1 00:00:10,000 --> 00:00:12,879 Speaker 1: Hello, and welcome to the Money Puzzle podcast. I'm James 2 00:00:12,960 --> 00:00:16,440 Speaker 1: Kirkby well T editor at The Australian. They welcome aboard everybody. 3 00:00:16,600 --> 00:00:19,440 Speaker 1: I don't know about you, but the most entertaining interesting 4 00:00:20,360 --> 00:00:22,840 Speaker 1: story financial story I thought in recent days. And by 5 00:00:22,840 --> 00:00:25,760 Speaker 1: the way, there's been a few round if you follow 6 00:00:25,800 --> 00:00:29,760 Speaker 1: a minrais, if you follow wisetech. But for me, certainly 7 00:00:30,040 --> 00:00:33,120 Speaker 1: on the property side, had to be the Prime Minister's 8 00:00:33,320 --> 00:00:36,640 Speaker 1: ill timed moved by a house by the sea four 9 00:00:36,640 --> 00:00:40,479 Speaker 1: point three million dollars at Copacabana Beach there in central 10 00:00:40,560 --> 00:00:43,559 Speaker 1: New South Wales. And here's the thing. It was a 11 00:00:43,600 --> 00:00:47,240 Speaker 1: bargain right the Prime Minister. Let's make it clear about 12 00:00:47,240 --> 00:00:51,360 Speaker 1: this house. Whatever the controversy is. Politically, he paid considerably 13 00:00:51,440 --> 00:00:55,520 Speaker 1: less than the previous owner who bought it about three 14 00:00:55,560 --> 00:00:58,360 Speaker 1: and a half years ago for four point six The 15 00:00:58,560 --> 00:01:01,080 Speaker 1: Prime Minister got about three hundred thousands off there. So 16 00:01:01,280 --> 00:01:04,480 Speaker 1: politically you wouldn't describe it as a good deal or 17 00:01:04,520 --> 00:01:07,600 Speaker 1: even a good idea. But hey, as an investment it's 18 00:01:07,600 --> 00:01:11,720 Speaker 1: pretty good. Now. Every spring who can resist this, including 19 00:01:11,760 --> 00:01:13,440 Speaker 1: the PM, who can resist it? The lure of the 20 00:01:13,480 --> 00:01:16,280 Speaker 1: holiday home there you're working on your ETFs and your 21 00:01:16,319 --> 00:01:18,920 Speaker 1: dividends and your tax returns, and it's all very dry 22 00:01:18,959 --> 00:01:20,360 Speaker 1: and it's all up in the cloud and no one 23 00:01:20,400 --> 00:01:22,319 Speaker 1: sees anything. And you buy a holiday home and hey, 24 00:01:22,360 --> 00:01:24,480 Speaker 1: you can sit on the veranda. You can sit on 25 00:01:24,520 --> 00:01:27,520 Speaker 1: the veranda with your friends. Bricks and water. A lot 26 00:01:27,680 --> 00:01:31,600 Speaker 1: to be said for it. So I decided I should 27 00:01:31,640 --> 00:01:33,880 Speaker 1: have a guest on who is not just able to 28 00:01:33,920 --> 00:01:36,319 Speaker 1: advise on things, not just across this, but it has 29 00:01:36,440 --> 00:01:39,680 Speaker 1: direct first end experience and all this something we've often 30 00:01:39,720 --> 00:01:43,480 Speaker 1: talked about. Actually, it's James Gerard Financial Advisor dot com 31 00:01:43,520 --> 00:01:46,160 Speaker 1: dot you Hi, James, how are you hello? Good? 32 00:01:46,240 --> 00:01:48,480 Speaker 2: Thanks for having me on the Pleasures always. 33 00:01:48,800 --> 00:01:51,480 Speaker 1: Do you know that's part of the world, the Central 34 00:01:51,560 --> 00:01:55,560 Speaker 1: Coast where the PM has a body's cliff top plot. 35 00:01:56,520 --> 00:02:00,440 Speaker 2: I do know it very well. I my accountants up there, 36 00:02:00,480 --> 00:02:02,280 Speaker 2: so I go up there to see the accountant. But 37 00:02:02,440 --> 00:02:04,480 Speaker 2: I had a holiday house not too far from there 38 00:02:04,520 --> 00:02:06,080 Speaker 2: as well, so I know that part of the world. 39 00:02:07,080 --> 00:02:10,560 Speaker 1: Then you're going to be ideal to be interrogated on 40 00:02:10,680 --> 00:02:13,079 Speaker 1: the wisdom strictly from an investment point of view of 41 00:02:13,080 --> 00:02:15,079 Speaker 1: the holiday home. It is funny, isn't it. In spring 42 00:02:15,240 --> 00:02:18,720 Speaker 1: it's only human. That's when all the holiday houses come online. 43 00:02:19,280 --> 00:02:21,760 Speaker 1: That's when the season is. Spring is the season for 44 00:02:21,840 --> 00:02:25,040 Speaker 1: all auctions, but particularly for holiday homes, because that's when 45 00:02:25,040 --> 00:02:27,280 Speaker 1: everyone starts to think about them. You don't see many 46 00:02:27,280 --> 00:02:30,639 Speaker 1: for sale in May or June, where the market completely 47 00:02:30,680 --> 00:02:33,760 Speaker 1: goes flat. So first of all, I thought that was 48 00:02:33,880 --> 00:02:36,639 Speaker 1: very interesting that I think a first class property really 49 00:02:36,639 --> 00:02:38,079 Speaker 1: and if you look at it, it looks like you 50 00:02:38,160 --> 00:02:39,760 Speaker 1: paid it off four point three but if you look 51 00:02:39,800 --> 00:02:44,720 Speaker 1: at it closely, it's a hilltop, it's a cliff top plot. 52 00:02:45,320 --> 00:02:47,600 Speaker 1: And I don't think anybody has any dispute with how 53 00:02:47,680 --> 00:02:50,480 Speaker 1: much he paid. Not everyone could pay that. But we 54 00:02:50,560 --> 00:02:53,680 Speaker 1: know Anthony alban is a big time property investor. We 55 00:02:53,800 --> 00:02:57,480 Speaker 1: know this. We know he has a considerable investment property portfolio, 56 00:02:57,560 --> 00:03:01,040 Speaker 1: residential property exactly what we talk about every week. It 57 00:03:01,080 --> 00:03:04,000 Speaker 1: would be well across negative gearing. He even had to 58 00:03:04,160 --> 00:03:09,520 Speaker 1: evict a tenant, which anybody would find uncomfortable excruciation, probably 59 00:03:09,760 --> 00:03:11,600 Speaker 1: if you're a politician. But he had to evict a 60 00:03:11,639 --> 00:03:15,200 Speaker 1: tenant from his place last from one of the places 61 00:03:15,480 --> 00:03:18,079 Speaker 1: a few months ago. So that's the sort of downside, 62 00:03:18,080 --> 00:03:21,720 Speaker 1: isn't it. That's the hard part of property investment. So, James, 63 00:03:21,800 --> 00:03:23,720 Speaker 1: if I've got it right, you had a holiday home 64 00:03:24,280 --> 00:03:26,920 Speaker 1: and now you don't have a holiday home, and so 65 00:03:27,040 --> 00:03:31,360 Speaker 1: I imagine you're not exactly a holiday home flag waiver. But 66 00:03:31,400 --> 00:03:34,560 Speaker 1: maybe I'm wrong from an investment point of view. First 67 00:03:34,560 --> 00:03:38,320 Speaker 1: of all, what's your approach or attitude towards them. 68 00:03:39,720 --> 00:03:44,680 Speaker 2: They can be good because you have a personal aspect 69 00:03:44,960 --> 00:03:47,520 Speaker 2: to it in that you get to go to the place. 70 00:03:47,880 --> 00:03:49,400 Speaker 2: And also, let's just be blunt about it, you have 71 00:03:49,480 --> 00:03:51,920 Speaker 2: bragging rights. You're standing around at a barbecue on the wakend. 