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Speaker 1: Good morning everyone, and welcome back to another episode of

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Speaker 1: Sugar Mamma's Fireplay. I am your host financial planner Canna Campbell,

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Speaker 1: and today this is a start Here series episode. Now,

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Speaker 1: if you're not familiar with this Start Here episode or

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Speaker 1: miniseries that I've got in Fireplay, this is all about you.

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Speaker 1: That is all about your financial questions, your financial challenges,

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Speaker 1: and your financial goals. This is a safe place where

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Speaker 1: you can actually DM me and get honest, practical general

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Speaker 1: advice to help you make them take the first and

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Speaker 1: most important steps in building financial clarity and confidence in

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Speaker 1: your life. So here's how it works. You send me

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Speaker 1: a DM on Instagram, at Sugar Mama TV or even

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Speaker 1: at Canna Campbell Official. Share with me what you're stressed about,

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Speaker 1: or what you're trying to make a decision around, or

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Speaker 1: what are your setbacks and challenges are in your life.

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Speaker 1: And through these episodes start Here, I will try and

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Speaker 1: give you back the best advice that is general advice

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Speaker 1: and guidance to help you get started. This will never

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Speaker 1: be personal advice. There's never product advice, strategic advice, or

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Speaker 1: investment advice. However, after listening to my answer, you will

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Speaker 1: definitely be filled with inspiration, be empowered to start making

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Speaker 1: some decisions that are a best view. But more importantly,

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Speaker 1: you'll be more educated as to what might be in

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Speaker 1: better alignment for your financial well being. So after listening

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Speaker 1: to each episode, you can actually think critically and take

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Speaker 1: the necessary and very important actions today. Now, of course,

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Speaker 1: I am always going to recommend that you get personal

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Speaker 1: advice from a financial planner before you make any major decisions. However,

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Speaker 1: this miniseries start here is a great place to help

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Speaker 1: you get going in the meantime. So I am absolutely

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Speaker 1: thrilled and honor to hear that you guys love this

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Speaker 1: miniseries because it is here to stay. So please make

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Speaker 1: sure you keep sending me your questions and I will

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Speaker 1: come back to you as quickly as possible. All right,

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Speaker 1: let us begin with this decision as to whether buy

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Speaker 1: a sister in law's property or not. Okay, So, as

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Speaker 1: I mentioned, today's episode is helping someone work out whether

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Speaker 1: they should be buying an investment property off their sister

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Speaker 1: in law. Now, obviously I'm not going to be sharing

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Speaker 1: the names of people who send me these dms for

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Speaker 1: obvious confidentiality reasons, but let me give you a bit

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Speaker 1: of a background to the DM that I received. Hi, Canna,

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Speaker 1: I know you can't give financial advice, but instead offer

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Speaker 1: general advice only. So here we go. What is considered

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Speaker 1: to be a good rental yield in Melbourne. You see,

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Speaker 1: my sister in law is selling her unit for approximately

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Speaker 1: one million dollars in Southeast Melbourne, with a rental yield

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Speaker 1: of just over three percent per annum. We need to

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Speaker 1: make a decision as soon as possible about whether to

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Speaker 1: purchase this or not. We're in a fortunate enough position

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Speaker 1: to be able to cover the gap in the mortgage

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Speaker 1: repayment and rental income. We already own some shares and

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Speaker 1: if we don't end up buying this property, we will

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Speaker 1: most likely end up buying more shares. The property has

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Speaker 1: some sentimental value and we're hoping to eventually be able

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Speaker 1: to house my mum, who doesn't have the financial stability

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Speaker 1: that we would like. Uh, the decision fatigue. I don't

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Speaker 1: actually know what I want to do. Can you please

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Speaker 1: help me to get me started in thinking about what

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Speaker 1: is right for me and what to do. Much love

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Speaker 1: and thanks. Okay, So there are so many things to

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Speaker 1: be considered here, and this is what I wanted to do,

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Speaker 1: because I'm not here to tell you whether you should

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Speaker 1: buy this property or not. That's not my motivation here whatsoever.

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Speaker 1: My motivation is to help you make a great decision

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Speaker 1: either way. So these are the things I'm going to

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Speaker 1: recommend that you or anyone else that is stuck making

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Speaker 1: a decision, a big financial decision in their life right now.

