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Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm

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Speaker 1: James Kirby, the Wealth editor at The Australian and welcome aboard.

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Speaker 1: Everybody we have could show for you today? Could we

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Speaker 1: make it more interesting? The Prime Minister Anthony Albanesi Noles

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Speaker 1: is quitting the investment roberty market and finding himself in

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Speaker 1: all sorts of difficulties in trying to extract himself as well.

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Speaker 1: He's not entirely quitting, he's selling one of his investment

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Speaker 1: properties and unfortunately for him, he has a tendant who

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Speaker 1: doesn't want to leave. So just what you wouldn't like

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Speaker 1: as an investor part one, but part two unfortunatelyave you

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Speaker 1: with the Prime Minister. You do also have the additional

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Speaker 1: complication that your struggles in the property market were on

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Speaker 1: the front pages of the papers. But that's what we're

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Speaker 1: going to take a look at, because of course, as

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Speaker 1: we know, many investors are getting out of the market

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Speaker 1: and you wonder why when got rising prices, rising rentals,

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Speaker 1: negative gearing, what's going on? Take a look at that

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Speaker 1: in a moment. Also the concept of super being used

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Speaker 1: for first homes. What do you think about that? I

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Speaker 1: have I must say, gone on a journey. I might

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Speaker 1: say on that one and have come right around, and

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Speaker 1: I do at this stage actually think is at the

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Speaker 1: least worst of the options out there. By that, I mean, yes,

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Speaker 1: I supported in a better world or a better tax system,

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Speaker 1: I wouldn't. But the way in reality, pragmatically the tax

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Speaker 1: system is loaded in favor of the home owner, and

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Speaker 1: you win if you own a home. So if that

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Speaker 1: gets you over the line, it gets you over the line.

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Speaker 1: One other thing that it might also take a look

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Speaker 1: at is about the NDIS. And you know all about

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Speaker 1: the NDI, I s I'm sure this is very poorly scoped,

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Speaker 1: very poorly designed system which is now a byworld really

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Speaker 1: for waste and fraudulent opportunity. It's terrible what's going on.

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Speaker 1: And it's terrible because it's going to weigh on public

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Speaker 1: sentiment against the provision of care for people with disabilities.

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Speaker 1: And we can't go deeply into that, but we can

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Speaker 1: warn you about the property dimension of any and schemes

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Speaker 1: that are being pushed out there. So we say, who

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Speaker 1: on earth could possibly talk to us about all this? Well,

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Speaker 1: the ideal guest is, of course James Gerard of Financial

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Speaker 1: Advisor dot com dot au who is also your host

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Speaker 1: next week on Tuesday. On Thursday, when I am off

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Speaker 1: for a few days.

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Speaker 2: How are you, James Girard, I'm doing great, Thanks for

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Speaker 2: having me on.

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Speaker 1: You're very welcome. Great to have you on. And you

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Speaker 1: already have you got all your notes and your homework

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Speaker 1: down for your two special shows next week? I have.

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Speaker 2: I've been busy preparing to fill those big shoes, the

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Speaker 2: big boid that you're going to leave. So hopefully you

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Speaker 2: listen to this will have something nice to listen to

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Speaker 2: next week.

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Speaker 1: Thanks. Just I've never been I've never been total. I

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Speaker 1: had big shoes before. That's that's a new one for me.

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Speaker 1: So now are you up to speak with this story?

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Speaker 1: I might I might just refresh for folks listening. Anthony

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Speaker 1: Albanezi has a house on Indulge Hill in Sydney. It's

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Speaker 1: an investment properly, it's had it for a couple of face,

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Speaker 1: had it for nearly ten years, and he has decided

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Speaker 1: to sell us, which he's perfectly entitled to do. The

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Speaker 1: surprise part here is that when he went to sell it,

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Speaker 1: the tenant at the property didn't want to leave, and

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Speaker 1: in that respect, I'm sure anyone who's ever had an

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Speaker 1: investment properly says, oh, gosh, you know, what does go?

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Speaker 1: What happens when that happens? What happens to you? Well,

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Speaker 1: how what do you do? And he's had to serve

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Speaker 1: an eviction notice, which is really, I imagine most uncomfortable

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Speaker 1: for the prime to have to do this. It looks

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Speaker 1: like he's going to make money on the sale of

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Speaker 1: this property. He's not going to Romp Pullman and sort

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Speaker 1: of it hasn't exactly hit the jackpot on it, but

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Speaker 1: it's it's I if I recall the numbers he bought

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Speaker 1: it for I think is one point two million at

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Speaker 1: about a decade ago, and he'll set it for about

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Speaker 1: one point nine and he faces all these issues that

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Speaker 1: every property investor faces, and a lot of people are

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Speaker 1: just saying it's too hard. I'm getting out, it's not.

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Speaker 1: The numbers don't add up for me. Are you seeing this, James?

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Speaker 1: And if people said that to you, what would you

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Speaker 1: say to them If I was a client of viewers

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Speaker 1: and I said this, I've had this rental. You know, honestly,

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Speaker 1: I lose money on it every year. I know there's

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Speaker 1: negative fear in but you know, so, so what it's

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Speaker 1: all too much?

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Speaker 2: So definitely those conversations, I mean had a lot more

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Speaker 2: over the past twelve months. And that's a function of

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Speaker 2: interest rates going up thirteen times over the past two years.

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Speaker 2: So if you go back a couple of years ago,

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Speaker 2: so a lot of investment properties were cash flow positive,

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Speaker 2: even in the expensive capital cities like Melbourne and in Sydney,

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Speaker 2: because interest rates on investment loans were below three percent.

