Property Investment & Wealth Creation Australia | The Michael Yardney Podcast

In today's show, my guest, property researcher John Lindeman, is going to help you solve the property investment puzzle.

Clearly, in today's more uncertain environment, we know that some locations are best avoided, while others still deliver good capital growth or better rental returns.

As a property investor, you need to understand which suburbs are going to deliver what you're looking for at your stage of the investment journey.

The problem is, the housing markets are like a huge jigsaw puzzle, with more than 10 million properties spread over 15,000 suburbs.

It seems almost impossible with so many suburbs and so many properties – and that may be true since most investors don't end up with the portfolio they want.

So in today's episode John Lindeman will divide all of the suburbs into four different groups. Once you understand which group the suburb you're looking at falls into, you'll understand whether it's right for you or not.

That, together with the other things I'll discuss with John today will give you more results and clarity in this uncertain time.

Then, I'm going to share with you some money lessons to teach your children. Don't worry if you haven't got children – these lessons are useful for you as well.

4 Categories of Suburbs

Sleepers – the majority of the suburbs. They create the median performance in the market

Long Shots – speculative investment locations. These suburbs may have new infrastructure projects or other factors that could make them more profitable. They could pay off well or they could end up not growing well at all.

Cash Cows – areas with high yields but limited growth. They can get you cash flow but are unlikely to give you growth.

Shooting Stars – these are the suburbs that have it all, strong growth and cash flow. They're the hardest to find, but they're what investors should be looking for.

To determine which category a suburb falls into, John looked into the different types of households in different areas. Lots of renters indicate cash cows, for example. Infrastructure projects, what the banks are doing, and whether they're lending can also tell you what type of suburb you're looking at.

Money Lessons to Teach Your Children

Today's debt equals tomorrow's slavery: Your children need to know is that today's debt is robbing them of tomorrow's earnings, because they're sacrificing money they don't yet have.

He who dies with the most toys isn't the victor: Possessions don't make for a rich life, it's the experiences and people – the things that money can't buy – that make you truly wealthy.

Take responsibility, and that will make you the master of your own destiny: The decisions that you make today are what will decide where you are tomorrow.

The value of patience and waiting: Understand the difference between wants and needs and recognize that all the money you spend on those material items you just 'had to have' today, is less that you'll have to fund your retirement with tomorrow.

Luck is made through hard work: Truly successful people do the hard yards to reach the pinnacle of their chosen field or endeavor.

You don't need millions to achieve financial freedom: Financial freedom is not dependent on money itself, but on your relationship to it and the level of personal responsibility and fiscal discipline you're prepared to exercise throughout life.

Spend less than you earn and invest the rest: Aim to invest at least 10 percent of your earnings and the power of compounding will take care of the rest.

Youth won't last forever, so use it wisely: Start saving and investing early in life and you're likely to secure your financial future.

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 – Lindeman Reports

Why not get John Lindeman's Shooting Star Suburbs Report.

Read John Lindeman's article- The Property Investment Puzzle Solved

Shownotes plus more here: The Property Investment Puzzle Solved with John Lindeman

Some of our favourite quotes from the show:

"This is not a social commentary, but it just seems to be a fact to me that the haves and have-nots are separating more and the current crisis that we're going through has shown that up even more than normal." – Michael Yardney

"Really demographics is going to be one of the biggest factors of what makes some areas do better than others in the long term." – Michael Yardney

"Fact is, there's no such thing as rich victims." – Michael Yardney

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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

You're smart. You've made a few dollars. You've done what the financial books have told you. You've listened to the podcasts, you've gone to the websites.

So why isn't it working? Why aren't you getting ahead?

Maybe your emotions and expectations are getting in the way of good sense. Maybe you're paying attention to the wrong people.

We've all made mistakes with money, sometimes unknowingly, sometimes recklessly. We all have poor habits that hold us back.

That's what I'm going to talk to Tom Corley about today.

We'll chat about why smart people do stupid things with their money, and hopefully, by the end of the conversation, you'll be more aware, and you won't make those mistakes.

