Hello, and welcome to the Australians Money Puzzle Podcast.

I'm James Kirby.

Welcome aboard everybody.

My guest today is a Nissa Cavallo of the Ida Property Group and she's been on the show actually more than once, and the last time we heard from her, I won't say a voice in the wilderness, but she did outdime with some confidence how Victorian property market, which she is an expert on, she had seen it as a bargain.

Basically, this is when things were pretty pretty bleak and as you know that Melbourne was the worst market for some time on a national basis.

Now most recently we see that basically Melbourne prices have been rising at an annualized rate something in the order of six percent and were probably gathering pace through this period.

So I've invited Anissa back on the show to talk first of all about this area because I think from a nation my point of view, it's where everyone's looking as investors.

But I also want her she does have an interesting story which I haven't put to you before for the simple reason I wanted to put her to you as a property expert first and foremost, But how she actually got into all this is very interesting, which we talk about in the second segment of the show.

But first and foremost, and this is Cavallo, try not You could almost gloase there if you wished, but but they wouldn't come across on the podcast.

But thank you.

I mean, let's say it was going to happen, right, it was probably going to happen that Melbourne would turn.

I didn't think it would turn quick.

Absolutely well, firstly, thanks for having me back, James.

I appreciate it to glow.

And look, I think in many cases when you listen to economists, eventually, if you wait long enough, what they say is correct.

Right, But we were talking about the next twelve months, so we did get it right.

The fundamentals are just there and we've talked about it before.

Population growth, we've got stronger wages growth.

The population growth hasn't really changed other than that little period during COVID.

There's just been so many positive characteristics about Melbourne and the last five years in particular have set us back ten And I know I've heard that you've spoken about this a lot on the show, that the numbers for the ten years is dire and that presents an incredible opportunity for investors that are willing to go against you, against the grain, which is really tricky.

So yeah, I was right.

It's not surprising.

I don't think we're not celebrating it, right, We're not popping the champagne.

But the first indicators are certainly there.

And it's a bit of a relief, to be honest, for me, because I'm highly exposed and a lot of my clients are.

I suppose, so you professionally put yourself out there.

It wasn't just a notion and you would have acted upon it, so you wanted to see it happen.

Look, well, take it that it is happening.

It's not shooting the lights out.

It's all it's doing so far, it would seem.

And Calendar twenty five is coming back to something like a normal market what you would expect an Australian city.

Five minions should be ticking away at least six percent parannum.

So let's just take it down.

Is the situation, and that it could get better.

Now, before we talk about where and style and type of property that might be attractive in the city, can you tell us I think the tax the role of new taxes that were announced by the Victorian State government at the very depth of, you like, of the cycles, So when things were really at their agrimace, they went and really sort of kicked it in the head by adding new taxes, and they got a lot of attention.

Is that still a risk from a broad point of view for people investing in this market?

Well, as we've discussed, I think it presented an opportunity because if you had a look at the true impact on the majority of investors, I think it was it was for majority investor property investors.

It came to seven hundred and fifty to nine hundred dollars extra a year that was tax deductible, and if you consider where interest rates have been in the past while property prices go up, that's not really a massive financial disincentive to invest.

So for me and what we discussed was it was largely sentiment.

I mean, we could have been taxed twenty dollars and we wouldn't have been happy with it because we felt it wasn't our fault, right, Why are we tacked?

Why we So you're saying that the dollar terms, it wasn't backbreaking, but it was, but it sure was in terms of sentiment wasn't it.

I think that the sentiment was also partly because we thought, well, what are they going to do next?

We'd had enough and interstate investors, Melbourne had a good run for many years.

We were relatively oversupplied in supplied in some areas, not all areas, which isn't always a massive issue.

But I think that it had a good run.

That we dealt with COVID in a way that wasn't very popular, and then it was like what else is this government going to do?

What else are they capable of?

And it was almost like I like to liken it to the Carton Football Club, everybody almost really enjoyed the lot, you know Melbourne.

Some Sydney siders enjoy seeing Melbourne's struggle in any fashion.

I don't tell that for a moment.

We know that we know that all too well.

But let's rise above all that as investors and look strictly at the numbers.

So I suppose what I'm asking you is that issue that seem government are still in power in Victoria, right, So is that risk still on the table?