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Speaker 2: And fast forward to twenty twenty four and interest rates

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Speaker 2: on investment loans are six and a half to seven percent,

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Speaker 2: So you need to have a pretty high rental yield

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Speaker 2: to make that property cash flow positive or even neutral,

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Speaker 2: and that's not happening for a lot of people. So

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Speaker 2: they're finding that they're reassessing their investment property portfolio because

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Speaker 2: where they were getting income from these investment properties, they're

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Speaker 2: now having to spend out of their own cash flow.

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Speaker 2: And remember that rents have gone up significantly, interest for

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Speaker 2: payments on mortgages on your home loan has gone up

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Speaker 2: as well. So people are finding the bit of a

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Speaker 2: cash flow crunch and they're looking for ways to move

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Speaker 2: into a more comfortable position. And one of those ways

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Speaker 2: is to sell off something that's costing you every money

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Speaker 2: every month, and that's an investment property. But I think

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Speaker 2: you just have to step back and look at the

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Speaker 2: fundamentals of it. So you're just in an investment property.

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Speaker 2: You benefit two ways. One is through the rent that

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Speaker 2: you generate and the other is through the capital growth.

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Speaker 2: And at the moment, half of that equation is negative.

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Speaker 2: Half of that equation is positive. So for most property investors,

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Speaker 2: they're getting negative income i e. The cost to maintain

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Speaker 2: that property, the interest on the mortgage, the strata the

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Speaker 2: council rates, everything that is associated to cost to own

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Speaker 2: that property as an investment is more than the rent

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Speaker 2: that they're receiving. But on the positive side, most capital

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Speaker 2: cities around the country are getting capital growth. The national

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Speaker 2: property prices have gone up ten percent over the past

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Speaker 2: twelve months. Some places have done better than others. PERFO

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Speaker 2: is up over twenty percent. You know, Sydney's up ten,

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Speaker 2: Melbourne's up three to five percent. But some places a negative,

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Speaker 2: like Hobart in Tasmania. But overall property investors are making money.

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Speaker 2: So I think it's a case of using that what

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Speaker 2: you call them the idiom or saying that you don't

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Speaker 2: throw the baby out with the bath water.

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Speaker 1: Think about it. Yeah, so you're saying, hang on, folks,

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Speaker 1: this is the game. It's a long game, and you

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Speaker 1: have to you have to sit with it, and you

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Speaker 1: have to go through good times and bad times. But

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Speaker 1: but at the same time, you are saying that the

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Speaker 1: numbers have changed, that basically your interest rate has probably

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Speaker 1: doubled if you're in, if you're on this property for

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Speaker 1: more than five years or whatever. So it seems to

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Speaker 1: me when I look at the surveys as to where

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Speaker 1: people are selling, it's throughout Victoria and in areas on

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Speaker 1: the edges of Sydney. The Hills District was mentioned, the

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Speaker 1: Blue Mountains district was mentioned in this survey from suburb

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Speaker 1: Trends where they actually said, you know that this the

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Speaker 1: sale by investors had gone through the roof in pockets,

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Speaker 1: not across the board. I suppose to wait the challenge

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Speaker 1: it orders to say, geep, isn't it much easier life

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Speaker 1: just to put it all into a share market fund

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Speaker 1: and forget about it. There's never any maintenance. No one

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Speaker 1: ever calls with a with a with a broken toilet.

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Speaker 1: If you have shared it's a lot less trouble year

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Speaker 1: to year. Is it worth all the effort we need

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Speaker 1: as property industrial It's interesting.

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Speaker 2: A lot of it is investor psychology, and you have

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Speaker 2: to say I'm biased by that myself. I like the

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Speaker 2: I can go and touch the bricks on the investment

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Speaker 2: property and it's there as a physical thing that can

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Speaker 2: never be taken away, Whereas you have that sometimes irrational

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Speaker 2: bit concerned that something on the share market can evaporate,

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Speaker 2: which generally doesn't happen if it's a property related stock.

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Speaker 2: If you buy into a Goodman Group or or something

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Speaker 2: like that, those warehouses aren't going to evaporate. Goodman Groups

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Speaker 2: always going to have a value, same with the other

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Speaker 2: property stocks. But I think the thing to remember here

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Speaker 2: is that the banks don't make it easy and cheap

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Speaker 2: to borrow money to buy shares on the share market,

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Speaker 2: but they do make it more accessible and easier to

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Speaker 2: leverage up to buy physical properties. So that's been the

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Speaker 2: major reason why most investors have property in their portfolio,

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Speaker 2: because they can borrow the money from the bank.

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Speaker 1: But the state governments don't get involved with your shares,

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Speaker 1: and they don't throw in new taxes with every budget,

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Speaker 1: and you don't get up and find out, Oh, another tax,

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Speaker 1: so another cost, so another duty or regulation has come

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Speaker 1: in on my whatever my vedsit or my townhouse somewhere

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Speaker 1: or other. That seems to be the key issue actually,

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Speaker 1: apart from rate rises, which perhaps not that we can

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Speaker 1: deal with them though, but that we know it's a cycle,

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Speaker 1: that we know perhaps this is as bad as it

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Speaker 1: gets in it and from here on it may start

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Speaker 1: to drop. We don't know when, but it's most likely

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Speaker 1: that the pattern on rates or mortgage rates is that

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Speaker 1: they will fall lower from here. They'll be lower this

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Speaker 1: time next year. So then you're left with the issue

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Speaker 1: of state taxes, and that seems to be really even

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Speaker 1: though it's probably uncoordinated, all the states have the same idea,

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Speaker 1: which is you can get some money out of property,

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Speaker 1: and they keep adding new obstacles that I suppose you

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Speaker 1: could call them, particularly in Victoria, and that's where the

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Speaker 1: market is week a self rre. The investors are leaving

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Speaker 1: the most. So do you think that's everyone to stop.

