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#343 - Warning! The Australian Property Crash Is Beginning · Money Grows on Trees

• 0:00
  The Australian property crash isn't coming. It's already here. Most people think property is the
• 0:05
  safest investment Australians can make and that at any downturn will be short, orderly and
• 0:10
  recovery will be quick. But the reality is that the data from June this year tells a very
• 0:15
  different story, and most Australians aren't prepared for what it means for their finances. I'm
• 0:20
  Lloyd Rose, 17, investor, entrepreneur, and I've helped thousands of everyday Australians,
• 0:24
  Americans, New Zealanders, Canadians get out of debt and build real wealth. And in this video, I'm
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  going to show you the hard evidence that the downturn has officially begun, the four triggers
• 0:32
  driving it, and the exact playbook for what to do, whether you own or rent or waiting to buy. Firstly,
• 0:39
  the evidence. Let's look at the fact that the real estate correction has begun and I can't help
• 0:46
  but come in here at the start of this episode and say, I think we were right. I think
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  we've been talking about this for the last two years, and now it has finally happened. And it's, uh,
• 0:59
  no, it's not. It's not ideal for certain amount of people. But we've had a huge 85% growth spike in
• 1:04
  like five years. And it's just way overshot the mark obviously. So we now have to have the market
• 1:10
  cycle we need to have. It's just the way it is. I don't know why people are so shocked. They're like,
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  oh my God, it's falling. I'm like, no shit Sherlock. It's been rising fucking straight up for over
• 1:19
  five years. What do you think was going to happen? What do you think? Just going to grow to the sky.
• 1:23
  It's ridiculous. They're selling flipping houses. $25 million in Bill. It's joke. It's not going to
• 1:27
  work. People are going to make money. They're going to be a lot of money lost a lot of money lost in
• 1:32
  the next few years. Heaps. Um, but of course, if you were, if you have bought in the right market swing,
• 1:38
  which many people have and held on to it, you're good. It's okay. Like not everyone gets hurt with
• 1:43
  this. But those who are speculating will and they bloody deserve to because they've been speculated
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  that a 19 year old kid DM me on Instagram telling me about the real estate market. And I was like,
• 1:54
  well, uh, you know, 19. He was 26 and he'd been doing this for five years. He never seen a recession in
• 1:58
  his life, I only ever seen real estate prices goes straight up. He's like, I'm just gonna keep
• 2:02
  flipping. I'm like, man, it's gonna come and get ya. And now got him. So we have to understand and be intelligent
• 2:08
  that the assets move in cycles. So what's the hard evidence that we are in a
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  downturn? Well, last month, in fact, a month before last May, the National Home Index record recorded
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  0% growth for the first time in a long time. 0% growth. The most telling figure
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  is the fact that auction clearance rates are way down. Auction clearance rate is the the the
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  percentage amount that of houses that sell at auction. And they clear. Right. So we're looking at
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  at a peak. It was 72%. And then it's dropped. It was below
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  60% in March, then 47% and then lower in April. And now I just saw, I read
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  yesterday that Brisbane, uh, which is the last of the Mohicans to go to, to tip
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  Its clearance rate was 16%, and we're seeing a huge fall in listings year on
• 3:05
  year. And we are obviously seeing a 30% less mortgage applications. So we're
• 3:12
  starting to see that not only the auction clearance rate is falling, we're seeing 12%, 10%
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  fall in actual prices in Sydney and Melbourne already. We're actually also seeing the fact that
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  less people are applying to get a mortgage. We're seeing store prices collapsing, clearance rates,
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  rising listings but not selling and a decline. It's happening. I don't think you have to be a
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  genius to work out that is actually happening. So here's the four reasons why it's happened. And
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  that's one is obviously interest rates have gone up and that's happened because we had to kerb
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  inflation. So and I think more are coming. So you're seeing obviously with with higher interest
• 3:46
  rates there's two things that happen with that one. Those that already have a mortgage and are
• 3:51
  struggling to pay it are getting get struggle even more. So they want to offload their mortgage
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  and sell their problem, sell their house. That's a that's a real possibility and probability of
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  what's causing some listings to go to market but not quite sell. The second thing you're seeing is
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  that because of the price rise in real estate and the wage growth hasn't kept up to it, people are
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  now finding it difficult to even qualify to get a loan. So you're seeing that happen too. With rising
• 4:13
  interest rates, it's just less people qualify. So you're going to get less people even in a
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  position to buy. Serviceability is getting strangled and demand for mortgages are getting
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  strangled at the same time. The second thing, the budget killshot, like the budget with then
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  negative gearing changes the the 50% now CGT discount gone and the change into trusts, which is
• 4:34
  a huge tax disincentive for business owners. This is what's causing a lot of confusion. And also the
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  fact of the matter is too. They haven't really gone through the trust in the in the House of
• 4:43
  reps yet. They passed the two other laws in the House of Representatives and it passed Senate, but
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  the next one is in August. So people are even like, what, what, what structure do I even buy the
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  property and do I I can't even buy in my trust. What do I do? And they've got to wait till August
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  to even figure that out. So we're seeing a lull in the marketplace. Huge lull. Like, what do we even do?
