The Rentvesting Podcast | Smart Investor | Real Estate Investing Couch | Australian Property Talk

The Rentvesting Podcast | Smart Investor | Real Estate Investing Couch | Australian Property Talk


If you're a property owner, investor or looking to get into the market this Podcast will help cut through the hype, look at the facts and draw on decades of experience to help you make smarter property decisions. The Rentvesting Podcast is for Gen X and Y Property Investors. If you’re a property owner, investor or looking to get into the market The Rentvesting Podcast will help cut through the hype, look at the facts and draw on decades of experience to help you make smarter property decisions. Each week Red & Co Director, and Award Winning Finance Broker Jayden Vecchio will unpack the facts behind the property market, explain what’s really going & where the market is heading. We have spoken to guests like Mark Bouris, Peter Switzer, Kevin Turner from Real Talk Podcast. Are you ready to make better property decisions and learn to live where you want, but invest where you can afford? Tune into us via iTunes, Stitcher, Google Play or through where you can see the Rentvesting Calculator


Q&A Wednesday: How Should I Invest My Super & What Are the Different Options?  


I would love to hear something about how to invest your super and the different options (retail, industry, self-managed funds and managed funds through a company) and its pros and cons.


So it’s a massive question and we’ll try and break it down as simply as possible.

You do have a massive range of choice between types of funds, such as (retail, industry, self-managed funds, corporate, public sector. The most common ones are retail, industry and self-managed.


Retail fund

A retail fund is a superannuation platform that’s trying to make a profit through giving you an additional service. Mostly owned by banks and there are third party's that are independent. Their whole mandate is to make a small profit through giving good service of a platform.

The cons of this are that it's more expensive than an industry fund


Industry fund

Industry funds are backed by a union so they can be very specific, QSuper is for Queensland government employees and they offer a limited range of investment options. The only issue is they’re not too transparent, you don’t know what shares they are part of. So the good thing is, it's industry funds and they’ll give you automatic insurance, depending on what your situation is like. However, it will have exclusions if you’ve got anything pre-existing. A con is if you don’t need cover, you’ll get it anyway and still be paying premiums.


Self-managed funds

ASIC has some rules if you’ve got less than $200,000, it's not economically viable to set an SMSF up, as there are auditing and accounting fees from additional trustees. There’s additional burden where you need to meet with an accountant, go through the audit and make sure your funds are still compliant.


In summary

If you’re starting out looking to grow super, industry funds are good, otherwise, if you have already got a decent amount in your super and you’re ready to take control and want to share funds outside of it, retail could be good. Otherwise, if you’re balling and want to buy investment properties in super then self-managed is best.

If you’ve got questions hit us up on Facebook or our website, and we'll answer them.

Don't forget to leave a review on iTunes here too. 

It's A Balancing Act: Tips to Get Your Portfolio Diversified  

So this week we’re doing a balancing act, Louis has got his best clown costume on, he’s got a bunch of plates balancing on his chin. We’re going to talk about building a balanced portfolio. We’ve spoken about diversification in the past but I think one thing we haven’t really gone into detail with and put a lot of colour on is the fact that when building a balanced portfolio, with property it’s more than spreading the geography and with shares it’s more than just investing in different businesses. There’s a lot of interrelated and correlated facts and background that can affect you and you’ll want to look at cashflow, the different types of property that you can look at and really balance it up at a portfolio level.

We’re just going to go through overall diversification and how not to muck it up, how to get it right and then some tips at the end just to make sure that you’re doing it properly and to measure your success which is measured by a little thing called ROI which we’ll talk about.

Before we get started I’d just like to thank you guys for leaving me reviews on iTunes, thankyou, thank you so much. We’ve got a couple in the last week, we’re going to do some shoutouts next week, but... if you guys don’t mind and you haven’t already left a review we would love you times infinity if you could just jump onto iTunes and search the Rentvesting podcast... Our one, not another one that kind of ripped on our name but definitely our one with a green logo and leave a review because we’d love you forever for it, so.. Thanks guys and let’s get into the episode.

So, a balancing act? Not a contortionist, building a balanced portfolio...

We’ve slightly covered it in the past but let’s dive in. A balanced portfolio means something different to everyone, some people think that, you know, having a balanced portfolio is 10 properties in Murrambah or something like that.

We’ll be going through diversification again; we’ve talked about this a bit in the past but today we’ll be breaking this down further into how to properly diversify your portfolio and give some tips. Success on how well you invest will really depend on how well you are able to diversify your properties and overall portfolio well, so it’s all about managing your risk.

What matters is the money you’re making overall consistently - there’s a thing called ‘Return On Equity’ or ROE for short because we get lazy and like to abbreviate everything. So the ROE is simply what return you’re getting on what equity you have invested. This is really the only measure of success when you’re investing in a property because it’s the return you make on the money you put in.

The Return on Equity is, say you’ve got $100,000 in a property, and it returns $10,000 in a year then your return on equity is 10%. So it works out what your overall return on your initial equity of the investment is but it doesn’t really take into account the debt or other things structured into the property, so to work that out it’s around what the cashflow is. If it’s negatively geared for instance you’d have to minus whatever you’re putting into there off the growth that the property has then divide that by the equity that you have in the property.

You can always think that you bought it for $300K, I sold it for $400K, I made $100K – I’m a genius! But if you’ve been losing $5K a year for 5 years it’s then minus $25K and then your net return is a lot lower, so that’s where Return On Equity or the ROE figure comes into play, it’s important to use that as your way to guide your investments.

Exactly, so if you’ve just got one sort of asset that has low ROE every year it’s probably going to make your overall return suffer quite a bit and diversification really manages all the risk involved, we’ve talked about this in the past – say if a property’s price goes down by 50% it’s going to take a long time to go back up because you have to make a 100% return on the upside. Even for some shares I’ve bought, one went down by 94% or so.. and to get back to my original value I need to make a 200% return of that so if it goes down by 95% then it needs to go up by 200%.


So tell me, diversification manages risk, helps you manage and maximise profits, but it can be a bit of a trap so how could it dilute those returns? How can you reduce that ROE by diversifying?

So over-diversification dilutes returns – the way that occurs is through a few different ways. Being over-diversified is if you have too many investments that can actually hurt your overall return so, a good example of that is the ASX itself (talking outside of property).

On the Australian Securities Exchange the bottom 100 companies of the ASX300, so the smallest 100 companies out of the top 300, their average return is about 0% per annum because in that market space you’ll have some companies that go up and some companies that go down and they’ll net their overall return. So that’s where over-diversification can really hurt, as there’s no point in having every share in every country in every economy or every property in every economy as well, because on average half of them might go up, half of them might go down and it would just cancel out any net return that you get. The next one is also diversifying into incorrect assets or highly correlated assets, so again, rather than spreading all your eggs across every basket you could just stick them all in one basket.

If you diversify in all medical shares it’s principally the one industry - they’re all related to the medical industry and if it starts getting regulated or in property if you’re relying on a mining town and if mining as an industry starts to go slow then…

Even mining itself, so if people bought all Fortescue, BHP and in the mining services companies – we don’t want to call it the ‘mining crash’ but after the downtown around 2013, after that little downturn, if you only had resource companies your losses were very much amplified compared to if you had banks or other types of investments, so diversifying into incorrect correlated assets means that you’re just buying many of the same thing, so it’s no different than just having 1 property.

Or 3 different lemons or 3 different oranges all of the same colour. It’s hard to make a fruit salad then.

So, these are the risks of diversifying – getting over-diversified or diversifying into incorrect or correlated assets but the most important thing is just getting the right asset and the right asset means getting your timing correct, getting the best location and getting the best price. So on timing this could be around the property clock for instance, some sectors in Brisbane, NSW etc. they might be on their peak, some might be on their trough – so making sure that you’re not overbuying for an asset is important.

We’ll attach the property clock – it’s just the Herring Todd White one that you can get online but it’s good to just keep that in mind, and then bearing in mind that within these markets there are sub-markets and there might be some that overheat and some that decline based on too much stock. Obviously location is critical in property and even where you’re looking in the suburb potentially and getting to understand that at a really minor level.

Markets are cyclical, so some markets will go up, some markets will go down and it’s all about making sure that you’re not buying an asset when the market is way up.

Which is a good point, when the next topic is PRICE.

Price - I think Kevin Turner said it really well, in the episode recently where “you make the money on the buy” and we’ve said it before, if you overspend up front it’s pretty hard to recover from that so you’ve just got to do your numbers up front and make sure that you’re buying for the right price. Realise that there’s always another deal, there’s always another property, there’s always another share, there’s always another investment – you’re better off walking away if it doesn’t make sense on paper.

Exactly, and then location as well. Location is important for diversification because certain sectors obviously will have different market returns. If you’re looking at Brisbane suburbs compared to inner-city apartments; their locations, while still being in Brisbane, are quite different and the types of properties you get in certain locations differ as well. So, acreage versus a 200m2 block.

Yes, or different property sizes, which brings us to tips on how to get diversification right for you.

One way of diversifying is through asset types.

You might own some units and look at townhouses potentially, or buy some land with redevelopment upside, then you might just look at potential rezoning plays so it’s about diversifying the asset class. Even though they’re all different types of property and they’ve all got different benefits and pros and cons. But it’s worth looking at that, just because you might be buying in the same suburb you might be diversifying the kind of asset, i.e. if you’ve got development upside on a property.

Infrastructure is actually a good one on that as well. So while infrastructure is not really direct property, you can view it as almost semi-property.


Is this with a fund that you’re talking about? In a syndicated, infrastructure investment fund?

Yeah, so you’re not just going out and buying a freeway. Unless you’re a baller, there’s infrastructure funds out there where you have access to a lot of infrastructure projects which themselves will be diversified. The way that these funds work is the manager’s behind them, they don’t really invest in an up and coming infrastructure project, they invest in established ones which have proven cashflows and are actually making a profit. So, unlike a couple of toll roads, they then manage those risks very well.

The volatility inside an infrastructure fu

Q&A Wednesday: I Want to Buy an Investment Property, But I'm Worried the Property Market will Downturn, What Should I Do?  

This week on Q&A Wednesday, we’ve got a question from Alex. Side note: we’re still waiting for a better name to come through, whoever comes up with a better name gets a shout out.


Hi guys,

Really loving the podcast- Easy listening, down to earth advice. And nailing every episode!

I am a Rentvestor looking to make my next purchase. With the strategy of initially an investing in a house that in 3 years time I will be able to live in.

I have plenty of equity and am in a good position to buy, but I'm having trouble committing to a buy, as I am worried the heat may come out of the market, and downturn slightly?

Which direction should I go in?



Well Alex, with the media it can be very confusing due to with every story in the media, 1 in 10 is good and the rest are negative. It’s a lot of doom and gloom, about assets going down, end of the world stuff. In reality, it all depends on what you’re after.

