Latest / The Money Puzzle / Commercial property suddenly looks attractive: Should you go near it?

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Commercial property suddenly looks attractive: Should you go near it? · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirby.
0:13
Speaker 2: Welcome aboard everybody.
0:15
Speaker 1: If you're an active investor, you probably know social media
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Speaker 1: and media generally is a wash just now with ideas
0:24
Speaker 1: for investors in the wake of the dramatic CGT and
0:28
Speaker 1: negative gearing tax changes now legislated. So basically there's a
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Speaker 1: lot of contention. I suppose contentious ideas about what you
0:36
Speaker 1: might do to sidestep or optimize this completely new tax
0:41
Speaker 1: framework in which we invest. This is specifically relevant, I
0:45
Speaker 1: think to property more than anything else. It seems to
0:48
Speaker 1: me the biggest idea I see at least floating around
0:52
Speaker 1: is a step outside residential property entirely and enter commercial property,
0:58
Speaker 1: which is a very different game. Can be very lucrative
1:03
Speaker 1: if you know how to work it, but it is
1:05
Speaker 1: a very different space, and I thought a good way
1:07
Speaker 1: to look at this morning would be with an advisor.
1:10
Speaker 1: James Gerard of Financial advisor dot com, regular on the show,
1:14
Speaker 1: suggested this idea and I've actually been working on well,
1:17
Speaker 1: so I've been talking to people in the market and
1:19
Speaker 1: it's beyond doubt.
1:20
Speaker 3: James, Welcome aboard, Thank you, James, thanks for having me.
1:23
Speaker 1: As always, I was talking to a couple of mortgage
1:25
Speaker 1: brokers and they're saying the exact same thing, that the
1:29
Speaker 1: interest is lifting big time on commercial and obviously it's
1:35
Speaker 1: fading at least for the moment on residential. And we
1:38
Speaker 1: can see that in all the numbers. We can see
1:39
Speaker 1: that the home loan applications are down across the board,
1:43
Speaker 1: and even where you think there might be investor interest
1:49
Speaker 1: newly built property housing estates at.
1:51
Speaker 3: The edge of the city.
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Speaker 2: No, that is not the case.
1:53
Speaker 1: The numbers are the applications are falling their according to
1:56
Speaker 1: AUSI Home Loans and Equifacts. So I think we're getting
1:58
Speaker 1: early data to back that up. But first of all, okay,
2:01
Speaker 1: I come into your office. I say, I've always been
2:04
Speaker 1: a property investor. You know, I like my residential property.
2:08
Speaker 1: I know it's not great. I know there's a lot
2:10
Speaker 1: of things that weigh against it. But I was confident
2:14
Speaker 1: with it and I never had cash flow problems. I
2:17
Speaker 1: never had an empty place. I could always rent it.
2:20
Speaker 1: Now I've done, my number is negative. Gear it doesn't
2:22
Speaker 1: work anymore CGT. I mean, the whole game was capitally gain.
2:26
Speaker 1: The whole game was capital gain, and it's going to
2:28
Speaker 1: be at taxed much more sharply than it was. And
2:30
Speaker 1: on top of that, the market's going nowhere. I'm thinking
2:34
Speaker 1: of commercial, what's your first response to someone who puts
2:39
Speaker 1: that to you?
2:40
Speaker 3: The other is yes.
2:42
Speaker 4: But and the big butt is there, because commercial is
2:48
Speaker 4: property at the end of the day. It's just a
2:50
Speaker 4: different type of property. But in my opinion, it's a
2:53
Speaker 4: much more riskier version of property just due to the
2:57
Speaker 4: nature that you have business splash commercial tenants who rent
3:01
Speaker 4: out that property so.
3:03
Speaker 1: Very different tenants, very different tenant they're in business, they're
3:07
Speaker 1: business people.
3:08
Speaker 4: Yeah, And there's a much smaller pool of tenants who
3:11
Speaker 4: will rent this commercial property. And over the years, I've
3:15
Speaker 4: seen some clients own commercial properties and they've done fantastically.
3:19
Speaker 3: They've never had a day without a tenant in there.
3:21
Speaker 4: And then I've seen other clients and they've had the
3:24
Speaker 4: properties vacant for over two years and had to drop
3:27
Speaker 4: the rent by fifty percent just to get a tenant
3:29
Speaker 4: in that commercial property because that area fell out of favor.
3:33
Speaker 1: Were they you know, if I didn't know, and I
3:35
Speaker 1: don't know what the circumstances you're mentioning, but I would
3:37
Speaker 1: guess that people who are having trouble had offices and
3:39
Speaker 1: the people who weren't had super industrial units in busy places.
3:42
Speaker 1: But tell us a little bit more about the nature
3:44
Speaker 1: of commercial property. When we see commercial property, you see
3:48
Speaker 1: it's very mixed bag. We see residential, it's pretty clear. Okay,
3:51
Speaker 1: it's a home hones street in the residential neighborhood. Commercial property,
3:54
Speaker 1: I mean it's vast, isn't that It ranges from industrial estates,
3:58
Speaker 1: little industrial units, little lockups which I'm sure people can access.
4:02
Speaker 1: Certainly they fit them into an SMSF. By that, I
4:05
Speaker 1: mean there are at a price point that's easy entry.
4:08
Speaker 1: Other parts are completely out I suppose. But office strated
4:11
Speaker 1: titled officers were also lea we're really talking about when
4:14
Speaker 1: we talk about retail investors looking at commercial property.
4:17
Speaker 4: That's correct, James, that there's three main segments of commercial property.
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Speaker 3: You have firstly, industrial that.
4:24
Speaker 4: Covers those small factory units that the warehouse style properties.
4:28
Speaker 4: And then you have retail, which is stores in main
4:31
Speaker 4: street locations. And then you have office which use for
4:35
Speaker 4: business purposes for usually white collar professionals. So they're the
4:39
Speaker 4: main three types of properties that an investor can buy
4:42
Speaker 4: in that commercial space. But very interestingly, the fortunes of
4:46
Speaker 4: each one of those three segments differ vastly depending on
4:49
Speaker 4: the economic condition, and COVID was a really big case
4:53
Speaker 4: in point with that.
4:54
Speaker 2: One's expanded on that.
