Today, Steve spoke with John and Matt McAndrew of McAndrew Property Group about their market views, opportunities and challenges they have faced and some advice/lessons learned thus far in their careers.
The podcast will be released every fortnight on Tuesday and will feature an elite developer discussing these same topics.
The podcast will be available to stream from iTunes and via the HoldenCAPITAL website.
For more information about the podcast or getting involved please email paige@holdencapital.com.au
Read full transcript below:
Steve Wiltshire: Okay, welcome gentlemen. Firstly, can I just say, this is the first time we've had joint guests, little father and son operation. So, this is a bit of first for us and I really thank you, both for agreeing to do it and sharing your knowledge about the business with us.
John McAndrew: I appreciate it, Steve.
Matt McAndrew: Thanks for having us.
Steve Wiltshire: By way of introduction, perhaps we can start with you, John? You can maybe give us a bit of an overview on how you initially got started in property. What motivated you specifically to create the McAndrew business and some of the directions it's taken. And then maybe, Matt, you can expand on some of the more recent series of operation and how the business is going. And [inaudible 00:58] of what you're trying to do.
John McAndrew: Well first of all, Steve, thanks for the opportunity. As you know, they'll appreciate we're now in our 32nd year of operation. So, a lot of time has passed. Of course, now a lot of technology that also has changed from when we started there, 32 years ago.
But to briefly answer your question to the original history of McAndrew Property Group's commencement, it really started back when I was in my earlier career, in the home improvement industry. That led me to an interest in property investment and consequently, that led to project marketing.
Which, at that stage, I had to obtain my Queensland real estate licence and I became an active promoter that was then the popular and fairly new negative gearing, of investment property.
My interest and knowledge in the building industry, and also my building connections, led me to, obviously be able to find a lot of suitable stock, for investment property. We had a lot of wide-range connections in the building industry, from that earlier development.
That's how, initially, I got into the negative gearing investment side of things. Then, Matthew came and joined the company. I guess Matthew might add a little bit from there. That's happened over the last 20 odd years, or so.
Matt McAndrew: Yeah. Since that time, obviously commencing out and the neg gearing and the wholesale property side, McAndrew Property Group's expanded into residential project marketing, residential property management, residential real estate, as well. Then also now I write as a property developer of our own projects. So, utilising those all areas of the business and combining them together.
Steve Wiltshire: Yeah, sort of a natural progression?
Matt McAndrew: Yeah.
Steve Wiltshire: John, what's some of the key differences, in terms of where the business is today, as opposed to your original vision for it? Because, I'm sure, way back then, you probably had certain ideas of where you wanted to go. But, in terms of where it's ended up and where we are today, what were some of the key decisions that drove the changes?
John McAndrew: Look, it's very complex, over that length of time, Steve. But, one of the first things is, I don't think we really used a computer, back in [inaudible 03:15] I think they were invented, but I certainly didn't use it, too much.
We're really talking about, now, going back to the late 1990s. Both Matthew and Scott having finished their secondary education. They chose to come into the business. Not my greatest wish, I might add. I would rather they'd went onto their uni degrees or whatever. However, that did happen at a later stage. Particularly with Matthew.
But, nevertheless, they did come into the company and that took the company more into general residential real estate, as well. Also in property management. While Scott was in, doing further studies in financial planning, Matthew ventured outside the company a couple of years later and utilised his Construction Management degree, to gain valuable experience with one of Australia's leading development companies.
Their combined skill then enabled us to take on another, with the current directions of the McAndrew group. Until now, what we are is a mildly disciplined company, with an additional focus now on the development opportunities, as well.
Certainly, the boys coming into the business, expanded broadly-
Matt McAndrew: The horizons.
John McAndrew: What we do, the horizons and what we did. Just, the straight out. Now, we're starting with selling investment properties, through into property management, through to residential. Obviously then, Matthew moreso than in the development arms, as well.
Steve Wiltshire: I guess bringing the new skills in to, you'd want to utilise those, I guess, Matt. So, where you saw opportunities and synergies, it's just a natural progression.
Matt McAndrew: Yeah, it really has been. I think that's been part of the key, to that growth. Over that time period, is the three directors between dad, myself and Scott. Have all bought something different to the table. Be that sales, marketing, finance or construction and development. Which has enabled the business to grow the way it has, over those years.
