What’s going to happen to mortgage rates for investors? When is a good time to invest in property? What fundamentals really drive price growth? And how can you become a market expert? All these questions and many more are answered by the team and investment expert Mark Bouris.
In a special episode of The Smart Property Investment Show money expert Mark Bouris from Yellow Brick Road reveals his secrets for success in property and how you can cut through the noise and doom and gloom to build a strong portfolio regardless of market conditions.
All this and much much more on this episode of The Smart Property Investment Show.
The Smart Property Investment Show gives you insight, strategies and tactics that every property investor can use.
In each episode, the Smart Property Investment team and its special guests will break down what’s happening in the world of property investment, how it affects everyday property investors and how they can take advantage of it.
Listen to other instalments of The Smart Property Investment Show:
Episode 44: '11 properties by 31, now I'm stuck: What's next?'
Episode 43: 22 properties by 30: Can Generation Ys build massive portfolios?
Episode 42: SPECIAL EPISODE: All your burning property investment questions answered
Episode 41: 14 properties and $13,000 cash flow positive: how this investor did it
Episode 40: How I achieved financial freedom in the face of divorce
Episode 39: $2 million in just five years: SPI porfolio update
Episode 38: Identifying an under market value property: buyer's agent reveals all
Episode 37: How to find - and keep - the perfect tenant
Episode 36: How to get the best properties for the best price
Episode 35: Top investors reveal how to reduce your interest rates and borrow more money
Episode 34: 4 properties in 4 months: The SPI Show gives the inside scoop on its portfolio
Episode 33: How we’re creating wealth for our young family: Investor reveals how real-life mum and dads invest
Episode 32: From family tragedy to successful young investor: 'How I did it'
Episode 31: How to beat other investors
Episode 30: How you can be millions in debt and loving it
Episode 29: How to succeed where other investors fail: real estate mogul reveals all
Episode 28: How a poker night led to a terrible property investment
Episode 27: Australian test cricketer reveals all about his property portfolio
Episode 26: 'How we bought 11 properties in less than 5 years': The SPI Show reveals all
Episode 25: 'How I bought six properties even though the banks don't want to lend to me and I'm self-employed'
Episode 24: 'How property helped me quit the rat race'
Episode 23: 'The worst property investment decision we made'
Episode 22: 7 properties by 25. How this young investor did it
Episode 21: The magic formula for negotiating on properties
Episode 20: 'How we recovered from our auction nightmare and bought a property goldmine'
Episode 19: ‘How I built a multimillion-dollar portfolio even though I bought the wrong properties’
Episode 18: ‘What’s the worst that can happen?’ The ups and downs of DIY property management
Episode 17: The secrets to my success – how I built a massive portfolio on a modest income
Episode 16: How I'll retire on $200,000 a year
Episode 15: 10 properties in 6 years – how this elite sportsman will create a passive income
Episode 14: How I turned $4,500 into a multimillion-dollar portfolio
Episode 13: Are we about to see real estate Armageddon?
Episode 12: My sink-or-swim investment strategy
Episode 11: How your living expenses will affect your borrowing ability and is it time to chat with your lender?
Episode 10: Is it boom or doom in 2016... and is ready access to finance assured in the year ahead?
Episode 9: How a tradie bought 12 properties in under 4 years
Episode 8: 'How I bought 9 properties on a modest income - all before 30'
Episode 7: How to pick a hotspot; Here comes the squeeze!
Episode 6: How to start investing without a plan
Episode 5: 'How I built a portfolio from scratch'
Episode 4: Christmas special! We look back on 2015 and forecast what's in store for investors in 2016
Episode 3: Are we in a property bubble? Does aircraft noise depress property prices? And where's the next boom?
Episode 2: Where are prices on the way back? What's the future for mining towns? Are we all in a ponzi scheme?
Episode 1: What do you do when rates rise? How APRA is affecting investors. And have we found new hotspots?
Introduction: Welcome to The Smart Property Investment Show, with your host, Phil Tarrant.
