1 00:00:09,800 --> 00:00:13,119 Speaker 1: Hello, and welcome to The Australian's Money Puzzled podcast. I'm 2 00:00:13,240 --> 00:00:16,680 Speaker 1: James Kirby, well editor at the Australian. Welcome aboard everybody. 3 00:00:17,040 --> 00:00:20,000 Speaker 1: One thing I've discovered doing this show, and particularly when 4 00:00:20,040 --> 00:00:24,280 Speaker 1: we have a sort of concentration on property on Tuesday's 5 00:00:26,000 --> 00:00:30,600 Speaker 1: edition of the show, we find that property people and 6 00:00:30,640 --> 00:00:32,880 Speaker 1: they're very good at many of them. And you hear 7 00:00:32,920 --> 00:00:37,920 Speaker 1: a agent, surviyor's advocates or mortgage brokers or economists. Everyone 8 00:00:37,960 --> 00:00:40,840 Speaker 1: involved in property has a view, but they're not advisors, right. 9 00:00:42,080 --> 00:00:46,920 Speaker 1: And then financial advisors, in my experience, they concentrate on 10 00:00:47,000 --> 00:00:50,239 Speaker 1: listed securities. They're particularly good on shares and funds and 11 00:00:50,280 --> 00:00:54,840 Speaker 1: ETFs and superintext they're not really good on property and 12 00:00:54,960 --> 00:00:58,960 Speaker 1: advising on property. And only some advisors really have any 13 00:00:59,040 --> 00:01:01,880 Speaker 1: clue about property and it's so important. So what happens 14 00:01:01,880 --> 00:01:03,600 Speaker 1: to people, and in my experience is they go into 15 00:01:03,640 --> 00:01:06,200 Speaker 1: financial advisors and they say I'm doing this and I'm 16 00:01:06,240 --> 00:01:08,440 Speaker 1: doing that, and they say yes, and they're good on 17 00:01:08,560 --> 00:01:10,800 Speaker 1: these areas that they have some expertise in and they 18 00:01:10,800 --> 00:01:13,280 Speaker 1: haven't really got much to say on property except they 19 00:01:13,319 --> 00:01:17,440 Speaker 1: just can't they can't communicate with them. So we found 20 00:01:17,520 --> 00:01:20,800 Speaker 1: every now and again, folks, it's been very useful to 21 00:01:21,000 --> 00:01:24,800 Speaker 1: bring an advisor in to talk about property strictly as 22 00:01:24,840 --> 00:01:29,320 Speaker 1: an advisor, because they're hard to find. I have found one. 23 00:01:30,040 --> 00:01:33,840 Speaker 1: It's James Gerard, a regular on the show from Financial 24 00:01:33,920 --> 00:01:37,080 Speaker 1: advisor dot com dot U Hi, James, how are you good? 25 00:01:37,160 --> 00:01:37,440 Speaker 1: Thank you? 26 00:01:37,520 --> 00:01:38,800 Speaker 2: James. Good to chet you today. 27 00:01:38,840 --> 00:01:41,480 Speaker 1: Apart from the fact that you are always been interested 28 00:01:41,520 --> 00:01:45,680 Speaker 1: in property and you monitor it, you write about it, 29 00:01:45,760 --> 00:01:50,240 Speaker 1: and you've actively been an investor yourself in different forms 30 00:01:50,280 --> 00:01:53,520 Speaker 1: of property, and I think that's great experience for you, 31 00:01:53,640 --> 00:01:56,000 Speaker 1: but also for you as an advisor. That's one of 32 00:01:56,000 --> 00:01:57,880 Speaker 1: the reasons I was asking you to come on today. 33 00:01:58,240 --> 00:02:01,240 Speaker 1: There's some mental block with financial property or is it 34 00:02:01,280 --> 00:02:04,760 Speaker 1: a regulatory gap or what's that explanation that people can't 35 00:02:05,040 --> 00:02:07,240 Speaker 1: they really can't get very good advice on property from 36 00:02:07,240 --> 00:02:09,440 Speaker 1: people who aren't up to their neck and selling property. 37 00:02:09,560 --> 00:02:13,639 Speaker 2: Seem to me, Yeah, it's really unfortunate. It's one of 38 00:02:13,720 --> 00:02:18,399 Speaker 2: the inadequacies of the financial advisory industry is that we're 39 00:02:18,440 --> 00:02:20,800 Speaker 2: not very good at giving property advice as the whole. 40 00:02:20,840 --> 00:02:22,840 Speaker 2: And I think it comes down to really just conflict 41 00:02:22,880 --> 00:02:26,440 Speaker 2: of interest. The all vested interest may be more to 42 00:02:26,480 --> 00:02:29,480 Speaker 2: the point of the financial advisor. Most financial advisors they'll 43 00:02:29,560 --> 00:02:31,880 Speaker 2: charge a fee for this in called a statement of advice, 44 00:02:31,960 --> 00:02:35,920 Speaker 2: which lays out your current situation, what recommendation should be made, 45 00:02:35,960 --> 00:02:38,920 Speaker 2: and then shows you a roadmap into the future. And 46 00:02:39,000 --> 00:02:42,440 Speaker 2: to execute that statement of advice, it usually involves setting 47 00:02:42,520 --> 00:02:46,120 Speaker 2: up super accounts, investment accounts, and inside of those accounts 48 00:02:46,160 --> 00:02:49,679 Speaker 2: are usually ETFs and managed funds and not so much 49 00:02:49,720 --> 00:02:53,000 Speaker 2: physical property. And that comes down to the financial advisors 50 00:02:53,440 --> 00:02:58,040 Speaker 2: ongoing remuneration. To retain that financial advisor, they'll usually charge 51 00:02:58,080 --> 00:03:01,760 Speaker 2: you either a flat dollar retainer or a percentage based fee. 52 00:03:02,120 --> 00:03:05,360 Speaker 2: But their skill set is on monitoring the share market, 53 00:03:05,480 --> 00:03:09,720 Speaker 2: monitoring the bonds in the portfolio, interviewing the fund managers. 54 00:03:10,080 --> 00:03:13,040 Speaker 2: It's not on looking at is adelaide a great hotspot? 55 00:03:13,120 --> 00:03:16,000 Speaker 2: Has Hobart turned a corner with the property market, and 56 00:03:16,040 --> 00:03:17,119 Speaker 2: as such, they don't. 57 00:03:16,960 --> 00:03:18,919 Speaker 1: Not in the exams of anything like that at all. 58 00:03:19,440 --> 00:03:23,840 Speaker 2: It's not. No, it's not and maybe partly regulatory as well, 59 00:03:23,840 --> 00:03:28,280 Speaker 2: because ACID don't consider property as a financial asset. They 60 00:03:28,400 --> 00:03:32,920 Speaker 2: consider if you own property through super an a financial asset, 61 00:03:32,960 --> 00:03:35,600 Speaker 2: but property itself is not, which means all of the 62 00:03:35,640 --> 00:03:39,360 Speaker 2: regulation is carved away and there's no education requirements and 63 00:03:39,400 --> 00:03:43,160 Speaker 2: there's no regulation there from an investment advisory perspective when 64 00:03:43,160 --> 00:03:47,080 Speaker 2: it comes to property as an investment, so you really 65 00:03:47,160 --> 00:03:50,120 Speaker 2: need to if you're a person looking to invest in 66 00:03:50,160 --> 00:03:52,920 Speaker 2: property as part of a diversified portfolio and you want 67 00:03:52,920 --> 00:03:55,720 Speaker 2: to seek advice, you should have a financial advisor because 68 00:03:55,800 --> 00:03:58,720 Speaker 2: we come in handy as a sounding board. We keep 69 00:03:58,960 --> 00:04:01,840 Speaker 2: the buyers agent and accountable. We'll probably delve into this 70 00:04:01,880 --> 00:04:03,960 Speaker 2: a little bit more, but firstly we just lay it 71 00:04:04,040 --> 00:04:07,000 Speaker 2: up with what's the strategy, why we buy in a property, 72 00:04:07,040 --> 00:04:08,560 Speaker 2: how much, where are we're going to buy, and then 73 00:04:08,560 --> 00:04:10,600 Speaker 2: when it comes to the execution, that's where we bring 74 00:04:10,640 --> 00:04:11,360 Speaker 2: in the buyer's agent. 