1 00:00:10,880 --> 00:00:13,920 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:13,960 --> 00:00:16,720 Speaker 1: James Kirby Well, the editor at The Australian. Hey, welcome 3 00:00:16,760 --> 00:00:21,279 Speaker 1: aboard everybody. In every episode we cover listener questions and 4 00:00:21,360 --> 00:00:24,400 Speaker 1: I have to say today's batch of questions is really 5 00:00:24,600 --> 00:00:27,600 Speaker 1: exceptional and I just want to say thanks to everybody involved. 6 00:00:27,600 --> 00:00:31,040 Speaker 1: I get more ideas for the show and what to 7 00:00:31,560 --> 00:00:33,280 Speaker 1: do on the show and have on the show from 8 00:00:33,320 --> 00:00:37,400 Speaker 1: your questions and your comments, complaints, observations than anything else, 9 00:00:37,440 --> 00:00:40,960 Speaker 1: so keep them rolling. Later on we'll hear from a listener, 10 00:00:41,200 --> 00:00:43,800 Speaker 1: for instance, who lives overseas and wants to come back 11 00:00:43,800 --> 00:00:47,280 Speaker 1: to Australia. We've got an investor in Perth who's worried 12 00:00:47,280 --> 00:00:50,400 Speaker 1: that the Eastern staters are taking over. Have a question 13 00:00:50,479 --> 00:00:53,880 Speaker 1: from Robert who says his bank is trying to pull 14 00:00:53,920 --> 00:00:57,400 Speaker 1: a fast one, basically because he signed on for a 15 00:00:57,480 --> 00:01:01,000 Speaker 1: mortgage at a rate and when it to sign the papers, 16 00:01:01,000 --> 00:01:04,040 Speaker 1: the rate was lower. I've experienced that. I'm really interested 17 00:01:04,080 --> 00:01:06,839 Speaker 1: to pick up on that question. And keep in mind, folks, 18 00:01:06,840 --> 00:01:08,440 Speaker 1: if we can do something for you, let us know. 19 00:01:08,560 --> 00:01:13,720 Speaker 1: You'd be surprised how quickly an organization responds when they 20 00:01:13,720 --> 00:01:16,479 Speaker 1: get a call from a show like ours. Okay, now today, 21 00:01:17,480 --> 00:01:20,000 Speaker 1: I think we need an advisor here to talk about 22 00:01:20,120 --> 00:01:23,240 Speaker 1: issues in property and many of your questions. Someone who's 23 00:01:23,240 --> 00:01:26,240 Speaker 1: across property and is also across that advice friend of 24 00:01:26,240 --> 00:01:28,800 Speaker 1: the show, a regular on the show. It's Bruce Brammel. 25 00:01:29,440 --> 00:01:30,160 Speaker 1: How are you, Bruce? 26 00:01:31,240 --> 00:01:33,720 Speaker 2: Not to be any thanks James, thanks for bringing me back. 27 00:01:34,000 --> 00:01:36,319 Speaker 1: Lovely to have you back. Always good to have you on. 28 00:01:36,680 --> 00:01:39,119 Speaker 1: I know that we would be of a similar vintage, 29 00:01:39,160 --> 00:01:41,240 Speaker 1: and we might have I don't know what age your 30 00:01:41,240 --> 00:01:43,360 Speaker 1: guys are, but mine are now of the age for 31 00:01:43,400 --> 00:01:47,720 Speaker 1: the starting just starting to look around and be aware 32 00:01:47,880 --> 00:01:51,240 Speaker 1: of the mountain they have to climb to get into 33 00:01:51,240 --> 00:01:54,919 Speaker 1: property in any way, but obviously particularly as a home buyer. 34 00:01:55,440 --> 00:01:58,360 Speaker 1: And one of the things apparently that they're all saying 35 00:01:58,400 --> 00:02:01,320 Speaker 1: to each other, if you don't mind, is that you know, 36 00:02:01,360 --> 00:02:04,040 Speaker 1: the prices are just tipping along at the moment, very 37 00:02:04,080 --> 00:02:06,600 Speaker 1: much at the sort of average rates. In some parts 38 00:02:06,600 --> 00:02:09,560 Speaker 1: they're quite slow, and there's a sense that you don't 39 00:02:09,639 --> 00:02:14,520 Speaker 1: have to move now. There's also a sense of fatalism, 40 00:02:14,520 --> 00:02:17,640 Speaker 1: and this is really something that is on the cards, 41 00:02:17,720 --> 00:02:21,160 Speaker 1: I think, and I see it reported and I see 42 00:02:21,200 --> 00:02:27,200 Speaker 1: it anecdotally this sense of fatalism with younger investors, where 43 00:02:27,400 --> 00:02:30,959 Speaker 1: they're saying, look, it's just out of my never going 44 00:02:31,000 --> 00:02:33,480 Speaker 1: to be able to afford to buy a house, and 45 00:02:33,600 --> 00:02:35,640 Speaker 1: so I'm going to go to Japan for two weeks 46 00:02:35,680 --> 00:02:38,440 Speaker 1: in ski something like that. So we have this attitude 47 00:02:38,440 --> 00:02:41,680 Speaker 1: that it's just become so hard, it's too hard, so 48 00:02:41,800 --> 00:02:45,040 Speaker 1: forget it. Do you come upon that And what would 49 00:02:45,080 --> 00:02:46,880 Speaker 1: you say to someone who said that to you? 50 00:02:50,520 --> 00:02:52,200 Speaker 2: I guess I don't say as much of it. From 51 00:02:52,200 --> 00:02:56,600 Speaker 2: a client perspective, payble reading the media and generally being involved. 52 00:02:56,600 --> 00:02:58,639 Speaker 2: Why could you be younger? They're still in hospital, there's 53 00:02:58,639 --> 00:03:00,440 Speaker 2: still a little while off from them. But we do 54 00:03:00,480 --> 00:03:03,920 Speaker 2: see clients coming in who who often have started on 55 00:03:03,919 --> 00:03:06,400 Speaker 2: the deposits and might have a reasonable amount and want 56 00:03:06,400 --> 00:03:09,880 Speaker 2: to know what to do with the deposit money while 57 00:03:09,919 --> 00:03:11,880 Speaker 2: they're continuing to save us, and how should we invest 58 00:03:11,919 --> 00:03:13,959 Speaker 2: in them into cash if you're going to buy in 59 00:03:14,000 --> 00:03:16,640 Speaker 2: the next couple of years. Look, parts of the country 60 00:03:16,840 --> 00:03:19,720 Speaker 2: are quite slow, Victoria in particular. Other parts of the 61 00:03:19,720 --> 00:03:25,639 Speaker 2: country are running rampants. What we it's a generational thing 62 00:03:25,800 --> 00:03:28,560 Speaker 2: to a degree. Back in the sixties and seventies, when 63 00:03:29,080 --> 00:03:31,680 Speaker 2: that generation, which included my parents were buying a house. 64 00:03:31,760 --> 00:03:33,880 Speaker 2: I tended to do it quite a lot younger. They 65 00:03:34,040 --> 00:03:37,720 Speaker 2: had kids a lot younger. The average age of having 66 00:03:37,800 --> 00:03:40,040 Speaker 2: kids I think when when I was born was about 67 00:03:40,040 --> 00:03:42,720 Speaker 2: twenty three, twenty four, twenty around that sort of thing, 68 00:03:42,720 --> 00:03:45,680 Speaker 2: and buying home was a bit easier. But they're also 69 00:03:45,760 --> 00:03:47,880 Speaker 2: doing it on one income as a general rule, or 70 00:03:47,960 --> 00:03:51,920 Speaker 2: say an average at one point one incomes per household, 71 00:03:52,080 --> 00:03:55,880 Speaker 2: whereas nowadays the average person's average household buying is probably 72 00:03:55,880 --> 00:03:57,800 Speaker 2: at one point eight incomes. Was a lot single people 73 00:03:57,800 --> 00:04:03,120 Speaker 2: buying as well, But yeah, have run hard. But like everything, James, 74 00:04:03,160 --> 00:04:06,320 Speaker 2: it's cyclical. And if people are finding it tough now, 75 00:04:06,360 --> 00:04:08,320 Speaker 2: which is partly about industrates have come off very low 76 00:04:08,320 --> 00:04:12,680 Speaker 2: intustrates and they've risen fairly strongly to November last year. 77 00:04:13,200 --> 00:04:15,840 Speaker 2: You know it's cyclical and when prices get too high, 78 00:04:15,880 --> 00:04:18,679 Speaker 2: prices will come back. People who are finding it tough 79 00:04:18,760 --> 00:04:22,320 Speaker 2: have just got to make In my opinion, it's about 80 00:04:22,320 --> 00:04:26,240 Speaker 2: priorities and if there are kids in their twenties or 81 00:04:26,600 --> 00:04:30,640 Speaker 2: young adults in their twenties or thirties and their primary 82 00:04:30,680 --> 00:04:32,919 Speaker 2: goal is to buy a home, then going off to 83 00:04:33,040 --> 00:04:35,520 Speaker 2: scan in Japan, for two weeks is going to be 84 00:04:35,600 --> 00:04:37,279 Speaker 2: a reasonably pretty expensive holiday. 