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In this week’s episode, Dave, Cate and Pete take you through:
- Reflecting on our own purchasing journeys, what is our most solid-gold nugget of wisdom that we’ve gained and feel compelled to share with others?
The trio share the most important lesson they’ve learnt from buying and investing in property. Although Cate, Dave and Pete have followed vastly different paths on their property journey, the advice is very similar – get a foot in the property door as early as you can and hold on to property as long as you can. The trio discuss the circumstances and key events that led them towards this realisation.
- What surprised the trio about the simplicity of their retrospective gold nugget?
Get in early and hold as long as you can. Simple, right? Whilst it might seem obvious now, there are many circumstances across a lifetime that can challenge this simple proposition and test your nerves. The trio share hot tips on how to keep it simple and stick to your guns. Action and patience is key!
- What positive role models did the trio learn from in their earlier years?
The trio discuss the investors that they consulted and learnt from at the start of their property journeys. The key is to mix with people who have had success, ask questions, absorb the lessons and work out what is the right strategy for you.
- Has the evolution of market conditions, lending conditions and social pressures changed how this gold nugget could work in today’s climate?
The trio look in the rear view mirror at the property landscape, how it was back then vs how it is now. Does the change in market, lending and social conditions change the advice? Tune in to find out.
- #92: Property planning and your next purchase – critical considerations and why modelling financial outcomes is vital to success
- #115: How much can I borrow? How borrowing capacity can be impacted, massaged and manipulated (without breaking the rules of course!)
- #116: How to increase your borrowing power – Learn how investors, first home buyers and upgraders increase capacity
- Four critical mortgage offset strategies
- Five mortgage strategies that can grow your wealth
- How will your mortgages serve you in the long run?
- How our mortgage strategy helps us to hold properties
- How to succeed with Property and Create your Ideal Lifestyle
- Mortgage Strategy 101 – YouTube video series.
- If we think holistically about our own experience and outcomes from property purchasing and investing, what is our most solid-gold nugget of wisdom that we’ve gained and feel compelled to share with others?
Pete – buy and hold. Best way to make money in property, not the only way. But certainly the last two years, has really brought it home. Personally retirement is looking better today than 2 and a half years ago, because held multiple properties for a long period of time. Generally slow increases, but cream on the cake is when the boom comes. It’s not just buy anything, right type of property, in the right street in the right suburb.
Cate – get in as early as you can and be as patient as you can. Some properties I bought in my earlier years, I would not have purchased now. They’re not all A-grade, but they’ve still performed. No one wants to buy a dud, but if you can afford to hold it for the long-term and be patient, then you can just wait. The only time I would sell a property, is if it is a dud, a head ache or some legislation changes or changes in personal circumstances (relationship breakdown). Sit tight and back yourself. Just do it, we all could have done it better. But at least we did it. If I waited to get the perfect capital growth asset, I would have had to wait for my salary to get me there. And I was impatient when I was young, but they still delivered. Not great capital growth, but yielding pool of assets.
Dave – As soon as you start earning a full time income, make sure that you’re saving as much as possible and then buy a property as soon as you can. Get into it early. Action trumps knowledge in life. The only other time that you may choose to sell is if you need to sell to get into long-term family home, because you’re prioritising lifestyle.
- When did we start to realise this?
Pete – Bought first property in 1991, recession, not much happened. Then there was a 40 to 50% increase in property prices in the early 2000’s and that made me realise how valuable it is to hold property.
Cate – when started going cash flow positive, so excited. Never see such an excited tax payer. First hint of that was post GST interest rate retraction. I could not believe that we had interest rates at 4.99%. Never happened before, just madness. Paled in comparison with covid shock introduction, but did get a taste of cash flow positive on a few of the assets. Once you’re in that position, you have to try to pull back about getting excited about more money, because you still have debt. Then coming home with paper titles to stick in the safe – it’s such a milestone.
Dave – as I’ve had kids. You think more and more about the way that you’d like them to grow up and advice that you’ll give. As they finish school and uni, how clear it is about how soon they can get into investing. Because of compounding and time, set foundation that you can build on top of. That’s what I’ll be trying to help them get a passion for. Can dabble in shares and build up understanding and then get into property.
- What surprised us about the simplicity of our own retrospective gold nugget?
Pete – patience, could take decades. Sometimes it’s the property that will attract the bad tenant. But you need to find yourself a decent property and decent location. From time to time, you’ll get tenants that give you some hassle, you will have to dip into your own pocket. But you just have to have the long-term goal in mind. There is a lot of water that goes under the bridge in that period of time.
Cate – just get in early and hold it for a long time. When you get in early, you don’t have the income, backing, education and resources to get a professional to advise you. I didn’t have the skill set in my early years, but the surprise that I have around this, it could be best described as not so great, they’ve still performed. The requirement to get the perfect property, is sometimes over inflated. Don’t go out and buy anything, but those you are perfecting, you can do it for 15 years and skill up, or you could have bought a B-grade 15 years ago, it won’t look as good because you have lost 15 years of growth and rent. You can over-finesse and over-perfect and lose your footing on the property ladder.
