Episode 136 | Shares vs property: Where is the money? | Owen Raszkiewicz, Rask Australia | Insights from Australian Investor Podcast

The debate continues on which is better? Shares, property or both?
You have probably read, heard or participated in the debate that is as old as capitalism, which is the best asset to invest into, shares or property? In this episode we talk with Owen Raszkiewicz founder of Rask Australia, which provides a member only investment advice platform, ASX news and investment insights through articles, podcasts and education. We discuss which of the two assets are better to invest into, how people can start DIY trading and what you should be looking for in quality shares or property.

Here’s what we covered:

• Where do investors get it wrong with share investing?

• What books should people read to develop better investing habits?

• How to choose a good fund?

• What makes a great fund manager?

• How can we change how we look at money and investing?

• How to know which company is the best?

• What are millennials thinking when it comes to shares vs property?

• Why buying assets isn't about the price spent but long term growth?

This weeks Dumbo:

• Buying 2 studio apartments in Melbourne 

RELEVANT EPISODES:
Episode 134 | Lisa Indge
Episode 118 | Pete Wargent
Episode 69 | Scott Phillips

GUEST LINKS:

• Free courses (four new courses coming before the end of the year)

• Podcasts (Investors podcast = more advanced; Finance podcast = beginners - both are good for intermediates) - shout out to Chris' episode with Owen

• https://education.rask.com.au

• https://au.linkedin.com/in/owen-raszkiewicz-4035a9b9

• https://twitter.com/OwenRask

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Send in your questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT: 
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded in July, 2020. 

Veronica Morgan:

If I had a conversation with someone who plays a stock market, I have, and I really heard about anything other than their wins. Do you wonder how and where they learn what to do or do you secretly doubt whether they do in fact know as much and do as well as they say they do well today, we're going to discuss the pros and cons of do it yourself investing and what you need to know. If you're keen to go down this path and achieve any success. And of course we'll be including property in the discussion.

Veronica Morgan:

Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent cohost of Foxtel's location, location, location, Australia, and author of auction ready.

Chris Bates:

And I'm Chris It's mortgage broker. Before we get started, I need to let you know that Nothing we say on here can be taken as personal advice. We always recommend you engage the services of a professional.

Veronica Morgan:

Don't forget that you can access the transcript for this episode on the website, as well as download our free, full or forecast to report, which experts can you trust to get it right? The elephant in the room.com did I use today?

Veronica Morgan:

We're joined by Owen Raszkiewics the founder of Rask Australia, a diversified business, providing members only investment advice, platform, ASX news, and publishing podcasts and education. And while investing in ASX and global shares is their day job. His team's mission is to get 10,000 adult students enrolled into risks, free online investing, tax valuation and finance courses over the next year. Now we're keen to understand where the biggest knowledge gaps are and how people who are so inclined can ride the share market or the property market for that matter without being bucked off the horse. Thanks for joining us on

Owen Raszkiewics:

That's wonderful to be on the show. Thanks for inviting me on.

Chris Bates:

Can I on good to chat might I guess there's lots for keen to chat about today, but I think just to start us off, where do the people who are kind of DIY is get it so wrong with investing?

Owen Raszkiewics:

Uh that's a pretty big question and a great way to start, I guess in my opinion, it's behavior. So when we talk about investing, particularly in shares or what I like to say just businesses, when you invest in businesses, one of the most common mistakes that people make a falling trap to behavioral biases, which I know that you guys have covered at great length throughout the series.

Veronica Morgan:

We love them all. We hate them. We love to talk about them.

Owen Raszkiewics:

Yes, you would love to. We often like to, I guess, a muse about everyone else's failings, but it can be sometimes very difficult to look internally and make that self assessment, which is why I find it so fascinating, I guess, because there's so many layers to it and case by case it varies. But if I had to pinpoint one thing, it would be probably temperament is the way or the, the area that people tend to go astray. They, they tend to think, you know, too short term is probably the most if I'm generalizing the most common, I guess, floor that I seen in DIY investing, but there are many others, which I'm sure we'll get to.

Chris Bates:

So you're saying in terms of short term, as about kind of encourages people to look for quick wins rather than sort of accumulating assets over time and looking just to focus on their longterm goals, that then leads to speculation rather than investing. Is that kind of a thought process there?

Owen Raszkiewics:

Yeah, exactly. That's the precise way you could sum it up. I would say that, you know, it's not just DIY investors, I would say much of the world is falls into this because you see it with fund managers who are supposed to be the most sophisticated and they have tend to tend to have what we call agency risk. So, you know, Charlie Munger says, tell me where I'm going to die and I won't go there. And that's a roundabout way of saying follow the incentives. And so if you followed the incentives right from the very top with the fund managers who we hold in, such a steam right down to the average punter who might be listening to this, I'm sitting in their lounge room with a buy order in their brokerage account. The most important thing is to understand the incentives of people. And so often, you know, when we think about incentives, it's like the, I guess you could bring it back to biology or even physics. We, we tend to think in terms of, you know, our emotions are anchored in the present, but the future is what we're investing in. So there's kind of this mismatch between expectations and our emotions. And it's a really complex thing to untangle from those people. And particularly when you're, I guess, embracing something where you should be embracing something, which is quite overwhelming, big money and find it

Veronica Morgan:

And sort of nails it though. Doesn't it? I mean, the thing is that a lot of the reason people want to invest is because they want to get rich or they want to be comfortable or they want freedom or whatever. But we're sort of very much thinking about now what we want now, but the reality is that investing requires time. And so, you know, that sort of gets to the very core of the problem, doesn't it?

Owen Raszkiewics:

Hmm, absolutely. And you know Chris, you mentioned that it's all about accumulating assets. I think one of the best books I read on this was just about the accumulation angle was from Pete Borgian who's you guys will know him, interviewed him a couple of times. We love pizza, great guy. So Pete talks about, and he's got a financial grip book, which was his first one. I believe he talks about how he changed his mindset from, I guess, buying and selling. Like I think some of the most dangerous words in investing are buy low, sell high, because then you have to make two decisions. Why not just make one good one and just say, bye. And, and, and in that comes back to what people would say is accumulation of assets. So buying things that make money and will make money for a very long period of time.

Owen Raszkiewics:

And I'm sure we'll get to some ideas around that. But I think if people just brought it back to that simple phrase of accumulating assets, Robert Kiyosaki talks about this and rich dad, poor dad, you know, you have your different, I guess, cashflow, you're building your own personal balance sheet where you have assets and you have liabilities just try and build up those assets as best you can. And so, yeah, Veronica, I heard you talking in a previous show about investment property. Maybe 95% of properties are things that people should avoid, but there's 5% that are really high quality. And it's the same shares, I guess it's probably even less than 5%

Chris Bates:

In terms of actual funds. You know, I think that's, you know, in terms of accumulating assets, you can accumulate any asset or you can create humiliate kind of quality assets, but a lot of people go out and they say, well, I don't want to do the share trading myself cause I've no idea what's the best stock. So I'll buy a fund. How do you actually pick a good fund though? Is it all marketing or is there actually a way to determine what's one good fund versus, you know, a fund you should avoid?

Owen Raszkiewics:

I guess that's a, that's a, that's a good, good, very good question. And again, there's many ways to answer this. I think if we take the historical context, I think it was the author JL Collins from the U S who said that if you look back over 30 years, there aren't too many fund managers that have survived that entire time. And mind you, I said, I guess say that I interviewed fund managers and one of our podcast series and they're fantastic. They're intelligent. There's a lot of smart people in there. And so this isn't a war on active fund managers, which are, who are fund managers that invest in individual stocks and try and find companies that outperform versus index investing. But jr Colin's point was that if you look back over 30 years, pretty much the only fund managers that are still in existence.

