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How to buy your first property (post-Budget) · The Money Puzzle

0:09
Speaker 1: Hello, and welcome to the Australian's Money Becuzzle the podcast.
0:12
Speaker 1: I'm James Kirkby. Welcome aboard everybody you know just now.
0:16
Speaker 1: We're in an unusual patch in the Australian property market.
0:20
Speaker 1: In that place as you're falling, it doesn't happen too often.
0:23
Speaker 1: It seems to be full of challenges really, but there's
0:26
Speaker 1: always people listening to the show who want to get started.
0:29
Speaker 1: They want to buy their first home, they want to
0:31
Speaker 1: buy their first investment property. Well, my guest today is
0:34
Speaker 1: Glenn James and he is the author of a new
0:36
Speaker 1: book which is called Don't You Know The Quick Start
0:40
Speaker 1: Guide to Your First Property is also the host of
0:43
Speaker 1: the Money, Money, Money podcast. How are you, Glenn?
0:46
Speaker 2: I'm very well. Nice to be with you on Hollow
0:48
Speaker 2: to all your listeners.
0:49
Speaker 1: Nice to have you on the show. It's an interesting
0:52
Speaker 1: time to bring out the book though, I mean imagine
0:55
Speaker 1: for you there's certain principles, key principles that don't really
0:59
Speaker 1: change when you're buying your first property, and there are
1:03
Speaker 1: major mistakes that people make and buying their first property.
1:06
Speaker 1: Where would we start with the person who's never bought one?
1:08
Speaker 1: Take us in on your early chapters, or how you
1:10
Speaker 1: even got the book, how you framed it in your
1:12
Speaker 1: mind before you ruled it.
1:14
Speaker 2: Yeah, So we primarily wrote this book for our audience.
1:18
Speaker 2: A lot of our audience are, you know, under thirty five,
1:21
Speaker 2: maybe meeting ages like thirty two of the Money, Money,
1:25
Speaker 2: Money Show, And a lot of people want to buy
1:28
Speaker 2: a property, and often they get to this kind of
1:31
Speaker 2: this confusing I did this kind of diagram that was
1:34
Speaker 2: circular at the start of the book. It's like, I
1:36
Speaker 2: want to buy a property. I can't afford to buy
1:39
Speaker 2: where I want to live. If by buy an investment
1:41
Speaker 2: property somewhere else, I might lose the first home owner concessions,
1:46
Speaker 2: but I don't want to lose those concessions, and I'm
1:49
Speaker 2: in this loop of inaction. So we wanted to really
1:52
Speaker 2: write this book for those who wanted to buy a
1:56
Speaker 2: first property, or those who have adult children who want
2:00
Speaker 2: to buy their first problem want to help their adult
2:02
Speaker 2: children with some ways to do that, But we really
2:06
Speaker 2: wanted to just help people with some clarity and with
2:09
Speaker 2: some strategy about the best way to go. And you're right,
2:12
Speaker 2: I think what the biggest change in tax and property
2:17
Speaker 2: policy maybe in twenty six years a little bit more so,
2:20
Speaker 2: it's a great time to be alive. But the good
2:21
Speaker 2: thing was I was at the Federal budget in Canberra
2:24
Speaker 2: when it was released and the book was kind of
2:26
Speaker 2: in tow We didn't have to really change that much
2:29
Speaker 2: at all in the book because as you said, the
2:31
Speaker 2: principles always remain right with any investing principles, any purchasing
2:37
Speaker 2: principles never change.
2:41
Speaker 1: So let to start up with the home okay, and
2:43
Speaker 1: I know a lot of our listeners are investors, but
2:46
Speaker 1: it's first principles really the home family, primary residents. In
2:51
Speaker 1: terms of a quick start to that pathway, what are
2:56
Speaker 1: the main messages you give to people. I'm thinking someone
3:01
Speaker 1: who has never done it before. There's so many variables.
3:04
Speaker 1: You know, Let's assume they want, they know where they
3:06
Speaker 1: want to live. Let's assume they know the city at least, yes,
3:08
Speaker 1: and let's assume they have a keen sense of how
3:11
Speaker 1: much they've got. Then happens after that.
3:14
Speaker 2: So then we need to work out I think and
3:16
Speaker 2: if particularly and this could be a good episode for
3:18
Speaker 2: your listeners to send to their adult children or their
3:20
Speaker 2: young adult children, right because as you said, a lot
3:23
Speaker 2: of people might already have a home. But if we've
3:25
Speaker 2: honed down the location, we've got our finance in order,
3:28
Speaker 2: or what age and stage are you at your life?
3:32
Speaker 2: And I always go and we started the first chapter
3:34
Speaker 2: about the why, So why are you doing this? Is
3:38
Speaker 2: it because I need to own a property and owning
3:41
Speaker 2: property in Australia equals I'll be successful. Or I want
3:45
Speaker 2: to own a property because I'm sick of renting. I'm
3:48
Speaker 2: sick of the oven breaking and the property owner not
3:52
Speaker 2: fixing it. I need it for my own safety or security.
3:56
Speaker 2: It might be I want to lock and leave apartment
3:58
Speaker 2: I don't want to have to move around to and
4:00
Speaker 2: so I think the asset type does come into that
4:04
Speaker 2: and to suit that with your agent stage in life.
