Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirby Well, the editor at The Australian. Hey, welcome
Speaker 1: aboard everybody. In every episode we cover listener questions and
Speaker 1: I have to say today's batch of questions is really
Speaker 1: exceptional and I just want to say thanks to everybody involved.
Speaker 1: I get more ideas for the show and what to
Speaker 1: do on the show and have on the show from
Speaker 1: your questions and your comments, complaints, observations than anything else,
Speaker 1: so keep them rolling. Later on we'll hear from a listener,
Speaker 1: for instance, who lives overseas and wants to come back
Speaker 1: to Australia. We've got an investor in Perth who's worried
Speaker 1: that the Eastern staters are taking over. Have a question
Speaker 1: from Robert who says his bank is trying to pull
Speaker 1: a fast one, basically because he signed on for a
Speaker 1: mortgage at a rate and when it to sign the papers,
Speaker 1: the rate was lower. I've experienced that. I'm really interested
Speaker 1: to pick up on that question. And keep in mind, folks,
Speaker 1: if we can do something for you, let us know.
Speaker 1: You'd be surprised how quickly an organization responds when they
Speaker 1: get a call from a show like ours. Okay, now today,
Speaker 1: I think we need an advisor here to talk about
Speaker 1: issues in property and many of your questions. Someone who's
Speaker 1: across property and is also across that advice friend of
Speaker 1: the show, a regular on the show. It's Bruce Brammel.
Speaker 1: How are you, Bruce?
Speaker 2: Not to be any thanks James, thanks for bringing me back.
Speaker 1: Lovely to have you back. Always good to have you on.
Speaker 1: I know that we would be of a similar vintage,
Speaker 1: and we might have I don't know what age your
Speaker 1: guys are, but mine are now of the age for
Speaker 1: the starting just starting to look around and be aware
Speaker 1: of the mountain they have to climb to get into
Speaker 1: property in any way, but obviously particularly as a home buyer.
Speaker 1: And one of the things apparently that they're all saying
Speaker 1: to each other, if you don't mind, is that you know,
Speaker 1: the prices are just tipping along at the moment, very
Speaker 1: much at the sort of average rates. In some parts
Speaker 1: they're quite slow, and there's a sense that you don't
Speaker 1: have to move now. There's also a sense of fatalism,
Speaker 1: and this is really something that is on the cards,
Speaker 1: I think, and I see it reported and I see
Speaker 1: it anecdotally this sense of fatalism with younger investors, where
Speaker 1: they're saying, look, it's just out of my never going
Speaker 1: to be able to afford to buy a house, and
Speaker 1: so I'm going to go to Japan for two weeks
Speaker 1: in ski something like that. So we have this attitude
Speaker 1: that it's just become so hard, it's too hard, so
Speaker 1: forget it. Do you come upon that And what would
Speaker 1: you say to someone who said that to you?
Speaker 2: I guess I don't say as much of it. From
Speaker 2: a client perspective, payble reading the media and generally being involved.
Speaker 2: Why could you be younger? They're still in hospital, there's
Speaker 2: still a little while off from them. But we do
Speaker 2: see clients coming in who who often have started on
Speaker 2: the deposits and might have a reasonable amount and want
Speaker 2: to know what to do with the deposit money while
Speaker 2: they're continuing to save us, and how should we invest
Speaker 2: in them into cash if you're going to buy in
Speaker 2: the next couple of years. Look, parts of the country
Speaker 2: are quite slow, Victoria in particular. Other parts of the
Speaker 2: country are running rampants. What we it's a generational thing
Speaker 2: to a degree. Back in the sixties and seventies, when
Speaker 2: that generation, which included my parents were buying a house.
Speaker 2: I tended to do it quite a lot younger. They
Speaker 2: had kids a lot younger. The average age of having
Speaker 2: kids I think when when I was born was about
Speaker 2: twenty three, twenty four, twenty around that sort of thing,
Speaker 2: and buying home was a bit easier. But they're also
Speaker 2: doing it on one income as a general rule, or
Speaker 2: say an average at one point one incomes per household,
Speaker 2: whereas nowadays the average person's average household buying is probably
Speaker 2: at one point eight incomes. Was a lot single people
Speaker 2: buying as well, But yeah, have run hard. But like everything, James,
Speaker 2: it's cyclical. And if people are finding it tough now,
Speaker 2: which is partly about industrates have come off very low
Speaker 2: intustrates and they've risen fairly strongly to November last year.
Speaker 2: You know it's cyclical and when prices get too high,
Speaker 2: prices will come back. People who are finding it tough
Speaker 2: have just got to make In my opinion, it's about
Speaker 2: priorities and if there are kids in their twenties or
Speaker 2: young adults in their twenties or thirties and their primary
Speaker 2: goal is to buy a home, then going off to
Speaker 2: scan in Japan, for two weeks is going to be
Speaker 2: a reasonably pretty expensive holiday.
Speaker 1: But logically, if I say to you, I have I
Speaker 1: earn one hundred thousand dollars and I want my house
Speaker 1: is going to cost nearly a million, I can never
Speaker 1: do it, Isn't that? What do you say to that?
