Episode 147 | Growing wealth: property or shares? | Paul Benson, Guidance Financial Services

Where does financial planner and author Paul Benson stand on the property vs shares debate?
In today's episode, we have Paul Benson, Principal of Guidance Financial Services and published author of Financial Autonomy. Paul has been working as a financial planner for the last 20 years, working with a wide spectrum of clients, helping them gain ‘financial autonomy’. Paul gives his two cents on the property versus shares debate, adding in extra commentary from his book and own experiences with clients and friends on their journey to creating wealth.

Here’s what we covered:

• What is the difference between financial autonomy and financial freedom?

• How can people retire in their early 60s?

• Income replacement or wealth creation?

• How are people finding their 'true purpose' through work?

• How to deal with the temptation of trying to time investments?

• Why ethical and sustainable investing will be the future.

• Should you invest a lump sum in shares or property?

• With interest rates so low, are people taking on more home debt?

• Why do most financial planners not give advice around property?

• How do you build your share portfolio?

• What are people investing in now?

RELEVANT EPISODES:
Episode 136 | Owen Raszkiewicz
Episode 131 | Jessica Brady
Episode 130 | Glen James

GUEST LINKS:
Guidance Financial Services 
Financial Autonomy - Podcast
Financial Autonomy - Book

New challenge!
Reach out to us if you have a positive off-the-plan purchase, we would love to hear from you!

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 October, 2020.

Veronica Morgan: Researching this episode, I was looking up quotes on money and happiness. And the best one I found was they say money doesn't buy happiness, but everyone wants to prove it for themselves. Now property, investment and wealth are often used in the same sentence, but what is wealth? Obviously it means different things to different people. Do we pursue wealth as an end in itself or for what it can buy us? And how much is enough?

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. And I'm

Chris Bates: 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 forecast report, which experts can you trust to get it right? The elephant in the room.com did I use.

Veronica Morgan: I'm talking to clients about property investment, I'm thinking about the options that they'll have available to them in 10, 20, 30 years time. If they make good decisions today, freedom choice and independence are all words that are frequently used in these conversations. Today's guest is Paul Benson, financial planner, and also a financial autonomy. And we're going to explore exactly what that means and the role property investment can play in the creation of it. Welcome Paul.

Paul Benson: Hey, thanks for Veronica. Thanks for inviting me on Paul.

Chris Bates: Thanks for coming on, mate. I guess financial autonomy. I do like that those words together. Can you explain how to be different to say financial freedom?

Paul Benson: Yeah, for sure. Thanks, Chris. So so I'm a financial planner and I guess therefore I've, I've been dealing with clients for, for a number of years and, and it came about through an observation that what people generally were seeking was choice and freedom or flexibility, you know, so it might be choice around, right? Well, when I retire but it could be choice around working hours or other, other things in their life, particularly in financial planning, often a starting point is, okay, what age do you want to retire? And very often people and sort of wouldn't quite know, all right, well, I want to retire at 60, but often they get to 60 and then I'm still enjoying work. I want to keep going. So the really correct answer was what I want is the choice, the ability to retire at 60 or whatever age, but actually I'll decide at the time. So, so choice is really we're seeking. And

Paul Benson: I guess, therefore sort of working back from that, that idea of financial autonomy around gaining choice. So it's not, I guess financial independence is another common term that comes up, but financial independence implies that you've got all this, these assets, perhaps property assets, for instance, that are throwing off a whole lot of rent. And therefore you don't ever need to get out of bed. All you need to cover in a financial independence type model. Well, that's not the reality for most people. I mean, that's a really high bar to achieve for one. And most people enjoy their work and they like to have something meaningful to do so. So rather than setting that as a bar, which is unrealistic and maybe not what people want anyway, the financial autonomy objective is more around that. How can we have choice in our life? And that seems to align better with my experience of what people are seeking.

Paul Benson: And conveniently is a bit more achievable to.

Chris Bates: Say that around the financial independence I'm actually in the same camp as you. I look at it exactly the same. I think one of my frustrations with this whole fire movement and we are going to have a, a fire expert, you know, financial independence retire early is what that kind of stands for. But yeah, I mean, it's, it's kind of saying we need to get out of work. Work's a bad thing. We don't need to, you know, we shouldn't aspire to work. We need to get independent so we can stop working. And I just don't think that that's, you know, part of the wellbeing, it's, it's enough to be fulfilled. And I feel like we need something, a purpose and a drive. And and if you can put that energy into work, there's a lot of benefits for your sort of happiness.

Chris Bates: So I think that's the other thing with that, that your other conversation about people wanting to retire. It's like, okay, so what you get to 60, what do you do with your 40 or 60 hours a week that you spend at work? What are you going to do? And they want to go blank. And all the research is there that, you know, that transition is actually really difficult for people, whether it's sports, people going from, you know, high intensity to not working people, retiring professional jobs, to not working, it's really a hard transition unless you think about it a bit differently.

Paul Benson: Yeah, absolutely. Yeah. And, and yeah, look, I think you did right. I mean, it's the objective surely is to find work that you find interesting and engaging and that you enjoy rather than to me than, than retiring early. Just seems a bit of a wasted opportunity, a wasted life.

Veronica Morgan: That's one of the issues, isn't it? That if you're chasing money and work's going to get you there, then you may be chasing a job or a profession that you don't really like, it's not your passion. And so therefore it becomes a real chore. And then that then leads into this idea of, I want to get out of that. I want to retire when freedom, as opposed to maybe the freedom is, well, I could actually work in something that doesn't pay me as much if I've actually utilized the bigger learning or the capacity I've had early on in my life to actually create that freedom for myself. So their work takes a different meaning, right? What happens is the easiest, quite a bit of a trap. This deer about retiring early. It can be, can loop people into an absolute trap and I've seen it in the property industry time and time again, it's the idea of income replacement and it's probably as income replacement.

Veronica Morgan: And it's like, and that just forces people really into a situation where often they're buying really shit assets or they're renovating to, you know, supposedly given us those a job, but they don't really know what they're doing. They overcapitalized, or they're under capitalize or, you know, they're just living out this silly, silly dream. And then that becomes a chore in itself. But, you know, so do you find that people in like say in your client base, do you find that they then can rethink what they do? I mean, do you have any, any stories to tell us about people that have sort of coming doing one thing and then had the ability and the freedom to do something quite different?

Paul Benson: A lot of the work we seem to end up working on areas that we send to work working with clients is often around financial modeling. So they might have an idea around what I'd like to do. For instance, had a really good one where some clients, they were starting a family and the, the husband he had played professional tennis for a little while. Like he never got really high up, but nevertheless had that experience. And so it could be a tennis coach, but it doesn't earn a lot of money. Right. So therefore, you know, he'd gone to uni, become an engineer, I've done all that sort of stuff, but now they were looking at all right, well, we're going to start a family. And what he would like to do whilst this point, I only had one child, but the intention was to have another, whilst the kids were sort of primary school age to do tennis coaching, right.

