1 00:00:07,720 --> 00:00:10,760 Speaker 1: Hello, and welcome to the Australians Money Puzzled podcast. I'm 2 00:00:10,880 --> 00:00:14,880 Speaker 1: James Kirkby. Welcome aboard everybody. Now, the property market is 3 00:00:15,160 --> 00:00:20,680 Speaker 1: clearly improving, rebounding, especially in the larger cities, especially at 4 00:00:21,200 --> 00:00:23,919 Speaker 1: entry level prices. But one of the things we discovered 5 00:00:24,360 --> 00:00:28,840 Speaker 1: on the show recently was the alarming loss facebine investors 6 00:00:28,840 --> 00:00:32,640 Speaker 1: in apartment investments all over the country, particularly in the 7 00:00:32,720 --> 00:00:36,199 Speaker 1: larger cities. When I looked a little closer at this, 8 00:00:37,200 --> 00:00:40,879 Speaker 1: it became clear that many of these apartments were or 9 00:00:40,920 --> 00:00:45,080 Speaker 1: had been bought off the plan, something we need to 10 00:00:45,120 --> 00:00:47,240 Speaker 1: catch up on. Basically on the show, we've never really 11 00:00:47,280 --> 00:00:49,519 Speaker 1: looked at this properly, and I think I need to 12 00:00:49,560 --> 00:00:53,600 Speaker 1: speak to an financial advisor who is over property rather 13 00:00:53,600 --> 00:00:56,280 Speaker 1: than somebody inside property on this and my guest today 14 00:00:56,440 --> 00:00:59,720 Speaker 1: is ideal for the exercise. It's James Gerard of financial 15 00:01:00,280 --> 00:01:02,160 Speaker 1: dot com dot U. Hi, James, how are you. 16 00:01:02,360 --> 00:01:04,640 Speaker 2: I'm doing very well, James, Thank you for having me on. 17 00:01:04,760 --> 00:01:07,679 Speaker 1: Great to have you on. We have talked a course 18 00:01:08,000 --> 00:01:10,240 Speaker 1: about just about everything over the years, but we haven't 19 00:01:10,240 --> 00:01:14,720 Speaker 1: talked on air about buying off the plan. But just 20 00:01:14,760 --> 00:01:18,600 Speaker 1: to introduce it, it cut my eye, how often they 21 00:01:18,600 --> 00:01:23,520 Speaker 1: were mentioned in this context, possibly because they are more 22 00:01:23,680 --> 00:01:27,600 Speaker 1: likely to be newish apartments are newly built in the 23 00:01:27,720 --> 00:01:34,080 Speaker 1: larger towers and complexes in cosmopolitan cities. But I suppose 24 00:01:34,080 --> 00:01:38,039 Speaker 1: straight up in terms of buying off the plan, why 25 00:01:38,080 --> 00:01:40,640 Speaker 1: on earth do people do it? Anyway? I think this 26 00:01:40,680 --> 00:01:42,600 Speaker 1: is the best way into it. Why would you? What 27 00:01:42,800 --> 00:01:44,440 Speaker 1: is the value proposal? 28 00:01:44,720 --> 00:01:47,120 Speaker 3: Yeah, it's interesting, and to put a kV out there, 29 00:01:47,160 --> 00:01:49,560 Speaker 3: I'm not a big fan of off the plan properties, 30 00:01:49,600 --> 00:01:52,760 Speaker 3: but there are some reasons, valid reasons why people would 31 00:01:52,800 --> 00:01:55,240 Speaker 3: pursue this type of purchase. So the first one is 32 00:01:55,280 --> 00:01:58,000 Speaker 3: that you lock in the price. Now by nature of 33 00:01:58,000 --> 00:02:00,280 Speaker 3: off the plane, you're buying off the plans. I think 34 00:02:00,280 --> 00:02:03,480 Speaker 3: that hasn't been built yet. You agree to it. There's 35 00:02:03,520 --> 00:02:05,880 Speaker 3: a contract that you sign, you leave a deposit, and 36 00:02:05,920 --> 00:02:08,720 Speaker 3: then the property will be constructed, which could be anywhere 37 00:02:08,720 --> 00:02:11,400 Speaker 3: from one to three years from the date of when 38 00:02:11,480 --> 00:02:15,639 Speaker 3: you agree to proceed. So that means that you agree 39 00:02:15,639 --> 00:02:17,800 Speaker 3: on the price today. But if the property market's moving 40 00:02:17,960 --> 00:02:20,920 Speaker 3: upwards by the time the place is being completed, you 41 00:02:20,919 --> 00:02:22,880 Speaker 3: could be sitting on a paper profit. And I've actually 42 00:02:22,880 --> 00:02:25,760 Speaker 3: seen that a couple of times in Sydney and Melbourne, 43 00:02:25,760 --> 00:02:28,400 Speaker 3: where people have committed to a property off the plan, 44 00:02:28,919 --> 00:02:31,280 Speaker 3: it comes two and a half years later and it's 45 00:02:31,320 --> 00:02:33,760 Speaker 3: ready to complete and they go, well, i'd actually want 46 00:02:33,800 --> 00:02:36,240 Speaker 3: to buy it. I want to sell it. And then 47 00:02:36,280 --> 00:02:38,000 Speaker 3: they can just sell it to somebody else and say 48 00:02:38,000 --> 00:02:40,200 Speaker 3: they paid seven hundred thousand, it might be worth eight 49 00:02:40,280 --> 00:02:43,080 Speaker 3: hundred thousand dollars. They just bank that profit and all 50 00:02:43,080 --> 00:02:45,000 Speaker 3: they've tied up is five or ten percent deposit for 51 00:02:45,040 --> 00:02:45,520 Speaker 3: that period. 52 00:02:45,880 --> 00:02:50,440 Speaker 1: So what it's best then in a rising market, it 53 00:02:50,480 --> 00:02:55,000 Speaker 1: has clear advantages that you capture the rise and even 54 00:02:55,040 --> 00:02:58,040 Speaker 1: in the process of when it's been built, you are 55 00:02:58,080 --> 00:03:01,399 Speaker 1: actually gaining money. So let's just look at the pros. 56 00:03:01,480 --> 00:03:06,239 Speaker 1: So that's an obvious pro that you can get in early. 57 00:03:06,280 --> 00:03:10,639 Speaker 1: There are exemptions and tax breaks and stamp duty attractions. 58 00:03:10,680 --> 00:03:13,160 Speaker 3: That's right, James, depending on the state that you live 59 00:03:13,200 --> 00:03:14,920 Speaker 3: in or that you purchase in. More to the point, 60 00:03:15,040 --> 00:03:18,920 Speaker 3: there are exemptions or concessions on stamp duty when you 61 00:03:19,000 --> 00:03:22,399 Speaker 3: buy brand new properties. And that's because state governments want 62 00:03:22,440 --> 00:03:25,200 Speaker 3: to drive the economy. They want the building industry to 63 00:03:25,520 --> 00:03:28,120 Speaker 3: be employed, so they they'll provide an incentive for people 64 00:03:28,120 --> 00:03:30,920 Speaker 3: to buy brand new properties. And then when the property 65 00:03:30,960 --> 00:03:33,280 Speaker 3: is complete and you take ownership of it. If you 66 00:03:33,360 --> 00:03:36,560 Speaker 3: happen to be an investor, you would engage a quantity 67 00:03:36,640 --> 00:03:40,520 Speaker 3: surveyor to do a depreciation schedule of which you can 68 00:03:40,600 --> 00:03:44,440 Speaker 3: depreciate the building itself over a forty year period, and 69 00:03:44,480 --> 00:03:47,280 Speaker 3: then you can build so depreciate the stuff inside it, 70 00:03:47,400 --> 00:03:49,760 Speaker 3: so the dishwasher, the blinds, all those type of things 71 00:03:49,840 --> 00:03:52,440 Speaker 3: over anywhere from a five to fifteen year period. 72 00:03:52,680 --> 00:03:56,320 Speaker 1: Can you how soon can you start that depreciation schedule? 73 00:03:56,400 --> 00:03:58,240 Speaker 1: Is it from when the building is officially open? 74 00:03:58,800 --> 00:03:59,280 Speaker 2: That's right? 75 00:03:59,360 --> 00:04:02,560 Speaker 3: Yeah, So when buildings complete and you take ownership of it, 76 00:04:02,720 --> 00:04:05,680 Speaker 3: sometimes the developer will provide you that schedule, but other 77 00:04:05,720 --> 00:04:07,880 Speaker 3: times you'll need to go engage a quantities of a 78 00:04:08,120 --> 00:04:10,280 Speaker 3: firm and then they'll provide you with the schedule. You'll 79 00:04:10,280 --> 00:04:13,840 Speaker 3: get this PDF document or a binded book, and then 80 00:04:13,880 --> 00:04:15,640 Speaker 3: you give that to your accountant and then they'll just 81 00:04:15,680 --> 00:04:19,240 Speaker 3: add these tax deductions, which for the average apartment that 82 00:04:19,279 --> 00:04:23,000 Speaker 3: costs a million dollars, you could be looking at maybe 83 00:04:23,440 --> 00:04:26,440 Speaker 3: seven to ten thousand for the fixtures and fit ins, 84 00:04:26,440 --> 00:04:28,479 Speaker 3: and then maybe four or five thousand a year for 85 00:04:28,560 --> 00:04:30,719 Speaker 3: the building itself, So it can that up to be 86 00:04:30,760 --> 00:04:32,160 Speaker 3: quite a big tax deduction. 87 00:04:31,960 --> 00:04:35,120 Speaker 1: Okay, But the specific attractions of buying off the plan 88 00:04:35,200 --> 00:04:38,200 Speaker 1: then is first of all, in a rising market, if 89 00:04:38,200 --> 00:04:40,120 Speaker 1: it takes three years to build and you buy your 90 00:04:40,160 --> 00:04:42,679 Speaker 1: apartment for whatever, five hundred and seven to fifty million, 91 00:04:42,880 --> 00:04:45,080 Speaker 1: and they go ten percent a year, you're actually capturing that. 92 00:04:45,080 --> 00:04:49,160 Speaker 1: You're going to capture that increase in value as it's 93 00:04:49,160 --> 00:04:53,720 Speaker 1: been constructed. That's one. Secondly, there are specific inducements, if 94 00:04:53,760 --> 00:04:57,520 Speaker 1: you like, sometimes from the developer, sometimes from the government. 