85 00:04:37,480 --> 00:04:39,880 Speaker 1: But logically, if I say to you, I have I 86 00:04:39,880 --> 00:04:43,240 Speaker 1: earn one hundred thousand dollars and I want my house 87 00:04:43,360 --> 00:04:45,960 Speaker 1: is going to cost nearly a million, I can never 88 00:04:46,040 --> 00:04:49,960 Speaker 1: do it, Isn't that? What do you say to that? 89 00:04:50,000 --> 00:04:52,960 Speaker 1: What do you say to the relatively logical observation that 90 00:04:53,120 --> 00:04:54,839 Speaker 1: on one hundred ground you can never buy a million 91 00:04:54,839 --> 00:04:55,400 Speaker 1: dollar house? 92 00:04:56,200 --> 00:04:58,760 Speaker 2: No, you can't. You just you simply can't do it 93 00:04:58,760 --> 00:05:01,080 Speaker 2: one hundred thousand dollars. Have you got two people on 94 00:05:01,080 --> 00:05:03,600 Speaker 2: one hundred thousand dollars? And it makes it a lot 95 00:05:03,640 --> 00:05:06,039 Speaker 2: easier put somebody doing a hundred thousand dollars is unlikely 96 00:05:06,000 --> 00:05:09,600 Speaker 2: about to buy. It depends on expenses. They've changed the 97 00:05:09,640 --> 00:05:13,000 Speaker 2: way they do loans and lending and affordability in the 98 00:05:13,080 --> 00:05:15,640 Speaker 2: last seven or eight years, and it makes it a 99 00:05:15,680 --> 00:05:17,800 Speaker 2: lot more divilt because they do actually dive deeper into 100 00:05:17,839 --> 00:05:20,960 Speaker 2: your expenses. Now that's what you earn is almost less 101 00:05:21,000 --> 00:05:23,240 Speaker 2: relevant than how much you spend, and they go and 102 00:05:23,240 --> 00:05:25,120 Speaker 2: look into it. When you're applying for a loan, they 103 00:05:25,120 --> 00:05:26,960 Speaker 2: look at your savings, they look at what you're spending 104 00:05:26,960 --> 00:05:29,600 Speaker 2: your money on and categorize it to see if the 105 00:05:29,760 --> 00:05:31,800 Speaker 2: expenses are the same. You used to be able to 106 00:05:31,839 --> 00:05:33,800 Speaker 2: just go with this minimum. 107 00:05:33,560 --> 00:05:35,360 Speaker 1: Used to go with a sort of a former league 108 00:05:35,400 --> 00:05:37,960 Speaker 1: thing that they just had they apply to everybody. 109 00:05:38,200 --> 00:05:40,600 Speaker 2: Yeah, and they didn't. They didn't really check it too hard. 110 00:05:40,760 --> 00:05:43,880 Speaker 2: Nowadays they do. You can't. You know, the hems have changed. 111 00:05:45,080 --> 00:05:46,320 Speaker 1: What difference did that make? Bruce? 112 00:05:47,360 --> 00:05:50,640 Speaker 2: An enormous difference because mortgage brokers in the industry wasn't 113 00:05:50,680 --> 00:05:52,760 Speaker 2: just mortgage brokers, the banks were allowing this as well. 114 00:05:52,800 --> 00:05:54,920 Speaker 2: You could put through of us. I'm going back a while, 115 00:05:54,960 --> 00:05:56,599 Speaker 2: but if you had mum and dad and two kids, 116 00:05:56,720 --> 00:05:58,440 Speaker 2: then there was a minimum spend of that that might 117 00:05:58,480 --> 00:05:59,800 Speaker 2: have been at the time about two and a half 118 00:05:59,839 --> 00:06:01,440 Speaker 2: hour dollars. Now it's probably three or three and a 119 00:06:01,440 --> 00:06:05,479 Speaker 2: half thousand dollars a month now. But that has changed dramatically. 120 00:06:05,520 --> 00:06:08,320 Speaker 2: They don't just accept this is what the minimum that mom, 121 00:06:08,440 --> 00:06:10,440 Speaker 2: dad and two kids can live on. They actually look 122 00:06:10,480 --> 00:06:13,240 Speaker 2: at your expenses and if you've got some private schooling 123 00:06:13,320 --> 00:06:15,520 Speaker 2: or you've got some bigger expenses in there for whatever, 124 00:06:15,520 --> 00:06:18,120 Speaker 2: they're going to see them and they're going to they're 125 00:06:18,160 --> 00:06:20,640 Speaker 2: going to penaloge you for it. But they're going to include. 126 00:06:20,640 --> 00:06:23,159 Speaker 2: That's when trying to determine how much it is that 127 00:06:23,200 --> 00:06:25,239 Speaker 2: you can borrow, and what you can borrow is based 128 00:06:25,279 --> 00:06:28,360 Speaker 2: on what money's left over. If you can make some 129 00:06:28,480 --> 00:06:31,880 Speaker 2: changes and find some spending cuts reduce your expenses, then 130 00:06:31,960 --> 00:06:33,719 Speaker 2: you want to be doing that at the time that 131 00:06:33,760 --> 00:06:36,800 Speaker 2: you're going to see a bank or broken about getting 132 00:06:36,800 --> 00:06:39,479 Speaker 2: a mortgage, because they're generally going to want to see 133 00:06:39,520 --> 00:06:42,160 Speaker 2: thirty sixty ninety days worth of weather expenses when you're 134 00:06:42,160 --> 00:06:45,000 Speaker 2: putting in your application. If they say three four hundred 135 00:06:45,000 --> 00:06:48,080 Speaker 2: bucks a month or a week going out to Uber 136 00:06:48,120 --> 00:06:50,880 Speaker 2: Eats or any of the delivery places, then they're going 137 00:06:50,880 --> 00:06:52,400 Speaker 2: to see that it's a bit to fuil to hide. 138 00:06:52,920 --> 00:06:55,680 Speaker 1: Well, I'd be furious if some bank are pointed out 139 00:06:55,720 --> 00:06:58,960 Speaker 1: to me so any element of my expenses as to 140 00:06:59,240 --> 00:07:00,880 Speaker 1: whether I should cheer, is that or not. But it's 141 00:07:00,920 --> 00:07:04,240 Speaker 1: really interesting you say that. It's really good to hear that. So, folks, 142 00:07:04,320 --> 00:07:07,520 Speaker 1: if you are thinking of if you are of that 143 00:07:07,839 --> 00:07:11,320 Speaker 1: persuasion that it's all too difficult, first of all, have 144 00:07:11,400 --> 00:07:14,240 Speaker 1: a look and see what could change how you might 145 00:07:14,240 --> 00:07:16,760 Speaker 1: get to it. But more broadly, Bruce, do you still 146 00:07:16,800 --> 00:07:21,480 Speaker 1: always is it always your advice that you should own 147 00:07:21,520 --> 00:07:23,480 Speaker 1: your own home. I know it's I just want to 148 00:07:23,560 --> 00:07:26,280 Speaker 1: check with you. Is it always in all situations virtually 149 00:07:26,280 --> 00:07:26,800 Speaker 1: your advice? 150 00:07:28,520 --> 00:07:31,320 Speaker 2: Well, I think it's for a lot of people. It's 151 00:07:31,360 --> 00:07:35,120 Speaker 2: a foundation stone of finances. The point about running a 152 00:07:35,160 --> 00:07:38,520 Speaker 2: home is security aspect and those sorts of things. But 153 00:07:39,080 --> 00:07:42,200 Speaker 2: you're building equity in a place. You're painting down a 154 00:07:42,200 --> 00:07:44,480 Speaker 2: line at some point in the future, and it's rarely 155 00:07:44,480 --> 00:07:46,920 Speaker 2: the twenty five or thirty years of a regular mortgage 156 00:07:46,920 --> 00:07:49,600 Speaker 2: you're normally paying off before that. That the cost of 157 00:07:49,960 --> 00:07:52,760 Speaker 2: putting a roof over your heads. Yes, you've still got rates, 158 00:07:52,760 --> 00:07:55,160 Speaker 2: and you're still at electricity and gas and insurance and 159 00:07:55,200 --> 00:07:57,960 Speaker 2: all those other expenses. But the main cost of having 160 00:07:57,960 --> 00:08:00,240 Speaker 2: a roof over your head is done when you when 161 00:08:00,240 --> 00:08:02,880 Speaker 2: you finally paid off the mortgage. If you decide not 162 00:08:02,960 --> 00:08:05,520 Speaker 2: to buy, you'll rent until you die. So if you 163 00:08:05,560 --> 00:08:07,920 Speaker 2: don't buy a home and eventually pay it off, you'll 164 00:08:07,920 --> 00:08:11,440 Speaker 2: be renting through until you're not on the earth anymore, 165 00:08:11,720 --> 00:08:13,920 Speaker 2: and there's an ongoing expense. Now, when you get to 166 00:08:13,960 --> 00:08:17,560 Speaker 2: that sort of older age groups and youre applying for the 167 00:08:17,600 --> 00:08:20,120 Speaker 2: age pension, they have a different level of pension higher 168 00:08:20,200 --> 00:08:22,320 Speaker 2: level of pension for people who don't own their home, 169 00:08:22,840 --> 00:08:27,200 Speaker 2: partly to cover and partly an acknowledgment of rent being paid, 170 00:08:27,200 --> 00:08:29,680 Speaker 2: and a lower government age pension for those who do 171 00:08:29,720 --> 00:08:32,440 Speaker 2: own their home. But it is a cornerstone for me 172 00:08:32,600 --> 00:08:35,240 Speaker 2: or a foundation stone of wealth. That doesn't mean that's 173 00:08:35,320 --> 00:08:37,120 Speaker 2: right