Speaker 1: What do you say to the relatively logical observation that
Speaker 1: on one hundred ground you can never buy a million
Speaker 1: dollar house?
Speaker 2: No, you can't. You just you simply can't do it
Speaker 2: one hundred thousand dollars. Have you got two people on
Speaker 2: one hundred thousand dollars? And it makes it a lot
Speaker 2: easier put somebody doing a hundred thousand dollars is unlikely
Speaker 2: about to buy. It depends on expenses. They've changed the
Speaker 2: way they do loans and lending and affordability in the
Speaker 2: last seven or eight years, and it makes it a
Speaker 2: lot more divilt because they do actually dive deeper into
Speaker 2: your expenses. Now that's what you earn is almost less
Speaker 2: relevant than how much you spend, and they go and
Speaker 2: look into it. When you're applying for a loan, they
Speaker 2: look at your savings, they look at what you're spending
Speaker 2: your money on and categorize it to see if the
Speaker 2: expenses are the same. You used to be able to
Speaker 2: just go with this minimum.
Speaker 1: Used to go with a sort of a former league
Speaker 1: thing that they just had they apply to everybody.
Speaker 2: Yeah, and they didn't. They didn't really check it too hard.
Speaker 2: Nowadays they do. You can't. You know, the hems have changed.
Speaker 1: What difference did that make? Bruce?
Speaker 2: An enormous difference because mortgage brokers in the industry wasn't
Speaker 2: just mortgage brokers, the banks were allowing this as well.
Speaker 2: You could put through of us. I'm going back a while,
Speaker 2: but if you had mum and dad and two kids,
Speaker 2: then there was a minimum spend of that that might
Speaker 2: have been at the time about two and a half
Speaker 2: hour dollars. Now it's probably three or three and a
Speaker 2: half thousand dollars a month now. But that has changed dramatically.
Speaker 2: They don't just accept this is what the minimum that mom,
Speaker 2: dad and two kids can live on. They actually look
Speaker 2: at your expenses and if you've got some private schooling
Speaker 2: or you've got some bigger expenses in there for whatever,
Speaker 2: they're going to see them and they're going to they're
Speaker 2: going to penaloge you for it. But they're going to include.
Speaker 2: That's when trying to determine how much it is that
Speaker 2: you can borrow, and what you can borrow is based
Speaker 2: on what money's left over. If you can make some
Speaker 2: changes and find some spending cuts reduce your expenses, then
Speaker 2: you want to be doing that at the time that
Speaker 2: you're going to see a bank or broken about getting
Speaker 2: a mortgage, because they're generally going to want to see
Speaker 2: thirty sixty ninety days worth of weather expenses when you're
Speaker 2: putting in your application. If they say three four hundred
Speaker 2: bucks a month or a week going out to Uber
Speaker 2: Eats or any of the delivery places, then they're going
Speaker 2: to see that it's a bit to fuil to hide.
Speaker 1: Well, I'd be furious if some bank are pointed out
Speaker 1: to me so any element of my expenses as to
Speaker 1: whether I should cheer, is that or not. But it's
Speaker 1: really interesting you say that. It's really good to hear that. So, folks,
Speaker 1: if you are thinking of if you are of that
Speaker 1: persuasion that it's all too difficult, first of all, have
Speaker 1: a look and see what could change how you might
Speaker 1: get to it. But more broadly, Bruce, do you still
Speaker 1: always is it always your advice that you should own
Speaker 1: your own home. I know it's I just want to
Speaker 1: check with you. Is it always in all situations virtually
Speaker 1: your advice?
Speaker 2: Well, I think it's for a lot of people. It's
Speaker 2: a foundation stone of finances. The point about running a
Speaker 2: home is security aspect and those sorts of things. But
Speaker 2: you're building equity in a place. You're painting down a
Speaker 2: line at some point in the future, and it's rarely
Speaker 2: the twenty five or thirty years of a regular mortgage
Speaker 2: you're normally paying off before that. That the cost of
Speaker 2: putting a roof over your heads. Yes, you've still got rates,
Speaker 2: and you're still at electricity and gas and insurance and
Speaker 2: all those other expenses. But the main cost of having
Speaker 2: a roof over your head is done when you when
Speaker 2: you finally paid off the mortgage. If you decide not
Speaker 2: to buy, you'll rent until you die. So if you
Speaker 2: don't buy a home and eventually pay it off, you'll
Speaker 2: be renting through until you're not on the earth anymore,
Speaker 2: and there's an ongoing expense. Now, when you get to
Speaker 2: that sort of older age groups and youre applying for the
Speaker 2: age pension, they have a different level of pension higher
Speaker 2: level of pension for people who don't own their home,
Speaker 2: partly to cover and partly an acknowledgment of rent being paid,
Speaker 2: and a lower government age pension for those who do
Speaker 2: own their home. But it is a cornerstone for me
Speaker 2: or a foundation stone of wealth. That doesn't mean that's
Speaker 2: right for everybody. And people have got to move every
Speaker 2: couple of years because that's their work who don't want
Speaker 2: to be tied down. Then if you're making that decision
Speaker 2: not to buy to rent, then you've got to make
Speaker 2: it work for you, is what I've always preached, and
Speaker 2: that is whatever you're not spending on a mortgage. So
Speaker 2: let's say your rent is whatever three grand a month
Speaker 2: and a mortgage that cost you four or four and
Speaker 2: a half. Then whatever the case is, extra money that
Speaker 2: you're not using to pay a mortgage really needs to
Speaker 2: be going into some sort of longer term investing to
Speaker 2: help look after you when you're getting into your old
Speaker 2: years or in your retirement. Now. Whether you're putting that
Speaker 2: money to souper or other investments is another matter that
Speaker 2: you need to look at on a personal level. But
Speaker 2: renting is indefinite. Buying home has an endpoint for the
Speaker 2: largest part of having a ref ahead.