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Speaker 1: My first vice is common sense, and that is to

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Speaker 1: take a deep breath and slow down. You should never

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Speaker 1: rush a major financial decision, particularly a big investment like property.

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Speaker 1: You do not want any regrets. Now, that doesn't mean

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Speaker 1: you can't make a decision. It just means you need

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Speaker 1: to press pause on everything in your life and slow

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Speaker 1: down and carefully consider absolutely everything. And the things that

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Speaker 1: you need to consider will talk about right now. So

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Speaker 1: please don't rush. And I have to say, if you

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Speaker 1: make it a mistake and you buy this with regret,

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Speaker 1: you've also got to consider the cost to your financial wellbeings.

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Speaker 1: So never be pressured into making a decision. If it's

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Speaker 1: meant to be, it will be. So this is what

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Speaker 1: I recommend you do. You have got to go and

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Speaker 1: speak to some professionals, starting with your accountant. Your accountant

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Speaker 1: needs to run the numbers for you, go through all

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Speaker 1: the buying costs, go through all the potential tax deductions,

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Speaker 1: and how it's going to potentially impact your cash flow.

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Speaker 1: That is essential before you make any major decisions. You

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Speaker 1: also need to be in contact with a mortgage broker,

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Speaker 1: ensuring that you have a pre approval in place for

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Speaker 1: the loan, so that if you do proceed ahead and

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Speaker 1: buy this property, it's a smooth transaction and there's no

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Speaker 1: issues with time being wasted. Of course, I'm going to

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Speaker 1: recommend that you go and speak to a financial planner,

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Speaker 1: or you go and find one if you don't have

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Speaker 1: one right now. It is so important that you understand

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Speaker 1: how this potential decision to buy this property is actually

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Speaker 1: going to fit in your financial situation, Is going to

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Speaker 1: help improve your financial wellbeing or is it going to

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Speaker 1: actually hinder. A financial planner will throw all sorts of

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Speaker 1: questions and ask you what if that's happens, what if happens?

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Speaker 1: What are your goals? What are your deadline? What are

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Speaker 1: the other assets you have? These are all things you've

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Speaker 1: got to be considering, particularly your risk profile and the

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Speaker 1: deadline for your goals. Another person that you need to

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Speaker 1: be speaking with and consulting with, is actually a real

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Speaker 1: estate agent. I know that you've mentioned your sister and

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Speaker 1: Lawa's selling this property for one million dollars. Now I

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Speaker 1: don't know whether she's giving you a discount or not,

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Speaker 1: but you need to get a really good feel as

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Speaker 1: to whether or not that is actually a fair price,

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Speaker 1: that is market price. Speaking to a real estate agent

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Speaker 1: and asking them what they think, they'll be able to

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Speaker 1: give you some honest feedback, whether that's a goodbye, whether

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Speaker 1: that's reasonably priced. And of course that three percent estimated

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Speaker 1: rental yield, how accurate is that or is there potentially

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Speaker 1: room to be able to put that rent up? And

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Speaker 1: what sort of people are renting is are they staying

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Speaker 1: in that property long term or is it potentially a

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Speaker 1: high turnover area? Because these are things that really do

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Speaker 1: impact and potentially damage your cash flow when it comes

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Speaker 1: to a property. So you really want to ask lots

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Speaker 1: of questions, pick everyone's brains, and there are no dumb questions,

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Speaker 1: only the questions that are not asked. So you must

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Speaker 1: speak with those four people immediately. The next thing you

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Speaker 1: need to do is invest time thinking about your own

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Speaker 1: financial goals here and does this potential property purchase align

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Speaker 1: with your goals. I would be thinking about what the

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Speaker 1: goals are for you. What does financial wellbeing look like?

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Speaker 1: For example, is your goal to build up a certain

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Speaker 1: amount of passive income per and how does this help?

