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Episode 136 | Four Corners and Q&A – The Property Bubble, Being Burnt and Afraid to Invest: What Not to Do

Well folks, after Awe-Guest, it seems like a long time since our last Q&A!

So a lot of you have been writing in to us wanting to know our view on Four Corners’ recent episode on property investment in Australia, Betting on the House.

Now, there was a bit of doom-and-gloom in this episode and we want to talk about it.

To do this, we’re going to answer YOUR hard questions about property investment — the difficulties, the consequences of poor asset selection, bad property investment advice, the fear of debt and the “1 – 2 property block”.

 

Note: Ben’s reference to PIPA’s Framework on regulating Property Investment (very, very important stuff) can be found if you click here.

 

Today’s Questions!

Hot Markets & The Overall Economy from David:

Hi Team,

Wanted your thought on this “bubble” topic and the actions we see from ASIC and APRA with the banks.
The way I see it (I am an Australian working in Malaysia, with 1 property investment in WA and 1 being built in NSW Blue mountains) the rate increases are short-sighted and will hurt more than they help.
With increasing rates it means more money is pumped into paying debt. This means there is less for discretionary spending (going out, movies, dinners, gifts, holidays). With less mining and less manufacturing, Australia needs these service based industries to grow. With less spending on them, due to rates, they will shrink — this in turn hurts our overall economic situation … almost starts to lead us down the “R” word path and a certain “bubble” correction.

Would it not be better to strict things in Sydney and Melbourne markets as a standalone action by:

  1. Restricting bank refinancing and equity accessing for those hot markets – ensure LVR at 70% minimum for a refinance
    2. Ensuring all investment purchases in those hot markets have 20 – 25% deposit minimum
    3. Assessing loans for investment on 10% interest rate for P&I
    4. Limiting foreign investor purchasing in the hot markets?

This will mean the wider economy can continue, other markets needing a boost can see a rate cut maybe, and first home buyers in ‘hot markets’ do not get squeezed out.
Is it that easy?

 

Asset Selection (Numbers versus Emotions?) from Anne:

Thanks for your fascinating podcast! Just had a quick question regarding looking for investment property. I often hear that the property should have owner/occupier appeal, and yet I also hear that you need to take your emotions out of the equation and just look at the numbers! How do you balance these seemingly conflicting ideals? I am trying to just look at the numbers on an area, which I personally would not live in, and am finding it difficult.

 

Why Most Investors Stop At One from Andrew:

Hi Ben, Bryce and Ivise,

My question is about moving onto the 2nd property. I have often heard statistics such as the overwhelming proportion of property investors stop at 1 investment property. I understand that cash flow is king. I really want to know why or how investors get “stuck” after 1 or 2 properties. Is it their fear of debt or high LVRs? Obviously, the serviceability assessment by banks and recent government changes and APRA regulations has put a slow down on the investor space but these statistics were around long before the changes.
I am of the belief that you purchase what you can afford, manufacture some equity, wait for your property to grow in equity to move on again, and again, and again …
I don’t mind sharing my details as there would probably be many listeners out there in similar situation:

I am 33, single income family on $110,000 a year — currently renting in regional QLD due to work. I used a buyer’s agent to purchase my first investment property, a 3 bed, 1 bath and 1 garage in Birkdale QLD on a corner block in March 2017 for $455k. The property manager had it rented in under 2 weeks of being on the market. It currently has a 4.9% gross yield. There is $65k in the redraw, which means the property is neutral, which is good as it is in a trust. Further to this, I am adding an additional $1400 a month to the redraw. I will be ready to go again in a few months. (Yay?) I plan on adding a bathroom and bedroom to the property after the tenants finish their 12 month lease. My strategy is to buy, renovate, hold.
I really hope to receive some information about the “1 – 2 property block”. If this question makes it to a podcast, I’ll be very satisfied as I know many investors would have this question.