In this situation, if you’re looking to live in that house, in about 3 years time, it will be hard to make the decision purely from an investment point of view. You’ve got to ask yourself first, am I happy to live there? It’s a long term purchase so anything can happen in the short term, the market can swing down, stay flat or go up a lot. It comes back to your long term plan. If that’s to buy it as an investment, keep it as one, and then move in - in another three years. It shouldn’t be an issue because long term property will grow. Even inflationary pressures will increase property by about 3% per year.

It’s more looking beyond three years as well. With most investments, you’ve got to look 10, 20, 30 years down the track. Look at the figures historically, the growth set. Avoid what’s already oversupplied, specifically like units in niche areas. But it’s very area specific and you can't broad brush a city, certain town or East Coast.

Ask your questions here now! We’ll answer.

Property Structures: The Four Key Elements - Pros, Cons and Which Structure's Best For You  

In this week's episode of the Rentvesting Podcast, we’re looking at property structures. We’re going to structure this episode to go through four key elements of issues to try to avoid through smart planning and structuring. This is pretty much how to choose the right ownership structure when buying investment properties. There are a lot of factors, it's easy when you find a property you just want to sign the contract and settle it, you’re excited, but there are lots of different issues you can have, be it asset protection, taxation, if you’re buying with multiple parties - unit trust etc. You want to keep your costs down and make sure things aren’t too complicated, we’re breaking down those four different areas looking at personal, company and trust and looking at self-managed super structures and why they’re good.

You want to keep your costs down and make sure things aren’t too complicated, we’re breaking down those four different areas looking at personal, company and trust and self-managed super structures and why they’re good.


How to choose the right ownership structure for property investment?

The four key structures are asset protection, taxation issues, multiple parties, and cost and complexity.

Like it or not, there are a lot of issues when it comes to asset protection. If you’re building wealth, you want to build it so you can keep it. The major two things are - along the lines of bankruptcy or being sued. If you’re being sued by a third party and you are technically personally liable – a sole trader. There’s no company to hide behind, so if you have assets in your personal name as a sole trader and the person suing you wins, they can go after these.

Ways around this are company, trust and superannuation structures. From a litigation point of view, if you have a family trust that provides an additional layer of protection. Even with bankruptcy they can go inside and do a look through test, but superannuation is off limits.

It’s not a good idea, a terrible idea actually, but I’ve heard of people taking say for instance a $400k bank loan, putting it into superannuation and declaring bankruptcy and they get to keep $400k. Not a good idea! Yet there are situations where a company, trust or superannuation will be better.

The only one where they all break down is in family court, like separation or divorce, there’s no real structure there and no protection there.

'We want a prenup!'

That doesn’t do anything either… in Australia, it’s a little different. It gets voided if your situation changes, so if you have a kid, that’s a significant change and they can throw it out.


Taxation I don’t think taxation should be the sole motivator for structuring, it can cost people a lot. Land tax can leave people with huge bills, so what are some of the things to be aware of around taxation?

On taxation, the biggest thing would be looking at a longer term plan first. If you’re looking to buy an investment property personally and it’s 50/50 split between you and your partner, one is working and the other isn't, from a tax deduction point of view, the person who isn’t working won't be able to claim any deductions.

It comes down to the cons, if you’ve got it in an individual’s name with high marginal tax rates then they’ll pay more on tax. If the property is sold the capital gains tax on that will be higher than an individual who is not earning an income. Then you’ve got the companies structure – the pros there for tax are if it’s a small company (if they turn over less than $10Mil), the flat tax is that you don’t get the capital gains discount inside a company structure.

As an individual - if they sold a property and earn $200k/pa they will get a 50% reduction on the capital gains that is assessable while the company won't. A company pays a rate of 27.5% if it’s turning over less than $10Mil, while an individual on $180-$200k does the same thing they’ll be paying 22.5% so it still works out in an individual's name even on the highest marginal tax rate, it’s better.


Family trust is good from a flexible point of view with tax. You’d have the trust own the property then each year the discretion of proceeds where the tax is paid would be figured out. It would be distributed to the individual with the lowest tax bracket. The problem is that as an individual you can’t claim the tax deduction personally, the trust has to do it. So if it has no other assets inside the trust and just the one property is negatively geared, you’re losing deductibility.



SMSF - Self Managed Super Funds 

From a low tax point of view, 15% is the income tax or after a year, the capital gains will go down to 10%, the only issue is that if that’s the most you can claim, that’s the most you can claim as a deduction. So if you’re deducting 15% of the property expenses, it's not much of a deduction but that means you’re not paying much in tax.


When buying with multiple parties – structural differences, what does it look like and what are the advantages?

Multiple parties – family trusts are fairly good, even unit trusts can be used if you don’t trust your brothers or sisters in your family.

With setting up trust structures, it comes down to family or unit trusts.

Family trust – has to be with family members.

Unit trust – a lot of developments and multiple parties who aren’t relatives will purchase a property as a unit trust and take a specific split of the number of units in there. Rather than the trust owning all of the assets it comes down to individuals or other entities owning the units in a unit trust, so you’re entitled to a number of units and you're entitled to the income off those and the trust is entitled to the deductions.

Unit trust is good for third parties, even companies, but the only issue with companies is the taxation issue of no CGT discount. So companies are generally not used as much as unit trusts because unit trust the distributions from each unit gets flown on directly to the individual.

Borrowing wise, the banks still consider you liable for that debt no matter which way you do it. If I apply for a loan application I need to declare 100% of that debt as mine no matter the structure. Potentially the bank might let you claim 100% of the rental but if it was only in our names and you owned 50% then they might only let you claim 50% of it. So the banks look at it as you owning 100% of the debt and only 50% of the rental which can be a bit of a sting. If you're looking at building a portfolio you need to do this planning up front and that can stop you in your track


Cost and complexity

I’ve seen some Frankenstein-ish crazy A3 page structures and it’s just unnecessarily complicated, have the right structure, be smart and keep it simple. The more structures you have, the more costs you’ll incur.

To set a company up you need to pay the ASIC fee of $472 just to set up a company and then add on the accounting and legal costs, ongoing compliance etc. it can be a costly process. If you’ve got a family trust for the property to be held in, you’re paying an addition $1,000 for auditing fees, depending on the situation, if you can benefit from the different structures, then it’s worth it.

The good thing with a family trust is that it's discretionary, so if you have kids you can distribute income around your family depending on their tax rate.


Structures, in summary:

In summary, you’ve got four major types – personal, company, unit trust, discretionary trust.

Out of them, the most simple is personal and most complicated is SMSF, if depends on your long-term outlook.


Personal – Owning property in individual or individual names

Pros – Easy to do.

Cons – Limited tax planning, risk of ownership.

When to do it – On a high marginal tax rate if negative gearing, low marginal tax rate if not.


Pros – Flat tax (27.5% for most), safety from litigation.

Cons – Paying money out will be taxable, no 50% CGT discount, Costly to setup and run.

When to do it – Almost never.


Unit Trust – Trust with units for non-family member.

Family Trust – Discretionary trust for family.

Pros – Great tax planning, segregated environment.

Cons - Negative gearing can be lost, costly for setup and running.

When to do it – Complicated structure, FT for family wanting tax planning and has other assets to help deductions, UT for non-family dealings like developments.


Pros – Limited to no tax payable, able to use retirement assets to buy property.

Cons – Costly, funds stuck inside super, deductions at 15% max.

When to do it – long term property, has to be good cash flow, business premises.


If you enjoyed this episode, drop us a line with our Q&A Wednesday or leave us a review on iTunes here.

Q&A Wednesday: Am I Too Young to Invest & Should I Use A Bank or Online Trading Platform?  

This week we’re doing Q&Wednesday… If you’ve got a better name, well tell us. We get a bunch of questions each week so we thought we’d give you guys a chance to listen to the answers.

Jake: Hey, how can a 17-year-old get started in investing, I have about $1000 in savings and I really want to get started in investing in the stock market. I have seen that most banks have their own trading platforms is it better to go through a bank or is there an online trading platform that has the option for under 18s to invest and if so what would be your recommendations?

This is good, you can't ever be too young to invest, whether you have kids or are a man-child like me... Where do you invest and how do you do it?

Louis, tell us!

Most banks have their own trading platforms and there are third party platforms too, accessing those - if you’re with Commbank you can get it up online through Commsec. The issue is that you’re 17, in Australia, there are rules around minors purchasing investments and shares. You can't legally buy it in your own name but you can set up a trust account with your parents or your guardian then you’d be put as the account designation.

So you’d have the right to the shares but it’s got to be owned by someone who is over 18.


Where to invest?

Should it be through a bank or online trading platform?

It comes down to brokerage, all trading platforms have the same access to what’s on the ASX, it just comes down to what they charge. Bank platforms are similar on brokerage fees while third party's fees can be a little more. Then with accounts overseas, you can access them too, but for the US you’d have to prove you’re a citizen, so it gets a little more complicated. So take a look at the brokerage fees and compare them, this will help you make up your mind.

If you have any questions send them through to us!

Become a King of Cash flow: What is Cash Flow, How to Manipulate it and What the Banks look for  



Today we’re going to cover:

What is cash flow A few tricks you can use to manipulate your ongoing cash flow by reducing tax and expenditures If you are borrowing, what the bank will look for Rates and how to forecast what your future expenditures will be


We’ve also got a webinar coming up, check it out here.


Jayden’s story:

I bought a property in Sydney and was forced to sell it before I wanted to, because I didn’t understand the importance of cash flow. Interest rates were going up and the bank gave me the money and it seemed like the right thing to do at the time but it led to me selling early and having to live off a credit card.


So let’s prevent you from getting into this situation too.


The story in detail:


This second property I bought was an investment property and I was living in my first property. I wanted to renovate it, at a high level went to the mortgage calculators online, at the time it was based on interest only repayments and I was fine. But then about two weeks after I bought it, interest rates went up – this was in 2009-2010 and the property needed more work too. The thing I didn’t account for, and most people don’t, is assuming that you can afford it based on the current repayments.

Repayments went up and I didn’t take into account body corporate fees, costs involved in tidying it up and the lost rent for not renting it immediately.


After that I had to sell it within 2 – 3 months of owning it. I would have liked to hold it longer, because now that 1 bedroom in Alexandria is worth a lot more that what I paid for it.


Cash flow is a generic term

Think about the income you’re earning and your after tax income. Then look at your outgoings, like in that example, if you jump on a bank repayment calculator, and think the repayments are $2,000 per month but you don’t account for body corporate, water and rates, or only are looking at interest only repayments, well you’ve got to consider all of these.


For a recent client, we were trying to figure out whether to go interest only or principal and interest. While the cash flow was better to go interest only, we worked out that for a $420,000 loan they were going to be paying $350 more in interest every month under interest only. That’s because the banks at the moment are pricing them differently, so if you’ve got an existing loan, check that you are up to date with these changes.


The other point you can look at is PAYG withholding variation application. This would have helped Jayden, when he eventually sold that property, because he turned his first property into an investment property, which was negatively geared.


