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Podcast title The Rentvesting Podcast | Smart Investor | Real Estate Investing Couch | Australian Property Talk
Website URL https://www.redandco.com.au
Description If you're a property owner, investor or looking to get into the market this Podcast will help cut through the hype, look at the facts and draw on decades of experience to help you make smarter property decisions. The Gen X & Y Podcast is for Gen X and Y Property Investors and talks about Rentvesting. If you’re a property owner, investor or looking to get into the market this Podcast will help cut through the hype, look at the facts and draw on decades of experience to help you make smarter property decisions. Each week Red & Co Director, and Award Winning Finance Broker Jayden Vecchio will unpack the facts behind the property market, explain what’s really going & where the market is heading. We have spoken to guests like Mark Bouris, Peter Switzer, Kevin Turner from Real Talk Podcast. Are you ready to make better property decisions and learn to live where you want, but invest where you can afford? Tune into us via iTunes, Stitcher, Google Play or through https://www.therentvestingpodcast.com.au/ where you can see the Rentvesting Calculator
Updated Thu, 23 Nov 2017 16:16:28 +0000
Image The Gen X & Y Property Investing Podcast | Smart Property Investor | Real Estate Investing Couch | Australian Rentvesting Podcast
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Link to this podcast The Rentvesting Podcast | Smart Investor | Real Estate Investing Couch | Australian Property Talk

Episodes

1. Buying A House vs. Apartment: The Battle Continues!
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This week we're talking about buying a house verse an apartment.

 

In this episode we cover: What to buy How to avoid capital losses. Some of the fundamentals that you need to look out for both internal and external Your personal circumstances and your personal cash flow Looking at the product that you're buying

 

Let's do this. 

 

Say there's been a lot of news that's come out recently just about a buying, which is often fake news. Anyway as news around buying apartments at the moment where a lot of apartments especially around Darwin, Perth and Brisbane have been selling for losses at the moment. So there's been a few stories about people who bought apartments. One in Canberra in 2010 they've just recently sold at a loss. If you think about how much you put in there a huge loss is about $30,000 but then yeah if you look at stamp you and everything, the net loss and how much you put in as a deposit. If you put $50-60k as a deposit and walk away with a $30k loss on your original capital you’ve lost 50%.

 

Sometimes stories that aren’t shared are the types of properties they're buying and the types of things they're losing money on because then equally in that time there haves been people that have double triple their money. Think about who you are selling to next.

 

RP data has found in Sydney on 1.8% units are selling at a loss

Melbourne is 11% Canberra is 22% Perth is 36% Brisbane is 25% Darwin is 52%

 

However this data didn’t give us timeframes or how big the data set is, which is be important.

 

Right now in the Brisbane market its expected there will be an additional supply of 20% above what we’ve already got. But some of that data is waiting on development approvals not commenced yet.

Overdevelopment is probably the biggest issue for the whole - are you going to make money on apartments.

 

 

What are some of the identifiers of that?

Number one it's actually getting there and going on the ground. As easy as it might be to buy something off the plan, buying something unseen is a risk. You actually have to go there and pound the pavement get a feel for the suburb and just make sure there's not too many cranes in the sky and all look at the council in Brisbane.

 

 

 

 

Things to look out for Your circumstances changing

You don't want to be in a position where you buy a property and then you have to sell it very shortly after. Property is a long term game, 7 to 10 years minimum.

 

Look out for the cash flow

The long term cash flow is going to be a major deterrant as to whether you have to sell or not. If you don't have much spare cash flow to start with, you're going to have to just sell the property. So making sure you have those numbers in place. The biggest thing to try and work out in the short term is don't bank on any capital growth or don't expect any capital growth because it is a long term thing and markets are cyclical. Anything can happen in the short term so if you're buying an apartment in Sydney now might go up might not in the next 12 months.

 

Don’t try and speculate

If you live by the crystal ball you end up eating a lot of glass.

 

Look out for the boutique and the really well located apartments

Michael Matusik went through with us on what to look for in a suburb, where to buy you know, what's the transport like, is it near traffic corridors and is it one of 500 in a building that has nothing really to set itself apart from the other 10000 that suburb or is it quite unique?

 

In summary

Take the time understand your own situation and understand what you're getting in to. Know your own situation your own circumstances. If you're a contractor on your six month rolling contracts should you be putting yourself heavily into debt if they don't renew that contract? So there might be short bursts of large growth but it's kind of like Michael Matusik actually has a good saying, explaining about how you know property growth isn’t a smooth line it's all jagged, to go up in different spaces and go down and up and down. It's just not consistent. Don’t account for capital growth. Look for boutique properties, don't go for the cookie cutter mass market stock. Try not to throw your capital in a property because if something goes wrong there's a short term emergency of cash flow.

2. Should I Buy Bitcoin? Matthew Dibb from Astronaut Capital Tells Us About Risks
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In this week's episode of the Rentvesting Podcast, we've got Matthew Dibb founder of Astronaut Capital in to talk to us about cryptocurrencies and investing in some of the landscapes.

In this episode: We're looking into investing What are some of the risks An overview of the industry

 

So tell us about your background and how you got into Bitcoin and all that sort of trading?

I started from a finance background actually in Australia. So previously working for Macquarie Bank and then in a trading background for stockbroking. Naturally, looking at the market this cryptocurrency market over the last few years, we've just seen this enormous growth out of it. Previously had a lot of clients who were looking into getting exposure into it. You think about Bitcoin and you know it's gone from in the early days in 2008 when it launched. That was after the GFC. It went from prices from as low as you know a few dollars and now it's trading at $7,000+ AUD and that's all in the space of six or seven years basically. So I got into it I sort of fell into it as a natural progression from derivatives trading. And now what Astronaut Capital is doing is basically managing funds on behalf of other retail investors and institutions and investing that into the currency market.

 

Take us back, even on a simple level I'm sure most people would have heard of Bitcoin and cryptocurrencies. But what is it at a high level? How does it work?

Sure. So probably the easiest way to explain it. You've got what they call blockchain and I think everybody has heard that word before. Bitcoin is effectively built off this concept called blockchain and blockchain is effectively a trust list system. It's like a ledger in the cloud where every transaction or block they call that is processed in there is there and can be verified by anybody. So having this trustless this system was it was a huge thing and as I mentioned before in 2008 after the GFC people were thinking well, you know what about a currency where we don't need to have banks involved like how cool would that be? And so effectively Satoshi Nakamoto created Bitcoin which is a currency based off blockchain. And what it allows you to do is send any nominal amount that you want straight to another person in real time. There is basically no transaction costs to it. Very small fees and it's done peer to peer. There is no middleman. There is no centralised service or anything that is intercepting and charging you in between. That's why we've seen the growth in that currency.

 

A lot of people have talked about how they've made some people made really rich from it and you've heard stories of I remember reading one where a guy had used a couple of coins early on to buy pizza from Papa Johns and now it's about 10 million dollars. What are you seeing with people trying to invest in, what are the good things that can happen, what are the bad things the downsides?

From when the guy was selling pizza and it was three dollars and now it's now it's over $7,000. But you know, think about it just a year ago when it was trading at less than $3000, even before that people have made a lot of money off this. It is a currency that's being used every day in the transaction volume, for example, it's bigger than some of the largest listings in the New York Stock Exchange. So it is huge, it's being used and it's going to continue to be used. So when we talk about investment for people and you know everyday people I think having exposure to that market albeit, not huge exposure, but having some is a great way to diversify your portfolio particularly because it is liquid. You don't have that problem of trying to get out of it. Billions of dollars of it are processed a day. So within a second, you can get in and out and you know a liquidity part of your portfolio in Bitcoin in other cryptocurrencies I think is a great idea.

 

So it's obviously highly volatile as well as a couple of weeks ago when China said they were going to ban Bitcoin and it dropped off like a flash drop. What do you see the future of it? Is it going to continue to be volatile? Is it like gold where it's kind of consistent, but obviously it doesn't make dividends?

That's an interesting question because you just made reference to gold which is a good one because this Bitcoin is hundreds of other these cryptocurrencies in the market. Bitcoin is the gold standard of cryptocurrency. We see a lot of volatility, sure we see 30% swings inside of a week or a month, which is huge and that's why you know taking too much exposure where you can't sleep at night that would be a big problem. Taking a nominal allocation in your portfolio is a good idea. But volatility will always be there. It always has. But we look at the returns it's volatility on the downside but also volatility on the upside that's producing these huge 30-40% gains inside of months, so it all comes back to having that, unique but small exposure to your portfolio.

 

There are other cryptocurrencies too because I think this is where it gets hugely confusing because there's Bitcoin which is kind of the original one. So how does that actually work? What does that look like?

Bitcoin is as we said is a currency but a lot of these other types are tokens that are coming out, we call them tokens if they're not a currency. They are blockchain. Blockchain can do legal contracts for land transferring a smart contract that no one can dispute that gets rid of the need for legal and conveyances. What companies do to build that intellectual property in that contract is they raise money via a token.

That's the same thing effectively that like you mentioned Bitcoin and the hundreds of others have done. They come up with a concept that is blockchain backed that is going to improve the world or a particular process and they raise money on that very similar to an IPO. So we talk about an ICO which is initial queen offering for the tokens is extremely similar to an IPO in raising money.

  With the ICO's, is it like an IPO to get shares in the company or do you have ownership, do you get dividends, do you get profits from it, how does it work?

Yeah, good question. So it really depends on how they're structured. So if we look at what we're doing with Astronaut, a token that you buy off us which is called an Astro gives you exposure, basically ownership to a pool of other tokens in cryptocurrencies, but other ones are structured in a different way.

For us, with Astronaut we actually distribute dividends based on our tokens performance and remembering that a lot of these tokens similar to Bitcoin, where the place prices fluctuate, these tokens actually list on exchanges as well. You may have ownership to a token that you get into it at a low price and you know within months of listing it can go up 10-20, even 30 times and we've seen that a lot this year.

 

With huge upside, there are huge risks. So this stuff is largely unregulated at the moment, along with what impact it can that have. What have you seen? I think you've mentioned before your time in America there's still not really sure how to treat it.

 

So what are the risks around that and the legal landscape?

I think the regulation is going to continue to be talked about almost on a daily basis and in every country as well as in the last couple of months. You've seen China, you've seen Singapore, the US and Australia has just issued their point of view on the fact, the matter is none of them has been able to implement legislation because blockchain and Bitcoin etc. they are somewhat of a threat to the natural ecosystem of the government in the gold and the dollar standard.

The whole financial system, the banking system and you know the Reserve Bank of Australia would be would be scared about that. And we're seeing the same in the US so regulation is going to continue to be talked about. But the question is can it actually be enforced? And no country has been able to do that because the whole point of Bitcoin and blockchain etc. is basically the freedom to be able to do what you want with it, without having to go through certain channels and middlemen. Governments and regulatory bodies are wanting to implement that and the market is simply saying no.

 

That's interesting. And I think it still largely seems to me we're in the early days so it's hard to say what the risks are exactly.

It really is and you know I think we've seen huge growth in everything. Even with some of the scare tactics that China came out with or the US Bitcoin has gone up 20% since then. If anything it may actually be helping the cause of using Bitcoin. You know it was funny because I saw something the other day, a post on Twitter by Julian Assange WikiLeaks founder. I think it was 2010 WikiLeaks was barred from using basically any financial institution to hold any money any currency paper, so they were forced they had no other alternative but to use Bitcoin. I guess they put all their money into Bitcoin and said Julian Assange put out a post the other day saying I'd like to thank the US government for basically making WikiLeaks millionaires of the past five years. I think I think it's really interesting that ecosystem.

 

In summary: Go look at Bitcoin yourself because it's all fairly unregulated at the moment but it could be something to look out for so much. When it comes to cryptocurrency, whilst some people are getting rich quickly is still a largely new area that should be watched but should be approached with a lot of caution. It's hard to say what's going to happen next. The government, the regulation and even the volatility is there, but I think definitely something great to look out for.

 



3. Cashed Up: Everything You Need to Know About the Reserve Bank of Australia; what it does and how it affects you?
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In this week’s episode, we talk about cash and the Reserve Bank of Australia (the RBA), the official cash rate, what it does and how it affects you. We’re going to look at how the economy is going on an individual level and how the flow on effects us.

 

The Reserve Bank of Australia

So what is it? It's an independent central bank to the government. They deal with the cash rate and stability of financial system. Through open market operations, all the RBA does every first Tuesday of the month is set the cash rate. They look at how well the exchange rate is going, unemployment rates etc.

 

What is the official cash rate for?

It’s simply the interbank lending rate - the rate the banks actually borrow money from each other. To increase the rate, they won't print as much money, or buy money off the RBA. Then to decrease the rate they’ll increase more. It’s all supply and demand, the more money in the economy the lower the interest rate will be. To stimulate the economy they’ll lower the cash rate and to cool it down they’ll raise it to help control consumer spending and lower inflation.

Over the past five years, we’ve seen a steady decline in the rate because the economy isn’t doing so well, so the RBA is stimulating the economy to get people spending.

 

How does it affect home loan interest rates?

So for example, the banks borrow at 1%, they then add their own clip so an extra 2% and then will lend the money to an individual at 3%. The interest rate will go down in cycle with the RBA’s cash rate.

The banks still set their own interest rates and that’s called an out of cycle interest rate. It’s an excuse to make extra money and margin; they don’t need to follow the cash rate. The flow on effects are nil if they don’t do so, so when the rates are down they’re advised to, otherwise the bank is making an extra margin. So all of its services are making banks more profit rather than helping the economy, it works on cash rates for term deposit. It doesn’t affect the lending side and also the deposit side.

 

The RBA stress test

The RBA did their own which APRA has been doing a lot too, and also is why banks are increasing investment rates.

There’s more stress on speculative when people in Sydney were buying on 1% yield - on speculation that it would increase in 12 months. They want more owner-occupied borrowers because if times get tough they’re less likely to just dump their property on the market because they live there. This is why they’re trying to slow down investment lending.

They did a stress test and found interesting things. The most interesting thing about it is that usually, the RBA doesn't go into this level of detail.

Prices are starting to stagnate or go down a bit. That's Brisbane and inner-city Melbourne which are cooling a bit. Sydney is stagnating and they’re also looking at other conditions in the market. Like macroeconomic scenarios, what the flow on effects of rising interest rates will be. Most people now as a household are spending less on their mortgage than 10 years ago because interest rates are lower. However, they've found it's still more expensive to own a property than rent one. So there’s a divide.

They’ve also found that over time the number of investments people own has increased. 2 in 9 households have more than one property and most are using it as an ability to invest. 1 in 14 own more than three. There’s been a steady rise in the baby boomer era of individuals owning more than one property. That’s what they’re trying to stop, a bubble of people buying too much property.

If you’re investing in a property, do the numbers on worst case scenario and assume it will be vacant 2 – 3 weeks, that the rental growth might not change and make sure you can ride it out.

 

Through lower interest rates your reduce the time of your loan too. Keep a buffer and don’t keep it too thin, if you have an extra expense you’ll get caught out.

 

Selecting property ratios – doing the modelling, any quick tips?

A rule of thumb is – in some areas, for every $100k worth of property you should expect about $100 worth of rent. With deposit ratios, it’s not going to be a cash flow burden if it's an area going up in value you can go for higher leverage. It depends on what level you’re at. You might have less of a deposit to get going. But you want to build a buffer. Once you get to that level you need to be at 50 – 60% gearing for banks to lend you more money.

 

Some interesting things to remember are the fact that the RBA is doing it as opposed to APRA and over time if rates do go up we’re in an interest yield trap.

 

The key takeaway points from this episode are:

The RBA affects you, your money in your bank account and the deposit rate. Before you buy, you need to do your own stress test to make sure you’re not putting yourself in a worse off position through buying an investment property.

4. More Value Than You Think: How to Avoid the Value Trap When Buying
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In this week’s episode, we’re looking at how to value, specifically property but we touch on shares and bonds too. We go through overall how to best not destroy your investments, we’ll be talking about valuations overall, the biggest mistakes most people make and paying too much.

In this episode:

We’ll go through some examples What is the actual value? How to actually value properties Information on valuing

Let’s talk about how to value, whether its property, shares or bonds.

 

When it comes to buying any investment it's going to cost you something, what’s generally considered the value?

So how do you actually avoid the value trap and not pay too much for an investment? You make your money on the buy-in, Kevin Turner says it. The cost of paying too much, what does it look like?

If you’re buying a $500k property and overpay by 5% (so about $25,000), as a first home buyer this happens a lot. New developments usually have referral costs built into the price.

In this scenario, if you had of invested that elsewhere for 10 years earning 8% that $25,000 would now be $54,000. The risk is not only are you foregoing investing those funds elsewhere, it will be harder for the investment to grow in value.

Getting the right price increases your capital growth overall.

 

What is Value?

There are two different types, market value or underlying/fundamental value.

Market value is what you pay for it – it’s not necessarily what it’s worth. Shares are a buyers recommendation.

Whats that drive from? It's driven by the fundamentals. If someone is giving recommendations on an asset it's from looking at the business model and how well the company will do in the future. If a share is $1.10 and they say don’t buy it, but the market value is 50c and they value it at a $1 then they will give you a buyer recommendation and say definitely get some.

Property is a bit different it's more subjective.

 

What is Fundamental Value?

It’s simply going through due diligence, doing some comparisons, you'll never be purchasing fundamental value its always market value. Being aware of this before you buy helps you not overpay.

For example with shares, Dominos shares went up massively in share price over a short period, it went about 80 times price earning, which means that the price was 80 times the earning. The banks at the moment actually have 13 price earnings, it was overvalued quite a bit and that’s an instant where people overpay.

In property, you could look at a yield basis, where if you’re buying an investment property at 0.5% yield and just speculating on capital gains it a similar thing where you can get caught out.

Property is harder to put an actual valuation on it.

 

What is market value and how is it derived?

For example, say Jim's house is valued at $500,000 how do I work out the value?

Look at what it last sold for, working back to how much you bought it for, how much the market has gone up – looking at Domain for the median price statistics.

Median value overall takes an aggregated view of the market and it depends on the sample size. It can be very bias and very skewed.

You can work out relatively easy if you have an existing property if the median house price rise has been 9% you can figure out the value that way, otherwise, banks use another methodology through looking at recent house sales and similar profiles within the last 6 months. That’s broadly how the valuers look at it.

Online as well, it’s a similar methodology. Bedrooms, land size, what the property is comparable to, etc.

Online you can do it for free – sites like Domain, On the House, Core Logic, RealEstate.com.au, SQM are all great tools.

The other way is you can get a real estate agent to do it for you, they have access to RP data which is the paid version of those free sites.

They will always happily come out and give you a market appraisal.

If you’re looking at buying you should be doing this, looking at property history and sales history. Just because your agent says its worth a certain amount doesn’t mean it is, make sure you don’t overpay by only looking at their price.

 

Future value, how do we work that out?

Again it’s very hard. With future value, the best way to predict is a through strong trend of demand verse supply. DSR Data actually gives a rough estimate of the supply verse demand of suburbs.

Low supply – high demand prices will grow, why Sydney is growing so well.

Over time if there’s strong demand for a suburb the price should go up. To get an idea of what the value might be in the future it’s a good idea to look around and look at potential factors that might increase the demand. Gentrification might happen in some suburbs so always look around. Use a variety of sources to make your decision and don’t just rely on one. Every time you do research still be the one making the decision don’t let it bias you too much, look at a few different sources.

 

What is the best way to get a valuation?

Domain has good property profiles, and you can look up the individual property.

SQM Research is good for rental rates and further information about the property, DSR Data also has a variety of sources. We’ve found On the House isn’t as accurate so beware of that.

They’re all not super accurate so it might be worth paying for RP data if you want really accurate info.

 

In summary:

Don’t pay too much - opportunity cost for future potential growth will be missed out on. If you pay too much upfront, your property won't grow as much. Fundamental value – this is the best guess of what something should be worth. Market value – the price people are willing to pay for it. If you took a look at different areas of Sydney and worked out the fundamental around that, the additional demand for that is a massive price disparity compared to the actual fundamental value. It's worth remembering that generally the bank and those valuations do it on the basis that you can sell a property fairly quickly. Which is why the value may be different because the on market value is more aggressive especially if it’s trending up so there can be a gap. Know what else is selling in the neighbourhood and do your research. Work out what it costs at the beginning.

If you enjoyed this episode, please leave us a review on iTunes here and don't forget to send us your questions for Wednesday with a Why!



5. Wednesday with a Why: How Much of A Deposit Do I Need As a First Home Buyer?
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Thanks Cam for the name recommendation, we’ve officially changed it!

This week we’ve got a question from Chris.

How much of a deposit do you recommend for first home buyers? What do you do with these savings – leave it in cash, savings? What if it's going to take 3+ years for a deposit?

 

How much of a deposit do you recommend for first home buyers?

It starts with the price, if you’re a first home buyer you’re not going to be buying a $2Mil property. As a percentage.

Louis says 20%, but Jayden says it's more about time in the market if you’ve got 5% saved but the trade-off is paying lenders mortgage insurance at least it gets you in as soon as you can. Louis is more cautious as it varies for each individual like doctors who get 95% loans because they can pay them down quickly. If you’ve recently gotten into a high-income occupation, you can get a bigger loan.

 

Where should I invest the deposit short term?

Typically the short term is from today to 2 – 3 years out. With any investment, if it's needed in the short term, while it sucks, cash is still the best and safest place. You don’t want to put it into the market if you’re potentially going to lose it. That’s why cash does make sense. You need to look at the expected return, cash has interest and there’s no chance you will put your money in and it will half in value, whether shares aren’t like this, in the short term you don’t know what will happen.

 

What about for a timeframe over three years?

In three-plus years, you could look at more growth orientated investments, but I wouldn’t put 50 – 50 outside of cash, maybe a bond for 3 -5 years would be good which would pay a higher income and retain a fair amount of cash. If it's something where you know you’ve got three years before you use it, it's best not to put it into the market.

 

Don't forget to send us your questions!



6. What Determines Good Debt and Bad Debt? Examples and ways to Minimise with Debt!
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In this week’s episode of the Rentvesting Podcast, we’re talking about good debt verse bad debt. We’re going to look at the ABS’s recent study of wealth in households and the results are surprising.

 

In this episode we look at: Good debt and bad debt What to look out for Where debt will take you in the future

 

There was a recent household study on household income and wealth done by the ABS. It was surprising to see but when you think about it, it makes a lot of sense. The results of the study showed that the households with more disposable income have more debt. They broke the population into 5 brackets (20% each) in terms of income brackets. The top 20% with the highest disposable income were more likely to be in debt compared to the lowest income 20% bracket.

This does make sense because the more money you’ve got the more the banks are willing to lend you.

They’ve found that around 73% of households are over-indebted and the top 40% of people with the most disposable income make up around 50% of the over-indebtedness.

Retired people have the least debt because the banks won't lend them money!

 

 

So let's go through the good and bad debt.

If you’ve got two incomes, the bank will lend you more money – that is when there are two people in the household. You’re in the category of people most likely to be over-indebted. The banks are probably advertising to you for more credit cards and more loans too.

 

Good debt is something that increases your net wealth and helps you generate income and value – so you manage your finances a bit better and buy things to grow that wealth. The interest is deductible for most of the good debt category.

 

Bad debt makes you poor. It’s debt that doesn’t help you increase your wealth and allows you to purchase goods and services that have no lasting value.

 

Good debt includes: Property 

It works off what’s called leverage. If you put $100k down and you take up $400k debt, you can claim a deduction. As that asset accumulates over time in value, for every percent you get, you get 5% additional growth. Here good debt can help you build wealth.

