How poor property choices can limit your future growth

By Todd Stevens 19 April 2018 | 1 minute read

Accountant Scott Kay has had a focus on creating a better financial future for himself for quite some time — from the age of 16, in fact, when he was thumbing through the pages of Rich Dad Poor Dad in the spare time that he had between holding down three jobs while still in school.

Scott Kay, Integrity Plus Acconting

Smart Property Investment’s Phil Tarrant sits down with the hard-working Mr Kay of Integrity Plus Accounting, who shares why he wanted to buy his first property before most of his classmates had even purchased their first car, and what he would do differently if he were to start his property journey again with his current knowledge around tax.

 Scott will discuss the reason he chose his first property, and why the property that you decide to buy first is so important to how your investment journey will go.  He will also give some insight into what he wishes he knew before buying for the first time and share the one piece of knowledge that he has today that could have saved him a lot of money at the start of his investment journey.

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If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!



Macquarie Park
Dee Why
St Leonards



The book that ignited this couple’s passion for wealth-creation
What is ‘good advice’ in property investment?
From 1 to 28 properties – what's his secret?
How a reluctant investor built an 18-property strong portfolio

About the author



Announcer:    Welcome to the Smart Property Investment show, with your host Phil Tarrant.

Phil Tarrant: G’day everyone, welcome to the Smart Property Investment show, thanks for tuning in. It's always a pleasure to have you onboard as we navigate this crazy world, which is property investment. If you've been tuning into the media recently, the last couple days, Shane Oliver has been all over it, splashed around, depending what media outlet you listen to or look at you're gonna get different sentiments on it, but talking about the declining basis in the house prices, how 5%'s about to come off. Shane Oliver's obviously a Chief Economist over at AMP, he's typically on the conservative side, he's saying that property value's gonna come off by another 5% in Sydney over the next coming year. And Melbourne's gonna see some declines as well, but I don't think, and he's adamant on this as well, that you're gonna see these massive, spiralling declines in property prices, which would quantify or attribute to people using the term property collapse.

            So be careful, this is the message. Be careful who you listen to, be engaged, be connected, know what's going on in the market, but don't get wrapped up in all the fear going around probably right now. If you're buying property the right way, if you're buying property in the right areas, you're buying property for the right reason, if you're buying property within your means, if you're buying property with a strategy in mind, you can confidently go into the market and look for those opportunities. Just be careful where you buy and who you listen to in terms of obtaining advice.

            Got someone in the studio today who is an advice-giver. He's an accountant, but he's also a property investor. So we're gonna have a bit of a hybrid chat around his journey as a property investor, his attitude towards risk and debt, and accountants, and I'll call them bean counters as a term of endearment. Typically see the world a bit different than the rest of us. I've got a really good accountant, I have him on the show. I put a lot of weight and emphasis in the advice my accountant provides me, and if you're a property investor you really need to find yourself a good accountant to help you as you go down this path.

            So Scott Kay in the studio, Scott, how you going?  You well?

Scott Kay:      Hey Phil, thank you for that introduction. Very well, thank you.

Phil Tarrant: So, are you worried about all this noise, and doom, and gloom, around property bubbles bursting and all this sort of stuff? Do you think there's much to it?

Scott Kay:      No, I think there's always gonna be areas that have well performing and poor performing. It's really about the property that you buy, and I think Sydney property is not going anywhere fast. It's not gonna collapse, but of course if you buy bad stock where something is just 200 units in a block, you could have some negative ... If you're trying to sell it fast and everyone else is selling.

Phil Tarrant: There's a lot of problems. I think, looking at the Sydney market, a lot of the noise coming out is that there's too many apartments now. There's an over supply of apartments. So whether that's the case I don't know, I'm not a demographer property analyst, but there's a lot of building going on. A lot of people are saying that we're just catching up with demand, a lot of people are saying that the population growth we're gonna see in Sydney is gonna far outweigh our ability to create these dwellings moving forward.

            So we're at a point in the cycle, get to Scott's point to my point, if you're buying property just make sure you're buying the right place. And buying property in the right place is something different to everyone, isn't Scott? And you're an accountant, you work at a firm, it's your firm, Integrity Plus Accounting, property investors come in all shapes and sizes, don't they?

