Property Investment & Wealth Creation Australia | The Michael Yardney Podcast

Last year was an extraordinary year for many homeowners and investors when their property values went up more than they owned in everyday regular income.

Clearly, the market's changing.

When the property market's booming, everyone's an investment genius. But when the property market's different, I think it's really important to listen to those who've got a perspective – who've lived and invested through many different cycles.

That's why I'm talking to property researcher John Lindeman today. John believes that property values are going to keep rising. I know that's contrary to what some of the big bank economists are suggesting, so it will be interesting to hear his thoughts.

In his recent report, John's gone back to 1901 to look at the statistics. He isn't just somebody thinking about property and telling you what's going to happen – he's done careful research to see what happens to property values when interest rates rise.

At the end of today's show, I hope you'll have more clarity about what's ahead for today's property markets.

Why property prices will keep rising

Last year around 98% of locations around Australia recorded rising property values with many properties rising in value by more than 20%.

Interestingly the Australian Bureau of Statistics said that the value of Australia's property portfolio skyrocketed to $9.9 trillion in 2021, driven by a record-shattering 23.7 percent annual rise in property prices.

The collective wealth of homeowners increased by $2 trillion in just one year alone – a sum 30 percent larger than the annual output of the entire Australian economy.

The growth in property wealth in the past two years is higher than all the gains over the decade before COVID-19 (2010-2019) combined.

Some bank economists are predicting that house prices will fall this year or in 2023 as interest rates increase, but property market analyst John Lindeman explains why property prices will continue to rise.

Economists are concerned that the Reserve Bank will soon raise interest rates to slow down inflation because inflation is very hard to reign in once it takes hold. They believe that higher interest rates will make housing less affordable, and that lower buyer demand will then push prices down.

It seems to make sense that higher borrowing costs will reduce buyer demand and therefore prices will fall. But it's hard to test this theory because interest rates have gradually declined since 1990 when the standard variable home loan rate was all the way up to 13.5%.

For over 30 years property prices have grown and interest rates have fallen.

There certainly is a strong correlation between falling interest rates and rising property prices, but does this mean that the reverse is also true? How can we be sure that if interest rates rise, property prices will fall?

• In the last 30 years, property prices did not fall when interest rates rose
• One-third of our housing is fully owned, with mortgages having been paid off and no remaining debt.
  • The owners are mostly older couples living in empty nests and when they sell, it will be to downsize. So, interest rate rises are of no concern to them.
• Another third of our housing stock is owned by investors who can claim the cost of housing finance interest against all their other income.
  • This means that interest rate rises reduce the amount of income tax they pay.
  • They can also raise asking rents on their properties to recoup the cost of any interest rate rises.
• Only one-third of our residential properties have mortgages that are being paid off by owner-occupiers.
  • Most of them purchased their homes many years ago when rates were much higher than they are now. Their financial situations have improved since then and they have probably paid down some of their debt, so a rise in interest rates is manageable
• Only first home buyers are badly impacted when interest rates rise

Some highly leveraged recent first-time buyers in new outer suburban first home buyer areas may experience mortgage stress when interest rates go up. If enough of them are forced to sell, and the number of potential first home buyers also falls, there is a risk that property values in first home buyer locations may fall.

But first home buyers only comprise around one-tenth of all homeowners, and despite the personal and social impact of such events when they have occurred in the past, local markets have always bounced back into growth within a few months.

The only times when housing prices went backward were during the First World War, the Great Depression, the Sixties Credit Squeeze, the Recession "We had to have", the Global Financial Crisis and most recently, because of APRA restrictions on the amount of housing finance that investors could obtain from the banks.

The aim of interest rate rises is to curb inflation, not hit housing prices

Because rising interest rates only impact a small percentage of homeowners, we should look at the reason that they are increased, which is to slow down the rate of inflation. Is there a link between rising inflation and housing prices?

Housing prices have always moved in sync with the rate of inflation. Housing prices have historically tended to move more vigorously than inflation rates but always in the same direction.

In periods of rapidly rising inflation such as the post-war years and the seventies hyperinflation years, housing prices experienced their most dramatic price growth in our history.

In summary, interest rate rises only impact a small percentage of property owners, while property prices on the whole rise whenever the rate of inflation increases. If inflation goes up this year or next, so will property prices.

Links and Resources:

Michael Yardney

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

John Lindeman of Lindeman Reports

Read John's article referred to in the Podcast here

Get a bundle of free eBooks and reports at www.PodcastBonus.com.au

Shownotes plus more here: Don't worry. Here's why property prices will keep rising, with John Lindeman

Some of our favorite quotes from the show:

"It's going to be a more fragmented market this year, I think, moving forward." – Michael Yardney

"I think the Reserve Bank's also learned lessons from the past about raising interest rates." – Michael Yardney

"So much of the drama that people go through in their careers and their personal life and their investing is avoidable if they listen to the signs the first time around." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

Maybe you're too biased to become a successful property investor? What do I mean by that? Well…did you know that we can sometimes be our own worst enemy as property investors?

It's not because of the decisions we make, the opportunities we consider, or the investments we miss out on, but rather, it's due to the way we think.

brains.

By the last count, I've read that there are 188 types of these fallible mental shortcuts in existence, and they constantly impede our ability to make the best decisions about our careers, our relationships, and for building wealth over time.

So, whether you are a beginner or an experienced investor, whether you're in business or an entrepreneur you'll enjoy my chat today with Mark Creeden, founder and CEO of Business Accelerator Mastermind as we discuss why seemingly rational people act irrationally when it comes to money.