Owen Raszkiewics:

So I've done well index fund managers. So fund managers that are passive and follow a stock market index, like the ASX 200. But I guess if you're trying to pick an active fund managers is someone who you believe has, I guess you could call it skill or something else, some sort of insight or edge where if you're trying to pick someone, you actually have two layers of complexity because you have to actually pick them and you have to pick their style. So oftentimes what happens, and this comes back to my time working for the investment partners, which is an Australian research house. It's probably the leading research house I do. So and oftentimes what we found is that when people pick fund managers, they're often drawn in by the charisma of the fund manager. And what I've found is sometimes the quirkiest weirdest, most strange people often turn out to be the best investors. I guess they can be aloof, but they can be aloof from emotion. They don't, they're not out to sell you anything. So I've actually found throughout my time that the very best investors are in fact, DIY investors who are reluctant to take on people's money. So that's kind of an interesting one. The people that you want to invest with chances are they're the people that don't want your money because they want to do it themselves

Veronica Morgan:

Because you often hear that it's like the people out there on the campaign trail, they they're doing the conferences, they're doing the big, you know, selling the, the, the systems, all that sort of stuff. You just keep thinking, you know, if it really was that successful, you know, when you just be quiet and just do it yourself, Oh, I'm on a mission. I've got to share this wonderful key to the, for the world.

Owen Raszkiewics:

Yeah. And I don't mean to bash the fund managers because there are some brilliant ones out there. And I invest in ETFs and I have some very good friends who are fantastic fund managers and I'm happily invested with them. But I guess the thing is if I could come back to a few concrete ideas it would be just again, follow the incentives of the fund manager, right? So I, if I was investing in a, in a fund manager, my personal preference and everyone's different would be to invest in a small cap fund manager. So a fund manager that invest in smaller companies, because I believe that's where they have better insights can be gained an edge if you like. And so I would invest with fund managers that are in that field, but lo and behold, there are fund managers now in Australia.

Owen Raszkiewics:

And I probably, I should refrain from naming names, but I could that don't charge a management fee. So they, if you invest with them, they won't take any of your money day to day out of, out of your investment automatically. They only take money if they out perform. And so if you follow the incentives, right, you can get to the basis of why they do things. And if they're properly benchmark, like they choose a good benchmarks to assess their performance against. They will only collect a fee if they outperform. And then another thing on top of that is that many of those fund managers also have what we call a high watermark, which is in effect them saying that we will not charge you fees, even if we do well in the last 12 months or the last five years, if we haven't gone back and above anything that we've lost in the past, we still won't collect a fee.

Owen Raszkiewics:

So there, there, there are some fund managers, particularly in the U S who do not charge management fees, who haven't collected a fee for 10 years because I've had one really bad year. And then they've taken 10 years to get back to that business. That's this is a really interesting run. And the, this, this is I guess, where it's, it's very important to think about who you're investing with. So a lot of these fund managers are independently wealthy. So it comes back to my point about them not wanting to necessarily take on as much money as they can. They're more just investing their own money. They have, but say for round figures, $5 million, they've been very successful in a formal life. Maybe they were an investment banker or something like that. And then they thought, well, maybe I'll go manage my own money. And then a few years down the track, like, Oh, maybe I'll let other people invest alongside me.

Owen Raszkiewics:

And I guess it creates a good incentive structure. So what I'm getting at here, guys, if, if, if you take nothing away from this, I think the big thing here is fees. If the best analogy of why fund managers underperform is to imagine a bell curve and many of your younger readers perhaps will know that a bell curve from their time at high school, where they would get a score at the end of their exams, and they would then be placed into universities. And what happens when you have a bell curve is if you have all of the high fee fund managers on one end or the really good performers on one end, and then you have the really bad form is on the other end. If by choosing a fund manager with a lower fee structure, you're effectively moving the entire bell curve to one side and you're moving that towards your favor. So when some index investors say you know, there's only 5% of active fund managers have outperformed over the past year. Well, if you actually take away the impact of fees, you see that maybe it's not 5%, maybe it's 25% or 30%. And so that's an important distinction, and that's just about tilting the odds in your favor.

Chris Bates:

So this is I agree that that's, you know, aligning to the right incentives, you know, a fund manager, that's got a high watermark that only takes fees when they're making profits for their over benchmarks. But the vast majority of the industry still stuck on a funds under management model, where they charge fees based on how much funds they've got while it potentially can impact the investors returns. And it does, what are some of the other conflicts that, that creates for the fund manager in terms of longer term impacting the investment fund?

Owen Raszkiewics:

Yeah, well, you guys have talked about compounding and fees and you've talked about interest and those types of things and have kind of, you know, interest is kind of the opposite of compounding. But if you're looking at fund managers, this is a really important insight, right? There are more fund managers in the U S than there are stocks on the stock market. And, and, and if, and if you're here, if you're here in Australia, there are hundreds to choose from hundreds of fund managers. Yet there are only 2000 or just over 2000 shares. And to be honest, to be Frank, 70% of them probably shouldn't be able to stop cause they're rubbish. So you know, if you take that, you can pretty much be, I guess, the simplest way to put it is you can be very choosy you know, with property, you know, it's important to see the forest from the trees and in shares and in fund funds management.

Owen Raszkiewics:

It's exactly the same thing. So I would say to anyone, listening to this be very, very, very choosy of who you, who you consider investing with follow their incentives. Also just understand how Frank they are, the top of the show. We talked about how people need to be candid and, and transparent with their losses. I think the, the phrase from the Wolf of wall street dare I quote, it was don't judge me on my winner on my winners, judged me on my losers cause I have so few but most fund managers would be happy to bury that information or just not talk about it. So I know that there are a couple of fund managers who are very prevalent in Australia in the retail investor landscape. So, you know, mum and dad investors, if we could be so general and they tend to, I guess, use a lot of doublespeak. So what I mean by doublespeak is that that language that's between the lines. So what are they not saying to you? And I've always found it refreshing when someone says, yeah, we lost a lot of money. It's going to take us time. We're sorry.

Veronica Morgan:

This is interesting. Isn't it? It was funny. We had an, actually a comment on our Facebook page only this week about you know, over overly positive discourse. So, you know, that sort of American sales, salesy type approach, and it in gender is a little bit of a disbelief. It's like, hang on a minute. You're not talking, it's not balanced. You're not talking about the reality of the situation. You're not talking about the fact that it's not possible to output F for every single investment to outperform. It's what lessons have you learned? You know, what direction, what pivots do you make? What, what directional changes, what adjustments will you make it because of what that learning? And it is interesting, the same in properties. Exactly the same in property. It's, it's, it's, you can't lose. And that sort of, that message that's out there.

Veronica Morgan:

It's still out there. I can't believe it's still out there, but the overwhelming evidence to the contrary. I also think there's interesting that with the share market as well, then investors are probably more likely if you do it yourself, investor, for instance, is more likely to dabble, you know? And so we talk about active investors in property, for instance, and that we're an active investor would be somebody who buys a property to renovate, you know, maybe a flipper or maybe someone who renovates to rent out and then manages it themselves. You know, that's, that's what you call an active investor in property. It takes a lot of time. It takes a lot of money to do that, but in the share market, an active investor can be, you know, you can get him 500 bucks and start, start dabbling around. Right. And so maybe that people have a bit of a different approach because they're not, they don't feel like they're risking as much. And it's a bit more of a game. Do you think that that might apply to some do it yourself?

