Property Investment & Wealth Creation Australia | The Michael Yardney Podcast

To have a better lifestyle you don't actually need to earn more money, you just need to use the money you earn now in a better way.

These are the words of my guest in today's podcast, Angela Santalia, who has written a book called The Money Messenger, and today you'll hear her thoughts on how to control your money and live the life you want.

Now while many people listen to this podcast because they're interested in property investing, money management is a critical part of any type of investing, and especially real estate investing.

You need good money management to save your first deposit and once you own a property or two, money management is even more important.

And even if you don't have money problems, I think you'll enjoy my chat with Angela today as she says she has some financial strategies to become wealthier by making your money work for you.

And of course, I will also be sharing my regular mindset message with you.

The Money Messenger

Navigating the world of personal finance can be overwhelming, yet with some smart planning, a good strategy, and an understanding of the basics you should be able to develop the money-management skills you need to get your finances under control.

Angela Santalia has over two decades of experience working in the Australian Financial Planning industry as a Financial Paraplanner Strategist. Her clients are other financial planners and through her experience, she has learned a lot about money, people, and which spending habits do and don't work.

Angela runs a thriving website called The Money Messenger, which features a blog, resources, tools, YouTube videos, and more where Angela shares her money management knowledge with the public.

Angela was 'Young Investor of the Year' Runner Up in 2017 for Your Investment Property Magazine.

Subjects Angela and I discuss:

• Angela's The Money Messenger blog, where she aims to get young Australians talking about money.
  • Angela shares her own financial planning and investment experience along with tools and resources.
  • Angela believes that young people need to learn about money because the things you do in your 20s and 30s continue to affect you in your 40s and 50s.
  • Financial mistakes can follow you for years.
• Angela explains that young people may have parents that don't necessarily understand money either.
  • Life is also very different now, with different job and life roles, different kinds of debt, and different family structures at different times
  • Young people today also want more freedom, choice, and flexibility than their parents had.
• Angela recently published a new book, The Money Messenger
  • She wrote it because she saw a problem with a lack of financial knowledge among people in their 20s and 30s.
  • People in their 40s also like the book and wish they'd had it when they were younger.
  • The purpose of The Money Messenger is to teach readers how to get wealthy by using their own money correctly and investing wisely
• Angela explains why people need more than one bank account.
• She also talks about the importance of paying off credit cards.
• According to Angela, one of the biggest complaints from millennials is that they can't save.
  • Most other complaints stem from that main one.
• Angela believes that young people need a plan for the future and that they'll never have enough without investing.

Resources:

Michael Yardney

Angela Santalia – The Money Messenger

As our markets move forward why not get the team at Metropole to build you a personalized Strategic Property Plan – this will help both beginning and experienced investors.

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

Shownotes plus more here: You can't control everything in life, but you can control your money

Some of our favorite quotes from the show:

"In fact, the average Australian's wealth grew more in the last year than it did during the preceding three years combined." – Michael Yardney

"Part of the reason you can't save is because you've got no idea where your money's going." – Michael Yardney

"The truth may hurt, but the world doesn't owe you anything." – 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

As the world works its way through the confronts of the Covid related economic issues, lockdowns, and health challenges, one thing has become clear.

The rich keep getting richer. They seem to do this through pandemics, through good times and bad.

And this has led a lot of people to ask why? How? What do they do differently?

That's what we're going to discuss in today's Rich Habits, Poor Habits episode of the Michael Yardney podcast.

Even if you come here to learn about property, success or money, at the end of today's show you're going to understand some new research that Tom Corley has uncovered which should help you in your future endeavours.

The Four Paths to Wealth

There are four predominant paths toward accumulating wealth. The "Savers-Investors" path is the easiest, while the other three involve much more risk.

1. The Saver-Investors path

Just less than 22% of the millionaires in Tom's study chose to take the Saver-Investors path. Not only is it the easiest way to build wealth, but if you start early, it almost always guarantees a lot of money.

The Saver-Investors had four things in common:

• A middle-class income
• A low cost of living and preference for saving to save
• A habit of saving 20% or more of their income.
• An early start to investing their savings

1. The Dreamers path

This is perhaps the hardest path to building wealth because it requires the pursuit of a dream, such as starting a business, becoming a successful actor, musician, or author.

Approximately 28% of the folks in Tom's study were Dreamers, and they accumulated an average net worth of $7.4 million — far more than any of the other groups — over a period of about 12 years.

Those who want to take this path, however, must be willing to work long hours and able to handle financial stress. The Dreamers in my study worked more than 61 hours per week before finally achieving their dreams. Weekends and vacations were almost non-existent.

1. The Company Climbers path

Climbers are individuals who work for a big company and devote all of their energy to climbing the corporate ladder until they land a senior executive position.