4:07
Speaker 3: And I know we'll talk.
4:08
Speaker 2: Later about strata and all that stuff, but I think
4:12
Speaker 2: when we're looking at our home to buy to live in,
4:16
Speaker 2: first and foremost, we don't always want to throw out
4:21
Speaker 2: investing principles.
4:22
Speaker 3: We need to consider them.
4:24
Speaker 2: But if it is because I want to feel safe
4:27
Speaker 2: and secure and not have to move around and try
4:30
Speaker 2: and cap my rent, because we know rent increases faster
4:32
Speaker 2: than inflation and wages a lot of the time.
4:34
Speaker 1: Right it's increasing at the moment and rices are going down.
4:38
Speaker 2: That's right, So we need to keep investing principles in mind.
4:42
Speaker 2: And I'll use an example. A dear friend of mine,
4:44
Speaker 2: she's in her forties. She recently purchased a one bedroom
4:48
Speaker 2: apartment in Pott's Point in Sydney, right to live in
4:52
Speaker 2: as a home, and strictly speaking, you would almost never
4:58
Speaker 2: buy that as an investment, Like it's very long voter
5:02
Speaker 2: draw to via one bedroom apartment as an investment property, right,
5:05
Speaker 2: But because it's our home, we have to go, well,
5:10
Speaker 2: I'm buying this to consume, so we're you know, paying
5:14
Speaker 2: for it. There's a consumption item. I want the security.
5:17
Speaker 2: I don't want to have to move around. So what
5:19
Speaker 2: I'm saying to people is there are situations when you're
5:23
Speaker 2: buying your first home where some logic will go out
5:27
Speaker 2: the window because the other soft things will trump that.
5:32
Speaker 2: But can you look at some other broader concepts when
5:36
Speaker 2: buying that. So if it was we want to buy
5:39
Speaker 2: an apartment at this stage of life, well let's try
5:44
Speaker 2: with the aim if we move out in five years
5:47
Speaker 2: or eight years or whatever that is, is a one
5:50
Speaker 2: bedroom with a one bath going to be better? Or
5:52
Speaker 2: a two times two? So like so I think it
5:56
Speaker 2: does delineate a little bit when we're buying to consume
5:59
Speaker 2: than buying to invest.
6:00
Speaker 1: So I tried to see beyond the immediate's achievement not
6:04
Speaker 1: having to pay rent and actually being able to buy property.
6:07
Speaker 1: Good for you, well done, But try and see it
6:09
Speaker 1: a bit further down the road. What happens next if
6:12
Speaker 1: you had to sell it?
6:14
Speaker 3: Who are the buyers?
6:15
Speaker 1: Did you buy a good property?
6:17
Speaker 3: Yeah?
6:17
Speaker 2: And remember, like even for example, that one bedroom apartment
6:21
Speaker 2: that a friend of mine purchased, there's limited lenders that
6:24
Speaker 2: will do that because of the square meterage, and there
6:27
Speaker 2: will be limiting limited purchases potentially, Like there are so
6:32
Speaker 2: many that are always for sale that don't always increase
6:35
Speaker 2: in value. But yeah, when we're buying a home to
6:38
Speaker 2: live in, particularly in this day and age, like the
6:41
Speaker 2: capital cities in Australia, they're just now international cities, like
6:45
Speaker 2: good or bad.
6:47
Speaker 1: And with international prices. Actually that's right.
6:51
Speaker 2: Some people just will always rent. But we have to
6:54
Speaker 2: look at how we're building wealth for future ass Yeah.
6:59
Speaker 1: And I remember buying a first film and I remember
7:01
Speaker 1: the agent saying to me, you know, are you looking
7:03
Speaker 1: for land? I'm thinking, how do I answer this question.
7:07
Speaker 1: Why did he ask me this question? What was he
7:09
Speaker 1: driving at?
7:09
Speaker 3: Do you think, yeah, are you buying land?
7:13
Speaker 1: I was thinking we might just reintroduce investors to that
7:16
Speaker 1: core notion of scarcity and land value. That's that that premier.
7:20
Speaker 1: It's all residential investing.
7:22
Speaker 2: One hundred percent and that's the whole thing. Like the
7:25
Speaker 2: old saying land, they're not making any more of it.
7:27
Speaker 2: And this is the thing like what governments come and go,
7:30
Speaker 2: but the principles remain. It's the worst house on the
7:34
Speaker 2: best street. Like this isn't rocket surgery, as I like
7:37
Speaker 2: to say. This is like we can get caught up
7:40
Speaker 2: and you know, get the hebgb's and house fever and
7:43
Speaker 2: rush in and buy a house to live in. But
7:45
Speaker 2: we know that there's sixty k and strata fees. But
7:47
Speaker 2: I love the apartment. There's more apartments people like, trust me,
7:51
Speaker 2: they're everywhere. Don't get the one with the sixty k
7:53
Speaker 2: strata levy. So I really just wanted to encourage people
7:57
Speaker 2: with this that if they do want to buy that
8:00
Speaker 2: first home to live in, there's a higher chance that
8:02
Speaker 2: you might be able to do it sooner with a
8:04
Speaker 2: heap of incentives that are state based in federally available
8:09
Speaker 2: and also to show people that want to help their
8:11
Speaker 2: adult kids the parental guarantees a very low risk strategy.