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  So confusion driving the market. And of course, with that comes the fact that there's poor
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  sentiment. So the confidence has been shaken out of the market. You take this momentum and you have
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  negative sentiment. You're going to start to see people not do anything right. And not to mention
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  they change SMSF investing too. So self-managed super funds could recently buy a property and get
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  a recourse loan to buy the house to buy a property investment. But now that's gone
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  eviscerated. So you're going to see I think there was some developments that 30% of their sales was
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  all to do with self-managed super funds gone. So you're going to see this massive demand coming
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  out of the marketplace, which is obviously going to cause price reductions. And in fact, if you go
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  and look on real estate now, you look at houses that were sold in 2021, they say 2.6 million then
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  now on the market for 2.6 million for five years later. So real estate doesn't always just go up
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  when you buy it. And when you own it, you can see that the real peak has come off. When the intros
• 5:53
  go to zero and all the money goes into assets. Massive spark. It was obvious it was a bubble. It's
• 5:58
  obvious it was a peak in the cycle. All the indicators said it was on this show. I said it
• 6:02
  over and over and over again. We've been smashing property for the last two years. We know. And now
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  it's happened. And then bloody told you so like it was obvious. And if you've been listening to the
• 6:12
  show, hopefully you took that on board and understand it and you're like, yep, I'm ahead of
• 6:16
  this call. And for those who didn't listen and they would literally know everything about
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  property and blah, blah, blah, now they're suffering in their jobs, so you never know who has. Warren
• 6:23
  Buffett says you never know who's swimming naked until the tide goes out. So now we're going to see
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  who's swimming naked, who's got more debt than what they need, who has not planned for the winter.
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  And we're going to see that exacerbated by the budget. The third thing that's happening is
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  there's an affordability wall, as I said earlier. So the reality is people just can't afford it
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  anymore. And then you've got the global cycle. We've got New Zealand. So this is a really
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  fascinating. The Australia is like the last one to go through this. You can almost see it's like a
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  slow car accident. New Zealand stopped immigration and they increased rates. And guess what?
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  18% drops of 20% drops in real estate since 2021 peak. China's real estate prices are back to what
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  they were in 2006. Canada is about 20 to 30% down in some areas, and it's in a recession.
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  And even in the United States, it's got strong GDP growth. It was also in a real estate bubble, and
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  it's come right back to in the UK. So we're seeing all these Western countries. We're the only ones
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  with ridiculous real estate prices still. So now we're starting to see it fall. It's happening. Now
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  what's really interesting is that it's happening and will continue to happen because rates
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  will likely go up another couple of times. Why? Because inflation is out of control. Why?
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  Because government spending is still out of control. That's why they're not going to rein it
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  in. So if you think about that like well there's some level of the wealth effect. If houses prices
• 7:49
  do fall, will people still spend money like they are? That's up for debate too. But if the
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  government's is spending the money, we have no control over that. None unless we vote them out in
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  2028, which I hope we bloody do. But I think the rates are going to go up because inflation's
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  sticky. That's not going to help the real estate market. But I think there's a longer term wall
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  ahead that's going to have a huge impact that people don't understand or realise or perhaps
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  have contemplated. But if you look at Canada, you look at New Zealand, you look at the United States.