for everybody. And people have got to move every 174 00:08:37,120 --> 00:08:40,199 Speaker 2: couple of years because that's their work who don't want 175 00:08:40,200 --> 00:08:44,160 Speaker 2: to be tied down. Then if you're making that decision 176 00:08:44,200 --> 00:08:46,800 Speaker 2: not to buy to rent, then you've got to make 177 00:08:46,840 --> 00:08:48,960 Speaker 2: it work for you, is what I've always preached, and 178 00:08:48,960 --> 00:08:53,160 Speaker 2: that is whatever you're not spending on a mortgage. So 179 00:08:53,320 --> 00:08:55,920 Speaker 2: let's say your rent is whatever three grand a month 180 00:08:55,960 --> 00:08:57,480 Speaker 2: and a mortgage that cost you four or four and 181 00:08:57,520 --> 00:09:00,760 Speaker 2: a half. Then whatever the case is, extra money that 182 00:09:00,800 --> 00:09:04,880 Speaker 2: you're not using to pay a mortgage really needs to 183 00:09:04,880 --> 00:09:07,400 Speaker 2: be going into some sort of longer term investing to 184 00:09:08,320 --> 00:09:11,160 Speaker 2: help look after you when you're getting into your old 185 00:09:11,240 --> 00:09:13,320 Speaker 2: years or in your retirement. Now. Whether you're putting that 186 00:09:13,320 --> 00:09:16,040 Speaker 2: money to souper or other investments is another matter that 187 00:09:16,080 --> 00:09:18,000 Speaker 2: you need to look at on a personal level. But 188 00:09:18,720 --> 00:09:22,160 Speaker 2: renting is indefinite. Buying home has an endpoint for the 189 00:09:22,240 --> 00:09:24,160 Speaker 2: largest part of having a ref ahead. 190 00:09:24,600 --> 00:09:26,559 Speaker 1: It could always be a book titled Bruce, if you 191 00:09:26,640 --> 00:09:30,880 Speaker 1: decide not to buy your rent until you die, That's 192 00:09:30,920 --> 00:09:32,559 Speaker 1: got a certain gravity. 193 00:09:32,640 --> 00:09:36,080 Speaker 2: But I'm very sorry, James, I am actually quoting myself 194 00:09:36,120 --> 00:09:38,360 Speaker 2: on that one. Is the line from debtband Walking, which 195 00:09:38,360 --> 00:09:39,680 Speaker 2: all right in two years at. 196 00:09:39,840 --> 00:09:43,400 Speaker 1: You're the quoting from yourself is now pleagerism, Bruce, quoting 197 00:09:43,440 --> 00:09:46,200 Speaker 1: from yourself is the opposite of pleasurism. We all do 198 00:09:46,240 --> 00:09:48,760 Speaker 1: it all the time. Good for you, Okay, I knew 199 00:09:48,880 --> 00:09:51,320 Speaker 1: Bruce would be good on that particular issue. Just before 200 00:09:51,320 --> 00:09:52,960 Speaker 1: we've got to questions I want to do. I want 201 00:09:53,000 --> 00:09:55,120 Speaker 1: to get to questions quickly this week because as I say, 202 00:09:55,120 --> 00:09:57,240 Speaker 1: there were so good and such a range of questions. 203 00:09:57,640 --> 00:09:59,319 Speaker 1: But what the other's come up on the show a 204 00:09:59,360 --> 00:10:01,520 Speaker 1: few times, it just ask you before we do, is 205 00:10:02,080 --> 00:10:05,760 Speaker 1: about rates. Okay. So we look at the media, or 206 00:10:05,760 --> 00:10:07,480 Speaker 1: we look at the financial press this week, and it's 207 00:10:07,520 --> 00:10:09,840 Speaker 1: all about how rates are going to go down and 208 00:10:09,880 --> 00:10:13,839 Speaker 1: how gold for instance, gold, folks, is gold the commodity 209 00:10:13,960 --> 00:10:16,559 Speaker 1: or gold as you buy them through bullion or ETFs 210 00:10:16,800 --> 00:10:20,560 Speaker 1: is really starting to move as an alternative investment with 211 00:10:20,640 --> 00:10:24,280 Speaker 1: a much clearer record than shall we say, private equity 212 00:10:24,320 --> 00:10:26,000 Speaker 1: or private credit. And by the way, I've had some 213 00:10:26,240 --> 00:10:29,640 Speaker 1: correspondence telling me that I'm too heavy and critical on that. 214 00:10:29,960 --> 00:10:33,040 Speaker 1: But the point I want to make is that globally 215 00:10:33,120 --> 00:10:38,000 Speaker 1: rates are going down, but in Australia there is it's 216 00:10:38,120 --> 00:10:41,440 Speaker 1: unclear if rates are going to go down in any 217 00:10:41,480 --> 00:10:46,280 Speaker 1: time soon, and if they did, RBA rates we don't 218 00:10:46,320 --> 00:10:49,560 Speaker 1: know to what extent the banks will cut rates. Anyway, 219 00:10:50,240 --> 00:10:52,160 Speaker 1: where are you coming from, Blues When people ask you 220 00:10:52,200 --> 00:10:53,959 Speaker 1: about that, If people are coming in your door and 221 00:10:54,000 --> 00:10:56,480 Speaker 1: they're making plans and their plans hinge on the fact 222 00:10:56,480 --> 00:10:59,480 Speaker 1: that rates are going to be cut, what do you 223 00:10:59,559 --> 00:11:00,160 Speaker 1: tell them? 224 00:11:00,840 --> 00:11:04,160 Speaker 2: Well, look, you know, there's always there's two sides that 225 00:11:04,200 --> 00:11:05,920 Speaker 2: The main side of the story, which is probably what 226 00:11:05,920 --> 00:11:07,679 Speaker 2: we're talking about here, is people are wanting to buy 227 00:11:07,880 --> 00:11:11,480 Speaker 2: a home. You can't bank on them. You just you can't. Now, 228 00:11:11,720 --> 00:11:14,719 Speaker 2: I think competitive pressures are such that in the industry, 229 00:11:15,960 --> 00:11:19,600 Speaker 2: you know, a bank, a lender, well a reasonable size lender, 230 00:11:19,920 --> 00:11:21,599 Speaker 2: if they decide to pass it on or pass the 231 00:11:21,679 --> 00:11:24,040 Speaker 2: vast majority of it on and others are hasn't to 232 00:11:24,080 --> 00:11:26,000 Speaker 2: do so, then they will pick up market share. It's 233 00:11:26,000 --> 00:11:28,439 Speaker 2: as simple as that they get to advertise that they've 234 00:11:28,559 --> 00:11:30,480 Speaker 2: passed it on in full, or they passed on twenty 235 00:11:30,520 --> 00:11:33,080 Speaker 2: when the average only did ten, or if we're talking 236 00:11:33,080 --> 00:11:35,360 Speaker 2: about a quarter percent, right, and they will pick up 237 00:11:35,400 --> 00:11:37,640 Speaker 2: market share, and they will very quickly. The brokers out 238 00:11:37,679 --> 00:11:40,000 Speaker 2: there will because brokers make up about three quarters of 239 00:11:40,040 --> 00:11:42,320 Speaker 2: the markets now, of the market now of every loan, 240 00:11:42,360 --> 00:11:44,320 Speaker 2: that's three out of every four loans that are done 241 00:11:44,360 --> 00:11:44,960 Speaker 2: and done brokers. 242 00:11:45,040 --> 00:11:47,080 Speaker 1: Yeah, the most loans go through brokers. 243 00:11:47,240 --> 00:11:50,720 Speaker 2: Yeah, yeah, So the brokers are going to look at 244 00:11:50,760 --> 00:11:53,640 Speaker 2: that most clients are at least a little focused or 245 00:11:53,760 --> 00:11:56,880 Speaker 2: reasonably focused on on interustrates. And if lenders pass it 246 00:11:57,080 --> 00:11:59,440 Speaker 2: on and other lenders don't, and there is going to 247 00:11:59,440 --> 00:12:01,320 Speaker 2: be a flow of need to the lenders that do. 248 00:12:01,840 --> 00:12:05,360 Speaker 2: What I tend to say is that competitive pressures are 249 00:12:05,600 --> 00:12:08,840 Speaker 2: such that if a few go, more will go. You might. 250 00:12:09,160 --> 00:12:10,640 Speaker 2: There is a lot of money to be made by 251 00:12:10,640 --> 00:12:12,880 Speaker 2: banks though in delaying passing it on. So if they 252 00:12:12,960 --> 00:12:14,800 Speaker 2: delay passing it on by a few days or a week, 253 00:12:14,840 --> 00:12:17,400 Speaker 2: then given the size of the loan books, particularly of 254 00:12:17,440 --> 00:12:19,120 Speaker 2: the fom mags, there's a lot of money to be 255 00:12:19,160 --> 00:12:21,440 Speaker 2: made by not passing on the seventeenth and delaying it 256 00:12:21,480 --> 00:12:24,280 Speaker 2: to a twenty second or whatever. But there will be 257 00:12:24,679 --> 00:12:26,559 Speaker 2: lenders that will take it as an opportunity in a 258 00:12:26,600 --> 00:12:29,280 Speaker 2: marking opportunity to cut rates in full or even go 259 00:12:29,400 --> 00:12:31,200 Speaker 2: a step further and off a thirty basis points. 