Recorded live from Melbourne's Property Buyer Expo, this episode of The Smart Property Investment Show brings you an open audience discussion about all things property investment!
Join host Phil Tarrant as he leads a panel discussion with guest Steve Waters from Right Property Group about everything from setting goals, to loan repayments, to working your way up the investment ladder – and why they believe educating and arming yourself with essential information is a powerful tool for investment success.
You’ll hear all of this and much, much more on this episode of The Smart Property Investment Show. Tune in now!
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Welcome to The Smart Property Investment Show with your host, Phil Tarrant.
Phil Tarrant: G’day, everyone. It's Phil Tarrant here. I'm the host of The Smart Property Investment Show. Thanks for tuning in. We're doing something very interesting today. We're recording live from the Property Buyer Expo in Melbourne. What we're going to try and do today is have some chat with some real life investors who have come out to talk about property to try and increase their education and knowledge by shopping around and seeing what's available here. I think there's about 40 or 50 different stands here today and they're all offering something in terms of property. Whether they're service providers, off the plan apartments, educators they're all here. So I thought we'd just get these guys on stage and have a bit of a chat with them.
I'm actually joined by one of my regular guests on the show Steve Waters. Steve Waters is from the Right Property Group. Steve is a buyer's agent. He is the buyer's agent that I use to help me buy my property and I've spoken about this a lot over the years that buying a property for me, why do I do it? I do it because I like it. I do it because I like winning, I like being better at other people that do it but I'm also thinking about wealth creation. So for me I like the game but for me it's wealth creation. I want to build an asset that I can keep growing over time, pass it onto my family perhaps but I want to have a good retirement.
But I'm a very time poor property investor. I don't have a lot of time during the day to be able to concentrate on investing in properties so I'm a very big advocate of using professionals to help me do that and I lean on Steve Waters who's here today, to help me with that. He's the guy who knows what my objectives are. He's the guy who knows what my passions are and what I'm trying to achieve in property and he helps translate that into the properties that I buy.
So, Steve thanks for coming on mate, it's always a pleasure.
Steve Waters: Great to be here.
Phil Tarrant: So I've got two guests on the show. I've only just met them. They've decided to come up on stage and I don't know if they're scared or what not, but there's a little bit of nerves.
Will: I'm a little bit scared.
Phil Tarrant: Yes, he's a little bit nervous. Don't worry I'll go easy on you. So I've got Will on the show and I've also got Ross on the show. How you going guys?
Ross: Good, thank you.
Phil Tarrant: Thanks for coming in. Will, why'd you put your hand up mate?
Will: I don't know I quite often listen to your show and you get your regular guests as well as property investors out there that just want to share their story and I'm always fascinated by your investors’ journeys. Every investment person’s journey's different and you know everyone's made a mistake and I guess that's the biggest thing I've learnt by educating myself, that everyone has made mistakes and we started investing probably 10 years ago. Myself and my wife and probably didn't invest in the right property to begin with and for years I use to toss and turn in bed at night thinking the what ifs, What if I'd done this. That stopped us from investing further and you know I started educating myself again probably about three or four years ago. We've had kids and they're a little bit older. We've still got young kids but I've started educating myself again and learnt that, that's part of the journey, making mistakes and learning from mistakes.
Phil Tarrant: It's your birthday today you mentioned right?
Will: It is actually.
Phil Tarrant: So you're out here. It's your birthday and you've come to a property investment show. It's a beautiful blue sky out there, I imagine there's a million other things you could be doing right now than-
Will: I'm from Melbourne and my wife's from the Peninsula and she's down the sunny Peninsula at the moment swimming in the pool with the two kids and she actually didn't want me to come. She didn't mind me coming today but I really wanted to come today and I said look it's my birthday, I want to come and that's why I'm here.
Phil Tarrant: So you've given up your time to come along today and your family’s time. I talk about this. MY weekends are pretty sacred since, I don't want to be walking around looking at open houses or doing stuff like that.
Will: We lead pretty busy lives.