Owen Raszkiewics:

Oh, absolutely. So we've just talked about funds management here. But we could also talk about individual shares and yeah. You see that all the time. So I think, you know, a really good question to ask yourself is, is very simple. This is not applied to shares, but it applies to anything which is to say, just ask yourself what sucks. And if you ask yourself what sucks you're inverting the logic. And again, I'll quote Charlie Munger who says it is easier to avoid doing something stupid than it is to seek brilliance. And so people tend to think that they are brilliant and there might be gift to share trading or they might just throw 500 bucks here, a thousand bucks there, whatever. But the reality is it's actually what I've found studying some of the best investors and speaking with extremely, extremely wealthy people and learning from their families and their stories is that the first rule is effectively not to lose money.

Speaker 2:

And you know, it doesn't matter if it's 500 bucks or 5,000 or 50,000, if you're going to invest in something, I would say to anyone the only difference between an investment property and $500 is that I guess the amount of money involved, you know, we think, we think in our business when we're doing our research, something I'll ask is if we're going to make this you know, some share idea recommendation or whatever you, we think, you know, I ask them, sorry, our team it's effectively, would you put all of your money in this? And if you're not prepared to put a significant majority of your money into something, you clearly haven't done the work and you clearly don't have, I guess, the right to invest in that. And I guess this is a little bit different for me. So just going back a bit, when I started investing, I started with a few thousand dollars of my own and I kind of just bought anything, my friend and I went through the fuck, the fin review, and we went to the shares table and he was like, Oh, Telstra, maybe I'll buy Telstra.

Owen Raszkiewics:

I was like, no, no, no, mate, listen to me, whatever went up yesterday by that. And it was this tiny little thing that was probably like 1 cent. Needless to say, a few months later, I pretty much lost everything because he sold out 70%, 80% down or whatever. But what, what I quickly realized was that my parents who had a small amount of money we're talking like 30 grand to invest. They they didn't know how to start investing, but I'd been studying at night started you could call it experimenting with dabbling speculating if you like. Once I started to take on their money. So their $30,000, it was a totally different thing for me. It was like, the world is flipped upside down and it's like, okay, first things first, I can't lose their money. I can, I can risk my own, but I can't lose theirs. And that, that mindset shifted. And then I started to really do my homework. And to be honest, it doesn't matter if it's $500, cause there's a lot of money to people, to some people or 50,000. I'd say, you know, $1 invested now should be 17, depending on how old your audience is. Which should be 17 by the time you retire, if you do it. Right. So you know, that's the way I think about it. Every dollar is precious.

Veronica Morgan:

Love it. I mean, every dollar is supposed to, it's just interesting. I often think, you know, hear stories of Kerry packer going to casino and losing, you know, $10 million and then all winning and tipping the croupiers, you know, paying their mortgages off. And I was just reading about this during the week. And I find that astounding that anybody, I mean, it's proportionate of course, but anybody would be comfortable and okay with gambling that amount of money and losing that amount of money. And so, and it, but it is proportional, isn't it? Because of course the thing is like you were saying that you were risking yours, but then when you looked at your parents, it was, that was all they had in a way. So I mean, how can we really change the way that we actually look at investing when there is this sort of culture of risk around and risk taking? You know, some people will take more risk and are prepared to lose because they focus on the gains. Whereas other people are focused on what they could lose. And so therefore they don't take any risk. You know what I mean? So how do we, how do we navigate this whole risk taking? Because there's some risk is essential, but too much is ridiculous.

Owen Raszkiewics:

Yeah. So David Gardner, who's the, one of the cofounders from the Motley fool in the U S he said, imagine that the stock market wasn't called the stock market, I imagine it's called the business market. And if you imagine that instead of calling them stocks, we call them businesses. So instead of ticker symbols, we have names of companies and that's all we could see if people just flick that switch in their mind, they would realize that, Hey, it's not necessarily about things going up or down one day, green lights, red lights flashing in your face. It's actually about, you know, businesses and behind every business, as Peter Lynch would say, there's a company. So you should find out what it's doing. And for us, it's, it's very much the case, what we find with the definition of risk in the stock market. So in property, you don't, when you, when you walk out and you grab the newspaper off your front lawn each morning, you don't turn around and say, hello, my, my property is going up 3.2% today.

Owen Raszkiewics:

Maybe I should sell. Right? But in the stock market, that same person who's walked out, grabbed the newspaper, walked back and start with a cup of coffee, would log into their share brokerage account. And they would see a price that's either going up or down. And I think, Oh, maybe it's time to buy yourself. There's really no basis for that. But a definition of risk, according to academics in the stock market is what we call volatility. So just the ups and downs of share prices. And you know, that's completely, when you think about that, if you are owning a business, let's say you had a cafe you wouldn't necessarily go down the street and look at all the competing cafes and say, Oh, the price of that, one's gone up 0.2% today. Mine only when I went down 0.1%, therefore the other one's more volatile and therefore it's more risky.

Owen Raszkiewics:

You would just be like, if someone came up to you, you probably lock them up in a mental institution because you'd probably say that actually has no basis. In reality, you're off in a different, different world. And the same thing should be applied to the share market. The problem is we don't know. Most people don't know the difference between risk and risk. Most people think that risk is volatility because that's what the academics tell us. But in reality, you guys running this podcast. If you made it a business, my business anyone's business could have shares in it. And the real risk is that that business no longer makes a profit. It doesn't pay dividends. It doesn't grow all of these types of things. So if we could just convince people that the stock market should actually be called the business market, I think we'd have a lot more people willing to take risk.

Owen Raszkiewics:

Of course, of course, there's fundamentals. What we call fundamentals in investing, which would be you know, akin to investment grade property. There are things that we look for in companies that makes one better than the other. And then there's this overlay. There's this veil, if you like of behavior, which is what we came back to it coming back to the start. But there's a behavioral element sits between the reality, which is that shares of just businesses and share prices. And oftentimes you can see a disconnect between those two and it's that behavior. If you can master that, you can cut right through all of the jargon. You can cut right through all of the nonsense and you can focus on the business. And that's really important insight when it comes to taking risk. And I'm not sure if we'll get to this, but I'm sure you guys have met Tina. Tina stands for, there is no alternative. And what it means is that with interest rates so low with unemployment being. So, so with bond yields, virtually zero and I guess term deposits offering negative because after inflation, you have to factor that in, there is no alternative to investing in taking risk. And so sooner than people realize the difference between risk and risk, the better off they'll be.

Chris Bates:

Yeah. I mean, it's very interesting when you flip it from stock market stock markets credit over many years fear attached to it because, you know, every day it's commented on in the radio, the newspapers, the TV, et cetera, and it's markets going up a guy's at 1%, but when it falls, it falls 40 billion. And that scares the hell out of people. Where does you change it in your mind to businesses? How does capitalism as a global sort of structure play into the stock market longterm and give investors confidence to just bet on that rather than just, you know, sitting on the sidelines?

Owen Raszkiewics:

Yeah, that's a great one. So the title of your, of your podcast is the elephant in the room. And there's a brilliant book, probably the most profound book I've ever read which is an element. I forget it off the top of my head, but basically it's to do with the size instinct. So what we, what we find is that people tend to, and the media loves this, by the way, people tend to jump to a number and think, well, that's really big because it's, there's no basis in reality for it insofar as we can't say 40 billion, that's a lot of money. Like there's so many zeros attached to that. I forget how many zeros there are, but if you say $4, then obviously it's a totally different thing. And what it takes is a bit of context around that. So just think, you know this, this business, or this industry, sorry, is, is built on, I guess, the foundations of capitalism, if we think of the stock market as representing businesses.

