What do you do when rates rise? How APRA is affecting investors and we may have found some hotspots.

In each episode, the Smart Property Investment team and its special guests will break down what's happening in the world of property investment, how it affects everyday property investors and how they can take advantage of it.

You can listen to the show below or go straight to iTunes and subscribe. 

Mortgage broker Ross Le Quesne joins us this week as we look at the news and what it means for investors. APRA's changes are already having an impact on the market with investors in off-the-plan units starting to be negatively affected. There's already evidence of property investors walking away from their deposits!

What can you do if you're in a similar position? Are all these properties going to flood the market and depress prices? We talk it through.

The banks have just announced a raft of rate rises and again there's no escape for property investors. But what do you do when the inevitable happens? We talk about the different approaches we've tried.

And finally it's new hotspots ahoy! Or is it? We chat over the latest round of crystal ball gazing and see if there's any merit in these recent pronouncements.

 Transcript:

Andy Scott: Hello and welcome to The Smart Property Investment Show. Coming up: APRA’s influence on off-the-plan sees investors scrambling; the banks team up and slap investors with a rate-hike stick; and what's this marching over the horizon? Not one, not two, not three, but four new hotspots. All this and more in this episode of The Smart Property Investment Show.

Hello and welcome to The Smart Property Investment Show. I'm Andy Scott. I'm publisher with Smart Property Investment. I'm joined as always by Phil Tarrant, property investor and managing director of the title. Hello Phil.

Phil Tarrant: Hello Andrew.

Andy: How are you today?

Phil Tarrant: I'm very well thanks.

Andy Scott: Our special guest this week is a multi-award winning mortgage broker. Ross Le Quesne who is principal at Aussie Parramatta. G’day Ross.

Ross Le Quesne: G’day. Thanks for having me.

Andy Scott: Not at all mate. How are you today?

Ross Le Quesne: I'm great mate, sun’s shining, a month ‘til Christmas, all guns’ firing mate.

Andy Scott: Just run this quickly through what you do.

Ross Le Quesne: So we’ve been the number one Aussie franchise the last four out of six years. We were the Australian Mortgage Broker Best Franchise Office in the Better Business Awards last year and also the Australian Mortgage Brokers as well. The top office there.

Andy Scott: So you're pretty good is what you're saying?

Ross Le Quense: Bloody good mate.

Andy Scott: Nice and your office smells of rich mahogany.

Phil Tarrant: I think also Andrew, I have to put in my disclosure which I'm all about, Ross is also my mortgage broker and I think he's your mortgage broker as well.

Andy Scott: Ross is my mortgage broker as well.

Phil Tarrant: He's also a good friend of ours, but this guy’s at the top of his game, isn’t he Andy? So I think he can lend us some really good insight into what's going on in the market today.

Andy Scott: Absolutely, absolutely. And look, without further ado, let's crack onto it gentlemen, have a look.

The first story I guess we'll look at is APRA’s influence on, I suppose it's really relating to SMSF investors in off-the-plan stuff. This came from Peter Ristevski – apologies if I got your name wrong there Peter – an account partner with Chan & Naylor out in Bankstown. He's also a councillor on Liverpool City Council. He said that he's already witnessed clients’ investment plans become effected by the lending changes which began trickling down during the middle of the year, with five clients having to abandon their purchases.

He goes on to say that “so far we've been lucky in that respect, but once the property market starts declining, I don't think we're going to be as lucky”.

Look, we've only have I suppose, these APRA changes coming through in the last couple of weeks or so, perhaps start to take a bite. Ross, any of your sort of clients been caught on this sort of stuff so far?

Ross Le Quense: Most of our clients buy existing properties.

It's only just starting to take effect. Really in the last six weeks we've seen the pre-approvals expire from the old APRA changes.

Moving on from here, we expect there's going to be a lot of fall out. For your average property investor and as I say, I deal with lots of property investors who have a multimillion-dollar portfolios. If a client has a million dollars in debt, to qualify for that same loan, they roughly need to earn an extra 40 odd thousand dollars. You can imagine someone with a $3 million portfolio. That's 120 grand extra income they need to show. They're just not getting those types of pay rises.

Andy Scott: So listen, so it's not necessarily clients’ positions have really changed in terms of the money they've got coming in, and other assets and stuff they've got. It's just literally because the banks have changed what the rules are. If they haven't got through that approval stage yet to go, yep, the banks have given them the money, the banks are going, “well we're re accessing how much we'll lend you now and you're going to need to pony up some extra cash for us to give you that.