95 00:04:57,680 --> 00:05:00,240 Speaker 1: Sometimes both are in place, or people who want get 96 00:05:00,240 --> 00:05:03,560 Speaker 1: into the market and mightn't get in easily in any 97 00:05:03,600 --> 00:05:07,960 Speaker 1: other avenue will come in here. What about these guarantees, 98 00:05:08,200 --> 00:05:12,600 Speaker 1: which at face value look attractive. So I see an 99 00:05:12,640 --> 00:05:17,920 Speaker 1: advertisement or I'm invited perhaps to a sales day in 100 00:05:17,960 --> 00:05:21,160 Speaker 1: a hotel or something, and there's a guarantee, I mean, 101 00:05:22,360 --> 00:05:24,000 Speaker 1: are they worth it? 102 00:05:24,120 --> 00:05:27,000 Speaker 3: The guarantee is very interesting, and they signal something to 103 00:05:27,080 --> 00:05:30,719 Speaker 3: me as a professional investor, Slasher advisor to explain what 104 00:05:30,760 --> 00:05:34,480 Speaker 3: the guarantee is. It's that you commit to purchase the 105 00:05:34,520 --> 00:05:38,200 Speaker 3: property for a certain price, and when the property completes, 106 00:05:38,520 --> 00:05:41,680 Speaker 3: the developer will say, look, if you can't find a tenant, 107 00:05:41,880 --> 00:05:45,600 Speaker 3: will guarantee to pay you rent for a period of time, 108 00:05:45,640 --> 00:05:48,800 Speaker 3: and that's usually three to six months at a certain rate. 109 00:05:49,240 --> 00:05:52,120 Speaker 3: And what that signals to me is that there is 110 00:05:52,320 --> 00:05:56,160 Speaker 3: potentially uncertainty with regards to the demand for that property 111 00:05:56,240 --> 00:05:59,360 Speaker 3: when it's completed, to the point whether the developer needs 112 00:05:59,400 --> 00:06:01,640 Speaker 3: to date all this carrot in front of you and say, look, 113 00:06:01,680 --> 00:06:04,000 Speaker 3: you don't worry if you don't get a tenant straight away, 114 00:06:04,839 --> 00:06:07,600 Speaker 3: we'll cover that for a period of time. And that's 115 00:06:07,640 --> 00:06:10,400 Speaker 3: a really important point to note for investors, particularly where 116 00:06:10,440 --> 00:06:14,120 Speaker 3: they're buying interstate into high rise apartment complexes. Is that 117 00:06:14,640 --> 00:06:18,720 Speaker 3: say there's two hundred apartments in a complex or in 118 00:06:18,800 --> 00:06:22,159 Speaker 3: a little sector of apartments in a particular street, you 119 00:06:22,200 --> 00:06:24,400 Speaker 3: have to remember that a fair whack of those buyers 120 00:06:24,400 --> 00:06:26,719 Speaker 3: are going to be investors, and when the property completes, 121 00:06:26,800 --> 00:06:28,040 Speaker 3: it completes at the same time. 122 00:06:28,279 --> 00:06:31,520 Speaker 1: Yeah, right, so everybody is advertising in the same place 123 00:06:31,560 --> 00:06:32,400 Speaker 1: at the same time. 124 00:06:32,560 --> 00:06:36,080 Speaker 2: Ah Ye, that's right. Yeah, it's just simple supply and demand. 125 00:06:37,000 --> 00:06:39,920 Speaker 3: Unless it's a really booming area where there's a real 126 00:06:39,960 --> 00:06:42,279 Speaker 3: big demand for for tenants, you're going to end up 127 00:06:42,279 --> 00:06:44,520 Speaker 3: with that property that will be vacant. Because your property 128 00:06:44,600 --> 00:06:47,760 Speaker 3: is identical, like literally identical to dozens of other properties 129 00:06:47,760 --> 00:06:49,880 Speaker 3: that have completed at the same time. 130 00:06:50,120 --> 00:06:53,200 Speaker 1: Okay, so that is definitely a negative. What struck me 131 00:06:54,360 --> 00:06:57,800 Speaker 1: about these guarantees is I presume they're not government guarantees, right, 132 00:06:57,839 --> 00:06:59,400 Speaker 1: there are guarantees from. 133 00:06:59,200 --> 00:07:00,880 Speaker 2: The developer, that's correct. 134 00:07:01,240 --> 00:07:05,000 Speaker 1: So it seemed to me what's really crucial here? Should 135 00:07:05,000 --> 00:07:07,120 Speaker 1: you go in this direction if you wish to, And 136 00:07:07,200 --> 00:07:09,920 Speaker 1: I'll ask you when we're finished explaining it basically why 137 00:07:09,920 --> 00:07:13,080 Speaker 1: you don't like it at all, But it would seem 138 00:07:13,120 --> 00:07:15,360 Speaker 1: to me that if the guarantee, it's very important for 139 00:07:15,560 --> 00:07:18,160 Speaker 1: listeners to understand that the guarantees on these off the 140 00:07:18,200 --> 00:07:23,200 Speaker 1: plan deals are from the developer, not the government or 141 00:07:23,200 --> 00:07:25,800 Speaker 1: anyone else or the bank or whatever. It's the developer. 142 00:07:26,400 --> 00:07:29,040 Speaker 1: So how do you know if the developer is good 143 00:07:29,120 --> 00:07:29,520 Speaker 1: or bad? 144 00:07:30,400 --> 00:07:32,960 Speaker 3: Track record is a big one, looking at the history 145 00:07:33,000 --> 00:07:37,440 Speaker 3: of their completions, how long they've been in business as well, 146 00:07:37,560 --> 00:07:39,360 Speaker 3: So all the things that you would do when you're 147 00:07:39,920 --> 00:07:42,200 Speaker 3: buying a car or any sort of major purchase, just 148 00:07:42,280 --> 00:07:45,920 Speaker 3: do your research there on it. Because we're see in 149 00:07:45,960 --> 00:07:49,600 Speaker 3: the media so much about these foul or troublesome developments 150 00:07:49,600 --> 00:07:54,400 Speaker 3: and then post completion about clouding issues and structural issues. 151 00:07:54,440 --> 00:07:56,840 Speaker 3: So that's one of the negatives of buying a brand 152 00:07:56,880 --> 00:08:01,120 Speaker 3: new property is the uncertainty, and that's start contrast to 153 00:08:01,160 --> 00:08:04,600 Speaker 3: buy an established property that's been around for say fifteen years. 154 00:08:05,200 --> 00:08:08,560 Speaker 3: The difference there is that the foundations have settled. Any 155 00:08:08,720 --> 00:08:12,280 Speaker 3: issues that have come to light would have been done 156 00:08:12,320 --> 00:08:14,640 Speaker 3: so probably in that ten or field gay period, so 157 00:08:14,880 --> 00:08:16,640 Speaker 3: you're buying something with more certainty there. 158 00:08:16,760 --> 00:08:20,240 Speaker 1: So the developer is very important, and the track record 159 00:08:20,280 --> 00:08:22,640 Speaker 1: of the developer is very important, and the guarantee is 160 00:08:22,640 --> 00:08:25,440 Speaker 1: only as good as the developer is. So in many 161 00:08:25,480 --> 00:08:29,760 Speaker 1: ways face value, this all sounds mildly attractive. Tell us 162 00:08:29,760 --> 00:08:32,280 Speaker 1: what goes wrong with these I'm going to assume a 163 00:08:32,280 --> 00:08:34,240 Speaker 1: few things right. We're going to assume that developers are 164 00:08:34,240 --> 00:08:36,400 Speaker 1: selling them right. So there's a certain element of sales 165 00:08:36,920 --> 00:08:41,240 Speaker 1: pressure on these developments, the sales tactics. To some extent. 166 00:08:41,320 --> 00:08:45,800 Speaker 1: You are possibly you're part of a larger enterprise that 167 00:08:45,840 --> 00:08:48,040 Speaker 1: wants to sell the apartments, So we take that on board. 168 00:08:48,800 --> 00:08:50,120 Speaker 1: What might we not guess? 169 00:08:51,760 --> 00:08:54,000 Speaker 3: One of the things that I see is an issue 170 00:08:54,160 --> 00:08:56,160 Speaker 3: is that, and this is maybe not so much about 171 00:08:56,160 --> 00:08:58,600 Speaker 3: the developers but more about the purchaser, is that some 172 00:08:58,640 --> 00:09:01,839 Speaker 3: people will take a gamble when they buy brand new properties. 