4:56
Speaker 4: Yeah, So if you recall, we all were locked down
4:59
Speaker 4: for a long and we couldn't do anything, and one
5:01
Speaker 4: thing we couldn't do unless you're an essential worker was
5:04
Speaker 4: leave the house to go to work, which meant that
5:06
Speaker 4: there were thousands of offices around the country that were
5:10
Speaker 4: empty and tenants were moving out of these offices working
5:14
Speaker 4: from home, and that became a thing post COVID as well.
5:17
Speaker 4: There was a lower utilization of office space as we
5:19
Speaker 4: had these flexible working conditions that came in to play.
5:23
Speaker 4: But this then meant that from a commercial property perspective,
5:28
Speaker 4: more people were at home buying stuff online from those
5:31
Speaker 4: online retailers, which meant we needed more warehouses to store
5:34
Speaker 4: those things for the online retailers. So the price of
5:37
Speaker 4: warehouses went up a lot during and after COVID, but
5:40
Speaker 4: officers went down in value because there was a lot
5:44
Speaker 4: less demand there. The rental returns were lower, and thus
5:47
Speaker 4: the values of these offices went down and Interestingly, they
5:50
Speaker 4: still haven't recovered. You can buy an office today in
5:53
Speaker 4: Sydney or Melbourne for a price lower than what it
5:56
Speaker 4: was in twenty twenty.
5:57
Speaker 2: That's amazing.
5:58
Speaker 1: That's because they've got concerts of thirty and forty percent,
6:01
Speaker 1: don't they. While in residential the zero vacancy rates really
6:05
Speaker 1: it's woanish.
6:06
Speaker 2: One percent or so.
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Speaker 1: That's that was the comfort factor and that that is
6:10
Speaker 1: not the case in industrial. I know we're trying to
6:13
Speaker 1: cover a lot in this show, but very broadly the
6:15
Speaker 1: three types retail, industrial, retail, industrial, and office. Right, which
6:21
Speaker 1: do you Is there a one you like? Do you
6:25
Speaker 1: think that it's most suitable for the every day investor?
6:29
Speaker 3: Yeah? I like office.
6:31
Speaker 4: I tend to be that contrarian investor, and I like
6:36
Speaker 4: it because property markets go through cycles, and we're in
6:39
Speaker 4: a down part of the cycle at the moment for
6:41
Speaker 4: office and also residential, which we may touch on later,
6:44
Speaker 4: but for commercial offices down at the moment.
6:47
Speaker 3: But things are changing.
6:49
Speaker 4: When I look at the broader dynamics, people are going
6:52
Speaker 4: businesses are enforcing going back to the office. And I
6:55
Speaker 4: noticed that I have an office in Sydney, CBD, and
6:57
Speaker 4: I'm noticing there's more traffic on the roads, the car
7:00
Speaker 4: parks of fuller, the restaurants are fuller, there's more people
7:02
Speaker 4: out on the street. And as I speak to people,
7:05
Speaker 4: they're coming back three four days a week, whereas you
7:08
Speaker 4: go back a couple of years ago, they're working from
7:10
Speaker 4: home three four days a week. So there'll be more
7:13
Speaker 4: demand I think moving forward for office space.
7:17
Speaker 2: Yeah okay.
7:17
Speaker 1: And then for the everyday investor again who's just listening
7:20
Speaker 1: to the show and just weighing up this offer. If
7:25
Speaker 1: you like the proposal of commercial property, the entry points
7:29
Speaker 1: I'm thinking strata title office obviously in office and doesn't
7:32
Speaker 1: even wrong in industry, it's like a little lock up
7:35
Speaker 1: unit's a little shed basically that you can pick up.
7:39
Speaker 1: And retail is not as easy I would think, but
7:42
Speaker 1: have the only sense of what the entry points are.
7:44
Speaker 1: I'm thinking, like what's under a million bucks and whatsoever.
7:49
Speaker 4: Yeah, different ways to enter into commercial property, so I'll
7:53
Speaker 4: just go around the ground and cover them. So firstly,
7:57
Speaker 4: there's managed funds that you canasically pay your fee to
8:01
Speaker 4: a fund manager and then they'll let you into their fund,
8:04
Speaker 4: which is a unit trust. You'll buy units in this
8:06
Speaker 4: trust and that trust will own healthcare property alone, childcare
8:10
Speaker 4: property alone, retail loon warehouses. It will do something in particular,
8:14
Speaker 4: and you can buy in a slice of that very
8:17
Speaker 4: small slice, and you'll get the change as these portfolios
8:20
Speaker 4: get revalued. Plus you'll get a little bit of distribution
8:22
Speaker 4: of income being the net rental return.
8:24
Speaker 3: That's one way.
8:26
Speaker 4: Another way, which usually requires more capital, is closed ended syndicates.
8:31
Speaker 4: You may have property companies that say, okay, we want
8:33
Speaker 4: to acquire this regional shopping center and we want to
8:37
Speaker 4: redevelop it. We're going to raise twenty million dollars and
8:40
Speaker 4: if you want to participate in this, we expect you'll
8:42
Speaker 4: get an eight percent rental return, plus you'll get capital
8:45
Speaker 4: growth once we do the redevelopment. But you need to
8:47
Speaker 4: contribute one hundred thousand dollars at least if you want
8:50
Speaker 4: to be part of this. Whereas the managed funds, there's
8:53
Speaker 4: two different versions, as a retail and the wholesale managed fund.
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Speaker 4: But the retail managed fund's usually one thousand dollars minimum
8:58
Speaker 4: investment in the so much lower barriers.
9:01
Speaker 1: And the more you obviously more you're engaged, the more
9:04
Speaker 1: control you have. So managed fund you have zilch control.
9:08
Speaker 1: You're just the end of the line. Whatever they say happens,
9:10
Speaker 1: it's what happens. You have no voice in that syndicate.
9:13
Speaker 1: Perhaps depending on the size of it, you'll be a
9:14
Speaker 1: little bit more a little bit more, say, perhaps depending
9:17
Speaker 1: on how many people are in the syndicate. And then
9:19
Speaker 1: there's direct, So tell us about directing those three pools
9:22
Speaker 1: we were talking about.
9:23
Speaker 4: Yeah, then there's direct And there's a bit of a
9:26
Speaker 4: misconception that you need a million dollars or more to
9:29
Speaker 4: get into commercial property. There's commercial property real estate websites
9:34
Speaker 4: similar to a residential where you can see all the listings.
