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Rent to own properties, are they a good idea? (spoiler: no) · She's On The Money

0:00
Speaker 1: She's on the Money. She's on the Money.
0:23
Speaker 2: Hello, and welcome to She's on the Money, the podcast
0:26
Speaker 2: for millennials who want financial freedom. Over the last twelve months,
0:30
Speaker 2: housing prices in Australia have increased by twenty two percent.
0:34
Speaker 2: While this is incredible news for the homeowners, it's more
0:38
Speaker 2: than a little deflating for aspiring first home buyers who
0:41
Speaker 2: are yet to have cracked the market. Like merk Good's self.
0:45
Speaker 2: But what if there was a way that we could
0:47
Speaker 2: get into the property market without needing a deposit from
0:49
Speaker 2: the outset by entering into a rent to buy scheme?
0:53
Speaker 2: My name is Georgia King, and joining me to explain
0:56
Speaker 2: exactly what renting to buy is and whether it's our
0:58
Speaker 2: ticket to homeowner or if it's a trap best avoided
1:02
Speaker 2: is of course Victoria divine.
1:05
Speaker 3: They firstly, what's up, g how are you? I'm so good,
1:09
Speaker 3: my good friend.
1:11
Speaker 2: It's episode two hundred and one today.
1:13
Speaker 3: Oh my gosh, I'm so excited. Monday it was Money
1:17
Speaker 3: Diaries and that was our two hundredth episode. And I
1:19
Speaker 3: really wish in the moment I had like four seen
1:23
Speaker 3: that that was gonna yeah, Like I just didn't even
1:25
Speaker 3: mention it in the episode, which is arguably really disappointing,
1:29
Speaker 3: but Happy two hundred and one Georgia.
1:31
Speaker 2: King, Happy two hundred and one VD. Okay, let's get
1:35
Speaker 2: straight into it. What is renting to buy? Exactly? V
1:39
Speaker 2: because I have not heard of this concept before.
1:42
Speaker 3: So a rent to buy scheme is like a lease
1:45
Speaker 3: agreement that allows you to pay rent and leave in
1:47
Speaker 3: the home that you will eventually want to buy for
1:50
Speaker 3: a fixed price and time period agreed upon by both
1:54
Speaker 3: you and the seller of the property at the time
1:56
Speaker 3: of signing the contract. So in addition to paying rent G,
1:59
Speaker 3: you'll also be paying the option to buy fees for
2:03
Speaker 3: the duration of the agreement and to the amount that
2:05
Speaker 3: was agreed upon by both parties. When the leasing period
2:09
Speaker 3: that is stipulated in your contract ends, which is usually
2:12
Speaker 3: between three and five years, the homes then yours and
2:16
Speaker 3: the mortgage is transferred into your name, which sounds like
2:18
Speaker 3: a dream if you say it that way, it does
2:21
Speaker 3: so fin I know, it's just like that's genius. But
2:24
Speaker 3: what this means is that people who can't get into
2:26
Speaker 3: the housing market in the traditional ways by saving for
2:29
Speaker 3: a deposit and then paying for their own mortgage have
2:32
Speaker 3: a different way of entering the market, and this could
2:34
Speaker 3: be good and it also could be bad. And they
2:37
Speaker 3: are theoretically locking in a set price with the homeowner
2:40
Speaker 3: at that period of time, like three or five years
2:43
Speaker 3: in the past, compared to when they'll purchase the property,
2:46
Speaker 3: which given the current growth, is not a bad thing
2:49
Speaker 3: to have done, right, But essentially it means that they
2:52
Speaker 3: can then save for a deposit over that three to
2:54
Speaker 3: five year period and put themselves in a better position
2:57
Speaker 3: to afford a mortgage. Often buyers do still have to
3:00
Speaker 3: pay a non refundable deposit to get into this, so
3:04
Speaker 3: it's not all completely cash free and you don't just
3:06
Speaker 3: turn your lease into an own situation. But essentially you
3:11
Speaker 3: need to make sure you know the semantics of that
3:13
Speaker 3: relationship before we actually get into it, because rent to
3:17
Speaker 3: buy can sound really attractive, because, let's be honest, as
3:20
Speaker 3: you said it before, the markets in Australia at the
3:23
Speaker 3: moment are technically cooked and it makes us all feel
3:27
Speaker 3: a little bit deflated when it comes to things like
3:29
Speaker 3: talking about when we can get into the property market
3:32
Speaker 3: or what it means for us when you're saving and
3:35
Speaker 3: maybe you're able to save eleven percent of your income
3:37
Speaker 3: each and every single year to then hear that the
3:40
Speaker 3: increase in property prices has gone up twenty two percent.