12 Reasons Why People Make Money Mistakes

1. Ego – Ego-driven money decisions prevent you from managing whatever money you do have in a prudent manner.
2. Emotion – Spending decisions that are based on spur of the moment emotions.
3. Bias – Making money decisions that are not fact-based but, instead, ideologically-based.
4. Ignorance – Not doing your homework. Taking uneducated risks could be Ego-based or Ignorance-based.
5. Overthinking – Simple solutions are usually the correct solutions. Seeking more complicated solutions leads to chaos.
6. Fear – Never make money decisions out of fear. An example would be liquidating investments during a downturn in the stock market.
7. Stress – Studies have shown that stress reduces your IQ by 13%. Never make money decisions when you are under stress.
8. Poor Decision-Making Habit – Making frequent poor decisions is a habit. There are a number of reasons why you make bad decisions: Ego, Emotions, Bias, Ignorance, Fear, Stress, Tired or Hungry, and Impairment.
9. Desperate Decisions – These are decisions that you make from a position of weakness. They are typically the result of prior bad decisions and always forced upon you by some third party, such as a lender, government agency, credit card company, employer, spouse, family, or friends.
10. Impulse – Making spur of the moment purchases. Related to emotion-based spending mistakes but could also be caused by Decision Fatigue.
11. Externalities – Keep up with the Jones's spending decisions are an example. Other reasons for making bad money decisions can be due to pressure from a spouse, family, friends, work colleagues, etc.
12. Impatience – Making poor money decisions, such as liquidating investments during a downturn in the market can be fear-based or driven by a lack of patience. Making any major purchase without wanting to spend the time on doing your homework, is another example.

Links and Resources:

Tom Corley - Rich Habits

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

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

Shownotes plus more here: Why Smart People do Stupid Things with Money with Tom Corley

Some of our favourite quotes from the show:

"The trouble today with social media is you're seeing people's highlight reels and it looks like their life's really good. You don't know all the hard work that they've done to get there." – Michael Yardney

"We're not pointing the finger at people, we're not saying look how bad you are. We're saying, if you want to improve your financial position, what you should be doing is having a look at your habits." –Michael Yardney

"If you recognize some of these habits in yourself, maybe now's the time to replace them with some good habits." – 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.

When it comes to property investing are you a fox or a hedgehog?

Is property investment an art or science?

Maybe property investment isn't what you should be spending your time on; maybe you should stick to your day job instead

That's what I discuss today with Stuart Wemyss.

And then, in my mindset moment, I'm going to share with you why we're not all created equal.

You'll get lots of great information from today's show that will help you get more success in your investments.

Why you might want to stick to your day job:

• You must take responsibility for your money, however, that doesn't mean that you need to make all of the decisions
  • Instead, you should have a team of experts who know how to make those decisions wisely and defer to them
• Looking for property in your own backyard isn't really research.
  • Investing isn't a hobby, it should be approached as a business
• The hedgehog concept: This refers to a story about a hedgehog and a fox. The fox knows how to do one thing, but the hedgehog only knows one big thing.
  • In other words, the hedgehog has the specialized knowledge that it needs to survive.
  • Does it make sense for you to spend 10 hours a week making financial decisions that you don't have specialized knowledge about?
  • Or would your time be better spent advancing yourself in your chosen profession that you do have specialized knowledge of, and deferring the finance decisions to experts in that field?
• You may be very smart, but that isn't necessarily a guarantee that you'll make smart investment decisions.
  • Your talents in one area might not translate to other areas, like finance
• What you need is a holistic team of experts who can advise you in your investment endeavors
  • You should choose people who have not only done well in the short term but have kept their wealth over the long haul

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

Stuart Wemyss – Prosolution Private Clients

Stuart's article referred to in the Podcast - Why you should stick to your day job Stuart's Book – Rules of the Lending Game

Shownotes plus more here: Maybe you should stick to your day job and not invest in property

Some of our favourite quotes from the show:

"Your investments should be boring so that the rest of your life can be exciting." –Michael Yardney

"Not only have we built wealth, but we've kept it, and I think that's one of the important principles." –Michael Yardney

"If you're listening to this in Australia or one of the other great countries that a lot of people listen to this podcast in, you've already won the lottery in life." – Michael Yardney

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Today, we're going to be talking about asset protection with Australia's leading property tax strategist, Ken Raiss.

Asset protection is the use of smart legal strategies to protect what's yours.

For instance, we're going to discuss why people who own properties in their own names are putting themselves at risk, and why even homeowners, not just property investors, need to have asset protection strategies in place.