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  The United States has gone through now for the first time in a long time, 0% population growth
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  and population growth is the driver for housing demand. Fact it is the demand. If
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  you have no population or no population growth, you have no value of land. It's just not valuable
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  for them. How do I know that we'll go in the middle of Alice Springs and tell me, how much
• 8:35
  property is there? It's cheap if you've been if we've been importing 600,000 people a year, which
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  we have, and it's now a real contention, and it's the main policy indicator, or it's
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  the lead argument for the opposition in any government coming in like they will
• 8:54
  have to debate. The one thing will be immigration. You watch. And so whoever brings that to the
• 9:01
  election and implements it, let's say, for example, we drop the immigration down to $200. We're going
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  to see a massive suck of the demand for housing come not just in in the short term, but long term.
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  So you think about what housing's got to do. Housing's got to hurt. It's got to jump the hurdle
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  of higher rates, which it won't do. It's then got to jump the affordability issue, which it won't do
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  quickly. And it's got to jump the sentiments. It's got to jump the budget and it's now got to jump a
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  long term expected fall in immigration over what could be multiple decades. It's got
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  to jump over all of those things. And so how can you possibly think that the best years for
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  property lay ahead. It's very difficult. Does that make sense. So serviceability rate hikes budget
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  constraints and of course long term population demand So will there be a crash or will there be
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  a correction? And, you know, correction is classed as perhaps a 10% fall, whereas a crash is like a
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  30% fall. Um, and a bear market is 20%. So the crash case,
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  incidentally, it's already corrected. So we've already had a correction. It's down about 10% in
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  Sydney, in Melbourne and now in Brisbane will begin. We're going to see it. Right. And the 2032
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  Olympics not going to I don't think it's going to save it. So let's look at the crash situation. If
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  declines accelerate because of sentiment and confidence and people are panicking and you're
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  starting to see many might be panicking early. You can see this because they're put they're putting
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  their property in the market. They bought it four years ago for 2.6 million. They're selling it
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  today for 2.6 million. And they've lost money on the stamp duty. So it's a negative lot. It's a loss
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  for them. And they're they're probably panicking quickly because they're like, fuck, I don't know
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  how far this is going to fall. Maybe it's going to fall 40. But no one knows. No one knows. No one
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  knows. Remember in 1890 from the last demand led massive boom. It took 60 years to recover, remember?
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  History doesn't repeat, but it rhymes then. Ahead of us, we've got stagflation. And I've done an
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  episode on stagflation. You know what that is? Go check out the episode on stagflation. We've got
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  high inflation and low growth, so that could exacerbate the fall in real estate prices even
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  further. Right? It could be the worst, they're saying in the last 30 years. In fact, they're
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  probably saying it could be as bad as what perhaps happened in 2008. Even back to the 90s
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  when we went through this inflationary jump. Tim Lawless is quite funny. He says the most likely
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  outcome, he says, is an orderly, uneven decline rather than necessarily a sharp correction or
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  crash. So he doesn't think it's going to be correct. I don't think it will crash, but it could.