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Speaker 2: Well, it's definitely a valid concern. The government's state governments

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Speaker 2: seed as an easy target to add more taxes to

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Speaker 2: investment property owners. But I feel that if they add

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Speaker 2: too much, Basically, they'll just get voted out at the

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Speaker 2: next election. So there's only so far that they can

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Speaker 2: push it before it becomes unpopular. But I don't want

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Speaker 2: to sound like that the champion of investment properties, because

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Speaker 2: I'm relatively agnostic between shares and property. But we also

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Speaker 2: have to remember that the share market is subject to regulation.

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Speaker 2: You're correct, not so much to state government, but to

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Speaker 2: federal governments. If we cast our minds back a few

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Speaker 2: years when there was that proposals to remove imputation credits

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Speaker 2: from retirees, and that they've changed the tax treatment on

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Speaker 2: share buybacks as well to make them not so attractive

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Speaker 2: as previously. So both share and property markets will continually

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Speaker 2: be effected with tinkering from from governments. But I think

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Speaker 2: in summary, you're writing saying that there's more hassle factor.

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Speaker 2: If you own a few is a coal property, then

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Speaker 2: you buy a stock, a property related stock.

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Speaker 1: Yes, okay, But as you say, the offset is, you

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Speaker 1: don't get up in the morning and find a fall

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Speaker 1: and twenty percent overnight. In fact, it might have fallen

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Speaker 1: twenty percent overnight, but you won't know that unless you

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Speaker 1: try to sell it, And there's something very arresting. Arresting

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Speaker 1: it would be in the nice words. So there's something

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Speaker 1: quite stumb up churning about share market drops. No matter

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Speaker 1: how many you've seen, they really are alarming, and the

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Speaker 1: more closer you are to retirement, the more alarming they become.

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Speaker 1: The other thing I think which we always underestimate, I

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Speaker 1: think is the long term value of property. I mean

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Speaker 1: the serious long term value of property. And I often

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Speaker 1: tell stories about, you know, certain properties that that handed

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Speaker 1: down from generations, that generations have had benefit from. And

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Speaker 1: that's something we rarely think about what we should because

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Speaker 1: it's a key part I think of property investing on

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Speaker 1: the super, using super to buy a home? Do you

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Speaker 1: think that's a good or bad idea? So I'm forty.

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Speaker 2: If I cast my mind back to when I was

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Speaker 2: in my early to mid twenties and put myself in

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Speaker 2: the shoes of first home buyer, would I have liked

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Speaker 2: to be able to access my super? And the answer

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Speaker 2: was yes. It was my in laws that lent us

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Speaker 2: money sort of off the record as a gift quote

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Speaker 2: unquote to be able to buy our first property, and

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Speaker 2: that allowed us to get in a few years quicker

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Speaker 2: than we otherwise would have. So if it wasn't for

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Speaker 2: my generous in laws that to help us out, it

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Speaker 2: would have been difficult to crack the market. And unfortunately,

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Speaker 2: property markets grow. Unfortunately for people trying to get into

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Speaker 2: the property market, it always seems to be the case

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Speaker 2: of you're chasing your tail, like your ability to save

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Speaker 2: is often trumped by the growth in the property market,

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Speaker 2: so they just fall further and further behind. So I

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Speaker 2: agree that it's not ideal for the long term to

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Speaker 2: pull money out of SUPER, But in terms of somebody's

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Speaker 2: financial life and the stages they go through, one of

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Speaker 2: the fundamental and foundational things is generally to buy a property,

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Speaker 2: whether that's to live in or as an investment, and

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Speaker 2: definitely to live in. If they can use one of

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Speaker 2: their assets that they won't be able to access for

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Speaker 2: another thirty to forty years to help them achieve a

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Speaker 2: goal today, well then fantastic. But I just think that

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Speaker 2: the execution of it needs to be thought through because

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Speaker 2: in theory, somebody in their twenties could be salary sacrificing

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Speaker 2: into SUPER and effectively paying fifteen percent tax to build

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Speaker 2: their SUPER, and then they could be pulling that money

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Speaker 2: out to buy a property and then they can upgrade

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Speaker 2: that property when they retire, and when they're sixty seven,

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Speaker 2: if they've dumped all of their assets into this house

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Speaker 2: they're living in, they can then pick up the age

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Speaker 2: pension from the government. So I think the governmany needs

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Speaker 2: to think about the equity of this with regards to

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Speaker 2: scent a link at retirement and tax benefits that were

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Speaker 2: generated throughout if they are going to let people access super.

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Speaker 1: I did agree with you will coming in from a

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Speaker 1: different danger. So I'm saying I'm coming in from someone

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Speaker 1: who's older than you, and who up until very recently

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Speaker 1: would have said, hey, listen, you know super policy for

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Speaker 1: super housing, policy for housing. Don't mix the two of

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Speaker 1: them up. It's all wrong. But I'm doing that from

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Speaker 1: the comfort of buying my first home for exactly three

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Speaker 1: and a half times my salary exactly, and a person

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Speaker 1: in the same position now could not do that. A

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Speaker 1: person in the same position could no way could they

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Speaker 1: do that by a house in the middle of Melmour

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Speaker 1: for three and a half times the salary that I

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Speaker 1: was on, even if you win dexted up to today.

