, 150, $200,000 just to get into it now.

With no equity.

Capital Edge: practicing what they preach

Yeah, exactly. And that’s I was fortunate enough to collect some equity in my property in Victoria. And then I went and invested in Rochdale in Queensland about 15 kms from the CBD day and, and that’s been on an upward twin trend for the last couple of years.

So that’s what you preach.

To be honest, and that’s what why I got involved with Capital Edge and join the team is that I want to practice what I preach and I want my friends to be successful and to be able to do it. What I’ve done and I’ve gone through the hard yards when I was younger with my wife and, you know, we probably didn’t have the extravagant holidays that we probably wanted to have or anything like that, but.

Sacrifice the later years.

Got now, I’ve got a two year old, so we’ve set ourselves up for that and going to set him up, especially with life at the moment and the cost of living you have to factor in your children going down the track.

Get in touch

Thanks AJ, we got an education and a life lesson and a better life story as well. So guys at home, if you want to know anything at all with property, reach out, give us a call, send us a text or an email, and until next time, happy investing.