Very few of us are taught about the importance of asset protection, yet smart investors look for ways to protect their assets from their creditors.

Hopefully, after today's show, you'll have a bit more clarity about what you could be doing and should be doing to protect and keep your assets so that you can pass them on later.

1. What is asset protection?
2. 1. Safeguarding your hard-earned assets from litigation whether eventually successful or not. Defending an action can be costly in time, money, and emotionally.
   1. The world is becoming increasingly litigious.
   2. Many people are seeing the easy road to financial security is to sue someone for their wealth.
   3. I have read that Australia is the 3rd most litigious society in the world.
   4. In these uncertain times and with no-cost legal services available many people are choosing to sue someone even if for greenmail – to get something just to go away.
3. Why should we be concerned about it?
   1. There are many instances of both legitimate and unscrupulous litigations.
   2. We should all do the right thing and have appropriate insurances in place but sometimes this is just not enough for example:
4. What do you say to people who believe this is just being paranoid?
5. You have a car accident before paying your overdue registration and insurance due to a busy work week.
6. Your house is underinsured and burns down and destroys the next-door neighbor's property. You are up for the underinsured payment

• Your child illegally downloads music or videos.

1. You take on a new job with increase occupational health and safety responsibilities.
2. You become a director in a business.
   1. Sometimes you are called a director but not on the ASIC records.
   2. You are responsible for all tax obligations plus the normal director responsibilities
3. I heard a story a few years ago when a thief while running from the police jumped a fence and fell into a hole that the homeowner had dug for the garden. The thief injured himself and sued the homeowner

• Safeguarding the family wealth for current use and to pass down to the next generation is not paranoid but prudent. The older you get the harder it is to rebuild so why risk the twilight years after a lifetime of hard work

1. Typical Strategies and Mistakes
2. 1. Typically, people go and see their lawyer for these strategies, but the lawyer does not understand the accounting, taxation, and estate planning intricacies that all must be built into the final solution.
   2. I see many people who have transferred their assets to a trust which for investments is reasonable but there is a cost in relation to capital gains tax For property there is also the potential increase taxes in relation to land tax and the foreigner's taxes if they have overseas relatives.
   3. They also ignore the impact on the family home. In a trust, they lose the main residence exemption and will be subject to land tax.
   1. You need an integrated approach that looks at the legal, taxation, accounting, estate planning and future changes to your life needs when looking at an appropriate strategy.
   2. We have seen many clients implement strategies, but the majority have only looked at one aspect of the total picture and have therefore left holes that can be exposed which reduces the overall effectiveness of the strategy. They have done the work to identify their concerns, have found a solution only to be let down in the execution.
   3. At Metropole Wealth Advisory we have four different strategies that can help people and in all cases, no taxes are triggered. You can also protect the family home and keep the main residence tax benefits in relation to CGT and land tax.
   4. The most appropriate of the four strategies is identified for your specific needs and as your life circumstances change, they can be modified.
   5. Each of the strategies build on a solid foundation looking at tax, accounting, estate planning future flexibility, and with the added benefit of adding a layer of asset protection for your family wealth in case of litigation.
   6. The benefit of the Metropole Wealth Advisory way is we look at all assets including the value of wealth in your trusts or companies.
3. How Should People Go About Protecting their Assets

1. Typically, these are ignored due to the tax implication but there are solutions when taking an integrated approach.
2. The wealth in these structures is incorrectly perceived as being safeguarded. This is not the case if the tenant in an investment property sues or a customer sues a business. The value is protected if you are individually sued but the other risks within the structure can be greater. It is like the trojan horse, if the attacker is inside the gates they can strike.

Links and Resources:

Ken Raiss, director Metropole Wealth Advisory

Have a chat with Ken Raiss to ensure you have the correct asset protection strategies in place – click here

In turbulent times like this why not get the team at Metropole on your side – find out more here

Shownotes plus more here: The right and wrong way to protect your assets with Ken Raiss

Some of our favourite quotes from the show:

"Your assets, your personal assets, things you own, are at risk for other people taking them." –Michael Yardney

"The lawyer was right, legally. The accountant was right numbers-wise. The financial planner did the right thing. But the left hand doesn't know what the right hand is doing." – Michael Yardney

"When things happen in life, things that we don't like, we can either choose to see them as a problem or as a solution waiting to be discovered." – Michael Yardney

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Donald Trump is inarguably one of the most interesting personalities in the world today.

