Latest / The Money Puzzle / YIMBY! Building in the backyard: the intergenerational breakthrough

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YIMBY! Building in the backyard: the intergenerational breakthrough · The Money Puzzle

• 0:10
  Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
• 0:14
  Speaker 1: James Kirby. Welcome aboard everybody. If you are watching property
• 0:18
  Speaker 1: prices take off around the country, land prices to be precise, really,
• 0:24
  Speaker 1: maybe as you're gazing out your back window you might
• 0:27
  Speaker 1: be looking at an opportunity right under your nose. My
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  Speaker 1: guest today is Nathan Fradley, financial advisor from Fradley Advice,
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  Speaker 1: regular on the show, and we're going to talk about
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  Speaker 1: this property opportunity which I think has been sort of
• 0:43
  Speaker 1: underplayed to some degree, and I'm really interested in what
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  Speaker 1: he has to say about it because he has been
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  Speaker 1: involved in it.
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  Speaker 2: How are you, Nathan, I'm good, James six for having
• 0:52
  Speaker 2: on again.
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  Speaker 1: Great to have you on. I mean, obviously there's a
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  Speaker 1: couple of other things I want to talk about, but
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  Speaker 1: I do want to put this up front, if you like,
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  Speaker 1: just before we do. I've had I think it might
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  Speaker 1: be one of the questions today from listeners, this ongoing
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  Speaker 1: suggestion that most advisors, not you, but most financial advisors,
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  Speaker 1: when you go into them, they just talk about chairs, bonds,
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  Speaker 1: listed investments, investment platforms, funds they don't like, they don't
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  Speaker 1: want they are not able, for one way or another,
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  Speaker 1: to actually advise in any sensible, coherent way on property,
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  Speaker 1: as we know direct residential property true or false, Nathan Bradley.
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  Speaker 3: There's there's layers to this, James, And you know I
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  Speaker 3: loved to be moderate, and you're looking for a headline
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  Speaker 3: as well, so i'll give you.
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  Speaker 1: I'll give you desperate for a headline today there is, Yes,
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  Speaker 1: there's an entire empty newspaper coming out tomorrow.
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  Speaker 3: I think the first part is to recognize that financial
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  Speaker 3: advisors are actually only licensed to sell financial products, so
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  Speaker 3: there is that kind of.
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  Speaker 2: Restriction in it.
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  Speaker 3: But I do think there's plenty of advisors out there
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  Speaker 3: who are more than comfortable to do financial planning and
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  Speaker 3: incorporate right strategy and property and if they are comfortable
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  Speaker 3: in doing so, if they licensee or the business they
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  Speaker 3: work for allows them to. But the other part of
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  Speaker 3: it is going to be the incentive. And that's always
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  Speaker 3: been the factor that what we are licensed to provide
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  Speaker 3: advice on and how we are paid may create a
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  Speaker 3: difference in how we give advice. Now, there's plenty of
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  Speaker 3: situations where someone might say, oh, I'd like to buy
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  Speaker 3: a property, and what they can afford and what makes
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  Speaker 3: sense doesn't make sense, but I think there is there
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  Speaker 3: has been, historically, more than now, I would say, a
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  Speaker 3: tendency to just lean towards things that advisers can charge
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  Speaker 3: a percentage fe on instead of charging for retirement advice
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  Speaker 3: as a whole.
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  Speaker 1: Yeah, And I suppose on one side we have the
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  Speaker 1: fact that some of them won't give advice. On the
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  Speaker 1: other side, we have the problem that some of them
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  Speaker 1: give advice. And that's beautiful to you're alluding to. Okay,
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  Speaker 1: so on those ones that do, like yourself, So we
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  Speaker 1: have a I mean, there's obviously this ongoing notion that
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  Speaker 1: property is expensive, but the chase the property market. Residential
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  Speaker 1: property market is in very good shape just now, just
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  Speaker 1: had a very good year. Forecaster for another very strong
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  Speaker 1: year next year. A lot of demand, strong rental returns,
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  Speaker 1: virtually zero vacancy rates in many places, capital gains, and
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  Speaker 1: a lot of this is to do with the value,
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  Speaker 1: if you like, of residential urban land. One of the
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  Speaker 1: things that has not been fully explored, it's been a
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  Speaker 1: while since I even talked about it on the show,
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  Speaker 1: is densification and the opportunities in that area. I don't
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  Speaker 1: mean developing, becoming a property developer yourself per se folks.