Ross Le Quesne: Yeah exactly, APRA’s gone in – all the deposit-taking institutions have a level that they need to access at – so that bench rate is around about 7.25 per cent on principle and interest. So, you imagine most investors, and we encourage all of our investors to pay interest-only, especially while they've got an owner-occupied mortgage, because it just makes sense – so these guys are paying interest-only at say 4.5 per cent, so that's 45 grand. They're getting accessed if their repayments are $86,000 so that's where the $40,000 comes in that I'm talking about.

Andy Scott: If you are an investor, I suppose these specific positions, or similar ones where – ‘cause we’re starting to see this with, I suppose the APRA changes – what sort of, I mean as an investor, what options do you have? You said you need to find extra deposit. Is that the only course of action unless you can, as I said get this extra cash, you're in trouble?

Ross Le Quesne: The best thing to do is sit down right now, don't wait until your property is a month when you get the notice, a month before it comes off-the-plan. Talk to your mortgage broker now so you can devise a plan.

Many of our clients as I say have other assets, other portfolios where they can raise that extra deposit. If it's in regards to serviceability, there's some specialist lenders that are still accessing the loans not under the APRA guidelines. So there may be some opportunities for them to qualify for a mortgage with a specialist lender or a second-tier lender.

Andy Scott: Phil, I suppose a lot of this talk specifically is about, I suppose the off-the-plan units coming through. There's a lot of units going up in potentially that part of the world. You hear there's all the units coming on board. You hear that Ross is telling us there are people who are going to have difficulties with getting the stuff serviced. Putting your investment hat on, does that mean, do you sit there and think, “Great. There’s going to be all these opportunities coming with people desperate to sell. I can go in and make my money going in here buying cheap stuff”? Or do you think, “You know that market is going to be depressed for a long time. There's a lot of stock coming on. Regardless if it was an off-the-plan unit or a house and land package”… How do you sort of see this effecting, I suppose, your purchase decisions as an investor in those areas?

Phil Tarrant: With an investor hat on, I’m an opportunist. You know, I will find any opportunity I can which gives me a competitive advantage over anyone else to acquire a property either under market value or at a cheaper rate than what everyone else is willing to pay.

I'm always out in there in the market place using the people I know as well, I've got a good buyer’s agent, and I'll go and find those opportunities and find people who are in distress and that's typically where I'll try and buy a property.

If I can locate and identify a property that someone needs to shift really quickly before it hits the market, I'm going to grab that really really fast. I'm looking at this here now in terms of off-the-plan purchases, if people aren't able to settle on these properties when they come due, what's available to them? There's a couple of things. They can either try and try to move it to someone else to take on the liability at that point in time, or they got to find the financing to do it. And as Ross said, there's some other ways that you can secure financing for the interim periods and etc. etc.

My concern around this is that, these new APRA requirements that come in place – and I think a little bit too late, to try and temper some of the increase in price, in particular in the Sydney market around investors in the market place who are putting upwards pressure on prices, which is creating these over-inflated prices, and hence the property bubble – which I don't believe in. But is the Sydney market particular over priced at the moment? Look, it's not going to grow a lot more. Is it going to flat line? Probably. So all these guys who have got into off-the-plan purchases have a double whammy of yes they’ve got to find the money to settle on these properties and these changes in bank lender requirements mean they're may struggle to do that. But then there's the other component and I'll say it's even more important is, is it actually good investment? Are these things going to go up in value that they've purchased or they’re settling in in a year’s time?

Considering the market in Sydney – now we've got to remember across Australia there’s markets within markets. You know, Sydney might be flat and Ross you’re probably better to talk about this, you know, Sydney might not show a lot of growth moving forward – but there's other places in Australia which are showing great great market conditions for investment. Whether you’re investing in off-the-plan purchases or you’re purchasing established stuff.

I guess it comes back down to, you need to look at the grade of the investment that you're purchasing, why you're purchasing it, what you're going to do with it over time and how you're going to finance the bloody thing. That's why you need a good mortgage broker now more than ever before.

Ross Le Quesne: It comes down to timing, doesn’t it, in terms of there's people that have done really really well in terms of over the last couple of years with Sydney growing at a rate of about 40 per cent over ...

Phil Tarrant: It’s ridiculous. Crazy stuff.