Owen Raszkiewics:

And I think there's no better example of that than coronavirus and the impact that that's had on society. So my wife and I were talking about this and she's an occupational therapist, so she's not in finance, although I've given her a pretty good education. She, we, we talked about this and we hear in the news things like stock market down 40 billion wiped off the ASX, whatever. And then we hear unemployment spiking. And then we hear this business closing that business closing, like I'm just sitting here in Melbourne. I could walk out of the office and there's a dry cleaner that has two signs on the window. And it says it proudly in business for 30 years. And then the next sign says closing down. And so you see these things and they're all tragic, right? There's really just pulling on our fear.

Owen Raszkiewics:

And yeah. And the important point with capitalism is that what we've seen in coronavirus is that businesses have adapted. If, if, if we have two cafes that sell the same coffee and one sells it for $4 50 and another one sells a foot for dollars, we would just go to the one that's $4. And the reason we do that is because capitalism works and we as consumers want the lowest price. And if the company can offer that for a better price, it's the same or fungible product, we will go to that. And during coronavirus, we had, we had an episode in our podcast. Recently, we, we talked about I guess, inspiring coronavirus pivots. And one of the ones was an eco lodge that would usually be akin to a bed and breakfast, turning it, turning into a pizza shop. So they had a pizza oven on site and they sort of an innovative way to fill demand.

Owen Raszkiewics:

And, you know, in a capitalist society that is delivering value to a consumer or customer and you do it and you make a profit and that's how capitalism works. And capitalism is often a dirty word because we think of like oil tycoons, so super rich people and inequality and all these things that the media is drummed into us. But capitalism is the reason we have a society. It's the reason we have roads. It's the reason we have airports, schools, hospitals, you name it. And so people, businesses need to make money. And you, as someone who is investing you need to realize that the sooner you can take advantage of that, the better Tony Robbins in his book unshakeable says, don't be a consumer of the economy, own the economy. And, and that's the basis of that is built on capitalism.

Veronica Morgan:

Find it, it is really interesting. A lot of debate around the moment is this the end of capitalism that is showing the weaknesses of capitalism, et cetera, et cetera, and capitalism, you know, I'm conscious capitalist, right? And in fact that, and I actually joined the association in Australia following listening to the Motley fool podcast, funnily enough. But there's, there's sort of two sides of it. It's the good side, the creative side, the, the, the way that we feel demand, we respond to market, we deliver what, what is needed and wanted, but there's also the side that creates demand really where it's not necessary. And I think that's capital capitalism gone, you know, and there's also the choices that are made where the economy has chosen over individual health and society choices and all that sort of stuff. So we sort of go down that path, but on the, on that sort of what I think is one of the bad sides of capitalism is, is watching the share market volatility and the things that it responds to, you know, so it responds to announcements by Trump for instance, and goes up and, and there's, there's a whole bunch of what looks on the surface to be really insane stuff that drives the share market as a whole.

Owen Raszkiewics:

So what's going on there? Hmm. That's a good point. Firstly, I should say never base your investment decisions on what Trump says or tweets rather. Maybe that's more, especially at 3:00 AM. So I guess the thing here is that, and this is another important insight, right? Is that when we inverse we invest looking through the windshield, we don't look through the rear view mirror and that is quite concerning to people because most people would be like, you know what? Telstra's paid a pretty good dividend five years that therefore makes it a good investment. Well, no, not necessarily because what happens is in the stock market, remember how we talked about those fundamentals and there's behavior in the stock market. If we look through the, if we look front on, if we're driving straight ahead, we want to know what direction it's going. And we do that on the basis of individual companies, where you say Telstra, it looks like it's going to grow Telstra.

Owen Raszkiewics:

It looks like it's not going to grow. So what, what basis do we have for that? And then what we do is we as investors, we, we can think about the future and we say, we expect Telstra is going to pay this dividend or that dividend, for example. And then we, we estimate that say, let's pick a number five years out into the future. And we say, we think it's going to pay this much in dividends over the next five years. And the time value of money or compounding tells us that we need to discount those dollars back to today. So what you could have is effectively any news that is new to the market. So like it's a tweet, it's a piece of jewelry, geopolitical news, a new tax legislation that's drafted and put through parliament. What happened? Any piece of news doesn't affect necessarily what the price was yesterday.

Owen Raszkiewics:

It affects what's going to happen in future. And because we're not just talking about today or tomorrow, the present, what's talking about many years into the future. So for example, if we lower taxes for companies from 30% to 15% in Australia, what we would find is that companies are going to pay half as much tax, but not just for this year for forever, according to our assumption, or at least for five years, if we were forecasting five years out. So the share market can react in really strange ways to different pieces of information. But the important part is if you, if you're looking at individual companies, as opposed to the stock market, as a whole is to understand how they impact the individual businesses. If we go back to our coffee example, accounting, the corporate tax or big corporate tax, I'd be company corporate tax rate from 30 to 15%, probably wouldn't have that much of an impact because most small businesses don't pay 30%. They might pay less than 30%. So that probably wouldn't affect them as much as say a large company. And so when we think about news surfacing, it's important to remember that the stock market is the value of things to come. Not necessarily what's happened in the past.

Veronica Morgan:

And that's, that's really interesting. I mean, I guess to use your coffee cafe analogy, you sort of saying, well, if one coffee shop had a main road that was suddenly going to be built right in front of it, each share price will go down versus the one that's opposite the park and is in a better position, quite a position. So that's sort of on that micro level, but it is a bit, don't you think it's a bit of a dichotomy because the thing is that what you're saying there is that the share market as a whole responds by thinking of the future impact of legislation changes to the environment, et cetera, et cetera. But the reality is we're also talking about behavioral biases and individual's reactions to some of this stuff. So it's chicken and egg, isn't it an individual's reacting to the way that the share market is perhaps behaving. So then what is then the share market?

Owen Raszkiewics:

You know what I mean? Yeah, yeah. That's a good, that's a good one. So there are a number of really good books that I could maybe follow up with an email and so you could include them, but the best definition I've found of the share market is not to look through it through a mathematical lens. So not through like a strict, like this equals that kind of lens, but to look at it as more I guess, through a biological lens. So think of it as, as complex system or an organism that is constantly changing and morphing over time. And, and what you have is a bunch of different people acting within that system, just like you'd have cells within some sort of I guess some sort of plant or animal, and they all do a different thing and they will act in a different way, but they all feel this kind of longterm vision.

Owen Raszkiewics:

But what you had over time is that yes, the share market to react bizarrely in the short term and this com this will come back to when we spoke about, I guess, investing as opposed to gambling and as opposed to everything else is that yes, things can happen in the short term. Like right now we have some companies on the stock exchange, particularly technology companies that are going crazy. And then we had other companies that are not and over time, and this was an insight going back as far as the 1920s from a guy called Benjamin Graham, who was the mentor of Warren buffet. And he said that in the short run, the market is a voting machine. So whatever's popular tends to do really well. So when you react to news, you tend to react really favorably to things that are really popular at the time.

Owen Raszkiewics:

So like a buy now pay later company would be very popular right now, but over time it's a weighing machine. And what he meant by that is, you know, maybe if you take five or 10 years as your time horizon, the best companies tend to do well. And if we go back to the cafe analogy and I'll call him David Gardner, again, he says that if you have three cafes on the street, don't try and time your way into which one's going to come out with a new blend of coffee or, you know, which one's going to have a new sign out the front, don't try and do that. And don't try and buy and sell each individual cafe. Just find the best cafe on the street and own that forever, because that is going to be the surest way to make money. And so if we, if we think about that, yes, the Sharemarket can do strange and bizarre things in the short run, but over time you want to find the best companies.