PS – Bring back the sign off in different languages!
PPS – awesome book — read it twice already

 

 

Episode 131 | How Did He Turn $4,500 Into A Multi-Million Dollar Property Portfolio?- Chat with Victor Kumar, Partner at Right Property Group

What would you do if you arrived from Fiji to Australia with only $4,500 to your name and little else? Well, that’s exactly what today’s guest, Victor Kumar, Partner at Right Property Group, and his wife did in 1997. And their story is truly extraordinary! Within 1 and a half years in Australia, the radiographers—thanks to reading The Wealthy Barber and Building Wealth Through Investment Property, learning as much as they could about property investment, lots of hard work coupled with a steel determination —had secured their own PPOR as well as 11 investment properties!

Here to explain how he did it, the co-host of Investing Insights with Right Property Group podcast, Victor Kumar, explains:

  • How he chose a mortgage broker to get the loan he was first rejected for
  • Who to take your advice from (aside from Jan Somers and David Chilton)
  • The difference between money and mindset, and why goal setting is crucial:

“The very first thing is: you’ve got to sort out your goals—why you’re doing it and what are you aiming for—before you start the journey. Most people start the journey and then try and get the GPS up-and-running to say we’re they’re going.”

  • Victor’s reason “why” he invests in property—and why it is crucial to know your “why”
  • A simple, easy habit anyone can do to outsmart a spruiker and determine if the property seminar is genuine
  • His investment strategy, how he accumulated such a ginormous portfolio and if he would do it again
  • A few of the mistakes and lessons learnt while building his portfolio (and they’re hilarious!)
  • When to DIY and when to always pay for professional services
  • What factors to consider if you are investing in the outer suburbs?
  • His renovation “Life Hack” and why it’s the most important renovation tip to add value
  • What are the three things that can ruin a property portfolio?
  • How to manage multiple investment properties and the problems with investing in too many properties
  • Special: Victor unpacked an amazing tip at the 55-minute mark. So make sure you don’t miss that!

 

Note: Victor brought enough gold to the couch to create a mining town … let us know if you agree! What to do and what never, ever to do … wooooaaaah, thanks Victor!

 

Some other resources for our fellow listeners:

  • Our chat with Steve Waters back in Episode 42 – Listen here
  • LocationScore’s Launch Offer is expiring this Sunday, 20th August 2017! (Code: TPC20)Check it out here

 

Episode 124 | Q&A – 20 minutes Saved 20 Years of Regret, Investing in Airbnb, Property Spruikers, Buying Cash Flow Only and the Cost of Commission

Alright folks, it’s that time again … you ask, the boys answer!

After receiving a tabletop full of new topics, we’ve taken our que this week behind an anonymously-sent testimonial. Turns out an earlier podcast Why You Shouldn’t Invest in Property saved our listener from being “sold a lemon by a spruiker”! Yep. Unfortunately guys, the property spruikers are still out there, so Bryce & Ben will be answering similar questions on the red flags to look out for, like:

  • How to sniff out the so called “educators” and get your trust back
  • What your next move should be to fix bad property advice
  • How 20 minutes stopped 20 years of regret
  • What the consequences are with ‘fee for service’ and ‘working for commission’
  • Why the right asset selection can flip the spruikers on their heads
  • What the finance in the first two stages of property investing are
  • Why negative gearing is really only a moment in time
  • How long and how many properties do you need in the accumulation phase
  • What ‘buying only for cash flow’ is, and its risks and rewards
  • Investing in regional area and factors to consider
  • How to spot the difference between a genuine property educator vs a spruiker

and (SUPER TOPICAL)

  • Airbnb Investment: Is it worth considering them?

This is a goodie, especially for those who don’t want to feel the sting of bad investing!

(For those who want to know the website Ben talks about, it’s PIPA.)

 

The questions we’ve handpicked are from:

 

Listener Anonymous (as continued from their nightmare situation, which the boys will read out):

… We have about $200,000 of available equity, but we are now not sure what our borrowing power is as our previous broker was also linked to the spruikers and we don’t trust what they’ve told us. In your opinion, what should our next move be? Ideally we’d like to invest in Melbourne or Sydney but are not sure if it’s the right time to get into these markets.