8:15
Speaker 2: The first home super scheme that is the worst kept
8:19
Speaker 2: secret or best kept whatever that saying is everyone's getting
8:23
Speaker 2: the hevgbs and like, oh, I need to say for
8:26
Speaker 2: my first home and I can't anymore because of the
8:28
Speaker 2: tax changes. Well, unless you've capped out the first Home
8:32
Speaker 2: super Savior scheme, don't talk about that because the CGT
8:38
Speaker 2: issues in SUBER haven't changed, and you can save fifteen
8:42
Speaker 2: thousand dollars a year up to fifty thousand dollars in
8:44
Speaker 2: a tax effective way in super. If you are buying
8:47
Speaker 2: your first home to live in, son investment property can't
8:51
Speaker 2: do it for that. But this is why we have
8:53
Speaker 2: to get strategic and work out I don't own a home,
8:58
Speaker 2: do I want to buy a home to live in?
9:01
Speaker 3: Well, amen, let's put a plan in place.
9:04
Speaker 2: We've got listeners every single month who are young, single,
9:09
Speaker 2: coupled still buying property. It's not hard, it's not easy,
9:13
Speaker 2: but it is worth it if you're serious enough about
9:15
Speaker 2: that goal.
9:16
Speaker 1: Okay, so what did you learn in terms of quick start?
9:20
Speaker 1: What did you learn in terms of finding a location,
9:22
Speaker 1: do you recommend that people pick a zeone, did they
9:24
Speaker 1: pick a price point and say we live anywhere, or
9:27
Speaker 1: do they pick a part of the city and really get.
9:28
Speaker 3: To know it well.
9:30
Speaker 2: But so this is the question. Are you now talking
9:33
Speaker 2: as an investment or somewhere to live in?
9:36
Speaker 1: Yeah, because well let's take it as somewhere to live
9:39
Speaker 1: in in this stage of the show.
9:41
Speaker 2: Okay, so somewhere to live in. You've got to live there.
9:45
Speaker 2: If you don't like living there, you're not going to
9:48
Speaker 2: want to buy there, right, because what can happen is
9:51
Speaker 2: and this is very interesting point you make. If your
9:54
Speaker 2: goal is to buy a home at all costs, maybe
9:59
Speaker 2: it could be worth buying a little bit out and
10:01
Speaker 2: living there for a while. Might end up Okay, it
10:05
Speaker 2: might not either. And that's why we have to get
10:08
Speaker 2: very strategic with not just buying a house or a property.
10:12
Speaker 2: It ll cost because the cost to get into a property,
10:15
Speaker 2: they're so it's very expensive.
10:17
Speaker 3: Right.
10:18
Speaker 2: So what I would say, if you're looking to buy
10:21
Speaker 2: a house to live in, do you like the area
10:25
Speaker 2: and can you afford the area?
10:26
Speaker 3: Now?
10:27
Speaker 2: If both of those a yes, Amen, brother and sister,
10:30
Speaker 2: go for it, right, what's your problem.
10:32
Speaker 3: You've got the money and you like living there. But
10:34
Speaker 3: this is where this.
10:35
Speaker 2: Next generation we really like living in two rack, but
10:41
Speaker 2: can't afford it, so it's off the menu. So then
10:44
Speaker 2: we say, well, strategically, what do we do with our life?
10:49
Speaker 2: Do you want an adventure? Do we want to potentially
10:53
Speaker 2: and this is where I think you might be able
10:55
Speaker 2: to get cute if you're up for because there's a
10:57
Speaker 2: bit of a risk profile here. Are you interested to
11:01
Speaker 2: buy property somewhere that could be a good investment long
11:05
Speaker 2: term move there? If you can work remote, awesome, If not,
11:09
Speaker 2: might be off the table. Do you want to take
11:11
Speaker 2: a chance to move somewhere, to buy that home to
11:14
Speaker 2: live in it for a little while.
11:16
Speaker 3: I don't know.
11:17
Speaker 2: I just want people to know that in this day
11:19
Speaker 2: and age, all bets are off. It is a different
11:23
Speaker 2: era than thirty years ago.
11:26
Speaker 1: Yeah, why it's so important that they have Buying the
11:30
Speaker 1: house becomes such a big deal because as a proportion
11:34
Speaker 1: of your salary, as a multiple of your salary, as
11:37
Speaker 1: a portion of your talking, whether it is multiples of
11:40
Speaker 1: what it used to be, absolutely put that on the table.