Steve Wiltshire: So, it's much more than an agency, these days. What issue developed those initial disciplines? What are some of the lessons that you've learned along the way? Were there things that you did and sort of went, "No, that didn't work. We're not gonna do that again."?
What are some of the things that, in terms of as you widen that service [inaudible 05:27] that you went down, maybe, blown galleys or just had to do it a different way?
Matt McAndrew: Yeah. I think, to answer the question, we see McAndrew Property Group as an integrated property group now. We take that approach from the very early commencement of a project, utilising all those facets of the business. To value add, be that for a project marketing client, a real estate client or a development ourselves.
What we are conscious of, though, is that we're not trying to be everything to everyone. So, whilst we've expanded in that vertical climb, of trying to add different areas to the business, we're also conscious that there are things we can't do, or we don't have the expertise to do. That's why we've stuck to-
Steve Wiltshire: Or maybe that the client doesn't need, so you-
Matt McAndrew: Or the client doesn't need, so, you know [crosstalk 06:15]
Steve Wiltshire: Hammering the offer, to the client.
Matt McAndrew: That's right. Again, we're not going down, trying to be a commercial or an industrial agent. Because, that's not where our expertise sits. We're not trying to be a builder. But, it's about being very good at what we can do. Adding that value to our clients and using that experience for our own projects, as well.
Steve Wiltshire: Makes a lot of sense. But, we've seen the evolution of developers moving from using local agents and progressively through to other in-house or specialised project marketeers. That's probably the most recent iteration.
Is the investment seller, with the long list from out of town. Who comes along and says, "Righto, we'll get you these sales." And then, off they go.
What advice would you give developers seeking guidance on how best to get results, in this market? Particularly where pre-sales are becoming much more difficult and valuable commodity, from a financier's perspective. The financiers are demanding them, but they're a lot harder to get.
What advice are you giving to your clients?
John McAndrew: I think, if you're talking about clients, in particular being developers that are trying to, whether they're large developers or small developers. Most of them still require pre-sales. Without trying to take anything away from the service offered by the local real estate agents.
Any experienced developer would be well aware of the specialised services. A network marketing context needed by a project marketer, to be successful. I mean, to obtain the necessary pre-sales, prior to construction and prior to even, their finance approval.
McAndrew Group's, with the experience and foresight, have built a very enviable relationship, over the past 20 plus years, with local, interstate and international marketing networks. So, marketing networks being, other financial planners, accountants. In some cases, other real estate agents, who rely on us to identify and procure local and in some cases, resell their existing client's investment properties.
Steve Wiltshire: So, you actually source it for other [crosstalk 08:17]
John McAndrew: We source from two ways. We source what they perceive their requirements might be, from their research. I.e. that might be the North side of the Brisbane, or the South side. Or, it might be, in some cases, country. It might be defining units.
As example, if we're relating to the Chinese investors, perhaps that we've worked with, particularly out of Sydney and Melbourne, they in turn, might be more conscious and more aware of wanting inner city high-rise. Because, culturally, that's more where they're coming from.
Our property sources comes from, certainly our experience and our context.
Steve Wiltshire: Yep.
John McAndrew: It certainly comes back into how it's distributed. If we have a particular, let's call it a marketing partner, such as I mentioned there, a bit earlier. As far as, say, the Chinese are concerned.
They turn round and they want to be involved in inner city high-rise, because they're familiar with that. They like that, they relate to it. They've been part of the growing Sydney market and now they feel it's Brisbane's turn.
So, they may well want us to source that sort of stock. Now, in some cases, we may have stuff that we have. I don't want to stay stuff. Should I say, developments ourselves?
Steve Wiltshire: Yep.
John McAndrew: That Matthew's team are developing. That of course gets passed onto them. In other cases, we'll put on our marketer's hat and engage the services of other developers outside of open corporation or Matthew's contacts.
The major goal here, is to provide the stock, that one or two things. The client perceives the right sort of stock, at the right time. Or, we perceive, as well, at being the right stock, at the right time. I.e. some years ago, we went through quite a wave of [Amrest 10:09] type properties.
Which are now, down the cycle, we were quite involved with it. We did a lot of research, we found out who to work with, who not to work with. Areas where it still fitted the model. Over the past couple of years, there's been a little bit more of a push towards geoplex.
Again, right now, the appetite seems to be a little bit more, the 10, 15K for townhouse. So, that's where our expertise and experiences comes in. To be holding a mirror up to the market, essentially.
But, I've probably added a bit more there, than I need to. I'm starting to give away secrets, these days.