Phil Tarrant: G'day guys, welcome to the show. Phil Tarrant here, I'm the editor of Smart Property Investment. I'm joined by my regular co-host, Vivienne Kelly. Viv, how you going?
Vivienne Kelly: I'm good, thanks, Phil. Happy to be here.
Phil Tarrant: What do you reckon about what the RBA did last Tuesday?
Vivienne Kelly: Well, I think it was generally pretty agreed that they were going to keep the cash rate on hold at 1.5 per cent. I don't think anyone was taken aback by that, but subsequently there's already been speculation by people such as John Kolenda from 1300HomeLoan who's saying that the cash rate could be cut in November down to 1.25 per cent, and that home loan rates are going to start falling regardless. So, I think it's a really interesting time of year, and Melbourne Cup will have that extra excitement to it.
Phil Tarrant: What's our readers saying, or listeners saying? Are they excited about a rate cut, or are they worried about it?
Vivienne Kelly: We always get amazing reads on our rate stories, no matter what the RBA does. I mean, a hold story is essentially, ‘nothing has happened, keep going’, and we still get thousands and thousands of reads. Aside from that, I don't really get the impression that investors are too worried about it. Rates are at record lows, so I don't think there's anything that they're overly panicked about when it comes to their home loan rates or the cash rate.
Phil Tarrant: Okay, that's good. Well, I want some more information on this, so we've brought somebody who I think can probably chat about it reasonably well, a guy called Mark Bouris. Mark, thanks for coming on mate.
Mark Bouris: G'day guys, how you going?
Phil Tarrant: Talk me through what you think about the Tuesday decision, mate.
Mark Bouris: Not unexpected. I think there's some sort of political bias about not reducing the rate any further, 'cause they've got to keep head room in there for themselves. I think if the cash rate was at 3.5 per cent, they probably would've reduced the rate by another 25 basis points. I think at where it is currently, there's not much head room in case something really goes wrong. I think they're worried if something goes wrong at a point where they really need super stimulus in the economy, they're not going to get it from the government and fiscal policy, that's for sure. So, the only way we can actually stimulate properly the economy is through the cash rate, and given the banks' propensity not to pass on the whole rate reductions, you know the last one ranged between 10 and 12 basis points, the banks held a lot back, I think the RBA would be very concerned about reducing rates irrespective of how the economy's going at the moment. So, I don't agree with John Kolenda.
Vivienne Kelly: Because, Mark, how low is too low? Like, if it gets below 1 per cent will people just start freaking out?
Mark Bouris: Yeah, I think that's right. I think there's ... It's sort of counter-intuitive, but the lower they make it, the more people start to get really worried, and also the loss of head room. So they're going to say, "Oh, hang on, rates can't go down any more. So what does that mean? What does that mean for me? Should I flood in the marketplace and go and start buying property, or should I start to sell?" I mean, people get very confused. We're going to get that American system, the European system, where the rates are so low now there's no stimulus in there whatsoever, no matter what they do. So, gut feeling is, unless something tragic really happens at the moment, or they foresee something tragic happening, they're going to leave the rates where they are.
Phil Tarrant: I've wanted to get you on the show for a little while. You're synonymous with mortgages in Australia. What you guys did, 15 years ago, in keeping the banks honest, I think is brilliant. I like what you're doing now with Yellow Brick Road, it's a business that you head up. In terms of disclosure, I'm a very small shareholder, just so our listeners know, which is good.
Mark Bouris: Well, in terms of disclosure, I'm a very big shareholder.
Phil Tarrant: What I liked about the YBR proposition, mate, is that it's very egalitarian. You're saying that wealth creation should be in the hands of every Australian, whether you're rich or poor, and I think that's absolutely essential. It's something we try and champion through this podcast. Everyone can invest in property, I feel, if you're a working Australian, if you do it the right way. It's just about doing it the right way, and education is absolutely fundamental to that. So, we chat about it all the time.
Mate, I hear every single day, "What's the right time to get in property? When shouldn't I buy property?" My response to that typically is, if you can afford to get in property, get in property today, but it needs to be the right property at the right price. There's a whole bunch of "rights" around it. Mate, what's your view towards Aussie property investors and the opportunity for them to create wealth through property, number one, but also, how the hell do you do it, and how do you get help along the way? Because a lot of people make mistakes.