Speaker 1: It could always be a book titled Bruce, if you
Speaker 1: decide not to buy your rent until you die, That's
Speaker 1: got a certain gravity.
Speaker 2: But I'm very sorry, James, I am actually quoting myself
Speaker 2: on that one. Is the line from debtband Walking, which
Speaker 2: all right in two years at.
Speaker 1: You're the quoting from yourself is now pleagerism, Bruce, quoting
Speaker 1: from yourself is the opposite of pleasurism. We all do
Speaker 1: it all the time. Good for you, Okay, I knew
Speaker 1: Bruce would be good on that particular issue. Just before
Speaker 1: we've got to questions I want to do. I want
Speaker 1: to get to questions quickly this week because as I say,
Speaker 1: there were so good and such a range of questions.
Speaker 1: But what the other's come up on the show a
Speaker 1: few times, it just ask you before we do, is
Speaker 1: about rates. Okay. So we look at the media, or
Speaker 1: we look at the financial press this week, and it's
Speaker 1: all about how rates are going to go down and
Speaker 1: how gold for instance, gold, folks, is gold the commodity
Speaker 1: or gold as you buy them through bullion or ETFs
Speaker 1: is really starting to move as an alternative investment with
Speaker 1: a much clearer record than shall we say, private equity
Speaker 1: or private credit. And by the way, I've had some
Speaker 1: correspondence telling me that I'm too heavy and critical on that.
Speaker 1: But the point I want to make is that globally
Speaker 1: rates are going down, but in Australia there is it's
Speaker 1: unclear if rates are going to go down in any
Speaker 1: time soon, and if they did, RBA rates we don't
Speaker 1: know to what extent the banks will cut rates. Anyway,
Speaker 1: where are you coming from, Blues When people ask you
Speaker 1: about that, If people are coming in your door and
Speaker 1: they're making plans and their plans hinge on the fact
Speaker 1: that rates are going to be cut, what do you
Speaker 1: tell them?
Speaker 2: Well, look, you know, there's always there's two sides that
Speaker 2: The main side of the story, which is probably what
Speaker 2: we're talking about here, is people are wanting to buy
Speaker 2: a home. You can't bank on them. You just you can't. Now,
Speaker 2: I think competitive pressures are such that in the industry,
Speaker 2: you know, a bank, a lender, well a reasonable size lender,
Speaker 2: if they decide to pass it on or pass the
Speaker 2: vast majority of it on and others are hasn't to
Speaker 2: do so, then they will pick up market share. It's
Speaker 2: as simple as that they get to advertise that they've
Speaker 2: passed it on in full, or they passed on twenty
Speaker 2: when the average only did ten, or if we're talking
Speaker 2: about a quarter percent, right, and they will pick up
Speaker 2: market share, and they will very quickly. The brokers out
Speaker 2: there will because brokers make up about three quarters of
Speaker 2: the markets now, of the market now of every loan,
Speaker 2: that's three out of every four loans that are done
Speaker 2: and done brokers.
Speaker 1: Yeah, the most loans go through brokers.
Speaker 2: Yeah, yeah, So the brokers are going to look at
Speaker 2: that most clients are at least a little focused or
Speaker 2: reasonably focused on on interustrates. And if lenders pass it
Speaker 2: on and other lenders don't, and there is going to
Speaker 2: be a flow of need to the lenders that do.
Speaker 2: What I tend to say is that competitive pressures are
Speaker 2: such that if a few go, more will go. You might.
Speaker 2: There is a lot of money to be made by
Speaker 2: banks though in delaying passing it on. So if they
Speaker 2: delay passing it on by a few days or a week,
Speaker 2: then given the size of the loan books, particularly of
Speaker 2: the fom mags, there's a lot of money to be
Speaker 2: made by not passing on the seventeenth and delaying it
Speaker 2: to a twenty second or whatever. But there will be
Speaker 2: lenders that will take it as an opportunity in a
Speaker 2: marking opportunity to cut rates in full or even go
Speaker 2: a step further and off a thirty basis points.
Speaker 1: Okay, you think it's sufficiently competitive in the banking circle
Speaker 1: that there will cut roots when the cuts come from
Speaker 1: the IBA.