Scott Kay:      Definitely. Definitely. And just with what you were saying there, it really depends on who you're trying to target. And I went to a property investment seminar, might be over 10 years ago now, that the guy was saying, "Hey, people wanna live in units, and live near amenities, and live near the city." And that was a little bit revolutionary at that time, but now, of course, everyone ... New town, all of these hot hubs that are close to the city, people in their 30s and 20s, they don't wanna live out in the sticks. And even if you've got a young family, I've got a young family, my daughter's almost 16 months old, we wanna live near the train line. We wanna live near the city.

Phil Tarrant: Do you live in a unit?

Scott Kay:      Yeah.

Phil Tarrant: Yeah. Yeah.

Scott Kay:      Two bedroom unit.

Phil Tarrant: Yeah. I live in a unit as well 'cause I live in the city and it's a nice place. But it's a good point, vertical living versus a house in the suburbs and a quarter acre block. The world is changing, it's changing quickly. More and more Australians now are born overseas, we have a lot of migrants coming to Australia, which is brilliant for our economy, equipping workforce moving forward to excel as a nation. And they're bringing along with them a lot of the ways they live back where they ... their original sort of place of origin.

            So the world's changing, keep connecting with what's going on. Don't panic too much, but know where you sit within the wider footprint, how your property's gonna perform, and just buy the right property. So buying the right property, Scott, let's get to that later on when we start talking about the work that you do as an accountant. The Scott Kay story, the property investor's story. Tell us a bit about yourself.

Scott Kay:      Sure. So I read Rich Dad Poor Dad when I was 15 or 16, I've still got a book from when I was 16 where I write notes of all the books that I read. I was always an avid reader, and I was always an avid worker. So I had a paper run, worked in a restaurant, and a supermarket. And I managed the supermarket, so I had three jobs until high school. After high school I got a cadetship at an accounting firm, and I kept my job. So I was often ... I had two or three jobs doing university part-time, and soccer, and other things. Now I look back and go, "I don't know how I did it all."

Phil Tarrant: How'd you manage it, yeah. So you work in a bazillion different jobs. You were at university again in qualification, I imagine around accounting? Yeah?

Scott Kay:      Yes, I was working full-time at the accounting firm and doing university part-time at night, and ...

Phil Tarrant: Okay. And then you had like a weekend job doing other stuff…

Scott Kay:      Yeah. And I was the underwater ceramics technician at a restaurant.

Phil Tarrant: The what?

Scott Kay:      The dishwasher.

Phil Tarrant: The dishwasher.

Scott Kay:      The underwater ceramics technician.

Phil Tarrant: I've spent some time, as well call them, dish pig. Anyway. You gotta do it. To all young listeners out there, go and do your jobs when you're young. The breadth of jobs that I've had, from being 14 years old on ... it's great. It's good. It helps you realise what's going on.

            So hard work, important.

Scott Kay:      Yeah, I think it's definitely ... It just benefited me so much having experience in a restaurant and a supermarket, because I know how those businesses run now. So any type of experience or part-time jobs you can get, even when you are working full time. Any type of experience you can get outside of what you're doing can just help you learn about business and learn about property.

Phil Tarrant: So working hard. Were you a saver back in those days?

Scott Kay:      Definitely was a saver.

Phil Tarrant: Yeah.

Scott Kay:      And I even thought about buying a property before I bought a car, but then my dad said he'd match me dollar for dollar for a car up to $5,000. So the car I bought was 10,500, and then he chipped in 5,000 of it. And bought the car in 2001, and then I traded it in in 2007 because I didn't wanna sell it to someone because it wasn't fantastic, and I got $500 for it.

Phil Tarrant: There you go.

Scott Kay:      So that was my first investment.

Phil Tarrant: Alright. That sounds like a ... Did you invest in your freedom? I imagine is the way you probably look at it.

Scott Kay:      Definitely. There were good times. I'd drive everyone around 'cause I was old for my year.

Phil Tarrant: What sort of car was it?

Scott Kay:      It was a Toyota Crusader.

Phil Tarrant: Okay.

Scott Kay:      But in-

Phil Tarrant: One of the greats.

Scott Kay:      When I started work the first year, my dad and I went on a tour looking at regional properties. 'Cause I'd read a lot of books like Margaret Lomas about buying regional properties for cashflow positive properties. So we went on this bus with about 40 other people on there, and they went to three different towns and they showed us all the areas, and my dad and I ended up playing cards with these guys, the two hosts, that evening.