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Speaker 4: And it's quite surprising that in Sydney's CBD, for example,
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Speaker 4: you can pick up a small office for three hundred
9:44
Speaker 4: thousand dollars. Sure may only be the size of a
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Speaker 4: closet at like twenty square meters.
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Speaker 2: I was going to do.
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Speaker 1: There must be very small gyms, very small people in there.
9:52
Speaker 1: Let'st be like being John Malkovich. There's a tiny little
9:54
Speaker 1: office of tiny people walking around.
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Speaker 2: But we'll take it on board. We'll take it on board.
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Speaker 1: Three hundred thousand entry points at Sydney CBD. Yeah, we'll
10:00
Speaker 1: put that to one side.
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Speaker 4: Yeah, Okay, but for a more normal, typical type budget,
10:07
Speaker 4: you would look at an entry point of maybe seven
10:09
Speaker 4: or eight hundred thousand dollars.
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Speaker 2: That's office, is it?
10:12
Speaker 3: That's office?
10:13
Speaker 2: Okay, that's an office.
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Speaker 1: You're buying it within a strata title, within a combination
10:17
Speaker 1: of offices, and you buy one.
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Speaker 3: Correct.
10:19
Speaker 4: Yeah, every capital city will have different prices with commercial property.
10:24
Speaker 4: It's priced differently to residential property. With residential property, you say, okay,
10:28
Speaker 4: the purchase price is a million dollars, and that's how
10:31
Speaker 4: you view the price. Whereas commercial sometimes I'm talk in
10:34
Speaker 4: square meters. They'll say this property is fifteen thousand dollars
10:37
Speaker 4: per square meter, or this is ten thousand dollars a
10:39
Speaker 4: square meter. You then need to go, well, how many
10:41
Speaker 4: square meters is it? Okay, on the list in it's
10:43
Speaker 4: one hundred square meters. They're asking for ten thousand per
10:46
Speaker 4: square meter, so hence it's a million dollars. And another
10:50
Speaker 4: little trick is that there's usually GST on top of
10:53
Speaker 4: the purchase price as well. So there's a few things
10:55
Speaker 4: that people need to consider with commercial that you don't
10:58
Speaker 4: have to deal with residential. And while I'm thinking about it,
11:01
Speaker 4: one other thing is on the lending side of things.
11:04
Speaker 4: Banks may not lend as much of a bank loan
11:07
Speaker 4: compared on commercial compared to residential, So you really need
11:10
Speaker 4: to speak to the broker or the bank at that
11:13
Speaker 4: pre approval before you go off and hunt commercial property.
11:16
Speaker 1: And the very broadly, folks, I mean, the best thing
11:19
Speaker 1: about commercial property obviously is the rental income. It's much
11:22
Speaker 1: higher than residential. So while the residential person could have
11:26
Speaker 1: rates rental yields of two to four percent, we see
11:30
Speaker 1: a little bit more in regional areas. In commercially, you're
11:33
Speaker 1: talking starters six or seven percent. Would that be right, James,
11:37
Speaker 1: There was.
11:38
Speaker 3: That's right.
11:38
Speaker 4: It used to be ten percent gross rental you that
11:41
Speaker 4: was the rule of thumb for commercial but the prices
11:43
Speaker 4: went up substantially. And this is going back about ten
11:45
Speaker 4: years ago and since that point in time, Yeah, anywhere
11:49
Speaker 4: from five to seven percent about the average for a
11:52
Speaker 4: commercial property.
11:54
Speaker 1: Which area do you find your every day investors are
11:58
Speaker 1: most interested in? We might zone in under Yeah.
12:01
Speaker 4: The outer suburbs of a capital city for that light
12:04
Speaker 4: industrial that little warehouse seems to be quite popular and
12:07
Speaker 4: in demand as well as CBD. So whether that's Brisbane, Melbourne,
12:12
Speaker 4: Sydney perf CBD office properties.
12:16
Speaker 1: Okay, yeah, so these are there are entry points less
12:20
Speaker 1: than a million dollars, industrial units and small offices basically
12:25
Speaker 1: that can be held by you individually. So that's the
12:29
Speaker 1: that's I think, folks, that's really a leman's guide to
12:32
Speaker 1: this area. It's getting a lot of attention. I suppose
12:35
Speaker 1: we should say games and you might explain why it's
12:38
Speaker 1: getting attention. It's always been there, But is it that
12:42
Speaker 1: recoil from residential Is that what's going on?
12:46
Speaker 4: It is it's that legislative change that has now made
12:51
Speaker 4: commercial property more attractive too. Major changes. One is a
12:55
Speaker 4: negative gearing change where you can't negatively gear residential property
13:00
Speaker 4: moving forward unless they're brand new properties.
13:03
Speaker 3: But there's a carve out.
13:04
Speaker 4: For commercial properties because the thrust of those policy changes
13:09
Speaker 4: was to free up the housing supply for younger people,
13:11
Speaker 4: but they weren't really concerned about commercial property. So you
13:13
Speaker 4: can continue to negatively gear commercial property into the future.
13:17
Speaker 4: And the other thing was in the Senate, the Greens
13:20
Speaker 4: negotiated with Labor with the budget changes, and the Greens
13:23
Speaker 4: insisted that there has to be a ban on loans
13:27
Speaker 4: inside of super funds to buy residential properties, and that
13:30
Speaker 4: actually commences on my birthday, which is a tenth of all.
13:33
Speaker 2: As long as everyone knows.
13:34
Speaker 4: Now, similar to the outside of SUPER changes of negative gearing.
13:40
Speaker 4: Inside of SUPER, they've created a carve out for commercial property,
13:44
Speaker 4: so you can still borrow money to buy a commercial
13:46
Speaker 4: property beyond ten August. So these two things mean that
13:49
Speaker 4: there's a lot more eyeballs on commercial property from a
13:52
Speaker 4: demand side of things.
13:54
Speaker 1: Yeah, okay, well we've got to take a short break up.
13:56
Speaker 1: We'll actually dive into this a bit deep, because I
13:58
Speaker 1: know there was great interest in it from the older
14:00
Speaker 1: and so of later and from obviously across investor community.
14:03
Speaker 1: For the simpler reason that it has to be reassessed
14:06
Speaker 1: now commercial property because all those issues around negative gearing,
14:12
Speaker 1: particularly the ban on residential lending in smsps, they are
14:17
Speaker 1: sidestepped in commercial property, and I suppose, James, its outlook
14:21
Speaker 1: is better and the immediate future than residential. I mean,
14:25
Speaker 1: residential is forecast of four ten percent by some of
14:27
Speaker 1: the big banks.