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  Do you think about all these things against it budget, inflation rates, portability and
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  population? It could, but let's say it's going to be an orderly, uneven decline. In some respects
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  It's kind of like ripping a band out off slowly. We haven't yet seen yet. Mortgage stress at the
• 11:58
  banks because they'll provision for bad and doubtful debts. You've got to see it on their
• 12:01
  balance sheet. We haven't quite seen the yet, but we're starting to see a fall in mortgage
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  originations. So we may start to see this start to happen soon. We have a little bit of fragmentation
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  in the market still because Perth is up a little, although it's starting to fall. And I think we're
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  starting to see a lot of these other places, like even the Gold Coast where we live, are starting to
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  now probably catch up a little bit, so we're a little bit behind. So you do see uneven markets in
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  the country. We don't see a full Australian market decline yet. We start to see the major capitals,
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  but the other areas follow the capitals, incidentally, and historically that's happened. The
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  only solace, the one thing that's probably going to prevent a crash, I would say, is we still have
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  sustained heightened demand in the immigration numbers. So it hasn't happened yet where they've
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  curbed immigration. I think it will. I think they have to take that to the election to win it, but
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  we haven't seen it yet. So I think one of the things we're going to still see that that
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  prevents a crash and is more probably an orderly decline. Is the fact that there's very low vacancy,
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  meaning there's just not enough houses? You know, I think there's something like 260,000 houses that
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  need to be built. And there's the sense of the budget constraint. It has been grandfathered. So
• 13:03
  there's going to be some level of tax treatment that's going to sustain and continue. So I think
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  that's going to help it as well. And the oil price shocks and what's happened there and the wealth
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  effect of the fact that housing is falling may limit the interest rate rises of the RBA. So we
• 13:19
  may see these things play out somewhere in the middle. We will not see a crash and all these bad
• 13:23
  things happen. We may not see it do nothing, but we may see a nice, steady, orderly decline. And that's
• 13:29
  a real possibility. If you were gonna have a bet, you'd bet that it's going to be a steady decline
• 13:34
  over a period of time that we don't know. And I don't know, maybe there's nothing to say that it
• 13:41
  can't be a sideways price action for five to 10 to 20 years. You just there's nothing to suggest
• 13:46
  that that's not a possibility. So you may not see a massive for people like, yeah, I can't wait to
• 13:50
  buy it. Maybe it doesn't. Maybe with the supply constraints that we have and the sustained demand
• 13:55
  from immigration, if it doesn't change quickly, we could very likely, at least for the next couple of
• 13:59
  years, we may see a real 5 to 10 year sideways movement in price or 20, like I
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  think from, uh, probably somewhere in the 70s when we hit stagflation, we probably didn't see
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  real estate really rise, potentially from, say, 1980, when rates were like
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  17% to 2000 was the the next boom that I can recall. There was like a boom in,
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  uh, in 2000. So what was that, 20 years? That's a real possibility. Okay. So here's the five sequence
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  to watch out for and to assess this and watch this happen. First one is auction clearance rates.
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  So it's below 50% and it's probably around the 40% mark. And as I said Brisbane is 16. So keep
• 14:41
  watching the auction clearance rates each weekend and each month. And if that starts to fall USC
• 14:46
  prices follow, which is already happening. Total listeners will go up. So if you go on real estate
• 14:50
  com the just the sheer volume of listings will go up because either people are panicking early or
• 14:54
  they can't afford their mortgage anymore and they're listening to get out. Right? Or or they're
• 14:58
  just fearful of losing their equity that they've raised over doing nothing but sitting on their
• 15:01
  ass. Right. Unemployment. Watch this. If unemployment goes up, people will then be forced to sell, which
• 15:08
  then drops prices. And of course the RBA interest rates end. Oil. If oil you know price goes up,
• 15:14
  inflation goes up, rates will go up. Rates will probably go up anyway because of inflation is
• 15:18
  high because of government spending days on the market. So obviously the longer the days on the
• 15:22
  market, you're going to see a drop in prices and you're already seeing this. Like if you get on
• 15:25
  real estate.com, you're seeing price reduction, price reduction and price reduction. Price
• 15:29
  reduction because days on the markets increasing, sometimes they're on the market for a year. And
• 15:34
  people just want to sell them. So they're going to drop the price. Because a lot of vendors if you
• 15:37
  talk to a vendor or an owner of a house, they always think it's worth 10 to 20% more than the
• 15:41
  real market. And even when I was an agency, when I was 20, we got, you know, to bring offers to the
• 15:45
  vendor to be able to condition them to what the actual market is saying, because they're all way
• 15:49
  over the top. And so it's about a meeting in the middle. So they're really people are still stuck
• 15:52
  at this high price. They need to be conditioned down by the marketplace, by the buyer. So actually
• 15:56
  it's way overpriced. Not ready to buy it yet, but I'll buy it at this. So there's going to be this
• 15:59
  conditioning and that's going to help bring the numbers down to it doesn't you just go and Google
• 16:04
  it. You'll find this this information, it's pretty available. But I just don't think people look for
• 16:08
  information. I think they just look on feel and they look they they go on what their neighbours
• 16:12
  talking about or what they see on the mainstream media on channel nine or channel seven, which is
• 16:16
  ridiculous. Yeah, everyone's been on the Ponzi and I think the Ponzi is unwinding. And incidentally,
• 16:21
  Labour's been a huge part of that through their budget. I think that was like the straw that broke
• 16:27
  the camel's back in terms of the Ponzi. So it's going to have a huge impact to a lot of people in
• 16:31
  the real estate sector. And I've got a lot of friends in my family. Like it's not it's it sucks.