Regardless of what you think of Donald Trump, you have to acknowledge that his decision to leave his highly successful day job as a property developer and run for President of the United States was gutsy.

For years I used to watch him from afar, I've read his books, watched him on TV and I used to admire his supposed success.

It's very different today - now he provides me with a very different type of entertainment, but I also keep learning lessons from him – more recently lessons of what one shouldn't be doing.

Now before I get any hate mail, I want to acknowledge that what we're going to discuss today is not a political statement of any kind. It's just an observation of some life lessons you can learn from Donald Trump – some things you could start doing and some things you shouldn't do to help you become more successful at whatever you choose.

Because I think that if you sift through all the negativity on both sides and look deeper, you will find some amazing life lessons everyone will benefit from what I'm going to discuss in today's episode of the monthly Build a Business, Not a Job podcast that I host with Mark Creedon, founder of Business Accelerator Mastermind.

Donald Trump's Terrible Success Lessons

Like or loathe him, and there are very few people who sit on the fence, there's no denying that the current President of the United States knows how to get people's attention.

As I explained in the main introduction I'm not going to talk about Donald Trump's suitability to lead his country or the world – that's not my area of expertise – but I think he's provided a few lessons of what one could do and what one shouldn't do if you want to be successful.

We know he's arrogant and Trump has been quoted as saying: "You know I'm, like, the smartest person"

• If you're the smartest person in your team you're in trouble

"Nothing is easy – but who wants nothing?"

• For once this quote makes sense

"I have never met a successful person that was a quitter, successful people never, ever give up."

"Always try and learn from other people's mistakes, not your own – it is much cheaper that way!"

"If you hang around with losers you become a loser."

• The corollary of this is that if you want to become successful, you should hang around with successful people.

"I try to learn from the past, but I plan for the future by focusing exclusively on the present. That's where the fun is."

• Yesterday is past, and tomorrow is yet to come, so the only time that you actually have is the present. Use the moment to make smart and profitable decisions that will lead you towards success. Respect time as it is the most valuable resource available to you.

"Sometimes, by losing a battle, you find a new way to win the war."

• If you fail at something, remember it is only a natural process and perfection takes time. Once you fail, think of it simply as if you have discovered another path that does not lead to success. It does not mean that you are lost, it only means that you will probably choose the correct path the next time.

"As long as you're going to be thinking anyway, think big."

• Leave "little thinking" for people who want to accomplish little things, but not you. Success begins with thinking big.

"If you're interested in balancing work and pleasure, stop trying to balance them. Instead, make your work more pleasurable."

• It is important to love what you do. It is only logical that a person will be self-motivated and more likely to work harder at something they love. Loving what you do is thought to be the first factor toward making you successful at what you do.

"What separates the winners from the losers is how a person reacts to each new twist of fate."

• Change is one of the most essential and important parts of life, be it your private or professional life. It is not necessary that every individual plan will work for every different person. Winners are known to react positively to fateful situations while losers are known to panic and stall in the path.

"Without passion, you don't have energy; without energy, you have nothing."

• One thing that remains common in most of the success stories is the unnatural and high levels of energy that people displayed when it came to pursuing their dreams.

"Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you're generally better off sticking with what you know. And the third is that sometimes your best investments are the ones that you don't make."

• Experience is the best teacher. It teaches you anything in such a way that you understand it very well. Some of the most valuable lessons are learned through past experiences.

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

Shownotes plus more here: Terrible Success Lessons From Donald Trump | Build a Business, Not a Job Podcast

Some of our favourite quotes from the show:

"You haven't come so far just to come so far." –Michael Yardney

"You only fail if you think of it as failure, on the other hand, if you see it as just the normal, natural part of moving forward, you have a different outlook." –Michael Yardney

"You've actually got to stay positive, you've got to look for the good things that are happening there. That's essential to get through the challenging time that we've got." –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.

We all know that real estate is a long-term investment. So, what were the best-performing suburbs over the last couple of decades?

They may not be the ones that you'd first think of.

Today's I chat with Bret Warren about what made certain suburbs outperform over the last couple of decades.

