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Transcript

Investment Property vs. First Home. · The Curve

0:00
Welcome to Raisin the Curve, a podcast designed to teach you everything that you need to know to be better with your money.
0:06
Come and learn alongside me, Sophie Hallwright, a total beginner from the finance expert Victoria Harris.
0:12
So I've asked all of the questions you wish you could so that finance, investing and growing your wealth actually makes sense.
0:18
Yes, it's expert education but with promise will not be boring and in the wise words of sheer...
0:22
My mom said to me, you know sweetheart, one day you should settle down and marry a rich man.
0:28
I said, Mum, I am a rich man. Come and talk and learn and laugh with us because together we really can raise the curve.
0:36
Gosh, we are very proud to be partnering with Trade Me for this property mini-series.
0:40
So for anyone that has followed the curve for a little while, I have spoken about my property buying journey quite a bit
0:48
to the point where people are like, what is happening? What is taking so long?
0:52
We are doing a podcast mini-series in partnership with Trade Me Property.
0:56
And whilst I'm not quite there yet on the actual purchase part, what I have been doing in the meantime is dream scrolling
1:03
and dream scrolling being looking through all of the amazing properties that are available in Trade Me Property
1:09
because there are more properties there than there are anywhere else.
1:12
And so this has been quite exciting for me, you know, I've been looking at, I mean, let's be honest, things are quite out of my budget right now.
1:20
But to see what's available from like seaside escapes, which, you know, one day I'll get there to like amazing properties that are available in the CBD
1:29
or centers of towns in New Zealand, it really is the best place to see absolutely all of my potential options.
1:37
So if you are in a position where you're thinking, do you know what? I'd love to buy a property or I'm interested in what's happening in the property market
1:44
and I want to know what things are going for. Then Trade Me is the place to look.
1:48
So thank you so much to Trade Me Property for empowering this conversation.
1:52
And why not open endless doors with Trade Me Property?
1:56
You can download the app on iOS or jump on your web browser, have a good old dream scroll.
2:01
And if you see any good ones, please flip them my way.
2:04
I know I've got such an exciting update. And do you know what's actually hilarious about this?
2:13
Is that I think the social media post that we put out?
2:17
That was so cute.
2:18
It was so cute, but I think everyone thinks I've bought a house.
2:21
I know I did think I was like, no, she's just got pretty approval.
2:25
I was like, oh no, I was in a yoga class this morning.
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This girl comes up and goes, congrats on buying a house.
2:34
Like redefine print, redefine print.
2:37
But it is, I don't know.
2:40
It is pre-approval is the kind of biggest biggest steps to overcome it.
2:44
The biggest milestone.
2:45
Then once you have that, it's like cool.
2:48
Now I can go shopping. Do you know what I mean?
2:51
It's the bank saying yes, you're financially viable for this amount.
2:55
And then you're like, oh my god, now I can go shopping.
2:58
But then it is, there is a whole other process now.
3:01
But the kind of a lot of the heavy lifting has been done.
3:04
Well, I think that, yeah, it's almost like you've applied for your credit card.
3:08
You've been given the limit, but you haven't spent the money.
3:11
Yeah, yeah.
3:12
It's like you've announced your pregnant.
3:13
Yeah, yeah, yeah.
3:14
Oh my god, amazing.
3:15
You haven't actually had the baby yet.
3:17
Yes, yes, yes, yes.
3:18
So anyone that's missed it, by the way.
3:20
So we put a video out on social media, basically telling close friends, family, grandma, that kind of thing.
3:26
Like a gender reveal, pretty much.
3:28
I was kind of just like, do you know what?
3:31
As someone who is in a different stage of life, let's just say, than a lot of my friends.
3:38
And the amount of messages I got from that first property episode we did that was about like me having my big old breakdown.
3:44
Yeah.
3:45
About feeling like I'm getting left behind and just like, you know, frustration around the house buying process.
3:50
Yeah.
3:52
The amount of people who sent me messages, emails like DMs on Instagram, and it was also really empowering stuff.
4:01
Like lots of content of like older women speaking to young women being like, don't get swept up and blah, blah, blah, blah.
4:09
A lot of people being like, don't compare yourself to others in terms of your progress or success in life.
4:14
And a lot of people being like, don't worry.
4:16
I was in that position, but contact this person, they helped me.
4:19
You know, like it was a lot of, don't worry.
4:21
Don't give up.
4:22
It was so.
4:23
It was really nice.
4:24
One thing about that post, I was like, if you watched it on silent, you would honestly think you were pregnant or it was like.
4:30
Do you mean the crying one or the gender reveal?
4:33
Oh, 100%.
4:34
Make sure you watch it with the sound up because.
4:37
Yeah.
4:38
But in saying that, what I was almost trying to do with that is I think since we recorded that first episode a few weeks ago,
4:44
and since all of these messages of like support have come in and really helped me honestly reframe where I'm at in life.
4:51
Yeah.
4:52
Which is, I'm working to my own timeline.
4:55
I'm doing things differently.
4:57
Yes, I'm focusing on my business right now.
4:59
And no, I'm not having 17 children and I don't have a dog and I don't have a house.
5:04
But I'm building something else really amazing.
5:07
And someone said to me, actually this was one of our advisors who is amazing.
5:11
And she was just saying, look at the percentage of people in the world that have babies or get married.
5:16
Look at the percentage of people in the world that build a business.
5:18
And then look at the percentage of the woman.
5:20
Yeah.
5:21
And she was just like, remember you're like a 1% right now.
5:24
And don't dim that because you're comparing what you don't have with what everyone else around you has.
5:29
And it's honestly like the grass always looks greener.
5:32
Do you know what I mean?
5:33
Like you look at people with things that you want and thinking that, oh my god, I want their toe.
5:39
They'll look at you and they're like, oh my god, I want that.
5:41
It's just...
5:42
You're never happy with what you've got.
5:43
You always look around.
5:45
Yeah.
5:46
I totally agree.
5:47
The grass always greener.