Steve Wiltshire: That's good. That's all right, just don't give too many away. Look, your model is strongly focused on delivering investor options, as you've just said. The result is, it obviously brings you repeat business. Which aids, obviously then, in delivering your client's projects.
Without giving away too many more of those secrets, how have you refined your service proposition, to ensure that you're always meeting the needs of the investor base? Other than just, as you've explained, sort of always looking to find the right product?
Is there anything else that you've done that's a bit different? In terms of how you go about it?
John McAndrew: Steve, I think it all comes back again, to being able to be able to be conscious of the market and move with the market, within reason. Valuations are always an important thing, it's always an issue from a buyer's perspective or our perspective. So, we're always conscious of trying to make sure that our current or future clients get value for money.
Now, I think that's the important thing. Is to be able to identify a product deserves a place, in the suburb.
Steve Wiltshire: Okay. Math, obviously you've got a significant amount of loyal investors, who are keen to regularly invest with you guys. How have you seen their appetite evolving? Are there any significant changes in their expectations, that are shaping how you're going to approach projects, going forth?
Or, your clients will [inaudible 12:18] you advise, then? To adjust.
Matt McAndrew: Yeah. Look, I think our investor base, or our client base, is cyclical, just like the market is. So, we see appetites, as dad touched on earlier, move. Depending on the demographic, or the location base of that client or clientele.
We're able to move with them and with the market, depending on that appetite. So, it's not a rule that overarches the business, in terms of how we treat that. It's more, reacting and working with our network. Be that locally, interstate or internationally.
To work best with those clients and identify their needs. Also, respond to the local market conditions. At the end of the day, we are the eyes and ears on the ground, for the Southeast Queensland market. For any client or any part of our network.
Steve Wiltshire: But, are you seeing anything, any significant changes, coming through at the moment? In terms of what investors are looking for? In terms of either configuration or return-driven. Are there any new, interesting changes, that you'd be advising a developer to consider, when he's looking to create a new project?
Matt McAndrew: Yeah. Look, I think right now, without stating the obvious, in the marketplace, it's settling back towards, either a freehold tenure product, if that's possible. As a duplex, house on land. Then, secondary, behind that would be a townhouse product, in that middle ring. 10 to 15Ks.
I think being conscious though, that that product now really has to be designed for the owner-occupied market, first and foremost. With the investor market coming in as a secondary consideration. If the product is going to be able to be sold locally, in a local market, the product isn't going to suit an investor market.
So, I think that's been a shift, generally, in the marketplace-
Steve Wiltshire: But, no specific design parameter changes?
Matt McAndrew: Look, not particularly [crosstalk 14:28]
Steve Wiltshire: Just keeping it simple and-
Matt McAndrew: Yeah. Going back to, probably where we were, three years, four years ago, back to larger apartment sizes, larger product sizes, better finishes-
Steve Wiltshire: More livability.
Matt McAndrew: More livability, better amenities. We've seen that, through the market, in general. But, trying to tick those boxes, that people don't want cookie-cutter apartments or townhouses, whatever it might be. They're looking for a better quality than that.
Steve Wiltshire: Okay. Questions, sorry John. Were you going to say something?
John McAndrew: Look, it really is the $64 question, that's moving all the time. Matt's example, right now, on a building, they might be doing under 40 square metre apartments in the city, with no park bark. If we had that product up here, well, we'll still have, in a number of years time. If the banks turn around and let us build it.
You have to look, even to the suburb and onwards, to the street. Of what the designer product is. It is not one-size-fits-all.
Steve Wiltshire: I think that's a good point. Too many guys don't actually look at the immediate surroundings.
John McAndrew: Yes.
Steve Wiltshire: They're sitting down to design a product.
John McAndrew: There are a lot of basics we use. Again, it's not something we'll turn round and give all the secrets away, if you allow me to say that. Because, it really is a matter of getting that right mix, that right product.
As an example, little things are important now, such as having storage space. It goes without saying that everybody wants a car park, if you're talking inner city. But, also, everything has a cost.
So, to have two car parks, one has to be prepared to turn around and obviously pay more for it, because [inaudible 16:01] to be built. If you're talking about townhouses, there's a certain formula there that we like to keep, as far as design, size, storage, car parks.
Studies are always a little bit important to us, we always like to have that. People now like to have that little room. Media rooms and things of that nature are starting to add to the expense. So, it's just fine-tuning that balance, between the product and the prices delivered and whether it fits in with the local community.