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Speaker 1: For example, you might have a goal to build up

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Speaker 1: a passive income of one hundred thousand dollars a year. Now,

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Speaker 1: this potential property purchase may actually help you because it's

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Speaker 1: more passive income, and you know, this may be something

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Speaker 1: that gives you another foot in the door and adds

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Speaker 1: greater diversification to your investment portfolio and helps add other

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Speaker 1: value in your financial journey ahead. But there might be

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Speaker 1: other things that you think about there your goals. For example,

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Speaker 1: you might have a goal to actually be buying a

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Speaker 1: family home for yourself, So buying this property, how does

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Speaker 1: that impact that goal to buy a home? Does that

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Speaker 1: reduce your serviceability? Does that reduce your ability to actually borrow?

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Speaker 1: Will you be geared up to the eyeballs and you

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Speaker 1: won't be able to apply for a new loan for

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Speaker 1: another couple of years, or may wipe your deposit out

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Speaker 1: completely for a new home and you have to start

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Speaker 1: all over again. These are all things that you need

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Speaker 1: to think about, or perhaps your goals are actually focused

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Speaker 1: around retirement. You're approaching retirement, you're trying to beef up

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Speaker 1: your superannuation. How does this property purchase impact your ability

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Speaker 1: to contribute to super or to structure assets in a

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Speaker 1: way that are tax effective that are going to be

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Speaker 1: complementary to your retirement goals. Really, spend time thinking about

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Speaker 1: what your goals are, both in the short term, medium term,

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Speaker 1: and long term. Think about diversification. What is your risk

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Speaker 1: profile and what other assets that is financial assets that

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Speaker 1: you already own that you want to maybe change, shift,

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Speaker 1: or build upon. Spend time doing this, and I'm going

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Speaker 1: to assume from your message that you have a partner.

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Speaker 1: This is the conversations that you need to be having together.

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Speaker 1: Take your time, turn off all the distractions around you,

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Speaker 1: and go deep with this so that you feel like

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Speaker 1: you've got a great understanding as to what is important

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Speaker 1: to you and where your financial values sit, because that

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Speaker 1: will help you see whether this is right for you

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Speaker 1: or not. The next thing I would be considering is

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Speaker 1: what is your time frame? Property is a long term

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Speaker 1: investment ten years, if not longer. As I mentioned at

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Speaker 1: the beginning of the episode to buy property is expensive.

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Speaker 1: You've got legal expenses, You've got things like stamp duty,

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Speaker 1: which are incredibly expenses, especially on a million dollar property.

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Speaker 1: And as you know, property is not liquid unlike your

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Speaker 1: share port folow that you already own. You can't just

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Speaker 1: go and sell fifty thousand dollars of that property like

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Speaker 1: you can with your share portfolio. You have to sell

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Speaker 1: the whole entire property if you need cash, and then

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Speaker 1: of course that triggers capital gains tax and all those

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Speaker 1: other selling expenses such as agents, commissions and all the

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Speaker 1: legal fees. The other thing I'd be thinking about from

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Speaker 1: a time frame point of view is that diversification. You

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Speaker 1: need to think about the fact that one property is

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Speaker 1: not considered diversification. All your money, or the bulk of

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Speaker 1: your money is potentially tied up in that one property

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Speaker 1: in that apartment block, or that one street, or that

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Speaker 1: one suburb, in that one area in that one state.

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Speaker 1: Now I don't know what other assets you may own,

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Speaker 1: and you actually may have seven, eight, nine, ten different properties,

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Speaker 1: so this could actually add diversification, but if not, you

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Speaker 1: need to be aware of that diversification risk if you

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Speaker 1: don't own other property. The next thing I would then

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Speaker 1: consider is is how is this going to impact your

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Speaker 1: cash flow both today and in the future. And this

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Speaker 1: is something to me sort of stood out like a

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Speaker 1: red flag. In reading your DM, you've mentioned that you're

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Speaker 1: in the situation where you can service the cash flow

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Speaker 1: negative impact. That is, you can service the cost between

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Speaker 1: the rent you receive and the interest repayments. Now, when

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Speaker 1: you speak to a mortgage proker, they'll give you great

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Speaker 1: advice to as to what is the best way to

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Speaker 1: set this loan up, whether it's principle an interest or

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Speaker 1: interest only. But my question to you, and I'm going

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Speaker 1: to be I guess play Devil's advocate here, is can

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Speaker 1: you afford this into the future, particularly if your situation changes.