72 00:03:52,160 --> 00:03:55,880 Speaker 1: I alluded to bragging rights at the start. Yeah, but 73 00:03:56,040 --> 00:03:58,040 Speaker 1: you and I are above bagging bragging rights. So let's 74 00:03:58,040 --> 00:04:00,920 Speaker 1: talk entirely theoretical here and the money point of view. 75 00:04:01,280 --> 00:04:03,000 Speaker 1: So they can be good. Why can they be good? 76 00:04:03,040 --> 00:04:05,960 Speaker 2: YEA, the good because it's a mixed asset. You have 77 00:04:06,040 --> 00:04:09,760 Speaker 2: the ability to have personal enjoyment from that property. You're 78 00:04:09,760 --> 00:04:13,200 Speaker 2: saving accommodation elsewhere by using your holiday house. But also 79 00:04:13,280 --> 00:04:15,480 Speaker 2: could be a good financial investment depending on how you 80 00:04:15,520 --> 00:04:19,159 Speaker 2: treat it. If you rented out on short term let insights, 81 00:04:19,200 --> 00:04:21,440 Speaker 2: while you're not using it, you're generating income from the 82 00:04:21,440 --> 00:04:25,800 Speaker 2: property and also grating hopefully capital growth as well. But 83 00:04:25,880 --> 00:04:28,840 Speaker 2: then some people they stay there a week in the 84 00:04:28,920 --> 00:04:31,800 Speaker 2: Christmas holidays, stay there over Easter, lock up the house 85 00:04:31,800 --> 00:04:34,480 Speaker 2: when they leave, and then it just stays vacant after that, 86 00:04:34,600 --> 00:04:36,839 Speaker 2: and they're a little bit more of a money pit 87 00:04:36,880 --> 00:04:40,039 Speaker 2: because they're paying council rates the pain for repairs. There's 88 00:04:40,040 --> 00:04:42,000 Speaker 2: a higher chance the property will get broken into because 89 00:04:42,040 --> 00:04:44,080 Speaker 2: people in the area know that it's a holiday house 90 00:04:44,120 --> 00:04:46,520 Speaker 2: and no one's using it. The only thing that has 91 00:04:46,520 --> 00:04:49,440 Speaker 2: going for it is that the capital growth. If that's happening, 92 00:04:49,600 --> 00:04:50,120 Speaker 2: so they. 93 00:04:49,960 --> 00:04:50,520 Speaker 1: Can be good. 94 00:04:50,800 --> 00:04:53,719 Speaker 2: And you mentioned that I sold my one, which I 95 00:04:53,760 --> 00:04:56,520 Speaker 2: did a couple of years ago during stufter COVID, because 96 00:04:56,560 --> 00:04:58,800 Speaker 2: what I've noticed was that the market pretty much doubled 97 00:04:58,839 --> 00:05:00,920 Speaker 2: in the space of a year and a half because 98 00:05:01,040 --> 00:05:04,000 Speaker 2: people were flocking out of Sydney, going up the coasts, 99 00:05:04,200 --> 00:05:06,839 Speaker 2: going we're never going back to the office again. Interest 100 00:05:06,880 --> 00:05:08,800 Speaker 2: rates it were low, all the conditions were right for 101 00:05:09,040 --> 00:05:12,000 Speaker 2: growth in those coastal properties, and that's exactly what happened. 102 00:05:12,279 --> 00:05:14,159 Speaker 2: So I thought, great, let us take that that profit. 103 00:05:14,240 --> 00:05:16,960 Speaker 2: And since that point in time, seeing big corporates forcing 104 00:05:17,000 --> 00:05:19,240 Speaker 2: people back to the office, and there's been a bit 105 00:05:19,279 --> 00:05:22,279 Speaker 2: of weakness in that coastal market, and astute property investors 106 00:05:22,320 --> 00:05:24,840 Speaker 2: like the PM himself have jumped in, so it's actually 107 00:05:24,839 --> 00:05:26,920 Speaker 2: probably not a bad time to be buying these sort 108 00:05:26,960 --> 00:05:29,719 Speaker 2: of coastal holiday regional type areas. 109 00:05:30,320 --> 00:05:33,400 Speaker 1: Exactly. You timed very well, and I suppose to flow 110 00:05:33,480 --> 00:05:35,440 Speaker 1: back to the city. Did happen? Probably a bit slower, 111 00:05:35,480 --> 00:05:38,400 Speaker 1: I imagine that you thought, or anyone thought, it's still slower. 112 00:05:38,440 --> 00:05:41,080 Speaker 1: But I was talking to another regular guest on the show, 113 00:05:41,120 --> 00:05:44,000 Speaker 1: Eliza on and had a research a core logic, and 114 00:05:44,080 --> 00:05:45,760 Speaker 1: I was saying, what about I was trying to get it, 115 00:05:45,800 --> 00:05:49,679 Speaker 1: basically to talk directly about the Prime Minister's house, which 116 00:05:50,160 --> 00:05:52,560 Speaker 1: obviously she was uncomfortable doing. But I said, okay, let's 117 00:05:52,560 --> 00:05:55,320 Speaker 1: talk about that area. Let's just talk about central coast 118 00:05:55,800 --> 00:05:57,920 Speaker 1: South Wales, which could be any area by the way, 119 00:05:57,960 --> 00:06:01,440 Speaker 1: really by that economically, from an investment point of view, 120 00:06:01,440 --> 00:06:04,359 Speaker 1: the coast is the coast, and if you can be 121 00:06:04,480 --> 00:06:09,240 Speaker 1: within striking distance of any of the cities, then it's 122 00:06:09,279 --> 00:06:13,560 Speaker 1: a lucrative, potentially lucrative and desirable zone. That would be 123 00:06:13,600 --> 00:06:17,239 Speaker 1: anything from the Morrington Peninsula in Victoria right up along 124 00:06:17,320 --> 00:06:20,320 Speaker 1: through the North and South Coast up and beyond Sydney. 125 00:06:20,600 --> 00:06:23,600 Speaker 1: The particular area here Copa Capana Beach, which will become 126 00:06:23,600 --> 00:06:26,960 Speaker 1: famous now of course, is between Sydney and Newcastle. So 127 00:06:27,040 --> 00:06:30,240 Speaker 1: I said to Eliza, tell us about that market from 128 00:06:30,240 --> 00:06:32,680 Speaker 1: the data. Just tell us about that market. And she said, 129 00:06:32,680 --> 00:06:34,960 Speaker 1: there's a couple of really interesting things happening. There's a 130 00:06:35,000 --> 00:06:38,960 Speaker 1: sea change reversal, so people are coming back to the 131 00:06:39,000 --> 00:06:41,800 Speaker 1: city and we know that. And in many ways the 132 00:06:41,880 --> 00:06:45,320 Speaker 1: voluntary part of that phase might be over and we're 133 00:06:45,360 --> 00:06:48,320 Speaker 1: now into the involuntary part where companies are now demanding 134 00:06:48,400 --> 00:06:50,560 Speaker 1: rather than asking people to come back to the office. 135 00:06:50,680 --> 00:06:54,359 Speaker 1: Is a very different sort of tone to all that. 136 00:06:54,440 --> 00:06:58,400 Speaker 1: She mentioned that the mortgage rates were elevated and people 137 00:06:59,080 --> 00:07:01,920 Speaker 1: who had two mortgage if you've got inflation like we have, 138 00:07:02,640 --> 00:07:05,240 Speaker 1: even if the capital growth is there, it could be 139 00:07:05,320 --> 00:07:07,440 Speaker 1: hard to keep those two mortgages running or you could 140 00:07:07,480 --> 00:07:09,760 Speaker 1: have almost no money left. What's the point of having 141 00:07:09,760 --> 00:07:12,200 Speaker 1: a holiday home if you can't fix your front fence 142 00:07:12,440 --> 00:07:15,480 Speaker 1: or something. So that's definitely an issue. And there was 143 00:07:15,520 --> 00:07:17,600 Speaker 1: a third issue that people had been hanging out for 144 00:07:17,600 --> 00:07:22,160 Speaker 1: a raid cut and it hasn't come and every week 145 00:07:22,440 --> 00:07:24,480 Speaker 1: it is less likely, and I think we can rule 146 00:07:24,520 --> 00:07:28,040 Speaker 1: it out this year already, and we're talking early next 147 00:07:28,120 --> 00:07:30,600 Speaker 1: year now for the holiday home investments or for any 148 00:07:30,640 --> 00:07:33,680 Speaker 1: investor who wants a lower and it's dependent on rates 149 00:07:33,680 --> 00:07:37,000 