Phil Tarrant: So for you to come out today like everyone else here investing their education, what's that one thing you'd like to take away from today, that would perhaps just change the way you invest or see you investment a bit different?
Will: I think whenever you read something new, whenever you meet someone new, whenever you listen to different podcasts like you two here, if I can take one little thing away each time I read something or listen to something that's my aim. That's my aim. So I don't know what I'm going to take away today but I'm hoping to take at least one new thing.
Phil Tarrant: That's good. Well, you've found some new friends at least.
Will: I've met some new friends as well yeah.
Phil Tarrant: We like talking numbers on the show, how many properties in your portfolio?
Will: So, we've got two in our portfolio and looking to invest again half way through the year for our third.
Phil Tarrant: Okay and sort of total value of your portfolio would be?
Will: So, the first property we purchased ten years ago for three-fifty, it's now worth about five hundred.
Phil Tarrant: Where was that?
Will: It was on the Mornington Peninsula, so it was in Tootgarook right next to Rye, between Rye and Rosebud. In hindsight, we probably shouldn't have invested there, it was a familiar area, something we knew well and so we brought in that area and hence why I tossed and turned at night for many, many years regretting that decision but, you know, we're here now and we just purchased our second one in Adelaide last year and looking to purchase our third. So the one in Adelaide's six-seventeen and half a mill for Tootgarook.
Phil Tarrant: So you're pretty comfortable with your debt level then?
Will: Oh yeah, really comfortable yeah.
Phil Tarrant: So, what do you do for a living?
Will: I'm a primary school teacher.
Phil Tarrant: Oh you're a primary school teacher?
Will: Yeah, I'm a primary school teacher.
Phil Tarrant: I was chatting with someone just recently and there are so many primary school teachers, or teachers that are investors.
Will: Yeah, I've met a few here today as well actually so, it's pretty interesting.
Phil Tarrant: So, teachers don't get paid a massive amount of money, I think you should get paid a lot more, I think what you guys do is --
Will: I agree.
Phil Tarrant: Absolutely, but you're investing on a, let's call it, an average salary right?
Phil Tarrant: Is that something that you worry about, obviously you've got a job which is stable and you're not going to get sacked tomorrow, but, as a teacher, does property investing give you a bit of capacity to be more in charge of your financial future rather than just relying on a salary or a job?
Will: Yeah, look, the reason we've done it is to get a passive income when we retire. We don't want to rely on Super to be able to retire on. We don't think that the Government wanted to change Super rules recently and in 20 years’ time, when we want to retire, we're not too sure where Super's going to be or what rules are going to be in place, or if we're going to be able to access it and how we're going to be able to access our Super. So, I guess we want to have control over our own destiny and that's the main reason why we do it.
Phil Tarrant: Have you got a number, say for retirement? You're probably going to have to work until you're 65 or 70 by the time you retire right?
Phil Tarrant: Do you have a number that you want to retire on and your property's going to give you that income post retirement?
Will: Yeah, so we've listened to a number of different podcasts and one of the podcasts we listened to is the Property Couch and I think you have been on earlier on in the year and we went to see the Empower Wealth halfway through the year and they work backwards so, you come up with a figure that you want to live off in retirement and they work backwards and figure out the plan as to how many properties you want to invest in, the types of properties, the amounts and they work backwards. So, certainly, we've worked backwards and we do have a figure in mind.
Phil Tarrant: How big does your portfolio need to be?
Will: It's not going to be big, it's not going to be big. For us, we want to enjoy our retirement, we want to be able to utilise all the spare time we have because we're not working to be able to do things that we want to do, travel. One of the biggest things that we want to do is, we want to go up to the Northern Hemisphere, every winter. So, we want to follow the summers and we don't want to look after a massive portfolio while we do that. So, yeah, four of five investment properties that's the goal and obviously getting property managers to run those and so it's not a big investment of our time. That's the goal anyway.