260 00:12:31,559 --> 00:12:34,880 Speaker 1: Okay, you think it's sufficiently competitive in the banking circle 261 00:12:35,320 --> 00:12:37,520 Speaker 1: that there will cut roots when the cuts come from 262 00:12:37,520 --> 00:12:38,000 Speaker 1: the IBA. 263 00:12:39,240 --> 00:12:41,120 Speaker 2: I think so. Look, we're getting a lot of emails 264 00:12:41,120 --> 00:12:43,480 Speaker 2: from the banks at the moment talking about fixed rates 265 00:12:43,480 --> 00:12:46,800 Speaker 2: already been cust making some reductions, They're making some bets there, 266 00:12:47,240 --> 00:12:50,240 Speaker 2: bond traders are beginning to price. I think it gets 267 00:12:50,280 --> 00:12:53,040 Speaker 2: to move around. But the RBA made a statement in 268 00:12:53,240 --> 00:12:56,320 Speaker 2: Whenever that was twenty twenty one about where they saw rates, 269 00:12:56,360 --> 00:12:58,760 Speaker 2: and bond traders called them liars very soon afterwards. So 270 00:12:58,960 --> 00:12:59,680 Speaker 2: was right the bond. 271 00:12:59,559 --> 00:13:03,600 Speaker 1: Traders, the bond vigilantes. Yeah, don't ever doubt them. The 272 00:13:03,640 --> 00:13:07,480 Speaker 1: money markets will override central bank Sandy Day, folks, as 273 00:13:07,520 --> 00:13:09,480 Speaker 1: we've probably seen that, and you know that, and you 274 00:13:09,520 --> 00:13:11,640 Speaker 1: know not even here in the RBA has already in 275 00:13:11,720 --> 00:13:15,360 Speaker 1: recent history been called out. And if the money market 276 00:13:15,360 --> 00:13:18,040 Speaker 1: says basically going to fold in a very strong way, 277 00:13:18,080 --> 00:13:20,959 Speaker 1: and the RBA are dithering and saying they mightn't. The 278 00:13:21,160 --> 00:13:24,720 Speaker 1: likelihood is they will. Okay, now let's go to questions. 279 00:13:24,760 --> 00:13:38,720 Speaker 1: We'll be back in a moment. Hello, and welcome back 280 00:13:38,760 --> 00:13:41,680 Speaker 1: to The Australian's Money Puzzle podcast. I'm James Kirby, the 281 00:13:41,679 --> 00:13:44,439 Speaker 1: weorth editor at The Australian, talking to Bruce Brammel of 282 00:13:44,480 --> 00:13:50,000 Speaker 1: Bruce Brammel, Financial financial Advisor, author and a regular guest 283 00:13:50,120 --> 00:13:56,359 Speaker 1: on the show. Christopher, I'm an Australian government official posted abroad, 284 00:13:57,040 --> 00:14:01,199 Speaker 1: commonly deployed to far away places for years at a time. 285 00:14:01,679 --> 00:14:04,000 Speaker 1: And I don't own properly property, but i'd like to. 286 00:14:04,040 --> 00:14:06,760 Speaker 1: And if I bought my dream home on the New 287 00:14:06,840 --> 00:14:10,240 Speaker 1: South Wales Coasted, would it be considered my principal place 288 00:14:10,280 --> 00:14:13,520 Speaker 1: of residence even if I'm not living in this part one? 289 00:14:13,960 --> 00:14:16,959 Speaker 1: If I rent out my principal place of residence while 290 00:14:17,000 --> 00:14:21,080 Speaker 1: I'm posted overseas, would this mean it becomes subject to 291 00:14:21,160 --> 00:14:25,080 Speaker 1: capital gains tax? Upon resaying? Okay, very clear, and none 292 00:14:25,120 --> 00:14:27,880 Speaker 1: of this is advice. It's always information. If he doesn't 293 00:14:27,880 --> 00:14:30,800 Speaker 1: own a place and he buys a place, then that's 294 00:14:31,000 --> 00:14:33,280 Speaker 1: and he declares that his principal place of residence for 295 00:14:33,360 --> 00:14:36,040 Speaker 1: tax purposes. Can he come? Is that all clear and 296 00:14:36,080 --> 00:14:38,240 Speaker 1: he can still be wherever he might be in what 297 00:14:38,320 --> 00:14:39,680 Speaker 1: does he call it? A far away place? 298 00:14:41,000 --> 00:14:45,320 Speaker 2: Yeah, Chris ro think, firstly, check with your accountants specifically 299 00:14:45,320 --> 00:14:47,840 Speaker 2: on that one. What the if you're not living in 300 00:14:47,880 --> 00:14:50,200 Speaker 2: it and you're renting out, you're drawing an income, you've 301 00:14:50,200 --> 00:14:52,400 Speaker 2: probably gotta lie and you're climbing tax deduction for it. 302 00:14:52,400 --> 00:14:56,840 Speaker 2: You're climbing probably climbing tax deductions for rights, insurances, land tax, 303 00:14:56,880 --> 00:15:00,360 Speaker 2: if that's what's happening, If that's what you're actually claiming, 304 00:15:00,480 --> 00:15:02,560 Speaker 2: there's also something called the six year old. I'll come 305 00:15:02,640 --> 00:15:05,920 Speaker 2: back to a bit. If you're intending to come home 306 00:15:05,920 --> 00:15:08,040 Speaker 2: and live in this, if you understand that it is 307 00:15:08,080 --> 00:15:10,800 Speaker 2: the portion. What the ATO looks at is the portion 308 00:15:10,920 --> 00:15:13,040 Speaker 2: of time that it was a PPOI you, principal place 309 00:15:13,080 --> 00:15:15,720 Speaker 2: of residence versus how long it was rented out for. 310 00:15:16,400 --> 00:15:18,520 Speaker 2: So if you had it rented out for a couple 311 00:15:18,560 --> 00:15:20,640 Speaker 2: of years, let's say you're coming home in a few 312 00:15:20,720 --> 00:15:22,400 Speaker 2: years to retire, it sounds like you've been able to 313 00:15:22,400 --> 00:15:24,840 Speaker 2: sease for a while and you have it rented out 314 00:15:24,840 --> 00:15:27,400 Speaker 2: for three years, but then you when you come back, 315 00:15:27,440 --> 00:15:29,720 Speaker 2: you live in it for another seventeen years or something 316 00:15:29,760 --> 00:15:32,320 Speaker 2: and then sell us. If you were to do that, 317 00:15:32,360 --> 00:15:36,640 Speaker 2: then three twentieths of the gain would most likely be 318 00:15:36,720 --> 00:15:41,560 Speaker 2: accessible and the other seventeen twentieths wouldn't be on that 319 00:15:41,600 --> 00:15:44,320 Speaker 2: three twentieth. It's also at the fifty percent couple games 320 00:15:44,360 --> 00:15:47,240 Speaker 2: discount because you've only asset for more than a year, 321 00:15:47,680 --> 00:15:50,600 Speaker 2: and the amount of CGT that you would actually pay 322 00:15:50,720 --> 00:15:53,640 Speaker 2: would be fairly small on a gain that you've held 323 00:15:53,680 --> 00:15:56,200 Speaker 2: for that period of time. Do talk to your account 324 00:15:56,280 --> 00:15:59,360 Speaker 2: about though, and specific taxation device is what you need 325 00:15:59,400 --> 00:16:01,520 Speaker 2: in regards to that. There's also what's known as the 326 00:16:01,560 --> 00:16:03,480 Speaker 2: six year rules. So a lot of expats will have 327 00:16:03,560 --> 00:16:06,280 Speaker 2: a property illustrate they only go and work overseas for 328 00:16:06,280 --> 00:16:08,480 Speaker 2: a period of time. You have six years six and 329 00:16:08,480 --> 00:16:10,360 Speaker 2: a half years, I think it is from the time 330 00:16:10,400 --> 00:16:12,840 Speaker 2: that you turn it into an investment property to either 331 00:16:12,880 --> 00:16:16,200 Speaker 2: return and move back into it or to sell it 332 00:16:16,320 --> 00:16:18,480 Speaker 2: and have it CGT free. So this one's a little 333 00:16:18,520 --> 00:16:20,480 Speaker 2: bit different to that, and that you won't have lived 334 00:16:20,480 --> 00:16:22,720 Speaker 2: in it. And the third thing I'll probably point out, 335 00:16:22,800 --> 00:16:25,320 Speaker 2: Christopher is that if it becomes your dream home and 336 00:16:25,360 --> 00:16:27,600 Speaker 2: you don't you read it out for a period and 337 00:16:27,600 --> 00:16:30,200 Speaker 2: then you move into it and you never depart us 338 00:16:30,280 --> 00:16:32,640 Speaker 2: until such times you're going out in the box, then 339 00:16:32,640 --> 00:16:34,480 Speaker 2: you won't be paying any CGT on it. Anyway, you 340 00:16:34,480 --> 00:16:37,120 Speaker 2: only pay CGT when you sell an asset. So if 341 00:16:37,120 --> 00:16:38,560 Speaker 2: it was to be your dream home and that was 342 00:16:38,600 --> 00:16:40,640 Speaker 2: going to be your last home, then the KA might 343 00:16:40,640 --> 00:16:43,440 Speaker 2: become a problem. For not a problem, but there might 344 00:16:43,440 --> 00:16:45,520 Speaker 2: be a tax issue for your kids when they're selling it. 345 00:16:45,600 --> 00:16:47,760 Speaker 2: But it shouldn't be in your lifetime if that's the case. 346 00:16:47,800 --> 00:16:51,120 Speaker 1: But interesting, Hey, Bruce, can I just double check on something. 