1 00:00:10,000 --> 00:00:12,880 Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. 2 00:00:12,920 --> 00:00:15,120 Speaker 2: I'm James Kirby. Welcome aboard everybody. 3 00:00:15,600 --> 00:00:18,560 Speaker 1: I don't think there's any segment actually of the residential 4 00:00:18,600 --> 00:00:22,639 Speaker 1: property market that has less attention and is quite as 5 00:00:22,680 --> 00:00:27,520 Speaker 1: significant as the concept of rent investing. You know, it's 6 00:00:27,560 --> 00:00:31,639 Speaker 1: a major social trend for aspiring home buyers. They don't 7 00:00:31,640 --> 00:00:34,240 Speaker 1: buy the home. They don't buy a home the first 8 00:00:34,280 --> 00:00:37,040 Speaker 1: time they buy. What they do is they purchase an 9 00:00:37,080 --> 00:00:40,599 Speaker 1: investment property. They get the tax deductions related to that, 10 00:00:40,680 --> 00:00:42,599 Speaker 1: and then they build up equity and it allows them 11 00:00:42,680 --> 00:00:46,480 Speaker 1: basically to lead frog into the house that the house 12 00:00:46,520 --> 00:00:48,639 Speaker 1: of their dreams, there forever home, as they call it. 13 00:00:49,320 --> 00:00:51,240 Speaker 1: I want to talk about this and I have someone 14 00:00:51,240 --> 00:00:55,960 Speaker 1: who's ideal for it. It's our June Paliwal of the 15 00:00:56,320 --> 00:00:59,120 Speaker 1: Investigate Group, which is a buyer's advocate group. First time 16 00:00:59,160 --> 00:01:01,200 Speaker 1: on the show, but I know I've been listening to 17 00:01:01,240 --> 00:01:02,920 Speaker 1: you on this issue. You're very good on it, so 18 00:01:02,960 --> 00:01:05,200 Speaker 1: I was I thought would be ideal way to bring 19 00:01:05,200 --> 00:01:05,440 Speaker 1: you in. 20 00:01:05,480 --> 00:01:06,000 Speaker 2: How I are. 21 00:01:06,040 --> 00:01:08,800 Speaker 3: June, Yes, great, my friend, and definitely a hot topic 22 00:01:08,840 --> 00:01:10,279 Speaker 3: at the moment the world of rent festing. 23 00:01:10,480 --> 00:01:13,280 Speaker 1: It is a hard topic and you know more than that. 24 00:01:13,400 --> 00:01:15,400 Speaker 1: I mean, there's always been sort of anecdotal. One of 25 00:01:15,440 --> 00:01:17,240 Speaker 1: the frustrating things I think is that there's a lot 26 00:01:17,240 --> 00:01:20,160 Speaker 1: of anecdotal commentary about it. It's like the bank of 27 00:01:20,200 --> 00:01:22,000 Speaker 1: Mom and Dad. You know, everyone talks about it, but 28 00:01:22,040 --> 00:01:24,560 Speaker 1: it's very hard to get stats on it. But I 29 00:01:24,760 --> 00:01:27,039 Speaker 1: was listening recently to one of the bank results, the 30 00:01:27,080 --> 00:01:30,560 Speaker 1: Bendico Bank results, and the CEO there, in releasing the 31 00:01:30,560 --> 00:01:34,720 Speaker 1: results actually, you know, made clear reference to Richard Fennell. 32 00:01:34,880 --> 00:01:36,200 Speaker 2: He made clear reference to. 33 00:01:38,040 --> 00:01:40,880 Speaker 1: Their observation as a bank of the number of people, 34 00:01:40,959 --> 00:01:45,600 Speaker 1: younger people now doing this rent vesting the rent basically 35 00:01:45,920 --> 00:01:50,120 Speaker 1: and own an investment property. And I think, intriguingly, there's 36 00:01:50,160 --> 00:01:52,720 Speaker 1: also a speculation in the market that the banks, more 37 00:01:52,760 --> 00:01:55,240 Speaker 1: than one are working on a product that will be 38 00:01:55,320 --> 00:01:58,440 Speaker 1: like basically aimed at this area rent vesting mortgages, and 39 00:01:58,440 --> 00:02:00,440 Speaker 1: that will really I think, move it up along the 40 00:02:00,440 --> 00:02:02,960 Speaker 1: line whatever they come up with. But you've really had 41 00:02:02,960 --> 00:02:06,280 Speaker 1: a look at it, and you, I mean broadly, you 42 00:02:06,320 --> 00:02:07,880 Speaker 1: think it's pretty good for the right people in the 43 00:02:07,920 --> 00:02:09,760 Speaker 1: right place. Is that would that be a fair comment? 44 00:02:10,919 --> 00:02:14,000 Speaker 3: Absolutely, it can play a key part of people's journey 45 00:02:14,040 --> 00:02:16,919 Speaker 3: to building wells and even transitioning to their end of 46 00:02:17,000 --> 00:02:20,200 Speaker 3: goal of buying a home. I am a personal success 47 00:02:20,240 --> 00:02:22,440 Speaker 3: story of that. I now live in my dream home. 48 00:02:22,520 --> 00:02:25,560 Speaker 3: So you definitely here to say that you don't have 49 00:02:25,639 --> 00:02:28,400 Speaker 3: to be a rent vestor forever, but it can be 50 00:02:28,440 --> 00:02:31,200 Speaker 3: a transitional journey that's an absolute game changer. And I 51 00:02:31,200 --> 00:02:33,920 Speaker 3: want to take you through very quickly some of my 52 00:02:34,320 --> 00:02:39,000 Speaker 3: own journey in earlier parts of my career, jumping in 53 00:02:39,040 --> 00:02:43,160 Speaker 3: and around different suburbs to essentially be living from a 54 00:02:43,200 --> 00:02:46,160 Speaker 3: performance and lifestyle basis. And I'll give you some examples 55 00:02:46,200 --> 00:02:49,800 Speaker 3: of performance performance being one of my properties that I 56 00:02:49,840 --> 00:02:51,880 Speaker 3: was renting at in the suburb of Bella Vista and 57 00:02:51,919 --> 00:02:55,200 Speaker 3: Sydney was about a thirty second walk from my office 58 00:02:55,280 --> 00:02:58,800 Speaker 3: in Bellavista and Sydney, So it was a growing phase 59 00:02:58,840 --> 00:03:01,640 Speaker 3: of career business things like that, So it allowed me 60 00:03:01,720 --> 00:03:05,600 Speaker 3: to have proximity time there and those extra hours. If 61 00:03:05,639 --> 00:03:07,400 Speaker 3: you do the math over a fifty weeks a year 62 00:03:07,520 --> 00:03:09,960 Speaker 3: or fifty two weeks, takeaways the man you leave. But 63 00:03:10,120 --> 00:03:12,320 Speaker 3: the key is that math of a few extra hours 64 00:03:12,320 --> 00:03:16,640 Speaker 3: per day around your different audience rather than traveling and 65 00:03:16,680 --> 00:03:18,600 Speaker 3: coming home, you're at the office and you're in and 66 00:03:18,600 --> 00:03:22,280 Speaker 3: around places of people you have greater performance. 67 00:03:22,680 --> 00:03:26,639 Speaker 1: It gives you that efficiency, both financial efficiency and living efficiency. 68 00:03:26,720 --> 00:03:27,679 Speaker 3: Yeah. Absolutely. 