Phil Tarrant: It's really good, so what you've spoken about, you're probably one of the ideal investors right, you know where you're heading, you know why you're heading there, you know what you need to do to head there and you know how you're going to benefit from this in the future and for our listeners and also for the guys in the audience today, if you've got to start thinking that way in order to be a good investor, if you're just investing in property because you think you should be investing in property or the guy at a barbecue told you to do it. A lot of people get started that way, myself included, I didn't really have a real, long term, goal until I started investing in property and rationalising and understanding how it could empower what I wanted to achieve but the journey that you've been on, and you've acknowledged that your first property probably wasn't the right property?
Will: No, it wasn't
Phil Tarrant: But you're moving on from there
Will: Yeah we have, it's all about mindset I guess as well, having that open mindset. I'm a big reader and I read a book called The Open Mindset it's by Carol Dweck, and it's about approaching any situation in life with an open mindset and not focusing on the negatives but rather the positives and lessons that you've learned. So, I take that into my property investing as well.
Phil Tarrant: It's good and I want to move on to Ross in a second but just beforehand, Will, so you're a primary school teacher right?
Phil Tarrant: What age do you teach?
Will: Little preppies, little four-five year olds, right up to ten-eleven year olds.
Phil Tarrant: Do you ever talk about money with your classes, so, I think kids need to be educated young but is that happening in schools?
Will: Yeah, my favourite unit that I run with the kids is about money and I get them to create their own little business and do spreadsheets about exporting products and making their own online businesses. We use specific formulas for the kids to be able to figure out just how much of a profit they make and they love it, it's one of their favourite activities that we do from year in and year out. So, we do to a certain degree, do money type activities.
Phil Tarrant: Nice, teach kids early I reckon.
Will: Yeah definitely.
Steve Waters: Is it part of the curriculum?
Will: It is, so we do an economics style unit.
Steve Waters: Awesome
Will: So I incorporate that sort of fun activity instead of teaching the same old boring stuff, economics, it's not the most exciting of topics, you try and make it a little bit more interesting for the kids and get them involved in the activities.
Phil Tarrant: So, Steve, the journey that Will's gone on in terms of investing in property, you work with a lot of people, myself included but hundreds if not thousands of investors. Do most investors you work with have the level of self-awareness of sophistication that Will has in terms of this journey he's going down?
Steve Waters: I don't think anybody really starts with that but as Will has, he's self-educated but we've got the help now to go forward and what you've done and what the guys at Empower have done is they've reverse engineered your end goal.
Will: Yeah they have.
Steve Waters: As you say to eke out a cashflow from the amount of properties but no one just wakes up with that, it's something that evolves.
Phil Tarrant: And do you think investors need to work hard at that or just let it happen?
Steve Waters: Look, I think it's something that's continuing, you've always got to be --
Will: Educating yourself don't you?
Steve Waters: Yeah, the education because the market changes dramatically in short periods of time and as does finance and everything else and as do your goals because as your family expands, your goals change and I think coming back to the strategy then your strategy needs to be fluid enough to change with your goals.
Will: Also, I think there's a lot of noise out there in the media, I know you're in the media, sorry Phil.
Phil Tarrant: Give us a hard time, we're responsible.
Will: Yeah but it's either the property markets either booming or busting and you've got to try and not listen to that noise and try and think of your end goal and stick to that path that you're on.
Phil Tarrant: I agree with that and I don't want to give the media a hard time but you need to be very aware of the media and why the media is there. Media, they talk about headlines, doom, and gloom, make, or break, the sky's falling in.
Will: That's what sells though.
Phil Tarrant: I know the guys on the Property Couch with [inaudible 00:12:40] were looking at what covers sell the most and the stuff has got to be emotive right? So, that's what the media does. What we try and do with the show is that, alright, we get that but you need to understand that under all this noise and these layers of stuff, there's the truth somewhere and everyone's version of the truth is going to be very different, but what you're doing is understanding, you're arming yourself with as much information as possible so you could determine what that is and be responsible for actions that you take.