173 00:09:02,160 --> 00:09:05,199 Speaker 3: They're not in a position to actually settle an investment 174 00:09:05,240 --> 00:09:08,600 Speaker 3: property for say a million dollars, but they'll commit to 175 00:09:08,720 --> 00:09:10,680 Speaker 3: and off the plan property for a million dollars on 176 00:09:10,720 --> 00:09:13,120 Speaker 3: the basis that you don't need to get finance at 177 00:09:13,120 --> 00:09:14,880 Speaker 3: the time you sign the contract. You need to get 178 00:09:14,920 --> 00:09:18,080 Speaker 3: finance two months or two years sorry, down the track, 179 00:09:18,080 --> 00:09:21,240 Speaker 3: when the property completes. And so they're betting on their 180 00:09:21,240 --> 00:09:23,839 Speaker 3: own ability to be able to get finance, save more cash, 181 00:09:24,000 --> 00:09:26,719 Speaker 3: get better income over that two year period to then 182 00:09:26,800 --> 00:09:30,120 Speaker 3: be able to transact on the property. But outside of that, 183 00:09:30,320 --> 00:09:32,080 Speaker 3: as you said, it's that it's a bit of a 184 00:09:32,160 --> 00:09:36,240 Speaker 3: murky industry. It's not regulated by ASSEK, and you see 185 00:09:36,240 --> 00:09:38,160 Speaker 3: a lot of dubious dealings there. So a lot of 186 00:09:38,200 --> 00:09:40,840 Speaker 3: promotions of off the plan properties, a lot of under 187 00:09:40,840 --> 00:09:44,240 Speaker 3: the table deals with undisclosed commissions. So you have a 188 00:09:44,280 --> 00:09:48,160 Speaker 3: lot of property marketers trying to promote this place that 189 00:09:48,160 --> 00:09:50,240 Speaker 3: they're trying to sell you as the best with regards 190 00:09:50,320 --> 00:09:52,480 Speaker 3: to growth and livability and all these things. 191 00:09:52,640 --> 00:09:53,880 Speaker 1: These guys are on commissions. 192 00:09:53,920 --> 00:09:57,720 Speaker 3: Are there on commissions? Yeah, they're mainly on commission. So 193 00:09:57,800 --> 00:10:01,360 Speaker 3: the developer has a choice. They either market the properties 194 00:10:01,400 --> 00:10:03,880 Speaker 3: themselves to try and sell them, or they outsource it 195 00:10:03,960 --> 00:10:06,360 Speaker 3: and they'll put their hand up and say, hey, anybody 196 00:10:06,400 --> 00:10:09,680 Speaker 3: who can sell these apartments will pay you x percent. 197 00:10:09,800 --> 00:10:13,520 Speaker 3: And that x percent depends on where the property is. Interestingly, 198 00:10:13,559 --> 00:10:17,400 Speaker 3: if it's in Sydney Melbourne, the commissions are lower. They're 199 00:10:17,440 --> 00:10:21,160 Speaker 3: generally two or three percent. But if it's somewhere regional 200 00:10:21,840 --> 00:10:24,600 Speaker 3: it could be so like a to Womba property for example, 201 00:10:25,040 --> 00:10:27,280 Speaker 3: or an Ipswich property, then the commissions can be as 202 00:10:27,360 --> 00:10:28,360 Speaker 3: high as ten percent. 203 00:10:28,720 --> 00:10:33,199 Speaker 1: Right, Okay, that's worth knowing. That's worth knowing, all right. 204 00:10:33,320 --> 00:10:34,920 Speaker 1: So there's a couple of things. I think they were 205 00:10:34,920 --> 00:10:37,200 Speaker 1: really crucial for listeners who are looking at this area. 206 00:10:38,160 --> 00:10:41,280 Speaker 1: You know that, first of all, the person they are salespeople, 207 00:10:41,400 --> 00:10:44,079 Speaker 1: so you're asking salespeople's questions, but their intention is to 208 00:10:44,120 --> 00:10:46,719 Speaker 1: sell the apartment to you. They're they're not neutral observers. 209 00:10:46,880 --> 00:10:51,320 Speaker 1: The second thing is that the developer is the developer 210 00:10:51,360 --> 00:10:53,160 Speaker 1: to some extent, is your risk, right, because it's the 211 00:10:53,240 --> 00:10:57,960 Speaker 1: developer offers to guarantee not to mention issues around building itself, 212 00:10:58,120 --> 00:11:01,080 Speaker 1: whether the building is in good chef, et cetera. That's 213 00:11:01,080 --> 00:11:03,960 Speaker 1: a reputation issue, James. It all comes back to the 214 00:11:04,000 --> 00:11:06,600 Speaker 1: developer you're buying off the plan from. And how would 215 00:11:06,600 --> 00:11:09,319 Speaker 1: I know of one? Is is there anything someone was mentioning? 216 00:11:09,360 --> 00:11:14,040 Speaker 1: How if it developer changes their name every time, a 217 00:11:14,040 --> 00:11:17,959 Speaker 1: different company for every development, that's a warning signal. While 218 00:11:17,960 --> 00:11:19,959 Speaker 1: as if you have the same company for ten years 219 00:11:19,960 --> 00:11:21,640 Speaker 1: doing these but a track record and you can see 220 00:11:21,640 --> 00:11:23,320 Speaker 1: the ones they did in the past, and they're full 221 00:11:23,360 --> 00:11:27,040 Speaker 1: and they're buzzing, that's away in Is that a guide? 222 00:11:28,040 --> 00:11:29,760 Speaker 2: It is a guide to some degree. 223 00:11:30,080 --> 00:11:33,319 Speaker 3: Developers will trade generally it's the same name across different 224 00:11:33,360 --> 00:11:35,760 Speaker 3: developments they do. But what they will change is the 225 00:11:36,040 --> 00:11:39,800 Speaker 3: underlying entity that you're entering the contract with. So they 226 00:11:39,840 --> 00:11:43,320 Speaker 3: silo every development with a different company, and they do 227 00:11:43,360 --> 00:11:45,680 Speaker 3: that to limit their liability. So if there's a problem 228 00:11:45,679 --> 00:11:50,680 Speaker 3: with one, they sometimes the less reputable developers will do 229 00:11:50,760 --> 00:11:55,200 Speaker 3: some financial magic ry and then things will disappear, namely 230 00:11:55,240 --> 00:11:57,240 Speaker 3: them will disappear as directors of that company, and then 231 00:11:57,240 --> 00:11:59,960 Speaker 3: people are left in the lurch with defective building. 232 00:12:00,160 --> 00:12:03,480 Speaker 1: Okay, so their development could be in trouble, but their 233 00:12:03,520 --> 00:12:05,160 Speaker 1: developer would not be in trouble. 234 00:12:05,600 --> 00:12:06,000 Speaker 2: Correct. 235 00:12:06,040 --> 00:12:08,600 Speaker 3: They have this entity set up solely for the purpose 236 00:12:08,640 --> 00:12:11,680 Speaker 3: of that development, and all of the developers assets and 237 00:12:11,720 --> 00:12:16,079 Speaker 3: income is going through other entities or generally held in 238 00:12:16,120 --> 00:12:18,800 Speaker 3: the name of their spouse. So it's very, very difficult 239 00:12:18,800 --> 00:12:20,800 Speaker 3: to be able to claw any money back from a 240 00:12:21,040 --> 00:12:24,520 Speaker 3: developer if something goes wrong without significant legal proceedings, which 241 00:12:24,520 --> 00:12:25,760 Speaker 3: obviously comes at a large cost. 242 00:12:26,160 --> 00:12:28,640 Speaker 1: It sounds pretty. It sounds pretty, I will say wild, 243 00:12:28,640 --> 00:12:30,440 Speaker 1: but it sounds like you're on your own out there. 244 00:12:30,679 --> 00:12:33,679 Speaker 1: You're very much on your own as an investor in 245 00:12:34,120 --> 00:12:39,120 Speaker 1: this space. So would you ever recommend someone goes near 246 00:12:39,520 --> 00:12:40,280 Speaker 1: buying off the plan. 247 00:12:41,000 --> 00:12:41,800 Speaker 3: I would. 248 00:12:42,040 --> 00:12:44,040 Speaker 2: It would have to be something quite unique. 249 00:12:44,360 --> 00:12:46,640 Speaker 3: I'd like to keep it simple when it comes to property, 250 00:12:46,679 --> 00:12:49,800 Speaker 3: and I look at supply and demand. Now, if this 251 00:12:50,040 --> 00:12:53,600 Speaker 3: off the plan property is somewhere very unique. So take 252 00:12:54,160 --> 00:12:56,960 Speaker 3: Barangaroo in Sydney for example, when they built the Crown 253 00:12:57,000 --> 00:13:00,840 Speaker 3: and they're offering residential apartments there, that's thing which there's 254 00:13:01,120 --> 00:13:04,240 Speaker 3: limited supply. You have a very unique view of the 255 00:13:04,760 --> 00:13:07,840 Speaker 3: Sydney Harbor Opera House, Harbor Bridge. So something like that, 256 00:13:07,960 --> 00:13:09,960 Speaker 3: I can say, Okay, well you're not going to have 257 00:13:10,480 --> 00:13:12,880 Speaker 3: ten other apartment blocks built around there. That's going to 258 00:13:13,440 --> 00:13:16,400 Speaker 3: sort of saturate the market. But if it's just another 259 00:13:16,440 --> 00:13:19,480 Speaker 3: apartment block, if it's just another house and land package 260 00:13:19,480 --> 00:13:21,920 Speaker 3: in this estate that was farmland a few years ago, 261 00:13:22,240 --> 00:13:24,199 Speaker 3: I have more hesitations there. And the other thing which 262 00:13:24,200 --> 00:13:26,440 Speaker 3: I would add is that when you buy a brand 263 00:13:26,480 --> 00:13:30,320 Speaker 3: new property, you're competing against overseas buyers who can only 264 00:13:30,360 --> 00:13:33,640 Speaker 3: buy brand new properties. So that plus all of the 265 00:13:34,040 --> 00:13:37,680 Speaker 3: commissions and charges and profits that are being made, means 266 00:13:37,840 --> 00:13:41,480 Speaker 3: generally that off the planned properties are much higher and 267 00:13:41,600 --> 00:13:45,320 Speaker 3: less value compared to an equivalent established property that's even 268 00:13:45,360 --> 00:13:46,760 Speaker 3: one years old or two years old. 269 00:13:47,280 --> 00:13:50,320 Speaker 1: So you have an advantage in that you can buy anything, 270 00:13:50,320 --> 00:13:53,839 Speaker 1: but the overseas buyer can't correct. Interesting, so of course 271 00:13:53,880 --> 00:13:56,320 Speaker 1: a lot of the marketing is overseas then for these towers, 272 00:13:56,640 --> 00:13:58,880 Speaker 1: and they're marketing in Singapore and Kyel. I mean I've 273 00:13:58,880 --> 00:14:02,000 Speaker 1: seen them in hotels in the many, many over many years, 274 00:14:02,040 --> 00:14:06,840 Speaker 1: and you realize how half the towers in the city centers, 275 00:14:06,920 --> 00:14:10,400 Speaker 1: especially Sydney and Melbourne, we're financed. How it all worked. 