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  Speaker 1: But I am talking about whether you are citing on
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  Speaker 1: a piece of land that could be much better used.
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  Speaker 1: Have you got a term for this? I know traditionally
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  Speaker 1: it was granny flats. I think Granni flat's probably too
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  Speaker 1: narrow these days, is it, Nathan.
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  Speaker 3: Well, yeah, The Granni flats world is more around transferring
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  Speaker 3: assets and living somewhere for life, versus the subdivision or
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  Speaker 3: building the physical Granni flat, which with comes from building
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  Speaker 3: up these I think there's two parts that as the
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  Speaker 3: part that says, hey, we've got this space, could we
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  Speaker 3: drop a tiny home on it, you know something that
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  Speaker 3: and subject of planning all the other fun stuff and
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  Speaker 3: get some additional rental board out of it. I think
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  Speaker 3: that's definitely an opportunity out there. And then there's the
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  Speaker 3: granny flat other side of that, which is, hey, we've
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  Speaker 3: got this big house. We've got might be estate planning needs,
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  Speaker 3: maybe we've got personal care needs, We've got kids that
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  Speaker 3: need additional support, maybe we spend a lot of time
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  Speaker 3: with them, they've got a big mortgage, whatever it might be,
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  Speaker 3: and we are comfortable living together and for whatever is
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  Speaker 3: in the estate planning and the stars all ALIGNE. Then
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  Speaker 3: that's kind of this transfer of assets for the right
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  Speaker 3: to live somewhere, And I think that's going to come
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  Speaker 3: up a lot as this generational wealth transfer sort of
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  Speaker 3: story plays out.
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  Speaker 1: Yes, absolutely, Okay, well let's delve into that. I mean
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  Speaker 1: there's two parts. Let's do both parts, the intergeneration and notion,
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  Speaker 1: which is put very simply, like, there's just a scenario
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  Speaker 1: being that there are two people in the big empty
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  Speaker 1: house with a large garden back. They have perhaps a
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  Speaker 1: son or a daughter who is struggling with a family
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  Speaker 1: in a tiny house, and it's all a bit absurd
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  Speaker 1: in that scenario. Is there a hypothetical you could put
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  Speaker 1: forward that would be useful to explore?
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  Speaker 3: Yeah, So I think the first definition we'd lean on
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  Speaker 3: as a cendling definition, because that's often where people latch
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  Speaker 3: onto centlink things.
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  Speaker 2: So according to center Link, the transfer of.
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  Speaker 3: Assets, be it a property or cash, for the right
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  Speaker 3: to live somewhere for the rest of your life constitutes
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  Speaker 3: a granny flat. So in that instance, we could have
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  Speaker 3: the parents potentially transfer the house to the kids and
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  Speaker 3: then they all move in together like parents have the
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  Speaker 3: right to live there for the rest of their life
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  Speaker 3: and that transfer happens, or they could sell their house
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  Speaker 3: and move in with the kids and maybe renovate or
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  Speaker 3: buy a new house or whatever it is and give
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  Speaker 3: them assets and those from a senlink perspective, depending on
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  Speaker 3: how it is done, come with what we call deprivation
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  Speaker 3: exemptions ie sent link don't assess that money anymore. It's
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  Speaker 3: not like a gift that you have to assess for
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  Speaker 3: the next five years. It disappears, So that can have
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  Speaker 3: really good I suppose outcomes for the right people where
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  Speaker 3: you've got a situation where you get the co living situation.
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  Speaker 3: Maybe there's shared responsibilities around taking give grandkids and future
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  Speaker 3: care responsibilities for the kids to take care of the parents,
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  Speaker 3: but parents will get to keep their pension, you know,
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  Speaker 3: the kids get their extra cash and support, maybe a
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  Speaker 3: reduced mortgage.
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  Speaker 2: Maybe that have to work as much.
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  Speaker 3: There's a lot of sort of co benefits in these
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  Speaker 3: kind of arrangements.