69 00:03:27,960 --> 00:03:31,480 Speaker 1: Now tell me you were talking particularly about the nature 70 00:03:31,600 --> 00:03:34,519 Speaker 1: of revesting that most of our listeners obviously would be 71 00:03:34,560 --> 00:03:36,760 Speaker 1: familiar with the broad term, and I'm sure it's worked 72 00:03:36,760 --> 00:03:38,840 Speaker 1: well for you, that's why you're on the show. But 73 00:03:39,360 --> 00:03:42,520 Speaker 1: you've made a particular observation that about reinvesting. You might 74 00:03:42,560 --> 00:03:44,840 Speaker 1: explain this to our listeners who wouldn't have heard it before, 75 00:03:45,320 --> 00:03:48,080 Speaker 1: the way it works with the yields being so low 76 00:03:49,160 --> 00:03:51,840 Speaker 1: in big cities, the yels are two or three percent. 77 00:03:51,960 --> 00:03:54,400 Speaker 1: Out in the bush, there are six seven eight percent 78 00:03:54,440 --> 00:03:58,000 Speaker 1: in country towns. But would you explain to our listeners 79 00:03:58,000 --> 00:04:01,880 Speaker 1: how it made your concept about where it makes more 80 00:04:01,960 --> 00:04:03,240 Speaker 1: sense to do this. 81 00:04:04,760 --> 00:04:06,800 Speaker 3: For sure, let's do the math on it. So before 82 00:04:06,840 --> 00:04:09,640 Speaker 3: I talked about performance space for investing, of where proximity 83 00:04:09,640 --> 00:04:13,160 Speaker 3: gives you performance in your home, your lifestyle, your business, 84 00:04:13,200 --> 00:04:16,800 Speaker 3: your career. Now if you move that over to financial 85 00:04:17,400 --> 00:04:21,600 Speaker 3: analysis of renvesting, let's take a three million dollar home 86 00:04:21,640 --> 00:04:23,120 Speaker 3: and you might go, why is are you using a 87 00:04:23,120 --> 00:04:25,960 Speaker 3: three million dollar home? It's intentional for a very specific reason. 88 00:04:26,440 --> 00:04:29,920 Speaker 3: If someone was to have a eighty percent loan against 89 00:04:29,960 --> 00:04:31,960 Speaker 3: that or even a ninety percent if someone wants to 90 00:04:31,960 --> 00:04:34,920 Speaker 3: get there with lower deposits and an eighty percent loan 91 00:04:35,000 --> 00:04:37,920 Speaker 3: is two point four million, and at today's interest rates 92 00:04:37,920 --> 00:04:40,400 Speaker 3: of say five and a half percent, that's one hundred 93 00:04:40,440 --> 00:04:43,640 Speaker 3: and thirty two thousand of interest. We're not talking principle 94 00:04:43,680 --> 00:04:46,120 Speaker 3: where everyone talking about buying your place is pushing the 95 00:04:46,160 --> 00:04:49,320 Speaker 3: loan down. We're just talking about the interest itself. Now, 96 00:04:49,360 --> 00:04:51,360 Speaker 3: with that one hundred and thirty two thousand of interest, 97 00:04:51,400 --> 00:04:53,440 Speaker 3: if you divide that by fifty two, that's two thousand, 98 00:04:53,680 --> 00:04:57,080 Speaker 3: five hundred and thirty eight dollars a week. However, a 99 00:04:57,160 --> 00:05:01,680 Speaker 3: three million dollar property does not cost you two and 100 00:05:01,720 --> 00:05:05,560 Speaker 3: a half thousand dollars per week to rent. Usually, rental yields, 101 00:05:05,640 --> 00:05:08,000 Speaker 3: like in some suburbs of Sydney, can be as low 102 00:05:08,120 --> 00:05:10,240 Speaker 3: as two to three percent or even one point seven 103 00:05:10,279 --> 00:05:12,159 Speaker 3: to two and a half percent. So if we took 104 00:05:12,160 --> 00:05:14,719 Speaker 3: a two point two percent rental yield and divided that 105 00:05:14,760 --> 00:05:18,440 Speaker 3: by fifty two, that's about twelve hundred and seventy dollars 106 00:05:18,440 --> 00:05:20,840 Speaker 3: a week in rent versus you know, more than two 107 00:05:20,839 --> 00:05:22,719 Speaker 3: and a half thousand an interest alone, and you're not 108 00:05:22,760 --> 00:05:25,000 Speaker 3: talking council rates and other things I see. 109 00:05:25,040 --> 00:05:29,640 Speaker 1: So is the concept basically that the Australian property has 110 00:05:29,640 --> 00:05:33,800 Speaker 1: become so expensive in the metropolitan areas that the rental 111 00:05:33,880 --> 00:05:38,400 Speaker 1: yields are so low that there's actually an opportunity for 112 00:05:38,600 --> 00:05:44,480 Speaker 1: the agile investor property investor to exploit this. But because 113 00:05:44,839 --> 00:05:49,040 Speaker 1: the yields are so poor for those very expensive subverbs 114 00:05:49,680 --> 00:05:52,000 Speaker 1: that if you want to the way to play it 115 00:05:52,000 --> 00:05:54,760 Speaker 1: is or to optimize that are exploited, is actually to 116 00:05:54,880 --> 00:05:56,960 Speaker 1: rent in it because you're actually getting a better deal 117 00:05:57,000 --> 00:05:58,760 Speaker 1: because rents have never kept pace with prices. 118 00:05:58,839 --> 00:06:00,400 Speaker 2: Is that the underlying. 119 00:06:00,279 --> 00:06:04,560 Speaker 3: Logic, absolutely the underlying logic. And so the thing here 120 00:06:04,640 --> 00:06:08,120 Speaker 3: is that the more premium the suburb is, the greater 121 00:06:08,320 --> 00:06:12,600 Speaker 3: the disparity between rental yield and actual interest on a 122 00:06:12,640 --> 00:06:16,000 Speaker 3: mortgage if you're owning. So if you're going to live 123 00:06:16,200 --> 00:06:19,840 Speaker 3: in a regional part of Australia in the most affordable 124 00:06:19,880 --> 00:06:23,120 Speaker 3: suburb in a unit, it's likely that the rat was 125 00:06:23,200 --> 00:06:26,200 Speaker 3: yields high, so rate vesting might not be for you 126 00:06:26,279 --> 00:06:28,600 Speaker 3: if you plan to live in that location for some time. 127 00:06:29,120 --> 00:06:30,920 Speaker 1: So that's the flip side of what we're saying. Right, 128 00:06:31,120 --> 00:06:33,640 Speaker 1: there's the logical flip side of what we're saying. Absolutely, 129 00:06:33,880 --> 00:06:36,479 Speaker 1: then in areas where the property prices are not so 130 00:06:36,600 --> 00:06:40,480 Speaker 1: relatively high, the deal on rent isn't as good. And 131 00:06:40,520 --> 00:06:42,679 Speaker 1: we know that because the rents are six seven percent 132 00:06:42,760 --> 00:06:44,320 Speaker 1: or whatever, while in the middle of the city is 133 00:06:44,320 --> 00:06:46,760 Speaker 1: there are two and three percent. It's a really good theory, 134 00:06:46,839 --> 00:06:49,599 Speaker 1: not just theory. It's a really good I am sure 135 00:06:49,640 --> 00:06:53,280 Speaker 1: for many people. It has a lot of pluses. Now 136 00:06:53,600 --> 00:06:55,480 Speaker 1: let's go a little bit deeper. If the person is 137 00:06:55,560 --> 00:06:59,240 Speaker 1: deciding to do this rent vest and they say, Okay, 138 00:06:59,279 --> 00:07:03,039 Speaker 1: we know how we're we're going to buy a good 139 00:07:03,080 --> 00:07:05,800 Speaker 1: investment property in their city, it's going to we know 140 00:07:05,920 --> 00:07:08,480 Speaker 1: this suburb is on the rise. We don't actually want 141 00:07:08,480 --> 00:07:10,320 Speaker 1: to live in that soburb. We want to live this 142 00:07:10,400 --> 00:07:13,360 Speaker 