5:48
I remember that when I turned 30, I was like, oh my gosh.
5:50
I'm in my 30s.
5:51
Oh my god.
5:52
My life.
5:53
I was like a big.
5:54
The 30s have been so much better than my 20s.
5:56
I'm like, and everyone says the 40s are even better than the 30s.
5:59
So I'm like, do you know what?
6:00
I think it gets better with age is what I've decided.
6:03
It's really made me think about things in the last few weeks where I've thought, okay.
6:09
Yeah.
6:10
I'm not doing what a lot of people my age are or I'm not at the same level as what a lot of people are.
6:18
But I want to be proud of my wins.
6:20
And so when I got pre-approval, I thought, you know what?
6:23
Like my friends aren't going to be coming to an engagement party or a wedding or a baby shower and honestly five plus years.
6:29
So if ever, you know, so with that, I'm going to celebrate something that is like the biggest milestone for me.
6:36
Like I was driving home when I just found out and like I get emotional at the best of times.
6:41
But I get really like emotional on behalf of feeling proud of other people.
6:46
Like I often think about things that you've done or friends of mine.
6:49
And I'm like filled with pride and like so proud.
6:52
And I was thinking about the fact that I'd got pre-approval and I was like feeling the same thing for myself.
6:57
Which I haven't in so long to be mine.
7:00
To really look at something I've done and feel that same pride that I have for my friends for myself.
7:06
I was like, I really don't think that I would have got that place.
7:09
Had it not been for so many people in our community.
7:13
Yeah.
7:14
Sending in messages.
7:15
Being like, hey, I was thinking about this.
7:17
I wanted to send you this to have a look at.
7:19
So I just wanted to say thank you to everyone because yeah, it's and also it felt stupid putting that out on in socials in a way where I was like,
7:28
am I being really self indulgent here?
7:30
But actually.
7:31
Screw it.
7:32
We've got to celebrate this stuff.
7:34
And this isn't small.
7:35
This is huge for me.
7:36
Yeah.
7:37
And I think so for anyone who is either struggling to get pre-approval or has no idea like the hopes that you know,
7:45
you have to jump through and how to get mortgage ready.
7:48
That's definitely something we're going to look at doing in the coming months.
7:52
Because I think if I'd known a lot of the stuff that I know now, I could have prepared a lot better.
7:57
Yes.
7:58
So we're going to definitely keep doing like beyond this trade me property mini series.
8:04
We definitely are going to do some more property content because yeah, it's just something so many Kiwis are interested in.
8:10
And it's such a state learning curve.
8:12
Not like honestly.
8:13
Oh my gosh.
8:14
Like the jargon involved with like lawyers and mortgage broker.
8:19
Yeah.
8:20
I actually think we should get a lawyer on.
8:22
Because I think doing almost like a refresh of the property law like Hoosers what?
8:28
Yeah.
8:29
If you buy with someone what you need to it.
8:31
Like I think it's a really important stuff just wanting to do some research.
8:34
Really good advice.
8:35
So I think it'd be a really good time to get someone on who's an interior designer.
8:41
Who can really come and like tell us how to use spaces, right?
8:48
Like I see where this is going.
8:51
So what we're going to need as well is to do a full company workshop.
8:55
I swear to renovate a home.
8:57
All of a sudden we're like a property partner.
9:02
I mean, it's not a no.
9:03
I need someone on like the tax between countries as well.
9:07
I'm going to be quite good.
9:08
But also you promised us a house party.
9:11
A house for me.
9:12
Oh my god.
9:13
Yes.
9:14
So when we have the next gender reveal celebration, which is the actual purchase of the house.
9:18
Yeah.
9:19
I love that you say it's happening.
9:21
Because I think I still have imposter syndrome.
9:24
You're like close to the finish line.
9:27
You've started the race.
9:28
The gun's gone.
9:30
Hate the gun.
9:31
You're so scared.
9:32
You're supposed to just go.
9:34
Oh shit.
9:35
Oh that was so shocked that I can't run.
9:39
I know.
9:40
I always do that in something sports.
9:42
Just kind of go before the gun.
9:45
And then it'll be like, oh, you run back up on the pew.
9:48
What do you call it?
9:49
Yeah.
9:50
When you're wearing like a cat and goggles, you're really muffling your hearing.
9:53
So I was surprised that you had a foster.
9:55
Yes.
9:56
Yeah.
9:57
Also, I just wanted to give you over and talk.
9:59
It's cheating.
10:00
Oh god.
10:01
So anyway, look, it's been, it's been a, what's a new word for journey?
10:05
I can't use the word journey.
10:06
I hate it.
10:07
It's been.
10:08
It's been a experience.
10:10
It's been an experience.
10:12
Just want to experience things.
10:15
Kylie Jenner.
10:16
I think you should experience it.
10:17
You always say I want to experience things, but I don't think you actually want to experience things
10:21
because you would experience it if you wanted to experience things.
10:24
But just for anyone that, yeah, so basically haven't bought the house yet.
10:28
However, do have pre-approval, which means I'm ready to go shopping.
10:32
So now I'm at the point where I'm thinking, right, I've been pre-approved.
10:37
So my pre-approval, I'm doing it with my friend.
10:40
He is someone I live with in London.
10:42
And he was kind of trusting you to buy the house, but he's not going to look at it.
10:46
Oh god, no.
10:47
Oh, do you mean me doing all the research?
10:49
Well, just like he's obviously not going to see the house before he buys.
10:53
Yeah.
10:54
Well, I think our approach, because we live overseas, we aren't able to do first home.
11:00
So the way that we have to approach this property purchasing journey is really different to a lot of people.
11:06
So we have to have our investment blinkers on.
11:09
So for him, he's kind of like, well, it's not an emotional purchase.
11:13
He's never going to live in a...
11:15
I mean, we're working on it very much together.
11:17
It's not a...
11:18
And actually, this really epic guy called Pete West,
11:21
who's kind of come out of the woodwork from his wife listened to the podcast,
11:24
and he's a real expert in buying investment properties and doing them up
11:28
and selling them on like he's awesome.