I'm also going to have a chat with an SAS commando.

Why? This is a show about property and success and money, but most of us are being affected by a form of hostage situation – COVID-19.

So who better to tell us how to handle a hostage situation when you've got a terrorist that you can't even see than someone who's put his life on the line more often than he's had a hot dinner?

We're going to have an interesting chat with Mick Donaldson.

Highlights from Brett Warren's research on the best performing suburbs

Would you like to know which suburbs are going to outperform over the next 20 years?

Well, maybe a good starting point is to understand which suburbs outperformed over the past two decades.

The principles we're going to discuss today are relevant for all property markets.

• Past history is not always a good indicator of future growth, but at least it's a starting place for our research.
  • The longer the past history, the more accurate predictor of future performance it will be.
  • Most investors only research back five years or so
  • Go back a minimum of 20 years – and if possible 40 years, however, it's important to understand how a suburb has changed in that time – might have gentrified, new infrastructure, etc.
• Some suburbs in Brisbane have performed more than 400% over a 20-year period.
• Understanding what the top-performing suburbs have in common
• What investment horizon means
• How a property investor can out-perform the market
• What will drive property prices moving forward

Some of the topics I discuss with Mick Donaldson

• Mick's background
• How COVID has affected Mick
• The stages you go through when you get a shock like COVID
• What you can control in a survival situation
• The options in a hostage situation
• Maintaining a level of control
• Mick's acronym: PEARL
  • Perseverance
  • Equanimity
  • Agility
  • Resilience
  • Leadership

Links and Resources:

Brett Warren - Metropole Property Strategists

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

Mick Donaldson – HQ Tag

Shownotes plus more here: What can you learn from the best performing suburbs over the last 20 years, with Brett Warren

Some of our favourite quotes from the show:

"Gentrification goes on over a number of decades, so it's not a bad way of trying to find an area that's going to outperform the averages." – Michael Yardney

"Sometimes the right thing to do is nothing." – Michael Yardney

"It's going to take longer than I expected, longer than we'd all hoped, but there is an end in sight and life will go on." – 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

Recently, I appeared on the Australian Taxation Office's podcast, Tax InVoice, to talk about tax-related matters that would be of interest to property investors in a time of crisis.

I spoke with assistant commissioner Adam O'Grady about how the events of 2020 impacted property investors and what recent law changes mean for residential property investors.

Some of the things we covered included what can and what can't be claimed, how to avoid some of the common tax mistakes, and where to find further information.

This was an informative discussion, one that I think listeners of my podcast will find relevant and useful, so I'm going to share that episode with you today. Subjects I discuss with Adam O'Grady

Landlords can continue to claim their deductions and interest, even if their tenants currently can't pay rent due to COVID-19

• How interest is being accrued on bank loans, even though the bank isn't charging interest right now
• The tax implications of using your rental property yourself, even when you can't rent it out
• If the surge in available rental markets affects what you can claim
• How recent tax law changes affect investors who are foreign residents for tax purposes
• Changes to the tax deductibility of holding vacant land
• Avoiding mistakes in apportioning expenses and income if you co-owned a property
• Misconceptions about when you can claim renovation work to your investment property
• The difference between a repair and a capital improvement
• How investors can use the Government's Renovations Grant to improve their property, and what they can claim from that
• Differentiating between what's deductible and what isn't
• Keeping records that provide evidence of income
• The elimination of travel expenses to inspect your property or collect rent as a claimable expense

Links and Resources:

Find this episode on the ATO website

Shownotes plus more here: Tax matters for property investors in a time of crisis | ATO Assistant Commissioner Adam O'Grady

Some of our favourite quotes from the show:

"There's some changes to the legislation, there's issues with COVID, there's been floods and bushfires, we've had a challenging year." – Michael Yardney

"As we said there's fewer tourists for the short term rental market, there's fewer international students coming, and currently people are just a bit more nervous about moving anyway, so a lot of people are going to have longer vacancies or are going to have to drop their rent." – Michael Yardney

"I've seen many people buy a property, it's a bit rundown, so they go ahead and they do a renovation to make it more attractive to tenants, to get more rent, so they're doing it for good, legitimate reasons, but then they think the repair can be claimed as a repair in that tax year." – 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 remember where I was when I first heard about coronavirus, it wasn't called COVID-19 then.