1: other suburb which is more expensive and is also close 143 00:07:13,400 --> 00:07:15,160 Speaker 1: to where we work, and we can cycle over something 144 00:07:15,200 --> 00:07:17,880 Speaker 1: like that. Okay, that all makes sense, but let's just 145 00:07:18,000 --> 00:07:20,520 Speaker 1: have a look at it more closely. Now, should the 146 00:07:21,000 --> 00:07:25,200 Speaker 1: renvestor then should they do interest only? It would seem 147 00:07:25,240 --> 00:07:28,240 Speaker 1: to me that that's probably on the table here. 148 00:07:28,600 --> 00:07:31,840 Speaker 3: Absolutely, So, I think firstly, each financial position would be 149 00:07:31,840 --> 00:07:34,160 Speaker 3: different betweening on the goals that they're after and seeking 150 00:07:34,160 --> 00:07:37,320 Speaker 3: their own advice and guidance. But when you look at 151 00:07:37,320 --> 00:07:40,000 Speaker 3: investment debt and the renvestor is now renting in that 152 00:07:40,080 --> 00:07:44,800 Speaker 3: great premium location for performance, lifestyle and financially, the next 153 00:07:44,840 --> 00:07:46,600 Speaker 3: thing is what they do with their money. Because they 154 00:07:46,680 --> 00:07:48,360 Speaker 3: still have capital that isn't tied. 155 00:07:48,200 --> 00:07:50,840 Speaker 1: Up, they must invest to make it work. I am 156 00:07:50,840 --> 00:07:53,400 Speaker 1: acting our joy. Absolutely, they can't go and spend it 157 00:07:53,440 --> 00:07:55,680 Speaker 1: on a boat. That blows your theory pretty quickly. 158 00:07:55,720 --> 00:07:59,880 Speaker 3: I imagine you're spot on right. Renting has its advantages, 159 00:08:00,160 --> 00:08:02,040 Speaker 3: but the money needs to go to work, right and 160 00:08:02,160 --> 00:08:04,800 Speaker 3: when you're going to work with that money. Yes, the 161 00:08:04,960 --> 00:08:09,440 Speaker 3: interest on those investment related debts can be deductible, and 162 00:08:09,480 --> 00:08:14,040 Speaker 3: so if they're deductible, then making sure you're not just 163 00:08:14,120 --> 00:08:17,800 Speaker 3: pushing down that repayment in those early Welsh building stages 164 00:08:18,280 --> 00:08:20,400 Speaker 3: is actually, you know, not in your favor. You want 165 00:08:20,400 --> 00:08:23,840 Speaker 3: to actually have the debt that's there and focus on 166 00:08:23,880 --> 00:08:27,160 Speaker 3: every bit of dollar towards acquiring more assets, whether there 167 00:08:27,240 --> 00:08:29,880 Speaker 3: be in other vehicles or property or so forth. You 168 00:08:29,880 --> 00:08:31,720 Speaker 3: don't want to go and focus on taking all your 169 00:08:31,720 --> 00:08:34,000 Speaker 3: cash flow just to pay down debts whilst you're in 170 00:08:34,040 --> 00:08:36,679 Speaker 3: what I call an acquisition phase. The Welsh building phase. 171 00:08:37,040 --> 00:08:40,160 Speaker 1: Right, Yes, okay, so there's two things then in its favor. 172 00:08:40,400 --> 00:08:41,080 Speaker 2: It seems to me. 173 00:08:41,200 --> 00:08:44,720 Speaker 1: One is a natural market issue, as you mentioned about 174 00:08:44,800 --> 00:08:53,080 Speaker 1: the basically for investing, the value is explicit in expensive 175 00:08:53,600 --> 00:08:57,160 Speaker 1: what we call relatively expensive parts of the market because 176 00:08:57,160 --> 00:08:58,960 Speaker 1: the user a little. The second part then is the 177 00:08:59,000 --> 00:09:06,319 Speaker 1: tax advantage. How dependent on tax advantages specifically negative gearing 178 00:09:06,800 --> 00:09:08,959 Speaker 1: is the whole rent vesting notion. 179 00:09:10,880 --> 00:09:13,560 Speaker 3: It plays a part. But even if there was no 180 00:09:13,679 --> 00:09:17,760 Speaker 3: tax advantages in favor from that negative gearing, there is 181 00:09:17,760 --> 00:09:21,840 Speaker 3: the wealth building advantage because the location that you're in 182 00:09:22,040 --> 00:09:24,400 Speaker 3: to live in from a lifestyle or maybe live in 183 00:09:24,440 --> 00:09:26,840 Speaker 3: what you can afford, because you can't live in that 184 00:09:26,920 --> 00:09:29,120 Speaker 3: premium location at all times. If you feel that that 185 00:09:29,240 --> 00:09:31,760 Speaker 3: cost is too high, ins why you're investing there. But 186 00:09:31,840 --> 00:09:34,360 Speaker 3: if you now went to another suburb and you decided 187 00:09:34,400 --> 00:09:36,360 Speaker 3: to pull all your money into buying a home to 188 00:09:36,400 --> 00:09:38,680 Speaker 3: live in, you've got to take a moment to question 189 00:09:39,040 --> 00:09:43,960 Speaker 3: tax advantages aside. Is there a location in Australia where 190 00:09:43,960 --> 00:09:47,280 Speaker 3: the data is better for me to actually invest in 191 00:09:47,600 --> 00:09:49,440 Speaker 3: than the place I'm going to sink money in, which 192 00:09:49,480 --> 00:09:53,240 Speaker 3: is the home And if that is better, you're now 193 00:09:53,280 --> 00:09:56,679 Speaker 3: actually onto something and renvesting can build your wealth faster 194 00:09:56,960 --> 00:10:00,400 Speaker 3: than the home you're in because that tax advantage does matter. 195 00:10:00,480 --> 00:10:03,319 Speaker 3: Now you already are going to actually focus on building 196 00:10:03,400 --> 00:10:06,280 Speaker 3: wealth with data, not just the tax advantage behind it. 197 00:10:06,880 --> 00:10:08,640 Speaker 1: Very good, and we're going to have a look at 198 00:10:08,679 --> 00:10:11,800 Speaker 1: that broad issue of the data you need in the 199 00:10:11,800 --> 00:10:14,600 Speaker 1: second segment of the show. But just to play Devil's 200 00:10:14,600 --> 00:10:18,360 Speaker 1: Advocate with you on manfesting, the criticism of it is 201 00:10:18,400 --> 00:10:22,079 Speaker 1: that sooner or later, right when you're renfesting, it sounds 202 00:10:22,080 --> 00:10:23,680 Speaker 1: like it's good at the start, but it seems to 203 00:10:23,720 --> 00:10:27,280 Speaker 1: me if a few years later, as time passes, your 204 00:10:27,320 --> 00:10:31,480 Speaker 1: rents rise and if you had a mortgage then you 205 00:10:31,520 --> 00:10:33,760 Speaker 1: would have been basically even inflation will be helping you 206 00:10:33,800 --> 00:10:36,800 Speaker 1: as you because you own the home, So does it 207 00:10:36,920 --> 00:10:39,520 Speaker 1: weaken as time goes by? That initial sort of sugar 208 00:10:39,600 --> 00:10:43,120 Speaker 1: hit you get from the renfesting idea. 209 00:10:44,320 --> 00:10:47,040 Speaker 3: It's a really good point to raise and the short 210 00:10:47,080 --> 00:10:50,240 Speaker 3: answers know with the right moves made. So I want 211 00:10:50,280 --> 00:10:52,840 Speaker 3: to give you a live example of the right moves, 212 00:10:53,440 --> 00:10:55,720 Speaker 3: but the numbers behind it. If I go through three 213 00:10:55,760 --> 00:10:59,680 Speaker 3: core reasons will help explain. The first core reason is 214 00:10:59,760 --> 00:11:02,880 Speaker 3: you usually when someone has a desire for a home 215 00:11:02,920 --> 00:11:05,000 Speaker 3: that they feel is better than what they can afford. 