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www.CreativeRealEstate.com.au

Episode 16 – A New Breed Of Property Investors

[LIVE At Go Direct Gold]

The Complete Transcript

www.CreativeRealEstate.com.au

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Ben: Rick Otton, Welcome to Creative Real Estate.

Rick: Benny Chislet. How are you Buddy, buddy, buddy, buddy.

Ben: I am going well Rick. This is our podcast where we talk about Street

Smart Secrets to Real Estate Wealth.

Rick: Do you know what, and we have done a lot of them right now.

Ben: We have done lots.

Rick: What number are we up to?

Ben: I think this might be number 15.

Rick: It could be 15 or 16.

Ben: 16.

Rick: So what are we going to talk about today?

Ben: Well, we were going to be talking about your crystal ball, but we’ve had

a change of plans.

Rick: OK.

Ben: Because our listeners probably don’t know this, but right now we are in

front of a live audience.

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Rick: We have a lot of people sitting in front of us right now and hang on a

second. Hey.

Ben: Hey.

Rick: My God. Which is great actually, we have got so much talent, cause

you and I have never had any anyway. (Laughing)

Ben: We just bluffed it all away, but anyway here is the thing Rick, here is

the thing. Now we haven’t just got anybody in the audience. We’ve got

probably the most specialist creative real estate people in Australia.

Rick: And you know why, because they actually do creative real estate.

Ben: Well, they are out in the market place doing it every day.

Rick: And you know what. Why don’t we should be finding out actually what’s

happening in the market place, cause there is a lot of people right now

glued to their radio thinking. “Well, what’s actually going on out there?”

Ben: Well that’s right. They are probably reading the news papers seeing a

lot more houses come on the market and they are probably wondering

how they’ve all got there.

Rick: Well, are you actually finding that yourself?

Ben: I’m finding that myself. I am finding a lot more houses are coming on

the market and they are staying on there for a lot longer.

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Rick: And I’ll tell you what, we’re actually finding more people who are

wanting to sell and they are having more and more trouble trying to get

houses sold the traditionally way.

Ben: The real estate agents are just telling them to drop the price.

Rick: Yeah and I am not too sure that’s always the solution. I am telling you

one of the things I am going up against all the time, are people saying

they can’t drop the price because the debt loan on the property is too

high.

Ben: That’s right.

Rick: And they can’t drop the price, because if they continue to drop the

price where the market is, they’ve got to take cash to the table and I

think that’s what people are short of.

Ben: Correct and just before we go to our live audience here today, one of

the things that I am finding, whenever a seller rings up and I say, “So

Jim, what do you reckon the house is worth”? I will say, “Well 18

months ago, it was worth this price".

Rick: Yeah.

Ben: But, probably in today’s market, it is worth this.

Rick: And I think that’s really a surprise. The amount of people that are

actually saying today’s market as if it’s a different market.

Ben: Yeah.

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Rick: It’s like the memo has gone out and we realize now it is a different

market.

Ben: But what that’s actually doing is that they are acknowledging that it

used to be worth more and now its worth less.

Rick: Yeah, yeah. Well I had someone today, who actually said to me on the

phone when I was chatting to them that they sent me an memo and

they said would I be interested in buying this house? And they said that

they just had this market value appraisal done for $2.6 million and I

said, “Let me ask you something. What is the latest on the value?” and

she said, “I’ve just had another one done”. And I said, “Yeah”, and she

goes, 2 million and you go “Wow”. I mean 600,000 drops in just a

matter of months.

Ben: That’s crazy.

Rick: It was just never happening before. I’ll tell you what we should do, let’s

cut to some of our people who are with us right here in our live studio

audience and find out what is going on out in the market there, cause

you and I have our idea of what’s happening, but have a whole bunch

of people in front of us. Who we got, Matt, Matt tell me what’s happing

in the market place?

Matt: Yeah, right now I agree with you guys and I am finding that there are

people out there who are just taking a long time to sell. They’re finding

that the real estate agents are perhaps are not finding the buyers that

they are looking for.

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Rick: Are you finding that the real estate people are changing from one real

estate agent to the next?

Matt: I am finding that a lot. I am finding that they get to the end and they

want to change to another real estate agent, absolutely.

Rick: Now, why do you think it is that they are not selling the houses? Are

you finding the stage where sellers are telling you that they can’t drop

their price any further?

Matt: Yeah, definitely. Just the other day I spoke to someone and they just

were adamant that they needed to sell at a particular price.

Rick: Right. OK. Do you know what was their thinking behind that? That their

loan debt was pretty high?

Matt: Yeah, they needed to clear a particular loan debt and they had to pay

for the agent’s commission as well.

Rick: You know that happens a lot Benny.

Ben: It does.

Rick: I think people really have to do two things. They’ve got to cover their

loan debt and, but not only that, a lot of people are now prepared just

to cover their loan debt and their agents fees and walk.

Ben: They resign the cash, the cash is gone.

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Rick: Yeah and now you know 12 months ago, we used to sort of hang in

there.

Ben: Yeah.

Rick: Do you know what I mean?

Ben: Yeah.

Rick: But now it’s like, if I can get that, get that, get that, I am out of here.

Ben: Yeah, well one thing that I am coming across, a lot of them will ask

everybody else if they’re finding the same. Is I’m finding a lot of people

are going into real estate agency agreements, particularly once they

have gone to the second real estate agent and they are leaving it open,

so they can actually sell it themselves or if the previous agent comes

along with the buyer, the new agent will step aside and that kind of

thing. I am finding a lot of that at the moment.

Rick: You know for people who are listening, I think it’s very important, when

they do go in agency listing agreements. The traditional sense, the real

estate agent will likely lock you up for like what a 9 to 120 day contract.

Matt: 9 to 120 days, yeah.

Rick: And I think that it is really imperative that you either make it what I call

a one month extendable. So its one month and you can renew it each

month. If you are happy with the agent and if you’re not, you can go. Or

if you sell the property yourself. I always love having a clause in there

Benny that says if I sell it myself, I don’t have to pay the agents

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commission. Now here’s the interesting part. They always let me have

that clause in there.

Ben: Yeah.

Rick: That says if I sell it myself, I don’t have to pay them the commission.

You know why they let me have it?

Ben: Because they think you’re a dummy and you won’t sell your property.

Rick: Yeah, that I haven’t got a clue. I haven’t gone to real estate school.

Ben: That’s right.

Rick: I wouldn’t have a clue and what would I know about real estate cause I

don’t look too smart anyway.

Ben: That’s it.

Rick: So that’s why they always give it to me and of course I have always

found that I can sell the properties quicker than they can. So James,

I’ll tell you what. I know you’ve been in the market place right now,

what do you find out there’s happening?

James: I am finding that with this GFC coming, people are just fearful and they

want to get rid of their mortgage debt because their finding it hard with

where they’ve got credit cards, they’ve got other things that are

zapping their money and so what they would love to do is just to be

free of that house so that they can move on with their lives. Often it’s

because the houses are almost exactly the same amount as the

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market price and sometimes below that and so you go to a real estate

agent and they say, “We’ll sell it for you”, but there’s a certain amount

that the sellers need to have, otherwise. They can’t get out of their

debt. So then they owe more to the bank after they have sold the

property. So their problem is not gone.