• 16:36
  But at the same time, there's been a nice purple patch for the last five years and they've made
• 16:39
  good money and you've got to take the swings like you've got to take the market side sucks, but
• 16:43
  you've got to take the market cycles. You can't just expect assets just go up and up and up and
• 16:47
  up and up and up and up forever. Okay. Just quickly. If you're ready to take control of your finances
• 16:52
  but feel stuck on where to start. I have a solution. My book, Money Buys Happiness Simplifies
• 16:58
  Investing and Wealth Building with practical steps to help you achieve financial peace. Get
• 17:03
  your copy via the link in the show notes and let's get your money working for you. Now back to
• 17:07
  the episode. So the last part of this is what's the playbook for an owner? For buyers or investors
• 17:13
  and renters. So here's the first part of that is if you own your home or you have a very low
• 17:19
  mortgage and it's not a problem, don't panic. Sell it like you wouldn't want to panic. Sell your
• 17:25
  house, especially if you've paid a lot of it off. And other people ask me, Lord, you know you talk a
• 17:29
  lot about not owning a house. And, you know, in buying shares and having cash flow assets and
• 17:34
  buying businesses. Yes, I do, because that's how I'm positioned. But a lady asked me the other day, Lord,
• 17:39
  I've got my house fully paid off. It's great, blah blah blah. Should I sell it and go? I'm like, oh my
• 17:43
  God, just you've done the hard work, you've got a home. It's, you know, well done. It's a good asset.
• 17:48
  Yes, the market is going to fall, but it goes in cycles. I wouldn't be in a hurry to panic. Sell my
• 17:54
  house. The only time you would do that is if it's turned into a liability, which, by all accounts, has
• 17:59
  happened to so many people and will happen to a lot of people right now. So if I turn into a
• 18:03
  liability and it's just dragging all your cash and you're just literally going up the M1 to go
• 18:07
  to work every single day to do nothing but pay the mortgage for the next day, that's no way to
• 18:11
  live your life. And I would personally exit. That's what I would do. But if you own it, don't panic.
• 18:16
  Sell it. Stress test your repayments. And what I mean by that is imagine your repayments are 1% on
• 18:22
  your mortgage higher. So for example you got $1 million house, 1% increase in the mortgage rates
• 18:26
  is going to be a $10,000 incremental increase in your mortgage repayments, which is about $1,000 a
• 18:31
  month. So can you sustain a $1,000 a month extra if they increase rates by a percent, which is a
• 18:36
  real possibility. So stress test it. Now, what areas do you need to cut in your expenses to be able to
• 18:41
  afford an extra $1,000 a month in your mortgage? That's a good place to start. Don't check your
• 18:47
  don't check prices weekly or anything like that. Just understand that we're going through a cycle
• 18:51
  and just make sure you can survive it. If you don't want to panic,
• 18:58
  someone says you want a panic. Panic early, but panic early if you got a huge mortgage, for sure.
• 19:02
  You don't want to be in negative equity. Fuck that. I remember in, uh, 2010.
• 19:11
  A lot of people were buying mining town residential property investments, and the yields
• 19:18
  were like 10%, 12% like high yields. And you could see that it was a short term boom in the mining
• 19:23
  sector, where the employment boom in the mining towns was gone through the roof. You had huge
• 19:27
  demand, static supply. And of course, vacancy rates were next to nothing. And you see huge rents.