Mark Bouris: One thing you've got to be careful of doing is thinking that someone else has the answers for you. I think that's the first thing. I really do believe that if you're going to get into the property market, you've got to know the market yourself. So, you don't hand it over to a financial planner or a property developer and just run off and do a pre-sale or pre-development purchase and you go off and say, "Well, the property developer's talked me into buying this and I should be buying something in the highlands of Queensland, because someone's told me that all of a sudden there's a bit of a demand out there." I mean, you've got to do all of the homework yourself. You've got to understand the fundamentals of the marketplace yourself, and that's not that hard to do.
What you really need to do is go along to someone who's going to teach you about the fundamentals. Go along to seminars, listen to podcasts, but don't go to somewhere where they're actually going to try and load a deal into you at the same time. As soon as someone starts to tell you they're going to sell you something or they've got something for sale, run for cover. Run for the hills, 'cause that's really the wrong place to be.
The second fundamental is, I agree with you, it's not about interest rates, it's about affordability. To some extent, the lower the interest rates, actually it's probably one of the worst times to buy if you look at the mathematics of it, because there's an inverse relationship between low interest rates or high interest rates and property prices. The property market is a perfect market in that it ... Priced market, the prices of it actually adjust relative to affordability. The more rate reductions that you get in the RBA for example, the more prices adjust up, the other direction. In other words, the lower the rates, the higher the purchase price. 'Cause affordability usually stays around about the same, on the same basis. It just adjusts, the market adjusts all the time. So, low interest rates could mean high entry price. High interests rates could mean low entry price.
So, you don't do it because of those sorts of reasons. You do it for fundamentals. What can the bank lend me now? The bank will make sure I can afford it. Generally speaking it's very hard to get a loan that you can't afford these days. Generally speaking, as a rule of thumb, banks, people like Yellow Brick Road, we don't approve your loan unless ... We do the loan assessment at 7.25 per cent, irrespective of the current rate, so we're building in 200 basis points, that's about 8 rate rises, into the formula for you. Generally, if we say you can afford it, generally speaking, you can afford it, unless you're telling lies in your application.
Then you make sure that you buy where you can afford and rent where you want to live. That's my view. Don't say, "Oh shit, I want to buy in Paddington, but it's too expensive for me." Don't complain about that. Rent in Paddington, or stay at home with your family, or rent with a friend or half a dozen friends, but go and buy somewhere where you can afford. You might rent in Paddington and buy in Ballina. I'm not suggesting Ballina's a good place to buy, but that's the process.
You buy what you can afford, and you buy based on fundamentals. Where you buy. You buy what you can afford, that's the amount. Where you buy is based on fundamentals, the fundamentals are always the same: population growth, are there jobs in the area? What's the economics of the area? In other words, what drives the area, is it driven just by tourism or has it got some basic industry in there? Is there schools? Is there amenities? Is it somewhere families want to go? What's the demand? What's the population growth? Those are your fundamentals.
Phil Tarrant: Yeah, we always say on the show, investing in properties is not hard. There's a lot of moving parts that you've got to get right, but it's not hard. Why do you invest in property? You invest in property, it's wealth creation, mainly. So, you buy property 'cause you want the thing to go up in value, and you want, essentially, the rent to underwrite the cost of the mortgage and other costs as much as possible. It's not hard right, it's pretty simple?
Mark Bouris: Yeah.
Phil Tarrant: A lot of people make it very, very complicated. You said before, when you hear blokes trying to flog you an off-the-plan purchase, or you've got to work out where the cash is, red flags should go up. You've been in this game for a while, right? A lot of people that I speak to in property investment, they get so engrossed in all the information that they never ever make a decision. A bloke like you, you understand how mortgages are made, how mortgages are priced, etc. etc. Then you've got on the other side, property markets, and you're pretty in tune with what's going on. You've got all this information. You can make confident decisions about what you should be doing, but you speak to punters on the street who get all this information, and they're gonna, gonna, gonna buy property all day. What do you say to them, to say, cut all the noise out, cut all the bullshit out of it, and just get on with doing it? 'Cause the best thing you can do in property investing is sometimes just to get started, right?