11:30
And he's been like, hey, I'm really happy to give you a hand.
11:32
So I think there's a...
11:34
And he's teaching me so much about property right now.
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Like we're doing theory sessions.
11:39
We're like...
11:40
Honestly, he's awesome.
11:42
And he's like giving me this...
11:44
Almost like...
11:45
Property schooling experience.
11:47
And I actually am going to speak to him about like,
11:49
how can we bring this to the curve?
11:50
Like is there a way that we can do something where...
11:54
Because this information he's teaching me is like game changer stuff.
11:58
Yeah.
11:59
And we'll be so helpful for so many people
12:02
who maybe can't buy the first home
12:04
or want to invest differently.
12:06
Because it was a lot of our audience already has a home.
12:09
So it's like, I'd be really keen to know
12:12
if I had already owned a house,
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like, when and what should I look for in terms of like starting the journey
12:18
for an investment property?
12:20
Do you know what I mean?
12:21
Like at one point, do I...
12:22
How much equity do I need?
12:24
Or do I need to have X amount of income
12:27
and like, what should I be looking for?
12:28
Should it be when the property market's down?
12:30
Or when it's like, you're like,
12:31
it's such a different mindset.
12:32
You're so right.
12:33
It's like, how do I make money rather than...
12:36
I like this property.
12:37
I want to live in it.
12:38
I can see myself in there with a family.
12:39
What do you propose?
12:40
Yeah.
12:41
It's way less emotional.
12:42
And that's kind of, I guess, my thinking at the moment,
12:44
which is what we wanted this podcast episode to be about,
12:47
is really speaking about the difference in buying a home
12:51
to buy an investment property.
12:53
Because also, a lot of our audience live overseas.
12:56
There's a lot of people that are in the UK or the US or Australia,
13:01
like all over.
13:02
And a lot of those are Kiwis.
13:04
As much as we like to think this is international.
13:06
I mean, I'm sure there are some, but a lot of it is Kiwis
13:09
abroad, right?
13:10
So within that, there's people who can't buy their first home
13:13
but are probably thinking.
13:15
And probably never thought they could buy a property in New Zealand.
13:17
Or in this thing, it's like the creativeness of like,
13:21
oh, I don't have enough for a deposit
13:23
or like, have you thought about joining forces with a friend
13:26
and getting, you know, okay, if you, if you haven't
13:28
and you want to go down that route, this is what you need to think about.
13:31
Because it's not as black and white sometimes as you think.
13:34
Yes, and it's such a good point, because when we had our
13:36
trade-me property event, which was last week,
13:39
if you haven't listened to that episode,
13:41
we did it with Emily, who's like the trade-me property
13:45
audience director, and she's been working at trade-me
13:48
for like six years.
13:49
She's amazing.
13:50
And actually I've known her for a long time,
13:52
but we got her on and she spoke with us at this event.
13:55
And we spoke a lot about the idea of investment first.
13:58
Anyway, it's a great episode.
13:59
We recorded it like a live podcast.
14:01
So if you haven't listened, you can.
14:03
It's called buying property, what you need to know.
14:06
So if you would like to listen to that, definitely do.
14:08
But yes, so on the fact that I've had to be really creative
14:11
with how I'm buying property,
14:13
I think that it started to wake a lot of people up to the idea
14:17
that they can do it differently.
14:18
Because when we were at this event,
14:20
this woman came up to us, actually she asked a question
14:23
so you'll probably hear it in the podcast,
14:25
but she was basically saying, you know, she's 33,
14:29
she's in a position where she's got a really decent deposit.
14:33
She knows where she wants to live.
14:35
Like she kind of knows all the criteria that she needs.
14:37
She almost just needs a partner in crime,
14:39
like someone to do it with her.
14:40
Yeah.
14:41
And when you've got a lot of friends that are in relationships
14:44
or family that don't have spare money or whatever the situation is,
14:48
like it made us think it would be so fun
14:50
to match people up if they want to buy property,
14:53
but they need to find a person to do it with like more speed dating.
14:56
Like a tender property.
14:57
Yeah.
14:58
And you're criteria.
14:59
Totally.
15:00
And it's like, what's your lending ability?
15:02
Like a full time, do you want to live in it or not?
15:04
You know, like really tick off.
15:05
You want to prove with me?
15:07
Yeah.
15:08
You want to get pre-approval together?
15:10
Cute.
15:11
But it is kind of just like thinking about it differently
15:14
because you know, for you when you bought property,
15:17
the first time was very much like a lifestyle purchase.
15:20
Yes.
15:21
For me, I don't have the option to do that
15:24
because I kind of forward to live in a place that I want to live in London.
15:27
So for me, it's like also really exciting
15:30
because the whole of New Zealand is my oyster.
15:32
New Zealand is your oyster.
15:34
Because I can buy an investment property anywhere.
15:36
It doesn't have to be somewhere I'd want to live.
15:38
Yeah.
15:39
But there's certain things you need to know what to look for
15:41
or so anyway, we're definitely going to take you on the learning process with me
15:46
because there's a lot that we could, I think, pass on from what I'm learning.
15:51
But today, I think it would be really cool to just start with,
15:55
like talking about the pros and cons of both
15:58
because there might be people listening to this sort of like,
16:01
I don't actually know which approach is right for me.
16:04
Because even if you are a New Zealand,
16:06
you can still do an investment property.
16:07
You don't have to do as you say.
16:09
As you say, whether it's your first, second, third,
16:12
there's like an active approach to investing in property,
16:16
which is when you get in there, you buy it, you renovate it, you sell it,
16:20
like you can't, almost like flipping houses,
16:22
and you add value that way.
16:24
And then there's just a passive approach where you're just focused on
16:27
really the kind of the increase in price over time.
16:30
You're more of a bit of a buy and hold strategy
16:33
which tends to be more residential or like your own home.
16:36
And then active is more the investment property side of things.