• 19:33
  People were buying houses for the yields and they were buying, you know, houses in Moranbah for 650 K,
• 19:38
  blah, blah, blah. And then the mining boom stopped and then they sat on those, and those houses
• 19:45
  went down to 350,000. So there are negative equity for like 25 years. Some have only just sold now. So
• 19:52
  negative equity is not a good place to be for long periods of time like two decades. So that's
• 19:56
  where selling makes a lot of sense. Get out and get out quickly if that's the situation you're in,
• 20:01
  if you're willing to buy, you're ready and you're waiting to buy, the first thing to do is get some
• 20:05
  sort of level of pre-approval on what you can afford and be in a position and be ready to start
• 20:10
  negotiating pretty hard because it's becoming it's not. My dad said the other day I was caught
• 20:14
  up with him on Saturday morning when I said, we catch up every Saturday or so and have a cigar,
• 20:18
  and I chat to him about it. He's got a real estate business, very good 35 year old family real estate
• 20:23
  business. And often people say on my feed they see his ads pop up. He's all about property and say,
• 20:27
  you're not about property. He is. I'd love to be around the family Christmas table talking to you,
• 20:32
  bloke. And the reality is we it's an intelligent conversation. It's not I'm definitely against the
• 20:38
  sector. I just don't like it when they're being bought for prices that are nosebleed prices that
• 20:44
  aren't supported by the yields. It's just an intelligent conversation about what I think, what
• 20:47
  he thinks, and he knows what I think and I know and it's all good. But he said to me, you know, I
• 20:53
  said, it's a bit of a buyer's market. He says, no, not really. I know what you mean. He goes, well, it's
• 20:57
  not a seller's market and it's not a buyer's market. It's a no man's land market. And that's
• 21:02
  true. It's not quite a buyer's market yet. It probably hasn't come back far enough. And it's
• 21:06
  certainly, you know, more so even probably a seller's market. We're still at the top of the
• 21:11
  market cycle. He's probably in between. It's a grey area, but you want to be in a position so you can
• 21:16
  start to begin to, to to take advantage of a buyer's market. So, you know, use the look at real
• 21:21
  estate. Com start putting your spreadsheet together. Use claw to assess whether if you go to
• 21:26
  Claudy and type in. Here's the details of real estate deal that I'm looking at. Can you please
• 21:29
  assess this as a pro real estate investor, what do you think. And it will give you some scenarios and
• 21:34
  it'll start to give you a very clear indication of what it's probably worth in local market, the
• 21:39
  what the real estate agent will. So you can start to determine, okay, this is what I'm prepared to
• 21:43
  pay for it. And you'll be in a position, especially if there's like low clearance rates, to start
• 21:47
  negotiating a lot harder, um, which is progressively going to be a better market for you,
• 21:54
  but only by on a ten year horizon or more. So remember, like if you buy in the next 12 months or
• 22:00
  whatever it is and the market, be prepared to understand you're not going to bottom ticket,
• 22:03
  you're not going to buy right at the bottom. So you may have to write out a, you know, the fall of
• 22:08
  that until it starts to correct and then start to progressively recover and move back. But if you're
• 22:12
  buying it, you've really got to think about, like a buddy of mine ask me, he say, text me, he sells pubs.
• 22:19
  That's what he does for for work. He's really good at it. He lives in Sydney and he sells pubs for a
• 22:23
  living. He does really well and he said to me, he texted me. He said, does this mean you're going to
• 22:28
  buy a house now? Because he knows that the real estate market is falling? Yeah. You said to me, what
• 22:32
  would it have to get to for you to buy a house? And I said it had to fall pretty far for me to be
• 22:37
  compelled to look at the area, look at the sector in terms of being under eight asset to buy. And he
• 22:41
  said, okay, well I'm hoping and he's thinking 30 to 40%. I said, that would be that would be fairly
• 22:45
  compelling. Um, and I he said, what's your answer to that question? I said,
• 22:52
  here's my answer. So I'll give you the answer on this show here. We've been living and renting in
• 22:55
  our apartment for 14 years, so we obviously like it. It's on the river. It's a nice apartment,
• 23:01
  beautiful apartment, and, um, never really like to buy things. I don't like to buy it. I like to buy
• 23:06
  cash flow. And he said, what would it take? I said, here's what it would take. The market would have
• 23:11
  to, you know, correct fairly substantially. And I think still, even if it did, I wouldn't be running
• 23:16
  out to buy property investments necessarily, because they're capital intensive. But if my
• 23:23
  landlord happened to just, like, shit the bed and not want to own anymore and like, fuck like bought
• 23:29
  it for, you know, off the plan and he bought it. For a very. Inflated price, I think off the plan back
• 23:35
  then when he bought it 14 years ago. Um, if he got tired of it,
• 23:43
  I'm out. I might buy it because here's why. Not because I expect to make any money. I
• 23:50
  don't. I wouldn't do it. I'm actually at the point where I'm like, we like it, we've been there, blah
• 23:53
  blah blah. Uh. I can't be bothered moving. It would
• 24:00
  interrupt my life so much with our business. It would probably be a huge cost mentally to go
• 24:06
  through that process. Then I'd be like, oh, and I just, you know, get enough. Uh, I just put some
• 24:11
  equity down and get enough borrowing to just commensurately pay what the rent is just to get
• 24:15
  off my plate, just to just to make it a non-event in my life. That's the only. The only thing. Ah, it's
• 24:21
  a hassle. I mean, it's all the hassle with money. You just don't do it. That's where I would buy it.