3:45
Speaker 3: That's literally double what you're able to save. So like
3:48
Speaker 3: that means that you're not going to be able to
3:50
Speaker 3: catch up and that sucks.
3:52
Speaker 2: G Yeah, well it does suck, And I definitely understand
3:55
Speaker 2: why people are turning to these kind of alternative ways
3:58
Speaker 2: of getting into the property market. But what are the
4:01
Speaker 2: other draw cards of this style of home ownership be so.
4:05
Speaker 3: Obviously the main draw cards are that it makes it
4:07
Speaker 3: a lot more accessible and we aren't required to save
4:10
Speaker 3: for a deposit straight away, so it gives you a
4:12
Speaker 3: bit more time to lock in finance with a lender
4:15
Speaker 3: and get that organized. In saying that G three slash
4:19
Speaker 3: five years, depending on how long you're entering into this,
4:22
Speaker 3: it's a long time. Anything could change, Like you might
4:25
Speaker 3: enter into this agreement and have a partner and then
4:27
Speaker 3: break up with your partner. You might enter into this
4:30
Speaker 3: agreement and then two years down the track to side
4:32
Speaker 3: to make a complete career change and go back to
4:35
Speaker 3: UNI and change your income significantly, meaning you might not
4:38
Speaker 3: actually get finance with a lender. So it can be
4:41
Speaker 3: a little bit constraining and we need to be really
4:44
Speaker 3: aware of that. And as I was saying before, there's
4:47
Speaker 3: obviously like that rent phase, but then there's the buyer phase.
4:51
Speaker 3: So there's two phases in this process or this program
4:55
Speaker 3: or this scheme as we're calling it, and it's really
4:58
Speaker 3: important to understand what the semantics of each phase mean
5:02
Speaker 3: and how it can actually impact you because during that
5:05
Speaker 3: rent phase, you don't actually have any legal right to
5:08
Speaker 3: the title of that property. Even missing like rent for
5:11
Speaker 3: one week can result in having the contract completely terminated
5:15
Speaker 3: and you'll lose all the money that you've spent thus far.
5:18
Speaker 3: It's a contract at the end of the day, and
5:20
Speaker 3: you've got to know what you are agreeing to before
5:23
Speaker 3: entering into it. But back to options, Yeah, the next
5:26
Speaker 3: major benefit is that it might be a good deal
5:28
Speaker 3: for the buyer. I mean, as I alluded to before,
5:32
Speaker 3: roberty over the last year has increased significantly, which means
5:36
Speaker 3: that you could be locking in a lower amount than
5:39
Speaker 3: the buyer might get if they sold in five years,
5:42
Speaker 3: which is a bit of a money win. Because also
5:45
Speaker 3: if we look at property in general as a financial advisor,
5:48
Speaker 3: and I put that hat back on, if you're going
5:51
Speaker 3: to make an investment, you would want that investment, whether
5:54
Speaker 3: it is property, bonds, shares, whatever it is, to double
5:57
Speaker 3: in value every ten years. You're halfway there with five years,
6:00
Speaker 3: so that's pretty good. But then again, some people think
6:05
Speaker 3: of rent money as dead money, which, as you know, Gking,
6:09
Speaker 3: we don't agree with that. I do not agree with that.
6:11
Speaker 3: We do not stand that. We also don't believe that
6:13
Speaker 3: you need to buy property to be financially successful. Just
6:15
Speaker 3: putting that hat on for a hot second. We did
6:17
Speaker 3: an entire episode on renting for life, and that's actually
6:22
Speaker 3: a really attractive option if property isn't something that you want.
6:25
Speaker 3: But as you guys know, property is a very popular
6:28
Speaker 3: topic in our community, so it makes sense that we're
6:30
Speaker 3: doing another episode on it because we give the people
6:33
Speaker 3: what they want. Georgia King, we do, we do. We're
6:36
Speaker 3: just so generous, honestly, but some people think of it
6:39
Speaker 3: as dead money. Going back to my point, but by
6:42
Speaker 3: renting to buy, some people can actually justify renting a
6:45
Speaker 3: little more because it can lead them to their main
6:47
Speaker 3: goal of attaining home ownership, and knowing that part of
6:50
Speaker 3: their rent is actually being turned into equity is pretty sexy.