347 00:16:51,200 --> 00:16:56,280 Speaker 1: If the person owns the property, rents it, and then 348 00:16:56,360 --> 00:17:00,880 Speaker 1: moves into it afterwards, if they're moving after six years, 349 00:17:00,960 --> 00:17:03,960 Speaker 1: are you saying the first six years are not accounted 350 00:17:04,000 --> 00:17:04,600 Speaker 1: for CGT. 351 00:17:05,520 --> 00:17:08,000 Speaker 2: No, that's if you've lived in it and it's been 352 00:17:08,040 --> 00:17:11,240 Speaker 2: your principal place of residence, then you've moved. I have interstate, overseas, 353 00:17:11,240 --> 00:17:14,280 Speaker 2: even across down Really, you have six years six and 354 00:17:14,320 --> 00:17:16,720 Speaker 2: a half years to either sell us or to move 355 00:17:16,760 --> 00:17:20,480 Speaker 2: back into it and maintain the CGT free status of 356 00:17:20,560 --> 00:17:21,040 Speaker 2: the property. 357 00:17:21,920 --> 00:17:24,120 Speaker 1: So you have to have lived in it and left 358 00:17:24,119 --> 00:17:24,800 Speaker 1: it and come back. 359 00:17:25,359 --> 00:17:27,200 Speaker 2: I would think so, But that is what I want 360 00:17:27,280 --> 00:17:30,680 Speaker 2: Christopher to chat to an account about the actual technicality 361 00:17:30,680 --> 00:17:31,040 Speaker 2: of that rule. 362 00:17:31,119 --> 00:17:36,080 Speaker 1: I hope that's interesting for you. It's what's exploring. Let's 363 00:17:36,080 --> 00:17:37,800 Speaker 1: put it that way. We don't give advice, but it's 364 00:17:37,840 --> 00:17:40,760 Speaker 1: what's exploring. All right. Want'll be this question from Stephen. 365 00:17:41,600 --> 00:17:45,080 Speaker 2: From Stephen, I'm a local resident of Mandura in Western Australia, 366 00:17:45,119 --> 00:17:48,560 Speaker 2: recently bought an investment property locally and called the real 367 00:17:48,640 --> 00:17:53,080 Speaker 2: estate agent for a rental appraisement apprais She automatically assumed 368 00:17:53,119 --> 00:17:56,240 Speaker 2: I was in the States and was shocked when I 369 00:17:56,240 --> 00:17:59,399 Speaker 2: said I wasn't, as the real estate agent said, we 370 00:17:59,440 --> 00:18:02,520 Speaker 2: don't have any were Australian's buying houses here. 371 00:18:03,400 --> 00:18:09,800 Speaker 1: Eastern State colonists charging in carpetbaggers from Melbourne and Sydney 372 00:18:09,840 --> 00:18:13,600 Speaker 1: pouring into Mandura. But hey, I tell you something. Do 373 00:18:13,600 --> 00:18:15,880 Speaker 1: you want to know the reverse of that? People put 374 00:18:15,880 --> 00:18:18,800 Speaker 1: their home up for sale in parts of Melbourne and 375 00:18:19,000 --> 00:18:22,280 Speaker 1: they get flyers in the door saying moving to Queensland, 376 00:18:22,720 --> 00:18:24,879 Speaker 1: such and such removals. We are around the corner and 377 00:18:24,920 --> 00:18:27,119 Speaker 1: here's our phone numbers. So there you are two sets 378 00:18:27,119 --> 00:18:29,639 Speaker 1: to every coin. Thank you for that, Steven. All right. 379 00:18:29,880 --> 00:18:34,280 Speaker 1: Question from Shankar SJ nk or I was amused by 380 00:18:34,320 --> 00:18:36,280 Speaker 1: your example of what people do while listening to the 381 00:18:36,320 --> 00:18:39,359 Speaker 1: podcast as blowing leaves. This is exactly what I do 382 00:18:39,440 --> 00:18:42,880 Speaker 1: each week with my host, quavarn a backpack blower. You've 383 00:18:42,920 --> 00:18:46,960 Speaker 1: identified your core demographic. M Perhaps I have a couple 384 00:18:47,040 --> 00:18:49,680 Speaker 1: of those that's very interesting. Ones we must actually I 385 00:18:49,760 --> 00:18:52,240 Speaker 1: must collect them and read a few out someday. Of 386 00:18:52,240 --> 00:18:53,840 Speaker 1: what people do listening to the show. We had a 387 00:18:53,920 --> 00:18:56,119 Speaker 1: chap who was so fed up of the waiting for 388 00:18:56,160 --> 00:18:58,520 Speaker 1: a builder to build something for him that he started 389 00:18:58,520 --> 00:19:02,119 Speaker 1: building himself and sent me pictures of himself on the 390 00:19:02,240 --> 00:19:05,680 Speaker 1: veranda doing what looked like quite elaborate building works. So 391 00:19:05,760 --> 00:19:09,560 Speaker 1: there you are and other things. Shankar's question, however, is 392 00:19:09,600 --> 00:19:14,359 Speaker 1: this my question relates to superannuation. I am fifty seven superbalance. 393 00:19:14,480 --> 00:19:18,399 Speaker 1: We don't need to know. My wife is fifty nine superbalance. Okay, 394 00:19:18,760 --> 00:19:21,959 Speaker 1: they've got plenty of super She will likely work beyond sixty. 395 00:19:22,040 --> 00:19:27,439 Speaker 1: I am not currently working. Both our super balances remain 396 00:19:27,600 --> 00:19:31,800 Speaker 1: in big super and retail funds. Okay. As we're nearly sixty, 397 00:19:31,840 --> 00:19:36,000 Speaker 1: I'm considering how and when to restructure for pension. Okay. 398 00:19:36,160 --> 00:19:40,040 Speaker 1: Oh makes a lot of sense so far. First, first question, 399 00:19:40,080 --> 00:19:43,359 Speaker 1: from Shankar. Are we missing a trick by remaining in 400 00:19:43,400 --> 00:19:47,000 Speaker 1: these retail funds and not commencing an SMF. Big question 401 00:19:47,160 --> 00:19:50,320 Speaker 1: Bruce comes up all the time. People get to the 402 00:19:50,359 --> 00:19:53,680 Speaker 1: retirement phase and then they say, will I start an SMSF. 403 00:19:54,160 --> 00:19:57,280 Speaker 1: My instinct is, if you were that type, you would 404 00:19:57,280 --> 00:19:59,280 Speaker 1: have done it years ago. What do you say? And 405 00:19:59,440 --> 00:20:01,080 Speaker 1: this is not a by shake guards, this is for 406 00:20:01,160 --> 00:20:02,320 Speaker 1: all the shake guards of the world. 407 00:20:03,080 --> 00:20:07,520 Speaker 2: Yeah. Look, certainly, with the balances that you've pointed out there, 408 00:20:07,520 --> 00:20:09,240 Speaker 2: which are north of two and a half mill for 409 00:20:09,840 --> 00:20:11,840 Speaker 2: the two of you, there's a lot of reasons that 410 00:20:11,880 --> 00:20:14,200 Speaker 2: you might start in SMSF. One of those might be 411 00:20:14,320 --> 00:20:17,320 Speaker 2: around cost. Certainly, I think that once you get to 412 00:20:17,359 --> 00:20:20,120 Speaker 2: about seven to fifty or a mill, smsfs can start 413 00:20:20,119 --> 00:20:21,800 Speaker 2: to make sense. They can start to make sense before that. 414 00:20:22,000 --> 00:20:24,280 Speaker 2: But from my perspective, and I'm advising clients that seven 415 00:20:24,280 --> 00:20:26,359 Speaker 2: to fifty to a mill can be where they start 416 00:20:27,040 --> 00:20:29,159 Speaker 2: to make sense from an overall cost perspective. Once you 417 00:20:29,160 --> 00:20:31,960 Speaker 2: get to two and a half mill, almost inevitably it 418 00:20:32,000 --> 00:20:35,320 Speaker 2: will make sense. It's not always about costs, though you can. 419 00:20:35,840 --> 00:20:37,760 Speaker 2: A lot of retail funds will offer you the same 420 00:20:37,800 --> 00:20:40,760 Speaker 2: opportunities that you can get for a similar cost. There's 421 00:20:40,800 --> 00:20:44,240 Speaker 2: what's known as family fee aggregation. You might be at 422 00:20:44,240 --> 00:20:47,400 Speaker 2: two different retail funds, but if you bought your funds 423 00:20:47,480 --> 00:20:51,159 Speaker 2: to the same platform, the same fund provider linked them 424 00:20:51,200 --> 00:20:53,320 Speaker 2: in the background. That doesn't mean putting the money together, 425 00:20:53,359 --> 00:20:55,880 Speaker 2: but linking them in the background. Then what you'll often 426 00:20:55,920 --> 00:21:00,280 Speaker 2: find is that they look at your the relationship with 427 00:21:00,359 --> 00:21:02,000 Speaker 2: husband and wife. Forgure, Okay, we've got one point five 428 00:21:02,040 --> 00:21:03,639 Speaker 2: mili here, one point one mill here. We don't have 429 00:21:03,680 --> 00:21:07,119 Speaker 2: two separate relationships. We've got sort of one relationship that 430 00:21:07,200 --> 00:21:09,679 Speaker 2: is worth two five two point six million, and the 431 00:21:09,720 --> 00:21:12,280 Speaker 2: fees come down accordingly as if you had one account 432 00:21:12,280 --> 00:21:15,760 Speaker 2: that was doing that roughly. That's one sort of potential 433 00:21:15,800 --> 00:21:17,840 Speaker 2: opportunity you've said you're in retail funds at the moment, 434 00:21:17,880 --> 00:21:19,879 Speaker 2: that would allow you the ability to buy the shares, 435 00:21:19,920 --> 00:21:22,200 Speaker 2: the ETFs, and various other things that you wanted to 436 00:21:23,080 --> 00:21:25,159 Speaker 2: if you want to take direct control. The biggest thing 437 00:21:25,160 --> 00:21:27,399 Speaker 2: about self many service funds is control, and that's the 438 00:21:27,440 --> 00:21:29,919 Speaker 2: reason that most people start them. It might be some 439 00:21:30,040 --> 00:21:32,480 Speaker 2: might be looking at expenses, but it's about control. Do 440 00:21:32,520 --> 00:21:34,920 Speaker 2: you want to control the investments or do you want 441 00:21:35,240 --> 00:21:37,760 Speaker 2: to work with an advisor to help you control the investments. 