Episode 108 | Assembling Communities | Kris Daff, Managing Director of Assemble

Veronica and Chris discuss the gap between societal needs and quality development projects

In today’s episode Veronica Morgan and Chris Bates interview Kris Daff, managing director of Make Venture, a Melbourne-based boutique development and investment company, Kris is also the managing director of Assemble, a homeowner-focused development company. Assemble attempts to bridge the gap between renting and home ownership by offering unique community-based development projects. 

Developer Kris Daff and our hosts discuss the value that comes with nurturing organic communities within future development projects, but also discusses the hard questions about developments and their stagnant capital growth and severe defects.

Here’s what we covered:

• New direction for creating communities, rather than ‘just’ developments

• The severity of housing anxiety

• Ownership and locking down where you want to live

• Housing prices growing faster than consumers ability to save

• Why is one of Australia’s the largest super funds interested in one of Assembles developments

• Building the gap between societal needs and development projects

• How nurturing meaningful relationships in a complex can increase tenancy lengths

• Creating scarcity by creating quality communities

• How to find out how your builder attends to defects

• If you are going to buy off-the-plan how to do your due diligence

MENTIONED EPISODES:
Episode 80 | Co-Living
Episode 104 | Build-To-Rent
Episode 106 | Dodgy Developers

GUEST LINKS:
Assemble
Make Ventures

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: info@gooddeeds.com.au 

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

AUCTION READY: HOW TO BUY PROPERTY AT AUCTION EVEN THOUGH YOU'RE SCARED S#!TLESS

By Veronica Morgan

Buy on Amazon

EPISODE TRANSCRIPT: 
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded on 10 September, 2019

Veronica Morgan: You're listening to the elephant in the room property podcast where the big things that never get talked about actually get talked about. I'm Veronica Morgan real estate agent buyer's agent cohost of Foxtel's location, location, location Australia and author of a new book called auction ready, how to buy property at auction. Even though you're scared shitless.

Chris Bates: And I'm Chris Bates, financial planner, mortgage broker, and together we're going to uncover who's really making the decisions when you buy a property.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website as well as download our free food or forecast report. Which experts can you trust to get it right, theelephantintheroom.com.au.

Chris Bates: Please stick around for this week's elephant rider bootcamp and we have a cracking Dumbo, of the week coming up

Chris Bates: Before we get started, everything we talk about on this podcast is generally nature and should never be considered to be personal financial advice. If you're looking to get advice, please seek the help of a licensed financial advisor or buyer's agent. They will tailor and document their advice to your personal circumstances. Now let's get cracking.

Veronica Morgan: Regular listeners will know that Chris and I are not fans of buying brand new apartments, townhouses or houses. It's all about risk and one of the areas of greatest risk is the big unknown of build quality over the last 10 months or so is if to prove our point. The newspapers had been full of headlines about collapsing apartment buildings and consumer confidence in the sector has waned, but the thing is we need new development and construction. We need the housing, we need it for the economy, so what makes a good development? How can a site be transformed into a place where people want to live, where community evolves, where sustainable value is created, how can the emphasis be taken away from the building investor stock and maximizing ROI and turn towards giving Ozzies an opportunity to own their own home. Where are the industry players?

Veronica Morgan: You care about the longterm and are prepared to stand for something other than a quick buck. In this episode, we pick the brains of Kris Daff, managing director of Make Ventures, a Melbourne based boutique development and investment company that specializes in mixed use developments in urban infill sites. Kris is also MD of assemble creators of the assemble model, which is a new pathway to home ownership. Bridging the gap between renting and owning your home. Thanks for joining us Kris. It should be a very interesting chat.

Kris Daff: Thanks for having me. Hi, doing good.

Chris Bates: Thanks for being here, mate. I yeah, I guess before we kind of get I guess into what you've actually doing and your work used to be an exam understanding of kind of your experience around development, how you got into it and how long have you been doing it?

Kris Daff: Sure, sure. Well, my training, I'm a civil engineer and a geologist, so geology was sort of more about the field trips and anything at university to be honest, that was a bit of fun at the time. But I was never much good at the the theory. And out of civil engineering I ended up getting into a project role in Docklands at the Docklands authority and as a young guy at the time, as a long time ago now it was a really good introduction to the development industry because as a young project manager working for a government authority it's a bit like utopia but not sort of quite that in some ways. But we were doing some pretty cool projects and I got to sit across the table from, you know, the sort of biggest and baddest developers, you know, nationally at that point and Lendlease, Mirvac, MAB, sort of all the big guys.

Kris Daff: So that was a really good exposure there. And so I went through that process and got to know a few people there and ended up getting myself involved in a business called Evolve development. And we were doing quite a lot of apartments and that was a business with Ashley Williams and Ron Walker. Our biggest year was probably 2013. We completed 600 dwellings in that year apartments and we'll probably doing four or 500 blocks of land a year in the Greenfield areas. So it was a pretty diverse business, all in all in sort of residential formats, blocks of land or, or units. And all the apartments were, were done in an off the plan model. So, and then, you know, out of the back of that I decided to go out and pursue some other areas of interest in real estate that were maybe a little bit less of a focus for evolve moving forward and established Make.

Kris Daff: And then now obviously we've got the assemble business and the assemble housing business is about delivering development models where we've got a much stronger alignment with our residents. So, and that, what does that sort of main, that's just sounds nice, doesn't it? But that means that it means that we don't expose our residents to a lot of the risks like you said and your sort of introduction that they might see in other housing models that are available to them. Let's just like off the plan, right. Not the plans mean pretty good. It's applying housing for this country, you know, for a long period of time now. And I think generally it's done a, I've done a pretty good job. There's been people that have been potentially a little bit disappointed with the outcome they got. And then there's been some stuff that's been a bit disastrous but saying the, the sort of industry broken, I'm not suggesting you are saying this, but I think on the hall it's a pretty good system, but it's definitely got its challenges and, or you know, Australians at looking to enter the property market in an ownership sense to go in basically sight on scene, make the biggest financial commitment you'll probably ever make in your lifetime is pretty odd though in a lot of ways.

Kris Daff: So you sort of say, well, what's really common, you know, and it's, you know, and for, you're not particularly for, I guess, you know, younger people trying to get into housing, you know, that might be, you know, the best option that's available for them in the market. You know, it has been in the past. There's other options now where you say, well cause I sort of, we talked to a lot of young Australians in particular about how they feel about housing and I, some of the stuff that we hear is, I feel like the housing market is not designed for them. So they sort of start to talk about things like saying, well, you know, I went to an auction for a one bedroom apartment in Richmond and I went head to head with two, you know, sophisticated real estate investors that are sort of acquiring their seventh sort of investment property and not just sort of got blown out of the water at this auction. And you know, that was pretty hard to take to be honest. Cause I've been doing a good job saving up towards my deposit and everything. So anything I, so we, we sorta, he read it at that, but I've sort of got a bit off the track. So

Chris Bates: Yes, I'm talking about off the plan I guess in more detail.

Kris Daff: I mean, so evolve was all off the plan. Right. And we did some really good projects and won some awards for those projects. And you know, I, I think generally people would be pretty happy with the products that we delivered for them, the housing that we delivered for them. One of the weird things about traditional development models, like off the plan, and this was probably my frustration and I sort of started to check out of off the plan process and we're doing some of that with my new development business. So the usual process is just sort of develop a goes and we go and buy some land and I get some approvals to do a development on it. And then we market the sell of those properties off the plan. Oh, I'd never met your customers, never make the future residents. So you've got a real estate agent that goes and does all that hardwork for you and talks to people and gets them to sign a contract and pay a deposit and then you get on and build things.