This is the second-hardest path to becoming a millionaire, and about 31% of the rich people I studied fell into this group. It took them an average of 22 years to accumulate a net worth of $3.4 million or more. In most cases, their wealth came from either stock compensation or a partnership share of profits.

To be a Climber, you must have strong relationship-building skills. Networking and making lasting connections with powerful people in your industry are essential.

1. The Virtuosos path

Roughly 19% of the participants in Tom's study chose this path. Virtuosos are among the best at what they do in their profession. They are paid a high premium for their knowledge and expertise, which sets them apart from the competition.

It took the Virtuosos in my study about 20 years to reach an average net worth of $4 million. Some worked in the medical field, while others worked in law. A handful either worked for large, publicly-held corporations, or they were small business owners with highly profitable enterprises.

Links and Resources:

Tom Corley - Rich Habits

Michael Yardney - Metropole

Get your own copy of our international bestseller Rich Habits Poor Habits

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: You really need to understand the 4 different paths to wealth | Rich Habits, Poor Habits With Tom Corley

Some of our favourite quotes from the show:

"I think something we should remind people is that most millionaires weren't born that way." – Michael Yardney

"Entrepreneurs often have to count their pennies carefully in the early days." – Michael Yardney

"You need resilience, because you're going to have troubles, you're going to run into challenges, there are always going to be hurdles." – 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 resurgence of Covid-19 across the country is causing concern.

It wasn't that long ago that we experienced minimal, or no cases of Covid around Australia and we thought we had this Coronavirus thing licked, and all of a sudden we are confronted with lockdowns, uncertainty, and everything that goes with it.

As Australia's circumstances continue to rapidly evolve, many are wondering what this means for the economy and our property markets.

As our property markets don't operate in isolation, to be a successful, strategic investor it's important to have a telescopic view – a big picture view of the macroeconomic factors affecting not just Australia's economy, but the world economy and that's why each month I have these Big Picture podcast chats with Pete Wargent, a lifelong student of and commentator on our economy. After that, I'll share my mindset message.

The Big Picture

When we recorded last month's Big Picture Podcast Australia's economic recovery was continuing to unfold, jobs kept being created and our property markets keep surging.

And this month's headlines are full of concern and mixed messages.

Let's look at the macroeconomic factors affecting our economy and the property markets to help gain some clarity about the future.

Some of the topics that Pete and I discussed:

• Monetary policy is not going to change based on the current interruption to the recovery
  • Although the new lockdowns and restrictions will have costs to the economy, the banks remain optimistic
  • It's also expected that the current surge will be a temporary problem and that economic conditions will bounce back quickly once it's over
• Despite the negative news, household wealth in Australia continues to boom
  • This is a good sign for consumer spending.
• Property prices have been largely unaffected by the lockdowns
  • Property values continue to rise, even though the rate of house price growth is now slowing
  • Renters, however, are having difficulties and facing rental stress
• The Federal Labor party has formally dumped its contentious negative gearing policy and dropped its opposition to the federal government's stage three tax cuts for high-income earners.
• The shape of the recovery is changing again.
  • It was previously touted as a V-shaped
  • Now, it's being described as a K-shaped recovery, with jobs in public service and big business on the risking arm of the K and tourism, hospitality, and small businesses on the falling arm.
  • The current surge of the Delta strain of COVID has affected the recovery and may continue to cause problems.
• As a more significant part of the population is vaccinated, lockdowns and restrictions will become rarer
  • The economy will continue to rebound as that happens
  • If household wealth continues to remain high and grow, it sheds a positive light on recovery over the next 6-12 months.

Resources:

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

Gets your bundle of eBooks and reports here: www.PodcastBonus.com.au

Join Michael's Property Update private Facebook group by clicking here

Pete Wargent Next Level Wealth

Pete Wargent's new book Low Rates High Returns

Shownotes plus more here: The Big Picture – economic and property trends you must understand – August 2021- with Pete Wargent

Some of our favourite quotes from the show:

"When we get through this, the cash that we've stashed is going to help make the economy rebound." –Michael Yardney

"But look how well all those people who made their decisions a year ago are doing in the property market." – Michael Yardney

"Entitlement gets us nothing but heartache." – 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

Tim Ferris, #1 New York times bestselling author has written a new book - Tools of Titans.

In it, he shares the tactics, routines, and habits of billionaires, icons, and world-class performers.

You could read this great book which is well over 700 pages long or you may instead enjoy my chat today with Mark Creedon who will share the top seven lessons he got from this book in this month's Build a Business, Not a Job podcast.

The lessons we had a chat about will be relevant for everybody and particularly if you want to succeed in life whether it's in your career, investment, your profession, or in business.

7 Takeaways from Tools of Titans

Rather than reading the whopping 707 pages of Tim Ferriss's Tools of Titans, I to ask Mark Creedon, founder of Business Accelerator Mastermind and business coach to some of Australia's top business people and entrepreneurs to unpack a number of the lessons for us.