16:40
If you want to learn about flipping,
16:42
we did an episode called buy, renovate, sell,
16:45
how to flip a property with Alex Harper a couple of weeks ago.
16:48
And that was really cool because that's a totally different approach.
16:51
There's also a hybrid of the two.
16:53
You could buy ad value and still hold it.
16:56
You don't have to flip it.
16:58
You could still hold it for 10 years.
16:59
A lot of people do.
17:00
You move in and then you might have a few extra kids.
17:02
You've got to add an extra extension.
17:04
Add value that way or you realize actually,
17:07
let's convert this bedroom into another bathroom
17:09
or something and add value that way.
17:10
But even if you're doing it where you're not living in it,
17:12
again, an investment property,
17:14
you can buy something.
17:16
You could add a liquor paint here.
17:18
You could, you know, lick a pint chairs up the carpet.
17:21
You could, you know, there's this way that you could do that
17:23
before you then rent it out.
17:25
So it's just like being aware of the big puzzle.
17:27
So to decide what kind of property approach is right for you,
17:30
where you're at, whether you own a house,
17:32
you don't, you're looking at investment properties,
17:34
you're looking at your first home.
17:36
Understanding the lay of the land in detail is really important.
17:39
And this is something that I went all over the show
17:41
with trying to decide between the UK or New Zealand.
17:45
You know how you said to me,
17:47
well, why wouldn't you just invest if you want to live in it in the UK?
17:51
Yeah.
17:52
Understanding what returns you see in different markets
17:55
can really help because at the end of the day,
17:58
yes, some people want to buy a home to live in it.
18:01
But at the other end of the spectrum is people
18:03
that just want to make money through the property market.
18:05
And that's also totally fine.
18:06
So can we break down the difference between,
18:09
let's just use our top three countries in terms of listenership,
18:13
which is New Zealand Australia and the UK.
18:16
Yeah, so we did kind of touch on the returns in New Zealand property market
18:20
in the trade me live event podcast.
18:23
But the average house price in New Zealand
18:28
is about 900,000 New Zealand dollars.
18:31
So that means that there's one really hard.
18:34
Yeah. So it means there's ones that are like,
18:36
obviously like 10 million, but it's like,
18:38
the median is 900,000.
18:40
So there's some that are super cheap, some are super cheap.
18:42
But that's the average.
18:43
And over the last 30 years,
18:45
the property market in New Zealand has returned
18:48
just over 7% return per year on average.
18:52
So remember the last 30 years we talked about the stock market,
18:54
it's about 10% return on average.
18:57
So if we looked at like this kind of risk and return spectrum,
19:04
we've got cash, which is low risk, but low return,
19:07
then you've got bonds, then you've got property, then you got shares.
19:09
And that's exactly why, because over 30 years,
19:12
shares has done better than property,
19:14
which is such a mind love for me.
19:16
Because if I think about,
19:18
I remember when we first started the curve
19:20
and we were talking about property and investing in stocks
19:24
or property, it took me such a long time to get my head around the idea that,
19:28
because when you think of property and the returns and property,
19:31
you just assume it's better than everything,
19:34
because it's what everyone talks about.
19:36
But actually on average, the return is lower.
19:39
Well, this is just the change in house prices.
19:43
So it doesn't take into account leverage.
19:46
So that's like when you borrow money and you therefore get a mortgage,
19:52
your returns are magnified.
19:55
So what might be 7% on average,
19:59
for you, it might be 12 or 15%,
20:02
because you've borrowed money.
20:04
So it kind of, in a simple as well,
20:07
just think about like it just kind of propels those returns.
20:10
But if we were to just think about that for a second.
20:13
And so it's hard to know what everyone's borrowing rate is.
20:17
So it's hard to take all of that into account.
20:20
So they just do the house price change.
20:22
Yeah.
20:23
Because if you've borrowed 2 million
20:26
and you're getting 7% on 2 million,
20:28
you're actually technically probably getting like 50% return,
20:32
maybe not that high.
20:33
But it's a lot higher than someone that's potentially,
20:37
it's a lot higher than someone that's loaned less.
20:40
But it's still following the same average house price increase per year of 7%,
20:45
because the amount of borrowed is massively magnifying.
20:48
That's 7% of the more amounts of money basically.
20:52
It's hard to think about.
20:53
There's a return on your equity.
20:55
And there's a house price return,
20:57
which includes like if you think of the house itself as like a circle,
21:02
you know, a portion of that circle is debt,
21:05
an portion of that is equity.
21:07
And as that circle gets bigger over time,
21:10
so that's like the percentage return,
21:13
that's the overall circle, the change in the overall circle,
21:16
the percentage change of the overall circle size,
21:19
whereas if you're just looking at the equity portion of that circle,
21:23
that return would be much greater,
21:25
because the debt doesn't really change.
21:27
The percentage change,
21:29
the percentage return of debt doesn't change.
21:32
So, you know, if you borrow 100 grand,
21:34
you still have to pay back 100 grand in five years time,
21:38
whereas hopefully house prices have gone up.
21:41
So your return on the equity,
21:44
so that just means like your money that you've put in is much greater.
21:48
Does that make sense?
21:49
Can I repeat this back to you?
21:50
Because I think I'm understanding you,
21:52
but I just want to repeat it back.
21:53
So, because when you borrow money from the bank,
21:57
the amount that you have to give back is the same.
22:00
That's not growing.
22:01
So like that you're not taking more and more debt
22:03
unless you're borrowing to renovate or whatever.
22:05
So, you're getting a total return on a larger amount of money,
22:10
so it's just the idea that, let's say you put,
22:14
you have a $500,000 house.
22:17
20% of that is your equity or your deposit.
22:21
Yeah.
22:22
The rest of the 80% has been bought by debt.
22:26
So, you only have to pay the bank back what you've borrowed.
22:32
That number doesn't change,
22:34
but because the dollar value doesn't change.
22:36
So, say I borrow $500,000 from the bank.
22:40
And you've put in $100,000, you've got a $600,000 house you're buying.
22:43
Yeah.