Speaker 2: I think so. Look, we're getting a lot of emails
Speaker 2: from the banks at the moment talking about fixed rates
Speaker 2: already been cust making some reductions, They're making some bets there,
Speaker 2: bond traders are beginning to price. I think it gets
Speaker 2: to move around. But the RBA made a statement in
Speaker 2: Whenever that was twenty twenty one about where they saw rates,
Speaker 2: and bond traders called them liars very soon afterwards. So
Speaker 2: was right the bond.
Speaker 1: Traders, the bond vigilantes. Yeah, don't ever doubt them. The
Speaker 1: money markets will override central bank Sandy Day, folks, as
Speaker 1: we've probably seen that, and you know that, and you
Speaker 1: know not even here in the RBA has already in
Speaker 1: recent history been called out. And if the money market
Speaker 1: says basically going to fold in a very strong way,
Speaker 1: and the RBA are dithering and saying they mightn't. The
Speaker 1: likelihood is they will. Okay, now let's go to questions.
Speaker 1: We'll be back in a moment. Hello, and welcome back
Speaker 1: to The Australian's Money Puzzle podcast. I'm James Kirby, the
Speaker 1: weorth editor at The Australian, talking to Bruce Brammel of
Speaker 1: Bruce Brammel, Financial financial Advisor, author and a regular guest
Speaker 1: on the show. Christopher, I'm an Australian government official posted abroad,
Speaker 1: commonly deployed to far away places for years at a time.
Speaker 1: And I don't own properly property, but i'd like to.
Speaker 1: And if I bought my dream home on the New
Speaker 1: South Wales Coasted, would it be considered my principal place
Speaker 1: of residence even if I'm not living in this part one?
Speaker 1: If I rent out my principal place of residence while
Speaker 1: I'm posted overseas, would this mean it becomes subject to
Speaker 1: capital gains tax? Upon resaying? Okay, very clear, and none
Speaker 1: of this is advice. It's always information. If he doesn't
Speaker 1: own a place and he buys a place, then that's
Speaker 1: and he declares that his principal place of residence for
Speaker 1: tax purposes. Can he come? Is that all clear and
Speaker 1: he can still be wherever he might be in what
Speaker 1: does he call it? A far away place?
Speaker 2: Yeah, Chris ro think, firstly, check with your accountants specifically
Speaker 2: on that one. What the if you're not living in
Speaker 2: it and you're renting out, you're drawing an income, you've
Speaker 2: probably gotta lie and you're climbing tax deduction for it.
Speaker 2: You're climbing probably climbing tax deductions for rights, insurances, land tax,
Speaker 2: if that's what's happening, If that's what you're actually claiming,
Speaker 2: there's also something called the six year old. I'll come
Speaker 2: back to a bit. If you're intending to come home
Speaker 2: and live in this, if you understand that it is
Speaker 2: the portion. What the ATO looks at is the portion
Speaker 2: of time that it was a PPOI you, principal place
Speaker 2: of residence versus how long it was rented out for.
Speaker 2: So if you had it rented out for a couple
Speaker 2: of years, let's say you're coming home in a few
Speaker 2: years to retire, it sounds like you've been able to
Speaker 2: sease for a while and you have it rented out
Speaker 2: for three years, but then you when you come back,
Speaker 2: you live in it for another seventeen years or something
Speaker 2: and then sell us. If you were to do that,
Speaker 2: then three twentieths of the gain would most likely be
Speaker 2: accessible and the other seventeen twentieths wouldn't be on that
Speaker 2: three twentieth. It's also at the fifty percent couple games
Speaker 2: discount because you've only asset for more than a year,
Speaker 2: and the amount of CGT that you would actually pay
Speaker 2: would be fairly small on a gain that you've held
Speaker 2: for that period of time. Do talk to your account
Speaker 2: about though, and specific taxation device is what you need
Speaker 2: in regards to that. There's also what's known as the
Speaker 2: six year rules. So a lot of expats will have
Speaker 2: a property illustrate they only go and work overseas for
Speaker 2: a period of time. You have six years six and
Speaker 2: a half years, I think it is from the time
Speaker 2: that you turn it into an investment property to either
Speaker 2: return and move back into it or to sell it
Speaker 2: and have it CGT free. So this one's a little
Speaker 2: bit different to that, and that you won't have lived
Speaker 2: in it. And the third thing I'll probably point out,
Speaker 2: Christopher is that if it becomes your dream home and
Speaker 2: you don't you read it out for a period and
Speaker 2: then you move into it and you never depart us
Speaker 2: until such times you're going out in the box, then
Speaker 2: you won't be paying any CGT on it. Anyway, you
Speaker 2: only pay CGT when you sell an asset. So if
Speaker 2: it was to be your dream home and that was
Speaker 2: going to be your last home, then the KA might
Speaker 2: become a problem. For not a problem, but there might
Speaker 2: be a tax issue for your kids when they're selling it.
Speaker 2: But it shouldn't be in your lifetime if that's the case.
Speaker 1: But interesting, Hey, Bruce, can I just double check on something.