Property can also be bad debt if you’re over-indebted, having too much debt can be crippling. Just because the banks will lend you the money doesn’t mean you should take on all of the debt.

As an idea, 30 – 40% of your income should go to servicing alone but if it’s more, you'll be in trouble.

 

Shares or managed investments

Borrowing money against a home or even a margin loan helps build up an asset base. While interest repayments will be made, they’re deductible and the value of the loan you took out will stay the same and the value of the asset will go up over time.

Margin calls – this is when it goes bad. The bad side of good debt is  margin calls -  one of the worst situations, if you take a loan out against shares where the value of the portfolio drops (which happens because they’re liquid as), so if it drops above a loan to value ratio above 80% and the bank tells you-you're outside of the range, you’ll need to sell, or buy more shares to top it up or pay some debt off. None of those options are good if the shares are going down. That’s where good debt turns bad because you’re overleveraged.

 

Remember that over long-term things historically have gone up and short-term there’s volatility against all asset classes and it just means you’ve got to have a bit of a buffer. With the bank's changes around investment only loans, good debt has become 'less good' because interest rates are higher but historically they’re still super low.

 

Education

This is good debt because it's adding value to you as a person and helping you build your wealth and increase your top line/revenue. So Jayden thinks HELP is good debt because the interest is very low. But it's important not to overeducate yourself, like doing three bachelor degrees and a Masters might be a bit much.

Louis sees debt as bad fundamentally, based on the education system where you study something and your earning capacity won't be increased. In some industries, you don’t need a bachelor degree but you can do a diploma instead for less. There are plenty of degrees out there where universities don’t have the monopoly of information too. As the supply of individual degrees goes up, the income for individuals has gone down. Studies have shown in America for those who have gone into trades and don’t have debt are better off.

This is a double edge sword.

 

Owning or starting a business

Again there are two points to this, borrowing money to get a business going and starting from zero is pretty hard. A lot of people might have a good idea but no capital which is why there are sites like Kickstarter and IndieGoGo. It is a bit riskier and can cost a lot more money though. The major reason most businesses fail is not enough demand for the product and also that they are too indebted to make money. It's always worth if you’ve got money to save up and are not starting from zero.

 

Bad debt

Borrowing to go to the shops to get a new pair of shoes or a handbag is clearly a form of bad debt, but let's go into detail with this.

 

Credit cards

They’re super expensive you still pay 20 – 25% interest on a credit card. Some banks don’t even ask for your payslips and just let you set one up. They’re bad because its access to money that you don’t have. Some people get into a lot of trouble with this.

Think about trying to find an investment that can earn you 25% per year, that would be amazing. But instead, most people are willing to pay this to have a credit card. Australia’s credit card balance sits at $52billion and almost 2/3 are growing interest.

 

Holidays

The best thing if you’re going on a holiday is to save for it. You’ll feel a sense of accomplishment and it won't put you far behind. If you lend money, because of the interest, you end up paying so much more back for the holiday. So often if you take out a loan and it takes you a while to pay it back you’ve almost paid for two holidays.

 

Cars and consumer goods

Interest-free loans are a common trap; just buying a nice new car is bad! They depreciate so quickly, so if you’re buying consumer goods they’re typically depreciative in value. If you’re serious about growing your wealth put off buying a car until you can pay for it in cash.

 

Borrowing to repay debt

For example, going on a holiday and putting it on your credit card and then refinancing it into a personal loan and paying it off over 7 years means you could end up paying it off twice due to interest. Not a good idea.

 

Gambling debt

This is clearly bad debt, we just had to add it in. It’s different to investing because it’s looking to get returns over time with minimal speculative risk. When you gamble you’ve got a lot of speculative risks where you’ll either lose everything or gain. You’ve got a 50/50 chance. It’s better to actually not gamble and put money into investments and let it grow.

 

In summary: Good debt

As long as it’s growing your wealth its effective tax wise and an effective form of debt its good.

 

Bad debt

Bad debt reduces in value if it's just creating a memory or won't help you move forward and isn’t deductible then it's considered bad debt.

If you’ve got a lot of bad debt why not put together a plan where you put every spare dollar to pay it off over a short period to cut the interest?

 

If you enjoyed this episode, please leave us a review here on iTunes or send us a question for Q&A Wednesday.



7. Q&A Wednesday: Do I Need A Will When I Buy A Property?
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In this week's Q&A Wednesday we've got a question from Candice who has just bought a property and wants to know if she needs a will?

 

Question:

I've just bought a property, do I need a will?

 

If the solicitor says so then maybe, but typically a will just covers you in the event that you pass away and you want your funds to go into a certain direction. A state asset is something you own outright but there are so many assets out there people don't think about, that aren't state assets. If you've bought a property in a joint name, it will automatically revert to the other co-owner of the property and your will won't count.

There are lots of different scenarios.

For examples, superannuation is not a state asset, as with life insurance policies. Consider, do you have dependents and are there people looking after you?

But what about if I am 25 and just bought a property and get hit by a car, who gets it?

A public trustee has discretion of it, if you have living relatives, it's called dying intestate - where if you do die without a will it goes through the process. If you don't have any living relatives the state just takes it.



8. Under the Hammer: Cate Bakos' Tips to Taking the Win at an Auction & A Reality Check for First Home Buyers
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In this week’s episode, we’ve got a special guest, Cate Bakos who’s a buyers agent based out of Melbourne. She started investing at 21 and has been building a portfolio ever since.

In this episode:

Cate takes us through her journey starting as a real estate agent and then helping people buy.

Tips on how to buy at an auction.

Talks us through financing process and the importance of doing your numbers.

A brilliant tip when buying your first home.

 

About Cate Bakos

I’ve got a background like a patchwork. I did a science degree and when I first graduated and always loved property. I went into property sales/real estate and learnt about how buyers and vendors think. This felt a bit one-dimensional as I could only sell what I listed. I then got more into investing because I had a keen interest in picking the numbers. After I had my daughter, I decided to do something that would keep me close to the industry but also be a mum, so I went into mortgage broking so that I could work flexibly. Little did I know that it would be so beneficial for my knowledge bank. Looking at properties the banks did or didn’t like, cash flow etc.

 

Do you have an investing strategy you use personally or what’s the process you use when selecting investment properties?

My strategy is to buy and hold.

A strategy is determined by how you want to go into retirement and what that strategy is. My plan is to enable all properties to pay themselves down slowly. I have a blend of cash flow and high capital growth. For those who start later or those who go aggressively into capital growth strategy, they may have a different strategy.
The most important thing for me is to profile someone when they start their investment journey and to understand the cash flow at hand.

There are lots of different models out there but I’m always open about what I do.

 

With the changes between banks and how they’re looking at investment debt – has your view changed on how people should look at managing their debt?

 It hasn’t really changed how I feel about debt, but it has changed how I feel about how people approach things. Three years ago you could pay the same interest rate on an interest-only investment loan and borrow 95% and in some cases more, so the category and segment of the market who has experienced significant changes are first-time property investors. Rentvesting has got a lot of airplay and there are a lot of successful stories out there but it’s not as easy of an option these days because of policy changes.

My appreciation is towards those whose journeys have had to mould around these changes, and this is a prominent part of my conversations with people now.

These days I still have a conversation about how much people can borrow but in almost every case people can borrow more than what the lenders give them but they have to think about how they can get their hands on money because it is harder.

 

A lot of recent first home buyers probably wouldn’t appreciate interest rates going up, how do you model that looking long term?

I am very open with them that when I first started 7.25% was the average so being prepared for 9% was something I had to factor into my strategy. Having said that it is at a record low and I don’t see us getting us back to 9% in a hurry. Lending is all calculated now with a buffer in place and it’s around 7.5% that people are serviced on, so with a servicing number like that it means the banks are buffering for interest rates to hit that level and they’re factoring in P&I.

If someone has held a 5-year interest only on a 25-year loan term they’re calculating those repayments. I’m not an economist and I don’t have a crystal ball though!

 

What are some tips you have on the buy-in and ways to approach it? A lot of people get emotional and attached so how do you help people remove that?

Depending on whether I’m looking for a home or investment property I have a different hat for each one. I have to help people identify their criteria if it’s a home, the most difficult thing is being realistic and not getting hung up on the nice to haves and sticking to the must-haves.

They need to make sure the budgets they’re working with are achievable and if they get that wrong they can be searching for over a year.

For an investor, it’s important to not let your emotional home buyer hat come down when you’re out there looking for something that just needs to perform. Identify what sort of performance you’re after and understanding the outgoings with each property. Too often I see people looking at properties they’d be prepared to live in but it doesn’t matter what you want. You don’t have to love it you just have to be proud of it.

 

 

What are some rules for bidding at auction? Make sure your finance is sorted – that doesn’t mean having an indicative preapproval over the phone or being confident you saved enough covers it. You need to make sure you fit into the lender's policy. There’s no cooling off when that hammer falls. It doesn’t just go for financing the property its also paying that deposit. If you’ve got any doubt around that it needs to be sorted prior. Knowing your market – if you’re out there bidding on a particular type of property in a given area, you’re trying to buy into a market where you’re just following the lead with the agent's quote ranges. You may find you’re disappointed because you need to do more than rely on the quote range. It's up to buyers to understand the type of dwelling in the given area is selling at. If you’re miles off the mark you’ll waste all of the due diligence. Understand what sort of expenses could come up. Making sure you get a legal professional review - there are often things a solicitor or conveyancer will identify on the contract for you. We won’t bid without one of those completed, I say, no review, no bid. Building inspections – a lot of people are unsure about these. It’s a difficult question because personally when it looks like a rock solid property, I want to know a bit about it so I’m prepared for any future issues and any deal breaker issues. In the metro areas its less common to use building inspections for negotiation, like in Melbourne its hard to push back with a building inspection under your arm. But it is a reality check and can enable you to have some leverage in the regional markets. Finding out more about the campaign – this is relevant with auctions because you need to prepare for the competition you could face. It’s not about preparing just the figure, you need to be successful about finding out what appeals to the vendor. You can shift the focus from money to terms if you understand a bit about it. Know what sort of other properties are on the market at the moment that are similar. There’s a lot of gold in asking an agent about the campaign. They’re generally friendly who will talk to you if you ask them. Having this information could be critical in getting a better deal. Setting your limit – it's a good idea to keep you honest to yourself and stop you paying too much, but it's about having a firm stretch limit and being a tactical bidder. So once a figure is in your head, you can read body language and bid really firmly as opposed to scrambling around thinking about price. It does make you a more effective bidder if you’ve already done that background work.

 

To finish off what’s your number one tip for buying your first property?

I think that people get carried away with their first property and they worry it won't serve them well when they have children - do their three kids get a bedroom each? Thinking beyond it being your forever home and treating it as your first property and a stepping stone is really vital. I remember years ago getting excited about living in Hobart, and I projected that I'd be there, but I learnt its hard to predict where your life will be further than 3 years down the track so if you’re buying for 10 years time it can be hard. Buy for now, don’t buy something you need to flip in 12 month’s time but buy something you’ll enjoy now.

 

How can our listeners find you?

On my website - Catebakos.com.au

 

In summary: Building inspection – this is something that people skimp on, but it’s really worth it because it can cost you thousands in the long run. Finding out about the campaign – those insights can give you a leg up. Know your enemy. Setting that firm stretch limit at the auction, set that hard upper limit otherwise you’ll end up overspending, this removes the emotion. When buying your first home, just look for the next three years. You don’t need to be looking beyond that.

9. Q&A Wednesday: Where is the Perth property market headed?
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Ben has asked us a question about the Perth market.

'What do you think of the Perth property market at the moment?

Do you think buying an inner city apartment in any state is a bad idea at the moment? Lots of people are saying there is an oversupply but it seems like demand is still really high, they also offer a good rental return of $450 a week for an investment of about $400k – $500k.'

 

What do we think of the Perth property market?

We don’t really know the market that well, but we did have Dr Shane Oliver from AMP and he gave us some good insights, in summary, it wasn’t all doom and gloom, you can read it here.

 

On the apartment side, not every single inner city apartment is currently oversupplied compared to demand. There are pockets of areas that do have demand meeting that supply like inner-city Sydney. It comes down to supply and demand. Make sure those rentals are actually there and do your own

Make sure those rentals are actually there and do your own research if there are heaps of properties up for rent you might not always get that return. Some developers also give out incentives for two years, which makes it look like it will be better than it is. You can't really generalise you need to look into the fundamentals of the suburb, public transport and amenities.

Check the hidden costs like rates, body corporate, sinking funds, because sometimes you’ll buy a property like that and realise that the body corporate funds are empty. Another thing is sometimes you have to pay for the strata reports but it's so worth it because you can find out if there are extra costs involved.

Another thing is sometimes you have to pay for the strata reports but it's so worth it because you can find out if there are extra costs involved. It's worth spending that extra money and getting those reports so you don’t get stung.

A sinking fund – You buy into an apartment complex and that’s the kitty for fixing up the complex. If there’s a big problem they throw a hat around the apartment owners and get them to put money in and help pay for it.

If you have any questions, please send them through to us via email or Facebook.



10. Bring in the Reins with Capital Gains: Kym Nitschke (Pt 2)
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In this week’s episode, we’re covering part two of our chat with Kym Nitschke.

In this episode: Kym talks about his strategy around going for capital gains How to spot a unique property Some of the things you can look out for Renovating and how to add value and capital gains to it quickly How to spot good suburbs

 

What is depreciation, what are the changes flagged and the impact on investors?

Depreciation is a crazy rule that enables you to identify all of the equipment in the property like air conditioning, hot water, kitchen covers, light fittings. You can get a report by an engineer (I use Depro its about $600 for a report and tax deductible) they will come up with a list of items you can claim an expense on because they depreciate. You can put it on your tax return and claim each year.

If you bought a property in the right period of time (more applicable to newer properties) you can claim 2.5% deduction on the building component on the property. So if you paid $400k, the land is worth $200k and building $200k you can claim 2.5% on the $200k building component. This all needs to be clarified from the depreciation report from the expert but provided that it’s approved, it can add up to a big amount.

 

My mindset is that land goes up buildings go down, so the more valuable the building the more you’ve got to lose. I’m always trying to get the most run-down house so my building depreciation claims aren’t anything spectacular but I’m happy to do that because I know the true value is the land.

 

If my land is going up the value of my property over time is increasing rapidly.

 

You’ve got to look beyond the short-term and look at the bigger picture of where the property might go. I’d never chase a property for a big depreciation claim, chase properties where you can get a big capital gain on instead.

 

 

What are some of the principals you look for in a property with capital appreciation?

What I look for are unique properties, I went on a holiday to Indonesia, and when I came home it was clear to me there are three things we can do here you can’t in anywhere else in the world.

The first is, buy close to the CBD. It’s still quite affordable, I aim for 5 – 10km to the CBD and preferably the eastern suburbs. The next is buy near the coast, the Eastern suburbs. This is because as soon as people retire they want to move to the coast. The third is buying a property with a lot of land. I bought a 22acre farm with a stone cottage on it. I try to chase one of those three types of properties.

 

I read a book called ‘7 Steps to Wealth’ and it changed my view. So the next property I bought following these principles was for $225k and sold it 10 years later for $630k. So when you get the parameters right you can make a lot of money and be successful through it.

 

What are some rules from the book you read?

Get as big block as you can get with the most run-down house that you can get. It’s got to have running water and electricity but the rest can be replaced and upgraded. Every weekend I’m at Bunnings all the time renovating, I buy run down and I try to artificially value-add through renovations.

I look for properties which I think are underpriced through doing research, I check RealEstate.com.au on the app and watch the price. I’ve also moved over to Domain now because you can sort them and have them show up for you every day. I’m always on the look out for an undervalued property.

 

 

How do you know suburbs intimately? What are some of the critical factors for the suburbs?

I look for a suburb that is being gentrified, it’s going from an old daggy suburb that people from a lower socio-economic area can afford but because of the location, it’s becoming an up and coming suburb. Look for groovy coffee shops that are there, young yuppies that are moving into it and whether it’s becoming the place to be seen.

I’m always doing research on the sale price of the properties in that area too, I can tell what a basic home and block of land would generally sell at the auction for. I’m looking for those outline properties that sell below that price. It could be a big tree out the front that everyone is too scared to cut down because of power lines; I’m looking for cosmetic things that scare people away. All of those factors are aesthetic things that won't cost a lot to change but will bring a wow factor.

 

The other things are that I love deceased estates; they’re good to start with. Poor old grandparents have enough work to look after their own health so the property never looks that great. No one wants to buy these sorts of houses because they’re not attractive and appealing, but it’s so easy to go in there and give it a cosmetic upgrade. I don’t like the structural upgrades; they’re too much work.

 

Renovations in the existing footprint are where you get bang for buck.

 

So Kym how can we find your podcast? Go to iTunes or here through Accounting Insider, please feel free to reach out for a chat too!

 

In summary: Depreciation – 2.5% on the value of your building. If you have a property that is an investment, go and get a depreciation report. If you’re looking at buying remember to take this into consideration too. Spotting a unique property – worst house, best street. Some of his mantras are buying close to the city; if you can - look at Eastern suburbs, buy land within your budget. Using Domain or RealEstate.com.au and pick a suburb intimately and watch it every day.

 

Tell us what you thought about this episode by leaving us a review on iTunes and send us your questions through here for Q&A Wednesday.



11. Q&A Wednesday: How do I know when to move from an interest only to a principle and interest loan?
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This week we’ve got a question from Jason.

"When or how do you know to move from an interest only to a principal and interest (P&I) loan on your investment property? We have a great tenant but we’d like to start paying down the loan. There are 17 months left on a fixed rate, which is the issue."

So we're going to split up this question into two for you Jason!

 

What happens if you have a fixed rate, can you make extra repayments.

If you have a fixed rate you’re limited in how much extra you can make in repayments. For Jason’s bank, they’re limited up to $10k in extra repayments per year. He can start making repayments today but your bank could be different. If Jason goes over that $10k the bank will charge him fairly big break fees. So, yes you can make extra repayments and in your situation, it’s up to $10k.

 

What are the advantages of this? How do I know if it’s beneficial?

There’s now a difference between the interest rate you pay. On an interest-only loan, you’ll be paying a higher interest rate. It works out to be 0.45-0.6% so it’s a big sting. On principal and interest, you’ll be paying more as a total repayment however you’ll be paying far less in interest. It’s a bit of a balancing act where if you’re cash flow poor, interest only is better because you’re paying less but P&I is better if you’ve got additional cash flow.

It’s a bit of a balancing act where if you’re cash flow poor, interest only is better because you’re paying less but P&I is better if you’ve got additional cash flow. Yes, paying the principal isn’t deductible but its forced saving and you can utilise those funds.

Yes, paying the principal isn’t deductible but its forced saving and you can utilise those funds.

 

Some interesting research done by Macquarie Bank, they said by using a 0.5% difference, bank customers in the top tax bracket with a $500k investment loan would be $6k better off after 5 years and $12k after 10 years switching to P&I and that’s after taking into account negative gearing. Simply because by paying that extra half a percent has obviously cost you a lot more cash flow wise. If you’re in this situation jump online and do a calculation. If it’s only going to cost you a small amount extra per month its worth considered, even though it’s an investment property and even though that half a percent might be tax deductible, it's still a cost to you.

Ask us your questions via email or on Facebook!



12. Tax on, Tax Off: Accountant Kym Nitchske's Tips For Tax Structures & Negative Gearing (Pt 1)
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In this week’s episode of The Rentvesting Podcast, we’ve got Kym Nitchske who's an accountant by trade and runs his own business based in South Australia. He also runs a podcast called the Accounting Insiders Podcast.

We’re covering TAX! But we’ve split it across two episodes because there's so much information and it's such a big topic.

In this episode we cover: Tax in property Things you can do around structuring How tax plays into that How it will affect you in the future Gearing – negative gearing in particular and how that fits into your overall tax strategy.

 

Can we get a bit of a background on you Kym?

I’m an accountant, I’ve got a practice with six staff and we’re a boutique agency, I’ve been doing it for 20 years. Before that, I worked for Price Waterhouse Coopers. I started doing family and friends tax returns and then built up my knowledge in property. By default I built up my property portfolio, now I’m a bit of a property expert in the accounting field.

 

As part of growing a property portfolio, tax is critical and it’s something people don’t get right. When do you think people should get involved with their accountant? What are the advantages of speaking to your accountant early on?

We can add tremendous value, it’s important to get it right from the start and when you’ve identified a property, that’s when you should be calling your accountant. Ask them what structure, what entity, how should you finance it, along with whether variable or fixed rates are best for you. Even when you’re at the concept stage, old or new properties, we can add value there.

 

Looking at structures, should you put it in your personal name?

By default, most people begin buying their first property in their own name, that one is the first and easiest step. But when you start adding property into the mix there are factors like land tax. In South Australia if you own a property in your own name and another in your wife's name and another joint, you get the land tax for three different entities even though it’s the same people.

Land tax has about a $500k tax-free threshold. If you add more properties into the mix, you’ve only got the threshold for the first, but if you spread it over different entities, you can get millions of dollars worth that you can use, by being clever.

Another reason is that if you choose a family trust, they enable you to split income. Trusts are a tremendous way to split income with other members of the family. Capital gains can be split, really, there’s a whole world of creativity you can bring to the table when you invite your accountant into the conversation.

Whenever I have a customer call me, I sit down and do the numbers. Looking at the long-term approach. There are all these different calculations to figure out which entity is best. Drilling down on the detail from the get-go will allow you to forecast what’s going to happen.

  Is it true if you’ve got a family trust there are certain capital gains tax benefits that are different to a unit trust?

Yes, so a unit trust is typically when you’ve got two people who are unrelated going into a property transaction together and everything is split 50/50 down the line. For the family trust, you use family members to split income. For both trusts, if you’ve held a property for more than 12 months you’ll be able to halve the capital gains tax you pay on the sale.

The unit trust has legal implications that protect you if you invest with the unrelated person, they’ve got legal mechanisms where you can't put all of your assets on the line if the other partner goes belly up.

There are tax implications and legal implications for choosing the ultimate entity.

 

Negative gearing – it might not always be appropriate if you’re on lower income, but at a high level, what is it and in what situations does it suit?

Negative gearing – I’m always chasing the capital gain. I want something that I'm paying $500k for today to be worth $600k to $750k in four to five years time. They are the numbers I’m chasing.

Behind the scenes, negative gearing, in a nutshell, is claiming the losses that you’re making and typically that’s when your interest is more than the rent you’re receiving.

So you’re making a loss on paper every year.

That is absolutely gold when you’re a high-income earner and your marginal tax rate is 0.48c to the dollar. It’s less beneficial and it doesn’t actually work if your income is low, like around $20k/year and you’re paying no tax at all. Also if you’re a pensioner or retired, it loses all of the benefits.

It’s a quirky piece of legislation where if you make a loss on a property you can use it to reduce your tax.

As an investor, you can make great use of it and the tax you pay to the government very minimum.

 

In summary: If you’ve got an accountant, lean on them and get them to help you unlock benefits and savings quicker. Negative gearing, whilst it’s great, it doesn’t fit everyone.

Next week we have part two where we’ll go through capital gains! Make sure you check out our Q&A Wednesday and if you’ve got a question, send it in! If you have time, please leave us a review on iTunes here.



13. Q&A Wednesday: Where Should I Start with Finance: Bank or Broker?
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This week's question is from Calen:

I've been listening to the podcast for around a month and have finally decided to purchase an investment property I'm unsure where to start with finance and whether I should go through a bank or a broker?