22:44
Then I only, at the end of the time that I decide to sell that house,
22:47
I still only have to give the bank back $500.
22:50
Yeah.
22:51
But because that $500 has been sitting in an asset
22:53
that is growing on average by seven percent,
22:56
the return on that money I get to keep
23:00
as well as the return on my equity.
23:03
So, it's like the amount that you're getting is actually so much more than seven percent
23:07
because it's almost like you're using someone else's money to compound.
23:11
You're on it.
23:12
Yeah.
23:13
Whereas if I'd only invested, let's say I'd invested,
23:16
let's say you didn't even borrow any money,
23:18
then your return would have been seven cents.
23:20
Seven cents.
23:21
Yes.
23:22
But it's seven percent on a larger number,
23:24
whereas you're putting in a small amount and that's growing.
23:27
Yeah.
23:28
I reckon the best way to think about it,
23:29
even though on average it's a seven percent return,
23:31
which doesn't actually sound like a lot compared to the stock market that's done ten percent,
23:35
the reason that property does so much better is because
23:39
it's not like you're just getting seven percent on your equity or your deposit.
23:44
Yeah.
23:45
You're getting seven percent on money you didn't have to start with.
23:48
Yeah.
23:49
So, it's like that's why it's so much greater.
23:52
Yeah.
23:53
So, there's quite a few numbers running around.
23:56
So, if you had a house that you purchased the $500,000,
24:01
that is the house price,
24:03
and you borrowed $400,000,
24:06
you deposited equity,
24:09
or what you would have afford to pay out of your pocket is $100,000.
24:12
So, $100,000 equity, $400,000,
24:15
which is borrowed from the bank,
24:17
that increases on average seven percent per year over the next five years.
24:22
The value of that house is going to be just over $100,000.
24:26
And the five years.
24:27
So, it's gone from $500,000 to $700,000.
24:30
You have to pay back the bank that $400,000.
24:34
So, the difference is...
24:36
Is it like a 35 percent increase then?
24:39
So, you have to pay back the back bank $400,000.
24:41
So, the difference is $300,000.
24:43
You put in $100,000,
24:45
you get $200,000 back.
24:48
What is that then?
24:49
That's a 200 percent increase.
24:51
Even though the market's only gone up seven percent,
24:53
the house price has gone up seven percent.
24:55
Oh, that took us a while to get there,
24:57
but that is huge.
24:59
Well, if you put in $100,000,
25:01
you get $200,000 back.
25:02
No, you get $200,000 on top of your $100,000.
25:04
Yes, sorry.
25:06
So, you actually are getting $300,000 at the end,
25:09
even though you only put $100,000 at the start.
25:11
Yeah.
25:13
200 percent returns.
25:15
This is why it's like...
25:17
Oh, the leverage.
25:18
And the leverage can do that in the stock market as well.
25:20
It can be exact.
25:21
It's an NES.
25:22
If you were like, look, there's a stock I want to buy,
25:25
and it's $500 for a share.
25:28
But I can only afford to put in $100.
25:31
I need to borrow the $400.
25:32
The exact same result would happen if the share price went up by seven percent.
25:36
You know, but that's very risky,
25:38
because that's just a super interesting thing.
25:40
But do you know what's so interesting?
25:41
Is that the more that I've learned about investing,
25:43
and I know that that's true.
25:44
Like, I know that it is really risky to go and invest in the stock market
25:48
with money that you don't have.
25:49
I understand that, but it's equally as risky to borrow money
25:53
and invest in property.
25:54
No.
25:55
You don't think?
25:56
No.
25:57
Investing in shares is a lot more risky,
25:58
because the movements of share prices move up and down.
26:01
Way more than property moves up and down.
26:03
So, you could wake up tomorrow and the stock you invested in be down 20 percent easily.
26:09
That does not really happen with property.
26:12
Yeah, but I guess my point is,
26:14
is if I'm investing for a long period of time,
26:16
which I am with all of the things I invest in,
26:18
property and stocks,
26:20
because I'm not planning to make it into an ETF.
26:22
You'd want to invest in ETF.
26:23
You wouldn't want to put that wall into Tesla and be like, no.
26:26
No, no, no, but what I'm saying is,
26:28
if I was doubling down and investing in, say, an ETF,
26:31
I feel just as confident doing that
26:34
as I would investing borrowing money to invest in property.
26:37
Is that like, am I just absolutely blind to risk?
26:40
A lot of people do with shares, but it's like very experienced investors
26:43
and they've got strict, like what we call,
26:45
kind of almost cut-offs where it's like, okay,
26:48
if the share price falls 10 percent,
26:49
I mean, I've got an automatic sell order to sell,
26:52
because I don't want that going down to,
26:55
because leverage works in the opposite way,
26:57
which is what we forget about.
26:59
You know, that could be negative 200 percent.
27:01
Oh, holy shit, balls.
27:03
Yeah.
27:04
But I guess, well, what I'm saying though,
27:06
is if I was to do that,
27:07
I would only do it in something like the ETF,
27:09
really, something that's very diversified.
27:11
You've kind of got the strategy.
27:12
Because really, if you think about it,
27:13
if you were borrowing like 300 grand,
27:15
I'm, by the way, I know we're not.
27:17
Honestly, if we could zoom back four years,
27:19
can you imagine me ever saying this?
27:21
But if I was, if I had more money to invest,
27:24
I would put more money into the stock market.
27:26
Yeah.
27:27
So what's the difference?
27:28
You know, it's in my head, I feel just as confident.
27:32
Confident?
27:33
Yeah.
27:34
And all of, and both asset classes, I understand enough to,
27:37
I'm not saying I'm going to get a loan
27:39
and invest it in the stock market.
27:40
But the point is, the more money you can invest,
27:43
the more money you can make.
27:44
And so, there's also borrowing that money.
27:47
It's the hard thing.
27:48
True.
27:49
Because then also you've got...
27:50
If you go to the bank and go,
27:51
hey, can I borrow 400,000 of this in the stock market?
27:53
They're going to be like, hell no.
