0:01

This is a momentum media production.

0:07

In this insights with ride

0:08

property group, exploring trends in

0:10

real estate, and helping property investors

0:13

gain financial security.

0:17

I

0:17

got a hair going. Phil Tarrink, co host, divesting

0:19

Insights with the Royal Property Group's joined by

0:22

Steve Waters and Dick Kumar, Director's

0:24

Royal Property Group, and we're just chatting offline. It's

0:27

just age me horribly. Oh, I reckon I'm looking

0:29

pretty good, but Steve Warders otherwise.

0:31

Vic I think just, I don't know, must get a

0:33

lot of manicures and care viewers

0:37

and a lot of spa treatments, but

0:39

ten years, we've known each or ten plus years, we've

0:41

known each other. At least two market

0:43

cycles, that's how we classify time

0:45

in the property game. How many

0:46

market swaddlers we're in on each other's Steve? Two,

0:49

three, be more be more than two, and I just

0:51

wanna go back to that initial point that you

0:53

made about, I'm looking pretty good, says you

0:56

wait, beg, to differ. Right. I think

0:58

listen I think to listen to would as well. In fact,

1:00

I've I've got photo view in your neon

1:03

highlighter blue

1:05

suit -- Yeah. -- which I was gonna put

1:07

up on our socials. if you

1:09

had a bit of a tangy and said, please, let's not

1:12

do that.

1:12

Let's let's not do that. The main

1:14

reason why, Steve, is I didn't wanna embarrass you

1:16

because I wear Lowe's, you wear

1:19

something a little bit inferior to that. So

1:21

I didn't want I didn't want anyone thinking that

1:24

you couldn't afford You're you're probably got shot

1:26

walking around. advised and people wear a boy's

1:28

property, and you dress like a peasant.

1:30

Man, I don't advise them where to shop.

1:32

And I'd probably suggest I'd probably suggest

1:34

you don't either with Well, you actually do. So

1:38

But You're much like you you you're

1:40

just like a good tailor. You are

1:42

you you look at you look at what people

1:44

are trying to present them sales to the

1:46

world and you dress them appropriately

1:48

with property. That's what you didn't make.

1:51

That's

1:51

why you wear hakhanuis. I did.

1:53

And

1:54

sluggies.

1:55

But

1:57

thank you, stylist.

1:59

It's been on time. So

2:02

how many market cycles we inherit each other?

2:04

giving

2:04

I'd say I'd say that'd be six.

2:07

No. No. That's six market cycles. Yeah.

2:09

Because that that that many different cycles as well,

2:11

Phil. Right? And and different states have cycles

2:13

and even within cycles of

2:16

inner state. There are suburban

2:18

cycles within that as well.

2:20

when you're talking about cycle, people

2:23

tend to think just, you

2:25

know, prices going up or prices going

2:27

down in terms of property. But

2:29

if you look at it on a very high level, you've

2:31

got the price cycle, you've

2:34

got the rent cycle, then

2:36

you've got the finance cycle,

2:38

And on that, we've also got the media

2:41

cycle as well. So there are a lot of cycles

2:43

that we need to look at, and

2:45

they all interweave into each other.

2:47

So it's not just looking at just the

2:49

one aspect of properly resting.

2:51

It's it's a complicated I

2:54

think in one of the podcasts, we

2:56

would discuss that properly investing

2:58

is like a bowl of spaghetti. Right? It's

3:00

it's all interwoven. And really,

3:02

you you gotta take one thread and go

3:04

down, but you gotta pass through all of these

3:06

other nodes along the way as well?

3:08

I think in relation to

3:10

what Phil's saying though, the

3:12

top line cycles.

3:14

if we have a look at that fill and

3:17

in relation to what you just mentioned being only

3:20

two. So whilst

3:22

we've known each other, there's been the GFC,

3:25

cycle

3:25

one. There's

3:26

been the finance environment

3:28

after that cycle two. There's

3:31

been APRA. cycle

3:33

three.

3:34

There's been the election

3:37

when the the Liberals won. That

3:39

was a huge

3:40

instance to propel able to

3:42

create another cycle. So that's four.

3:45

We had COVID five.

3:47

We have had now what we're experiencing now.