Paul Benson: Because that would give me more time to be able to help out with the kids and, and be involved. And, and it was just less stressful and it looked like that would work nicely for that for the family, but it meant considerably less income than he was on in his current roles. So a lot of the work that we were doing was all right, how can we make that work? And, and a key element of that was, well, all right. It might mean that you need to work a little bit later into life. Are you comfortable with that? And they were, and we just had to quantify that and just show them all. Here's the impact of having lesser income in your, in your mid thirties to mid forties, is that, you know, maybe retirement at 60 is not so viable, but if you're happy to work on until 70 you're in end up in a very strong position and they were, they were totally on board with that and great let's move forward, you know? So, so that's really good sort of stuff that I enjoy working with people on.

Chris Bates: Yeah. It's interesting that one where you know, they want to step away from a career and pivot into something else like leaping into a different profession. It's hard because you know, a lot of people go in there with the, you know, the Rose colored glasses. I'm going to start a business in three or four years time, I'm going to replace my income or et cetera. And then it doesn't work, you know, and then I want to get back into what they do before. And you've got a gap for three or four years and you may be in different industries, you're seeing as you're out of touch, but I think it's how you deal with that sort of fear of stepping away from something that you've worked on.

Paul Benson: It's interesting that though Chris, cause I actually reckon the risk of having a crack at self employment is less than people think like as an employer, I've employed people who have been self employed and I reckon it's great to employ people who have had that experience because yeah, I don't feel as entitled. I know it's hard being self employed and that there's not just this open checkbook and we can just spend money. So I actually find people that have been self employed and then become an employer to be the best employees See Having a crack at self-employment is it feels really daunting. And obviously there's an issue there about financial runway and some of those kind of considerations, but sometimes I think it's made out to be more risky than it really is.

Veronica Morgan: Well then what you're saying though, there is that the crack itself employment is really good for their future employer after they failed.

Paul Benson: But I guess just from a risk point of view, the down side, if it doesn't work out, it's maybe not as disastrous as maybe people might think it's actually true. I mean,

Veronica Morgan: I I had a cafe and it didn't do very well and I had to bail out and had some debts and et cetera, et cetera. That's actually what led me to get into real estate was because I thought, right, well, I'm interested in real estate, I've got certain skills, sales skills and so on. And I, and I need to make some money cause I've got to pay some debts. I can't flip about sort of pursuing some femoral dream any longer. And I accidentally got into my passion. I didn't realize it was going to be a passion or gift until I got there. I went, Oh my God, I'm a born for this. But, and I, and I worked for that, that that really said I can see for six years until I had my daughter. And, and that whole time I was very, very conscious of what a good employee I was.

Veronica Morgan: Maybe they might argue actually that we're going to go and basically, you know, I'm still opinionated or I still, but it's still a challenging person to have around it in a good way I say. But, but the thing was that I recognized the challenges of small business and I also didn't think it was easy and therefore I was less likely to be going, you guys, it just eats, you know, you don't know what you're doing and then I do, you should, you know, like it's not fair that you're getting your cut and I'm only getting this cut. Like I didn't have any of that sort of dialogue in my own bright. I was really, really thankful for the support and this and the setup and everything. I really wish I had more employment over my time. My current staff are fantastic, but I really, really do wish that I had more people work for me over the years that have been like that.

Chris Bates: Yeah. Yep. Yeah. It's interesting that you say Veronica, that you started it, you found your gift or your calling straight away. I feel a lot of other people they don't ever want to me cause really true purpose comes from mastery, right? Like once you truly believe in your own ability and that You are helping on a deeper level rather than just doing a job, but that doesn't happen over night. You've got to actually do the hard yards over many years. And that's where I feel like a lot of people, they get to that point and they're like, Oh, you know, and they don't really push themselves. So that sort of next level, and they go and look for another solution and then they have four or five career changes and never actually make it to that sort of next level. But it's a, it's a suicide. Some people you find on day one, but you've actually sometimes got to keep on pushing through. I wonder sometimes, sorry,

Veronica Morgan: You know, I have had six curries. Was it starting to get there really? When I think nothing was wasted in terms of getting me to that direct, that, that everything was sort of handled. Yeah. And, and millennials, I cited millennials now and every time six Curry's is exactly, but yeah, this is chopping and changing cause you're in the wrong one or you pull out too early versus actually that persistence towards mastery. So I wouldn't, I'm not going to claim that I had any great design in my personal career, but there's, it's two sides of the same coin really. Isn't it a bit of a challenge. So sorry I cut you off there pool.

Paul Benson: I was just going to say, as someone who mentioned to Chris earlier, my son's in year 12. And so he's just about to finish high school. And so obviously there's a fair bit of right, what are we going to do next year and study and these sorts of things. And so you reflect on your own experience. I think there's a lot of, you don't know what you don't know. I mean, when I was in high school, like I love financial planning, but when I was in high school, I had no idea that that even existed and probably it didn't exist to a great extent at that point either. So, so that evolution and six different crews, Veronica, that's awesome. But, and as you say, you learned as you went along, maybe some of it is just, we just need that experience. You just need to get in there, roll the sleeves up and learn and then find, Oh, this is what I enjoy.

Paul Benson: I don't enjoy that so much. I mean, I, I did a degree and then got into a role that I would have thought was perfect. It was essentially an analyst type role looking at spreadsheets all day. And I did it for six months and realized, hang on, this is not for me. You know, theoretically my ideal job, that was what I'd studied for. And that was what I wanted to get into. But until you do it, yeah,

Chris Bates: I think sometimes it's the environment, right? Or the company you work for, the culture your personal, you know, lifestyle needs you know potentially at higher or smaller at different points of your life. Right. And you know, and you just can be spinning too many plates. And, you know, I've seen a lot, some clients that just swapping companies or they're taking that day off a week, but you know, a few months or going on a break this, a red that they would just get burnt out, right as well. So, you know, employment and that your, to how you view that longterm does lead a lot into property investment, whether you want to buy your home or whether you want to buy an investment. Cause you got to have that confidence there to take on a mortgage to, ah, you know, to buy that investment property, to put more money into surfer cetera. So It is a really important discussion to sort of help people get direction because that kind of income will then lead to saving savings, lays into what you can invest. You've got to get that first ingredient, right?

Paul Benson: The other element there I'd suggest to just sort of tying those two together is for someone who wants to pursue self-employment, if they've say bought even just their home, then it might be that the equity in their home is the way that it facilitates either the runway or they're buying another business. Or they've got capital expenditure to set that up. So having gotten into the property market and building yourself up, some equity gives you that fire power that you need gives you that financial backing to be able to do other things. And so yeah, getting into the market I think is really important there to, to give you that choice, if that's something that you're ever going to be interested in.

Veronica Morgan: It's another double-edged story though, isn't it? Because you think about, I know that a lot of employers say, Oh, I want my, I want my employees to have kids and have a mortgage because then they have to work. You know, it can be a trap, you know, the, the, what you are able to achieve because you're on a good income can then actually lock you in to that income, to that, that job. So it's, it's, I think that, I certainly think that an openness to you know, to learning and compounding your learning, you know, the, the beauty of compounding the magic of compounding and what it can do when you buy a good asset over time and obviously compounding your learning and applying that in different different environments can help. But you know, I guess all of this has risks though, isn't it?