75 00:04:11,720 --> 00:04:13,720 Speaker 1: So just to flip it around. Then, if I'm going 76 00:04:13,760 --> 00:04:19,520 Speaker 1: in the door to a random financial advisor and I 77 00:04:19,520 --> 00:04:21,919 Speaker 1: am building an investment portfolio and it's very important to me, 78 00:04:21,920 --> 00:04:24,480 Speaker 1: it's going to be my super probably and I've got 79 00:04:24,480 --> 00:04:26,680 Speaker 1: my shares, I've got my bonds, I've got my ets, 80 00:04:26,720 --> 00:04:29,760 Speaker 1: I've got it all nicely. And then i have property, 81 00:04:30,120 --> 00:04:33,400 Speaker 1: and it's it's a property in some suburb, it's just 82 00:04:33,440 --> 00:04:37,720 Speaker 1: got basically got an address, or it's a property multiple properties, 83 00:04:38,000 --> 00:04:40,720 Speaker 1: But can I reason why can I reasonably expect the 84 00:04:41,080 --> 00:04:43,800 Speaker 1: advisor to advise me in this on. 85 00:04:43,680 --> 00:04:48,280 Speaker 2: This Yeah, you can't seek advice from an advisor, But 86 00:04:48,360 --> 00:04:50,839 Speaker 2: it just comes down to going to the right advisor. 87 00:04:50,880 --> 00:04:52,479 Speaker 2: I mean, if I could simplify it and put the 88 00:04:52,520 --> 00:04:56,480 Speaker 2: advisors into three different buckets, that will help the consumers 89 00:04:56,480 --> 00:04:58,440 Speaker 2: sort of pick the right advisor for them when it 90 00:04:58,480 --> 00:05:02,080 Speaker 2: comes to property advice. The first type of advisor is 91 00:05:02,120 --> 00:05:03,480 Speaker 2: the one all the way down the end of the 92 00:05:03,520 --> 00:05:06,560 Speaker 2: spectrum that I mentioned that has no desire to recommend 93 00:05:06,560 --> 00:05:09,880 Speaker 2: property investments for you because their fee and their service 94 00:05:09,880 --> 00:05:13,240 Speaker 2: model is around managing your share and your bonds. So 95 00:05:13,320 --> 00:05:15,680 Speaker 2: if anything, if you go to that advisor's office, he's 96 00:05:15,680 --> 00:05:17,400 Speaker 2: probably going to tell you He or she will probably 97 00:05:17,480 --> 00:05:21,360 Speaker 2: tell you to not worry about property investment as too concentrated, 98 00:05:21,360 --> 00:05:23,960 Speaker 2: as too much hassle. Let's just put that idea on 99 00:05:23,960 --> 00:05:25,880 Speaker 2: the side of buying property and put more into your 100 00:05:26,440 --> 00:05:28,839 Speaker 2: share and ETF and managed firm portfoluo. And by the way, 101 00:05:28,839 --> 00:05:31,040 Speaker 2: that advisor will probably want to take over that portfolio 102 00:05:31,120 --> 00:05:33,920 Speaker 2: and charge your fee. So that's the first type of advisor. 103 00:05:34,520 --> 00:05:36,400 Speaker 2: And then down the other end of the spectrum, we 104 00:05:36,480 --> 00:05:40,760 Speaker 2: have the advisor who's really pro property and he'll go look, 105 00:05:40,839 --> 00:05:42,880 Speaker 2: he or she will go, yes, look, that's a great idea. 106 00:05:42,960 --> 00:05:45,240 Speaker 2: Let's buy some property, but maybe not the one you're 107 00:05:45,279 --> 00:05:47,880 Speaker 2: thinking of. I've got a really good contact. You can 108 00:05:47,920 --> 00:05:51,080 Speaker 2: help you buy a brand new property that's in it 109 00:05:51,600 --> 00:05:53,240 Speaker 2: by the land, and then I'll induce you to the 110 00:05:53,240 --> 00:05:55,520 Speaker 2: builder and then he can build the property for you. 111 00:05:55,720 --> 00:05:59,000 Speaker 2: So the problem with that advisor is that there's usually 112 00:05:59,040 --> 00:06:02,839 Speaker 2: some deal under the table there with regards to getting 113 00:06:02,839 --> 00:06:06,520 Speaker 2: commissions on the build for these brand new properties. So 114 00:06:06,880 --> 00:06:09,560 Speaker 2: they like property, but they'll steer you towards ones that 115 00:06:09,839 --> 00:06:11,080 Speaker 2: benefit them from commission. 116 00:06:11,480 --> 00:06:14,400 Speaker 1: That's all legal, is it, that's all within the law. Yeah, 117 00:06:15,440 --> 00:06:18,080 Speaker 1: because the property is excluded because it's not a financial asset. 118 00:06:18,800 --> 00:06:21,840 Speaker 2: Yeah, that's right. Like as us as funnage advisers, we're 119 00:06:21,839 --> 00:06:23,599 Speaker 2: not meant to take or not meant to we're not 120 00:06:23,680 --> 00:06:26,640 Speaker 2: allowed to take commissions. But there's lots of ways to 121 00:06:27,000 --> 00:06:31,039 Speaker 2: divvy things up. So advisors business people, they're creative. What 122 00:06:31,120 --> 00:06:34,279 Speaker 2: if they have a stake in the property development business 123 00:06:34,279 --> 00:06:36,440 Speaker 2: and they get a dividend rather than a referral fee. 124 00:06:36,440 --> 00:06:38,640 Speaker 2: There's all sorts of ways to skin a cat as 125 00:06:38,680 --> 00:06:39,359 Speaker 2: the same goals. 126 00:06:42,120 --> 00:06:44,720 Speaker 1: This is exactly what I was hoping to find out. Well, 127 00:06:44,880 --> 00:06:46,480 Speaker 1: this is getting to the heart of it, like why 128 00:06:46,680 --> 00:06:51,040 Speaker 1: why why is advice so hard to find for property investors? 129 00:06:51,320 --> 00:06:53,400 Speaker 1: Which is the use of this show obviously and shows 130 00:06:53,440 --> 00:06:55,520 Speaker 1: like it that people This is why people listen obviously 131 00:06:55,600 --> 00:06:57,760 Speaker 1: because they can't get advised. Sorry, James, keep going. So 132 00:06:57,800 --> 00:07:00,480 Speaker 1: you had you were going through the types of Yeah, 133 00:07:00,680 --> 00:07:04,160 Speaker 1: that was the second, and you had one more, yeah, 134 00:07:04,240 --> 00:07:04,720 Speaker 1: the second. 135 00:07:05,000 --> 00:07:07,520 Speaker 2: So far, I've gone through both ends the spectrum. The 136 00:07:07,560 --> 00:07:10,320 Speaker 2: advisor who doesn't like property tries to steer you towards funds. 