Kris Daff: And the night, you know, the people that have bought off, you turn up at your lawyer's office once a building's finished. And hand over a check for settlement and get a set of keys back and off they go. And you sort of part wise at the sort of the, the sort of the end points you know, as soon as the building's finished for a developer. So and there's something a bit funny about that process. And there was something that it's sort of just, you know, sort of lost the appeal of sort of continuing to develop under that model. But the issue I had is that we'd gone and acquired a really large land bank of housing projects in middle ring Melbourne. So you know, like a couple of thousand apartments of supply and saying, so way in, which that has him would typically get delivered in Australia is via off the plan sales and development under that model. You know, might be buggered here. What have I done? Oh, don't be, I'm not bleeding

Chris Bates: Really bugged you though. Like if you're, cause you could just keep going down that model. Like, what's, what's really bugging you about it? I guess you've gone and taken a whole different yeah, which is a good model, which we talk about more, but like what was the catalyst to think that the current system is not what I want to follow? I want to do a new model. Is it because you could sell it or it would motivate it by what was actually driving you to go in this direction?

Kris Daff: It wasn't because we couldn't sell it. I think you know, the market fluctuates a bit obviously, but you know, and our brand was pretty solid so we were sort of able to get the sales down to the extent we wanted to. It was more the sort of faceless developer, you know, and, and this sort of thing where we never made our residents, we never make those people that are giving us hundreds and hundreds of thousands of dollars to buy real estate off us. And that's a generalization. But that's, that's a pretty appropriate generalization. So the majority of developers would be operating under that model where they would very rarely actually meet their, their customers.

Chris Bates: So probably a developer doesn't really, I mean, it doesn't really mind that because you know, they've bought it, they're sold it, they've made their money, they're on to the next part and just say, I mean, they don't need to connect with, they don't consumer because there's no real need. So why would that, why did that bother you? I guess

Kris Daff: Cause that's so what do you achieve as an individual so that you're achieving capital success? So it's, you know, that's a good sort of well model founded in capitalism, which is, which is fine. So but you start to read, you know, the sort of global investment thematic with a bunch of large institutional investors and pension funds in the like about saying, well, when we're investing and when we're funding projects and the lock, what else are we solving for with those investments? So I started to spend more time in the United States and Western Europe in particular looking at different housing models and trying to understand why large pension funds style investors are investing in all housing assets and owning those assets longer term and having a much stronger commercial imperative on them to do a much better job of creating great little neighborhoods within those buildings in which people can live.

Kris Daff: So, because you have to, right? So you need to want to as well. So you need to be you need to have, you know, a sort of drive or a purpose to want to create a great place for people to live. You know, there's also, you know, it's really strong commercial imperative for you to do so as well because if you've gone and spent probably hundreds of millions of dollars of money to build a building and someone can just move out, right and sell and just get my bond back, thanks, I'm going to move out. They're not exposed in the same way as our having signed a contract and having a large deposit down. So, so I started to investigate a bunch of those things and I was really looking at it through the lens of what they would call in the United States multifamily housing, which is basically institutionally owned residential apartment buildings.

Kris Daff: And in the United States, a lot of that stocks sort of really sort of embellished amenity models. So they would have pools and gyms and libraries and you know, a whole bunch of stuff that you don't really need to live a good life. But you know, they charge a premium to market rate for the fact they've got those facilities and concierge type services. So I started looking at that and thought, you know, that's sort of interesting as a model. But most of the sort of psychology of most Australians is this, the sort of psychology, the Australian sort of housing markets quite the same as the United states. So knowledge that ownership was still important in Australia. So 80% of young Australians between 20 and 40 still want to own a home at some point. And I was sort of thinking, well, what's driving that?

Kris Daff: And, you know, the analogy I use is, you know, if mum and dad bought a house in Glen Waverley for $100,000 35 years ago and it's now worth one and a half million dollars, and that's why they've got the latest and greatest J Cole, and they're at Bombay two months a year, having a good retirement because of the financial security that a home ownership afforded them, that not being able to achieve that creates a sort of certain level of anxiety around someone's financial future and have good of a retirement, you know, young Australians going to have when they get to that point in their life. So, yeah. So I would get why the ownership thing's important in Australia and it's just because you know, the reality is it's been an incredible source of wealth of people that have been lucky enough to get into ownership. So,

Chris Bates: And the security element of it, of 100%. Well, because you know, if you renting, generally speaking, you're lucky to get a one year lease, two years. No, I don't think so. So, you know, that's, you never know what's going to happen in the future.

Kris Daff: That's right. Yeah. So housing anxiety's a real thing for people that are in the private rental market, so annuity laces. So and people that the home ownership might not be an option. So stuck in that short term lacing cycle and you know, I guess what does that translate into for an individual's propensity to volunteer, engage in the community in which they are living. And you know, human nature would say that there that would be lessened, you know, as a result of not knowing if they're actually going to be in that suburb next year. So you're going to go in. Yeah. Yeah. So you know, there's still a little things like, you know, being able to sort of get a GP that you can go to, you know, you sort of form a strong relationship with those sorts of things. So that sort of infrastructure and putting roots down into communities that mean that tenure provide you.

Kris Daff: And at the moment, as you rightly said, the really the Andy way to secure that in Australia is via ownership to get that certainty of being able to be in that location longterm. So we knew ownership was important. And we started looking at some of the barriers to on a ship. So if your sort of a lower middle income Australian you know, one of the things that making it difficult for you to get into ownership and to participate in, in that part of the housing market. And one of the big things that we observed and we got a lot of help from groups like ANZ and KPMG and other sort of data sources on, you know, what are their observations as well. So we developed quite a sophisticated research piece around what are the actual barriers and time to save was a big one and not having a fixed goal to work towards was another one. So,

Chris Bates: Well, yeah, because the markets, by the time you save that money, then the market's moved. And that's the demotivating, because you thought you needed a hundred, but now you need 150, 100%. That's the experience.

Kris Daff: And people have this arms in the air moment and they go, just like, if this, this is nonsense, this market's not designed for me. You know, I'm going to go on holiday to Thailand for four months and spend more money on that. Whatever it is, bugger it, look in, see, sorta, you know, going to go and get a jet ski or whatever. Doesn't matter. But, you know, there, and it's, it's sort of it's, you know, we don't, you know, we, we, we clearly, there's sort of deep, sort of social purpose to what we're doing and we try and understand how people are feeling about housing. But, you know, they're sort of really shoes, you know sort of socially issues in this country and, you know, and that, what that does to someone's peace of mind where if you say, you know, in a hierarchy of human needs, shelters, you know, a cornerstone at the bottom of the pyramid, right? So that's fundamental for someone's emotional sort of security and how they're feeling about themselves and their future. So we so we designed a model where we said we would, dad was about seven years if someone had a fixed goal to work towards the save sort of 15 to 20% deposit based off some income and analysis that we'd done, but they needed about seven years to save up and qualify for a mortgage based off what we know today.

Kris Daff: So many things are relatively the same in seven years. Melbourne. yeah, so we look at Melbourne, Sydney roof we're going to Brisbane next. So yeah. So the incomes the issues are the S similar in different locations around Australia, in different cities. Uthere's sort of this sort of GI specific considerations. I guess in different spots part, you know, the reality is, you know,uyou know, sort of nurse in Brisbane, you know, it gets paid and you know, similar to a nurse in Melbourne sort of thing. So yeah, that's right. Yeah.