Now, you've chosen the guys as Empower Wealth to help you out but listen that's a really good extension, you don't have to go to guys like Empower Wealth, you don't have to use guys like Steve Waters, you can do it all yourself if you want but you need to understand, are you equipped enough, do you have the skills, the best skills to be able to make the best decision when it comes to investing in property and I'm a massive advocate of getting other people to sort it out for you because I'm good at the media, I'm not that good at investing in property and there are guys infinitely better than me at it. So, just keep that in mind.
Phil Tarrant: Thanks for coming on.
Ross: Thank you.
Phil Tarrant: So, your portfolio, can you tell us a little bit about it?
Ross: Well, I was a late starter, I was in my 50's before my wife and I brought our first investment property. Life goes quick so, if you're young, in the audience, I'd certainly recommend getting into it, you've got time on your side, do it, that's what I'm telling my children every day.
Phil Tarrant: So, how old are you now? I'm going to ask these questions
Ross: Thank you, late 50's.
Phil Tarrant: So, you been at it, for what, eight years now, investing in property?
Ross: Four or five.
Phil Tarrant: Okay
Ross: So, yeah, a busy executive, working hard. My wife is a primary school teacher as well. I was a senior executive, good pay, good equity in our residential home, everything was growing, we came to a period of time, ten years ago where things would just grow and you would think that would go on forever. Then, the GFC came in and you realise that things don't and you start looking at your birthday candles and you think oh my goodness, I'd better do something. So, I went to a lot of education courses and seminars and one of the things that struck me at those was that, so many horror stories of people who had done it themselves without education and had stuffed it up.
I thought, well, I'm in my 50's, the last thing I want to do is stuff is up because I haven't got the time, I'm sure I've got a lot of time left, but I haven't got as much time as my 30 year old sons to recover if there was something not done right.
Phil Tarrant: Was there one thing, a light bulb moment, a catalyst, that you went, and I would normally swear, but "oh whatever, I've got to sort this out", was there anything at all? Or was it just a build up over time.
Ross: Look, it was just my age level.
Phil Tarrant: Yeah.
Ross: And where am I going to derive a retirement income from? What's that going to look like? So, really that was it. It just built up and then I started doing the seminars and the education and so I'm a very conservative investor, so I wanted to make sure I was well educated before I took that first step and through that journey actually, was probably five years ago, at this property Expo where I met the guys from Right Property Group.
Phil Tarrant: Okay, Steve?
Ross: Yeah, Steve and Victor, yeah.
Phil Tarrant: So, you said the words, "I'm a conservative investor", you feel you're a conservative investor, I'd say I'm probably on the side of conservative, I look back at my portfolio and I get asked the question all the time, what's the one thing you could have done better in your portfolio and I say, I should have brought a lot more properties when I could have, because I could have, I had the cashflow and I all that sort of stuff but I just didn't because I'm slightly risk averse, I'm on the conservative side. Conservative for you, do you frame that in a risk perspective, as in you don't want to push the boat out too far because you are the back side of 50 that you're thinking, well, I haven't got a lot of time so I can't make mistakes? Is that your conservativeness?
Ross: That's right and one thing age can give you is the ability to, just because of the number of years, to have built equity so we had built some good equity, I certainly didn't want to lose any of that, I just wanted to build on that and as I said before, I had so many people that had lost money just with buying the wrong investment property.
Phil Tarrant: So, I've mentioned, I don't know anything about your portfolio but I imagine what you did, you extracted a lot of equity out of your principle place of residence and used that as a war-chest to start investing in property, was that what you've done?
Ross: Exactly, that was the benefit of being a bit older and, no mortgage.
Phil Tarrant: So, you were completely paid off, principle place of residence paid off?
Ross: No mortgages, yeah, and you know, they say you spend to your income level and I'd agree with that, more money I earned, the more we spent and we didn't invest it.
Phil Tarrant: So, how much did you pull out of your principle place of residence.
Ross: Well, when we discovered Right Property Group, it was about a strategy, it was about having a strategy, the right strategy, a timeline and minimising the risk, there is always risk but minimising the risk so, our residential property was quite strong in equity so we've never really had a problem with the banks.
Phil Tarrant: Yep.