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  Speaker 1: So for those who are on a pension, who will
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  Speaker 1: probably be on a pension, which is by the way,
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  Speaker 1: the majority of Australians right, the majority of students have
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  Speaker 1: some access to the pension. To retain that access, there's
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  Speaker 1: certain so tell us how that would work in the
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  Speaker 1: scenario I've just put forward.
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  Speaker 3: Yeah, So if you think about I mean the point
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  Speaker 3: about property made earlier, most Australians hold most of their
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  Speaker 3: wealth in their property, you know. That's you know, and
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  Speaker 3: they might be sitting on a you know, on a
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  Speaker 3: two million dollar house that's unassessed for the age pension,
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  Speaker 3: and maybe they've got a couple hundred grand it's super
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  Speaker 3: whatever it might be. That house is currently exempt. If
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  Speaker 3: they sold it and that money sat in the bank,
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  Speaker 3: it's now assessed. So I suppose the continuation of that
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  Speaker 3: is they still live somewhere and centillly going to give
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  Speaker 3: that exemption to that point. And so there's a few
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  Speaker 3: sort of curly worthy rules and I won't get too
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  Speaker 3: heavy into them. Don't do anything until you get vist
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  Speaker 3: on this one, guys. This is a curly weary one.
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  Speaker 3: But there is the ability to transfer the property and
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  Speaker 3: the full value of the property, if done in the
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  Speaker 3: right way, can be exempt from gifting or from deprivation.
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  Speaker 2: It's a technical term.
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  Speaker 3: Or and that could be a ten million door a house,
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  Speaker 3: mind you, or it could be the sale of the
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  Speaker 3: property and the transfer of assets and the amount that
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  Speaker 3: is zempt is calculated based off the youngest party in
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  Speaker 3: that transaction, the youngest gifter, and basically a life table.
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  Speaker 2: So there's a series of calculations that are done there.
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  Speaker 1: Okay, so the couple can actually retain their pension and
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  Speaker 1: do this arrangement where everyone in intergeneration, where everyone lives
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  Speaker 1: on the original property and the pension is not affected.
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  Speaker 1: Tell me that where there's a scenario where there's two
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  Speaker 1: people and again the same scenario. They want the young
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  Speaker 1: family to move in with them, but pension doesn't matter. Right,
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  Speaker 1: So they have more than enough, they don't need the pension.
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  Speaker 1: Is it easier then?
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  Speaker 2: Well, this is where the center link thing stops being
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  Speaker 2: an issue.
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  Speaker 3: Right, And this is why I think I alluded to
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  Speaker 3: before this conversation is not so much about granny flat
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  Speaker 3: rights and the scent link benefits and what have you.
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  Speaker 3: This actually falls back to intergenerational living arrangements. You know,
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  Speaker 3: it ties into a state planning, It ties into retention
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  Speaker 3: of property within the family, It ties into family law.
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  Speaker 3: You know, you might just.
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  Speaker 2: Transfer the house to them.
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  Speaker 3: There's a or a co ownership arrangement or something to
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  Speaker 3: such an effect. And obviously that has all sorts of
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  Speaker 3: tie ins around you know, what's in the will, and
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  Speaker 3: maybe if the children separate or all that kind of
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  Speaker 3: stuff comes into it. But I think fundamentally it's a
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  Speaker 3: conversation around as a family, what do we need and
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  Speaker 3: how can we all benar effort in this world that
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  Speaker 3: is getting increased in the expensive and harder, but also
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  Speaker 3: that we can lift together, that we can cohabitate things
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  Speaker 3: that I think we kind of fell away from through
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  Speaker 3: the nineties and two thousands and see that coming back.
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  Speaker 1: Now, right. Is there any numbers about this? I know
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  Speaker 1: obviously intergeneration well transfer is the huge issue. We also
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  Speaker 1: know the property prices and the elevation, if you like,
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  Speaker 1: is a huge issue. Do we have any numbers about
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  Speaker 1: in this area.
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  Speaker 3: I don't have any stats on how much this has
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  Speaker 3: been taken up, but I do know that until the
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  Speaker 3: twenty twenty one the transfer of those assets was considered
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  Speaker 3: a D one capital gains event for the recipient, ie
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  Speaker 3: they paid full tax on it, and so it kind
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  Speaker 3: of deterred people from doing it. There's a few exemptions
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  Speaker 3: that the ato of are put in place, but if
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  Speaker 3: you meet their requirements, then that saves that tax that
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  Speaker 3: gives you the exemption on that tax, so that I
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  Speaker 3: think that's sort of drawn people to a lot more
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  Speaker 3: these days.