As far as not being right on main roads and being close to schools and all those basics, of course they'll clock. It's something we're conscious of and that's where our experience comes in, as well-
Steve Wiltshire: Yeah, I was going to say-
John McAndrew: To get that right.
Steve Wiltshire: Because that really is the importance. Because, you can advise as to what adds real value, in a given location. As opposed to a nice-to-have.
John McAndrew: See, I think the big thing here is, as ourselves, as having our own little, family development team and in Matthew's case, having a larger syndicated projects that Matthew looks after. We're still looking for the same thing in our own [inaudible 17:03]
If we wouldn't buy it or get involved with it, then we're not recommending it for our clients.
Steve Wiltshire: Yeah, good.
John McAndrew: That's a promise.
Steve Wiltshire: So, another question, for both of you, I suppose. What are the qualities that you look for, in a development? And a developer, for that matter, that give you the confidence that you need, going into it, work with that project and that client?
John McAndrew: I guess, a little bit, Steve, it comes back to adding a little bit more to what [Alison 17:32] was saying. We apply the same fundamentals in choosing our own developments, as we would prior to taking on a project, marketing, for another development.
Local amenities, supply and demand, the design, the product type fitting in with the area. The local transport, current or impending infrastructure, school, shopping nearby. The employment nodes. All of these things have a play on the future growth potential and the rentability.
The suburb's socioeconomic profile, that doesn't mean to say that it has to be high or low, but has to fit with the product and has to fit within the area and the infrastructure. So again, there's not one-size-fits-all. Everything needs to be assessed at the point of time.
How long is it going to take to deliver the product? The product itself. What's the competition doing? So, we really do apply a lot of research. On somebody else's product, we might just do marketing and the same thing. Obviously, if we're going to take it on and put our own money in, we want to have successful outcomes.
We won't just turn round and build a product, just on price. To make price-alone work. Whether it ends up just being a very poor product that has no future potential to an owner-occupier.
So, the products that we get involved in, are just as appealing to an owner-occupier and/or an investor. In today's market as well, certainly, we don't lose sight of having a product where the price is applicable, preferably under the £500,000 mark, that appeals to a first-time buyer.
Steve Wiltshire: Yeah, that makes an awful lot of sense. The last 12 to 18 months has seen a real change in the big-picture, from a finance point of view. That's impacted the markets. We've seen the base apply rates, based on APRA attempt to slow that marketplace down. Particularly the investment side of things.
Not let the banks get too overexposed. I think most people are agreeing that there's an oversupply of sites with DA, at the moment. Although, I think the oversupply in the city of Brisbane, has slowed to a stop, now.
With projects just not getting funded. So, I think there's been a lot of good, natural barriers to entry, aside from APRA applying the breaks. But, obviously, we haven't overshot as much we have in past situations.
I mean, Sydney's continuing to boom and Melbourne has slowed down a bit, in terms of its growth. But, we're still seeing projects come out of there, for the inner city. Its suburban demand across the board, all three cities, remains relatively strong.
From your perspective, what's your assessment, where the Southeast Queensland markets are going? How do you decipher the data that comes into you, through your own projects and obviously, other sources? How do you then interpret where the market is likely to go and where the opportunities are?
Matt McAndrew: Yeah, so-
Steve Wiltshire: Sorry to bring up a loaded question.
Matt McAndrew: That's all right. Look, I think you're quite right, in the general perception, that's in the marketplace now. With regards to the perception or reel, whatever your view is. In regards to the oversupply of development [inaudible 20:56] sites in Brisbane.
Our view is that that supply is restricted to few areas and it's probably had some contagion through the Brisbane market, at the moment. In effecting other areas, where maybe there isn't such a supply of future projects. But, everyone's been caught in the same approach, at the moment.
Our view, moving forward is that obviously, majority of, no, the vast majority of those sites won't move beyond their existing development approval. Certainly, in this cycle. That, in itself, is probably where we also see an opportunity, at the same time.
So, the opportunity where a developer has got an approval. Be that big, small, doesn't really matter. But now, through the ACRA conditions and market conditions generally, et cetera, won't be able to get that site to the market and is not in a position to hold onto that site through the cycle.
Good sites, good locations, hopefully good designs, will lead to opportunities for those looking to add to their portfolio. Be that for this cycle, or next. [crosstalk 22:11] I think that's where the opportunities are presenting themselves, at the moment.