216 00:11:06,480 --> 00:11:11,280 Speaker 3: That particular part is what creates this satisfaction between, oh, look, 217 00:11:11,320 --> 00:11:14,840 Speaker 3: home is unaffordable. I can't go and achieve what I 218 00:11:14,840 --> 00:11:18,120 Speaker 3: want because it's not exactly what I desire versus the 219 00:11:18,160 --> 00:11:21,800 Speaker 3: position I'm in. And so with rent vesting, the step 220 00:11:21,840 --> 00:11:25,200 Speaker 3: one that you're doing is you're matching the desire to 221 00:11:25,280 --> 00:11:27,880 Speaker 3: the position that you're in. And it starts to have 222 00:11:27,960 --> 00:11:30,040 Speaker 3: a perfect match now because now you can have this 223 00:11:30,160 --> 00:11:33,080 Speaker 3: performance upsides, I can rent somewhere where I wanted to 224 00:11:33,080 --> 00:11:36,400 Speaker 3: live in. That first part is there for you. The 225 00:11:36,440 --> 00:11:39,240 Speaker 3: second part coming to now is your career and time. 226 00:11:40,040 --> 00:11:45,280 Speaker 3: As you map out income and age, it's close correlation 227 00:11:45,440 --> 00:11:48,320 Speaker 3: that is age and time and workforce and experience in 228 00:11:48,400 --> 00:11:53,040 Speaker 3: workforce builds income tends to as well. And so as 229 00:11:53,080 --> 00:11:56,120 Speaker 3: you're growing on the rent vesting journey and maybe you're 230 00:11:56,160 --> 00:11:58,560 Speaker 3: now getting the lifestyle upside that you didn't once have 231 00:11:58,679 --> 00:12:01,679 Speaker 3: and you're now investing in money, there is growth occurring, 232 00:12:01,760 --> 00:12:05,400 Speaker 3: not just financially in your actual investment, but there's growth 233 00:12:05,440 --> 00:12:08,960 Speaker 3: also occurring professionally. So now when you are returning to 234 00:12:09,400 --> 00:12:12,080 Speaker 3: the home buying goal, of the future. It's not the 235 00:12:12,120 --> 00:12:15,840 Speaker 3: same argent that was there at twenty five as he 236 00:12:15,920 --> 00:12:18,560 Speaker 3: is in thirty five and forty five, and so your 237 00:12:18,559 --> 00:12:22,000 Speaker 3: different capability allows you to now get closer match to 238 00:12:22,080 --> 00:12:24,560 Speaker 3: your preference and the home you want to live in. 239 00:12:25,240 --> 00:12:28,880 Speaker 3: The third part is rent vesting involves building wealth through 240 00:12:28,920 --> 00:12:32,800 Speaker 3: property across Australia with data, not by emotion or things 241 00:12:32,840 --> 00:12:33,720 Speaker 3: that feel comfortable. 242 00:12:34,080 --> 00:12:36,800 Speaker 1: I imagine since you're a buyer's agent that your notion of 243 00:12:37,000 --> 00:12:39,679 Speaker 1: the afteromen way to spend the money that becomes available 244 00:12:40,120 --> 00:12:42,600 Speaker 1: as a renvestor is to put it back into property. 245 00:12:42,960 --> 00:12:45,680 Speaker 1: You don't suggest to go outside property where we know 246 00:12:45,720 --> 00:12:48,120 Speaker 1: there's very good turns, for instance in the market of 247 00:12:48,160 --> 00:12:50,040 Speaker 1: double digits every year in recent times. 248 00:12:51,960 --> 00:12:54,600 Speaker 3: No, you can actually do that. Even then, that could 249 00:12:54,600 --> 00:12:57,920 Speaker 3: still work under the rent vesting umbrella because you have 250 00:12:58,280 --> 00:13:01,280 Speaker 3: cash that's there that wasn't there before because it would 251 00:13:01,280 --> 00:13:03,600 Speaker 3: have gone into your own mortgage. Now you have a 252 00:13:03,679 --> 00:13:06,640 Speaker 3: lifestyle upside of the performance upside, and you have the 253 00:13:06,679 --> 00:13:08,520 Speaker 3: free flowing cash flow if you wanted to put it 254 00:13:08,559 --> 00:13:11,280 Speaker 3: to indexes and other things, and you still live the 255 00:13:11,280 --> 00:13:14,160 Speaker 3: same lifestyle of that multimillion dollar home, but not the 256 00:13:14,240 --> 00:13:16,920 Speaker 3: multimillion dollar mortgage. You can do that. At the end 257 00:13:16,920 --> 00:13:18,840 Speaker 3: of the day, rent vesting is your choice of where 258 00:13:18,880 --> 00:13:21,160 Speaker 3: you invest the money. But the main thing here is 259 00:13:21,200 --> 00:13:24,319 Speaker 3: this third part is as home prices have gone up, 260 00:13:24,640 --> 00:13:28,240 Speaker 3: rents have increased because you were a performance driven not 261 00:13:28,440 --> 00:13:30,040 Speaker 3: I'm going to get the best home I can in 262 00:13:30,080 --> 00:13:32,200 Speaker 3: my twenties or thirties for the income I have today. 263 00:13:32,720 --> 00:13:35,880 Speaker 3: You're able to have an outperformance and that outperformance will 264 00:13:35,880 --> 00:13:38,200 Speaker 3: come back and help you. And an example I can 265 00:13:38,240 --> 00:13:40,040 Speaker 3: think of with that is a couple i'd met by 266 00:13:40,080 --> 00:13:42,720 Speaker 3: the name of Danny and Ron. They were in banking 267 00:13:42,760 --> 00:13:45,760 Speaker 3: as she's an executive in the Big Four and if 268 00:13:45,800 --> 00:13:48,559 Speaker 3: you'd wind the clock back to twenty twenty, her budget 269 00:13:48,559 --> 00:13:50,480 Speaker 3: would have allowed her a unit to live in the 270 00:13:50,480 --> 00:13:53,559 Speaker 3: inner West of Sydney. Now that budget itself, whilst it 271 00:13:53,559 --> 00:13:55,840 Speaker 3: would have gotten her unit, that wasn't her ideal home 272 00:13:55,880 --> 00:13:58,000 Speaker 3: that she wanted. That it wasn't the ideal location that 273 00:13:58,040 --> 00:14:01,280 Speaker 3: she wanted, so she could have parked them in that way. Instead, 274 00:14:01,559 --> 00:14:03,839 Speaker 3: we purchased a property in Brisbane for five hundred and 275 00:14:03,880 --> 00:14:06,120 Speaker 3: sixty thousand, which has doubled in value in the five 276 00:14:06,200 --> 00:14:08,960 Speaker 3: years later. And then she'd use the equity to go 277 00:14:09,040 --> 00:14:11,760 Speaker 3: to three other locations. Now built over one point one 278 00:14:11,800 --> 00:14:14,400 Speaker 3: million dollars in equity across three point five million dollars 279 00:14:14,440 --> 00:14:18,000 Speaker 3: worth of assets in four different properties. So all of 280 00:14:18,040 --> 00:14:19,680 Speaker 3: this wealth building allows you to do that. 281 00:14:20,480 --> 00:14:21,000 Speaker 2: Interesting. 