Ross Le Quesne: ... I saw something the other day, since 2009 the GFC, RP Data reported the Sydney market’s gone up about 72 per cent. Depending on what your time frame was, some people have obviously done really well. If people were entering into contracts now off-the-plan, I might be concerned, given that there's a good chance that we'll see properties coming off over the next 12 months, it may be a different story.

Phil Tarrant: What do you reckon Andy? What are you hearing from your guys, people in the market place?

Andy Scott: I think the thing that people ... the way that we invest, you and me personally, Phil, we have a similar sort of tactic and strategy. Some others don't. Some other people like the idea of buying something that's off-the-plan, “You know what, I’m going to put money into it. It's going to sit there over 10 or 15 years, not going to cost me much to hold and someone else is going to pay it down. It's going to be worth something”. The perception being, it's off-the-plan, it's brand new, it's going to be hassle free. They're not going to be annoyed with the calls that you and I get from our property managers that a $500 carpet needs replacing or “the doors are falling off the showers” – that's one I got the other day which was nice to hear.

Some people like not having that, but I think, ultimately again, it comes down to, you need to be able to be prepared to be able to give yourself wriggle room for whatever your strategy is. I think that's sort of clear. These people for whatever reason don't necessarily have wriggle room to do that. I think that's where the problem happens when you've pushed your limit and you don't see yourself a buffer.

Phil Tarrant: The summary of this is contingencies. Make sure you've got some ways to manoeuvre depending on the situation. Whether that is alternative financing, whether it's some way you can offload the property before it comes due. Is that a good way to sort of summarise where we are with this story?

Ross Le Quesne: Understand the investment that you're getting into at the time of investing and be prepared in cases like this.

Andy Scott: Times change and things change.

And I can't think of a better segue to move through to the next thing that popped up across my desk the other day that was getting a lot of popularity. “Investors getting slapped with a rate-hike stick by a majority of the banks”.

This is something that got flagged a while ago, but came into effect a few days ago. 13 banks enacted increases on their variable rate home loan products on Friday and of course that sweep up all investors with stuff of that as well. A round of rate hikes. We're at historic lows with regards to the RBA rate and the cash rate in this country and with sort of lending rates. I guess the only way is up in that regard. Is this something that we're seeing – I suppose a) the bank's breaking step with what the RBA are doing and what does that mean to us as investors? We've spoken about APRA at the front end, but is that banks just being friendly using conditions to just jack the rates up on all of us and take an extra bit of cream off the top?

Ross Le Quesne: There's a real appetite for an owner-occupied mortgages and we're seeing that from all the banks because of the APRA guidelines. The guidelines stipulate that they can't grow their investment portfolio, so that's the number of investment mortgages on their books, by more than 10 per cent. These loans are profitable to banks. Banks want to write them, but they want to stay at that 9.99 per cent. We have seen lenders moving rates on investment loans, some more than others, so they get within that balance. They get around that 9.99 per cent cap. I mean, a few lenders have come back into the market, AMP has come back in the market for all bar SMSF this week and Bankwest has also come back in the market.

They dropped out mid-year and they're coming back in the market, which shows their volumes of loans are coming in line with that cap. Before they were quite aggressive, so now they’re in line with the cap and you'll see that.

I mean, St George, for example, are offering a cash back for investors to entice them.

Obviously with the rebalancing of their portfolios, a lot of people originally took out investment loans and now they've gone to the banks with a change in their interest rates to have those repriced, so they're now getting owner occupied. So that has freed up quite a lot of space under these caps. Some banks have that appetite, but it'll be a month by month thing depending on how close they are to that 10 per cent.

Andy Scott: I suppose in my experience of banks here, they never miss an opportunity to explain that their costs and stuff have gone up and so consequently their shareholders have to feel a bit of pain and their customers have a bit of pain as well with sort of inevitable price rises and stuff.

Phil your customers are probably your tenants aren't they? You're getting a bit of pain with the rates going up, so what rates up, rents up – simple as that for you?

Phil Tarrant: Like most things in life, I concentrate on things that I can control and I don't really concern myself too much with the stuff that I can't control.

I can't control what lenders are going to do with interest rates. I’m like anyone else and what they say goes and I've got to work within that. That said, I do have certain mechanisms I can you to influence my mortgage. I can look to refinance it if I'm not happy with. I can try to find cheaper rates somewhere else. Obviously there's costs associated there as you know Ross, or I could just suck it up and go, “all right, at the moment, my money's going to cost me this to lend, to borrow and I'll just pay that out”.