I think that projects now, that are in the marketplace, will probably find themselves in some thin air, moving forward. Because, the pipeline that Sydney, behind the existing projects, obviously isn't moving.
So, again, working through what's in the marketplace now. 12 months, 18 months time, there's not going to as much on the market as there is right now. Certainly not a lot in the pipeline, that's going to be pushing for that.
Steve Wiltshire: So, looking forward, on that basis and with all of that in mind, what are some of the problems that you typically see the developers making? Sorry. What are the mistakes that you typically see them making, that we need to avoid, as we move forward in that cycle?
Matt McAndrew: I think now is the perfect example, where those mistakes or errors in judgement are going to be showing up. I think, for us, the two main ones we see are developers or clients, going into a project with unrealistic expectations around feasibility targets. Most likely regards to revenue assumptions, back into the project.
Secondly, structuring that acquisition with too much debt, too early. So, buying a wall site, moving through the planning phase, getting an approval. Carrying debt on the land through that, or through the presale component. The market's moving [crosstalk 23:37]
Steve Wiltshire: They're overextending themselves.
Matt McAndrew: Overextending, then getting caught with interests and overheads and holding costs. Rising significantly when the market's turn themselves [inaudible 23:48] where they were.
Steve Wiltshire: Yeah, when the market slows down and-
Matt McAndrew: And that leads to the opportunities we spoke about, in the [crosstalk 23:55]
Steve Wiltshire: One developer's problems are another developer's opportunity, essentially.
Matt McAndrew: Absolutely.
Steve Wiltshire: Yeah. How are you seeing product evolving? I touched on this earlier, but in terms of size and what have you, I mean, we've probably talked about this. But, are there any design parameters that you see, going forward or that you would like to see, going forward? Out of what we've talked about, in terms of size?
I'm thinking here, we've talked about it, in the past, configurations where, particularly if you're going to pitch for rental markets, but making sure your bedrooms are a legal size, having good amenities in terms of bathroom, quite often both having en-suites if you're doing two beds and that sort of thing.
Is there any other innovative things or things that you recommend developers consider?
John McAndrew: Steve, I think obviously, nothing ever beats experience, in deciding the right product size-type mix. Without trying to blow our trumpet too much, if you had a project here right now, that you're contemplating, you would Matthew, Scott and myself, sitting down, running the ruler over it, so to speak.
You're getting broad experience from the old man, if you like and the younger guys, whatever. We're looking through it, through a lot of different eyes. From the first honeymoon, from the price, from the design. From the investor market, from the location.
There really is a lot to turn round and look at. But, I think the real bottom line is, "Would you live in it, if you were a one-bedroom unit buyer, would you live in it?", "If you were a penthouse buyer, would you live in it?"
It's some really basic stuff that you can come back to. But, a lot of it still comes back to the quality of the fitter, the tiles. Is it modern? Who's designed it? How well is it designed? Is the name important? Does it have a leading architectural name behind it? Do you need that?
There are so many factors, that we are really confusing ourselves. But, we bounce these ideas off each other and I think that's a real power that we have, within this organisation. Outside of that, as well.
We use our own consultants, we use our own team to turn round and try and get that mix right. That being said, we don't turn round and recommend a 20-story-building with one floor plan, continued 20 levels.
Matt McAndrew: Yeah, exactly.
John McAndrew: The big thing is trying to have a mix, because there are the penthouse buyers. We've seen that with our mix, as well. Where, in one case, we've got 160 square metre, three-bedroom penthouse and down on a lower level, we've got a one-bedroom unit, that suits the first homeowner, that wants to live in it.
Having that mix an in turn, the flexibility to turn round and work on it, with their own developments and/or other consulted developments. Where they're prepared to have a little bit of custom-made added to it. In other words, a tweak to the design.
Steve Wiltshire: Yes. We're all different and I think if you create [crosstalk 26:53]
John McAndrew: Be flexible. That's probably a more important criteria you can take with you now, for developers to have a system that's flexible enough. But, not penalising the potential [crosstalk 27:06] client, from a cost point of view, enormously.
Steve Wiltshire: Yeah and for that matter, from a build point of view, too.
John McAndrew: Yes, as well.
Steve Wiltshire: [inaudible 27:13] So, in light of all that, guys, where do you see the McAndrew business focusing itself inside the next 12 to 18 months?