Speaker 1: coming down to keep it all rolling. What about then, 150 00:07:37,120 --> 00:07:41,440 Speaker 1: the issue of a holiday home. Very few people would 151 00:07:41,440 --> 00:07:44,520 Speaker 1: not like to have one. To me, it seems many 152 00:07:44,560 --> 00:07:47,640 Speaker 1: people have them, and they say, we're never there as 153 00:07:47,680 --> 00:07:49,800 Speaker 1: a constant complaint. We're never there. We were supposed to 154 00:07:49,800 --> 00:07:52,200 Speaker 1: go down this weekend, but my nephew is playing soccer 155 00:07:52,400 --> 00:07:55,280 Speaker 1: or whatever. Another one is that when they have a 156 00:07:55,320 --> 00:07:58,400 Speaker 1: holiday home, they think that they might move down there 157 00:07:58,520 --> 00:08:01,960 Speaker 1: whatever that never comes to. They think that there it 158 00:08:02,000 --> 00:08:04,800 Speaker 1: would be wonderful for the wider family, but that never 159 00:08:04,840 --> 00:08:08,280 Speaker 1: works out either, often because people aren't around. One person 160 00:08:08,320 --> 00:08:10,600 Speaker 1: wants to go down, the other person never does, etc. 161 00:08:10,960 --> 00:08:14,720 Speaker 1: So you have those complications. But that's thinking of it 162 00:08:14,760 --> 00:08:17,680 Speaker 1: in the old fashioned way. I suppose as strictly an 163 00:08:17,800 --> 00:08:20,960 Speaker 1: asset that's un mortgaged. But if we approach a holiday 164 00:08:21,000 --> 00:08:23,120 Speaker 1: home from an investment point of view and say, look, 165 00:08:23,200 --> 00:08:27,640 Speaker 1: it's another property. I have a negatively geared property in 166 00:08:27,680 --> 00:08:30,480 Speaker 1: the metropolitan area, and now I'm going to have a 167 00:08:30,560 --> 00:08:34,720 Speaker 1: regional coastal investment property. That happens to be a beach house, 168 00:08:35,040 --> 00:08:37,160 Speaker 1: I can rent it, I could air be and be it. 169 00:08:37,360 --> 00:08:43,160 Speaker 1: What about it as a proposal as a financial proposal 170 00:08:43,280 --> 00:08:44,880 Speaker 1: under those terms, James. 171 00:08:45,960 --> 00:08:49,480 Speaker 2: Good Yep, it works out well. When I looked at 172 00:08:49,480 --> 00:08:52,720 Speaker 2: the numbers on my holiday house, which we had mainly 173 00:08:52,800 --> 00:08:56,079 Speaker 2: as an airbnb, we'd stay there for the minority of 174 00:08:56,520 --> 00:08:59,840 Speaker 2: the time. The utilization the amount of time that people 175 00:09:00,200 --> 00:09:02,640 Speaker 2: were staying in the property was about forty percent, which 176 00:09:02,640 --> 00:09:05,800 Speaker 2: meant that most weekends, holiday periods, people were renting out 177 00:09:05,960 --> 00:09:09,280 Speaker 2: the property. And I stacked the numbers up side by 178 00:09:09,320 --> 00:09:11,600 Speaker 2: side to say, if I put a permanent tenant in 179 00:09:11,840 --> 00:09:14,120 Speaker 2: the property, I would get X per week. If I 180 00:09:14,160 --> 00:09:18,000 Speaker 2: get forty percent utilization on stays and Airbnb, I get 181 00:09:18,080 --> 00:09:20,280 Speaker 2: why return per year. And it worked out to be 182 00:09:20,320 --> 00:09:24,240 Speaker 2: about a two percent increase in yield rental return if 183 00:09:24,280 --> 00:09:27,160 Speaker 2: I rented out short term versus a permanent tenant, And 184 00:09:27,200 --> 00:09:29,520 Speaker 2: that also sliced away a bit of time for family 185 00:09:29,559 --> 00:09:32,200 Speaker 2: to go utilize the property as well. So for us 186 00:09:32,200 --> 00:09:35,320 Speaker 2: it worked out perfectly. But it resonated what you said 187 00:09:35,360 --> 00:09:37,960 Speaker 2: with regards to the common complaints as to what happens 188 00:09:37,960 --> 00:09:41,080 Speaker 2: with holiday houses that we didn't go there a lot. 189 00:09:41,120 --> 00:09:42,920 Speaker 2: We went there a lot in the first twelve months, 190 00:09:42,920 --> 00:09:43,720 Speaker 2: but then after. 191 00:09:43,520 --> 00:09:45,520 Speaker 1: That you take it for granted. We really need to 192 00:09:45,559 --> 00:09:45,839 Speaker 1: go there. 193 00:09:45,880 --> 00:09:47,520 Speaker 2: Other things pop up. It's always going to be there. 194 00:09:47,559 --> 00:09:49,560 Speaker 2: We could go there another time, and you never really 195 00:09:49,559 --> 00:09:50,960 Speaker 2: get around to it. Whereas if you go on a 196 00:09:50,960 --> 00:09:53,520 Speaker 2: holiday somewhere else, you need to book a combination, you 197 00:09:53,600 --> 00:09:55,360 Speaker 2: really need to put it in the calendar and it 198 00:09:55,360 --> 00:09:57,679 Speaker 2: becomes an event that you look forward to, whereas a 199 00:09:57,679 --> 00:09:59,840 Speaker 2: holiday house, again, you take it for granted. 200 00:10:00,600 --> 00:10:03,520 Speaker 1: Interesting, I never thought about it that way. Yes, yeah, 201 00:10:03,520 --> 00:10:05,560 Speaker 1: I imagine that's it. That is certainly an issue, and 202 00:10:05,800 --> 00:10:07,480 Speaker 1: I'm one of the practical about it. Before we take 203 00:10:07,480 --> 00:10:11,440 Speaker 1: a break, Apparently it's really hard to get treaties in 204 00:10:11,520 --> 00:10:13,760 Speaker 1: these holiday areas. It's hard to get them in the 205 00:10:13,760 --> 00:10:16,680 Speaker 1: middle of the city, so I presume it's considerably even 206 00:10:16,720 --> 00:10:18,800 Speaker 1: more difficult in regional areas. 207 00:10:19,679 --> 00:10:22,640 Speaker 2: It was awful trying to get trades people there, but 208 00:10:22,720 --> 00:10:25,600 Speaker 2: it didn't help because we were on the lake Lake Macquarie, 209 00:10:25,640 --> 00:10:28,120 Speaker 2: and there was ninety eight steps from the street down 210 00:10:28,160 --> 00:10:30,559 Speaker 2: to the property, and I remember trying to get an 211 00:10:30,559 --> 00:10:33,760 Speaker 2: electrician there and he came to the front. I heard 212 00:10:33,760 --> 00:10:36,000 Speaker 2: his mute I saw him from down the bottom there. 213 00:10:36,120 --> 00:10:37,839 Speaker 2: He looked at the ninety eight stairs, jump back in 214 00:10:37,880 --> 00:10:40,400 Speaker 2: his ute and drove off again. So it was hard 215 00:10:40,480 --> 00:10:43,000 Speaker 2: to get people there. But the thing is that once 216 00:10:43,040 --> 00:10:45,960 Speaker 2: you find these good trades people, they're worth their weight 217 00:10:46,000 --> 00:10:48,880 Speaker 2: in gold. So you just need to be patient and 218 00:10:48,960 --> 00:10:50,560 Speaker 2: find the right one through trial and er and then 219 00:10:50,600 --> 00:10:54,640 Speaker 2: you've got a great little network of electricians, plumbers, handyman 220 00:10:54,720 --> 00:10:57,680 Speaker 2: to to help fix up the property. But I guess 221 00:10:57,679 --> 00:10:59,880 Speaker 2: overall with holiday houses that they can work quite well. 222 00:10:59,880 --> 00:11:03,040 Speaker 2: And the Prime Minister is very stuting that someone told 223 00:11:03,080 --> 00:11:05,600 Speaker 2: me years ago that when you're buying property, one thing 224 00:11:05,640 --> 00:11:07,560 Speaker 2: that you can't build more of, for get more of, 225 00:11:07,720 --> 00:11:10,120 Speaker 2: is waterfront. There's only going to be a finite supply 226 00:11:10,240 --> 00:11:12,960 Speaker 2: of properties on the lakes, on the oceans, and so 227 00:11:13,360 --> 00:11:16,080 Speaker 2: you're pretty much assured a decent capital growth long term, 228 00:11:16,240 --> 00:11:18,320 Speaker 2: assuming you don't buy the wrong point in the cycle. 