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  Speaker 1: The way it works, folks, is up until twenty twenty one,
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  Speaker 1: there was a bit of gray area and a lot
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  Speaker 1: of arrangements where there was build out the back and
• 10:01
  Speaker 1: perhaps an older couple living out the back. They were
• 10:04
  Speaker 1: informal arrangements and the Board of Taxation moved in. It
• 10:08
  Speaker 1: looked like they were kind of clamping down, but in
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  Speaker 1: fact when they came out the other side of this,
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  Speaker 1: they sort of formalized the capital gains tax exemption for
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  Speaker 1: the Brandy flats. That's a really strong issue. I mean,
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  Speaker 1: even at the time there was three hundred and fifty
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  Speaker 1: thousand older Australians who lived basically in homes owned by
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  Speaker 1: their in homes presided in homes owned by their adult children.
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  Speaker 1: So those arrangements are quite prevalent. And that was a
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  Speaker 1: couple of years ago, so it can only have increased.
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  Speaker 2: Let's just look for a.
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  Speaker 1: Moment, Nathan. So this is a I mean, obviously this
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  Speaker 1: is terrific, as you say, you costiously say all the time,
• 10:43
  Speaker 1: as long as everyone is happy to live together and
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  Speaker 1: you know they can work that one out for themselves.
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  Speaker 1: Not for our show to determine that one, But can
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  Speaker 1: we look very briefly at the notion of the building
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  Speaker 1: out the back using your property, not for that intergenerational
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  Speaker 1: setup in the traditional manner, but in a new manner
• 11:02
  Speaker 1: where perhaps young adult children could live on the property
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  Speaker 1: in their own accommodation. How does that work and does
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  Speaker 1: that have the CGT exemption?
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  Speaker 3: So if you're talking about in that example of they
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  Speaker 3: living together, or we're talking about two separate buildings on
• 11:17
  Speaker 3: the same lot.
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  Speaker 1: I'm imagining two separate buildings where I know people have
• 11:21
  Speaker 1: bought larger properties and they're say, my plan is you know,
• 11:24
  Speaker 1: my son's going to live there or whatever.
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  Speaker 3: Yeah, I think that will largely fall back to probably
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  Speaker 3: a planning issue more than anything around what can be
• 11:32
  Speaker 3: done with that property. But the premise would fall back
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  Speaker 3: to how is it transferred? So an example might be
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  Speaker 3: that there's a large property.
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  Speaker 2: We'll say it's.
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  Speaker 3: Less than two hectares because it makes it easier and
• 11:44
  Speaker 3: for whatever reason, there can be two buildings on it.
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  Speaker 3: In that instance, the parents may transfer that full property
• 11:50
  Speaker 3: to the name of the children. The children then build
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  Speaker 3: the second property on there. The parents have the right
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  Speaker 3: to live there it could be a granny flat. So
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  Speaker 3: it all falls back to those two elements for Senlink
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  Speaker 3: if that's relevant, which is the transfer of asset for
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  Speaker 3: the right to live, and then meeting the requirements for
• 12:08
  Speaker 3: the ATO, which is you know basically that it's documented
• 12:11
  Speaker 3: that it's not commercial and there's some requirements around either
• 12:14
  Speaker 3: being of age, pension age, or requiring.
• 12:16
  Speaker 2: Assistance from a disability perspective.
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  Speaker 3: So and I'm being very blase because they are very
• 12:21
  Speaker 3: distinct rules and you've got to make sure you get
• 12:23
  Speaker 3: them right or it goes horribly wrong. But you know
• 12:25
  Speaker 3: that's how that would tend to work.
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  Speaker 1: Okay. It's interesting and I imagine it's something that our
• 12:31
  Speaker 1: listeners are really tuned into what we're going to do
• 12:33
  Speaker 1: with text short break and Nithan's going to tell us
• 12:35
  Speaker 1: about an example of where it worked out very well.
• 12:37
  Speaker 2: Back in a minute.