Speaker 1: If the person owns the property, rents it, and then
Speaker 1: moves into it afterwards, if they're moving after six years,
Speaker 1: are you saying the first six years are not accounted
Speaker 1: for CGT.
Speaker 2: No, that's if you've lived in it and it's been
Speaker 2: your principal place of residence, then you've moved. I have interstate, overseas,
Speaker 2: even across down Really, you have six years six and
Speaker 2: a half years to either sell us or to move
Speaker 2: back into it and maintain the CGT free status of
Speaker 2: the property.
Speaker 1: So you have to have lived in it and left
Speaker 1: it and come back.
Speaker 2: I would think so, But that is what I want
Speaker 2: Christopher to chat to an account about the actual technicality
Speaker 2: of that rule.
Speaker 1: I hope that's interesting for you. It's what's exploring. Let's
Speaker 1: put it that way. We don't give advice, but it's
Speaker 1: what's exploring. All right. Want'll be this question from Stephen.
Speaker 2: From Stephen, I'm a local resident of Mandura in Western Australia,
Speaker 2: recently bought an investment property locally and called the real
Speaker 2: estate agent for a rental appraisement apprais She automatically assumed
Speaker 2: I was in the States and was shocked when I
Speaker 2: said I wasn't, as the real estate agent said, we
Speaker 2: don't have any were Australian's buying houses here.
Speaker 1: Eastern State colonists charging in carpetbaggers from Melbourne and Sydney
Speaker 1: pouring into Mandura. But hey, I tell you something. Do
Speaker 1: you want to know the reverse of that? People put
Speaker 1: their home up for sale in parts of Melbourne and
Speaker 1: they get flyers in the door saying moving to Queensland,
Speaker 1: such and such removals. We are around the corner and
Speaker 1: here's our phone numbers. So there you are two sets
Speaker 1: to every coin. Thank you for that, Steven. All right.
Speaker 1: Question from Shankar SJ nk or I was amused by
Speaker 1: your example of what people do while listening to the
Speaker 1: podcast as blowing leaves. This is exactly what I do
Speaker 1: each week with my host, quavarn a backpack blower. You've
Speaker 1: identified your core demographic. M Perhaps I have a couple
Speaker 1: of those that's very interesting. Ones we must actually I
Speaker 1: must collect them and read a few out someday. Of
Speaker 1: what people do listening to the show. We had a
Speaker 1: chap who was so fed up of the waiting for
Speaker 1: a builder to build something for him that he started
Speaker 1: building himself and sent me pictures of himself on the
Speaker 1: veranda doing what looked like quite elaborate building works. So
Speaker 1: there you are and other things. Shankar's question, however, is
Speaker 1: this my question relates to superannuation. I am fifty seven superbalance.
Speaker 1: We don't need to know. My wife is fifty nine superbalance. Okay,
Speaker 1: they've got plenty of super She will likely work beyond sixty.
Speaker 1: I am not currently working. Both our super balances remain
Speaker 1: in big super and retail funds. Okay. As we're nearly sixty,
Speaker 1: I'm considering how and when to restructure for pension. Okay.
Speaker 1: Oh makes a lot of sense so far. First, first question,
Speaker 1: from Shankar. Are we missing a trick by remaining in
Speaker 1: these retail funds and not commencing an SMF. Big question
Speaker 1: Bruce comes up all the time. People get to the
Speaker 1: retirement phase and then they say, will I start an SMSF.
Speaker 1: My instinct is, if you were that type, you would
Speaker 1: have done it years ago. What do you say? And
Speaker 1: this is not a by shake guards, this is for
Speaker 1: all the shake guards of the world.
Speaker 2: Yeah. Look, certainly, with the balances that you've pointed out there,
Speaker 2: which are north of two and a half mill for
Speaker 2: the two of you, there's a lot of reasons that
Speaker 2: you might start in SMSF. One of those might be
Speaker 2: around cost. Certainly, I think that once you get to
Speaker 2: about seven to fifty or a mill, smsfs can start
Speaker 2: to make sense. They can start to make sense before that.
Speaker 2: But from my perspective, and I'm advising clients that seven
Speaker 2: to fifty to a mill can be where they start
Speaker 2: to make sense from an overall cost perspective. Once you
Speaker 2: get to two and a half mill, almost inevitably it
Speaker 2: will make sense. It's not always about costs, though you can.
Speaker 2: A lot of retail funds will offer you the same
Speaker 2: opportunities that you can get for a similar cost. There's
Speaker 2: what's known as family fee aggregation. You might be at
Speaker 2: two different retail funds, but if you bought your funds
Speaker 2: to the same platform, the same fund provider linked them
Speaker 2: in the background. That doesn't mean putting the money together,
Speaker 2: but linking them in the background. Then what you'll often
Speaker 2: find is that they look at your the relationship with
Speaker 2: husband and wife. Forgure, Okay, we've got one point five
Speaker 2: mili here, one point one mill here. We don't have
Speaker 2: two separate relationships. We've got sort of one relationship that
Speaker 2: is worth two five two point six million, and the
Speaker 2: fees come down accordingly as if you had one account
Speaker 2: that was doing that roughly. That's one sort of potential
Speaker 2: opportunity you've said you're in retail funds at the moment,
Speaker 2: that would allow you the ability to buy the shares,
Speaker 2: the ETFs, and various other things that you wanted to
Speaker 2: if you want to take direct control. The biggest thing
Speaker 2: about self many service funds is control, and that's the
Speaker 2: reason that most people start them. It might be some
Speaker 2: might be looking at expenses, but it's about control. Do
Speaker 2: you want to control the investments or do you want
Speaker 2: to work with an advisor to help you control the investments.