Chris Bates: Yeah. So tell me what your biggest problems probably are in Melbourne and Sydney. Right. Well, home ownership's out of reach and so they're going, well my only options either, you know, or never going to achieve it, so I'm just going to keep saving and then when I have time I get there, it's going to keep going. So there's not.

Veronica Morgan: Data, it's in the individual 12 years to save a deposit in Sydney. Nine years in Melbourne obviously it's, yeah, it's pretty, yeah. So that's X amount of what channel it is. Yes.

Kris Daff: On about seven years. And we sort of say if someone's only got a dollar left in their bank after they've paid their bond to secure their spot, then you know, what sort of a savings rhythm can they get into? So we basically, what you would call off the plan, we can, we last some on changes on an agreement where they, we would commit to them having a five year lease, but they're not locked in. They can leave after 12 months or two years or three years. And if it's just not working for them anymore and they also get a free option to acquire the property at the end of the five year lease. So, and that's for pre agreed price. I would pray. Great rent. So people down sort of sign up blind to anything so they know exactly how much they rent going to be for each of the five years.

Kris Daff: And I have a pre agreed contracted price, which they can work towards. So, but they're not obliged to buy any savings. I might just sit in this sort of, you know, dollar Mata count or whatever. They've sort of got, you know, from primary school days.

Chris Bates: Similar price to what they would buy the size, like two, three bedroom apartments. '.

Kris Daff: So we, we sorta had a hypothesis about what people needed, you know, cause you're, when you're doing something new, you've sort of gotta I guess you've gotta you've gotta you gotta frame it somehow. We thought everyone would need at least two bedrooms because over such a long period of time, their household formation full might change a bit. They might get into a relationship, have children, get five cats, whatever they want to do. So so, but that was wrong. So you know, it was right in parts.

Kris Daff: Sorry. So what we got wrong was a lightened demand for one bedroom apartments. So, and particularly from over 55 60 people that are single person households, particularly single women,

Chris Bates: Some of the most vulnerable, I guess.

Kris Daff: Yeah. Yeah. So that was, so in our next project, we've now had a much deeper focus on that product. So we're getting more and more data all the time is more people registering interest in being in one of our buildings.

Veronica Morgan: How do you . Okay. So let's wind it back how do you then if does, does decide on what side can fulfill this goal?

Kris Daff: So what we do is we look at it. So we don't go down to our local architect and say we've got a site and you dishonest a beautiful building and then sort of back solve to how much rental, how much we need to sell the properties for. It might be a project viable for us. So we, look at median area incomes for a location that we want to be in and we look at sort of different. So for a single couple, no dependence family. So across that alarm, middle income bands, and we'd look at how much those people can afford to pay in rent during the five year period. And what's an affordable rent for them is still having the capacity to save on top of that.

Veronica Morgan: You're specifically targeting locations based on yeah. Yeah.

Kris Daff: So we are, so we won't, you know, we can. So what's what's a good way to describe it? So that has informed my department formats that wouldn't work in packing them because you can still go and into four bedroom house for 400 bucks a week or something. And packing a model. I buy house and Land 350,000.

Veronica Morgan: So it's too expensive for you to better know. So yeah,

Kris Daff: So the psychology of our suburbs is probably important as well. So we think that there's with a Y that we sort of design our buildings and the way that people are sort of interested in being, you know, sort of having a meaningful relationship with their neighbors in our buildings and things is, yeah. So areas like Kensington, Brunswick and in the Southeast of Melbourne. So like we're looking more on in Brisbane at the moment. So there's sort of certain locations that we think sort of a brand appropriate. Oh, they're definitely open. So we need to be in locations where we provide a much higher level of communal communal spaces in our buildings in a typical building would provide. But we also like hide ourselves in locations where there's extremely high levels of existing infrastructure in the suburbs.

Kris Daff: So you know, and we do a lot of work with state government talking to them about how much more cost effective it is for say a state government to locate households where they can augment existing infrastructure rather than starting from scratch in your own fields context. So,

Chris Bates: And everyone in these, so you know, I guess it's trailers, there's there kind of got it. You've got a block of land, your developer, you've got you've got to, you know, sell these or go through the project. You've got institutional money funding it, so it allows you to build it. And then everyone in that apartment complex have all signed up to a five year lease.

Veronica Morgan: That they can break

Chris Bates: I can leave, but they pay a bond or something.

Kris Daff: That sits with the RTA, the residential tendencies, bond authority. So just in a normal way. So,

Chris Bates: But I mean, in terms of, you know, you'd like to think that they're all trying to get the home ownership because to go through this process and feel that you're taking it serious, she might've just rent something else. Right? Yeah, that's right.

Veronica Morgan: So serious that the housing market isn't designed for them, for instance, and they're presented with an opportunity to actually weight towards something that's.

Kris Daff: Well, because they're not trying anything to have the option to buy and because there's no sort of penalty, so they don't decide to buy it, you know, down the track then you know, it's sort of like a, why wouldn't you like it? Sort of if you're just going to be renting anyway around the corner, why wouldn't, yeah. They wanted to add buildings. They're sorta occupants focus design apartments. So we've sort of got to a date focus on occupants that are comfort and and look at it. We don't sort of sort of embellished apartments with all sorts of fancy light fittings and things we do sort of ride bus and we put the money into the things that are actually important, you know, in the quality of an apartment. So, Oh, that's right. So yeah, no, that's all right. You're not the sort of fancy term. Yeah. So we do a lot of work on that. And lost my train of thought here a bit, but there well.

Chris Bates: You've got it because you still own it, right?

Kris Daff: Yeah we still do It has to be better.

Veronica Morgan: You cop the defects.

Kris Daff: That's right. Yeah. Look, to be honest, like if someone tape keeps, breaking the kitchen tap, it's sort of falling off or something like that. I said look, stuff these crews thought this is not what you sort of told me I was going to get. So I'm just going to live at end of this year and just give us my bond back and I'm still going to move back around the corner. Yeah. So, so that's part of it. So there's this sort of financial journey that people go on and we've got a financial coaching program that we provide free of charge. So we're, people can cause some people don't even know what a mortgage is, right? Because they've never thought about home ownership cause I didn't think that was something that was ever going to be available to them. So he's trying to help upskill them a beating. Just basic stuff. So, you know, I started as head of my household budget. You should set up a separate account, direct deposit, some savings into and all those sorts of things. So some simple tools to help people get a better relationship with money. And from my perspective and from the investor's perspective, that's a sensible thing for us to provide because it means that people are more likely to get into some good sort of habitual savings and then it comes to the end of their lease. They're more likely to be in a position where they are support to achieve their, their sort of ownership train.

Chris Bates: And how do you stop people? Yeah, once they kind of get to the five years. In the investors, if you don't sell them, do you have to sell it to other people who are gonna live in them? Is it all going to be owner occupies or it's brilliant and shift to, well actually now it's all of a sudden it's becoming owner occupies renters that want to buy it, but then also just renters and then the building composition starts to shift from a community focused building where everyone owns where everyone wants to own a building. So a traditional off the plan building where you do get a high concentration of event renters and investors, which generally speaking there's a lot more kind of transient and sort of building is how are you going to stop.