27:55
Because also, there's the question of like,
27:57
the interest you have to pay back on, say, a personal loan.
27:59
Let's say you loaned money to the invest in the stock market.
28:02
There's 20 years.
28:03
There's the stock market is down.
28:05
You still have to pay that interest back.
28:08
So, I understand, like, in that way.
28:10
But anyway, we've gone slightly off the air here.
28:13
Yeah.
28:14
So, in terms of property market performance,
28:17
more recently, so 30 years, over the last 30 years,
28:20
New Zealand has delivered about just over 7% per year on average.
28:25
But more recently, that's slightly below 7%.
28:28
So, in the last kind of five years,
28:29
we've, sort of, market hasn't done very well.
28:31
So, market are popping up.
28:32
Sorry, property market hasn't done very well.
28:35
So, like, campaign.
28:36
I know.
28:37
Oh, God.
28:38
But historically, I mean, we like to look at long-term averages here,
28:42
or without the long-term.
28:44
And in Australia, the average price is $985,000, Australian dollars,
28:50
so nearly a million.
28:51
But it's property market hasn't done as well as New Zealand.
28:55
Is it not?
28:56
No.
28:57
Well, it's the average increase.
28:58
It's just about 5.7% per year over the last 30 years.
29:04
And what about the UK?
29:05
And the UK is about the same as Australia.
29:07
So, about 6%.
29:08
It's still really good though.
29:10
That is still really good.
29:11
But, yeah, there's so many reasons why New Zealand is an attractive
29:17
place to live in why our property market has done so well.
29:22
I honestly thought it would be more.
29:24
I thought that the percentage average yearly increase
29:27
would actually be a lot more than 7, this 5.9, or whatever it is.
29:32
Yeah.
29:33
It's not that bigger difference.
29:34
No, but compounded over 30 years.
29:36
It's up.
29:37
True.
29:38
But like, it's the same premise though.
29:40
You borrow money to leverage, to invest, and that 5% ends up being, you know,
29:46
a lot more because of the leverage.
29:47
Yes.
29:48
So it's like, really, everywhere in the world, property is an amazing place to make returns.
29:53
Yeah.
29:54
It's just, it can actually be out of reach for a lot of people
29:57
because of the deposit that you need.
29:59
Why?
30:00
It's so true.
30:01
I haven't saved my whole fucking life to try and get enough money.
30:07
Yeah.
30:08
So, yeah, if you are in a position to buy property, it is a great way to diversify your assets
30:17
and your wealth, and not just put it all in shares or all in the bank.
30:22
You know, it is a great way to not only make a good return, but actually diversify out of
30:28
investing other things.
30:30
Interestingly, what you just said in terms of diversifying for me, I think what I'm thinking
30:35
is, because I'm just such a stock market girl, you know, I love the stock market.
30:41
I really enjoy investing in it.
30:43
Yeah.
30:44
I love knowing what I'm investing in.
30:45
I feel excited by looking at companies, and honestly, the investing club has like sparked
30:51
something inside of me that's just like, it's so far unleashed the dragon.
30:55
Yeah.
30:56
The dragon is well and truly loose out there in the Hogwarts grounds, you know.
31:00
I am just really into it, and I think that I don't want to invest so much of my money that
31:06
that's the only asset class I can be invested in.
31:09
I really want to be able to continue to invest in the stock market.
31:13
I want to be, I think that like I understand the premise of investing more because you can borrow more
31:19
because you then return blah, blah, blah.
31:21
But for me right now, I want to stay active with my investing in stocks as well as property.
31:28
Yeah.
31:29
And I know that if I stretch myself too much, that will be totally out of reach for me.
31:34
Yeah.
31:35
It feels safer to be doing, you know, a huge part of my investments in property, but not 100%.
31:42
No.
31:43
Yeah.
31:44
You've got a good balance.
31:45
Yeah.
31:46
I do work and they do move in different ways as well.
31:49
There's things that impact the property market, that don't impact the stock market and vice versa.
31:53
So, yeah, the more diversified you can be, the better.
31:56
But obviously that's not possible for a lot of people.
31:59
But also I think where I'm lucky is that because my friend is in a similar position where he...
32:04
What you're talking about me is like, my friend is...
32:07
No, but like because he's in a similar position where we both have a similar amount of a deposit.
32:14
Yes.
32:15
I would need almost double what I am currently...
32:19
You know, I'm putting 110,000 New Zealand towards this potential house property buying situation.
32:26
And so I was, hey, if I wanted to do it by myself, it just wouldn't work.
32:30
Yeah.
32:31
And so I think it's unfortunate that it makes a lot of sense to buy property with somebody else.
32:36
Because it's less scary you get to go in on the loan with someone, the whole process you're doing with...
32:41
It feels like a joint burden in a way.
32:44
A joint risk.
32:45
You're sharing the risk.
32:46
You're sharing the...
32:47
Yeah.
32:48
There's the exciting possibility of it doing well.
32:51
There's a lot of...
32:52
You're sharing the unknown as well.
32:54
It's not like you're diving into something.
32:57
I don't know, it's kind of exciting a business.
32:59
No, it is.
33:00
It totally is.
33:01
But I think with that, it means that I also only need half the amount of money.
33:07
So whether it's buying with a partner or it's buying with a friend or a parent or whatever a stranger...
33:16
That feels better for me than it does to be 100% in property by myself.
33:22
Like it feels way laughing.
33:24
No, I'm just like, imagine if you became a property romantic partner, that'd be easy.
33:28
Do you know what is so funny?
33:30
Because someone said that to me, they were like, okay, but have you ever been romantic?
33:35
And I was like, why are you asking that?
33:37
Like, no, we haven't.
33:39
It's quite easy to combine the like...
33:41
Do you know what it did make me think?
33:43
You already combined.
33:44
It made me think if you are investing, if you have this sort of stuff in place when you go into a relationship.
33:51
So for example, you approach your romantic relationship just like you would a business deal.
33:56
Yeah, yeah.
33:57
The chance of things going wrong like it sucks still because your relationship would break down.