Mark Bouris: Correct. Do something about it. That's what Nike says, Just Do It. I would say to somebody, just keep it nice and simple. First point is what you just said, don't buy the property because you want to get negative gearing. Just put negative gearing aside. Negative gearing is a tax deduction of the difference between the rent you pay and the interest you pay. In other words, the interest is higher than the rent. The reason you get a tax deduction is because you're losing money, so that's not why you're going to invest in property if you can avoid it in the first place. Let's not think we should be buying property for negative gearing purposes. I want to put it clear, on the table, put aside the concept of negative gearing. If you somehow can manage it, great, but if you're losing money, it's no good, yeah?
So, the first thing you should be trying to do is buy a property which has a yield, or a return, or the rent, after all the deductions – in other words, after you pay the strata title people and you pay some maintenance and you pay the person who's collecting the rent for you – has a rent, a net year rent, which is close enough to the interest you've got to pay on the amount that you borrowed for.
Second thing, once you've done that, you've got to look at an area who delivers that sort of rent relative to the purchase price. Once you've done that, you find, okay now which property am I going to get, in that area? Find one that's close, a property that's close to the schools, that's close to transport, that's close to parks, that's close to shops or coffee shops, because people will pay more for lifestyle. Put it the other way, don't go getting a property that's so far away from everything that no one wants to live there, 'cause you're not going to get your return and no one's going to want to buy it.
Then, as I said, finally, don't try and load yourself up. Don't try and borrow to the max. Try and buy something you can afford. Don't much too much pressure on yourself. They're the sort of three things to look at to start off with. If you qualify all those three, then just go and do the deal. Don't stuff around. Do one, and then as it starts to wash its face, and as you start to make a little bit of money, ride the momentum of property price rises. Property prices rise, generally speaking, in this country, particularly in the major cities – Sydney, Melbourne, Brisbane – every year. So, where your equity is, is in the property price rises.
Now, use your property as some sort of discipline. So you say, "Okay, I've got a mortgage, my repayments are $2,000 a month, I can afford $2,300." Start to build some equity in your mortgage, not the property, but equity in your mortgage. In other words, pay more off, if you can. Now, that equity in your mortgage allows you to have a redraw, every product these days has got a redraw, and when you get to a point where you've actually forced yourself to save some more, you might want to redraw the money and invest in another property. Or, alternatively, you might want to repay that debt out completely, and re-borrow up to 80 per cent of the new value of the property, because it's increased in value. You've got to start to use your mortgage as a tool, and use your property as a tool, to build your portfolio.
Phil Tarrant: We're pro-advice, I'm pro-advice, I built a really nice property portfolio and I don't claim that's because of my brilliance, I'm just smart enough to actually use very bright people to tell me what to do. So number one, I made a decision to use people to help me do it, and I've let them go about doing what they should be doing, right? I've got a really good accountant, I use a buyer's agent, I've got a really good mortgage broker. They've helped mentor me on understanding how you can create wealth through property. I turn to them for pretty much every decision, they do it really well, right? It's money well spent. Just sort of the psyche of most of Australians, a lot of people are reluctant to use advisers. Mind boggles to me, why that happens. A mortgage broker doesn't cost you anything, for example.
You guys now, Yellow Brick Road, you've got, I don't know how many branches, but branches right across Australia. When people walk in off the street or they have some sort of connectivity with one of your branch managers or franchises, or what do you call them, what are you hearing on the street? Where are Australians at the moment, where are they at the moment with actually getting in front of people and asking questions, asking the right questions to advisers or even looking for advice? Do you think, is it where it should be? Or do you think there's a lot of growth still in that space?