 

Andy:

Can you guys talk about the finance in the first two stages of property investing? How do we go about understanding the numbers eg loans, consolidation and what is involved how everything works with the finance and loans, what to do with the loans from accumulation stages to consideration stages and onwards?

 

Jonathan:

Hi guys. I’ve recently started listening to your podcast and think it’s great. I’ve recently attended a seminar with ‘XYZ’ company, ‘XYZ’ Education they call themselves. Just wanted to know if you had heard anything about them? I understand there are many of these ‘mentors’ out there—those that are ‘fee for service’ and those that work off commission. These guys are the later. Any thoughts, comments would be greatly appreciated. Thanks in advance.

 

Kate:

What do you think about the idea of buying for cash flow only? I live in Adelaide and there are many areas within 60 – 90mins of Adelaide where you can buy quality character properties for less than $250,000. If only earning an average income, and planning to buy and hold for 15 – 20 years, do you think a larger portfolio of properties like this may be less risky than one or two closer to the CBD, which will have substantial holding costs?

 

Eddie Airbnb:

Hi. I am an avid listener to your podcasts and I started listening to them since 2015, but I have stopped for a year. I have recently bought another investment unit and have started listening to them again. I am currently at episode 51 and it is great because I can listen to them nonstop without having to wait for the next one to arrive in my podcast. Great work, I really enjoy your shows.
I have a question regarding Airbnb. I know it is not aligned with your property investing strategy and overall investing mantra. But recently, it has taken the property market by storm and there are many investors who are doing this to become positive cash flow. It is sort of the elephant in the room and there is a lot of talk about it out there, whether it is in high-rise holiday resort, or brick and mortar family homes. People are doing it. I have recently bought an apartment (yes: high rise, high density, tourist destination, lifts and caretaker) and so far I am cash flow positive, after netting all costs including cleaning, rates and body corporate. I only manage the bookings of the apartment and outsource everything to a cleaner who doubles up as my meet-and-greet host. I also have insurances to cover those times when needed, and I do everything above board.
I would like your views on how your look at Airbnb investment as part of an investment strategy—if it is something that you are interested at discussing.
Thanks.
If you like this Q&A episode (A Transitioning Market, Money, Habits, Tax Deductions and What It’s Really Costing You), don’t forget to rate us on our iTunes channel (The Property Couch Podcast) and our Facebook page. Any questions or ideas? Feel free to drop us your thoughts here: http://thepropertycouch.com.au/topics/

Episode 122 | Q&A – A Transitioning Market, Money, Habits, Tax Deductions and What It’s Really Costing You

It’s that time again … a few questions from you and a few answers from the boys!

Oh, before we give you a tiny tease about today’s podcast … just a huge shout out for being SO supportive about our technical glitch last week. Our inbox was flooded with all of your emails and concerns—please know that our hearts’ burst (with love) and we missed you all too! We really did. But we’re back and better than ever this week. (With an epic guest next Thursday we’ve got The Stig running the server like a pro.)

Right … to today’s Q&A! It’s the time of a transitioning market. So things are starting to balance out in the property scene. The boys will fill you in on the nitty gritty; but, guess what? This is an empowering time for buyers!

Think Question. Think Answer. Think Golf. Blame Bryce for his legendary metaphors.

 

  • Question on debt reduction from Allen:

I am trying to get into a better money management system and have just a few questions.
I currently have 1 personal loan of $22,000 and 2 credit cards both roughly $5000 each. In your previous podcasts about credit card management and The Money SMARTS System you suggest paying off whichever debt charges the most interest first. Well, the personal loan charges more than the credit cards in the long run and has more to pay off although the credit cards are of smaller amount but it is still high, which would you recommend paying off first?