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Speaker 1: And so I'm coming from a different point of view

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Speaker 1: I'm saying, Oh, it's easy to sit here and say

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Speaker 1: super is very important, But actually, as you allude to,

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Speaker 1: and this is I think this is the million dollar point.

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Speaker 1: The tax system has been designed and has morphed to

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Speaker 1: a shape that is totally biased towards the homeowner. So

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Speaker 1: it's not just that you win when you're thirty five

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Speaker 1: or forty five I as a homeowner because you get

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Speaker 1: CGT breaks, et cetera. You win forever because when you're

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Speaker 1: older in retirements, the value of your home isn't included

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Speaker 1: in pension, but every dollar of SUPER is. So it's

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Speaker 1: as you say, it's it's a as a result of

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Speaker 1: that system that logically, I think you have to you

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Speaker 1: have to say that if you can get money, your

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Speaker 1: money out of your super to buy your home, then

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Speaker 1: why wouldn't you. Okay, hey, we might take a short break.

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Speaker 1: We'll be back in a moment. Hello and welcome back

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Speaker 1: to The Australian's Money Puzzle podcast. I'm James Kirby, the

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Speaker 1: Wealth editor at The Australian, talking to James Girard, lancial

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Speaker 1: advisor at TRIPLEW Financial Advisor dot com dot you, who

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Speaker 1: is of course a regular contributor to The Australian's Wealth Section,

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Speaker 1: and we'll be hosting the show for you in the

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Speaker 1: first full week of June. Those two two shows coming

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Speaker 1: up now. James. I mentioned NDIS at the start and hey,

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Speaker 1: we could do an hour on NDIS, but so could anyone.

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Speaker 1: Our speciality here is investing and the investors are looking

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Speaker 1: at the world through an investing prison, maybe like investors

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Speaker 1: to the extent that they are exposed directly to NDIS

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Speaker 1: tends to be on property. And you've done a little

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Speaker 1: bit on this for the paper which is about these

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Speaker 1: schemes and promotions which suggests to the retail investor, come

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Speaker 1: and participate in this NDIS property and you'd get very

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Speaker 1: good returns and the government backed and they often give

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Speaker 1: the impression that they are actually government certified or whatever.

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Speaker 1: But you when you looked at this that was not

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Speaker 1: the case. As usual, the NDIS had a leak. What

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Speaker 1: was the leak on this one?

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Speaker 2: So yeah, I went down to the rabbit hole on

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Speaker 2: the NDIS having a look at it with regards to

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Speaker 2: how attractive are these property investments because you often come

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Speaker 2: across it if you google NDIS Property Investment Guarantee ten

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Speaker 2: fifteen percent returns. It sounds really great, and I always

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Speaker 2: felt there was a catch to it, but I never

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Speaker 2: really looked into it. So when I did, it really

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Speaker 2: just comes down to understanding what the numbers are and

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Speaker 2: understanding the likely projected outcome. And it is possible to

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Speaker 2: get ten percent yield fifteen percent yield, but you need

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Speaker 2: to thread the needle perfectly, and there's a lot of

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Speaker 2: cases where you don't. And so, for example, the vacancy

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Speaker 2: rates are higher than a normal investment property with NDIS property,

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Speaker 2: So there's four different types of NDIS accommodation depending on

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Speaker 2: the needs of the participant in the NDS scheme, and

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Speaker 2: one section called fully accessible. The vacancy rates are over

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Speaker 2: fifty percent and it can take up to six months

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Speaker 2: for a quarter of those properties to be out to somebody.

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Speaker 2: So that sort of vacancy rate generally isn't factored in

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Speaker 2: it in the cash flow. It's assuming that or one

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Speaker 2: hundred percent of the times that the property is tenanted

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Speaker 2: to get your double digit gross rental yield. And the

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Speaker 2: other thing to remember is that it's the NDIS participant

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Speaker 2: that is allocated the money from the scheme. It's not

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Speaker 2: guaranteed from the government over the particular property. So if

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Speaker 2: you don't have NDIS participants who want to rent your property,

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Speaker 2: you're not going to get anything from the government. It's

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Speaker 2: just going to stay vacant. You're not going to earn

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Speaker 2: a cent. So location is really really important. So what

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Speaker 2: I sort of determined out of my research was two things.

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Speaker 2: One is that you need to understand where the demand

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Speaker 2: is for NDIS properties, and you need to get your

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Speaker 2: cash flow forecasts right because sometimes the people who promote

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Speaker 2: the NDIS property investments they're a little bit creative, you

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Speaker 2: could say, with the accounting and the forecast because.

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Speaker 1: They give the oppression their government sanctioned and they're not right.

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Speaker 1: They're just pitching into a government scheme and helping there again,

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Speaker 1: that's it.