34:01
But you have all of your stuff sorted.
34:03
Yes.
34:04
So I think going into this for me with the same mindset of like, this is how I should enter every...
34:09
Any romantic relationship because it's a business partnership.
34:13
It is.
34:14
It's an asset that has got monetary value and yeah, there should be a contract involved.
34:20
I totally agree.
34:21
No, no 100%.
34:22
But sorry, what I mean is like, yes, of course with our current, the current situation of buying a house for the friend you need that.
34:27
Yeah.
34:28
But it's bigger than that.
34:29
It's more made me think if I was to go be in a relationship with somebody where I was coming.
34:36
In the same way that I am with this house buying situation with my own assets, my own money, my own blah, blah, blah.
34:43
If you have those conversations about like contracts and putting things in place and being really clear about who's is what.
34:51
You're mitigating the potential risk of the financial fallout as well as a romantic fallout.
34:58
Because the romantic fallout like awful heartbreaking shit.
35:03
But if you've got the financial side sorted.
35:05
It feels less stressful.
35:06
Like my heart can handle it.
35:07
Do you know what I mean?
35:08
If I've got the rest of it sorted, it's sweet.
35:10
Yeah.
35:11
So if you're like, yeah.
35:12
Exactly.
35:13
It's kind of like, oh my god, everything's turning to shit.
35:16
I know, actually, smart me five years ago.
35:19
Yeah.
35:20
Make sure that I dotted my eyes across my teeth.
35:22
So now I can just lean into the emotional side of the breakup, not the financial.
35:26
Yeah.
35:27
Exactly.
35:28
Because that's all sorted.
35:29
And like someone said the other day they were like, actually no, it was, sorry, going right back to the beginning of this episode.
35:34
It was one of the things that someone sent me in response to my big cry on the podcast.
35:39
Yeah.
35:40
It was like this woman who's in her 50s.
35:42
I almost should like play it or share on Instagram, but she was basically saying, you know, marriages end in divorce 60%.
35:49
If I, she was like, I wouldn't enter a business relationship.
35:52
If I thought it was going to add a 60% chance of failing.
35:55
Yeah.
35:56
You know, like, so why the hell would you not push it in place?
35:58
Or if you did, if you knew that statistic, you'd be like, okay, well, there's 60% chances it's going to turn to shit in a business sense.
36:04
Yeah.
36:05
So let's make sure we've got everything in place because majority of times end up in.
36:12
Yeah.
36:13
Yeah.
36:14
I think when we talk about property prices, I think the key thing is with any investment, prices go up when there is an increased demand for that.
36:24
But like limited supply.
36:26
So even if you want to invest in something, it's like you want to invest in something that everyone wants, but there's not enough of.
36:34
And it's the same with property.
36:36
And so that's why people want to buy, you know, the best house on the worst street.
36:42
No, the worst house on the best street.
36:44
You know, it's a second one.
36:45
Is it second one?
36:46
Sorry for that.
36:48
Can I tell you one of my favorite things about you is that a face.
36:52
Or you're kind of like, you've said something and then you're like, I'm like, oh, God.
36:55
I'm having a brand that's like, oh, no, I know that's wrong.
36:58
Yeah.
36:59
So you want to buy the best house on the.
37:01
They should have.
37:02
Sorry.
37:03
They should have house on the best.
37:04
That's if you're flipping.
37:06
If you're flipping a house, that's what Alex said.
37:08
She was like, you buy the worst house on the best street because everyone wants to be in that street.
37:11
And there's only a certain amount of.
37:13
But that's the thing.
37:14
It's like, because everyone wants that.
37:15
Everyone wants that house eventually.
37:17
So it's like, everyone wants to the street.
37:19
Yeah.
37:20
So it's things like, and this is why New Zealand properties done so well is because if we just looked at the demand side of the equation,
37:27
you know, we've got a very, very accommodating or supportive text structure when it comes to property.
37:34
We, one of the only countries in the world that doesn't have capital gains tax on property on your first home.
37:40
Do you think that'll come into play?
37:42
Well, good luck to the politician that tries.
37:45
For me, I'm going to bring in capital gains tax.
37:47
But could they do that when they're in power?
37:49
Yeah, but they're not going to vote it in again.
37:50
So it's like, what if they did on their last Harat?
37:52
Yeah.
37:53
It was like, like that capital gains tax on.
37:56
Yeah.
37:57
So, well, that's kind of what they did with the investment properties.
38:01
And they did this bright line test, which is like, you have to own the property for a certain number of years.
38:07
Otherwise, you'd have to pay tax.
38:09
What is that?
38:10
I need to know that.
38:11
Yeah.
38:12
It's just changed recently, but there is a certain number of years.
38:15
Yeah.
38:16
Oh, no, that's right.
38:17
Because I think it's two years.
38:18
It's two years.
38:19
Yeah.
38:20
Because otherwise, then people will just be buying, flipping, buying, flipping.
38:21
Yeah.
38:22
Yeah.
38:23
Yeah.
38:24
Yeah.
38:25
Yeah.
38:26
So there is, you do have to be aware of that.
38:27
But yeah, so we've got a really supportive tax environment for property.
38:29
We've also got low interest rates.
38:31
I know a lot of countries around the world do, but this plays into demand as well.
38:34
We've got interest rates that are falling, which we know is like a sea sore.
38:39
You've got high interest rates, property prices are low, but the sea sore the other way.
38:44
If you've got low interest rates, you've got high property prices.
38:46
That's how the world works.
38:48
Is it not the other way around?
38:51
So high interest rates, low property prices, low interest rates, high property prices.
38:57
Either way, when you buy out.
38:58
Oh, because right now we've got higher property interest rates.
39:00
They're falling.
39:01
So that the sea sore is kind of starting to come down and house prices are starting to go back up.
39:07
And I mean, our economy hasn't been too great.
39:09
But that also plays into the demand.
39:11
So if you've got really strong economy, you've got low interest rates.
39:14
And you've got really supportive kind of tax environment for property.