Dave – when you’re young, your life is simple. Get your first job, not yet married, don’t have kids, living expenses not as high, no mortgage. It’s the easiest time of life to save money to get into your first property. Live in a rental with friends, live with parents a bit longer. Make the most of investing when life is simple and use the opportunity to invest and get ahead.
- What positive role model experiences were shared with us in our early years from successful investors?
Pete – I learnt more from my father and dealing with property myself, than from university degrees. They are to get a career in a chosen field and make money from a salary. Mix with people that have done it, learn from them and work out what’s best for you.
Cate – role models that said and did the right things:
- Local real estate agent – always wore a top hat, happy guy, gregarious and outgoing and knew property inside out. I was in his ear for a lot of that time. He probably couldn’t type, didn’t have internet. Collated some things for me and cut out pictures and adds and circled properties on good pieces of land in my budget. He was thinking with his capital growth hat on and gave me advice that I didn’t take.
- First thing my friends dad did was buy property in Thornbury, sacrifices required when you’re young and they let the property do it’s thing and it’s served them well.
Dave – trying to learn from people who had been successful. When I set up the mortgage broking arm to a life insurance business who I played cricket with. Put myself around people who were successful and learn from them. He was big on investing and ultimately, looking for people who had been successful, talking to people, asking questions, reading magazines and reading books. Gathering information and advice, even if it’s with people you don’t know as well. Mum and dad bought some properties before I bought my first one. They bought in Richmond and Abbotsford, I bought in Kew East.
- Have the market conditions, lending conditions and social pressures of today changed how this gold nugget could work in today’s climate?
Pete – market conditions are different, are they better or worse, hard to say. We needed a deposit of 20%, now only need 5%. Back in the 80’s it was finish school, apprenticeship, job, get married and get a house. Now it’s finish school, get two degrees, stay there as long as you can, get life experiences. Buying a home is not as important today as it was in the past. Many of your friends in their late 20’s won’t have a home.
Cate – some things have gotten easier. Something that we can’t estimate is the power of job security that we enjoyed. It is a casualised work force right now, but security is not that high. People on contract or in casual jobs. Teachers, sometimes have to re-go for their roles, yet we still have people re-applying because they’re on contract format. People are nervous jumping into debt when their job situation.
Lenders lot more flexible around casualised employment. Ability to grab LMI, have a 5 or 10% deposit. Interest rates, ratio of income to household debt, we’ve all had our challenges. Gold nuggets getting in as early as you can, my advice would stand.
Dave – more money is being thrown at helping people buy their first home than ever before. FHOG only came in when I was buying my first home. That is a relatively new thing, governments are putting even more money than they have before. Property values have outstripped wage growth over the last 10 or 30 years, that’s harder. Access to finance in Australia is as good as it’s ever been in history, got harder after GFC, but it was a lot harder 30 years ago.
Big picture, life is about your mindset and you really can’t worry about that. If you think things are hard, then it will be hard. People will figure out how to buy if they want to buy. If you get too caught up in what’s going on externally you just make your life harder.
Peter Koulizos – The Property Professor’s Golden nugget: for all parents who are listening. We will hand over investment properties, but what’s more important is teaching your kids about investing and being a positive role model. Teach them how to fish, rather than giving them a fish. Talk about properties that bought and holding, take your kids to open for inspection. Teaching them how to do it will be more valuable than passing on a property or two
Cate Bakos – The Property Buyer’s Golden nugget: The power of buying and holding. A $500,000 property increases in value by 8%. It’s an incredibly growth trajectory, in the first 10 years you get $500,000 growth. In 20 years you’ll have a $1.2M gain. In 30 years it’s worth $2.7M.
- Beware of changing borrowing capacity when on the property hunt
With monthly cash rate increases, borrowing capacity has been slowly dwindling as lenders update their affordability calculators. However, the ‘Household Expenditure Measure’, a measurement for scrutinising living expenses, is also increasing to reflect the higher cost of living due to inflation. For those who are hoping to purchase at the limit of their borrowing capacity, it is imperative that you are checking in with your strategic mortgage broker to confirm affordability before you sign any contracts.
- Shared equity scheme for Victorian’s announced
The Labor party in Victoria have announced a shared equity scheme to help buyers get into the market. Interestingly, it is not limited to first time buyers. The scheme allows for purchases in metro Melbourne and Geelong up to $950,000 and up to $600,000 in regional Victoria, with the government assisting in purchasing up to 25% of the property. But take note, they will also expect 25% of the gain when you sell! We recommend to those who are interested to understand all of the requirements and fine print.
- Auction clearances indicate further green shoots
The latest auction clearance rates show some positive signs, which for the third week in a row have been holding steady above 60%. With volumes continuing to rise and the recent rate increase representing only 25 bps, the market is showing resilience with buyers trickling back in.