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Speaker 2: And assic have come out and said that, hey, you know,

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Speaker 2: watch out if people are saying that this is a

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Speaker 2: government certified scheme or subsidized scheme, you don't run the

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Speaker 2: other direction, because in reality it's not. There are grants

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Speaker 2: through the NDIS scheme to help people with accommodation. But again,

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Speaker 2: just because you have a property that's accredited to be

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Speaker 2: eligible to have people under the NDA scheme rented doesn't

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Speaker 2: guarantee you anything. You need to be in the right location,

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Speaker 2: have the right management agency who can help you place

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Speaker 2: people in there. And just one last quick thing is

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Speaker 2: that with the four different categories of disability accommodation, there's

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Speaker 2: different payments that the government make. And I've seen in

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Speaker 2: some forecasts where the property firm have assumed one hundred

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Speaker 2: percent of the occupancy would be from the high physical support,

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Speaker 2: which gets the highest payment from from the government, whereas

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Speaker 2: in reality assume they assume assume the very best, but

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Speaker 2: in reality it's about a quarter of the All of

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Speaker 2: the accommodation is for that high physical support, So it's

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Speaker 2: misleading to project one hundred percent of the mental income

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Speaker 2: from that higher payment. So again, just doing your research,

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Speaker 2: you can make good money from it, but you know

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Speaker 2: it again goes back to that if it's too good

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Speaker 2: to be true, it usually is type things, So there's

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Speaker 2: a lot of work involved if you want to make good.

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Speaker 1: It's very, very disappointing because I'm sure many listeners would

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Speaker 1: earnestly see, gosh, that be good. If you could do

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Speaker 1: that invest in this, it would actually be impact investing virtually,

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Speaker 1: and you would get a reward. So just for those

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Speaker 1: who stick with it, or stick with the notion of

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Speaker 1: those four categories, is there a category that is you would.

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Speaker 2: Think the most middle category, which I think is called

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Speaker 2: robust or the fully accessible one that seems to be

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Speaker 2: where the majority of the demand is. So that was

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Speaker 2: the sort of the safer place to be in withinside

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Speaker 2: of the NDIS scheme. So I absolutely agree for you

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Speaker 2: that it is great social invest in it. It has

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Speaker 2: a good feel about it that you're purchasing an investment

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Speaker 2: property that has benefits to the broader community by housing

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Speaker 2: people with disabilities. However, I feel the big problem is

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Speaker 2: that because the property sector in general isn't regulated by ACIK,

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Speaker 2: there's too much sort of eagerness with the promotion of it,

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Speaker 2: and I think sometimes the claims that are being made

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Speaker 2: aren't fully factual or they're being exaggerated a bit, which

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Speaker 2: then leads to people being disappointed. Which otherwise is still

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Speaker 2: a decent investment, but not as good as what was

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Speaker 2: being hyped it up to be.

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Speaker 1: Okay, very good, we're very well explained. Disappointing, as so

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Speaker 1: many things are in relation to the NDIS. I mean, really,

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Speaker 1: if they had sculpt this out properly at the start,

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Speaker 1: in rigorous fashion, and had allowed and had looked forward

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Speaker 1: and said, if it could go wrong here, is there

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Speaker 1: any chance at all that a property developer might exaggerate

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Speaker 1: the scheme? And had you know, really had it ironclad,

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Speaker 1: then this wouldn't have happened. Then wouldn't be warning about

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Speaker 1: a government scheme which is just you know, absolute inverse

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Speaker 1: of what should have happened here. Anyway, all right, we

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Speaker 1: will leave that when we would take sure a break,

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Speaker 1: we were back in a moment with some great pieces

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Speaker 1: of correspondence, some very good questions, some very cheeky questions

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Speaker 1: to back in a moment. Hello, and welcome back to

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Speaker 1: the Australian's Money Puzzle podcast James Kirby with James Gerard.

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Speaker 1: We've got some really good questions. First questions from Andrew.

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Speaker 1: Would actually read the first question, James, can you see

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Speaker 1: you there?

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Speaker 2: I can, It'd be my pleasure. So Andrew asks there

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Speaker 2: was a comment from a Neil about the notion of

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Speaker 2: limiting negative gear into one property or one million dollar value.

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Speaker 2: I know you were very busy with the budget at

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Speaker 2: the time, but feel like you went over this a

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Speaker 2: little bit too quickly. I think there is a real

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Speaker 2: opportunity in there for discussion. Surely anyone with two or

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Speaker 2: more investment properties, or owns a single high grade investment

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Speaker 2: property would fall outside the quote unquote mum and dad investor,

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Speaker 2: which is the usual cohort politicians claim that they're trying

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Speaker 2: to protect it. Sounds like the tax change that might

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Speaker 2: actually work politically and financially. The only sticking point I

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Speaker 2: can see is if the one million dollars is the

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Speaker 2: right amount across all of Australia, I should be could

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Speaker 2: be saying that it's cheaper to buy a property in

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Speaker 2: Hobart then it's in Melbourne for example, And how it

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Speaker 2: could be indexed to remain fair into the future. What

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Speaker 2: do you reckon, James?

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Speaker 1: I don't know. I wondered if he means a million

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Speaker 1: in equity? You know I could have I could have

433
00:23:25,440 --> 00:23:27,719
Speaker 1: a TV piece of equity on a million dollar property.

434
00:23:27,720 --> 00:23:29,720
Speaker 1: Am I gone? Is it all over for me already?

435
00:23:29,760 --> 00:23:32,760
Speaker 1: On the on that basis, Andrew and all the Andrews

436
00:23:32,760 --> 00:23:36,359
Speaker 1: out there, this is never advice on the information. It's

437
00:23:36,520 --> 00:23:41,040
Speaker 1: very hard to know how they might restrain or reform

438
00:23:41,119 --> 00:23:44,840
Speaker 1: negative gearing. It is not impossible, but it's take it

439
00:23:44,880 --> 00:23:48,560
Speaker 1: for granted, it's politically very difficult. Pulcating could manage it.

440
00:23:48,600 --> 00:23:51,000
Speaker 1: When Portkating was managing just about everything under the sun.