Ross: Part of the strategy was to build our base portfolio, very quickly so within about three years we had seven investment properties.
Phil Tarrant: Okay.
Ross: Along the east coast of Australia.
Phil Tarrant: So, what sort of assets are you buying? Is there any commonality amongst the properties you're buying?
Ross: Well, the strategy was, probably out of those seven, five were brought in the two hundred thousand dollar mark.
Phil Tarrant: Okay.
Ross: So, they started with two, two=twenty, two-fifty, two-eighty. One we brought for a hundred and fifty thousand and one was in the late three hundreds so, a lot of value if you like, spread the risk, in good working class suburbs.
Phil Tarrant: Good yields I imagine?
Ross: So, overall the portfolio has been cash flow neutral.
Phil Tarrant: Okay.
Ross: With some good tax depreciation making it cash flow positive, if you take the tax depreciation into place and really good equity, really good growth we've had.
Phil Tarrant: So, how many in the portfolio now?
Ross: Seven, two of those are home and land and so this year we're looking at putting sub-divisions and granny flats, just to increase the cashflow.
Phil Tarrant: So, you're looking for properties with upsides as well so you put a granny flat on there, generate greater yield, increase the value.
Ross: Yeah, the thing with Right Property was that they gave us a strategy, it was spreading the purchases across the country as I said, we've got two in Queensland, four in New South Wales and one in Victoria. Some of those are in my name, some are in my wife's name, some in both our names to minimise land tax and maximise depreciation.
Phil Tarrant: We could talk about structure all day but I won't go there.
Ross: Yeah, there's a strategy and within that there are some apartments, there are homes, there are houses and land, there's regional city.
Phil Tarrant: Yeah, so we spoke with Will about this number, this income post-retirement.
Phil Tarrant: You have a number that you can comfortably live off through property, I imagine, with some Super contributions
Ross: That was the first question I was asked, what do we want as a retirement. So we're aiming for a hundred and fifty thousand income in retirement.
Phil Tarrant: Okay. So, what does this portfolio then need to look like to deliver your hundred and fifty grand?
Ross: Well, the strategy includes, as I said, a rapid initially growth of the portfolio, we're now going through an increase in the cashflow component, roughly speaking if you buy something for three hundred thousand, you should get three hundred dollars a week rent. We'll put a granny flat and sub-divide and put properties that will cost us a hundred and fifty thousand to build and we'll pull three hundred plus rent out of those. So, three of those each year will increase our cashflow and then we're going to go into really paying off, consolidating so some of those properties may be sold down or will be sold down to pay of the others so that, as I said, we pay down the portfolio and we're left with --
Phil Tarrant: A nice retirement.
Phil Tarrant: There are two different stories here, Steve, quite similar at the same time.
Steve Waters: Very similar at the same time and I think, forgetting that Ross is one of our clients, the strategies are very, very similar, we're just talking about different start points in terms of age and even perhaps income, but the goal is the same and that is to have a portfolio that in unencumbered, there's no debt and, in a relatively short period of time.
Phil Tarrant: And what do you guys going to do, how long have we got left? Five minutes or so. Good, excellent. Still got five minutes left. So, we're talking about creating this portfolio, this pool of assets to provide for good retirement, what are you guys going to do with this thing once you're six foot under. Is it going to get passed on to someone or what's the long term plan?
Ross: So, in my case, I have three children who are in their late twenties, early thirties, I expect them to develop their own portfolio, I mean, again for just little old me, if you're young get on to it. Get on to it now, you've got the time, build it. So, by the time I'm, as you described, six foot under, or spread across the ocean, I expect my kids to have built their own portfolio and if there's anything left for them from my wicked retirement-
Phil Tarrant: Or you could sell everything and live well.
Ross: They can do what they want with it, but I expect them to get moving. That's the big thing I've learned.
Phil Tarrant: Yeah, how about you Will?