137 00:07:10,320 --> 00:07:12,080 Speaker 2: And then you've got down the other end of the spectrum, 138 00:07:12,120 --> 00:07:14,520 Speaker 2: the advisor that does like property, but they're trying to 139 00:07:14,560 --> 00:07:17,040 Speaker 2: line their own pockets with some commission on some property 140 00:07:17,040 --> 00:07:19,000 Speaker 2: deal they're trying to shovel you into. And then you've 141 00:07:19,000 --> 00:07:21,240 Speaker 2: got the third type of advisor who sits in the 142 00:07:21,280 --> 00:07:24,720 Speaker 2: middle where they're usually self license and they'll usually charge 143 00:07:24,760 --> 00:07:27,920 Speaker 2: you at flat dollar fee and they'll say, okay, well 144 00:07:28,400 --> 00:07:30,760 Speaker 2: we can advise you on what's important to you. If 145 00:07:30,800 --> 00:07:34,080 Speaker 2: you're set with your ETF portfolio, that's fine, we'll scope 146 00:07:34,120 --> 00:07:35,480 Speaker 2: that out. We don't need to give you advice on that. 147 00:07:35,480 --> 00:07:37,680 Speaker 2: If you're coming into our office and you'll seeking advice 148 00:07:37,720 --> 00:07:40,920 Speaker 2: on this commercial property investment around the corner from you, great, 149 00:07:41,120 --> 00:07:43,320 Speaker 2: we'll talk to you about the pros and cons of it, 150 00:07:43,400 --> 00:07:47,920 Speaker 2: the tax aspects of it, the funding, the future CGT implications, 151 00:07:47,920 --> 00:07:50,280 Speaker 2: how it fits into your broader portfolio, and then you 152 00:07:50,280 --> 00:07:53,120 Speaker 2: can go ahead and make decisions on it. So that's 153 00:07:53,360 --> 00:07:55,240 Speaker 2: the third type of advisor, which i'd have to say 154 00:07:55,280 --> 00:07:58,040 Speaker 2: is the minority of advisors, but is probably the biggest 155 00:07:58,040 --> 00:07:59,800 Speaker 2: asset for a property investor to have on this. 156 00:08:00,640 --> 00:08:04,760 Speaker 1: Yes, but it's not typical, and it's not typical. Why 157 00:08:04,800 --> 00:08:05,600 Speaker 1: are they so rare. 158 00:08:06,560 --> 00:08:10,920 Speaker 2: It's because it's a harder business model for the advisor. 159 00:08:11,120 --> 00:08:14,000 Speaker 2: They need to charge on an hourly basis or retain 160 00:08:14,040 --> 00:08:16,920 Speaker 2: a basis linked to the property, and it's harder to 161 00:08:17,320 --> 00:08:21,000 Speaker 2: show ongoing value. It's more transactional in nature, whereas financial 162 00:08:21,040 --> 00:08:24,960 Speaker 2: advisors more like to have ongoing relationships. And what I 163 00:08:25,000 --> 00:08:27,880 Speaker 2: mean by transactional is that the advice is given on 164 00:08:27,920 --> 00:08:31,400 Speaker 2: a specific property or a couple of properties and then 165 00:08:31,440 --> 00:08:33,600 Speaker 2: it's done. But then how can you charge a fee 166 00:08:33,679 --> 00:08:36,120 Speaker 2: every year as a retainer on that property if the 167 00:08:36,360 --> 00:08:39,120 Speaker 2: client just collecting the rent, paying their mortgage. There's not 168 00:08:39,160 --> 00:08:41,400 Speaker 2: too much to add. Maybe, sure, there's an argument for 169 00:08:41,440 --> 00:08:43,280 Speaker 2: once a year to do a review to say should 170 00:08:43,320 --> 00:08:45,000 Speaker 2: we sell the property or should we keep it? But 171 00:08:45,440 --> 00:08:49,280 Speaker 2: outside of that, it's tough to give advice, whereas advisors 172 00:08:49,320 --> 00:08:51,439 Speaker 2: like to keep giving advice. So that's why they prefer 173 00:08:51,480 --> 00:08:53,920 Speaker 2: that managed fund and ETF type portfolio, and that's why 174 00:08:53,960 --> 00:08:56,560 Speaker 2: the property financial advisors are few and far between. 175 00:08:56,880 --> 00:08:59,520 Speaker 1: Oh see that really good answer. It explains it all. 176 00:09:00,080 --> 00:09:01,719 Speaker 1: I don't want to be fatalistic, but in a way, 177 00:09:01,760 --> 00:09:07,280 Speaker 1: it seems to me that most of the time most 178 00:09:07,280 --> 00:09:10,080 Speaker 1: people won't be able to get advice from advisors about 179 00:09:10,080 --> 00:09:11,720 Speaker 1: property being realistic about it. 180 00:09:11,800 --> 00:09:12,280 Speaker 2: That's right. 181 00:09:12,400 --> 00:09:14,240 Speaker 1: Yeah, And then you're left with the property people, and 182 00:09:14,240 --> 00:09:15,920 Speaker 1: then they're always going it's like you went to the shop, 183 00:09:15,960 --> 00:09:18,200 Speaker 1: you try on the jacket, the assistant says that jacket 184 00:09:18,200 --> 00:09:21,240 Speaker 1: looks really good on you. What else would they say, 185 00:09:21,559 --> 00:09:24,520 Speaker 1: I can't believe how bad it looks on you. So 186 00:09:24,760 --> 00:09:27,840 Speaker 1: property is the same. If you're dealing with someone that's selling, 187 00:09:28,840 --> 00:09:30,960 Speaker 1: what else would they say? Do you think this is 188 00:09:31,240 --> 00:09:33,240 Speaker 1: someone standing there talking to a really staying agent saying 189 00:09:33,240 --> 00:09:34,480 Speaker 1: do you think this would be a good investment. What 190 00:09:34,559 --> 00:09:37,360 Speaker 1: are they going to say no? And then where do 191 00:09:37,400 --> 00:09:40,560 Speaker 1: they seek advice outside the property industry financial advisors, But 192 00:09:40,600 --> 00:09:43,480 Speaker 1: financial advisors don't do it. So something of a real 193 00:09:43,559 --> 00:09:45,680 Speaker 1: catch twenty two there, And I think we might just 194 00:09:45,760 --> 00:09:48,200 Speaker 1: leave that there, James, for people think about listeners to 195 00:09:48,320 --> 00:09:50,960 Speaker 1: think about it. And as I say, perhaps it's one 196 00:09:50,960 --> 00:09:53,040 Speaker 1: of the reasons that there are sor there's so much 197 00:09:53,040 --> 00:09:56,440 Speaker 1: property media, so many property investment gurus out there are 198 00:09:56,520 --> 00:10:00,560 Speaker 1: various types, but also so many publications and podcast et 199 00:10:00,640 --> 00:10:04,280 Speaker 1: cetera on property, and that I think essentially is the reason. 200 00:10:04,720 --> 00:10:06,400 Speaker 1: And it was one of the reasons that I did 201 00:10:07,360 --> 00:10:11,160 Speaker 1: ensure that we concentrated in a sort of screen fashion 202 00:10:11,200 --> 00:10:14,360 Speaker 1: on property within the podcast as it rules, because I 203 00:10:14,400 --> 00:10:17,400 Speaker 1: do believe that many of our listeners need to know 204 00:10:17,440 --> 00:10:19,520 Speaker 1: and want to know more about property, and it's very 205 00:10:19,559 --> 00:10:23,040 Speaker 1: hard to get a very good information. Obviously, we're not 206 00:10:23,040 --> 00:10:25,280 Speaker 1: in the business of providing advice, but we are in 207 00:10:25,320 --> 00:10:28,520 Speaker 1: the business of providing information, as you're well aware of, folks, 208 00:10:28,640 --> 00:10:30,840 Speaker 1: when we do the questions each week. Okay, we'll take 209 00:10:30,880 --> 00:10:44,320 Speaker 1: a short break. We'll be back in a moment. Hello, 210 00:10:44,480 --> 00:10:47,199 Speaker 1: and welcome back to the Australian's Money Puzzled podcast. It's 211 00:10:47,240 --> 00:10:49,679 Speaker 1: the two James's here, James gr R James Kerby talking 212 00:10:49,720 --> 00:10:53,079 Speaker 1: to you on the podcast, James the course regular guest 213 00:10:53,200 --> 00:10:58,080 Speaker 1: and marvelously heroically stands in sometimes for me when I 214 00:10:58,120 --> 00:11:05,040 Speaker 1: am off on my Venturers Elsewhere. Now, James, the biggest 215 00:11:05,080 --> 00:11:08,439 Speaker 1: mistake then, from your side of the desk as an advisor, 216 00:11:08,480 --> 00:11:12,640 Speaker 1: that you see when people who are diversified, active, useful 217 00:11:12,679 --> 00:11:16,079 Speaker 1: investors when it comes to property, the biggest mistake they make. 218 00:11:16,120 --> 00:11:17,920 Speaker 1: I have no idea what answer you're going to give, 219 00:11:18,480 --> 00:11:22,080 Speaker 1: which is good. So what's the biggest mistake? 