3:50

six.

3:50

So just on the generalized term

3:53

around cycles, there's been six, but as

3:55

we've said, there's been all those

3:57

other little I guess,

3:59

market movements

4:02

along the way. And I'd probably suggest there

4:04

was three or four in between each of those major

4:06

ones in different areas. Yeah. Yeah. And

4:08

and this is the point. This is big misnomer

4:11

in in property investment. I

4:13

said

4:14

one, two micro cycles because most people

4:16

think a a marker cycle is this

4:19

this this idea of our property

4:21

doubles in value every seven

4:23

to twelve years. Right? This is I don't know who made

4:25

that up, but So most people

4:27

think that is one market cycle. Seven to twelve

4:29

years is one market cycle. So going back to how

4:31

I would've known each other is that as

4:34

a mechanism for for motorcycles

4:36

rather than years, yeah, it's at least six,

4:38

probably seven, Steve, and and a whole

4:40

bunch of mini cycles in in and

4:42

wrapped up in between. So adding

4:45

your sense of this and and you talk about

4:47

markets being in

4:49

the market timing the market. And again,

4:51

one of these sort of catch all

4:53

phrases that most people

4:56

are aware of or or property people

4:58

may use. It's

5:00

not timing the market.

5:02

It's time in the market. Now there's

5:04

a to pull that apart, which I

5:06

really wanna do today because It's

5:08

a bit philosophical. So Dust Off,

5:10

Steve, you you tweak jacket, you wear

5:12

the arm patches, and you pipe because we're gonna get a

5:14

bit academic. I know Victor will keep up with

5:16

this, but might need to start

5:18

concentrating a little bit more on his struggle. Yeah.

5:20

Yeah. Stroke is is already placed over.

5:22

He's already placed over there. You lost any

5:24

with the tweed jacket comment. I would But

5:29

that's really important because a lot of people will approach

5:31

property with these these sort of mantras

5:33

or doctrine the way you want to call it. Right? probably

5:36

doubles every seven or twelve years, but

5:38

largely BS depends what you want.

5:40

One doubling one year or two year is a month.

5:43

doubling forty years and you see that as

5:45

well. So not really stacking up,

5:47

but then this other one is not time

5:49

in It's not time in the

5:51

market. It's it's not timing the market.

5:53

It's time in the market. So

5:55

you're talking about time and time is

5:58

a consequence

5:59

of cycles. You know,

6:01

we've known each other for six, seven cycles.

6:03

And then the market the market is just

6:05

not properties going up or down. The market

6:07

is what's inside your head. The market's

6:10

what Aper is doing in changing prudential

6:14

rules around lending money, time

6:16

is sorry. Markets is global financial

6:18

crisis. Markets impacted by

6:20

elections. Markets impacted by inflation,

6:22

markets impacted by wars in Europe,

6:24

markets impacted by unemployment

6:27

levels, access to debt, So the

6:29

market is a lot more than just what

6:31

property does up and down.

6:33

So to deconstruct that idea

6:36

of timing the

6:38

market versus timing the market, it's

6:40

probably something that you shouldn't be putting

6:42

at the fore of your property investment decision

6:44

making, Victor. What do you think about that?

6:46

you know, is is a guy who typically

6:48

I go to for sensibility

6:51

when it comes to these type of discussions.

6:53

Look, I I think one of the important things

6:55

that you did say was that, you know, people

6:58

think that time in the market is one or

7:00

two cycles. Right? And

7:02

this is again, borrowing

7:04

from the adage that properly doubles in

7:06

value seven to twelve years or

7:08

seven to ten years depending on who

7:10

you subscribed to. And

7:12

that's the assumption that the cycle

7:15

is seven years or nine

7:17

years or ten years or twelve years.

7:19

We've shown through COVID and

7:22

we've shown through twenty seventeen

7:24

to twenty nineteen that the

7:26

cycles can be very compressed. So

7:28

the advice that some

7:30

people give you that, you know, hold for

7:32

one cycle, a hold for two cycles, you'll

7:34

do alright. And the thought process,

7:37

okay, you got a hold for twenty years. This

7:39

is where you really need to drill down

7:41

to what what you're really trying to achieve

7:43

from that particular property

7:45

within your portfolio, and

7:47

that certainly determines the

7:49

time that you hold onto because

7:52

the time aspect in that is

7:54

the end value or end result

7:56

for that property. as opposed

7:58

to the actual cycle itself.