Lesson number 1: You are the average of the five people you most associate with

You should never underestimate the detrimental effects that your pessimistic or unambitious friends have on you.

If someone isn't making you stronger, they're probably making you weaker. Ferris says that "giving your time and energy to negative people is masochistic".

In a nutshell, and I'm sure you've heard it before, you are the average of the five people you most associate with.

Lesson number 2: Don't wait until you're ready

It's worth remembering that often, reasons come first, and answers come second as Carl Brian often says.

Waiting until everything is perfect before making a big change is just a self-protection mechanism.

The stars will never align, and all the traffic lights will never be green at the same time so sometimes you just have to make the hard decision to bring about change in your business, to employ that next level to help you scale out; to put systems and structures in place so that you can spend less time in your business and more time in your life.

Lesson number 3: Be the best at one thing

Focusing on one thing at a time and being great at it is the fastest way to scale your business.

Focus on perfecting one thing at a time in your business and don't get distracted by implementing new features or new products all the time.

Narrowing your focus will help you broaden the lens and see even more opportunities for success.

Lesson number 4: Being in your own business doesn't have to be an all-or-nothing wager.

The idea of testing a business idea for a period of time and building both confidence and cash flow makes a lot of sense.

It's worth remembering that being successful at business and entrepreneurship is 90% psychological.

If you can get the headspace right and you've got an idea that has "legs" then you're well on your way to success.

Lesson number 5: Getting preferential treatment can come from being more assertive.

You don't have to be aggressive or the biggest dog in the yard, but you do need to be clear on what you want to achieve, standing your ground on the journey to get it, and being assertive where it counts.

I suggest the best way to achieve that is to work out what is negotiable and what is nonnegotiable. In your journey to business or professional practice success, there are some things worth fighting for because they are simply not negotiable and that's when you must be your most assertive.

Lesson number 6: Fear is a good thing.

Tim makes a great observation when he says, "what we fear doing most is usually what we most need to do."

Fear is what keeps you focused and motivated.

The reality is that your fears often provide you advance notice of exactly what you need to be doing more of.

Lesson number 7: Success is way more possible than you think

Everybody has wild dreams. The problem is that most of us think they aren't achievable.

If we believe they aren't achievable then we never even try.

I encourage my grandchildren to aim for the stars because as Richard Branson showed just last week, you might just hit them.

It doesn't mean that becoming a wildly successful entrepreneur is easy, but it does mean that it is more possible than you might think.

Links and Resources:

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 heap of special reports and eBooks here- www.PodcastBonus.com.au

Shownotes plus more here: Tools of Titans – learn the tactics of Billionaires with Mark Creedon | Build a Business, Not a Job Podcast

Some of our favourite quotes from the show:

"It's not only the people that you deal with day to day but what you choose to learn, what you choose to read." – Michael Yardney

"I think that you actually have to show respect to others and do it with integrity." – Michael Yardney

"All the good stuff is just outside your comfort zone." – 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 industry, and investors in general, welcomed the Labor party's announcement that they won't change the rules of negative gearing if they got into power.

So, is this the end of the debate?

Not necessarily according to Stuart Wemyss who still has some concerns that we're going to talk about today.

We'll also discuss the concept that sophisticated investors shouldn't have to jump through the same hoops that beginning investors do.

Then, in my mindset message, we're going to talk about the fears that may be holding you back.

Is this the beginning of the end of negative gearing despite Labor's promises?

One of the aspects of finance I discuss with Stuart is negative gearing.

What is negative gearing?

Negative gearing allows investors to offset property investment losses against other taxable income (such as employment income) to reduce their tax liabilities.

Why do people negatively gear?

The only reason that you would negatively gear is that you anticipate that the property's capital growth will eventually dwarf its income losses.

Is negative gearing at risk?

There are three main reasons why tax benefits resulting from borrowing to invest in property will not be as substantial as they have been in the past. As such, investors should not rely on negative gearing tax benefits when making investment decisions.

Reason 1: Government will probably (eventually) limit negative gearing

The expansion of federal government debt to over $1 trillion dollars means the government must generate more revenue to service and eventually repay this debt. One way to do that is to grow the economy (GDP) which will generate more tax revenue, even if tax rates don't change. Another way is to raise taxes or limit deductions.

Reason 2: Persistently low interest rates reduce tax savings

Gross property residential rental yields typically range between 2% and 3.5%. After allowing for expenses (such as management fees, maintenance, insurances, and so on), net rental yields typically range between 1% and 2.5%. With interest-only investment rates starting at 2.5% p.a. (fixed rates), a property's pre-tax income loss can range from nil to 1.5% of a property's value (being net yield less interest rate). This means if your property is worth $1 million, your pre-tax loss probably won't exceed $15,000 p.a. Consequently, your tax benefit (savings) won't be more than $,7,050 (being 47% of the loss).