442 00:21:38,359 --> 00:21:40,520 Speaker 2: By doing that, I mean buying direct share. A lot 443 00:21:40,520 --> 00:21:43,239 Speaker 2: of people start their s misss because they want to 444 00:21:43,520 --> 00:21:46,560 Speaker 2: choose to buy the hp O areal or to exclude 445 00:21:46,640 --> 00:21:49,960 Speaker 2: certain things, and they've got certain interests investment interests that 446 00:21:50,000 --> 00:21:52,080 Speaker 2: they want to follow and think that they can do 447 00:21:52,080 --> 00:21:53,800 Speaker 2: it just as well as the fund managers. Some will 448 00:21:53,840 --> 00:21:56,080 Speaker 2: be able to do someone, but there are a lot 449 00:21:56,119 --> 00:21:59,040 Speaker 2: of different options there. Start considering doing it at this 450 00:21:59,200 --> 00:22:00,960 Speaker 2: stage in life when the guy to turn on a 451 00:22:01,000 --> 00:22:05,360 Speaker 2: pension isn't necessarily about idea James, I don't think that 452 00:22:05,359 --> 00:22:07,480 Speaker 2: that's a bad idea to. 453 00:22:07,560 --> 00:22:09,920 Speaker 1: Play Devil's advocate on it. Blue, So I would say, 454 00:22:09,920 --> 00:22:12,800 Speaker 1: what about the fact that this looks like it would 455 00:22:12,840 --> 00:22:15,439 Speaker 1: seem I don't know, but it would seem that I 456 00:22:15,480 --> 00:22:17,959 Speaker 1: see no complaints about their retail super funds and they 457 00:22:18,000 --> 00:22:21,160 Speaker 1: have pretty healthy superbalances, and so it would be worth 458 00:22:21,200 --> 00:22:25,880 Speaker 1: asking could you really do better? And how much more 459 00:22:26,040 --> 00:22:30,680 Speaker 1: work would it involve? And at are you sufficiently equipped 460 00:22:30,680 --> 00:22:34,240 Speaker 1: and energetic if you like to take on the substantial 461 00:22:34,520 --> 00:22:40,040 Speaker 1: not just the logistics and paperwork of doing an SMSF, 462 00:22:40,119 --> 00:22:43,920 Speaker 1: but the actual stress of being in charge of your 463 00:22:43,960 --> 00:22:46,679 Speaker 1: own retirement when it has become exceptionally important to you. 464 00:22:46,720 --> 00:22:48,440 Speaker 1: It's more important to you now than it was two 465 00:22:48,480 --> 00:22:51,560 Speaker 1: years ago. That's just too just to play Devil's advocate there. 466 00:22:52,040 --> 00:22:53,800 Speaker 1: Second part of Shankar's question is more or less the 467 00:22:53,800 --> 00:22:56,200 Speaker 1: same as the first. Would we move? Would will be 468 00:22:56,200 --> 00:22:59,000 Speaker 1: better off moving to pension products in our existing providers. 469 00:22:59,200 --> 00:23:03,040 Speaker 1: That's the playoff between that and SMSFS For you to decide, Shankar. 470 00:23:03,400 --> 00:23:06,199 Speaker 1: I hope that's useful to you. Okay, I think you 471 00:23:06,280 --> 00:23:07,119 Speaker 1: read the next one. 472 00:23:07,600 --> 00:23:11,439 Speaker 2: So from Robert purchased a property prior to auction earlier 473 00:23:11,440 --> 00:23:14,480 Speaker 2: this year and received unconditional loan approval from the bank. 474 00:23:14,720 --> 00:23:18,320 Speaker 2: Settlement was due at the end of August. His bank 475 00:23:18,359 --> 00:23:20,760 Speaker 2: acquoted him and illustrate in June, but when he received 476 00:23:20,800 --> 00:23:23,240 Speaker 2: the mortgage documents, the bank had increased the quoted rate 477 00:23:23,280 --> 00:23:26,440 Speaker 2: by zero point two seven percents with us informing him, 478 00:23:26,960 --> 00:23:30,520 Speaker 2: and obviously there'd been no RBA rate increases during that period. 479 00:23:30,960 --> 00:23:32,920 Speaker 2: When he questioned the change, was informed that they had 480 00:23:32,920 --> 00:23:36,159 Speaker 2: withdrawn the special introductory offer at the end of July, 481 00:23:36,880 --> 00:23:39,120 Speaker 2: after he purchased the property, but before he'd been given 482 00:23:39,160 --> 00:23:43,320 Speaker 2: unconditional approval. It's now only a couple of weeks to settlements, 483 00:23:43,440 --> 00:23:47,080 Speaker 2: and the idea of sourcing a line without delaying settlements 484 00:23:47,160 --> 00:23:50,080 Speaker 2: could be difficult. Robert feels badly mistreated by the bank. 485 00:23:50,240 --> 00:23:53,159 Speaker 2: They used a great offer to lure him in and 486 00:23:53,200 --> 00:23:57,000 Speaker 2: then pulled the loan prior to him signing the documents 487 00:23:57,040 --> 00:23:57,560 Speaker 2: and whatever. 488 00:23:57,760 --> 00:24:00,920 Speaker 1: So is such a good question. I don't know about you, Bruce. 489 00:24:00,920 --> 00:24:04,000 Speaker 1: Have you come across this. The first home I ever bought, 490 00:24:04,680 --> 00:24:07,520 Speaker 1: I also fixed, so it was very important what the 491 00:24:07,560 --> 00:24:10,080 Speaker 1: deal was. And I remember I fixed for five years. 492 00:24:10,720 --> 00:24:15,240 Speaker 1: And when we sat down opposite the guy in nab 493 00:24:15,560 --> 00:24:17,919 Speaker 1: and it's I noticed Robert hasn't. By the way, folks, 494 00:24:17,960 --> 00:24:21,200 Speaker 1: you can mention went to these institutions anytime you wish, 495 00:24:21,359 --> 00:24:23,400 Speaker 1: and we'll make a decision whether it's fair to mention 496 00:24:23,480 --> 00:24:25,720 Speaker 1: them in turn. But in any event, or when we 497 00:24:25,760 --> 00:24:28,000 Speaker 1: got into sit down with my wife and when we 498 00:24:28,040 --> 00:24:31,280 Speaker 1: got into to sign the documents, the banker was talking 499 00:24:31,320 --> 00:24:33,320 Speaker 1: a nauseam about all sorts of things and then just 500 00:24:33,640 --> 00:24:36,240 Speaker 1: mentioned the raid and I just noticed it was a 501 00:24:36,240 --> 00:24:39,160 Speaker 1: half percent ire. Then we'd agreed all the way along, 502 00:24:39,200 --> 00:24:41,479 Speaker 1: and we were at the last moment and I just 503 00:24:41,520 --> 00:24:44,200 Speaker 1: said hang on second, blah blah blah, and he backtracked 504 00:24:44,200 --> 00:24:46,040 Speaker 1: and said, yeah, And I don't know how much that 505 00:24:46,160 --> 00:24:48,439 Speaker 1: meant to us over the years, but it was a lot. 506 00:24:49,080 --> 00:24:53,320 Speaker 1: So my point is that the whole first thing I 507 00:24:53,320 --> 00:24:56,160 Speaker 1: would suggest to anyone in that situation is to kick 508 00:24:56,240 --> 00:24:59,240 Speaker 1: back hard on the bank and see how they respond. 509 00:24:59,760 --> 00:25:06,000 Speaker 1: Their not inflexible, and you have worked on a deal 510 00:25:06,040 --> 00:25:08,639 Speaker 1: on the assumption of a reach which you all agree on, 511 00:25:08,720 --> 00:25:10,960 Speaker 1: and they're changing it. It doesn't matter what the explanation is, 512 00:25:11,400 --> 00:25:13,639 Speaker 1: they're changing it. What do you think, Bruce, That's what 513 00:25:13,680 --> 00:25:16,000 Speaker 1: I think. What do you think? As an advisor on 514 00:25:16,040 --> 00:25:16,480 Speaker 1: the ground? 515 00:25:17,040 --> 00:25:20,680 Speaker 2: Mortgage broker had on you need to settle. Basically, now 516 00:25:21,200 --> 00:25:23,119 Speaker 2: you settle with a bit of a sour taste in 517 00:25:23,160 --> 00:25:25,760 Speaker 2: your mouth. It probably is too late. We're getting pretty diffal. 