Home Dreams vs Investment Dollars – Upgrade & Sell vs Rentvest & Hold, Location Choices & School Zones, Taxes & Cash Flow Pressures (Ep. 248)

Previously known as “The Property Planner, Buyer and Professor”

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Episode Highlights

2.32 – Cheerio from Mike, and Cate then leads into Jim’s scenario

4.22 – Cate bounces the first dilemma to Dave

9.05 – Dave and Cate tackle the importance of having both partners on the same page, particularly in relation to Jim’s rent-vesting suggestion.

14.37 – Cate shares a past personal experience about the challenges of rent-vesting

17.42 – Jim asks, “Should we purchase a B grade property in an A grade suburb, or an A grade property in a B grade suburb?”

22.45 – Teaser for next week’s episode… the February market update

50.31 – Gold Nuggets


Show notes

Dave and Cate man the fort this week while Mike does his charity ride… and the duo decided to tackle a great listener question about lending policy, loan structuring and the critical decisions that arise for many.

Jim and his partner have a very important scenario to run past the Trio. They are particularly high income earners with $500,000+ combined incomes, but there are some critical messages here that apply to all home owners and investors. The challenges they face have been exacerbated by increased interest rates, but they also have had second thoughts about the home that they selected in 2019.

The dilemmas are very real… how do Cate and Dave address them?

Our listeners chose to buy a house that had less appeal than some of the others that they were missing out on in the lofty hot market of Sydney. Why do people go for the lower hanging fruit? And what are the risks? Dave and Cate share their thoughts, from fatigue to FOMO.

Should they sell and rent-vest, re-purchase in another location, or hold their home?

“They need to nail the big rock in the jar, which is where they’d like to live long-term to raise their kids.” Dave’s ever-pragmatic insights shine through… tune in to hear more.

Cate discusses the importance of partners being on the same page as each other, and this is a fantastic case in point in relation to rent-vesting. Rent-vesting is often a particularly challenging strategy for couples and Cate explains why. She also shares a personal experience dating back to 2008 that derailed hers and Ian’s rent-vesting strategy.

Jim asks, “Should we purchase a B grade property in an A grade suburb, or an A grade property in a B grade suburb?” Dave and Cate don’t necessarily agree, but they each share their answers openly and Cate cites a great recent example.

Dave takes up the challenge to help Jim and his partner with their cash flow. How can they ease the pressure, and what are some of the options?

They really need to do a full cash flow assessment, how can things be improved and weigh these up against their personal priorities around how they want to live.

REPAYMENT TYPE – They are paying P&I on both loans. They should be paying I/O on the investment loan to optimise tax deductions and reduce interest on the home by have more money go towards the home.

This will also make it more viable to keep this property when it comes to upgrading the home if they go down this path.

BUFFER – They have $450,000 in buffer in offset which allows them to ride through this time with reduced income if they want to prioritise working part time and being able to spend more time with the kids. This is time you can never get back.

I suspect that if cash flow is tight, you could still manage.

The question is can you/do you want to change your mindset that if we are not growing our savings as much as we would like for a period, is that a price we are willing to pay to spend more time with the kids while they are a young?

What a lot of developing a Property Plan or a strategy is about is really deciding upon what we prioritise in life?

Ultimately all decisions should boil down how do we strategically design our life to create our ideally lifestyle and what does that look like and then we make our financial and property decisions to suit that.

Too often it is done the other way around because that is what people think or feel like they should be doing. Eg design around what they think they should be doing RATHER than what they would like to actually prioritise.

Dave and Cate enjoy a good banter about investment strategy, and in particular, retirement strategy… and this is what it’s all about!

And lastly, can Jim and his partner achieve $140,000pa passive income? Dave uncovers the answer.


Gold Nuggets:

Dave Johnston’s gold nugget: “If you do plan to purchase a family home, don’t put off deciding what that looks like. Start planning for it!”

Cate Bakos’s gold nugget: “I wish everyone could afford a property plan. If you can get that right from the start, you can establish things from the ground up”. And when you’re a high income earner, it really does carry some weight.

Mike Mortlock’s gold nugget: Mike talks about the importance of being quite discerning when it comes to buying the family home, and not compromising on the key elements.


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