            But then we didn't end up buying anything, and then maybe it was six or nine months later, turned out they were fraudsters who were flipping the properties for $40,000 more than they bought them for.

Phil Tarrant: So they'd buy them, take people on a road show, and sell them those properties.

Scott Kay:      They'd buy them for $70,000 and then they don't sell them they'd be on a delayed settlement, and then they'd sell them for 110 for the investor.

Phil Tarrant: Oh, okay. So they essentially get an option to buy the property and they resell it during that period of time…

Scott Kay:      I think that was what ... from memory, they were doing something like that.

Phil Tarrant: Yeah. And this goes back to my point, be careful who you get your advice from. So, alright, so education. That's good. So you didn't buy anything, which is handy. So-

Scott Kay:      Because we just didn't get the right gut feel. My dad was like, "Why's a guy who's so wealthy around wearing track suit pants?" And I was like, "Dad, it doesn't matter. If you're wealthy, you wear what you wanna wear." But there was just ... I think trust your instinct is an important thing, that if something doesn't quite sit right, the property's not quite right, or the person's not quite right, do your research and if it's not right then your gut is good and it should be trusted.

Phil Tarrant: Yeah. Listen to your instincts. I completely agree with you. So didn't buy anything that time around, so you're working, you're hustling, you're saving money, you're ready to buy. What's your first purchase?

Scott Kay:      First purchase was in Macquarie Park.

Phil Tarrant: Okay.

Scott Kay:      Two bedroom unit. And I looked at Hornsby and Dee Why at the time, and Macquarie Park had the train line going in. So looking at the prices there, at one other point. I've still got the page that I printed out that had all the ... that property, that I bought, and all of the other prices.

Phil Tarrant: So Macquarie Park, for our listeners, is sort of Ryde’ish way near Macquarie University where the train line now is.

Scott Kay:      Yes, yes. And there's tow train stops in that suburb. And there's definitely ... There is a, like a lot of suburbs, there is a divide. There are higher values at different points, and there's quite a difference in the property stock. There's some amazing properties there and there's also some properties that are really run down. So we got one with a lovely view over the bush, but even though I had been working for a few years in the county point at that point, no one told me that I needed to live in the property first to avoid capital gains tax. So if you live in the property first, and you can live in it for a set period, there's no legislated set period. But six months or a year would definitely keep you clear of the line, and then you can rent it out for up to six years, and then sell it without any capital gains tax.

Phil Tarrant: Yeah. Speak to your accountant about this, for our listeners, it's-

Scott Kay:      That's right. So you wanna always get good advice, and anything that we say isn't advice, it's just talking.

Phil Tarrant: No, no, it's just general conversation for a disclaimer. But that's a really important point, if you live in a place then you can only ever have principal place of residence.

Scott Kay:      At a time, that's correct.

Phil Tarrant: And I'm not gonna get into this 'cause I'm not an accountant, but a lot of people use this as a strategy. They will leap frog into properties, and skip paying capital gains tax, but you need to make sure you stay compliant and definitely speak to your accountant.

            So you bought this place, how much did you pay for it?

Scott Kay:      315,000.

Phil Tarrant: Okay. I reckon that's probably petty good right now, 'cause Macquarie Park did really well for a period. So you've still got the property?

Scott Kay:      Still got it.

Phil Tarrant: Okay.

Scott Kay:      But because I didn't live in it first, I've lived in it for parts of it, I've lived in it for periods, I've lived in it with friends, my wife and I lived there for a few years. So I have the exact calculations worked out and I've got it-

Phil Tarrant: I'll bet you do.

Scott Kay:      And I've got it worked out how much additional capital gain will go on as the time goes on. 'Cause obviously it increases in value, and also the percentage of capital gain can be-

Phil Tarrant: Increased. Well-

Scott Kay:      Increased.

Phil Tarrant: Listening to this, you only pay capital gains tax when you choose to sell the property.

Scott Kay:      That's exactly right.

Phil Tarrant: So if you hold onto it it's not an issue, but if you do sell it at a point in time you're obviously gonna pay capital gains tax.

Scott Kay:      And there could ... So we could hold onto it until I pass away and pass it to children, and that's definitely a strategy that a lot of people use, but in our case we've decided to take the hit because I run my own business, I can be flexible in the year that I sell it. And then invest elsewhere.

Phil Tarrant: Okay. So you're going to sell this property.

Scott Kay:      Yes.