Ben: So, do you think James, that people have bought these houses, do you

think they are more likely to be in new housing estates or in sort of

older built up areas?

James: I think that in 2003 onwards when there was lots of money that the

banks would lend that people boarding those new estates and with all

of this new.

Ben: 95% home loans.

James: Yeah, 95% home loans and now as the market starts to drop, their

cash goes and they’re stuck with the house, which is basically

strangling them on their necks because they can’t live.

Rick: You know there is something you and I covered at lunch today, which

was really quite interesting. We were talking about how when people

can’t sell properties in foreign countries, like England, United States.

Normally, they rent it. The rent is high enough to cover the mortgage,

because they don’t have negative gearing. There is only 3 countries

that have negative gearing, Australia, New Zealand, and Canada. So if

you have a property that you can’t sell in the United States or if you

have a property that you can’t sell in England, you rent it and the rent

will cover the debt, but in Australia you are still three grand in the hole

a month.

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James: That’s right.

Rick: So then you’re thinking, well I will just rent it, but you still bleed 3,000

solid dollars every single month. Year after year after year, which the

other countries don’t have that problem. They just rent it and say. I’ll

come back in 10 years time and I’ll sort out the mess then, but they’re

not writing checks out of their pocket and I think that’s one of the

issues we have in Australia, that the other countries aren’t going to be

experiencing in this market.

Ben: And you were also saying off air at lunch Rick. You actually mentioned

some psychology around this and there is a bit of a tipping point on

how long people will do that for.

Rick: Well yeah, cause people will go through what’s called the emotional

zone to like what’s called tipping point. So when things aren’t working

out, people will sit there for about 18 months, until the logic of the

situation sinks in and they say “that’s it, I’m out of here”. So people

hang on, hang on, hang on, hoping things will get better, times will get

better, whatever and then they’ll go through Christmas and realize you

know there’s no presents for the kids this year because they’ve got this

upside down property. So people will get to about 18 months, then they

get to tipping point where everybody says, “That’s it, I’m over it. My life

is falling apart. This thin is never coming back” And they just want to

dump it and want to get out of it. Nearly that tipping point takes about

18 months after a perceived market down turn. They have to work

through it, but that’s just one of those things that people have to work

through.

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Ben: Yeah.

Rick: So I’ll tell you what, yes go ahead.

Female: Yeah, just going on that Rick, I’ve, my background was that I actually

had a whole lot of negatively geared properties. We weren’t into the,

we bought into the negatively geared parcel a few years and we had

about 20 mortgages that were running us and we had to sell a certain

way. It wasn’t for sale, but what we were really surprised about, was

we only got the debt on the property. We even got the value; we

thought that the banks had put on it. So all the equity we thought we

had in the spreadsheet wasn’t there and what we’re finding today in the

market place is that’s just becoming more and more apparent. You’ve

got as money tightens, you’ve got a lot of investors out there now that

are really hurting with negative gearing. Putting their own money into

their own pocket. You know, we are trying to work with them in other

strategies that will you know, help them with some positive cash flow

and I really got into this program because I really, I was sick of

negative gearing and I thought there had to be another way. I liked

Rick strategies because of the fact that he was working in the

established market and I thought there had to be a whole different way

of doing it and yeah and there is turning, you know negative into

positive.

Ben: You said something really interested there though.

Rick: Yeah you did pick up the same. Rick what did you get?

Ben: You said about the equity on the balance sheet and that the banks

valued it and then loaned you the money there. How many times do

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you have somebody call you up that’s wanting to sell their house and

you’ll ask them, what’s it worth? Well I just got a bank value and it was

bloomp.

Rick: Yeah.

Ben: Whatever it is and I’m just wondering how many investors out there are

sitting around with 20 mortgages going, I’ve got a 2 million dollars of

equity here and as soon as they go and realize their equity, they’ll

realize, I’ve got a bunch of debt that I just don’t have any more.

Rick: Yeah and the bigger pictures are the loan the banks. Thinking on their

balance sheets. They got property worth a lot more money than their

actually worth. They have to cash up a lot of those properties, those

houses. They wouldn’t have that sort of money. But the bit that I

grabbed out when I thought was interesting is when you said where all

these properties running us. Now this is gets to your tipping point

because what happens is, people get to about 18 months and they go,

you know what, this property is now worth half the value of what it used

to be. It was worth 600, it’s now worth 300. This property is running us.

For it to go to 300 back up to 600 and for us to recover the $3,000 a

month payments on it, we are going to be doing this for about 5 to 10

years and you get to that stage where they go, that’s it. I am not longer

going to be in this situation where these properties are running us.

Because you can’t see the headway of it. Now when the properties

were doubling every couple of years, every 8 or 9 years. Everybody

goes; I sit it out because of the benefit. They double every 7 or 8 years.

And there’s now people realized that’s not happening. There’s a whole

new world order. You know, they go, well hang on, hang on, hang on.

Why am I really hanging on to this thing now? Cause my quality of life

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isn’t what it meant to be. One of the things that I told that is funny is, I

used to say to people when I first started. People would go. The

Accountants use to say to me, you know what your negatively geared

and then you would be so rich you can do whatever you want, right. I

didn’t have to work, but the more negative geared I got, the more I had

to work.

Ben: That’s exactly right, yeah.

Rick: That’s fire into the cycle you know.

Ben: Yeah.

Rick: And then I never did get the last bit.

Female: And you do things easy. You can’t even rebel and support folio,

because agents start to sell and then they chill out and kind of offset

your losses, you know it just goes from bad to worse. So we actually

sold a 12 million dollar portfolio that we thought we had a 3 million

equity in and we ended up with a couple hundred thousand out of it.

Ben: Wow.

Female: So it’s a really sobering exercise and now I mean the reason you go

into negative gearing in the first place is to get capital growth.

Ben: Correct.

Rick: So how long were you negative geared for with all of those properties.

How many years did this happen over?

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Female: We started putting them together from about 2000 to about 2007.

Rick: Wow.

Ben: Wow.

Female: So progressively over that period and we had some very good

properties, but we’re pulling the good ones, cash out of the good ones

and putting them off of the other ones.

Ben: Off on the bad ones, yeah.

Female: And crossing our fingers that things were going to get better and you

know. Of course it came a point when you say, well hey there’s got to

be a better way.

Ben: Yeah that’s right.

Female: And I think people are realizing that there is a better way.

Rick: And you said something earlier, everybody goes negatively geared

because the property is going up. Once for a long period of time, it

hasn’t gone up and people believe it’s not going to go up. Then they

are going to want to restructure, rechange. Cause the whole idea; you

know when you think about it. The whole idea of the whole negative

gearing was for people to appear for to have choice. Now people are

realizing they’ve got no choice.

Ben: That’s right.

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Rick: They work 24 hours a day, 7 days a week. They don’t have a choice.

You know, where’d the choice go?

Ben: And they want this big tax deduction.

Rick: That’s it.

Ben: And they realize that once they get their tax done, they’re deductions

aren’t just quit as big as they thought.