276 00:14:10,520 --> 00:14:13,640 Speaker 1: Very interesting, Okay, really really interesting subject. I'd love to 277 00:14:13,880 --> 00:14:17,120 Speaker 1: know what our listeners think of that, whether we were 278 00:14:17,160 --> 00:14:19,840 Speaker 1: fair on buying off the plant, if it is an 279 00:14:19,880 --> 00:14:23,560 Speaker 1: area that our listeners think is valid or to be 280 00:14:23,640 --> 00:14:34,960 Speaker 1: avoided really really interesting. We'll be back in a moment. Hello, 281 00:14:35,000 --> 00:14:37,760 Speaker 1: Welcome back to The Australian's Money Puzzle podcast. I'm James 282 00:14:37,840 --> 00:14:40,600 Speaker 1: Kirby with James Gerard Blancial Advisor dot com dot you. 283 00:14:41,000 --> 00:14:44,600 Speaker 1: Regular contributor of course to the wealth section of the Australian. 284 00:14:44,640 --> 00:14:47,960 Speaker 1: We both are and these issues are often and regularly 285 00:14:48,000 --> 00:14:52,520 Speaker 1: covered in the Australian. Speaking of that last weekend, I 286 00:14:52,560 --> 00:14:56,200 Speaker 1: came across something I thought was just absolutely amazing on 287 00:14:56,520 --> 00:14:59,720 Speaker 1: self managed super funds. Tim Tooey, who is not a 288 00:15:00,080 --> 00:15:02,880 Speaker 1: not in the managed super fund space, is not in 289 00:15:02,920 --> 00:15:06,000 Speaker 1: any way trying to promote him. He's a guy that 290 00:15:06,160 --> 00:15:08,120 Speaker 1: every now and again beans out these amazing reports. He 291 00:15:08,160 --> 00:15:10,720 Speaker 1: works with the Yara Capital, used to work with Goldman Sachs. 292 00:15:10,760 --> 00:15:13,480 Speaker 1: I remember he did a housing report one time which 293 00:15:13,560 --> 00:15:17,960 Speaker 1: was so spot on, so spot on, many years ago. 294 00:15:18,120 --> 00:15:20,360 Speaker 1: So he has this ability to cast his eye over 295 00:15:20,360 --> 00:15:23,080 Speaker 1: an area and he looked at smsfs and he came 296 00:15:23,160 --> 00:15:26,760 Speaker 1: to the conclusion, James, that they are considerably more successful 297 00:15:26,920 --> 00:15:31,080 Speaker 1: for investors than industry super funds or other big funds. 298 00:15:31,480 --> 00:15:35,800 Speaker 1: And he showed and he really laid it out how smsfs, 299 00:15:36,040 --> 00:15:42,120 Speaker 1: even on a straight asset allocation basis as investors are 300 00:15:42,160 --> 00:15:45,240 Speaker 1: more successful than big super funds. But when you add 301 00:15:45,280 --> 00:15:50,600 Speaker 1: in the tax aspect of smsfs, the after tax returns 302 00:15:50,640 --> 00:15:54,880 Speaker 1: of smsfs compared to big super were they were roughly 303 00:15:54,880 --> 00:15:58,720 Speaker 1: one third higher over a period of three years and 304 00:15:58,840 --> 00:16:02,000 Speaker 1: part then he went into why that was, and he 305 00:16:02,120 --> 00:16:05,520 Speaker 1: mentioned he mentioned the obvious things like that you have 306 00:16:05,600 --> 00:16:09,200 Speaker 1: this control, you can choose your allocations frank dividends in 307 00:16:09,240 --> 00:16:13,239 Speaker 1: the local shares, and he did say that the ability 308 00:16:13,360 --> 00:16:16,520 Speaker 1: to buy property directly was still a powerful issue for 309 00:16:16,840 --> 00:16:21,760 Speaker 1: smsfs and their out performance. It's really interesting because sms 310 00:16:21,840 --> 00:16:24,520 Speaker 1: putting property into SMSF gets such a hard time. It's 311 00:16:24,520 --> 00:16:29,120 Speaker 1: meant so difficult because the big banks withdrew from financing 312 00:16:29,160 --> 00:16:31,920 Speaker 1: that market, and because there's kind of a cloud over 313 00:16:32,000 --> 00:16:34,800 Speaker 1: it in that government's blow hot and code on it 314 00:16:34,840 --> 00:16:37,440 Speaker 1: and they don't really commit to it. There has been 315 00:16:37,480 --> 00:16:40,760 Speaker 1: threats that it would actually be completely repealed regularly, but 316 00:16:40,800 --> 00:16:44,320 Speaker 1: they never came to pass. Four people, James, who are 317 00:16:45,560 --> 00:16:51,320 Speaker 1: thinking about using an SMSF to finance a property investment, 318 00:16:52,440 --> 00:16:54,120 Speaker 1: do you know what they can do if the banks 319 00:16:54,120 --> 00:16:57,840 Speaker 1: are out of the business. How do you start the 320 00:16:57,960 --> 00:16:59,080 Speaker 1: for finance in that area. 321 00:16:59,600 --> 00:17:01,960 Speaker 3: Yeah, I'm the perfect person to speak about this. I'm 322 00:17:01,960 --> 00:17:03,920 Speaker 3: actually going through the process in the middle of at 323 00:17:03,920 --> 00:17:04,280 Speaker 3: the moment. 324 00:17:04,440 --> 00:17:07,359 Speaker 1: Okay, are you dealing with right? So how did you start, Like, 325 00:17:07,400 --> 00:17:09,200 Speaker 1: how did you even get a panel together? 326 00:17:09,480 --> 00:17:09,680 Speaker 2: Yeah? 327 00:17:09,720 --> 00:17:13,240 Speaker 3: So I went through a mortgage broker and maybe just 328 00:17:13,280 --> 00:17:15,800 Speaker 3: stepping back a little bit, the major banks pulled out 329 00:17:15,840 --> 00:17:18,239 Speaker 3: of the self managed super fund lending market, and this 330 00:17:18,280 --> 00:17:21,840 Speaker 3: is going back almost ten years ago because they saw 331 00:17:21,960 --> 00:17:24,840 Speaker 3: the risk of these properties. There was a lot of 332 00:17:24,840 --> 00:17:27,720 Speaker 3: off the plan properties being sold to mum and dad 333 00:17:27,760 --> 00:17:32,000 Speaker 3: investors who were convinced to set up a self managed 334 00:17:32,040 --> 00:17:34,640 Speaker 3: super fun and move out of their industry super funds 335 00:17:34,680 --> 00:17:37,200 Speaker 3: into a self managed buy this off the plan property, 336 00:17:37,640 --> 00:17:39,960 Speaker 3: and of course commissions paid to the people that were 337 00:17:39,960 --> 00:17:40,520 Speaker 3: promoting that. 338 00:17:40,760 --> 00:17:42,760 Speaker 1: So that is not good. It's not good to have 339 00:17:43,160 --> 00:17:46,160 Speaker 1: to open an SMS just to buy an investment property. 340 00:17:46,200 --> 00:17:48,280 Speaker 1: That is that is in some expent again, but that's it. 341 00:17:48,320 --> 00:17:51,520 Speaker 1: That's amst at its worst. That's the worst side of 342 00:17:51,560 --> 00:17:53,320 Speaker 1: the market. Yeah, okay, that's right. 343 00:17:53,520 --> 00:17:56,320 Speaker 3: The concentration risk is high where the majority of your 344 00:17:56,359 --> 00:17:59,040 Speaker 3: super is exposed to one property, and the banks were 345 00:17:59,040 --> 00:18:01,160 Speaker 3: looking at their loan book where they were self managed 346 00:18:01,200 --> 00:18:03,639 Speaker 3: super fund loans going geez, these properties are going down 347 00:18:03,680 --> 00:18:07,320 Speaker 3: in value and if the borrower defaults, we might lose 348 00:18:07,320 --> 00:18:10,760 Speaker 3: some money here. Because under superannuation law, the banks are 349 00:18:10,760 --> 00:18:14,120 Speaker 3: limited to what's called limited recourse. The loans are called 350 00:18:14,119 --> 00:18:18,359 Speaker 3: limited recourse borrowing arrangements or lrbas as an acronym, which 351 00:18:18,400 --> 00:18:21,760 Speaker 3: means that you can only as the blender, take back 352 00:18:21,800 --> 00:18:24,080 Speaker 3: that property. And if the property is going down, well, 353 00:18:24,119 --> 00:18:27,320 Speaker 3: then your loan is becoming risky if there's a default. 354 00:18:27,359 --> 00:18:29,200 Speaker 3: So the bank said, we don't need this risk. We're 355 00:18:29,240 --> 00:18:31,760 Speaker 3: getting out of the market. So the major banks all 356 00:18:31,920 --> 00:18:34,879 Speaker 3: stopped writing self managed super fund loans, which left the 357 00:18:34,920 --> 00:18:38,800 Speaker 3: second tier lenders as the primary lenders in that market. 