Every year after depreciation Jayden might have gotten $5,000 or $6,000 back at tax time but with this variation you can do it monthly. The ATO will allow you in most situations to do this. Every fortnight when you get paid you get PAYG withholding tax, so when it gets to tax time you don’t receive a big bill because you’ve been paying it along the way.

You can lodge a variation where they will reduce how much tax is being withheld every pay cycle in anticipation that you’ll receive it at the end of the year. So it’s paying less tax now instead of receiving a rebate at the end of the year. The benefit is that on an ongoing basis you’d have more surplus cash month to month.


Another major thing that’s changed recently are the bank’s lending requirements


A couple of years ago if you went to apply for a loan the bank wouldn’t ask you about your living expenses. They didn’t take into consideration everyone’s different expenses per month. They had just categories like single or no kids, or couples, with or without kids.

Fast forward to today, they’re getting to the weeds of your living expenses. Banks want to see a minimum of the last 30 days of statements and they have computer programs to break it down into fixed or discretionary expensesi.

Fixed expenses are electricity and phone bills, rent etc.

Discretionary involve your handbag buying habits, going out for drinks and food, jewellery, etc.


If for the last month you’ve been on holidays, they will look at that and annualise it. So a tip for this is if you’re going for another loan soon, be a bit frugal for a while and make sure your cash flow is in check if there are too many discretionary in there, get rid of them. As this will have a significant impact on how much they’ll lend you, too.


Looking at longer term interest rates

If you’re forecasting with your current cash flow that a property is really affordable right now, and is slightly neutrally geared, look at what it would be like if it went back to long term interest rates - around 7.5%.

Effectively, because the earnings to debt ratios are higher than they used to be, lower interest rates are the new normal for interest rates. But the reality is the rates won’t stay low forever and eventually they will go up. Don’t get caught out, when the rates go up they go up quickly.

Google search ASX rate indicator and there are graphs you can click on which show you what a lot of financial markets expect interest rates will do over the next 18 months.


It’s expected that in less than two years rates will start going back up. One thing to look out for is that fixed rates will generally move 12 – 14 months out from when the variable rate will. Those fixed rates are already starting to move, so consider this option getting some certainty around your cash flow.


In summary

Components of cash flow are – income and expenses, fixed and discretionary expenses. The easiest things to change are your expenses. The major thing is if you’re looking to build wealth you need to get your cash flow in order. Unless you can generate a surplus income, and put that towards an asset. Otherwise you’ll be similar to Jayden’s position and buy an asset for long-term growth potential, but if you have to sell that before you’re ready to, you won’t be able to generate much in the way of wealth. Just because the bank will give you money doesn’t mean you should take it.


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Let's Get Political With Trevor Evans: Brisbane Going Forward, Negative Gearing and What Effects the Bank Levy will have  

In this week's episode of the Rentvesting Podcast, we’ve got Trevor Evans – a member of Australian Parliament, the member for Brisbane in the House of Representatives and a Liberal National MP.


Today we’ll cover Why Brisbane is a great prospect for investors going forward The government's plan for negative gearing Hard hitting questions on the bank levy – why it won’t get passed onto borrowers.


Trevor Evans in 30 seconds…

I’m the new federal member for Brisbane and I’ve been a politician representing Brisbane for about 1 year. I was the CEO of the National Retail Association before this, and I’m an economist by trade, I’ve done a few things at the edges of where economics and politics all combine.


A bit of a personal question… As the member for Brisbane, you grew up in Tweed, where do you stand for the State of Origin?

I didn’t live in Tweed for very long, I was born there and moved away when I was 1, so I follow the Brisbane Broncos. I work closely with them and we all know Queensland works heavily with them, so on that basis, I support them.


A lot of our listeners are interstate, what’s your background on Brisbane’s story and why they’d invest here and think about Brisbane as a market that’s good for them?

The Brisbane story is a fascinating one, especially over the last 10 – 20 years, people are constantly surprised when they return to Brisbane and see what it means to live here. There are some global trends but Brisbane has had that usual typical growth that capital cities have but it’s also come of age. It might be all of the residential towers in the CBD but Brisbane talks about itself as being Australia’s new world city, it’s a huge magnet for tourists and international trade. International education is the cities biggest export which is amazing for a city focused on real estate and resources. We’ve also got good nightlife with the proposed lock outs being fought against. We’ve got a big growing variety of food and drink, and entertainment and a consequence of those things mean we’ve got a vibrant young city filled with people who aren’t Brisbane born and bred.

Brisbane scores pretty well for young people who are at the start of their careers because there’s that critical mass of corporate jobs and offerings. The commutes are relatively good, but also just an hour outside of the city - you can be at the best beaches, hinterlands and more.


Looking at some of those economic drivers, like the education sector – what does that look like for Brisbane over the next 10 to 20 years?

Construction has been going gangbusters but originally Brisbane was just a property and resources town and now we’ve seen a huge diversification of the industry.

We’ve got a big digital offering in software programming area, we’ve just seen the first G-nome sequencing lab, we are seeing international education continue to grow, but on top of that, the traditional industries are also finding their feet.


Do you think some of the big projects flagged coming up will have an impact and help increase these sectors?

Certainly, in the case of Queens Wharf, the fact that these proposals are being aired are all a vote of confidence for Brisbane. The growth is organic and self-sustaining and everything is likely to continue to grow.


A question for the investors, shifting gears, one thing that was big last year was negative gearing, what does that look like going for?

The treasurer did well to target the measures around housing affordability specifically for those who need the more support. Brisbane isn’t Sydney or Melbourne, and the housing affordability is more nuanced. There are homes on big blocks that are constant and ongoing, but equally, we’ve seen a big boom in the construction market but at different ends - in terms of quality and quantity, and space that we’re looking at.

There are some pockets in Brisbane where housing and apartments are cheaper than what they were a year ago and that trend is likely to continue. The government has been careful not to create an overarching policy which smashed the value across all properties because places like Brisbane and regional areas aren’t seeing the same pressures they are in inner Sydney

These measures were about supporting first homeowners and about supporting the supply of future release, so the types of premises that first home buyers are getting into are more likely to be available.


This might be hard to answer, but in New Zealand they targeted Auckland when there were pockets and offered different policies, why doesn’t Australia do the same?

That’s because we’ve got a federal system in Australia, New Zealand has both the benefits and disadvantages of not having states. Australia’s federal system means most of the power for land and stamp duty are determined by State Government. The Federal Government is constrained because the Constitution doesn’t let us come up with different policies for different areas.

So it would be possible to take a region-by-region approach but only the states would be able to do it. Also running a bureaucracy in Canberra doesn’t let you take a sub-regional approach.


Last question, the bank levy – this was intended not necessarily for retail investors. Why do you think the banks won't pass it on to retail investor’s somehow and ultimately borrowers?

I think this is a case of wait and see what happens. I understand why it would be in the banks and other people’s interests to highlight the prospect that this tax would get passed onto consumers.

The important thing to remember is with this bank levy that’s proposed, unlike similar levy’s in the past, all about taxing the deposits of customers, this is about putting a levy onto the liabilities of the banks which is higher up in the chain of financing.

The other point is that the banks themselves have been strongly arguing that their markets are extremely competitive and that they focus like a laser on the prices of the products they sell. In places like mortgages, they’ve been telling us for years that if they can any way avoid it they wouldn’t put their interest rates up because they would lose their market share from the miners. The smaller banks aren’t subject to this levy so if the big four do decide to put their prices up in places like home mortgages, there are dozens of other small banks making more competitive offers to customers.


Takeaways There is a lot going on in Brisbane, it's not just an apartment oversupply or glut - like the Brisbane metro, Queens Wharf, Brisbane live. Negative gearing – let’s see what happens.


Don’t forget to leave a review on iTunes or leave us some feedback here.

Loan to Value Ratio Uncovered: The Myths, Facts and Tricks to Maximising Your Loan  

In this week’s episode of the Rentvesting Podcast, we’ve got Louis and Jayden back together talking about loan to value ratio and working out how much is too much. It’s important to know how to use loans but also to know when it's too much, the pros and cons of it.


Today we're going to cover: How to maximise long term returns through leveraging as much as possible without receiving too many of the negative consequences The pros and cons of LVR Some tricks to get around them How to avoid LMI and get more education


How much is too much?

It's important to know how much is too much with LVR and the more property you buy, the more debt you’re taking on.


What is Loan to Value Ratio?

It’s basically the loan to the value of the asset. You can have this with margin loans, for this, it’s home loans. So if you’ve got a property worth $500k and there’s $400k of debt, that’s 4 divided by 5 = 80%.

The LVR is just a percent of how much of an asset is built up to the loan. You can either have LVR if you’ve got no debt, otherwise, people might have 95 – 120%. Some people call it LTV which is loan to value in America they use that but in Australia we use LVR


What are the pros and cons of high LVRs?

The big con, in general, is if you have 80% LVR or more than 20% deposit, you don’t’ pay lenders mortgage insurance - but if you have less than 20% deposit you pay it. This is an additional cost where the bank will make you go with a third party provider to get insurance and add ons to your loan. It also increases your debt and it's an insurance to cover the bank when you have a small deposit.

This premium allows you to get that product, the pros is that a lower deposit means you can get into the market quicker and more deduction because you’re paying higher interest rates. This is a double edge sword, assuming it's an investment property, the more debt you have, the more interest and the more deductions. Otherwise, owner occupied you have less deposit and more nondeductive and non-tax effective debt but it can help you put your foot in the market.

It’s good on your cash flow up front because you don’t need to save us much upfront but bad long term because you’ll have more debt.

You’re more susceptible to asset price drops, so if you buy a property for $100k and you get an 80% loan, it drops by 15% in value, all of the sudden the loan itself is worth more than what the properties value is. You will struggle to sell it because the bank will say if you want to sell it you have to top us up for the difference in the loan.

The banks are more critical on your application with a smaller deposit, so there are more checks and balances because to the bank you’re a higher risk customer.

The rates are generally higher. With all the changes with APRA, the banks are pricing for risk, in effect, that means the lower deposit the higher the risk in the eyes of the bank. With higher LVR and less deposit, you pay higher interest rates, which is a con of higher LVR stuff.


Solutions Go and study medicine – different types of jobs

White collar workers, like if you’re a doctor, vet, radiologist, optometrist - any medico type profession, can get up to 95% LVR without paying lenders mortgage insurance because these jobs are recession proof. The banks are willing to lend more to these professions because they’re earning potential will only go up.

This was recently extended to engineers, accountants, some forms of financial advisors. It’s an industry specialisation deposit, but different criteria and incomes change this.



Family guarantor loan

This is where the banks are happy to lend you money using a guarantors property as security, most people use their parents. Where in Louis' scenario if you’re buying a house for $500k and you borrow it all, but the bank will put $100k loan to your parent's property then $400k (80%) will be secured against yours. So the bank has two different loans. Because both loans are below 80% there's no LMI and it helps you get into the market a bit quicker. The only negative is higher interest repayments because you're borrowing more. If you're on a high income and your parents can do this, it’s a good option.