I was on the other side of the world on a cruise with Pam, for our annual end of year overseas excursion and this virus thingy was a problem that was happening in China.

Who would've thought then we'd be where we are today with a worldwide pandemic, a recession, and so much political and social unrest?

Today those pre-COVID-19 days in January feel like a different lifetime.

COVID upended everything and still today every new day seems to bring a new shock.

A lockdown in Victoria, the worst recession in a century, massive unemployment, business closures.

But if you survey the confusing mess we're in you have to remember that none of it happened in a vacuum.

Every event has parents, grandparents, siblings, and cousins – previous events that planted the seeds, passed on their DNA, and continue to influence what's happening today.

To have any hope of making sense of what's ahead we have to pay attention to a bunch of seemingly unrelated stories that began before anyone had heard of Covid-19 and that's what I'm going to be talking about today with leading demographer Simon Kuestenmacher.

So let's have a chat about what got us to where we are today and what's ahead.

Understanding the factors that help us forecast the future

If you were told in January what April 2020 would look like, you wouldn't have believed it, would you?.

If you were told in May that in August we'd have Stage 4 Lockdown, you wouldn't have believed it.

So how do you begin to make sense of the future when things change so fast?

I recently read a great article on from Morgan Housel, one of my favorite social commentators where he explained that until we know where we've been and how we got here it's difficult to figure out where we're heading.

Why are so many people so angry?

To understand why so many people are so angry in 2020 you have to realize that half the world has gained insight into the other half at the very moment those halves were as different economically as they've ever been.

Over the years the gap between the haves and have-nots grew - people grew apart financially at the same time they became connected digitally, which exacerbates tribal instincts and exposes you to people who don't see the world as you do, who become easy targets for criticism and blame.

Was an increase in working from home coming anyway?

Up until recently working from home was not really an option, but let's look at how things have changed:

A century-long shift away from labor-intensive jobs towards creative-thinking jobs created a stark contrast between jobs that can be done during a pandemic and jobs that can't.

The pandemic has brought forward some trends that probably would have happened anyway, including working from home.

Pandemics are not new or unheard of, so why does this one feel so much different from similar events in the past?

Things have been pretty good for a long time. So a setback, even if it's not unprecedented, feels overwhelming.

The coronavirus pandemic feels real to us in a way that pandemics that we've only read about in history textbooks cannot. For future generations, 2020 will likely be only a page in the history books that doesn't carry the same urgency we feel while living in it.

Why is the news so negative?

Local news gave way to national news which gave way to global news, which can make the world feel perpetually broken because there is always a tragedy somewhere, and now you are guaranteed to hear about it.

Why haven't the direst predictions about the economy come to pass?

The Federal Reserve in the US and the RBA here and the central banks around the world learned how to keep the financial system from falling apart. That's both kept a lot of the economy humming and ruined a lot of assumptions people had about how the economy works.

Links and Resources:

The article By Morgan Housel quoted in this show here: Here We Are: 5 Stories That Got Us To Now

Simon Kuestenmacher - Director of Research at The Demographics Group

In these challenging times why not get the team at Metropole to build you a personalised Strategic Property Plan – this will help both beginning and experienced investors.

Shownotes plus more here: There are a few things we must understand before we try and forecast the future

Some of our favourite quotes from the show:

"A century ago people had more labor-intensive jobs. Now we've gone to more creative thinking jobs." –Michael Yardney

"We were feeling complacent, I believe now we're going to probably think differently moving forward." –Michael Yardney

"Bad news seems to get more attention than good news because pessimism is seductive. It feels more urgent than optimism." – 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, we answer some of your common questions.

Questions like…How should your property investment strategy change given the current circumstances?

Should you still be focusing on capital growth for your investments?

How do you transition from the capital growth stage to the cash flow stage for your investments?

We'll also talk about those 40-year spreadsheets and property strategy plans. Do they work, or is there a more effective property strategy plan?

People also want to know about how much of a financial buffer they need or whether diversification is the right move for them.

These are all good questions, and hopefully, my conversation with Kate Forbes will bring you some clarity.

Q&A with Kate Forbes

How has Metropole changed what they buy given the current circumstances?

It hasn't.