Veronica Morgan: I mean, you know, so you're modeling out what people can, you know, what their life might look like and when they succeed 70 based on the decisions that they can say, you know, make today. And of course in that there's a whole bunch of assumptions, right? You've got to actually plug in figures in order for this to work. And I always, you know, some of these modeling, particularly around property and I, and I have always felt sad to go, Oh, I love it. That's 7% annual glory. And they come from, Oh, it's, you know, and some planners I'll justify plug in these numbers in, and I'm like, there's no guarantee of that. And your name is spoken about the quality of the asset in the first place. I mean, you know, good asset might do that, but a shit asset sure. As hell won't. Do you know what I mean? It's so how do you, it's all well, and good to model this stuff is still being honest, right?

Paul Benson: Well, absolutely. I mean, I guess your starting point is you try and be conservative with your assumptions, but the other way is that typically we model multiple scenarios. So we'll model, right? Here's the scenario. If your assets grew at 3% here, is that at 5% here is at, at 7%. So you generally have multiple scenarios. We'll try and be concise.

Veronica Morgan: Don't grow, go back with,

Paul Benson: Well, I guess typically you're modeling 10, 20 years. So there would be an expectation the longer term that your acid on a grow and particularly, you know, often for the stuff we're doing, it's not exclusively property. So there'll be poor, you know, share portfolio superannuation, that sort of stuff, which tended to be more diversified and therefore is a bit more predictable outcome. But I guess as a starting point, but the conservative, right?

Chris Bates: Yeah. You're right. Modeling is the funny thing. I I'm saying a planet for a long time. It's how you build any plan. Right? You figure out that, gosh, you figure out what the cashflow, you look at their assets, you put it into different buckets, different strategies, and then it spits out what's potentially the optimal sort of option for them. But Veronica is bang on, you know, a lot. There's so many assumptions there around interest rates around broach rates, inflation you know, what you need to live when you're going to retire and et cetera. So I think a lot of that conversation comes back to simplifying it and SEO, what are the trade offs? Like the two options I can pay my mortgage off faster, or I can put more money into super, or I can put more money into super or buy an investment property, et cetera. And then you start to get some real tangible sort of what's potentially the best next move for someone. What are some of the trade offs you find that your clients really struggle with or, you know, get the best benefits from?

Paul Benson: I mean, I guess at the foundation it's lost all expenditure versus paying down debt typically. Or sometimes the lifestyle expenditure creates the debt credit cards or lines for cars, and then they sort of things. So that's, that's probably the most obvious trade off, but then you do get should I be investing or should I focus on paying off the mortgage sometimes depending on someone's age, should I be investing or salary sacrifice into super, for instance, you might get some times probably pay down the mortgage or invest is the one that I suggest beyond just basic cash flow, spending too much and recommend any card. But if you pass that point, yeah, pay off the mortgage or investors the most common one, and that my feeling I'd be interested to get your guys' thoughts. But my feeling is the thinking on that's kind of changed. I mean, in days gone by, I would have said pay off the mortgage because you've got a guaranteed outcome there, you know, you've saved your six or 7%. Whereas if we invest, we don't know what you're going to get. But at the moment with interest rates at two and a half percent or something, that's becomes a much tougher argument to make, you know, two and a half.

Veronica Morgan: Absolutely. It's a, it's much more challenging and does encourage people to make, take more risk, right?

Chris Bates: And it was a way of right to going through this forward guidance as well. So, you know, if you thought that rights are two and opposite now, but they've going to be four and a half percent in three years, you would be much more conservative in your thinking, right? So, but if you go, Oh, it's two and a half percent and I can lock that in for five years or two and a half percent, which you can that it's kind of where rates are going is what drives a lot of behavior. So I mean, what that is encouraging, I believe, right. The home upgrade to go on, well, you know, we can actually afford it. We can get a you know, a higher high mortgage center going to be two and a half percent. So are you saying much people wanting to do home upgrades and how do you deal with that sort of dilemma?

Paul Benson: Look, I haven't seen much of that yet. And in part I'm in Melbourne and we're still in lockdown, so that probably contributes to that. So yeah, as I say, I haven't seen any examples of that yet, but I guess just broadly, I mean, interest rates are particularly low now, but really they've been low for probably the last couple of years. It's extreme right at this moment, but they've been low nevertheless. And so, yeah, I think there is a bit more appetite for investment. They let property or shares and it's not, I guess, particularly thinking about the property market. It's not hard to see if you do the numbers and think about the rental yield to see transactions where you can buy a property and where the rental income is enough to cover the cost of holding the property. And

Veronica Morgan: A lot in good areas. It's like it's. Yeah. Yeah. I mean, it's great to see, you know, yes. In an, in if covert admin here, for instance, it might be that that would be an argument that might work, but now that COVID and a rental yields of taking them, you know, I guess, and we're hearing lots of different sort of stories. And a lot of it comes from property managers who are talking about individual properties that were listed X and then subsequently leased at Y and also the fact that tenants can actually start shopping around now and saying, well, actually I can, I can do the same rent. I can get more or, or I can renegotiate this one and actually pay less. And I've certainly had that happen on one of my properties. So you sort of, as a land landlord, you've got to sort of weigh it out. Well, what's going to cost me to lose that tenant. And what's the likelihood of me getting that rent again. So like, yeah, don't do the deal

Paul Benson: Balance because Krista said, the outlook on interest rates is pretty stable and low, which is nice, but the outlook on rental yield, you're saying Veronica is trending down.

Veronica Morgan: So, and look at the conversation I have with my clients around that is that you've got to have the cashflow to support a good asset. You cannot be buying for yield because it's shit, you know, down the track, maybe you want to live off it, but there's going to be a massive asset tied up to give you that yield. But the yield is more than just rental yield with property it's. And this is that you don't often get that, that one index, which is the capital growth and the yield combined. Is there such a thing?

Paul Benson: I don't know. I haven't seen it.

Veronica Morgan: It needs to be discussed why I call it a return on investment. And in fact, in your book, you've got a property, you've got a chapter on property and you alluded to this actually about the, really the return on investment is how much cash you're putting into it versus how much you're borrowing and what return you're getting on that. And then you, you, you allude to that in terms of capital growth. And I think about it in terms of actual cashflow. So you think every year I'm going to tip in X amount of money to support holding this asset. And then I have to look at what the growth is and the actual income that I've, that I've that I've got from that plus the actual growth. And obviously that's a very difficult thing to measure with property. And then you think, okay, what's the return on that money that I've ticked into that investment in that year.

Veronica Morgan: And that's something that I think people are not looking at their properties and assessing them that way. And instead what they say, and you alluded to this also in your chapter is that they say I've made really good money in property, and it's not because I bought it for a million and I sold it for 1.0, I made half a million dollars and you go, well, actually, I have you taken that all your costs and B, did you ever compare what else you could have done with that money or that same period of time, whether it was actually a good return or she had returned. And this is the benchmarking is doesn't happen. We'd probably, it's a challenge, you know, because it, it needs a level of financial agility and mental agility to actually get there. And whilst I've got the smarts and think about this stuff, I don't have the models for it, you know, combined right. One,

Paul Benson: I think the benchmarking too, I don't think it's, it's not alone in property either. I mean, if you're doing a share portfolio and you say, okay, what we should do is sell this and buy this really is someone going to go back three years later and say, well, what if I didn't do that? And what if I had held that one? Cause then, you know, Oh, well I made the wrong call or no one wants to feel that they've made the wrong call. You know? So yeah, you're right. It's, it's, it's a challenge for sure.