Reason 3: Stage 3 tax cuts will reduce tax savings

It was reported last week that the ALP will likely support the government's stage 3 tax cuts which are set to become effective in the 2024/25 financial year. This means that there will only be two tiers for taxpayers that earn in excess of $41,000:

$41,001 to $200,000 = 34.5% tax rate including Medicare; and

Over $200,001 = 47% tax rate including Medicare.

Sophisticated Borrowers Shouldn't Have to Jump Through the Same Hoops

Anyone who recently made an application to get more finance would have realized how much harder it is, how many more questions you have to answer, and how much longer it takes today.

Stuart recently wrote a great article where he suggested that sophisticated, more experienced borrowers shouldn't be required to jump through the same hoops to get finance that less experienced borrowers need to.

What do you mean by that?

We discuss the retail versus wholesale investor rules

The Corporations Act makes a distinction between wholesale and retail clients (or "sophisticated investors" if being offered bonds or direct shares). A wholesale client is someone that meets either of the below two tests:

Asset test – having a net worth of over $2.5 million; or

Income test – having a pre-tax income of at least $250,000 in each of the past two years.

The Act also includes other exemptions in addition to the above including professional investor test, product value test, and small business test.

These asset and income hurdles were struck back in 1991 and are now vastly outdated. Adjusting for the impact of inflation, the income threshold should now be over $490,000 and asset value over $4.9 million.

Wholesale clients are assumed to be financially savvy enough to make informed decisions and are able to protect their own interests. In short, they can decide whether an investment is appropriate so there's less onus on the provider or advisor. Also, there are fewer obligations (on financial advisors and product issuers) when dealing with wholesale clients such as there is no need to provide a Financial Services Guide, Statement of Advice, Product Disclosure Statements, etc.

The current system is broken

The fact that someone with several millions of dollars in the bank is subject to the same assessment as someone with very little financial resources highlights that the current regulations are inadequate. Banks must be given a robust framework but enough discretion to operate within that framework to achieve acceptable outcomes. Distinguishing between retail and sophisticated borrowers seems to be a logical step in the right direction.

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 bundle of eBooks and reports here: www.PodcastBonus.com.au

Stuart Wemyss – Prosolution Private Clients

Stuart's Book – Rules of the Lending Game

Shownotes plus more here: Is this the beginning of the end of negative gearing despite Labor's promises? With Stuart Wemyss

Some of our favourite quotes from the show:

"Finance is going to be critical for us as property investors – property investment is a game of finance with some house is thrown in the middle." – Michael Yardney

"In this environment, fear is not unusual. It's not uncommon. In fact, I guess it's normal." – Michael Yardney

"Fear of change causes some people to become stagnant, and they miss out on a lot of the really great opportunities." – 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

In a time of lockdowns, thinking 40 hours ahead is sometimes a challenge.

Now try thinking 40 years ahead.

Well, that's what the Federal Government has done when it recently released its fifth Intergenerational Report.

It has taken a 40-year view on where we'll be in 2061 and forecasts that Australia will be older, smaller and more in debt than previous Intergenerational reports suggested.

Predicting anything 40 years out is a challenge. But predicting what will happen to something as unpredictable as our economy, and the budget settings it generates, requires the most adept of crystal balls.

And as with any such exercise, the predictions are completely meaningless without understanding the assumptions upon which they are based, so today I unpack this report in my regular chat with leading demographer Simon Kuestenmacher and ask him what do the findings mean for our economy and our property markets.

What's ahead for Australia?

Our property markets don't work in isolation – they're driven by our demographic changes and according to the latest Intergenerational Report in 40 years' time Australia will be smaller and older than previously expected after the first downward revision of official projections in an intergenerational report in 20 years.

• The purpose of the intergenerational report:
  • Show everyone what Australia could look like in 40 years under the current policy settings
  • Help treasury understand how much money it can spend
  • Help politicians consider the long-term effects of their policies
• In the current intergenerational report:
  • The Australian economy is projected to grow at a slower pace over the next 40 years than it has over the past 40 years.
  • Real gross domestic product per person is expected to grow at an annual average of 1.5 percent
• The pandemic has interrupted heavy population growth. Growth has been buoyed by government stimulus, but that can't last forever.
  • The previous Intergenerational Report in 2015 projected an Australian population of almost 40 million by 2054-55.
  • The 2021 update projects 38.8 million by 2060-61.
  • That's less growth, but it's still a monumental trend.
  • City and town planners will have a lot to do in coping with the growth.
  • This will impact property investment choices, but strategic knowledgeable investors will be well-placed to capitalize on the changing trends.
• In 2060-61, about 23% of the population is projected to be over 65, up from 16% at present and 13% in 2002.
  • Health improvements suggest that older Australians will be able to remain active longer
  • However, they'll also need to work longer to self-fund retirement.
  • As a consequence of the low birth rate, aging population, and decline in migration, over the next decade, we will lose out on over a million people in Australia who could have added to our GDP.