220 00:11:22,240 --> 00:11:26,160 Speaker 2: In my opinion, it would be listening to people and 221 00:11:26,160 --> 00:11:28,319 Speaker 2: listening to the wrong people and not listening to your 222 00:11:28,320 --> 00:11:32,880 Speaker 2: own gut. Because, as you've hinted that, there's a lot 223 00:11:32,880 --> 00:11:36,199 Speaker 2: of people in the property industry. You have real estate agents, 224 00:11:36,320 --> 00:11:40,240 Speaker 2: you have buyers agents, you have mortgage brokers, you have lawyers, 225 00:11:40,760 --> 00:11:43,920 Speaker 2: and all of them only make money if you do something, 226 00:11:43,920 --> 00:11:48,280 Speaker 2: if you transact, so their vested interest is to make 227 00:11:48,320 --> 00:11:50,559 Speaker 2: you do something, oh, usually to buy a property or 228 00:11:50,559 --> 00:11:53,640 Speaker 2: if you have the property, to sell a property. So 229 00:11:53,880 --> 00:11:58,559 Speaker 2: the issue there is using your own judgment to go okay, well, 230 00:11:59,080 --> 00:12:02,040 Speaker 2: is this person telling me this is a fantastic property investment, 231 00:12:02,040 --> 00:12:04,000 Speaker 2: whether it's a buyer's agent or a real estate agent, 232 00:12:04,760 --> 00:12:06,760 Speaker 2: is this the right thing for me to do. And 233 00:12:06,880 --> 00:12:09,280 Speaker 2: a big mistake that goes hand in hand with that 234 00:12:09,520 --> 00:12:12,360 Speaker 2: is people being pressured, so people going, well, I need 235 00:12:12,400 --> 00:12:14,240 Speaker 2: to make this call, otherwise I'm going to miss out 236 00:12:14,480 --> 00:12:16,640 Speaker 2: on this property. You really need to just step back 237 00:12:16,679 --> 00:12:20,120 Speaker 2: and go, well, this is just one property. If it 238 00:12:20,200 --> 00:12:22,400 Speaker 2: goes fine, you know, it might have been a great property, 239 00:12:22,440 --> 00:12:24,200 Speaker 2: but there's going to be more of them. There's not 240 00:12:24,200 --> 00:12:25,480 Speaker 2: the only property that it's ever going to come up 241 00:12:25,559 --> 00:12:28,880 Speaker 2: on the market. And usually when people step back and 242 00:12:29,000 --> 00:12:31,280 Speaker 2: where they're in that pressured situation to make a call 243 00:12:31,320 --> 00:12:34,000 Speaker 2: and buy it, if they don't, it usually fate happens 244 00:12:34,000 --> 00:12:36,440 Speaker 2: and then the next week something better and cheaper comes 245 00:12:36,559 --> 00:12:39,719 Speaker 2: onto the market. But had they been pressured and went 246 00:12:39,760 --> 00:12:41,679 Speaker 2: ahead with that, I usually see that that can be 247 00:12:41,760 --> 00:12:44,800 Speaker 2: a big mistake and they regret that purchase, having overpaid 248 00:12:45,120 --> 00:12:47,280 Speaker 2: on the buy side and taken too low of a 249 00:12:47,360 --> 00:12:48,360 Speaker 2: price on the cell side. 250 00:12:48,440 --> 00:12:51,560 Speaker 1: Yes, it's a terrific observation, and it reminds me of 251 00:12:51,600 --> 00:12:54,240 Speaker 1: a story I can cross one time, which is I 252 00:12:54,320 --> 00:12:58,079 Speaker 1: thought so revealing. So we as property investors will think 253 00:12:59,559 --> 00:13:03,440 Speaker 1: that as you say, the lawyer's calling, the mortgage broker says, 254 00:13:03,440 --> 00:13:07,160 Speaker 1: everything's ready, the property is ready to be boat, and 255 00:13:07,200 --> 00:13:10,839 Speaker 1: you're there, and you're sort of being rafted along with 256 00:13:10,880 --> 00:13:15,080 Speaker 1: all this. But in fact, the most powerful position is 257 00:13:15,120 --> 00:13:18,040 Speaker 1: that they all want your money, basically, and you have 258 00:13:18,160 --> 00:13:19,880 Speaker 1: the power to say yes or no. And there was 259 00:13:19,920 --> 00:13:24,280 Speaker 1: a marvelous anecdote about a one of the founding fathers, 260 00:13:24,320 --> 00:13:27,200 Speaker 1: if you like, one of the patriarchs of the Rich List, 261 00:13:27,240 --> 00:13:29,360 Speaker 1: one of the big families on the rich List, who 262 00:13:29,440 --> 00:13:33,880 Speaker 1: was famous property operator, but became famous slash infamous for 263 00:13:34,520 --> 00:13:36,680 Speaker 1: what you could call a trick he had, and this 264 00:13:36,800 --> 00:13:39,640 Speaker 1: was in commercial property, and basically what he would do 265 00:13:39,760 --> 00:13:42,920 Speaker 1: was and this happened consistently, so it was clearly a plan. 266 00:13:43,600 --> 00:13:46,760 Speaker 1: They would get to a point when this particular tycoon 267 00:13:47,000 --> 00:13:49,560 Speaker 1: was ready to buy the property. Let's just pick a property, okay, 268 00:13:49,640 --> 00:13:53,360 Speaker 1: let's just say it's whatever, you know, number four Pitt Street, 269 00:13:54,320 --> 00:13:56,760 Speaker 1: and let's say it costs eighty million or something, and 270 00:13:56,880 --> 00:13:58,920 Speaker 1: they would all go along to a certain point and 271 00:13:59,600 --> 00:14:02,920 Speaker 1: the deal be ready, and they'd finally meet the last day. 272 00:14:03,360 --> 00:14:06,319 Speaker 1: Everyone's there, the lawyers are there, and the brokers and 273 00:14:06,360 --> 00:14:10,840 Speaker 1: the agents and the buyers, et cetera. And everyone's ready. 274 00:14:11,440 --> 00:14:14,240 Speaker 1: They're there to seal it, there to see the deal. 275 00:14:14,559 --> 00:14:18,840 Speaker 1: And he would stop and he said, I just don't 276 00:14:19,160 --> 00:14:24,000 Speaker 1: know about this. I'm just I think I just think 277 00:14:24,000 --> 00:14:25,880 Speaker 1: we'd have to go back and look at a few 278 00:14:26,120 --> 00:14:30,800 Speaker 1: And everybody was weakened by this because everybody said, we're 279 00:14:30,840 --> 00:14:33,080 Speaker 1: here to do it. It's done, and everyone thought they 280 00:14:33,080 --> 00:14:37,800 Speaker 1: were across the line and it would be renegotiated, always 281 00:14:37,800 --> 00:14:40,480 Speaker 1: in his favor. Very interesting. I thought it was most 282 00:14:40,560 --> 00:14:47,720 Speaker 1: interesting about that true story is you're in charge. It 283 00:14:47,800 --> 00:14:52,480 Speaker 1: isn't that you must buy, it's that they need you 284 00:14:52,600 --> 00:14:54,920 Speaker 1: to purchase. And I think if you kept that in mind, 285 00:14:55,200 --> 00:14:58,640 Speaker 1: which is very much underpinning what you're saying, would be 286 00:14:58,720 --> 00:15:00,880 Speaker 1: very good. Okay, that was a very good answer. The 287 00:15:00,880 --> 00:15:05,040 Speaker 1: biggest mistake people make, and I expect James, the less 288 00:15:05,160 --> 00:15:07,360 Speaker 1: experience you have, the more likely you make that mistake. 