Rick: Yeah, that’s everything. Sometimes when people actually look at the

tax deduction they get.

Ben: Yeah.

Rick: Right, their actually not getting that much tax deduction.

Ben: Well mostly the people that I talk to, that will call us up as a seller and

they talk about the tax deduction. They are using the check from the

tax deduction to pay off the arrears. They bank on it every year just to

clear up a couple months worth of rent. Yeah you’re right.

Rick: Right. So John, what are you finding up there?

John: Well, I’m in the same boat. I’ve got a negative geared property and I

want to stop working in a year and a half and that negatively geared

property is keeping me working for the next 10 years.

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Rick: Let me ask you something, that negatively geared property John, how

long has it been with you on the portfolio for?

John: For 10 years now.

Rick: OK, for 10 years. Now here’s an interesting question for you. If you

look at where the rents were 10 years ago to where the rents are now,

have the rents gone up enough to cover all of the outgoing costs on the

property?

John: We are all mutual at the moment.

Rick: Mutual?

John: Yeah.

Rick: Well that’s interesting. Benny, it’s taken 10 years of rent increases

before it actually starts covering the debt.

Ben: Yeah.

Rick: That means you got to be in a losing proposition for a decade. Imagine

saying to somebody, I want to buy a property and lose money for at

least a decade before I start making a profit. Imagine for the start of a

company. Well actually we are just mutual. We haven’t any profit. Hey

Benny I am putting back on the business. I’m thinking I’ll make losses

for 10 years. I will break in on the tenth year. I mean, it’s interesting

isn’t it John, because your right now 10 years into it and now, it’s only

now beginning to break even.

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Ben: Do you think John; it’s gone up in value, the property?

John: Oh, It’s definitely gone up in value from 187,000 to about 310,000.

Ben: Yeah, great.

John: And I started off at $200 a week and I’m $370 a week now.

Ben: OK.

John: And the interest I am paying is for 1,400 a month and I am getting

1,400 a month. So.

Ben: OK.

Rick: And that’s interesting. You’re getting 1,400 in and 1,400 going out. On

top of that you are still are paying what, land taxes and water and

counsel and all that sort of stuff.

John: Yeah.

Rick: So John, you actually don’t actually have enough money coming in yet

to cover all of that. Would that be right?

John: That’s right. Yeah.

Rick: So you probably, you have a couple more years to go on that.

John: Yeah.

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Rick: You know it’s interesting. I read something a little while ago that said It

takes you 16 years to hold a property before the rents high enough to

not only cover your outgoings, but your outgoings, your mortgage

loans, the whole thing. Cause right now 10 years John’s rent is

covering the debt, but it is still not covering body corporate pays,

counsel, water, land tax, blah, blah, blah. So you got to ask yourself

how many more years does this thing have to keep going just to get to

break even. Interesting.

Ben: It’s just a scary proposition.

John: Plus the body corporate has gone up from 400 a quarter to 658. That’s

an expense.

Rick: Yeah, one of these your thinking, we have had this and I will tell you

what. We have had a massive talk about body corporate fees and is

we’ve had had a lot people buy into new developments over the last

few years and what they find is, the body corporate fees or what they

thought the body corporate fees would tally and funded. So they’ve go

into this build and they’ve been in there for three months and they go, it

really was going to be $140 a month for your body corporate, but we

realize we really totally underfunded this building that actually has a

swimming pool out the back and we have a lift and we actually have

got to move that to 140 a month to 500 a month. Now it just changes

the whole dynamics of the property.

Ben: There was an interesting article in the, I think it was in the Finance

Review the other week saying that, out of everything that stops getting

paid, body corporate usually the first thing that will go. People don’t see

that as the most important thing.

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Rick: Right.

Ben: So they’ll usually leave that unfunded. Interestingly enough.

Rick: John, let me ask you something. Do you think you will get the same

capital gains in the next 10 years that you got in the last 10 years?

John: I don’t think so. Not with the new economy. I think I am expecting the

prices to drop a bit. At least 20% so.

Rick: OK so, alright, OK so with your thinking now with what your thinking is,

what do you think the move that you will be doing with this property?

John: Well I want to; I want to sell it to somebody else.

Rick: You want to move it on?

John: Yeah.

Rick: Alright. It’s interesting. I just passed the microphone to Matt next to you

cause I know it’s fair. I know Matt your are in the lending business.

Matt: Yeah Rick.

Rick: And we talk about people trying to borrow money. Compared to where

it was before the legislation, in what way are you seeing legislation

changes make a difference to people’s ability to borrow now?

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Matt: It’s been really interesting; it’s been a double whammy really. We’ve

had the global financial situation go pear shaped, but also the

government has sort of stepped up and made a whole heap of extra

bureaucratic red tape for lenders and mortgage brokers to jump

through when they’re lending for someone to buy an investment

property or a home and that’s really made it quite a lot more difficult.

It’s a lot more compliant.

Rick: So let me ask you from my perspective. If I am the borrower, I come

along to you and I want to borrow money to borrow, or to say to buy

the property. Am I going to have to jump through a bunch more hoops

then I had to two years ago?

Matt: Correct, correct and those hoops are a little bit tricky. So that knocks a

few more potential buyers out of the system.

Rick: And if I am self employed, I guess that’s even more difficult to get?

Matt: Well, that has always been a little trickier than someone who can

present a record of pay slips.

Rick: That’s interesting. So we have a loan on the market that’s no longer

doing what people wanted it to do, but for just people to get into the

system is even harder then what it was.

Ben: Yeah, so they are obviously a little bit more selective with whom they

lend money to, if they are going to lend the money at all.

Rick: If they are going to lend the money. The funny thing about it.

Interesting is as we start to see property prices slide, because the

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banks are aware that property price are coming down or going up. The

loan to value ratio is that they’re lending are actually reducing. Now the

interesting thing is cause the same is what I see happen over seas in

Dallas and London two decades ago. As the banks lend lower

proportions or you know, lower loan to values, because they are

concerned about falling prices. That makes it more difficult for people

to buy because there’s less percentage being lended. So the prices

continue to fall.

Matt: Yeah.

Rick: So they lend less. It continues to fall, they lend less and it sort of

spirals downward.

Ben: Well that’s right. Something that I’ve found to be consistent this

probably the last six months is, lenders are actually sending out letters

to people saying, if finance the has declined you can agree or disagree

with this feedback. What I am finding is people could get a conditional

approval and they’ll get all the way through to the valuation stage and

it’s always that the valuation that comes in to late to approve the loan.

Is that something you think that’s a practice with lenders?

Matt: Yes, that’s absolutely correct Ben. That’s one way I guess the lender

manages to turn the tap on and off, because one of their limitations is

that they don’t have unlimited money to lend in the current conditions,

but they don’t want to admit that on the streets. So they just say, look

the hurdle is now here and you might have passed just today, but

today you won’t and the other way they do that is, they just tell the

valuers, “Look guys, this suburb or this area has gone a bit cold. I think

you better pull back on what you think the property is worth there.” So

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the values come in low and that would cause a bunch a trouble. People

are with either knocked out or they got to put their hand in their pocket

to put more cash in or grab equity form another property or something.