• 12:44
  Speaker 1: Hello, Welcome back to the Australians Money Positive Podcast. I'm
• 12:47
  Speaker 1: James Kirby talking to Nathan Fradley, financial advisor and we
• 12:50
  Speaker 1: are talking about building out the back Ymbi's yes, in
• 12:55
  Speaker 1: my backyard please. This is optimizing your property from an
• 13:00
  Speaker 1: intergenerational perspective. It may be for you that you're all
• 13:05
  Speaker 1: adult children, perhaps end up actually moving into the larger
• 13:08
  Speaker 1: house you're at the back, or it may be that
• 13:12
  Speaker 1: you are putting an adult child in the back and
• 13:15
  Speaker 1: you stay in the house. Nathan, just you've got to
• 13:18
  Speaker 1: tell us a story about something you came across recently
• 13:20
  Speaker 1: in this area. How it all worked.
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  Speaker 3: Yeah, this is a case I worked on about eighteen
• 13:24
  Speaker 3: months ago, and it was effectively, we've got an only
• 13:28
  Speaker 3: child with three kids, a partner living in a house
• 13:32
  Speaker 3: in Sydney, discerent sized mortgage, both professionals, and then you've
• 13:36
  Speaker 3: got mum and dad living in their house. Dad's sort
• 13:40
  Speaker 3: of taken ill a little bit, so he needs a
• 13:43
  Speaker 3: bit more support. Mom's still working part time and she's
• 13:45
  Speaker 3: doing grandchildren stuff, and everyone's kind of chipping in left,
• 13:49
  Speaker 3: right and center.
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  Speaker 2: There's a lot of driving around.
• 13:51
  Speaker 3: So they decided to investigate the grainy flat option, and
• 13:54
  Speaker 3: what they ended up doing was mom and dad sold
• 13:57
  Speaker 3: the property and then transferred the assets to the children
• 14:02
  Speaker 3: for the right to live there for the rest of
• 14:03
  Speaker 3: their life. But the way they did it was they
• 14:05
  Speaker 3: actually paid a series of invoices for a construction, so
• 14:09
  Speaker 3: they built an extension.
• 14:10
  Speaker 2: They went up.
• 14:11
  Speaker 3: Kids live upstairs with their kids. There's a common living
• 14:14
  Speaker 3: area downstairs, and mum and dad lived in a more
• 14:16
  Speaker 3: accessible spot down below. And what that meant was that
• 14:20
  Speaker 3: everyone's in the same household, so we all of a
• 14:22
  Speaker 3: sudden save all that time. The kid's mortgage was substantially lower,
• 14:26
  Speaker 3: and they actually could reduce their days of work and
• 14:28
  Speaker 3: help out with dad more. Mum didn't have to do
• 14:31
  Speaker 3: as much, so she could actually get back some form
• 14:33
  Speaker 3: of social life again, and it worked really well. It
• 14:37
  Speaker 3: worked well because they had lived together during COVID while
• 14:40
  Speaker 3: they were saving for that house. Yep, exactly a very
• 14:43
  Speaker 3: important mine. It's not in everyone likes ramon situation. You know,
• 14:47
  Speaker 3: they only child, so there was that. You know, the
• 14:50
  Speaker 3: inheritance piece was less of a concern because once that
• 14:52
  Speaker 3: those assets are transferred, they're not the parents' assets anymore.
• 14:56
  Speaker 2: They were also quite young, so they're in their.
• 14:58
  Speaker 3: Mid sixties or midi late sixties, which meant that the
• 15:02
  Speaker 3: transfer itself, when you calculate how much they could transfer,
• 15:05
  Speaker 3: was quite high. It was about nine hundred grand, so
• 15:09
  Speaker 3: it meant that they could move closer into the city,
• 15:11
  Speaker 3: be with a family, still maintain their pension as before
• 15:13
  Speaker 3: a little bit of cash left over from the sale,
• 15:16
  Speaker 3: but overall everything worked together and then sadly unfortunately a
• 15:19
  Speaker 3: dad passed away, but everyone was together for that and
• 15:24
  Speaker 3: is still together, so mum's down and living by herself.
