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Most Investment Mistakes Are Sequencing Failures · My Accounting Advantage

• 0:01
  Speaker 1: Hello and welcome back to the podcast, My Accounting Advantage, featuring Mai Harris.
• 0:07
  Speaker 1: Today is episode six.
• 0:09
  Speaker 1: Most investment mistakes are sequencing failures.
• 0:13
  Speaker 1: She joins us again.
• 0:18
  Speaker: Thank you, Lee.
• 0:19
  Speaker: It's so nice to be back.
• 0:20
  Speaker: And hello to all listeners.
• 0:23
  Speaker 1: Now we've had amazing feedback from the launch of any podcast.
• 0:28
  Speaker 1: People think, what is this about?
• 0:29
  Speaker 1: The fact it's pure advice.
• 0:31
  Speaker 1: I know in my travels, people are letting me know how much they love it, but they're also saying, I've passed it on to my son.
• 0:38
  Speaker 1: He's a gyp rocker.
• 0:39
  Speaker 1: I've passed it on to my other son.
• 0:41
  Speaker 1: He's a builder.
• 0:42
  Speaker 1: Because everyone is in small business.
• 0:45
  Speaker 1: And I often wonder about that, Mai.
• 0:47
  Speaker 1: Is everyone built for small business?
• 0:50
  Speaker 1: It's a large commitment.
• 0:51
  Speaker 1: And sometimes people underestimate that you do the work, and then when you get home from work, you start the next part of your job, which is the managing and the operations of any business and the marketing, and the phone doesn't stop.
• 1:05
  Speaker 1: And people don't budget for that.
• 1:08
  Speaker: No, it it really is a different type of operating framework that you need to adopt as a business owner.
• 1:18
  Speaker: And it's such a different frame of mind as well, because you don't just turn up for work and then you know things just happen for you.
• 1:29
  Speaker: You are everything.
• 1:31
  Speaker: You're you are um the the problem solver mostly, and also you are the planner and you are the doer in some cases.
• 1:40
  Speaker: So you really need to um be prepared for all of that, to be the everything, and to have such attitude that nothing is too big or too small, and you need to really prepare your mindset to understand that there might be, you know, a lot more work than you anticipated.
• 2:04
  Speaker: It's definitely not a 38-hour week or 40-hour week, it could be much more.
• 2:11
  Speaker 1: I was observing some behavior the other day.
• 2:14
  Speaker 1: I know so many families that the couples work together.
• 2:18
  Speaker 1: I work with my wife.
• 2:19
  Speaker 1: When you work in the business together, there is front end and back end.
• 2:23
  Speaker 1: And back end's very different to front end, and they're different skills.
• 2:27
  Speaker 1: And as we know in business, there's three colours in business: there's red, blue, and black.
• 2:32
  Speaker 1: Red, administration.
• 2:34
  Speaker 1: Very important compliance, insurances, we've done everything right.
• 2:38
  Speaker 1: And that's the red work.
• 2:40
  Speaker 1: I'm the world's worst red worker.
• 2:42
  Speaker 1: Mai, just for the record.
• 2:44
  Speaker 1: Blue is dollar productive.
• 2:46
  Speaker 1: That's when you are customer facing, winning business, putting the quotes out there.
• 2:49
  Speaker 1: And if we don't win business, there is no business.
• 2:52
  Speaker 1: And then finally, there's black, which is strategic thinking, which is exactly what this podcast is.
• 2:58
  Speaker 1: Yeah.
• 2:58
  Speaker 1: You've got to take a moment out and understand that, well, today's topic, most investment mistakes are sequencing failures.
• 3:05
  Speaker 1: Take us into this topic.
• 3:07
  Speaker: Well, basically, this topic is about the framework that I follow.
• 3:11
  Speaker: And I actually developed this framework because I realized, you know, there's a success method to everything.
• 3:18
  Speaker: So I call it the SRS framework for decision making.