6:53
Speaker 2: Yeah, when I was having a little peruse on the
6:57
Speaker 2: Google before the show. I know just that a lot
7:00
Speaker 2: of the companies that specialize in this area really talk
7:05
Speaker 2: about rent money being dead money. So they're like, instead
7:08
Speaker 2: of you know, wasting your rent, turn it into home
7:11
Speaker 2: own a shit. Like that's a big, a big selling
7:14
Speaker 2: point that they really lean on. But how true is it? Not? Sure?
7:18
Speaker 3: Look, it's not I really want to put the term
7:21
Speaker 3: rent money is dead money straight in the bin because
7:23
Speaker 3: they just don't agree with it. Like, you're paying for
7:26
Speaker 3: a lifestyle, You're paying for a roof over your head.
7:28
Speaker 3: It is not a negotiable cost. Like, I feel like
7:31
Speaker 3: it's an incredibly entitled thing to say rent money is
7:34
Speaker 3: dead money. It's like, okay, so should I just live
7:36
Speaker 3: on the streets. Yeah, Like, not everybody has the privilege
7:40
Speaker 3: of staying at home and saving for a deposit. Not
7:42
Speaker 3: everybody even has the privilege of having a safe home
7:46
Speaker 3: to be and they need to pay rent like we
7:48
Speaker 3: all do. So I just feel like it's a really
7:50
Speaker 3: outdated term to say rent money is dead money, because
7:52
Speaker 3: it's just Bavid's letting your entitlement show and we don't
7:55
Speaker 3: want that. In twenty twenty one.
7:56
Speaker 2: Yeah, I could not agree more. They so, what are
7:59
Speaker 2: the benefits for people selling their homes in this way?
8:02
Speaker 3: So we are having this conversation, I just want to stipulate,
8:06
Speaker 3: so I'm going to get my negative hat on in
8:08
Speaker 3: a hot second. We're just presenting the benefits and the negatives.
8:11
Speaker 3: But I mean, at the same time, I think it's
8:14
Speaker 3: really important for you guys to understand that I would
8:17
Speaker 3: further on the side of caution when it comes to
8:19
Speaker 3: rent to buy, and I'll explain why because it's actually
8:22
Speaker 3: illegal in a few states, but don't tell anybody yet.
8:25
Speaker 3: But when it comes to the benefits for people selling
8:27
Speaker 3: their home, they have a guaranteed buyer for their home.
8:30
Speaker 3: How good is that, Like, you know that that home
8:33
Speaker 3: is going to sell. I mean, in this market it's
8:36
Speaker 3: probably not that much of a draw card anymore, but
8:39
Speaker 3: historically it would have been because it used to take
8:41
Speaker 3: months or even years to sell particular properties. And they
8:45
Speaker 3: will arguably receive more money than they would have by
8:49
Speaker 3: just renting their home out in that period of time
8:51
Speaker 3: the old fashioned way, as they're going to receive not
8:54
Speaker 3: only inflated rental prices, but also that option to buy
8:58
Speaker 3: a fee, which is a se in lieu of a deposit.
9:02
Speaker 3: And then also when it comes to risk, obviously it's
9:06
Speaker 3: quite risky for the buyer, but for the seller. If
9:08
Speaker 3: the buyer fails to secure a finance at the end
9:11
Speaker 3: of the agreement, they actually get to keep their home
9:13
Speaker 3: and all of the money that they made along the way.
9:16
Speaker 3: So there's not actually all that much risk on the
9:19
Speaker 3: person who's selling the property because if it doesn't work out, yes,
9:23
Speaker 3: maybe you don't have a buyer for your home, but
9:25
Speaker 3: you get to keep your home, you get to keep
9:26
Speaker 3: the money that they have paid you over that three
9:28
Speaker 3: or five year term. You're not just keeping the rent
9:31
Speaker 3: money because that would have been arguably yours regardless, But
9:34
Speaker 3: that option to buy fee completely sacrificed from the person
9:37
Speaker 3: who's buying it, and that's the risk you go into.