Ben: That’s really interesting, cause it’s kind of a way of saying. Look we’re

with you. We are happy to give you the money, but it’s what’s

happening out there that we can’t give you it.

Rick: Yeah, We go our arms around your shoulder.

Ben: Yeah, yeah, yeah buddy, look what’s what’s happening out there, you

know.

Rick: We’re your banking in the future. Let’s just make sure you don’t bank

on us. Barry, what are you finding out there in the market place?

Barry: Just recently at lunch time. I had a seller.

Rick: That is recent.

Barry: Yeah, It’s just in. An investor, an investor said, “Look, I’ve got a house

that I bought, because everyone thought I need to buy houses. You

know units. You need to get this negative geared thing going and I

don’t like it and I need to get out. Can you help me?” I said “Are you

taking it to a real estate agent?” He said “I don’t really want to go with

them because things just taking too long to sell. Is there something you

can do for me now”?

Rick: How long has he been in this thing? He bought this property how long

ago?

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Barry: A couple of years ago.

Rick: A couple of years ago.

Barry: And it’s just bleeding him dry and he wants to take his money out and

just no interest in there.

Rick: You know what’s so interesting about what you just said? What was is

the set up for that? It was, listen if you want to get in a property

business in Australia or if you want to get ahead. You’ve got to get into

this negatively geared property. This is how it works. Like you get this

property and there’s money for 10 years, doubles a better way to go.

But it is so institutionalized, that even if we were in 2008. We’ve

already gone through the global financial crisis. The worlds in melt

down, but people are still saying, but you know what if you would have

got into property, this is the way to do it and everybody, it’s like, it’s like

the time when you’re born and you come out of the hospital of Sydney.

You know and as soon as the kid pops out. You say to the kid. Which

house are you looking at, you know what I mean. It’s like. Where are

you going to go? You know. Somebody going to buy. It’s just very, very

institutionalized, it goes back a long way.

Ben: It’s an arrange to marry.

Barry: Well you see, he said he was an investor. I am like well and you want

to get out of it. I’m like are you an investor or.

Rick: Yeah.

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Barry: What’s your story?

Rick: Yeah.

Ben: And Barry, when he said, I want to get my money out. Did you, what

did he want to do with the money?

Rick: Much money to get out or is it all dead Barry?

Barry: He’s I haven’t really got there yet and I’m just going to you know,

maybe call him back, but he wants to take his money out and go to

America.

Rick: Does he? (Laughing) He’s not losing it fast enough!

Barry: Yeah, That’s great. That’s what you want to do then that’s totally fine

by me, but you know what we will see what happens and we will just let

that just sort of sit for the next couple of days and I might call him back

and do a few a numbers I said.

Rick: Yeah, he probably didn’t even get to the stage of how much the debt

bit, how much the cash bit and that sort of stuff.

Barry: No, not yet.

Rick: That’s interesting, isn’t it? People are wanting to sort of there’s a very

big of rush of people moving money to cash and of course the cash

rates are going down because the banks are getting more money than

they really need.

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Ben: That’s right, that’s because of all of the uncertainty. They don’t know

what to do with it next, if they get it all back today, what are they going

to do with it?

Rick: Yeah where are you going to put it?

Ben: I always ask the question to people and they are like, oh I didn’t really

think about that.

Rick: Yeah, I mean where I people going to put money now. So it brings us

to really the new economy, which is where everything goes now.

Cause I actually think that what we are seeing right now, not just in

Australia but, around the world, is a major, major shift and I am telling

you what I am seeing in the last. Remember how if we go back a few

years ago, like smoking was really trendy right.

Ben: Yeah.

Rick: Everybody used to smoke and get cigarette holder, all sorts of stuff.

Well now, I mean it’s just so unsociably acceptable.

Ben: It’s like a disease.

Rick: It sort of is, isn’t it? I mean, if you turned up and you had a cigarette at

a party. I mean everyone would stop talking and look at you, you know

what I mean.

Ben: Yeah.

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Rick: And I mean. I don’t know. I am just sensing that now if you went to a

party and said, guess what I just did? I bought a negatively geared

property. Like people will stop talking and looking at you like.

Ben: That old boo you.

Rick: Yeah, like where did that come from, like why would you do that? You

know what I mean.

Ben: That’s right.

Rick: Like a year ago, people would go, good idea mate. That’s the only way.

Get that pioneer. Right, but now it is kind of like. If you do that.

It’s like guess what; I’ve just set up a new way to lose money fast and

people will look like that’s just no longer cool.

Ben: Yeah, it’s not cool. It’s kind of like working long hours in some sort of

corporate job. You know, people used to do that and I did it myself

thinking I was on the road to success until they decided they didn’t

need me anymore and I realized how far from success I was. And it’s

the same thing I think with investors, you know. Investors that jump into

these things and thinking, wow I am on my way and all of a sudden the

way is no longer the way. They are thinking, wow I am really so far

from the way.

Rick: Yeah and it’s just a whole different way, so what we are going to see is

the new economy and I believe that one of the things that you can’t do

in this new economy, the new world. I want to say that the new

economy, the new world order, you can’t drag our old processes and

try to apply the old processes to the new world. So whatever used is

27

old right, the old thing we used to, you can’t take into the forward. Now

if you think about most stuff of what we know or what we learn is buried

in the old way of doing stuff. Like if you speak to any university

professor or anybody who walks around with a DVD, 1, 2, 3, a, b, c

behind their name. They’re all going to be buried in old architecture.

Ben: Yeah.

Rick: You know what I am saying?

Ben: Yeah, on the business card though.

Rick: Yeah, yeah, yeah, yeah, yeah. It says something like going, you know.

For instance it’s like trying to go to a guy who builds steam engines for

a living and talk about sort of future momentum of the hydrian vehicle.

Doesn’t matter, wrong guy. So most of the people right now are going

to be buried in what I call old architecture and old process and you

can’t drag the old processes forward into this new world order because

everything has changed.

Ben: So it sounds like to me Rick, It sounds like you are actually trying to

say, you can’t solve today’s problems with yesterday’s tools?

Rick: Correct.

Ben: That’s what you are trying to say?

Rick: Yep, Got to redesign everything.

Ben: Cause I think that before we get to entrenched in the new economy.

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Rick: Yeah.

Ben: We ought to drill down on some of the new tools. The guys in the room

here are using to solve some of these problems. What do you think?

Rick: Well think about this. Let’s go for the big, big concept. I think that there

are two things that are really being, so obvious and so allowful and

especially I see this in the UK. You know, if they have the situation

were you got 62 million people. Yet the percentage of new home loans

are coming out of the banking systems is the lowest it’s ever been

since World War II right? So the funny part about it that makes us all

laugh is if you think about it. You got all of these people around the

world that are trying to get out of real estate. Like they don’t want to be

in it any more right,

Ben: Yeah.