Resources:

Simon Kuestenmacher - Director of Research at The Demographics Group

As our markets move forward why not get the team at Metropole to build you a personalised Strategic Property Plan – this will help both beginning and experienced investors.

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

Shownotes plus more here: Should we be scared by the forecasts of the 2021 Intergenerational report? With Simon Kuestenmacher

Some of our favourite quotes from the show:

"In the next 40 years, our population will increase by 13.3 million they're saying. In other words, increase by over 50%." – Michael Yardney

"Some people would also say another way is to import these higher-skilled people from overseas." –Michael Yardney

"There's a long list of people who'd rather complain than actually do something about it." – 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

While it's not rocket science, it's not easy to research our property markets given the array of jargon and information and the many mixed messages that are out there.

So, in today's podcast, I would like to chat with you about some of the many sources of research data that we look into to ensure we make good investment decisions for ourselves and our clients at Metropole.

You'll hear me explain the importance of data but also how even more important is the ability to put the plethora of information into perspective, as I share with you several metrics that we look at when deciding where to invest.

And just as importantly, I'm going to share with you one very commonly used data metric that most investors use but at Metropole we almost totally ignore. And I'll explain why you should also.

5 Metrics You Should Use and 1 That You Shouldn't

If you're looking to assess a property's investment potential, use these 5 metrics work as a starting point.

1. Past sales history

We look at past capital growth to give us an indication of future growth potential.

While past performance is obviously not a guarantee of future performance, the fundamentals rarely change.

1. Days on market

Days on Market is a measure of how long it takes to sell a typical property in a particular suburb.

This statistic helps investors to identify those locations that are strengthening so they can buy before the masses and therefore make the most of the price uplift as the time on market decreases.

1. Depth of Market

What we're looking for here is an assessment of the supply vs demand balance within a particular market.

This is a measure of how long it will take for the current inventory to be absorbed completely based on the current rate of monthly sales, assuming there are is no more new inventory being added to the market.

1. Ratio of owner-occupiers to renters.

While many beginning investors have their prospective tenant top of mind, an important strand of Metropole's Six Stranded Strategic Approach is to buy a property with an owner-occupier appeal.

This is because owner-occupiers "make the market" and add stability to property values in those suburbs where there is a predominance of established owner-occupiers b who bought their homes many years ago and have significant equity in their properties.

1. Above average wages growth vs state average

Since property investment is a game of finance with some houses thrown in the middle, it's important to find locations where the local residents have higher disposable income than average and suburbs where wages are growing faster than the state averages; as in these locations people will be able to afford to, and usually be prepared to, pay more to buy new homes or upgrade their homes.

You'll often find these suburbs are going through gentrification. Here you want to focus on the trend of how the wages growth in a particular suburb is trending against the state average. The faster at which it outpaces the state average, the better.

What we don't rely on – Median prices

Most beginning investors use median price growth as their guidance for suburb selection

How is median calculated

Be careful – observing the change in median property prices may not be as useful as you think.

While median house prices are one of the most cited property market statistics as with any single measure there are some shortcomings that investors need to understand in order not to be misled with what's really happening to house price values.

How is the median price calculated?

The median house price is essentially the sale price of the middle home in a list of sales where the sales are arranged in order from lowest to highest price.

This is different from the average, which would be the total value of all the house sales, divided by the number of homes sold.

Technically speaking, the median is more accurate than the average because it is less affected by a few unusually high or low sale prices.

1. A change in the median price does not necessarily mean a change in your property's value

While median prices are a useful tool for understanding the price changes of properties that have transacted in a market, a 10% increase does not necessarily mean that your property is worth 10% more.

What it does reflect, however, is activity in the market.

1. Median prices are a more valuable indicator in some areas than in others

Changes in median price statistics are more meaningful in determining property price growth in some areas than others.

For instance, suburbs where many properties transact on a more regular basis will be more statistically meaningful than in areas where homes are tightly held, sell infrequently, and are significantly different from another.

1. Different data providers measure different statistics

Ever wondered why different data providers' median prices are different?

That's because there are three key differences between all the providers.

• The data they collect,
• The time frames they report on – daily, monthly or quarterly
• The accuracy/complexity of the index methodology they rely on.

One way around this shortfall in median property value changes is to use data sets like the Corelogic Hedonic Index which seeks to overcome some of these issues by measuring the attributes of properties that are transacting as part of the analysis.

1. Statistics are more reliable if looked at over the long term.

Be careful relying too heavily on the data.

You're probably aware that property investment is part science and part art.

The art component is the market intelligence that comes from decades of experience in buying and investing on the ground.