9:40
Speaker 3: And more often than not, that option to buy fee
9:44
Speaker 3: is usually somewhat equivalent to a deposit, so it's not
9:47
Speaker 3: just a fifty dollar Fiji. It's almost equivalent to a
9:51
Speaker 3: house deposit that you could potentially be losing as the
9:53
Speaker 3: person buying, but a money win. If you're the person
9:56
Speaker 3: selling the home and it all falls.
9:58
Speaker 2: Through, oh you'd feel a little bit like a little
10:01
Speaker 2: bit of an asshole though, wouldn't you.
10:04
Speaker 3: Would, but absolutely would. But I don't think that that's
10:08
Speaker 3: the problem when we're talking about risk versus return, Like
10:11
Speaker 3: when it comes to investing or selling a property, it's
10:14
Speaker 3: not I mean, we don't want to be ushold, but
10:17
Speaker 3: we do absolutely want to make sure that we're putting
10:19
Speaker 3: ourselves in the best possible position to get the best
10:22
Speaker 3: possible financial outcome, right, Like we're not selling our property
10:26
Speaker 3: so that we can be charitable. Like arguably, if you're
10:29
Speaker 3: selling a property, especially a property that someone is renting
10:33
Speaker 3: and then going to purchase from you, it's probably an
10:35
Speaker 3: investment strategy from your point of view, So it's not
10:38
Speaker 3: as though that's your only home, like you probably have
10:40
Speaker 3: a couple anyway. I won't go on about that, but
10:43
Speaker 3: I just think that it's fraught with risk.
10:46
Speaker 2: George f Perhaps this is a silly question, but are
10:52
Speaker 2: these sellers just people like you and me or are
10:58
Speaker 2: they more like developers that have companies that are specializing
11:03
Speaker 2: in this or is it a combo poor.
11:06
Speaker 3: Kin or Los dos Achish King? All right, it can
11:09
Speaker 3: be both. So finding homes this way is actually relatively uncommon.
11:14
Speaker 3: You know, you don't go on domain or real estate
11:16
Speaker 3: dot com and then see a home and it's a
11:18
Speaker 3: rent to buy version, Like, you do have to be
11:20
Speaker 3: seeking this out, and it's definitely more rare in regional
11:25
Speaker 3: and remote areas, so it's not that common if you
11:27
Speaker 3: were like living in Wodonga, but it might be really
11:30
Speaker 3: common in Melbourne, CBD, where they've built a really big
11:33
Speaker 3: apartment complex and the developers plan is entirely rent to own,
11:38
Speaker 3: which is not uncommon. So I do feel like it's
11:40
Speaker 3: more common in the city than it is in the country.
11:44
Speaker 2: But there are.
11:45
Speaker 3: Also businesses that specialize in this type of service, Like
11:48
Speaker 3: literally businesses will build an entire apartment complex with the
11:51
Speaker 3: intention of having everybody in that complex rent to buy
11:54
Speaker 3: because they might feel like they'll make more money that way,
11:57
Speaker 3: or that's just the investment structure that they're decided to
12:00
Speaker 3: take on. In saying that, there are legitimate versions, and
12:05
Speaker 3: there are also scammers who do the same thing, and
12:07
Speaker 3: you're like, oh my gosh, that's so exciting. That sounds
12:10
Speaker 3: like a dream and it doesn't work out that way,
12:12
Speaker 3: So please, please, please do your due diligence and listen
12:15
Speaker 3: to the property playbook, so you know what due diligence
12:17
Speaker 3: actually is true?
12:19
Speaker 2: True, good little throw there. So say I'm living in
12:23
Speaker 2: Carlton North and I love my apartment and I'm like,
12:27
Speaker 2: rent money's dead money, baby. Could I have a chat
12:30
Speaker 2: to my landlord and be like, hello, Max, what her
12:33
Speaker 2: thoughts on renting police specific?