11:42
Speaker 1: So one thing you mentioned, and I think anyone just
11:45
Speaker 1: other buying a home, folks. One thing that's very different
11:47
Speaker 1: today than it was even ten years ago, fifteen years
11:50
Speaker 1: ago is this absolute patchwork of grants and schemes that
11:55
Speaker 1: are available now, both stats and federal. The big one,
11:58
Speaker 1: as everyone knows, is versus five percent deposit scheme. That's there, Okay,
12:03
Speaker 1: on limited numbers. Anyone in Australia who by their first
12:07
Speaker 1: home can go in on a five percent deal. I'd
12:09
Speaker 1: like to flip that over and say that you can
12:11
Speaker 1: go in on a ninety five percent mortgage deal. That's
12:14
Speaker 1: not all sorts of problems, but we'll come to that
12:16
Speaker 1: in the moment. I'm just saying that is that the
12:18
Speaker 1: big one. Then there are others, Glenn. You mentioned the
12:20
Speaker 1: first Home Super Safer scheme, which is a minor scheme
12:23
Speaker 1: in terms of participation, but allows you to use the
12:26
Speaker 1: superannuation system. And as you say, Super was their relative
12:29
Speaker 1: winner in the budget. It wasn't affected by all these
12:32
Speaker 1: new anti property taxes I want to call them that
12:34
Speaker 1: came through in the budget. How does someone sitting there,
12:37
Speaker 1: let's say they've made the decisions that we talked about
12:39
Speaker 1: in the first part. They know where, they know where
12:41
Speaker 1: they want to live. They think that property is just
12:44
Speaker 1: as good. It could be an investment property if it
12:46
Speaker 1: had to be. When in five years time or seven
12:49
Speaker 1: years time, when they go to move on, it should
12:50
Speaker 1: be fine to allow them to do what they want
12:52
Speaker 1: to do next when they go to make that purchase.
12:56
Speaker 1: Once upon a time, it was all about the multiples
12:58
Speaker 1: of your salary. Now they the deposits are so big
13:01
Speaker 1: that you are probably look at the starts. You're probably
13:04
Speaker 1: going to get help, possibly from the government, possibly from
13:07
Speaker 1: your own family, parentally guarantees. People can work out themselves.
13:12
Speaker 1: But I want to ask a few about the government schemes.
13:15
Speaker 1: How does someone even know what there what's out there
13:19
Speaker 1: they can access? Is there some sort of one stop
13:21
Speaker 1: shop whether they can say what are the schemes and
13:24
Speaker 1: which one can I choose?
13:26
Speaker 2: Yeah, there's a book called The Quick Startguard to Your
13:28
Speaker 2: First Property James, which will.
13:31
Speaker 1: Sorry just has it got a road map for all
13:34
Speaker 1: this stuff?
13:35
Speaker 2: It really does. But that's why we need to work
13:37
Speaker 2: out first and foremost. If we're buying a house to
13:39
Speaker 2: live in, then we let the cards fall backwards about
13:44
Speaker 2: what Because a lot of these schemes you can layer, right,
13:47
Speaker 2: you can use the first home toper save a scheme.
13:49
Speaker 2: You can use the five percent deposit scheme. You'll be
13:51
Speaker 2: able to layer state based grants and exemptions, So you
13:55
Speaker 2: mean you can add them the other yeah.
13:59
Speaker 3: Okay.
14:00
Speaker 2: One of the schemes you didn't mention, which you will
14:02
Speaker 2: know of when I tell it, and I think it
14:04
Speaker 2: is a really potentially helpful scheme for some people is
14:09
Speaker 2: the government's help to buy scheme. Where they'll buy it.
14:12
Speaker 2: It is to share shared equity scheme.
14:14
Speaker 1: Yes, yeah, expend to listeners what that is and how
14:16
Speaker 1: you like it?
14:17
Speaker 3: Yeah?
14:17
Speaker 2: So I like it because the government will put in
14:20
Speaker 2: up to thirty percent of the purchase price of your
14:24
Speaker 2: first home. Okay, if it's a brand new property, they'll
14:28
Speaker 2: do forty percent. And I don't mind it because for
14:32
Speaker 2: all my I've got friends in their thirties and even
14:36
Speaker 2: early forties who have not purchased a home yet, and
14:39
Speaker 2: for all the negative detractors, for the schemes and all
14:42
Speaker 2: that stuff, if I was a first home buyer, I
14:45
Speaker 2: want to do everything I can to get into my
14:48
Speaker 2: first property. And so this scheme, if it was a
14:51
Speaker 2: million dollar property, the government would effectively buy three hundred
14:56
Speaker 2: thousand of it. If it was pre existing. You have
14:59
Speaker 2: to pay the rates and the upkeep on the whole
15:02
Speaker 2: million dollars, but your mortgage would be seven hundred thousand.
15:05
Speaker 2: Over time. You can do minor renovations. If you want
15:09
Speaker 2: to buy the government out, you can in due course.
15:12
Speaker 2: If the property sells, any gains are proportionate, so the
15:15
Speaker 2: government will get an uplift. You'll get an uplift. Again,
15:18
Speaker 2: it's just another tool that is out there to help
15:22
Speaker 2: people get their first home. Now, these schemes that we're
15:25
Speaker 2: talking about, I'm literally and in the book, we're just
15:28
Speaker 2: talking facts. These are what's available if you're a first
15:32
Speaker 2: home buyer or if you've got kids that are first
15:33
Speaker 2: home buyers. Do everything you can to get that first
15:36
Speaker 2: home because the deposit is the biggest problem. Most people
15:40
Speaker 2: have got high incomes, high expenses, and rent. I will say,
15:44
Speaker 2: if you are after buying your first home, the word
15:47
Speaker 2: uber eats. Those words should not ever leave your lips
15:51
Speaker 2: because you know, like, come on, like, are you wanting
15:56
Speaker 2: at that bad that you're willing to sacrifice for the
15:59
Speaker 2: long term to get into your first property?