Speaker 2: By doing that, I mean buying direct share. A lot
Speaker 2: of people start their s misss because they want to
Speaker 2: choose to buy the hp O areal or to exclude
Speaker 2: certain things, and they've got certain interests investment interests that
Speaker 2: they want to follow and think that they can do
Speaker 2: it just as well as the fund managers. Some will
Speaker 2: be able to do someone, but there are a lot
Speaker 2: of different options there. Start considering doing it at this
Speaker 2: stage in life when the guy to turn on a
Speaker 2: pension isn't necessarily about idea James, I don't think that
Speaker 2: that's a bad idea to.
Speaker 1: Play Devil's advocate on it. Blue, So I would say,
Speaker 1: what about the fact that this looks like it would
Speaker 1: seem I don't know, but it would seem that I
Speaker 1: see no complaints about their retail super funds and they
Speaker 1: have pretty healthy superbalances, and so it would be worth
Speaker 1: asking could you really do better? And how much more
Speaker 1: work would it involve? And at are you sufficiently equipped
Speaker 1: and energetic if you like to take on the substantial
Speaker 1: not just the logistics and paperwork of doing an SMSF,
Speaker 1: but the actual stress of being in charge of your
Speaker 1: own retirement when it has become exceptionally important to you.
Speaker 1: It's more important to you now than it was two
Speaker 1: years ago. That's just too just to play Devil's advocate there.
Speaker 1: Second part of Shankar's question is more or less the
Speaker 1: same as the first. Would we move? Would will be
Speaker 1: better off moving to pension products in our existing providers.
Speaker 1: That's the playoff between that and SMSFS For you to decide, Shankar.
Speaker 1: I hope that's useful to you. Okay, I think you
Speaker 1: read the next one.
Speaker 2: So from Robert purchased a property prior to auction earlier
Speaker 2: this year and received unconditional loan approval from the bank.
Speaker 2: Settlement was due at the end of August. His bank
Speaker 2: acquoted him and illustrate in June, but when he received
Speaker 2: the mortgage documents, the bank had increased the quoted rate
Speaker 2: by zero point two seven percents with us informing him,
Speaker 2: and obviously there'd been no RBA rate increases during that period.
Speaker 2: When he questioned the change, was informed that they had
Speaker 2: withdrawn the special introductory offer at the end of July,
Speaker 2: after he purchased the property, but before he'd been given
Speaker 2: unconditional approval. It's now only a couple of weeks to settlements,
Speaker 2: and the idea of sourcing a line without delaying settlements
Speaker 2: could be difficult. Robert feels badly mistreated by the bank.
Speaker 2: They used a great offer to lure him in and
Speaker 2: then pulled the loan prior to him signing the documents
Speaker 2: and whatever.
Speaker 1: So is such a good question. I don't know about you, Bruce.
Speaker 1: Have you come across this. The first home I ever bought,
Speaker 1: I also fixed, so it was very important what the
Speaker 1: deal was. And I remember I fixed for five years.
Speaker 1: And when we sat down opposite the guy in nab
Speaker 1: and it's I noticed Robert hasn't. By the way, folks,
Speaker 1: you can mention went to these institutions anytime you wish,
Speaker 1: and we'll make a decision whether it's fair to mention
Speaker 1: them in turn. But in any event, or when we
Speaker 1: got into sit down with my wife and when we
Speaker 1: got into to sign the documents, the banker was talking
Speaker 1: a nauseam about all sorts of things and then just
Speaker 1: mentioned the raid and I just noticed it was a
Speaker 1: half percent ire. Then we'd agreed all the way along,
Speaker 1: and we were at the last moment and I just
Speaker 1: said hang on second, blah blah blah, and he backtracked
Speaker 1: and said, yeah, And I don't know how much that
Speaker 1: meant to us over the years, but it was a lot.
Speaker 1: So my point is that the whole first thing I
Speaker 1: would suggest to anyone in that situation is to kick
Speaker 1: back hard on the bank and see how they respond.
Speaker 1: Their not inflexible, and you have worked on a deal
Speaker 1: on the assumption of a reach which you all agree on,
Speaker 1: and they're changing it. It doesn't matter what the explanation is,
Speaker 1: they're changing it. What do you think, Bruce, That's what
Speaker 1: I think. What do you think? As an advisor on
Speaker 1: the ground?
Speaker 2: Mortgage broker had on you need to settle. Basically, now
Speaker 2: you settle with a bit of a sour taste in
Speaker 2: your mouth. It probably is too late. We're getting pretty diffal.