12:36
Speaker 3: Yes? Max, Max? Max can be approached to do that. Okay, Yep,
12:41
Speaker 3: you can absolutely approach Max and have that conversation if
12:44
Speaker 3: you wanted to in saying that it's not that common
12:48
Speaker 3: for pre existing homes to do that. Because if I
12:51
Speaker 3: wanted to sell my property. G So pretend I was
12:54
Speaker 3: Max and I said, oh, I'm ready to sell. Am
12:56
Speaker 3: I going to want to pick Georgia who's just come
12:58
Speaker 3: to me and said, Hey, I'd love to do a
12:59
Speaker 3: rent buy, don't have any money, don't know if I'm
13:02
Speaker 3: going to get funding after this three or five years,
13:05
Speaker 3: going to pay you an increased amount right now? Or
13:07
Speaker 3: you might go, well, my name's Max, and I've read
13:10
Speaker 3: news dot com dot you can see that property prices
13:13
Speaker 3: have increased twenty two percent. Do I want to make
13:15
Speaker 3: bank right now and actually sell and get the deposit
13:19
Speaker 3: and the full amount for that property now and invest
13:22
Speaker 3: in something else, or do I want to wait three
13:25
Speaker 3: or five years for Georgia to get it together? Like,
13:27
Speaker 3: I don't mean that in a negative way. We just
13:29
Speaker 3: have to put our different hats on as to why
13:32
Speaker 3: that might be a good decision. And they might go, oh, yeah,
13:34
Speaker 3: like that sounds nice and they just enter into that
13:37
Speaker 3: because it's a simple agreement from their end in terms
13:40
Speaker 3: of yep, you have that fee, you pay that, continue
13:43
Speaker 3: paying rent, and then after three or five years the
13:46
Speaker 3: property will be purchased by you. Could be a really
13:49
Speaker 3: good strategy for people who want to retire and will
13:52
Speaker 3: need to liquidate assets to retire. Also, I've seen this
13:56
Speaker 3: strategy work for families who own property and their chill
14:00
Speaker 3: and purchasing that property and want them to purchase and
14:03
Speaker 3: have the best possible way to do it so they
14:05
Speaker 3: live in the property and set up this agreement because
14:07
Speaker 3: it all needs to be you know, above board and legal.
14:10
Speaker 3: But yeah, from my perspective, it's not that common when
14:13
Speaker 3: it comes to pre existing dwellings, right.
14:16
Speaker 2: Okay, but you could still have the chat with Max.
14:18
Speaker 3: You could absolutely have the chat with Max. Let's go
14:21
Speaker 3: to a break though, because I use the word dwellings
14:23
Speaker 3: and that's kind.
14:23
Speaker 2: Of weird dwellings. Yeah, a good place to leave it.
14:26
Speaker 2: But on the other side, guys, we will be talking
14:28
Speaker 2: about the other side of renting to buy. That is,
14:30
Speaker 2: of course what the negatives are, and we'll also be
14:33
Speaker 2: covering some alternatives to renting to buy. So don't go anywhere,
14:37
Speaker 2: okav So for me, the word scheme it sets of
14:42
Speaker 2: alarm bells. What are the downfalls of renting to buy?
14:46
Speaker 3: Look, let's be honest, there are a lot more than
14:50
Speaker 3: there are benefits. And maybe we should have said that
14:52
Speaker 3: in the first half of this podcast, because Georgia, there
14:54
Speaker 3: are probably some people listening who are like.
14:56
Speaker 2: Sounds like a good idea, Oh my.
14:57
Speaker 3: Gosh, this is genius. Sounds great, and I'm like, don't
15:00
Speaker 3: do it, so avologies if that was you. But we
15:04
Speaker 3: exist to help. Doesn't mean we go in the like
15:08
Speaker 3: a straight line to do that. But essentially, yes, there
15:11
Speaker 3: are a number of downfalls. The biggest one is that
15:13
Speaker 3: you don't actually own the home in any way, shape
15:16
Speaker 3: or form until the final payment is put down. So
15:18
Speaker 3: if you miss a payment, the contract could be completely
15:21
Speaker 3: terminated and you're left with nothing. And I covered that earlier,
15:24
Speaker 3: Like that's almost a half deposits worth of money. Also,
15:27
Speaker 3: if you reach the end of the rental period and
15:30
Speaker 3: you aren't able to lock in finance for whatever reason,
15:33
Speaker 3: then you could lose both the home you were hoping
15:35
Speaker 3: to purchase and hoping it would be yours and the
15:38
Speaker 3: inflated rental and all of the option to buy in
15:41
Speaker 3: our payments that you made along the way for nothing,
15:44
Speaker 3: which kind of sounds really scary. As I mentioned, they're
15:47
Speaker 3: paying rent in these homes is usually more than you
15:50
Speaker 3: would pay for a similar home in a similar location. Again,
15:54
Speaker 3: rent money is not dead money. Say it after me.