Well, okay, okay, So I think that we've seen this pan out now for a period of time and realized that not a lot has happened.

We haven't had this huge despite what the media says, and even the headlines of people are leaving Victoria and drives, it's simply untrue.

If you look at the ABS figures more people left Queensland last year than Victoria and that's on a numbers basis, so on a percentage basis, it's much greater.

Right, So I think we've got it.

People are starting to see the truth.

There's not anything massive that's happened.

We haven't grown hugely, but we've also become incredibly a foe audible and I know that whilst there are some talks about some additional taxes on property in general, it seems that the huge, the huge imposition to Victorians in particular, it has stopped, right, So we're not not quite sure that much more is coming.

I think we've had We've watched it play out a bit.

There's also been other states that have made very unpopular policy decisions, and you know that just hasn't been as as widely publicized.

Actually, Hugh Robinson's The Financial Advisory based out of Brism was on the show sometime ago and him at the point that Land tax is actually and the way it's going on the forward estimates inside the budgets of the two states, land tax will be higher in Queensland than it will be in Victoria, and so the Victoria might have more taxes, but the one that really matters to most people is land tax and it's heading to be higher in Queensland.

Okay, we've got those things on the table.

Where in the city of Melbourne are the bargains and what are the type of properties that offer opportunity to our listeners.

Well, my strong focus for most people that are trying to increase wealth, right, not drawing down on their income, but increasing wealth is capital growth and everyone's heard me talk about that a lot.

I think that's where the magic is.

You change your wealth position by through capital growth with property yield after all the costs associated with it rarely changes anything.

Okay, it's a good way to pay for the asset while it grows in value.

So my strong focus is how do we find there's nuggets of growth.

And you've said affordable anyway, and affordable is actually a really important part of finding these nuggets.

Those areas that are less affordable that have bigger supply issues have traditionally had a lot of volatility, so you've really got to ride the wave.

So I'm really looking for those suburbs that are affordable because if you think about it just logically, there's a much greater percentage of the population that can afford it, so you've got more buyers.

You know, always so looking for affordability, and there's different ways to do that.

There's going into those sort of those growth corridors, which I do like.

Some of those growth corridors that can sometimes appear like they've got a lot of land available, also present the opportunity to build more hospitals, to build more schools, to build better roads, and so the Victorian State government has done a very good job of building what we call employment clusters.

We don't build commuter suburbs where you have to commute to get to work.

I think it's something like seventy percent of the people that live in the Melton that work and live in melton Shire actually work locally.

They don't commute, which is a huge number of local workers.

So I'm looking for if I'm looking for growth corridors, I'm looking for a lot of local employment.

Could be southeast your Cranburns.

A lot of that is now getting quite expensive.

And I can tell you fifteen years ago people looked at Cranburn and said it's all land, there's too much available, and yet it's been an incredible performer against other inner urban suburbs.

Of interesting straight away that when you're looking at the city, you're looking at you were looking at middle to alto suburbs.

You didn't do you mention them first?

Yeah, I'm mentioning them first.

These are growth, these are new housing estates basically.

It sometimes new housing estates, sometimes we get a bit closer to the suburb.

Right now, I'm talking about new housing estates.

We've done a lot in Melton, a lot in Deanside, a lot in Werribe.

I mean, Weerriby is an established area, but it has a few little infill sites that we've invested in.

So that's one way to do it.

And the good thing about that is that you're getting the benefit of a lot of migration, a lot of population growth, but a lot of a lot of infrastructure growth.

There are new jobs going in which creates household income growth, which in the end is a lead indicator for price growth.

Right So I love that then there's another way to find affordability, but without investing in units and townhouses which are unlikely to give you the same effects in terms of capital growth.

Because we're focusing on capital growth, we want as much land as possible, and that's going to those regentrifying suburbs.

You know, your Coburgs, your sunshines going towards the Monash, further out from the Monash, even your seafrets are very expensive now.

But finding those suburbs that are still a little affordable the problem is one of the things that a lot of that in my experience, that I've learned the hard way, and that a lot of people don't take into consideration when they're investing, is one thing, is this property doubling in ten years or doing more right?

Capital growth great, but you have to be able to hold it, and the holding costs is often the killer, just like cash flow in a business.