Rick: But they can’t get out right, but on the other hand you got all of these

people that want to get in, but they can’t get in. So the system, which is

the banking system says, you can no longer get in and all of these

other people can’t get out, so the other people can’t get in and I have

always thought its really funny that when you break it down on its most

simplest formula, the guy who sales, sales a property. Gets a bank

loan and puts it back in the bucket. The guy who buys, goes and gets

the bank loan back out of the bucket to buy the house, But the home

loan the guy already had. It seems to me, why don’t we just get rid of

the bucket instead of the seller putting the home loan back in the

bucket, the buyer goes to get the home loan back out. The seller just

29

gives his, what he doesn’t want across the table to the guy who does

want it.

Ben: It’s kind of like trading your apple for someone’s banana.

Rick: Well, kind of is. Isn’t it.

Ben: You don’t want your apples so you trade it for someone else’s banana.

Rick: I mean the other way you do it is you go and sell your apple to the fruit

shop right, then I go and buy the banana at the fruit shop. Why don’t I

just trade you the apple for the banana?

Ben: That’s where I am coming from.

Rick: That’s the whole thing. So the funny part about it is when you talk to

people about doing it that way and you say, why can’t you do it that

way? People always look at you confused and if you say you can’t and

you ask them why, they actually don’t know why. You know, cause

what happens is their brain just goes back to past process. There is no

process, therefore there is no past process, well you probably can’t,

but if you said why, they don’t really know.

Ben: No.

Rick: It’s like when lawyers go and tell you, well you can’t do that. You go,

why not. Because it’s says, it says where and they can’t actually show

you where, but there is no past process around.

Ben: Correct.

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Rick: So you have to sort of think everything forward now. Everything

becomes a new process and everything becomes something that’s

undiscovered and I think what we are going to see over the next 10

years is massive opportunity as new financial vehicles are coming into

the market place.

Ben: Yeah.

Rick: That are actually being created as we go into this market.

Ben: There is always going to be some resistance bringing something new

into any market. People are going to say you can’t do it. People are

going to give you all of the reasons, uneducated reason, and

unemployed brother in laws opinions.

Rick: Yeah.

Ben: All that sort of stuff. As the way you can’t do it.

Rick: Let me ask, Hang on for a second. Have any of you guys sitting in this

room right now, has anybody said there’s something you can’t do.

Crowd: Yeah

Rick: Really. OK, do me a favor. Chris goes to that microphone. Where is

he? Go to the microphone back there. Tell me about an example

where your we’re talking about something you can’t do.

31

Chris: I am a baby boomer and I talk to a lot of baby boomer and a lot of baby

boomers have the, have the conception that the only way you can buy

a property or sell is by a real estate agent.

Rick: Yep.

Chris: And obviously if I can present something that they can buy a property

without using an agent. Most of them shake their head and that’s not

the way it’s done and obviously it’s only because they don’t know.

Rick: That’s interesting because if you said, just suppose you don’t have a

real estate agent and we just did direct without the real estate agent.

Chris: Yeah, but that whole.

Rick: How would that make you feel and, but the concept of that is like, well

how could you do that? Well do you know what I mean? They are so

buried. It’s so they way they have been for a loan.

Ben: Well an interesting question I think for anyone who is being a baby

boomer would be, do you think that because of the value that the baby

boomer generation put on houses, like you know everything has to be

about getting a house. Do you think that’s why? If they were trading a

car that may be a bit more relaxed and all of that, but because it’s a

house, do you thinks it’s a little bit more anxiety and things like that

around it.

Chris: Absolutely. I mean. We were taught as young kids as the security is in

your home and the great Australian dream is to own your own home.

32

Rick: Yeah.

Chris: And so everybody poured their ambitions into buying a property with a

backyard and three bedroom houses with the double garage.

Rick: The ambitions of their future, the whole security of way I think of the

way of that. I think you are absolutely right Chris.

Chris: Yeah, things have changes.

Rick: I think one of the things we are going to see, but you won’t see it now.

We’ll see it over the next 10 or 15 years. Housing in people’s minds will

move from an investment to a commodity.

Ben: Yeah.

Rick: And they’ll treat it accordingly.

Ben: Well that’s what it’s like in the US.

Rick: Well that’s what it’s like in the US.

Chris: Yeah.

Rick: They don’t see housing as an investment. It’s an absolute commodity.

They trade it, bulk, buy it, sell it, go home. I remember once, when I

bought seven townhouses back in the old savings and loans and an

asset manager was working for the government, you know. I bought

seven townhouses. I said to him, I said look, these seven townhouses,

I mean look gee wiz. Look, why don’t you just have one and he said to

33

me, well what I am going to do with a townhouse? I’m thinking

etiquette, well they last thing I want is a townhouse and I was like. It

was sort of a hassle, you know what I am saying and he says, we are

now going to sale I got this, but it was like.

Ben: He said that in Australia.

Rick: Oh my god. He was like, oh my god, great.

Ben: Yeah.

Rick: So it was just how they sort of think about that. I have gone on. I think

Dorothy or Sam. You guys have both of had the experience of people

have actually said there’s something you can’t do?

Sam: Yeah, quite often actually.

Rick: Yeah.

Sam: Like I had a situation a couple of weeks ago that arose. I came across

a buyer and a seller who were already agreed on a deal together and

after agreeing on a price and the buyer getting approval from his bank

to proceed with the transaction. After the valuation, the bank decided to

drop the amount of money that they were going to give him buy a

150,000.

Rick: Wow.

Sam: So they buyer and the seller started scratching their head and thinking,

well hang on, we thought we had a sale going. You agreed on this

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figure and now you have dropped it by 150,000. The deals fallen

through, the deals not going to go ahead. So I stumbled across this

particular scenario and I obviously worked towards helping both the

buyer and seller you know, finalize their transaction.

Rick: OK, now did that come together? I am guessing if the buyer was

probably short the 150 are probably suggesting the buyer to make

those payments to the seller or something.

Sam: Yeah, yeah. What, what, what. The way it turned out was that the

buyer, the buyer had a certain sum of money that was adequate to get

a loan from the bank, however not adequate enough to support the

short fall the 150,000 short fall that the bank wouldn’t give him. The

seller on the other hand didn’t actually need all of his money at the one

go, he needed a certain sum of his money.

Rick: He needed to get started.

Sam: He needed it in cash to go on and do certain things with his life. So in

the end both parties were able to sort of solve one another’s problem.

The seller was able to take part of his money and leave some of the

equity that he had in the property stay in the property and the buyer

was able to buy the property with the money that he had using the

mortgage that he could get.

Rick: Yeah, Now let me ask. Were you able to put that together for two

people?

Sam: That’s correct.

35

Rick: And I am going to guess that if you weren’t there, they couldn’t have

probably see the way to do that?

Sam: Actually, they walked away from one another. I found out through the

agent that was handling the transaction that was telling me that he had

this sale that fell through, been on the market for about six months.

The house has come down about 200,000 over the last six months.

Ben: Wow.

Sam: Seller needs to get out and he just couldn’t believe it, He was just

scratching his head, saying that I just can’t believe the deal had fallen

through.

Rick: So the interesting thing. I actually don’t think deals fall through. It’s the

way you try and put them together, fall through, right. Because people

will go for someone to get out and will buy to buy. They can only be

one way. I think it could be 50 different ways. One guy wants to exit the

table; one guy wants to come to the table. You know there’s lots of

different ways to do that. Dorothy, were you going to add on to what we

have been discussing?