Veronica Morgan: The risks we properly are much greater,

Chris Bates: True cause of the transaction size. Yeah. The borrowing as well. That's a part of being a good advisor that Paul is that you encourage people to think about opportunity costs and to rewind on their decisions. It's never to say judgment to say, you should have done this and you could have had this much money, et cetera. But sometimes people have got overconfidence bias and you're right. They don't want to go back in time because they would, that makes it a pain. It's painful, it's loss of version. It's like, it's actually not a great feeling, but if you can do it in a good way then they can kind of go actually, you know what, maybe I shouldn't have bought that sort of $300,000 property Southeast Queensland has done nothing for 15 years old. You know, what if I did a buy that I could have bought an apartment in Sydney that, you know, it's on this, you know what I mean?

Chris Bates: Like this it's painful that to say, but that sounds sometimes the best way people learn. I think it's, you, you go back and you actually say, well, this is the different road you would have gone on now going forward. Let's not make those same mistakes again. And let's look at some better options. I think it's a role of a good advisor to talk through those know those past experiences, I guess.

Paul Benson: Very true. I guess maybe the other side to that coin is the alternative is people, could you get your paralysis? Right? It's like, well, I could do this or I could do that or I could do that. And Oh my God, it's too overwhelming. I'll do nothing. And you know, so yeah, that'd be a balance Strava, those clients as well. You know, Veronica was talking about spreadsheets there, of course.

Chris Bates: And I, as soon as that said that I have very, you know, the client's been with me a long time and the CFO he shovels of analysis for us is more than anyone I ever know. And he always wants to throw it back to the spreadsheet. And like you, I was explaining to him for many years, even though he's a CFO, like he understands this stuff, he can't grasp what you were talking about. Veronica is and size of what you're actually investing into properties, your negative cashflow per year. And, and your borrowing capacity. Cause that's another option. But yeah. And so if your negative cash flow say a thousand dollars a month, so $12,000 a year you've got to say, I'm going to afford that negative cashflow for maybe five to 10 years before it gets anywhere near the rents rises, as I'm got anywhere near cover all your costs and that's just being conservative.

Chris Bates: So you're really saying to yourself, I'm going to invest a thousand dollars a month for 10 years. And and then what that 120 grand is going to get me is the growth on that property, which you know, if you buy 120 grads, you might get a million dollar property, let's say a thousand bucks a month, negative cashflow. So investing 120 to get, to grow fund a million property, a property over 10 years. The thing that people sometimes forget is that in 10 years time, the rent's gone up enough to now cover up all your costs. So you're not having to put in a thousand bucks a month anymore. You might be making up a hundred dollars a month now, but nothing, nothing. That's a lot of money. And then you've got this property growing for another 10 years and then another 10 years. And that's where all the rewards come. I think people want a best for five years and go, Oh, well, what am I going to make in five years time? Well, probably not much. But again, I might be 30. Well, you know, probably a lot more. So I think that's the big dilemma.

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Veronica Morgan: When you're talking to people about buying property, what are some of the things that you're discussing with them? Because I guess, and I'm counting this question because I know you've written a chapter on property in your pool because you've got basically three ways in which people can achieve financial autonomy, right? And property is obviously one of them, a lot of property planners and property advisors tend to avoid talking about property. And I'd like to know I, why do you Think that is the case and what conversations you have with your clients?

Paul Benson: Well, why that is the case and Chris, hopefully we'll be able to verify this as well, but it's because of the background of financial planning, which is that most financial planners in days gone by were employees of product manufacturers, whether they are the banks, the INPS, that sort of stuff. And so your role, your reason for existence was to sell your employer's products, not really to give advice and no one makes any money recommending a client buy a property. If you're employed by amp or a bank or something like that. I know that's not the nicest thing to hear, but that's the reality, right? So that's, that's the background to where the financial planning profession. I mean, it is a profession now, but it hasn't always been and that's where it came from. And so that's the historic legacy of why lenders traditionally, haven't thought a lot about property now.

Paul Benson: That's changing in recent years, thankfully. And more people yeah, more planners. I would hope it's a fee for service arrangement and, and there's, you know, commissions are gone and those sort of things. So things have improved enormously. And, and I think there's just been a little bit of lag in terms of, I guess, upskilling of planners to be able to talk about property to, to your question, Veronica for me. So I certainly don't get into, Hey, I think you should buy this property in car. Like I don't get down to that granular level. Cause I don't have that expertise. My focus is around cashflow primarily, right? Here's if you borrow this, here's the expected cash flow, how's that going to play out? Can you afford it? What if you lost your job? What are we going to, how are we going to manage that? Right. So cash flows for me. I, I guess from a broader educational piece and, and, and you know, how it's going to improve the client's position, longterm thinking about the impact of gearing. Cause that's really the great beauty of property investment is its ability to leverage and the impact that leverage has on your longterm position. So, so that's an education piece in making sure that clients understand this is why it might be relevant. But first and foremost, for us, it's really financially. Can you, can you make this stack up?

Chris Bates: Yeah, it's interesting. It gets you you're bang on about the history of finding show. She got 20 years and all built, it's all ending, which is good. You know, all the banks have sold off their, their provisors that I am pay advisors are all rushing for the door. You know, there's been other transactions in the last couple of weeks that are sort of simplifying the industry and taking out the product provider, giving the advice, which is definitely a good, I think you're right. That it is splintering a lot of advisors because a lot of advisors do want to run businesses and make money and they get to the property conversation. Then they're like, well, maybe I can make money recommending property. And so when they, cause we get phone calls, like we didn't really ever get phone calls from buyer's agents saying, yeah, can you refer us business?

Chris Bates: Cause they're kind of busy trying to hunt out and try to find scares property and you know, calling financial vases, isn't a good use of their time, but developers and off the plan and all these types of people have marketing teams that just sit there and hammer, hammer brokers and hammer financial advisors. And you know, the fire survivor gets a phone call. They don't really know much about property because they haven't been trained in it. And next thing you know, they've got a partnership with a developer and they're going well, actually, wow, I can make $50,000 off this, referring this client down this route and look at that negative cashflow. Then look at that. It's it's, it's, you know, it's positively geared cause of depreciation. And and one of the things I'm doing is actually trying to get in there now is to get into the advisors and to try to stop and going down that route.

Chris Bates: And to say, actually you can be amazing at property. You just need to get to that. Cashflow is so important, which I think it's really good that you focus on that, especially if you're buying a home upgrading or investing, but then it's just, the next decision is actually making them get a good asset, making sure they know what they're doing there. Which is, it's a journey for advisors cause they don't actually know what they don't know, I guess. Yeah. And part of that is just like the medical model, right?