• 15:26
  Speaker 3: So it kind of had a big flow on effect
• 15:29
  Speaker 3: from that around the benefits. But I think, again I
• 15:32
  Speaker 3: mentioned before, the stars do align with that one. It's
• 15:34
  Speaker 3: a great example of when it works. But you know,
• 15:37
  Speaker 3: there's definitely broader considerations.
• 15:39
  Speaker 2: Okay, what we.
• 15:40
  Speaker 1: Might do is actually get you to just listen, what
• 15:42
  Speaker 1: are the key issues to examine if you're thinking of
• 15:46
  Speaker 1: this folks. And obviously it course without saying it does
• 15:49
  Speaker 1: sound like this really an advisor is ninety nine percent
• 15:55
  Speaker 1: compository here just before we do. In terms of the
• 16:00
  Speaker 1: commitment that must be made in this, it sounds to
• 16:02
  Speaker 1: me that it is the older people that must make
• 16:04
  Speaker 1: the commitment, and they must actually sign off a former
• 16:07
  Speaker 1: document where they attained the right to live on the property,
• 16:13
  Speaker 1: so that's part of their security and it is that right.
• 16:16
  Speaker 3: Yeah, so you've got you've got a contract, right, it's
• 16:20
  Speaker 3: a commercial arrangement or private arrangement twent two people or
• 16:23
  Speaker 3: between those parties, and that document will should have certain
• 16:27
  Speaker 3: words in it for cen Lenk purposes, and it should
• 16:29
  Speaker 3: have certain words in it for the ats purposes. But
• 16:31
  Speaker 3: then broader than that, it should include what the terms
• 16:34
  Speaker 3: of the arrangement are we're going to move in. And
• 16:37
  Speaker 3: in that case I talked about, the idea was we
• 16:39
  Speaker 3: never want to go into residential care.
• 16:42
  Speaker 1: Yes, right, and it's written in black and white that
• 16:44
  Speaker 1: they have the right to live there forever.
• 16:47
  Speaker 2: Forever has to be, has to be.
• 16:49
  Speaker 3: There can be exit clauses if it doesn't work, and
• 16:52
  Speaker 3: things like that. There is a five year rule that
• 16:54
  Speaker 3: sen Alink apply that if it breaks for reasons you
• 16:57
  Speaker 3: should have known when you entered it within five years,
• 17:00
  Speaker 3: they just unwind the whole thing and chase up the
• 17:02
  Speaker 3: pension basically. But in this instance, the agreement was that
• 17:06
  Speaker 3: if age care residential care was on the cards, that
• 17:10
  Speaker 3: either one of the kid or their wife would actually
• 17:13
  Speaker 3: quit their job take care of mum. So there's a
• 17:16
  Speaker 3: commit there's a future commitment that sort of tied into
• 17:20
  Speaker 3: that that there was this joint what are we going
• 17:23
  Speaker 3: to do?
• 17:23
  Speaker 2: And that is very that's a very private matter.
• 17:25
  Speaker 3: I think how people want to navig at that, what
• 17:28
  Speaker 3: the line is for care all of those things. And
• 17:30
  Speaker 3: then also or you know who pays for what we're
• 17:32
  Speaker 3: going to move in, We're giving this lump sun we
• 17:34
  Speaker 3: don't want to have to pay for any more utilities,
• 17:35
  Speaker 3: or will chip in this much, all those kinds of
• 17:37
  Speaker 3: things that all factors in. So that gets done as
• 17:40
  Speaker 3: an agreement. So you should absolutely be getting legal advice
• 17:43
  Speaker 3: and both sides should. Those agreements are only as good
• 17:46
  Speaker 3: as the advice that he's given on them. So I
• 17:48
  Speaker 3: think that's crucial outside of obviously for a.
• 17:50
  Speaker 1: Chart is that is both generations basically it should get
• 17:53
  Speaker 1: their own legal advice.
• 17:54
  Speaker 3: Yeah, one would draft the document, the other one would
• 17:56
  Speaker 3: get advice on the document drafted.
• 17:58
  Speaker 2: Yeah.
• 17:59
  Speaker 3: I think the estate planning stuff comes into that as well. Again,
• 18:02
  Speaker 3: a lawyer that does both is usually pretty common. But
• 18:05
  Speaker 3: the transfer of assets changes estates, you know, it changes
• 18:09
  Speaker 3: the dynamics of the will it's in place, and other siblings,
• 18:13
  Speaker 3: is everyone on the same page, all that kind of stuff,
• 18:15
  Speaker 3: And then the family law respects.