When you invest in property there are three major factors deciding where you buy and the type of property you buy:

1. Your budget – and that is usually determined by the banks
2. The location - we are not prepared to compromise on this because location will do 80% of the heavy lifting of your property
3. The property you purchase. – It has to be the right type of property, one that's going to outperform the averages with regard to capital growth.

We don't change our strategies, which are long-term plans, due to the short-term fluctuations of the economy or property markets.

Why should I focus on capital growth over cash flow? Especially now when there is likely to be lower capital growth?

Despite what you'd like to believe, you just can't live off the rents of your property.

In my mind the only way to become financially independent through property is to first grow a substantial asset base (by owning high-growth properties) and then transition to the next stage – the cash flow stage – by lowering your loan to value ratios. In other words, reducing your debt, but not paying it off completely.

Remember the 3 stages of wealth creation I've mentioned before

1. The asset growth – this requires leverage
2. Transitioning to lower LVR - where you slowly pay down your debt
3. Living off the Cash Machine of your property portfolio

How are you going to repay all your loans before you retire?

An ideal situation would be to own a mixture of growth and income-producing assets that looks a little like this:

• You would own your own home with no debt against it
• You'd have a substantial superannuation fund which should be delivering you a regular income
• You would own a multimillion-dollar property portfolio which is no longer negatively geared and, if it does have debt against it, the LVR would be such that the portfolio generates income. This would not need to be a lot of income but needs to be sufficient so that your property portfolio is not draining your cash flow.

I know many financial planners suggest you should go into retirement with no debt at all, but in my mind entering retirement with a conservative amount of leverage works well for those investors who have set themselves up correctly.

These investors often live off their superannuation assets and income for the first 10- 15 years of their retirement allowing their property portfolio to once again double in value which allows their already low loan to value ratio to fall even further enabling their property portfolio to spin off even more cash flow.

Others achieve their cash flow in retirement through the dividends from shares or from the positive cash flow of commercial property investments.

So how do I transition to the cash flow phase of my investing?

Grow your portfolio at a slower pace

• • Once you've grown a substantial asset base, one option is to slow down the pace at which you grow your property portfolio.
• Convert to a principal and interest loan
  • As you transition to the cash flow phase of your investing, you could convert some of your loans to principal and interest, allowing your tenants to slowly pay off your mortgages, thereby putting you in a stronger cash flow position. Remember that while paying interest on investment loans is tax-deductible, paying off the principal portion of the loan is not.
• Sell a property or two and repay debt
  • You know I prefer to hold properties for the long term, but the purpose of owning these properties is to give you the lifestyle you want. This means sometimes the right thing to do is sell off one or two investments and use the proceeds to reduce your portfolio debt and increase your cash flow.
• Investing in commercial properties.
  • Different from residential real estate, commercial properties tend to have strong cash flow but less capital growth. So, adding commercial properties to your portfolio once you already have a strong asset base may be appropriate for you.
• Use part of your Super or savings to pay off debt
• Redevelop a property or two to repay debt

Some property strategists put together 40-year spreadsheets as part of their plan for their clients. Why doesn't Metropole do that?

Our plan is a lot more than just spreadsheets are numbers and figures. Even though it does contain detailed numbers and projections.

Of course, we know there are a myriad of different factors that will affect your wealth journey including factors out of your control and factors within your control.

Your life circumstances will change, interest rates will change, inflation will change and your ability to obtain finance (one of the most important factors of all) will change over time.

Then every year there will be an X factor, and we have learned all too well that every decade or so the economy "breaks."

So rather than giving you a false sense of security I having very detailed long-term spreadsheets, we break down your goals into shorter timeframes and then regularly, usually annually, review your situation to make sure you're heading in the right direction.

How big a financial buffer do I need?

It depends.

Beginning investors can't really afford much of a buffer all, it's better to use their cash to increase their deposit and get into the property market, and then they should save their spare money, often putting it into the offset account, and create a buffer.

Your buffer is there to cover unexpected expenses, and by definition, if they are unexpected, you won't really know how much you really need.

Some things to consider are:

• What is your current monthly cash flow surplus, in other words, how much are you able to save (your income minus all your expenses)
• Can you cover the current cash flow shortfall for your investment property?
• Are you able to fund the cash flow shortage in between tenancies when there will be no rental income for a couple of weeks plus you're managing agents letting fee?
• Will you be able to fund unexpected repairs or maintenance?
• Could you find a rising interest-rates?
• How secure is your job, and are you able to increase your income by doing extra shifts or seeing extra clients, customers, or patients?