Phil Tarrant: Okay. What do you think its value is now?

Scott Kay:      I haven't done all the ... It's at least 650.

Phil Tarrant: Okay, alright. So it's probably doubled at least. That's good.

Scott Kay:      Yeah.

Phil Tarrant: Okay. So you've got that property. What's your other investment property?

Scott Kay:      One I mentioned earlier, Phil, is it's three properties I pulled out on, and that's sort of the ... But just to answer your question, the other property is a two bedroom in Atarmon, where we're currently living.

Phil Tarrant: Okay.

Scott Kay:      And we bought that two years ago, and it's lovely, and it's close to the station, and, again, it ticks all the boxes, and even in the two years it's done quite well.

Phil Tarrant: You're not gonna go two wrong investing in those locations. Atarmon's a stone's throw from St. Leonards, which is a stone throw to the city, from Atarmon to the city. In a car it's literally sort of five, seven minutes I imagine. And it's just as good in a train. So good locations. Do you think, and you've been working as an accountant now for a period of time, and you run your own business, you obviously see property as a wealth crashing tool, and you spoke about the different strategies that you have and other people can have. But you quickly just briefly mentioned that you haven't bought a couple of properties. So I just really wanna get an understanding of your attitude toward risk and debt. Are you risk averse as an accountant? Some accountants are not risk averse, but others are very risk averse. Where do you sit with in that spectrum?

Scott Kay:      I'm quite willing to take risk, however I always wanted to start my own business or become a partner where I worked. So I wasn't set on starting my own business, I went into work with people wanting to join their firm and move up the ranks. But in the end, I've started my own business and I'm really glad I did. But what I didn't wanna do is have a whole bunch of properties with debt that would leave pressure when that happened. So I wanted a low LVR and lower debt so that I could start my own business and have the time to grow it.

Phil Tarrant: Fair enough.

Scott Kay:      'Cause I know particularly the first year, the first two years, is quite difficult to make it happen. And accounting has a bit of a lead time where you trust your accountant, get to know them, which might happen over a few years, before you change.

Phil Tarrant: You gotta pay for good accounting advice. So you kept your LVR position somewhere where you're comfortable so you could go away and build a business without having enormous mortgage payments that you needed to commit to every single month when they fall due.

Scott Kay:      And also it just wasn't a complete focus. I met my wife, I actually lived with my wife before I met her, I lived with her as a flat mate before we started dating.

Phil Tarrant: There you go.

Scott Kay:      So that took a different focus. I wasn't focused on buying properties, I was just focused on work and family.

Phil Tarrant: Doing what you do. So what's your attitude toward debt then? As an accountant, also as an individual? Are you ... Most accountants will say, "Good debt is good, bad debt is bad." Is that the way you see the world? How would you explain the two differences between good and bad debt? Seeing that you read Rich Dad Poor dad early on as well, so which is a big part of it.

Scott Kay:      So any debt is debt, so if you have a $3 million property portfolio and a $2 million loan, then that is debt. But also, property means the bank can always sell the property. So if you buy terrible property, for example, there's the girl who bought all the mining towns and then she was everyone's favourite property investor guru, and then she went from a $3 million equity position to a-

Phil Tarrant: Negative equity.

Scott Kay:      Negative equity, because those properties demolished in value. And that was a unique situation, but it does highlight that debt is debt and why the property selection process is important. To pick the right properties that aren't gonna fall in value, or, if they do, they're only a small part of your portfolio. The more wealth you have, the more risks you can take because the smaller part of your ... Anyone can have a 5% of their total portfolio debt, but for most people their wealth portfolio doesn't mean that 5% is of property.

Phil Tarrant: And that's a really good way to frame it. So if you've got 20 or 30 properties in your portfolio and you have one poor performer, you can weather that storm by and large, and you find that most people with a portfolio of that size typically has one or two, call them a dog in their portfolio, and they either keep it in there to remind them of bad decision they made, or they can underwrite the expense of holding it through the other stuff in the portfolio. But if you've got two properties in your portfolio and one of them is a dog, that's a very, very different situation because you're gonna get hurt and you're not gonna be able to have any levers or capacity to alter the overall sort of position of your portfolio.

Scott Kay:      And one thing that people don't realise is that also limits you from buying the next properties. If you're trying to swim 1500 metres and you're got a 5 kilo weight that's on you, it doesn't feel that much at the start, but it's gonna stop you from reaching your goal.