In short:

Most brokers have access to 10 - 20 different lenders, rather than a bank which has access to one. Brokers have more choice around policies, whether banks just have theirs. The rates and fees at banks can cost a lot more between them.

In terms of specialisation, if you're self-employed some brokers might be more specialised with specific circumstances. Instead, banks have certain specifications and if you don't fit into 'that box' unfortunately you won't be able to get your loan.

For the price range, it depends, if you've got a $50k deposit you won't be looking in the million dollar range to buy a property. The most important thing is not overpaying. So the price range depends on your situation and cash flow returns. It's a bit of a how long is a piece of string question but make sure you have a plan in place and you've done the numbers, like if it's affordable.

In summary:

Deposit - you need to have this to buy. Servicing/borrowing capacity, know how much you're earning and what you can afford to borrow.

If you have a question send it through to us.



14. David Hyne Reveals Where You Can Buy Houses for Under $500k in Brisbane
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In this week’s episode of the Rentvesting Podcast, we’ve got David Hyne, director at Herron Todd White National Valuers.

David's company Herron Todd White has valued over $85 Billion in property every year across Australia, so we’ve got access to heaps of great data.

In this episode: David Hyne is a Director of Herron Todd White National Valuers He is based in Brisbane so we speak about the local Brisbane market, things to look for, indicators on when to spot growth, and how to look at markets and find the next hotspot. Where you can buy houses and properties under $500k. We then talk about buying property off the plan, and the difference between investor stock, compared to owner-occupied stock. It’s something you might not have heard of and could be buying a property that is affected by its resale. Lastly, we close off on the next 3-5 years.

 

About David:

I’m a property valuer and started out in rural valuation, but I’ve been here in Brisbane for the last 17 years, in the residential space and development. Herron Todd White is a national firm and has been operating for about 50 years.

 

Tell us about the Brisbane market? What are some of the green shoots you’re seeing around Brisbane?

The cycle of Brisbane and where we’ve been, in contrast to the southern cities, we had a bottoming out in 2011. But if we look at the last five years from 2012 to now, we’ve had median growth in about 20% compared to Sydney’s 80% and Melbourne's 60%. We’re the poor cousin in this last cycle. But we’ve seen activity slowly increase over the past years and it’s at or slightly above long term average. The key market driver is affordability which is above average, interstate migration, we’ve seen it bottom and kick in all the graphs. The other one we look at is confidence, most of those graphs are showing something at or slightly below long term average.

Again, we’re playing poor cousin to Sydney or Melbourne and we haven’t had the growth cycle southern cities have had, but fundamentally the market is in a sound position.

 

Looking forward, the next 12 months to five years how does it compare to Sydney and Melbourne?

Short to medium term, so 3 - 5 years, I’d like to think it’s Brisbane’s turn in the growth cycle in that period. As interstate migration takes a hold a bit more, if we look historically at things, it’s a key driver. The price of real estate in those southern cities has been a catalyst in the past. With that, prices will pick up.

One preface to that is that it comes down to - if different properties perform differently, it probably would be more on the house and land.

 

Where are you seeing activity in Brisbane?

Every other cycle started this way and this one is no different. It's always the inner city areas, you’d attribute the near city areas to have about 35% of growth and outer at 5%, certainly house and land in these areas has started to move. It hasn’t impacted yet on properties 25 – 30kms out, they’ve seen limited growth but eventually it does make its way there. Brisbane inner city areas aren’t overheated but they've performed at about 5 – 6% per annum.

 

Having lived in Brisbane, the apartment oversupply is area focused. Do you think its fair for people to take a broad brush approach? Or what do you see?

That is a good point, take it one step further, a lot of commentary on the property market is way too general.

If we talk about Brisbane we talk about suburbs and types of properties. Even in the one city, we talk about property classes.

Either get good advice or school yourself.

Yes, there are pockets of oversupply, but one step on from that is when people talk about investing in units – often people underestimate the type of unit invested in. As an investor in units, location goes hand in hand, a close second is the design of the unit and whether that appeals to the local market. So picking out something that appeals to that audience is important.

 

It’s true you see developers that are making investor stock, what are some telltale signs you’d see? How can you protect yourself from investor stock to owner occupied?

First the location, non-local investors get sold on the location to the city. In Brisbane, we’ve got areas like Bowen Hills and Fortitude Valley that are close to the city, but from my perspective, they're not as good to buy in. They don’t have the local infrastructures like coffee shops that are popular for unit dwellers. So knowing where the local market is in terms of that is important.

Secondly, when we talk about the design aspect, this is what separates those two markets. We’ve got examples where the properties are in good locations but simple things like bedrooms where the size is so small you can't even fit a queen bed. That’s impacting the fact that we’ve got a softer rental market, so when they go to sell, those people are walking in and straight back out.

 

If you’re an interstate investor in Sydney with a budget of $500k, what could you buy for that?

You’re certainly in the house and land market in Brisbane, but realistically in the 15-20km from the city as a starting point. In terms of capital growth, get as big of parcel of land as you can as close to the city. There’s nothing wrong with starting in Sydney for your research, look at what’s going – sold and being purchased.

 

Any particular areas or suburbs?

Here on the north side of Brisbane is my preference, Everton Park, the older timber style post war housing. Realistically you’re probably going to Keperra, Albany Creek, Chermside too, which all have reasonable infrastructure. There are no big developments there so there’s reasonable rental.

 

I know you help people with pre-buying reports, so how can people get in touch with you?

We love to help, so check out our website www.htw.com.au or Google us.

 

In summary: There are areas in Brisbane you can buy for under $500,000, like Keperra or Albany Creek, it’s about finding the next suburb along. Look on maps and do research to get to know the area. Xkms from the city doesn’t mean it’s a good location, just because you’re within 5kms doesn’t mean the property you’re buying has the same amenities or public transport so get familiar with the local area.

15. Q&A Wednesday: How Should I Invest My Super & What Are the Different Options?
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Question:

I would love to hear something about how to invest your super and the different options (retail, industry, self-managed funds and managed funds through a company) and its pros and cons.

 

So it’s a massive question and we’ll try and break it down as simply as possible.

You do have a massive range of choice between types of funds, such as (retail, industry, self-managed funds, corporate, public sector. The most common ones are retail, industry and self-managed.

 

Retail fund

A retail fund is a superannuation platform that’s trying to make a profit through giving you an additional service. Mostly owned by banks and there are third party's that are independent. Their whole mandate is to make a small profit through giving good service of a platform.

The cons of this are that it's more expensive than an industry fund

 

Industry fund

Industry funds are backed by a union so they can be very specific, QSuper is for Queensland government employees and they offer a limited range of investment options. The only issue is they’re not too transparent, you don’t know what shares they are part of. So the good thing is, it's industry funds and they’ll give you automatic insurance, depending on what your situation is like. However, it will have exclusions if you’ve got anything pre-existing. A con is if you don’t need cover, you’ll get it anyway and still be paying premiums.

 

Self-managed funds

ASIC has some rules if you’ve got less than $200,000, it's not economically viable to set an SMSF up, as there are auditing and accounting fees from additional trustees. There’s additional burden where you need to meet with an accountant, go through the audit and make sure your funds are still compliant.

 

In summary

If you’re starting out looking to grow super, industry funds are good, otherwise, if you have already got a decent amount in your super and you’re ready to take control and want to share funds outside of it, retail could be good. Otherwise, if you’re balling and want to buy investment properties in super then self-managed is best.

If you’ve got questions hit us up on Facebook or our website, and we'll answer them.

Don't forget to leave a review on iTunes here too. 



16. It's A Balancing Act: Tips to Get Your Portfolio Diversified
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So this week we’re doing a balancing act, Louis has got his best clown costume on, he’s got a bunch of plates balancing on his chin. We’re going to talk about building a balanced portfolio. We’ve spoken about diversification in the past but I think one thing we haven’t really gone into detail with and put a lot of colour on is the fact that when building a balanced portfolio, with property it’s more than spreading the geography and with shares it’s more than just investing in different businesses. There’s a lot of interrelated and correlated facts and background that can affect you and you’ll want to look at cashflow, the different types of property that you can look at and really balance it up at a portfolio level.

We’re just going to go through overall diversification and how not to muck it up, how to get it right and then some tips at the end just to make sure that you’re doing it properly and to measure your success which is measured by a little thing called ROI which we’ll talk about.

Before we get started I’d just like to thank you guys for leaving me reviews on iTunes, thankyou, thank you so much. We’ve got a couple in the last week, we’re going to do some shoutouts next week, but... if you guys don’t mind and you haven’t already left a review we would love you times infinity if you could just jump onto iTunes and search the Rentvesting podcast... Our one, not another one that kind of ripped on our name but definitely our one with a green logo and leave a review because we’d love you forever for it, so.. Thanks guys and let’s get into the episode.

So, a balancing act? Not a contortionist, building a balanced portfolio...

We’ve slightly covered it in the past but let’s dive in. A balanced portfolio means something different to everyone, some people think that, you know, having a balanced portfolio is 10 properties in Murrambah or something like that.

We’ll be going through diversification again; we’ve talked about this a bit in the past but today we’ll be breaking this down further into how to properly diversify your portfolio and give some tips. Success on how well you invest will really depend on how well you are able to diversify your properties and overall portfolio well, so it’s all about managing your risk.

What matters is the money you’re making overall consistently - there’s a thing called ‘Return On Equity’ or ROE for short because we get lazy and like to abbreviate everything. So the ROE is simply what return you’re getting on what equity you have invested. This is really the only measure of success when you’re investing in a property because it’s the return you make on the money you put in.

The Return on Equity is, say you’ve got $100,000 in a property, and it returns $10,000 in a year then your return on equity is 10%. So it works out what your overall return on your initial equity of the investment is but it doesn’t really take into account the debt or other things structured into the property, so to work that out it’s around what the cashflow is. If it’s negatively geared for instance you’d have to minus whatever you’re putting into there off the growth that the property has then divide that by the equity that you have in the property.

You can always think that you bought it for $300K, I sold it for $400K, I made $100K – I’m a genius! But if you’ve been losing $5K a year for 5 years it’s then minus $25K and then your net return is a lot lower, so that’s where Return On Equity or the ROE figure comes into play, it’s important to use that as your way to guide your investments.

Exactly, so if you’ve just got one sort of asset that has low ROE every year it’s probably going to make your overall return suffer quite a bit and diversification really manages all the risk involved, we’ve talked about this in the past – say if a property’s price goes down by 50% it’s going to take a long time to go back up because you have to make a 100% return on the upside. Even for some shares I’ve bought, one went down by 94% or so.. and to get back to my original value I need to make a 200% return of that so if it goes down by 95% then it needs to go up by 200%.

 

So tell me, diversification manages risk, helps you manage and maximise profits, but it can be a bit of a trap so how could it dilute those returns? How can you reduce that ROE by diversifying?

So over-diversification dilutes returns – the way that occurs is through a few different ways. Being over-diversified is if you have too many investments that can actually hurt your overall return so, a good example of that is the ASX itself (talking outside of property).

On the Australian Securities Exchange the bottom 100 companies of the ASX300, so the smallest 100 companies out of the top 300, their average return is about 0% per annum because in that market space you’ll have some companies that go up and some companies that go down and they’ll net their overall return. So that’s where over-diversification can really hurt, as there’s no point in having every share in every country in every economy or every property in every economy as well, because on average half of them might go up, half of them might go down and it would just cancel out any net return that you get. The next one is also diversifying into incorrect assets or highly correlated assets, so again, rather than spreading all your eggs across every basket you could just stick them all in one basket.

If you diversify in all medical shares it’s principally the one industry - they’re all related to the medical industry and if it starts getting regulated or in property if you’re relying on a mining town and if mining as an industry starts to go slow then…

Even mining itself, so if people bought all Fortescue, BHP and in the mining services companies – we don’t want to call it the ‘mining crash’ but after the downtown around 2013, after that little downturn, if you only had resource companies your losses were very much amplified compared to if you had banks or other types of investments, so diversifying into incorrect correlated assets means that you’re just buying many of the same thing, so it’s no different than just having 1 property.

Or 3 different lemons or 3 different oranges all of the same colour. It’s hard to make a fruit salad then.

So, these are the risks of diversifying – getting over-diversified or diversifying into incorrect or correlated assets but the most important thing is just getting the right asset and the right asset means getting your timing correct, getting the best location and getting the best price. So on timing this could be around the property clock for instance, some sectors in Brisbane, NSW etc. they might be on their peak, some might be on their trough – so making sure that you’re not overbuying for an asset is important.

We’ll attach the property clock – it’s just the Herring Todd White one that you can get online but it’s good to just keep that in mind, and then bearing in mind that within these markets there are sub-markets and there might be some that overheat and some that decline based on too much stock. Obviously location is critical in property and even where you’re looking in the suburb potentially and getting to understand that at a really minor level.

Markets are cyclical, so some markets will go up, some markets will go down and it’s all about making sure that you’re not buying an asset when the market is way up.

Which is a good point, when the next topic is PRICE.

Price - I think Kevin Turner said it really well, in the episode recently where “you make the money on the buy” and we’ve said it before, if you overspend up front it’s pretty hard to recover from that so you’ve just got to do your numbers up front and make sure that you’re buying for the right price. Realise that there’s always another deal, there’s always another property, there’s always another share, there’s always another investment – you’re better off walking away if it doesn’t make sense on paper.

Exactly, and then location as well. Location is important for diversification because certain sectors obviously will have different market returns. If you’re looking at Brisbane suburbs compared to inner-city apartments; their locations, while still being in Brisbane, are quite different and the types of properties you get in certain locations differ as well. So, acreage versus a 200m2 block.

Yes, or different property sizes, which brings us to tips on how to get diversification right for you.

One way of diversifying is through asset types.

You might own some units and look at townhouses potentially, or buy some land with redevelopment upside, then you might just look at potential rezoning plays so it’s about diversifying the asset class. Even though they’re all different types of property and they’ve all got different benefits and pros and cons. But it’s worth looking at that, just because you might be buying in the same suburb you might be diversifying the kind of asset, i.e. if you’ve got development upside on a property.

Infrastructure is actually a good one on that as well. So while infrastructure is not really direct property, you can view it as almost semi-property.

 

Is this with a fund that you’re talking about? In a syndicated, infrastructure investment fund?

Yeah, so you’re not just going out and buying a freeway. Unless you’re a baller, there’s infrastructure funds out there where you have access to a lot of infrastructure projects which themselves will be diversified. The way that these funds work is the manager’s behind them, they don’t really invest in an up and coming infrastructure project, they invest in established ones which have proven cashflows and are actually making a profit. So, unlike a couple of toll roads, they then manage those risks very well.

The volatility inside an infrastructure fund is very low because in a way infrastructure is correction-proof to an extent – with toll-roads, airports, trainlines, regardless of economic cycles, all those things still get used quite regularly so they’re not as correlated. If property crashes then infrastructure generally doesn’t do that bad compared to it.

 

The next topic in terms of diversification is CASHFLOW.

We’ve previously spoken at length about positively and negatively geared properties but potentially having both in your portfolio could balance out. So if you’re an average income earner, like we’ve alluded to in the past, you might be buying a first property which is a bit smaller, a cashflow-positive property could work as your first property off the rank. But perhaps with your second or third property a negatively geared property might work if you’re going to make a capital gains play or if you’re buying a property with development upside. It’s more looking at that as a method of diversification in your portfolio so all your properties aren’t negatively geared for example and you’re not shelling out money every month to keep it afloat.

A bit of strategy for that would be if you’re building a property portfolio is to start with positively-geared assets. What you want to do is over time, build up a positively geared scenario and then you can look at diversifying into something negatively geared so the two can balance each other out. You’re not actually still forking out money for your investment portfolio overall.

Even on that, another good way that I’ve done with units that I’ve had in the past and houses, is thinking about renovating older houses and apartments to potentially improve that short-term yield and your capital gain so you’re actually getting a bite of both cherries. Potentially it plays into that cashflow piece where you’re investing in it up front to make sure you’ve not got your eggs all in the one negative or positively geared cashflow basket.

The last one is if you’re not sure how to diversify into different areas, so if you know property really well but you want to start diversifying into shares – seek specialised knowledge because you can’t be an expert in everything. There’ll be some things that you do want to diversify in, or it’s a good idea to diversify into it, but again going back to those reasons why diversification fails is if you don’t know what you’re diversifying in then it’s going to be hard to actually achieve that.

Talk to an expert if you’re actually investing a large amount of money, it’s not insignificant. That’s easy to forget and sometimes people squirm at thinking about getting a $500 report to get a valuation, $2,000 to use a buyer’s agent, it seems like a big amount but you’ve got to remember you’re spending half a million dollars on an asset so it’s actually disproportionately small.

If you get help on buying a property, even interstate in an area you don’t really know that well, you can pay way more than $2000 in long-term costs and mistakes. If you overpay for something by $10,000 then you’ve basically still lost $8,000 on that overall position.

Diversification helps you manage risks, your profits, but it can be a trap. Try to avoid the diversification trap by over-diversifying or just purchasing more of the same thing.

One of each thing is not necessarily good, so a property in every single town in Australia isn’t a great thing if you do that. Just not diversifying for the sake of it, the asset needs to be worth buying so make sure you get the timing, the location, the pricing and the fact that it is a quality asset right first and then it’s OK to diversify into that asset.

Final three tips?

1. Your cashflow – making sure that your overall position for cashflow is still positive to neutral at a portfolio level.

2.Diversifying into different property types – different asset classes, so looking at infrastructure, commercial properties, residential, then other asset classes as well – shares, fixed interest, alternatives, private equity.

3. Specialised knowledge, so if you’re not sure what you should diversify in or if you do know what you want to diversify in but don’t know too much about it – then definitely just seek some help because the major thing will be protecting yourself in the right way and not screwing up that diversification strategy.

Well that’s it for the episode – if you have any questions hit us up at the website or Facebook, and if you have a question you should leave it because we’ll answer them. You can also go onto the website and record your question via audio and we’ll upload it into an episode on Wednesday so you’ll get your voice beamed out to lots of people across Australia, potentially across the world.



17. Q&A Wednesday: I Want to Buy an Investment Property, But I'm Worried the Property Market will Downturn, What Should I Do?
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This week on Q&A Wednesday, we’ve got a question from Alex. Side note: we’re still waiting for a better name to come through, whoever comes up with a better name gets a shout out.

 

Hi guys,

Really loving the podcast- Easy listening, down to earth advice. And nailing every episode!

I am a Rentvestor looking to make my next purchase. With the strategy of initially an investing in a house that in 3 years time I will be able to live in.

I have plenty of equity and am in a good position to buy, but I'm having trouble committing to a buy, as I am worried the heat may come out of the market, and downturn slightly?

Which direction should I go in?

 

 

Well Alex, with the media it can be very confusing due to with every story in the media, 1 in 10 is good and the rest are negative. It’s a lot of doom and gloom, about assets going down, end of the world stuff. In reality, it all depends on what you’re after.

In this situation, if you’re looking to live in that house, in about 3 years time, it will be hard to make the decision purely from an investment point of view. You’ve got to ask yourself first, am I happy to live there? It’s a long term purchase so anything can happen in the short term, the market can swing down, stay flat or go up a lot. It comes back to your long term plan. If that’s to buy it as an investment, keep it as one, and then move in - in another three years. It shouldn’t be an issue because long term property will grow. Even inflationary pressures will increase property by about 3% per year.

It’s more looking beyond three years as well. With most investments, you’ve got to look 10, 20, 30 years down the track. Look at the figures historically, the growth set. Avoid what’s already oversupplied, specifically like units in niche areas. But it’s very area specific and you can't broad brush a city, certain town or East Coast.

Ask your questions here now! We’ll answer.



18. Property Structures: The Four Key Elements - Pros, Cons and Which Structure's Best For You
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In this week's episode of the Rentvesting Podcast, we’re looking at property structures. We’re going to structure this episode to go through four key elements of issues to try to avoid through smart planning and structuring. This is pretty much how to choose the right ownership structure when buying investment properties. There are a lot of factors, it's easy when you find a property you just want to sign the contract and settle it, you’re excited, but there are lots of different issues you can have, be it asset protection, taxation, if you’re buying with multiple parties - unit trust etc. You want to keep your costs down and make sure things aren’t too complicated, we’re breaking down those four different areas looking at personal, company and trust and looking at self-managed super structures and why they’re good.

You want to keep your costs down and make sure things aren’t too complicated, we’re breaking down those four different areas looking at personal, company and trust and self-managed super structures and why they’re good.

 

How to choose the right ownership structure for property investment?

The four key structures are asset protection, taxation issues, multiple parties, and cost and complexity.

Like it or not, there are a lot of issues when it comes to asset protection. If you’re building wealth, you want to build it so you can keep it. The major two things are - along the lines of bankruptcy or being sued. If you’re being sued by a third party and you are technically personally liable – a sole trader. There’s no company to hide behind, so if you have assets in your personal name as a sole trader and the person suing you wins, they can go after these.

Ways around this are company, trust and superannuation structures. From a litigation point of view, if you have a family trust that provides an additional layer of protection. Even with bankruptcy they can go inside and do a look through test, but superannuation is off limits.

It’s not a good idea, a terrible idea actually, but I’ve heard of people taking say for instance a $400k bank loan, putting it into superannuation and declaring bankruptcy and they get to keep $400k. Not a good idea! Yet there are situations where a company, trust or superannuation will be better.

The only one where they all break down is in family court, like separation or divorce, there’s no real structure there and no protection there.

'We want a prenup!'

That doesn’t do anything either… in Australia, it’s a little different. It gets voided if your situation changes, so if you have a kid, that’s a significant change and they can throw it out.

 

Taxation I don’t think taxation should be the sole motivator for structuring, it can cost people a lot. Land tax can leave people with huge bills, so what are some of the things to be aware of around taxation?

On taxation, the biggest thing would be looking at a longer term plan first. If you’re looking to buy an investment property personally and it’s 50/50 split between you and your partner, one is working and the other isn't, from a tax deduction point of view, the person who isn’t working won't be able to claim any deductions.

It comes down to the cons, if you’ve got it in an individual’s name with high marginal tax rates then they’ll pay more on tax. If the property is sold the capital gains tax on that will be higher than an individual who is not earning an income. Then you’ve got the companies structure – the pros there for tax are if it’s a small company (if they turn over less than $10Mil), the flat tax is that you don’t get the capital gains discount inside a company structure.

As an individual - if they sold a property and earn $200k/pa they will get a 50% reduction on the capital gains that is assessable while the company won't. A company pays a rate of 27.5% if it’s turning over less than $10Mil, while an individual on $180-$200k does the same thing they’ll be paying 22.5% so it still works out in an individual's name even on the highest marginal tax rate, it’s better.

 

Family trust is good from a flexible point of view with tax. You’d have the trust own the property then each year the discretion of proceeds where the tax is paid would be figured out. It would be distributed to the individual with the lowest tax bracket. The problem is that as an individual you can’t claim the tax deduction personally, the trust has to do it. So if it has no other assets inside the trust and just the one property is negatively geared, you’re losing deductibility.

 

 

SMSF - Self Managed Super Funds 

From a low tax point of view, 15% is the income tax or after a year, the capital gains will go down to 10%, the only issue is that if that’s the most you can claim, that’s the most you can claim as a deduction. So if you’re deducting 15% of the property expenses, it's not much of a deduction but that means you’re not paying much in tax.

 

When buying with multiple parties – structural differences, what does it look like and what are the advantages?

Multiple parties – family trusts are fairly good, even unit trusts can be used if you don’t trust your brothers or sisters in your family.

With setting up trust structures, it comes down to family or unit trusts.