Mark Bouris: I do, heaps of growth. I actually think that Australians, well, the feedback I'm getting is people are trying to over-complicate things. They're trying to build complicated portfolios of asset classes, and they're looking at, "Should I buy hybrids? Should I buy equities in the market? What level of property portfolio should I buy? Should I be buying LPTs?" Listen guys, let's just keep it nice and simple, real nice and simple. Maybe you put your super, which might be run by somebody else, you can have that in the equity market. Perhaps you've got a lot of extra super there, you might want to think about investing in a property and borrowing some money in your super fund. But keep it nice and simple. Outside of the super, maybe you want to build a small property portfolio, or start off with one property anyway. Just keep it nice and simple.
Problem is, and your point before, Australians, when they are ... Our experience is, when they are seeking advice, when they go into one of our branches and want to talk to one of our planners, the stuff they're asking is so complex, it's based on a whole lot of stuff they're reading, and they don't know what they're doing. They're trying to build something like Warren Buffet would be freaking out at. They don't try to keep it simple.
So we're holding a series of talks this month about prosperity through property. We're just actually trying to bring people back to the beginning, back to the fundamentals, back to the simple stuff. Just buy an investment, get it cash flow positive. What you learn from that, as you just said, what you learn from that, you learn about the mortgage, you learn about how you can get someone to find the property for you, you learn how to manage it. Then go and do another one, and then do another one.
Phil Tarrant: So how do we get this message out there? Because, you know, we've been, I don't want to say, banging on about it for years, Viv, that it is a quite simple thing to do.
Vivienne Kelly: I think it's quite interesting, both of your points about that inertia in terms of getting advice. In the first week of October we had a podcast go out with Simon Loo, he's 31, he's got 11 properties, and he admitted this huge mistake where he couldn't be bothered to pay for a pest and building inspection and that resulted in a poor property purchase. He admits now that was a mistake, but so many people do that. A couple of hundred dollars for something that's worth hundreds of thousands of dollars, and people baulk at it. People think they don't want to spend money on it. There's a bit of a disconnect there. "I'm not going to spend a couple of hundred dollars, but I am willing to throw a half a million dollars at something." So, I just think people need to look at that, spend money to make money, and learn to re-rationalise that in their head, because it's just a bit bizarre.
Mark Bouris: That's interesting you said that, Viv, because you know, that's a good point. People, if they just look at the process, and someone wrote them a piece of paper with the process: Get a pest and building inspection, make sure there's no asbestos in the place, make sure there's no borers in the floor, before you go and exchange contracts, make sure that when you exchange contracts this is what's in the list, make sure you get an insurance policy on the property because the moment you exchange you're actually on the hook for the insurance of the property, make sure, make sure, make sure. There's half a dozen things, maybe a dozen things. If they just ... They just need to repeat these things. It's all about consistency and persistency.
The wealthy people I know, they have big property portfolios. In the Asian community, the Chinese community, they do it, they're buying one a year or one every 2 years. They make a commitment for 10 years. They're not saying, "Is it going to go up? I went to a dinner party and I found out our property price is ... Someone got less than what we paid for." It's irrelevant. If you can afford the repayments, you're looking at a 10-year cycle. Hang in there for 10 years, 20 years, 30 years, it doesn't really matter. You can have it to the day you die, because by that time it's probably given you such good, positive rents that it's going to pay for your kids’ school fees.
That's the way you look at it. Not whether it's gone up this year or that month or this month. That's the problem with the Australian psyche, we are always thinking about, has it gone up, has it gone down? I heard someone say the other day that, "They sold the house around the corner from me, and it's actually less than what I paid for my house, oh shit." They start talking to their partner about it, dinner party discussions.
Phil Tarrant: Yeah.
Mark Bouris: We're preoccupied…
Phil Tarrant: They're not property advisers, right?
Mark Bouris: Correct, they're not.
Phil Tarrant: Dinner parties and barbecues, right?
Mark Bouris: But that's what we listen to, and that's crazy. I mean, we should have a long-term view on it and just go through the process. That's why the Asian community is so smart when it comes to investing in property. They never sell. They're just buying, buying, buying for accumulation purposes. If you just think about the fundamentals of that, as populations grow, Sydney's populations are going to grow. People have got to live somewhere. The reason why Sydney's populations are going to grow is because this is where the jobs are. So people are going to come flocking in here, they're either going to own or rent. One of the two. They can't ...