Cognitive Biases You Need to Know

Without always knowing it, property investors are pre-programmed with a range of biases which may cause them to interpret information incorrectly and thus undertake sub-optimal investment decisions.

You see, most of us think we're rational people but we're not.

There is no shortage of cognitive biases out there that can trip up our brains.

However, because cognitive biases are based on generalizations and assumptions, they can't always be correct.

And if you don't check your reasoning, they can lead to judgments and decisions that negatively impact your business.

1. Confirmation bias

People tend to search for information that confirms their view of the world and ignore what doesn't fit.

In an uncertain world, we love to be right because it helps us make sense of things.

One way to counter confirmation bias is to read things you're going to disagree with. In other words, read all you can from reputable sources, whether it's confirming your original view or not.

1. Anchoring bias

We have a tendency to use anchors or reference points to make decisions and evaluations, and sometimes these lead us astray.

This is because the initial price you set for a house or car or more abstractly, for a deal of any kind, tends to have ramifications right through the process of coming to an agreement.

Whether we like it or not, our minds keep referring back to that initial number.

It's important for you to evaluate any property deal based on its own fundamentals and all the information you have available from your research and due diligence at the time.

1. Awareness bias

How are your investments performing – are you happy with the results you're getting?

It's been shown the poorest performers in all areas of life are the least aware of their own incompetence, a phenomenon known as the Dunning-Kruger effect.

If you're the smartest person on your team you're in trouble.

It's best to work with a team of mentors and professional advisors.

1. Positivity bias

In the face of lack of capital growth, prolonged vacancies, or inflated expenses, some investors continue to believe that their investment will turn the corner "one day."

The problem with this is that when all signs point to a dud investment, it likely is one – but positivity bias can stand in the way of an investor taking action to rectify the situation.

One of the best things an investor can do is admit what they don't know and get a good team of professionals around them.

1. Negativity bias

Just as some investors can be overly positive this is the tendency to put more emphasis on negative experiences rather than positive ones.

Our ancestors evolved a brain that routinely tricked them into making three mistakes: overestimating threats, underestimating opportunities, and underestimating resources. This helped keep them alive. It's a great way to pass on genes, but a lousy way to promote quality of life or grow your wealth through property.

Fact is: there will always be property pessimists around, but you can minimize your risks and maximize your upside if you educate yourself and become financially fluent, follow a proven strategy, and get a good team around you.

1. Status quo bias

This describes our tendency to stick with what we know, whether or not it's the best course of action.

Psychologists call this "loss aversion" and it explains why so many Australians are willing to stick their money in a plain old bank account earning minimal interest, rather than taking the "perceived risk" of property investment.

Successful investors, businesspeople, and entrepreneurs have mentors, coaches, and mastermind groups to help them see their blind spots and to encourage them to keep moving forward.

1. Survivorship Bias

The misconception here is that you should focus on the successful if you wish to become successful, while the truth is that when failure becomes invisible, the difference between failure and success may also become invisible.

The trick when looking for advice is to not only learn what to do but also look for what not to do.

1. Bandwagon bias

This is the psychological phenomenon whereby people do something primarily because other people are doing it.

The bandwagon effect has wide implications but is commonly seen during strong property markets where the media stirs up a frenzy and it's one of the factors that lead to asset bubbles.

But when it comes to financial matters we know "the herd" is usually wrong – most property investors never build a substantial portfolio.

It pays to remember that just because everyone else is doing it, that doesn't mean you should follow the crowds.

1. Restraint bias

Following on from bandwagon bias, restraint bias is the tendency for people to overestimate their ability to control impulsive behavior.

Psychologists say the very people who think they are most restrained are also most likely to be impulsive.

1. Bias bias

Failing to recognize your cognitive biases is a bias in itself.

Arguably this is the most damaging bias because having blind spots means you're less likely to recognize any of these psychological influences in yourself.

Simply becoming aware of these biases means half your battle against your own worst enemy – yourself – is won.

The bottom line:

We all want to think we are rational and biases are things that afflict other people.

However our brains are designed with blind spots and one of their clever tricks is to confer on us the comforting delusion that we, personally, do not have any biases.

This is why so many of us are not only bad with money but make the same mistakes over and over again.

Links and Resources:

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

Why not join Metropole's Business Accelerator Mastermind

Learn more about Mark Creedon – Business Coach to some of Australia's leading entrepreneurs

Get a copy of Mark's new book here – Have a Business not a Job

Get a bundle of eBooks and reports – www.PodcastBonus.com.au

Shownotes plus more here: This may be exactly what is holding you back from being a more successful investor with Mark Creedon

Some of our favourite quotes from the show:

"It's actually not as much the investment, it's about the person." – Michael Yardney

"In fact, it's been shown the poorest performers in all areas of life are the least aware of their own incompetence." – Michael Yardney

"There will always be pessimists around, but I don't really know any rich pessimists." - Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

The property market is going to crash!

How many times have we heard that one recently?

2021 was a year like no other - prices boomed creating new records and as the value of Australia's housing market skyrocketed, the collective wealth of homeowners jumped by over $2trillion despite the pandemic.

And sure, it's clear that we won't see the same level of overall price growth in 2022.

But a housing market crash?

I don't think so, despite all the messages in the media suggesting it will occur.

If you're a regular listener to this podcast or follow my blogs you will know that I have a weekly video chat with Dr. Andrew Wilson, Australia's leading housing market economist.

Today's podcast is the audio of one of my recent chats with Andrew, who has an enviable record of property market forecasts and together we share 10 reasons why we don't think we're heading for a property market downturn soon.