Speaker 2: We don't know if about the circumstances you incomes all
Speaker 2: that sort of stuff. To see whether you do actually
Speaker 2: have time to go to another lender, I would probably
Speaker 2: suggest settling, pushing back on a bit and saying hang
Speaker 2: on a second, But it sounds like you've probably given
Speaker 2: them a try. Push back on a bit. But the
Speaker 2: most important thing is settling, getting the property in your name.
Speaker 2: Once you've done that, you don't owe any loyalty to
Speaker 2: this bank. I would be it doesn't sound like you've
Speaker 2: gone through a broker. I would probably suggest going to
Speaker 2: see a broker straight afterwards or even now and say
Speaker 2: this has happened, particularly if you've gone direct to a bank,
Speaker 2: I don't see a broker and explain to them what's happened,
Speaker 2: and see whether the rates, whether there are more competitive
Speaker 2: rates out there. If you did go through a broker,
Speaker 2: then get your broker to push back on the bank.
Speaker 2: It might not have an impact. They do have to
Speaker 2: cut off special rates at various periods of time. That's
Speaker 2: what they do. The energy is to try to get
Speaker 2: people in the door. I would probably suggest settling, getting
Speaker 2: the place, and then looking to move on or to
Speaker 2: bash the bank. Go back and tell the bank that
Speaker 2: you want to that you're not happy with it, and
Speaker 2: you're going to leave. They've done a lot of work.
Speaker 2: They're not making any money really out of this. In
Speaker 2: the short term. Banks make money the longer you hang
Speaker 2: around with them, and you might find in that situation
Speaker 2: that if you go and push back or threaten to leave,
Speaker 2: once the loan is settled, and say that you're unhappy
Speaker 2: that something might happen, and if it doesn't, take it,
Speaker 2: take it to the market, go and see broker.
Speaker 1: Thank you for that answer. It's so good and really
Speaker 1: reflected your own skills, Bruce and experience. I didn't even
Speaker 1: know and even into my mind that you could after
Speaker 1: settlement take a second look, because in my mind that
Speaker 1: was it. That was the end.
Speaker 2: I think in your cast, James, you were talking about
Speaker 2: a fixed right, and we don't now whether Roberts talking
Speaker 2: about a fixed right here or not. If he's talking
Speaker 2: about a fix right, then yes, then that's not going
Speaker 2: to necessarily be possible. If it's a variable right, yep,
Speaker 2: he doesn't have to hang around. There might be some phase.
Speaker 2: You got to figure out whether the phase to get out,
Speaker 2: which are not as big as I used to be,
Speaker 2: but the pace to get out are worthwhile to get
Speaker 2: the new rights at a new bank or something like that,
Speaker 2: but fixed right to be the variable maybe less, sir.
Speaker 1: Okay, so and also mortgage broker on that occasion, I
Speaker 1: think sounds like to be absolutely essential for anyone in
Speaker 1: that position. Very interesting, Okay, we'll take short break back
Speaker 1: in a moment. Hello, Welcome back to The Australian's Money
Speaker 1: Puzzle podcast. I'm James Kirby, Well editor at The Australian
Speaker 1: talking to Bruce Bramble, financial advisor, author, media figure and
Speaker 1: regular on the show. Now it's a question from Neil.
Speaker 1: I heard Danielle Ekoye on the show a few weeks
Speaker 1: ago mention she never borrows to invest, but what about
Speaker 1: the property market? My question is, if leverage is a
Speaker 1: good idea, then why do more investors not borrow to
Speaker 1: invest in the share market as opposed to the property market?
Speaker 1: And he mentions one of the he mentions the NAB
Speaker 1: equity builder, which is often mentioned here and there for
Speaker 1: people who are leveradging, looking for what you might call
Speaker 1: a structured product, an arrangement to go into the share
Speaker 1: market and borrow. Now, that was unusual. I was surprised
Speaker 1: that Danielle said that, but because she's in the market's
Speaker 1: a long time and a very skilled operator herself. But
Speaker 1: that's her view. Most people identify property and leverage property
Speaker 1: through negative gearing because there are specific tax advantages. Those
Speaker 1: tax advantages are also available to you if you buy shares.
Speaker 1: So Neil just to enhance the question a bit. Why
Speaker 1: don't people borrow more often to buy investments outside property
Speaker 1: when they can negatively gear just like the negatively gear property.
Speaker 1: What do you think, Bruce, Why is it because the
Speaker 1: trauma of watching share prices bounce around every day?
Speaker 2: It is partly about volatility. Shares are just simply far
Speaker 2: more volatile than property. I love both, as as said classes,
Speaker 2: and we've got clients with both obviously, but borrowing to
Speaker 2: invest in the share market is less popular because of
Speaker 2: things like if you're using a margin loan, because of
Speaker 2: marginal calls. When markets tend to fall quite heavily and
Speaker 2: there's a margin call, that can be a problem borrowing
Speaker 2: to buy. The other way borrowing for share investment is
Speaker 2: potentially without margin calls, is to borrow against another asset,
Speaker 2: generally a property. So you might want to invest tax
Speaker 2: effectively into a share portfolio, divis or a share portfolio.