Dorothy: Mine is very much in agreeance to what Chris had. Also, mine was also

very much immediate attack was the families. I just made a mistake of

discussing one of the deals that I was doing.

Rick: With a family member right?

Dorothy: Yeah. And so immediate reaction was, you can’t do that, that’s illegal.

36

Rick: Yeah. No, I understand that.

Dorothy: That was an immediate attack.

Rick: That is funny. I had one of my good friends come in the other day. He

said Rick you been doing real estate for 30, 40 years and I need to sell

my house. How do you suggest the best way for me to do it and I

thought about it for one second. I was thinking what you just said. I

said you know what; the best thing for you to do is call a real estate

agent. There’s just no way for us to get there.

Ben: That’s it.

Rick: You know, the different ways.

Ben: Yeah.

Rick: We are going to buy and transact houses.

Ben: You don’t want to lose a friendship over it either Rick.

Rick: And you know that’s the one thing I have learned over the years. When

friends of mine want to do a transaction like this, what I do is I find the

best thing, I direct them to someone else who knows how to do it and

then they can report back to me and then I can sort of oversee it and

give guidance. But, I just don’t get directly involved with it.

Ben: No.

37

Rick: Because it’s just, you know. Yeah you know it’s all too hard and we’re

friends, but.

Ben: So Rick, where have we got to with the new economy so far?

Rick: Well, what we are going to do with the new economy is we are going to

have to accept a few things. First of all, everybody who knows,

everybody, well let me rephrase this. Most people who tell you

anything are wrong. That’s the first thing. Because everybody who tells

you how anything is done, is telling you based on the past. So when

people tell you that it is done this way, it’s done that way.

Ben: It’s how it was.

Rick: It’s the past. The past is gone, it’s how it was. So anybody who says

we do it this way or we do it that way or mate you got to do it that way.

That’s the old, that’s all, that’s all past. So you’ve got to except that

anything you do or anybody gives you advice is probably wrong and

that anything that you’re gonna do is an undiscovered process. You

haven’t discovered how to do it yet.

Ben: And I think to, that you got to ask why is this person giving me advice?

What’s their vested interest in seeing me not succeed with this

transaction?

Rick: Yeah and look, one of the issues are sometimes the issues are if

someone else is not really getting out of life what they want to get out

of life and then suddenly you do. It doesn’t make them look too good.

Ben: No.

38

Rick: It exposes them in somebody who maybe.

Ben: Shows their horns.

Rick: Yeah, Correct you get my point. No one’s wants to feel like they are

going to be left behind. So the best way for me to feel cold in the

swamp is for to me keep you in the swamp with me. If I keep you in the

swamp, then we are warm in the swamp. You get out and climb the

mountain, well I am there by myself and I fell pretty cold. So what’s

going to happen is, is I’m always going to make my lack of action on

my positioning statements stronger if you don’t get ahead.

Ben: Yeah.

Rick: There’s nothing worse than you getting ahead and peoples coming up

to me and going, hey how come Ben ended up being successful and

you never did. No one wants to experience that.

Ben: That’s exactly right.

Rick: And you want to say, well Ben I don’t think that that is going to

happen. You and I were talking at lunch and you were saying that you

were thinking of doing this thing and I said to you, oh mate do it, it’s

great and I was just thinking, but most people would say, well I don’t

know if it was legal it would have been done now and are you sure, but

it is just sort of a thinking cycle, you know.

39

Ben: When people say to me that is illegal and you can’t do it. I just got a

funny mind as say well, I guess I better stop doing it then. I might get

caught. I am just trying to throw some humor around it.

Rick: Yeah, yeah, yeah. Yeah. And usually when people say something is

illegal. What they are really saying is, I don’t understand it. I don’t have

much knowledge around it. I don’t know what it is, but I am going to

appear like really ignorant if I say I have no idea what they are talking

about.

Ben: Yeah.

Rick: What they are really saying is I have no idea on what you are talking

about, but you can’t say that.

Ben: Yeah.

Rick: Because people look like they are ignoramus. So they go, well that’s

illegal, because there for it looks like it comes from a position of

authority and gives the person some status.

Ben: Yeah.

Rick: So I always hear people say that’s illegal. I say let’s see, cause when

people say, they say and I say who are they and people go well just

they idiot. Well who in particular,

Ben: That’s it, they.

Rick: People.

40

Ben: They is such a huge you know.

Rick: They say and the new economy is new. Every new price has got to be

credit; they haven’t even been created yet.

Ben: Yeah,

Rick: You can’t look at anything from the old way of doing stuff. It’s all gone,

it’s all finished. Nothing is relevant.

Ben: Well let’s talk about new ways for a little while.

Rick: Yeah.

Ben: Let’s find out, let’s hear from a few people about how they’ve solved

say, we have talked about negative gearing.

Rick: OK.

Ben: For the first half of this podcast.

Rick: OK, good.

Ben: We have heard that people are turning people from negative to

positive. Let’s hear a few ways.

Rick: Well that’s pretty powerful, cause there is a lot of people putting their

left ear screwed up in the gear box on the radio trying to figure out how

do you get from negative gearing to positive.

41

Ben: Yeah.

Rick: Knowing that there are so many people that are set up that way.

Ben: And you can do that with four pieces of paper.

Rick: Right now on the mic at the moment. Oh, there we go.

Ben: Greg, buddy.

Rick: So here’s the thing. We are talking about the new way, the new way for

all of those people who are negatively geared who were wishing they

weren’t. What do you think the way forward is?

Greg: The way forward is certainly not the way they have gone, that’s for

sure. If you spoken about. The way forward is to look at how we can

possibly unfold that house to someone who really wants it and maybe

give them a bit of time to buy it.

Ben: To someone who may not have conventional bank financing perhaps?

Greg: That’s correct. Someone who may not have conventional bank

financing. Someone who really wants a house, someone who really

want to get out of their rental market. They have been there for years

and they really want to get in the house and just haven’t found the

means.

Rick: So hang on, so what you are saying Greg is maybe these people that

want to get in and haven’t made the means, could actually come in and

42

make payments on the seller’s loan that the seller no longer wants to

be a party to.

Greg: That’s correct.

Rick: No that’s interesting right there, isn’t it? So rather put that away in the

bucket. The new guy tried to get out of the bucket, but he can’t

because it’s too hard to get him out. The new guy coming in simply

starts making the servicing payments on that old line of the seller no

longer wants.

Ben: Its already in place isn’t it.

Rick: It’s already in place. So it’s kind of like, let’s not rock the boat.

Ben: I guess from the sellers point of view and the buyers point of view is

the value is not going to come out and revalue the property and

mortgage isn’t going to have to come and have their two bobs with

either.

Rick: Well no, because here’s the interesting part. The buyer and seller

between themselves have set the value. So we are not having to worry

about these guys coming right, with the suits.

Ben: Yeah.

Rick: Because the buyer and the seller are in a free market set the value.

Now this is the most interesting thing. I believe that people would

rather have things set by the market, the free market then artificially set

by an outside thing.

43

Ben: And I am probably guessing that the ease that which it can take place,

might even add a new value to it.