• 18:17
  Speaker 2: I did one recently.
• 18:18
  Speaker 3: There was a double granny flat, so nana and mum
• 18:21
  Speaker 3: and dad and so there was a family law consideration
• 18:24
  Speaker 3: of a's one point four million dollars coming across from
• 18:27
  Speaker 3: my family. So they did a binding financial agreement as
• 18:30
  Speaker 3: well to kind of build that into the process. And
• 18:34
  Speaker 3: these are all these sort of formal considerations that are
• 18:37
  Speaker 3: you know, I mean, ultimately you have to get along firstly,
• 18:40
  Speaker 3: but I think this is one of those areas if
• 18:42
  Speaker 3: you don't, if you don't pay to do it properly,
• 18:45
  Speaker 3: you definitely can't afford to pay when it absolutely goes wrong.
• 18:48
  Speaker 1: Yeah, Okay, well yes, I imagine. So so there you
• 18:53
  Speaker 1: are for isn't that really fascinating? And I think we've
• 18:56
  Speaker 1: got to see more and more of this. As you say, Nathan,
• 18:58
  Speaker 1: it's hard to get stats on it. The onliest we
• 19:00
  Speaker 1: have was that three hundred and fifty thousand and that
• 19:02
  Speaker 1: was elderly Australians living, you know, with their own children.
• 19:06
  Speaker 1: But one thing we do know from just all you
• 19:09
  Speaker 1: have to do is look at property listings. Intergenerational properties
• 19:13
  Speaker 1: are not just on the market, but they are being
• 19:16
  Speaker 1: created from the ground up more and more, Okay, back
• 19:19
  Speaker 1: in a moment with some questions. Hello, Welcome back to
• 19:29
  Speaker 1: the Australians Money Puzzle podcast with Nathan Fradley and James Kirby.
• 19:33
  Speaker 1: Folks it's interesting. I had two questions, and those two
• 19:37
  Speaker 1: questions that actually came in more or less underpinned created
• 19:40
  Speaker 1: this show to some degree, but it's worth going back
• 19:42
  Speaker 1: over them. The first was from Annie, and he asked,
• 19:46
  Speaker 1: I have been to financial advisors more than once, and
• 19:48
  Speaker 1: they talk always about shares and funds and platforms. No
• 19:51
  Speaker 1: one talks about property investment. Is this always the case? Well?
• 19:55
  Speaker 1: I think we kind of covered that just on that issue, Nathan,
• 19:58
  Speaker 1: so proper on occasion, an advisor may not even be
• 20:03
  Speaker 1: able to give advice because it's not a financial product.
• 20:06
  Speaker 1: Is that right?
• 20:06
  Speaker 2: I think it. Yeah. It's important to understand what they're
• 20:08
  Speaker 2: giving advice on.
• 20:09
  Speaker 3: So if you're finding an advisor that you want to
• 20:11
  Speaker 3: work with that does property, and I say does property
• 20:14
  Speaker 3: with talking points, that's a philosophical alignment. What kind of
• 20:18
  Speaker 3: advice do you give? What do you consider them, what
• 20:20
  Speaker 3: you do? Do you manage investments? Do you talk about feelings?
• 20:23
  Speaker 3: I think that's sort of that area. But what we
• 20:26
  Speaker 3: are licensed to give advice on is financial product. But
• 20:30
  Speaker 3: when we do retirement planning, we consider and model out
• 20:35
  Speaker 3: the long term impacts. We are tax financial advisors. We
• 20:38
  Speaker 3: can model for tax We can do all of those
• 20:40
  Speaker 3: kinds of things. So when you're getting advice from an
• 20:42
  Speaker 3: advisor on property, it's more of a strategic a property
• 20:46
  Speaker 3: of blah blah blah blah blah, as opposed to if
• 20:49
  Speaker 3: advisor starts telling you like taking you out on a
• 20:52
  Speaker 3: Sat Day and going auctions together and all that kind
• 20:53
  Speaker 3: of stuff, they might be crossing some boundaries there, but
• 20:57
  Speaker 3: it could be a property worth this.