282 00:14:21,040 --> 00:14:24,880 Speaker 1: Now what we must do is let our listeners hear 283 00:14:25,000 --> 00:14:28,560 Speaker 1: what Arjen has to say about using data to optimize 284 00:14:28,600 --> 00:14:39,680 Speaker 1: the notion of rent investing back in a moment. Hello, 285 00:14:39,840 --> 00:14:43,600 Speaker 1: Welcome back to The Australian's Money Puzzle podcast. Today's guest 286 00:14:43,680 --> 00:14:46,800 Speaker 1: is Arju and Padival, who is head of Investor Kit, 287 00:14:46,960 --> 00:14:50,560 Speaker 1: which is a buyer's advocate agency. He operates out of Sydney, 288 00:14:50,560 --> 00:14:54,880 Speaker 1: but it's a nationwide operation and I'm going to resist 289 00:14:54,920 --> 00:14:58,240 Speaker 1: asking you which is your favorite. I certainly wouldn't spend 290 00:14:58,240 --> 00:15:00,720 Speaker 1: a whole segment on it, but just quick before we 291 00:15:00,760 --> 00:15:03,160 Speaker 1: go into the issue of data. Everyone i'm on the 292 00:15:03,160 --> 00:15:05,440 Speaker 1: show in recent weeks has been asked one single question, 293 00:15:05,720 --> 00:15:08,320 Speaker 1: what city is the best value in the country at 294 00:15:08,320 --> 00:15:10,200 Speaker 1: the moment and the answer is. 295 00:15:10,840 --> 00:15:12,800 Speaker 3: I would say the answer is Melbourne. 296 00:15:14,480 --> 00:15:14,920 Speaker 2: Very good. 297 00:15:16,440 --> 00:15:20,000 Speaker 1: And you are now adding to the majority week by week. Yeah, 298 00:15:20,080 --> 00:15:24,320 Speaker 1: that's interesting. We're building a consensus here now about data 299 00:15:24,360 --> 00:15:26,120 Speaker 1: and collection of data the point I think in the 300 00:15:26,120 --> 00:15:28,120 Speaker 1: first part of the show, which was really interesting folks 301 00:15:28,200 --> 00:15:30,520 Speaker 1: with Arjun, was this notion of the perfect match in 302 00:15:30,560 --> 00:15:33,120 Speaker 1: the property. And if I've got it right, I mean, 303 00:15:33,160 --> 00:15:37,120 Speaker 1: I think what he's driving at is it's not just 304 00:15:37,160 --> 00:15:39,280 Speaker 1: the notion of re investing, and it's not just the 305 00:15:39,320 --> 00:15:42,520 Speaker 1: notion that you rent and you buy an investment property, 306 00:15:42,560 --> 00:15:46,800 Speaker 1: but because you're buying the property on strictly investment criteria, 307 00:15:48,160 --> 00:15:51,320 Speaker 1: you optimize your possibility of making the very best investment. 308 00:15:51,800 --> 00:15:53,720 Speaker 1: So a lot of it comes down to what and 309 00:15:53,760 --> 00:15:55,520 Speaker 1: where will I buy, which is nothing to do with 310 00:15:55,560 --> 00:15:57,760 Speaker 1: where I want to live? Is not it basically arguent? 311 00:15:57,840 --> 00:16:00,240 Speaker 1: So how do you approach that? And what data? You've 312 00:16:00,240 --> 00:16:02,800 Speaker 1: mentioned data a few times, what do you mean and 313 00:16:02,840 --> 00:16:05,800 Speaker 1: what do people look for for sure? 314 00:16:05,880 --> 00:16:10,000 Speaker 3: So from a data perspective, the key thing to point 315 00:16:10,040 --> 00:16:13,040 Speaker 3: out that I believe in property is true is that 316 00:16:13,440 --> 00:16:17,960 Speaker 3: capital growth does not exist without competition. Capital growth as 317 00:16:18,000 --> 00:16:21,720 Speaker 3: an outcome is simply there because competition in a fewer 318 00:16:21,800 --> 00:16:26,120 Speaker 3: amount of houses for sale has created growth and someone 319 00:16:26,160 --> 00:16:29,440 Speaker 3: willing to pay more. And this multiple events happen again 320 00:16:29,480 --> 00:16:32,600 Speaker 3: and again, and new comparable sales arise at high amounts 321 00:16:33,040 --> 00:16:36,200 Speaker 3: and So when you understand that concept without any data 322 00:16:36,240 --> 00:16:40,520 Speaker 3: points or KEYAI terms, machine learning, or anything fancy behind it, 323 00:16:40,600 --> 00:16:43,240 Speaker 3: you now realize that what you're really looking for is 324 00:16:43,320 --> 00:16:47,320 Speaker 3: signals of data that points to high competition occurring, which 325 00:16:47,360 --> 00:16:51,920 Speaker 3: increases the likelihood of property prices to grow. Right, And 326 00:16:51,960 --> 00:16:55,640 Speaker 3: so when you're looking at that, there are really competition 327 00:16:55,960 --> 00:16:59,000 Speaker 3: in two parts of housing markets. One is the rental 328 00:16:59,040 --> 00:17:02,240 Speaker 3: market and one is the established market for sale. So 329 00:17:02,400 --> 00:17:05,720 Speaker 3: competition and the rental market can be shown by is 330 00:17:05,720 --> 00:17:08,879 Speaker 3: there a low amount of rental vacancy so vacancy rates 331 00:17:08,920 --> 00:17:15,280 Speaker 3: are low? Or secondly, is there are decreasing speed which 332 00:17:15,400 --> 00:17:18,480 Speaker 3: is increasing speed which is decreasing days on markets, which 333 00:17:18,520 --> 00:17:20,800 Speaker 3: means rental properties don't take on average two weeks to 334 00:17:20,800 --> 00:17:22,840 Speaker 3: find a tenant, they take on average one week to 335 00:17:22,840 --> 00:17:25,040 Speaker 3: find a tenant. Then, if we move on to the 336 00:17:25,160 --> 00:17:29,600 Speaker 3: sales data, is how many properties are there for sale 337 00:17:30,080 --> 00:17:33,119 Speaker 3: and the trend of those properties for sale. Is it 338 00:17:33,160 --> 00:17:36,040 Speaker 3: a decreasing trend of properties for sale at any one 339 00:17:36,080 --> 00:17:40,200 Speaker 3: point because there is more buying occurring, sales volumes increasing, 340 00:17:41,000 --> 00:17:44,040 Speaker 3: Is there a decreasing days on market because people don't 341 00:17:44,080 --> 00:17:46,119 Speaker 3: take two weeks to make a deal, they do it 342 00:17:46,160 --> 00:17:49,240 Speaker 3: in the first open or they don't take three or 343 00:17:49,240 --> 00:17:52,880 Speaker 3: four inspections, they're doing the first inspection. And is there 344 00:17:53,240 --> 00:17:56,479 Speaker 3: a listing price that now has far less discounts or 345 00:17:56,560 --> 00:18:00,600 Speaker 3: are having sales occur beyond the listing price. So there 346 00:18:00,600 --> 00:18:02,760 Speaker 3: are over thirty different data points we look at, but 347 00:18:02,760 --> 00:18:05,800 Speaker 3: if you just simplify to these three to five, you 348 00:18:05,920 --> 00:18:09,320 Speaker 3: have found competition and competition equals capital. 