10 Reasons Why the Property Market Won't Crash

2022 has already turned out to be a fascinating year in real estate.

Last year was unusual when we experienced a once-in-a-generation property boom and values grew strongly almost everywhere.

But now there seem to be more pessimistic forecasts about the short-term future of our housing markets than there are positive market commentators.

If you've been watching our regular Property Insider weekly chats you would know that we believe property values will still grow this year, but more slowly and the markets will be much more fragmented, which of course is more normal.

I don't want to minimize the horrors of war and the obvious humanitarian disaster that is occurring in front of our eyes. Nor do I want to downplay the terrible effects of the floods in Australia or the effects that supply shortages and rising global food prices will create in the developing world, but today I'd like to concentrate on some of the good news that can easily get lost and why I'm still confident about the future of the Australian Housing markets

1. The average Australian is wealthier than ever
2. 1. It's been suggested there is a war chest of $230 Billion in household savings
   2. Many homeowners have 30% more equity in their homes than they had 2 years ago
   3. Aussie super funds and shares portfolios are performing well
   4. Overall the total residential property market is worth close to $10 trillion and there is only $2 trillion worth of loans owing against all residential real estate.
   1. Half of all homeowners have no mortgage
   2. ANZ bank suggests 70% of their borrowers are ahead in their mortgage payments
   3. It is estimated that $1.37 billion is sitting in offset or redraw accounts which would act as a buffer
3. There's no evidence of mortgage stress for the majority of borrowers
4. Interest rates are low and even when they rise, it will take 5 x 0.25% rises in rates to bring them back to where they were 3 years ago. And there was minimal mortgage stress then.
5. Banks have been very conservative in stress testing loan applications and most who borrowed over the last couple of years will be able to handle the interest-rate increase of 2.5% or even 3%, and those who borrowed prior to these stricter requirements being brought in would have considerable equity in their properties
   1. Interest rates rose over a 6-year period commencing in 2002 and again in 2010-11 after the GFC yet the value of well-located properties continued to increase in most years that interest rates rose.
   2. Sure, many first home buyers have extended themselves and they will be the most vulnerable, but they'd rather eat Maggi Noodles than sell up their homes.
6. Rising interest rates did not make the market fall in the past
7. There is a shortage of supply of good properties at a time that
8. Overseas Migration is going to pick up. Melbourne and Sydney will be the main beneficiaries of this.
9. The same "experts" who are currently predicting that property markets will crash in 2023 are the same ones who have made multiple incorrect Doomsday predictions over the last couple of years.
   1. Our export income will improve because of the Russian Ukrainian crisis.
   2. Our tourist income will improve now that our international borders are opening.
10. Australia's economy is growing strongly and will continue to do so and anyone who wants a job can get a job
11. There's a shortage of rental properties, and rents will increase strongly this year, bringing more investors back into the market.

Links and Resources:

Michael Yardney

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

Dr. Andrew Wilson, Chief Economist My Housing Market

Subscribe to our weekly Property Insiders videos – www.PropertyInsiders.info

Get your bundle of eBooks and reports at www.PodcastBonus.com.au

Shownotes plus more here: Why are you worried? The property market won't crash. With Dr Andrew Wilson

Some of our favourite quotes from the show:

"In general, they'd rather eat Maggi Noodles than sell up their home, so they're not going to end up selling up and making the property market crash." Michael Yardney

"To find success, sometimes you'll have to dismiss common beliefs." Michael Yardney

"In my mind, diversification leads to averageness." Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

2022 promises to be a fascinating year in real estate.

Last year was relatively unusual – we experienced a once-in-a-generation property boom where values grew strongly almost everywhere.

Around 98% of locations across Australia recorded rising property values; with many properties rising in value by more than 20%.

This year is shaping as a more "normal" market, where some locations will still see strong property price growth, some will experience moderate price growth, some locations will languish, and a few locations will see property values falling.

And this will be dictated by local supply and demand and local economic conditions.

New factors will further underpin our property markets this year.

1. More investors will be getting into the market due to finance approval and higher rents. They will replace the first home buyers who are now finding properties less affordable.
2. Around 200,000 visa holders will be coming to Australia in the next year as our international borders open. They will primarily be coming to Melbourne and Sydney where the jobs are

Don't be scared by the property pessimists.

Don't lose any sleep over the predictions that property values will drop 10 - 15% in 2023.

In my mind the big banks' economists will be wrong – just like they were with their calls of property Armageddon in 2020.

Property investment rules to keep in mind in changing times like these

It seems that everyone is an investment genius when the property markets are booming.

But even though our property markets have been resilient, in fact booming, the markets seem to be slowing down a little. And don't be fooled into thinking that all our economic and business problems are over.

Now don't get me wrong – I don't think there's a property crash any time ahead, but I clearly see many headwinds that could slow us down – both international and local challenges.

That's probably why I've been asked by both clients and the media what rules do I apply in times like this when the markets are changing in front of our eyes.

1. Become financially fluent

The secret to financial freedom is to spend less than you earn, save the balance and then wisely invest your savings in growth assets.

Becoming financially fluent means you will invest rather than speculate.

One of the reasons most investors don't develop the financial freedom they deserve is because they don't understand the rules of money and they end up buying their properties with emotion.

Be it your first property or your next property, it should be part of a long-term plan and a stepping stone to building a substantial portfolio.

By having a plan and a system to gauge the worth of an investment you will achieve better results.

1. Learn to invest rather than speculate.

Don't buy properties with emotion.

Instead, you must start with a strategic property plan.