289 00:15:07,880 --> 00:15:11,240 Speaker 1: Flipping it over, what did you think was the trait 290 00:15:12,360 --> 00:15:16,080 Speaker 1: that you thought most common among successful property the best investors. 291 00:15:16,080 --> 00:15:19,280 Speaker 1: And you deal with people who've been dealing in property 292 00:15:19,320 --> 00:15:22,000 Speaker 1: all their lives, So what do you see that they 293 00:15:22,040 --> 00:15:22,920 Speaker 1: have in common? 294 00:15:23,480 --> 00:15:25,520 Speaker 2: The thing I see in common is that they have 295 00:15:25,760 --> 00:15:30,280 Speaker 2: a plan. They know why they're buying a property. They 296 00:15:30,280 --> 00:15:32,720 Speaker 2: have an idea of when they're going to buy a property, 297 00:15:32,760 --> 00:15:34,440 Speaker 2: and I'm not talking about the next property. I'm talking 298 00:15:34,440 --> 00:15:36,960 Speaker 2: about ten properties down the track, so that they've got 299 00:15:36,960 --> 00:15:39,120 Speaker 2: a plan to buy a property every six months or 300 00:15:39,160 --> 00:15:42,120 Speaker 2: every twelve months. And when I say they have a plan, 301 00:15:42,320 --> 00:15:44,560 Speaker 2: there's a multiple parts of this plan. They're taking into 302 00:15:44,640 --> 00:15:48,480 Speaker 2: account taxation. So they're thinking about structures and buying properties 303 00:15:48,520 --> 00:15:52,040 Speaker 2: in the right structure, whether that's through their personal names. 304 00:15:52,200 --> 00:15:54,720 Speaker 2: They might pick one of the spouses for tax reasons. 305 00:15:54,800 --> 00:15:56,600 Speaker 2: They may buy it through a family trust, they may 306 00:15:56,680 --> 00:15:59,720 Speaker 2: use super, they may use an investment company. There's pros 307 00:15:59,720 --> 00:16:02,120 Speaker 2: and co of these, and so seeking advice on that 308 00:16:02,800 --> 00:16:05,280 Speaker 2: is important if you're interested in learning more about structures. 309 00:16:05,280 --> 00:16:08,480 Speaker 2: But the long term successful property investors will understand the 310 00:16:08,520 --> 00:16:11,600 Speaker 2: different structures and they'll know, Okay, for these ten properties 311 00:16:11,600 --> 00:16:13,520 Speaker 2: I'm going to buy over the next five to ten years, 312 00:16:13,680 --> 00:16:15,960 Speaker 2: I'm going to buy a property two in super, property 313 00:16:15,960 --> 00:16:18,120 Speaker 2: five in my personal name because I can negative gear 314 00:16:18,200 --> 00:16:20,960 Speaker 2: that one property eight through the family trust to distribute 315 00:16:20,960 --> 00:16:23,680 Speaker 2: income through the family and someone and so forth. But 316 00:16:23,720 --> 00:16:25,720 Speaker 2: it's not just that. They'll then have a look at 317 00:16:25,920 --> 00:16:29,800 Speaker 2: the characteristics of the property, because investment properties will have 318 00:16:30,040 --> 00:16:33,760 Speaker 2: income the rental return, they'll have potential capital growth, and 319 00:16:34,000 --> 00:16:36,120 Speaker 2: some properties will have more growth, some properties will have 320 00:16:36,160 --> 00:16:39,640 Speaker 2: more income. So understanding what type of property are you 321 00:16:39,760 --> 00:16:42,680 Speaker 2: targeting in that particular structure is important, and that's what 322 00:16:42,720 --> 00:16:46,240 Speaker 2: these property investors do. And that relates back to the 323 00:16:46,280 --> 00:16:50,120 Speaker 2: bank as well, because usually there's borrowing involved. They borrow 324 00:16:50,240 --> 00:16:53,120 Speaker 2: money from the bank to buy a property, that property 325 00:16:53,120 --> 00:16:55,400 Speaker 2: goes up, they then leverage the equity, they buy a 326 00:16:55,400 --> 00:16:58,000 Speaker 2: second property, and just repeat that process over and over again. 327 00:16:58,440 --> 00:17:02,240 Speaker 2: But the smart long term investors realize that the banks 328 00:17:02,240 --> 00:17:04,520 Speaker 2: aren't going to just keep giving them unlimited amounts of 329 00:17:04,840 --> 00:17:08,560 Speaker 2: money unless they shape their property portfolio in a certain way. 330 00:17:08,720 --> 00:17:11,120 Speaker 2: So what they'll do with these property investors, they'll forecast 331 00:17:11,240 --> 00:17:13,879 Speaker 2: to go, all right, I know what my employment income is. 332 00:17:13,960 --> 00:17:15,159 Speaker 2: I think I know what it will be over the 333 00:17:15,200 --> 00:17:18,320 Speaker 2: next five years with increases, and then they'll forecast their 334 00:17:18,359 --> 00:17:21,159 Speaker 2: borrowing capacity, and then they'll put in the properties that 335 00:17:21,520 --> 00:17:24,679 Speaker 2: will maximize their ongoing ability to borrow from the banks, 336 00:17:24,720 --> 00:17:27,760 Speaker 2: because at some stage the bank will go you don't 337 00:17:27,840 --> 00:17:30,720 Speaker 2: have enough serviceability, your income's not enough to service its 338 00:17:30,760 --> 00:17:33,200 Speaker 2: next loan, or the bank will say you don't have 339 00:17:33,320 --> 00:17:35,760 Speaker 2: enough equity. If I have, your properties aren't enough for 340 00:17:35,840 --> 00:17:38,440 Speaker 2: us to lend you more money. So the property investor 341 00:17:38,520 --> 00:17:41,000 Speaker 2: will think ahead and then buy the right properties to 342 00:17:41,440 --> 00:17:43,639 Speaker 2: make sure the banks will keep lending the money ongoing 343 00:17:43,680 --> 00:17:45,480 Speaker 2: and ongoing, to keep building their portfolio. 344 00:17:45,720 --> 00:17:48,560 Speaker 1: That's very interesting, So begin with an end in mind, 345 00:17:49,680 --> 00:17:53,199 Speaker 1: a sort of a lifetime approach. Absolutely interesting, isn't it. 346 00:17:53,280 --> 00:17:55,400 Speaker 1: Rather than that idea I must buy it, I must 347 00:17:55,400 --> 00:17:58,159 Speaker 1: buy a property, I must buy come bank shares, I 348 00:17:58,240 --> 00:18:01,520 Speaker 1: must buy a property, and deeper plan than that, just 349 00:18:01,560 --> 00:18:04,080 Speaker 1: that I should have one. Everyone does it. I should 350 00:18:04,080 --> 00:18:07,800 Speaker 1: have it. There's no plan there at all. Very interesting. Okay, 351 00:18:08,560 --> 00:18:11,080 Speaker 1: great answers, James, thank you very much. We'll take a break, folks, 352 00:18:11,119 --> 00:18:13,480 Speaker 1: and we'll be back with some terrific questions from David 353 00:18:13,480 --> 00:18:31,320 Speaker 1: and Jack and John. Hello, and welcome back to The 354 00:18:31,320 --> 00:18:35,960 Speaker 1: Australian's Money Puzzled podcast. David, I expect that customers of 355 00:18:36,080 --> 00:18:38,879 Speaker 1: the wealth industry are typically older and more established in 356 00:18:38,960 --> 00:18:42,080 Speaker 1: their careers, and