Paul Benson: The GP doesn't go into your x-rays or, you know, give you advice on, on a cancerous growth, right medical that they refer out to the specialists and it's to some extent it's about financial planners getting comfortable with, alright, I can do this and this and this, but what I need is a buyer's agent for this piece of the puzzle and mortgage brokers, I guess financial planners to worked with for a long time. It's so part of it is getting used to the buyer's agents role.

Veronica Morgan: He's a Christian. Okay. So with the medical analogy, if a doctor refers to a radiographer for argument's sake for an X Ray, does that doctor get a kickback from the radiographer? Does the writing for dr. And go here, I'm going to give you five bucks every x-ray because let me tell ya. And this is something that is becoming a real bugbear of mine and easing the buyer's agent space at the moment, there is so much more of this. How can we make more money as the question that's being asked, as opposed to, how can we better say that clients? And I'm about to get on a big bandwagon about this because it is becoming rife in my industry. And you know, when I first started, I used to get referred a lot of business by sales agents who genuinely wanted to help certain buyers or clients actually get looked after.

Veronica Morgan: And I, that source of referral for me is all but dried up. It's absolute trickle. And my, most of my referrals is actually through clients. You know, I have a huge clients, but do not get referred business from sales agents anymore. And it's because they're all in bed with it all in bed with all the bars, agents and saws agents and go and they will sell, they basically go right. Well, I'll get 20% of that. Thanks. So I'm not going to refer to someone I know is good and we'll look after the client, I'm going to record. If someone's going to give me 20% and with disclosure, there's a bit of a loophole and disclosure in our industry to say that you don't have to declare it because if I'm a sales agent and I'm dealing with you as a thought, I don't have an agency group with you. So therefore I don't have to sign a section 47 disclosure to say that I've recommended someone to you that I get money from for recommending, because I don't have an agreement with you. So

Paul Benson: A financial plan is, cause I would've thought for a financial planner to get any sort of kickback.

Veronica Morgan: No, I don't know about financial planners. In terms of not declaring. I do know, as I said, there's a loophole with sales agents not having to disclose. Right.

Paul Benson: I'll just think that would be illegal financial planners can't receive on the commission. It's interesting. Won't pull aside.

Veronica Morgan: I feel like just jumping very quickly. It is, I don't know about financial planners, but it is happening with mortgage brokers. Interesting. Yeah, absolutely.

Chris Bates: So a way around the system, it's pretty scary. So you can basically get yourself your own real estate license and the re you refer to your real estate license. Then it's very easy to get a real estate lawyer, like a mortgage broker license. It's a weekend course and 500 bucks. And then all of a sudden your company,

Veronica Morgan: It's just changing and God, but yes, up until March this year, it's been an open door for that. And and, and that, but that comes back to that. Doesn't how do we make more money? Is the question that's been asked? Not how can we better say that clients it's modifying the, hopefully that door shut,

Chris Bates: What's it probably it's a good sign for you as a business. Frontica that you're not getting referrals from agents because it's quite a conflicted relationship. Anyway, to be honest, it's a sign to show that the agents won't be able to sell their stuff to their clients. You know, if they've got, you know, and you're going to go with that said, let's look at this brief, let's forget about that connection to that agent, but let's go to the whole market and let's not just buy the stuff that that agent refers to me is that's what easily you could, you know, an agent would want to have a buyer's agent, this trigger happy. That's happy to overpay an Ida. The things that I add a 10 properties, good enough, rather than, you know, not that we're not going to compromise on that road. We're not going to compromise on that building, you know, et cetera. Or you have to say, know you're not a great partner for a real estate agent

Veronica Morgan: Charter sort of encouraged us to push it and property to our clients. And like, no I won't bond. You're wasting your breath on me, but you know, I'm LinkedIn, you see this and, and we'll get back to financial planning side of this in a minute, but you see it in LinkedIn a lot. You see the sales agent about Recode Price and Lara. And I go down, I go, I can sell this and get so much money for my glide. You see the buyer's agent commenting on LinkedIn about the exact same deal, talking about how they got this bargain for their client. I'm sorry, those two things don't equal the same. They don't go together.

Chris Bates: No, it definitely does get a different tech. I thought it was quite interesting when I was reading about you and I've, I've seen him, I've gone into this space. I haven't fully committed when I was an advisor. Just because it was in its infancy and was still sort of growing, but I know you've done a lot of work in sort of responsible investing, sustainable investing, ethical investing in it. We haven't really done that at 150 episodes on the podcast. I'm, can't remember another episode where we've really had a good chat about it. What's your thoughts on all of that space and how it's growing and why? I guess they will, may want to consider it.

Paul Benson: It's really interesting. I mean, first what got me interested, a friend of mine and a financial planning practice, Stan in Tazzy and called Taz ethical and peace sort of switched me on to, Hey, this isn't hippie stuff. If you look at the numbers, actually the returns are better on the ethical investments because I must admit I was a bit sort of blinded to it. You know, this is rainy rubbish, but actually he, he provided the numbers and the more I looked into it, the more I recognized that actually investment wise, it makes a lot of sense. And there's some really good logic. I mean, things like, for instance, a lot of ethical investments, they won't have tobacco companies, right? Why would you want to invest in a business where you've got governments around the world, actively marketing against you, irrespective of the harm that you do, and the fact that your customers are dying just business was doesn't make a lot of sense.

Paul Benson: Wouldn't you rather be with a business, say like CSL, where governments are actually buying your product and sponsoring you and trying to help you succeed. Right? So generally the applying sort of ethical, responsible type filters to investments there's just some good underlying business logic as to why they're probably the companies that you go into want to be interested in anyway. So, so for me, first and foremost, it was just seeing the data and just saying, look, this makes sense. And then trying to understand, well, why does it make sense? And then I guess we've just embedded that into our process of when we engage with new clients, we have a risk profile type scenario that, that every financial planner would do. And then we have an extra step which is around ethical considerations. And, and look, the majority of people are like, if it's legal, I'm fine.

Paul Benson: And that's, you know, that's totally fine. Right. But it's good to have asked people, appreciate being asked. And there are increasingly we find people who say, well, actually, yeah, I do have a few concerns. You know, I really, I don't want gambling exposure for instance, is a hot topic at the moment. You know, a lot of people don't want anything to do with gamble, so, okay. That's good to know. Thank you. You know, depending on what we're working on here, we can try and make sure that we don't have any exposure to gambling. So yeah, it's, it's an interesting, and as I say, it, it's not, you're not compromising, you know, there's an expectation that it's a bit like organic fruit and vegetables, right? You've got to pay twice as much for it. And you know, maybe it looks a bit crappy, but actually responsible investment. Sometimes they cost a little more, but their performance is there. You're not compromising,

Veronica Morgan: It's funny. The first time I sort of encountered that was listening to one of the Motley crew at the Motley fool podcasts. And then I started doing some research into a couple of years ago as well. And I've actually since invested in one fund and watching it's, it's a performance posts that COVID lockdowns interesting. Actually it really has performed since because before then it was sort of, it was just sort of just doing its thing. And I wasn't, I'm not too worried. I made it a longterm decision. And so I just was just checking in our every now and then, and it was just meandering. And, but the difference is really market now, but I'm interested in the sort of philosophical side of things is who determines what's ethical. And I, I, you know, I think that I'm very good at choosing what's ethical and I agree, I wouldn't want gambling in my portfolio. I certainly wouldn't want and I don't really want a lot of big pharma in my portfolio either. And I certainly don't want to Boko. And there's, there's, you know, then you want, you want businesses where they're actually got the diversity in their boards and there's all bunch of things, but the criteria to make it ethical or not.