And if you are buying older properties, because you want to spend seven hundred and fifty which is the average investment price, so average investor in Australia will want to spend about seven hundred and fifty to eight hundred.

There's not a lot of brand new, beautiful properties that you can buy in the inner urban ring for that price.

So you're often if you're going in an urban, you're often buying something that may may cost you a lot in terms of you know, constantly doing it up, et cetera.

And often the yields can be a little bit lower, and so if it's hard to cash flow and it's hard to hold, then you may not be in a position to hold it long term.

So I've had a lot of it's James that have purchased older properties.

I did it myself, It's what I used to do, and they've just said, we just simply can't afford it because every cent that we get from the tenant just goes and in repairs.

Because he used our relatively low, very long.

So the red lincome is con considering what they've paid out and come considering what the mortgage is, what's coming in is relatively low.

So they get caught in that sort of trap, and that's more common in the inner city older style properties.

Is it, Yes, absolutely absolutely so.

Are the only better in the subject of the subverbs that you've mentioned, Is the yield any better?

Well, they are.

You can you can get something relatively new, a couple of years old.

We're often looking for something no more than five years old if we can, right, because we want as much as possible to just buy this asset and get on with that day job and let it go up in value.

I just don't even want to know about it, I say to some of my clients.

If my life depended on driving it to some of my suburbs, I wouldn't even know where they are, which is a good thing.

I don't want to worry about them.

Well, that's the Warren Buffett line.

You know that he should be able to go to the movies for the afternoon care of what the share market is doing, if he's made the right.

Decisions, Yes, exactly.

Just let them do their thing without me worrying about them.

And so in some of these suburbs you can still purchase things that aren't necessarily units.

If I am looking at a unit for a client, I'll be looking for something that's on as much land as possible, and obviously I will rely heavily on site inspections and professional building inspections, et cetera to make sure there's no underlying issue.

But I'm always looking for as much land as I can get, and also as much house as I can get because you need to tenant it.

So some of these outer suburbs that have got, in particular new hospitals, new infrastructure that is under construction, because you know, a promise of a hospital could be twenty years away, right, So I'm looking for a Footscray Sunshine has got an existing hospital.

Melton's Hospital has commenced, and I.

Just ask you, as an investor, is that just a signal or is it literally that you will be able to rent to people who work in those big areas, hops, et cetera.

Yeah, I'm using hospital probably unfairly, but I love hospitals because they create long term growth and they bring in other professionals, and they're bringing in a relatively high income.

And if you're talking about so remember I said that in our experience, the most important factor and characteristic for future price growth in Australia globally is something family income growth, household income growth.

And if a new hospital is going in then you're often particularly in these outer rings or the inner urban ring, but right on the borders, you're often increasing the employment the household employment income as a result of having a lot of health workers.

In some of the suburbs we're looking at, there's new legal facilities going in, new courts, et cetera, which is also a great thing because what you're looking for is the sort of infrastructure that is going to bring a lot of employment and long term employment.

Schools are wonderful because it will bring people looking to house their children in a good quality school, and certainly a good quality high school can be unbelievable for a suburb.

There are many suburbs that people just buy or rent just to get their children into these really great public schools.

But it doesn't necessarily create a lot of jobs, whereas there are other types of infrastructure that will create a lot of jobs and also entice other workers to come in and service the local health workers, et cetera.

So it's sort of a you know, snipall effect.

Just something I really want to put to you, and I mean, obviously I'm thinking is very strong and it's interesting and it's interesting how you are looking.

Obviously, it turns out we're talking about city of Melbourne being a bargain, so which areas.

But your theme and you're largely could be applied at any city.

Let's come back in a moment.

I want to ask you about one thing that sort of hangs over all that that just me threaten it back in a moment.

Hello, Welcome back to the Australians Money Puzzle Podcast.

James Kirby here with the Nisa Cavello.

We left you with a cliffhanger.

What is it that possibly go wrong with Anissa's concept of the opportunities?

Can I put words in you about and say, in any city and it just happens to be Melbourne being the one that you are expert in and from a nationwide perspective is clearly the bargain state at the moment.

But you and you outline how you like these new areas, new clusters, new growth developments, for they have new hospitals and they have you're really focusing on houses and alone houses with land.