Kris Daff: So you know, this sort of, we don't try and engineer outcomes in the community in which live in our buildings, but you know, there's this sort of, you know, the utopia would be that, you know, everyone's just an are you going to live a happy life there together in the sort of people that went in day one are going to be the people that are there in 20 years time. It's just done. It's unrealistic crowd. So that's not going to be the case. And people's circumstances over the five year lease will change as well. You know, people might lose a job or have a relationship breakdown or whatever, something will happen and that means that not everyone's going to be able to buy off us. So we would say if there was a hundred apartments and 80 people, you know, sort of achieved their ownership goal with us.

Kris Daff: And then we had 20 left and we would dispose of those in an orderly way on market. And we're up front with people about this. We're saying whilst were happy to, you know, except probably one quarter of the returns from those projects that would make, if we're doing off the plan, for example, it's still an investment. They bet one court we went back about 25% and the sort of annual returns we would compare to doing off the plan. It's a much more sort of, you know, the investors sort of talk about it as a sort of long and low, so it's longterm investment but much lower returns. And the reason that the superannuation funds are happy to support that is because they see it as, although it's a lower return compared to doing much higher risks off the plan development. They say, well it's actually hitting a whole bunch of other sort of social sustainability corporate objectives that we've got around.

Chris Bates: Is there, have you got funding from, you know, I guess super funds that will allow you to scale this model out? Yeah.

Kris Daff: So we were we'll be announcing a, a very large investment from one of the largest super funds in the country in the next sort of month, six weeks, which is really exciting. So and they're attracted to what we're doing because of the sort of social purpose around it as well as being what they thinks, you know, they look at a lot of different models and affordable housing models and the lock and I sort of say, yeah, our model and the way that assembled pitching itself and the sort of service offer that we provide to our residents has been quite unique. And something that can solve sort of a lot of barriers that people are saying in housing. So and it's pretty applicable to a lot of the largest super funds, a sort of member union based funds. So, so there are lot of janitorial staff, you know, hospitality staff.

Kris Daff: So they're brought now heating's zine, you know, in terms of salaries and you know, they're the sort of people that, you know, they're sort of, we always talk aboutK workers and things, but you know, I think the reality is for most people, probably the most importantK worker in their suburbs, they're barista, right? I think on a lot, you know, as sort of life or death sometimes gone to work and getting that morning coffee seems like at that. So they say, well, but if the barrista, hou know, for whatever reason, you know, I just can't afford to live in that location. All sort of, hou know, so we're just sort of just providing some options for people that might otherwise get dislocated to add or areas or

Chris Bates: So in the, in the past we haven't had, you know, problem, while we haven't got a problem, I potentially with not enough quality properties that families want to kind of live in. We've got a lot of stuff that's potentially investors, the boards and people were happy to rent, but they don't really want to buy them and live in them, let's say apartments. But in like, you know, in, in countries around the world, the government have kind of stepped in and built lots of housing. That's right. I like the UK built lots of council housing and they, they've kind of be the developer, you know, and then they allow kind of people in the community to kind of buy it back off the council. Right. That's right. But we haven't done that in Australia. So you're kind of seeing there's a huge gap between, you know, what, you know, developers are building and then what society needs and you're trying to,

Kris Daff: Hmm. Yeah. You started to talk a bit about bridging the gap will talk a bit about the missing middle in housing. So say they're very low income housing is like date government subsidy type housing. So that's what we would call, you know, commission housing or social housing here. Government's got a couple of programs though. There's a incredible shortfall of public housing in Victoria. I think the current waiting list, 63,000 Victorian families on a waiting list to get into in our social housing dwellings. So that's in these countries. That's quite, yeah.

Veronica Morgan: A day from the housing trust some time ago. And she, I think she says something like a nine or 10 year waiting list.

Kris Daff: Yeah. It's quite disgraceful actually. But but look, they've got a tough job and government's got a lot of sort of, you know, government's got a limited budget and they've got to set a lot of competing objectives and they've been very focused on sort of roads and mile and stuff like that and transport. I spend a fair bit of time with, with the state and and they're, now they're sort of lens is turning to housing as being sort of critical social infrastructure. So, you know, and they're starting to look more at, same with, if we don't provide this housing, what's the real longterm cost to an economy or the state budget for, you know, things like mental health issues and a whole bunch of stuff that goes in not providing that housing. So we operate in the middle,

Chris Bates: Holding up the bottom right. You know, if there's someone moves into the house but you're not building it, there's someone that's getting pushed out and it's why are we getting homelessness? You know? And especially if, you know, families are kind of splitting and you know, you need two houses and a family gets divorced, but then I've got the money and then where did they go? You know, and things like that. So there's lots of.

Veronica Morgan: So do you got any developments that have actually got gone in the five years yet.

Kris Daff: Not yet. And so we've got our first site on construction in Kensington. Very greenfields. Yeah. So we're just getting going, really just getting a bit of momentum up, but we've got a, we had about 4,000 people register their interest in the first 60 apartments there. And then we've got another project around the corner, which is 200 apartments. So we're sorta doing, that's about our size. We're thinking about 200 apartments in a building. We've got about 800 apartments committed in Melbourne to that part of the business. And then we've got separately about 1700 apartments that we will build and there'll be, it'll be assemble housing, but it would just be available for rental so they won't pay.

Chris Bates: Oh, complete build to rent model. Are you saying that you know, I think the build to rent thing's great, but you know, it's, it's at some point you know, your life changes and you want to own or do you think has the biggest floor with that model is that you are going to get people we just renting but they at some point not going to get to retirement with no home really. It's suiting just a gap.

Kris Daff: Yeah. Look, it is, you know, and it'll get ownership. It's not the sort of be all or end all, but it, you know, it, it has been important in the past and I think it will continue to be so so when you look at the ownership, it's just not an option for some people and they just will never get themselves in a position to own a home. So, so if their choices are to participate in the private rental market with mum and dad investor owned stuff where they're subject to short laces and things, or they can be in a building that's signed by an institutional investor that's purpose built rental accommodation, and they know that as long as I started kept paying their rent their locker to be able to be there for as long as I choose to. So we think that's, you know, sort of solving a different part of the, you know, some issues in housing. So we've sort of got one model, which is clearly about working with people to get them into ownership and getting, keeping them tenure by our ownership. And then the stuff that's just available for rental gives people the certainty that, you know, they've still got tenure. It's just a rental thing. But you know, it's sort of a bit of a, yeah.

Kris Daff: You know, 34% of Australian households rent. So, you know, that's a, it's a, it's a, it's a big thing. It's a big market. So, and the benefits that we can provide as a, a sort of institutional residential building owner and the sort of service offer and some of the things that we can sort of bolt by our lucky run our own data and power networks and we'll sort of side people 20% on this sort of bills compared to what they would be without us in a normal apartment. You know, we bought boss at a coffee beans and you know, you just sort of name it and we sort of use, we've got about 7,000 people in our database now. We use a pair of themselves to get them a bit of deal on farm direct groceries. You know, loo paper, you name it, they sort of put a whole bunch of stuff so we can provide a cost of living advantage in our buildings as well. In a traditional development model, you'd be less focused on it. Yeah. You sort of say, well, you know, the building's finished. We're moving on, we're going to go onto our next project, place it earlier. And

Chris Bates: Those builders that are there already having a bit of a problem right now because there's a bit of a misunderstanding confidence has been shot, bang, completely shot in the product. So 4,000 people on your wedding, how do they feel about you as a business? Because you're a disruptor, right? You're creating a new model that's potentially not as profitable as their old model. How do they kind of look at you as a business and you know, do they really want to change to building better products or are they just there to,

Kris Daff: Maybe they think I'm crazy. Who knows? We'll say they're also going to get a couple of buildings people first for where we're making good progress. But I think as I think I said earlier, I think the, there are issues with the industry, but some of that's a bit of a generalization. I think a lot of people, a lot of good developers are getting sort of target with a brush of, you know, as sort of a few bad ones. But you know, I think there's a lot of developers around looking at different ways to, you know, develop housing rather than just sort of relying on this very cyclical sort of off the plan sales type environment side. You know, whether or not they're you know, we're not there yet. One's looking at build to rent. You know, there's other businesses like Mirvac and Growcon and others that are looking in that space, but there's probably looking at the sort of higher amenity type models. So whereas we're more sort of operating in a sort of paired back approach and trying to target affordable rents.