229 00:11:18,320 --> 00:11:20,280 Speaker 2: But if you buy something that's on the water, it's 230 00:11:20,320 --> 00:11:21,959 Speaker 2: always going to be a scarce resource. 231 00:11:22,840 --> 00:11:24,760 Speaker 1: That's so true. That is so true. We'll come back 232 00:11:24,760 --> 00:11:37,040 Speaker 1: to that in a moment, folks. We'll take a short break. Hello, 233 00:11:37,080 --> 00:11:39,720 Speaker 1: Welcome back to the Australian's Money puzzle James Kirby with 234 00:11:39,840 --> 00:11:44,000 Speaker 1: James Gerard, and thank you James for hosting in September 235 00:11:44,040 --> 00:11:45,920 Speaker 1: when I was aware that was great, Thank you very much. 236 00:11:46,120 --> 00:11:48,280 Speaker 1: I meant to say that at the start, the medium 237 00:11:48,320 --> 00:11:51,000 Speaker 1: price at that coastal reserve where the PM board is 238 00:11:51,040 --> 00:11:54,120 Speaker 1: one point nine, and he paid four point three. And 239 00:11:54,160 --> 00:11:56,400 Speaker 1: I remember thinking when I saw the first photograph, I 240 00:11:56,440 --> 00:12:00,480 Speaker 1: said four point three for this house. That looked house, 241 00:12:00,520 --> 00:12:03,200 Speaker 1: but it's by no means outstanding, and the area isn't 242 00:12:03,240 --> 00:12:07,560 Speaker 1: particularly well known either. However, on closer inspection you realize 243 00:12:07,600 --> 00:12:10,600 Speaker 1: that what he boat was exactly what you're saying. Absolute 244 00:12:10,600 --> 00:12:14,080 Speaker 1: water frontage. If you see aerial pictures, it's on a cliff, 245 00:12:14,840 --> 00:12:19,040 Speaker 1: so it's actually a really terrific slice of land I 246 00:12:19,080 --> 00:12:21,280 Speaker 1: saw even just doing the numbers, if you look at 247 00:12:22,000 --> 00:12:26,000 Speaker 1: Airbnb that place, the house is what the up to 248 00:12:26,080 --> 00:12:29,760 Speaker 1: nine hundred a night, nine hundred dollars a night on Airbnb, 249 00:12:29,880 --> 00:12:32,280 Speaker 1: which would put it in the top shelf I would 250 00:12:32,280 --> 00:12:37,719 Speaker 1: imagine of Airbnb properties. One other thing which I think 251 00:12:37,760 --> 00:12:40,240 Speaker 1: would be very interesting. I just thought i'd bring this up. 252 00:12:40,280 --> 00:12:43,200 Speaker 1: I think our listeners would find it really interesting. We 253 00:12:43,200 --> 00:12:44,959 Speaker 1: were talking about holiday homes and how they work on 254 00:12:45,000 --> 00:12:47,439 Speaker 1: the economics of it. If you do your work, as 255 00:12:47,520 --> 00:12:51,000 Speaker 1: James says, you can make them work. And there are 256 00:12:51,080 --> 00:12:54,320 Speaker 1: aspects to them that are a drag, like any investment property, 257 00:12:54,400 --> 00:12:57,600 Speaker 1: and that means bills and repairs and the ongoings, etc. 258 00:12:58,960 --> 00:13:01,360 Speaker 1: And one of the issues with the holiday homes that 259 00:13:01,400 --> 00:13:04,200 Speaker 1: they for everybody is that they don't get used enough. 260 00:13:05,000 --> 00:13:07,520 Speaker 1: Some people don't like renting. You're putting their property on 261 00:13:07,600 --> 00:13:10,079 Speaker 1: AB and B. But a few months ago I came 262 00:13:10,200 --> 00:13:12,319 Speaker 1: upon something James and I were talking about this a 263 00:13:12,400 --> 00:13:15,280 Speaker 1: while ago called Third Home and Third Home is a 264 00:13:15,400 --> 00:13:19,360 Speaker 1: US group and they they're basically what they call a 265 00:13:19,520 --> 00:13:23,600 Speaker 1: luxury holiday home Exchange club. And what you do is 266 00:13:23,640 --> 00:13:26,800 Speaker 1: you join and you become a member, and then you 267 00:13:26,840 --> 00:13:30,240 Speaker 1: get to swap houses with other members around the world. 268 00:13:30,520 --> 00:13:36,080 Speaker 1: And here's the catch, if you like or the threshold 269 00:13:36,920 --> 00:13:41,079 Speaker 1: of what makes it special, the rock bottom minimum value 270 00:13:41,520 --> 00:13:44,160 Speaker 1: that your property must be worth to join this club 271 00:13:44,320 --> 00:13:48,840 Speaker 1: is US one million, which which puts Copoa Cabana comfortably inside, 272 00:13:49,000 --> 00:13:51,120 Speaker 1: but maybe not for most people. I wonder what the 273 00:13:51,160 --> 00:13:54,520 Speaker 1: average holiday home is worth. I presume it's under US 274 00:13:54,559 --> 00:13:57,560 Speaker 1: one million. Have you familiar with those guys, James, what 275 00:13:57,600 --> 00:13:59,319 Speaker 1: do you think of that arrangement. 276 00:14:00,360 --> 00:14:04,560 Speaker 2: I've heard of similar concepts, not that particular company in detail, 277 00:14:04,640 --> 00:14:07,600 Speaker 2: and it's worked well for people. The feedback that I 278 00:14:07,679 --> 00:14:10,880 Speaker 2: had from friends and family who've used similar things was 279 00:14:10,920 --> 00:14:15,200 Speaker 2: that the availability of homes overseas was somewhat limited, and 280 00:14:15,280 --> 00:14:16,800 Speaker 2: so they had lots of requests for people to stay 281 00:14:16,800 --> 00:14:18,920 Speaker 2: in their place, but they couldn't really find or get 282 00:14:18,920 --> 00:14:22,440 Speaker 2: accepted to places overseas, and making the dates match up 283 00:14:22,520 --> 00:14:26,640 Speaker 2: nicely with busy work schedules was difficult as well. So 284 00:14:26,680 --> 00:14:28,840 Speaker 2: in theory sounds great, can work, but there's a little 285 00:14:28,880 --> 00:14:31,040 Speaker 2: bit of work involved with it. And you mentioned that 286 00:14:31,080 --> 00:14:33,000 Speaker 2: the PM's place where nine hundred to night is that 287 00:14:33,080 --> 00:14:35,960 Speaker 2: with miss Alberteazy serving you toast and coffee in the morning, 288 00:14:36,080 --> 00:14:37,080 Speaker 2: is at nine hundred. 289 00:14:36,800 --> 00:14:39,640 Speaker 1: A night and telling jokes written for him by former 290 00:14:39,840 --> 00:14:44,680 Speaker 1: journalists on the Australian. Yes, yes, okay. Put that to 291 00:14:44,720 --> 00:14:47,960 Speaker 1: one side. Where were we? Yes? Now James cutting to 292 00:14:48,120 --> 00:14:51,600 Speaker 1: the serious part of the show. If someone's listening and 293 00:14:51,640 --> 00:14:54,280 Speaker 1: they want to do this, and this is a we 294 00:14:54,320 --> 00:14:58,560 Speaker 1: have many listeners who are very engaged in property, it 295 00:14:58,640 --> 00:15:01,440 Speaker 1: would seem, and the PM has flagged this very clearly. 