• 3:24
  Speaker: S stands for structure, R stand for risk, and another S is sequencing.
• 3:30
  Speaker: So why is it so important?
• 3:33
  Speaker: Is that a lot of the time when you're actually investing, you quite emotionally attached to um what you're about to do.
• 3:44
  Speaker: Like buying an investment property can be quite exciting.
• 3:48
  Speaker: And I think people um got caught up in the excitement.
• 3:52
  Speaker: For example, I have clients attending an auction and didn't realize that they're actually going to do the bidding, the bidding side, and they're like, I think I'm gonna place a bet on this um property, and they haven't even spoken to um the broker, they haven't spoken to me.
• 4:14
  Speaker: Wow, seriously.
• 4:15
  Speaker: That's right, and then they they were prepared to drop like seven figures on this property investment that they've seen for 10 minutes.
• 4:26
  Speaker: So that's a bit scary.
• 4:28
  Speaker: I think um when you actually going through the investment process, you need to do your homework and plan well rather than just you know invest so much emotionally into it.
• 4:41
  Speaker: Because yeah, I'm sure I I've been there and a lot of people do really invest themselves into that investment in the first 10 minutes and they just want to go for it.
• 4:52
  Speaker: But that could change the course of your life and your wealth.
• 4:58
  Speaker 1: Do you know that's why the buyer's advocates have actually been very successful is they're actually, without knowing it, following your structure here.
• 5:05
  Speaker 1: A buyer's advocate will go in with no emotion and they say you stay away, you're way too attached to the picket fence, and you're about to make some mistakes because you didn't find out there's a unit block going in behind it, which is why the owners are selling.
• 5:19
  Speaker 1: You just love the picket fence.
• 5:21
  Speaker 1: So, structure, risk, and sequence.
• 5:24
  Speaker 1: SRS, one of Mai's own beautiful frameworks and sequences, take us into it.
• 5:31
  Speaker: What you should do first um when you decided that yes, I'm going to start my investment journey, is to figure out the structure.
• 5:41
  Speaker: Your accountant, your your financial planner um should be able to take you through it and it's decide on um what structure that would work for you.
• 5:52
  Speaker: There's no one size fit all type structure in terms of whether or not you should invest in your um own name in a family trust, a unit trust, or should it be under the SMSF?
• 6:09
  Speaker: It depends on your investment goals and also where you want to be in the next five to ten years.
• 6:17
  Speaker: Is it a long-term investment or is it a short-term investment?
• 6:21
  Speaker: All that is so important because you don't want to purchase the investment in the structure that will not work for you long term or the short term, because you know, the losses that it would be making would be trapped in there, etc.
• 6:40
  Speaker: So that's the number one to um consider before you invest.
• 6:46
  Speaker: And then number two is um assessing the risk of having that investment.
• 6:53
  Speaker: For example, if you actually invest in an investment property, you purchase an investment property in a family trust, in New South Wales, there's land tax implication.
• 7:06
  Speaker: So you don't actually get the um land tax threshold, which means that you are assessed from the first dollar.
• 7:14
  Speaker: And that could mean um you're paying land tax from the get-go on, you know, so for example, land value of $500,000.
• 7:25
  Speaker: That could be almost $10,000 worth.
• 7:29
  Speaker: So you need to consider how you're going to pay for that, and you're already in a massive minus because of land tax before you even earn a dollar from it.
• 7:41
  Speaker: So that may not be the right structure for you.
• 7:44
  Speaker: But if you actually purchase in Queensland, that's different because the land tax law in Queensland is so different from land tax in New South Wales.
• 7:55
  Speaker: So that's a big thing.
• 7:56
  Speaker: Also, is it going to be negative gearing or is it going to be positive gearing investment?
• 8:02
  Speaker: So if it's in a negative gearing territory, well, then it may not be wise to put your investment in a company structure or family trust.