441
00:23:51,080 --> 00:23:54,360
Speaker 1: He couldn't do it, and he brought it back. So

442
00:23:54,400 --> 00:23:58,040
Speaker 1: that's the political backdrop. And then you have the fact

443
00:23:58,040 --> 00:24:00,159
Speaker 1: that there's too manyon people already engaged in property and

444
00:24:00,200 --> 00:24:02,760
Speaker 1: they would have to be I suppose going for through

445
00:24:02,800 --> 00:24:08,200
Speaker 1: the system. It could of course, it could be modeled

446
00:24:08,400 --> 00:24:12,679
Speaker 1: and capped in the fashion that super is capped, so

447
00:24:12,720 --> 00:24:15,119
Speaker 1: it's not impossible, and I would just leave it at that.

448
00:24:15,200 --> 00:24:17,520
Speaker 1: How you actually do it will be difficult, But I

449
00:24:17,520 --> 00:24:20,639
Speaker 1: think you'd have to zone in on the equity the

450
00:24:20,680 --> 00:24:24,320
Speaker 1: person has rather than the value of the property, because

451
00:24:24,320 --> 00:24:26,439
Speaker 1: the value of the properties could be multiple of the

452
00:24:26,440 --> 00:24:28,800
Speaker 1: equity be have. What do you think, James g.

453
00:24:29,520 --> 00:24:32,800
Speaker 2: Every time negative gearing and changes come up, my mind

454
00:24:32,960 --> 00:24:37,480
Speaker 2: cast back to Bill Shorter. Any of the unlosable elected

455
00:24:38,240 --> 00:24:42,520
Speaker 2: highly politically unpopular to make any changes to the tax

456
00:24:42,600 --> 00:24:47,720
Speaker 2: benefits that Mum and Dad property investors generate. Okay, it's

457
00:24:47,720 --> 00:24:50,760
Speaker 2: a really difficult one. I don't think there will be

458
00:24:50,840 --> 00:24:54,520
Speaker 2: any change because the federal politicians know they'll be out

459
00:24:54,560 --> 00:24:56,880
Speaker 2: of power the next election if they do something like that.

460
00:24:57,440 --> 00:25:00,800
Speaker 2: But you know that it does make sense because we

461
00:25:00,840 --> 00:25:02,720
Speaker 2: do have caps for a lot of things. We have

462
00:25:02,760 --> 00:25:05,879
Speaker 2: caps of superinhoation, so it makes sense. You know, we

463
00:25:05,920 --> 00:25:08,320
Speaker 2: have caps for the age pension as well. There's caps

464
00:25:08,320 --> 00:25:10,720
Speaker 2: for taxation and and other government benefits, so it makes

465
00:25:10,720 --> 00:25:12,520
Speaker 2: sense that there is some sort of ceiling. I feel

466
00:25:12,520 --> 00:25:15,320
Speaker 2: a million dollars is too low. You buy average investment

467
00:25:15,359 --> 00:25:18,000
Speaker 2: property in Sydney or Melbourne, it's going to be close

468
00:25:18,040 --> 00:25:20,439
Speaker 2: to or exceed a million dollars, whereas you buy something

469
00:25:20,480 --> 00:25:22,800
Speaker 2: in I had to client buy an investment property in

470
00:25:22,880 --> 00:25:25,600
Speaker 2: Rockhampton in Queensland, three bedroom house, thousand square meters of

471
00:25:25,640 --> 00:25:28,480
Speaker 2: land last week three hundred thousand dollars. You can buy

472
00:25:28,520 --> 00:25:31,240
Speaker 2: four of those or one property in Sydney or Melbourne.

473
00:25:31,280 --> 00:25:34,920
Speaker 1: How about that? What's then sery like in Rocky pretty low.

474
00:25:35,040 --> 00:25:37,080
Speaker 2: I don't know what's driving that market, but I suspect

475
00:25:37,119 --> 00:25:40,040
Speaker 2: it's probably similar to other places that have done really

476
00:25:40,080 --> 00:25:43,680
Speaker 2: well in recent years, like Perth, which is sounds a

477
00:25:43,680 --> 00:25:47,080
Speaker 2: little bit silly, but I think it's just the thinking

478
00:25:47,160 --> 00:25:49,280
Speaker 2: behind it is that people are looking outside of their

479
00:25:49,320 --> 00:25:52,159
Speaker 2: own capital city as it becomes expensive it's expensive if

480
00:25:52,160 --> 00:25:54,440
Speaker 2: you live in Sydney or Melbourne. So they go, where

481
00:25:54,480 --> 00:25:55,800
Speaker 2: can I buy something cheap?

482
00:25:55,840 --> 00:25:56,760
Speaker 1: And previously it.

483
00:25:56,680 --> 00:25:59,600
Speaker 2: Was Adelaide, it was Hobard, it was Perth and now

484
00:25:59,640 --> 00:26:01,080
Speaker 2: those my it's have gone up again. It's not so

485
00:26:01,160 --> 00:26:04,520
Speaker 2: cheap an YouMore so Rockhampton your turn to shine?