And this is crucial because relying solely on the scientific approach isn't enough.

What I'm getting at is that while you need the data in the research phase of your investment journey, to be a successful property investor you need much more – you need on-the-ground experience and perspective.

Data will only get you part of the way, you must complement data with local area knowledge and expertise.

That's why our buyer's agents at Metropole are ex-selling agents who understand the local market drivers.

They understand why one side of the road is more valuable than another or why one part of the suburb is more in demand than another.

This is the type of perspective that money can't buy.

Property investors who only do their research on the Internet but don't have the on-the-ground expertise or context have the "science" part of the investment equation covered but miss out on the "art" part of investment smarts.

Don't get me wrong, doing your research is a critical step in getting ready to invest, but it is only one of the many important steps.

There is no substitute for practical, on-the-ground experience.

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 range of my ebooks here: www.PodcastBonus.com.au

Shownotes plus more here: How to use property data to your advantage

Some of our favorite quotes from the show:

"Once this property boom ends and the impetus of low interest rates has worked its way through the system, we're going to end up at a time where affordability will be stretched for many people." –Michael Yardney

"If there's minimal market depth, there's going to be more volatility." – Michael Yardney

"Let's be frank, you can make the data say almost anything you like." – 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 invest in residential property, how can you be sure that it's going to work out for you?

That's what we discussed in today's show, because if you're going to borrow money to invest and take on the risk of investment you need to ensure that you're going to get wealth-producing rates of return, not just during this boom, but over the long term.

Today I'm chat with Brett Warren and we give you some insights to ensure you make the most of this property cycle.

To increase the probability of being a successful investor, or put it differently, to reduce the risk of being unsuccessful and ending up with only one or two properties like 92% of those you get into property investment do, you need to focus your energy on only investing in quality assets.

Drivers of this boom:

• Low-interest rates leading to people upgrading, which creates demand
  • Tenants upgrading to be owner occupies – first homebuyers
  • established homeowners upgrading to better accommodation
  • other homeowners upgrading their lifestyle to 20-minute neighborhoods or regional locations
  • baby boomers upgrading their lifestyle moving to family-friendly apartments or townhouses
• rising consumer confidence
• pent-up demand
• supply versus demand
• demographic changes
  • Millennials moving to family formation stage
  • how and where we want to live – Home versus an apartment, the right neighborhoods.
• infrastructure improvements

What's going to happen in 3 or 5 years?

• Property values will have risen significantly – in many cases 25 to 30% over this cycle.
• The economy will rebound
• Wages and inflation will rise
• The RBA will push up interest rates just a little.
• Property will become unaffordable for many Australians
• The gap between the rich and the poor average Australian will keep increasing.

You have to ensure you own the right property, yet FOMO means many investors are making poor investment decisions currently and will lose out in the future.

Locations where you could invest.

1. The "established money" suburbs, where many established owner-occupiers have limited debt
2. The aspirational suburbs that are gentrifying – where there are high-income earning Millenials
3. The outer, cheaper, less affluent suburbs which are unlikely to gentrify in the medium term as that's not where the wealthier people want to move into and live. (Avoid these.)

The problem is during this current property boom, almost all properties are increasing in value, so people who have bought the wrong properties will still think they're doing well. They won't realise their mistakes until they wake up in 5- or 10-years' time and realise the huge opportunity cost – what they have lost out on - because of owning the wrong property is in the wrong locations

What Happens Next?

Property prices will not continue to rise at such a rapid rate.

As a part of any normal property cycle, there will also be a downturn in our property markets.

But in a rising market and in the heat of the moment, this can often be forgotten.

In Summary

The current market tide will certainly lift our property market causing prices to rise.

Some investors buying on a whim and with emotion buy into this and think that any property will likely do well in the short term.

They do very little research and give into confirmation bias

These investors do not understand that they are likely making a medium to long-term decision based on only the short-term outlook, instead of making the decision that will move them closer to their longer-term goal.

Understanding their reason for investing and then understanding longer-term fundamental data should be a priority.

Following a process is critical otherwise, you may be caught swimming naked once the tide goes out.

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 free eBooks and reports at www.PodcastBonus.com.au

Shownotes plus more here: This is no ordinary property boom, where will you be when it ends With Brett Warren

Some of our favorite quotes from the show:

"In my mind, the intensity of this boom is a once in a generational opportunity, and it's not too late to get into the cycle." – Michael Yardney

"Buying the right property now is not only going to help build your asset base but should set you up correctly to establish intergenerational wealth." – Michael Yardney

"Successful people have a long term perspective. They have the ability to work hard to accomplish something which isn't achieved for a long time." – Michael Yardney

PLEASE LEAVE US A REVIEW

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Are we heading for the biggest crash since the Great Depression?

Is it just around the corner?