Paul Benson: Yeah. And that's where, I guess as part of our questionnaire, we have a range of different issues and whether it's of high concern, some concern or no concern, and depending on where people lie there, either you could go, so we're getting a little bit off property here, but it would typically be related to share portfolios. So if they had a really high concern about a particular issue, then it might be that we need to construct the portfolio with individual stocks or maybe some, some ETF different sectors so that we can specifically exclude. But if their concern is a more, just broad you know, global warming, greenhouse gas, for instance, then you could typically go with fund manager and, you know, there are certain ones around that have good screening on that sort of stuff. And so, and then go with that fund manager. So it just depends on what the particular client's concerns are, but it's totally legitimate Veronica. And that was to be honest, one of my original concerns is, you know, well ethical, but whose ethics and, and how does that work? And, and it is tricky. Like I don't know if it's still the case, but for a long time, Woolworth was the biggest diner of pokey machines in the country. And people can, we, can we hold Woolworths because predominantly they're a supermarket chain, but they've got all this gambling exposure, you know? So yeah,

Veronica Morgan: If you ever watch the war on waste, you wouldn't want to, he shakes him. How many recently watching that again

Chris Bates: Is how do you build that portfolio? And in the past, there was a limited number options For the advisor to, to build a portfolio that was not just getting out tobacco, getting out gambling, getting out call sort of resource companies, et cetera, but that's all negative screening. So we've got a hundred companies we'll take out 50 of them because we died the, in terms of their app, but then you can go and things like you said, everyone, a Hindu positive screen. So you could say, well, I actually want to weight more to companies that are investing in green technology that have great diversity on boards, et cetera, have great are a B corporation, for example, inside, you know, you can go granular. It's just the difficulty there as an advisor. I'm sure Paul was to maintain constantly check that portfolio. There are companies that can allow you to do that. But yeah, I think just now there is getting more options around the sustainable ethical investing for the people.

Chris Bates: And I think, you know, fund managers are moving in that way. You can only say the biggest fund managers in the world are saying, look, we know that we have a huge impact on the way, the way the world goes, because we control trillions of dollars. And so you started to say places like BlackRock, you and I say that no longer are we going to have this in our index portfolios? And yeah, it's, it's, it's a very interesting spice and for our listeners that haven't really thought about it. I do encourage you just, just to stop checking it out. And places like Australian ethical is one company that you can learn a lot from got a good website

Veronica Morgan: In your just sort of segue back to property a little bit in your queue. You mentioned basically you make an interesting distinction between having a lump of cash, in which case you'd invest in shares versus a monthly surplus in which case you'd invest in property. So I'm a bit, I'm curious as to why you wouldn't invest a lump of cash in property.

Paul Benson: Well, to my property, it's a great advantage is this leverage. So if you've got some surplus cash flow and ability to service debt and property really that's where it, to me, it suits really nicely. If I've got a lump of cashier, look, personally, I would go a share portfolio. I guess I liked the diversification, the fact that it can be international and, and Australian you know, it's, it's not single tenant issues, some of those type of things, and frankly, on not in the least bit handy or in any way, fancy any degree of sort of property maintenance or getting, you know, I mean, I'll have a couple of investment properties, but, but I, yeah, I probably do have a slight comfort towards shares. So if I had a lump of cash, I would go that way. It's just effortless and it's working. But if I had didn't have a lump of cash, but I had that surplus cashflow, then that would lend me towards the right. Let's do some gearing and let's find a property that's going to work great.

Veronica Morgan: I got a number of clients at the moment. It's sort of come out of the woodwork that actually have quite a lot of cash. And they're, they're choosing to invest in property and I'm not necessarily saying that's right or wrong. And obviously I'm not privy. They've had this led to that decision. But, but it is an interesting time because I've never seen that many people come out of the wood work to me saying, I wa I don't want to leverage. It's like, I'm thinking really we could buy tin. He, instead of buying, you know, you can buy here's an interesting element

Paul Benson: If the current low interest rate environment, isn't it. I mean, if they leave it in cash, they penalize, they're earning less than the rate of inflation. I got to do something with the cash, whether it's property or shares, there's this push to not have it sitting in the bank.

Veronica Morgan: And I guess how much you have it's whether they want to put it, say, you know, they've got a million dollars in cash to go buy a property, as opposed to a million dollars in cash, putting a million dollars in cash into the share market in one here. And I, and obviously it'd be, you know, you'd want to stagger it. You want to do it. You want to get advice. And certainly wouldn't be that simple, but whereas in probably working in one here, cause you buy one asset, a million for argument's sake. But but yeah, it's quite funny. I find that quite fascinating just in terms of those options and the feeling that different people would get around those choices.

Chris Bates: It's a really interesting conversation cause yeah, who's going to have a lot of cash, right. So you know, if it's someone in their twenties, thirties, well, that would probably help you with a house deposit really. You know, and yeah, unless if I don't know, well, all family money is a different story, right? But he talking just a traditional someone in their twenties, maybe they got an inheritance of a couple hundred grand or something. You go this how to beat bonus or something. So a lot of, that's not going to be a lot of cash. It's just going to help them. By the first time, the thirties, forties, if they've got a lot of cash, I mean, if they made it probably paid off their mortgage and maybe sold a business or you know, or solid investments or something. And so th but generally they're, they're still a minority, the generally people who with a lot of cash so that when you get to your fifties and sixties and that's off the demographic, they were tiring.

Chris Bates: The wealth is accumulating. And that's what you've got to really start to think he's property the right move, because they're getting to a point where it actually snouts no more assets going into the bucket. We're now draw down. It's about phase and properties just as such a lumpy asset. So you gotta buy a million dollar property and you go, look, I want 50 grand. Well, I can take Bonnie getting 30 grand a year rent. That's going to take me a long time to get my 50. So you've got to kind of, how do you sell a brick

Veronica Morgan: To me if they don't need the income, right. They're doing it for capital preservation.

Chris Bates: Yeah. So this is, this is the next level. So if you got to the point where you know, financially, there's never going to be, there's always going to be more than enough, right? And so you're going to be able to live a great life in retirement, you know, give money to the kids you know, not be worried about money. And then you're going to have this portfolio of, you know, let's say it's 10, 15 million. Then you might write Veronica. You might just say, well, this money, this property is going to pass on to the kids. I don't even need to sell it ever. I might just go down the property route, but most people are getting to that level. And so they've got that fear in retirement that how long are you going to live? Like, you know, you wouldn't have thought you would live to 80, say 20 years ago, but now you're probably thinking I might live to a hundred.