349 00:18:08,960 --> 00:18:11,239 Speaker 2: Growth, right, So maybe we just go through them. 350 00:18:11,280 --> 00:18:15,520 Speaker 1: The obvious thing obviously in price days on market, that's 351 00:18:15,560 --> 00:18:17,159 Speaker 1: something you're looking at some of the sounds of it 352 00:18:17,240 --> 00:18:20,399 Speaker 1: very closely. What are the signals for you that this 353 00:18:20,520 --> 00:18:23,840 Speaker 1: suburb is going to fly basically or outperform. 354 00:18:24,000 --> 00:18:26,360 Speaker 3: Of course we'll do it as a dock point signals then, 355 00:18:26,440 --> 00:18:31,760 Speaker 3: So the first one is listing levels below five year averages, 356 00:18:32,119 --> 00:18:36,200 Speaker 3: so substantially lower levels of property listings in comparison to 357 00:18:36,240 --> 00:18:41,720 Speaker 3: what's normal. The second one is surging sales volumes, so 358 00:18:41,880 --> 00:18:46,960 Speaker 3: increasing number of deals happening. The third one is depending 359 00:18:46,960 --> 00:18:51,800 Speaker 3: on which cities, increasing auction clearance rates and above sixty 360 00:18:51,840 --> 00:18:54,639 Speaker 3: five percent auction clearance rates as a clear benchmark, but 361 00:18:54,880 --> 00:18:59,880 Speaker 3: increasing trainings as well. Then the fourth one is decrease 362 00:19:00,240 --> 00:19:02,960 Speaker 3: days on market, and if I had already mentioned that 363 00:19:03,000 --> 00:19:05,560 Speaker 3: when prior, this is just the time to sell and 364 00:19:05,600 --> 00:19:09,240 Speaker 3: it's getting faster or quite low. And then the fifth 365 00:19:09,280 --> 00:19:14,120 Speaker 3: one here is having lower levels of vendor discounting. They're 366 00:19:14,200 --> 00:19:17,240 Speaker 3: listing price in what percentage comes off it or a 367 00:19:17,280 --> 00:19:20,200 Speaker 3: positive vendor discount event the listing price, and how much 368 00:19:20,240 --> 00:19:22,240 Speaker 3: more it sells than it. And so if you just 369 00:19:22,320 --> 00:19:25,600 Speaker 3: use these five as a blanket statement, it's basically one paragraph. 370 00:19:25,720 --> 00:19:28,800 Speaker 3: Someone over the barbecue at the sausage ses are saying, hey, mate, 371 00:19:28,840 --> 00:19:30,960 Speaker 3: I'm at this market and I saw that it doesn't 372 00:19:31,000 --> 00:19:33,360 Speaker 3: have a lot of properties for sale. There's less properties 373 00:19:33,400 --> 00:19:36,000 Speaker 3: for sale today than there was five years ago. A 374 00:19:36,040 --> 00:19:38,520 Speaker 3: lot of people are buying properties in the suburb, and 375 00:19:38,520 --> 00:19:40,840 Speaker 3: they're actually buying it twenty percent more than there were 376 00:19:40,920 --> 00:19:43,400 Speaker 3: last year. And then on top of that, it used 377 00:19:43,400 --> 00:19:45,600 Speaker 3: to take a month to sell, it only takes two 378 00:19:45,600 --> 00:19:48,840 Speaker 3: weeks to sell property here on average. And then looking 379 00:19:48,920 --> 00:19:51,560 Speaker 3: at properties in this area, they used to have list 380 00:19:51,640 --> 00:19:53,960 Speaker 3: prices of eight hundred K and that often sell at 381 00:19:54,000 --> 00:19:56,760 Speaker 3: seven point fifty. But now the eight hundred k listings 382 00:19:56,800 --> 00:19:58,600 Speaker 3: are there and they're often selling at eight fifty to 383 00:19:58,680 --> 00:20:01,960 Speaker 3: nine hundred. So that's someone having a casual chat. 384 00:20:02,000 --> 00:20:04,440 Speaker 1: I wonder I had doubt, but I would be skeptical 385 00:20:04,520 --> 00:20:10,760 Speaker 1: about obviously says above the reserve, since there is underculting 386 00:20:11,080 --> 00:20:13,119 Speaker 1: in the market, and we know there is across the market, 387 00:20:13,320 --> 00:20:15,600 Speaker 1: and it's always a problem, especially when the market's starting 388 00:20:15,640 --> 00:20:18,160 Speaker 1: to lift. Which of your data points do you, at 389 00:20:18,160 --> 00:20:20,240 Speaker 1: the moment think is the most powerful. 390 00:20:21,560 --> 00:20:24,360 Speaker 3: The most powerful data points? I would say it's an 391 00:20:24,440 --> 00:20:28,359 Speaker 3: equal tie between listings and sales volumes. But if I 392 00:20:28,440 --> 00:20:31,879 Speaker 3: was to use listings as an example, here's where that's important. 393 00:20:32,280 --> 00:20:35,240 Speaker 3: If you have listings well below a five year average 394 00:20:35,359 --> 00:20:39,639 Speaker 3: and it's extremely low levels, it means any sort of 395 00:20:39,680 --> 00:20:43,480 Speaker 3: interest or any sort of sales volumes or insights from 396 00:20:43,520 --> 00:20:47,600 Speaker 3: elsewhere will showcase that there's a lot of demand that 397 00:20:47,680 --> 00:20:50,880 Speaker 3: is showing against the supply that's there. Because it's all 398 00:20:50,920 --> 00:20:54,240 Speaker 3: relative to each other, you could have listings come down, 399 00:20:54,320 --> 00:20:57,360 Speaker 3: but if there is still a lot of transactions not happening, 400 00:20:57,600 --> 00:20:59,560 Speaker 3: then all of a sudden, that's still considered a lot 401 00:20:59,600 --> 00:21:01,440 Speaker 3: of list So you want to see those two data 402 00:21:01,440 --> 00:21:04,600 Speaker 3: points together. But the second part of sales volumes is 403 00:21:04,640 --> 00:21:07,320 Speaker 3: that if all of a sudden, you had fifty transactions 404 00:21:07,359 --> 00:21:09,639 Speaker 3: per month on average in a suburb, and then that 405 00:21:09,840 --> 00:21:13,679 Speaker 3: number is now eighty to one hundred. Well, either it 406 00:21:13,800 --> 00:21:16,920 Speaker 3: means a there is a lot more building supply that's 407 00:21:17,000 --> 00:21:19,200 Speaker 3: arrived in the market, a lot more properties for sale, 408 00:21:19,200 --> 00:21:21,320 Speaker 3: and they're just transacting at a higher amount, which is 409 00:21:21,359 --> 00:21:25,440 Speaker 3: a false positive, or it's the lower level of listings. 410 00:21:25,440 --> 00:21:28,760 Speaker 3: It's just transacting far more frequently because properties come on, 411 00:21:28,800 --> 00:21:30,080 Speaker 3: then they get off, then they come on, then they 412 00:21:30,119 --> 00:21:32,840 Speaker 3: get off. So these two data points would be the 413 00:21:32,880 --> 00:21:35,960 Speaker 3: most telling ones, and they flow on to all the 414 00:21:36,000 --> 00:21:39,200 Speaker 3: other indicators I've mentioned, because the other indicators don't get 415 00:21:39,240 --> 00:21:41,680 Speaker 3: faster unless these two move right. 416 00:21:42,200 --> 00:21:45,000 Speaker 1: Very good, very good, And if you are thinking of manterfesting, 417 00:21:45,080 --> 00:21:48,480 Speaker 1: obviously this is I suppose the point being are doing 418 00:21:48,640 --> 00:21:51,240 Speaker 1: is that when you're not thinking of buying a home, 419 00:21:51,880 --> 00:21:55,320 Speaker 1: you're thinking strictly rationally. Then you're thinking strictly on data points. 