486
00:26:04,840 --> 00:26:08,520
Speaker 1: There you go cascading effect. Okay, yep, yeah, Well logically

487
00:26:09,280 --> 00:26:12,280
Speaker 1: I can see what people are doing, okay, Phil asks

488
00:26:12,359 --> 00:26:16,040
Speaker 1: I keep hearing stories about unfair the new three million

489
00:26:16,080 --> 00:26:19,960
Speaker 1: dollars superannuation cap is because it introduces the concept of

490
00:26:20,119 --> 00:26:24,400
Speaker 1: taxing people on realized gains on their superasset. My simple

491
00:26:24,480 --> 00:26:30,520
Speaker 1: retort is, get over it, folks. The government here is

492
00:26:30,600 --> 00:26:33,200
Speaker 1: clearly intending to have no one with the balance over

493
00:26:33,280 --> 00:26:36,840
Speaker 1: three million. Yep, yep, no problem with that statement at all, Phil.

494
00:26:38,800 --> 00:26:41,080
Speaker 1: I think I put it to Julie Dolan, head of

495
00:26:41,320 --> 00:26:45,680
Speaker 1: SMSFT KPMG, last week, which was like, really, this cap,

496
00:26:45,760 --> 00:26:48,560
Speaker 1: in a way, it's basically saying we don't want you

497
00:26:48,600 --> 00:26:50,760
Speaker 1: to have more than three million super It's not a

498
00:26:50,920 --> 00:26:54,760
Speaker 1: it's not a cap, but it's effectively so. And it's

499
00:26:55,320 --> 00:26:57,280
Speaker 1: not formally a cap, but it will work as one.

500
00:26:57,960 --> 00:26:59,679
Speaker 1: And I think what we will see, of course, as

501
00:26:59,680 --> 00:27:03,000
Speaker 1: people will be money all over the place to ensure

502
00:27:03,000 --> 00:27:04,639
Speaker 1: that they're not in there. And the only people who

503
00:27:04,720 --> 00:27:07,520
Speaker 1: might get stuck up people with extraordinary amounts of the

504
00:27:07,520 --> 00:27:12,240
Speaker 1: super and they are obviously being targeted and they are

505
00:27:12,359 --> 00:27:19,440
Speaker 1: obviously not going to get enormous public support. Okay, last

506
00:27:19,480 --> 00:27:22,520
Speaker 1: question is from Michael. You want to read that one.

507
00:27:22,920 --> 00:27:26,000
Speaker 2: Yes, my wife and I both retired in our early sixties,

508
00:27:26,000 --> 00:27:29,159
Speaker 2: although our financial advisor continues to suggest managed funds and

509
00:27:29,200 --> 00:27:32,760
Speaker 2: more recently are separately managed to account consisting of direct

510
00:27:32,760 --> 00:27:36,680
Speaker 2: shares ETFs and managed funds with a quote unquote growth profile.

511
00:27:37,040 --> 00:27:39,679
Speaker 2: I question whether a simple strategy of investing in a

512
00:27:39,720 --> 00:27:42,440
Speaker 2: small number of passive index funds such as the ASX

513
00:27:42,440 --> 00:27:44,760
Speaker 2: two hundred or the S and P five hundred would

514
00:27:44,800 --> 00:27:48,040
Speaker 2: provide just as good or even better returns at a

515
00:27:48,119 --> 00:27:50,880
Speaker 2: lower cost. What are your thoughts.

516
00:27:50,760 --> 00:27:55,320
Speaker 1: Well, these financial advisors are going to watch them so closely. Look,

517
00:27:55,359 --> 00:27:59,239
Speaker 1: we don't know any Michaels particular circumstance, and again as

518
00:27:59,280 --> 00:28:05,720
Speaker 1: to say that this is advice, however, they're both retired. No,

519
00:28:07,240 --> 00:28:10,240
Speaker 1: so I don't know why there's this wind up for

520
00:28:10,359 --> 00:28:14,360
Speaker 1: growth if you're both retired you would imagine income is

521
00:28:14,400 --> 00:28:20,879
Speaker 1: the primary driver there. And I don't know what exactly

522
00:28:21,440 --> 00:28:25,600
Speaker 1: was agreed between everybody, but a simple strategy of investing

523
00:28:25,600 --> 00:28:31,439
Speaker 1: in passive index funds underpinning a portfolio would seem to

524
00:28:31,440 --> 00:28:34,800
Speaker 1: be perfectly sensible to me in retirement. We don't know, right,

525
00:28:34,840 --> 00:28:37,520
Speaker 1: we don't know, But just talking in very general terms,

526
00:28:38,000 --> 00:28:40,880
Speaker 1: what do you think of the of the suggestion that

527
00:28:40,920 --> 00:28:43,680
Speaker 1: the that you could just passively invest in ets rather

528
00:28:43,720 --> 00:28:49,120
Speaker 1: than setting up all these new growth focused vehicles in retirement.

529
00:28:50,040 --> 00:28:52,200
Speaker 2: Yes, it's a great question from Michael. It's a healthy

530
00:28:52,280 --> 00:28:55,160
Speaker 2: level of cynicism about the structure that he has and

531
00:28:55,240 --> 00:28:59,800
Speaker 2: being suggested suggested. I guess I let let you all.

532
00:28:59,800 --> 00:29:02,440
Speaker 2: This is into a little secret in the financial services sector,

533
00:29:02,440 --> 00:29:06,040
Speaker 2: and it's that the SMAs A separately managed to counts

534
00:29:06,840 --> 00:29:08,680
Speaker 2: one of the biggest routs going around. So if your

535
00:29:08,720 --> 00:29:12,920
Speaker 2: financial advisor is recommended one, have a think about it,

536
00:29:12,960 --> 00:29:16,160
Speaker 2: because you hit with four layers of fees.

537
00:29:16,480 --> 00:29:19,120
Speaker 1: I have always thought so, James, I've always thought so.