so sometimes it seems that discussion is 357 00:18:42,119 --> 00:18:46,679 Speaker 1: too focused on lower risk wealth strategies. That's the discussion 358 00:18:46,720 --> 00:18:49,240 Speaker 1: on the show, David things. I wonder whether these apply 359 00:18:49,320 --> 00:18:52,600 Speaker 1: to all listeners. For example, those that are much earlier 360 00:18:52,920 --> 00:18:55,640 Speaker 1: on in their careers should potentially be encouraged towards taking 361 00:18:55,720 --> 00:18:58,560 Speaker 1: much larger risks, like starting a business. It would be 362 00:18:58,600 --> 00:19:02,040 Speaker 1: interesting to hear this explode on the podcast. Okay, David, 363 00:19:02,600 --> 00:19:06,080 Speaker 1: no problem what you're saying at all, David, Yes, absolutely, 364 00:19:06,119 --> 00:19:08,560 Speaker 1: the younger as a very broad principle, the younger you are, 365 00:19:09,280 --> 00:19:12,160 Speaker 1: the more risk you're you're able to take. And if 366 00:19:12,200 --> 00:19:15,760 Speaker 1: you are much older, there's two things on if you're 367 00:19:15,800 --> 00:19:18,840 Speaker 1: much older. One is you've got more to lose. That's 368 00:19:18,880 --> 00:19:21,200 Speaker 1: the first thing, which probably doesn't come up very often, 369 00:19:21,240 --> 00:19:23,520 Speaker 1: but it's psychologically very importantly. We've got if you haven't 370 00:19:23,520 --> 00:19:27,080 Speaker 1: got much to lose, if you've got fifty grand and super, 371 00:19:27,440 --> 00:19:29,920 Speaker 1: that's one thing, and you take risks. If you've got 372 00:19:30,000 --> 00:19:32,800 Speaker 1: a million and super and you're close to retirement, it's 373 00:19:32,800 --> 00:19:35,439 Speaker 1: a very different approach to risk at that stage. But 374 00:19:35,640 --> 00:19:38,600 Speaker 1: I would completely agree with the principle. Maybe sometimes on 375 00:19:38,640 --> 00:19:42,760 Speaker 1: the show there is an emphasis on I hope there 376 00:19:42,800 --> 00:19:45,399 Speaker 1: isn't an emphasis too much on by the preservation, because 377 00:19:45,400 --> 00:19:48,199 Speaker 1: that's the sort of I think if you get to 378 00:19:48,200 --> 00:19:50,800 Speaker 1: that point, then the show is less useful to you. 379 00:19:51,240 --> 00:19:54,080 Speaker 1: What do you think, James, I agree with that. 380 00:19:54,440 --> 00:19:57,920 Speaker 2: I use the analogy of climbing a mountain, So the 381 00:19:58,280 --> 00:20:00,840 Speaker 2: younger willth accumulators down the botto of the mountain and 382 00:20:01,160 --> 00:20:03,760 Speaker 2: the pre retiree or the retirees at the top of 383 00:20:03,960 --> 00:20:06,040 Speaker 2: the mountain. So when you're down the bottom of the mountain, 384 00:20:06,440 --> 00:20:08,760 Speaker 2: you can afford to take risks and try and climb faster, 385 00:20:08,920 --> 00:20:10,720 Speaker 2: and you fall down a bit, that's fine, you can 386 00:20:10,800 --> 00:20:13,280 Speaker 2: dust yourself off and you go back up that mountain. 387 00:20:13,320 --> 00:20:15,520 Speaker 2: But when you're near the top, you don't want afford 388 00:20:15,560 --> 00:20:17,000 Speaker 2: down half the mountain. You don't want to lose a 389 00:20:17,040 --> 00:20:20,000 Speaker 2: lot of your assets, so you become a lot more cautious. 390 00:20:20,280 --> 00:20:23,359 Speaker 2: So David's right. A lot of the wealth industry is 391 00:20:23,400 --> 00:20:27,480 Speaker 2: focused around the older investor, and that's because they have 392 00:20:27,760 --> 00:20:32,240 Speaker 2: the money. That's said that, there are a great amount 393 00:20:32,240 --> 00:20:36,400 Speaker 2: of younger financial advisors and younger property advisors who service 394 00:20:36,560 --> 00:20:38,760 Speaker 2: those people who are in their twenties and thirties who 395 00:20:38,760 --> 00:20:41,560 Speaker 2: are just getting started. It's just about doing research and 396 00:20:41,680 --> 00:20:44,480 Speaker 2: interviewing a couple of different people and finding the ones 397 00:20:44,520 --> 00:20:47,920 Speaker 2: that focus on that younger demographic and which one resonates 398 00:20:47,960 --> 00:20:48,280 Speaker 2: with you. 399 00:20:48,800 --> 00:20:50,840 Speaker 1: Yeah, And we have had advisers on the shore and 400 00:20:50,920 --> 00:20:54,320 Speaker 1: they say, my main business is worthy people come to 401 00:20:54,320 --> 00:20:56,280 Speaker 1: me and I keep them money, and that's good and 402 00:20:56,280 --> 00:21:00,720 Speaker 1: that's fine. We all walk together someday on the show. 403 00:21:00,760 --> 00:21:04,000 Speaker 1: But actually a lot of the show is focused on 404 00:21:04,240 --> 00:21:10,359 Speaker 1: building and starting and aculating phase of wealth and investing 405 00:21:10,400 --> 00:21:13,080 Speaker 1: because I think that's where people really need some support, 406 00:21:13,440 --> 00:21:15,880 Speaker 1: and that's the nature of the show that we're in. 407 00:21:16,080 --> 00:21:18,640 Speaker 1: Just as an aside. Unfortunately, the tax system is also 408 00:21:18,720 --> 00:21:22,239 Speaker 1: loaded towards the older Australian and you think about how 409 00:21:22,359 --> 00:21:26,000 Speaker 1: SUPER works and that you can have from July. It's 410 00:21:26,040 --> 00:21:28,440 Speaker 1: going to be two million per capita in Super tax 411 00:21:28,480 --> 00:21:30,760 Speaker 1: free from July this year for sure, the way inflation 412 00:21:31,000 --> 00:21:34,119 Speaker 1: indexing works. But at the same time, the most you 413 00:21:34,119 --> 00:21:36,960 Speaker 1: can put into SUPER on a contributing basis as you're 414 00:21:37,000 --> 00:21:40,280 Speaker 1: building it is thirty per annum. This is a pre 415 00:21:40,400 --> 00:21:42,600 Speaker 1: tax concession. How many years are you going to have 416 00:21:42,640 --> 00:21:45,720 Speaker 1: to be contributing to get up to where these people are? 417 00:21:45,760 --> 00:21:48,600 Speaker 1: So I think there's a terrible it's quite upside down, 418 00:21:48,680 --> 00:21:50,919 Speaker 1: and I say it all the time. The Super innovation 419 00:21:51,000 --> 00:21:53,720 Speaker 1: systems upside down and the older Australians are treated better 420 00:21:53,720 --> 00:21:56,720 Speaker 1: than younger ones. Okay, question from Jack? Can you see 421 00:21:56,720 --> 00:21:58,960 Speaker 1: that you want to read it again? 