Am I moving as my interest rates go up? Am I looking to increase my rentals? Sure, of course I am. I'll do that whenever I possibly can. But that’s really a dialogue with my property manager to say: “what's the appetite at the moment for renting in this particular area? Can I still get my rent without losing my tenants?” You know what, over the last year or so, most of the time they’ve gone “nup, just to keep it as it is.
You can't shift it because there are so many investors in the market place buying investment properties in the same areas and there’s too many investment properties in the market place right now so there's now pressure on rents, so just be thankful that you've got someone in your property right now. Shut up. Sit there. Pay your mortgage. Don't worry about it.”

For me, this goes back to ... and this is a number that you used that banks are assessing on 7.25 per cent P&I on it right? When I look at my ability to pay my mortgages, I always try and look at it, as in what can I spend if rates go up to this particular amount and am I going to be able to sleep at night and make sure I'm not going to be worried about money? That's my benchmark for everything. I don't want to be sitting there worrying about paying my mortgage. I want to know that I can do it comfortably. When I look at purchasing property for investment, I look at what is my capacity to lend if rates go up? I would look at it that way so I have again, I'll use the word a ‘contingency’, so I know that even if rates go up one per cent and you don't know what's going to happen in the future – Ross when’s the next interest rate rise? – I'm not going to call it, but I'm going to leave that one for you.

Andy Scott: Do you know Ross?

Ross Le Quesne: I don't know…

Phil Tarrant: The message is, rates are going to go up, rates are going to go down. As an investor, you need to be comfortable that should rates go up one per cent, two per cent, that you're still going to be able to put food on the table.

Andy Scott: I suppose Phil has sort of hit on a point here Ross. I suppose the question is, bank rates have gone up p, do your rents go up? It's that sort of reactive thing, but do you, I mean Phil sort of hinted that he has more a process of review of how he looks at stuff anyway. With your mortgage broker hat on, and look obviously with your hat on as a property investor as well, is that where you sit that these things happen, it doesn't really matter. It's about how you have a regular review of what you look at and to know what your position is really, to know really what your options are?

Ross Le Quesne: If you look at it over the history of time in terms of, you know, we started our mortgage broking business in 2004 after a similar boom and rental yields went to similar levels where they are today. Then as the market flattens out and there's less people buying investment, the demand changes for rental properties, as it's a supply and demand thing. As the demand for rental property increases, then rents are able to go up.

At the moment as Phil touched on, rates have been low, there's been a buying frenzy, there' been a construction, we’re seeing more construction than we’ve ever had. There's more rental properties on the market. So it makes sense that rents are increasing at this point in time. Given what we expect to happen over the next couple of years, I think you will see that change. As there becomes less properties on the market, your rents will tend to increase. It's basic economics.

Phil Tarrant: So we’ve been a bit Sydney-centric here because, I invest right across the country as do you, but I feel like we're being a bit Sydney-centric, but the reason why I think at the moment is that we’ve come to that point in all property cycles where it's starts to get flat. Investors have been highly active in the Sydney markets, in particular sort western suburbs, southwest suburbs where there's been some great opportunities for capital growth. All the investors have brought a lot of properties out that way and that's had some effect on pushing prices up. How much of the hike in prices in your Mount Druitts or your Campbelltowns of the world are driven by investors? I’d argue quite a lot, because it's a sentiment driven thing. But at that point right now where APRA’s stuck in these new requirements, it's slowed down investor activity, give it a tic, it needed to happen. Now you've got a stabilisation period, where with less investors in the market place it’s going to take a little bit a heat out of that market. It's not going to be the competition for property as there is, therefore prices will stabilise which means within a year or so, maybe 18 months, I’m going to start to looking to lift my rents up in those areas because that's the natural cycle that happens.

Ross Le Quesne: I think you hit on a good point. It’s about having a chat to your property manager and seeing what's on the market. If for example, a 200-unit complex has just come on the market and purchased predominantly by investors, there's 200 units that you’re competing against that your property is. It's really a market by market specific thing.

A good time in terms of this time of year is to look at not having your leases renew around Christmas time. Rather than doing a 12-month lease, look to doing maybe a 14-month lease so your lease is expiring around February, because it's hard at times to get tenants in the property around December.

Phil Tarrant: So, a question for you on that Ross, I use management agents to look after my stuff because I don’ have the time or inclination to run out and fix someone's washer right? It costs me whatever per cent it is a month. If you don't use a managing agent to look after your properties, how do you know as an investor whether or not stick your rates up or when to review or what sort of lease term to set?