This works well for someone who has been studying but has a big income, they can pay down 5 – 10% within two or three years and after that time they can remove that guarantee - they’ve paid down the 20% and move on.


Gifts from parents and relatives

You can use this as a deposit if you don’t have your savings. I don’t really advocate people using personal loans as a deposit because you get into too much debt. Personal loans have higher interest rates and shorter repayment periods. It’s better to get the lenders' mortgage insurance.

Also, it’s potentially tax deductible against investment properties.



In summary: High LVR is a really important tool, there are a lot of pros that should be considered. When I bought my first home I had a 5% deposit and paid $12k in mortgage insurance, moved in for 6 months and then after turned it into an investment property and claimed a deduction for the costs. So there are a lot of pros in there. I wouldn’t have been able to buy another property for another 2 years had I not done this. Going back to our last episode on the battle of property, if you can get into property with a 0% deposit, and experience the full return on that whole value, it’s a very powerful tool but it’s solely reliant on growth, which is never guaranteed. The cons of high LVR are if there’s a market correction it can really affect your equity. The banks have a lot more caveats and checks and balances in place because of its higher risk to the bank.
Silver Hair, Platinum Tips: Real Estate Talk's Kevin Turner Gives Us His Secrets to Becoming Recession Proof  

This week, we’ve got Kevin Turner as a special guest, industry veteran and host of Real Estate Talk Podcast. He has been in the industry for over 30 years, and more importantly, he’s seen a lot of deals. 

We run through his tips on the art of negotiation when dealing with real estate agents and a few tricks of the property trade including:

The good times and bad times Recession and what would happen in the future if it happened again How to recession proof your portfolio and protect yourself from the downside Kevin, could you please give us a background on yourself?

I’ve been in real estate since 1988, and I’ve seen a lot of tough times. I’ve been a real estate agent as well as an investor and my background is broadcasting. Having been in radio for quite some time, I combined those two careers, I’ve still got a licence but I haven’t sold in quite a few years.

  Being so involved in real estate, I had a recent scenario with a client of mine and they were buying their first owner occupied home and they didn’t know how it all worked, what are some tricks that agents use to help you as a buyer, purchase quicker? How can our listeners arm themselves?

I wouldn’t call them tricks that agents use, but there are negotiations strategies. Real estate agents work for the seller and they’re there to get the most they can for them, but first home buyers look at it in an emotional sense. Agents try and make you proceed with early offers, so make sure you go in with a plan, think about how much you want to spend and stick to it. The bottom line is that there’s always another property. Don’t get caught up, as if this is the only property, think of it as a commercial exercise.

That’s the secret.

Don’t get caught up in commentary and emotion, and plot your own path.

If you are going to into the market as a first home buyer, get help from a buyers agent and even consider taking a negotiation course so you learn how to hold the high ground.



When there are dual offers, how can people navigate that situation and work through it?

Well, this means you’re buying at a good time, but you could be caught in it. This goes back to understanding the true value of it and being prepared to pay what you want. There is a requirement where if there’s a competitive offer, the real estate agent can't show you the offer. But good agents will get you to sign a competing offer form and you can make your best and final offer, then if you miss out on it, walk away and don’t get caught up in the emotion of it.

You make money out of real estate when you buy, not when you sell. Don’t pay extra when you buy, because you can't expect to make up for it when you sell.


It was reported that Australia now has the record of longest time without a recession in the economy.

What are your thoughts on ways people can arm themselves against recession because you can't go up forever?


I remember when mortgage rates were 18% that was hard. Plan for the best but expect the worst. Rates will go up they cant be the lowest they’ve been forever that scenario will change. The banks build a buffer whenever you borrow, so make an allowance for rates to change up to 5%.

Make the sacrifices early in life and be prepared to go without, a lot of smart young investors that I meet and talk to are happy to go and rent in a place they like to live in but invest where they know will go up (Rentvesting_

Smart investors also understand that having a plan is set and has a strategy behind it, whether you’re looking for capital growth or turning it over.

You also need a team of experts around you, buyers agent, good accountant, real estate agents, tax accountant. When you’re starting to build a portfolio you need to have the right tax structure, think about your plan and your team and build it as soon as you can.


Where can we find you? 4BC regular show on Saturday and Sunday morning. Call me anytime for a chat about real estate!


Takeaway points: Negotiation – realise that the agent is working for the vendor and not working on your side, arm yourself with this information You make money on the buying, if you pay a bit extra on the buy you won't make it up on the sell. So go hard and negotiation well because you won't make that money back up Don’t be afraid to walk away Recession proof your portfolio, don’t be too over levered if you get that down. The market is a cycle and that’s just a part of life


[Quick ep] Upcoming LIVE Show + Q&A  - Growing Passive Income: 6 Steps to Financial Freedom! Make sure you register  

Sick of having to show up to work every day on time, when really you’d rather be at the beach? Or do you just want financial freedom so that you can spend more time doing what you love?

Join Jayden & Louis hosts of the Rentvesting Podcast as we go through the Steps to Financial Freedom!! 

Whether you want to quit this month, next year, or sometime in the future, this webinar will give you clear, actionable strategies to make it happen.

So what will be covered from start to finish?

The Six Steps for Gaining Financial Independence webinar will cover the following:

Why we invest? The reality gap for 99% of the population How to build passive income Why people fail And how to get started today!

This LIVE webinar has content we haven’t covered before in the Podcast, and will provide you with further detail to help you move forward towards achieving your financial goals. Best of all, if you have any questions, doubts or worries, you can chat to Jayden directly about it, as we open up question time at the end of the webinar for you.

So what are you waiting for? Join the Rentvesting Podcast’s webinar and learn the six steps to gaining financial independence so that you can live the lifestyle you’ve been dreaming about and no longer resent waking up every morning for your 9-5 job.

Sign up to this FREE webinar today here, and get ready for Thursday 10th August 2017. The link if it doesnt appear is -

Six Steps to Financial Freedom Webinar Information:

Online free webinar Thursday 10th August 2017 7pm (AEST) Register here now
Is Commercial Property A Good Investment? Property Expert Thor Harrison Tells Us the Pros and Cons, and How to Find the best investment opportunities in today's market.   

In this week’s episode of the Rentvesting Podcast, we’re talking about commercial property. This week we’ve got a special guest, Thor Harrison who is a commercial real estate agent and manager at Net Rent Property in Brisbane. So far on the Rentvesting Podcast, we’ve only spoken about commercial properties in the sense of REIT’s and investing, but today we’re going to talk about:

Why commercial property? Types of commercial property Risk & Return of commercial Tennant risk



Background on Thor Harrison:

Net Rent is a commercial real estate agency. Thor started in property development and 10 years later he now does sales, leasing and property management.

That’s commercial property, to retail, to industry warehouses. In terms of property management, it’s more industrial, with a number of tenants in retail and the rest is commercial office.



What is commercial property?

Commercial property is more of a return based investment, so people are looking at it based on yields and some sort of financial security with a long-term tenant. You have a lot of self managed supers, mums and dads looking to park their money and longer lease terms.



Main types of commercial property Office Retail – i.e. Nandos Industrial – i.e. supply Woolworths groceries, distribution.



Advantage and disadvantages of commercial property?

The advantage of investing in commercial over residential is the return.

Residential is lower risk with 4 – 5% return but commercial you’ll get 10% on a good day.



What are the risks involved with commercial property?

The biggest risk would be the vacancy time; it’s never easy to find a tenant. Commercial you could be waiting for up to 12 months before you find someone. The risk is also that the tenant doesn’t always survive. In retail particularly - the mum and dad style businesses can really struggle. It’s all about finding a good solid tenant and making sure there are guarantees in place so if they go early, you can chase them. Even just a bond to cover you for three months of finding a tenant is important to have in place.



In some cases, the landlords often manage properties and the tenant hasn’t looked through the lease properly. With commercial, what are the things people need to think about before getting a tenant?

Worst-case scenario? There are a lot of people who just really want a tenant and they wont do their checks. It’s a good idea to get history from a past landlord or someone they have a line of credit with. Also check their profit and loss, assets and liabilities to be sure.


Yield and leases

Compared to residential – commercial does cost more, because you’re getting a higher yield, but the finance you’re putting down is about 30 – 40%. Getting into it, the yield is a big thing, so there are net and gross leases.


Net Lease

Net lease is where you’ve got a tenant paying all your costs, often not including the land tax but some leases have all costs, so you have no expenses. That’s rates, electricity, water, internet, so what rent they pay goes straight into your pocket.


Gross Lease

For a gross lease, the rent is higher to account for it. It may be set by per square metre at $400 per sqm net plus outgoings, another $100. It depends on who negotiates the deal and the owner’s profile, how they structure the business.

Most importantly, look at net return and ensure you are covering bank costs.

Keeping on costs, if you’ve got tenant paying outgoings it sounds pretty good until they disappear, so there’s that risk there.



What about maintenance cost, who looks after that?

This is good for a commercial owner, as it will be a tenant cost and it’s budgeted for. So depending on the lease there should be an outgoings budget which the tenant pays monthly. The only thing you can’t capture is capital costs. For example, fixing a whole roof can’t be passed on to the tenant but repairs and maintenance is fine.

So with lease terms, residential will be 6 – 12 months then you’ve got to find someone new or extend.



There are different assets with commercial, but in general what are the lease terms?

It’s usually 3 -5 years initial term, then there can be optional for additional years. If the tenant hasn’t done the wrong thing, they have a right that they can stay with the lease - you have to give it to them.


Also on that, what are some incentives with commercial?

Well, in some of the tough areas they throw in incentives.


How does that affect yield?

There are normally two approaches, tenants will ask for a rent discount or rent free as the incentive. Normally it’s one or the other, but sometimes both. Traditionally it’s been one month free for every year of lease. They’re the incentives you’ve got to take into account.

If you’ve got a blank retail space and they fit out a Nandos, when the tenant leaves, they’ve got to change it back to be a blank space again. However, if you see it as an advantage and you want to add to it, you can. So you can offset that for not having to give a bigger incentive.



Finance in commercial

Lopping back to the finance side, so with residential you can get away with a 5 – 10% deposit, while in commercial its generally 25 – 35% deposit , sometimes higher.

So is it as accessible as buying a unit or home? No, it makes it really tough. But if you’re looking at diversifying your portfolio it could be good.

So I guess, just rounding it off, there are three types of commercial investments:

Office Retail Industrial

The advantages are that they’re great because you get a higher return, but there’s more risk around tenant vacancy, incentives. You’ve also got concerns like buying in an area that has no growth. If you’re looking for growth over return, then look at residential. Another advantage is the duration of lease, with the tenant in for years and years. The downside is that it has a higher cost of entry and the tenant risk. However maintenance cost is covered by the tenant as with outgoings, so you don’t really need to worry about it.