The only thing that I would from an economic point of view, the challenge might be supply.

That scarcity isn't there and that Melbourne and Victoria actually has the best supply in the country.

There's a variety of reasons for that, but the main one is that you can keep building forever.

There's no parks, lakes or the ocean.

To get in the way like other cities.

What do you say to that if I said to you, I love your thinking.

I'm ready, I've got my checkbook half opened, but I'm worried about supply.

Well, we don't.

I'm not only investing in these growth areas, but it is an area that we do like.

It is one of our themes.

Okay, just to say that, just a bit clear, but if you looked at it, I think I use the example before a Cranburn fifteen years ago was just paddocks and many people said, why would I invest there?

There is so much supply.

Now there is nothing.

And so often when you have these large land supplies and you have these huge population growth to go with it, it's the chicken and the egg.

Why are we getting the population growth?

Because there is job opportunity because there is land to build new roads, There is land to build new hospitals and new schools, so we are able, we have the capacity to build these employment clusters which will then bring the population.

So that's one thing.

Sometimes this presents opportunities.

And sometimes when you drive out to suburbs like towards Caroline Springs and you go on the Western Ring Road, and then you end up on the I've forgotten the name.

I think it's EMA, and just you go past vacant Land, huge industrial estates in vacant Land.

A lot of that is not rezoned residential, a lot of it is commercial, and so there are huge pockets of future employment in these areas, which is exciting.

So some of it is actually an opportunity for Victoria because we have the land to create jobs, to create employment clusters.

The other thing that people don't take into consideration is we've had a lag in building approvals and construction, a massive lag, and yet our population growth has accelerated, and so we are now way behind where we need to be.

Okay, So it sounds like excepploint doesn't disturb you really because you're coming in with a it's a more optimistic view rather than saying no, we need a bit of serciosity, forget the price.

You're coming in a different point of view, really, which is like top down.

You're saying no, there's population growth, so there's going to be literally new towns, and these new towns the values will improve.

And I suppose what's interesting with your approaches that century level, Like you said seven fifty, which is, if someone's listening in Sydney, what can they buy for seven fifty I have?

Again, they're lucky, that's right.

Very little.

There's something I wanted to bring in here, which is we have lots of people on the show and they're coming with different perspectives on property to us just a little bit.

I wanted to tell the listeners, now that we know you know that we know your expertise, now that we know what you have to see, it's interesting how you started in property, and you might just synopsize it for us as to how you got to where you are, and just before you do in how many properties are you running now?

So I'm under my peak.

So and I hate answering this question because I say all the time to media, I don't want everybody to go up by seventeen properties.

I think it's ridiculous for most people.

Right, yeah, I think you know, two, three, four really good place properties is all you need.

But I'm in the industry, so I buy and sell.

I'm now under fifteen.

I'm about to start buying up again.

So I've gone down and I go up, and again I don't recommend other people do that because the cost of transaction is so high with.

Property, you're in it all day long.

You're a professionally, it's right.

So you're taking three or four properties for the serious investor.

It's interesting because we talked about stocks and we see ten.

If you're serious, ten to fifteen, you should be able to name them, remember them and know how much they are on the d If you've got forty stuction, probably not able to do that.

So something similar with the properties had to concentrate.

So tell us how did you get to this point?

How did you get into property?

Well, it's a long I won't go back all the way, but I bought property when I was very young, not knowing what I was doing.

I was in financial services for many years.

But I'm Italian and if you know anything about Talian parents, they make you buy property or you're not a good girl, right or a good boy.

So you do what you're told.

You do what you're told, and.

So I thought, I think that.

It's a lot of helt.

So I bought a couple of properties, and I unfortunately listened to my parents.

I didn't do what I wanted to do because I wanted to buy a property in footscram my mother said, oh, no way, not Footscrad.

This is in when I was in my twenties and I'm nearly fifty and so, and I wish I bought the property in Footscrad.

Tell you what.

I bought an apartment in Sint Kilda and then I bought a house with my brother and Cremawn Richmond.

And I eventually realized that I was working very hard.

I was virtually a single mum, and I was nowhere near being able to replace my working income.

So what I wanted to do was sell these properties, increase my income and have a bit of a break.

I was absolutely exhausted, and I worked out by going to sell them because I just sort of left them and didn't think about them.