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Speaker 1: You've mentioned in your DM that you can serve us

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Speaker 1: the difference between the rent and the interest today, But

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Speaker 1: what if you're planning on having a family in a

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Speaker 1: couple of years and you'll be going down to one income.

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Speaker 1: Will you be able to still afford to hold this property?

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Speaker 1: What happens if you go in between tenants and the

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Speaker 1: property is empty for say a couple of weeks or

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Speaker 1: even a month, do you have sufficient money to be

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Speaker 1: able to continue on servicing that gap. What if rents

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Speaker 1: go down, can you still afford to service that? What

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Speaker 1: if interest rates go up? Do you still have the

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Speaker 1: cash flow to be able to continue on holding this?

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Speaker 1: Throw as many what ifs to make sure that you

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Speaker 1: are financially bulletproof when it comes to looking at your

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Speaker 1: cash flow. Remember property is a long term investment, so

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Speaker 1: that cash flow needs to be able to work for

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Speaker 1: you long term as well. The next thing that I

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Speaker 1: would think about is protection wealth protection. First of all,

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Speaker 1: do you need to reassess your emergency money if you

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Speaker 1: do go ahead and purchase this There are lots of

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Speaker 1: costs of whole time a property. You've got strata if

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Speaker 1: it's an apartment, you've got council rates, you've got water,

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Speaker 1: you might even have land tax if you own other property,

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Speaker 1: So maybe you need to increase your emergency money to

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Speaker 1: cover any costs, in particular things like special strata levies.

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Speaker 1: And then, of course do you need to assess your

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Speaker 1: personal insurances. I'm assuming you're taking on debt to buy

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Speaker 1: this property, as you've disclosed in your DM. Does that

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Speaker 1: mean you need to go back and look at how

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Speaker 1: much life cover you've got or how much income protection

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Speaker 1: or trauma cover or tpdcover you've got, and if you

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Speaker 1: do need to increase this to help cover the new

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Speaker 1: loan and functional responsibilities that you're taking on, how's that

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Speaker 1: going to impact the premiums? And are you in a

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Speaker 1: situation where you can increase your existing cover without any

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Speaker 1: risk of the premiums increasing that's going to impact your

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Speaker 1: cash flow, or you've had potentially a change in health

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Speaker 1: where you won't be able to actually increase your level

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Speaker 1: of cover. Leave no stone unturned. You need to consider

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Speaker 1: absolutely everything. And then of course you've got to consider

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Speaker 1: what insurances you need for this property, such as landlord insurance.

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Speaker 1: And then finally, I want you to think about this

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Speaker 1: property and take a big step back and look at

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Speaker 1: the big picture. I want you to ask yourself this question.

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Speaker 1: If this opportunity to buy your sister in law's property

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Speaker 1: hadn't come up, would you still want to actually buy

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Speaker 1: that property that she's selling. If your answer is no,

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Speaker 1: I think that's a really big indication that this may

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Speaker 1: not necessarily be the right property for you right now.

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Speaker 1: If your answer is yes, well then that might give

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Speaker 1: you a great sign that you do need to proceed

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Speaker 1: ahead with continuing on doing your research, speaking to the professionals,

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Speaker 1: picking their brains and going deeper and working out whether

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Speaker 1: this is the right decision for you and your financial

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Speaker 1: goals and your long term financial wellbeing. The other things

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Speaker 1: I would recommend you think about is how do you

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Speaker 1: know that your mum will actually be okay living in

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Speaker 1: that property? Does she actually want to live in that property?

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Speaker 1: Do you have comfort from her? Have you had a

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Speaker 1: conversation with her to say, look, mum, we're thinking of

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Speaker 1: buying this property of our sister in law and we

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Speaker 1: were thinking that hopefully maybe one day to help you,

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Speaker 1: you might like to live in this property. Is that

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Speaker 1: something that you'd actually like? Now, everybody is different. Some

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Speaker 1: people are partially retirees, might be fiercely independent and don't

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Speaker 1: want to accept help, And of course we need to

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Speaker 1: respect that. Your mother may turn around and say yes,

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Speaker 1: I would absolutely love that would take a huge financial

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Speaker 1: stress off of my life and that's wonderful. But she

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Speaker 1: may actually say, you know what, I really like that property,

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Speaker 1: but it's probably not right for me. I need a

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Speaker 1: home that I can live in a retire and that's

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Speaker 1: maybe a ground floor apartment or a home that doesn't

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Speaker 1: have stairs, or something that's low maintenance for me, or

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Speaker 1: a home that's actually in an area that's closer to

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Speaker 1: hospitals or closer to where my community or my friends are.