422 00:21:59,280 --> 00:22:02,720 Speaker 2: Jack, I'm currently sixty eight years. I'll old own my 423 00:22:02,800 --> 00:22:05,240 Speaker 2: house and have nine hundred thousand in super. I want 424 00:22:05,280 --> 00:22:07,160 Speaker 2: to work another three to four years. I've been told 425 00:22:07,200 --> 00:22:10,160 Speaker 2: to close my accumulation super account and turn it into 426 00:22:10,200 --> 00:22:12,879 Speaker 2: a pension as you pay no tax on the gains 427 00:22:12,920 --> 00:22:16,160 Speaker 2: in pension super if you are over sixty five, take 428 00:22:16,200 --> 00:22:18,479 Speaker 2: the minimum out each year, which is five percent, and 429 00:22:18,520 --> 00:22:21,959 Speaker 2: reinvest it in the accumulation account. When I'm ready to retire, 430 00:22:22,119 --> 00:22:25,199 Speaker 2: close both the pension and accumulation down and put them 431 00:22:25,240 --> 00:22:28,320 Speaker 2: into a brand new pension account. I'm doing this to 432 00:22:28,320 --> 00:22:30,960 Speaker 2: get better returns. Can it be done? It might seem 433 00:22:31,040 --> 00:22:32,760 Speaker 2: greedy on my part, but I don't want to be 434 00:22:32,800 --> 00:22:35,120 Speaker 2: a burden on my kids or society when I get 435 00:22:35,160 --> 00:22:35,800 Speaker 2: too old. 436 00:22:36,440 --> 00:22:40,040 Speaker 1: Thank you Jack. This is never advice, of course, but 437 00:22:40,280 --> 00:22:45,000 Speaker 1: recontribution strategy is crazy, daft, wacky, but utterly legitimate and 438 00:22:45,040 --> 00:22:47,679 Speaker 1: recommended by advisors. And why not because our system is 439 00:22:47,720 --> 00:22:50,600 Speaker 1: on nuts that it's no surprised that there's a sort 440 00:22:50,640 --> 00:22:53,560 Speaker 1: of a knotty. There's a knotty business going on, which 441 00:22:53,600 --> 00:22:55,760 Speaker 1: is called recontribution. Take money out of soup and put 442 00:22:55,800 --> 00:22:58,240 Speaker 1: it back in believe it or not, and that's better 443 00:22:58,440 --> 00:23:01,199 Speaker 1: in lots of ways. Is Jack on track? And what 444 00:23:01,320 --> 00:23:03,960 Speaker 1: he's saying there everything sound sensible. 445 00:23:04,240 --> 00:23:07,880 Speaker 2: It does sound sensible as a general strategy. So maybe 446 00:23:07,920 --> 00:23:10,360 Speaker 2: just going through that the technical rules at a very 447 00:23:10,560 --> 00:23:14,479 Speaker 2: high level, when you're sixty years old, if you stop working, 448 00:23:14,760 --> 00:23:17,000 Speaker 2: you can access your super so you can start that 449 00:23:17,160 --> 00:23:22,240 Speaker 2: pension accounts. Jack describes if you're between sixty and sixty five, 450 00:23:22,840 --> 00:23:25,000 Speaker 2: you need to have a break and employment to be 451 00:23:25,000 --> 00:23:27,359 Speaker 2: able to start these tax free pensions. You don't have 452 00:23:27,400 --> 00:23:29,440 Speaker 2: to retire, but you just need to not be working 453 00:23:29,480 --> 00:23:32,160 Speaker 2: at that point in time. And if you're sixty five 454 00:23:32,200 --> 00:23:34,280 Speaker 2: years old, it doesn't matter if you're working or not. 455 00:23:34,359 --> 00:23:36,320 Speaker 2: You can start these tax free pensions out of your 456 00:23:36,359 --> 00:23:39,320 Speaker 2: super account. And this is where Jack is because he's 457 00:23:39,359 --> 00:23:41,720 Speaker 2: sixty eight. So a lot of people come to me 458 00:23:41,760 --> 00:23:44,159 Speaker 2: and they say, I don't want to touch my super. 459 00:23:44,520 --> 00:23:47,120 Speaker 2: I'm happy with my salary. I don't need to draw 460 00:23:47,200 --> 00:23:49,679 Speaker 2: down on it. But what they fail to appreciate is 461 00:23:49,720 --> 00:23:51,960 Speaker 2: that even though they don't need that money out of 462 00:23:51,960 --> 00:23:55,360 Speaker 2: that super account that SUPER accounts currently paying between ten 463 00:23:55,400 --> 00:23:58,800 Speaker 2: and fifteen percent tax on earnings and capital gains that 464 00:23:58,800 --> 00:24:02,080 Speaker 2: it's making each year. And if they start that pension account, 465 00:24:02,359 --> 00:24:04,200 Speaker 2: sure that they're getting four or five percent out of 466 00:24:04,240 --> 00:24:06,480 Speaker 2: their Super each year, which they don't need because they're 467 00:24:06,520 --> 00:24:09,000 Speaker 2: fine off their wages. But they can recycle that back 468 00:24:09,000 --> 00:24:13,480 Speaker 2: into SUPER again. So just using simple mass on someone 469 00:24:13,520 --> 00:24:16,240 Speaker 2: with nine hundred thousand in super, if they're making about 470 00:24:16,280 --> 00:24:19,439 Speaker 2: seven percent return, that seven percent return gets taxed at 471 00:24:19,480 --> 00:24:22,480 Speaker 2: ten to fifteen percent, and that equals about ten thousand 472 00:24:22,480 --> 00:24:25,080 Speaker 2: dollars a year in tax. So if someone with that 473 00:24:25,160 --> 00:24:27,600 Speaker 2: nine hundred thousand dollars balance, if they're over sixty five, 474 00:24:27,640 --> 00:24:30,720 Speaker 2: and they start that pension account, they're saving ten thousand 475 00:24:30,720 --> 00:24:33,399 Speaker 2: dollars in tax because that's not being chewed up inside 476 00:24:33,400 --> 00:24:33,920 Speaker 2: of their Super. 477 00:24:34,320 --> 00:24:36,200 Speaker 1: And apparently it's common. Isn't there a lot of people 478 00:24:36,240 --> 00:24:40,440 Speaker 1: out there who could be paying less tax if they 479 00:24:40,480 --> 00:24:42,480 Speaker 1: just sat down for a second and said, Hey, I'm 480 00:24:42,480 --> 00:24:46,400 Speaker 1: an age of which I can chante my super arrangements 481 00:24:46,400 --> 00:24:51,920 Speaker 1: and contributions and I shouldn't be paying the tax I do. 482 00:24:52,400 --> 00:24:55,560 Speaker 1: So keep that in mind, folks. It's an issue. It's 483 00:24:55,600 --> 00:24:58,320 Speaker 1: that strange not strange, but it's an issue where people 484 00:24:58,400 --> 00:25:03,199 Speaker 1: are between so somewhere between sixty and seventy. Basically all 485 00:25:03,240 --> 00:25:06,320 Speaker 1: the rules change as you because you because you're moving 486 00:25:06,320 --> 00:25:12,240 Speaker 1: from accumulation to retirement. But it's phased under our system. 487 00:25:12,320 --> 00:25:16,160 Speaker 1: So it's an area that that's an area people really 488 00:25:16,160 --> 00:25:19,160 Speaker 1: do need advice on and it's an area where their 489 00:25:19,400 --> 00:25:21,520 Speaker 1: advice could be quite rewarding. Quite if you're paying too 490 00:25:21,560 --> 00:25:24,000 Speaker 1: much tax and suddenly you can do something and not 491 00:25:24,000 --> 00:25:27,639 Speaker 1: pay that tax, that sounds pretty useful to me, all right, John, 492 00:25:27,760 --> 00:25:30,680 Speaker 1: final question with the government's goal for a one point 493 00:25:30,720 --> 00:25:32,800 Speaker 1: two million new homes in the next five years. That's 494 00:25:32,800 --> 00:25:35,920 Speaker 1: a goal, John, that's a target, very ambitious one. There's 495 00:25:35,960 --> 00:25:39,760 Speaker 1: a need for speed. Perhaps this would be an election issue. 496 00:25:39,800 --> 00:25:43,040 Speaker 1: What if everyday Australians like me could more easily invest. 497 00:25:44,040 --> 00:25:49,160 Speaker 1: He's leading to the into building and into residential property. 