Will: Yeah I guess from our perspective, we obviously are going to pass it on to our two boys but we want to be able to educate them along that process as well because, there's no point in us passing on these properties to these two boys of ours and, within ten years they could have squandered it all, they could have lost it all. So, we want them to educate themselves, they're five and two so they've got a little while to go but you know, we want to give them the opportunity to talk about finances around the dinner table and be open and transparent about it and get them started from an early age. So, whenever you talk to investors they always say, start early and yeah, we want them to start early on this journey as well.
Phil Tarrant: That's good. Questions. Does anyone want to ask anything at all? I've got plenty more to ask but right at the back there? What's the question? Okay. The question is, is there a property bubble and will property prices ever decrease?
Steve Waters: Is there a property bubble? Look, we could go on for hours about that, I believe that perhaps some suburbs, some states are a little overcooked. Will property prices ever go down? There is always an upward projectory but there are always going to be dips and peaks and troughs along the way but if you buy in the right areas, over a period of time, be it ten, twenty, thirty years, they will go up in value but I don't think that's the key to property, the key is can you actually control the property for that period of time while it goes up in value. So, if you've got massively poor cashflow, you can have all the equity in the world but you've got nothing to be able to control it.
Phil Tarrant: I imagine this would be a risk orientated response.
Ross: One of the things I've learned too, you hear in the media about the property market, well there are a thousand property markets in Australia, or two thousand property markets and one of the things I've learned is, there are always markets that you can get into. This time last year, I purchased a home in Geelong, for two hundred and ten thousand dollars. So, you know, I pick up the paper and people say "oh we can't afford a house dah dah dah dah". I mean, there are still good bargains in the right areas to buy and I think that'll always be the case even when the market totally might not be so strong.
Will: I think that also lends itself to the whole affordability issue. You know, when my folks brought out in East Bentley, which is 15k's out of city centre here in Melbourne, they had to buy out there because they couldn't afford to live in town and that was thirty odd years ago. So, I think the affordability story is always been there but I guess with social media these days and the ease with which you can get information, I think it's splashed across your face basically sometimes and people are more aware of it. I think it's always been there and I guess, I don't know if I can be controversial, but people need to look to buy further out I guess, to be able to get into the property market and then work your way up to potentially living closer and closer into town.
Phil Tarrant: That's fair enough. Any other questions? We'll do two more. Yep, what's your question? Okay, so are you talking about property managers, or buyers agents? Property agents. So, the question is, if you've got multiple properties in different suburbs, in terms of, should you be finding experts in those particular suburbs to manage or help you find them versus one person who helps you realise a strategy or goal? I want to start with you Steve.
Steve Waters: Is that in terms of purchasing or managing?
Phil Tarrant: Managing.
Steve Waters: Managing the properties. Look, I'm a firm believer in having the property manager be where the properties are. There is no real benefit of having a property manager that's twenty-five suburbs away managing your property because they don't have the same through-put through the shop, they don't have the same inquiry and the don't have the data base, more importantly, of tenants wanting to rent in that area where they can just swap tenants out so, spread the risk, spread the managers.
Phil Tarrant: So did you use property managers?
Will: Yeah, we've got property managers for both our properties and both of them are local and they know the clientele, they know the business inside out, they know the suburbs and so, yeah, I'd recommend getting someone that's local yeah, definitely.
Phil Tarrant: One question over here. Okay, Ross, when did you feel as though you had enough education to make that first step and start investing in property?
Ross: Good question, when I did the education and seminars, I picked up education but I also realised there was a whole lot of missing links and still the decision of where to buy a property, it was a bit like being in a lolly shop. You know, this massive lolly shop, where do you go, where do you start and really by using, in my case, Right Property Group, they just brought the whole focus in.
Phil Tarrant: Don't think, I hear this all the time chatting with people, they are gonna do it, oh I'll just need to do this little bit more and then I'll go and start investing in property, every successful property investor I've met says the best thing they did was just get started. You know, it's okay just to get started and find your way through it.
Will: You never stop learning, even these guys I'm sure they'll tell you that [crosstalk 00:29:30] they're constantly learning so, if you going to wait until you know enough, you're never going to invest so I'd invest today, tomorrow.