Chris Bates: So, you know, that's a hard thing to plan for aged care, you know, health, et cetera. So, you know, you generally, you want to be more conservative in what you think you're going to need in retirement, because you just don't know how long it is. What's going to happen. Investment returns could all of a sudden plummet and your money doesn't go anywhere near as long as you thought. So it's an interesting one. I agree with Paul that I probably lead to, if I've got some costs me 500 grand of cash, that's pure cash, and they haven't got a home debt and they can't borrow money. I'd probably go, let's just buy some shares, but what I do financial wise anymore. So that's, that's probably,

Veronica Morgan: Well on that note, Paul, if you've got a property,

Paul Benson: Yo look, this fits the category, but it actually, I had a discussion with a colleague earlier in the week and I thought this, as I say, I hope it doesn't offend anybody. And I hope it fits the category, but we were just tossing around. Chris touched on this earlier off the plan properties just sort of said to him, as I was thinking about it, sitting in front of clients for 20 years, right? And in all cases, you know, you talk about goals and then you go through a personal balance sheet. So therefore you get to see or visit the assets, inevitably, this property assets. I said to him, you know, I can't think of a single investor who was done will out of balling a property off the plane. Can you and the friend of mine who's, hasn't been in the history quite as long, but still they sort of, you know, roll the eyes, looked up at the ceiling for a bit.

Paul Benson: And he said, no, I can't think of anyone either. Like I can think of, I can think of someone who, you know, they bought something 10 years later, it was worth 20 grand more than what they paid for it. So they didn't lose. But really over 10 years it was a rubbish result. I didn't lose. And I must be off the plan. You know? I mean, it's not a great people size, but I've been around a while. And I couldn't think of anyone who, you know, at 10 years say, and they doubled their money or something really had a good result.

Veronica Morgan: We can put out a challenge, not that one, but Hey, can I actually come up with an example and substantiate it?

Chris Bates: Neither. Definitely. The off the plan is a timing thing, right? So you need to basically buy something before anyone wants it, right. You don't get a good deal from the developer. You need to be buying pre-boom. How do you get the M manuals? I got to buy the best one in the block. So how does the developer gives you that the one with the North facing or the top level you know, the bigger apartment that's finished well and, and that's all I known that's hard to get, and then you've got to hope for a boom. And then by the time that place finishes you know, there's potentially quite a lot of equity in it, but you know, it's not right place, right time, 99 times out of a hundred, you're not going to be able to perfectly get the right one and you're not going to buy a pre-boom cause you know, those things just don't always happen.

Chris Bates: They haven't maybe three or four years in 10 years. And so they might do a right, cause they might say, well, I didn't, I couldn't afford to buy a property, but I could afford to pay a deposit or buy an off the plan. And so you'd argue that, you know, that was probably one of their only options, but, and it's paid off for them. So I know a lot of people say that, ah, you know that, but yu're right. What you said, a really interesting point to stop being a financial planner. You get to talk people through their assets, their liabilities and their history and the amount of insights that you know, you've got, you've been doing it for 20 odd years. I was doing it for 13 years. That sounds still do it everyday. Now you've just seen so many people. And so, and you can see here, you know, you want to say, let's say a hundred a year, that's a 1500, that's 2000 people. And so and now you're totally out of anecdotal stuff and all the learnings and all the rating and all that sort of stuff. So through 2000 people you've seen it probably is a lot more than that. But you still can't even think of someone. So that's pretty telling isn't it for a little bit of listeners, hope it's helpful.

Veronica Morgan: Oh, it's helpful. All right. And you know, I spoke to a guy the other day, he rang me and he was said, look, I'm sick of making dumb, dumb decisions with, you know, with property. And I'm like, so what do you mean? He said, Oh, well, you know, I've lost. He sort of worked it out. I think I've lost a million dollars because I bought off the plan properties. And then so he's adding in opportunity cost. But he's actually had real losses as well. And, you know, it's because he, he was, you know, I think maybe about 10 years ago, he was in a good earnings position and had this ability to borrow all this money and got sold a dream about, you know, for a cup of coffee a day, you to come in and Vista and you know, bought a number and even with some quite reputable developers as well. So it wasn't like as all chunky stuff. This is, you know, it doesn't matter really who's building it. If it's an investment, it really needs to give you a return. And if after 10 years you can sit down and work out that you've really lost a million dollars in real terms and opportunity costs. That's pretty shocking.

Chris Bates: It's funny this week and made his a financial planner. So this is one of the reasons why we stopped doing advice. A lot of advisors would prefer as clients because they know they haven't got those property expertise. And so they would say, well, you know, who's, who can kind of give them great mortgage of us. And then it has access to lots of buyers, agents that they've worked with. And that's kind of how that donation is planning. Our first is to call and he says, look, he's a really close mate of mine. I'm really worried. He's going to buy this thing in Brisbane. Can you have a chat with him? And I was like, okay. Yeah, no worries. Yeah, he's already got a broker, so that's fine. I can, I can chat talking through. Anyway. He sends me the link of the property and it says off the plan in Brisbane, it's like a four bed townhouse. And you think it looks like going on holidays in in Bali or in the Mediterranean, it's got the, The chairs around

Chris Bates: Anyway, excuse me, a bit of a backstory. And it's a, another plan I had actually referred say, this client's gone to a broker. He lives in Singapore. So he's gone to the broker and Singapore, the Singapore's are 30 into a planning here. That's got a partnership with a developer. And I, so I called the guy up and I was of the shot sits up and I just let him say, what's happening. What are you up to? What are you thinking about? And he goes, I've looked at the property. I said, yeah, we'll go into that a bit later. Like what's made you make this decision. He's gone from potentially buying a house in the Northern beaches to, it is also hard. I keep missing out. He was on the right path. He's going to move back in five years. He was on the right path. He can afford it to met this sort of developer. And he's like, well, why don't you buy two? And Brisbane is going to go up 40% in next.

Veronica Morgan: Oh, isn't it? Yeah. Yeah. He's never, ever, ever again.

Chris Bates: And you just rattled it all off. Basically the sales pitch and we arm wound at all. And I said to him, look, just type this into Brisbane now, like you're trying to buy for a million dollars, try these suburbs. Right. look at these houses that you could be buying for the same purchase prices that apartment, like, what do you think an aspirational family would want? Like, do you think they'd want to live in this house or live in that townhouse for the same price? And it was just like slapped him in the face. Cause he was like, well actually, yeah. What, why wouldn't you want to live right near the river in this beautiful old Queenslander for a million dollars rather than these sort of new townhouse, you know, that's got a big, fancy pool that you wouldn't want to use because it's not private. Right. So 10 years from now, it's going to look tired and run down.

Veronica Morgan: Exactly. And let's get on really. If it's all tentative in corporation going, it has to be looked after. It's just not going to be like that. We're going to give you a couple of some nineties in the stands

Chris Bates: He does for these properties and videos. And you should say that every year they get better. Right. They're just like, man, Manny, he put the VR on and experience it and they just never look anything alike. So it's, it's a, it's a funny space. Oh,

Veronica Morgan: On that note. Thank you so much, Paul, for joining us today. We'll put the link in the show notes to your walk financial autonomy. And obviously anybody's interested in reading that. I mean the other, just so you can quickly say the three ways that people can gain financial autonomy, but it's quickly say it now

Paul Benson: Investing in stocks, investing in property or becoming self employed. Right. So if you want to know more about one, two or three of those ways, you probably should read the book. Thank you so much.