If you’re comparing it to shares, there’s a higher barrier to entry with costs and liquidity if you want to get in at a lower cost there’s always funds you can access, where people are managing the asset and they’ve done the investigation with regards to returns. That’s on the real estate investment trust and is worth looking at if you want exposure but you don’t’ have the deposit, it could be how you get into the market while you’re still building it up.



Three takeaway points: Long dated lease terms can be powerful. Return is higher than residential – but there are risks. More capital – when you’re financing you need a 30% deposit on these types of commercial asset, so keep that in mind. If you’re looking at a return based on your equity it could be lower than residential where you only need 5 or 10% deposit.


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Banker or Broker? Which is best, how you can get a better rate without refinancing & tips to find the right person for you!  

Today we’re comparing bankers to brokers, and what the advantages of using a mortgage broker are, or why you might go to a bank directly instead. Now that the industry has changed a lot with APRA on board and policies changing daily, rates moving up and down it’s time to know these things.

If you’ve had your mortgage for more than 2 years, chances are you’re probably paying too much.

Don’t forget to leave a review on iTunes here, we love your feedback.


So you’ve banked with Commonwealth Bank your whole life and you walk in there to sort your mortgage out, why isn’t this good?

Well if you’ve got a stable income changes are you can get a good rate with almost any bank. Once thing I’ve found is that banks punish loyalty.

Louis had his loan for 18 months and the banks never did a review, so Jayden stepped in and got his rate down by 0.2%. Which saved him about $1,000 per year. So be aware that banks do punish loyalty and they’re not looking at you individually, whether brokers have a one on one outlook. If you’ve only ever banked with Commonwealth Bank, they’ll put you on the only product they’ve got. Instead, if you’ve got a choice between a few banks, you’ll find the best structure for you. 


So how can I find a mortgage broker right for me?

Start with talking to your friends, family and colleagues to see if they know any great mortgage and finance brokers they have dealt with. Mortgage broking is all about word of mouth referral, but it’s also good to look at reviews and case studies to see if they’re helped others who are similar to you.


Does it matter if they’re qualified?

Well would you use a forklift without a licence?

Or get in a car with someone who doesn’t have a licence?

Yes, mortgage brokers need to be qualified and you can take initiative to see their qualifications. LinkedIn is always a great place to start, as it lists their experience. At a minimum you should expect them to have a University Degree or a Certificate IV in Mortgage Broking. Equally, they should be licenced by one of the Mortgage Broking industry associations, which are FBAA (Finance Brokers Associate of Australia) or the MFAA (Mortgage and Finance Associate of Australia).



How do you tell if they’re experienced?

Find out who they’ve helped and also look at LinkedIn. Make sure they have case studies and have experienced working with different clients. Another thing to ensure is that they’re still actively in the industry and doing what they say they are, as policies are always changing. Make sure they’re doing lots of deals, awards and accolades are a good indication of this.


Does it matter what banks they use or if they have a choice of lenders?

Here’s an industry secret! A lot of brokers advertise that they have access to over 30 lenders, but generally they can only access two or three banks because they don’t do enough volume. You should ask what lenders they predominately use, and if they are only limited to 2 or 3, ask why they don’t use others and how this will help or hinder your situation.


How much will it cost you to use a mortgage broker?

In general, when it comes to residential loans, banks pay commission to brokers. This ranges from 0.5 – 0.6% upfront. Howveer sometimes with commercial loans and complicated finance it can be a bit different. That’s the industry standard. If they are going to charge you, mortgage brokers are required by law to detail any commission they receive as a part of the process.


How do you find someone who can help you with structuring?

It comes back to their experience and making sure they ask the right questions look at what you’re achieving and what your goals are.


In summary: How to make sure you’re getting the best deal for your loan? Get someone else to do it for you! Make sure they’re qualified; you can read reviews and find out about their history. The markets change some banks go up and others down, but one thing is that they all try and put up peoples rates and don’t give you a lot of options. So have a broker working for you and reviewing those rates.
Which is the better investment for me? Property Vs. Shares it's the Showdown of the Century, Find out Which Performs better and Which Makes More Money?  

In this week's episode of the Rentvesting Podcast, we're going to talk about the battle of growth. There was an article in the AFR about the growing number of Millenials investing in the stock market. So we're looking at the pros and cons of property verse shares and which one is better, in both situations.

Louis is going to be fighting for shares and Jayden will fight for property, and we're going to battle it out.


Round 1: Pros - Property, leveraged.

Being able to leverage property is a clear advantage for property. If you invest $100k in shares verse property, the return of property will be a lot higher. So the big pro with property is that it's leveraged because if you get 10% return on property you'll make more than 10% return on shares.

According to residential property returns, they sit at 9.9% compared to Australian shares at 8.7% - gross return.


Pros - Shares, higher yield, no outgoings.

With shares, you'll get higher income per yield, so after costs and outgoings, that $100k can still earn similar income to property overall.

With property, it depends on where you are buying your property, obviously, the higher the yield will affect it.

As with shares, it's the same. You can buy some mining stock that won't ever pay a dividend because they don't really have earnings but generally, there are mid-capped to large capped shares that pay fully franked dividends. Telstra at the moment is paying a yield of 7.5 excluding franking credits. That's from an income point of view, fairly sexy.

Shares have franking credits, this is where the company has paid tax and out of the profit they pay you a dividend when you receive that income you pay your marginal tax rate but you'll get some franking credits back and it works out as a tax effective income.

This is exclusive to Australian shares, on American and European you don't get franking credits. But you can invest in Malta.

So obviously pros and cons to both.


Pro - Property, no capital gains when living in it.

Another property pro is that if you're living in it, it's hugely lucrative tax-wise as there's no capital gains tax when you sell it.


Con - Shares, capital gains tax.

Whereas shares you the get the capital gains tax when you sell. You will be assessed as earning half of it, so if you're on the highest marginal tax rate you'll lose a big chunk of it to tax.

So if you make $100k off shares, you'll be assessed as earning $50k and so you'll pay about $25k, a big chunk.

While property, it's hugely beneficial to renovate and flip it, as long as it's your principal place of residence and it's not your primary income source, there's no capital gains tax which is a great instrument when selling your home.


Pro - Shares, diversification.

It's cost effective to get a lot of shares at a low price. You can buy 300 shares for $20 through an ETF. However also beware that shares can be expensive if you're buying small parcels due to paying brokerage.

But equally, property can be expensive to get into with stamp duty, conveyancing, real estate costs, maintenance etc. The rule of thumb on an investment property (it's not the same interstate) but generally I use 5% as entry cost for a property.

But then if you look at the long-term returns, property wins.

However, if you go 30 years, shares win hands down, while 10 - 20 years though property is better.


Pro - Property, historically good long-term returns.

The other pro is that people in Australia like having a physical asset, it's easier to understand and look at a property, as you can touch and feel it. Whereas shares you have to pull apart financial statements and look at their three-way reporting, which is more difficult.


Pro - Shares, there's no fuss involved.

They're set and forget and you have no tenants calling you trying to get things fixed.


What is market cap?

Market cap is the number of shares X shares price.

It's not a true idea of how big or successful a company is but it's how big overall it's market capitalisation is. In general, anything that has stable cash flow and is large with a stable business model doesn't go out of business.

Con - shares, it always feels like there are some people with an inside understanding and it can be a bit opaque you don't know what's going on all the time.


Pro and con - Shares, volatility.

Shares can be volatile, however being volatile as heck is your friend. When a property goes down in value, how will you take advantage of that? Instead, with shares, you can put money into the share market as this will compound your returns massively. While being volatile, that's the best thing about them.


Are there are more risks in shares compared to property?

No, there are just more perceived risks.

As some people might have invested in shares in 2007 or 2008 and now it's sitting at 38% less. It comes down to your individual behaviours. If you're watching the market every day, it can go up and down a lot and emotionally affects you.

But you can do a speculative approach with property too. If you wanted to buy a development in the middle of nowhere, and you're going in for a speculative commercial thing you can lose a tonne of money off development because there's leverage in development, so you could lose it.

Developments need a 20 - 30% return to factor in that and you can get pre-leases and pre-sales to assist that.


Pro - Shares, franking credits.

If you're in a tax-free environment, eventually you will be in an allocated pension, you get 100% of franking credits. Right now Telstra is paying a 10% income when you include franking credits.



Round 2: Risks with shares?

This is part of the problem though. Shares are quick and easy you can take that franking credit and buy something. The risk with shares is the temptation is there because they're so liquid.

Pro - Shares, liquidity.

Property is a good measure of savings because you don't take the money out.

Con - Property, forced repayments.

You're forced to pay money each week.

Con - Shares, unforeseen drop.

Shares can go to zero quickly - my Anglo-American shares went from 11c to half on one cent.

You can't take anecdotal evidence though (Louis).


  Final argument

Over a 20-year period, Australian residential property performed even better, posting an average annual return of 10.5 percent compared to the 8.7 percent gain in domestic shares.

Australian shares have had a really bad 10-year run because you look at 10 years ago was 2007, but if you look at 9 years ago, shares have returned close to around 16% per annum. One year's difference is a massive overall difference.


Pros in summary:


No capital gains tax. Enforced savings to help you pay your mortgage. Good long term returns. Owning a physical asset is great. The leverage and tax deductions can help.



Great diversification at a low price. The low price is a pro alone. Volatility can be your friend. There is no fuss involved, you can buy some blue chips and even the index and get those returns. Franking credits, potentially higher incomes, historically returns might be similar but with property you can leverage it. Shares you're just investing on your cash. If you look at the return on capital it's different. Positive yields.


Cons in summary:


Is a lot of fuss to deal with. High costs, transactions, lots of outgoings. Initially expensive to get into but not necessarily ongoing. The vacancy is difficult too.



Can be costly to get into if you're not buying big parcels. Volatile. Risky.


Shares and property can co-exist but obviously, they each have different reasons to invest in them.

Risk It for the Biscuit: How to Work out What your Risk Tolerance is, and What is Risk Profiling?  

On this week's episode of the Rentvesting Podcast we're talking about risk profiling. This episode is based on a question from Chris, looking at a bird's eye view of how you can be thinking of investing. We're breaking down why people make decisions and what risk profiling is based on. The question was around where someone should really be investing, as opposed to where someone does invest.


We'll run through what determines that individual preference along with what it should be

A lot of people who have lost money in the share market are now moving to property. This is based on psychology, if you're risk tolerant and don't mind things like gambling, running with scissors, swimming after you've just eaten - these sorts of people are considered risk tolerant. The other

On the other side of this are those considered risk adverse, they don't like taking risks in life.

Based on that fact, that starts to determine where, if they're looking to invest, they do.

If someone is risk tolerant they might go for penny shares where those companies could go up or down a lot. While someone who is risk averse might just keep all their money in cash.