Well according to Harry Dent, we are and it is.

He is telling anyone who is prepared to listen that we are heading for a stock market crash, and the value of your house will drop by up to 40%.

Today I to chat with economist Harry Dent about his views, and then Pete Wargent and I give you our thoughts on what's ahead.

Now a word of warning before we get into the interview, especially for the faint hearted. There are some scary predictions made by Harry, so please listen to his whole interview and don't sell up your assets before you have my views and those of Pete Wargent.

Subjects I Discussed with Harry Dent

Harry is a Harvard MBA graduate, a Fortune 100 consultant, and his demographics-based approach to economic forecasting has helped him correctly predict many major economic events, including Japan's 1989 economic collapse, the 2000 dot-com bust, and the populist wave enabling Brexit and Donald Trump's election.

• Harry believes that an economic winter is coming that will be worse than the Great Depression.
  • He believes that the governments are using stimulus to keep economies alive, and that this is bound to not end well.
• Harry's biggest surprise about COVID was how much the governments stepped up and created stimulus.
• He believes that the biggest sign of problems in the US is that the home sales are going down while housing prices go up.
  • He believes that rates are artificially low because governments are printing money out of nowhere and using it to do things like buy bonds.
  • His line in the sand is 2022, which is when he believes the lowest point will occur.
• Harry says that hitting the limits wall cause the bubble to explode.
• He says that China has the biggest bubble, and because they're Australia's biggest export, their bubble bursting will hurt Australia.
  • Harry believes that Australians who think he doesn't understand Australia's markets just don't understand the world.
• He would advise people to reassess their assets and sell what they don't need.
• Harry explains that the upside of a burst bubble is that it will get rid of bad companies being artificially propped up and make way for new ones.
• Harry also discusses how he would explain his views to someone who visited his seminars and did what he suggested years ago but didn't see it work out for them.

Bursting the Bubble with Pete Wargent

• According to Pete Wargent, we're not in a bubble, and there isn't necessarily a big explosion coming
• Australia is seeing record-low mortgage rates
  • A typical response to low mortgage rates is more people getting into the housing game.
  • More people getting into the housing game is basically what is happening right now.
• The current housing market is underpinned more by owner-occupiers than investors
  • This makes a bubble less likely.
• Australia's government has been prudent, and there are not high levels of government debt.
  • What's more, the interest rates are low.
• Australia's banking system is sound.
• The majority of the debt is in the hands of people who have the means to service it.

Resources:

Michael Yardney

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

Harry Dent's newsletter: www.HarryDent.com

Pete Wargent Next Level Wealth

Pete Wargent's new book Low Rates High Returns

Shownotes plus more here: Harry Dent says Australia's property bubble will burst, but Pete Wargent bursts his bubble

Some of our favourite quotes from the show:

"As an investor, I believe it's important to listen to others views." – Michael Yardney

"In my mind, a bubble is an economic cycle characterized by a rapid escalation in asset values, then it's followed by contraction." – Michael Yardney

"From what I can see, the debt that's out there is in the hands of people who can manage it." – 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

I hope you're taking advantage of the current property boom.

I haven't seen conditions like this since the early 1970s when I first started investing.

Now you won't find charts of that particular boom in the various research house statistics, because they weren't keeping those types of records in those days.

Back then, the boom in property values was in part related to the very strong inflation we were experiencing, and at the time the booming markets of the early 70s and that of the late 80s and the boom of the early 2000's twenty years ago created a lot of Real Estate empires.

I know the boom of the 70's got me off to a great start and the subsequent booms grew the value of my portfolio allowing me to continue growing it, but I also know there were others who invested through the various property booms who haven't had the success they hoped for. Even though initially it seems they were heading in the right direction.

So, my chat with you today will be to help you understand the type of property that you should be buying at this stage of the cycle to take advantage of the current conditions that see you through for the rest of your investing life.

Today's podcast will be in two parts, I'll initially give you my thoughts and then I'll have a chat with independent financial strategist financial adviser Stuart Wemyss who will share his thoughts on a big mistake he's seeing investors make – in the hope that you don't make the same mistake.

Here's how to invest in our booming property markets

I'm continually being asked questions like:

• What's the right property for this stage of the property cycle?
• Is this the right or wrong time to invest in property?
• Is it too late to invest this time round – prices have grown so much?
• Where's the best place to invest in 2021?

First, let's take a look at what is happening.

What's driving Australia's property boom?

• Low interest rates – Low interest rates are facilitating change from all types of prospective property buyers, many of who are starting to experience FOMO (fear of missing out) and are pushing prices higher and higher. Rising consumer confidence -- The combination of improving economic conditions, increased jobs security plus the sense that we're getting Covid under control is lifting consumer confidence, which in turn has created continued strong demand for housing.
• Supply versus demand – Buyers are snapping up properties faster than vendors can list them for sale at present which puts further pressure on prices.
• Pent-up demand – Buyer demand is particularly strong at the moment because it has been pent up for a number of years.
• Demographic changes – Changes in demographics, the structure of family life, and what we want out of our home also shifted during the height of pandemic lockdowns. The desire to live in a 20-minute neighborhood shone through.