15:57
Speaker 3: Because the other thing that they don't usually publicized is
16:01
Speaker 3: that if the seller of the property is using that
16:03
Speaker 3: property as security for their own debts, it could compromise
16:07
Speaker 3: you if their home was seized for whatever reason.
16:11
Speaker 2: I don't like that. Yeah, yeah, so.
16:13
Speaker 3: Think you know Max, No idea who you are, Max,
16:16
Speaker 3: but oddly specific, I'm led to believe that maybe that
16:19
Speaker 3: is your landlord's name. If Max had like debt up
16:23
Speaker 3: to his eyeballs and was doing this thing with you,
16:25
Speaker 3: and then he had to declare bankruptcy and lose his home,
16:28
Speaker 3: your contract doesn't matter.
16:30
Speaker 2: I don't like that at all.
16:31
Speaker 3: No, that makes me feel really icky, Like that's really uncomfortable.
16:35
Speaker 3: Arguably you shouldn't be able to do that. But if
16:37
Speaker 3: you're in that situation, I would be asking about the
16:39
Speaker 3: seller's debts. No, you are not overstepping the mark. You
16:42
Speaker 3: deserve to know because that is a ramification that could
16:45
Speaker 3: impact you significantly. You also have to apply for the
16:48
Speaker 3: home loan when it comes to buy, so like, this
16:50
Speaker 3: isn't just some dreamy process where it's like, oh my gosh,
16:53
Speaker 3: you'll just end up owning it. Like, you have to
16:56
Speaker 3: apply for a mortgage. And if you're in a situation
16:59
Speaker 3: where you're in come isn't going to be sufficient to
17:01
Speaker 3: service a mortgage or for some reason, you know, maybe
17:04
Speaker 3: you started your own business. More often than not, g
17:07
Speaker 3: banks want at least two years worth of financials if
17:11
Speaker 3: you're self employed. So if you, you know, in a
17:13
Speaker 3: couple of years, start your own business and then you're,
17:15
Speaker 3: you know, nine or twelve months into that business, not
17:19
Speaker 3: many banks are going to want to lend to you
17:21
Speaker 3: because you're too risky. And that makes sense, but like
17:23
Speaker 3: it's not something you should have to think about during
17:26
Speaker 3: the home buying process. Yeah, if you're like in this contract.
17:30
Speaker 3: You're like, Yep, that's all done, dusted, set up, will
17:32
Speaker 3: own this in this period of time? Like no, no, no,
17:35
Speaker 3: you still have to get a mortgage and you still
17:37
Speaker 3: have to be approved for it. Nothing is guaranteed.
17:42
Speaker 2: What about fee? You know?
17:43
Speaker 3: How?
17:43
Speaker 2: So you're paying the rent, which is usually inflated, it's
17:47
Speaker 2: more expensive than it usually would be. Then you're paying
17:50
Speaker 2: the option to buy fee on top of that. What
17:54
Speaker 2: does that option to buy fee get you? Is that
17:56
Speaker 2: contributing to the deposit or is that just the fear
17:59
Speaker 2: of being a part of this type of a scheme, Like,
18:02
Speaker 2: how does that work?
18:03
Speaker 3: It's the fee that the seller would come up with,
18:05
Speaker 3: and essentially that's in lieu of a deposit. So your
18:08
Speaker 3: inflated rent and the fact that you're paying this fee
18:11
Speaker 3: is going to add up, hopefully to somewhat close to
18:14
Speaker 3: a deposit for them. So that you actually can say
18:17
Speaker 3: to the lender, because you're never going to get one
18:19
Speaker 3: hundred percent mortgages with alta Garran tour, you can say
18:23
Speaker 3: to the lender, I've actually already quote saved this amount
18:27
Speaker 3: for the deposit. They already have it. I technically have
18:30
Speaker 3: paid my ten or twenty percent or whatever it is
18:32
Speaker 3: towards this property over the last three or five years,
18:35
Speaker 3: and they'll go, great, no problems, will see that as
18:38
Speaker 3: your deposit. Does that make sense?