• 8:14
  Speaker: I don't like having negative gearing in self-managed superfund either, because that means you're just your retirement's going backwards all the time, even though you might be getting capital growth, but you you're not guaranteed that growth.
• 8:28
  Speaker: You need to assess that because a lot of the structure, like companies and family trust, the um losses can't be passed on to you.
• 8:38
  Speaker: It's trapped in those entities until you make profit in the future.
• 8:46
  Speaker: So that may not be the, you know, you're not going to get a tax break from from making that loss.
• 8:53
  Speaker: So you have to actually understand that you'll have to wear that until you make the profit.
• 8:59
  Speaker: So that might not work for you cash flow-wise.
• 9:02
  Speaker: The last thing is super important is sequencing.
• 9:06
  Speaker: So sequencing is about take a deep breath, have a look at your structure, have a look at the risks that are involved in entering into the investment.
• 9:20
  Speaker: And then what should you do first?
• 9:24
  Speaker: Are you equipped to um purchase this property?
• 9:28
  Speaker: Are your structures in place?
• 9:31
  Speaker: You're uh you are well aware of the risk involved, and then okay, if um you purchase an investment property under your self-managed super fund, for example, you might need to do a certain amount of super contributions into the self-managed super fund first, lower your tax, and then uh utilize that cash to successfully complete the purchase of that investment.
• 10:01
  Speaker 1: This is so important, Mai.
• 10:02
  Speaker 1: And as I listen to today's podcast, I feel part of it amazingly, because it was only about two months ago I rang you up and said, Robyn and I've seen a property up in Byron Bay, we love it, we've got kids up there, we might buy that one.
• 10:17
  Speaker 1: No thought to structure at all, no thought to the risk, other than, and this is such an interesting moment because the Australian dream is you just buy property, yeah.
• 10:27
  Speaker 1: Uh, because that's exciting, and that's the Australian dream.
• 10:30
  Speaker 1: But when you look at SRS, it's like, well, hang on, are you gonna live in it one day?
• 10:35
  Speaker 1: Is it investment?
• 10:36
  Speaker 1: And I I answered your questions from the structure, and then we work out I needed a bucket company, and I said, What's one of those?
• 10:44
  Speaker 1: It takes time to set up these things.
• 10:46
  Speaker 1: That's right.
• 10:47
  Speaker 1: And why that was all going on, we calmed down.
• 10:50
  Speaker 1: We took a breath and went, it's it's not urgent.
• 10:54
  Speaker 1: We don't have to have it.
• 10:56
  Speaker 1: I'm actually pleased now we didn't, because we were going, right?
• 11:00
  Speaker 1: I feel like the was this written about me.
• 11:03
  Speaker: Um, it's not, I can guarantee.
• 11:06
  Speaker 1: It's exactly what you're saying about the excitement's there, and oh, let's just do it.
• 11:10
  Speaker 1: When you are a small business owner, you I think you're just used to risk.
• 11:14
  Speaker 1: You're like someone who's been to the war.
• 11:16
  Speaker 1: If you hear a gunshot, ah, it's nothing, you know.
• 11:18
  Speaker 1: You you you listen to it all the time.
• 11:20
  Speaker 1: And what's so good about this podcast is you can't read the label from inside the jar.
• 11:26
  Speaker 1: That's right.
• 11:26
  Speaker 1: And SRS is a great example of this.
• 11:30
  Speaker 1: And there's many people in our community who pay stamp duty twice because they set it up wrong, and then it's 15 years later, and they go, What do you mean I've got to pay stamp duty?
• 11:40
  Speaker 1: Well, you you don't own it, yeah, and you want to live in it, so you are the new purchaser.
• 11:44
  Speaker 1: Yeah.
• 11:44
  Speaker 1: And they go, But I bought this with my super fund so I could live in it one day, but you can't.
• 11:49
  Speaker: No, the the the law doesn't allow you to.