14:29
Speaker 3: Definitely every week with them.
14:31
Speaker 4: No one has that crystal ball, But residential property markets
14:34
Speaker 4: that are falling around the country, whereas commercial seems to
14:37
Speaker 4: be holding.
14:37
Speaker 3: Ground and gaining a lot more interest.
14:40
Speaker 4: So if I was a betting man, I'll probably lay
14:42
Speaker 4: my bets with commercial Okay, we'll be back in one moment, folks.
14:58
Speaker 1: Hello, welcome back to the Australians Puzzled podcast. James Kirby
15:01
Speaker 1: here with James Gerard of Financial Advisor dot com dot you.
15:04
Speaker 1: We're talking about the big lift and interest in commercial
15:08
Speaker 1: property for retail investors. Traditionally, retail investors very slow to
15:12
Speaker 1: get into this area for the simple reason that it
15:14
Speaker 1: has a higher entry point. Traditionally it had a higher
15:17
Speaker 1: entry point than houses.
15:18
Speaker 2: But of course.
15:18
Speaker 1: Houses and so dear of the average house. James's outdined
15:22
Speaker 1: how there's actually you can get into the office market
15:25
Speaker 1: or the industrial unit market for less than the price
15:27
Speaker 1: of an average house. That's another thing that's changed immensely. Also,
15:31
Speaker 1: there was the issue I think which will never go away.
15:34
Speaker 1: I think, James, you might explain we've outlined the upside
15:37
Speaker 1: of commercial property.
15:38
Speaker 2: It has a better outlook.
15:39
Speaker 1: Just now, it has a better tax, It has a
15:41
Speaker 1: relatively better tax arrangement. Right now that's beyond doubt because
15:46
Speaker 1: you can still negatively gear and you can still borrow
15:49
Speaker 1: in your SMSF etc. But the downside, which we need
15:55
Speaker 1: to clarify is that we were saying at the start,
15:58
Speaker 1: you're dealing with business people. So it's totally different, isn't it.
16:02
Speaker 1: They everything's more serious, it's more long term. When you
16:07
Speaker 1: do a deal and you get a talent, that talent
16:10
Speaker 1: is going to stay for longer. But if that tenant leaves,
16:12
Speaker 1: are probably going to leave for longer. You mentioned at
16:14
Speaker 1: the start of the show the sort of nightmare scenario
16:16
Speaker 1: where someone had a commercial property that was empty. What
16:19
Speaker 1: did you say for two years?
16:21
Speaker 4: Yeah, for over two years. Had to take the rent
16:23
Speaker 4: by fifty percent. And another interesting nuance with commercial property
16:28
Speaker 4: is what's called incentives. Usually you need to incentivize the
16:33
Speaker 4: tenant to come into your commercial property, which is usually
16:37
Speaker 4: by either giving them a rent free period of standard
16:40
Speaker 4: is three months, but can be up to twelve months,
16:43
Speaker 4: or otherwise giving.
16:44
Speaker 3: Them money and you would give them money.
16:47
Speaker 4: To help them fit out the property if it was
16:50
Speaker 4: say a medical practice, and they need to fill out
16:52
Speaker 4: a certain way. So that's something else the owners need
16:55
Speaker 4: to take into account, is that cost to get a
16:59
Speaker 4: new tenant in as well as if it's a particularly
17:02
Speaker 4: an office, the strata can be very high, much higher
17:05
Speaker 4: than an equivalent residential apartment complex.
17:08
Speaker 3: If you're in an office block for commercial strata cost
17:12
Speaker 3: strata costs.
17:13
Speaker 1: Yeah, yeah, yeah, okay, I see, yes, but then the
17:16
Speaker 1: tendencies are much longer, right.
17:18
Speaker 3: That's right.
17:18
Speaker 2: Yeah.
17:19
Speaker 4: On the flip side, some of the benefits are that
17:20
Speaker 4: tendency is usually three to five years, and there's usually
17:24
Speaker 4: an option there for the tenant to release the property
17:27
Speaker 4: for another three to five year period, so there can
17:31
Speaker 4: be less sort of changeover of tenant. But when that
17:33
Speaker 4: tenant change occurs, it can be a costly exercise for
17:36
Speaker 4: the owner.
17:37
Speaker 3: Yeah.
17:38
Speaker 1: So I think the outstanding risk, folks is there's two things.
17:42
Speaker 1: One is the entry point in that it's a different
17:46
Speaker 1: world than residential and I think an every day investor
17:51
Speaker 1: with very little business experience could easily enter the residential market.
17:56
Speaker 1: But the commercial market is a very different beast. And
17:59
Speaker 1: I just put that out that'd be very sure that
18:02
Speaker 1: you are able or you have people around you that
18:04
Speaker 1: are able to operate at that level. And the other
18:07
Speaker 1: point is cash flow risk, which is virtually non existent
18:11
Speaker 1: in the residential market. For all its false It's got
18:15
Speaker 1: a vacancy rate of one percent across the major cities. Basically,
18:18
Speaker 1: you can rent anything. If someone says they're leaving, you
18:20
Speaker 1: can get someone in next month.
18:21
Speaker 2: You don't have that.
18:23
Speaker 1: The cash flow risk, and it's the big risk I
18:25
Speaker 1: think for commercial really interesting. Wanted to ask you, James,
18:28
Speaker 1: just about buying anything, buying commercial or buying anything right now.
18:33
Speaker 1: You always have like the idea of contrary and investing.
18:37
Speaker 1: So if there had been a share market crash a
18:39
Speaker 1: month later, if I called you, you'd always talk in
18:42
Speaker 1: terms of now's the time, the buffet idea, you know,
18:46
Speaker 1: to be fearful when everyone is greedy, and greedy when
18:48
Speaker 1: everyone's fearful. Well, everyone seems to be pretty fearful right
18:51
Speaker 1: now in across property, So what's the contrarian view.
18:56
Speaker 4: Contrarian view is to go out there and snap up
19:00
Speaker 4: a bargain.
19:01
Speaker 3: That said, you do need to show a high level
19:03
Speaker 3: of caution.
19:04
Speaker 4: There's another saying when things are falling, you don't want
19:07
Speaker 4: to catch a falling knife.
19:09
Speaker 3: So this is.
19:10
Speaker 2: A saying for every scenario.