That these two properties had made me more money in five years than Assex said my portfolio was going to do in something like fifteen, right, And so I had a light bulb moment and thought, I haven't even performed wealth it compared to other property markets because I don't know anything about it.

So I set out to become very serious about it.

And I actually did work with Louis Christopher from SQM Research, who's just a legend and a knew end from the industry, and we built a methodology to understand those suburbs most likely to outperform over the long term.

And I started to follow that and in a very short period of time I did really well, and I went to areas that The first place I invested was Werribe And I can tell you twelve years ago when I drive out to wear Abe and wind and Veil, I thought, what am I doing, you know?

But I did yet that beyond the paddocks and thought, really, where where are all the people?

You know?

But I listened, I said, because I'd been in financial services, I built financial products.

I understood how to listen to the numbers and not listen to my heart.

So I did it.

And the two these properties that I bought, the first ones that I started with, performed a lot better than the ones that I bought in urban and they cost me less.

It was easier to hold them, you know, all of those things that I'm now teaching my clients.

I was able to get a second one a year later and build my portfolio very quickly.

So you change your nature of risk.

And the first ones you went into well worn, established city suburbs where you knew people lived there already, and you moved to a different type of thing where you went to somewhere you didn't know, yes, possibly had never been.

And that's been the case ever since, has it.

That has well?

I held on to my older properties for a while, and then my personal story is that I had marriage breakdown and I had to start again.

That was about six years ago now, And this time what I did was I got rid of I had nothing, no old properties, and I just listened to the advice that I gave my clients, because some of them had got to the point where they were doing better than me, and I thought, well, why don't I just listen to them?

And I actually took a little bit of risk and I started to buy untitled land.

So I put small deposits towards untitled land, and in most cases, after twelve months that land had appreciated significantly and I'd put ten to fifteen thousand dollars down and made fifty to one hundred grand.

What untitled land is.

So untitled land is where land has been approved for subdivision, but it hasn't titled because the developer hasn't yet built the roads, et cetera.

So you can that developer is only allowed to take a ten percent deposit as a maximum on a piece of untitled land, and you can often negotiate five percent.

So I had paid small amounts anything that I was getting in from my income.

I was putting towards taking massive risks.

I don't recommend other people do this, putting towards this untitled land in areas in very strategic positions that I felt would perform well.

And you know, I did six in the first year, and then did a few others in the second year and built a portfolio very quickly, and luckily it all went in my favor.

H I see, Okay, So that was and I presume that was when you in terms of risk, that was the most that was the most risk exposed activity compared to what you do now.

Well, well, now I probably take a bit more relatively speaking, you know, I'm probably not taking more risk because I'm in a much better position.

But I will do things now where I'll test market So I, for example, am trialing and NDIS property.

I'm really I've got a lot of clients that ask me about it, but I won't allow a client to invest in something that I haven't been prepared to invest in myself.

So I want to trial it.

I want to work it out and then come back and say, look, I found that too difficult, don't bother, you know.

And I'm aligned with some great advisors on it.

But so I'm testing that, and that to me is a big risk.

I see a lot of risk in that type of really high yield property.

That's very specialized.

It's a very small market.

It's very high regulation risk.

There is the government team, it is very high and there's a lot of intermediaries in between.

Look, there's a lot of issues with oversupply with something like that.

When there's such high yields.

There are a lot of property spookers will say that we'll go out and talk about the guaranteed returns and government backed, which is actually not correct at all.

There's nothing guaranteed.

It's not government back to the you, it's government back for the tenant.

And so there's a lot of misinformation out there.

And unfortunately, the property industry is not regulated like the financial services industry, so you can get away with saying a lot of things that aren't that can be misleading.

Okay, I think it's a really good point, and we would take a break here of some questions I want on Lissa to cover their property questions.

Really interesting about the NDIS property I didn't want.

I didn't even know we were going to bring that up in Nissa.

Everything I've read about them suggests don't go near them.

But that doesn't mean that you can't that you and Nissa can navigate your way through it.

But I would be very careful for the inexperienced investor on that one.

All right, back in a moment.

Hello, Welcome back to The Australian's Money Puzzled podcast.

I'm James Kirby talking to a Nissa Cavallo regular on the show from the Ida EDA property group.