First concentrate on building a substantial asset base over a number of property cycles, then slowly lower your loan to value ratios. Eventually, you'll be able to live off your cash machine.

In other words, invest for the long term.

1. Not every property is an investment-grade property

Remember that while the location of your property will account for around 80% of its performance, it's also important to own the right property to suit the local demographic.

1. Don't believe the hype

Be careful who you listen to for advice.

There are some great independent advisors out there, but the market is flooded with developers, property marketers, and real estate agents who don't really have your best interests at heart.

1. Location does the heavy lifting

Location will do 80% of the heavy lifting for your property's performance and that's why I only invest in select suburbs of our three major capital cities.

Most jobs, most wages growth, most population growth and most of our economy happens in Australia's capital cities and in particular in our big 3 capital cities.

1. Demographics drive markets

Over the long-term demographics will be more important in shaping our property markets than the short-term ups and downs of interest rates, consumer confidence, and government meddling.

1. Real estate investing is a game of finance with some properties thrown in the middle

Cash flow management and the correct finance strategy is critical to successful property investing.

This is little to do with low-interest rates and much more to do with having the correct finance product and setting aside financial buffers.

1. The economy and our property markets move in cycles

Property cycles vary in length and are affected by a myriad of social and economic factors and then, at times, the government lengthens or shortens the cycle by changing economic policies or interest rates.

Market sentiment is one of the key drivers of property cycles and one of the reasons why our markets overreact, overshooting the mark during booms and getting too depressed during slumps.

1. My 6 Stranded Strategic Approach to buying property:

1. It's below intrinsic value — that's why I'd avoid new and off-the-plan properties which come at a premium price.
2. It has a high land to asset ratio
3. It's in an area with a long history of strong capital growth and will continue to outperform the averages because of the demographics in the area.
4. With a twist — something unique, different or scarce about the property, and finally;
5. Where you can manufacture capital growth through renovations or redevelopment rather than waiting for the market to do the heavy lifting.

1. Don't focus on bargains — they rarely have a future

Sure, we are experiencing fewer property transactions because of the effects of coronavirus, but there is a flight to quality and buyers have become more discerning.

Think about it…Properties that no one else wants today will probably be the type of property that no one else will want in 5 years' time.

Price is what you pay, value is what you get; so buy the best property you can afford.

1. Allow for an X factor

There are a few "X factors" every year — unforeseen events or situations that blow away all our carefully laid forecasts.

Links and Resources:

Michael Yardney

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

Get a heap of eBooks and reports here: - www.PodcastBonus.com.au

Shownotes plus more here: Here's why I'm bullish on investing in 2022

Some of our favourite quotes from the show:

"Start investing as early as you can so you have time and compounding on your side." – Michael Yardney

"Why fight the gorillas? Why fight the big trends." – Michael Yardney

"Make a plan, but plan for your plan not to go to plan." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

Are New Year's resolutions powerful? Or are they pointless?

Every year more than 50% of people make New Year's resolutions.

They plan to lose weight, quit smoking, work out, save money, get a promotion, get a raise, move their business to the next level, buy that investment property, and more.

And yet, virtually every study tells us that around 80% of New Year's resolutions will get abandoned by this time of the year.

So maybe you didn't keep up that resolution to exercise more or go to the gym, but today in my chat with Mark Creedon, founder and CEO of Business Accelerator Mastermind, we're going to talk about how to make 2022 a great year for you.

Have you lapsed on your New Year's Resolutions?

Whether it's a small, (seemingly) easily achievable goal or a huge, life-changing goal, people tend to fail at the same rate: Approximately 80 percent of people who make New Year's resolutions have dropped them by the second week of February.

Some reasons why your resolutions may have failed.

1. You're treating a marathon like a sprint

Small changes stick better because they aren't intimidating.

1. You're in too much of a hurry

If it was quick and easy, everybody would do it, so it's in your best interest to exercise your patience muscles.

1. 3. You don't believe in yourself

The only way to defeat doubt is to believe in yourself. Who cares if you've failed a time or two? This year, you can try again (but better this time).

1. You don't track your progress

Keeping a written record of your progress will help you sustain an "I CAN do this" attitude.

1. You have no social support

It can be hard to stay motivated when you feel alone. The good news? You're not alone.

1. You know your what but not your why

The biggest reason why most New Year's resolutions fail: you know what you want but not why you want it.

So, here are 9 strategies to rescue those resolutions:

1. You can't achieve new goals or make desired changes without allocating time to do so.

To make this a better year you will have to do things differently from last year.

There are obviously some things you are going to need to keep doing, some new things you will need to do, and a bunch of things you'll have to stop doing to make room for the new, more productive activities.

1. Priorities should govern schedule; schedule shouldn't govern priorities.

To have a better year this year you'll have to wrest control away from others' priorities and be governed by your own priorities.

1. Resolutions aren't resolutions without resolve.

So, don't bother making resolutions to appease or satisfy others. Be honest with yourself – that's a prerequisite for success.

1. Resolutions require resources.

You aren't really serious about a resolution unless you invest in and gather the required resources.

Sometimes investment motivates follow-through since you've spent time, effort, and money on it. But don't be held back by limited resource thinking. If you are truly committed, you'll find the resources.

1. Daily Progress

Refuse to end any day without doing something that moves you toward the goal, no matter how small!

1. Who motivates the motivator?

Any professional sports coach will tell you: measurement automatically improves performance, and measurement monitored by someone else, further improves performance.