Phil Tarrant: Yeah, absolutely agree. Chatting with investors all the time, one of the ... and particularly sophisticated investors, when I asked them what's ... Most people wanna buy more properties than what they do and they will look back in time and say, "I wish I bought more when I could." But one of the biggest challenges you have, and I can't remember the stats exactly right now, most property investors, only in Australia, so people who ...

Scott Kay:      Have less than three.

Phil Tarrant: Have less than three. Most have one, right? They have one investment, property investment, and typically they don't go from one to two or two to three because the first one they bought is something which is completely not performing and is more of a handbrake than an enabler. So you've gotta get that first purchase right. So in terms of the way you've gone about buying the properties that you've secured, did you do it all yourself? How did you do it?

Scott Kay:      I did do it all myself, and I wouldn't necessarily make that choice again.

Phil Tarrant: Okay.

Scott Kay:      I would've got the right advice at the time to try to help me invest, and now I realise the cost of getting that advice, as we said, you do have to pay for it, but in terms of what my equity gains could've been if I'd had that advice 10 years ago.

Phil Tarrant: Yeah. And your accounting practice, do you mainly deal with small or medium business owners, or property investors, or PAYG, just people doing their tax return, what's the sort of blend of the client base that you have? Is it all of that?

Scott Kay:      I've focused ... Small business accountants are a dime a dozen, and I started using Xero very early on, and I knew it was going to be the next amazing thing. But now everyone's using it. So serve a small business, and focus on property and individuals, and solicitors, and those in the legal industry, and professionals are a target. And that's kind of people that I help. 'Cause I wanna take the extra time for individuals to help them grow their wealth.

Phil Tarrant: And do you-

Scott Kay:      As well as business as well.

Phil Tarrant: Yeah, yeah. And that's cool. Do you think, looking back over your career servicing that, that demographic, do you think more people now are interested in investing in property than what they were previously?

Scott Kay:      I think people have always been ... I don't think it's changed. Does that make sense?

Phil Tarrant: Yeah.

Scott Kay:      When I worked for a larger accounting firm, a lot of our clients were baby boomers nearing retirement or retired. And I've had my own clients ever since. I've worked full time and had my own client base. So I've always had friends as clients, and friends of friends, and people in their 30s, 20s, as clients. So I don't think ... I think Australians have always and will always love property, and I think that will continue even if the government tightens the rules and changes the rules.

Phil Tarrant: Yeah. And do you think people are more educated today than what they were prior? There's so much information, like this podcast, right? This just gets ... tens of thousands of people listen to it. Are people more educated now when they sit in front of you? Do they say, "I'm investing in property and can you help me do this?" Or do you still need to go through the education process with them?

Scott Kay:      I find there's a lot of shortfall in peoples understanding of tax on property and structuring. So there's a lot of information about property selection and what the market's doing in capital cities and regional areas, but I find ... yeah. A lot of simple things about tax that people don't know and understand, and also tax can make a big difference to how things work. So I think people understand how to buy property, but they don't understand how to put the right building blocks in place to build a skyscraper, or build a property portfolio.

Phil Tarrant: And do you think that's because most people would just wanna get the property and think they're a property investor rather than they're buying for the now rather than buying for the exit? And when you're building a property investment portfolio it's about why are you doing it. Well, you wanna create wealth, obviously, but how are you gonna retire that debt so you can actually generate an income from it at a point in time? And then what do you do when you're six feet under, these property portfolios? So that often dictates the structure that you put your properties in, whether you purchase it in your own name or co-ownership, or in a trust structure.

            How do you, when you sit with your clients, work out the best structure for people? What would be those couple of steps to help steer the conversation, you say, "This is the best thing for you?"

Scott Kay:      It really depends on what people most want, and for some people cost is a big factor. And they wanna pay less cost in the short term, and it might be just an individual ownership structure because capital gains aren't that important because they're not planning to sell.

Phil Tarrant: Yeah. But the other side is someone's looking to build a big portfolio, to sell it down, and realise a big chunk of cash is gonna change the structure that you hold the property within.

Scott Kay:      Definitely. Definitely.

Phil Tarrant: And do you see a lot of people get it wrong in their structure? Do you need to fix a lot of people's problems as an accountant? Servicing property investors?