Chris Bates: So the elephant in the room is 100% for you.

Veronica Morgan: The reason that Chris and I do this podcast is because we passionately believe that property buyers can do it better. We really want to help all of you understand all the risks but also the ways in which you can avoid your elephant making the decisions.

Chris Bates: Or what we would love for you to do is just to share this episode and share other episodes with people around you that are going through the property process.

Veronica Morgan: Give us a review on iTunes. Firestar please would be very appreciated because this is about making sure that we all benefit from the wonderful information that our guests have been sharing with us.

Chris Bates: Unless I build rent takes off and hopefully it does because there are, I think it will, yeah, part of the population it needs to rent and they look at, there were two options. They can go rent in a bill to rent where they know they can stay as long as they want. They're not going to get kicked out in a year's time or they could go and sign a 12 month lease in an older building that was potentially poorly built or it's got problems with their building and they can only sign 12 months. What's going to happen to those buildings and those, you know, in terms of their marketability, cause people are going to be like, if you aren't going to rent, why would I rent that? I can ramp it up to rent.

Kris Daff: I think short term not much is going to happen because the, you know, the vacancies so low. Yeah. But medium to longterm I think build to rent an institutionally owned residential buildings that have got a much higher service offer. You know, they're better delivering, they're cheaper to live in. You know, you get, you know, you get a lot more help living there than you would in a normal residential building will become a, you know, it'll be a pretty binary choice for paper. And I think there'll be saying, you know, I'd rather than being a sort of institutionally controlled rental environment institutions, probably not. Yeah. It sounds to be off asylum, doesn't it professionally run housing asset compared to just like an owners corporation thing where, you know, cause I sort of, we we were, we were renting an apartment in Elwood recently and we Mmm. The tap broke in the bathroom and like just the experience as a renter, it's pretty poor, you know. So I had to ring the local real estate agent in Norman, right. Elwood and I eventually got back to me the next day and then the plumber got cranky with me cause I couldn't be there at 10:00 AM on a Wednesday to meet them. And yeah. So a lot of those sort of issues and just that sort of, you know, the administration of the rental experience is something that I was a lot easier when you've got a building that's controlled in one line by, you know, sort of professional,

Veronica Morgan: You've got a building manager and a community community.

Kris Daff: Yeah. We have a big focus on developing the social equity in the, in the building. So we provide spaces like, so we don't do gyms and pools and all this sort of stuff that yeah, you don't sort of really need to live a good life. We provide spices a lot workshops where, and people can go and fix a bike together or paint a chair together and 

Kris Daff: Multi-Function communal rooms where you could sort of do the mantra yoga in the morning and then people might work from home there during the day. And so, and what it is it's about, so we don't do sort of wine and cheese pairing nights and that sort of stuff. So we just allow our community to form, you know, in a pretty organic way and for just provide spaces for sort of unforced social interaction. And we facilitate things, you know, like walking groups and yoga classes and we provide occasional care and we might sort of potluck dinners and, and a lot, but it's all opt in. You know, some people just want to go home, you know, jump in the lift, go to their apartment and watch my kitchen rules and go to bed or whatever sort of things. So, and, but some people are, have a, I think for some people what they're sort of missing in there potentially in their sort of current living circumstance is that ability to sort of form deeper relationships with other people in their community.

Veronica Morgan: It's got a bit of the co living to it

Kris Daff: Yeah. So it does. So it's definitely this sort of service design approach around saying, well, what are the sort of spaces that you need to provide in a building and what's the sort of service style that you, you need to design to, you know, their community to form the objective is society? Well that over time potentially the community starts to self curate? They don't actually need us, they're sort of organizing a walking group on a Wednesday morning or during the yoga or things like that. So, and that's a lot more the sort of housing cooperative model from places like Netherlands or Switzerland.

Chris Bates: Is that why you said 200 apartments? Because, I mean, the bigger the, you know, we're sorry, they'll say you can only have a hundred people in your life that you can have a relationship with or something like that. So that's right. So as a groups you can only know that many people. Yeah. I mean, as you start to not be able to take on more people,

Kris Daff: You know, so do a lot of work on cohort sizing. Um and what does that mean? So that means that for example, you might get a lift in one of our buildings to level three and you sort of go lift out of the lift and we sorta thinking about this as like a little cooler sec. So it wouldn't have more than eight or 10 apartments in that little group of apartments because that's about the number of hassles it can sort of start to form into a group. And then in a bigger community it might be 40 to 50 apartments in a sort of part of a building. And then so, but it's 200 apartment building might be sort of a collection of four of these little neighborhoods. Yeah. So 

Veronica Morgan: Optimum apartment number optimal game and apparently was 40. Yeah. You know, you've probably got all that research Avenue. Yeah.

Kris Daff: Well we doing? We've got alot of researchers in the office there's a, there's a, there's a little labor arch photos in the, in the office, but they're the one of the if you're just looking at it from the investment lens, it'd be the bigger, the better. Not so because you just get all these efficiencies that come with scales. So for our first project, which was only 70 apartments, we actually go backwards managing a project of that scale, but it was a manageable sort of pilot project site and top scale. So we need to sort of get to 150 apartments plus for that debate and economic size for us to deliver the sort of service that we want to provide to the communities. So, so

Chris Bates: I've been a traditional developer would say, you know, I've got a, this block of land, I can fit 350 apartments on it. Let's just go for it. Right. That's probably where your profit margin is because you're saying, well, it's any build two, you know, let's create a bit more community space as crab move more green space extension. And you can do that because you've got institutional funding. There's a driving the metric

Kris Daff: That's true. 100% yes. So they're happy to invest for Laura returns over the subtle longer term. But Mmm. It's a bit about saying, you know, we provide communal spaces and we do sort of mid scale developments because Mmm. You know this in commerce in that as well. So they're, they're, they're a size that we know we can manage. We think community, we had a full forming community in buildings of that size. So, and there's a whole bunch of data around these from the side of the U S as well, where the data says that if an individual in an apartment building makes two meaningful friendships with two other households, I'll stay 2.5 to three times longer than someone that feels isolated. So there's that sort of community curation pace has a investment logic to as well from the.

Chris Bates: I'm not leaving unless you leave.

Kris Daff: Yeah, that's right.

Veronica Morgan: So yeah, they kind of send me suburbs and streets and you know, so I'll know the side of the business. So the make side of the business, I mean, you know, I was looking at a website and there's some some development that you guys well, well one complex what, 6,000, 3000, almost 3000 apartments and another one with 27 hectors. So I'm presuming that's in this well traditional development model.

Kris Daff: Most of that housing and get delivered by assemble either purpose built rental accommodation or via our homeownership pathway model. So so we won't probably, do any builders sell under the sort of Mike umbrella off the plan developments? Yeah. So we, you know, we might do a component of a may do that under the, the assemble brand. We've actually got a lot of papers pull that actually just want to buy now, but they want to be in an assemble community and in one of our neighborhoods. So cause they liked the way that we look at design, they know that we're focused on quality. And some of those other things 

Chris Bates: I want to be in that building. Cause if part ownership, right, if the building's going to get taken care of because they're invested in the outcome,

Veronica Morgan: You're not gonna see later you got the keys.