Owen Raszkiewics:

And one thing I might just circle back to is this idea about conscious capitalism and avoiding, I guess the companies that do bad, you don't have to own everything. But what I would say on that is over time. I don't know about you guys, but for me, I believe that companies have tended to move. If I could bring in some I guess, political speak, I would say that most good companies in the 21st century have moved towards the center left. And what I mean by that is they tend to the companies that are more sustainable in this day and age tend to be those that also have an ethical focus. So they focus on the triple bottom line, you know, your society environment and profits. If you like,

Veronica Morgan:

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Chris Bates:

I agree with you in terms of, yes, the best companies are the best things to hold, right? Cause you want to own those quality companies that will survive and be sustainable and have great profits in their future. But where does the price you pay to buy that company? Come into that because, you know, for example, like Tesla at the moment, right? It's bigger than all the car manufacturers in the world. It's gone up 15% last night as an example. And you know, yes, it potentially is the best vehicle manufacturer out there, but you have to pay an enormous price to buy it today. So where does the price that you buy that company come into it? Yeah, that's, that's a good point. I've often heard that the money is made in property on the way in, and I've, I've heard in shares that people have missed out on tremendous opportunities because they focused on what they would say, quote, unquote value.

Owen Raszkiewics:

And these are important concepts, I guess, in mathematics and in reality, because the price is what you pay, but the value is what you get. And so you do have to have some appreciation for this, but some people kind of shroud this and mystery that, Oh, there's a valuation for the stock. And then this broker does put a target price and what have you. But again, I'll come back to the idea that if you focus on a very long time horizon and you focus on a really good business I can give you an example, which is a company from Australia called pushback. Push pay, even though States from Australia, we just claim everything that comes out of New Zealand. That's good. So this is a company originally from New Zealand listed here in Australia on the stock market, but does most of its business in the U S and what does it, what does it do?

Owen Raszkiewics:

Well, push pay is a software business that works with churches to get them more donations. And so they sell this software to churches subscriptions, or via like a percentage of the, the team that goes through donations. And so for years Pushpay was not making a profit. And I guess the only people that could really see value in it, we bought it a long time ago, but the only people that could really see value in it were people that understood how software works and the software. I know you guys have talked about this in the past about how you have these businesses, that charge subscription fees, and what you could see with a company like Pushpay's unprofitable looked like it was sky high valuation, but again, if you focus on the future of that business and the ability for it to serve more and more churches with virtually the same app you begin to realize how it could make more and more money without laying out a lot more money.

Owen Raszkiewics:

And so I'm not, I couldn't say that I'm intimately familiar with Tesla. What I would say is that there's a very charismatic and energetic CEO who tends to make the headlines and help that one way or the other, but it's sooner or later, it does come back to I guess, a reasonable price, but what I've found in my time in stock market and from interviewing, you know, the best investors in the country is that oftentimes people have a really good appreciation for the value of something one to three years out. So they can say, you know, in the next two to three years, I feel like, you know, Tesla's electric cars are gonna, they're going to do this much in production and that's going to happen in this. But one thing that many investors I guess don't have an ability to price in or to value is that the optionality that comes with a company.

Owen Raszkiewics:

So if you bought Amazon shares back in 2001, you would have thought that this is a tremendous online bookstore, but then it wasn't until 2015 or 2010s that you realized that, Hey, this has got the biggest server network in the world. And the now the most profitable thing, isn't it's books, it's not even an eCommerce business. It's actually its ability to sell service-based to millions of customers around the world. So when it comes back to valuation, there's a few things I'll give you some short hand tricks that we use. One, your business has gotta be cashflow positive, or it's going to be in a position to be cashflow positive. Number two, we always look at businesses that we would have what we would say, have a competitive advantage or a moat. So like the ring around a castle, it protects the business and protects its.

Owen Raszkiewics:

And so in the case of Pushpay, which is this term church donation software, the, the very simple moat that it has is that once it is installed in a church, it's very hard for the hundreds, sometimes tens of thousands of church goers to uninstall the app and move to a different system. And so that protects its profits. And so if we look at just cash flow, positive companies, that would rule out probably 50% of the companies on the ASX I don't know, that's just a guess, but there's a lot that don't need to make a dime. So that would be one thing. The next thing would be focused on companies that have a moat and as next thing would be focused on companies that you can understand. And only those companies that you can understand, because if you focus on, if you try to think about something that you don't understand, you'll never be able to put a value on it. You'll never be able to say, I think it's worth as much. There are some other shorthand things which we could probably talk for about three days on and still not get anywhere under the surface. But yeah, there are many different things. Value is very important, but I would say focused on the business first and foremost and just accumulate assets, save money.

Chris Bates:

You've got a great education business. You're out amazing articles, the podcasts, you know, creating a lot of content and understand I guess millennials, how do they think about property and what worries them the most versed in that kind of property versus shares debate? Yeah,

Owen Raszkiewics:

I think the big one that comes across my desk is I have a deposit or at least I think I have a deposit which might be say 20, 30, $40,000. I'm trying to buy a house for 600,000, which means if I want to get to 20%, it's 120, but it's going to take me two or three years to get there. Do I invest that money in the share market in the short term? And that's the question that I get a lot from millennials. So yeah. It's how do I make my deposit grow quicker? And this is only been, I guess I'm made worse by what we've seen in recent years, which is interest rates falling like back when now back when my parents were looking at houses, they were probably getting 10 or 20% interest on 20%, 10 or 15% interest on a term deposit.

Owen Raszkiewics:

Right. And now you'd be lucky to get 1%. And so I think the difference for millennials now is, you know, we've just got the, really, the only option for us is to save or to take risks or to push out our timeline by a few years and maybe invest in some way. But so that's probably the big thing and I can certainly understand this because I'm actually believe it or not. I'm 29, right. I'm 29 and I'm looking for my first house. I've never bought a house I've never invested in property other than outside of ETFs and REITs, real estate investment trusts. And so I'm looking for my first house and I would, I mean, not to butter my own bread here, but I would say earn a decent wage. Right. My wife been an occupational therapist. She has a decent wage as well.

Owen Raszkiewics:

But at the same time, we're finding it very difficult to I guess justify spending the amount of money that would be required to buy a house. And by the way, obviously I only want to buy a quote unquote investment grade property. So I'm pretty picky here, but I could move somewhere else, but I don't want to. And so I guess we, we try, we find it hard to justify the trade off between shares and between property. Obviously they're totally separate asset classes, but yeah, that's kind of a roundabout. That's something that's on my mind a lot as well.

Veronica Morgan:

Oh yeah. It is interesting. You say that that trade off because of course you're very familiar with the share market. You understand it obviously it's your profession. So one thing that obviously the big difference is leverage and obviously the fact is you can't live in a share. So if you don't buy your own home, you're gonna be paying rent elsewhere. So there's all those other factors that come into play. Great. Hm, absolutely. You balancing those, however, I mean, I guess how, what is your thinking? I know that you said you are struggling to balance them. What did you think, what other things that you are considering in that, in that debate?

Owen Raszkiewics:

Yeah. Yeah, sure. So I guess the capitalist in me is is very simple. It's very, it's very simple in the way I think about it, but so the, the way I think about it is I want to put my money where I can maximize my return. And so much of the time we think about a property as using leverage and I don't think enough people consider the risk that's involved in leverage. I think a lot of those people are going to consider that in the next 12 months. But yeah. I don't think for a long time, because of this unwinding of interest rates and the net migration and all these wonderful things that we've had, I think people have kind of overlooked that risk, but I've always sort of leveraged just kind of artificially inflating something. So it's like kind of saying, you know, I've got a, I've got a guitar at home.