Matt McAndrew: McAndrew Group, over the next 12, 18 months, to answer your question, I think will see us continue in the areas we're currently specialising in. Across all facets, we don't see that our service offerings changing over that time period.
In terms of where we're focusing our growth efforts, dad is going to be around our residential project marketing business.
John McAndrew: Right.
Matt McAndrew: Then, coupled with that, our property development business, as well. So, we have already seen, in the past 12 months, an increase in both areas of those business. In particular, helping other developers and other landowners navigate through the existing market conditions.
Working with them to get through, be that funding requirements, design, construction. Feasibility, as well. Working with them to get a project delivered in what's currently some tough market conditions.
Steve Wiltshire: Yeah. That makes sense. I mean, Matt, from your point of view, we're talking about feasibilities and what have you. Are there any technology changes that you're seeing, that are making it easier to assess projects, get them approved and deliver them?
Are there any big game-changers out there that you think are going to influence either your operation, your developer's, in the foreseeable future?
Matt McAndrew: Look, I think generally, technology has aided the industry as a whole. Information is very readily available around projects, demographics, development approvals, whatever it may be. We can all get most of that information pretty quickly, these days.
What we find, on the flip side of that, is that the market is also much more educated now, than what they were say, 10 years ago. In terms of where we see that taking the business, I think, over the last three, four years, we've invested heavily in our technology-side of the business.
It enables us to be more efficient and provide greater levels of service to our customers within our business, ourselves. It allows staff to work remotely and be offsite and spend more time at projects and things like that.
But, I think, at the end of the day, unlike the tax industry, or others, where technology could be massive disruptor, I personally don't see that in the property industry. But, there is so much of a personal element, stealing a lot of the processes that we do.
Be that the design element, the front-end and having a person apply that. Be that the architectural design, the interior design. Then, at the back-end, I think at the sales side, there's always that human element, as well, to a sale and that emotion.
Steve Wiltshire: It's still the biggest emotional decision that you make in life, is [crosstalk 30:03] residential property, for most people.
Matt McAndrew: Exactly right. I don't [crosstalk 30:07] for that reason, I can't see emotion being taken out of the equation. Whilst there's great technology to assist the process, in a buyer maybe shortlisting their requirements for a property or shortlisting projects. I think, at the end of the day, the transaction will still happen between, essentially, two people. The buyer and the seller.
Steve Wiltshire: I have to agree with you. I must admit, I can't see anything that will take away that personal element. There will always be a need for intermediaries, to help communicate what's going on. Because, people need reassurance that the decision they're making is a good decision and they need to get that from somewhere.
More often than not, it's dealing with someone like yourselves. From both sides of the equation, particularly from a buyer's point of view. That's an important part of the process.
John, a question to you. What advice would you give to a young John, starting out on this journey, for the first time?
John McAndrew: Become a doctor.
Steve Wiltshire: Maybe a little bit more than that.
John McAndrew: All right. You might have to edit that out, Steve.
Steve Wiltshire: Nah.
John McAndrew: Pretty much what I say to a couple of the future property investors is, I don't know, to put it suddenly, keep in mind the 6 Ts. What do I mean by that? Well, make time work for you. Property investment is not a get-rich-quick scheme, however, it is a get-rich-slowly scheme, there's no question of that.
Steve Wiltshire: You've got to plan it.
John McAndrew: Well, you need to plan it. You need to obviously think ahead and plan ahead. But, you've got to make time work for you. Property investment is exactly that. It's going to grow with time, it doesn't happen overnight. It's not a get-rich-quick scheme and certainly, we don't promote that.
Make your investment property tax effective. Now, that means maximising allowable deductions, preferably with positive gearing, not the old negative gearing. With interest rates the way they are now, that's certainly achievable. For most average-income earners, that have equity in their own home.
One of the big things, and it sounds rather ruddy silly, but, your name has to be on the title. The amount of times that you talk to someone and they say, "Well, if only I'd have bought X, Y, Z." All of it's about this hindsight. Hindsight's a fantastic judge. Your name has to be on the title. Whether it be in tenants and common, 50/50, 60/40, 70/30-
Steve Wiltshire: Divided.
John McAndrew: With a family friend, co-ownership, whatever.
Steve Wiltshire: You've got to be on the-
John McAndrew: It needs to be on the title, in some showable form.
Think, "Will I be able to sell it to an owner-occupier in the future?" So, look an exit strategy. If it doesn't appeal to a future owner-occupier, ask yourself why.