Rick: Well Greg, let’s talk about that for a minute. With that thinking and

going forward with that thinking, do you think that it’s faster, quicker,

and easier for transactions to be put together?

Greg: Oh, much faster Rick. It takes days instead of weeks or months. My

experience of doing them, it’s days.

Rick: So you can bring somebody in your property that wants that property

within days.

Greg: Yep.

Rick: Because they don’t have to go through the old system with valuations

and surveys and bank forms and all of this stuff. They are virtually are

picking up from the seller what the seller no longer wants. The seller

moves out and they move in and they virtually pick up from where the

seller left off. Is that kind of right?

Greg: Exactly right and seller is really happy, because he gets out of that

debt load and that negative gearing or whatever his case may be.

Rick: Yeah.

Greg: And the buyer is happy as anything. Their out of that rental rut and

they’re into ownership.

44

Rick: Now that’s interesting. If you can do it within days and you can do it

that quickly and the market price is the price set between the buyer

and seller. Why the heck would you do it any other way?

Greg: That’s got me beat Rick.

Rick: Yeah.

Greg: I don’t know why you wouldn’t.

Rick: Yeah, OK. I am on that. I totally get that. That’s the new way of

thinking, yep. Who also gets something that they reckon, represents

where we are going on now. The new way of doing stuff? Dorothy.

Dorothy: Also access this thing of information?

Rick: Yes, the access of information. The availability to get it.

Dorothy: Yeah, well no is well, yeah, before you wouldn’t even be able to find out

who we would be able to go to. Especially with the situation with

mortgage repossession properties.

Rick: Right.

Dorothy: Before, you’d be lucky to be able to have even any form of inkling

contacts with anyone.

Rick: Yeah.

45

Dorothy: Where is now it’s having access you can basically through the right

channels, have access to that information.

Rick: Do you know what, you said two things. One, is you can get a load of

information electronically online.

Dorothy: Yes.

Rick: Which means you don’t have to go anywhere. But I will tell you

something else that is interesting that represents the new thinking. You

now the old days, you would go down the real estate agent, right.

They’d build up a little brick building. Sat down on the ground and put

the little signs in the front yard, right? No one is going to be doing that

anymore.

Ben: No.

Rick: So everybody is going to see real estate off of the internet. No one is

going to go to the building because the end of the day you are only

going building to look at the pictures out the window.

Ben: That’s right.

Rick: Do you see what I am saying?

Ben: Yeah.

Rick: Well, no one is going to do that anymore, cause, and what do they

have? Google cam and Sky cam and look in your front window cam.

46

Ben: Press three buttons in front of your screen.

Rick: Yeah correct. You can see everything you want to see about a house

without actually going to the house. Now if you think about how

documents are electronic now. All documents you can set up for

electronic delivery to solicitors and Council. You don’t actually have to

do the old work around.

Ben: No you don’t. It will save you a lot of time, a lot of petrol.

Rick: A lot of petrol and here’s the other thing. If I am not actually going to be

living in the house, I not too sure I need to be satisfied or happy with

the house. I think the guy that’s going to own the house.

Ben: 100% right. There is no need for you to see the house.

Rick: No, no not really, because at the end of the day I am not living in it.

Ben: No.

Rick: And I think as we’re moving forward, I think one of the biggest shifts,

head shift of people is you can actually pick up a house for 3 million

right, and move it on to the next person without seeing it and people

say to me, how can you ever buy a house for 3 million and not see it?

And I say, cause here’s the deal, in the old way, it’s my 3 million, my 3

million on my bank account and I’ve got to go down and look at that

house and get values around it. Well actually now its not, cause all I

am doing is babysitting it and servicing other situations and transferring

it to somebody else.

47

Ben: That’s right.

Rick: So it’s not actually my 3 million and that’s a big physiological shift.

Ben: Yeah.

Rick: Cause I don’t have to say to you, why don’t you buy these houses

without ever seeing them?

Ben: Yeah they do and they probably have a lot of questions around the

inspection process. How did you never see it, but your buyer has gone

and look at the house?

Rick: Right. What I am thinking, I am never going to be sort of living in it, and

do you know what I mean?

Ben: That’s right.

Rick: And I don’t need to see it. It’s pretty my point that he inspects it he

likes, and he does whatever he has to do.

Female: Just following from Greg I guess, I have spoken to a lot of buyers as

well with our first transaction. He’s actually got 10% saved up in his

pocket. So the transaction we put together, I guess, they can get into

their homeownership as little as 5,000 and that is what we were asking

for. So that’s the other opportunity for people in the market trying to

own their own home for as little as 5 to 10 thousand.

Rick: Where did you get the, where do people say to me is that, do you think,

where do you get into a house to 5, 10, 15, 20 grand? I mean you can’t

48

and this is so, I think once the lids off of the can and the lids not off of

the can yet, but once the lid is off of the can. I don’t believe people will

do it any other way. I think the only reason why the banking system put

atm's on the outside walls, they figured out eventually people will

realize that they don’t have to go inside anymore. Do you know what I

mean? It’s like you really don’t. It’s like so, you know when you start

buying houses for 5, 10, 15, 20 grand electronic credits in your own

accounts, All the forms are electronic. Everybody goes this is, I don’t

have to see them. All I have to do is set up the pathway and let people

go down the pathway. You know and it’s a whole different process the

represents the future.

Ben: There’s something you talk a lot about Rick is that a lot of time is the

delayed gratification.

Rick: Yeah.

Ben: And we know how we Normans made a lot of money out of the late

gratification, but I think that once sellers have houses start to realize

that they can profit a lot further through delayed gratification.

Rick: Most sellers want a discount their house and want to take the cash.

What I suppose to say, to pay less for cash? I see if its electronics, but

if its we’ll take less for cash. But all of these sellers are trying to get a

little more for their house, but actually saying psychological market, we

will take cash, we’ll take less.

Ben: Yeah.

Rick: Right.

49

Ben: Pay cash.

Rick: And I actually say, I will never sell a house for cash, cause I don’t want

to take so little. People say to me, you know, why don’t I ever take

cash and I say, why I want to leave most of my profit behind, you know.

I’ll just put it out in the have normally. People make payments to me

and I will get the retail price.

Ben: That’s right.

Rick: But I am happy with the delayed gratification, because it’s reprehensive

more dollars in the bank account.

Ben: And you usually find that people come and buy these places from you

on this, like a payment plan.

Rick: Yeah.

Ben: They usually do want to get the house, you know all paid off as quick

as possible anyway. So you know. Like a normal mortgage. We know

that the steps in Australia are about 4 years or 5 years.

Rick: 3, 4, 5 years people are going to change the loan anyway.

Ben: Yeah.

Rick: So even if I set people up, which is funny because if I set people up

with a 3.8 year loan and I said to you, pay for 3.8 years. People would

freak out.

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Ben: That’s right.

Rick: People would go, oh my god, what if happens in 3.8 years.

Ben: What if, what if, what if.

Rick: Yeah what is, But if you set them up for a 30 year loan, the statistics

will actually show, they will refinance it or remortgage it within 3.8

years.

Ben: Yeah, they just move to the new product.