Owen Raszkiewics:

If I plug it into my amplifier, paying the debt, it doesn't make a difference if I'm a good guitarist it won't make a difference whether I'm just playing it so I can hear it or playing it. So other people in here it's going to be good music, but if I'm a shit guitarist and I plugged that into an amp, then everyone's going to hear it and it's gonna make matters a lot worse. And so, and so the way I think about it is as an investor, where can I put my capital, my equity or cash to the maximum. So he has the maximum possible return for all probabilistically speaking anyhow. And so for me, being in the share market for about 10 years now I think to myself, if I can compound my money at between 10 and 20% per annum and the yields on property, regardless of the debt element, aren't there yet for me, then I should, I should keep allocating to two shares and this is what my wife and I have long been.

Owen Raszkiewics:

I guess, torn over is that I probably, and I'm maybe I'm kicking myself a little bit, but I probably could have bought a house. When I was early twenties, very early twenties, but I didn't yet. Instead I went into shares and I didn't use leverage and I didn't get ahead of say some of my group might've. But, and then I've also had to pay, you know, living costs since then I've had rent and what have you. So that's definitely something that comes into the personal finance side. My, my kind of feedback to anyone that asks me this question is, yeah. And it's like that, that young girl in the the tortillas ad or the taco ad, like, you know, do you want the hard shells or do you want the soft shells? And she says, why not have books? And with me with shares, I often say to people, if you are in this first homeowner bracket, save your deposit.

Owen Raszkiewics:

If that's your goal, you should be saving towards that as much as you can. However, the dose think that just because you're saving for a deposit, you can't invest in shares. As you said, you can do it with $500. You can even do less with one of these micro investing apps. So why not just fork some of your income or your cashflow to shares and some of it due deposits. So you get the best of both worlds. And I think that's really good because it's a psychological nudge for people too, because they don't feel like they're missing out on anything. They don't think, Oh, you know, this guidance came on the podcast and said, Hey, your money's going backwards in a term deposit, you know, Oh, you know, I've actually, I'm actually learning to invest in shares. And I'm learning to invest in ETFs because I've got $500 or I've got a $2,000.

Owen Raszkiewics:

And that is enough sometimes for people to scratch that itch and still keep saving and then they can learn as they go.

Chris Bates:

I really love your point around leverage. Cause I think you're a hundred percent, right? It's, it's a massive positive for prices. You know, that's what drives a lot of prices. Longterm is people borrowing, you know, taking that a hundred thousand and borrowing 900,000 and then putting another million dollars into the property market. And that's kind of what keeps pushing prices up. And that potentially can work if you buy a good asset because you know, the good asset rises, but a lot of people don't understand the problems with leverage if it goes wrong, you know, and I think that's where a lot of first home buyers or people who are buying investment properties, don't really think through when, you know, you're only buying borrowing 80, 90% of the money. Tony takes a five or 10 or 20% fall in prices for you to lose absolutely everything. And I think that, you know, the leverage, it's, it's two sides to it. And I think a lot of people in the property market kind of, you know, encourage people to go and leverage their money, but the not enough focus is put on. Well, it actually can go both ways.

Veronica Morgan:

I think one thing around leverage is that a lot of people in property, particularly if they're looking at buying their first property let's just say investment for a minute. Not at home, they're thinking, okay, well I don't want to borrow too much cause I've fear, you know, owing that much. Right? So I might limit myself at say 400,000 that feels safe, that feels comfortable and there then go out and make the mistake of buying what they can afford with that self-imposed budget, if that is self-imposed. And that means that they often go and buy a really crap asset because they've actually filed to realize the risk in that case, isn't in the borrowing, it's actually in the asset, what's actually in every case, it's in the asset, the risk is in the asset, but if you borrow to buy a crap asset, then you've just compounded the risk as well. And so, and this is, this is a fee thing that a lot of property buyers, particularly first time buyers do think, you know, are all there. They're also trying to diversify like, Oh, well I can't put all my eggs in one really good property. I have to then carve it up into two or three really little ones, really crappy ones in terrible locations or substandard properties. And so they fail to understand and it feels less risky, but the reality is, is actually more risky. So it's a real paradox.

Owen Raszkiewics:

I, I think that's a really good point. You guys make it's it's D is definitely an enabler for some people. And it can be, I guess, a good thing or a bad thing. And we've heard the, I guess the saying of good debt versus bad debt. And I guess it's in this instance, the debt itself is not the good or the bad bit. It's actually the asset that you buy. And, you know, if you, if you take out a loan to buy a TV, that's probably not a good debt, but if you take out a loan to buy a really good investment grade property that's a, that's a, that's a good debt to have. And I think that's where a lot of people do or don't go. Right. So I, I wholeheartedly agree with you on that,

Chris Bates:

The last element, imagine your situation. So think about buying the first property I assume is the property you're going to live in. So if, for example, what's the alternative there, cause you know, you just mentioned around Taina before is that the alternative, let's say longterm for you as a couple and family, et cetera. Are you thinking I'm just going to potentially rent longterm and invest in shares and or am I potentially and avoid property altogether? Or are you thinking I'm just going to invest in shares for another five years then buy property? Like what are the two options you thinking about?

Owen Raszkiewics:

Yeah, so that's it's a really good question, I guess. I always get, so this is funny, right? As someone who is a qualified financial planner, I don't give personal advice by the way, we only give general advice, but as someone who is a qualified financial planner, it might sound a bit strange when I say this, but I often get a bit of anxiety when it comes to a financial plan and the reason why I do, and this is for my own, of course, I'd happily give someone else advice. But the reason I do is that I like to live my life with some very simple tenants. And some of those are just put your money where its best views that's for the first one. So if we talk about finance, because I don't like to see my life played out on a, on a spreadsheet, it sounds weird, but so I maximize my savings wherever possible.

Owen Raszkiewics:

My wife and I do this, we sit down and we have a budget and we maximize our returns for whatever amount of capital that we have. And when we think a bit longer term it's, it's only been in the recent few years that we saw an opportunity. So we would be happily renting to be honest. But it was only in recent years that we've we've and particularly the last six months, we've thought maybe there's going to be an for us as people that principally invest in the stock market. Maybe there's going to be an opportunity for us to deploy some of our capital for a deposit and get take advantage of this extremely low interest rates and even potentially lower house prices in certain areas. And so what we've done is we've kind of set out on this bit of a mission and we've decided that we're not going to sell our shares.

Owen Raszkiewics:

We're going to keep adding to them, but we've decided to save outside of that. And so as soon as it gets sort of the limit that we believe is acceptable, which we think we're at that now then we'll, we we've already in the preapproval process. Once we get to that, which we are, then we can start buying and we look to buy a houses in suburbs that we believe are investment gray, whereas supply constrained those types of things, but there's really no grand plan. Chris, I would say it's more so you know, two to three years out for us we don't want to sacrifice and pay the tax man from anything that's in our shares, but we do want to obviously have somewhere to live and we recognize Peter O'Malley had a really good book on this and it was a property book and he talked about how, you know, you want to look at properties when I guess the cost of ownership is, is lower than the custom rent. And we've, I think in our areas, we've definitely reached that. So again, coming back to that capital component, where at that, so now we just save until we find the place that's right for us, we just gotta compete with about 120 other buyers. That's about it.