Phil Tarrant: There's no other option.
Mark Bouris: There's no other option. So, in 10 years’ time, you can imagine there's going to be huge demand for properties here. It's going to go up, whether it goes up by 5 per cent or less than the CPI or more than the CPI or double it, the same rate it's been going for the last 5 years, it's really irrelevant. It's just going to go up. The game for you is to make sure that you hold for as long as you can. That's the deal. It's simple.
Phil Tarrant: Yeah. You've got to get in the game first.
Mark Bouris: You've got to get in!
Phil Tarrant: Get in there. It's really interesting, you know? When you look at Australia, great place to live, it's brilliant being Australian. You look at our economic health, we haven't had a recession for twenty-something years, right? We've had pretty good times, yeah? Australians love property, brilliant, big tick. There's strength in our property market, buoys up our banks, big tick. We're strong, we're stable, the opportunities and capacities for Australians to create wealth through property is huge.
Mark Bouris: Bigger than other places in the world, I should say. I want to say that, Phil.
Phil Tarrant: Yeah.
Mark Bouris: Because there's a reason for that. There's no country in the world, particularly as big as ours, as a continent, that has such population concentration in 3 cities. If you go to America, there's not one city that dominates like Sydney, Melbourne, Brisbane dominate in our holding of our population. The reason for that is our geography. You can't actually build a big city in the middle of Australia or in some other part of New South Wales, because it's just not liveable and the infrastructure's not there, and it's too expensive and it's just not going to happen. So our 3 big cities have more than 55 per cent of our population, so that's where the jobs are going to be, that's where the people are going to live, and that's where the property prices are going to be, and that's why property prices continue to rise in those 3 cities, irrespective of what The Economist wants to keep saying, and whatever his name is, that bloke from America who keeps coming over and saying we're going to have…
Phil Tarrant: …It's 40% overpriced…
Mark Bouris: Yeah, all that. It's all bullshit, because we have a specific set of circumstances that address Australia, and it's a lot to do with our geography and the size of our country and the infrastructure that we don't have. Therefore property prices will continue on, unless some government says, the Australian government says, "Oh, we've decided we're going to invest billions and billions of dollars into some part of north-western New South Wales and we're going to build a new city which is going to attract all the business out of Sydney and put it into this place," which is totally unlikely. Therefore we're far more protected from the swings that other countries get.
Phil Tarrant: Yeah. I think you made a good point as well, we're protected from ourselves. A bank or guys like yourselves aren't going to lend ... They're not going to give someone too much money so they're going to find themselves in trouble, right?
Mark Bouris: Well, we can't!
Phil Tarrant: You can't do it.
Mark Bouris: The regulator won't let us do it.
Phil Tarrant: Yeah.
Mark Bouris: The mortgage insurers who are a part of every transaction will not let us do it.
Phil Tarrant: And a bank's not going to overvalue your property because they think they want to give you more cash, right?
Mark Bouris: Right, the other way.
Phil Tarrant: No, they're going to go the other way.
Mark Bouris: Correct.
Vivienne Kelly: I mean, I think it's interesting when they try ... People like Dent in the US…
Mark Bouris: Dent, that's who I'm talking about, Harry Dent.
Vivienne Kelly: … Who try and draw comparisons between the US and Australia. I mean, they had things that were called NINJA loans, which was no income, no job, no assets, or something like that. They were lending these people money.
Mark Bouris: 110%.
Vivienne Kelly: Yeah. We don't have anything like that here. We've always been, some people argue, over-regulated. So, we're not going to end up in a situation where people with no income have a loan worth more than their property.