• 24:25
  But I wouldn't buy it for any reasons of making money. Or it would just be a convenient thing, I
• 24:30
  think. Money things. I think that's how I'd approach it, because I'd. By all accounts, I don't
• 24:34
  even want to be in Goodbye Even. It's more about the convenience of just getting rid of the
• 24:38
  problem to have to get out of there. But, you know, but I think a lot of the challenges that people
• 24:42
  face with property is that they actually go into it with the intention to build wealth as their
• 24:48
  main wealth driver early in their life, because they want perceived security and it kills them.
• 24:54
  That's what I'm a big proponent against. I'm not for that. Um, so, you know, you can buy when you buy
• 25:00
  applies for cash. It's more of just a convenience thing. Yeah. If I can get it to get off my. That's
• 25:04
  why I bought the real estate market. Would have to be very compelling. I'd have to see some very
• 25:07
  compelling yields. Like, I remember in 2008, I after the GFC, I was caught up.
• 25:14
  There's a, there's a hotel. Ah well it's a mantra view now actually in the Gold Coast and um, the
• 25:21
  company that owned it, they went into I think maybe the Raptor Group, Raptors Group owned at the
• 25:25
  time, and they went into liquidation and they were just flicking this stuff, mortgagee in possession
• 25:29
  sales. And I had agents calling me up and said, Lloyd, do you want to buy this, this studio
• 25:33
  apartment in the middle of Surfers Paradise? I was like, yeah, how much? And they're like 50 grand. I
• 25:38
  was like, fun. Oh, isn't that a look? And I was like, oh, and I did the numbers on the net income after
• 25:43
  the cost of operations is about 4%. And I was like, you know what? I can put my money in Commonwealth
• 25:47
  Bank and get a 6% yield tax free, which is what I did. And then I made a lot of money in CBA shares.
• 25:52
  So you always got to assess investments based on what other alternatives are out there. Now was
• 25:57
  that a mistake? I don't think so. I think it was pretty, pretty prevalent. In fact, I'll go a step
• 26:00
  further. At the time, Airbnb was becoming a thing and I was, you know, not as open minded as I
• 26:07
  am now. This is a long time ago. Um, and the guy, the guy I always thought he
• 26:14
  was buying 3 or 4 of them in a row, I was like, how come you buying? And I messaged him on Facebook
• 26:18
  and he said, um, I'm being Bingham. I was like, oh, can you make money doing that? He goes, pay me a
• 26:22
  hundred bucks and I'll teach you how to do it. I'm like, fuck no, I'm gonna pay rent. And I didn't do
• 26:25
  it. Now looking back, I'm thinking, oh my God, what a deal. That was like paying a hundred bucks to go
• 26:29
  to coffee. And I said, I could have done that, you know, but but I do. I did find alternatives. You
• 26:33
  know, it's like when I went to buy this property in, um, I had been. Very close to buying. Property,
• 26:38
  many times haven't done it. Across from Bonn University where I live. There's um, like a there's
• 26:45
  a student housing student accommodation, but you get, uh, it's across the river and it's nice. It's
• 26:51
  it's in a pretty good location. And, um, you could buy these double titles on one, so it's like
• 26:58
  two rooms in one title. And the yield was 10%. Yeah. I was like, whoa, that caught my attention. It's
• 27:05
  like 10% return in cash. Now, what's also got my attention was that was selling for 180 grand. And
• 27:11
  I was like, this is compelling. I did the numbers and it probably worked out to be about 5% net
• 27:16
  after cost because administration cost of those. But it was just so compelling. I was like, oh my
• 27:21
  God. I remember I asked a buddy of mine to ask his billionaire friend who's big in real estate, and
• 27:25
  he said, oh, I'll just get it, and I didn't. I took the cash that I was going to deploy there because
• 27:28
  it's very difficult, nay, impossible to get financing on studios. And so that wasn't an option.