Steve Wiltshire: That's good advice.
John McAndrew: The big one is, you've got to take action. You can only procrastinate for so long. There is never a bad time to purchase good real estate. Fear of the future and procrastination are the biggest barriers to building up a decent property investment portfolio. There's just no question of it.
Do your homework, don't be ridiculous but, you can't just keep putting it off. I was almost tempted there, to use examples of a mate of mine that's been looking round for the past 25 years, for a good buy. Anyway, I haven't mentioned his name, so it doesn't matter.
Steve Wiltshire: Okay.
John McAndrew: As far as rentability's concerned, now, I'll cover this in two ways. First of all, take out landlord's insurance and be nice to your property manager.
Steve Wiltshire: Yep.
John McAndrew: But, a good example of something on a new high-rise the other day, were looking out and I was actually there with a valuer. The valuer alluded towards the fact, "Oh, what about all these units?" I went up the balcony with him, I said, "Look out there." I said, "Look how all those units out there, the six-packs, the eight-packs, the ones that are 20, 30, 40 years old."
I said, "Any vacancies, [inaudible 34:02] do you think they're going to be in there? Or this lovely unit that you're standing in?" He was actually dumbstruck. He said, "Well, you're quite right." He said, "For the sake of another 20, 30 bucks a week, they'll move away from there, where they've got one-toilet bathroom. They'll move in here, where they've got two, where they've got the swimming pool, the air condition amenities.
If you get an oversupply they're, unfortunately, the ones that might suffer. Where there's [crosstalk 34:24]
Steve Wiltshire: I take it from this, that this is the advice that John didn't follow? You didn't follow that property investment?
John McAndrew: Oh, there's no question of that, on one side, being a good judge. The amount of times that I've spoken to clients and they've spoken to their financial planner, they've got a borrowing capacity, let's call it a million dollars.
That's their financial borrowing capacity. In other words, their financial advisor or broker has said, "If you really wanted to, you could buy a million dollar's worth of property." Usually, that's what they come back to, is what I call a ticker capacity. Which is, the old heartbeat. That's normally about half.
So, they buy one property and they'll give it a go. 15 years later, "Oh, that worked." But, it's too late, you can't go back. So, there's a balance between maxing out and being a squib.
Steve Wiltshire: Being cautious, there. Too much.
John McAndrew: But, again, it comes to making tax work effectively for you. Making time work for you. Taking out necessary income protection insurance if need be. I don't want to spec like a financial planner, because I'm not, but most of it is-
Steve Wiltshire: Do you know what? I think that's really good advice, because I think all of us, in the industry included, it's human nature, you tend to just not go that extra step that you probably should. You know that you probably should do it. But, you don't do it. I think that's human nature, for people to sort of, pull back a bit.
John McAndrew: If I was to, again, giving advice, in fact, your question was, what would I do differently? I've encouraged myself-
Steve Wiltshire: What advice would you give yourself?
John McAndrew: The advice I'd give myself, again, which I've done with the boys, the boys being Matthew and Scott, they entered the property market at a very early age. Partly because of my motivation, I would hope, to a certain degree. But, also, the fact they just saw that it was possible.
Steve Wiltshire: Yeah.
John McAndrew: They got into the market earlier, admittedly, they worked hard and they earned hard and they saved hard. I taught them things you shouldn't do, like buying a 130 foot boat and pressing from Cairns to [Thursdale 36:28] on a seven day turnaround.
I taught them a lot of things not to do, Steven, I'm not going to go any further than that. So, that's the advice I'd give to John McAndrew. Stay with your [inaudible 36:38], buy property, keep it simple, make time and tax work for you. Take out landlord's insurance and basically get some good advice for [crosstalk 36:46].
Steve Wiltshire: There you go, Matt. You got all that?
Matt McAndrew: Yeah. That's why I don't own a boat.
Steve Wiltshire: So, guys, the big, important question, last question. What's the best bottle of wine that you've drank lately? Or, maybe a scotch, depending on your preferences.
John McAndrew: Steve, I think the quality of the liquor is never as important as the quality of the company sharing it. I'd be happy to share any decent liquor, with you, down the track somewhere.
Steve Wiltshire: Sounds good. Gentlemen, thank you very much, really appreciate your time.
Matt McAndrew: Thanks, Steve.
John McAndrew: Thanks, Steve.
Steve Wiltshire: Thank you both. Next time.