What's the risk reward concept? There's low risk like cash, then there a high risk.

In financial markets or investment, risk isn't like everyday risk. Risk is considered through volatility. The risk-return equation says the higher the volatility you accept, the more movement that can occur, the higher your return should be.

For instance cash, cash can't lose value unless hyperinflation occurs. Cash doesn't move up and down, it will get you different interest rates but as you go down the chain of assets that have higher growth components because they go up and down, they now have volatility. The greater they go up, the greater they can go down.

If we break it down on the chain as far as what's the least and most volatile:

Bonds have a slight volatility, but generally, they're more an income asset. Property and shares, when they have growth components to them - you can break it down to high or low growth depending on the area. You can buy in blue chip suburbs where the yield might be lower, but high-risk suburbs like mining towns could have high yield but also could drop and then you could be at risk. As for companies, the banks don't move so much but smaller companies have more risk involved and that volatility can be at 80% a day.


How do people determine when they invest in that risk profile?

Generally, people just determine it on their own, they invest in what they feel is right for them. Sometimes it's easy to miss the point though and what you're trying to achieve.

Individual needs + psychology = risk profile.

Someone who is young and can handle the risk could go for property, because they have time to invest in a long-term investment. While someone who is defensive in retirement should go for 30% growth and 70% defensive.


Are there any one size fits all rules?

Not really, it depends on the individual. I've seen some 20-year-olds who don't want to invest in any shares and they think they're too risky. Then I've seen some individuals in their 70's have invested in their shares all their life and love the up and down changes of it. While even though they need more defensive assets at that time.

Although there might be broad profiling depending on the age and time you're at in your life, it really depends on the person.

For myself, when I try to figure out where funds should be invested the first thing we look at is their individual means and how long they want to be investing the money for.

If it's for a home deposit that's 2 - 4 years and those funds shouldn't be invested as it's too short term. But if it's for long term 30 - 40 years that can allow a lot of growth, especially if there are regular investments, it's better to split out the investments over time.


What are some questions on how you determine a risk profile?

Return requirements

Return requirements mean that planning and forecasting are required in order to get 8% return per annum. So working back from how much you need in your super, we look at how much you need as an underlying return. If you cut out growth from the equation:

Income + Growth = Return.

You've halved a lot of the equation and if you're defensively invested, you'll be getting income from cash and bonds and a little bit of growth. But if you get that solely, you're likely to get a lower percent return than if you've got more growth allocation over the long term.

So that's the first one looking at return requirements.

How much to invest

If you've got a lot to invest and more money to diversify, that can often allow for a bit more risk to be taken on. Just generally, we ask them what their reaction to case scenarios would look like. For example, if your investment goes down by 50% how would you react? What's the max level of volatility you want to accept in a portfolio? This is looking at their psychology of how tolerant they are.

This is looking at their psychology of how tolerant they are.

Figure out what sort of needs you're after.

We also test their understanding with questions like - say the portfolio does drop by 25% how would you react? Would you invest more? So that one helps determine a lot of their knowledge around investment

So that one helps determine a lot of their knowledge around investment and volatility. It's about re-educating, as volatility occurs, so the best thing to do is not to sell, because selling when it goes down guarantees you will lose money.

If a share goes from 100 to 50, it then needs to go up by 100% to go back where it was. If you invest at that point, then your upwards return isn't that great. So if you added another 50, then any additional growth after is just a plus.

In summary, shares are the highest risk - between shares, property, fixed interest and cash.


Case Study

Looking at case studies at a high level, if Bob is a young investor and has only invested once (30 years old), what is the portfolio for someone who is a bit risk averse but wants to grow?

As this person has probably been burnt by investments before, they probably will try and avoid it. For this individual, it would be about reeducating them. If you're in your 20's and your investment is in super, let's have a look at the difference between keeping your funds in cash or taking on additional risk over a 30 year period.

First of all, don't sell! If you have a surplus of cash or you manage them wisely, they shouldn't drop that much.

Long term, the market does recover.


On the other side, Sarah loves to gamble, she's a bit older, the late 50's and has a decent amount of money. Is it bad for her to go high growth, high risk?

It's up to her. If she's about to retire, what will she live on?

If Sarah has a decent amount of money to retire on and draw an income, it's probably better for her to be more defensive. If she's 100% invested in shares, then 40% of their value could go down.


Key takeaways Risk profiling is based on your individual needs and not what your friends are doing or what the market does. It's based on your individual profile - answering the above questions, understanding what you can handle if it goes up or down. Changing the perception of letting external things determine where you invest and looking at what is the right thing for you towards your long term goal.

Don't forget to leave a review on iTunes!

Did our parents have it easier? Is it harder than ever for Millennials to buy property? Times are changing: Baby Boomers vs Millennials  

In this week's episode, we're talking about Tim Gurner's latest interview and we're going to cover what our parents pre-1989 had in terms of net income and household budget, looking at what we've got and the cards we've been dealt and the ways we can all work through this.

Today we will run through:

Working overtime and incomes of Millenials verse our parents and the property price story. The income over the years between our generation and our parents What we spend our money on

You can see here that rent is significantly higher, along with tax and HECS along with hidden taxes like the GST.

Over the past 17 years, the cost of things have gone up due to GST and has increased the cost of everything by 10%.


Superannuation guarantee

A lot of people think the payments your employer makes into your super is what your employer covers. But really these days it's part of your total package. If you're on a $54, 500 income then you'll only get $50,000 and the other $4, 500 goes into your super.



In 1989, Hawkes government introduced HECS, under HECs there was a system where $1, 800 could be charged to university students and the government paid the rest. Now between 4 - 8% of your income goes to HECS and 9.5% of it goes to super, so you're left with a bit less than those from pre-1989. So that's about 20% of income that they had otherwise no have had to pay.

Also, the average HECS debt was $17k and now the average cost is between $30k - 50k for a standard bachelor degree.


Real wage growth is low

Wage growth is low.

Inflation - Actual Wage Growth = Barely Keeping Up

At the height of the last recession in 1990, the official cash rate was 7% and inflation fell from 7% to 2%, yet last month the Reserve Bank of Australia opted to keep the official cash rate on hold at 1.5% and inflation is currently sitting at 1%.

In reality, your wage is going backwards. Overall this is creating the effect of Millenials having less money than their parents in their pockets.


Property prices

Home ownership has gone down. For those between 25 - 34 in the '80s around 56% of people owned a home and now it's around 34%. The same with those between 35 - 44, home ownership has dropped by 15%. So generally, overall for people who own their own home, the younger they are, the less of them there are.


What can we do? Fractional Investments

Fractional investments are where you invest in small parcels and still get same property exposure. This is a big market and there are a lot of positives but potentially negatives just so you know what's out there. The main ones are:

Acorns Brickx REITs ETFs


Have a budget

Try apps like Pocketbook or the Rentvesting spreadsheet to track what's coming in and going out. It's important to stay on top of your spending so that you can save more.


Times have changed, so we all need to change with it. It's not fair to compare now with the past as it's like comparing apples to oranges. So budgets of today compared to those of 1989 and earlier are completely different. It's just about being smarter with your money.

The light at the end of the tunnel is that although times have changed there are good tools out there to combat that. Try the Rentvesting calculator here to see if you should rent or buy.

If you enjoyed this episode, make sure you leave a review on iTunes for us here.

How one Aussie Millennial Has Grown Over $335,907 in Net Assets & His Financial Independence Hacks  

This week we've got Matt the Aussie FIREbug (Financial Independents Retire Early) teaching us a few things about his road to financial independence. He's going to take us through rapid saving strategies, his financial independence journey and ETFs and break down these in further detail.  


About Matt - The Aussie Firebug

My name is Matt - the Aussie Firebug, I've got a website which is dedicated to my journey of financial independence which stands for Financial Independents Retire Early. I'm currently 28 years old and I work in IT. I started working when I was 22 after finishing university and growing up I had an Italian father, who was very thrifty and I was always very good with my money.

I struggled as I'd save all this money for no reason, then I'd blow it on something like clothes. Then I got a full-time job, and it was then that I realised there should be more to life. I was out of the house for about 10 - 12 hours a day working Monday to Friday each week and I wasn't used to that. I thought is this going to be my life for the next 40 years with four weeks off and a couple of sick days? I liked my job but I really struggled to adopt this lifestyle. So I worked that year, and then I bought an investment property right before the first home buyers grant finished. But I didn't really want it, I just did it because it's what you do. It wasn't until after a couple of years when I discovered the whole financial independence. I bought the property in 2012, and in 2013, I was thinking - I've got this asset, a lot of debt to my name, I better figure out what I'm doing. My initial path to lead me to financial

I liked my job but I really struggled to adopt this lifestyle. So I worked that year, and then I bought an investment property right before the first home buyers grant finished. But I didn't really want it, I just did it because it's what you do. It wasn't until after a couple of years when I discovered the whole financial independence. I bought the property in 2012, and in 2013, I was thinking - I've got this asset, a lot of debt to my name, I better figure out what I'm doing. My initial path to lead me to financial

My initial path to lead me to financial independence was through property investing. I realised you can buy an asset and generate income from it.

Keep buying things that are assets, which generate an income.

I read a lot of finance books and then I stumbled across Mr Money Moustache about a guy who's an engineer and retired from full-time work at 29.

His post - the formula to financial independence is a really good post and he goes through ETFs and what he invests in. I ended up buying my third property and I was slowing understanding diversification.

I realised I was heavily weighted in just Australian property and if there ever was a bust, it'd go badly for me. This last year I've been concentrating on exchange-traded funds - a blend of shares wrapped in a package.  I've been investing heavily in ETF's lately, there are pros and cons in each asset class.

I hope to get to a point where I track my expenses religiously. I think that's the most important part of the whole journey. You have to know. I post my net worth every month and when I get to a certain number hopefully my assets are generating an income.


Savings - if it doesn't get measured it doesn't get managed.

Aim to save 25% but with the fire piece generally, it's trying to strive to save more than 50% of your income.


You hit 74% of your income last year, what are some tips?

The main reason I could do 74% was due to living with my parents in the last half of that financial year. I was only paying rent for 6 months of that time. I'm about to release my new post, about how much I spent in this financial year and it won't be anything near that good. There's no rule. It's all about how quickly you want to escape the rat race. I always tell people, track your expenses! If you track them and look and how much money you're spending on things and you'll start to realise how much money you're wasting. You need to start plugging the holes.

You can do the hardcore way with a spreadsheet. Or you can use Pocketbook which is an Australia software company and it categorises your transactions which you can create graphs and things with. It allows you to drill down where you're spending your money.

Track your expenses and this will help you improve. It takes discipline and you've really got to want it to do it. Especially if you're on the path of independence you've got to want it bad!

I always think about whenever I want something I always mull it over for a few days at least. If we want to buy something we weigh it up and look at it as this purchase will delay the date for when we can quit our jobs.