Veronica Morgan:

The rents are reducing. So that, that equation is going to change

Chris Bates:

All of a sudden in Melbourne, Melbourne. I think there is a, A lot of potential accommodation from a renting point of view, not just apartments, but even houses in good areas. I feel like there's a lot more potential options in Melbourne if you don't want to buy, you can rent. And so have you actually thought through, in terms of like a longer term sort of lifestyle sort of family, have you, do you feel that your desire to move from renting to own home ownership is growing each year? Or do you feel like even if, for example, kids and things like that,

Owen Raszkiewics:

You would want to just rent longterm? Yeah. Yeah. So kids is an important factor because you have stability, obviously when you're on your own home, I've got a friend who actually, he got interviewed on the ABC because he went on a rant on Twitter about how he'd moved house five times in seven years. Not because he wanted to, but because the landlord said we're selling or we're moving and this was in Sydney, but, but here in Melbourne, you're absolutely spot on Chris. There are a lot of places to rent. You know, maybe when we come to the back of the show, I'll share one story with you. But yeah, when we think longer term, we do want that stability. So I think naturally my wife and I were at that part of our last cycle where we think, you know, we do need to prepare for children.

Owen Raszkiewics:

We don't have them yet, but in the next two to three years, she probably say two, I'd probably say three, but probably in the next two to three years, we'll be ready for that. And absolutely that factors in, and then, so then we think, okay, this first home I've got, my eyes are bigger than my stomach, or I should say my expectations definitely outside. It's, outsizing the reality of the situation here in Melbourne, because even the line, because I'm thinking, yeah, you know, I've got a pretty good job, we've got savings, you know, all this sort of stuff, come on, come on with special respect. She'll give us some training here. But what we found is that we're not going to get to our dream home in the first step we may have to, unfortunately not, unfortunately we'll have to find a smaller, but still equally attractive investment, the home that becomes virtually I hope an investment for us. And so we think maybe it's a five year plan in insofar as that, but we don't, we haven't really said anything in concrete, going back to not really setting plans. We've kind of just, let's take it one step at a time. Let's find a house that we think is investment grade that meets all of our requirements for children. And then we can maybe parlay that into something else over time. Yep.

Chris Bates:

But you said they're a dream home. So I'm just curious too, as someone who has say value in investing outside property and is able to generate good returns, roll your knowledge and your experience and knowing, know what to invest in that ultimately sounds like there is still an aspiration for a home and a dream home. Is that still something that's important to you or do you think that, you know, you'd still be happy just to live in a, you know, a smaller house or a cheaper house longterm? Or is it ultimately a goal to

Owen Raszkiewics:

His dream property? Yeah. yeah, there's absolutely a goal there. So the great thing about money is if you have more of it, it's easier to do things with it. So the thing is if we just focused on some very simple tenants, we can get to that. And my dream home is actually a, being a country boy is to go back and have land and have my kids grow up in a place where they've got fresh air and what have you. And so I absolutely think that that's really important, but we've all I specifically, I've seen it as more of a lifestyle asset than an investment asset for a long time. Whether or not that, you know, that's right. We'll probably find out in the, in the long run, but in the meantime I'm quite happy absolutely. To find an investment grade property.

Owen Raszkiewics:

And I think there are merits to investing in your own home or an investment property. Absolutely. I do. And I could see myself in 10 years having maybe two properties to our name, but maybe, maybe not. I would want, you know, this is a thing from a, I guess philosophical point of view. I'd probably want everything to be positively geared. That's just the way I see assets is that they should produce cash for you, not take cash away from your pocket. And you know, I, I think 10 years we'll probably have two properties under our belt. We might have a home that's on a farm, but one that's closer to town too.

Chris Bates:

So, I mean, we've got to kind of wrap this up, but I think when you say positively, give us as native a kid, do you include the capital gains that you're making, for example, as part of that cashflow, you know, for example, let's say you buy some shares and they're not yielding much, but they're growing really strongly. Do you kind of accumulate those returns and say, well, that was actually a good investment or do you kind of think the property has to be positively cashflow and it doesn't matter about the growth or the increase in share price.

Owen Raszkiewics:

Uh so, you know it's probably, I'd like both. So if I'm being so choosy and so selfish, I would want both. So I wouldn't be averse to buying a property that was negatively geared, but my preference would be for it to be positive for good, in a similar way. You know, I would love a company that pays out say 30% of its profits to to share help with the students. And then usually the other 70% to grow its business viciously. And so there's a company on the stock exchange called ProMedica, which we've owned for a very long period of time very, very long period of time.

Owen Raszkiewics:

And it is that exact case. So it is paid a dividend yet it's a sexy tech stock. And what it's effectively found is that, you know, where our business is growing fast enough, we don't need that money, so we'll pay it back to you. And so what I would like to think that I can find something offering a similar, I guess, scenario in property. I maybe I'm a bit ambitious again with my eyes being bigger than my stomach, but I think that I could maybe find a way to do that. And in that respect I wouldn't be averse to buying an asset property with the expectation that it is a property for income as opposed to capital growth.

Veronica Morgan:

That's interesting. And I'm trying to wrap my head around how possibly that could be possible. Cause obviously in a company, a you've got revenues that generate profit, it's actually real money. You can then reinvest that back into the business to generate more revenues, et cetera, et cetera. But with property, the distinction between capital growth and your revenue is really fixed. And I, you know, I don't know, maybe there's some clever ways to borrow against that capital growth and then whatever, but without making it very complicated the problem is of course we're property. You've got that, that thing is either high yield or high capital growth. That's a principle. It doesn't necessarily always apply cause there's plenty of low yielding properties that don't grow much either. But to get both I've, you know, I'll be amazed and I'd love to find one.

Owen Raszkiewics:

Yeah. So, so rather than whether they be talk to this as a kind of capital allocation, it's like a structure thing where money goes in and out. I think the best example is where, and the simple example you guys would know better than I do is that the rent is enough to cover all of the maintenance cost of the holding cost of that property. And so that makes it in my mind positively geared. And then you can buy hopefully in an area that is potentially able to grow, whether it's compounding at say, let's say a property in a particular suburb goes up, let's say three to 5% on average, over a long period of time, but it also pays off your loan, which is, you know, two to 3%. Well, that's a 6% potential return, maybe a little bit more, maybe a little bit less compounding a way for your, for your wealth.

Owen Raszkiewics:

And so that's what I mean by a property that over a long period of time can compound quite well. I do. I think there's opportunities in the share market that outweigh that probably, but it's also a lot of opportunities that are not that and we'll go the wrong way. So so you're not factoring in interest costs. So let's say hypothetically, I could get a, like hypothetically I could get a 4% yield, gross yield on a property. And my, my interest costs were 2.9%. And I had, you know, obviously upkeep costs out of rights. What have you? Well maybe it goes close to breakeven and maybe it's slightly negative. Maybe it's slightly positive, but that's what I'd be looking for. I wouldn't buy something with the intention to share some of that with the with the ATO.

Chris Bates:

Perfect mate, I guess we would love to just, have you got a probably done by us?

Owen Raszkiewics:

Yeah, I do. And I probably shouldn't say it's a Dumbo, but it's something that I just it's just come across my desk yesterday when I was looking through Twitter, a user that I follow on there said that he had bought two properties, two studio apartments in Melbourne CBD, and he's looked on the real estate.com website and found that there are 3,800 apartments to rent in Melbourne at the moment. And he hasn't, he originally had it as an Airbnb and hasn't had any takers, whether it's an Airbnb or for longer term rents on on his properties since February. And I, you know, you don't want to poke fun or anything like that, but I guess the lesson for me is that the lesson there for me is that if you are going to invest in property carefully, consider diversification or just anything really not just property, consider the diversification angle, consider what could go wrong because they could go wrong. It could happen and you could be in that situation.

