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Episode 075| Q&A – RBA Rate Cut, Planning for Reduction in Income and Bidding Tactics at Auction

This week on The Property Couch Podcast, we are going through some of our listeners’ questions. But before that, Bryce and Ben will be discussing the 25 basis point cut passed on by the Reserve Bank of Australia early this week. How will this impact the Australian Economy, how much have the banks passed on and will there be any flow-on effect on the Australian household?

Here are the questions for today’s podcast:

  • Question on planning for a reduction in income from Matt: How do you plan for a reduction in income when you are still a reasonable distance from retirement and would it be wiser to maintain current income for long term potential or is there a process that could be applied?
  • Question on bidding tactics at auction from Adam: I was hoping in your next Q&A perhaps Bryce might be able to address the topic of bidding tactics at auction. Most of the tips and strategies you read amongst the property press propaganda are ridiculous things like dress in a suit and pull up in a sports car out the front. In your experience is there any value in these sorts of image approaches? or concepts such as ‘knockout bids’ and bidding late, or are auctions pre-determined events going to whoever was always going to pay the most. I know you will say the gold standard is to employ a buyers agent but I’d be interested in your tips for someone keen to DIY.

 

Some of the resources mentioned in this podcast:

 

If you like this Q&A episode (RBA Rate Cut, Planning for Reduction in Income and Bidding Tactics at Auction), 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/

Episode 064 | Case study: mid 30s couple, combined income of $150k p.a, existing PPOR and two IPs

It has been quite some time since our last case study so this time on The Property Couch, Bryce and Ben will be discussing one the case studies that we’ve received from our fellow listeners! Here’s what Tom wrote to us:

 


 

After listening to Episode 56 where you discussed various other case studies I thought I might write in to see if you were interested in discussing our situation. I’ll try and keep it short!

Basically, my partner Kirby (30yo) and I (32yo) are both teachers on a combined income of about $160k. 3 years ago we got the bug to do something with our money but weren’t exactly sure how. Our simple goal is to have choice whether to work or not. If we had no loans to service we imagine a passive income of $80-100k would be more than enough, and any more is a bonus!

We had a PPOR property valued at a tad over 300k with a mortgage of ~200k, limited other expenses and a disciplined approach to spending. Property sounded like a great avenue so we went about increasing our knowledge. Unfortunately our naivety led us to a property investment ‘education’ group where although we have learn a lot we have made what we think are two poor investment decisions. We overpaid for both to fatten the developer’s margins.

Our first was brought using the above equity in our PPOR and was a House and Land duplex in Dakabin, Qld for circa $500k. Although the yield is decent there were many costs that the property investment ‘education’ group failed to mention/understand that we have been left with, and there is little scarcity or owner occupier appeal to make growth a good prospect. We have always had tenants in both sides which has been great. We borrowed 90% on interest only terms.

About 18 months ago we signed another contract, this time on a 4 bed H & L in Doolandella, 18kms out of Brisbane for circa $400k. After a long land settlement this was completed yesterday and will be advertised for rent tomorrow. Looking at about a 4.9% yield. Again, this is on an interest only loan at 90%. Deposit and costs were paid from our savings – I know, huge mistake!

Right after we signed this contract we found your podcasts which have taught us that there are so many fundamental errors in our property selections, and if we had our time again would have purchased existing properties with scarcity and owner occupier appeal.

We have just had our first child and Kirby is now off work. We have a ~$45k buffer in our PPOR offset and somehow are still managing to save, even though Kirby is off work, although receiving maternity leave payments.

We use a credit card to pay for 95% of our spending, and repay at the end of every month to ensure no interest payments.

So, we are still very keen to use property as our investment vehicle and have learned so much in the last year but are now stuck as to our next step. We doubt we would have enough equity to purchase again now and the fact Kirby is off work will severely hamper our serviceability. She will return to work at the start of 2017.
Questions:

  • Do we sell both/one of our current properties? We’d like to keep if possible as I am a firm believer in buy and hold, although will they hamper us moving forward?
  • Where to from here?

Any information from you would be extremely appreciated. I’m sure there are a number of people who have used ‘property spruikers’ such as these to purchase less than ideal investments.


 

If you like this case study episode (Mid 30s couple, combined income of $150k p.a, existing PPOR and two IPs), don’t forget to rate us at 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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ps: For those of you who have stumbled on to this post, please do check out Episode 60 where Bryce & Ben discuss about building a property portfolio through rentvesting.

 

 

Episode 53 | The Money SMARTS System

By now, our listeners should understand the importance of good money management habits. It is the core of building a successful property investment portfolio and has been reiterated multiples times throughout this podcast.

Since episode 3, as part of the Four Pillars of Mastery, Bryce and Ben have talked in various occasions about Cash Flow Management and the flow of money in your household. This includes where money comes from, types of spending and types of investments for your surplus. In episode 41, they talked about the moving parts of cash flow management otherwise known as the money and accumulation model. This model looks at variables and assumptions to consider when you’re modelling sophisticated money and wealth outcomes.

Ep 53 Money SMARTS system - which account do I use - picOn page 58 of the Armchair Guide to Property Investing, they introduced the money SMARTS system. It’s a money management system and the name stands for Surplus, Mindset, Application, Resources, Timelines and Strategy. The book provided an overall summary of each section and also some tips on how you can set up this account structure yourself. But we’ve received some feedback that our readers would like us to explain this little bit more so that is exactly what Bryce and Ben have done in this podcast.

As an extension of the money SMARTS system, we are also sharing a “cheat sheet” on which account to use for different types of expenses. Just fill in your details below and we’ll send you the link to download it.

 

 

Money SMARTS System | Cheat sheet

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If you like this podcast: “The Money SMARTS System”, don’t forget to rate us at our iTunes channel (The Property Couch Podcast) and our Facebook page. If you have any questions or ideas, feel free to drop us your thoughts here: http://tpcaustralia.wpengine.com/topics/

Episode 041 | The Moving Parts of Cash Flow Management (Money & Wealth Accumulation Model)

Money & Wealth Accummulation Model - FinalThis week on The Property Couch, Bryce and Ben discuss about the moving parts of a cash flow management strategy. As compared to Episode 3 (Four Pillars of Mastery – Cash Flow Management) where we talked about the flow of money, this podcast is mainly about the Money and Wealth Accumulation Model. It includes the variables and assumptions to consider when modelling sophisticated wealth outcomes. As this topic can be fairly detailed, we strongly recommend our listeners to have the diagram open while listening to the podcast.

We will also be answering this question from Bradden:
You often refer to paying down debt during your talks as a means of creating passive income. Is there a strategy of paying down debt on your rental properties? Is it just as simple as paying P&I? Do you only start paying down debt once you have finished your accumulation phase? Does this only happen when you start to sell one of your properties? I’m interested in hearing your thoughts on paying down debt.
PS: Ben’s not a bad bloke for a Collingwood supporter.

 

This topic is also discussed in Part Three (Section 10) of our book: The Armchair Guide to Property Investing. For those who have the book, you can also refer to page 219 for additional reference. And here’s the video mentioned in the podcast:

 

 

Free resources mentioned in this podcast:

 

If you like this episode, don’t forget to rate us at 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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