296 00:15:01,760 --> 00:15:03,680 Speaker 1: If you're ever going to buy one. In terms of value, 297 00:15:03,720 --> 00:15:07,720 Speaker 1: they are relatively better value than they were. That house again, 298 00:15:08,120 --> 00:15:10,520 Speaker 1: the PM's house. He bought it for four point three 299 00:15:10,920 --> 00:15:13,560 Speaker 1: three years ago. It sold for four point six. And 300 00:15:13,640 --> 00:15:17,160 Speaker 1: there is discounted prices all around the country. I mentioned 301 00:15:17,160 --> 00:15:21,040 Speaker 1: the Mornington Peninsula, which is outstanding in Victoria because Victoria, 302 00:15:21,080 --> 00:15:25,240 Speaker 1: of course the whole market's week. So the holiday house 303 00:15:25,320 --> 00:15:27,480 Speaker 1: market's going to be weaker because it does tend. They 304 00:15:27,480 --> 00:15:29,560 Speaker 1: do tend to overdo it, don't they, James. They fly 305 00:15:29,680 --> 00:15:31,720 Speaker 1: higher than the rest when things are going up, and 306 00:15:31,840 --> 00:15:36,560 Speaker 1: they sink harder when everything else is dropping because they're discretionary. Really, 307 00:15:37,000 --> 00:15:39,960 Speaker 1: are there any spots around the country you're aware of 308 00:15:40,040 --> 00:15:44,360 Speaker 1: where there is relative value. Yeah. 309 00:15:44,560 --> 00:15:48,560 Speaker 2: I'd say there's a lot of places in most states 310 00:15:48,600 --> 00:15:51,920 Speaker 2: actually that are a regional and coastal that have weakened 311 00:15:51,960 --> 00:15:54,120 Speaker 2: over the past couple of years due to the things 312 00:15:54,120 --> 00:15:57,240 Speaker 2: that you've mentioned, with high interest rates, that reversal of 313 00:15:57,320 --> 00:16:00,880 Speaker 2: working from home type trends, general cost of living pressure. 314 00:16:00,880 --> 00:16:04,960 Speaker 2: People have been offloading those discretionary assets. And you can 315 00:16:05,000 --> 00:16:08,840 Speaker 2: find good land with homes on it for less than 316 00:16:08,920 --> 00:16:11,600 Speaker 2: half a million dollars in a lot of places, and 317 00:16:11,880 --> 00:16:15,680 Speaker 2: The way that I purchased my holiday house on about 318 00:16:15,680 --> 00:16:18,440 Speaker 2: one hour outside of Sydney was that it would be 319 00:16:18,480 --> 00:16:20,840 Speaker 2: somewhere that I could downsize to in the future. So 320 00:16:20,880 --> 00:16:24,400 Speaker 2: I locked in my retirement property in today's dollars rather 321 00:16:24,440 --> 00:16:26,520 Speaker 2: than have to buy it down to the track. And 322 00:16:26,640 --> 00:16:29,560 Speaker 2: we saw it because we didn't actually like the lifestyle 323 00:16:29,640 --> 00:16:31,920 Speaker 2: up there. We preferred the hustle and bustle of Sydney. 324 00:16:31,920 --> 00:16:34,480 Speaker 2: So we ended up purchasing and property on the low 325 00:16:34,600 --> 00:16:37,080 Speaker 2: off shore that looks into the harbor and see the 326 00:16:37,120 --> 00:16:40,360 Speaker 2: fireworks on New Year's Eve, and that really agreed with us. 327 00:16:40,480 --> 00:16:42,680 Speaker 2: So having a holiday house, you need to think about 328 00:16:42,720 --> 00:16:44,440 Speaker 2: why you're doing it. Is it because you want to 329 00:16:44,520 --> 00:16:47,440 Speaker 2: enjoy it now with yourself, friends, family? Do you want 330 00:16:47,480 --> 00:16:49,600 Speaker 2: to get capital growth? Do you want high income from it? 331 00:16:49,640 --> 00:16:51,360 Speaker 2: Do you want to lock something in that you give 332 00:16:51,360 --> 00:16:54,480 Speaker 2: yourself options that you can downsize into in the future. 333 00:16:54,680 --> 00:16:57,080 Speaker 2: So in terms of where to buy, you. 334 00:16:57,080 --> 00:17:01,000 Speaker 1: Might like to got under for your holidays. Let's not 335 00:17:01,160 --> 00:17:05,000 Speaker 1: forget the original principle of the holiday home. 336 00:17:06,200 --> 00:17:06,400 Speaker 2: True. 337 00:17:06,520 --> 00:17:08,199 Speaker 1: Keep that in mind, folks, you might actually use it 338 00:17:08,240 --> 00:17:11,600 Speaker 1: for holidays. It's ironic, isn't it. The people that have 339 00:17:11,680 --> 00:17:16,040 Speaker 1: the drive perhaps, and the drive more than anything else, 340 00:17:16,040 --> 00:17:19,359 Speaker 1: and the tempo to have multiple investments and have a 341 00:17:19,400 --> 00:17:21,840 Speaker 1: holiday home are probably not the same people who can 342 00:17:21,880 --> 00:17:25,040 Speaker 1: sit on the veranda for very long. That's one of 343 00:17:25,040 --> 00:17:28,120 Speaker 1: the ironies of life. Okay, I hope that you found 344 00:17:28,119 --> 00:17:30,480 Speaker 1: that interesting, folks. It's been something that I wanted to 345 00:17:30,520 --> 00:17:33,280 Speaker 1: do for a long time. And thank you to the 346 00:17:33,280 --> 00:17:36,440 Speaker 1: Prime Minister for triggering the notion of a show based 347 00:17:36,480 --> 00:17:38,520 Speaker 1: on holiday homes, because I've been waiting to do it. 348 00:17:38,760 --> 00:17:40,560 Speaker 1: Now we have some really good questions, so I want 349 00:17:40,600 --> 00:17:42,840 Speaker 1: to move on to them pretty quickly, and they are 350 00:17:42,920 --> 00:17:47,479 Speaker 1: actually quite properly focused, these questions, and James has seen them. 351 00:17:47,480 --> 00:17:49,200 Speaker 1: So we're going to come back in a moment and 352 00:17:49,280 --> 00:17:59,199 Speaker 1: we'll be covering those. Hello and welcome back to the 353 00:17:59,200 --> 00:18:04,600 Speaker 1: Australians Money Puzzle Podcast James Kirkby with James Gerard. Okay, 354 00:18:05,200 --> 00:18:07,560 Speaker 1: I'm going to I'll read out the first one James, 355 00:18:07,720 --> 00:18:11,520 Speaker 1: and these first two questions they are a tiny bit specific, 356 00:18:11,960 --> 00:18:13,640 Speaker 1: so I will say, first of all, we don't give 357 00:18:13,880 --> 00:18:17,119 Speaker 1: advice on this show, and I will probably minimize some 358 00:18:17,160 --> 00:18:19,119 Speaker 1: of the detail. I don't need this much detail, folks. 359 00:18:19,119 --> 00:18:21,600 Speaker 1: When you send in your questions, Okay, here we go. 360 00:18:22,920 --> 00:18:26,120 Speaker 1: The first question from James. I bought a regional house 361 00:18:26,160 --> 00:18:28,719 Speaker 1: in a regional town for two seventy k. It's been 362 00:18:28,760 --> 00:18:31,680 Speaker 1: geared ever since, low maintenance, probably worth five fifty now. 363 00:18:31,840 --> 00:18:35,600 Speaker 1: Growth has been great, renting easy. That sounds good. How 364 00:18:35,640 --> 00:18:38,040 Speaker 1: do I know when it's time to sell? That's a 365 00:18:38,080 --> 00:18:40,600 Speaker 1: really good question that comes up all the time, and 366 00:18:40,800 --> 00:18:44,199 Speaker 1: it's asked by so many people. That question, which I 367 00:18:44,200 --> 00:18:47,560 Speaker 1: think actually is from Michelle. I'm sorry, Michelle. She says 368 00:18:47,600 --> 00:18:51,600 Speaker 1: I'm on the highest tax backet, but love to have 369 00:18:51,640 --> 00:18:56,320 Speaker 1: your thoughts, not advice. Never advise Michelle? When is it 370 00:18:56,359 --> 00:19:03,200 Speaker 1: time to sell? Zillion dollar? A question? What would you say? 371 00:19:03,280 --> 00:19:05,280 Speaker 1: If she? What would you see? 372 00:19:07,080 --> 00:19:11,199 Speaker 2: I'd