Family trust – has to be with family members.

Unit trust – a lot of developments and multiple parties who aren’t relatives will purchase a property as a unit trust and take a specific split of the number of units in there. Rather than the trust owning all of the assets it comes down to individuals or other entities owning the units in a unit trust, so you’re entitled to a number of units and you're entitled to the income off those and the trust is entitled to the deductions.

Unit trust is good for third parties, even companies, but the only issue with companies is the taxation issue of no CGT discount. So companies are generally not used as much as unit trusts because unit trust the distributions from each unit gets flown on directly to the individual.

Borrowing wise, the banks still consider you liable for that debt no matter which way you do it. If I apply for a loan application I need to declare 100% of that debt as mine no matter the structure. Potentially the bank might let you claim 100% of the rental but if it was only in our names and you owned 50% then they might only let you claim 50% of it. So the banks look at it as you owning 100% of the debt and only 50% of the rental which can be a bit of a sting. If you're looking at building a portfolio you need to do this planning up front and that can stop you in your track

 

Cost and complexity

I’ve seen some Frankenstein-ish crazy A3 page structures and it’s just unnecessarily complicated, have the right structure, be smart and keep it simple. The more structures you have, the more costs you’ll incur.

To set a company up you need to pay the ASIC fee of $472 just to set up a company and then add on the accounting and legal costs, ongoing compliance etc. it can be a costly process. If you’ve got a family trust for the property to be held in, you’re paying an addition $1,000 for auditing fees, depending on the situation, if you can benefit from the different structures, then it’s worth it.

The good thing with a family trust is that it's discretionary, so if you have kids you can distribute income around your family depending on their tax rate.

 

Structures, in summary:

In summary, you’ve got four major types – personal, company, unit trust, discretionary trust.

Out of them, the most simple is personal and most complicated is SMSF, if depends on your long-term outlook.

 

Personal – Owning property in individual or individual names

Pros – Easy to do.

Cons – Limited tax planning, risk of ownership.

When to do it – On a high marginal tax rate if negative gearing, low marginal tax rate if not.

Company

Pros – Flat tax (27.5% for most), safety from litigation.

Cons – Paying money out will be taxable, no 50% CGT discount, Costly to setup and run.

When to do it – Almost never.

Trusts

Unit Trust – Trust with units for non-family member.

Family Trust – Discretionary trust for family.

Pros – Great tax planning, segregated environment.

Cons - Negative gearing can be lost, costly for setup and running.

When to do it – Complicated structure, FT for family wanting tax planning and has other assets to help deductions, UT for non-family dealings like developments.

SMSF

Pros – Limited to no tax payable, able to use retirement assets to buy property.

Cons – Costly, funds stuck inside super, deductions at 15% max.

When to do it – long term property, has to be good cash flow, business premises.

 

If you enjoyed this episode, drop us a line with our Q&A Wednesday or leave us a review on iTunes here.



19. Q&A Wednesday: Am I Too Young to Invest & Should I Use A Bank or Online Trading Platform?
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This week we’re doing Q&Wednesday… If you’ve got a better name, well tell us. We get a bunch of questions each week so we thought we’d give you guys a chance to listen to the answers.

Jake: Hey, how can a 17-year-old get started in investing, I have about $1000 in savings and I really want to get started in investing in the stock market. I have seen that most banks have their own trading platforms is it better to go through a bank or is there an online trading platform that has the option for under 18s to invest and if so what would be your recommendations?


This is good, you can't ever be too young to invest, whether you have kids or are a man-child like me... Where do you invest and how do you do it?

Louis, tell us!

Most banks have their own trading platforms and there are third party platforms too, accessing those - if you’re with Commbank you can get it up online through Commsec. The issue is that you’re 17, in Australia, there are rules around minors purchasing investments and shares. You can't legally buy it in your own name but you can set up a trust account with your parents or your guardian then you’d be put as the account designation.

So you’d have the right to the shares but it’s got to be owned by someone who is over 18.

 

Where to invest?

Should it be through a bank or online trading platform?

It comes down to brokerage, all trading platforms have the same access to what’s on the ASX, it just comes down to what they charge. Bank platforms are similar on brokerage fees while third party's fees can be a little more. Then with accounts overseas, you can access them too, but for the US you’d have to prove you’re a citizen, so it gets a little more complicated. So take a look at the brokerage fees and compare them, this will help you make up your mind.

If you have any questions send them through to us!



20. Become a King of Cash flow: What is Cash Flow, How to Manipulate it and What the Banks look for
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Today we’re going to cover:

What is cash flow A few tricks you can use to manipulate your ongoing cash flow by reducing tax and expenditures If you are borrowing, what the bank will look for Rates and how to forecast what your future expenditures will be

 

We’ve also got a webinar coming up, check it out here.

 

Jayden’s story:

I bought a property in Sydney and was forced to sell it before I wanted to, because I didn’t understand the importance of cash flow. Interest rates were going up and the bank gave me the money and it seemed like the right thing to do at the time but it led to me selling early and having to live off a credit card.

 

So let’s prevent you from getting into this situation too.

 

The story in detail:

 

This second property I bought was an investment property and I was living in my first property. I wanted to renovate it, at a high level went to the mortgage calculators online, at the time it was based on interest only repayments and I was fine. But then about two weeks after I bought it, interest rates went up – this was in 2009-2010 and the property needed more work too. The thing I didn’t account for, and most people don’t, is assuming that you can afford it based on the current repayments.

Repayments went up and I didn’t take into account body corporate fees, costs involved in tidying it up and the lost rent for not renting it immediately.

 

After that I had to sell it within 2 – 3 months of owning it. I would have liked to hold it longer, because now that 1 bedroom in Alexandria is worth a lot more that what I paid for it.

 

Cash flow is a generic term

Think about the income you’re earning and your after tax income. Then look at your outgoings, like in that example, if you jump on a bank repayment calculator, and think the repayments are $2,000 per month but you don’t account for body corporate, water and rates, or only are looking at interest only repayments, well you’ve got to consider all of these.

 

For a recent client, we were trying to figure out whether to go interest only or principal and interest. While the cash flow was better to go interest only, we worked out that for a $420,000 loan they were going to be paying $350 more in interest every month under interest only. That’s because the banks at the moment are pricing them differently, so if you’ve got an existing loan, check that you are up to date with these changes.

 

The other point you can look at is PAYG withholding variation application. This would have helped Jayden, when he eventually sold that property, because he turned his first property into an investment property, which was negatively geared.

 

Every year after depreciation Jayden might have gotten $5,000 or $6,000 back at tax time but with this variation you can do it monthly. The ATO will allow you in most situations to do this. Every fortnight when you get paid you get PAYG withholding tax, so when it gets to tax time you don’t receive a big bill because you’ve been paying it along the way.

You can lodge a variation where they will reduce how much tax is being withheld every pay cycle in anticipation that you’ll receive it at the end of the year. So it’s paying less tax now instead of receiving a rebate at the end of the year. The benefit is that on an ongoing basis you’d have more surplus cash month to month.

 

Another major thing that’s changed recently are the bank’s lending requirements

 

A couple of years ago if you went to apply for a loan the bank wouldn’t ask you about your living expenses. They didn’t take into consideration everyone’s different expenses per month. They had just categories like single or no kids, or couples, with or without kids.

Fast forward to today, they’re getting to the weeds of your living expenses. Banks want to see a minimum of the last 30 days of statements and they have computer programs to break it down into fixed or discretionary expensesi.

Fixed expenses are electricity and phone bills, rent etc.

Discretionary involve your handbag buying habits, going out for drinks and food, jewellery, etc.

 

If for the last month you’ve been on holidays, they will look at that and annualise it. So a tip for this is if you’re going for another loan soon, be a bit frugal for a while and make sure your cash flow is in check if there are too many discretionary in there, get rid of them. As this will have a significant impact on how much they’ll lend you, too.

 

Looking at longer term interest rates

If you’re forecasting with your current cash flow that a property is really affordable right now, and is slightly neutrally geared, look at what it would be like if it went back to long term interest rates - around 7.5%.

Effectively, because the earnings to debt ratios are higher than they used to be, lower interest rates are the new normal for interest rates. But the reality is the rates won’t stay low forever and eventually they will go up. Don’t get caught out, when the rates go up they go up quickly.

Google search ASX rate indicator and there are graphs you can click on which show you what a lot of financial markets expect interest rates will do over the next 18 months.

 

It’s expected that in less than two years rates will start going back up. One thing to look out for is that fixed rates will generally move 12 – 14 months out from when the variable rate will. Those fixed rates are already starting to move, so consider this option getting some certainty around your cash flow.

 

In summary

Components of cash flow are – income and expenses, fixed and discretionary expenses. The easiest things to change are your expenses. The major thing is if you’re looking to build wealth you need to get your cash flow in order. Unless you can generate a surplus income, and put that towards an asset. Otherwise you’ll be similar to Jayden’s position and buy an asset for long-term growth potential, but if you have to sell that before you’re ready to, you won’t be able to generate much in the way of wealth. Just because the bank will give you money doesn’t mean you should take it.

 

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21. Let's Get Political With Trevor Evans: Brisbane Going Forward, Negative Gearing and What Effects the Bank Levy will have
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In this week's episode of the Rentvesting Podcast, we’ve got Trevor Evans – a member of Australian Parliament, the member for Brisbane in the House of Representatives and a Liberal National MP.

 

Today we’ll cover Why Brisbane is a great prospect for investors going forward The government's plan for negative gearing Hard hitting questions on the bank levy – why it won’t get passed onto borrowers.

 

Trevor Evans in 30 seconds…

I’m the new federal member for Brisbane and I’ve been a politician representing Brisbane for about 1 year. I was the CEO of the National Retail Association before this, and I’m an economist by trade, I’ve done a few things at the edges of where economics and politics all combine.

 

A bit of a personal question… As the member for Brisbane, you grew up in Tweed, where do you stand for the State of Origin?

I didn’t live in Tweed for very long, I was born there and moved away when I was 1, so I follow the Brisbane Broncos. I work closely with them and we all know Queensland works heavily with them, so on that basis, I support them.

 

A lot of our listeners are interstate, what’s your background on Brisbane’s story and why they’d invest here and think about Brisbane as a market that’s good for them?

The Brisbane story is a fascinating one, especially over the last 10 – 20 years, people are constantly surprised when they return to Brisbane and see what it means to live here. There are some global trends but Brisbane has had that usual typical growth that capital cities have but it’s also come of age. It might be all of the residential towers in the CBD but Brisbane talks about itself as being Australia’s new world city, it’s a huge magnet for tourists and international trade. International education is the cities biggest export which is amazing for a city focused on real estate and resources. We’ve also got good nightlife with the proposed lock outs being fought against. We’ve got a big growing variety of food and drink, and entertainment and a consequence of those things mean we’ve got a vibrant young city filled with people who aren’t Brisbane born and bred.

Brisbane scores pretty well for young people who are at the start of their careers because there’s that critical mass of corporate jobs and offerings. The commutes are relatively good, but also just an hour outside of the city - you can be at the best beaches, hinterlands and more.

 

Looking at some of those economic drivers, like the education sector – what does that look like for Brisbane over the next 10 to 20 years?

Construction has been going gangbusters but originally Brisbane was just a property and resources town and now we’ve seen a huge diversification of the industry.

We’ve got a big digital offering in software programming area, we’ve just seen the first G-nome sequencing lab, we are seeing international education continue to grow, but on top of that, the traditional industries are also finding their feet.

 

Do you think some of the big projects flagged coming up will have an impact and help increase these sectors?

Certainly, in the case of Queens Wharf, the fact that these proposals are being aired are all a vote of confidence for Brisbane. The growth is organic and self-sustaining and everything is likely to continue to grow.

 

A question for the investors, shifting gears, one thing that was big last year was negative gearing, what does that look like going for?

The treasurer did well to target the measures around housing affordability specifically for those who need the more support. Brisbane isn’t Sydney or Melbourne, and the housing affordability is more nuanced. There are homes on big blocks that are constant and ongoing, but equally, we’ve seen a big boom in the construction market but at different ends - in terms of quality and quantity, and space that we’re looking at.

There are some pockets in Brisbane where housing and apartments are cheaper than what they were a year ago and that trend is likely to continue. The government has been careful not to create an overarching policy which smashed the value across all properties because places like Brisbane and regional areas aren’t seeing the same pressures they are in inner Sydney

These measures were about supporting first homeowners and about supporting the supply of future release, so the types of premises that first home buyers are getting into are more likely to be available.

 

This might be hard to answer, but in New Zealand they targeted Auckland when there were pockets and offered different policies, why doesn’t Australia do the same?

That’s because we’ve got a federal system in Australia, New Zealand has both the benefits and disadvantages of not having states. Australia’s federal system means most of the power for land and stamp duty are determined by State Government. The Federal Government is constrained because the Constitution doesn’t let us come up with different policies for different areas.

So it would be possible to take a region-by-region approach but only the states would be able to do it. Also running a bureaucracy in Canberra doesn’t let you take a sub-regional approach.

 

Last question, the bank levy – this was intended not necessarily for retail investors. Why do you think the banks won't pass it on to retail investor’s somehow and ultimately borrowers?

I think this is a case of wait and see what happens. I understand why it would be in the banks and other people’s interests to highlight the prospect that this tax would get passed onto consumers.

The important thing to remember is with this bank levy that’s proposed, unlike similar levy’s in the past, all about taxing the deposits of customers, this is about putting a levy onto the liabilities of the banks which is higher up in the chain of financing.

The other point is that the banks themselves have been strongly arguing that their markets are extremely competitive and that they focus like a laser on the prices of the products they sell. In places like mortgages, they’ve been telling us for years that if they can any way avoid it they wouldn’t put their interest rates up because they would lose their market share from the miners. The smaller banks aren’t subject to this levy so if the big four do decide to put their prices up in places like home mortgages, there are dozens of other small banks making more competitive offers to customers.

 

Takeaways There is a lot going on in Brisbane, it's not just an apartment oversupply or glut - like the Brisbane metro, Queens Wharf, Brisbane live. Negative gearing – let’s see what happens.

 

Don’t forget to leave a review on iTunes or leave us some feedback here.



22. Loan to Value Ratio Uncovered: The Myths, Facts and Tricks to Maximising Your Loan
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In this week’s episode of the Rentvesting Podcast, we’ve got Louis and Jayden back together talking about loan to value ratio and working out how much is too much. It’s important to know how to use loans but also to know when it's too much, the pros and cons of it.

 

Today we're going to cover: How to maximise long term returns through leveraging as much as possible without receiving too many of the negative consequences The pros and cons of LVR Some tricks to get around them How to avoid LMI and get more education

 

How much is too much?

It's important to know how much is too much with LVR and the more property you buy, the more debt you’re taking on.

 

What is Loan to Value Ratio?

It’s basically the loan to the value of the asset. You can have this with margin loans, for this, it’s home loans. So if you’ve got a property worth $500k and there’s $400k of debt, that’s 4 divided by 5 = 80%.

The LVR is just a percent of how much of an asset is built up to the loan. You can either have LVR if you’ve got no debt, otherwise, people might have 95 – 120%. Some people call it LTV which is loan to value in America they use that but in Australia we use LVR

 

What are the pros and cons of high LVRs?

The big con, in general, is if you have 80% LVR or more than 20% deposit, you don’t’ pay lenders mortgage insurance - but if you have less than 20% deposit you pay it. This is an additional cost where the bank will make you go with a third party provider to get insurance and add ons to your loan. It also increases your debt and it's an insurance to cover the bank when you have a small deposit.

This premium allows you to get that product, the pros is that a lower deposit means you can get into the market quicker and more deduction because you’re paying higher interest rates. This is a double edge sword, assuming it's an investment property, the more debt you have, the more interest and the more deductions. Otherwise, owner occupied you have less deposit and more nondeductive and non-tax effective debt but it can help you put your foot in the market.

It’s good on your cash flow up front because you don’t need to save us much upfront but bad long term because you’ll have more debt.

You’re more susceptible to asset price drops, so if you buy a property for $100k and you get an 80% loan, it drops by 15% in value, all of the sudden the loan itself is worth more than what the properties value is. You will struggle to sell it because the bank will say if you want to sell it you have to top us up for the difference in the loan.

The banks are more critical on your application with a smaller deposit, so there are more checks and balances because to the bank you’re a higher risk customer.

The rates are generally higher. With all the changes with APRA, the banks are pricing for risk, in effect, that means the lower deposit the higher the risk in the eyes of the bank. With higher LVR and less deposit, you pay higher interest rates, which is a con of higher LVR stuff.

 

Solutions Go and study medicine – different types of jobs

White collar workers, like if you’re a doctor, vet, radiologist, optometrist - any medico type profession, can get up to 95% LVR without paying lenders mortgage insurance because these jobs are recession proof. The banks are willing to lend more to these professions because they’re earning potential will only go up.

This was recently extended to engineers, accountants, some forms of financial advisors. It’s an industry specialisation deposit, but different criteria and incomes change this.

 

 

Family guarantor loan

This is where the banks are happy to lend you money using a guarantors property as security, most people use their parents. Where in Louis' scenario if you’re buying a house for $500k and you borrow it all, but the bank will put $100k loan to your parent's property then $400k (80%) will be secured against yours. So the bank has two different loans. Because both loans are below 80% there's no LMI and it helps you get into the market a bit quicker. The only negative is higher interest repayments because you're borrowing more. If you're on a high income and your parents can do this, it’s a good option.

This works well for someone who has been studying but has a big income, they can pay down 5 – 10% within two or three years and after that time they can remove that guarantee - they’ve paid down the 20% and move on.

 

Gifts from parents and relatives

You can use this as a deposit if you don’t have your savings. I don’t really advocate people using personal loans as a deposit because you get into too much debt. Personal loans have higher interest rates and shorter repayment periods. It’s better to get the lenders' mortgage insurance.

Also, it’s potentially tax deductible against investment properties.

 

 

In summary: High LVR is a really important tool, there are a lot of pros that should be considered. When I bought my first home I had a 5% deposit and paid $12k in mortgage insurance, moved in for 6 months and then after turned it into an investment property and claimed a deduction for the costs. So there are a lot of pros in there. I wouldn’t have been able to buy another property for another 2 years had I not done this. Going back to our last episode on the battle of property, if you can get into property with a 0% deposit, and experience the full return on that whole value, it’s a very powerful tool but it’s solely reliant on growth, which is never guaranteed. The cons of high LVR are if there’s a market correction it can really affect your equity. The banks have a lot more caveats and checks and balances in place because of its higher risk to the bank.

23. Silver Hair, Platinum Tips: Real Estate Talk's Kevin Turner Gives Us His Secrets to Becoming Recession Proof
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This week, we’ve got Kevin Turner as a special guest, industry veteran and host of Real Estate Talk Podcast. He has been in the industry for over 30 years, and more importantly, he’s seen a lot of deals. 

We run through his tips on the art of negotiation when dealing with real estate agents and a few tricks of the property trade including:

The good times and bad times Recession and what would happen in the future if it happened again How to recession proof your portfolio and protect yourself from the downside Kevin, could you please give us a background on yourself?

I’ve been in real estate since 1988, and I’ve seen a lot of tough times. I’ve been a real estate agent as well as an investor and my background is broadcasting. Having been in radio for quite some time, I combined those two careers, I’ve still got a licence but I haven’t sold in quite a few years.

  Being so involved in real estate, I had a recent scenario with a client of mine and they were buying their first owner occupied home and they didn’t know how it all worked, what are some tricks that agents use to help you as a buyer, purchase quicker? How can our listeners arm themselves?

I wouldn’t call them tricks that agents use, but there are negotiations strategies. Real estate agents work for the seller and they’re there to get the most they can for them, but first home buyers look at it in an emotional sense. Agents try and make you proceed with early offers, so make sure you go in with a plan, think about how much you want to spend and stick to it. The bottom line is that there’s always another property. Don’t get caught up, as if this is the only property, think of it as a commercial exercise.

That’s the secret.

Don’t get caught up in commentary and emotion, and plot your own path.

If you are going to into the market as a first home buyer, get help from a buyers agent and even consider taking a negotiation course so you learn how to hold the high ground.

 

 

When there are dual offers, how can people navigate that situation and work through it?

Well, this means you’re buying at a good time, but you could be caught in it. This goes back to understanding the true value of it and being prepared to pay what you want. There is a requirement where if there’s a competitive offer, the real estate agent can't show you the offer. But good agents will get you to sign a competing offer form and you can make your best and final offer, then if you miss out on it, walk away and don’t get caught up in the emotion of it.

You make money out of real estate when you buy, not when you sell. Don’t pay extra when you buy, because you can't expect to make up for it when you sell.

 

It was reported that Australia now has the record of longest time without a recession in the economy.

What are your thoughts on ways people can arm themselves against recession because you can't go up forever?

 

I remember when mortgage rates were 18% that was hard. Plan for the best but expect the worst. Rates will go up they cant be the lowest they’ve been forever that scenario will change. The banks build a buffer whenever you borrow, so make an allowance for rates to change up to 5%.

Make the sacrifices early in life and be prepared to go without, a lot of smart young investors that I meet and talk to are happy to go and rent in a place they like to live in but invest where they know will go up (Rentvesting_

Smart investors also understand that having a plan is set and has a strategy behind it, whether you’re looking for capital growth or turning it over.

You also need a team of experts around you, buyers agent, good accountant, real estate agents, tax accountant. When you’re starting to build a portfolio you need to have the right tax structure, think about your plan and your team and build it as soon as you can.

 

Where can we find you? RealEstateTalk.com.au 4BC regular show on Saturday and Sunday morning. Call me anytime for a chat about real estate!

 

Takeaway points: Negotiation – realise that the agent is working for the vendor and not working on your side, arm yourself with this information You make money on the buying, if you pay a bit extra on the buy you won't make it up on the sell. So go hard and negotiation well because you won't make that money back up Don’t be afraid to walk away Recession proof your portfolio, don’t be too over levered if you get that down. The market is a cycle and that’s just a part of life

 



24. [Quick ep] Upcoming LIVE Show + Q&A - Growing Passive Income: 6 Steps to Financial Freedom! Make sure you register
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Sick of having to show up to work every day on time, when really you’d rather be at the beach? Or do you just want financial freedom so that you can spend more time doing what you love?

https://www.therentvestingpodcast.com.au/webinar/

Join Jayden & Louis hosts of the Rentvesting Podcast as we go through the Steps to Financial Freedom!! 

Whether you want to quit this month, next year, or sometime in the future, this webinar will give you clear, actionable strategies to make it happen.

So what will be covered from start to finish?

The Six Steps for Gaining Financial Independence webinar will cover the following:

Why we invest? The reality gap for 99% of the population How to build passive income Why people fail And how to get started today!

This LIVE webinar has content we haven’t covered before in the Podcast, and will provide you with further detail to help you move forward towards achieving your financial goals. Best of all, if you have any questions, doubts or worries, you can chat to Jayden directly about it, as we open up question time at the end of the webinar for you.

So what are you waiting for? Join the Rentvesting Podcast’s webinar and learn the six steps to gaining financial independence so that you can live the lifestyle you’ve been dreaming about and no longer resent waking up every morning for your 9-5 job.