358 00:18:38,920 --> 00:18:42,800 Speaker 3: And interest rates today, I think my rates high sevens, 359 00:18:42,840 --> 00:18:45,760 Speaker 3: but arranges anywhere from that sort of high sevens through 360 00:18:45,800 --> 00:18:49,359 Speaker 3: to mid nines as an interest rate, And you contrast 361 00:18:49,440 --> 00:18:53,560 Speaker 3: that to a normal non super investment loan which would 362 00:18:53,600 --> 00:18:55,880 Speaker 3: be below six percent. So you do have to pay 363 00:18:55,920 --> 00:18:58,520 Speaker 3: a premium because of the lack of competition there with 364 00:18:58,560 --> 00:18:59,120 Speaker 3: the lenders. 365 00:19:00,000 --> 00:19:04,600 Speaker 1: I used to pay a high rate to borrow for 366 00:19:04,880 --> 00:19:07,000 Speaker 1: your property inside the super fund. The highest rate in 367 00:19:07,040 --> 00:19:10,640 Speaker 1: the market because it's higher than commercial. It's it's exclusively 368 00:19:10,720 --> 00:19:14,159 Speaker 1: high for smsfs, and negative gearing is not as good, 369 00:19:14,240 --> 00:19:16,359 Speaker 1: right because the tax isn't as high, So the negative 370 00:19:16,359 --> 00:19:20,159 Speaker 1: gearing is diluted if you like. So why would anyone 371 00:19:20,200 --> 00:19:20,480 Speaker 1: do it? 372 00:19:21,040 --> 00:19:23,000 Speaker 3: Well, if I look at an investment property that I 373 00:19:23,040 --> 00:19:25,280 Speaker 3: buy my personal name, if I want to pay down 374 00:19:25,320 --> 00:19:29,240 Speaker 3: the principle I every dollar of income that I make, 375 00:19:29,320 --> 00:19:31,760 Speaker 3: I'm taxed forty seven percent, so I only have fifty 376 00:19:31,800 --> 00:19:33,679 Speaker 3: three cents in the dollar to then pay down that 377 00:19:33,760 --> 00:19:37,320 Speaker 3: investment property loan. If I contrast that to Super, depending 378 00:19:37,359 --> 00:19:39,359 Speaker 3: on my income, if it's above or below two hundred 379 00:19:39,359 --> 00:19:42,480 Speaker 3: and fifty thousand dollars, I'm taxed either fifteen percent or 380 00:19:42,520 --> 00:19:45,760 Speaker 3: thirty percent or my SUPER contributions, which means that more 381 00:19:45,880 --> 00:19:48,200 Speaker 3: of my after tax dollars can go to pay down 382 00:19:48,280 --> 00:19:51,080 Speaker 3: that same mortgage if it's in SUPER versus outside SUPER. 383 00:19:51,280 --> 00:19:53,200 Speaker 1: I suppose you have that terrific thing that you can 384 00:19:53,200 --> 00:19:57,400 Speaker 1: put a deposit out from your super fund, but you 385 00:19:57,400 --> 00:20:00,000 Speaker 1: you know, which is money you don't have hanging around. Basically, 386 00:20:00,040 --> 00:20:02,240 Speaker 1: most people don't have the deposit of an investment property 387 00:20:02,240 --> 00:20:03,800 Speaker 1: hanging around in their every day account. 388 00:20:04,040 --> 00:20:09,480 Speaker 3: Yeah, and so it helps people that have restrictions or 389 00:20:09,520 --> 00:20:13,199 Speaker 3: limits around their borrowing capacity personally, maybe they've purchased a 390 00:20:13,280 --> 00:20:15,760 Speaker 3: home and they've got a home loan and they don't 391 00:20:15,800 --> 00:20:19,119 Speaker 3: have the ability to purchase another property as an investment. 392 00:20:19,440 --> 00:20:23,400 Speaker 3: But interestingly, superannuation, when you apply for a loan, it's 393 00:20:23,440 --> 00:20:26,800 Speaker 3: assessed separately to your personal borrowing capacity, So you may 394 00:20:26,840 --> 00:20:29,440 Speaker 3: be capped out personally to buy a property, but you're 395 00:20:29,520 --> 00:20:32,000 Speaker 3: super fund if you were to set one up. How 396 00:20:32,000 --> 00:20:34,400 Speaker 3: they assess it is that they look at super contributions. 397 00:20:34,440 --> 00:20:38,159 Speaker 3: They look at is your employer putting in regular contributions 398 00:20:38,200 --> 00:20:40,119 Speaker 3: into your super account and it doesn't have to be 399 00:20:40,160 --> 00:20:41,760 Speaker 3: the self managed It could be that the retail or 400 00:20:41,840 --> 00:20:45,080 Speaker 3: the industry fund, which predates having a self managed super fund. 401 00:20:45,080 --> 00:20:48,159 Speaker 3: So they're just looking at the contribution history and they 402 00:20:48,320 --> 00:20:50,959 Speaker 3: use that for what we call serviceability. And then they 403 00:20:50,960 --> 00:20:53,600 Speaker 3: look at equity, so they look at how much you 404 00:20:53,680 --> 00:20:56,320 Speaker 3: have in your superannuation account and then based on those 405 00:20:56,320 --> 00:20:59,200 Speaker 3: two things, they'll make this independent assessment as to how 406 00:20:59,240 --> 00:21:01,879 Speaker 3: much you borrow inside of super. 407 00:21:01,960 --> 00:21:04,480 Speaker 2: So that's another benefit of buying property in super. 408 00:21:04,520 --> 00:21:07,840 Speaker 3: It unlocks in some cases the ability to move down 409 00:21:07,840 --> 00:21:09,960 Speaker 3: that path of purchasing another property where they couldn't do 410 00:21:10,000 --> 00:21:11,520 Speaker 3: it outside in their personal name. 411 00:21:11,640 --> 00:21:16,160 Speaker 1: Yeah, so it's entirely autonomous. Basically, it's it's an issue 412 00:21:17,320 --> 00:21:20,840 Speaker 1: your super fund has got is separated from you, and 413 00:21:20,960 --> 00:21:24,479 Speaker 1: they judge it on this fund wants to buy a 414 00:21:24,520 --> 00:21:26,600 Speaker 1: property and they want to look at the cash flows 415 00:21:26,600 --> 00:21:29,200 Speaker 1: into this fund, which would be your contributions obviously coming 416 00:21:29,240 --> 00:21:31,360 Speaker 1: in all the time. And if they're comfortable that there's 417 00:21:31,400 --> 00:21:33,840 Speaker 1: a that that is that cash flow is there, then 418 00:21:33,880 --> 00:21:36,000 Speaker 1: the service ability is there, then they can sign it 419 00:21:36,040 --> 00:21:42,280 Speaker 1: off regardless or autonomous of your personal finance circumstances, what's 420 00:21:42,320 --> 00:21:45,280 Speaker 1: going on with your your credit card or your mortgage 421 00:21:45,400 --> 00:21:49,560 Speaker 1: or whatever. That's well worth knowing. That's a very interesting 422 00:21:49,680 --> 00:21:52,800 Speaker 1: piece of information which I'm sure our listeners will now digest. 423 00:21:52,840 --> 00:21:54,639 Speaker 1: We will have a short break, we'll be back in 424 00:21:54,680 --> 00:22:08,800 Speaker 1: a second. Hello, Welcome back to The Australian's Money Puzzle podcast. 425 00:22:08,880 --> 00:22:12,320 Speaker 1: James Kirby here with James Girard. Well, we've been talking 426 00:22:12,400 --> 00:22:14,560 Speaker 1: buying off the plan, which I thought was pretty interesting. 427 00:22:14,640 --> 00:22:21,560 Speaker 1: I must say, ah, yes, I think there's a lot 428 00:22:21,600 --> 00:22:24,920 Speaker 1: of cons. You listed the pros and cons. I feel 429 00:22:24,920 --> 00:22:28,880 Speaker 1: there's a lot of cons basically working against buying off 430 00:22:28,880 --> 00:22:31,879 Speaker 1: the plan James on balance, and I also thought on 431 00:22:32,040 --> 00:22:35,320 Speaker 1: the smsfs, that's very interesting and it's also very interesting 432 00:22:35,359 --> 00:22:38,879 Speaker 1: to know, folks that the smsfs, which we talk about 433 00:22:38,920 --> 00:22:41,320 Speaker 1: all the time, and I know many of you have smsfs, 434 00:22:42,280 --> 00:22:44,160 Speaker 1: it's nice to know that it wasn't just this year 435 00:22:44,200 --> 00:22:47,000 Speaker 1: you did better than the big funds. You've done better. 436 00:22:47,080 --> 00:22:49,719 Speaker 1: It would seem for several years in a row if 437 00:22:49,760 --> 00:22:54,640 Speaker 1: we judge very deep dive done by Tim Toohey at 438 00:22:54,800 --> 00:22:57,280 Speaker 1: Yarra Capital, which you can have a look at. It's 439 00:22:57,280 --> 00:23:00,119 Speaker 1: on the web Arra Capital. Just have a look there 440 00:23:00,160 --> 00:23:04,280 Speaker 1: all right now, and you'll see he's quite persuasive arguments 441 00:23:04,320 --> 00:23:07,879 Speaker 1: about the power of SMS investments, which I thought was 442 00:23:08,000 --> 00:23:10,399 Speaker 1: very important James, that he didn't just say it was 443 00:23:10,400 --> 00:23:12,159 Speaker 1: tax because someone who would say, oh, yeah, sure, well 444 00:23:12,160 --> 00:23:14,480 Speaker 1: they get you know, they're playing their Frank dividends and everything. 