say to people generally who have investment properties and 373 00:19:11,240 --> 00:19:13,800 Speaker 2: they're not sure and when to seal is why do 374 00:19:13,840 --> 00:19:17,520 Speaker 2: you want to sell? And what happens if you sell? 375 00:19:17,560 --> 00:19:19,240 Speaker 2: What are you going to do with the money? Is 376 00:19:19,720 --> 00:19:22,639 Speaker 2: there a purpose non deductible debt against your house? Do 377 00:19:22,680 --> 00:19:26,240 Speaker 2: you want to purchase another investment property? What's the outlook 378 00:19:26,280 --> 00:19:28,800 Speaker 2: for the investment property that you hold? Will it continue 379 00:19:28,840 --> 00:19:30,400 Speaker 2: to go up or do you think it's hit its 380 00:19:30,440 --> 00:19:33,200 Speaker 2: peak and thus it might be a good time to sell. 381 00:19:33,359 --> 00:19:36,760 Speaker 2: And also for people on the highest marginal tax bracket, 382 00:19:36,800 --> 00:19:38,040 Speaker 2: they're going to have to pay twenty three and a 383 00:19:38,080 --> 00:19:40,960 Speaker 2: half percent capital gains tax assuming that they've held the 384 00:19:40,960 --> 00:19:42,760 Speaker 2: property for more than twelve months. There is a fifty 385 00:19:42,800 --> 00:19:45,520 Speaker 2: percent discount off the forty seven percent, but still it's 386 00:19:45,560 --> 00:19:49,080 Speaker 2: twenty three and a half. Alternatively, if people wait until 387 00:19:49,080 --> 00:19:53,080 Speaker 2: they retire five ten years away, for someone in there 388 00:19:53,080 --> 00:19:56,160 Speaker 2: their fifties or early sixties, and they don't have their 389 00:19:56,200 --> 00:19:59,200 Speaker 2: employment income pushing them up into the highest marginal tax rate, 390 00:19:59,280 --> 00:20:01,600 Speaker 2: if they then choose to sell the property, then they're 391 00:20:01,640 --> 00:20:04,640 Speaker 2: going to pay a lot less capital gains tax. So 392 00:20:04,960 --> 00:20:06,840 Speaker 2: you need to think about what you're going to do 393 00:20:06,880 --> 00:20:09,280 Speaker 2: with the money. How much capital gains tax would you 394 00:20:09,320 --> 00:20:11,919 Speaker 2: pay now if you're sold versus if you waited it 395 00:20:11,960 --> 00:20:13,959 Speaker 2: and sell it down the track. So put all these 396 00:20:14,000 --> 00:20:15,760 Speaker 2: things together and then you can make an informed decision. 397 00:20:16,800 --> 00:20:20,080 Speaker 1: So if I buy a holiday house and I said 398 00:20:20,440 --> 00:20:24,880 Speaker 1: I'm sixty four, I pay CGT. And if I retire 399 00:20:24,960 --> 00:20:26,399 Speaker 1: and I said it when I'm sixty six, I paen 400 00:20:26,480 --> 00:20:27,520 Speaker 1: noal CGT. 401 00:20:28,520 --> 00:20:32,280 Speaker 2: Less CGT because you're you're starting income is zero, assuming 402 00:20:32,320 --> 00:20:34,199 Speaker 2: that there's no other sources of income that you have 403 00:20:34,240 --> 00:20:37,240 Speaker 2: for your tax return, whereas while you're working, the average 404 00:20:37,240 --> 00:20:39,320 Speaker 2: worker makes one hundred thousand year, so they're reready in 405 00:20:39,359 --> 00:20:41,680 Speaker 2: the thirty something percent tax bracket, and then the CGT 406 00:20:41,720 --> 00:20:42,960 Speaker 2: gets added on top of that. 407 00:20:43,200 --> 00:20:46,919 Speaker 1: Yep, all right, So it's something to consider. And income 408 00:20:46,920 --> 00:20:49,320 Speaker 1: stream would be free of course too, wouldn't it. If 409 00:20:49,320 --> 00:20:51,680 Speaker 1: you're the income. If you're getting twenty grand a year 410 00:20:51,680 --> 00:20:55,440 Speaker 1: from the house or thirty or whatever, then pre retirement 411 00:20:55,600 --> 00:20:58,840 Speaker 1: you pay income tax on your income, and post retirement 412 00:20:59,000 --> 00:21:01,720 Speaker 1: you would possibly have no tax at all unless you're 413 00:21:01,760 --> 00:21:04,359 Speaker 1: over at one point nine million assets. Yeah, is that 414 00:21:04,400 --> 00:21:05,160 Speaker 1: how I got that right? 415 00:21:05,240 --> 00:21:08,200 Speaker 2: Yeah, that's right. Personally you can earn depending on whether 416 00:21:08,200 --> 00:21:10,200 Speaker 2: you're a singer or a couple. But in the ballpark 417 00:21:10,240 --> 00:21:12,720 Speaker 2: of twenty five thousand a year when you apply tax 418 00:21:12,760 --> 00:21:16,159 Speaker 2: offsets in terms of personal income and not pay any tax. 419 00:21:16,240 --> 00:21:18,199 Speaker 2: And then if you have property in super you're right 420 00:21:18,240 --> 00:21:20,359 Speaker 2: up to that one point nine million dollars of asset 421 00:21:20,400 --> 00:21:23,040 Speaker 2: value in super you pay no capital gains tax. And 422 00:21:23,040 --> 00:21:26,640 Speaker 2: just touch on something really quickly. It's interesting that holiday houses, 423 00:21:26,680 --> 00:21:28,480 Speaker 2: even if you don't rent them out at all, there's 424 00:21:28,520 --> 00:21:31,920 Speaker 2: still a CGT asset. There's no exemption there. You only 425 00:21:31,920 --> 00:21:34,520 Speaker 2: get one exemption, which is your primary residence. And then 426 00:21:34,680 --> 00:21:36,720 Speaker 2: holiday houses, even if you use as a personal asset, 427 00:21:36,760 --> 00:21:38,439 Speaker 2: are still subject to capital gains tax. 428 00:21:39,080 --> 00:21:41,919 Speaker 1: Okay, that's really interesting. Yeah, so keep that in mind, folks, 429 00:21:42,240 --> 00:21:46,320 Speaker 1: really interesting approach, and always keep that in mind that 430 00:21:46,880 --> 00:21:51,720 Speaker 1: your tax situation changes after you retire. So just consider 431 00:21:51,760 --> 00:21:53,639 Speaker 1: that for a moment. It may be the case that 432 00:21:53,800 --> 00:21:56,520 Speaker 1: you hadn't planned that or hadn't thought about that. That's 433 00:21:56,560 --> 00:21:59,560 Speaker 1: two Michelle and all the Michows out there. Okay, So 434 00:22:00,000 --> 00:22:05,480 Speaker 1: the next question is from andre A and d r 435 00:22:05,760 --> 00:22:07,920 Speaker 1: z DJ. Would you like to read it? 436 00:22:08,080 --> 00:22:11,280 Speaker 2: James, So, Andrea's rights. We bought a block of land 437 00:22:11,280 --> 00:22:14,119 Speaker 2: in a small coastal town south of Perth, built a 438 00:22:14,200 --> 00:22:16,880 Speaker 2: house on it fifteen years ago, and then thirteen years 439 00:22:16,920 --> 00:22:19,320 Speaker 2: ago they bought the neighboring block of land and they 440 00:22:19,359 --> 00:22:22,880 Speaker 2: amalgamated the two blocks together because they just wanted one 441 00:22:22,920 --> 00:22:24,800 Speaker 2: set of rates and they were looking in at building 442 00:22:24,840 --> 00:22:27,720 Speaker 2: a shed on the block, which Andres didn't do. We 443 00:22:27,760 --> 00:22:30,400 Speaker 2: would also like a large garden and no rear neighbors. 