Okay, there is a question.

It's very good.

It's also very long.

From Michael.

I'm going to just cut it in half and hopefully it all makes sense, he says.

My partner and I bought our first home, a villa that'd be a villa unit I imagine in Canberra at the height of the previous peak, which is twenty twenty one.

We're at the point now of looking to upgrade to something bigger.

Thankfully don't need to sell our current home in order to purchase the next one.

The property is a good asset in terms of quality, etcetera.

But as a recent guest suggested, you make your profit when you buy, and we bought high.

We're unsure what to do when we buy our next home.

Should we sell the old one immediately and invest elsewhere?

Perhaps?

Okay, I'll stop it right there, and I'd put it to it.

And they said, this is not advice, it's information only for all the Michaels in the world.

But I like what I like.

My imagination is captured by the essential feature of Michael's question is when they bought Camber, they bought the top of the cycle, and Camber really ran high there at one stage, having done nothing for years.

This happens in Australian cities.

Part really ran high recently having done nothing for years.

Melbourne has done nothing for years, and the earlier part of our conversation suggests it will now run.

How do you get around that when you have a bit of bad look at the very first property you buy because it just happened to be top of the cycle.

Well, I was buying at the top of the cycle two years ago with several clients, so I've done it.

My mantra is, don't try and time the markets.

Economists get it wrong all the time.

Investment professionals get it wrong all the time.

So what hope do we have of getting it right.

There's a saying that we say in the property that you'd never bought too high, you just bought too soon.

So hang in there, right, But my only qualification of that is if you're in an asset that you don't think is going to perform and recover, and you're missing out on something that's going to do a lot better for you than you, by all means, get out of it.

But I'm European.

I'm a traditional investor that likes to hold by and hold unless my asset isn't performing.

So I mean the risk is that he gets out of it, and not just Michael, that an investor gets out of it an asset at the peak and then buys another one at the peak.

You know, if you're timing markets, if you're timed it wrong once, you could time it wrong again, So potentially hanging that particularly, as we've mentioned before, due to the transaction costs, James, you know, they're so high that you really need to make significant increases in property in particular in order not to sell it a loss.

And so I think you've got to look at what is it likely to do over the next five years.

Is it worth hanging in there or could I do so much better in another asset and therefore risk a slight loss in sale.

Yes, okay, very good, Well, thank you for that answer it.

And I think it's it's a very good point in this.

And Meeks, I mean timing and share is a totally different thing.

In property.

You have that thing that you just cannot move in and out easily in the short period of time.

I mean, what do you think is a question without notice like rock bottom shortest time cycle someone should have an investment property for in any market, all things being even, Look.

If somebody is if it's really underperforming, cut your losses.

Right.

So I have had clients that have had it for a year and to at least save on CGT, you'd hang on to it for a year, right, Well, you won't have any capital gains if it's really underperforming.

But let's say that it's underperforming in the sense that you just can't afford it.

You've got to get out of it.

Et cetera.

But I would say that if you've got the capacity to make six percent a year, hang in there for a few years.

You know, if you've got the capacity to make a lot less than that three percent four percent, then maybe cut your losses as soon as possible.

So I think it's not a timing issue, it's a prospect issue.

I mean, often clients are going to units to tell me that, but I'm going to get good yield and it'll cover the mortgage, right.

But if you if it's just covering the mortgage and you and as a result of that, you're missing out on potentially getting six to seven percent capital growth and another asset, just forget about it, get out of it, cut your losses and get into something that's going to make you six to seven percent that will make up for the loss in that one year.

Okay, and one in five mediourne apartments that salt in the last year, so to the loss.

So we know who we're talking to.

It's terrific.

That is probably the perfect place to leave it for the moment.

And this Thanks very much for coming on the show.

Pleasure James.

Thank you very much for having me.

Great to have you on as always a Nissa Cavallo there of the IDA property group.

I hope you found that interesting.

It was only meant to be a show that looked at whether Melbourne was well, we know, I think it's ticking very nicely.

What I wanted Danissa to do was to talk about where the opportunities are in their city.

But she brought a lot more to the table than that, which was really good.

Okay, let's have some more emails the money puzzle at the Australian dot com dot au.

Talk to you soon.