Ross Le Quesne: A great tip that someone told me was every time you get your rates notice, use that as a cue to jump on realestate.com.au our Domain and just have a look at what the market rent is. Compare similar properties to yours and see what level they're being rented at. And that will give you a good guide if you're managing your own property to see where the market's sitting at that point in time.

Andy Scott: Rolled gold.

I know you mentioned we're that we're talking about Sydney, a little bit Sydney centric, I guess that's with some of the news coming out, but I'm going to blow that out the water now by actually talking about Sydney again.

Phil you mentioned you thought Sydney was a little bit flat. Ross you didn't look mad keen on it. You're both wrong. That's not my opinion. That's the opinion of Angus Raine. He's the executive chairman of Raine & Horne.

This comes on the back of the New South Wales state government this week confirming the location of six new metro stations across the city CBD and north shore, with new stations particularly to be built at North Sydney and Crows Nest. Mr Raine identified a couple of areas, Crows Nest, Camperdown, Newtown and of course North Sydney – reckons that he'll be looking at, well jumps of between five and 10 per cent following the announcement to paraphrase him. Phil we're based in North Sydney, we love a hot spot. Have you noticed the pavement beneath your feet warming as you've been walking out to get your lunch over the last couple of months?

Phil Tarrant: We're looking at a story on smartproperyinvestment.com.au which we ran Thursday of last week which says prices in four suburbs set to skyrocket and you know how much I love the word skyrocket. I don't know what it means. Is it a rocket? Is it a skyrocket? Is it a spaceship? I don't know.

As you know Andy, I like these stories, but they also make me a little bit nervous. Hot spotting, it's probably up there with the AFL in terms of a national past time. Everyone likes a hot spot, me included, but I typically don't talk about my hot spots, because they are the ones that people are going to be talking about in three years’ time and I've already been there and gone. Just I'll frame this within the sort of realm of just be careful with hot spots. If people are talking about hot spots maybe they're not so hot. You need to find your own hot spots and you can do that by doing a whole bunch of different things, because basically look at the fundamentals. I'll talk about this hot spot, because I do like a hot spot as you know Andrew.

Andy Scott: Indeed.

Phil Tarrant: To your point, is North Sydney paved in gold? Well it's paved in new paving stones ...

Andy Scott: It is.

Phil Tarrant: Coles has just opened up just up the road which I'm very happy about because I can get a barbecue chicken there at lunch with some bread rolls for about four bucks 50, so it makes me very very happy.

I found that really interesting because I would imagine that Coles stipulated by taking on that lease that they needed to get a refurbishment of Walker Street in North Sydney. That's happened and it's all aligned, it's very nice. It's injected some life blood into North Sydney, particularly on the weekends. I was up here on Saturday buying some groceries and there's actually activity here. There's stuff going on. What did it on me though was that the locking mechanism on the trolley meant that I couldn't push the trolley outside of the front door and I had a small toddler there with a big whole bunch of shopping and my car down the road, so I wasn't about that. But anyway I'm not going to complain.

It's good to see the state government giving some actual concrete projections on the allocation of investment dollars. Obviously the growth of this great city and this state is dependent on infrastructure. And as a property investor, you need to be looking at these things constantly to work out where's the next best place to invest. The city can ... this is not me as an investor, this is me as a journalist, which you know is my passion Andrew.

Andy Scott: It is your passion.

Phil Tarrant: It means that I'm a cynic and sometimes a grumpy, miserable old git.

Andy Scott: Also your passion.

Phil Tarrant: It is a passion of mine.

I remember about 10 years ago I was living Balmain and I was looking at property to buy and I got real excited when they announced the new tube which was going to be developed and there's going to be a spot underneath Rozelle where the Tigers was at the time, where they're going to build a brand new station. I got really excited about it thinking, “brilliant, I don't have to take that bus into the city over the ANZAC Bridge every day, great”.

You know what, it didn't happen, because some of the blokes in government said, “nah let's not do that now, let's do something else. Let's spend our money on something which doesn't really service the rest of the good people of Sydney”. So I look at this, I think, big tick to the New South Wales government by saying, yes create a metro project. Is it going to happen in my lifetime? No. I don't believe this is going to happen.