445 00:23:14,520 --> 00:23:17,679 Speaker 1: But he actually showed that in terms of asset allocation 446 00:23:17,880 --> 00:23:21,680 Speaker 1: on that basis alone, the smsfs were more successful than 447 00:23:21,680 --> 00:23:23,960 Speaker 1: the big funds, which I thought was very very interesting. 448 00:23:24,240 --> 00:23:29,359 Speaker 1: All right, Corinn, Hello Krinn asks listening to your last 449 00:23:29,440 --> 00:23:33,359 Speaker 1: episodes in relation to index funds, with one guest liking 450 00:23:33,400 --> 00:23:37,400 Speaker 1: to follow the Australian top two hundred in index funds. 451 00:23:37,440 --> 00:23:39,880 Speaker 1: And just when I thought, okay, that's the way I'll 452 00:23:39,920 --> 00:23:44,159 Speaker 1: go and I'll forget about my SMSF buying property, and 453 00:23:44,160 --> 00:23:47,240 Speaker 1: another guest points out that the index is heavily weighted 454 00:23:47,240 --> 00:23:50,600 Speaker 1: towards banks and resources, and then there is this dependence 455 00:23:50,640 --> 00:23:53,720 Speaker 1: on shares that I come on my bank. Sokriinn puts 456 00:23:53,760 --> 00:23:58,080 Speaker 1: forward the idea, would she and our answers never advise 457 00:23:58,160 --> 00:24:00,760 Speaker 1: its information. Only could she construct her own index fund, 458 00:24:00,800 --> 00:24:06,919 Speaker 1: basically a top fifty Currin's top fifty index fund, and 459 00:24:06,960 --> 00:24:11,000 Speaker 1: then she would buy proportionately so many stocks. What do 460 00:24:11,080 --> 00:24:13,720 Speaker 1: I think of the strategy. I think it's very elaborate strategy. 461 00:24:14,119 --> 00:24:16,760 Speaker 1: It's quite sensible in some fashion. I remember Doug Turek 462 00:24:17,359 --> 00:24:19,040 Speaker 1: on the show explained that you could build your own 463 00:24:19,080 --> 00:24:21,920 Speaker 1: index funds. But I think for a word to make sense, 464 00:24:21,920 --> 00:24:23,720 Speaker 1: with all the fees you'd have and all the trades 465 00:24:23,760 --> 00:24:25,439 Speaker 1: you'd have to do, I think it would have to 466 00:24:25,440 --> 00:24:27,520 Speaker 1: be on scale. By that, I mean you'd have to 467 00:24:27,840 --> 00:24:29,560 Speaker 1: stick with it for a long time I think for 468 00:24:29,640 --> 00:24:31,359 Speaker 1: it to pay off, and you'd have to track it 469 00:24:31,480 --> 00:24:36,159 Speaker 1: very carefully and just separately. Kurin. You know, one of 470 00:24:36,200 --> 00:24:38,399 Speaker 1: the things if you listen to the show again, we 471 00:24:39,080 --> 00:24:42,720 Speaker 1: talked about most industries are straight market cap indicies, but 472 00:24:42,760 --> 00:24:46,160 Speaker 1: there are now variations like equal weighted indices, where they 473 00:24:46,160 --> 00:24:49,840 Speaker 1: try to get away from the from the problems of 474 00:24:49,880 --> 00:24:52,760 Speaker 1: the same for instance, the banks and minors dominating the 475 00:24:52,800 --> 00:24:55,640 Speaker 1: top stocks, and they try to get a more equalized, 476 00:24:56,480 --> 00:25:00,720 Speaker 1: more representative index. So there is there are people almost 477 00:25:00,720 --> 00:25:04,240 Speaker 1: doing that, are doing versions of that without you having 478 00:25:04,280 --> 00:25:07,320 Speaker 1: to go and do it by yourself. But in principle 479 00:25:07,320 --> 00:25:10,119 Speaker 1: it's not crazy. What do you think, James, you're looking 480 00:25:10,280 --> 00:25:12,119 Speaker 1: Are you looking skeptical there? I'm not sure. 481 00:25:13,560 --> 00:25:18,320 Speaker 3: No, no, because you don't have to reinvent the wheel. 482 00:25:18,320 --> 00:25:22,600 Speaker 3: It's been done for you ETFs. So just use one 483 00:25:22,680 --> 00:25:24,920 Speaker 3: of those. Because if you go buy fifty stocks and 484 00:25:24,960 --> 00:25:28,040 Speaker 3: you manage your own equal weight portfolio, oh jeez, your accountant, 485 00:25:28,080 --> 00:25:29,639 Speaker 3: I don't know if they're going to be angry. 486 00:25:29,840 --> 00:25:34,840 Speaker 1: Your count will cry and you need a software package 487 00:25:34,880 --> 00:25:38,160 Speaker 1: to follow it all. But also the fees, the fees 488 00:25:38,200 --> 00:25:40,479 Speaker 1: will be higher than any TF wouldn't they That's right? 489 00:25:40,600 --> 00:25:42,399 Speaker 3: Yeah, at first, the account is not going to be 490 00:25:42,440 --> 00:25:44,280 Speaker 3: happy for the transactions, but then they may be rubbing 491 00:25:44,320 --> 00:25:45,840 Speaker 3: their hands together and all the extra fees are going 492 00:25:45,880 --> 00:25:47,920 Speaker 3: to be charging you to administer this. 493 00:25:48,000 --> 00:25:50,720 Speaker 2: Equal weight portfolio that you've constructed for yourself. So I'd 494 00:25:50,760 --> 00:25:53,520 Speaker 2: say go buy the ETF. There's multiple ETF companies that 495 00:25:53,600 --> 00:25:54,760 Speaker 2: do equal wait ets. 496 00:25:54,840 --> 00:25:56,919 Speaker 1: Yes, but look closely at the ETS crew and they 497 00:25:56,960 --> 00:25:59,560 Speaker 1: are they are now of a variety and they're not 498 00:25:59,640 --> 00:26:03,440 Speaker 1: all strictly market cap. Some are what we call equal weighted, 499 00:26:04,880 --> 00:26:06,440 Speaker 1: and have a look at that and how they get 500 00:26:06,480 --> 00:26:10,080 Speaker 1: around that issue. That was a failing which was highlighted 501 00:26:10,359 --> 00:26:12,800 Speaker 1: on the show about the index funds. But good on 502 00:26:12,840 --> 00:26:16,280 Speaker 1: you and very interesting notion. Certainly shows that you understand 503 00:26:16,280 --> 00:26:19,600 Speaker 1: it very very well. Thank you. Okay, question from Ashley 504 00:26:19,600 --> 00:26:20,840 Speaker 1: there you want to read that one. 505 00:26:20,680 --> 00:26:23,199 Speaker 3: So Ashley, he's talking about bitcoin. While bitcoin can be 506 00:26:23,200 --> 00:26:26,760 Speaker 3: expected to remain volatile in the shortter medium term, it 507 00:26:26,840 --> 00:26:30,400 Speaker 3: seems that AMP has doubled their investment into it and 508 00:26:30,680 --> 00:26:32,920 Speaker 3: more companies and people will want to have a greater 509 00:26:33,040 --> 00:26:36,320 Speaker 3: understanding of why bitcoin was created, how it's used, the 510 00:26:36,320 --> 00:26:39,440 Speaker 3: implication for current monetary systems. 511 00:26:39,800 --> 00:26:40,520 Speaker 2: Like every other. 512 00:26:40,400 --> 00:26:44,360 Speaker 3: Bitcoiner, the AMP journey is on a one way street 513 00:26:44,480 --> 00:26:47,360 Speaker 3: and growing institutional adoption reflects that process. 514 00:26:47,480 --> 00:26:49,720 Speaker 1: Yeah, well it's a powerful point actually, which we can't 515 00:26:49,760 --> 00:26:54,040 Speaker 1: really get around amp representing, if you like, the big 516 00:26:54,119 --> 00:26:58,680 Speaker 1: end of town establishment Australia, establishment money, a very old 517 00:27:00,000 --> 00:27:04,119 Speaker 1: Australian virtual providence society as it was. So the definitive 518 00:27:04,280 --> 00:27:07,560 Speaker 1: establishment incumbent player in our market went and put twenty 519 00:27:07,560 --> 00:27:12,400 Speaker 1: seven million into bitcoin and they have done very well 520 00:27:12,440 --> 00:27:15,119 Speaker 1: from that, and we had Shane Oliver on the show 521 00:27:16,560 --> 00:27:20,000 Speaker 1: explaining why they did it. At a certain point, I 522 00:27:20,040 --> 00:27:22,960 Speaker 1: felt that the most powerful notion was that they bought 523 00:27:23,000 --> 00:27:24,440 Speaker 1: it because they thought it was going to go up. 524 00:27:24,640 --> 00:27:27,360 Speaker 1: Now he rejected that out of hand, but it has 525 00:27:27,440 --> 00:27:30,320 Speaker 1: gone up, and I think it's still largely the attraction 526 00:27:30,440 --> 00:27:34,280 Speaker 1: is still largely the concept that it could be an 527 00:27:34,280 --> 00:27:37,479 Speaker 1: alternative store of value, that it could be something like gold, 528 00:27:38,320 --> 00:27:42,920 Speaker 1: and clearly mainstream investors are starting to think that way. 529 00:27:42,960 --> 00:27:45,880 Speaker 1: There's one point six billion in SMSF money in bitcoin 530 00:27:46,080 --> 00:27:48,639 Speaker 1: and crypto. That's an ATO figure, by the way, so 531 00:27:48,680 --> 00:27:50,960 Speaker 1: that's not speculation to say to you. So I think 532 00:27:51,000 --> 00:27:52,879 Speaker 1: it's here to stay. I think it's an ascid class 533 00:27:52,920 --> 00:27:54,560 Speaker 1: that is on the table. What do you think, James? 