Scott Kay:      Well unfortunately there's not that much you can do to fix the outcome if someone's about to sell a property and they've rented it for more than six years, or they've got this large capital gain to pay. If they're just a straight employee there are things that can be done, and tax planning, but there's not so much you can do. There's not a magic silver bullet. Usually if you're an employee and you're selling a property and you've made a 300,000 gross capital gain or 150,000 net capital gain, there's not so much your accountant can do.

Phil Tarrant: Can do. Well the thing is that the beauty of accounting is that there's a set of rules and you need to play within those rules. A good accountant knows those rules better than not so good accountants, but if your property's going up in value and you're gonna sell it, you gotta pay your tax. That's the way the world works, and we're fortunate that we live in this great nation, Australia, and as taxpayers we all contribute to make it better and better. But you need to building and structuring your portfolio with the end in mind, and I think a lot of people, from my understanding, don't think about the end when they start investing in property. They just think, I've gotta be a property investor.

            What's your view sort of moving forward with any potential changes the government might implement? So you've obviously got budgets coming up in May, last year everyone was worried about changes in negative gearing, didn't happen, the changes mainly were around depreciation and plant equipment, which was the major one. And travelling to the investment property. So you couldn't claim a lot of that stuff anymore. But the government has a reputation, or it can do at any point in time, to change the rules when it comes to tax. And as you get different governments coming into place, and as we move forward as a nation, 5, 10, 20 years ahead, no one knows what changes there will be to legislation, how that might impact on property investors. What's your view on the future for property investors? Prepare for the worst?

Scott Kay:      I think that tax is only one piece of the picture. And I don't think that the government is going to take away. If you can suddenly claim negative gearing, I don't think it's gonna be ... In three months time you're not gonna be able to claim it. I think there probably would be some sort of grandfathering provision, so I definitely wouldn't stop investing in property because of any changes in rules. So tax plays a part, but tax might not alter the course of your goals and plans.

            So it will be very interesting where the plane lands in the next few years with Labour talking about cutting out negative gearing. I actually think the government in 2007 made a big error in how they were too lenient to baby boomers and retirees. Before, in the 2007 tax return, you would include your super pension income, but it would be taxed at 15%. But everything on top is taxed at marginal rate. So I had clients going from ... One client went from $50,000 to $8,000 tax in a year just because of those changes. And also clients can get brief ... because of this no tax in superannuation, clients can get refunds of all the franking credits. So I saw a client who lives in the lower North Shore and doesn't need any extra money receive a refund of 120,000 of franking credits. So that's what Bill Shorten is trying to-

Phil Tarrant: Change up.

Scott Kay:      Avoid.

Phil Tarrant: Yeah.

Scott Kay:      What John Howard did back in 2007 when the mining boom all happened, they went too far, and hopefully they can bring it back without discouraging property investors.

Phil Tarrant: So you should be planning for ... Well, there's certain things you can't plan for, you can't change, is that what the government decides to do. You've just gotta cop it and work within those rules. So expect there to be changes.

Scott Kay:      At the moment the ability to buy property, negatively gear it, claim depreciation, at least on the building now, and maybe on the plant equipment if it's on new property, or plant equipment if it's an old property, and then sell it and pay half of what you make when you sell it. It's a fantastic deal. It's a fantastic bet. And, as we've said, you gotta pick the right property, it's gotta be the right strategy. But it's kind of like saying, "Hey, I'll bet $10, but I'll give you back 3 of it, and if you win, I'll give you 20, but you only need to pay tax on 10 of it."

Phil Tarrant: Well a lot of people globally look at our system of taxation around property here and just go, "It's a great, great location." That said, though, we've got property investors. Property investors are driving, in many ways, the way people live in Australia, the housing that's available. If we didn't have property investors out there doing what property investors do, I think we'd be stagnated quite a lot because we need to be providing for a future, which Sydney, for example, and Melbourne, are doubling the population within potentially our lifetimes. So someone needs to be driving this force, somebody needs to be paying for it. And property investors really big part of that.

            Scott, I've enjoyed the chat. We've covered quite a lot of different things, from the structure, to attitudes towards risk, to your story in property investing. What's your plan? Are you gonna start buying some more property, is that the idea?

Scott Kay:      Yeah, definitely.

Phil Tarrant: Yeah? What sort of stuff you gonna be looking for?