• 11:52
  Speaker: Yeah, and a lot of people don't ask the right question, and that's why this podcast exists, so that you know, um, you are aware of what you can do and what you can't do, and you have clarity and also you have control.
• 12:06
  Speaker: So you you can ask your advisors the right questions.
• 12:11
  Speaker 1: Just a conclusion to our thinking on that one.
• 12:14
  Speaker 1: So once we calmed down and and did the breathing part, I said to my wife Robyn, we only come here probably a couple of weeks a year, if that.
• 12:24
  Speaker 1: And you look at the property sitting there, and yes, you could rent it out, but there's another commitment and another thing, another rates notice you've got to pay, and life's about reducing stress.
• 12:33
  Speaker 1: And one thing we never do as homeowners is think of the question of why don't we just rent something when we need it?
• 12:41
  Speaker: That's right.
• 12:42
  Speaker 1: And I worked out, I think it was three years free rent just on stamp duty, on what the stamp duty would cost for what we're gonna buy, that we're not gonna be there that much.
• 12:50
  Speaker 1: And you think you've got to shift your thinking sometimes, and that's exactly what this is about.
• 12:55
  Speaker: Yes.
• 12:55
  Speaker: Yeah, it's about um pause.
• 12:58
  Speaker: You know, you might be really excited about the investment, and honestly, I've been there.
• 13:03
  Speaker: You got his paddle.
• 13:05
  Speaker: Yeah, and then I went, no, stop, stop.
• 13:09
  Speaker: Just um what do I really want?
• 13:12
  Speaker: What are my goals?
• 13:13
  Speaker: Uh is it going to affect my cash flow?
• 13:16
  Speaker: And will it change the course of my life in terms of my um, you know, if it will affect my lifestyle, can I actually accept that?
• 13:27
  Speaker: You know, if the answer is no, well then you need to go, oh I'll better plan better.
• 13:32
  Speaker: Because you don't want to jump into something like this, like a lot of the time it's, you know, over a million dollars.
• 13:40
  Speaker: So and it's you shouldn't take this lightly, and that's a lot of money.
• 13:44
  Speaker: You work really hard for that money.
• 13:46
  Speaker: So it's so important to just go, okay, what is the framework, the thinking framework, the decision-making framework that I should follow?
• 13:57
  Speaker: And SRS is definitely going to provide you with that framework to think it through.
• 14:05
  Speaker: I believe that it will actually take you to the success journey and get you what you want in terms of your in investment um dream that fulfill your investment goals.
• 14:22
  Speaker 1: Mai Harris, another wonderful podcast.
• 14:24
  Speaker 1: SRS has been born.
• 14:26
  Speaker 1: Everyone breathe, put down the bidding paddle.
• 14:29
  Speaker 1: We look forward to next week.
• 14:31
  Speaker 1: Thank you for joining us.
• 14:32
  Speaker: Thank you, Lee.
• 14:33
  Speaker: And if any of our listeners would like the SRS framework, please DM the word SRS.
• 14:40
  Speaker: And you can find me on Instagram.
• 14:43
  Speaker: So DM me there.
• 14:44
  Speaker: It's the handle is the_mai harris.
• 14:49
  Speaker: So DM me.
• 14:52
  Speaker 1: And also on that note, Mai, in our show notes now, there is a hyperlink that says ask Mai.
• 14:59
  Speaker 1: And they can click on that and they can either type in their question or they can hit record now and say, Hi Mai, loving the podcast, and we love your feedback, by the way.
• 15:09
  Speaker 1: Could you do a segment on and we'll cover that in the future?
• 15:12
  Speaker 1: Great new feature, and I look forward to next week.
• 15:16
  Speaker: Thank you, Lee.
• 15:17
  Speaker: And yes, definitely.
• 15:19
  Speaker: Do leave any feedback and comments and um any topics that you would like me to cover, very welcome there, and um I will do it for you.