Sign up to this FREE webinar today here, and get ready for Thursday 10th August 2017. The link if it doesnt appear is - https://www.therentvestingpodcast.com.au/webinar/

Six Steps to Financial Freedom Webinar Information:

Online free webinar Thursday 10th August 2017 7pm (AEST) Register here now

25. Is Commercial Property A Good Investment? Property Expert Thor Harrison Tells Us the Pros and Cons, and How to Find the best investment opportunities in today's market. 
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In this week’s episode of the Rentvesting Podcast, we’re talking about commercial property. This week we’ve got a special guest, Thor Harrison who is a commercial real estate agent and manager at Net Rent Property in Brisbane. So far on the Rentvesting Podcast, we’ve only spoken about commercial properties in the sense of REIT’s and investing, but today we’re going to talk about:

Why commercial property? Types of commercial property Risk & Return of commercial Tennant risk

 

 

Background on Thor Harrison:

Net Rent is a commercial real estate agency. Thor started in property development and 10 years later he now does sales, leasing and property management.

That’s commercial property, to retail, to industry warehouses. In terms of property management, it’s more industrial, with a number of tenants in retail and the rest is commercial office.

 

 

What is commercial property?

Commercial property is more of a return based investment, so people are looking at it based on yields and some sort of financial security with a long-term tenant. You have a lot of self managed supers, mums and dads looking to park their money and longer lease terms.

 

 

Main types of commercial property Office Retail – i.e. Nandos Industrial – i.e. supply Woolworths groceries, distribution.

 

 

Advantage and disadvantages of commercial property?

The advantage of investing in commercial over residential is the return.

Residential is lower risk with 4 – 5% return but commercial you’ll get 10% on a good day.

 

 

What are the risks involved with commercial property?

The biggest risk would be the vacancy time; it’s never easy to find a tenant. Commercial you could be waiting for up to 12 months before you find someone. The risk is also that the tenant doesn’t always survive. In retail particularly - the mum and dad style businesses can really struggle. It’s all about finding a good solid tenant and making sure there are guarantees in place so if they go early, you can chase them. Even just a bond to cover you for three months of finding a tenant is important to have in place.

 

 

In some cases, the landlords often manage properties and the tenant hasn’t looked through the lease properly. With commercial, what are the things people need to think about before getting a tenant?

Worst-case scenario? There are a lot of people who just really want a tenant and they wont do their checks. It’s a good idea to get history from a past landlord or someone they have a line of credit with. Also check their profit and loss, assets and liabilities to be sure.

 

Yield and leases

Compared to residential – commercial does cost more, because you’re getting a higher yield, but the finance you’re putting down is about 30 – 40%. Getting into it, the yield is a big thing, so there are net and gross leases.

 

Net Lease

Net lease is where you’ve got a tenant paying all your costs, often not including the land tax but some leases have all costs, so you have no expenses. That’s rates, electricity, water, internet, so what rent they pay goes straight into your pocket.

 

Gross Lease

For a gross lease, the rent is higher to account for it. It may be set by per square metre at $400 per sqm net plus outgoings, another $100. It depends on who negotiates the deal and the owner’s profile, how they structure the business.

Most importantly, look at net return and ensure you are covering bank costs.

Keeping on costs, if you’ve got tenant paying outgoings it sounds pretty good until they disappear, so there’s that risk there.

 

 

What about maintenance cost, who looks after that?

This is good for a commercial owner, as it will be a tenant cost and it’s budgeted for. So depending on the lease there should be an outgoings budget which the tenant pays monthly. The only thing you can’t capture is capital costs. For example, fixing a whole roof can’t be passed on to the tenant but repairs and maintenance is fine.

So with lease terms, residential will be 6 – 12 months then you’ve got to find someone new or extend.

 

 

There are different assets with commercial, but in general what are the lease terms?

It’s usually 3 -5 years initial term, then there can be optional for additional years. If the tenant hasn’t done the wrong thing, they have a right that they can stay with the lease - you have to give it to them.

 

Also on that, what are some incentives with commercial?

Well, in some of the tough areas they throw in incentives.

 

How does that affect yield?

There are normally two approaches, tenants will ask for a rent discount or rent free as the incentive. Normally it’s one or the other, but sometimes both. Traditionally it’s been one month free for every year of lease. They’re the incentives you’ve got to take into account.

If you’ve got a blank retail space and they fit out a Nandos, when the tenant leaves, they’ve got to change it back to be a blank space again. However, if you see it as an advantage and you want to add to it, you can. So you can offset that for not having to give a bigger incentive.

 

 

Finance in commercial

Lopping back to the finance side, so with residential you can get away with a 5 – 10% deposit, while in commercial its generally 25 – 35% deposit , sometimes higher.

So is it as accessible as buying a unit or home? No, it makes it really tough. But if you’re looking at diversifying your portfolio it could be good.

So I guess, just rounding it off, there are three types of commercial investments:

Office Retail Industrial

The advantages are that they’re great because you get a higher return, but there’s more risk around tenant vacancy, incentives. You’ve also got concerns like buying in an area that has no growth. If you’re looking for growth over return, then look at residential. Another advantage is the duration of lease, with the tenant in for years and years. The downside is that it has a higher cost of entry and the tenant risk. However maintenance cost is covered by the tenant as with outgoings, so you don’t really need to worry about it.

If you’re comparing it to shares, there’s a higher barrier to entry with costs and liquidity if you want to get in at a lower cost there’s always funds you can access, where people are managing the asset and they’ve done the investigation with regards to returns. That’s on the real estate investment trust and is worth looking at if you want exposure but you don’t’ have the deposit, it could be how you get into the market while you’re still building it up.

 

 

Three takeaway points: Long dated lease terms can be powerful. Return is higher than residential – but there are risks. More capital – when you’re financing you need a 30% deposit on these types of commercial asset, so keep that in mind. If you’re looking at a return based on your equity it could be lower than residential where you only need 5 or 10% deposit.

 

Don't forget to sa hi to us on Facebook or leave a review on iTunes.

 

Want to know more about Thor Harrison?

Website: ThorHarrison.com.au

Otherwise visit the NetRent.com.au



26. Banker or Broker? Which is best, how you can get a better rate without refinancing & tips to find the right person for you!
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Today we’re comparing bankers to brokers, and what the advantages of using a mortgage broker are, or why you might go to a bank directly instead. Now that the industry has changed a lot with APRA on board and policies changing daily, rates moving up and down it’s time to know these things.

If you’ve had your mortgage for more than 2 years, chances are you’re probably paying too much.

Don’t forget to leave a review on iTunes here, we love your feedback.

 

So you’ve banked with Commonwealth Bank your whole life and you walk in there to sort your mortgage out, why isn’t this good?

Well if you’ve got a stable income changes are you can get a good rate with almost any bank. Once thing I’ve found is that banks punish loyalty.

Louis had his loan for 18 months and the banks never did a review, so Jayden stepped in and got his rate down by 0.2%. Which saved him about $1,000 per year. So be aware that banks do punish loyalty and they’re not looking at you individually, whether brokers have a one on one outlook. If you’ve only ever banked with Commonwealth Bank, they’ll put you on the only product they’ve got. Instead, if you’ve got a choice between a few banks, you’ll find the best structure for you. 

 

So how can I find a mortgage broker right for me?

Start with talking to your friends, family and colleagues to see if they know any great mortgage and finance brokers they have dealt with. Mortgage broking is all about word of mouth referral, but it’s also good to look at reviews and case studies to see if they’re helped others who are similar to you.

 

Does it matter if they’re qualified?

Well would you use a forklift without a licence?

Or get in a car with someone who doesn’t have a licence?

Yes, mortgage brokers need to be qualified and you can take initiative to see their qualifications. LinkedIn is always a great place to start, as it lists their experience. At a minimum you should expect them to have a University Degree or a Certificate IV in Mortgage Broking. Equally, they should be licenced by one of the Mortgage Broking industry associations, which are FBAA (Finance Brokers Associate of Australia) or the MFAA (Mortgage and Finance Associate of Australia).

 

 

How do you tell if they’re experienced?

Find out who they’ve helped and also look at LinkedIn. Make sure they have case studies and have experienced working with different clients. Another thing to ensure is that they’re still actively in the industry and doing what they say they are, as policies are always changing. Make sure they’re doing lots of deals, awards and accolades are a good indication of this.

 

Does it matter what banks they use or if they have a choice of lenders?

Here’s an industry secret! A lot of brokers advertise that they have access to over 30 lenders, but generally they can only access two or three banks because they don’t do enough volume. You should ask what lenders they predominately use, and if they are only limited to 2 or 3, ask why they don’t use others and how this will help or hinder your situation.

 

How much will it cost you to use a mortgage broker?

In general, when it comes to residential loans, banks pay commission to brokers. This ranges from 0.5 – 0.6% upfront. Howveer sometimes with commercial loans and complicated finance it can be a bit different. That’s the industry standard. If they are going to charge you, mortgage brokers are required by law to detail any commission they receive as a part of the process.

 

How do you find someone who can help you with structuring?

It comes back to their experience and making sure they ask the right questions look at what you’re achieving and what your goals are.

 

In summary: How to make sure you’re getting the best deal for your loan? Get someone else to do it for you! Make sure they’re qualified; you can read reviews and find out about their history. The markets change some banks go up and others down, but one thing is that they all try and put up peoples rates and don’t give you a lot of options. So have a broker working for you and reviewing those rates.

27. Which is the better investment for me? Property Vs. Shares it's the Showdown of the Century, Find out Which Performs better and Which Makes More Money?
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Description:

In this week's episode of the Rentvesting Podcast, we're going to talk about the battle of growth. There was an article in the AFR about the growing number of Millenials investing in the stock market. So we're looking at the pros and cons of property verse shares and which one is better, in both situations.

Louis is going to be fighting for shares and Jayden will fight for property, and we're going to battle it out.

 

Round 1: Pros - Property, leveraged.

Being able to leverage property is a clear advantage for property. If you invest $100k in shares verse property, the return of property will be a lot higher. So the big pro with property is that it's leveraged because if you get 10% return on property you'll make more than 10% return on shares.

According to residential property returns, they sit at 9.9% compared to Australian shares at 8.7% - gross return.

 

Pros - Shares, higher yield, no outgoings.

With shares, you'll get higher income per yield, so after costs and outgoings, that $100k can still earn similar income to property overall.

With property, it depends on where you are buying your property, obviously, the higher the yield will affect it.

As with shares, it's the same. You can buy some mining stock that won't ever pay a dividend because they don't really have earnings but generally, there are mid-capped to large capped shares that pay fully franked dividends. Telstra at the moment is paying a yield of 7.5 excluding franking credits. That's from an income point of view, fairly sexy.

Shares have franking credits, this is where the company has paid tax and out of the profit they pay you a dividend when you receive that income you pay your marginal tax rate but you'll get some franking credits back and it works out as a tax effective income.

This is exclusive to Australian shares, on American and European you don't get franking credits. But you can invest in Malta.

So obviously pros and cons to both.

 

Pro - Property, no capital gains when living in it.

Another property pro is that if you're living in it, it's hugely lucrative tax-wise as there's no capital gains tax when you sell it.

 

Con - Shares, capital gains tax.

Whereas shares you the get the capital gains tax when you sell. You will be assessed as earning half of it, so if you're on the highest marginal tax rate you'll lose a big chunk of it to tax.

So if you make $100k off shares, you'll be assessed as earning $50k and so you'll pay about $25k, a big chunk.

While property, it's hugely beneficial to renovate and flip it, as long as it's your principal place of residence and it's not your primary income source, there's no capital gains tax which is a great instrument when selling your home.

 

Pro - Shares, diversification.

It's cost effective to get a lot of shares at a low price. You can buy 300 shares for $20 through an ETF. However also beware that shares can be expensive if you're buying small parcels due to paying brokerage.

But equally, property can be expensive to get into with stamp duty, conveyancing, real estate costs, maintenance etc. The rule of thumb on an investment property (it's not the same interstate) but generally I use 5% as entry cost for a property.

But then if you look at the long-term returns, property wins.

However, if you go 30 years, shares win hands down, while 10 - 20 years though property is better.

 

Pro - Property, historically good long-term returns.

The other pro is that people in Australia like having a physical asset, it's easier to understand and look at a property, as you can touch and feel it. Whereas shares you have to pull apart financial statements and look at their three-way reporting, which is more difficult.

 

Pro - Shares, there's no fuss involved.

They're set and forget and you have no tenants calling you trying to get things fixed.

 

What is market cap?

Market cap is the number of shares X shares price.

It's not a true idea of how big or successful a company is but it's how big overall it's market capitalisation is. In general, anything that has stable cash flow and is large with a stable business model doesn't go out of business.

Con - shares, it always feels like there are some people with an inside understanding and it can be a bit opaque you don't know what's going on all the time.

 

Pro and con - Shares, volatility.

Shares can be volatile, however being volatile as heck is your friend. When a property goes down in value, how will you take advantage of that? Instead, with shares, you can put money into the share market as this will compound your returns massively. While being volatile, that's the best thing about them.

 

Are there are more risks in shares compared to property?

No, there are just more perceived risks.

As some people might have invested in shares in 2007 or 2008 and now it's sitting at 38% less. It comes down to your individual behaviours. If you're watching the market every day, it can go up and down a lot and emotionally affects you.

But you can do a speculative approach with property too. If you wanted to buy a development in the middle of nowhere, and you're going in for a speculative commercial thing you can lose a tonne of money off development because there's leverage in development, so you could lose it.

Developments need a 20 - 30% return to factor in that and you can get pre-leases and pre-sales to assist that.

 

Pro - Shares, franking credits.

If you're in a tax-free environment, eventually you will be in an allocated pension, you get 100% of franking credits. Right now Telstra is paying a 10% income when you include franking credits.

 

 

Round 2: Risks with shares?

This is part of the problem though. Shares are quick and easy you can take that franking credit and buy something. The risk with shares is the temptation is there because they're so liquid.

Pro - Shares, liquidity.

Property is a good measure of savings because you don't take the money out.

Con - Property, forced repayments.

You're forced to pay money each week.

Con - Shares, unforeseen drop.

Shares can go to zero quickly - my Anglo-American shares went from 11c to half on one cent.

You can't take anecdotal evidence though (Louis).

 

  Final argument

Over a 20-year period, Australian residential property performed even better, posting an average annual return of 10.5 percent compared to the 8.7 percent gain in domestic shares.

Australian shares have had a really bad 10-year run because you look at 10 years ago was 2007, but if you look at 9 years ago, shares have returned close to around 16% per annum. One year's difference is a massive overall difference.

 

Pros in summary:

Property:

No capital gains tax. Enforced savings to help you pay your mortgage. Good long term returns. Owning a physical asset is great. The leverage and tax deductions can help.

 

Shares:

Great diversification at a low price. The low price is a pro alone. Volatility can be your friend. There is no fuss involved, you can buy some blue chips and even the index and get those returns. Franking credits, potentially higher incomes, historically returns might be similar but with property you can leverage it. Shares you're just investing on your cash. If you look at the return on capital it's different. Positive yields.

 

Cons in summary:

Property:

Is a lot of fuss to deal with. High costs, transactions, lots of outgoings. Initially expensive to get into but not necessarily ongoing. The vacancy is difficult too.

 

Shares

Can be costly to get into if you're not buying big parcels. Volatile. Risky.

 

Shares and property can co-exist but obviously, they each have different reasons to invest in them.



28. Risk It for the Biscuit: How to Work out What your Risk Tolerance is, and What is Risk Profiling?
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On this week's episode of the Rentvesting Podcast we're talking about risk profiling. This episode is based on a question from Chris, looking at a bird's eye view of how you can be thinking of investing. We're breaking down why people make decisions and what risk profiling is based on. The question was around where someone should really be investing, as opposed to where someone does invest.

 

We'll run through what determines that individual preference along with what it should be

A lot of people who have lost money in the share market are now moving to property. This is based on psychology, if you're risk tolerant and don't mind things like gambling, running with scissors, swimming after you've just eaten - these sorts of people are considered risk tolerant. The other

On the other side of this are those considered risk adverse, they don't like taking risks in life.

Based on that fact, that starts to determine where, if they're looking to invest, they do.

If someone is risk tolerant they might go for penny shares where those companies could go up or down a lot. While someone who is risk averse might just keep all their money in cash.

 

What's the risk reward concept? There's low risk like cash, then there a high risk.

In financial markets or investment, risk isn't like everyday risk. Risk is considered through volatility. The risk-return equation says the higher the volatility you accept, the more movement that can occur, the higher your return should be.

For instance cash, cash can't lose value unless hyperinflation occurs. Cash doesn't move up and down, it will get you different interest rates but as you go down the chain of assets that have higher growth components because they go up and down, they now have volatility. The greater they go up, the greater they can go down.

If we break it down on the chain as far as what's the least and most volatile:

Bonds have a slight volatility, but generally, they're more an income asset. Property and shares, when they have growth components to them - you can break it down to high or low growth depending on the area. You can buy in blue chip suburbs where the yield might be lower, but high-risk suburbs like mining towns could have high yield but also could drop and then you could be at risk. As for companies, the banks don't move so much but smaller companies have more risk involved and that volatility can be at 80% a day.

 

How do people determine when they invest in that risk profile?

Generally, people just determine it on their own, they invest in what they feel is right for them. Sometimes it's easy to miss the point though and what you're trying to achieve.

Individual needs + psychology = risk profile.

Someone who is young and can handle the risk could go for property, because they have time to invest in a long-term investment. While someone who is defensive in retirement should go for 30% growth and 70% defensive.

 

Are there any one size fits all rules?

Not really, it depends on the individual. I've seen some 20-year-olds who don't want to invest in any shares and they think they're too risky. Then I've seen some individuals in their 70's have invested in their shares all their life and love the up and down changes of it. While even though they need more defensive assets at that time.

Although there might be broad profiling depending on the age and time you're at in your life, it really depends on the person.

For myself, when I try to figure out where funds should be invested the first thing we look at is their individual means and how long they want to be investing the money for.

If it's for a home deposit that's 2 - 4 years and those funds shouldn't be invested as it's too short term. But if it's for long term 30 - 40 years that can allow a lot of growth, especially if there are regular investments, it's better to split out the investments over time.

 

What are some questions on how you determine a risk profile?

Return requirements

Return requirements mean that planning and forecasting are required in order to get 8% return per annum. So working back from how much you need in your super, we look at how much you need as an underlying return. If you cut out growth from the equation:

Income + Growth = Return.

You've halved a lot of the equation and if you're defensively invested, you'll be getting income from cash and bonds and a little bit of growth. But if you get that solely, you're likely to get a lower percent return than if you've got more growth allocation over the long term.

So that's the first one looking at return requirements.

How much to invest

If you've got a lot to invest and more money to diversify, that can often allow for a bit more risk to be taken on. Just generally, we ask them what their reaction to case scenarios would look like. For example, if your investment goes down by 50% how would you react? What's the max level of volatility you want to accept in a portfolio? This is looking at their psychology of how tolerant they are.

This is looking at their psychology of how tolerant they are.

Figure out what sort of needs you're after.

We also test their understanding with questions like - say the portfolio does drop by 25% how would you react? Would you invest more? So that one helps determine a lot of their knowledge around investment

So that one helps determine a lot of their knowledge around investment and volatility. It's about re-educating, as volatility occurs, so the best thing to do is not to sell, because selling when it goes down guarantees you will lose money.

If a share goes from 100 to 50, it then needs to go up by 100% to go back where it was. If you invest at that point, then your upwards return isn't that great. So if you added another 50, then any additional growth after is just a plus.

In summary, shares are the highest risk - between shares, property, fixed interest and cash.

 

Case Study

Looking at case studies at a high level, if Bob is a young investor and has only invested once (30 years old), what is the portfolio for someone who is a bit risk averse but wants to grow?

As this person has probably been burnt by investments before, they probably will try and avoid it. For this individual, it would be about reeducating them. If you're in your 20's and your investment is in super, let's have a look at the difference between keeping your funds in cash or taking on additional risk over a 30 year period.

First of all, don't sell! If you have a surplus of cash or you manage them wisely, they shouldn't drop that much.

Long term, the market does recover.

 

On the other side, Sarah loves to gamble, she's a bit older, the late 50's and has a decent amount of money. Is it bad for her to go high growth, high risk?

It's up to her. If she's about to retire, what will she live on?

If Sarah has a decent amount of money to retire on and draw an income, it's probably better for her to be more defensive. If she's 100% invested in shares, then 40% of their value could go down.

 

Key takeaways Risk profiling is based on your individual needs and not what your friends are doing or what the market does. It's based on your individual profile - answering the above questions, understanding what you can handle if it goes up or down. Changing the perception of letting external things determine where you invest and looking at what is the right thing for you towards your long term goal.

Don't forget to leave a review on iTunes!



29. Did our parents have it easier? Is it harder than ever for Millennials to buy property? Times are changing: Baby Boomers vs Millennials
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In this week's episode, we're talking about Tim Gurner's latest interview and we're going to cover what our parents pre-1989 had in terms of net income and household budget, looking at what we've got and the cards we've been dealt and the ways we can all work through this.

Today we will run through:

Working overtime and incomes of Millenials verse our parents and the property price story. The income over the years between our generation and our parents What we spend our money on

You can see here that rent is significantly higher, along with tax and HECS along with hidden taxes like the GST.

Over the past 17 years, the cost of things have gone up due to GST and has increased the cost of everything by 10%.

 

Superannuation guarantee

A lot of people think the payments your employer makes into your super is what your employer covers. But really these days it's part of your total package. If you're on a $54, 500 income then you'll only get $50,000 and the other $4, 500 goes into your super.

 

HECS/HELP

In 1989, Hawkes government introduced HECS, under HECs there was a system where $1, 800 could be charged to university students and the government paid the rest. Now between 4 - 8% of your income goes to HECS and 9.5% of it goes to super, so you're left with a bit less than those from pre-1989. So that's about 20% of income that they had otherwise no have had to pay.

Also, the average HECS debt was $17k and now the average cost is between $30k - 50k for a standard bachelor degree.

 

Real wage growth is low

Wage growth is low.

Inflation - Actual Wage Growth = Barely Keeping Up

At the height of the last recession in 1990, the official cash rate was 7% and inflation fell from 7% to 2%, yet last month the Reserve Bank of Australia opted to keep the official cash rate on hold at 1.5% and inflation is currently sitting at 1%.

In reality, your wage is going backwards. Overall this is creating the effect of Millenials having less money than their parents in their pockets.

 

Property prices

Home ownership has gone down. For those between 25 - 34 in the '80s around 56% of people owned a home and now it's around 34%. The same with those between 35 - 44, home ownership has dropped by 15%. So generally, overall for people who own their own home, the younger they are, the less of them there are.

 

What can we do? Fractional Investments

Fractional investments are where you invest in small parcels and still get same property exposure. This is a big market and there are a lot of positives but potentially negatives just so you know what's out there. The main ones are:

Acorns Brickx REITs ETFs

 

Have a budget

Try apps like Pocketbook or the Rentvesting spreadsheet to track what's coming in and going out. It's important to stay on top of your spending so that you can save more.

 

Times have changed, so we all need to change with it. It's not fair to compare now with the past as it's like comparing apples to oranges. So budgets of today compared to those of 1989 and earlier are completely different. It's just about being smarter with your money.

The light at the end of the tunnel is that although times have changed there are good tools out there to combat that. Try the Rentvesting calculator here to see if you should rent or buy.

If you enjoyed this episode, make sure you leave a review on iTunes for us here.



30. How one Aussie Millennial Has Grown Over $335,907 in Net Assets & His Financial Independence Hacks
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This week we've got Matt the Aussie FIREbug (Financial Independents Retire Early) teaching us a few things about his road to financial independence. He's going to take us through rapid saving strategies, his financial independence journey and ETFs and break down these in further detail.  