Scott Kay:      For me it's both property and business, so trying to work them hand in hand. I am more focused on capital growth, but at the same time if opportunities come up where a property could be cashflow positive, then that's great as well. So I don't wanna limit my capital growth, because that's where I believe true wealth comes from, and it's also money that you can't necessarily spend. Whereas if you earn an extra $10,000 on a cash flow positive property, then you pay maybe 3,500 of it in tax. And then if you've got that extra money in your bank account, you may very well spend it and then it's gone.

Phil Tarrant: Yeah.

Scott Kay:      If that property goes up by $80,000 in that year, or 30,000, or even if it just goes up by the 10,000 that you're positive ... You're not spending that money.

Phil Tarrant: That's what a lot of people talk about with the pros and cons of property. A lot of people say the cons of investing property is that it's not liquid money. So to realise any equity gain you've either gotta refinance it, that takes time and you gotta pay increased debt as an associated cost or you gotta sell the property at a re-loss, and then you get slammed with capital gains, but you're always gonna get hit with something. Whereas other people say stocks and shares you can liquidate today and have the cash in your bank tomorrow or the next day. But what you're talking about is one of the positive, having a liquid investments, because if you can't touch it, and it's just there, and it' brewing away, and it's growing over time, it's a nice little nest egg that's gonna grow.

Scott Kay:      And I definitely think it's worthwhile getting advice from various people, whether that's a property strategist, potentially a financial planner, a lot of property investors might not appreciate financial planners because a lot of financial planners don't recommend direct property. But because of the way the tax rules work, negative gearing is fantastic, but if when you retire you have a $50,000 taxable income on your properties, you'll pay $10,000 tax as a regular person. Forgetting for a minute there are senior Australian tax concessions. But at the moment, with dividends, you could earn $100,000 in frank dividend income, and not pay much extra tax. So that ... As we've said, there's no silver bullet. But if there was a way of having property going for a year without working to sell it and not pay as much capital gains, then reinvesting in super and shares, along with your existing building your property portfolio, there could be some great outcomes there.

Phil Tarrant: Yeah.

Scott Kay:      So that's why I think it's worth getting the right advice.

Phil Tarrant: Oh, absolutely agree with you. And it's all about a good diversified portfolio as well, and not having all your eggs in one basket. That being property. So need to be diversified. Because then, you know, different markets, different asset classes all perform at different rates, and sometimes they're up, sometimes they're down, but if you need to have the right attitude toward risk, if you're risk averse, there is particular strategies, which work for you. If you're happy with an element of risk. And, again, it depends where you are in your career. If you're 20 years old, or 30 years old, you still got a lot of working life yet left where you can recover if you make the wrong call, but if you're sort of 60s or 70s, you're gonna be in a spot of bother.

Scott Kay:      And I have done ... I have invested in shares, I've invested in options, I've invested in covered calls, I've invested in naked puts. So I've lost probably $50,000 in the share market, I lost $30,000 in the share market in a month.

Phil Tarrant: Yeah. Yeah, that's not good. But this is it. My view on property is that it's something that I've got a lot more control over than stocks and shares. Stocks and shares I'm just investing in a company, which I hope to see out as a good job, and for my stock to go up in value, and also give me good yield through dividend. But, Scott, I've enjoyed the chat, mate. Keep in touch, let us ... When you get your next place, let's get you back in, you can tell us all about it.

Scott Kay:      Wonderful.

Phil Tarrant: Nice one. Remember to check out smartpropertyinvestment.com.au for the latest breaking news in property investment. If you're not subscribing to our daily morning market newsletter so you first know what's happening, smartpropertyinvestment.com.au/subscribe.

            Please keep those reviews coming on iTunes. We do appreciate it. Or wherever you're listening to this podcast. There's a whole bunch of different podcast players. If you just like us and give us a nice five star rating we do appreciate it. Goes to show that what we're doing is important. If you'd like to leave a comment we'd appreciate it.

            Any questions at all for myself, or even for Scott, you can email the team, [email protected] We'll be back again next time. Until then, bye bye.

Announcer:    The information featured in this podcast is general in nature, and does not take into consideration your financial situation or individual needs, and should not be relied upon. Before making any investment, insurance, tax property, or financial planning decision, you should consult a licenced professional who can advise whether your decision is appropriate for you. Guests appearing on this podcast may have a commercial relationship with the companies mentioned.


How poor property choices can limit your future growth
Scott Kay, Integrity Plus Acconting
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