Chris Bates:

Wow. it reminds me, I've just literally done it. Knack is I remember doing it a couple of years ago. I talked to him about Rosebury and new South Wales into real estate and just apartments and just thought I want to, how many are for rent in Rosebery? And I remember it was about 800. I've just like this right now. Cause it kinda it's 2,400. Wow. So, you know, and that's,

Chris Bates:

And that's just Royce bro. And like I know if he kind of expand the search and you add in like areas like Alexandria and green square and mascot in sorry, Hills and Redfern you know, the compounding the problem compounds and that's what all those renters will be considering all those suburbs, not just Rosebury if they're thinking about an apartment. So yeah, it's, it's a pretty horrible situation to be is have an asset and not be able to sell it or not be able to rent it. You just get left with an empty apartment and, you know, crystallized losses if you sell. So yeah, not a good outcome.

Veronica Morgan:

And I wonder actually, just as a bit of an aside and probably a whole episode on this topic, but I wonder if Highrise apartments will become less attractive given our social distancing requirements, you've got to get into a lift and, you know, with a restricted amount of people who can get into a hotel long, it takes to get to your apartment, et cetera, et cetera, et cetera. And I, and I know it's not quite the same with public housing in Melbourne and I'm not sure when we go to where here, but obviously they've just in the, in the midst of a hard lockdown. I don't know, what's their, I know they're public tenants and I know that they've also got very, very small list. I know also got quite a lot of people living in each apartment, no balconies, you know but I guess what that does shine the spotlight is this type of living and if we're going to live with their pandemic, they don't necessarily coexist very comfortably. Do they?

Chris Bates:

No, not at all. The markets was in a lot of trouble. Hasn't really written risen in Melbourne and Brisbane like it did in Sydney, just because there was this real FOMO and real lack of stock in the boom. And everyone just went and competed on apartments. And they can't afford houses. So their only option was apartments, but in Melbourne they can still afford houses. And I think these kind of covert situations really disincentivize or people not interested in apartments. And I think that's really gonna smash the values in both Brisbane and Melbourne and potentially Sydney. So yeah, yeah, yeah. I can, I can say that.

Owen Raszkiewics:

I appreciate that. Sorry guys. I moved out of my apartment in Hawthorne and we moved down our apartment in Hawthorne because we wanted to get away from that scenario. So we went back to out into the Hills as we call it. And that's that? Yeah. Before I just, I just remember the name of that book familiar on it's called it's by Hans Rosling, it's called fact fullness, fantastic book on understanding instincts and incentives

Veronica Morgan:

Fact fullness. I love it. Now. I think you're offered to include a list or send us a list of all the books that you've mentioned. You're obviously very well read. That would be wonderful. And I think a lot of our listeners and myself included will probably develop that list. And we really appreciate your time today, Owen.

Owen Raszkiewics:

No, thank you. It's I'm, I'm a big fan of the show. It was many other esteemed guests, so I'm very very fortunate to have some time to speak with you and speak with the audience.

Chris Bates:

And while we're there actually a shout out to your podcast, you've got a couple of great podcasts that are always in the, you know, the business top 20 podcasts. What are the names of those just for our listeners?

Owen Raszkiewics:

It's very, they're very simple. They say it on the tin, Chris, the Australian finance podcast and the Australian podcast. Yeah. So we've been flooded with how successful they've been and the reception that we've been able to, I guess, snowball into our courses as well has been tremendous. So as you guys said at the top of the show 10,000 students is what we want to get into our free courses. And that's what I'm most proud of. So if you want to take a free course, please head on over to our website. Wow. Thanks very much. Thanks for your time guys. Thanks Allen.

Chris Bates:

We want to make a bet at elephant rider and this week's elephant rider training is

Veronica Morgan:

Let's pick up on Owen's value checklist and just make a few tweaks to make it apply to property. He said that when he's looking at shares, he looks at a, the company must be cashflow positive. B has a competitive advantage or moat and three, that it's something that he understands a company you understand. And I think the cashflow positive thing, we just had quite a lot of chat around that. I think it's important to also think at that cashflow positive would property can come in the future at some point. And if you are looking at a longterm strategy and how that property fits in with your longterm strategy, you might be buying that property and not really too worried about its cashflow at any point, because you are, you can afford it in your own cashflow, but also because you're really focused on capital growth and you're buying it with a view to selling in order to pay down other debt in the future.

Veronica Morgan:

That's one way in which people look at buying property. And so therefore we property, I think you've really got to focus on what your goals are down there at the end your exit strategy or your retirement plan or whatever it is, whatever reason you're buying property. That's why you gotta be thinking longterm. And the cashflow sort of fits into that that decision making the competitive advantage. That's really about scarcity. And that's really around buying an asset in a, in a area where it's you know, it's a good location quality location. We often talk about the 80 20 rule that 80% of its location, 20% of it is within that location. You've got to get a good asset. So you're looking at scarcity, whether that means the style of, of property, the size of land, the proximity to, you know, views, et cetera, et cetera.

Veronica Morgan:

All of those things, you've gotta be looking for scarcity. And so that's effectively the competitive advantage. And then thirdly he talks about companies. You understand well properties, you understand. And, and I think that this is where some people get a bit carried away. We'd probably have to think, okay, I want to buy a commercial. Now I've got residential. I want to buy a commercial or I want to buy industrial. And, and that's fine for certain investors, but some many people don't understand those types of properties. And that it's a very, very different way of assessing value in commercial, industrial property than it is in residential. But I think also a lot of property investors fall in the trap that they feel like they do understand property because all live in property. And so that idea of understanding the property is very important. Understanding the pros and cons different property in different locations and the caliber and the qualities that are, or characteristics that a property in one location might require to do very, very well over time versus in a different location. And understanding that just because I live in a property in a suburb, doesn't mean that those same principles that I know and understand actually apply in a different type of property in a different suburb.

Chris Bates:

I mean, I think I agree with all those three points. I think with the cashflow, the most important part is, is factoring the future, cashflow your future yield. And that's what matters. It's not the negative cashflow today. It's, what's that going to be in five years, 10 years, 20 years. And that comes a lot of that's driven by the scarcity of the property, which is, you know, the competitive value competitive advantage. And then finally, like you say, in terms of understanding, it, just understand that you have got knowledge gaps and you do potentially need to do more research before you go and buy property. You can't just go in blindly. There's lots of elements to what drives the market. So get your knowledge before you go and buy property, not after

Veronica Morgan:

If you're looking to buy your dream home or an investment property and Sydney's inner West Eastern suburbs or North shore, my team, and I can help you by, without regrets, reach out by my website. Good deeds.com.edu. If you're looking to,

Chris Bates:

By your first time thinking of upgrading into a new one or purchasing an investment property anywhere in Australia, my team loved to carefully guide you on this journey. And most importantly, get the finance right, reach out via our website. [inaudible] Dot com today. Yeah,

Veronica Morgan:

If you're a first time buyer and you don't want to miss a step with this most important purchase, join me on Wednesday nights at 7:30 PM. Sydney time on the home buyer Academy, Facebook page for live Q and a check out the website homebuyer academy.com that I use every month.

Chris Bates:

My team hosts a webinar on what we are seeing at the banks, the best rates, changing policies And their service. We also share the latest insights we hear And read that it impacting the property market direction. Check out [inaudible] dot com today. Thanks for joining us. We'd love to see you again

Veronica Morgan:

And remember don't be a Dumbo.