  Let's talk ETFs, practically, how do you invest in them?

So basically, you need a broker. You cannot get around not using a broker and this cost is what funds the whole system. The cheapest you can find is $10 for every 20,000. How it works is that you buy packs of ETFs of around about $5 - $10k at a time. You could buy low-cost ETFs but then you'd be hit with a brokerage fee. So it's best to buy them in big amounts so that the percentage of the brokerage cost is an acceptable amount.

I run a three ETF split, so I buy VAS which are the top 300 companies on the ASX, and the best thing about these is that they're all Australian companies and you get franked dividends where basically when you're distributed dividends you get more. In the global share market, Australia only makes up 2% while America makes up almost half of it. Due to this, the whole reason and power behind ETFs is diversification for not a lot of money. If you wanted to diversify them same in property it would cost you a lot and you'd need a lot of properties. But then an ETF you can easily diversify and spread your money across a bunch of asset classes and businesses, which is sort of what your super does. Some supers invest in ETF's themselves.

Then I do VTFs which is the US market - top 300 biggest companies again. Then the other one is the VEU which is the entire world excluding the US. So between those three ETFs I've got most of the markets and countries covered. The theory behind it is if you buy stock in a few different companies, then you're safer. Property is one asset in one location, whether ETFs are reaching so many markets.

If you would like to learn more about Matt, read his blog here.

Property Expert Michael Matusik Talks 3 Areas Tipped to Grow That Most Investors Haven't Heard of!  

In this week's episode, we've got Michael Matusik, property expert! Michael's had almost three decades of experience. We talk property outlook, look at the Brisbane market, and the wider South East Queensland market along with interest rates and where they're headed. Finishing off with how investors can protect themselves from spruikers, with a special treat at the end.

If you enjoyed this episode make sure you leave a review on iTunes and say hey to us on Facebook!


Property outlook - there's always a lot happening in the market, let's start with Brisbane?

If you were to talk about an outlook, imagine the property clock. 12pm is the peak of the market, when things are really hot and property is selling fast, time on market is low. Then 6pm is not a good time, at the bottom of the market where things get stuck, 3pm is a downturn where things are slowing down and price falls then finally 9pm is a recovering phase. Brisbane is currently in the recovery phase, it's showing time on market contracting, the driver behind that is interstate investing, but one of the things different to this cycle is the strengths of it, it's not as strong as it once was in the past and that's to do with employment growth, which isn't as high.

We have good affordability, it's better than Sydney and Melbourne but not as good as it once was. There is some constraint on the ability for locals to pay. It should remain in a recovery phase for the next 12 to 18 months maybe a bit longer.


So you're seeing an increased driver from investors in Sydney and Melbourne coming to Brisbane?

Some of the drivers for the southern investors is the promise they've been told as to what will happen. There has been a past trend where Sydney and Melbourne actually improve and you see how prices of houses and apartments improve in South East Queensland at the same time. This time they're not as strong, but they've been promised this growth. The next thing is affordability as $900k doesn't get you much in Sydney, but in Brisbane, $450k buys you a two bed and two bath townhouse in the Ipswich and Moreton Bay areas. So investors realise they can buy two properties for the price of one and the yields are at 4 - 6% whereas in Sydney they're at about 2%. In many cases, in Brisbane people are looking to purchase for a yield rather than anything else.

  Something that gets a bit glossed over is wider South East Queensland, let's talk about Ipswich.  What's the outlook for that?

A couple of important things, when we look at regional markets - we break South East Queensland in up to 10 to 12 areas. Just like the West in both Sydney and Melbourne - Ipswich will become something like Parramatta. It is merging to be like Parramatta and one of the major drivers behind people investing in Ipswich are jobs - it's likely to create a lot more jobs in the future due to where industrial land is created along with its proximity. It is between Brisbane and the Gold Coast and is a funnel through to Regional QLD with areas that have minimal resources. It's got pretty good road and railway infrastructure too.

There are some issues with traffic but they're not as bad as Sydney or Melbourne. So Ipswich is expected to create a lot of new jobs, which will be local. People living and renting there won't need to commute to Brisbane for work. It's a major growth market in terms of population and land supply, anyone buying there needs to take a longer-term view.

You can buy house and land packages for under $400k, some cases under $300k. Sometimes you can buy quite well for older homes. Some of them might be 50+ years old, and new estates that are certain products can be great value. By that, I mean multigenerational homes where two generations can live on the same property.

A multigenerational home is when homes have the back with its own kitchen and bathroom area, and it might be a four bedroom with two kitchens. That allows the market to have several tenants and on resale that an owner-occupier is likely to buy it as it allows the mother-in-law or adult child to live with them. One in five households in Australia is multigenerational. So buying something like that is a wiser thing to do in those outer lying areas. Developers are starting to deliver this type of product and they show 7-8% yields.


What about Logan? Any opportunities moving forward?

Logan is an opportunity market as well, there's a lot of new land supply and the underlying demand for Logan isn't as strong. Its employment generation opportunities are limited. Investing in Logan you may have a government tenant, if you have the mindset that money is money and you're buying at a certain price point and profile, then this sort of market might have some appeal. There's upside in both markets, probably Logan is more cyclical looking forward and will bounce around. Whether Ipswich will be more steady.


What about multigenerational housing - where are other opportunities for this?

One of the things that is frustrating in Australia is that there isn't one uniform housing policy to do with compromised housing and allowing/encouraging more people to share homes either by that multigenerational model or duplexes.

The reason I emphasise this is because it may change. What you can do in Logan and even the Sunshine Coast, you can't do in Brisbane. The Building code is restrictive.

Right now there are opportunities on the Sunshine Coast - north of the Maroochy River where there's no land supply left.

It is forecasted that people will go back to what they used to do where lots of people live in one house due to wages not going up and cost of living expenses rising. So this is one market, then you've got is larger families and a change in overseas migration mix. You could say there are two types of tenants in this category, and for the multigenerational Australia - these types of homes are undersupplied for the amount of demand. So for investors, there is one where the demand is likely to exceed the supply in 5 - 10 years, which will confirm price growth on these.


For investors, costs are an important piece of the equation. So let's talk about interest rates?

I believe that interest rates will rise, we use a yield curve to predict it and at the moment a 0.5% difference between the two is a neutral policy. Go back 20 years you can see where interest rates fell, and at the moment it would indicate that interest rates are likely to rise. This may sound funny as we've just mentioned people having to spend more and retail getting tougher but it's to do with the cost of money and if the US continue to rise and Australia doesn't change, we will get a drop in the dollar and that will cause a spike. So, to keep things in equal we will see interest rates maybe in the next year or two rise.

Something my partner and I have done in the past is that we've always had a mindset that we may have to pay 50% more interest in a 5-year window. If you'repaying 4.5 - 5.5% you need to think you could be paying 6.5 - 7.5% in the future. We 're at the bottom of the cycle with interest rates. So plan ahead.



Back on interstate investors buying in South East Queensland, one thing I have seen - is where interstate investors come to Queensland and think it's cheap to buy a house and land package in Logan.  What are some ways our rentvestors can protect themselves from buying something just because it seems cheap and not necessarily a good investment?

This is really important. It's about the composition of the pricing rather than the price difference. First Sydney is over inflated, so the differences are huge.  So aside from the culture and lifestyle differences, the first thing to look at is rent - I would be hesitant to buy anything that is lower the 4 - 5% yield, but check for yourself. Don't listen to what the agents say, check on Domain or RealEstate. Look at the vacancy rate and what it's done over time.

The rental market is fluid, it can change month to month and just because you got an appraisal two months ago it can change quickly. Traditionally around June/July and at the beginning of the year, there isn't as much to rent. This is to do with student movements and other variables, so then there can be a tightness in the market and the rent return looks good.

SQM Research does a good job and gives you access to a free database over time to see how the stock has changed on the market.


About Matusik - Market Report Outlook

My firm is a small firm and I largely focus on Queensland and some degree Sydney and Melbourne. I give project and development advice. We break Brisbane City Council up into different areas and also have a capital cities outlook report.

One thing to keep in mind is if you're looking at spending money on a property, do your own research!

This report includes our unique twelve benchmark indicators that define the state of supply and demand in each city.  There is a clear logic behind our forecasts. In other words, you’ll find everything you need to know to assess those markets and to understand what’s really going on.

The report can be purchased here. Listeners will be able to purchase the report for $99+GST, down from the normal $175+GST by using the code REDANDCO – and download immediately.
The $300k Mistake This Young Property Investor Made  

In this week's episode, the spotlight is turned with Kevin Turner interviews Jayden Vecchio.


Kevin:  By way of introduction, my next guest is Jayden Vecchio. Jayden is the director of a company called Red & Co. They specialize in finance, rentals, sales, and development management.


The reason I want to talk to Jayden and I’m really keen to get his backstory is because he is a young investor. In his very early 30s, he already has five properties and he says he’s well on his way to having 15 properties in his portfolio over the next five years.


Jayden, thank you very much for joining us in the show. I’m really keen to talk to you about what you’re doing now and where you see it going in the future. Give me your backstory. Where did it all come from? What’s your experience?


Jayden:  Thanks for having me, Kevin. I started working with a couple of big banks when I was straight out of university, in 2007–08, around the time the GFC was starting to bite, which was an interesting time.


I got to learn a lot of the background of how the banks work in terms of securitization, the mortgage market. I worked my way through to private and commercial banking, where I was dealing with moms and dads and investors and learned a lot of the good things you need to do and the bad things that happen in the banks, unfortunately. Then I used that as a bit of a platform to start my own business, Red & Co, about four years ago with two other business partners.


Like you said, these days we’re basically an all-in-one property solution for people who are looking at buying, investing, developing, and selling. So it’s all been one big progression.


Kevin:  You were recognized in 2016 as the FBAA Commercial Finance Broker of the Year, and that wouldn’t have come too easily, I would imagine. FBAA being Finance Brokers Association of Australia; is that correct?


Jayden:  Yes, that’s right. That was quite exciting, because they’re obviously a national organization, and it was good to be recognized for the work that I’ve done over the last couple of years, especially in the development finance markets across Brisbane, which a lot of the listeners would see the cranes and the things in the sky.


I’m helping funding some pretty big projects across that – over a hundred townhouses in some cases – and then in the commercial finance markets, we’ve funded a shopping center down in Ballina, one in Yeronga, and then even a couple of office towers down Coronation Drive for some fun.


It’s not like traditional mortgage broking, which is good, because I get to see lots of different structures and things, and the good, the bad, and sometimes the ugly, and trying to help people through that.

  Kevin:  No doubt you learn a lot from that, too. Let’s talk about your own experiences. Interesting when you did communicate with me first, you said you’ve made probably all the mistakes. I’d question that; I think I’ve made a few mistakes that you haven’t made. But that’s the best way to learn, isn’t it?