1. Build up to change

So, say you resolve to get up an hour earlier every morning to work on some projects. You could start with 15 minutes for two weeks, then 20 minutes for two weeks, then 30 minutes for a month, then 45 minutes for two weeks, and then you will find reaching the hour mark a lot more achievable.

1. It's not too late to regroup!

You may already have let your resolutions slip away. Doesn't matter.

Review the resolution and pick one or two that mean the most and apply the 7 ideas I've just shared with you.

1. Don't try and do it all on your own

It's really hard to be successful on your own. You need to find an accountability partner, a group of like-minded people, a coach, or talk to me about Business Accelerator Mastermind and I'll show you how we provide all 3!

Links and Resources:

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

Why not join Metropole's Business Accelerator Mastermind

Learn more about Mark Creedon – Business Coach to some of Australia's leading entrepreneurs

Get a copy of Mark's new book here – Have a business not a job

Get your free bundle of reports and eBooks – www.PodcastBonus.com.au

Shownotes plus more here: Where did my new year's resolution go? 9 Strategies to rescue them, with Mark Creedon

Some of our favorite quotes from the show:

"Just because 98% didn't get past their first or second or third property (well actually 92% don't get past their second property) that doesn't mean that you can't." – Michael Yardney

"One of the comments I often make is: you haven't come this far to come this far. So, keep going." –Michael Yardney

"Nothing changes until you change, and part of changing is changing who you hang around with, who you get advice from, how you do things." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

If you've been listening to my podcasts or reading my blogs, you'll know I have a number of rules and frameworks to help my property investing. By having these it takes the emotion out of investing and makes the results more predictable, but what's the most important golden rule of property investing?

That's a question I'm going to ask today of leading financial advisor Stuart Weymss, who's written a book about the golden rules of investing so let's see which rules have stood the test of time.

The Golden Rules of Property Investing

What's the most important factor in your property investment success?

Well according to leading independent financial advisor Stuart Wemyss the most important rule is the quality of your assets.

But what does this really mean and can really be as simple as that?

• So, let's start with the obvious question - what does quality mean?
  • Quality really means that a property will benefit from excessive demand.
• What investment-grade means
• The Supply-demand equation
  • Limited supply
  • Demand is diversified
• Look for properties that attract buyers that can and are prepared to pay more because of their higher incomes.
• Factors that drive demand.
• Amenities. This includes necessities such as supermarkets, family doctors, dentists, etc. Equally important are entertainment amenities including cafes and restaurants, entertainment venues, parkland including running and bike tracks, and so on.
• Proximity to employment opportunities. There will always be substantially better employment opportunities in large capital cities for most industries.
• Schools. This can include sort after public school zones as well as desirable private schools. Proximity to schools can contribute a lot towards capital growth.
• Culture/community. It's a positive attribute for a location to have a good community vibe/feel. This is often present in local shopping strips and the mixture of businesses adds a lot to this attribute. Some inner suburbs lack this and it's to their detriment.
• Healthcare. Proximity to hospitals is important to some buyers, particularly older folk.
• Transpor This includes good public transport easily within walking distance as well as major arterial roads.
• Neighborhood

Well also discuss playing the long game.

• Short term profit does not create long term value
• Three reasons short-term opportunities are inferior
  • Risk-based returns
  • Compounding capital growth
  • Taxes

Links and Resources:

Michael Yardney

Stuart Wemyss – Prosolution Private Clients

Stuart's Book – Rules of the Lending Game & Investopoly

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

Shownotes plus more here: Is this the most important Golden Rule of property investing? With Stuart Wemyss

Some of our favorite quotes from the show:

"Of the properties on the market at the moment, in my mind, there's probably less than 5% that I would class as investment-grade." – Michael Yardney

"Even when you buy a home, for most people it's not their final home. It's not their forever home, so they should still think like an investor." – Michael Yardney

"Enjoy the journey, because if you don't enjoy the journey, you're not going to appreciate the destination when you get there." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

Today's podcast will be a little different. Today I'm going to be brutal. I'm not holding back and I'm going to tell you some brutal truths about property investing You'll learn some of the things that can go wrong. You'll learn about the frustrations of being a property investor. You will learn some of the ways in which slick marketing can lead you astray.

But stick with me. It's not all negative.

Understanding what could go wrong is one way of making sure things don't go wrong and you can enjoy the success a small group of property investors enjoy.

The problem is most people who get involved in property investment don't develop the financial freedom they're after.

• 50% of new investors sell up in the first 5 years
• Most investors never get past their 1st or second property
• Only 20,000 Australians own 6 properties or more.

Now, this is not the type of information most people tell you about property when you first get started.

That's probably because many of the people you speak with are trying to sell you something – sometimes it's a property – in other cases it's their services (buyers' agents).

This episode is my attempt to redress that balance a little bit and share some brutal truths about property that you don't often come across.

Despite what some people will tell you, property investment isn't easy.

But it's simple. Now that isn't a play on words.

What I'm trying to say is that if you do what most property investors do, you'll get the same results as most property investors get — and that's not pretty.

You'll be heading in the right direction if you understand the following truths about real estate investing.

Sorry, but...

1. Property markets go through cycles.

• There are times every property cycle when values stagnate — sometimes for several years.
• And there are short periods when the value of your properties will fall a little.
• A-grade homes and investment-grade properties are less volatile – but property prices do fall at times, occasionally for several years in a row.