420 00:21:56,040 --> 00:21:59,159 Speaker 1: And if you find that perfect match of data points, 421 00:21:59,440 --> 00:22:01,000 Speaker 1: it doesn't really matter of where it is. I am 422 00:22:01,280 --> 00:22:03,359 Speaker 1: it sounds to me it doesn't matter where it is. 423 00:22:03,400 --> 00:22:04,840 Speaker 1: You could be in Sydney and you could find it's 424 00:22:04,880 --> 00:22:06,360 Speaker 1: in Brisbane, or you could be in Brisbane and find 425 00:22:06,400 --> 00:22:08,640 Speaker 1: it's in Perth or whatever is that fair to say? 426 00:22:09,840 --> 00:22:13,399 Speaker 3: This is an absolutely like the most critical point to 427 00:22:13,480 --> 00:22:17,159 Speaker 3: consider an investing. Too many myths go on that people 428 00:22:17,240 --> 00:22:20,840 Speaker 3: think your backyard or regional markets or other capital cities 429 00:22:20,840 --> 00:22:22,639 Speaker 3: aren't as good as the place you love and know 430 00:22:22,800 --> 00:22:25,800 Speaker 3: the bakeries, the cafes and the proximity to the city 431 00:22:25,800 --> 00:22:30,199 Speaker 3: of eighty five percent as pro totality data over the 432 00:22:30,280 --> 00:22:35,719 Speaker 3: last twenty five years of LGAs have had five percent 433 00:22:35,880 --> 00:22:40,280 Speaker 3: or greater compounding growth levels. And so if you now 434 00:22:40,720 --> 00:22:44,440 Speaker 3: took away the fifteen percent from those markets that did 435 00:22:44,440 --> 00:22:47,440 Speaker 3: not perform, and you took away towns with a single 436 00:22:47,680 --> 00:22:51,000 Speaker 3: industry economy, and then number two, you took away towns 437 00:22:51,280 --> 00:22:54,760 Speaker 3: that had a population of less than fifteen thousand that 438 00:22:54,880 --> 00:22:58,760 Speaker 3: had those LGAs present in you now are now taking 439 00:22:58,840 --> 00:23:03,160 Speaker 3: that number to above ninety five percent, which actually means 440 00:23:03,440 --> 00:23:07,159 Speaker 3: every city, town or suburb across Australia and when you 441 00:23:07,240 --> 00:23:10,240 Speaker 3: exclude those has its time in the sun one day. 442 00:23:11,040 --> 00:23:13,840 Speaker 3: And so your goal as an investor that's now national 443 00:23:13,880 --> 00:23:18,119 Speaker 3: and borderless, should be thinking about where a that time 444 00:23:18,320 --> 00:23:22,840 Speaker 3: is happening, because long term holds everywhere will do well eventually. 445 00:23:23,520 --> 00:23:27,480 Speaker 3: And then b, how can my portfolio create the greatest diversity, 446 00:23:28,000 --> 00:23:31,720 Speaker 3: because again, when something's happening in Adelaide and Brisbane doesn't 447 00:23:31,720 --> 00:23:34,280 Speaker 3: always mean it's happening in Sydney and Melbourne. They can 448 00:23:34,400 --> 00:23:36,720 Speaker 3: happen at different times, and the data suggests that when 449 00:23:36,760 --> 00:23:40,119 Speaker 3: you look at twenty twelve to twenty seventeen, Sydney Melbourne boomed, 450 00:23:40,280 --> 00:23:42,359 Speaker 3: but then when you look at twenty twenty to twenty 451 00:23:42,400 --> 00:23:46,320 Speaker 3: five Perth, Adelaide Brisbane substantially outperforms Sydney and Melbourne. 452 00:23:46,320 --> 00:23:48,040 Speaker 2: That's right, that's right. Borderless. 453 00:23:48,119 --> 00:23:51,080 Speaker 1: I like that, borderless absolutely. Okay, we'll take a break 454 00:23:51,119 --> 00:23:53,680 Speaker 1: just before we go LGAs just in case our listeners 455 00:23:53,760 --> 00:23:54,800 Speaker 1: weren't familiar with the term. 456 00:23:54,840 --> 00:23:57,480 Speaker 3: It means local government areas. 457 00:23:57,600 --> 00:23:58,800 Speaker 2: Yeah, local government aias. 458 00:23:58,840 --> 00:24:01,439 Speaker 1: Okay, so folks, all right, we'll be back. We have 459 00:24:01,480 --> 00:24:03,960 Speaker 1: some great questions which we have kept for today. Back 460 00:24:04,000 --> 00:24:18,439 Speaker 1: in the moment. Hello, Welcome back to The Australian's Money 461 00:24:18,440 --> 00:24:22,440 Speaker 1: Puzzle podcast. My guest today is Argent Paliwal from Investor Kid. 462 00:24:22,840 --> 00:24:26,920 Speaker 1: As you have probably discovered by now, a property expert, 463 00:24:27,160 --> 00:24:30,760 Speaker 1: a buyer's agent operates out of Sydney, and some very 464 00:24:30,760 --> 00:24:35,000 Speaker 1: interesting observations already on the show about rent investing. I 465 00:24:35,160 --> 00:24:40,159 Speaker 1: think it's a very convincing case Argent puts forward based 466 00:24:40,200 --> 00:24:45,080 Speaker 1: on his key observations about the optimization of that about 467 00:24:45,119 --> 00:24:49,240 Speaker 1: being borderless basically in your approach and having that strictly 468 00:24:49,280 --> 00:24:53,120 Speaker 1: financial rational approach to it which optimizes your chances basically. 469 00:24:53,640 --> 00:24:55,479 Speaker 1: And do keep in mind that. I thought it was 470 00:24:55,480 --> 00:24:59,200 Speaker 1: interesting also that Argian about the point that tax is favorable, 471 00:24:59,240 --> 00:25:03,159 Speaker 1: but it's not actually mandatory the tax. Your arguments are 472 00:25:03,160 --> 00:25:05,560 Speaker 1: not entirely based on tax. They're helped by the tax situation, 473 00:25:05,640 --> 00:25:09,680 Speaker 1: but they're not crucial, all right, Sus says. The biggest 474 00:25:09,720 --> 00:25:12,680 Speaker 1: barrier to downsizing and upsizing for that matter is stamp 475 00:25:12,760 --> 00:25:16,800 Speaker 1: duty in Victoria. It's yet another tax, and on indexed 476 00:25:16,920 --> 00:25:19,480 Speaker 1: I might add a real barrier to people having the 477 00:25:19,520 --> 00:25:22,960 Speaker 1: right size home. As an buyer's advocate said to me, 478 00:25:23,480 --> 00:25:26,200 Speaker 1: you should budget ten percent transaction cost of buying when 479 00:25:26,240 --> 00:25:30,000 Speaker 1: you have properties, and that's a huge disincentive. Yes, there 480 00:25:30,000 --> 00:25:32,840 Speaker 1: are disincentives, that's for sure, Sus. Thank you for that. 481 00:25:33,200 --> 00:25:39,320 Speaker 1: And obviously Victoria, with its menu of taxes ten particularly 482 00:25:39,359 --> 00:25:43,000 Speaker 1: different property taxes, has done itself no favors, certainly in 483 00:25:43,080 --> 00:25:45,840 Speaker 1: terms of investor sentiment or right. A question this time 484 00:25:45,840 --> 00:25:49,680 Speaker 1: from Tim, is it possible that by allowing new home 485 00:25:49,720 --> 00:25:52,240 Speaker 1: buyers into the market with a five percent deposit, that's 486 00:25:52,280 --> 00:25:55,160 Speaker 1: the that's