Mark Bouris: I had a debate with Harry Dent years ago, a public debate, in two forums, and Harry came up with this outrageous number. He said that the property price-to-income ratio, which is like an asset-class-to-income ratio, which is a typical ratio used for all asset classes, is dangerous when it's more than 10:1. In other words, if a property is worth $1 million and the average income is only $90,000 in Australia, therefore the properties are priced too much. That ratio is used for lots of things. Now, he came out and he said that The Economist had done an analysis that in Australia, that ratio was beyond 10 times. When I went and did an analysis of The Economist's analysis, they used a group called Demographia, and Demographia actually were using Sydney house prices versus the national income. When I went back and re-did the analysis, I did Sydney house prices against Sydney incomes and I did Australian house prices against Australian incomes, we found that the ratio is only 6.5. It's actually in the perfect, in the sweet spot.
So, Harry lost the debate because he was using wrong information. Now, he was using the wrong information because it suited him, because he was selling a book that he was trying to promote in Australia. This is the sort of stuff I'm talking about, listening to people who are spruiking something that they're trying to sell. Harry, he's come back a couple of times and we've had more debates over it. It's very easy for people to say that. It's very easy for The Economist to bag Australia. It's very easy for the groups like Demographia to go and bag Australia. The only people you should listen to in relation to what is the true ratios around what we do is the Reserve Bank, and the Reserve Bank every half year prints out what they call the financial stability report. In that financial stability report they do this calculation, and this calculation still sits between 6 and 10.
Now, that doesn't mean that in some parts of Sydney, for example Chatswood ... I'm not saying Chatswood, but let's pick an area like Chatswood. Let's say that the property-price-to-income ratio in Chatswood may be more than 10, but there might be an exception for that reason, and the reason for that is that people are borrowing less because maybe they've got a lot of foreign money in there, or they've got more cash, or whatever. I mean, there might be people trying to build migration schemes. There could be a whole lot of reasons and those numbers will distort the total market. So you've got to be very careful about applying these ratios that people like Harry Dent goes 'round using to promote his own argument in order to promote his book about talking about a catastrophe that's going to occur in Australia. It frightens the shit out of people.
I guess what I'm trying to say here is, go back to fundamentals. If someone promotes something that looks the fundamentals to scare you into buying something or scare you out of buying something, go back to the fundamental and do an examination. This is what I'm talking about, what you’re talking about, Philip. Go along to an adviser, say, "Could you just give me some advice on this?" That's ... You don't want the adviser to say, "Buy on the left hand side, odd numbers only, on the Pacific Highway near Ballina." Because a financial planner doesn't actually know that, and by the way, no one knows that. You can know that.
But what you want to ask is, "What are the fundamentals that I should be looking at?" Asset-to-price, asset-to-income ratios. What is the current interest rate? Is it affordable? How does it fit within my portfolio? Should I use my superfund to buy it? Those are the sorts of fundamentals you need to get your head around, and what's it look like in the 10-year plan? How does it fit into my superannuation for the day I want to retire? Blah, blah. The general conversation, they're the things no one talks about. Everyone gets into the minutiae all the time.
Phil Tarrant: Yeah, keep it simple. Viv! We're running out of time.
Vivienne Kelly: Always do, Phil.
Phil Tarrant: Good, I'm going to try and summarise this chat. You can fill it in if I miss anything, mate.
Mark Bouris: No, no, I've been doing plenty of filling in, I'll pull back.
Phil Tarrant: What I'll say, and this is good because, I like the way you frame it, because there's no bullshit in property, right? There's just, get on with it and get educated, right? You need to actually understand what you're doing and what're you trying to achieve, number one. So I'd say, my first point would be, you've got to get educated. Education is empowerment. If you're not empowered to make the right decisions, you're probably going to get it wrong.
Another point I'd make is, you've got to get in the game. Sitting on the sidelines, waiting for the right time, right moment, right property, right day of the month, whatever it is, if you're not in the game you're not going to experience some of the growth that we're going to see. You made some really good points, Mark, around Sydney, the east coast in particular, around population drivers and how that's going to help support and sustain good price growth over time. That's really important.