Phil Tarrant: I'm sure there's someone who'll sell you a property out there. Okay I've got permission for one more question, anyone? Okay, you going to fight over it? Oh we'll do two. Okay, the question's around property spruikers, I don't know, I don't want to get too [inaudible 00:29:56], I have a target on my back but, property spruikers.
Will: I've got a funny story about that if I could share it.
Phil Tarrant: Alright, quick, quick yeah.
Will: Halfway through last year we brought our property and just before we started listening to a whole heap of podcasts, your podcast as well as the Property Couch podcast, we put a deposit on an apartment in inner Melbourne, from a property spruiker, you know, they were getting a cut obviously, and luckily we didn't, we got our refund back and I think that property has actually gone down in value since that point in time. So, yeah just be wary, yep.
Phil Tarrant: Ross.
Ross: Follow the money trail, if the guy who is giving you advice is selling, then get out quick. If you're going to buy an investment property it is to make money and one of the ways you make money is to actually buy into the market lower than what the normal entry price is so if you've got people who can help you buy lower whereas spruikers tend to be more overpriced.
Steve Waters: I'd suggest, as Ross says, follow the money trail and there are a lot of spruikers out there so if there was one tip I could give you to spot the spruiker so to speak, look for full disclosure. So, if they're not willing to give you full disclosure where they earn their money, then go the other direction.
Phil Tarrant: There's a really good resource, there's a stand up here, the PPA Stand, that I'm on the board of, the Property Professional of Australia, they're all about full disclosure, transparency in property so go and see someone over there and they'll give you all the things to spot a spruiker but beware. One last question. Okay yeah, so it's a financing question so, as an investor, should you be principal and interest loans or should you just go interest only? Steve?
Steve Waters: Yeah look, I'm a fan of interest only unless you're perhaps taking equity out of your principle place of residence, then I'd probably entertain the idea of keeping those repayments as principal and interest but certainly on your investment properties, I'm a fan of interest only, it frees up cashflow for you.
Will: We're actually slightly different to probably the mainstream view, we actually pay interest only on all our loans including our principle place of residence. So, we have a bucket, like I should call it, an offset bucket bank account where we put the excess funds that we would have paid off in that offset bucket. So, say, for example you had a hundred thousand dollar loan for your home loan, instead of paying an extra twenty thousand dollars in principal, we pay that twenty thousand dollars to ourself and, you're still then only paying interest on eighty thousand dollars. Also, with your investment properties, we pay interest only and that excess cashflow we then reinvest in our next property to grow the portfolio.
Steve Waters: Just on that, because that's actually a very, very good idea the only thing that I would add to that is that if you're going to have an offset facility instead of principal and interest, you need to be very disciplined.
Ross: You look quite a bit younger than me but, in my opinion, if you're paying principal and interest, that might be okay if you've got one investment property, but looking at your age, you should, and that's your dad? By the time you get to dads age, if you don't have ten plus properties, I mean you need that sort of number of properties to have the income that you expect, so okay, go and buy one property or two, but if you're going to build that portfolio you really need the cashflow and that's why I think interest only is the way to go.
Phil Tarrant: That's good, good question. Speak to a mortgage broker, you know, they'll sit down and explain how it all works to you. You've got to think, these guys, there's an end goal and the end goal is that you want to own property in a portfolio and be debt free on it so, how do you get rid of the debt? You've either got to sell some properties to pay off the other stuff or you can start paying down the principal further on, but you've got to get to the point where you've got enough clout behind you, a sizeable enough portfolio, so you can realise that end number and then you've got to start thinking about paying down the debt but you know, there are plenty of guys who will chat to you about it but it's a good way to be thinking.
I'm going to wind up, that's it, okay, hang on a sec. So, thanks for joining us and thanks for tuning in everyone to The Smart Property Investment Show, remember to check us out at smartpropertyinvestment.com.au, if you've got any questions for me or any of the guys you can email [email protected] Thanks for tuning in and we'll see you next week. Bye, bye.