18:40
Speaker 2: Yeah, gotcha? Okay, all right.
18:42
Speaker 3: But it's also worth noting, g that there was a
18:44
Speaker 3: report that was completed in twenty sixteen by the very
18:47
Speaker 3: fancy Sound and Consumer Action Law Center and they had
18:50
Speaker 3: found not any successful cases of renting to buy and
18:55
Speaker 3: reiterated that it is extremely financially risky and the legal
18:59
Speaker 3: protection for buyers were quote grossly inadequate. That's scary. Is
19:05
Speaker 3: that's just I don't know, red flag.
19:08
Speaker 2: I wonder hopefully it's like improved in the last five years.
19:11
Speaker 2: But that's a pretty damaging quote.
19:15
Speaker 3: It's not just a damaging quote. It is a rearing
19:18
Speaker 3: red flag from me, Like, gee, if you're in the
19:21
Speaker 3: Sheese on the one community, it's crimson. It's a crimson
19:24
Speaker 3: red flag.
19:25
Speaker 2: So are you saying that you would generally caution against this,
19:29
Speaker 2: You're not recommending it to any.
19:30
Speaker 3: Of your cobsolutely, I'm not recommending it after doing a
19:33
Speaker 3: whole heap of research and understanding it. As I said before,
19:37
Speaker 3: I do have clients who have implemented this with their
19:40
Speaker 3: children to make sure that their children actually save for
19:43
Speaker 3: a deposit. And maybe they're not the most responsible people,
19:47
Speaker 3: and I get that, and maybe that works in a family,
19:50
Speaker 3: but I just can't as a financial advisor give you
19:54
Speaker 3: the advice to say, hey, I advocate for this, because
19:58
Speaker 3: I don't and I'm very risk averse and I just
20:01
Speaker 3: feel like, if you are going to enter into one
20:04
Speaker 3: of these schemes, I absolutely would be getting independent financial advice,
20:09
Speaker 3: independent legal advice, and making sure you were doing your
20:12
Speaker 3: due diligence to the nth degree before you even sign
20:15
Speaker 3: a thing. But I think it's also worth remembering the
20:18
Speaker 3: quote it was extremely financially risky and the legal protection
20:22
Speaker 3: for buyers is grossly inadequate. Like that's an OPRAH.
20:27
Speaker 2: It's pretty clear. Also worth remembering that, Like, you don't
20:30
Speaker 2: need to get into the housing market tomorrow if that's
20:33
Speaker 2: your goal. If your goal is to you know, buy
20:36
Speaker 2: a home one day, you don't need to rush into it.
20:38
Speaker 2: Take the time, say if you deposit over the next
20:40
Speaker 2: ten years, like you know, property is always going to
20:43
Speaker 2: be that.
20:43
Speaker 3: This is a conversation Gee, I actually had in my
20:46
Speaker 3: DMS this morning and someone was saying, like, oh, my gosh,
20:49
Speaker 3: thank you so much for like your Renting Forever episode.
20:52
Speaker 3: It really opened up my eyes to the fact that
20:54
Speaker 3: I don't need a property to see myself as financially secure.
20:58
Speaker 3: And I think that because so many of it go oh,
21:00
Speaker 3: our parents did it, or the last generation did it,
21:03
Speaker 3: or there's a lot of societal pressure going on. I
21:06
Speaker 3: feel like it's become quote the norm to buy property,
21:09
Speaker 3: when in reality, it's not actually the norm to buy property,
21:12
Speaker 3: Like it's not actually that obtainable, especially for millennials who
21:16
Speaker 3: have average wages, and the average wage in Australia is
21:19
Speaker 3: between sixty and eighty five thousand dollars. Like combine that
21:23
Speaker 3: you still have an income of combined if you have
21:26
Speaker 3: a partner of less than two hundred thousand dollars, and
21:29
Speaker 3: the idea that you would then need to service a
21:31
Speaker 3: mortgage of arguably in Melbourne or Sydney, and obviously I'm
21:35
Speaker 3: not speaking for the entire country here, but of about
21:39
Speaker 3: a million dollars, it's completely unfathomable, Like it is so
21:43
Speaker 3: much money, and you go, is there something better? Is
21:46
Speaker 3: there something different? Like why are we putting this pressure
21:48
Speaker 3: on ourselves? Is it because we genuinely want a home, Okay,
21:52
Speaker 3: let's work towards that. But there's no oh my gosh,
21:55
Speaker 3: you need to be buying a property before thirty Like
21:57
Speaker 3: that's not a thing like a lot of home buyers
22:00
Speaker 3: in Australia. And you know, we don't know this research
22:03
Speaker 3: yet because a lot of millennials aren't yet in the
22:06
Speaker 3: property market. And I would not be surprised g if
22:09
Speaker 3: over the next few years research starts coming out saying
22:12
Speaker 3: that the average age of a first home buyer is
22:14
Speaker 3: closer to forty because that just seems more reasonable. And
22:17
Speaker 3: as someone who is a financial advisor and I have
22:20
Speaker 3: a mortgage broking business and I work really closely with brokers,
22:23
Speaker 3: most of the people i'm talking to a thirty five
22:26
Speaker 3: plus because that's how long it's taking to save for deposits.