Chris Bates: I guess fear for me right now is that they get the keys, they move in and then they start getting defects and the buildings, you know, it hasn't been built with the best intentions.

Veronica Morgan: Well I think in the past that hasn't been a big enough for you, just quietly now is becoming obvious why people should have been fearing this

Kris Daff: Things for people. And you know I'm doing it every day and I still find it hard. You know, the process is sort of going to a sales suite and looking at an A3 sheet of paper and even just to visualizing actually hit have bigs of 50 square meter apartment. You know, don't, you don't really not. So there's sort of a whole bunch of sort of able to sort of live in there and work out with you've got room for the cats or whatever you got, you know, is a yeah, it's sort of much more sensible way in our view to sort of enter a market and make such a big decision like that.

Chris Bates: What about the capital value, like if that's one thing and kind of buying the property, but if the capital value doesn't go up from an investment point of view, is that really a sound decision for the person in five years time? Have you done enough kind of, you know, I guess figuring out how do we make sure that asset value goes up and time keeps rising because why would you want to own it if it's not going to go up in value? I guess in five years I can rent it, I can get it from a security point of view, but it doesn't make sense from an investment point of view.

Veronica Morgan: From security. Cause we'll basically take a rent forever.

Kris Daff: That's right. Yeah. So look, I'll think like we can't, you know, we do a lot of modeling on what we think the market might look like in the future. And there's some sort of things like replacement cost indices and things that sort of drive growth in, in process, but it's all bit sort of boring. I guess the beauty of what we're offering PayPal is I'm old, I get afraid, look at the market in. So now it's in 2026 we'll pray a great prospect can buy bought for in 2026. And they've got seven years to work away and save. If the price then doesn't make sense to them or the apartment doesn't make sense, I can walk away then I worse off as a result of that experience. But we do model that. We say, well if an area like Kensington where longterm capital growth might be seven and a half to 8%, that's what we've seen.

Kris Daff: You know, the last 18 months has been a bit different per annum and wayside. Well let's just say that hob. So we sort of get back to a more sort of stable market. And maybe capital growth mod motorized to high 4% per year. So if from where we're at today, if that 4% rates achieved, then our residents, we basically buying at a 20% discount to market value in the future. So, but we can't sort of promise that, and we don't use that often in the marketing because we sort of, it feels a bit sort of spuikery sort of thing, like you said. Yeah. You sorta just trying to sort of see, it seems a bit too good to be true, but we do do people data. Yeah. And they say, yeah, that's where you don't need to. Yeah. But it's when people are, you know, people said a lot to understand it and you know, if, you know, if I was, you know, do a lot of, we'd obviously do a lot of real estate, you know, if it was me, you know, I'd love to be able to go and sort of tightly, sort of free option to buy 50 of them.

Kris Daff: Right. And, you know, and if you can just walk away in the future, you know, why wouldn't you? So but you know, obviously that's not, that's not available to us. I guess we are, we are in a way we probably on lots of them don't we?

Chris Bates: But I guess you, I mean it would make sense in five years time because if the building is built well, yeah. So you're not worried about that. It has got a good community then that's great. And it is quite scarce because while you might have, you know, great intentions to be building these all over the country, you know, there's only so much you as a model can produce. Right? And so those buildings with these good communities, when you break it down, there's still going to be a very small percentage of the apartment options out there. So you might be able to create capital growth because.

Kris Daff: That's a good observation.

Chris Bates: You might really want to be in a community driven, that's right. Housing. So we've, but then you start pushing out the market you were trying to achieve in the first place because that's interesting to me. The people's will sell it because they'll go, well, I can profit on this. And then they sell it to someone who's got money and then the affordable housing starts to move out of the system.

Kris Daff: Yeah. So we don't try and grandfather and affordability outcome with their housing as sort of views that we can support those groups of people that are sort of participating in the modeling, do ownership and, and sell the apartment the day after they bought it from us at the end of the fifth year on my account and another a hundred grand profit. Plus they've got all their savings. And that means that they can go into some different accommodation that suits them better at that point in time or whatever within that good.

Veronica Morgan: You can friends with two other people. And might not want to leave.

Kris Daff: Yeah, that's right. Yeah. So and so we don't have any issue with that and love. We think that's okay. And I'll sort of, you want to use this so well to be honest, like if someone's been there and they've been a good tenant and been paying rent for five years and they've done well out of this whole thing financially and that's helped them have a better financial future than I would have had without and model, then that's good. You know that you've done something,

Chris Bates: But is there any limitations on you? You're accepting cause how do you, let's say you've got 4,000 people when you're at 65 apartments, then how do you decide who gets it?

Kris Daff: Out of a hat, like your fancy hat.

Chris Bates: So if someone is earning 200,000 grand a year and someone's earning 60,0000 a year one's a key worker and one's not.

Kris Daff: So we have some apartments which have mains tested. Okay. So they're like a dedicated key worker allocation. The rest of it know we don't have any issue if someone's on a high salary and they, you know, they deserve to be in a sort of engaged community as well. They obviously don't need as much help in housing as others. But I'll get very nervous about trying to engineer an outcome too much. So I think, you know, having dedicated allocations to sit in socioeconomic groups is important. But I just sorta saw sidewall, you know, the, you know, if you sort of get a sort of junior partner, they're on another only $200,000 a year. The local law thin and you know, that might be good. And then my bet to help pay, run with this sort of contracts and everything at the end when they're buying it or something.

Veronica Morgan: Yeah. Of the five years. Like is there a reason why it's five years or seven years?

Kris Daff: Was the period that way worked out? We thought people needed to save a deposit. So, and so the why that works is, is two years a building the building and then a five year lease. So that's seven years. Yeah. Yeah. So basically off the plan in advance of construction. Right. So, and we've.

Chris Bates: They aren't commiting to anything besides just renting it for a year. Renting for it. Yeah.

Kris Daff: Putting their bond down 

Chris Bates: Forced them to do that though.

Kris Daff: We wouldn't. Yeah. So we, we, we got from, if it was, so look, if your circumstances change and you don't want to go ahead, we will put the apartment back to our database and try and reallocate it to someone else. We think based off the demand we've got, that should be relatively easily achieved. So we don't need to commit to people off the plan, but the logic to that is saying we want to give people the maximum period possible to save. They'll be able to sort of get into ownership and we start the financial coaching program during the construction period. So they start to develop some of those habits and getting themselves sort of set up for success, I guess. Yeah, so,

Chris Bates: No, that's good. I think the the only challenge I think is that, like you say, if someone is in their early fifties, for example, they're not coming to you seven years. I haven't caught seventies, for example, when they could buy it, but then do they get the mortgage at 57? Yeah, that's right. So you might find that that's a market where getting a loans might a problem. It might only suit people in their say thirties forties where they actually get the lions five years time.

Kris Daff: It's about three quarters of the people that are interested in being in our buildings are that younger demographic. And then we sort of got a mix above that and then you know, be a bit of a skew towards people over 55 60. So they've got different challenges that they need to think about and different considerations. But we capture a whole bunch. And so when people make an application, they give us information on current level of household savings, salaries, job prospects, a whole bunch of stuff that we help use to, because we're very conscious too that we don't want to put people and we tell people for these different apartment types sort of salary you would need to be on for that to be an affordable option for you and for you to be likely to be able to. So we say, you know, unless you're earning $60,000 a year for this apartment, you know, that's probably not gonna be a good option for you because we don't want people to, they might be able to struggle, lie and make the rent and everything else, but if they can't save and it just sort of all sort of tends to cast it for them.