444 00:22:30,440 --> 00:22:33,320 Speaker 2: Fair enough, they're in a residential area. They're three hundred 445 00:22:33,359 --> 00:22:35,960 Speaker 2: meters from the beach. They've got three thousand square meters 446 00:22:35,960 --> 00:22:38,840 Speaker 2: of land. Property prices that are booming there. So Andre's 447 00:22:38,920 --> 00:22:41,480 Speaker 2: question is around he knows that he can't sell a 448 00:22:41,520 --> 00:22:43,280 Speaker 2: part of your house to raise cash, but what if 449 00:22:43,320 --> 00:22:45,760 Speaker 2: he subdivided the land and sold off a piece. What 450 00:22:45,800 --> 00:22:48,720 Speaker 2: do you have to pay capital gains tax on the 451 00:22:48,720 --> 00:22:51,480 Speaker 2: part that he subdivided, which I assume would be that backyard, 452 00:22:51,600 --> 00:22:53,960 Speaker 2: that second lot that they purchased. And then can they 453 00:22:54,000 --> 00:22:55,960 Speaker 2: put some of the proceeds into his wife super And 454 00:22:55,960 --> 00:22:59,480 Speaker 2: I'm assuming Andres's referring to the downsize of contribution, where 455 00:22:59,560 --> 00:23:01,679 Speaker 2: you can put up to three hundred thousand dollars as 456 00:23:01,720 --> 00:23:04,600 Speaker 2: a nonconcessional contribution if you've lived in your property for 457 00:23:04,640 --> 00:23:10,040 Speaker 2: ten years. So it's really interesting. It's probably worthwhile getting 458 00:23:10,119 --> 00:23:12,920 Speaker 2: advice from a tax accounter because it's quite a specialized 459 00:23:13,119 --> 00:23:16,080 Speaker 2: situation here. But I would have thought generally that if 460 00:23:16,080 --> 00:23:18,760 Speaker 2: you had two blocks of land you lived in a 461 00:23:18,760 --> 00:23:20,880 Speaker 2: house on one you bought the other one made into 462 00:23:20,920 --> 00:23:23,480 Speaker 2: your garden or looking to put a shed or something 463 00:23:23,480 --> 00:23:25,280 Speaker 2: on it, you didn't generate any income from it. I 464 00:23:25,320 --> 00:23:27,000 Speaker 2: would have thought that if you separated the get and 465 00:23:27,040 --> 00:23:29,520 Speaker 2: sold the back part, there'd be no capital gains tax. 466 00:23:29,520 --> 00:23:30,960 Speaker 2: But that's just my personal. 467 00:23:30,600 --> 00:23:34,320 Speaker 1: Thoughts, because you're selling a part of your principal place 468 00:23:34,400 --> 00:23:39,080 Speaker 1: of residence exactly place of residence enlarged that one point, 469 00:23:39,160 --> 00:23:44,000 Speaker 1: which is entirely feasible. Okay, that's a guide on the situation, 470 00:23:44,400 --> 00:23:47,679 Speaker 1: hypothetical situation where they occur. Listeners, and I'm sure you 471 00:23:47,680 --> 00:23:51,159 Speaker 1: can all follow that. Okay, very interesting. Yeah, funny that 472 00:23:51,200 --> 00:23:54,320 Speaker 1: never came up before. Okay, Gordon says, I'm the sure. 473 00:23:54,400 --> 00:23:57,760 Speaker 1: Jackie C. Shark advised. Maybe she didn't advise Gordon. She 474 00:23:57,880 --> 00:24:00,639 Speaker 1: said that you could get some basic advice from mates. 475 00:24:00,760 --> 00:24:04,080 Speaker 1: From mates, I have a fairly decent grasp of finance, 476 00:24:04,119 --> 00:24:09,199 Speaker 1: and says Gordon, I have my emergency funds sorted. I 477 00:24:09,280 --> 00:24:13,040 Speaker 1: realize many of my friends haven't done this, and did 478 00:24:13,119 --> 00:24:16,359 Speaker 1: at a point start providing some very generic advice. I 479 00:24:16,400 --> 00:24:19,119 Speaker 1: asked a clarifying question in a closed Facebook group on 480 00:24:19,280 --> 00:24:23,280 Speaker 1: something I had been doing. People who were all fairly 481 00:24:23,320 --> 00:24:26,080 Speaker 1: clewed up, were very adamant that this could be interpreted 482 00:24:26,160 --> 00:24:29,760 Speaker 1: as advice which I am not qualified to give. Since then, 483 00:24:29,800 --> 00:24:33,080 Speaker 1: I've never offered this to friends. Where did the boundary 484 00:24:33,080 --> 00:24:38,000 Speaker 1: line sit? Oh? Yes, million dollar question, Gordon look, there 485 00:24:38,080 --> 00:24:42,159 Speaker 1: is advice, is there's general advice, and there is individual advice. 486 00:24:42,200 --> 00:24:43,919 Speaker 1: So there is actually there is layers to it. But 487 00:24:44,000 --> 00:24:47,719 Speaker 1: I wouldn't worry about advice from one person to another. 488 00:24:48,080 --> 00:24:50,320 Speaker 1: If I meet my neighbor on the street and my 489 00:24:50,400 --> 00:24:52,800 Speaker 1: neighbor says should I sell my house? I'm thinking of it, 490 00:24:52,840 --> 00:24:55,040 Speaker 1: and I say, yeah, I go for it, that's not advice, 491 00:24:55,800 --> 00:24:59,720 Speaker 1: and that's not formulated advice given on a statement of advice. 492 00:25:00,600 --> 00:25:03,200 Speaker 1: There's no license in the seeing or whatever. That's casual 493 00:25:03,240 --> 00:25:05,919 Speaker 1: that happens every day in every city. There is a 494 00:25:05,920 --> 00:25:07,679 Speaker 1: at the other end of the spectrum. If you go 495 00:25:07,720 --> 00:25:11,640 Speaker 1: into a financial advisor like James, fully qualified, fully credentioned, 496 00:25:11,880 --> 00:25:15,040 Speaker 1: licensed in giving you advice, he has to go through 497 00:25:15,080 --> 00:25:18,080 Speaker 1: an enormous amount of paperwork, this thing called the statement 498 00:25:18,160 --> 00:25:21,040 Speaker 1: of advice, which is supposed to be clear or possibly 499 00:25:21,080 --> 00:25:24,600 Speaker 1: dropped all together in this new regime being very slowly 500 00:25:24,600 --> 00:25:27,359 Speaker 1: put through Parliament, but it remains a place for the moment. 501 00:25:27,800 --> 00:25:31,760 Speaker 1: There's layers. Also, there is a general advice. Again, when 502 00:25:31,760 --> 00:25:34,440 Speaker 1: we talked, we never talked specifically on the show. For instance, 503 00:25:34,520 --> 00:25:37,560 Speaker 1: if Frank comes in with a question about his particular 504 00:25:37,800 --> 00:25:40,639 Speaker 1: situation and he owns two houses and he wants to 505 00:25:40,640 --> 00:25:43,159 Speaker 1: sell one. We don't talk about that one person. We 506 00:25:43,200 --> 00:25:47,720 Speaker 1: talk about a character. If a person in Australia was 507 00:25:47,760 --> 00:25:50,200 Speaker 1: in that situation, what they could do, and that is 508 00:25:50,760 --> 00:25:54,400 Speaker 1: how we approached its information only. So I hope that's 509 00:25:54,680 --> 00:25:59,920 Speaker 1: untangled things. Just from your perspective, James, as a qualified 510 00:26:00,080 --> 00:26:04,240 Speaker 1: licensed advisor, is it dangerous for you if you're sitting 511 00:26:04,280 --> 00:26:05,800 Speaker 1: on the train and someone you never met in your 512 00:26:05,840 --> 00:26:08,560 Speaker 1: life stars talking to you and they say, I'm thinking 513 00:26:08,600 --> 00:26:12,680 Speaker 1: of whatever? Are you? Actually? What happens if you say 514 00:26:12,720 --> 00:26:13,360 Speaker 1: something to them? 515 00:26:14,640 --> 00:26:18,199 Speaker 2: You're bound with liability to give them a statement of 516 00:26:18,280 --> 00:26:21,080 Speaker 2: advice if you make statements to them which are of 517 00:26:21,119 --> 00:26:24,480 Speaker 2: a personal advice nature. And the thing is that the 518 00:26:25,040 --> 00:26:27,919 Speaker 2: vast majority of financial advisors really care about people and 519 00:26:27,920 --> 00:26:30,040 Speaker 2: they just want to help people and they want to 520 00:26:30,320 --> 00:26:33,320 Speaker 2: share the information and knowledge that they have, but unfortunately 521 00:26:33,320 --> 00:26:35,879 Speaker 2: we have all this red tape and regulations and you 522 00:26:35,960 --> 00:26:38,320 Speaker 2: hit the nail on the head with general versus personal. 