Speaker 2: I've got equity in my home, I'm going to borrow
Speaker 2: get a two hundred thousand dollars facility against my home.
Speaker 2: So go it against my home to invest in two
Speaker 2: hundred thousand dollars worth of shares. You'll get a home
Speaker 2: run home loan rate on those on there, which can
Speaker 2: be one way of doing it. And you're investing in
Speaker 2: shares which will be returning dividends and distributions, and there'll
Speaker 2: be some negative most likely when you start, some negative
Speaker 2: gearing around that, so you can and do have that ability.
Speaker 2: The chairs are just more volatile. The thing about property
Speaker 2: is when you're borrowing for property, is the normally leaning
Speaker 2: against the asset itself, and depending on which way you
Speaker 2: do it, ninety percent against the property, and then you
Speaker 2: need to either put up the remainder of the money
Speaker 2: or borrow the remainder of the money the extra twenty
Speaker 2: percent pusly stamp duties and put that against another property.
Speaker 2: But I think the reason that most people it's less
Speaker 2: less well taken up is largely because of the volatility
Speaker 2: element of it.
Speaker 1: Yes, and you're alluding there to the fact that the
Speaker 1: banks or lenders with property. If you say you've got
Speaker 1: a million dollar house, it's worth a million dollars, they'll
Speaker 1: take it as a million dollars. If you say you've
Speaker 1: got a million dollar shareport for you, they don't take
Speaker 1: it as a million do that. They ratchet it way
Speaker 1: back and they say we'll only assume that's worth They
Speaker 1: mark that down a fair bit for collateral purposes.
Speaker 2: From a leanning, they tend to take it at face value.
Speaker 2: They might discount a little bit. They certainly do discount
Speaker 2: the income that comes from it when they're looking for loan.
Speaker 2: So if you've got a million dollar portfolio yielding four
Speaker 2: percent plus of franking credits, then they'll take twenty percent
Speaker 2: as a general rule, I think off that discount the
Speaker 2: income strain because dividends can be cut. But gfc's or co.
Speaker 1: But don't they assume that rents, that the rentalss can
Speaker 1: be vacuant.
Speaker 2: Yes, they do, but they assume that there's a percent
Speaker 2: rental vacancy on any given property. They yeah, two percent,
Speaker 2: as in two a couple of weeks a year or something.
Speaker 2: So they'll if you tell them that's worth five hundred
Speaker 2: bucks a week, they automatically discounted by probably about a
Speaker 2: similar sort of percentage of twenty percent. But that's the
Speaker 2: cover vacancy rates, insurances, the other costs of holding a
Speaker 2: property as well.
Speaker 1: Okay, Yes, and as you said, the risk of a
Speaker 1: vacant property just now is more or less zilch. Okay. Finally,
Speaker 1: question from Ben if you would read.
Speaker 2: That one, I'll read this one. But I think this
Speaker 2: is definitely quick for you, James. So from being how
Speaker 2: come you're expanding the Top Advisor's list to one fifty, well,
Speaker 2: not just expand it to fifteen thousand cover all advisors.
Speaker 2: Maybe an idea is to do like wines and categorize
Speaker 2: them best for small accounts, best for retire is best
Speaker 2: for big families.
Speaker 1: Yes, thank you, Ben. The Top Advisors disc goes from
Speaker 1: one hundred two hundred and fifty this year on its
Speaker 1: seventh year. Ben, we're not exactly rushing. It started with
Speaker 1: fifty and two seventeen and then we opened it up
Speaker 1: to one hundred a couple of years ago, being very
Speaker 1: careful opening it up at at one hundred and fifty
Speaker 1: out of fifteen thousand. That's not exactly. It's a balance
Speaker 1: between offering something that's really useful and it's not so
Speaker 1: tiny that it's not useful. Because nobody can get into
Speaker 1: these people. As to how big the list will get,
Speaker 1: I couldn't tell you. And as I like your idea
Speaker 1: of course, and by the way, so does Barons. And
Speaker 1: in the US they have sufficient data and scale that
Speaker 1: they do slice, and I said, like that, they have
Speaker 1: the best male and the best female and the best
Speaker 1: family advisors, and they have it stayed by state and
Speaker 1: it's all quite marvelous. But they're doing it for twenty
Speaker 1: five years there and they have an enormous population, of course,
Speaker 1: but we are steadily and conservatively moving along on that one.
Speaker 1: So that's the explanation Ben, which I hope is good
Speaker 1: enough for you. All right, Hey, thank you very much, Bruce.
Speaker 1: Great to have you on today.
Speaker 2: Absolute pleasure. Thanks for having me on Jobs.
Speaker 1: Always great to have Bruce Brammel, Bruce Brammel Financial Advice
Speaker 1: on the show. Thank you everybody for listening. Do mention
Speaker 1: us to someone, one person you know, be lovely to
Speaker 1: spread the word about the show and keep the emails
Speaker 1: coming in the money puzzle at the Australian dot com
Speaker 1: dot au. Talk to you soon,