Kris Daff: Yeah. It is sort of selling them into this sort of false hype that, you know, these guys are great, they're going to get me into ownership. But yeah. So we've gotta be up front with people about sort of level of celery that would night in 2019 to be likely to be able to afford the property in 2026. So, but your eyes, so we saw with a lot of the older demographics that they were, you know, materially different position financially than the people sort of, you know, in their twenties, but

Chris Bates: Four or five out of the ground, the development side. Obviously, you know, a lot of our listeners have kind of know that we don't really like off the plane for a lot of the risks. What, what's your thought was why, why do you think that, you know, someone should buy off the plan and when they know all these risks around asset value, build quality, you know, contract risk around, you know you know, could settle settlement risk around prices falling. I mean, it seems like there's lots of risks, but, you know, they're not really, the developer's not taking on much themselves. No, no warranty, et cetera like that. So yeah. How do you think that it actually, how do they scales get a bit more fair for the person buying the building? 

Kris Daff: Yeah, look, I think off the plan is a model has its challenges, but it's also done a pretty good job of providing housing. What we sort of said earlier. I think models like our model and sort of other models that are sort of emerging in the market again, to sort of help shift the scales a little bit towards just giving people choice. Whereas, you know, father, years ago there wasn't really any choice. If you wanted a new apartment, you would buy that off the plan and paid 10% deposit and it settle sort of two weeks after the construction was completed or you'd lose your deposit and sort of, so so people, you know, if you, if you're in a position to buy now and you need to sort of, you know, you need to sort of do some, and I think people are getting better at their research piece, so there's not that sort of urgency in the market at the moment where people would just sort of feel, I need to queue up at sort of sales suit doors get in there and put their deposit down.

Veronica Morgan: That's about research or I just think that's about consumer sentiment. That's purely just lack of FOMO.

Kris Daff: Oh, that's right. I'm sorry. Yeah, I meant no, you know, then if, yeah, do their research about saying who is the developer, who's funding it? Let's go and have a look at a couple of the other buildings that they finished that were finished five years ago. And you know how they are looking. I've even have a chat to people that are sort of living in there. And so the apartments are good. So you know, you can't sort of commit these huge decisions to chance. So you need to do some work around that. And I think off the plans still a good option for some Australians that are ready to buy now. But you know, I think it's definitely got its challenges. So, and it is a heck of a lot of money to sort of commit to something site on sane.

Veronica Morgan: And it is. Absolutely. And I think, you know, you alluded to people maybe overestimate their ability to read a drawing. There's also very few of those developer plans. I've got dimensions on them, you know, they, they look big. You really do have to look very hard to find the exact size. And of course there's a variation allowed, you know, in there as well. But one of the things about the defects though, because the reality is that, you know, we know that not all developers and builders are bad, that they're plenty, have supported their buildings and have, have gone in and fixed it, attended a defects and everything. But the fact is a very, very large proportion of buildings certainly New South Wales is the worst as it seems to be over 90% of buildings in new South Wales. Appear, have they fixed him multiple areas within the first seven years, 70 odd percent, Queensland, 70 odd percent in Victoria. So it's a fact that there are defects. So I mean how does a consumer, how does somebody who's thinking about buying off the plan, how do they work out? How'd that builder that developer attends to defects also given that quite often they'll, they'll have a like a company or $2 company just for the actual build. Yeah, definitely.

Kris Daff: You know, I saw, I guess it's, you know, I will walk us at track records. One of them's a gang and having a look at other projects that developer's done. So that, I think that's probably one of the most important pieces of due diligence that someone could do. Have a look at, you know, that you sort of better.

Veronica Morgan: How do they find that cause I mean cause that's actually,

Kris Daff: Did they like some of the, you do to sort of get on the websites and have a look at some of their completed projects or we do any my to people that are doing the style. So what other projects is developed on, I want to go on look at them. And what information can you give me about those? And.

Chris Bates: It's really consumer protection right at the moment the consumer protection is very, very little and on purpose. You know, the state government the federal government, the local government, the, you know, the industry, the construction industry is a huge part of our economy. No one really wants to change that. And so, you know, there has been a relaxing of regulation around it all that she gets it through and you get the products through. But you know, we've kind of figured out, so by him personally, I think the best way to change this is consumer protection. Yeah. He forced developers to be more much more accountable to their defects and if they get pain from it and they have to remediate that pain, they're going to be a bit more careful when they build the building, aren't they? That's a good point. Yeah. Commercial and you've got to do it. Yeah, that's right. But at the moment they have it. So I guess it's just the risk is people buying these buildings that are already being built that haven't had gone through the same rigorous process, haven't got the same, you just gotta be careful buying is because you do don't change in the future, but maybe not soon enough.

Chris Bates: Every week we hear incredible stories of the dumb things. Property buyers do dumb things that end up costing a whole lot of money and, or a whole lot of stress mistakes that can be avoided. Please. Kris, can you give us an example of a property Dumbo? We can all learn what not to do from these stories.

Kris Daff: I guess it's, we've sort of probably spoken about at Dumbo during the course of the podcast, but it was really in Ram. We S we hear a lot from people about making that commitment to an off the plan dwelling and committing such a huge financial decision to, not to chance, but you know, to, you know, to sort of on a side on the same basis is very hardcore actually. So, so this time we'll, you know, I might be based some sort of different and alternative ways to do that. So starts

Chris Bates: The Dumbo signs up on track without just walking down the street. It's just crazy. And then they go into an office, they get sold a, you know, a house or an apartment and they sign a million that's good advice. It's cause that's, if, you know, the whole idea of selling these things is to try to, he wouldn't make a business unless you sold it. So yeah. You know, you have to the idea of selling it is actually hoping those people walk in the door. So you know, that's the whole development built on that. So, and I really appreciate your time, Kris. Come on.

Kris Daff: Thanks guys.

Veronica Morgan: Know, so obviously some insights from your background in the whole development space. Funnily enough the geologist bit, we shouldn't talk to me more about that because you know what's underneath is very important. That's underneath the building. But you know, the, the assembly model is, is a really interesting concept and I'm, you know, I shall be, well we'll watch with interest and love to do a follow up interview with you once you actually do have some runs on the boards and see the theories playing out with the actualities and, and some of the learnings would be fantastic to hear about that.

Chris Bates: I mean that's the thing I actually I love about this topic is that you know, we have, we do have, we can't just, you know, say we can't keep building things cause we want to keep growing up population. We've got to keep going and there has some ways, I think the opportunity now is to build the right stuff and actually get good community outcomes.

Chris Bates: And you know, you're one option. There's other ones like Nightingale and there's other ones popping up and there will be more. The more, the better living, you know, a few episodes back. Yeah. So the more of these things that come out, we need to support them because you know, that's what's going to create the future of housing 100%.

Veronica Morgan: Thank you.

Kris Daff: Thanks for having me.

Chris Bates: We want to make you a better elephant rider and this week's elephant rider training is.