7:59

And then, of course, both Steve

8:02

and I have got properties that

8:04

we've held through and

8:06

twelve cycles that have not even doubled

8:08

in value. In fact, they've gone backwards

8:10

in in some some of the cycles. So

8:12

it's really important to understand that

8:14

the first thing we need to look at is

8:17

with the property that we buy,

8:19

what's the impact within the portfolio, and

8:21

then more importantly, what's

8:24

the result you are after in that property?

8:26

People tend to otherwise become transactional.

8:29

assuming that the market will do

8:31

everything. It comes back to the asset

8:33

selection. It comes back to how that probably

8:35

fits in within your own investor

8:37

profile. in own financial

8:39

profile. And therefore,

8:41

that dictates the result and

8:43

where that particular property heads.

8:46

which brings into play

8:48

the timing of purchasing

8:50

that, the timing of perhaps

8:53

working on that property and the timing of might be even

8:55

selling down. No one seems to be willing to talk

8:57

about selling down properties. And

8:59

this is something that you need to be

9:01

weaving into your plan to say, make

9:03

sure that we are addressing all aspects

9:06

and taking advantage, therefore,

9:08

the timing of the market to

9:10

offload the property. So if it's a

9:12

property that's very poorly performing.

9:15

And it's actually costing you

9:17

money, not not from not from dollars and

9:19

cents, but opportunity. It may

9:21

be

9:21

killing your borrowing capacity as an example.

9:24

A buoyant market like twenty

9:26

twenty one. The timing

9:28

would be great to offload that property

9:30

and perhaps look at replacing it with another

9:32

asset, better performing asset? I

9:34

think that's a

9:34

good point, Vic, because coming back to

9:37

the time

9:38

in and timing the market, which is

9:40

what most people subscribed to to either

9:42

enter into the

9:43

purchasing of property and then

9:46

holding it forever to get

9:48

the result

9:49

The only thing that I have

9:51

subscribed to in terms of

9:53

time in and timing the market,

9:55

well,

9:55

not the only thing, but a major thing

9:57

is should I offload a property?

9:59

That's when timing the

10:02

market really

10:03

is very, very

10:05

important because as we'll get into a little bit

10:07

further on all these other little, not

10:09

little, but major components, which

10:12

create the market. I

10:14

wanna be riding a very

10:16

buoyant market if I'm

10:18

selling. Mhmm. I'm not gonna

10:20

be selling before the timing

10:22

of the market takes effect whether it be on the

10:24

upside or the downside. But

10:27

purchasing

10:27

is a different bag

10:28

of fish. completely.

10:30

So for those that subscribe

10:32

to the

10:32

strategy of, well, my strategy is about

10:35

time,

10:35

timing the market to

10:38

the when, I would suggest that you're

10:40

looking at it incorrectly.

10:41

In fact, very, very wrong.

10:43

It's a poor strategy, if that

10:45

is your strategy. But once

10:48

again, on the retirement

10:50

of an asset, well then timing, the market

10:52

becomes very, very important. Now we're

10:54

not saying that you should be traders or flip as a

10:56

property and and what have you.

10:58

But from time to time, there

11:00

may be a reason

11:02

to sell

11:02

a property. as

11:04

you say, for the opportunity cost, it

11:06

could be the retirement of debt or whatever

11:08

it may mean to

11:09

you. But I also

11:11

think something that you said earlier on about

11:14

whether a particular property, what

11:16

does it do to your portfolio, if

11:18

that's it is with multiple properties. Would

11:20

that be two or twenty two? I

11:23

think the

11:24

more pertinent thing

11:26

to think about is how is it how is this purchase

11:28

gonna affect my personal

11:30

finances? Mhmm. Because you could have you could

11:32

have the the best intentions to have a great

11:34

property in a great location with all the right

11:36

fundamentals and growth patterns and what have

11:38

you. But if it affects you

11:41

negatively, in

11:43

terms of your personal finances to be able to

11:45

control that property. Well, then

11:46

it's not worth it. You could have all the equity in the world,

11:48

but if you can't sustain the debt, you've got

11:51

nothing. Yep.