• 20:58
  Speaker 2: Here's some local stistics.
• 21:00
  Speaker 3: We've made some assumptions like that, and then you go
• 21:02
  Speaker 3: off and you purchase that property and come back and
• 21:04
  Speaker 3: they sort of adjust the plan and you work together
• 21:06
  Speaker 3: on that strategically. That's absolutely something that advices can help with.
• 21:11
  Speaker 1: Okay, Yeah, I've never heard that actually sort of written
• 21:14
  Speaker 1: out like that. Okay from Ron it's a self managed
• 21:17
  Speaker 1: super fund. It's just suitable for residential property investments. And
• 21:20
  Speaker 1: do I have to deal with non banks to get
• 21:22
  Speaker 1: a loan? A great question, but that not really means
• 21:28
  Speaker 1: the person has to really think about the answer.
• 21:29
  Speaker 3: Yeah, I know the adswer my rule of thumb is
• 21:34
  Speaker 3: not really and the main reasons around that.
• 21:37
  Speaker 1: More or less really they're not really suitable not for.
• 21:40
  Speaker 3: Residential I'm not saying it's not saying you can't. I
• 21:42
  Speaker 3: think there's a couple of factors that fall into it.
• 21:45
  Speaker 3: One is, as the listener alluded to, I don't think
• 21:48
  Speaker 3: any of the major banks lend to them anymore. I
• 21:50
  Speaker 3: could be wrong on that, It's been a while since
• 21:52
  Speaker 3: I've looked at it. But secondly, I think a lot
• 21:55
  Speaker 3: of the time money is made through residential property through
• 21:59
  Speaker 3: self improvement, going in there and being able to do
• 22:01
  Speaker 3: repaint things yourself, tidy it up. You know, all those
• 22:04
  Speaker 3: sort of assets or development right one or the other,
• 22:08
  Speaker 3: and you can't do those.
• 22:10
  Speaker 1: No, you can maintain, isn't that right?
• 22:11
  Speaker 2: Yeah, and you have to.
• 22:12
  Speaker 3: Pay someone else to do so at market rates. So
• 22:14
  Speaker 3: that's where you start seeing those sort of strategies fall down.
• 22:18
  Speaker 3: I think it's not saying you can't work with plenty
• 22:20
  Speaker 3: of clients of the year who've got great residential portfolios
• 22:23
  Speaker 3: within SMSFS. I do think diversification falls into it. Sometimes
• 22:27
  Speaker 3: we jumped to the idea if I want to buy
• 22:29
  Speaker 3: a property in super I've just got enough money by
• 22:31
  Speaker 3: what I can afford. Doesn't end up being a great property,
• 22:34
  Speaker 3: end up being killed by interest. I think, Yeah, my
• 22:38
  Speaker 3: rule of thumb is at least a mill if you're
• 22:40
  Speaker 3: going to be, you know, looking at that sort of strategy,
• 22:42
  Speaker 3: not the old two hundred thousand dollars in super line
• 22:44
  Speaker 3: and the same they used to use.
• 22:45
  Speaker 1: I think it's that person would want to have Mitian
• 22:47
  Speaker 1: in their super fun before they play in the area. Yeah,
• 22:49
  Speaker 1: it's very interesting and not advice folks, of course, information only,
• 22:53
  Speaker 1: but a couple of points there. Nathan's making that managed
• 22:56
  Speaker 1: super funds. It's a bit ticket item property, so it's
• 22:58
  Speaker 1: difficult for first of all, you need a lot in
• 23:00
  Speaker 1: your super to really get in there, and you are
• 23:03
  Speaker 1: paying more than everybody is because the banks don't do
• 23:05
  Speaker 1: it and you must deal with non banks. Other aspects
• 23:08
  Speaker 1: of that. Negative gearing isn't as good either, but it
• 23:10
  Speaker 1: may suit some. All right, very good, Thank you, Nathan Frandley.
• 23:14
  Speaker 1: That was great, Hey, James, I would love to have
• 23:16
  Speaker 1: some correspondence on that, especially on the intergenerational living. We
• 23:20
  Speaker 1: haven't done enough on that at all. So the money
• 23:24
  Speaker 1: Puzzle at the Australian dot com dot au. Talk to
• 23:27
  Speaker 1: you soon.