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Speaker 1: Make sure you have that conversation with her so that

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Speaker 1: you know that this actually is in alignment to what

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Speaker 1: your non financial goals are, which obviously to help support

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Speaker 1: your mother back. And then I would be asking the

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Speaker 1: questions as, Okay, how's this going to work financially? I

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Speaker 1: think it's so admirable that you want to help your

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Speaker 1: mom out and give her a safe home to be

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Speaker 1: able to live in. However, what will that look like financially?

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Speaker 1: I know you've said that you can afford the gap

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Speaker 1: in the rent and the mortgage repayments right now, but

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Speaker 1: what will your mother be able to afford to contribute?

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Speaker 1: Perhaps you're going to have to take on the whole

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Speaker 1: entire mortgage repayment if she's not in a position where

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Speaker 1: she can afford to contribute towards the cost of this property. Now,

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Speaker 1: you might be able to afford it now, but what

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Speaker 1: if your situation changes. You may have children, or you

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Speaker 1: may already may have children already, you might have more

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Speaker 1: children or you might be looking at your own retirement

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Speaker 1: goals where you want to look at working part time.

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Speaker 1: You need to ask these questions and get a really

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Speaker 1: clear picture as to what this is going to look like,

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Speaker 1: both immediately, medium term and long term, and throw some

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Speaker 1: what if situations, play Devil's advocate, just like I have

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Speaker 1: done right now, and when in doubt hold off. That

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Speaker 1: doesn't mean don't proceed ahead, and it means continue on researching,

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Speaker 1: continue on going deep, picking people's brains, asking the right questions,

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Speaker 1: doing your research. This may lead you to another property.

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Speaker 1: You may realize, actually, this is what we do want

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Speaker 1: to do, buy a property, but this particular property isn't

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Speaker 1: actually the right one for us, Or this particular property

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Speaker 1: is right for us, but the timing isn't right. By

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Speaker 1: going through and considering all of these things, it will

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Speaker 1: help you get started in making the right decision for

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Speaker 1: yourself and for your partner, so that you are always

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Speaker 1: upholding your financial well being, your financial goals, but also

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Speaker 1: the value system behind how you want to help support

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Speaker 1: your family. Help back your family, and look at the

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Speaker 1: big picture so that you're always in a position where

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Speaker 1: you can afford to help other people around you. So

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Speaker 1: thank you so much for sending me this DM and

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Speaker 1: asking these questions. I'm absolutely honored that you've asked me

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Speaker 1: to help you dissect, analyze, and critique this massive financial decision.

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Speaker 1: Never feel pressured or rushed. If it's meant to be,

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Speaker 1: you will know when it's right because you've considered absolutely everything.

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Speaker 1: And again a reminder, always go and get personal advice

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Speaker 1: from a financial planner. Speak with your accountant, get a

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Speaker 1: great mortgage broker that can help you and run all

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Speaker 1: the numbers with you, particularly if interest rates change. And

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Speaker 1: of course, give a couple of real estate agents in

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Speaker 1: that area a few phone calls. You'll get a much

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Speaker 1: greater understanding as to what the true value of the

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Speaker 1: property is, as well as the potential long term value

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Speaker 1: and how it's going to work for your financial goals

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Speaker 1: and dreams. All right, everyone, thank you so much for

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Speaker 1: listening to today's start a Here episode. If you would

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Speaker 1: like me to help you get started, please send me

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Speaker 1: a DM on Instagram at Sugar Mama TV or at

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Speaker 1: Canna Campbell Official, and as mentioned, I will come back

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Speaker 1: to you as quickly as possible so that you can

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Speaker 1: quickly get start. All right, everyone, I'll see you next.

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Speaker 1: Monday morning, chappin Out