 

About Matt - The Aussie Firebug

My name is Matt - the Aussie Firebug, I've got a website AussieFireBug.com which is dedicated to my journey of financial independence which stands for Financial Independents Retire Early. I'm currently 28 years old and I work in IT. I started working when I was 22 after finishing university and growing up I had an Italian father, who was very thrifty and I was always very good with my money.

I struggled as I'd save all this money for no reason, then I'd blow it on something like clothes. Then I got a full-time job, and it was then that I realised there should be more to life. I was out of the house for about 10 - 12 hours a day working Monday to Friday each week and I wasn't used to that. I thought is this going to be my life for the next 40 years with four weeks off and a couple of sick days? I liked my job but I really struggled to adopt this lifestyle. So I worked that year, and then I bought an investment property right before the first home buyers grant finished. But I didn't really want it, I just did it because it's what you do. It wasn't until after a couple of years when I discovered the whole financial independence. I bought the property in 2012, and in 2013, I was thinking - I've got this asset, a lot of debt to my name, I better figure out what I'm doing. My initial path to lead me to financial

I liked my job but I really struggled to adopt this lifestyle. So I worked that year, and then I bought an investment property right before the first home buyers grant finished. But I didn't really want it, I just did it because it's what you do. It wasn't until after a couple of years when I discovered the whole financial independence. I bought the property in 2012, and in 2013, I was thinking - I've got this asset, a lot of debt to my name, I better figure out what I'm doing. My initial path to lead me to financial

My initial path to lead me to financial independence was through property investing. I realised you can buy an asset and generate income from it.

Keep buying things that are assets, which generate an income.

I read a lot of finance books and then I stumbled across Mr Money Moustache about a guy who's an engineer and retired from full-time work at 29.

His post - the formula to financial independence is a really good post and he goes through ETFs and what he invests in. I ended up buying my third property and I was slowing understanding diversification.

I realised I was heavily weighted in just Australian property and if there ever was a bust, it'd go badly for me. This last year I've been concentrating on exchange-traded funds - a blend of shares wrapped in a package.  I've been investing heavily in ETF's lately, there are pros and cons in each asset class.

I hope to get to a point where I track my expenses religiously. I think that's the most important part of the whole journey. You have to know. I post my net worth every month and when I get to a certain number hopefully my assets are generating an income.

 

Savings - if it doesn't get measured it doesn't get managed.

Aim to save 25% but with the fire piece generally, it's trying to strive to save more than 50% of your income.

 

You hit 74% of your income last year, what are some tips?

The main reason I could do 74% was due to living with my parents in the last half of that financial year. I was only paying rent for 6 months of that time. I'm about to release my new post, about how much I spent in this financial year and it won't be anything near that good. There's no rule. It's all about how quickly you want to escape the rat race. I always tell people, track your expenses! If you track them and look and how much money you're spending on things and you'll start to realise how much money you're wasting. You need to start plugging the holes.

You can do the hardcore way with a spreadsheet. Or you can use Pocketbook which is an Australia software company and it categorises your transactions which you can create graphs and things with. It allows you to drill down where you're spending your money.

Track your expenses and this will help you improve. It takes discipline and you've really got to want it to do it. Especially if you're on the path of independence you've got to want it bad!

I always think about whenever I want something I always mull it over for a few days at least. If we want to buy something we weigh it up and look at it as this purchase will delay the date for when we can quit our jobs.

 

  Let's talk ETFs, practically, how do you invest in them?

So basically, you need a broker. You cannot get around not using a broker and this cost is what funds the whole system. The cheapest you can find is $10 for every 20,000. How it works is that you buy packs of ETFs of around about $5 - $10k at a time. You could buy low-cost ETFs but then you'd be hit with a brokerage fee. So it's best to buy them in big amounts so that the percentage of the brokerage cost is an acceptable amount.

I run a three ETF split, so I buy VAS which are the top 300 companies on the ASX, and the best thing about these is that they're all Australian companies and you get franked dividends where basically when you're distributed dividends you get more. In the global share market, Australia only makes up 2% while America makes up almost half of it. Due to this, the whole reason and power behind ETFs is diversification for not a lot of money. If you wanted to diversify them same in property it would cost you a lot and you'd need a lot of properties. But then an ETF you can easily diversify and spread your money across a bunch of asset classes and businesses, which is sort of what your super does. Some supers invest in ETF's themselves.

Then I do VTFs which is the US market - top 300 biggest companies again. Then the other one is the VEU which is the entire world excluding the US. So between those three ETFs I've got most of the markets and countries covered. The theory behind it is if you buy stock in a few different companies, then you're safer. Property is one asset in one location, whether ETFs are reaching so many markets.

If you would like to learn more about Matt, read his blog here.



31. Property Expert Michael Matusik Talks 3 Areas Tipped to Grow That Most Investors Haven't Heard of!
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In this week's episode, we've got Michael Matusik, property expert! Michael's had almost three decades of experience. We talk property outlook, look at the Brisbane market, and the wider South East Queensland market along with interest rates and where they're headed. Finishing off with how investors can protect themselves from spruikers, with a special treat at the end.

If you enjoyed this episode make sure you leave a review on iTunes and say hey to us on Facebook!

 

Property outlook - there's always a lot happening in the market, let's start with Brisbane?

If you were to talk about an outlook, imagine the property clock. 12pm is the peak of the market, when things are really hot and property is selling fast, time on market is low. Then 6pm is not a good time, at the bottom of the market where things get stuck, 3pm is a downturn where things are slowing down and price falls then finally 9pm is a recovering phase. Brisbane is currently in the recovery phase, it's showing time on market contracting, the driver behind that is interstate investing, but one of the things different to this cycle is the strengths of it, it's not as strong as it once was in the past and that's to do with employment growth, which isn't as high.

We have good affordability, it's better than Sydney and Melbourne but not as good as it once was. There is some constraint on the ability for locals to pay. It should remain in a recovery phase for the next 12 to 18 months maybe a bit longer.

 

So you're seeing an increased driver from investors in Sydney and Melbourne coming to Brisbane?

Some of the drivers for the southern investors is the promise they've been told as to what will happen. There has been a past trend where Sydney and Melbourne actually improve and you see how prices of houses and apartments improve in South East Queensland at the same time. This time they're not as strong, but they've been promised this growth. The next thing is affordability as $900k doesn't get you much in Sydney, but in Brisbane, $450k buys you a two bed and two bath townhouse in the Ipswich and Moreton Bay areas. So investors realise they can buy two properties for the price of one and the yields are at 4 - 6% whereas in Sydney they're at about 2%. In many cases, in Brisbane people are looking to purchase for a yield rather than anything else.

  Something that gets a bit glossed over is wider South East Queensland, let's talk about Ipswich.  What's the outlook for that?

A couple of important things, when we look at regional markets - we break South East Queensland in up to 10 to 12 areas. Just like the West in both Sydney and Melbourne - Ipswich will become something like Parramatta. It is merging to be like Parramatta and one of the major drivers behind people investing in Ipswich are jobs - it's likely to create a lot more jobs in the future due to where industrial land is created along with its proximity. It is between Brisbane and the Gold Coast and is a funnel through to Regional QLD with areas that have minimal resources. It's got pretty good road and railway infrastructure too.

There are some issues with traffic but they're not as bad as Sydney or Melbourne. So Ipswich is expected to create a lot of new jobs, which will be local. People living and renting there won't need to commute to Brisbane for work. It's a major growth market in terms of population and land supply, anyone buying there needs to take a longer-term view.

You can buy house and land packages for under $400k, some cases under $300k. Sometimes you can buy quite well for older homes. Some of them might be 50+ years old, and new estates that are certain products can be great value. By that, I mean multigenerational homes where two generations can live on the same property.

A multigenerational home is when homes have the back with its own kitchen and bathroom area, and it might be a four bedroom with two kitchens. That allows the market to have several tenants and on resale that an owner-occupier is likely to buy it as it allows the mother-in-law or adult child to live with them. One in five households in Australia is multigenerational. So buying something like that is a wiser thing to do in those outer lying areas. Developers are starting to deliver this type of product and they show 7-8% yields.

 

What about Logan? Any opportunities moving forward?

Logan is an opportunity market as well, there's a lot of new land supply and the underlying demand for Logan isn't as strong. Its employment generation opportunities are limited. Investing in Logan you may have a government tenant, if you have the mindset that money is money and you're buying at a certain price point and profile, then this sort of market might have some appeal. There's upside in both markets, probably Logan is more cyclical looking forward and will bounce around. Whether Ipswich will be more steady.

 

What about multigenerational housing - where are other opportunities for this?

One of the things that is frustrating in Australia is that there isn't one uniform housing policy to do with compromised housing and allowing/encouraging more people to share homes either by that multigenerational model or duplexes.

The reason I emphasise this is because it may change. What you can do in Logan and even the Sunshine Coast, you can't do in Brisbane. The Building code is restrictive.

Right now there are opportunities on the Sunshine Coast - north of the Maroochy River where there's no land supply left.

It is forecasted that people will go back to what they used to do where lots of people live in one house due to wages not going up and cost of living expenses rising. So this is one market, then you've got is larger families and a change in overseas migration mix. You could say there are two types of tenants in this category, and for the multigenerational Australia - these types of homes are undersupplied for the amount of demand. So for investors, there is one where the demand is likely to exceed the supply in 5 - 10 years, which will confirm price growth on these.

 

For investors, costs are an important piece of the equation. So let's talk about interest rates?

I believe that interest rates will rise, we use a yield curve to predict it and at the moment a 0.5% difference between the two is a neutral policy. Go back 20 years you can see where interest rates fell, and at the moment it would indicate that interest rates are likely to rise. This may sound funny as we've just mentioned people having to spend more and retail getting tougher but it's to do with the cost of money and if the US continue to rise and Australia doesn't change, we will get a drop in the dollar and that will cause a spike. So, to keep things in equal we will see interest rates maybe in the next year or two rise.

Something my partner and I have done in the past is that we've always had a mindset that we may have to pay 50% more interest in a 5-year window. If you'repaying 4.5 - 5.5% you need to think you could be paying 6.5 - 7.5% in the future. We 're at the bottom of the cycle with interest rates. So plan ahead.

 

 

Back on interstate investors buying in South East Queensland, one thing I have seen - is where interstate investors come to Queensland and think it's cheap to buy a house and land package in Logan.  What are some ways our rentvestors can protect themselves from buying something just because it seems cheap and not necessarily a good investment?

This is really important. It's about the composition of the pricing rather than the price difference. First Sydney is over inflated, so the differences are huge.  So aside from the culture and lifestyle differences, the first thing to look at is rent - I would be hesitant to buy anything that is lower the 4 - 5% yield, but check for yourself. Don't listen to what the agents say, check on Domain or RealEstate. Look at the vacancy rate and what it's done over time.

The rental market is fluid, it can change month to month and just because you got an appraisal two months ago it can change quickly. Traditionally around June/July and at the beginning of the year, there isn't as much to rent. This is to do with student movements and other variables, so then there can be a tightness in the market and the rent return looks good.

SQM Research does a good job and gives you access to a free database over time to see how the stock has changed on the market.

 

About Matusik - Market Report Outlook

My firm is a small firm and I largely focus on Queensland and some degree Sydney and Melbourne. I give project and development advice. We break Brisbane City Council up into different areas and also have a capital cities outlook report.

One thing to keep in mind is if you're looking at spending money on a property, do your own research!

This report includes our unique twelve benchmark indicators that define the state of supply and demand in each city.  There is a clear logic behind our forecasts. In other words, you’ll find everything you need to know to assess those markets and to understand what’s really going on.

The report can be purchased here. Listeners will be able to purchase the report for $99+GST, down from the normal $175+GST by using the code REDANDCO – and download immediately.


32. The $300k Mistake This Gen Y Property Investor Made on his first home!
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Description:

In this week's episode, the spotlight is turned with Kevin Turner interviews Jayden Vecchio.

 

Kevin:  By way of introduction, my next guest is Jayden Vecchio. Jayden is the director of a company called Red & Co. They specialize in finance, rentals, sales, and development management.

 

The reason I want to talk to Jayden and I’m really keen to get his backstory is because he is a young investor. In his very early 30s, he already has five properties and he says he’s well on his way to having 15 properties in his portfolio over the next five years.

 

Jayden, thank you very much for joining us in the show. I’m really keen to talk to you about what you’re doing now and where you see it going in the future. Give me your backstory. Where did it all come from? What’s your experience?

 

Jayden:  Thanks for having me, Kevin. I started working with a couple of big banks when I was straight out of university, in 2007–08, around the time the GFC was starting to bite, which was an interesting time.

 

I got to learn a lot of the background of how the banks work in terms of securitization, the mortgage market. I worked my way through to private and commercial banking, where I was dealing with moms and dads and investors and learned a lot of the good things you need to do and the bad things that happen in the banks, unfortunately. Then I used that as a bit of a platform to start my own business, Red & Co, about four years ago with two other business partners.

 

Like you said, these days we’re basically an all-in-one property solution for people who are looking at buying, investing, developing, and selling. So it’s all been one big progression.

 

Kevin:  You were recognized in 2016 as the FBAA Commercial Finance Broker of the Year, and that wouldn’t have come too easily, I would imagine. FBAA being Finance Brokers Association of Australia; is that correct?

 

Jayden:  Yes, that’s right. That was quite exciting, because they’re obviously a national organization, and it was good to be recognized for the work that I’ve done over the last couple of years, especially in the development finance markets across Brisbane, which a lot of the listeners would see the cranes and the things in the sky.

 

I’m helping funding some pretty big projects across that – over a hundred townhouses in some cases – and then in the commercial finance markets, we’ve funded a shopping center down in Ballina, one in Yeronga, and then even a couple of office towers down Coronation Drive for some fun.

 

It’s not like traditional mortgage broking, which is good, because I get to see lots of different structures and things, and the good, the bad, and sometimes the ugly, and trying to help people through that.

  Kevin:  No doubt you learn a lot from that, too. Let’s talk about your own experiences. Interesting when you did communicate with me first, you said you’ve made probably all the mistakes. I’d question that; I think I’ve made a few mistakes that you haven’t made. But that’s the best way to learn, isn’t it?

 

Jayden:  It definitely is, because I know it makes a big difference when you can sit down with someone and look them in the eyes having been in that situation. Or if they’re trying to grow aggressively and want to grow a portfolio, which a lot of young people these days are aspiring to do, it’s good taking a step back and saying, “Well, just because we’re at historically low interest rates, doesn’t mean it’s always going to be that way, and you have to remember you have to have a bit in the tank in reserve, because otherwise, you can get caught out.”

 

Kevin:  Tell me about some of the mistakes you’ve made. I am going to ask you a question to round this out about if you were to go back and do it all again, what would you do differently? I guess it’s going to be couched in terms of some of the mistakes you’re going to tell us about now, but I believe that, like most of us, you stretched yourself financially as well at some stage. Did you?

 

Jayden:  Yes, I bought my first unit in Sydney. I was living down there in 2009, and within 12 months of owning it, I was hooked. I knew I was going to be this property mogul, I was going to own these properties. I was ready to go at it, hammer and tongs.

 

Within that 12 months, my first property had a bit of equity gain, and meanwhile, saving up and trying to buy another property. In early 2010, I’d saved up enough and bought another property in the same suburb, in Alexandria in Sydney.

 

It was just a small, 50-square-meter unit. If you imagine a rectangle, you cut it in half and you fit a bedroom and lounge room and stuff in it, that was basically it. There wasn’t much to it, but I thought there was some scope there to do a bit of renovation, some cosmetic stuff, tart it up a bit, and potentially either rent it out and keep it, or flip it and make a budget.

 

What I didn’t realize was around that time in early 2010 was when the RBA was actually on an interest rate increasing cycle, so the rates went up in March by 25 basis points, in April, then also in May, and the expectation was the rates were going to keep rising.

 

So for me as this young property investor who just settled on my second investment property, hadn’t quite rented out my first investment property, I was trying to cash flow this, and all the while, trying to renovate the second place in Alexandria. I was painting, I was doing the carpet, and I hadn’t really set out a budget. I hadn’t prepared myself. I didn’t really know how. I thought I could do it and manage it and make it work.

 

Within the first month of just trying to paint the place, I didn’t realize the first mistake I made was the ceilings were made out of this Vermiculite stuff. It almost looks like a popcorn ceiling. So instead of using a couple of liters of paint, it ended up using three times the amount of paint. It blew out my timeframes, my budgets, all the while the interest rates across both my properties were going up and up and up.

 

It literally felt like a noose around my neck, to the point where I was in the place and it was starting to get winter, it was cold, I was sleeping in the place I was painting on my yoga mat in a sleeping bag, and I actually had to use the oven as a heater to keep me warm at night because I had to use my money towards the repayments.

 

It was a very low point and very uncomfortable, because I stretched myself financially. I’d basically borrowed 100% to purchase that second property, and I didn’t have a lot of savings behind me.

 

I obviously didn’t do a budget, didn’t think about the cash flow and worst-case scenario, so it’s definitely something that when I sit down with anyone now on the finance side – and our business definitely looks at this – you have to look beyond what the rates are today and what the situation is today: what’s the worst case and where they’re going to?

 

Kevin:  A great lesson, isn’t it, to plan for the worst-case scenario, because just listening to that story, those two properties you just talked about in themselves probably very good properties. No doubt you sold those, but if you’d held onto those, what sort of position would you have been in today if you had a better plan and a strategy?

 

Jayden:  It’s one of those ones where I started out with a plan and I was going to stick to the plan until I got to that point where it was just unmanageable. It was very stressful, and you’re quite right, I ended up having to sell them.

 

But I actually saw the first apartment I bought in Sydney, in Alexandria for about $340,000 in 2009 recently sold for over $600,000, so it has doubled.

 

Kevin:  That probably would have been about what you lost on that deal anyway, wouldn’t it?

 

Jayden:  It’s one of those things where you just have to look forward. There’s no point looking back on that and what you could have done, but it’s worth taking those lessons in and working on it going forward.

 

Kevin:  That’s part of the university of hard knocks, isn’t it? I think the thing about it too – and no doubt you’ve done this – is that you learn from those experiences and you take them into your next deal. No doubt, you’re a lot smarter now. You tell me you have five properties. Whereabouts are they?

 

Jayden:  They’re all in Queensland, actually. I think that’s more a case of Sydney, the prices have gone up. Also living in Brisbane, it’s good to know the market intimately. In Sydney, I was quite fortunate that I had some friends and people who knew the areas and helped me give me a bit of a leg up investing.

 

I think it can be hard when you’re investing to save unless you have that guidance, and I like now being able to if you need to go fix something, I can go fix it, and having a bit more control over that.

 

They’re all within five to eight kilometers of Brisbane CBD, a mix of houses and a few apartments.

 

Kevin:  Over the next five years, your plan is to add another 10 properties to build it up to 15, which is what you mentioned to me in your note. Will any of those be interstate? Will you branch out and go interstate again, or will you still continue to buy in Queensland?

 

Jayden:  I think if the conditions are right and it makes sense, I potentially will. But to me at the moment, living and working here, the focus is mostly on Queensland.

 

I think it’s important in any portfolio – that’s one thing I have learned – is having diversification, because like in Queensland a few years ago, if there’s a bit of a mining downturn, that can lead to broader impacts on the economy in the local area. So it’s always good being hedged against that, and obviously being diversified interstate in different markets can help protect against that.

 

But I think for me personally, my view is probably to keep it here where I understand intimately the infrastructure that’s going up, the projects that are happening, the developments that are in the area, the government, what’s in the pipeline, tourism, and I think it’s important in my situation having a really narrow focus and just being across those details.

 

Kevin:  You’re still very young and you have a long way to go with your career and your business. Is there a possibility that you’ll probably look at getting into some commercial and/or development at some stage? With the number of people you know through your business, is that a possibility for you?

 

Jayden:  Yes, the business has a development management arm, so I’ve invested some funds into some smaller projects there, and they’re all boutique, sub-ten properties. Definitely involved in that, and I think that’s a good way of getting in the market where you can leverage other people’s experience and learn from their mistakes, I guess.

 

And commercial is definitely something that I’ve been actively looking for recently, because it can make sense within super. It can be a good investment because you can look at longer-term leases.

 

The only downside with commercial, as you know, is it requires a lot more capital and funding at the front end, because you can’t leverage it up as much. So it’s that tradeoff of allocating more capital to potentially get longer returns, but then how that fits in with the overall strategy. It’s important to take a step back and look at that.

 

Kevin:  Jayden, round this out for me, if you could. Just give me the best pieces of advice you’d give people based on what you know now, probably what you would have done differently. What would you say to me if I came to you and said I want to go down the path and start to build a portfolio? What should I, and what shouldn’t I do?

 

Jayden:  I reckon the quote that comes straight to mind would be “Failing to plan is planning to fail.” I think in my situation, I had a plan but then I actually didn’t stick to it, and if I look back retrospectively, if I’d stuck to it, I’d probably be in a potentially better position.

 

It’s good knowing that now and being able to sit down, take a deep breath. And if I had a bit of extra funds there and planned for that, I probably would be in better. So yes, I definitely think having a plan and then sticking to it is critical to success in property.

 

Kevin:  Great advice, Jayden. Any other advice before I leave you?

 

Jayden:  I think it’s always good to leverage other people’s knowledge and the advice of experts. I know when I got my first property, like I said, I had some friends down there who all owned multiple properties and knew the area to give me advice.

 

I think it’s the same these days. There’s so much to know in the markets, in finance, even when you’re renting out. So I think it’s important to stand on the shoulders of giants and leverage other people who have done this stuff before, have made the mistakes, and you can take away and learn and do a lot more quicker using that.

 

Kevin:  Jayden, it’s been great talking to you. Thank you very much for your time. If you want to make contact with Jayden, if you have a few questions or you want to start to build your own portfolio, the website to go to is RedAndCo.com.au. They’re finance rentals, sales, and development management specialists.

 



33. 7 Tips to Increase your Borrowing Capacity by over $139,000!
http://rentvesting.libsyn.com/... download (audio/mpeg, 32.12Mb)

Description:

In this week's episode, we're going through how to increase your borrowing capacity. People struggle to get loans initially, and it's only becoming harder because APRA is tightening lending requirements. This is really just, how much people can take out and we'll go through seven practical tips.

This is all simple stuff and whether you're looking at buying in the short term, or medium to long term this will affect building your wealth and your property journey.

If you like this episode, make sure you tell your friends!

 

Tip 1: Reduce credit cards and don't get debt because it seems like a good idea at the time!
A lot of people think that they need to get a credit card for credit history when this is actually wrong. At the moment they've only got negative credit reporting. It's more about having a good credit file, you don't need to establish history.

Reduce any credit card owing you have. If you've got a $10,000 credit limit this will reduce your borrowing capacity by $40,000. So essentially, four times the credit impact. Even if you have no debt owing on the $10,000 credit card - it will still be assessed as if the whole thing is debt, as the assumption is that you could go to the casino and spend that whole $10,000.

 
Tip 2: Clean up your unsecured debts
 
Secured loans - a mortgage is a secured loan because the bank can sell it if something happens.
An unsecured loan is a credit card because there's no collateral or security against it.
 
You can go to the bank and they'll give you $15,000 to have a holiday, but you will pay huge rates aginst that and it will affect your borrowing capacity. If you default on the $15,000 holiday loan the bank will have a hard time getting its money back.
 
Even a small car loan will affect this. Just $500 a month ends up decreasing your borrowing capacity by over $80,000.
It's amazing how those small things do add up and can affect your ability to grow a portfolio.
 
There's good debt and bad debt, and car loans like that should be paid as quickly as possible so that they don't affect your borrowing capacity. If you've got an existing property, you could look at debt consolidation, where you increase your home loan to add your car loan onto it. The trap here is that the extra $10,000 they keep for 30 years so the interest costs are higher. Speak to a broker about this before doing it!
 