19:12
Speaker 1: Yeah, but let's just interrogate that idea that, hey, you know,
19:17
Speaker 1: property is cheaper than it was. It's falling, the demand
19:21
Speaker 1: is very soft, the clear and straits are the West
19:24
Speaker 1: since COVID. On the other side, the share market is
19:27
Speaker 1: running absolutely rampant, and with all the key ratios that
19:30
Speaker 1: you might worry about going the wrong way would way
19:32
Speaker 1: the keep Shiller ratio is at forty one now, it's
19:35
Speaker 1: double the average. I haven't seen it since nineteen ninety nine.
19:38
Speaker 1: So I'm just saying, just what's your views on bargain hunting?
19:42
Speaker 4: Now, yeah, I think that, well, my view is that
19:47
Speaker 4: bargain hunt but you need to build in a buffer.
19:50
Speaker 4: So using that that phrase low boll you need to
19:52
Speaker 4: low ball that the seller is because you need to
19:54
Speaker 4: build in your own buffer. If the market price is
19:56
Speaker 4: a million dollars, you want to buy it for nine
19:59
Speaker 4: hundred thousand all less, and that protects you if we
20:01
Speaker 4: get that an extra ten or fifteen percent falls because
20:04
Speaker 4: you've acquired at a good price. Because there's still a
20:07
Speaker 4: fifty per cent chance that we're going to see the
20:09
Speaker 4: RBA increase the rates one more time before it's likely
20:11
Speaker 4: to go flat. And looking at the property market, where
20:15
Speaker 4: we're still getting residential now, James just we're speaking residential now.
20:20
Speaker 4: Looking at residential markets, the metrics are getting worse. There's
20:24
Speaker 4: higher days on markets for properties that are for sale,
20:27
Speaker 4: there's higher withdrawn auctions. There's more slower clearance rates on
20:31
Speaker 4: the auctions as well, and that's anticipated to get worse
20:35
Speaker 4: throughout twenty twenty six. So again, look to buy a bargain,
20:39
Speaker 4: but building a buffer. Don't pay top dollar because you
20:42
Speaker 4: need to factor in that you may see your five
20:44
Speaker 4: or ten percent drop from the price that you bought
20:46
Speaker 4: it for.
20:47
Speaker 1: Yes, and you're not just talking off the top of
20:49
Speaker 1: your head. There's a Morgan Stanley podcast out there of
20:51
Speaker 1: a ten percent drop picked trough in residential property. And
20:54
Speaker 1: as you say, if we've got another lift in interest rates,
20:57
Speaker 1: then the sentiment in the market could turn very negative.
21:00
Speaker 2: Indeed.
21:01
Speaker 1: Okay, folks, Now I've kept gyms here because I've got
21:04
Speaker 1: some very good questions that I've been collecting from you all.
21:07
Speaker 1: We're going to do them after a short break. Hello,
21:18
Speaker 1: Welcome back to The Australian's Money Puzzleive podcast. James Kirby
21:21
Speaker 1: here very much a deep dive in property today and
21:24
Speaker 1: I've kept some property questions from Jens, really good questions.
21:27
Speaker 1: I hope we get through them all there. From Flora, Richard,
21:30
Speaker 1: Nathan Matt, why don't you take the first one from
21:33
Speaker 1: Dave Games, and you might read that and see how
21:36
Speaker 1: we go.
21:37
Speaker 3: Okay, great, a little bit of a long one. Here
21:40
Speaker 3: we go.
21:40
Speaker 4: You talked about the importance of a property valuation as
21:42
Speaker 4: at one July twenty twenty seven. I would have thought
21:45
Speaker 4: that the highest credible value is preferred so that a
21:48
Speaker 4: larger portion of the capital gains are treated under the
21:50
Speaker 4: pre July twenty twenty seven rules. You also talked about
21:53
Speaker 4: the treatment of losses, such as a real loss due
21:56
Speaker 4: to indexation is not allowed and only a nominal loss
21:59
Speaker 4: will be allowed to offset other gains. If properties in
22:03
Speaker 4: Brisbane perf Adelaide with solid returns in recent periods go
22:06
Speaker 4: through a Melbourne esque period post July twenty twenty seven
22:10
Speaker 4: in brackets where price graph is less than inflation before sale,
22:14
Speaker 4: then this could introduce an interesting quirk that a lower
22:17
Speaker 4: valuation as at one July twenty twenty seven is preferred,
22:22
Speaker 4: one that reduces pre July twenty twenty seven taxable gains
22:26
Speaker 4: while allowing calculated post July twenty twenty seven returns to
22:30
Speaker 4: near inflation and real losses that cannot be offset to
22:33
Speaker 4: be minimized. Perhaps it'll be worth having a couple of
22:37
Speaker 4: valuations up your sleeve.
22:39
Speaker 1: Oh, Dave, A couple of valuations up your sleeve. Don't
22:42
Speaker 1: think our readers or our listeners will.
22:44
Speaker 2: Be doing such a thing.
22:45
Speaker 1: We would all be playing it straight as a bat
22:48
Speaker 1: in terms of valuations. But I think your very first point, Dave,
22:51
Speaker 1: was most part of it, which is, you know, for
22:54
Speaker 1: mostly for most of the time, I suppose with this valuation,
22:58
Speaker 1: you'd be trying to cases. You'll be trying to opt maximum.
23:02
Speaker 1: You're trying to maximize it and make sure it's not
23:05
Speaker 1: that you capture it at its highest possible point for
23:08
Speaker 1: the ATO under the RCG CGT system which was more generous,
23:13
Speaker 1: and the new one that's sort of logical enough. What
23:16
Speaker 1: do you think if he's more advanced tactics, there are
23:19
Speaker 1: genes in relation to the losses.
23:23
Speaker 4: I think Davey's right, and I think Dave's clever. Everyone's
23:26
Speaker 4: thinking about trying to maximize the valuation as at one
23:29
Speaker 4: July twenty twenty seven to have more of the game
23:32
Speaker 4: captured under that old system, but nobody's thinking about what
23:35
Speaker 4: if we have lower negative growth or no one but
23:38
Speaker 4: Dave's thinking about this. If we have lower negative growth,
23:40
Speaker 4: then the inverse is relevant a lower valuation. But James,
23:44
Speaker 4: I think the problem is going to be getting valuations
23:47
Speaker 4: done because there's only three thousand valuers in Australia and
23:51
Speaker 4: there's three million investment properties two point five million businesses,
23:55
Speaker 4: so that's almost two thousand valuations per valuer to get
23:59
Speaker 4: through around that in the financial year that's going to
24:02
Speaker 4: come in twelve months time.