  • Question on how to work out a property’s true value from Laura:

When monitoring an existing Investment Property’s capital growth, and trying to do this in an objective, non-biases and reliable method, can you please compare and contrast—get the advice—just relying on a real estate agents sales appraisal vs. a proper bank valuation?

My wife and I bought a house (PPOR) in Croydon Vic 2.5 years ago, which has since appreciated by nearly 20%. We are looking at buying our first investment property this year, around mid-year. We had a child last year, my wife will be going back to work part time mid-year and is currently on maternity & LSL. My salary will be about $100k more than hers.

Will it make sense to get the investment loan out in my name so that the losses can be claimed against my greater income? For some reason she is apprehensive about this idea, which I’m not sure why because we are married anyway and the titles can still be put in both our names even though the finance is in my name. Is this worth considering this or should everything just be in both our names, joint loans the like?

 

And here are the Free Resources mentioned in today’s podcast:

 

If you like this Q&A episode (A Transitioning Market, Money, Habits, Tax Deductions and What It’s Really Costing You), don’t forget to rate us on our iTunes channel (The Property Couch Podcast) and our Facebook page. Any questions or ideas? Feel free to drop us your thoughts here: http://thepropertycouch.com.au/topics/

Episode 119 | The Power of Compounding

Smart Money Management. Savings. Leverage. Compounding interest.

That is basically what we are talking about in today’s podcast as inspired by two of our listeners who wrote in. Now, rewind a few episodes, and you’ll find the boys quoting Albert Einstein famous words, “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.” And today’s focus is all about getting the foundation RIGHT, finding the SWEET spot for your money management habits and understanding WHAT delayed gratification is all about.

One of the questions that we asked the listeners today is,

Would you take a million today or take a cent now and double the amount every day for the next 30 days?

Tune in to find out the numbers behind this question and here are the Free Resources mentioned in today’s podcast:

 

Just in case you’re wondering, here’s what the two listeners wrote in:

 

  • From Chris:

Hey guys. Love the podcast. I’ve told so many people about you guys. Out their flying the flag. One day I’ll probably knock on your door for a job. Seriously.

I find that one of the biggest advantages/disadvantages to building wealth can of be determined as to whether you are or aren’t on the same page as your partner when it comes to finance and household spending. I meet so many people in life who are either money savvy (to some degree) or they just aren’t. I love that we all have different passions in life, it makes the world go round, but wouldn’t it make life, relationships and wealth building easier if we all LOVED the concept of making our money work harder for us. We were all money SMART 🙂 *Thanks rubbish Australian education curriculum!

So my challenge is to you. Not an easy one. Do one podcast that in the most effective mainstream fashion, gives those that aren’t ‘interested’ yet, just a taste of how they MUST be money smart. Because…it is not actually that hard, how it can impact their lives so dramatically and how they should take a bigger interest in how to make their money work for them now if they want options of living a wonderful life. A life of experiences. Inspire them. One podcast I can make my loved ones listen to, to try flick that switch in them to take more control of their finances with joy. Like when I read Rich Dad Poor Dad. I know how amazing compound interest is, I know how amazing leverage is, but so many people just don’t. Therefore they don’t know why they should be delaying gratification. So they simply choose to spend.

In a time that is crazy busy for you guys building a business and living your own family lives, well done on giving so much back to society. You will never know how great an impact you have had on generations to come.

 

  • From Greg:

Hi Guys

I just watched the first video you’ve done with realestate.com.au. Congratulations on the partnership and great work as usual.

Just one comment on the first video. The savings/investment glass got filled with what was left over. This goes against many of the gurus (The Richest Man in Babylon, Robert Kiyosaki etc) who all say “pay yourself first”. So, in the video, the savings/investment glass should have its share first (whatever amount the person has decided) and then the other glasses divide up what’s left over.

Keep up the great work.

 

If you like this episode (The Power of Compounding), don’t forget to rate us on our iTunes channel (The Property Couch Podcast) and our Facebook page. Any questions or ideas? Feel free to drop us your thoughts here: http://tpcaustralia.wpengine.com/topics/

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