the government's new five percent universal five percent 487 00:25:55,160 --> 00:25:58,040 Speaker 1: deposit first home scheme. Anyone anywhere can get their first 488 00:25:58,080 --> 00:26:00,960 Speaker 1: home with a five percent deposit, ten percent covered by 489 00:26:00,960 --> 00:26:06,600 Speaker 1: the government. Tim asks, does the government run the real 490 00:26:06,680 --> 00:26:09,840 Speaker 1: risk of negative equity in the future years? Falling rates 491 00:26:09,960 --> 00:26:13,560 Speaker 1: coupled with reduced deposits appear already to be pushing first 492 00:26:13,600 --> 00:26:17,919 Speaker 1: home buyer market upwards. I don't doubt this at all. 493 00:26:18,160 --> 00:26:22,560 Speaker 1: If you have people who were not expert and were 494 00:26:22,600 --> 00:26:25,359 Speaker 1: not familiar with the points you've been making, Arjen, and 495 00:26:25,400 --> 00:26:28,359 Speaker 1: they had ninety five percent mortgage, and if we have 496 00:26:28,440 --> 00:26:30,920 Speaker 1: many more people with the ninety five percent mortgage under 497 00:26:30,920 --> 00:26:33,919 Speaker 1: this scheme, does it create some new risks in the market? 498 00:26:34,200 --> 00:26:34,640 Speaker 2: Do you think? 499 00:26:36,560 --> 00:26:38,960 Speaker 3: It depends for how long? And it depends how many 500 00:26:39,000 --> 00:26:42,040 Speaker 3: get going. I feel like there's a couple of things 501 00:26:42,080 --> 00:26:47,520 Speaker 3: to share here. Firstly, Australia's debt position overall presents a 502 00:26:47,520 --> 00:26:50,680 Speaker 3: low risk. We have just over two and a half 503 00:26:50,760 --> 00:26:53,800 Speaker 3: trillion dollars worth of debt in this country on houses 504 00:26:54,359 --> 00:26:58,679 Speaker 3: against over eleven trillion dollars of value, so most of 505 00:26:58,720 --> 00:27:01,200 Speaker 3: it still sits at a low loan to value ratio. 506 00:27:01,320 --> 00:27:04,120 Speaker 3: So if there was some movements in prices, it would 507 00:27:04,119 --> 00:27:06,520 Speaker 3: have to be so large for that ratio to come together, 508 00:27:06,600 --> 00:27:08,879 Speaker 3: and so many properties have to go online and not 509 00:27:08,960 --> 00:27:11,240 Speaker 3: sales for that to happen. But that's the first core 510 00:27:11,320 --> 00:27:15,479 Speaker 3: structure piece. The second part here is that when it 511 00:27:15,560 --> 00:27:18,840 Speaker 3: comes to those owner occupy or like those properties that 512 00:27:18,880 --> 00:27:21,680 Speaker 3: we have across the country or more than a third 513 00:27:21,680 --> 00:27:24,720 Speaker 3: of them actually have no debt individually, like a third 514 00:27:24,720 --> 00:27:27,280 Speaker 3: of houses or the ten point four million dwellings don't 515 00:27:27,320 --> 00:27:30,080 Speaker 3: have that, so it does take many more years of 516 00:27:30,280 --> 00:27:33,800 Speaker 3: high leverage debt with high volume of places, by the way, 517 00:27:33,840 --> 00:27:35,959 Speaker 3: which is only for a first home by segment up 518 00:27:36,000 --> 00:27:38,760 Speaker 3: to certain price points. It's not for everyone. So I 519 00:27:38,760 --> 00:27:41,639 Speaker 3: don't think structurally that problem there is as bad, but 520 00:27:41,720 --> 00:27:43,960 Speaker 3: I guess the key points to also mention that the 521 00:27:44,040 --> 00:27:47,080 Speaker 3: last forty five years of housing data, there have only 522 00:27:47,119 --> 00:27:50,680 Speaker 3: been ten events occur in which we've seen some national 523 00:27:50,720 --> 00:27:53,960 Speaker 3: house price steps, of which the largest one was actually 524 00:27:53,960 --> 00:27:57,160 Speaker 3: in recent times in twenty twenty two, where we had 525 00:27:57,240 --> 00:28:00,160 Speaker 3: like over nine percent did some some markets which which 526 00:28:00,280 --> 00:28:05,080 Speaker 3: really quickly came back, and so the largest amount of 527 00:28:05,160 --> 00:28:08,200 Speaker 3: dips has been that eight nine percent. Secondly, it wasn't 528 00:28:08,240 --> 00:28:10,800 Speaker 3: on all cities, it was on a select few. And 529 00:28:10,840 --> 00:28:13,960 Speaker 3: then thirdly it's only had ten events where we've seen 530 00:28:14,080 --> 00:28:17,600 Speaker 3: national price tips in forty five years. And so when 531 00:28:17,600 --> 00:28:20,359 Speaker 3: you think of the Australian housing market, it would have 532 00:28:20,440 --> 00:28:23,280 Speaker 3: to be some major shocks that causes that negative equity. 533 00:28:23,520 --> 00:28:26,119 Speaker 3: And if we look at long term compounding growth rates, 534 00:28:26,240 --> 00:28:29,520 Speaker 3: it's likely that within twelve months someone's ninety five percent 535 00:28:29,960 --> 00:28:33,040 Speaker 3: if the national averages play out, is suddenly down to 536 00:28:33,200 --> 00:28:35,960 Speaker 3: ninety percent loan by the nature of them paying down 537 00:28:36,000 --> 00:28:36,679 Speaker 3: and growth occurrent. 538 00:28:37,200 --> 00:28:39,840 Speaker 1: We'll so the wider picture being Tim and thank you 539 00:28:39,880 --> 00:28:42,800 Speaker 1: for the question, Susan, Tim, and there are This is information, 540 00:28:42,880 --> 00:28:46,640 Speaker 1: of course, not advice. But the wider issue is that 541 00:28:47,000 --> 00:28:49,680 Speaker 1: there is actually substantial stability in the system, not just 542 00:28:49,680 --> 00:28:53,960 Speaker 1: because we have Opera or other regulators, but because, as 543 00:28:54,080 --> 00:28:57,160 Speaker 1: Argent points out, there's a substantial portion of the population 544 00:28:57,240 --> 00:28:59,800 Speaker 1: that have no household debt at all, which we don't 545 00:29:00,040 --> 00:29:02,320 Speaker 1: pay much attention to. They don't make the headlines, but 546 00:29:02,360 --> 00:29:05,200 Speaker 1: they probably do their bit to stabilize the market. Terrific, Hey, 547 00:29:05,280 --> 00:29:06,880 Speaker 1: Ardyne thank you very much for coming on the show. 548 00:29:06,960 --> 00:29:07,720 Speaker 1: Nice to have you on. 549 00:29:08,320 --> 00:29:09,080 Speaker 3: Thank you so much. 550 00:29:09,400 --> 00:29:13,440 Speaker 1: That was Argent Pollowell of the Investor Kid group. Let's 551 00:29:13,440 --> 00:29:17,800 Speaker 1: have some more questions and comments. Always happy to have comments, 552 00:29:17,880 --> 00:29:20,840 Speaker 1: just like Susan's comments today. They're very good, they're very welcome. 553 00:29:21,080 --> 00:29:24,480 Speaker 1: You can ask multiple questions of course, anytime the Money 554 00:29:24,480 --> 00:29:27,000 Speaker 1: Puzzle at the Australian dot com dot au. 555 00:29:27,360 --> 00:29:28,000 Speaker 2: Talk to you soon.