518 00:25:25,840 --> 00:25:28,080 Speaker 2: We don't know if about the circumstances you incomes all 519 00:25:28,080 --> 00:25:29,639 Speaker 2: that sort of stuff. To see whether you do actually 520 00:25:29,680 --> 00:25:32,080 Speaker 2: have time to go to another lender, I would probably 521 00:25:32,119 --> 00:25:35,440 Speaker 2: suggest settling, pushing back on a bit and saying hang 522 00:25:35,440 --> 00:25:37,400 Speaker 2: on a second, But it sounds like you've probably given 523 00:25:37,440 --> 00:25:39,600 Speaker 2: them a try. Push back on a bit. But the 524 00:25:39,640 --> 00:25:42,080 Speaker 2: most important thing is settling, getting the property in your name. 525 00:25:42,680 --> 00:25:45,320 Speaker 2: Once you've done that, you don't owe any loyalty to 526 00:25:45,400 --> 00:25:48,280 Speaker 2: this bank. I would be it doesn't sound like you've 527 00:25:48,320 --> 00:25:50,520 Speaker 2: gone through a broker. I would probably suggest going to 528 00:25:50,560 --> 00:25:53,440 Speaker 2: see a broker straight afterwards or even now and say 529 00:25:53,560 --> 00:25:56,359 Speaker 2: this has happened, particularly if you've gone direct to a bank, 530 00:25:56,520 --> 00:25:58,800 Speaker 2: I don't see a broker and explain to them what's happened, 531 00:25:58,920 --> 00:26:01,560 Speaker 2: and see whether the rates, whether there are more competitive 532 00:26:01,600 --> 00:26:04,840 Speaker 2: rates out there. If you did go through a broker, 533 00:26:04,880 --> 00:26:07,159 Speaker 2: then get your broker to push back on the bank. 534 00:26:07,400 --> 00:26:09,199 Speaker 2: It might not have an impact. They do have to 535 00:26:09,200 --> 00:26:12,160 Speaker 2: cut off special rates at various periods of time. That's 536 00:26:12,240 --> 00:26:14,439 Speaker 2: what they do. The energy is to try to get 537 00:26:14,440 --> 00:26:18,480 Speaker 2: people in the door. I would probably suggest settling, getting 538 00:26:18,480 --> 00:26:21,040 Speaker 2: the place, and then looking to move on or to 539 00:26:21,080 --> 00:26:23,480 Speaker 2: bash the bank. Go back and tell the bank that 540 00:26:23,520 --> 00:26:25,639 Speaker 2: you want to that you're not happy with it, and 541 00:26:25,680 --> 00:26:27,280 Speaker 2: you're going to leave. They've done a lot of work. 542 00:26:27,280 --> 00:26:29,399 Speaker 2: They're not making any money really out of this. In 543 00:26:29,440 --> 00:26:31,520 Speaker 2: the short term. Banks make money the longer you hang 544 00:26:31,560 --> 00:26:34,600 Speaker 2: around with them, and you might find in that situation 545 00:26:34,720 --> 00:26:36,800 Speaker 2: that if you go and push back or threaten to leave, 546 00:26:36,880 --> 00:26:39,280 Speaker 2: once the loan is settled, and say that you're unhappy 547 00:26:39,320 --> 00:26:41,880 Speaker 2: that something might happen, and if it doesn't, take it, 548 00:26:42,200 --> 00:26:43,760 Speaker 2: take it to the market, go and see broker. 549 00:26:44,280 --> 00:26:47,040 Speaker 1: Thank you for that answer. It's so good and really 550 00:26:47,080 --> 00:26:51,720 Speaker 1: reflected your own skills, Bruce and experience. I didn't even 551 00:26:51,840 --> 00:26:54,359 Speaker 1: know and even into my mind that you could after 552 00:26:54,480 --> 00:26:58,080 Speaker 1: settlement take a second look, because in my mind that 553 00:26:58,240 --> 00:26:59,080 Speaker 1: was it. That was the end. 554 00:27:00,520 --> 00:27:02,200 Speaker 2: I think in your cast, James, you were talking about 555 00:27:02,200 --> 00:27:03,960 Speaker 2: a fixed right, and we don't now whether Roberts talking 556 00:27:03,960 --> 00:27:05,640 Speaker 2: about a fixed right here or not. If he's talking 557 00:27:05,640 --> 00:27:07,679 Speaker 2: about a fix right, then yes, then that's not going 558 00:27:07,760 --> 00:27:10,720 Speaker 2: to necessarily be possible. If it's a variable right, yep, 559 00:27:10,720 --> 00:27:13,000 Speaker 2: he doesn't have to hang around. There might be some phase. 560 00:27:13,000 --> 00:27:15,040 Speaker 2: You got to figure out whether the phase to get out, 561 00:27:15,119 --> 00:27:16,399 Speaker 2: which are not as big as I used to be, 562 00:27:16,560 --> 00:27:18,520 Speaker 2: but the pace to get out are worthwhile to get 563 00:27:18,520 --> 00:27:20,520 Speaker 2: the new rights at a new bank or something like that, 564 00:27:20,600 --> 00:27:24,040 Speaker 2: but fixed right to be the variable maybe less, sir. 565 00:27:24,600 --> 00:27:27,679 Speaker 1: Okay, so and also mortgage broker on that occasion, I 566 00:27:27,680 --> 00:27:31,320 Speaker 1: think sounds like to be absolutely essential for anyone in 567 00:27:31,359 --> 00:27:34,680 Speaker 1: that position. Very interesting, Okay, we'll take short break back 568 00:27:34,680 --> 00:27:43,560 Speaker 1: in a moment. Hello, Welcome back to The Australian's Money 569 00:27:43,560 --> 00:27:47,040 Speaker 1: Puzzle podcast. I'm James Kirby, Well editor at The Australian 570 00:27:47,160 --> 00:27:53,280 Speaker 1: talking to Bruce Bramble, financial advisor, author, media figure and 571 00:27:53,359 --> 00:27:56,000 Speaker 1: regular on the show. Now it's a question from Neil. 572 00:27:57,040 --> 00:28:00,920 Speaker 1: I heard Danielle Ekoye on the show a few weeks 573 00:28:00,960 --> 00:28:04,920 Speaker 1: ago mention she never borrows to invest, but what about 574 00:28:04,920 --> 00:28:10,119 Speaker 1: the property market? My question is, if leverage is a 575 00:28:10,119 --> 00:28:13,560 Speaker 1: good idea, then why do more investors not borrow to 576 00:28:13,680 --> 00:28:16,399 Speaker 1: invest in the share market as opposed to the property market? 577 00:28:16,400 --> 00:28:18,680 Speaker 1: And he mentions one of the he mentions the NAB 578 00:28:18,760 --> 00:28:22,920 Speaker 1: equity builder, which is often mentioned here and there for 579 00:28:23,080 --> 00:28:26,000 Speaker 1: people who are leveradging, looking for what you might call 580 00:28:26,040 --> 00:28:29,600 Speaker 1: a structured product, an arrangement to go into the share 581 00:28:29,600 --> 00:28:33,000 Speaker 1: market and borrow. Now, that was unusual. I was surprised 582 00:28:33,000 --> 00:28:35,159 Speaker 1: that Danielle said that, but because she's in the market's 583 00:28:35,200 --> 00:28:37,520 Speaker 1: a long time and a very skilled operator herself. But 584 00:28:37,600 --> 00:28:42,640 Speaker 1: that's her view. Most people identify property and leverage property 585 00:28:42,680 --> 00:28:46,000 Speaker 1: through negative gearing because there are specific tax advantages. Those 586 00:28:46,040 --> 00:28:49,640 Speaker 1: tax advantages are also available to you if you buy shares. 587 00:28:50,160 --> 00:28:53,360 Speaker 1: So Neil just to enhance the question a bit. Why 588 00:28:53,400 --> 00:28:58,680 Speaker 1: don't people borrow more often to buy investments outside property 589 00:28:58,720 --> 00:29:02,360 Speaker 1: when they can negatively gear just like the negatively gear property. 590 00:29:02,400 --> 00:29:05,360 Speaker 1: What do you think, Bruce, Why is it because the 591 00:29:05,560 --> 00:29:08,920 Speaker 1: trauma of watching share prices bounce around every day? 592 00:29:09,760 --> 00:29:13,920 Speaker 2: It is partly about volatility. Shares are just simply far 593 00:29:14,000 --> 00:29:17,000 Speaker 2: more volatile than property. I love both, as as said classes, 594 00:29:17,160 --> 00:29:20,360 Speaker 2: and we've got clients with both obviously, but borrowing to 595 00:29:20,400 --> 00:29:23,880 Speaker 2: invest in the share market is less popular because of 596 00:29:24,040 --> 00:29:26,120 Speaker 2: things like if you're using a margin loan, because of 597 00:29:26,160 --> 00:29:30,120 Speaker 2: marginal calls. When markets tend to fall quite heavily and 598 00:29:30,160 --> 00:29:32,560 Speaker 2: there's a margin call, that can be a problem borrowing 599 00:29:32,640 --> 00:29:36,920 Speaker 2: to buy. The other way borrowing for share investment is 600 00:29:36,960 --> 00:29:40,320 Speaker 2: potentially without margin calls, is to borrow against another asset, 601 00:29:40,360 --> 00:29:43,320 Speaker 2: generally a property. So you might want to invest tax 602 00:29:43,320 --> 00:29:46,640 Speaker 2: effectively into a share portfolio, divis or a share portfolio. 