Get the right advice, that's absolutely fundamental. And what is the right advice? You need to sort that out yourself. There's some exceptional people around in the marketplace right now, across accounting, financial planning, buyer's agents, and in particular mortgage brokers, who can actually help you, steer you down the path of where you need to go. Tap these people up. That's their job is to help you out. I guess that's linked in with this red flag thing, mate, if it's too good to be true, it's probably not. If you can't understand it, if you don't even get the terms or even comprehend the terms, don't touch it. If you're not sure, ask someone about it. That's how I would probably summarise these 20 minutes, mate.
Mark Bouris: I agree, and just, do your homework. Do it yourself, too. Actually try and understand, why am I buying this property? Do I think that rent will equal the interest? How do I know what the rent is? Who's telling me what the rent is? Who's the person telling me what the rent is? Is it the developer, or is it someone in the street who's got exactly the same house, telling me that they are getting $500 a week? Now does that equal what the developer's saying, I'm going to get 650? Maybe I've got to say, well maybe the $650's not right. If it doesn't sound right, smell right, or look right, it usually isn't. Just do a bit of homework. Put your boots on, walk around the street and have a look. Don't buy anything unseen, don't rely on anybody else.
Phil Tarrant: That's good. You've got to take responsibility for yourself, and you can do that through education. I think Mark mentioned earlier on, the guys at YBR are doing some seminars across the east coast. It's called Prosperity Through Property, I've got that right. I was chatting Mark off-air really quickly and he said that these have been really popular, so if you want to get in there, I highly recommend you get along. Go to YBR.com.au, and I think you can register there?
Mark Bouris: Yep.
Phil Tarrant: That's good.
Mark Bouris: Correct.
Phil Tarrant: Hurry up. I think they're next week or the next couple of weeks.
Mark Bouris: The week after next.
Phil Tarrant: Week after next.
Mark Bouris: Sydney, Melbourne, Brisbane.
Phil Tarrant: If you have problems tracking it down, just contact us. We'll point you in the right direction. If you've got any questions at all for me or for Viv, or just in general, you can contact us at [email protected]. Remember to check us out online, www.smartpropertyinvestment.com.au. You can check everything out, we'll share this podcast plus some other stuff from Mark. Mark, mate, appreciate you coming. Good to see you.
Mark Bouris: Cool.
Phil Tarrant: Come back.
Mark Bouris: I will, I will come back. I enjoyed it. I mean, I think these things are good. People can listen to these going in the car somewhere and they can get a bit of an idea and listen together to it with someone on a Sunday night, as opposed to just blindly watching television, they actually get some actual value out of things. Not necessarily because I'm talking but just all these sorts of things around property, they're going to listen more and they're going to think more about what they're doing.
Phil Tarrant: Best investment you can make in property is the education, right?
Mark Bouris: Absolutely.
Phil Tarrant: You listen to podcasts? I digress, but…
Mark Bouris: I do, yeah.
Phil Tarrant: Yeah. I like your show, The Mark Bouris Show.
Mark Bouris: Yeah, The Mark Bouris Show. More about entrepreneurs and innovation.
Phil Tarrant: Yeah, it's cool. I listen to a lot of podcasts and I'm really fortunate, doing the job that I do, I get people like you in the studio, whoever right, I give them a call and they come in, it's my education. It's absolutely brilliant. It's good fun.
Mark Bouris: That's what Kerry Packer did, he used to learn everything by ... He didn't read, so he used to learn everything by ... He did, learned by talking to other people. I mean he had the ability to be able to tap anyone on the shoulder, he could talk to Bill Gates if he wanted to.
Phil Tarrant: That's handy.
Mark Bouris: You do learn a lot when you can ask the questions, but it's cool.
Phil Tarrant: Yeah, but you know what, and I'll finish with this point, is that every single Aussie investing in property has the same opportunity. You pick up the phone, you speak to someone, you ask them the questions you need to know to make the right call.
Mark Bouris: 100%.
Phil Tarrant: That's what it is. Thanks mate, appreciate it.
Mark Bouris: Cool.
Phil Tarrant: Viv, nice to see you Viv. Good one.
Vivienne Kelly: Thanks, Phil.
Phil Tarrant: Thanks guys. Tune in next week, we'll be back with more stuff on property. Speak to you soon, bye bye.