If it does, I'll eat my hat and that seems to be a common term that we use around here. If there is concrete plans that this is going to happen and it is actually going to happen, I don't know how you're going to work it out, it's going to happen, I don't think anyone's going to put their hand up and say yes 100 per cent, Metro's going to go in. Isn't it great and wonderful? They’ve talked about a second harbor crossing for trains for years and years and years and years. I would take this with a sense of cynicism and scepticism and think if you want to take a punt and you want to base your investment decisions on this particular thing, yeah you know what, it's a bit of risk. That said, North Sydney is a stone’s throw from the Sydney CBD. Crows Nest is a stone’s throw from the Sydney CBD.

The whole area up here, this sort of lower north shore is a stone’s throw from the CBD. You're probably not going to go too wrong investing in this area. You might pay a little bit too much for a property right now, but if you’re happy to sit on that profit 20, 30 years or pass it on to your children, you're probably going to make a few bucks out it. A tick for investing in this area, but should you be investing in this area because the state government said it's going to build some infrastructure? Na.

Andy Scott: What about you Ross? As Phil mentioned, we love a good hot spot story here at Smart Property Investment and it's entertaining if nothing else. Are you from a school that you can genuinely glean something from these sort of stories or are you from the school of well if bafoons like me and Phil are talking about it then the opportunity has gone?

Ross Le Quesne: I must say I do love a good hot spot article. I always have a look and have a read in terms of where they’re saying.

Andy Scott: It’s the Kardashian story of the property investment industry.

Ross Le Quesne: It is. It is.

Andy Scott: You don't want to, but you can't help it ...

Phil Tarrant: How to break the internet Andrew.

Ross Le Quesne: Phil and I were at a seminar the other and the figure bandied around was the property market in Australia is, there’s $6.2 trillion worth of residential property, which you compare the share markets with that, it’s about $1.5 trillion. It's a massive market, so there's always going to be markets within markets. I think it comes down to sometimes street by street or even house by house. There's some people that are going to be winning and there's going to be the losers as well.

In terms of this particular, North Sydney obviously, North Sydney has located, all these properties located within that 10 kilometre radius of the Sydney CBD, long-term over 50 years, it's going to be a place where you're money's going to increase. As for rental returns and building a sustainable portfolio, that comes down to affordability. As mortgage brokers, we're constantly looking at affordability. Affordability is something you have to take into consideration in terms of how quickly a market is going to move. Being around these types of areas, I would consider that's your more well-to-do families and so forth. The levels of income are probably quite high, but it’s something I would definitely be doing more research in to, to make sure the affordability is there to sustain those properties in the long term.

Andy Scott: Great stuff. That's about it for this week guys. Any final thoughts, Phil Tarrant?

Phil Tarrant: Next time we do this I promise to be less Sydney centric ...

Andy Scott: There we go. It's not New Year's, you don't have to make resolutions.

Phil Tarrant: No, no, no.

Andy Scott: You could've said that when we weren't recording, but that’s okay.

Phil Tarrant: That's all right, that's our commitment to our listeners to cover all markets right across Australia, opportunities good and bad.

Andy Scott: Ross thanks for coming in today mate. Any final nuggets of I suppose wisdom that you can glean from your experience of having lots and lots of investors? If you had to give someone sort of three bullet points, of “look you should always be making sure you're doing this when it comes to your property investment finance”, in a nutshell what would they be?

Ross Le Quesne: I think from a general market sense, there's always somewhere to invest. So Phil and I are currently buying properties in the market looking in the Brisbane market, so there's always opportunities. There's markets within markets around the country, so don't focus on where you live or feel that you have to be able to drive past the property.

From a financing point of view, look after your cash flow is the most important thing. So, rental yields and your ability to make those mortgage payments is very important. Set up buffers like $50,000 sitting in an offset account, something that's going to help you sleep well at night. And don't sail too close to the wind in terms of your serviceability. Don't go out and buy three or four off-the-plan properties because you don't know what that's going to mean down the track. Really look after ... have those buffers in place so you've got that protection should something else happen. Look to buy, as Phil said, look to buy those under market properties as well, because in times of trouble you could always sell it and get out of that market.

Andy Scott: Good stuff. Thanks Ross. That's all for us this week. Guys again, thanks for coming in. Remember everyone, you can find all the latest news and opinion and the sort of things that we and all other property investors are talking about on www.smartpropertyinvestment.com.au. We've also got our sister site which is www.whichinvestmentproperty.com.au. Come along, subscribe. If you've got any feedback for us here. You can email me on [email protected]. Any other contact details, you'll find it on the site. Thanks again guys. Speak soon.