22:30
Speaker 3: And I see all this research flying around about, oh,
22:33
Speaker 3: it takes three and to five years to save a
22:34
Speaker 3: deposit for who, like who is actually, especially if you're
22:39
Speaker 3: in a city person like we are, g who's saving
22:42
Speaker 3: an entire home deposit in three to five years? Like,
22:46
Speaker 3: if you have literally props to you, I'm so genuinely impressed.
22:50
Speaker 3: But I'll almost bet my bottom dollar that you guys
22:53
Speaker 3: are not buying inner city Melbourne homes like you're not
22:57
Speaker 3: buying in Sydney. You're maybe a little bit more regional.
23:00
Speaker 3: You might be in Tasmania or you might be in Queensland.
23:02
Speaker 3: And that's not to downplay that achievement. That's an epic achievement.
23:06
Speaker 3: But what we want to actually do is normalize the
23:09
Speaker 3: fact that it's not that normal, especially in major cities,
23:12
Speaker 3: to be able to afford property under the age of thirty. Anyway,
23:15
Speaker 3: thank you for coming to my ted talk job.
23:19
Speaker 2: Now. I think you're exactly right, and I think it's
23:21
Speaker 2: probably a good time as well, just to kind of
23:24
Speaker 2: mention that it's worth reflecting on what you do want
23:28
Speaker 2: from your life and kind of questioning if you do
23:30
Speaker 2: have your heart set on property, thinking about why is that,
23:34
Speaker 2: Like is it just because Janine on Instagram just bought
23:37
Speaker 2: a hot house down the road and you're like, oh,
23:39
Speaker 2: that would look good on my grid? You know, think
23:41
Speaker 2: about what makes you happy and the life that you
23:44
Speaker 2: actually want instead of you know, looking around you put
23:46
Speaker 2: your blinkers on and just yeah, have a little think,
23:49
Speaker 2: have a little thing.
23:49
Speaker 3: Stay in your own lane, because if you're not in
23:51
Speaker 3: your own lane, the path is going to be really
23:53
Speaker 3: crowded if you're trying to be on the same one
23:55
Speaker 3: as everybody else exactly right, well, that could be an
23:57
Speaker 3: inspirational quote if we cleaned it up. Do pop, let's
24:00
Speaker 3: go pill us. Honestly, that is all we have time
24:04
Speaker 3: for Georgia. But as always, just before we head off,
24:07
Speaker 3: we'd like to acknowledge and pay respect to Australia's Aboriginal
24:11
Speaker 3: and torrist Right islander peoples. They're the traditional custodians of
24:14
Speaker 3: the lands, the waterways and the skies all across Australia.
24:18
Speaker 3: We thank you for sharing the caring for the land
24:21
Speaker 3: on which we are able to learn. We payer respects
24:23
Speaker 3: to elders past and present, and we share our friendship
24:26
Speaker 3: and our kindness.
24:27
Speaker 2: And remember, guys that the advice shared on She's on
24:30
Speaker 2: the Money is general in nature and does not consider
24:33
Speaker 2: your individual circumstances. She's on the Money exists purely for
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24:39
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Speaker 2: three two five seven AFO sal three three nine one
24:54
Speaker 2: five one Hey J, you sound like you've got that
24:57
Speaker 2: pretty down pat you reckon. You still have to read it?
25:01
Speaker 3: Okay, good because I'm changing it soon. Catch you guys,