523 00:26:38,680 --> 00:26:41,639 Speaker 2: So someone sitting on the train and they say to me, James, 524 00:26:42,720 --> 00:26:44,080 Speaker 2: what do you think of ETFs? So they a good 525 00:26:44,080 --> 00:26:47,359 Speaker 2: idea and should I should? And tell me about salary 526 00:26:47,400 --> 00:26:49,920 Speaker 2: sacrifice as well? I can talk about that. Yep, these 527 00:26:49,960 --> 00:26:52,199 Speaker 2: what ETFs are, basket of stocks blah blah blah. This 528 00:26:52,240 --> 00:26:54,960 Speaker 2: is what salary sacrifice is. Thirty thousand per year limits 529 00:26:55,040 --> 00:26:57,600 Speaker 2: catch up concessionals and they go, oh, do you think 530 00:26:57,640 --> 00:26:59,080 Speaker 2: I should buy some ETFs? And do you think that 531 00:26:59,119 --> 00:27:01,800 Speaker 2: I should salary sacrife in the superb Then that's where 532 00:27:01,800 --> 00:27:04,480 Speaker 2: the line is drawn. I can't respond to that. 533 00:27:05,040 --> 00:27:08,280 Speaker 1: No, but you can't. You could say many Australians like ETFs, 534 00:27:08,320 --> 00:27:12,280 Speaker 1: so are many Australians sacrifice into super and it works 535 00:27:12,280 --> 00:27:16,080 Speaker 1: for many Australians, etc. And basically turned that into a 536 00:27:16,119 --> 00:27:19,639 Speaker 1: generic but not a particular or an individual conversation. I 537 00:27:19,680 --> 00:27:23,040 Speaker 1: hope that's useful to you, Gordon. It's interesting. Now, perfect 538 00:27:23,080 --> 00:27:27,000 Speaker 1: segue into the next question, which brings up this subject. David, 539 00:27:27,400 --> 00:27:30,040 Speaker 1: who would you like to read that one? James? 540 00:27:30,320 --> 00:27:33,000 Speaker 2: Sure? David right. So, I enjoyed your recent show and 541 00:27:33,440 --> 00:27:37,240 Speaker 2: declining numbers of financial advisors and the increasing advisor fees 542 00:27:37,680 --> 00:27:40,080 Speaker 2: to me, the financial advice regulations are an example of 543 00:27:40,119 --> 00:27:44,440 Speaker 2: why over the zealous regulation is flatlining productivity. More generally 544 00:27:44,480 --> 00:27:47,560 Speaker 2: in Australia. We recently asked our financial advisor of almost 545 00:27:47,560 --> 00:27:50,280 Speaker 2: twenty years if we should switch our superinnuation to the 546 00:27:50,320 --> 00:27:53,239 Speaker 2: pension phase. We receive back a statement of advice of 547 00:27:53,280 --> 00:27:56,879 Speaker 2: twenty six pages plus three other compliance documents. Of the 548 00:27:56,880 --> 00:27:59,920 Speaker 2: twenty six pages, six were relevant, the rest were complying. 549 00:28:00,560 --> 00:28:03,280 Speaker 2: It could have been written in two pages, including modeling. 550 00:28:03,320 --> 00:28:06,840 Speaker 2: In David's opinion, David's question is what happened to the 551 00:28:06,880 --> 00:28:10,119 Speaker 2: Michelle Levy Quality of Financial Advice Review? 552 00:28:10,760 --> 00:28:14,280 Speaker 1: Indeed, indeed, so there's the statement of advice we're talking about, 553 00:28:14,480 --> 00:28:15,879 Speaker 1: and the only thing to say to you, David is 554 00:28:15,880 --> 00:28:18,160 Speaker 1: that your advisor was probably just as I knowed about 555 00:28:18,160 --> 00:28:21,159 Speaker 1: that statement as you were. They must buy load do that, 556 00:28:22,320 --> 00:28:24,360 Speaker 1: they must buy load do that. This is the problem. 557 00:28:24,600 --> 00:28:27,959 Speaker 1: What happened to Michelle's Quality of Advice review is that 558 00:28:28,000 --> 00:28:32,920 Speaker 1: the government orchestrated a potential new regime for financial advice 559 00:28:32,960 --> 00:28:37,040 Speaker 1: called Delivering Better Outcomes, but they broke it into phases. 560 00:28:37,280 --> 00:28:41,080 Speaker 1: The first phase is through, but it's some very minor 561 00:28:41,560 --> 00:28:44,560 Speaker 1: red tape clear ups and some small issues to do 562 00:28:44,560 --> 00:28:48,640 Speaker 1: with big super funds. But the big changes remain on, 563 00:28:49,120 --> 00:28:52,560 Speaker 1: not through Parliament and not put in yet. There's a 564 00:28:52,600 --> 00:28:56,040 Speaker 1: variety of things. They are much greater simplification of advice, 565 00:28:56,080 --> 00:28:59,040 Speaker 1: including the removal of that statement of advice for something else, 566 00:29:00,000 --> 00:29:02,680 Speaker 1: allowing big super funds to really get in and give 567 00:29:02,720 --> 00:29:04,960 Speaker 1: advice in the way that we are as we know it. 568 00:29:05,360 --> 00:29:07,840 Speaker 1: That still coming down the lines. That's where we are 569 00:29:07,880 --> 00:29:10,240 Speaker 1: on all that. Hey, thank you very much, James. Very 570 00:29:10,240 --> 00:29:12,800 Speaker 1: interesting to hear your views. I knew that I knew 571 00:29:12,840 --> 00:29:15,040 Speaker 1: that you'd be good on this one because you've been 572 00:29:15,080 --> 00:29:17,880 Speaker 1: in one door and out the other on that. And 573 00:29:18,440 --> 00:29:20,280 Speaker 1: if ever there was a time to do the holiday 574 00:29:20,280 --> 00:29:24,160 Speaker 1: home show, this was it. So thanks very much, my pleasure. 575 00:29:24,200 --> 00:29:24,840 Speaker 2: Thanks James. 576 00:29:25,920 --> 00:29:29,480 Speaker 1: Great to have you on. Okay, folks. On Thursday, I'm 577 00:29:29,520 --> 00:29:34,560 Speaker 1: having I am having Alex Moffat on the anniversary of 578 00:29:34,640 --> 00:29:38,440 Speaker 1: the Great Stockmore market crash, the Great Crash of nineteen 579 00:29:38,440 --> 00:29:42,520 Speaker 1: eighty seven. He was on the floor trading as a 580 00:29:42,520 --> 00:29:45,680 Speaker 1: stockbroker when it happened. Not many people around that can 581 00:29:45,760 --> 00:29:47,640 Speaker 1: really give us a clear view of what it's like 582 00:29:48,080 --> 00:29:50,440 Speaker 1: to wake up in the morning with the twenty five 583 00:29:50,440 --> 00:29:54,080 Speaker 1: percent drop overnight in the value of your shares. It's 584 00:29:54,120 --> 00:29:57,040 Speaker 1: something everyone should know could happen again. And I want 585 00:29:57,120 --> 00:29:59,840 Speaker 1: to talk about that. This is coming Thursday, but Alex 586 00:30:00,400 --> 00:30:05,240 Speaker 1: so looking forward to that. Let's have some questions, observations, comments, 587 00:30:05,600 --> 00:30:09,760 Speaker 1: love to have them. The Money Puzzle at the Australian 588 00:30:09,800 --> 00:30:13,200 Speaker 1: dot com dot au is the email and do mention 589 00:30:13,360 --> 00:30:16,040 Speaker 1: us to any of your friends that you'd like to show. 590 00:30:16,040 --> 00:30:18,600 Speaker 1: That would be really good and we'd appreciate that and 591 00:30:18,960 --> 00:30:19,680 Speaker 1: talk to you soon