16:02
Speaker 3: Do you have a freaking car Loan? Like? How?
16:05
Speaker 2: Actually, because I've met people that do sacrifice over a
16:08
Speaker 2: long period of time and save and get their first home.
16:12
Speaker 2: But just back on that, I was thinking about something before.
16:15
Speaker 2: If you were living in a suburb in Australia that
16:19
Speaker 2: was out of the capital city and homes are still
16:22
Speaker 2: quote unquote reasonable, and you're thinking, oh, we want to
16:25
Speaker 2: buy our first home to live in. We can get
16:26
Speaker 2: a freehold block. We probably will be there as our
16:30
Speaker 2: stepping stone home still be a little bit strategic. We
16:34
Speaker 2: might not be doing it on the main road at
16:35
Speaker 2: the crossing because it's going to be more appealing for
16:39
Speaker 2: other people to buy if it isn't on a main road.
16:41
Speaker 2: So I just think you can still have some investment
16:47
Speaker 2: principles at play when you're buying your home to live in.
16:51
Speaker 2: But loud and clear, the home that we live in
16:54
Speaker 2: is broadly consumed and I don't know, like for me,
17:00
Speaker 2: I don't I just rent and have investment properties because
17:04
Speaker 2: I just don't really want non deductible debt because speech
17:08
Speaker 2: out there.
17:09
Speaker 1: Yeah, well, I think what we might do in the
17:10
Speaker 1: second stablement is have a look at the investment layer.
17:13
Speaker 1: But just to cover off folks, I think that was
17:15
Speaker 1: a very interesting part of how to get a first
17:18
Speaker 1: home which has changed immensely because the deposits are now
17:21
Speaker 1: so big. I think it's important to know what you
17:23
Speaker 1: can do and to know what can help you. I mean,
17:26
Speaker 1: obviously if your parents can help you, or if you
17:28
Speaker 1: are a parent and you can help your adult children.
17:30
Speaker 1: But that's all fine, we'll deal with that in another show.
17:33
Speaker 1: But there are now an extraordinary menu of government grants
17:36
Speaker 1: and incentives to buy homes. The main was the universal
17:40
Speaker 1: five percent deposit scheme, and Glenn also mentioned the Help
17:44
Speaker 1: to Buy Scheme, which is a shared equity scheme, which
17:46
Speaker 1: is a very interesting scheme federal. I think it has
17:48
Speaker 1: a cap of ten thousand or so, but there's also
17:51
Speaker 1: some in the States individually, and that of course allows
17:55
Speaker 1: you to get the deposit and have a smaller mortgage.
17:58
Speaker 1: The prices that you call own the property with the
18:01
Speaker 1: government interesting arrangements the early days on that one. We'll
18:04
Speaker 1: be back in a moment. Hello, Welcome back to the
18:21
Speaker 1: Australian's Money Puzzle podcast. James Kirby here with Glenn James,
18:25
Speaker 1: author of the Quick Start Guide to Your First Property.
18:28
Speaker 1: We were talking in the first half Glenn about buying
18:31
Speaker 1: your first home, which is a very sort of specific exercise,
18:34
Speaker 1: but as you say, can't be seen or shouldn't be
18:36
Speaker 1: seen as quarantine from investment principles. I mean basic stuff.
18:40
Speaker 1: You know, if you buy an apartment among two hundred
18:42
Speaker 1: similar apartments, among two hundred similar apartment towers, there's a
18:46
Speaker 1: very little scarcity there. If you buy a property where
18:50
Speaker 1: there is some scarcity, obviously the closer to the land area,
18:54
Speaker 1: if you actually have freehold land, that is the best
18:56
Speaker 1: possible in terms of principles, That is the very best
18:59
Speaker 1: part property in terms of its type, and that you
19:02
Speaker 1: work from there. You have to think of your home
19:05
Speaker 1: not just as the solution short term that you've managed
19:10
Speaker 1: to not pay rent anymore, but you have to think
19:12
Speaker 1: about it down the track. What about afterwards if you
19:15
Speaker 1: want to move, if somebody else wants to buy that property,
19:18
Speaker 1: what does it look like? Is it an attractive property?
19:20
Speaker 1: Can you widen the potential audience for that property beyond
19:23
Speaker 1: home buyers to include investors? And then if you actually
19:27
Speaker 1: invoke some investing principles into your purchase decision, and that
19:31
Speaker 1: should translate to a wider buyer population at the other
19:34
Speaker 1: side of the deal down the track. On property investment,
19:37
Speaker 1: I wandered Glenn. Just to cut on that one. You're
19:39
Speaker 1: an active property investor yourself, and you have been rent vesting.
19:44
Speaker 1: Tell me I would have thought, do you think what
19:48
Speaker 1: is your assessment of the current climate for investing property
19:53
Speaker 1: just now? I mean, it seems to me if I
19:55
Speaker 1: was Devil's advocate, I would say it's trocious. We have
19:58
Speaker 1: high rates and we have a budget which has layered
20:04
Speaker 1: multiple problems for investing in property. The tax tid isn't
20:08
Speaker 1: as good as it used to be, but capital against tax,
20:11
Speaker 1: the negative gearing has gone from most people on investment properties.