24:04
Speaker 1: That's really yeah. I know that is an accident waiting
24:06
Speaker 1: to happen. Well, we'll put that to one side.
24:09
Speaker 2: But thank you Dave. This has never advised.
24:11
Speaker 1: It's information on a very good piece of correspondence, Thank
24:14
Speaker 1: you very much. Okay, something from Matt. Why isn't it
24:17
Speaker 1: mandatory for apartment listings to see what the body corporate
24:21
Speaker 1: fees are? It's so annoying and time wasting to find
24:24
Speaker 1: the information, Thank you, Matt.
24:25
Speaker 2: Very simple. I don't know.
24:28
Speaker 1: There's a lot of stuff they could put an apartment
24:29
Speaker 1: listings that would but yeah, for apartments when you're looking
24:32
Speaker 1: at a block, I mean absolutely. I've never found it
24:36
Speaker 1: particularly hard to find them though, what about you, James?
24:39
Speaker 4: Not too hard to find. It's one phone call way
24:41
Speaker 4: to the real set agent. I think they're not in
24:43
Speaker 4: there because the law doesn't require it. Listings are mainly
24:46
Speaker 4: for marketing. And interestingly, I was over in France recently
24:49
Speaker 4: and I was walking past a real set agency and
24:53
Speaker 4: every listing has energy ratings on the listings, and that's
24:57
Speaker 4: a mandatory, illegilative thing in France. And it's goes from AH,
25:01
Speaker 4: which is highly efficient, down to G which is highly
25:03
Speaker 4: in officially.
25:04
Speaker 1: So important, and that will come here. I think eventually.
25:06
Speaker 1: We're the same. We're just selling our own family home
25:08
Speaker 1: in Ireland, my sisters and I, and this is so important.
25:12
Speaker 1: Now you have to get I mean, there's much more
25:14
Speaker 1: rules there because of the EU, but you have to
25:15
Speaker 1: get your energy rating. And what you're rating is quite pertinent,
25:20
Speaker 1: you know, to the valuation at least in the market.
25:24
Speaker 1: Our house was nineteen seventy five, so the energy rating,
25:26
Speaker 1: let me tell you it wasn't great. In fact, the
25:28
Speaker 1: whole house was run on oil heating free oil crisis. Yes, anyway,
25:36
Speaker 1: tell you what livelier market than here? Just now, Okay,
25:40
Speaker 1: there's a question from Fiora.
25:42
Speaker 4: Sure says, I really appreciate the show and have been
25:45
Speaker 4: listening for years. I'm hoping you can provide some clarification
25:49
Speaker 4: on a few general property investment and tax concepts, Can
25:53
Speaker 4: you please arrest the following scenario. Suppose an investor owns
25:56
Speaker 4: and existing long term rental property like a free standing house,
26:00
Speaker 4: build a counsel approved second dwelling or granny flat on
26:02
Speaker 4: the same title. This results in two separate dwellings on
26:06
Speaker 4: two individual rental leases with two separate sets of tenants.
26:10
Speaker 4: In first point in negative gearing, will the ATO treat
26:13
Speaker 4: the newly built second dwelling slash granny flat as a
26:16
Speaker 4: new residential premise, therefore allowing the owner to claim negative
26:20
Speaker 4: gearing and full depreation depreciation benefits on that specific build.
26:24
Speaker 1: Great, that's such a good question and I don't think
26:26
Speaker 1: there's an answer yet. Is there has a treasure clarified
26:29
Speaker 1: on that one? Living kicking it around.
26:31
Speaker 4: I saw early reports when the budget first came out
26:34
Speaker 4: that a granny flat built on an established property site
26:38
Speaker 4: does not qualify as an eligible new build. I haven't
26:41
Speaker 4: seen anything contrary.
26:44
Speaker 1: Do think all the treasures discretionary powers around particular definitions
26:49
Speaker 1: in the budget. This one, because it was such a
26:52
Speaker 1: sweeping budget with so many changes, has an exceptionally large
26:55
Speaker 1: bag of treasure discretionary powers which have yet to be clarified.
27:01
Speaker 1: So I think the short answer on the first one
27:03
Speaker 1: fiel Is, remains to be seen. And she had two
27:07
Speaker 1: other questions on there, and they're very sound budget based questions.
27:12
Speaker 1: So it might be that one capital against what is
27:14
Speaker 1: she asking that?
27:15
Speaker 3: Of course on capital gains?
27:17
Speaker 4: How is CGT split or calculated when a single title
27:20
Speaker 4: evolves into dual occupancy property?
27:23
Speaker 3: Furthermore, how would.
27:24
Speaker 4: The propose July twenty twenty seven CPI based CGT changes
27:28
Speaker 4: impact the future sale of a property with both an
27:30
Speaker 4: established house and a newer second dwelling.
27:33
Speaker 1: M Well at ex variation of the first answer, which
27:37
Speaker 1: is unclear?
27:40
Speaker 2: Do you know anymore?
27:41
Speaker 4: Yeah, I think it's unclear, And I would note that
27:46
Speaker 4: this is general information where we're talking about.
27:47
Speaker 3: This is not for yourself.
27:49
Speaker 4: But I would take a stab and say that it's
27:51
Speaker 4: probably going to be valued as at one July twenty
27:53
Speaker 4: twenty seven, the whole property, and then when you sell
27:55
Speaker 4: it down the track, you'll have to apportion what was
27:58
Speaker 4: the part that was your private residents exempt from CGT
28:01
Speaker 4: and what was the part that was the income producing part,
28:04
Speaker 4: I e. That Grinny flat and whatever that percentage you
28:06
Speaker 4: then have to apportion the CGT across that.
28:09
Speaker 1: So I think it's not risky to say to Fiora,
28:12
Speaker 1: be really detailed and keep a clear diary and love
28:16
Speaker 1: book as to what happened when, which was classified where,
28:20
Speaker 1: because it was always complicated jewel occupancy, and it's become
28:23
Speaker 1: more complicated now with.
28:24
Speaker 2: The new rules.