Rick: Yeah, new product in line from a new bank who says, do that loan out

there.

Female: Yeah, the first one we did, the people were so overjoyed. Like they still

call us today to thank us and literally like there were self employed so

there was no way the bank was going to give them a loan, they

couldn’t get in and so this is the only way to get in and they’re already,

you know calling us, you know, do you got another one? We have got

friends.

Rick: Really.

Female: We, this is amazing. We never knew about it.

Rick: So they have been renting for a long time?

Female: That was their only option. They just could not get a bank loan.

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Ben: And you said you said something really amazing then. They never

knew about it.

Rick: Yeah.

Ben: They never knew about it, so they can’t do something they don’t know

about.

Rick: No. And we are just had to be tip of the iceberg. Yeah, interesting thing

is, that knowing that you got these other people wanting to know. If you

got another one, how much are you spending on marketing?

Female: Nothing.

Rick: That’s it. You see, like every, if you think about what the agents spend

on their marketing is shames right, to get people to come in the front

door. Use an old system, an old process from yesterday, right. All they

got to do is figure out what the other guy wants and give it to them and

hand out the marketing machine. Cause he’ll tell his friend, who tells

his friend, who tells his friend.

Ben: That’s right.

Rick: Who keeps coming back. Sewing their marketing machine.

Ben: Yeah. That exactly right. Do you, does everybody here get the

impression that agents at the moment don’t fully understand what the

houses are worth at the moment?

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Crowd: Yes.

Ben: Yeah, I think that’s a real big swing at the moment with the new

economy. Is everyone sort of guessing, it’s like, well where do we

start?

Rick: Well yeah. I’d say all the years I have been in real estate; I have never

seen two things in my life. Usually you know if the market is going

down and then usually you know if the market is going up or where you

are in the cycle.

Ben: Yeah.

Rick: It’s the first time I have ever seen the worlds going; we don’t know

where we are in this cycle.

Ben: Yeah.

Rick: Right and the past are going to drop out of here? Is America going to

fall away and be sort of get a post it note saying, goodbye you were

great once. You know, no one knows where we are in this economic

cycle, right. That’s the first thing.

Ben: Right.

Rick: I have never seen that ever in property and there was something else I

was going to totally say and I forgot what it was. What was it?

Ben: I don’t know Rick.

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Rick: You don’t know either.

Ben: It’s a.

Rick: But it would have been good.

Ben: We were talking at lunch about the amount of real estate agents that

are leaving the market.

Rick: Oh, that’s what I say. Before we get to that.

Ben: Oh that what you were going to say.

Rick: I want to come back to that in a second.

Ben: Fantastic.

Rick: Now you know what it was. Usually the agent will walk in right past the

branch and say, this will sell between this price and this price. Right.

Ben: Yeah, we’ll put a range.

Rick: And by the way, when anybody puts a range in, they will always set it

out for the bottom price of the range.

Ben: Yeah.

Rick: So just for practical, this is like if he goes. It will sale between 500 and

600 if go yes, he will set that at 5 right.

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Ben: 501.

Rick: Absolutely 501 every time, but the other thing is they can’t put a figure

on anything.

Ben: No.

Rick: Because there’s no financing, because there’s no cash, because

everybody is not spending. Everybody is holding back. I mean let’s

face it. We talked about this at lunch today. If you are right now

thinking about changing houses and you had half a million bucks or a

million bucks. Would you be changing houses or would you be sitting

back and thinking, hang on; let’s just see how it pans out.

Ben: Yeah, let’s just say, let’s just see what happens over the next five.

Rick: Just sit back, absolutely. Sitting back and waiting and let’s see what

pans out. Now everything’s pans out, so therefore no one could put a

value on it, because no one really sort of buying anything.

Ben: That’s right.

Rick: I never saw a situation where the agents just don’t know. What

anything is worth.

Ben: Well people with a lot of cash aren’t buying anything at the moment.

Rick: No.

Ben: And there are a lot of people that still want to get in there,

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Rick: Why do you think the cash people aren’t buying?

Ben: Cause they don’t want to lose their cash.

Rick: Well, I also think they are waiting to see if things are going to get any

better. You know. Everybody’s sort of waiting for whatever bottom is.

Ben: Yeah.

Rick: I don’t know what bottom is. It might be one of those things we’re all

going hand out snorkels, but here’s the thing. Everybody is holding on

to their cash, because no one wants to spend it today and suddenly

find out, oh my god, things got even better still.

Ben: Yeah.

Rick: You know what I men.

Ben: I remember seeing last year on the Herald Sun in Melbourne and no

one and of a few people might have seen this but they had this article

saying the average house in Melbourne is going up $771 a week. So

everything is getting excited that it is going up $771 a week.

Rick: Yeah.

Ben: And we haven’t seen any more articles from that journalist lately, by

the way.

Rick: Yeah.

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Ben: Isn’t it just interesting that how way we talk about the houses being an

ATM machine these days.

Rick: Yeah that’s it and for so long everybody was having their credit cards.

Cause this is something else. Everybody had their cards, their credit

cards piled up against their house, right and their just sucking all of the

equity out of their houses with these credit cards. One of these things

we are seeing right around the world now is the world now, is the

amount of people that got into these low dock loans, which have these

higher interest rates, like these 9% or 10%.

Ben: Yeah.

Rick: And one of the issues the Americans are having right now is interest

rates have dropped to three or four, but most Americans can’t get out

of the 8% loans they’ve got because the loan value is so low.

Ben: Yeah.

Rick: Like the values the property right. So they can’t refinance down. So

we’ve got a massive amount of people in Australia who have got like

9% and 10% low dock loans. Want to get back to a 7% loan, but

because the values have dropped, they can’t back out.

Ben: That’s right.

Rick: So we got all of these people trapped in these loans,

Ben: At least the loans are aaa rated in some reason.

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Rick: And we know how safe they are.

Ben: That’s right. There you go Rick. I reckon, unless anyone else wants to

contribute something on the new economy, we’re almost done.

Rick: We certainly are. I tell you, what are we doing next week?

Ben: Well next week, because we didn’t talk about Rick’s crystal ball,

although we did kind of talk a little bit about it.

Rick: Well I’m glad we didn’t talk too much about it, I don’t know what it is

yet, but I am going to have it by next week.

Ben: Yeah we are going to have it all ready. So look what we want people to

do is, if anyone listening has liked what we talked about and would like

to send us a question in, you can email

support@creativerealestate.com.au. Did you know you can also get

transcripts for this show Rick?

Rick: Is that right.

Ben: Yeah.

Rick: Do you mean what you and I actually say people can actually read it all

over again?

Ben: Well, they must really slow it down to actually write it down. I don’t

know how they do it, but you can get the transcripts at

creativerealestate.com.au and if anyone wants to see what’s up and

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coming, any events or anything like that, you can actually go to that

creativerealestate.com.au and go to the products page. It will tell you

absolutely everything that’s coming up. So on that note Rick, I am

going to let you go. And thanks everybody for coming in and give us a

big yeah.

Rick: Thanks for coming in. With a little pat.

Ben: We’ll see you all again soon.

Rick: See you guys next week!

Ben: Bye-bye!