20:14
Speaker 1: You can't borrow and you're super fund if you have
20:16
Speaker 1: one to buy an investment property. What do you think
20:19
Speaker 1: is it worth than buying investment property at all?
20:21
Speaker 2: I think it is far out lots to unpack there.
20:25
Speaker 2: I gosh, it's funny because there's like the political component
20:30
Speaker 2: of this and the actual outflow or the outworking goal
20:33
Speaker 2: of it.
20:34
Speaker 3: Right. I think the negative gearing stuff.
20:36
Speaker 2: The government did a bad job at selling that and
20:38
Speaker 2: explaining it because negative gearing has not gone away. We
20:43
Speaker 2: just can't get the benefit on our taxable income from employment.
20:47
Speaker 2: It's quarantined in the asset. I did a really good
20:49
Speaker 2: on our Instagram Money podcast. There's an explainer real that's
20:53
Speaker 2: up the top of the feed that explains exactly how
20:56
Speaker 2: it works. And most people are surprised that, Ah, it's
21:00
Speaker 2: not as bad as I thought, and we need to
21:02
Speaker 2: know that the negative gearing that was an outlier in
21:06
Speaker 2: Australia in the world's standards like it just I personally,
21:11
Speaker 2: I'm a filthy capitalist pig James like the rest of them.
21:15
Speaker 2: Love my property, love my money. Yeah, like all that.
21:19
Speaker 2: I just it's not going to stop me from investing.
21:23
Speaker 2: And I think the actual lending policy with not adding
21:27
Speaker 2: back for the servicing, will do the heavy lifting of
21:29
Speaker 2: the policy, not the policy itself, the capital gains tax,
21:33
Speaker 2: I think again, just more confusing, more like why didn't
21:38
Speaker 2: they just go it's from a political thing, not going
21:41
Speaker 2: We're ditching the discount and just making it thirty percent
21:44
Speaker 2: just easy.
21:45
Speaker 1: Like, so do you think why do you think investing
21:47
Speaker 1: in property is still a feasible business? Is it as
21:52
Speaker 1: good as it was? Cut to the chief? Does it
21:55
Speaker 1: after the potential it did?
21:57
Speaker 2: I think it does over the long term because we
22:00
Speaker 2: know one thing, with all these tax changes, what hasn't
22:04
Speaker 2: changed in Australia right, the big S word supply, yes,
22:09
Speaker 2: so that has not changed.
22:12
Speaker 1: To the renting vacancy rest remained rock bottom one percent.
22:15
Speaker 2: You can always still increasing, like when you look at
22:19
Speaker 2: the high Welcome to economics kids, this is class one
22:22
Speaker 2: oh one. Let's talk about market forces. The supply, the
22:25
Speaker 2: demand has not changed. One thing I will say with
22:29
Speaker 2: investing in particularly any property, do not buy any growth
22:35
Speaker 2: assets unless you're planning to keep it for more than
22:40
Speaker 2: seven eight years. Tried nine or ten for property, like
22:46
Speaker 2: we need the whole time in the market, and like comedy,
22:50
Speaker 2: maybe with properly timing can be everything. I think at
22:53
Speaker 2: the moment it could be a good time to if
22:57
Speaker 2: you do have ducks lined up if you want to
22:59
Speaker 2: buy property. Because my colleague John Pidgeon, who is the
23:02
Speaker 2: co host on Money, Money, Money, he's a property coach
23:06
Speaker 2: and buyers advocate. He doesn't do those crappy seminars on
23:10
Speaker 2: weekend and flog off the plan. So he's not a
23:12
Speaker 2: rogue shark, he says, and I've learned from him. There's
23:17
Speaker 2: three ways to make money in property, right. The first
23:21
Speaker 2: way is to buy a discount, so relatively you know.
23:24
Speaker 3: You've got a good deal.
23:25
Speaker 2: You use the BA Buyers Advocate buyers agent. You stole
23:29
Speaker 2: the property because they didn't want to list it and
23:30
Speaker 2: all that. Two add value, so you know, can we
23:35
Speaker 2: pretty up the bride add value to all that?
23:37
Speaker 1: It's just something you can't do. Another areas, yes, very important.
23:41
Speaker 2: And three is time in the market and capital growth.
23:46
Speaker 2: So ideally can you do all three or at least
23:50
Speaker 2: two of them? And this is the problem, like I
23:55
Speaker 2: worry with I know this wasn't a commentary on the
23:59
Speaker 2: tax changes. I really worry for everyday Australians that they're
24:03
Speaker 2: going to get targeted with buying investment properties that are
24:07
Speaker 2: brand new for the tax benefits. I really worry about that,
24:11
Speaker 2: like extremely worried, because you do anything just for the
24:15
Speaker 2: tax benefits. Like that's what happened when people were buying
24:19
Speaker 2: timber farms in Tasmania in the early two thousands, right,
24:22
Speaker 2: So you sped up.
24:23
Speaker 3: To the listener.
24:24
Speaker 1: Why you're worried? What can go wrong?
24:26
Speaker 2: I'm worried because if you're buying a brand new off
24:30
Speaker 2: the plan property where it's a big greenfield state or
24:35
Speaker 2: potentially an apartment, and this is a there's always an asterisk, right,
24:38
Speaker 2: It's not always it's always an asterisk. You talked about
24:42
Speaker 2: it for lack of scarcity, will or did you pay
24:46
Speaker 2: too much for it? You probably did because there could
24:50
Speaker 2: be someone getting thirty grand you know.