Concentration or diversification – which makes better investments?

Common wisdom seems to suggest that you should diversify your investments.

But is this correct?

You will find many financial planners telling you to diversify for your own protection.

What they fail to tell you is that it is also for their protection.

Warren Buffett, one of the world's greatest investors, said, "Diversification is a protection against ignorance. It makes very little sense for those who know what they are doing."

Instead of diversifying, strategic investors focus on finding the best investments.

Averageness

In my mind diversification leads to averageness - bottom of the best and cream of the bottom.

In my experience, I've found that wealthy and successful people - be they a businessperson, entrepreneur, or investor - have one in common: they specialize.

One of the reasons the rich get richer is because they are focusing, while the middle class is diversifying, and the poor are counting on the pension.

First, they concentrate, then they reinvest

Another thing the successful people all had in common was that they reinvested the money they "earned" from that one activity into passive investments – most often real estate.

They kept building their asset base so that it would one day provide them "unearned income" - income they do not have to work for.

The lesson from this is to specialize and concentrate your activities on something you can become good at.

Risk mitigation

However, as your portfolio grows in size here are some areas where you can diversify:

• Diversify lenders - just as banks worry about "concentration risk" if they have lent you money for "too many properties", it doesn't make sense to have lender loyalty - spread your risks by using a number of banks
• Diversify loan terms and types - protect yourself from interest rate fluctuations by having some loans fixed and some with variable interest rates. if you only have one loan you can split it into both fixed and variable in most cases
• Diversify your investments across different states to take advantage of their individual cycles
• Tenant and property types – over time you should own residential, commercial and industrial properties, apartments and townhouses

Links and Resources:

Michael Yardney

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

Organise a time to speak with Kate Forbes- National Director Metropole by clicking here

Shownotes plus more here: Q&A Day: What's the right property investment strategy today? Diversification, Finance Buffers + more| with Kate Forbes

Some of our favourite quotes from the show:

"If you're wanting to live purely off your rentals, you're going to have to get a big enough cash machine, which may mean 5, 6 million dollar's worth of property with no mortgage." – Michael Yardney

"Since most financial advisors cannot tell you exactly which share or managed fund is a great investment, they tell you to buy a bunch of them." – Michael Yardney

"What's happening now won't go on forever. A chapter in your life is not the whole story." – 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

There's so much uncertainty with what's going to happen to our economy and our property markets.

How do you plan for your financial future?

That's one of the questions we're going to answer today in the first of a series of question and answer podcasts.

Today I'm going to have a chat with Brett Warren to answer some of your questions including how to formulate a property plan, what your endgame should be, and how many properties you need to retire comfortably.

At the end of today's show, you should have answers to some of the common question investors like you are asking.

Highlights from my conversation with Brett Warren:

• People don't often know where they want to end up. Property investors need to start with the end in mind and work toward that end, rather than starting with the property but no clear end goal.
• In the current climate, it's hard to tell what will happen to your superannuation, so you can't count on that alone. You need a long-range plan.
• It's more important to have quality properties than a large quantity of properties.
• You need to begin to build wealth by acquiring assets that will grow in value.
  • Then you'll need to work on adding value to your assets and increasing your cash flow.
• Property is not a get rich quick scheme. Property isn't a quick way to build wealth, it's a long-term process. But you can find ways to add value and increase your returns.
• If you only have a short amount of time to build wealth, you can't afford to make mistakes. Getting a good team around you that can help you achieve better results is even more important if you've left wealth-building until late in the game.

Links and Resources:

Michael Yardney

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

Brett Warren – Director Metropole Property Strategists

Shownotes plus more here: Q&A Day: How to plan for your financial future in a world of uncertainty + more | with Brett Warren

Some of our favourite quotes from the show:

"You've actually got to accumulate your assets first, and then live off the cash flow." – Michael Yardney

"If you do what everyone else does, if you listen to who everyone else listens to, you're just not going to build the wealth that you're looking for or that you deserve. It's just not the way property works." –Michael Yardney

"We're all walking around with one foot on the accelerator and one foot on the brake." – 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