534 00:27:55,040 --> 00:27:57,159 Speaker 3: It was set up well back in two thousand and eight, 535 00:27:57,240 --> 00:28:02,240 Speaker 3: two thousand and nine in response to feelings around central 536 00:28:02,240 --> 00:28:05,639 Speaker 3: banks and traditional banking systems post global financial crisis, and 537 00:28:05,680 --> 00:28:07,600 Speaker 3: there was this desire to have this what they call 538 00:28:07,680 --> 00:28:11,840 Speaker 3: decentralized digital currency, and up came along Bitcoin as the 539 00:28:11,840 --> 00:28:14,960 Speaker 3: first one, and there's been thousands that have followed. Now 540 00:28:14,960 --> 00:28:19,240 Speaker 3: fast forward to twenty twenty five, we've got black Rock, Fidelity, Vanek, 541 00:28:19,359 --> 00:28:22,000 Speaker 3: we've got big US pension funds that are investing money 542 00:28:22,240 --> 00:28:24,919 Speaker 3: into it. So it is gaining mainstream adoption. But my 543 00:28:25,040 --> 00:28:27,520 Speaker 3: personal feeling is that it needs to move to the 544 00:28:27,520 --> 00:28:30,760 Speaker 3: next stage of actually having some use other than being 545 00:28:31,200 --> 00:28:33,760 Speaker 3: something that's cool to buy and say that you've got bitcoin. 546 00:28:33,880 --> 00:28:37,560 Speaker 3: So unless it does become a currency used, I find 547 00:28:38,600 --> 00:28:41,200 Speaker 3: my feeling is that it may become something like those 548 00:28:41,520 --> 00:28:43,720 Speaker 3: I forget the names of them, those digital artworks that 549 00:28:43,760 --> 00:28:47,680 Speaker 3: you could buy linked through crypto and fts. That's all right, 550 00:28:48,280 --> 00:28:50,880 Speaker 3: I can't remember their name, the Dancing Monkeys, or yet 551 00:28:51,000 --> 00:28:52,600 Speaker 3: there was this particular epe I think it's called the 552 00:28:52,640 --> 00:28:54,800 Speaker 3: Board eight Yacht Club, where they were going millions of 553 00:28:54,800 --> 00:28:58,160 Speaker 3: dollars and now they're selling for hundreds of dollars. I 554 00:28:58,240 --> 00:29:00,480 Speaker 3: feel that there needs to be stage two bitcoin. It 555 00:29:00,520 --> 00:29:04,400 Speaker 3: actually needs to be used in practice in economies, otherwise 556 00:29:04,760 --> 00:29:05,520 Speaker 3: it will decline. 557 00:29:05,560 --> 00:29:09,560 Speaker 1: You're searching for intrinsic value. But Shane Oliver Chief Economists 558 00:29:09,560 --> 00:29:12,040 Speaker 1: today and he said he didn't. It didn't require intrinsic 559 00:29:12,080 --> 00:29:13,240 Speaker 1: value for them to make them move. 560 00:29:13,440 --> 00:29:14,560 Speaker 2: Yeah, I get that. 561 00:29:14,760 --> 00:29:16,280 Speaker 1: What do you say to clients who come in now? 562 00:29:18,120 --> 00:29:20,960 Speaker 1: Has your advice changed to clients on crypto and bitcoin 563 00:29:21,040 --> 00:29:23,440 Speaker 1: over the last two or three years. 564 00:29:23,120 --> 00:29:24,320 Speaker 2: It hasn't. 565 00:29:24,440 --> 00:29:28,040 Speaker 3: It's put money that you're willing to lose to it. 566 00:29:28,640 --> 00:29:31,240 Speaker 3: And the more that you hear about it in the media, 567 00:29:31,320 --> 00:29:33,840 Speaker 3: the more that you hear James Kirby talk about bitcoin 568 00:29:33,920 --> 00:29:36,920 Speaker 3: with guessed like myself, the later it is in the cycle, 569 00:29:37,440 --> 00:29:39,840 Speaker 3: because when it's out of favor and down and out, 570 00:29:39,960 --> 00:29:42,440 Speaker 3: that's when people should be buying. But when it's in 571 00:29:42,520 --> 00:29:46,320 Speaker 3: the newspapers, it's the mums and dads are buying it, 572 00:29:46,360 --> 00:29:48,520 Speaker 3: and the prices are really elevated and there's not too 573 00:29:48,560 --> 00:29:51,000 Speaker 3: much more to go. And that's just my opinion based 574 00:29:51,040 --> 00:29:52,000 Speaker 3: on previous cycles. 575 00:29:52,120 --> 00:29:55,280 Speaker 1: Oh, it's so true. And it's one hundred and twenty 576 00:29:55,320 --> 00:29:57,440 Speaker 1: thousand to hit a new record. Why am I paying attention? 577 00:29:57,480 --> 00:29:59,200 Speaker 1: Because it's one hundred and twenty thousands, it hits a 578 00:29:59,240 --> 00:30:03,720 Speaker 1: new record. That's unfortunately the nature of the beast. Yeah, okay. 579 00:30:03,880 --> 00:30:07,560 Speaker 1: One very interesting thing I thought about bitcoin is that 580 00:30:07,600 --> 00:30:10,560 Speaker 1: the more people buy it, the less volatile it becomes. 581 00:30:11,200 --> 00:30:13,880 Speaker 1: And as it becomes part of the institutional framework, it's 582 00:30:13,960 --> 00:30:17,560 Speaker 1: less volatile. But that also means that you won't get 583 00:30:17,560 --> 00:30:20,560 Speaker 1: those big surges anymore. They didn't want do those amazing 584 00:30:20,600 --> 00:30:24,960 Speaker 1: run ups. So I think that's part of reality for everybody. 585 00:30:25,240 --> 00:30:26,120 Speaker 1: Last one from Mark. 586 00:30:26,280 --> 00:30:28,600 Speaker 3: Yeah, so, Mark says, I'm an avid fan of the 587 00:30:28,640 --> 00:30:31,680 Speaker 3: podcast and love the variety of topics you cover. Given 588 00:30:31,680 --> 00:30:34,760 Speaker 3: the tax advantages of salary packaging and electric vehicles, I'm 589 00:30:34,760 --> 00:30:37,760 Speaker 3: looking into a novaated lisse option and have discovered that 590 00:30:37,800 --> 00:30:40,680 Speaker 3: there is an option for a self managed novated lease 591 00:30:41,040 --> 00:30:43,560 Speaker 3: as standard novated liases in bed charges and interest in 592 00:30:43,600 --> 00:30:46,320 Speaker 3: their fees. As an accountant, I find it hard to 593 00:30:46,360 --> 00:30:49,320 Speaker 3: determine the effective loan interest rate. Would you be able 594 00:30:49,360 --> 00:30:51,120 Speaker 3: to cover this topic and explore? 595 00:30:51,240 --> 00:30:53,880 Speaker 1: All right, Mark's accountant, Remember everybody might be easy to 596 00:30:53,920 --> 00:30:56,120 Speaker 1: copy him. What exactly is he talking about? James? 597 00:30:56,400 --> 00:30:56,680 Speaker 2: Sure? 598 00:30:56,880 --> 00:31:03,040 Speaker 3: So there is this scheme available where you can finance 599 00:31:03,320 --> 00:31:07,120 Speaker 3: the cost of a vehicle, plus pay the ongoing maintenance 600 00:31:07,240 --> 00:31:10,120 Speaker 3: and running costs of that vehicle through this arrangement that 601 00:31:10,160 --> 00:31:13,720 Speaker 3: involves your employer that's called a novated lease. In the past, 602 00:31:13,960 --> 00:31:16,680 Speaker 3: you would use roughly half of your pre tax income 603 00:31:16,840 --> 00:31:19,760 Speaker 3: towards this lease and half of your post tax income. 604 00:31:19,840 --> 00:31:22,040 Speaker 3: But go back a couple of years ago, the federal 605 00:31:22,080 --> 00:31:24,600 Speaker 3: government said, we want more people driving electric vehicles. So 606 00:31:24,920 --> 00:31:27,320 Speaker 3: if you buy an electric vehicle less than circle ninety 607 00:31:27,320 --> 00:31:29,479 Speaker 3: thousand dollars, you can use one hundred percent of your 608 00:31:29,480 --> 00:31:32,560 Speaker 3: pre tax income to be able to fund the finance 609 00:31:32,600 --> 00:31:35,120 Speaker 3: plus the operating costs of that electric vehicle. 610 00:31:35,440 --> 00:31:37,480 Speaker 1: That has been spectacularly successful. 611 00:31:38,080 --> 00:31:39,080 Speaker 2: Yeah, fantastically. 612 00:31:39,520 --> 00:31:42,160 Speaker 3: I've got one of my driveway vehicle that's in a 613 00:31:42,840 --> 00:31:44,800 Speaker 3: novated lease and I was one of the first to 614 00:31:44,840 --> 00:31:47,520 Speaker 3: do it because it's one of the best tax breaks 615 00:31:47,680 --> 00:31:52,640 Speaker 3: going around. To facilitate this, if you're an employee, you 616 00:31:52,680 --> 00:31:56,480 Speaker 3: need to speak to your HR department and they'll either say, look, no, 617 00:31:56,760 --> 00:32:00,920 Speaker 3: we don't offer that through this employment arrangement, or they 618 00:32:00,920 --> 00:32:03,240 Speaker 3: may say, yes we do. Go see these people over 619 00:32:03,280 --> 00:32:06,000 Speaker 3: here at the x y Z leasing company now markets 620 00:32:06,000 --> 00:32:08,080 Speaker 3: saying rather than go see x y zed people at 621 00:32:08,080 --> 00:32:11,440 Speaker 3: the leasing company. He wants to pick the provider for 622 00:32:11,480 --> 00:32:14,800 Speaker 3: the finance, which you can do, but that's again subject 623 00:32:14,800 --> 00:32:17,720 Speaker 3: to your employer saying, ah, okay, we're going to deal 624 00:32:17,760 --> 00:32:20,719 Speaker 3: with the extra administration of you picking your own finance 625 00:32:20,760 --> 00:32:22,760 Speaker 3: company rather than dealing the one dealing with the one 626 00:32:22,800 --> 00:32:24,480 Speaker 3: that we've signed up a deal with that makes it 627 00:32:24,520 --> 00:32:26,880 Speaker 3: all streamlined for our payroll purposes. 