28:25
Speaker 1: They will have rules for how it's supplied. But to
28:29
Speaker 1: the best of our knowledge, Fiora, they have not been
28:32
Speaker 1: clarified yet. I know the property people, property counsel, et cetera,
28:35
Speaker 1: and lobbying behind the scenes furiously trying to get these
28:37
Speaker 1: things sorted, but I have not seen the treasures, determinations
28:41
Speaker 1: or directions as they call them on that just yet.
28:43
Speaker 1: I think that is where we are. And just the
28:45
Speaker 1: last bit of Fura's three parter, which is great, folks,
28:49
Speaker 1: if you have questions, no problems ending in three parts
28:52
Speaker 1: four parts, if you're going to take the effort to
28:54
Speaker 1: write in of course, So what's the hard last question there?
28:57
Speaker 4: That The last part relates to self managed super and lending,
29:01
Speaker 4: and the question is can it self manage super fun
29:03
Speaker 4: legally lend money to a member to build a turnkey
29:06
Speaker 4: second dwelling on land that is currently owned and this
29:09
Speaker 4: is the important part in the individual's personal name, or
29:12
Speaker 4: does this breach related party transaction rules?
29:15
Speaker 1: Well, let us know what's the story.
29:18
Speaker 4: Yeah, if you want to stay out of jail, it's
29:19
Speaker 4: just that you don't do that. So definitely it's a
29:22
Speaker 4: big no with that one. There is a little exemption
29:25
Speaker 4: where you can use five percent of your superannuation money
29:28
Speaker 4: for things which are classified as in house assets, but
29:30
Speaker 4: still it's not a wise idea.
29:32
Speaker 3: So I just say blanketed no to that one.
29:34
Speaker 1: Is that how is it the case that you can
29:36
Speaker 1: lend your super SMSF five percent and you can lend
29:40
Speaker 1: you five percent?
29:40
Speaker 2: Is that how it goes?
29:41
Speaker 3: That's right.
29:42
Speaker 4: Yeah. The reason for this is that the government wants
29:45
Speaker 4: you to separate your super with yourself and you not
29:49
Speaker 4: have any benefit or real connection to your super fund
29:51
Speaker 4: because that money is meant to be growing purely for
29:54
Speaker 4: your retirement. And where you start to mix things in
29:56
Speaker 4: like building properties lending money, they don't like that.
29:59
Speaker 1: So they do allow five percent, but they're like, they
30:01
Speaker 1: hate you doing it, and there they watched it very carefully.
30:05
Speaker 4: Yeah, I would suspect that you're probably going to sit
30:07
Speaker 4: higher on an audit list if you have what's classified
30:10
Speaker 4: as that up to five percent in house assets and
30:12
Speaker 4: yourself managed super fun.
30:13
Speaker 2: Okay, and that's it? Is it? Is that all the
30:16
Speaker 2: lending that's allowed.
30:18
Speaker 3: Between related parties? Yeah, yeas, all that's allowed.
30:21
Speaker 1: Yeah, But then there is an architecture that's out there
30:24
Speaker 1: that that could be explored with an advisor if you
30:26
Speaker 1: are where where SMSF money and property interests can combine
30:34
Speaker 1: in various ways. But they're fairly elaborate with unit trust
30:37
Speaker 1: and everything else like that, So it's not impossible, is it.
30:39
Speaker 1: James is within the rules, but it has to be
30:42
Speaker 1: done properly.
30:42
Speaker 3: Correct for the EVERYMSF trustee.
30:44
Speaker 4: This was probably a bit too complex the maneuvering that's
30:48
Speaker 4: required for it. But if you're really determined to do
30:50
Speaker 4: this type of arrangement, go speak to a supernuation lawyer
30:54
Speaker 4: and specialist accountant and advis and they'm able to guide you.
30:58
Speaker 1: Yeah, because if it's worth it, you know it, it
31:00
Speaker 1: may well be worth it.
31:01
Speaker 2: If it's worth.
31:01
Speaker 1: Paying, there are times for advisors are well worth it.
31:04
Speaker 1: I have to say this, James is on the show,
31:05
Speaker 1: but it's true. Okay, we're going to try and do
31:08
Speaker 1: the last three questions fairly quickly, So I'll read the
31:11
Speaker 1: first one. Richard, we own a property in a discretionary
31:13
Speaker 1: trust and a different property in a unit trust. They
31:16
Speaker 1: both have the same corporate trustee. We bought a second
31:19
Speaker 1: property in a unit trust on the belief that we
31:21
Speaker 1: could shift it to a different entity if needed, which
31:25
Speaker 1: apparently is incorrect as it's residential. Will the new minimum
31:30
Speaker 1: thirty percent CGT applied to trusts affect both properties when sold.
31:37
Speaker 4: Quick answer is that there's two separate issues here that
31:41
Speaker 4: Richard may be mixing together. So one is that there's
31:45
Speaker 4: a thirty percent minimum tax on distributions from discretionary trusts.
31:50
Speaker 4: Only separately to that, there's new thirty percent minimum tax
31:54
Speaker 4: on capital gains tax, which is for everybody. We need
31:57
Speaker 4: to trust discretionary trust individuals as well. So I think
32:01
Speaker 4: Richard just needs to appreciate those two differing rules. But
32:04
Speaker 4: it's confusing because they're both thirty percent.
32:07
Speaker 1: They are, and also, just by Richard, this may I'll
32:14
Speaker 1: help you. The CGT thirty percent minimum is now legislator,
32:19
Speaker 1: but the trusts thirty percent minimum income distribution tax is
32:26
Speaker 1: not legislator yet, Just so you know, by that. I mean,
32:30
Speaker 1: who knows there could be variations. Just keep watching that,
32:32
Speaker 1: all right, Nathan? Did I read that one quickly?
32:35
Speaker 4: Nathan, So, I bought my nineteen seventies one bedroom apartment
32:38
Speaker 4: in a bayside suburb a few years ago, despite it
32:41
Speaker 4: still being able to negatively gear it newbys of similar
32:44
Speaker 4: stock won't, as it stands, will this sely investors like
32:47
Speaker 4: myself experienced significant falls in our properties value? Or will
32:51
Speaker 4: apartments in suburbs like mine where there are no buildings
32:54
Speaker 4: allowed above three stories be relatively immune?
33:02
Speaker 1: Well, apartments have been doing it. They've been doing it hard,
33:05
Speaker 1: haven't they? And the apartment investment market won't be helped
33:09
Speaker 1: want tiny emit by the tax changes, but are supposed
33:13
Speaker 1: a very good apartment in with some rest of scarcity,
33:16
Speaker 1: which sounds like this situation.