Jayden:  It definitely is, because I know it makes a big difference when you can sit down with someone and look them in the eyes having been in that situation. Or if they’re trying to grow aggressively and want to grow a portfolio, which a lot of young people these days are aspiring to do, it’s good taking a step back and saying, “Well, just because we’re at historically low interest rates, doesn’t mean it’s always going to be that way, and you have to remember you have to have a bit in the tank in reserve, because otherwise, you can get caught out.”


Kevin:  Tell me about some of the mistakes you’ve made. I am going to ask you a question to round this out about if you were to go back and do it all again, what would you do differently? I guess it’s going to be couched in terms of some of the mistakes you’re going to tell us about now, but I believe that, like most of us, you stretched yourself financially as well at some stage. Did you?


Jayden:  Yes, I bought my first unit in Sydney. I was living down there in 2009, and within 12 months of owning it, I was hooked. I knew I was going to be this property mogul, I was going to own these properties. I was ready to go at it, hammer and tongs.


Within that 12 months, my first property had a bit of equity gain, and meanwhile, saving up and trying to buy another property. In early 2010, I’d saved up enough and bought another property in the same suburb, in Alexandria in Sydney.


It was just a small, 50-square-meter unit. If you imagine a rectangle, you cut it in half and you fit a bedroom and lounge room and stuff in it, that was basically it. There wasn’t much to it, but I thought there was some scope there to do a bit of renovation, some cosmetic stuff, tart it up a bit, and potentially either rent it out and keep it, or flip it and make a budget.


What I didn’t realize was around that time in early 2010 was when the RBA was actually on an interest rate increasing cycle, so the rates went up in March by 25 basis points, in April, then also in May, and the expectation was the rates were going to keep rising.


So for me as this young property investor who just settled on my second investment property, hadn’t quite rented out my first investment property, I was trying to cash flow this, and all the while, trying to renovate the second place in Alexandria. I was painting, I was doing the carpet, and I hadn’t really set out a budget. I hadn’t prepared myself. I didn’t really know how. I thought I could do it and manage it and make it work.


Within the first month of just trying to paint the place, I didn’t realize the first mistake I made was the ceilings were made out of this Vermiculite stuff. It almost looks like a popcorn ceiling. So instead of using a couple of liters of paint, it ended up using three times the amount of paint. It blew out my timeframes, my budgets, all the while the interest rates across both my properties were going up and up and up.


It literally felt like a noose around my neck, to the point where I was in the place and it was starting to get winter, it was cold, I was sleeping in the place I was painting on my yoga mat in a sleeping bag, and I actually had to use the oven as a heater to keep me warm at night because I had to use my money towards the repayments.


It was a very low point and very uncomfortable, because I stretched myself financially. I’d basically borrowed 100% to purchase that second property, and I didn’t have a lot of savings behind me.


I obviously didn’t do a budget, didn’t think about the cash flow and worst-case scenario, so it’s definitely something that when I sit down with anyone now on the finance side – and our business definitely looks at this – you have to look beyond what the rates are today and what the situation is today: what’s the worst case and where they’re going to?


Kevin:  A great lesson, isn’t it, to plan for the worst-case scenario, because just listening to that story, those two properties you just talked about in themselves probably very good properties. No doubt you sold those, but if you’d held onto those, what sort of position would you have been in today if you had a better plan and a strategy?


Jayden:  It’s one of those ones where I started out with a plan and I was going to stick to the plan until I got to that point where it was just unmanageable. It was very stressful, and you’re quite right, I ended up having to sell them.


But I actually saw the first apartment I bought in Sydney, in Alexandria for about $340,000 in 2009 recently sold for over $600,000, so it has doubled.


Kevin:  That probably would have been about what you lost on that deal anyway, wouldn’t it?


Jayden:  It’s one of those things where you just have to look forward. There’s no point looking back on that and what you could have done, but it’s worth taking those lessons in and working on it going forward.


Kevin:  That’s part of the university of hard knocks, isn’t it? I think the thing about it too – and no doubt you’ve done this – is that you learn from those experiences and you take them into your next deal. No doubt, you’re a lot smarter now. You tell me you have five properties. Whereabouts are they?


Jayden:  They’re all in Queensland, actually. I think that’s more a case of Sydney, the prices have gone up. Also living in Brisbane, it’s good to know the market intimately. In Sydney, I was quite fortunate that I had some friends and people who knew the areas and helped me give me a bit of a leg up investing.


I think it can be hard when you’re investing to save unless you have that guidance, and I like now being able to if you need to go fix something, I can go fix it, and having a bit more control over that.


They’re all within five to eight kilometers of Brisbane CBD, a mix of houses and a few apartments.


Kevin:  Over the next five years, your plan is to add another 10 properties to build it up to 15, which is what you mentioned to me in your note. Will any of those be interstate? Will you branch out and go interstate again, or will you still continue to buy in Queensland?


Jayden:  I think if the conditions are right and it makes sense, I potentially will. But to me at the moment, living and working here, the focus is mostly on Queensland.


I think it’s important in any portfolio – that’s one thing I have learned – is having diversification, because like in Queensland a few years ago, if there’s a bit of a mining downturn, that can lead to broader impacts on the economy in the local area. So it’s always good being hedged again

7 Tips to Increase your Borrowing Capacity by over $139,000!  

In this week's episode, we're going through how to increase your borrowing capacity. People struggle to get loans initially, and it's only becoming harder because APRA is tightening lending requirements. This is really just, how much people can take out and we'll go through seven practical tips.

This is all simple stuff and whether you're looking at buying in the short term, or medium to long term this will affect building your wealth and your property journey.

If you like this episode, make sure you tell your friends!


Tip 1: Reduce credit cards and don't get debt because it seems like a good idea at the time! A lot of people think that they need to get a credit card for credit history when this is actually wrong. At the moment they've only got negative credit reporting. It's more about having a good credit file, you don't need to establish history.

Reduce any credit card owing you have. If you've got a $10,000 credit limit this will reduce your borrowing capacity by $40,000. So essentially, four times the credit impact. Even if you have no debt owing on the $10,000 credit card - it will still be assessed as if the whole thing is debt, as the assumption is that you could go to the casino and spend that whole $10,000.

  Tip 2: Clean up your unsecured debts   Secured loans - a mortgage is a secured loan because the bank can sell it if something happens. An unsecured loan is a credit card because there's no collateral or security against it.   You can go to the bank and they'll give you $15,000 to have a holiday, but you will pay huge rates aginst that and it will affect your borrowing capacity. If you default on the $15,000 holiday loan the bank will have a hard time getting its money back.   Even a small car loan will affect this. Just $500 a month ends up decreasing your borrowing capacity by over $80,000. It's amazing how those small things do add up and can affect your ability to grow a portfolio.   There's good debt and bad debt, and car loans like that should be paid as quickly as possible so that they don't affect your borrowing capacity. If you've got an existing property, you could look at debt consolidation, where you increase your home loan to add your car loan onto it. The trap here is that the extra $10,000 they keep for 30 years so the interest costs are higher. Speak to a broker about this before doing it!     Tip 3: Sort out your paperwork

As a mortgage broker, I see how bad people are with paperwork, but this is so important! You need to have your group certificates, rates notices, pay slips etc. all ready to go. It's amazing how disorganised people are with this. Get your paperwork in check because this can affect your borrowing capacity. So go through a pre-approval process first so that you don't need to waste time when you're ready.

Get your paperwork in check because this can affect your borrowing capacity. So go through a pre-approval process first so that you don't need to waste time when you're ready to move forward with things.

No one likes paperwork but unfortunately, it is necessary. If the bank is lending you $500,000+ a few pieces of paper are necessary!



Tip 4: Shop around for deals between banks

You need to look after yourself, which means ensuring that you're getting the best rate. If you want to get into investing, look at different lenders and deals because these small differences can really hold you back.

There are two things that make a difference.


How much the bank will lend you

If you've got a combined income of $85,000 - between lenders there can be an $139,000 difference between them. So doing your research can make a huge difference.

Now, this isn’t just limited to home loan rates because, surprisingly, different banks can potentially increase your borrowing capacity. If you have a look at the scenario we have put together below for 2 adults, no kids and a combined annual income of $85,000. There is over $139,000 difference in how much Lender A and Lender G will lend the couple!

Lender A          $465,900

Lender B          $456,438

Lender C          $427,258

Lender D          $411,000

Lender E          $399,508

Lender F          $361,459

Lender G          $326,516


Lenders mortgage insurance 

There can be a huge difference again between banks. For example between them, there could be a $6,000 difference on how much insurance you pay the bank. This is compounded over 30 years equates to almost $30,000 over 30 years, four times the amount. LMI is a good tool if you need it, but if you are going to do it make sure you find the best rate. 


Tip 5: If you have split loans with someone else, show how you are sharing them

If you have owned property with friends or family members in the past you may own 50% of the property. Therefore, you own 50% of the home loan associated but in the eyes of some banks, you are considered wholly liable for the debt even though you only own 50% of the property.

Fairly or unfairly, they assume you need to make 100% of the loan repayments but are only entitled to 50% of the rent. This can severely decrease your borrowing capacity.



Tip 6: Consider extending your loan

Again, this is situational. If you can extend the term of your home loan is it really a good idea?

Pro - extending the term of the loan means you can borrow more with fewer repayments each month

Con - more interest because it's a longer period


This is something to seek advice on and proceed with caution.

Practically, this would look like:

$300,000 loan at 5% over 25 years - $1,753 per month with the total interest payable $226,131

If you, however, looked at extending the loan term to 30 years, it would look like this:

$300,000 loan at 5% over 30 years - $1,610 per month with total interest payable $279,767


Tip 7: Save!

Save! Anyone who has been successful in generating a number of properties has great cash flow management. To do that, you've got to have the ability to save money!

If you have more savings in the bank, the bank will lend you more money. The more cash you put towards a property, the more the banks will give you.

The boring stuff is true.



In summary Reduce your credit card limits! You can do it online or call your bank. Shop around for different banks or get someone else to do it for you. Having more savings, if you've got a bigger deposit you can avoid lenders mortgage insurance. The more you have, the more the bank will lend you. Long term, the banks want to see you at 60 - 70%, if you're too highly geared, you're very susceptible to issues. Try to have them positively geared, as this income is the one thing you can control.

Make sure you are working with a professional mortgage broker like the team at Red & Co to maximise how much you can borrow, and grow your property portfolio in a sustainable way. Also, check out Louis' podcast

AMP Chief Economist Shane Oliver on Opportunities in the Property Market, and where Interest Rates are heading  

In this week's episode, we've got Dr Shane Oliver, chief economist at AMP Capital. Giving us an idea of where the property market is headed and if it's going to crash. Looking at interest rate outlooks, outer cycle bank and interest rate heights, what the implications for property investors are and opportunities for investors, what there is outside of the typical Sydney and Melbourne areas and thinking left field like Perth and beyond. For more info check out The Rentvesting Podcast, and remember to have a try at our Rentvesting Calculator

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