24:53
Speaker 3: Introduction fee.
24:54
Speaker 1: This is if you buy a new property from.
24:56
Speaker 2: Brand new, from developers yep, or just to get the
24:59
Speaker 2: negative gearing benefits, Well, who's going to buy that property
25:03
Speaker 2: from you? An investor might not be wanting to buy
25:06
Speaker 2: it because it's not.
25:07
Speaker 1: Because it's no longer new, it's an existing property, so
25:09
Speaker 1: that investor can't negatively gear.
25:11
Speaker 2: There's two hundred of them in the estate. And so
25:15
Speaker 2: that's why I'm really worried because just because we can
25:19
Speaker 2: negatively gear it doesn't mean it's a good asset. Now,
25:24
Speaker 2: I've personally purchased and off the plan apartment as an
25:30
Speaker 2: investment in twenty sixteen, and I've done it very well
25:36
Speaker 2: from it. So there's always an asterisk. And if you're
25:39
Speaker 2: in that world and you can see opportunities and you
25:42
Speaker 2: look at other infrastructure in the area, jobs, overall vacancy rate,
25:48
Speaker 2: there's always a thing that will counteract the broad rule.
25:52
Speaker 3: But when we're.
25:53
Speaker 2: Talking on big podcasts and almost like public policy, I
25:58
Speaker 2: think it is very important to have rules of thumb
26:02
Speaker 2: and potentially just really make sure that you're not just
26:07
Speaker 2: buying the brand new house and land package as an investment,
26:11
Speaker 2: because what if the whole estates and investors, and there's
26:14
Speaker 2: data out there you can one of the things, not
26:17
Speaker 2: only vacancy raids, is the actual tilt towards investor versus
26:22
Speaker 2: owner occupier.
26:24
Speaker 1: Yes, and if you're housing a statius full of investors,
26:28
Speaker 1: it's never good. And if your new housing in status
26:30
Speaker 1: is full of investors, as you say, what's going to
26:32
Speaker 1: happen is in five years time when all those houses
26:35
Speaker 1: come up for sale, the investors can't make it to
26:37
Speaker 1: a big gear. It's a really good point. I take
26:40
Speaker 1: a short break. I'll move you back in a moment. Hello,
26:50
Speaker 1: Welcome back to the Australians Money Plussive podcast. James Coby
26:53
Speaker 1: here with Glenn James, author of a new book on
26:57
Speaker 1: buying your first property. We mentioned it the quick Star
27:00
Speaker 1: Died to Your First Property to self explanatory. Hey, Glenn,
27:03
Speaker 1: covering off the issues that we had in segment upon
27:05
Speaker 1: segment two, I'm wondering when you now that you know
27:09
Speaker 1: what you know about the budget and the scale of it,
27:12
Speaker 1: and all the changes to taxes. I don't dispute your
27:15
Speaker 1: key point at all that investing in property smart, investing
27:19
Speaker 1: in property will always be rewarding every properties individual. And
27:24
Speaker 1: we have the one huge plus, which is as property investors,
27:29
Speaker 1: there's no there's no rental risk. Okay, there's a one
27:31
Speaker 1: percent vacancy rate. That's not going to change. No way
27:34
Speaker 1: is that going to change following the budget. But I
27:36
Speaker 1: want to ask you, as an investor or buyer in
27:39
Speaker 1: the market, with all those changes, what's the main thing
27:42
Speaker 1: we need to know? You pointed out that watch it
27:44
Speaker 1: with new property, right, because you've got this whole sort
27:47
Speaker 1: of we are concerned that there's going to be this
27:50
Speaker 1: whole army of promotion promoters bringing people into investing in
27:55
Speaker 1: new property for no other reason than they can negatively
27:59
Speaker 1: gear now, and that they can't negatively gear bard property.
28:03
Speaker 1: And you should never buy obviously, just on that basis alone.
28:06
Speaker 1: So the market's disturbed by that. The budget has disturbed
28:10
Speaker 1: the new property market, but as has it changed for
28:13
Speaker 1: the investor or buyer?
28:15
Speaker 2: What it might change if you look at the CGT
28:20
Speaker 2: thing when you know, like I used to be a
28:24
Speaker 2: financial advisor and used to have a lot of clients
28:27
Speaker 2: that may be self employed and their quote unquote superannuation
28:32
Speaker 2: was their house and they didn't worry about it.
28:35
Speaker 3: We just built equity in their home.
28:38
Speaker 2: Maybe the family home could now be a bit more
28:43
Speaker 2: of a wealth storage tool without because it still doesn't
28:48
Speaker 2: have any CGT. And one of the things we had
28:51
Speaker 2: a question around our show just this week's episode, they
28:54
Speaker 2: were earning nine hundred and fifty grand a year income
28:57
Speaker 2: like whopping income. Had all these cash saved, all these
28:59
Speaker 2: shared and they're still renting, And I said, well, maybe
29:04
Speaker 2: the strategy is to buy premium property to live in
29:08
Speaker 2: because you're still going to hopefully get that growth in
29:11
Speaker 2: the capital cities in a tax effective way. So that
29:16
Speaker 2: I think that's just bought the family home in terms
29:19
Speaker 2: of the storage of wealth potentially back into the fray,
29:23
Speaker 2: notwithstanding that it doesn't produce an income, but in terms
29:27
Speaker 2: of storage in wealth.