498 00:25:49,560 --> 00:25:53,160 Speaker 1: John asks what would need to change in the supersystem 499 00:25:53,600 --> 00:25:56,720 Speaker 1: make this possible without the need without the need for 500 00:25:56,840 --> 00:26:00,439 Speaker 1: a self managed superfund. You're smiling there, James, because you 501 00:26:00,680 --> 00:26:03,800 Speaker 1: did something smack on this a while ago, didn't you. 502 00:26:04,200 --> 00:26:06,439 Speaker 1: We've had a couple of people you and I have 503 00:26:06,520 --> 00:26:09,600 Speaker 1: both come across people who have had various schemes and 504 00:26:09,720 --> 00:26:17,080 Speaker 1: ideas where super can be used in the housing industry 505 00:26:17,080 --> 00:26:19,399 Speaker 1: because at the moment you can do everything super. You 506 00:26:19,400 --> 00:26:23,320 Speaker 1: can buy crypto, which can't buy the house around the corner. Similarly, 507 00:26:24,000 --> 00:26:27,080 Speaker 1: big super funds are in every conceivable assetask, but they're 508 00:26:27,080 --> 00:26:29,520 Speaker 1: not in housing. And here we are with a rental 509 00:26:29,720 --> 00:26:32,600 Speaker 1: crisis and a vacancy rate of one percent. There's two 510 00:26:32,640 --> 00:26:34,960 Speaker 1: sides to that, isn't there how big super could get 511 00:26:34,960 --> 00:26:39,520 Speaker 1: into housing and how smsfs could get into housing. On 512 00:26:39,600 --> 00:26:43,639 Speaker 1: the big super side, they say that they need a 513 00:26:43,680 --> 00:26:47,240 Speaker 1: lot more help for that those investments to make sense 514 00:26:47,400 --> 00:26:49,560 Speaker 1: for them, despite Jim Charmers really trying to get them 515 00:26:49,560 --> 00:26:52,520 Speaker 1: to do that. That's where we are so far. The 516 00:26:52,560 --> 00:26:54,920 Speaker 1: buill to rent is some sort of hybrid area where 517 00:26:54,960 --> 00:26:58,679 Speaker 1: that's coming on just for individuals. Maybe people are more interested. 518 00:26:59,119 --> 00:27:02,879 Speaker 1: You can go in and buy the market for super savers. 519 00:27:03,000 --> 00:27:05,400 Speaker 2: Am I right? You are? Yeah, you are. You can 520 00:27:05,560 --> 00:27:07,840 Speaker 2: use your super to convert to a self managed super 521 00:27:07,880 --> 00:27:11,000 Speaker 2: fun You can buy a residential property, but you can't 522 00:27:11,200 --> 00:27:14,199 Speaker 2: live in. That's's something which a lot of people have 523 00:27:14,240 --> 00:27:19,000 Speaker 2: tried to solve because it's interesting challenge, particularly with cost 524 00:27:19,080 --> 00:27:22,199 Speaker 2: of living pressures and the property price growth over the 525 00:27:22,200 --> 00:27:25,320 Speaker 2: past fifty years, people are constantly chasing their tails. They 526 00:27:25,320 --> 00:27:28,360 Speaker 2: may be able to service a mortgage, but it takes 527 00:27:28,400 --> 00:27:31,040 Speaker 2: on average ten years to save up a deposit. The 528 00:27:31,040 --> 00:27:33,159 Speaker 2: average person to save the average posit to buy the 529 00:27:33,200 --> 00:27:36,679 Speaker 2: average property in Australia where that wherever they live, and 530 00:27:36,720 --> 00:27:39,720 Speaker 2: so these people are left renting for ten years and 531 00:27:39,760 --> 00:27:41,720 Speaker 2: sometimes much longer than that. So if there was a 532 00:27:41,720 --> 00:27:44,080 Speaker 2: way that they could use their hundreds of thousands of 533 00:27:44,080 --> 00:27:48,160 Speaker 2: dollars sometimes in super to help kickstart and fast track 534 00:27:48,240 --> 00:27:50,440 Speaker 2: that goal to buy a property, a lot of people 535 00:27:50,520 --> 00:27:53,679 Speaker 2: see that as a greater good, but as the rule stand, 536 00:27:53,720 --> 00:27:54,840 Speaker 2: that's definitely not allowed. 537 00:27:54,880 --> 00:27:58,199 Speaker 1: And big super by the way, folks they similarly, but 538 00:27:58,560 --> 00:28:03,080 Speaker 1: more to do with their investment disposition, are shy of 539 00:28:03,160 --> 00:28:06,680 Speaker 1: going near housing in the sense of residential housing as 540 00:28:06,680 --> 00:28:09,840 Speaker 1: we know it and fixing that problem with shortage. There 541 00:28:09,880 --> 00:28:13,280 Speaker 1: has been efforts and there are several schemes that are 542 00:28:13,359 --> 00:28:15,399 Speaker 1: in front of big super funds and they are looking 543 00:28:15,440 --> 00:28:18,480 Speaker 1: at right now to see if they can do this, 544 00:28:18,640 --> 00:28:20,719 Speaker 1: if there are ways, for instance, that they can go 545 00:28:20,760 --> 00:28:24,000 Speaker 1: into housing as a fund, or if there are ways 546 00:28:24,040 --> 00:28:28,399 Speaker 1: even more creatively for an individual through their big super fund, 547 00:28:29,200 --> 00:28:32,480 Speaker 1: can go into housing. In one case we've come across 548 00:28:32,520 --> 00:28:34,520 Speaker 1: wherever they can go into their own housing. That is 549 00:28:34,520 --> 00:28:38,480 Speaker 1: that you could they would deal with your superfund, and 550 00:28:38,600 --> 00:28:41,880 Speaker 1: that super fund in turn would invest in a house 551 00:28:41,920 --> 00:28:45,560 Speaker 1: in which you aspire to live in. Eventually, there's all 552 00:28:45,600 --> 00:28:48,240 Speaker 1: sorts of efforts going on. They are all hypothetical at 553 00:28:48,280 --> 00:28:51,520 Speaker 1: the moment. No one's managed to crack it yet. Someday, 554 00:28:52,120 --> 00:28:56,080 Speaker 1: if somebody does, it would be a very successful business. Okay, 555 00:28:56,240 --> 00:28:58,920 Speaker 1: we might leave it there for the moment. James, Thank 556 00:28:58,960 --> 00:29:00,760 Speaker 1: you very much for being honest today. Great to have 557 00:29:00,800 --> 00:29:00,960 Speaker 1: you on. 558 00:29:01,040 --> 00:29:03,840 Speaker 2: As always, my pleasure is always, thank you, James. 559 00:29:04,880 --> 00:29:07,520 Speaker 1: Really good to have an advisor talk about property, it's 560 00:29:07,560 --> 00:29:10,400 Speaker 1: something we must do. I have to commit to you 561 00:29:10,480 --> 00:29:13,760 Speaker 1: folks to do this regularly, to have an advisor to 562 00:29:13,840 --> 00:29:17,400 Speaker 1: talk about property. Because everybody in property likes to have 563 00:29:17,400 --> 00:29:20,800 Speaker 1: an opinion. But the vast majority of people who know 564 00:29:20,880 --> 00:29:23,240 Speaker 1: anything about property are in this and they're probably selling 565 00:29:23,280 --> 00:29:25,320 Speaker 1: you something. Is that sort of divide we have to 566 00:29:25,320 --> 00:29:27,680 Speaker 1: try and cross, and it's up to us to try 567 00:29:27,680 --> 00:29:29,720 Speaker 1: and help you with that one. All right, thank you 568 00:29:29,800 --> 00:29:32,800 Speaker 1: very much for listening. Today's show. Thank you very much 569 00:29:32,880 --> 00:29:36,360 Speaker 1: Leah Samuel Glue for producing and keep the emails rolling 570 00:29:36,520 --> 00:29:39,960 Speaker 1: the money puzzle at the Australian dot com dot au. 571 00:29:40,160 --> 00:29:40,880 Speaker 1: Talk to you soon.