  Tip 3: Sort out your paperwork

As a mortgage broker, I see how bad people are with paperwork, but this is so important! You need to have your group certificates, rates notices, pay slips etc. all ready to go. It's amazing how disorganised people are with this. Get your paperwork in check because this can affect your borrowing capacity. So go through a pre-approval process first so that you don't need to waste time when you're ready.

Get your paperwork in check because this can affect your borrowing capacity. So go through a pre-approval process first so that you don't need to waste time when you're ready to move forward with things.

No one likes paperwork but unfortunately, it is necessary. If the bank is lending you $500,000+ a few pieces of paper are necessary!

 

 

Tip 4: Shop around for deals between banks

You need to look after yourself, which means ensuring that you're getting the best rate. If you want to get into investing, look at different lenders and deals because these small differences can really hold you back.

There are two things that make a difference.

 

How much the bank will lend you

If you've got a combined income of $85,000 - between lenders there can be an $139,000 difference between them. So doing your research can make a huge difference.


Now, this isn’t just limited to home loan rates because, surprisingly, different banks can potentially increase your borrowing capacity. If you have a look at the scenario we have put together below for 2 adults, no kids and a combined annual income of $85,000. There is over $139,000 difference in how much Lender A and Lender G will lend the couple!

Lender A          $465,900

Lender B          $456,438

Lender C          $427,258

Lender D          $411,000

Lender E          $399,508

Lender F          $361,459

Lender G          $326,516

 

Lenders mortgage insurance 

There can be a huge difference again between banks. For example between them, there could be a $6,000 difference on how much insurance you pay the bank. This is compounded over 30 years equates to almost $30,000 over 30 years, four times the amount. LMI is a good tool if you need it, but if you are going to do it make sure you find the best rate. 

 

Tip 5: If you have split loans with someone else, show how you are sharing them

If you have owned property with friends or family members in the past you may own 50% of the property. Therefore, you own 50% of the home loan associated but in the eyes of some banks, you are considered wholly liable for the debt even though you only own 50% of the property.

Fairly or unfairly, they assume you need to make 100% of the loan repayments but are only entitled to 50% of the rent. This can severely decrease your borrowing capacity.

 

 

Tip 6: Consider extending your loan

Again, this is situational. If you can extend the term of your home loan is it really a good idea?

Pro - extending the term of the loan means you can borrow more with fewer repayments each month

Con - more interest because it's a longer period

 

This is something to seek advice on and proceed with caution.

Practically, this would look like:

$300,000 loan at 5% over 25 years - $1,753 per month with the total interest payable $226,131

If you, however, looked at extending the loan term to 30 years, it would look like this:

$300,000 loan at 5% over 30 years - $1,610 per month with total interest payable $279,767

 

Tip 7: Save!

Save! Anyone who has been successful in generating a number of properties has great cash flow management. To do that, you've got to have the ability to save money!

If you have more savings in the bank, the bank will lend you more money. The more cash you put towards a property, the more the banks will give you.

The boring stuff is true.

 

 

In summary Reduce your credit card limits! You can do it online or call your bank. Shop around for different banks or get someone else to do it for you. Having more savings, if you've got a bigger deposit you can avoid lenders mortgage insurance. The more you have, the more the bank will lend you. Long term, the banks want to see you at 60 - 70%, if you're too highly geared, you're very susceptible to issues. Try to have them positively geared, as this income is the one thing you can control.

Make sure you are working with a professional mortgage broker like the team at Red & Co to maximise how much you can borrow, and grow your property portfolio in a sustainable way. Also, check out Louis' podcast SelfMadeMil.com.au



34. AMP Chief Economist Shane Oliver on Opportunities in the Property Market, and where Interest Rates are heading
http://rentvesting.libsyn.com/... download (audio/mpeg, 22.09Mb)

Description:

In this week's episode, we've got Dr Shane Oliver, chief economist at AMP Capital. Giving us an idea of where the property market is headed and if it's going to crash. Looking at interest rate outlooks, outer cycle bank and interest rate heights, what the implications for property investors are and opportunities for investors, what there is outside of the typical Sydney and Melbourne areas and thinking left field like Perth and beyond. For more info check out The Rentvesting Podcast, and remember to have a try at our Rentvesting Calculator



35. Taku Ekanayake: The Uber Driving Rentvestor. His top 3 Rentvesting Strategies
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Description:

Taku Ekanayake has gone from renting in Sydney to building a property portfolio of over 6 properties. He truly lives the rentvesting philosophy.

In this episode, Taku goes through how he started investing with not a whole lot of money (middle-income salary) and then implemented the rentvesting strategy.

We'll speak about:

How he went from 1 to 4 properties Buying interstate Some cool ideas and tips on ways that you can renovate a property before you own it and get the previous landlord to pay for your interest and expenses.

 

For those who haven't heard of Taku, he's actually not a full-time property investor.  Tell us about yourself:

I'm 28 years old and live in Sydney by myself renting, hence why I'm a rentvestor. I was born in Japan but moved here as a toddler, now I work as a sales professional for an IT consultancy. Eventually, I want to get into property full time, but right now investing is just humming in the background

I started in October 2015, and I managed to progress pretty rapidly through the strategy I adopted.

 

When you started, you were on a middle-income salary and renting a share house in Marrickville. How did you get into the market?

Initially, I was looking for somewhere to live in Sydney, and even prices then were around $500-600k, I was priced out of the market and only had a deposit for half of that.

This was a blessing in disguise.

I read  Robert Kiyosaki’s - Rich Dad Poor Dad which was a game changer for me, I shifted from that 'Australian dream' to making your money work for you and looking for income producing assets. Once I started researching into that space I got fixated on it and taken into a maze. Through that, I found different markets and went interstate.

 

What made you look interstate, what was your criteria?

I know I'm not supposed to be investing purely on how much I can afford, but at the time I wanted to get into the property market and only had saved a deposit and just had to look at the market through that. At the time, I was researching what areas were best suited to me, I wanted something that would look after itself, self-funding with rental income covering expenses.

Melbourne was out of the picture for me, so I looked at Brisbane. It was half the price of Sydney with strong yields and good fundamentals. It hadn't seen significant growth and I liked where it was at in the property cycle.

I was still green at the time, just doing research and networking with investors. I was attending seminars - almost two to three a week, online forums and calling agents.

 

Brisbane is a big market, did you have suburbs you were looking for? Or what was your key way to research?

I did have a high-level criteria, I was looking below $400k and wanted to stick to houses only and I read about the oversupply of apartments.

I was looking at a 15 - 20km radius from the city and various pockets, specifically at which areas were undervalued. Through that, I came across Bracken Ridge, I liked how it was priced, the yields it was presenting and what I could buy for under $400k and still get good land content.

Since then, Bracken Ridge has performed well.

 

I really like the quote you said:

“There are so many different markets in Australia, and over the long term Sydney isn’t the best performing market,” he said. “Over the last 15 years – Sydney, Brisbane and Adelaide have all performed the same.”

 

Moving on from there, you bought another property. Where people get stuck is going from one to two properties. Can you tell us about some of the techniques you used to make this happen?

There's no magic pill, but when I bought the first one that was my sole goal, to get one property. I wasn't looking further ahead at the point. So after I bought that, I used up all of my savings and was back to the drawing board. I thought, I need to save again, working as hard as I can then I picked up a second job, Ubering doing 25 - 30 hours a week on the side. That allowed me to accelerate my savings over the next 13 months. I ended up saving about $35k - $40k just over a year. I also revalued the Bracken Ridge property, which I bought it for $375k and it was revalued for about $60k more.

I also gained capital growth increase, pulled out that equity and then used the cash savings to buy the third property.

Property two and three were in a space of about 6 - 8 weeks and that's when I started to adopt the renovation strategy.

I learnt from my mistakes and I knew there had to be a faster way to manufacture that equity. That's how I came about this strategy.

 

What does renovating a property look like to you?

I aim to invest in the middle to outer ring, so I really don't want to overspend because the return I get on them isn't too much. I only want to spend between 3 - 5% of the purchase price.

If there is an opportunity to add real value, like adding an extra room if the floor plan accommodates, that's a good way to add extra rental income and increase the value.

The renovation strategy:

If a property is untenanted, I will negotiate early access so that I can start the renovations immediately. This is so that there is minimum time between renters, so that it can be filled as soon as possible.

 

What are your plans from here?

I still want to continue buying bread and butter properties. I want to get into commercial too because the rental agreements are long term. The only thing with commercial is that you need 30% minimum deposit, so you want healthy buffers and good equity in order to invest.

 

Two or three tips for people getting into the market?

One of the mistakes I pointed out earlier, was that when I started out (only if you want to keep growing), don't just think about the first property. Think, what's the end goal and work back from it. Draw out a strategy and work around it.

Structuring your finance - don't just look for the cheapest interest rates, think about other aspects like does this bank have good finance? Do they allow good top ups? If your strategy is to continue to keep growing, you don't want to go to a lender who's going to hold onto your money.

Cash flow is king! Especially if you're building a property portfolio. Keep a close eye on your rental yields because that will help you sustain your expenses and continue to hold on to your property.

Capital growth is why we play this game but cash flow is what keeps us in this game.

Taku is always keen to network with like-minded people, you can reach out to Taku on LinkedIn, Facebook, Instagram and Twitter @TakuEkanayake.

And remember to check out The Rentvesting Calculator, and other Free Rentvestor Tools to help work out if you should Buy a Home, or Rentvest your way to building a portfolio.



36. Is Rentvesting better than owning a home? We talk Pros, Cons & the Rentvesting Calculator
http://rentvesting.libsyn.com/... download (audio/mpeg, 25.43Mb)

Description:

With all the recent buzz in the media, and crazy stats from OECD; which has reported that Australia jumped from 29th to the 9th most unaffordable country for housing in just five years. Then Sydney listed as the world's second most unaffordable city, after Hong Kong, it's not hard to think that buying your home is nearly impossible.

Whether you are a first-time investor or if you already own a home, there is no denying property prices are becoming more and more unaffordable across Australia, and the so-called Australian dream is well out of reach.

The problem is, the traditional mindset towards property (pushed into you from young age) is that rent money is dead money, but in today's market this is completely wrong. Rent money should never be thought of as dead money!

Rentvesting is a pretty neat concept that turns traditional property ownership on its head. 

We believe you should be able to live where you want and invest where you can afford. Okay, this sounds great, but what are the financial benefits in rentvesting versus buying your own property?

Is rentvesting better than owning a home? Good question. 

We designed The Rentvesting Calculator to help you look at the numbers, and see what makes sense FINANCIALLY for you based on your income and how much you would pay to buy a home.

So, how does the calculator work?

This calculator uses your individual situation and calculates whether it is better for you to purchase a property or to rent and invest. If you purchase a house, it uses the long-term mortgage repayments and costs of running the property, versus if you were to rent somewhere.

Whichever strategy leaves you with the most surplus income financially - makes more sense to do!

If there is a surplus of income from renting, the calculator assumes that you will direct this into a portfolio of investments each month. For this investment, this is also a margin loan.

Margin loan

A margin loan is a loan that you take out when purchasing investments that aren’t property, such as shares, or managed investments. For example, if you invest $1,000 of your own money into shares such as Telstra shares, you can take out a loan on top of this to buy more Telstra shares. Now you have $2,000 to invest in Telstra shares rather than $1,000.

Through using a loan, you can help ‘leverage or gear’ your investments. Leverage is a term used when referring to doing more with less, in this case borrowing funds now to help the long-term growth of the investment.

When you purchase a property to live in, you naturally experience leverage because you are using a small deposit to purchase an asset of greater value. As the property value grows this leverage helps the overall return on your contributed funds. This is why we decided to include it in the rentvesting strategy.

On any loan, including margin loans there is a thing called a Loan to Value Ratio (LVR). This calculator assumes a margin loan with a LVR of 30%.

What figures do you need?

Your current income: To determine your current taxable income, tax rate and net after-tax income received. What state you live in: To determine stamp duty and settlement costs as these change dramatically between the different states. Your current situation: To determine if you have a second income (and living expenses) compared to if you are single and on the one income. If you were looking to buy, your house budget? Again this works out how much deposit is needed, and how your after-tax income would be affected. If you were to rent, how much would you spend per week? This works out if you were to rent, how much surplus income you would be left over with to invest! Rentvesting in practice

Let’s work with an example, Jill - she lives in Sydney, works full time and is trying to decide if she should buy a property or purchase something as an investment.

Your current income: $150,000 What state you live in: NSW Your current situation: Single If you were looking to buy, your house budget? $1,000,000 (a little shack West of Sydney!) If you were to rent, how much you would spend per week? $500

Then drum roll, we crunch the numbers through The Rentvesting Calculator.

 

Should I rent or should I buy?

For Jill who is on $150,000 living in Sydney, she would have an additional $10,945.71 in AFTER TAX income that she could put towards investing.

The Rentvesting Calculator then assumes she invests this amount monthly after initially investing her deposit of 20%.

Do you make any assumptions around this? 

Our calculator obviously makes a few assumptions, including:

Marginal tax rates for the 2016/17FY. Income Return – 4.2% p.a. Growth return – 3.6% p.a. Principal and Interest Mortgage repayments over 30 years. Home deposit of 20% required. Mortgage interest rate at long-term averages of 7% p.a. Stamp duty state by state Margin loan interest rate at long-term averages of 8% p.a. Property expenses - $2,000 p.a. insurances, $1500 rates p.a. Other ongoing property costs (maintenance, water, etc) 0.5% p.a.

And a few more caveats around these including

This page shows you an approximate idea about your overall cash flow from either buying or renting. This is the financial metric that determines what strategy will leave you with the most after tax income, while also taking into consideration what percentage of your income you would spend on buying a property or renting. Therefore it may be better for some of you to buy or for some of you to rent. The ultimate decision does come back to you on what your priorities are in life, having somewhere to call your own or moving around while being able to build wealth.

It seems easy to use The Rentvesting Calculator!

Yeap, we tried to make it as simple as possible!



37. *BUDGET SPECIAL* Impact for Rentvestors, Interest Rates, Exchange Rates & Growth
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Description:

On this week's episode of the Rentvesting Podcast, we're talking about the budget that's just been released. We're looking at the impact it has on property and how it will influence the wider market. Especially around the Commonwealth releasing more land and helping the supply side.

 

What is the budget?

Every year, the treasurer announces what the budget will be - that is, just the changes to the overall budget. A lot of what has been announced though may not ever actually go ahead, but it's the measures that the government look at, understanding what they're going to be saving on and spending on.

This year is quite an exciting budget if you're in property or investment.

The whole point of the budget is to help get us out of debt and help the economy. There's a lot of assumptions that the government put around the budget, like the inflation target.

 

First home buyers

We spoke about the superannuation system in this episode, and this is the flow on effect. This is the way to use your super as a vehicle to save money and use it towards your deposit. You can do salary sacrifice, which funds into super and saves to a home deposit.

 

Concessional / pretax

The concessional option you don't pay tax on, so if your base salary is $80k + super you can ask your employer to pay you $10k less (salary sacrifice) and then you only pay tax on the $70k and the other $10k goes towards your super.

On that $10k you would receive in hand $6,550 if you're still earning $80k but if you put it into super it would be $8,500 int your account. Beware though, if you withdraw it you can pay marginal tax rate but there's a 30% offset.

The only catch is, where is your super and where is it invested.

Volatility! If you've invested your super into a high growth, aggressive manner and you're looking to buy a property within 2 -3 years, it's not a good idea to have it in volatile assets. If anyone wants to do this, make sure you're putting this allocation into conservative investments for the short term because you will get an aggressive loss if you do.

Disclaimer: Please seek individual advice.

 

Negative gearing and tax breaks

This one isn't so good for property investors, under new rules, depreciation deductions will only be allowed if investors bought the items themselves. The change will apply to any items purchased after budget night.

How does this affect Rentvestors?

Unless you have the invoice or receipt, you won't be able to claim depreciation.

 

Buying interstate

Claiming negative gearing benefits on interstate properties for inspecting or collecting rent will no longer be allowed.

 

Ghost houses

If a foreign investor has bought a property here and kept it vacant, it's called a ghost house. Now, if it's kept vacant for 6 months or more it will be taxed. It will be at least $5k per annum charge for this, however, information is still limited around this.

Ghost houses can be identified by whether water or electricity has been connected or even just darkness in the evening in certain areas, making you say, where is everyone!?

How does this affect Rentvestors?

This will be good for areas in Sydney and Melbourne which will assist with supply and demand.

 

Record levels of spending on infrastructure

This one is good! The government wants to spend money on growing and improving infrastructure.

New Sydney airport - This will create up to 20k jobs Inland rail link for freight between Melbourne to Brisbane

If you're over 65 and sell your home to downsize and move into a smaller place, you can put $300k each into superannuation as a post-tax contribution. Usually, after 65 and you're not working you can't put funds into your super, but with this change, you can.

How does this affect Rentvestors?

It's going to free up housing stock, due to people being incentivised to downsize which helps to keep the market moving.

 

Incentives for building and development

Increased concession for capital gains tax.

NRAFs - affordability to help people rent properties. If you currently own an investment property, and if it's an affordability housing scheme you can have an additional 10% discount off capital gains tax.

 

Banking

The government has proposed a tax on bank liabilities. This will contribute up to $6 billion over 4 years. This is almost 0.6% which will add to commercial and development loans. This will only affect the big five banks, and unfortunately, this will most likely get passed through to consumers.

How does this affect Rentvestors?

Fixed rates are worth considering, due to rate changes forecasted.

The benefit is, that this will enhance competition because it helps the smaller banks to catch up to the bigger ones.

 

Medicare Levy

Currently, it is 2% of assessable taxable income but the threshold will go up and the medicare levy overall will go up by 0.5%.

How does this affect Rentvestors?

Not massive, but still an additional tax.

 

In summary, it has been a pretty positive outcome: More incentives involved with superannuation and the housing market. The negative gearing side has a few deductions. Ghost housing will be cracked down on. Big infrastructure spends. Incentives for building, developing more social housing. Banks are getting a kick, which could affect consumers. If you've got investment properties, it could be time to look at fixed rates and take a long-term view.

Thank you for listening, we've had some really great reviews lately!



38. The $13,000 deduction most property investors miss: Depreciation. With Bradley Beer, CEO at BMT Tax Depreciation.
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Description:

This week we're talking tax, it would otherwise be a dry episode but we're going to make it fun. It's so important, so we're talking to Bradley Beer from BMT Tax Depreciation.

In this week's episode: What depreciation is How it helps investors How it helps your capital and cash flow long term Common mistakes people make

People forget to get a depreciation report which ultimately cost you money by not claiming deductions.

Depreciation is one of the major things that can help cash flow for Property Investors.

https://www.therentvestingpodcast.com.au/property-depreciation-tax/

Depreciation seems to be an area where people forget about. But what exactly is depreciation tax?

Quite simply, when you've got an investment property, the elements in it wear out like the carpet and items inside. It's like when you have a car and use it for work, you can claim depreciation.

We're buying property for it to increase in value but your carpet is still wearing out. So you can make a claim for this.

It is often missed, however, because it is a non-cash taxed deduction item. Depreciation is wear and tear on the property that happens over time but it is often missed.

 

What does claiming look like for someone who owns an investment property - what would an average depreciation report look like?

The simple thing is that people buy a property with an intent to make money and the depreciation is one of those things from a cash flow element that does make a difference.

Old properties still get some depreciation, but it's always worth asking the question about how much that it might actually be. Deduction depends on your tax rate if you're on a top marginal rate you can get nearly half of it back.

There are some difference in property ages too like if it's built before 1987 you won't get building allowances, so there are questions like that. We, as the agency worry about that though and will tell you if there's enough in the property to make it worthwhile doing it.

The average first-year deduction is about $4,800, while brand new is about $13,000. It changes based on what the property is, but there are always potential deductions and they do mean cash back in your pocket.

 

People speak to different agents and can get confused, so these are some good points. Further to that, how have you seen people maximising depreciation? What can you do as a property investor?

I think one of the important things to start with is to make sure whatever is there, you take advantage of. People don't do this sometimes because they believe they have a good accountant.

The biggest thing that is missed is actually doing it properly in the first place. After that, when you're looking at properties try to get some idea of what makes a difference.

For example, a newer property gets more deductions, then older properties get more back if have newer appliances - like a new hot water system will get more than an older one. You can use our deduction calculator on our website to figure out what sort of deductions can be made.

One of the numbers that need to come in when you're investing is looking at the depreciation deductions. Make sure you know what it will cost you to hold the property before you look at buying.

 

What are some signs of a good operator?

As with anything, if someone's fees are half as much as someone else, then you've got to question if something has been cut out of the process.

One thing we always make sure that is done is inspecting the properties ourselves. We go out and look at the type of assets in the property to put a price on it. Nothing is outsourced, it's done by people getting the maximum deductions out of the property.

That widens to how you estimate the construction costs. We measure and estimate the building then marry that with the tax rules, we also build the software to make sure the tax rules are applied properly. Inspecting the property is important because it's being thorough and not making a guess about it. I think with any type of professional service if you cut corners you can do it cheaply, but in the long run, this will mean you'll probably miss things and end up with fewer deductions.

 

In summary: If you've had a report done, it's worth reviewing when it was last completed. Making sure you haven't replaced anything (like new carpet) and are potentially missing out on depreciation. If you don't already, make sure you have a report in place. All rentvestors should look at this because you could be leaving money on the table!

If you didn’t mind this episode (or even maybe liked it!), please leave a review for us on iTunes here, and if you’d like a visual guide on how to leave a review, check out these instructions here. Don't forget to check out Louis' new site Self Made Millenials here.



39. 4 INVESTOR TRAPS: Ways to avoid making common rentvesting stuff ups!
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Description:

This week we’re talking about behavioral traps that can stop Rentvestors from starting their journey - breaking it down to short term issues, old timers and their prospect theories, when you follow the crowd and the issues around that, and analysis paralysis.

This is all stuff we see every day of the week, so we’re going to break it down into detail. We hope you’ll learn not to take tips from online forums.

Today we’ll be going through four behaviours that will kill your overall investments in life, including:

Myopic risk aversion

Prospect theory

Herd theory

Analysis paralysis

https://www.therentvestingpodcast.com.au/behavioral-traps-rentvestors/ for questions contact us at jayden@therentvestingpodcast.com.au



40. INVESTOR LOAN CRACKDOWN: What you need to know
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Description:

This week we are talking about investment lending. We are looking at why the banks and APRA are tightening down on this. So we thought we’d help you understand how to avoid some of the nasty changes that may be coming.

As always, for the full show overview check out http://www.therentvestingpodcast.com.au/ or contact us at jayden@therentvestingpodcast.com.au 



41. HOW NOT TO OVERPAY: 5 Negotiating Techniques You Need to Know When Buying Property
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Description:

In this week's episode of The Rentvesting Podcast we’ve got a special guest, Anthony Oddo, who is the residential sales director at Red & Co.

Anthony is taking us through some tips on how to avoid overpaying with some awesome negotiation tactics.

In this episode we cover: The agents’ mindset What they look for in people Questions to ask agents for better prices Tips to implement on how to make agents take your offers How to get the best price you can

42. PROPERTY BUBBLE? IS THE MARKET ABOUT TO CRASH? Where is the market headed, is Australian property in trouble?
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Description:

Is the bubble about to burst? Where are Sydney & Melbourne property prices headed?