1. You need a significant amount of money to invest

• You do need money to invest in property.
• If you don't have the financial discipline to save a deposit, you shouldn't be borrowing money to get involved in property.
• You can get rich over the long term, but it is not a get-rich-quick

1. It takes the average investor 30 years to become financially independent through property

• Most investors waste the first ten years making mistakes and learning what not to do.
• The next few years are taken up selling underperforming assets and getting their financial house in order.
• Then it takes two or three good property cycles to become wealthy through property.
• Of course, you can shortcut this by getting the right mentors early in your journey.

1. Saying "I'll be fearful when others are greedy, and I'll be greedy when others are fearful" is much easier than doing it.

• Most investors are overly optimistic during booms when they should be cautious and most pessimistic during downturns when they are surrounded by opportunities.

1. No one really knows what the property market will do in the short term

• While in the long term our markets are driven by fundamentals, in the short-term human emotion and crowd psychology play havoc with the best-laid

1. Real estate investment is a game of finance with some properties thrown in the middle

• Strategic property investors buy themselves time in the market by having financial buffers in place to see them through the ups and downs of the property cycle.

1. Property investment is meant to be boring.

• Make your investing boring so the rest of your life can be exciting.

1. There is more free property information available today than ever before, but much of it is useless

• Most market news is not only useless, but it is harmful to your financial health.

1. Be careful who you listen to

• Rather than listen to the get-rich-quick stories, it's worth listening to those who talk about their mistakes and avoid the spruikers who don't — theirs are usually much bigger.

1. There is virtually no accountability for the many property gurus and their hot spot predictions

• I find it interesting that people who have been wrong about everything for years still draw large crowds of followers looking for the next get rich quick scheme.

1. The more "comfortable" an investment feels, the more likely you are to be taken by marketers or salespeople

• Avoid rental guarantees or promises of certain returns.

1. Despite what most would like to think the biggest difference between ultra-successful property investors and the rest is not their property strategy or their investment "secrets."

• It's the way they think — their "mindset" and their Rich Habits.

1. If you have credit card debt and are thinking about investing — stop

• Become financially fluent before you start investing otherwise the significant debt, you'll take on buying property will most likely overwhelm you.

1. Residential real estate is a high growth, relatively low yield investment, so don't buy real estate for cash flow

• Of course, cash flow is important to keep you in the game, but it's capital growth that will get you out of the rat race.

1. There are 3 stages of your property investment journey

• You first go through the asset accumulation stage which requires leverage and owning high growth properties; then you slowly reduce your loan to value ratio; until you can eventually live off your "cash machine" of properties.

1. However many properties you think you'll need to provide cash flow for your retirement, double it

• Now you're closer to reality.

Links and Resources:

Michael Yardney

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

Collect your bonus ebooks and reports here: www.PodcastBonus.com.au

Shownotes plus more here: The Brutal Truths about property investment that no one else will tell you

Some of our favorite quotes from the show:

"If you're looking for excitement, go bungee jumping. Go trail bike riding." –Michael Yardney

"Despite what the average person believes, though, debt is good. As long as it is used to buy appreciating assets." –Michael Yardney

"The very fact that you exist means you're lucky." –Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

Do you want to be a successful property investor?

Is so, you'll have to do things differently than most investors. One way to do that is to treat it like a business.

Today, I'll be discussing this concept in detail with Australia's leading property tax accountant Ken Raiss, director of Metropole Wealth Advisory.

I'm sure you'll find his take on things will be a little different, but you'll get some great insights to help you move your property investing up a level.

Build Your Property Investment Business

Property investors start their journey with good intentions great enthusiasm, but unfortunately, 92% don't manage to get past the stage of ever owning one or two investment properties. And less than 1% of investors build a portfolio of six or more properties.

So, where did they go wrong? But in most cases, the root of their problem lies in their strategy – or rather the lack of one. It never fails to amaze me how many people go into property investing without any sort of strategy, let alone one that is specifically crafted to match their personal criteria, goals, time frame, budget and risk profile.

It's like starting a new business without a business plan – and without any idea of what you want to sell, or how.

And if you think about it, property investing is a business decision.

So, how do you treat your properties like a business?

Every property that doesn't fit your overall strategy will be the wrong choice.It's critical to get some expert guidance when developing your strategy to ensure you consider all the important factors relevant to your current position and long-term wealth creation and lifestyle goals.

What does it mean to treat property as a business?

• All too often people are led into a false sense of security that a residential property in Australia will grow in value
• But less than 5% of properties are investment grade.
• You must also consider the money you use both from savings and borrowings.
  • In today's market, you will need to spend $300k even on a less desirable investment and much more for an investment-grade
  • That level of spending should require an understanding of the economic and market dynamics, a capability to identify the gems, and an ability to negotiate professionally.
  • Most sellers go through a real estate agent who is trained and practiced at this and performs these functions daily.
  • It is not a level playing field. You need to tip the scales back in your favor by seeking professional help.
  • Buying the right property then gives you the best chance to maximize future capital growth which leads to improved rentals, equity to use for future purchases, and as part of an exit strategy to maximize capital gains.
  • As a business, you need to consider future and current use, funding, potential to manufacture equity (as opposed to just waiting for the market), buying structure, impact on future lifestyle, and intergenerational wealth transfer.
    • This requires a more holistic approach where the various components of tax, structures asset protection estate planning, risk, and retirement must be all taken into account under one central umbrella. Why is asset protection so important?
  • Asset protection needs to be considered under three circumstances
    • You work in a litigious profession such as a surgeon
    • You find yourself in a management role where you take on responsibilities for employees where issues such as occupational, health, and safety concerns are part of your responsibilities.
    • When you are wanting to wind down and live off the fruits of your hard work you do not want an unfortunate accident to wipe out your wealth through litigation.
  • As a property investor, your risk is higher than normal as your tenants can sue if they are injured through your carelessness.
  • In the case of litigation, you risk the loss of all your assets which could include the family home.
  • There are specific steps we should all take such as not being in a position to be sued and having adequate insurance, but we all know this is not always enough.
  • Many people are advised to move these assets to a trust if they feel sufficiently concerned but this triggers CGT and stamp duty and for the family home the potential loss of the main residence exemption and land tax exemption. There are strategies to eliminate these taxes which we at MWA assist our clients with and that is to implement an Equity Transfer Trust.
  • You can also purchase your assets in a more appropriate structure from the beginning.