• 27:35
  I was like, well, I'll just buy cash. But then I was like, Bank of America at the time. Went through
• 27:38
  post GFC. It was selling for $11 a share. Warren Buffett just loaded up $5 billion in convertible
• 27:43
  notes into it, and I thought, that seems compelling. And I chucked all the money in there and I
• 27:47
  doubled money in 12 months. So that's why I haven't bought. Okay. Getting back to where we're
• 27:54
  headed with this. If you're an investor, established property bought, um, so you're going to
• 27:58
  have grandfather negative gearing. So if you're an investor and you own, just make sure that it's
• 28:02
  washing its own face if you have to add extra equity. Do that to make sure that it can handle a
• 28:08
  fall in in value. Because I think the rents will be stable, but I wouldn't be rushing out to buy
• 28:13
  more. Just making sure that the yields are covering the the repayments and be understand too,
• 28:19
  that as rates go up, as long as your grandfather buy the new budget, you're going to get some level
• 28:24
  of negative gearing benefit from that loss. And that's okay. But I wouldn't be rushing out to get
• 28:28
  more if you rent. Same as me. Um, the the the downside of being a renter is that
• 28:35
  the the downturn is not going to hit you in terms of you're not going to benefit because the
• 28:40
  vacancy rates are so low. Rents may even go up. And so that's not that's a bit sucky, but at the same
• 28:45
  time you're going to be positioned to be able to buy at way more affordable prices in the future.
• 28:51
  So you've got to have some level of short term pain for then the long term gain, right? Uh, and if
• 28:56
  buying is your goal, then here's the chance. Here's your first chance to get in front of it and be
• 29:01
  ready. So here's the verdict of what's happening. Real estate market. Has the downturn begun? Yes.
• 29:06
  Measurably. Measurably. Is it a crash? Not yet. A crash means a lot more
• 29:13
  for sellers. We haven't seen that. Does fragment fragmentation of the market matter? Yes, because
• 29:18
  we're seeing different things in different cities. But it's starting to conform together as Brisbane
• 29:21
  just showed us. And it's the first time in a long time you've seen a shift. And so if you've been
• 29:28
  waiting for a shift, I think you have time to play it out a little bit. You don't be in a rush the
• 29:34
  next one and two years will be critical, and I would like to see a good 20% plus fall before I
• 29:40
  started getting. If. Are you getting interested in being a buyer? For me personally, I don't see a lot
• 29:44
  more than that. It has to be very compelling and that may be a possibility. But the most important
• 29:49
  thing is that you have the data to make intelligent decisions. Is the crash coming? It's
• 29:54
  pretty much already here. The downturns here is what you're going to do with the information. So
• 29:58
  if you've enjoyed the episode and you need to send this to a friend who's like, I'm going to buy
• 30:00
  real estate, send this to them and pop a comment below. Ask me a question, of course. Hit the
• 30:04
  subscribe button so you can get be in the front of what's happening across the marketplace in
• 30:09
  these sectors. And, um, you can learn and level up your financial IQ and I'll see you in the next
• 30:14
  episode. Thanks for listening. To Money Grows on Trees. If you enjoyed the episode. Leave a five
• 30:18
  star. Review on Apple Podcasts and Spotify, and subscribe to us on YouTube so you never miss an
• 30:24
  episode. And if you're serious about building wealth, make sure to check out the links in the
• 30:27
  show notes and follow me on all social media platforms at Lloyd James Ross for more. See you in
• 30:34
  the next episode.