In this episode we go through:

What a bubble is? How property cycles work and the current figures What the market has done historically Where we think it's moving forward to

As always, for the full show overview check out http://www.therentvestingpodcast.com.au/ or email us at jvecchio@redandco.com.au 

 



43. Rise of the Robots? Should I use Robo-Advice, ETF's and making money on Managed Funds?
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Description:

RISE OF THE ROBOTS!! This week we had a great question about ETF’s and managed funds. We're going to be looking at the pros cons and why you’d choose a managed fund or exchange traded fund. We're also covering the role of robots with our money, robo-advisers and what it entails. Finally, we'll cover what to look for in a financial advisor.



44. Can You Use Your Super As a House Deposit? What are the pros, cons and issues?
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Description:

This week, we get super political, we're talking about taking money out from your superannuation (super). This topic stems from how a lot of Australians are struggling to save for a house deposit, which is where super comes in.

In some cities with house prices are at all time highs and people having trouble saving a house deposit, therefore with money sitting in super there is a desire to access this. So we’re going to delve into whether it’s a good idea or bad idea to access super to pay for your deposit. The Australian Government are speaking about allowing people to access this money to fund their home deposit too.

Got any questions, comments and feeback? Hit us up at http://www.therentvestingpodcast.com.au/ and if you like the podcast please leave a review on Itunes or wherever you get your podcasts from.



45. How to get wealthy in property, shares and investing with Tony Robbins book Unshakable
http://rentvesting.libsyn.com/... download (audio/mpeg, 28.55Mb)

Description:
The Rentvesting Podcast is the ultimate property podcast that unpacks the facts and explains what's really going on in property.
 
It's not timing but time in the market that matters. This week, Jayden's been reading (shock, horror!). He came across a book by Tony Robbins - Unshakeable. In Tony's previous book, he wrote about how after the GFC a lot of people had issues, so he has written another book helping people get around that and get over the fears of what stops from investing and making money. 
In this episode we cover: How to be wealthy Getting over your fears The power of compound interest Trying to time the market, diversification.
 We're talking about some of the most common mistakes investors make—and how to avoid them.


46. Should I use the first home buyers grant? Pros, Cons, how people get stuck.
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Description: This week, the Victorian state government have made some changes to the first homeowners grant. This is a question were asked all too often - What is the first home buyers grant and should I get it? For more details check out the website http://www.therentvestingpodcast.com.au/

47. 8 SIGNS A SUBURB IS ABOUT TO BOOM (OR GO BUST!!)
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Description: Hey guys and welcome to this weeks episode of the rentvesting podcast. With auction clearance rates hitting highs of over 2,000 for the year, and clearance rates in excess of 77% how do you know if a suburb is about boom? Any smart investor will know that you make your money when you buy, not when you sell. In property, the key is to buy into a city or suburb that is about to boom, meaning you get in before prices rise and enjoy the wealth that comes from the growth. Unfortunately, it’s a lot easier said than done. If it was easy, everyone would be making a fortune from property. It can be very hard to tell when a suburb is about to boom, but there are a couple of key indicators that you should look out for.

48. HOW TO MAKE $2.20M PROFIT FROM ONE PROPERTY WITH PETER SWIZTER [REPLAY]
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Description: We've got one from the archives this week, we're talking to Peter Switzer. This has to be one of my favourite interviews of all time, lots of practical tips. This week we’re speaking to Peter Switzer, a published author, host of the Switzer Show on Sky Business News, former university lecturer, property investor, entrepreneur and employer that has over 50 staff throughout his various businesses. He has been involved in the property industry for almost his entire life, in the global financial crisis he bought a young women’s magazine and has helped to grow that too.

49. HOW DO I WIN IN PROPERTY? WHAT'S HOLDING YOU BACK AND MAKING AUSTRALIAN PROPERTY GREAT AGAIN
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Description: In this week's episode, Louis is speaking about trickle down economics. We saw a few articles about how less than 1 in 10 young Australians think they'll be better off than their parents will be, which was a Deloitte study conducted in 2016. One of the biggest concerns of Millennials is wealth, retirement and getting a job. Today we're talking about: What's holding back the economy and people as individuals What you can do to mitigate it The steps you can take today A few takeaway points

50. DOOM, GLOOM & RISKS IN PROPERTY. HOW TO MITIGATE & COVER OFF ON THE DOWNSIDE.
http://traffic.libsyn.com/rent... download (audio/mpeg, 30.02Mb)

Description: Welcome to the Rentvesting Podcast, the ultimate property podcast that unpacks the facts and explains what's really going on in property. In this week's episode, we're talking about risks involved and getting doomy and gloomy with it. Hang in there though, because we'll be covering: Risks in property Types of risks What these risks look like How to identify them How to mitigate them as best you can It's good to be aware of these sort of things, as the reality is, property hasn't gone up for everyone in every area. So being aware of risks involved is a key part of buying and selling.

51. SHOULD I INVEST IN SHARES? WHAT ARE THE RISKS & STRATEGIES INVOLVED?
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Description: In this week's episode, of The Rentvesting Podcast, Louis is sharing his share stories with us. We're talking about: An article we read about Millenials, who are buying shares and why that is What shares are Some of the risks when buying shares Why you would want to access them and how Don't forget to give us some feedback or drop us a line on Facebook here.

52. Want to know where to find high yielding property? We talk DHA, Student Acom, Granny Flats and more
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Description: In this episode we're talking about: What is a yield? Why is it important? The difference between the gross yield and mega yield Some strategies on how to unlock that yield We're looking at practical way on how to get more yield out of renovating, student accommodation, defence housing (DHA), granny flats and fully furnished properties. If you want more details to email us (jayden@therentvestingpodcast.com.au or louis@therentvestingpodcast.com.au) or send us a question on Facebook. We'd love to hear from you!

53. IS 2017 THE YEAR OF THE RENTVESTOR? PROPERTY TRENDS & WHERE IS THE PROPERTY MARKET HEADED?
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Description: Today we're covering the rise of the renters! Louis is going to take us through the history of property, looking at Sydney, Melbourne and Brisbane in the 70s, 80s, 90s and now. In this episode we cover: The rise of renters What power tenants have What landlords can do to counteract that Yield - leading into next weeks episode Also, if you didn't mind this episode (or even maybe liked it!), please leave a review for us on iTunes here, and if you'd like a visual guide on how to leave a review, check out these instructions here. It's 2017, and there are lots of news articles coming about covering renting. So today we're going to talk about the year of renters, going through a few different points, more specifically we're looking at affordability and demographics.

54. OUR BIGGEST MISTAKES: ROOKIE ERRORS WHEN INVESTING
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Description: Learn how to live where you want, but invest where you can afford. Welcome to the Rentvesting Podcast! This week we're speaking about our n00b errors we made as young, naive investors! In this episode, we're going to cover: - Speculating over investing - Not diversifying - Listening to the media - Over-leveraging - Over-captilising For more details and free tools check out http://www.therentvestingpodcast.com.au/worst-mistakes-when-investing-property or facebook.com/therentvestingpodcast

55. HOW WAS YOUR 2016? HOW TO MAKE 2017 YOUR BEST YEAR YET!
http://traffic.libsyn.com/rent... download (audio/mpeg, 26.33Mb)

Description: Sorry we got delayed in posting this!! But this is still very important to get this planning done for 2017!! In this week's episode, we're getting ahead for the year ahead. We're going to cover planning, setting goals and making 2017 your best year ever - including a FREE daily planner. See the link at the bottom of our post -What's the first step to an awesome year? -Think about what your goals are for this year. -Have a buddy! -What happens if you don't make plans? -How to beat procrastination? Also check this episode http://www.therentvestingpodcast.com.au/ for a great diary template to keeping yourself accountable or here - http://www.therentvestingpodcast.com.au/just-do-it/

56. HOW TO USE DEBT RECYCLING TO 10X YOUR PROPERTY PORTFOLIO
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Description: In today's episode, we're talking about a strategy called debt recycling. You can recycle your plastic and paper, AND also your debt. http://www.therentvestingpodcast.com.au/debt-recycling/ It's a long term wealth building strategy, it's not an overnight 'make $1M investment strategy', but the whole concept is that in most people's homes they have equity. For example, in your own property that you live in, all that debt is considered bad debt = non-deductable debt. Good debt is deductible debt. So the whole process is turning bad debt into good debt, over the long term. The other premise is investing now rather than waiting. Most people's whole strategy is trying to pay your home off as soon as possible but it does forego future wealth building. In this episode we cover: What is debt recycling? What is good and bad debt - the difference between them? How debt recycling works Some of the risks and common traps people get themselves into

57. HOW TO GO FROM ZERO TO 3 PROPERTIES IN 3 YEARS
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Description: In today’s episode we’re going to talk about the actual tips in buying 3 properties in 3 years going from nothing, and how it is possible to do without those ‘golden parachutes’. Firstly, the strategies on how to get that initial deposit, buy initial investment property and the rent and repeats strategy for property 2, 3 and so on. Depending on your dedication, serviceability and incomes you can definitely do this in 3 years. We’ll be talking about a few strategies and give you some practical hints and tips that you’ll definitely be able to put into practice straight away. Louis has some sweet calculators which we’ll talk about later. http://www.therentvestingpodcast.com.au/024-go-zero-three-properties-3-years/

58. Supplementary Ep - 6 Year Exemption Rule for Rentvestors (and capital gains tax)
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Description: Following on from our previous Rentvesting Podcast with Bianca from FInancy, Louis is taking us through the 6 Year Exemption Rule (which relates to capital gains tax) and how Rentvestors can take advantage of this in your future purchases.

59. MAKING FINANCE FANCY - WITH BIANCA HARTGE-HAZELMAN FROM FINANCY
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Description: Today we chat to Bianca Hartge-Hazelman from Financy. Bianca is a finance journalist and made the decision to start Financy - a women's money and finance magazine, but is also a firm believe in Rentvesting having written several articles on the topic and having lived the Rentvestors life herself. We chat through the reasons for Rentvesting, and a few tips she has for people looking at getting into the Rentvesting market.

60. How to find Rental Yield Opportunities & Brisbane's best buys with Joshua Coleman
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Description: Three's a crowd in today's episode. This week we've got Joshua Coleman - a valuer, buyers agent, finalist of 2016 Buyers Agent of the Year award. Josh breaks down a couple of things you wouldn't otherwise know when buying properties like the best and worst case's he's seen, and how to increase the valuation of your property and when not to. We go through - 1. For someone that sees a lot of deals, what are the worst deals you've seen? 2. What would be some signs you point out to people to spot a property spruiker? 3. Positives - what's the best deal you've seen? 4. What are some tips for people who are looking for a yielding asset? 5. Back to the yields, obviously a yield is derived from the price and obviously the market is pretty expensive for property at the moment, so increasing people's rentals. When you value a property, what were the major things that can increase or decrease the valuation? 6 .If you've got an investment property in the suburbs, what are some simple tips to extract the most value? 7. People are time poor, but what do you do differently to realestate.com.au - why do people go to buyers agent? 8. As you said, everyone wants to get rich quick. Do you find that you have to re-educate and focus on the long term view with your clients? Whats your set game plan? 9. What are some suburbs / opportunities in Brisbane?

61. SWEET LOAN STRUCTURING TIPS FOR RENTVESTORS
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Description: Action packed episode! Louis Strange and Jayden Vecchio are going to take you through how to set up your property portfolio correctly and their top five tips on what might sound simple, but are so critical when it comes to building a portfolio. Here are our sweet loan structuring tips for Rentvestors. Check out our awesome show notes here - http://www.therentvestingpodcast.com.au/sweet-home-loan-structuring-tips-rentvestors/ #Tip 1: Don't be a principal and interest (P&I) noob (Investment-specific) Tip #2: Don't speculate on interest rates! Tip #3: Sweet strategies to bullet debt Tip #4: Loyalty doesn't pay Tip #5: The most important tip: Never cross securitise.

62. Property Ownership Structures - 3 common mistakes to avoid
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Description: In this week's episode, we've got Jayden Vecchio and Louis Strange helping us crack the code of structures. Structures are the 'building blocks' you buy property in. Instead of buying your property in your personal name, you might buy it in a trust, a company or superannuation. We'll be running through the considerations, the major things you need to look at when deciding where to buy a property and how to structure that. Looking at asset protection, taxation strategies, exit strategies and the cost and complexity. We'll be running through the considerations, the major things you need to look at when deciding where to buy a property and how to structure it. We'll also be looking at asset protection, taxation strategies, exit strategies and the cost and complexity of it all. In this episode we cover: Companies, trust, super and individuals (pros and cons) Practical examples of this

63. Four steps on how to buy undervalued (cheap) property!
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Description: Jayden Vecchio and Louis Strange are going to be covering four practical steps for what you need to know to pick up a bargain in the property market. In this episode we cover: Knowing and understanding what the local market value is. Being deal ready, sorting out your financing. Working connections and using agents and other people in local areas to get you the best deal. Negotiating: Offering lower than what they are expecting. Bonus: The Four D's to get you the best deal

64. HOW TO OWN PROPERTY WITHOUT OWNING IT - WE TALK REITs
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Description: Today we talk REITs, or Real Estate Investment Trusts and other ways of owning and investing in property without having to physically own it, deal with tenants and large deposits. We go through a few different ways of getting into the property market quicker, and some smart ways of knowing the difference between listed, unlisted or garden variety real estate investment trusts.

65. HAVE YOUR AVOCADO ON TOAST AND EAT IT TOO! HOW TO GET A PROPERTY PLAN
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Description: We chat through Bernard 'The Silver Fox' Salt's avocado article, how rentvesting answers (and questions) a few of his points and what a property plan looks like! Change the way you think & get your property plan in place! If you are struggling to get into the property game then this episode is for you! Get your plan in place and get going! nrk93gdk

66. AUSTRALIAN PROPERTY OVERSUPPLY? HOUSING BUBBLE? WHAT DOES SUPPLY MEAN?
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Description: This week we speak about supply - A topic that has been recently pushed around the news with shock headlines of apartment oversupply, being in housing bubble and empty properties. We talk about what affects supply and how it impacts your investments!

67. AUCTION CLEARANCE RATES UP? PROPERTY IN HIGH DEMAND? WHAT IT ALL MEANS
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Description: Property in demand? Today we dive into the demand of property in Australia and explore the factors that cause prices to move.

68. GO GET FR**KED - 4 WAYS TO BUILD PASSIVE INCOME WHILE LIVING WHERE YOU WANT
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Description: An owner occupied home can be a liability, so build a passive income instead! Today we run through how you can build a passive income while living where you want!

69. WHY CONSIDER RENT-VESTING? THE POSITIVES AND FINANCIAL REASONS BEHIND IT
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Description: Your home can be a liability, so build a passive income instead! Today we run through how you can build a passive income while living where you want! Check out our calculators on http://www.rentvestingpodcast.com.au/

70. THE RENTVESTING CON - FIND OUT WHY YOU SHOULDN’T RENTVEST AND ALL OF THE NEGATIVES INVOLVED.
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Description: Time to get negative on Rentvesting! Today we will explore the downsides to rentvesting and why it can be a bad idea depending on your situation. We will cover the financial, psychological and practical cons to this strategy to make sure you are informed.

71. WHAT IS RENTVESTING AND HOW IT CAN ROCKET YOUR PROPERTY PORTFOLIO
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Description: What is rentvesting? Today we do a quick overview on what is rentvesting and why this concept is on the rise! We also discuss why we have changed our direction to focus on this important concept.

72. 004 - IS AUSTRALIA'S PROPERTY MARKET HEADED DOWN? FIND OUT IN THIS WEEKS EPISODE ON PROPERTY SNAKE
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Description: Sooner or later, we will be facing a property snake. That’s the topic of this week’s discussion with acclaimed property veteran Michael Matusik, and award-winning mortgage broker Jayden Vecchio. The snake refers to a property slide that, when it hits, most won’t be able to avoid. But it’s not all doom and gloom according to Michael – a property slide can present great investment opportunities – often better than when climbing a ladder. This is one discussion you won’t want to miss.

73. 003 - CLIMBING THE PROPERTY LADDER WITH MICHAEL MATUSIK AND JAYDEN VECCHIO
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Description: Many a fortune has been made (and lost) with the help of a property ladder....we're talking this week with property expert Michael Matusik and top mortgage broker Jayden Vecchio. What are those things that have propped up our economy and allowed some to achieve lucrative results through property over the last 20 years? What still applies today? And what do we think will still apply in two, five or even 10 years' time? Tune in as Michael Matusik discusses the good, the bad and the ugly of trying to make one's fortune in property.

74. 002 - WHERE IS THE AUSTRALIAN PROPERTY MARKET HEADED NEXT?
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Description: This week our property experts, Michael Matusik and Jayden Vecchio, talk about positions on the Property Clock. The clock tells you the time, whereas the property clock provides a sense of what to do, says Michael – well, at least our interpretations as to what might be the best course of action during each phase of the property cycle. It’s kind of like telling the time, but it’s not foolproof and it’s not the same for all markets at any given time. Listen and learn as Michael explains what to expect in each phase of the property cycle; and how there there’s one property clock for apartments and another for detached houses.

75. 001 - READING THE AUSTRALIAN PROPERTY MARKET WITH A PROPERTY CLOCK
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Description: Welcome to Property Radar and the first in our great new series with renowned market analyst and industry veteran Michael Matusik and multi award winning mortgage broker Jayden Vecchio. It's only fitting for our first podcast, that we start at the beginning.....not with the dinosaurs, but with the Property Clock. When he first started in the industry more than 26 years ago, Michael recalls, he was one of just a handful of analysts using the property clock. Now, everyone uses it, he says – but common sense and caution are required. Michael explains the value of this simple tool; how it's used; and what it can tell us. Just understanding the clock, he explains, will present opportunities to help investors and buyers make better property decisions.

76. 006 - PETER SWITZER ON HOW TO MAKE $2.20M PROFIT FROM 1 PROPERTY & TIPS TO GROWING A PORTFOLIO
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Description: GRAB A NOTEPAD - We speak with TV personality, host of Switzer Daily on Sky Business, former university lecturer, property investor and employer of over 50 staff through his various businesses. Peter tells us about some of the best property strategies he has seen used including how to find the worst house on the best street, how to look for the next ‘up and coming’ suburb and keep your eyes open and leverage some more successful investors research - Peter uses the example of Meriton which is run by Harry Triguboff who recently topped the BRW Rich list in 2016. If you want daily tips on how to build your wealth go to and learn more about Peter go to http://www.switzer.com.au/

77. 005 - MARK BOURIS' 3 SIMPLE TIPS TO BEING SUCCESSFUL IN PROPERTY
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Description: MASSIVE EPISODE - We speak with Mark Bouris, Chairman of Yellow Brick Road Wealth Management, Order of Australia recipient and TV personality. With decades of experience in finance and property, Mark shares with us his personal property story and how he got started in the market. Mark also shares his Top 3 Tips on being successful in the property market, and what he believes are the key drivers to owning a highly sought after property. Really really big show, and regardless of whether you are a first time property investor, experienced developer or seasoned veteran in the property industry you will find this chat invaluable and useful to help you make smarter property decisions. EPISODE TIMELINE 00:53 Welcome & overview 02:35 Today’s guest introduction – Mark Bouris 02:43 Interview with Daniel 20:00 My top 3 learnings from my chat with Mark 12:30 Wrap-up and insights in to next week’s guests

78. 004 - BUYING $110K UNDER A BANK VALUATION & 3 PRACTICAL + AFFORDABLE PROPERTY FACELIFT IDEAS
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Description: In this Episode we chat to Daniel Argent, owner of Urban Property (http://www.urbanproperty.com.au/) and winner of the 2015 REIQ Small Residential Agency of the Year, and REIQ Salesperson of the Year. With a background in law, and more than 12 years experience in property sales Daniel takes us through his personal property journey. We'll chat through Daniel's top tips on getting the maximum value from any property you buy, and how you can get the absolute best bang for your buck by doing some of the simplest things. Yep it's a massive show, and regardless of whether you are a first time property investor, experienced developer or seasoned veteran in the property industry you will find this chat invaluable and useful to help you make smarter property decisions. EPISODE TIMELINE 00:31 Welcome & overview 01:43 Today’s guest introduction – Daniel 02:43 Interview with Daniel 20:00 My top 3 learnings fro my chat with Daniel 23:25 Wrap-up and insights in to next week’s guests

79. 003 - FROM $60 to MULTIMILLION $ DEVELOPER - WHAT MAKES A GOOD PROPERTY PURCHASE BRENDON ANSELL
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Description: In this Episode we chat to Brendon Ansell, who arrived in Australia with $60 in his pocket and has since built one of Australia's fastest growing property development business Velocity Property Group - currently with over 11 projects on the go across South East Queensland giving him a really good understanding on what makes a good property. Brendon is a true renegade that thinks very different from the status quo. He gets to understand the local markets he is investing in and build homes that people want to live in, and not concrete jungles. It all starts with thinking about the end in mind. We’ll go through Brendon’s thought process when he is trying to pick potential up and coming suburbs, how he choses one suburb from another when investing and why you shouldn’t ever think about investing from overseas! Check out his business here http://www.velocitypropertygroup.com.au/ Yep it's a massive show, and regardless of whether you are a first time property investor, experienced developer or seasoned veteran in the property industry you will find this chat invaluable and useful to help you make smarter property decisions. EPISODE TIMELINE 00:41 Welcome & overview 01:01 Today’s guest introduction – Brendon 02:41 Interview with Brendon 21:23 My top 3 learnings fro my chat with Brendon 23:30 Wrap-up and insights in to next week’s guests

80. 002 - CREATING A PORTFOLIO OF 30 PROPERTIES + DEVELOPING $1BN WITH KEIRAN FOSTER
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Description: In this Episode we chat to Keiran Foster, who since having left university worked for several large developers and oversaw the acquisition, construction and sales of over $1Bn in residential projects across the Eastern Coast of Australia. Since leaving the corporate life a few years ago Keiran has personal built a portfolio of over 30 - yes Thirty properties in his own right. We’ll go through Keiran’s core investment philosophy, learn what areas he would never invest a single dollar in again and what has built him into the development machine that he is today. Yep it's a massive show, and regardless of whether you are a first time property investor, experienced developer or seasoned veteran in the property industry you will find this chat invaluable and useful to help you make smarter property decisions. EPISODE TIMELINE 00:41 Welcome & overview 01:01 Today’s guest introduction – Keiran 02:41 Interview with Keiran 21:23 My top 3 learning's from my chat with Keiran 23:30 Wrap-up and insights in to next week’s guests

81. 001 - DEVELOPING A $300k + PA PROPERTY PORTFOLIO & HOW TO BUY RIGHT WITH DAVID LAVERTY
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Description: In this Episode we chat to David Laverty, who after having lost $300k on the stock market has rebounded and built a property portfolio producing over $300k PA, as well as developed over 60 townhouses and apartments in the past 5 years. We get David's 3 simple but effective tips on developing a portfolio and a few clever ideas on how to buy right in property. So how is David any different from every other property developer? He sticks to developing and holding bread and butter properties that sell for the median house price in their suburb, and can always be rented - but thats not all. David has a few really critical tips on how to choose a suburb, the things to look for in the area and what can save you literally as a landlord. Yep it's a massive show, and regardless of whether you are a first time property investor, experienced developer or seasoned veteran in the property industry you will find this chat invaluable and useful to help you make smarter property decisions. EPISODE TIMELINE 00:41 Welcome & overview 01:27 Today’s guest introduction – David Laverty 03:05 Interview with David Laverty 17:53 My top 3 learnings fro my chat with David Laverty 19:28 Wrap-up and insights in to next week’s guests Music by bensound.com