Links and Resources:

Michael Yardney

Ken Raiss- Director Metropole Wealth Advisory

Get Ken Raiss to build you a Strategic Wealth Plan

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

Shownotes plus more here: Build a property investment business you can be proud of with Ken Raiss

Some of our favourite quotes from the show:

"If you don't ask your consultants the right questions, sometimes they won't be forthcoming." – Michael Yardney

"A trust is really just a document, a piece of paper, with lots of clauses in it. And they're not all the same." – Michael Yardney

"It's critical to buy your assets in the correct structure upfront." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

How steeply will house prices fall after this boom? Are townhouses good investments, what's ahead for Brisbane property?

They are some of the questions we answer in today's Q&A podcast with Brett Warren.

Question:

Can real estate prices really keep rising considering where they are today? In the past, property values rose because interest rates dropped and prior to that one-income households became 2 income households, and we know financing became easier to obtain, but what will be the driver for future capital growth?

That's a great question and the simple answer is yes property values can keep rising, but not everywhere and not to the same extent as they have over the last year.

Now that I've given the spoiler alert let's dig into this more deeply so that you can understand my rationale behind those answers.

Bank Predictions

The Australian banks don't have a good track record in housing market forecasts.

But if house prices fall by the amounts predicted this time around, that will make it the biggest housing downturn in modern history.

The last time property took a downward turn was in 2018, when Australian house prices plunged by about 5 percent overall.

Prices also fell 4.8 percent in 2011 after a period of post-global financial crisis rate rises from the Reserve Bank.

Those falls pale in comparison to what banks now predict. They are quite remarkable forecasts.

Why would house prices fall?

Currently, Reserve Bank interest rates are low to bolster the economy and stimulate inflation and wages growth.

Once the Reserve Bank believes inflation is comfortably and consistently within its desired band of 2 -3% and unemployment is low enough to cause significant wages growth, then the RBA will slowly raise its interest rates from stimulatory levels to neutral levels.

Of course, there is some conjecture as to how high a neutral interest rate is, but considering the general level of Australian household debt, it is unlikely to require a big rise in rates.

There is no reason for the Reserve Bank to raise rates sufficiently high to create a recession or a housing market crash.

Moving forward some areas will strongly outperform others

If social distancing and the Covid-19 environment have taught us anything, it has taught us the importance of the neighbourhood we live in.

If you can leave your home and be within walking distance of, or a short trip to, a great shopping strip, your favourite coffee shop, amenities, the beach, a great park, the recently implemented coronavirus restrictions might seem a little more palatable than if you had none of that on your doorstep.

That's why choosing the right neighbourhood is important for property investors.

Question:

Thanks for your podcast, I now understand the importance of selecting the right location to do the heavy lifting as you frequently mention, but I can't really afford a home in investment-grade suburbs of our capital cities. Rather than apartments, what do you think of townhouses as an investment?

It's important to understand why we recommend buying investment-grade properties rather than affordable properties, and as you've hinted in your question a lot of this has to do with buying in the right location.

The more affluent locations are likely to be less affected by external influences than the non-blue chip areas.

So, one question you need to ask when buying an investment property is will there be ongoing demand from both owner-occupiers and tenants to live in this area despite what might happen to the world economy, the local economy, or local market conditions?

You should also ask yourself the question are people living in this location going to be earning more income than average, having higher increases in their income than average, and will they be able to pay more to buy or rent in these locations?

With houses becoming more unaffordable for many families, I see townhouses becoming more popular, particularly for millennials who no longer want to live in apartments but can't afford homes in the more established suburbs of our capital cities.

Townhouses typically provide the size and privacy of a home, as well as outdoor space but on a compact block of land and being 2 stories, they utilize verticality to retain internal sizes.

Because they are in smaller blocks of land, they are usually cheaper than single-family houses.

I've seen some very large complexes of townhouses built on very small blocks of land in some of the outer suburbs – I don't see those making good investments. As always, the other investment criteria regarding investment-grade locations must be adhered to.

Question:

I was considering employing an advisor agent to help with my next investment property because he said he specializes in buying off-market properties. Can you really buy off-market properties? And is one really able to get them for well under the market value?

• Understand the difference between off-market and pre-market
• We buy these a lot at metropole - but vendors are very informed and are unlikely to sell below market value
• If someone can get you a "bargain" property well below the market value, there's something wrong and that should raise red flags as a buyer. ..
• We believe 99% of properties in a blue-chip market sell for 5-10% above market value and even more in these boom times.

Links and Resources:

Michael Yardney

Brett Warren – National Director Metropole Property Strategists

Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us

Get a bundle of eBooks and reports - www.PodcastBonus.com.au

Shownotes plus more here: Can property prices really keep rising – Q&A Day, with Brett Warren

Some of our favourite quotes from the show:

"Property prices are notoriously difficult to forecast in the short term because there's so many factors involved." Michael Yardney

"I definitely see townhouses becoming more popular, especially for millennials, who no longer want to live in apartments, but can't afford a home in more established areas." Michael Yardney

"If someone says you can get a bargain well below market value in today's informed marketplace because sellers are informed, that would raise real red flags with me." Brett Warren

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how

Boy, there's a lot going on in the world right now isn't there?