538
00:29:19,480 --> 00:29:22,080
Speaker 1: Every time someone explanded to me, I just said, I

539
00:29:22,080 --> 00:29:24,320
Speaker 1: should actually have of course I should have gone and

540
00:29:24,360 --> 00:29:28,880
Speaker 1: done something, honest, But they seem so arcane and so

541
00:29:29,400 --> 00:29:32,240
Speaker 1: to me, I just couldn't see the attraction. But just

542
00:29:32,760 --> 00:29:36,160
Speaker 1: to be fair to all concerned, what is the alleged

543
00:29:36,200 --> 00:29:39,560
Speaker 1: attraction of the self managed separately managed account?

544
00:29:39,680 --> 00:29:44,400
Speaker 2: Yeah, the alleged attraction is that your financial advisor who's

545
00:29:44,440 --> 00:29:48,840
Speaker 2: charging you a fee, will recommend a separately managed account manager,

546
00:29:49,000 --> 00:29:51,680
Speaker 2: So they're basically outsourcing their function saying it, Look, I'm

547
00:29:51,720 --> 00:29:53,640
Speaker 2: your financial advisor. I can talk to you about state

548
00:29:53,680 --> 00:29:56,200
Speaker 2: planning and other things, but I'm not an investment experts,

549
00:29:56,200 --> 00:29:58,360
Speaker 2: So we're going to pay this other company to manage

550
00:29:58,360 --> 00:30:00,840
Speaker 2: your portfolio. So this other company you will run the SMA.

551
00:30:01,360 --> 00:30:04,160
Speaker 2: They'll charge a fee, and then but they won't directly

552
00:30:04,160 --> 00:30:06,239
Speaker 2: invest in two shares. Most of the time, they'll go

553
00:30:06,280 --> 00:30:09,600
Speaker 2: buy managed funds and ETFs, which both have fees as well,

554
00:30:09,760 --> 00:30:12,040
Speaker 2: and they'll run the separately managed to count through a

555
00:30:12,040 --> 00:30:14,680
Speaker 2: platform which also has a platform cost. So that's where

556
00:30:14,720 --> 00:30:17,520
Speaker 2: your four different costs come in. So you sort of

557
00:30:17,640 --> 00:30:22,800
Speaker 2: around three percent outgoings from day dot before, you're sort

558
00:30:22,800 --> 00:30:25,360
Speaker 2: of making anything behind the ball. So if you wanted

559
00:30:25,360 --> 00:30:28,640
Speaker 2: to simplify things, you would just go for what you said,

560
00:30:28,720 --> 00:30:32,360
Speaker 2: the simple strategy of a couple of index ETFs that

561
00:30:32,440 --> 00:30:36,000
Speaker 2: get the asx the SMP five hundred, maybe the property

562
00:30:36,040 --> 00:30:39,880
Speaker 2: sector as well, and then some bond ETFs and your

563
00:30:39,880 --> 00:30:42,400
Speaker 2: total cost is going to be less than half a percent.

564
00:30:42,480 --> 00:30:45,120
Speaker 2: So again, anyone who has an SMA, go ask your

565
00:30:45,160 --> 00:30:47,920
Speaker 2: financial advisor what exactly are you doing because they can't

566
00:30:48,000 --> 00:30:50,880
Speaker 2: make changes on it. That's what the SMA manages for.

567
00:30:50,960 --> 00:30:53,160
Speaker 2: So if you're paying the advisor fees, make sure it's

568
00:30:53,160 --> 00:30:56,320
Speaker 2: not for the investment management side if you're in an SMA, So.

569
00:30:56,240 --> 00:30:58,640
Speaker 1: If you're paying four or five times the fees, it

570
00:30:58,680 --> 00:31:00,520
Speaker 1: would want to be kicking it out of the park

571
00:31:01,320 --> 00:31:06,080
Speaker 1: to make sense. It seems to me broadly. Okay, well,

572
00:31:06,160 --> 00:31:09,120
Speaker 1: isn't that an interesting turn of events? That question turned

573
00:31:09,120 --> 00:31:11,880
Speaker 1: out to be very juicy? Indeed, Thank you very much, Michael,

574
00:31:11,920 --> 00:31:14,680
Speaker 1: and thank you everybody who sent in questions to speak

575
00:31:14,680 --> 00:31:18,240
Speaker 1: they're great questions. Keep them rolling, Thanks very much, James.

576
00:31:18,360 --> 00:31:21,480
Speaker 1: Everyone's looking forward to you taking the week of next

577
00:31:21,480 --> 00:31:24,480
Speaker 1: week on the show, and I know you always get

578
00:31:24,480 --> 00:31:27,640
Speaker 1: interesting guests so they'd hear from you, So thanks for today.

579
00:31:28,120 --> 00:31:31,160
Speaker 2: That might pleasure And everyone's sent through some questions, so

580
00:31:31,240 --> 00:31:33,040
Speaker 2: we've got lots of interesting things as always, so have

581
00:31:33,080 --> 00:31:34,840
Speaker 2: a chat about let's next week and I look forward

582
00:31:34,880 --> 00:31:35,960
Speaker 2: to chatting to everyone.

583
00:31:35,960 --> 00:31:38,160
Speaker 1: Then I leave plenty in the camp for you, James,

584
00:31:38,320 --> 00:31:41,000
Speaker 1: all right, and in any event, let's have some more.

585
00:31:41,800 --> 00:31:44,560
Speaker 1: The money puzzle at the Australian dot com dot au

586
00:31:44,920 --> 00:31:46,600
Speaker 1: is the met Talk to you soon,