628 00:32:27,440 --> 00:32:30,600 Speaker 1: Okay, I see, yes, I know. And most corporations have, 629 00:32:31,000 --> 00:32:33,760 Speaker 1: like Newsport here, they have a you know, they have 630 00:32:33,840 --> 00:32:37,120 Speaker 1: the deals, no vated lease, and they haven't arranged with 631 00:32:37,160 --> 00:32:39,760 Speaker 1: whoever it is. And I would imagine if you rank 632 00:32:39,800 --> 00:32:41,240 Speaker 1: the pay office and said could I go and do 633 00:32:41,320 --> 00:32:47,120 Speaker 1: one outside, they really would groan. But Ashley is an accountant, 634 00:32:47,680 --> 00:32:50,880 Speaker 1: so perhaps he could go fair better than the rest 635 00:32:50,920 --> 00:32:55,360 Speaker 1: of us non accountants. I would imagine as the majority 636 00:32:55,360 --> 00:32:58,239 Speaker 1: of listeners. Okay, very good, very good. And how's that 637 00:32:58,440 --> 00:33:01,920 Speaker 1: novated lease working out? Would you bought an electric car 638 00:33:02,120 --> 00:33:02,640 Speaker 1: without it? 639 00:33:03,520 --> 00:33:07,000 Speaker 3: I probably would not have an electric car without the 640 00:33:07,040 --> 00:33:10,360 Speaker 3: novated lease. Now, the the interest rate wasn't too bad, 641 00:33:10,440 --> 00:33:12,560 Speaker 3: and that's something that they don't tell you about when 642 00:33:12,600 --> 00:33:15,520 Speaker 3: you go get yournvated lease. They're just like tax benefits, 643 00:33:15,520 --> 00:33:18,000 Speaker 3: saving next amount per month, per year, but the interest 644 00:33:18,080 --> 00:33:20,240 Speaker 3: rate that they hired, and you have to actually work backwards, 645 00:33:20,280 --> 00:33:22,640 Speaker 3: and in most cases it's not too bad. It's a 646 00:33:22,640 --> 00:33:24,600 Speaker 3: few percent above what you would expect to pay on 647 00:33:24,640 --> 00:33:26,760 Speaker 3: your home loan, so at the moment it's probably seven 648 00:33:26,840 --> 00:33:28,920 Speaker 3: or eight percent interest, so it's not too bad. But 649 00:33:29,000 --> 00:33:31,640 Speaker 3: what really drew me was that using your pre tax 650 00:33:31,720 --> 00:33:34,040 Speaker 3: income to to find this vehicle taket me of the 651 00:33:34,040 --> 00:33:35,040 Speaker 3: line so important. 652 00:33:35,160 --> 00:33:37,760 Speaker 1: So a few things you as an everyday salary owner, 653 00:33:37,760 --> 00:33:40,160 Speaker 1: there are so few things that you can do pre tax. 654 00:33:40,200 --> 00:33:43,440 Speaker 1: You know. Obviously your super contribution maxed out at thirty 655 00:33:43,480 --> 00:33:47,240 Speaker 1: thousand a year is the big one. And after that, 656 00:33:47,480 --> 00:33:50,520 Speaker 1: really it's what it's about you doing something like an 657 00:33:50,560 --> 00:33:53,640 Speaker 1: investment property or whatever. You're looking for your negative gearing, 658 00:33:53,880 --> 00:33:55,880 Speaker 1: and then there's very little less. And this was the 659 00:33:55,880 --> 00:33:59,400 Speaker 1: first new thing for many years, wasn't it? That one 660 00:33:59,440 --> 00:34:04,680 Speaker 1: hundred percent and basically tax concession pre tax if you 661 00:34:05,000 --> 00:34:09,240 Speaker 1: take an electric car lease as opposed to a petrol 662 00:34:09,239 --> 00:34:13,600 Speaker 1: car lease, which is roughly fifty percent or there thereabouts. Interesting, Yes, 663 00:34:13,640 --> 00:34:19,200 Speaker 1: that explains all the byd utes buzzing around my neighborhood. Flashy, 664 00:34:19,719 --> 00:34:25,759 Speaker 1: brand new zippy they're zippy. I've got to say, the 665 00:34:25,800 --> 00:34:28,560 Speaker 1: speed these guys moving around on these big, awkward youths, 666 00:34:28,840 --> 00:34:31,600 Speaker 1: it's alarming, really, and they get away with things because 667 00:34:31,600 --> 00:34:33,920 Speaker 1: they don't make any noise. That's my personal theory that 668 00:34:34,560 --> 00:34:36,480 Speaker 1: if it was petrol that makes so much noise, everybody 669 00:34:36,520 --> 00:34:39,120 Speaker 1: would jump, But it's they've kind of gone past you 670 00:34:39,120 --> 00:34:41,239 Speaker 1: by the time you realize the outrage that has been 671 00:34:41,280 --> 00:34:43,560 Speaker 1: committed in front of you, you don't go around to 672 00:34:43,560 --> 00:34:43,920 Speaker 1: one of those. 673 00:34:44,680 --> 00:34:46,840 Speaker 2: I died. I've got a little Volvo Electric. 674 00:34:46,920 --> 00:34:49,280 Speaker 3: But finally, I've been in a few electric vehicles where 675 00:34:49,640 --> 00:34:53,040 Speaker 3: the speakers for the cast Aeia system make little car noises. 676 00:34:53,040 --> 00:34:56,040 Speaker 3: So you guys, when you put the accelerator down to 677 00:34:56,239 --> 00:34:58,200 Speaker 3: limitate as if you were in a petrol vehicle. 678 00:34:58,280 --> 00:35:00,520 Speaker 1: Yeah, really to tell you what you doing. It is 679 00:35:00,880 --> 00:35:04,400 Speaker 1: very interesting. Just one last thing, resale value of these 680 00:35:04,440 --> 00:35:08,920 Speaker 1: electric vehicles is it on tested? Is it is it 681 00:35:08,960 --> 00:35:10,200 Speaker 1: reliable with any idea? 682 00:35:10,280 --> 00:35:13,040 Speaker 3: Yeah, So we've had teslas around for ten years now, 683 00:35:13,080 --> 00:35:16,320 Speaker 3: so that there is market based evidence around the resale values, 684 00:35:16,400 --> 00:35:20,760 Speaker 3: and they are poorer than the equivalents and internal combustion 685 00:35:21,440 --> 00:35:24,120 Speaker 3: engine vehicle, so that that's no doubt. People are concerned 686 00:35:24,160 --> 00:35:27,960 Speaker 3: about technology because technology for evs has moved really fast 687 00:35:27,960 --> 00:35:31,000 Speaker 3: over the past ten years. The battery technology as well, 688 00:35:31,000 --> 00:35:32,960 Speaker 3: so the range that you get on the evs, and 689 00:35:32,960 --> 00:35:35,759 Speaker 3: also people are concerned about the life that they're going 690 00:35:35,800 --> 00:35:37,279 Speaker 3: to have left on the battery if they're buying one 691 00:35:37,280 --> 00:35:39,879 Speaker 3: that's seven or eight years old. The manufacturers are saying, well, 692 00:35:39,920 --> 00:35:41,880 Speaker 3: you know, after ten years, you may need to replace 693 00:35:41,920 --> 00:35:46,040 Speaker 3: that battery, which could cost ten fifteen thousand dollars. 694 00:35:46,560 --> 00:35:48,680 Speaker 1: It's an argument to Lisa, isn't it really rather than 695 00:35:48,680 --> 00:35:49,160 Speaker 1: buy them? 696 00:35:49,239 --> 00:35:49,920 Speaker 2: Yeah, that's right. 697 00:35:49,960 --> 00:35:52,240 Speaker 3: At the end of the novated lease, there is still 698 00:35:52,280 --> 00:35:55,600 Speaker 3: that reckoning event where you need to hand it back 699 00:35:55,920 --> 00:35:59,319 Speaker 3: and pay this residual or buy it. So you can't 700 00:35:59,320 --> 00:36:01,400 Speaker 3: get away from the fact that there is that depreciation 701 00:36:01,440 --> 00:36:02,000 Speaker 3: there on it. 702 00:36:02,160 --> 00:36:04,640 Speaker 1: Yeah, yeah, I wonder I'd love to see the figures 703 00:36:04,680 --> 00:36:09,080 Speaker 1: and whether whether there is a propensity if you'd like 704 00:36:09,120 --> 00:36:13,560 Speaker 1: to lease an ongoing basis electrics. Why wouldn't you if 705 00:36:13,560 --> 00:36:15,239 Speaker 1: that packete, if you're in the same position, in the 706 00:36:15,239 --> 00:36:17,880 Speaker 1: same salary sort of frame, the same arrangements, why wouldn't 707 00:36:17,880 --> 00:36:19,680 Speaker 1: you extend the least rather than buying the car, which 708 00:36:19,680 --> 00:36:21,600 Speaker 1: you know had to appreciated more than a petrol car. 709 00:36:22,320 --> 00:36:27,080 Speaker 1: Interesting stuff thoughts for another day. Okay, terrific. Thank you 710 00:36:27,120 --> 00:36:29,360 Speaker 1: everyone for your questions, keep them rolling the money puzzle 711 00:36:29,360 --> 00:36:32,120 Speaker 1: at the Australian dot com dot au. And thank you James. 712 00:36:32,480 --> 00:36:33,600 Speaker 1: We're talking again soon. 713 00:36:33,440 --> 00:36:35,680 Speaker 2: My pleasure, James. 714 00:36:35,680 --> 00:36:39,080 Speaker 1: That was the other James, James Gerard of Financial Advisor 715 00:36:39,200 --> 00:36:41,839 Speaker 1: dot com dot au. Talk to you soon.