Overseas there are all the geopolitical issues, and back home there are our own political issues plus concerns about wages growth, inflation, and the economy.

Of course, Australia's economy and our property markets don't operate in isolation, and that's why each month I take time out to have a look at the big picture, the macroeconomic factors affecting not just Australia's economy, but the world economy, to help us understand what's ahead for us, and I do this once a month in these Big Picture Podcasts with Pete Wargent.

There has been a lot happening since I last spoke with Pete, so I'm sure you'll get a lot out of the show.

Russia / Ukraine

• A lot of the world has been imposing sanctions on Russia, which will greatly impact the Russian economy.
• There is currently a huge humanitarian crisis.
• The world is seeing increased fuel and gas prices.
• Australia will probably reduce its dependence on Russian fossil fuels.
• Inflation will probably stick around longer because of this conflict.
• Monetary policy will become more complicated worldwide.
• We are likely to see more spending on defence.

Brisbane Floods

There has been some recent dramatic flooding in Brisbane, and while in the medium term our focus must be on the safety and rebuilding of Queensland, we also must consider the long-term effect of this flooding.

• The initial focus will be on clean up.
• Next will be repairs and insurance claims.
• In the five years after the 2011 floods, house prices in Brisbane increased by about 25%
  • History suggests that the housing market will snap back quickly.

Australia's Great Resignation?

Information from the NAB Survey:

• While around 1 in 5 working Australians actually did change jobs in the past year, when asked about their plans to do so, almost 1 in 4 (23%) said they were also considering leaving their current place of employment.
• A further 4 in 10 (41%) indicated they were not considering leaving their current jobs but were keeping up to date with potential job opportunities.
• Around 3 in 10 (31%) said they had no intention to change jobs and did not keep up with potential job opportunities.
• Just over 1 in 20 (6%) were unsure.
• A greater share of full-time workers are considering leaving their jobs over the next 12 months (24% vs. 18% of part-timers).
• By age, younger workers are more likely to be considering a change (28%), but a sizeable share of Australians aged 30-49 (23%) and 50-64 917%) are also considering doing so.
• Importantly, the survey also finds that many of the key reasons workers are contemplating leaving their jobs are "push" factors - a lack of personal fulfillment, purpose or meaning, lack of career growth, mental health, poor pay, and benefits. Many Australians who are considering changing jobs are also looking for a fresh start, with around 3 in 10 planning to move to a different or new role in a new industry.

Wages data and Interest rate rises.

As expected, the Reserve Bank Board decided to maintain the cash rate at 10 basis points.

When is the Reserve Bank going to raise interest rates? How high will interest rates go this cycle?

These are questions of speculation and concern to commentators, homeowners, and investors.

Some commentators were pointing to the possibility of rate hikes as soon as this June.

If the RBA raises interest rates this year this will further decelerate already slowing housing price growth.

However, for the bank to raise the cash rate, it will need inflation 'sustainably' within the 2% to 3% range – a scenario that would require wages growth in the order of 3-4%.

Although the latest inflation data was stronger than expected and underlying inflation is back within the RBA's target range, the board will be waiting for evidence that wages have turned a corner.

What are neutral interest rates?

Interest rates are currently at very low stimulatory rates, and at some point, the Reserve Bank is going to need to raise them, not to slow down the market, but to allow a comfortable level of inflation and wages growth to occur.

• How high these rates will go will determine whether the household sector will be able to service higher mortgage rates.
• Currently, Australians are wealthier than they ever have been, and many are months ahead in their mortgage repayments.
• The NAB CEO suggested that he can't see mortgage stress occurring with rate prices anytime soon.
• Wages and rents are going to increase

Home loan activity up again over January

• Home loan activity continued to rise over January
• In fact, home lending increased by 44.2% over the ending of January 2022.

Net arrivals positive for the first time since June 2021

• There were only 245,000 short-term visitors to Australia in 2021, down from 9.5 million two years prior.
• But now things are beginning to look up for the country's tourism sector.
• Australia eased its international border on 15 December 2021 to the 235k visa holders currently outside Australia.
• It also opened travel bubbles with Japan and South Korea, which follows the existing bubble with Singapore.
• Travel is set to re-open to all fully vaccinated visa holders from 21 February 2022.
• Short-term visitors are now coming here, and in January the number of net overseas arrivals shifted into positive territory for the first time in six months.
• Skills shortages within highly skilled industries should ease as 2022 progresses, though not completely and not overnight.
• Shortages in agriculture, hospitality, and caregiving may persist for longer.

Links and Resources:

Metropole's Strategic Property Plan – to help both beginning and experienced investors

Get a bundle of free reports and eBooks – www.PodcastBonus.com.au

Pete Wargent's new Podcast

Shownotes plus more here: Economic and property trends you must understand. The Big Picture with Pete Wargent

Some of our favourite quotes from the show:

"There's already a shortage of tradespeople, there's a shortage of builders, shortage of materials, and there's now all of a sudden going to be a huge extra requirement for all of those sorts of things." –Michael Yardney

"What's been happening up to now is the Reserve Bank's been saying, "we're waiting for wages to go up." – Michael Yardney

"I think one has to take into account in one's planning, but not be worried by these Armeggedon forecasts by the same people who thought the property market was going to crash in 2020." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how