39:18
That's like the demand side.
39:20
So property prices are going to go up.
39:22
And then supply.
39:23
I mean, we can't build enough houses to save ourselves right now in New Zealand.
39:27
We've got people coming in here to live and we can't build enough property to support that.
39:32
And that's a function of the fact that one of.
39:34
We've got quite a monopoly in terms of there's one company that kind of dominates the construction industry here in New Zealand.
39:41
Fletcher building.
39:42
So building prices is ridiculous.
39:46
And through the roof, they kind of control a lot of the market here.
39:49
So we need a new Fletcher.
39:51
Yeah.
39:52
ASAP.
39:53
Yeah.
39:54
And also just getting staff.
39:55
Getting builders, getting tradies has been really, really hard to post COVID.
39:58
Fletcher is quite a fun name to say.
40:00
Yeah.
40:01
Fletcher.
40:02
Like it's quite like lots of things happening in your mouth.
40:05
Thank you.
40:06
You're really trying, I can feel that you're trying to get through your research here that you've done.
40:11
Well, I'm just trying to say like, yeah, overall with any investment, it's like what is going to make this.
40:17
This asset increase in value and the price of it go up.
40:21
And it's more demand for it.
40:23
But if you're looking at buying in neighborhood where they've got like
40:27
100 new apartment buildings going up.
40:30
And you're buying an apartment in that neighborhood that increases supply.
40:35
So demand would be lower.
40:36
So demand would be lower.
40:37
Well, supply would increase.
40:38
And so prices aren't going to go up as much because you've got all these apartments that people can now choose from.
40:44
So it's like, that's a really good point.
40:47
Yeah.
40:48
That's kind of plays into it as well.
40:49
So it's just something to be aware of when you're buying an investment property.
40:54
Because with any investment property, you're buying because you want to create money and you want to create value.
41:00
Residential a bit different.
41:01
But yeah.
41:02
So this is kind of why it's really important to think of all these things when you're buying property.
41:07
For investment.
41:08
Because I was going to say, I feel like we could go into that so much more.
41:12
And I know that that was our plan.
41:13
And I'm sorry, I feel like I really derailed this whole conversation a little bit.
41:16
But I thought it was interesting where the other people do it.
41:18
I don't know.
41:19
Please give us feedback.
41:21
But this is the thing, right?
41:22
Like we sort of plan to go and have this conversation.
41:24
And I'm looking at all of the stuff that we were wanting to talk about and we haven't got to it.
41:27
So this is kind of just further to the point that we have a lot of property conversations that we need to have.
41:33
It's a whole asset class.
41:34
We've been talking about investing in stocks for years.
41:36
Yeah.
41:37
And then we're trying to like quickly do a whole other asset class in 40 minutes.
41:42
So yeah.
41:43
Oh, one, do we're rushing to get through it?
41:45
I mean, we'll come back with some more updates.
41:47
I can't tell you when but we will be doing it.
41:49
Yeah.
41:50
So if there's any particular topics when it comes to investing in property that you'd love us to cover.
41:56
Can you comment on this podcast?
41:58
We're of your listening because it would be really good to add them to our list.
42:02
We currently have 10 episodes to get through that.
42:05
Yeah.
42:06
We'll be speaking.
42:07
Let's talk about the pros investing in property.
42:11
Now let's talk about the calm every episode will be like one pro.
42:14
But do you know what I think is quite fun about this?
42:16
Is that we've got a whole lot of stuff to talk about.
42:19
All of a sudden from a selfish perspective.
42:21
I'm very interested in property.
42:22
So if there are any interior designers that are listening to it for you.
42:25
Yeah, get in touch.
42:26
You know, I'm looking for a painter or a researcher.
42:29
Imagine me.
42:30
Now we've got someone who's doing my carpet on the podcast.
42:33
What's the best thing to look for when putting carpet in?
42:37
God, smooth face.
42:38
I'm really hoping I do have an exciting update though.
42:41
Yeah.
42:42
I feel like I can't wait to see the house you buy.
42:44
I know.
42:45
You know how people say that your dog is like a reflection of its owner.
42:49
Oh, don't say that because I can't afford much.
42:51
The thing will look at my house and will be like,
42:53
yep, makes sense.
42:54
No, but I feel like it will be like really cute and light and...
43:01
Let me think of me.
43:03
In a bush somewhere.
43:05
As a giant bush.
43:07
I mean like...
43:09
We all know what you mean.
43:11
We all know what you mean.
43:12
Yeah.
43:13
It's so funny.
43:14
Okay.
43:15
Bye, bye.
43:16
This conversation was brought to you proudly by Trady Property,
43:20
a partnership that we are super, super proud and excited about to be honest.
43:24
And look, who knows how long this is going to go on for
43:27
because we're not quite sure what's happening with my pre-approval.
43:31
Will it happen?
43:32
Won't it happen?
43:33
TBC, we'll come back to that.
43:34
But, yeah, thank you so much.
43:36
You should trade me for allowing us to have these conversations.
43:39
And you know what?
43:41
Whether you are looking for property now or maybe in the future,
43:44
trade me have absolutely, without a doubt,
43:48
hands down the most properties than anywhere else.
43:50
So if you want to do a little dream scroll,
43:52
have a look and see what's available,
43:54
then I would highly recommend dropping on.
43:56
We will come back with part two of this conversation next Friday.
43:59
So let's just hope there's some exciting updates,
44:02
but in the meantime, have a look at Trade Me.
44:05
At Trade Me.
44:08
Okay, quickly, the curve was created to empower and educate
44:11
you about investing, but we are not financial advisors.
44:14
Our platform exists for educational purposes only,
44:17
and it doesn't provide personalized investing advice for your individual needs
44:20
and should not be relied upon to make an investment or financial decision.
44:23
And always remember to do your own research before making
44:26
any investment or financial decision.
44:28
We're here for any knowledge and support you need,
44:30
but the final call is always yours.
44:32
And thanks for being here.
44:34
You got this.
44:35
We know you got this.