Veronica Morgan: Well, we talked about, I mean, obviously Paul's Dumbo was about to off the plan properties and I always think that's, cause I'm not sure he knew our thoughts on that, but I was talking to a client the other day and they're, they're looking at buying an apartment, which is about five years old in an area where there's quite a lot of new stuff being built side by side. Now this is not one huge complex where it's all the same developer. This is actually quite a big sort of infill land release where there's been a number of different developers. And so therefore there's a level of diversity, even though it's all new, there's still level of diversity because you're at different architects, different sort of build materials, different quality, different designs, right? And so the, you know, they were just telling me their story about how they'd been looking at these apartments and had they'd been, and I said, so how are you working at what you want to pay for it?

Veronica Morgan: And they said, well, we've been looking at the new stuff because we haven't been able to find existing stocks or five-year stock that compares, you know, so we've been going and looking at this stuff, that's finished and it's for sale, but it's brand new and this, this compares so much better. It's bigger, it's better finished. It's got a nicer outlook. It's got all these pros, you know, that these new stuff doesn't have. So I had to have a conversation with them around there. The comparison was sort of out because what they need to be doing is looking at how scarce is that, that actual pro apartment they're looking at versus everything that's existing, that's a similar age. And so they need to be looking at recent sales rather than what's currently on the market. So so we had a conversation around that, but I also thought it was really interesting because I said the reality is the most buyers that are buying brand new and not looking at the apartment that you're looking at because most buyers that are buying brand new, I heavily marketed to and heavily influenced by the first home buyer grants.

Veronica Morgan: And if they are an investor they're heavily influenced by the negative gearing. And so therefore there's no incentive for them whatsoever to buy the five-year-old apartment. And even though the five year old apartment might be better, bigger, better, finished, better outlook, but a terrorist, everything. You will, you should see that there are less buyers for that five year old apartment. Now, if it gets highly competitive, though, it speaks to actually a quality, potentially a quality asset in amongst all of that new development, if it really is scarce. And so that's the, that's the thing that I was encouraging them to look at, but I just thought that that joined that distinction between there's so much better value so much, you know, there's better stock opportunities potentially out there in properties that may be five years old. If you are only looking at brand new, if you are being, you know, I guess if you listen to this podcast, you're probably not anyway.

Veronica Morgan: But if you're looking at brand new, because you're thinking about negative gearing, well, because you thinking about getting those government incentives, and of course the new building incentive has actually just been increased or the time period the federal government has just increased it. So if that's what you're looking at you won't be looking at the existing stock. You have no idea that a bigger one with a better terrorist and a bit of you and better finishes isn't even available, even in a similar price point. You'll have no idea because you're looking at a silo. So that's just the tip. If you, if, if you've got this far in the episode, if you've got this far on the podcast, you haven't wound up buying brand new or I'm off the plan, then go and look at what else is existing, because you might be very surprised at the value.

Chris Bates: Yeah. And I'd probably say Cape Ben swap suburbs you know, I just think you're still fishing in the wrong pond. You may have got a, a better fish, but you still, ultimately that pond is going to get more fish in it. Basically, if you want to keep going, there'd be analogy if you're in an area with it. I know you said this is potentially an infill area, so it might have a cap on supply, but it's probably are they, there's no reason they can't expand that lymph, that, that area, you know, you can see

Veronica Morgan: If they're if it's an infill area, because it's basically a resigning of industrial sites, there is a, there is a finite border to that in these areas.

Chris Bates: Some areas like I I'm probably where my power was quite unwilling. Melvin, actually he was at box Hill hospital in Melbourne. And I was like, I am really spent much time in this part of the world before. And I had to go there quite a lot Houses on the instream and apartment blocks going up over the back fence. So these area was, and these are nice looking houses, but how the hell is that getting approved? And because there's a, that sort of high density areas spreading into areas where you didn't think it was possible. And you know, I think with this Sydney sort of growing, even, you wouldn't want to be too close to any of these sort of spots because it doesn't take much for them just to say, you know what? Housing affordability is a bit of an issue we need to create supply. We made more money off that anyway, who cares about those house owners? Let's just expand the borders of it. That can be good for those households because they could sell to a developer, but you don't want to be buying apartments. I also argue that covert and the building issues, consumers are probably going to demand a better product and they might not be there today.

Chris Bates: But in 10 years time, I do feel that builders are going to have to update game and a lot of new apartments again, to be better than the apartments built today. And so then you've gotta be, you know, if you're buying in that area, you know, you can't potentially just always leverage off the thing to say that my apartment's better than new stuff because of all of the new stuff may come out. That he's actually pretty good compared to yours in that area. It's so I'd just say avoid those areas, that building anything new. And if anything, new

Veronica Morgan: There's I actually collected some news articles some years back of exactly that sort of example you're talking about in box Hill and there was a house and it was in Cobra and it was an old man. He was probably in his eighties or nineties and he was, it was a picture of humanity's backyard under his Hill's voice. And, you know, one side of him was like an eight story apartment building in the back or the back face was an eight story apart building. And on the other side, he was because he refused to sell and he was basically, Oh yeah, this is my castle. And another one, a classic example was and, and I filed to account for the stress that that could cause, and even just living in the middle of building sites for so long. And so it's like this sort of, it's sad, cause it's sort of been bullied out of their home is 60 years or something. But at the same time, it's like really the, the alternative is worse for you. And then, then another one was a house in Lewisham as a semi detached. So it was semi and the other half of the semi had been demolished and a five story apartment building built there and I've driven past it. Five story, quite a skinny ugly looking, not very nice. Obviously it's got a half of a semi stuck on the side of it.

Chris Bates: I hope he's on the North side. Cause if he's on the South side bed up there that it's not going to be nice to live in, right. No sun for ever there's bunny. You get all those funny things on the internet where you get all these houses that didn't sell. There's an interesting one on George street at the moment wet. You know, you've got new when you're going up. These two 75, George is another nice new building and you've got the crazy John's building in the middle there. I just think it's a skinny building. It's ugly. It's like it's right around all this other development. Surely he would have had the door knocked on to sell it. And then you can say that the tried to sell it you know, this boom and they haven't been able to sell it from what I remember.

Veronica Morgan: Yeah, exactly. Cause then if you've got like a house on a 600 square meter block of land, you need much bigger than 600 square meters to build an appropriate to Buddha an apartment building. And that's what is surrounding then no, one's going to want to buy a house and live there. Maybe it'd become a doctor surgery or something. I mean, it's, you know, that's got very, very limited use.

Chris Bates: Yeah, yeah, yeah. You come from a potentially a, a good offer at you know, to take the money to a, an, a property that no one ever is potentially going to buy or no bank would want to lend on if they found out as well. So yeah, that's a, that's a good elephant rider bootcamp Dumbo rolled in