29:29
Speaker 3: But what I we go back to the concepts.
29:32
Speaker 2: So for me my investing, I've got a bit of
29:35
Speaker 2: a different philosophy than potentially the average bear. When I
29:40
Speaker 2: invest for the future, my whole philosophy is I'm doing
29:43
Speaker 2: the glen of tomorrow or favor today. So I need
29:46
Speaker 2: to live on less than I earn. And with my investing,
29:49
Speaker 2: I've just got two key criteria. One has to beat
29:54
Speaker 2: inflation and the cash rate, and then I'm okay with
29:58
Speaker 2: the market money being part in growth assets that aren't
30:01
Speaker 2: shooting the lights out. Because I'm a little bit conservative.
30:05
Speaker 2: I don't have an equity portfolio that is one hundred
30:07
Speaker 2: percent growth. You know, I'm a more conservative investor, so
30:12
Speaker 2: I like to think about I just want to beat
30:14
Speaker 2: inflation and potentially the cash rate a few percent above that.
30:18
Speaker 2: So I don't know if the budget has changed too much,
30:22
Speaker 2: but we just always need to be strategic.
30:24
Speaker 3: What are we buying, how are we keeping it?
30:28
Speaker 2: We do want to you know, most I think the
30:30
Speaker 2: stats say around nine years is the average whole time,
30:34
Speaker 2: because I've just seen too many, particularly young people. If
30:36
Speaker 2: you've got young adult kids that buy property and then
30:39
Speaker 2: they get married or divorce or whatever, and they sell
30:43
Speaker 2: the property within a few years. It's really hard to
30:46
Speaker 2: see on paper, but they've done their ass because property
30:50
Speaker 2: doesn't always go up in value, and I know that
30:54
Speaker 2: that's people just lose their light their hair on fire.
30:58
Speaker 2: When I say that. When you look at different markets
31:02
Speaker 2: around Australia at at different times. There's been a lot
31:04
Speaker 2: of capsities that went sideways for years. So it's about
31:11
Speaker 2: the quality of the asset and your strategy.
31:14
Speaker 1: Okay, very good, Well though, was useful to you folks.
31:17
Speaker 1: I think it's something that I should have come back
31:19
Speaker 1: to much earlier than this. It's one of the sort
31:21
Speaker 1: of core investment challenges for everybody buying their first home,
31:25
Speaker 1: buying their first and property. I think from today's show
31:28
Speaker 1: we've learned a few things. Certainly the rules have changed.
31:32
Speaker 1: It has become such an enormous commitment that you have
31:37
Speaker 1: to really think of it long term. You really can't
31:39
Speaker 1: play around here. It's a long term business. As Glenn says,
31:43
Speaker 1: you need to buy a quality asset. You need to
31:45
Speaker 1: be thinking in a seven, eight, nine year time frame.
31:48
Speaker 1: You need to know the conditions in which you are
31:52
Speaker 1: investing in what's going on around you. Obviously, as he says,
31:55
Speaker 1: the budget tax changes, they don't change the core principles
32:01
Speaker 1: of how you buy a property, but they do change
32:05
Speaker 1: the immediate nature and the environment in which you may
32:07
Speaker 1: be buying in. That would be pertinent really to anyone
32:10
Speaker 1: buying a new property. As Glenn said, perhaps the next phase.
32:13
Speaker 1: Nextbeak trend in our local property market is a surprise
32:18
Speaker 1: level of investor activity in new property that was never there,
32:21
Speaker 1: chasing the residual tax attractions of negative gearing, which is
32:26
Speaker 1: all a recipe for ruin. Really if everyone goes to
32:30
Speaker 1: sell at the same time, because the people who go
32:32
Speaker 1: to when those same people go to sell those properties,
32:34
Speaker 1: they can't sell them as negative gearing properties their existing properties.
32:38
Speaker 1: It's a catch. It's like a cliff that's just waiting
32:41
Speaker 1: down the road for investors. That's been really good to
32:43
Speaker 1: cover off on those issues. Glenn, and best of look
32:46
Speaker 1: with the book and thank you for coming on the
32:47
Speaker 1: show today.
32:49
Speaker 3: My pleasure. Thank you so much, James.
32:51
Speaker 1: That was Glenn James, author of The Fick Stark Guy
32:54
Speaker 1: to your First Property. Okay, folks, keep those questions only.
32:57
Speaker 1: I haven't covered questions this show or the last show.
33:00
Speaker 1: I wanted to catch up on a few things. I
33:02
Speaker 1: wanted to do a couple of special shows that we
33:04
Speaker 1: didn't really want to wander or go through a sort
33:07
Speaker 1: of wide spectrum of issues, but we will from here
33:10
Speaker 1: on in. I have some questions, of course, but I'd
33:12
Speaker 1: love to have some more than money puzzle at the
33:15
Speaker 1: Australian dot com dot Au. Today's show was produced by
33:19
Speaker 1: Leah Sammaglu. Talk to you soon,