Veronica Morgan: Ah, Chris, you know how you and I, we keep telling people, don't buy off the plan, but the fact is that some people are going to buy off the plan. So I just thought we can maybe touch on a few things that if you are hell bent on doing it, that you should check out. We are and I'll tell it in the guise of a story. How's that different? Sorry. Some years ago my parents actually came to me and said, we want to buy this apartment off the plan. And I was like, no, this is back in 2012. No, I said my mind set against it and I was set for it. So I said, okay, if you're going to do it, let me go and investigate. Now they had friends had already bought this building, so this one of the reasons they wanted to buy in there. So I went in and went to the developer suite, which was the in the real estate agent's office and looked at the layouts and the floor plans and took you know, took away a whole bunch of material. But the thing was, he gave me his brochure and the brochure had various floor plans in the for various apartment layouts and all the rest of it.

Veronica Morgan: And I said, right, can I look at the actual building plans, site plans? And he looked at me like, what? No one's ever asked for that. And I said, well, I would like to see it. So what I got was this full set of architectural plans for the whole complex. Now why was this useful? For lots of reasons. Because the particular apartment that my parents had decided they wanted to buy. When I looked at the actual site plans, I could see that the garbage bean room was not too far away from the balcony. And always what, that's interesting because you know, you don't want to choose that apartment, but you know what, when you think about all the nice brochure, you don't ever see the garbage bean room marked on the renders. Really? Do you? So I went, well there you go. That's interesting.

Veronica Morgan: So because I've got the full set of plans so you can't ask for that and they may or may not give it to you, but they gave it to me. So that was useful. So then I went back to the actual plans or sale plans and said, right, well you don't want to buy that apartment. You want to buy one that maybe has the same aspect, the same layout. But is not located pretty much directly above the garbage bin room. So that's number one. That's number one tip. You look, ask for more information. The other thing that I did do, I actually went out and to the site and because I could walk around the side, obviously come onto a building site, but you can certainly pace around it. Now, once again, you know, this wasn't a huge complex. I mean if you're in a massive, massive complex, not gonna be able to do these services quite contained.

Veronica Morgan: So I literally could walk on the front street and the back street. So once again I could pace out where the driveway was going to go in as well. And I could pace out because my pace is pretty much one stride per meter. So I could face out literally and look up into this sort of sky and imagine exactly where various apartments were going to be according to the plan. So you do have to go to that level of detail to start to try to get a fuller understanding of exactly what it is he buying. So they just, two things that I thought I could add into the conversation here, that if somebody is hell bent on buying off the plan, they won't be doing the Dumbo as mentioning this earlier in this episode of just buying site Unsane walking into a a, you know, what do you call it?

Veronica Morgan: A sales suite. Actually my parents didn't buy it in the end anyway, so that is another Dumbo in this episode. I shouldn't make my parents be a Dumbo, but my parents weren't paying me for my advice and when I finally gave them some advice on this particular property, they didn't take it.

Chris Bates: Well they did. They didn't buy it, I guess.

Veronica Morgan: No, I originally said no. But this particular one I did research the developer and the builder and they actually had a really good track record. And interestingly enough, the particular building on our drive past it, every time I go and visit my parents. So it's seven years ago, it's now been up out of the ground for probably five and a half, six years. They now can't afford to buy that same apartment because it performed well. And as it turned out, the market moved really well.

Veronica Morgan: Actually everything would have moved in their favor. The timing was perfect just before the boom. They ha they would've had a good 18 months to sell their property. They probably would have gone up more than we anticipated. Actually. If they'd done it, it would have been a really good outcome for them. And then some years later they came to me, said, Oh, you know, my friends, they'd love the building. They actually really enjoy living in there. The another one would come up on the market and that's when and when it sold, when it came on the market, I say, you can't afford it. You know that your home has actually not performed as well as those apartments are.

Chris Bates: So they did buy something else, but that.

Veronica Morgan: No, no, no, no. The house that they've still got original house had not gone up in value at the same rate as the brand new apartments. So they, that is an exception to our rule, but it would have actually been a good outcome for them. But I had done a lot of research before I changed my mind and my initial recommendation.

Chris Bates: Be interesting to look at the research as well that if they didn't buy that new apartment, they bought an existing property for the same price in a similar area, like an older apartment on a good street and a good block. There was probably selling for the same price. Has that apartment worth more than the new apartment? Because that's really the problem. The problem is off the plan is that people then don't compare what they could have done with that money to the same point in time. And I researched actually back there and I actually looked at established properties in order to establish the price and there was obviously a premium for being brand new, but the one thing that these apartments have that none of those properly properties had was actually some city views.

Veronica Morgan: And so actually that was the uniqueness that sort of made that worthwhile.

Chris Bates: But only some apartments in that block actually. Yeah, over certainly.

Veronica Morgan: But more than half of them though.

Chris Bates: But I mean on the other side of the buildings around or a square,

Chris Bates: It's actually a building where all the apartments are orientated in one direction. So those, those, you know, and that's that's the thing with these buildings is that not many builders build them that way, that core. And then they build all the way around the core. And so maybe 60, 70% of the apartments generally could be South facing and I haven't got the view or you know, a low floors, I haven't got the lights, et cetera like that. So, you know, in those apartment buildings, you know, there's only a certain portion that has got all the boxes ticked.

Veronica Morgan: It's true. And in fact, even in this one, I really went through every single floor plan with a fine tooth comb to really come down to what the optimum floor plans were and the optimum aspects. So even though they all face the same way, they had still had balconies on different sides and they were sort of, some of them. But Eastern morning sun and some of the got Western afternoon sun. So we had that whole conversation about what, what's your preference, you know, in terms of daylight. So yeah, you're absolutely right. The genuinely in the building though, yes. When you don't have everything facing the same way then then you do have, you know, you've got better apartments and worse apartments and you know, there's, there's usually a very small handful of the ideal apartments in any block like that.

Chris Bates: And that's the other problem is that those buildings, the ones that are the good ones for sale either had been sold, already developed, the, sold them to their mates that kept them in their own little pocket and only what you can buy as an investor are all the stuff that no one else really wants. Because the reality is it's not like it all goes on South the right same time. A lot of it's pre sold. All the good stuff's taken away. And what's left for the punters on the street, it's usually the poor assets. So I think it's you are buying these off the plan developments. How do you actually get the best ones in the block?

Veronica Morgan: We definitely don't want a boat on discipline. Exactly. You definitely do not want to be buying the last one thats for sure.

Chris Bates: Especially if you buying the last 70% you still might be buying all the poor ones in the plot.

Veronica Morgan: Although I'll tell you why. A lot of investors, I don't think think that deeply about it. No. So therefore, you might sniffle something. So there you go cautionary tale tears and my parents not taking my advice so I'll never listen to this podcast. They don't even have a, I don't even think I got a smart phones.

Veronica Morgan: Please join us for our next episode when we interview a property stylist and interior designer Amy stead. She's also got a really great real estate background, so her insights into ah, things like lipstick on a pig. You know when you're renovating a property or you're flipping things to look for as buyers in terms of what little tricks does stylists do to make properties look bigger and lighter. Loads of absolutely really practical hints in this episode. Great chat. Please join us.

Chris Bates: Don't forget we're on all the social channels. We're on Facebook, we're on LinkedIn for on Twitter,

Veronica Morgan: Or you can connect with us on the elephant in the room.com today, you, the links are all there for you.

Chris Bates: Please connect and send us a message. We'd love to hear from you until next week. Don't be a dumbo

Veronica Morgan: Now remember, everything we talked about on this podcast is general in nature and should never be considered to be personal financial advice. If you're looking to get advice, please seek the help of a licensed financial advisor or buyers agent who will tailor and document their advice to your personal circumstances with a statement of advice.