Fast forward 3 years - what can we expect next?

If we fast forward another 3 years or so, I expect we'll find that property values have risen significantly - as much as 25-30% higher than at the beginning of this current property cycle.

By then our economy will have rebounded even further, wages will have increased, and inflation will be starting to rise.

This means the RBA will most likely have stepped in and raised interest rates, but only a little.

Make way for a 2-tier property market

When this property cycle ends, I believe we'll be left with a 2-tier property market.

This is because on one hand there will be the more affluent people who will be able to afford to live in the more expensive discretionary, established money suburbs or the up-and-coming gentrifying aspirational suburbs.

On the other hand, we'll have the majority of Australians who will find property unaffordable as they've only experienced slow or stagnant wage increases.

This means moving forward we're likely to find see a larger percentage of Australians unable to enter the property markets as owner-occupiers and those who can get a foot on the property ladder will be flung out further and further from the center of our capital cities.

The key takeaway is that if you want to ensure you end up owning the right type of property when this cycle comes to an end, you'll have to make the right investment decisions today.

So where should you invest?

It will be important to invest in the type of locations where not only more affluent owner-occupiers live, but where more affluent tenants will want to live because they'll be able to pay increasing rent over time.

So I suggest investing in:

The "established money" suburbs

This is where many owner-occupiers have been living for 20, 30, or even 40 years and have "old debt", and in fact, minimal debt against their homes.

The aspirational suburbs

This is where higher-income earning millennials are moving to, with new money and in turn are upgrading, improving, and gentrifying these locations.

Don't invest in outer suburbs

Stuart recently wrote about why investing in outer suburbs is likely to lead to underperformance.

Some buyers' agents promote investing in more affordable locations (i.e. outer suburbs). I can understand why some investors might be attracted to follow their advice. But it's not until you delve into the theory and evidence that it becomes blatantly obvious that such investments have a high probability of under-performing.

Attractions of investing in the outer suburbs:

The price point is a big attraction for some investors. That is, houses are substantially cheaper. That means that people can spread their eggs across multiple baskets i.e. invest in multiple properties. It also means that people that cannot afford a house in a capital city, can still "invest" in property.

Secondly, because properties in outer locations tend to have a lower land value component (land is cheaper than the building), rental yields are higher. This makes property more affordable to hold, particularly while interest rates are so low.

Investment weaknesses of outer-suburban locations:

The first thing to recognize is that the supply and demand fundamentals are significantly different compared to blue-chip locations. The supply of vacant land in the surrounding locality is typically infinite. Whereas the demand for property reduces the further you move away from blue-chip suburbs.

The second consideration is the tenant profile. Tenants in these locations are more likely to be lower-income earners. That can include young families, often with pets that create a lot of wear and tear on your property.

Lastly, it is incredibly important to recognize the impact that increasing borrowing capacities have had on house prices over the past 3-4 decades, even in outer suburbs. The average Australian's borrowing capacity has increased by 2 to 3 times since the early 1980s. Borrowing capacities have peaked. They will only rise in line with incomes. That means the buying power of low to middle-income earners will not increase by the same rate as it has over the past 30+ years.

Putting aside affordability considerations, most people desire to live near the CBD (not in it but surrounding it). These locations tend to offer a greater array of employment opportunities and better amenities such as entertainment, schooling, medical and pastime activities.

The richest 20% of Australian's own 64% of all household wealth. And between 2003 and 2017 this top 20% grew their wealth by 68% (compared to 6% for the least wealthy 20%). It is this cohort of Australians that can afford to (and will) drive blue-chip property prices perpetually higher.

Investment principles must never be compromised:

It is probably tempting for some buyers' agents to buy property at any price point. Because, of course, not everyone can afford to spend over $500k on an investment property. However, the only way you can do that is if you compromise sound investment principles. And that is a slippery slope and is a sure-fire way to make costly mistakes.

Resources:

Michael Yardney

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

Stuart Wemyss – Prosolution Private Clients

Stuart's Book – Rules of the Lending Game

Shownotes plus more here: The right and wrong things to do to secure your financial future through property, with Stuart Wemyss

Some of our favourite quotes from the show:

"While a rising tide may lift all ships, investing in the current market may not be as straightforward as you think." – Michael Yardney

"Buying the wrong property now not only affects your investment purchase today, but it will affect your capacity to create wealth over the next 5, 10, or 15 years." – Michael Yardney

"While you need cash flow to stay in the game, it's really only capital growth that's going to get you out of the rat race." – 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