603 00:29:46,640 --> 00:29:48,200 Speaker 2: I've got equity in my home, I'm going to borrow 604 00:29:48,560 --> 00:29:51,960 Speaker 2: get a two hundred thousand dollars facility against my home. 605 00:29:52,040 --> 00:29:53,640 Speaker 2: So go it against my home to invest in two 606 00:29:53,680 --> 00:29:56,120 Speaker 2: hundred thousand dollars worth of shares. You'll get a home 607 00:29:56,200 --> 00:29:59,720 Speaker 2: run home loan rate on those on there, which can 608 00:29:59,760 --> 00:30:01,600 Speaker 2: be one way of doing it. And you're investing in 609 00:30:01,720 --> 00:30:05,440 Speaker 2: shares which will be returning dividends and distributions, and there'll 610 00:30:05,440 --> 00:30:07,920 Speaker 2: be some negative most likely when you start, some negative 611 00:30:07,960 --> 00:30:11,520 Speaker 2: gearing around that, so you can and do have that ability. 612 00:30:11,880 --> 00:30:14,400 Speaker 2: The chairs are just more volatile. The thing about property 613 00:30:14,480 --> 00:30:18,120 Speaker 2: is when you're borrowing for property, is the normally leaning 614 00:30:18,120 --> 00:30:20,800 Speaker 2: against the asset itself, and depending on which way you 615 00:30:20,840 --> 00:30:23,000 Speaker 2: do it, ninety percent against the property, and then you 616 00:30:23,080 --> 00:30:24,800 Speaker 2: need to either put up the remainder of the money 617 00:30:24,880 --> 00:30:26,760 Speaker 2: or borrow the remainder of the money the extra twenty 618 00:30:26,800 --> 00:30:30,400 Speaker 2: percent pusly stamp duties and put that against another property. 619 00:30:30,440 --> 00:30:34,080 Speaker 2: But I think the reason that most people it's less 620 00:30:34,640 --> 00:30:37,400 Speaker 2: less well taken up is largely because of the volatility 621 00:30:37,440 --> 00:30:38,080 Speaker 2: element of it. 622 00:30:38,440 --> 00:30:40,680 Speaker 1: Yes, and you're alluding there to the fact that the 623 00:30:40,680 --> 00:30:44,400 Speaker 1: banks or lenders with property. If you say you've got 624 00:30:44,440 --> 00:30:47,240 Speaker 1: a million dollar house, it's worth a million dollars, they'll 625 00:30:47,240 --> 00:30:48,680 Speaker 1: take it as a million dollars. If you say you've 626 00:30:48,680 --> 00:30:50,840 Speaker 1: got a million dollar shareport for you, they don't take 627 00:30:50,840 --> 00:30:52,480 Speaker 1: it as a million do that. They ratchet it way 628 00:30:52,480 --> 00:30:55,320 Speaker 1: back and they say we'll only assume that's worth They 629 00:30:55,400 --> 00:30:58,280 Speaker 1: mark that down a fair bit for collateral purposes. 630 00:30:59,160 --> 00:31:01,840 Speaker 2: From a leanning, they tend to take it at face value. 631 00:31:01,880 --> 00:31:04,120 Speaker 2: They might discount a little bit. They certainly do discount 632 00:31:04,160 --> 00:31:07,720 Speaker 2: the income that comes from it when they're looking for loan. 633 00:31:07,840 --> 00:31:10,920 Speaker 2: So if you've got a million dollar portfolio yielding four 634 00:31:10,920 --> 00:31:13,720 Speaker 2: percent plus of franking credits, then they'll take twenty percent 635 00:31:13,800 --> 00:31:16,720 Speaker 2: as a general rule, I think off that discount the 636 00:31:16,760 --> 00:31:20,440 Speaker 2: income strain because dividends can be cut. But gfc's or co. 637 00:31:20,560 --> 00:31:23,880 Speaker 1: But don't they assume that rents, that the rentalss can 638 00:31:23,920 --> 00:31:24,440 Speaker 1: be vacuant. 639 00:31:26,000 --> 00:31:28,720 Speaker 2: Yes, they do, but they assume that there's a percent 640 00:31:28,800 --> 00:31:33,520 Speaker 2: rental vacancy on any given property. They yeah, two percent, 641 00:31:33,560 --> 00:31:36,400 Speaker 2: as in two a couple of weeks a year or something. 642 00:31:36,480 --> 00:31:38,560 Speaker 2: So they'll if you tell them that's worth five hundred 643 00:31:38,560 --> 00:31:41,840 Speaker 2: bucks a week, they automatically discounted by probably about a 644 00:31:41,880 --> 00:31:43,880 Speaker 2: similar sort of percentage of twenty percent. But that's the 645 00:31:43,920 --> 00:31:47,720 Speaker 2: cover vacancy rates, insurances, the other costs of holding a 646 00:31:47,720 --> 00:31:48,400 Speaker 2: property as well. 647 00:31:48,760 --> 00:31:50,880 Speaker 1: Okay, Yes, and as you said, the risk of a 648 00:31:50,960 --> 00:31:55,000 Speaker 1: vacant property just now is more or less zilch. Okay. Finally, 649 00:31:55,080 --> 00:31:57,240 Speaker 1: question from Ben if you would read. 650 00:31:57,040 --> 00:31:59,320 Speaker 2: That one, I'll read this one. But I think this 651 00:31:59,400 --> 00:32:02,240 Speaker 2: is definitely quick for you, James. So from being how 652 00:32:02,280 --> 00:32:05,880 Speaker 2: come you're expanding the Top Advisor's list to one fifty, well, 653 00:32:05,920 --> 00:32:08,880 Speaker 2: not just expand it to fifteen thousand cover all advisors. 654 00:32:09,280 --> 00:32:12,200 Speaker 2: Maybe an idea is to do like wines and categorize 655 00:32:12,240 --> 00:32:15,000 Speaker 2: them best for small accounts, best for retire is best 656 00:32:15,000 --> 00:32:15,720 Speaker 2: for big families. 657 00:32:16,040 --> 00:32:18,920 Speaker 1: Yes, thank you, Ben. The Top Advisors disc goes from 658 00:32:18,960 --> 00:32:21,600 Speaker 1: one hundred two hundred and fifty this year on its 659 00:32:21,720 --> 00:32:25,200 Speaker 1: seventh year. Ben, we're not exactly rushing. It started with 660 00:32:25,320 --> 00:32:27,719 Speaker 1: fifty and two seventeen and then we opened it up 661 00:32:27,720 --> 00:32:29,920 Speaker 1: to one hundred a couple of years ago, being very 662 00:32:29,960 --> 00:32:32,640 Speaker 1: careful opening it up at at one hundred and fifty 663 00:32:32,640 --> 00:32:35,960 Speaker 1: out of fifteen thousand. That's not exactly. It's a balance 664 00:32:36,000 --> 00:32:39,480 Speaker 1: between offering something that's really useful and it's not so 665 00:32:39,840 --> 00:32:42,440 Speaker 1: tiny that it's not useful. Because nobody can get into 666 00:32:42,480 --> 00:32:44,760 Speaker 1: these people. As to how big the list will get, 667 00:32:44,800 --> 00:32:47,600 Speaker 1: I couldn't tell you. And as I like your idea 668 00:32:47,640 --> 00:32:49,840 Speaker 1: of course, and by the way, so does Barons. And 669 00:32:49,880 --> 00:32:53,480 Speaker 1: in the US they have sufficient data and scale that 670 00:32:53,520 --> 00:32:55,320 Speaker 1: they do slice, and I said, like that, they have 671 00:32:55,400 --> 00:32:57,520 Speaker 1: the best male and the best female and the best 672 00:32:57,520 --> 00:32:59,720 Speaker 1: family advisors, and they have it stayed by state and 673 00:32:59,760 --> 00:33:02,720 Speaker 1: it's all quite marvelous. But they're doing it for twenty 674 00:33:02,720 --> 00:33:06,720 Speaker 1: five years there and they have an enormous population, of course, 675 00:33:06,760 --> 00:33:11,040 Speaker 1: but we are steadily and conservatively moving along on that one. 676 00:33:11,080 --> 00:33:13,600 Speaker 1: So that's the explanation Ben, which I hope is good 677 00:33:13,680 --> 00:33:16,800 Speaker 1: enough for you. All right, Hey, thank you very much, Bruce. 678 00:33:16,840 --> 00:33:18,120 Speaker 1: Great to have you on today. 679 00:33:18,680 --> 00:33:20,960 Speaker 2: Absolute pleasure. Thanks for having me on Jobs. 680 00:33:21,400 --> 00:33:24,680 Speaker 1: Always great to have Bruce Brammel, Bruce Brammel Financial Advice 681 00:33:24,920 --> 00:33:28,000 Speaker 1: on the show. Thank you everybody for listening. Do mention 682 00:33:28,200 --> 00:33:31,080 Speaker 1: us to someone, one person you know, be lovely to 683 00:33:31,480 --> 00:33:34,520 Speaker 1: spread the word about the show and keep the emails 684 00:33:34,800 --> 00:33:37,920 Speaker 1: coming in the money puzzle at the Australian dot com 685 00:33:37,960 --> 00:33:39,760 Speaker 1: dot au. Talk to you soon,