33:19
Speaker 2: And we're not.
33:20
Speaker 1: This is not independent individual advice. This is for all
33:23
Speaker 1: the Nathans in the world. What would you say to
33:25
Speaker 1: someone who comes into you and says, I'm worried about
33:26
Speaker 1: my apartment. I wonder if he's had it since the seventies.
33:31
Speaker 1: But what would you say, because ye I would have
33:32
Speaker 1: told the apartment market is weak and going to get weaker.
33:36
Speaker 4: Yes, different capital cities are performing differently over a twelve
33:40
Speaker 4: month period. Melbody's down, Perfose up. But in general it's
33:44
Speaker 4: a weak market around the country. I think the best
33:46
Speaker 4: way to deal with this is pragmatically to go Okay, Well,
33:49
Speaker 4: the major banks have said that due to the changes
33:52
Speaker 4: in laws on negative gearing, the average property is going
33:55
Speaker 4: to drop by three to five percent, and unfortunately Nathan's
33:57
Speaker 4: property may drop by three to five percent. But the market,
34:00
Speaker 4: the property market will adjust for that and it'll be
34:02
Speaker 4: fine longer term.
34:05
Speaker 2: Yeah.
34:05
Speaker 1: I really like that point, James. Like, it is a market.
34:09
Speaker 1: It does a just and you know, the market is
34:12
Speaker 1: the same market. It always was, the same demand and
34:15
Speaker 1: supply factors. Importantly, what's changed is the tax treatment, and
34:21
Speaker 1: tax investors will adjust to tax settings. They won't adjust easily,
34:26
Speaker 1: and they won't adjust quietly, but they will adjust if
34:29
Speaker 1: they if the government manages to get them through in
34:32
Speaker 1: the entirety of their plans, and half of them are
34:35
Speaker 1: already through a point of repeatedly making out the shows
34:38
Speaker 1: CGT changes, negative gearing changes, They're done. They're through parliament, folks.
34:43
Speaker 2: Okay.
34:44
Speaker 1: The final question was, Paul, very tricky, are very clever?
34:47
Speaker 1: Listeners have put in some very clever questions today, this
34:50
Speaker 1: one particularly so under the new budget. If it gets past,
34:54
Speaker 1: is this possible move out of my principal place of
34:57
Speaker 1: residents renters for five years, get the old negative gearing treatment,
35:02
Speaker 1: move back in after five point five years, and then
35:05
Speaker 1: if I said it soon after, claim the zero capital
35:08
Speaker 1: gains tax because it will be my principal place of
35:11
Speaker 1: residence after five years, after all we bought it pre budget.
35:18
Speaker 2: Well, is that a yes or no? I hear you say there, James.
35:22
Speaker 4: It's an in theory, yes, just for the're theory is yeah,
35:25
Speaker 4: with a caveat attached.
35:27
Speaker 3: Just make sure that you don't paul in all the
35:29
Speaker 3: pause of this world.
35:29
Speaker 4: They don't purchase another main residence when they move out
35:32
Speaker 4: of the primary residence. You can only have one principal
35:35
Speaker 4: place of residence to claim that former residence exemption. And
35:38
Speaker 4: the other thing is that on the depreciation side of things,
35:42
Speaker 4: see your tax account. But you're likely to be able
35:44
Speaker 4: to claim that two point five percent per year on
35:46
Speaker 4: the build in depreciation. But you're probably not going to
35:48
Speaker 4: be able to claim on the fixtures and fit ins
35:50
Speaker 4: because when the property was first made available, those items
35:53
Speaker 4: weren't brand new.
35:54
Speaker 3: And that's what's required under the legislation.
35:57
Speaker 1: But you know, folks, Paul has picked up on something
35:59
Speaker 1: which is so so important that you know. The negative
36:02
Speaker 1: gearing is banned on all but new property, but existing property,
36:07
Speaker 1: and the night of Budget May twelve this year, all
36:10
Speaker 1: existing property are that night can be negatively geared. Now
36:16
Speaker 1: we're in the future, and that includes all residential property.
36:20
Speaker 1: So if you own your own home and under a
36:22
Speaker 1: scenario like post where you move out of that house
36:24
Speaker 1: and you go to another house, that new house becomes
36:26
Speaker 1: your permanent residence, you can negatively gear your existing property home.
36:32
Speaker 3: Is that right, James, That's right, Yep, that's the case.
36:35
Speaker 4: One thing which is got people up at arms is
36:36
Speaker 4: that I believe that if you get divorced, that then
36:38
Speaker 4: resets the nature of the property and then you're not
36:40
Speaker 4: exempt anymore under the rules.
36:42
Speaker 2: Yeah.
36:43
Speaker 1: I think they rushed in an amendment to that, actually
36:45
Speaker 1: to Yeah, I believe so. But you're right on top
36:49
Speaker 1: of things there, James. Okay, folks, that was very interesting.
36:52
Speaker 1: I hope you were able to hold it all together
36:54
Speaker 1: through that show. It was we started in broad terms
36:56
Speaker 1: talking about commercial property, and I think look, it's worth
36:59
Speaker 1: the look if you've never looked at it.
37:01
Speaker 2: We've done shows in the past.
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Speaker 1: There's one with the mission Daniel Misha Daniel. If you
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Speaker 1: just search on that on your podcast app, you'll find
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Speaker 1: that we had a deep look on so technicals of
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Speaker 1: commercial property before. But at that time we didn't have
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Speaker 1: a tax regime which is certainly you know, lined up
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Speaker 1: against residential investing. So it's a whole new world, well
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Speaker 1: worth the look. Thank you very much James your art
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Speaker 1: for the show today.
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Speaker 4: My pleasure and thank you to you guess such intelligent,
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Speaker 4: insightful questions that they're asking, but unfortunately that they're needing
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Speaker 4: to ask these questions because of how complex things have
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Speaker 4: become exactly.
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Speaker 1: I know we have had a big lift in the
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Speaker 1: volume of questions of that nature where people are trying
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Speaker 1: to just figure out what to do. Well, that's what
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Speaker 1: the show is for. I hope it's been useful to you.
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Speaker 1: Any more questions Keep them rolling the money Puzzle at
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Speaker 1: the Australian dot com dot Au. Today's show was produced
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Speaker 1: by Leah sammcglue Don't you Soon