11:51

Yep. And again,

11:53

I was talking to one of my clients

11:56

recently as part of my review

11:58

process, and we

11:59

were planning for what

12:01

would happen in her portfolio

12:03

once her loans go from

12:05

interest only to principal and interest, which is

12:07

in in about three years time. Right? So we've got

12:09

time on our side to plan these

12:11

things. However, when we

12:13

look at it and we're working things out

12:15

that things will turn into

12:17

principal interest in three years' time

12:19

at, say, five point five percent interest

12:21

rate. That

12:23

would suck out about

12:25

fifty percent of a net

12:28

a kong pay, right, when that

12:30

happens in our portfolio. So

12:32

the the timing of

12:34

actually working on the portfolio

12:36

is three years where we need to

12:39

mitigate that cost because fifty

12:41

percent of your net income into the portfolio

12:43

is a huge cost. No. she can

12:45

sustain it. Her lifestyle's

12:47

pretty frugal. And so

12:49

she's comfortable with it. But what we've

12:51

done as part of making

12:53

sure that the timing is right

12:55

for her to invest, is that we've brought

12:57

forward, even though the construction

12:59

costs are fairly high, we've

13:01

brought forward one the

13:03

twenty flat constructions to

13:05

anticipate the big

13:06

change in cash flow in three years time.

13:08

Right.

13:09

Now we're not trying to scramble to

13:11

do it in year three. We're doing it

13:13

well ahead, well early in the

13:15

piece so that we can then also

13:18

use timing of the market in terms

13:20

of capitalizing opportunities as more

13:22

opportunities open up in the next

13:24

coming years so that she's

13:26

not timed out of the market. in

13:28

the three years knowing that she's got this

13:31

big sword hanging of her head

13:33

in terms of cash flow.

13:34

So it's really important to understand

13:36

that whilst Everyone

13:38

gets

13:39

swayed by the media

13:41

articles, the success stories, the the

13:43

Facebook blogs, of

13:45

how well they've done in terms

13:47

of value increase, how well they've

13:49

done their portfolio. We really

13:51

need to bring it down to, is the

13:53

time right for you? in

13:55

terms of whether that is adding an

13:57

asset or should you bring forward

13:59

a

13:59

construction if that's your plan?

14:02

Or should you really seriously

14:04

look at

14:04

perhaps evening the out

14:07

of the play field for yourself. Taking

14:09

another example of a of a client

14:11

just before we headed into the COVID

14:13

lockdowns and and the first after

14:15

the first lockdown, we

14:17

elected to sell down my property

14:19

because he had a couple

14:21

of things happening. One was that he was

14:23

changing jobs. The

14:24

second was that they're starting a family so

14:26

down to one income, and

14:28

he

14:29

knew that when that happened,

14:31

he would not be able to refinance his

14:33

portfolio even though it could do

14:35

it right now at that point in time.

14:37

So selling down was

14:39

a good play to allow

14:41

him to hold on to the rest of

14:43

his portfolio, in other words, perform the

14:46

time in the market for the balance of

14:48

his portfolio, without

14:50

putting undue pressure on

14:52

his

14:52

financials, personal financials. Because

14:54

when there's undue pressure,

14:57

The chances are that you would have to

14:59

sell the worst time possible and

15:01

you would be highly, highly negotiable

15:03

and therefore leave a lot of money on

15:06

the table. Yeah.

15:06

It'll be more of a reactionary

15:09

thing -- Yeah. -- more certain preplanned.

15:11

And when you react due

15:13

to financial duress,

15:15

you tend to make poor decisions, or your acts

15:17

against the wall. I think maybe a

15:19

way to explain a bit around the

15:21

the timing and time in

15:23

the market is

15:24

more the

15:25

timing and the timing in the market is more from

15:27

a macro approach. Whereas,

15:29

realistically, we want to be doing

15:31

this from a micro right. So it's all the

15:33

movements or the fundamentals that you need to

15:35

be addressing well ahead of time to

15:37

be able to enter the market.

15:39

So the timing of

15:42

the market is not the asset.

15:44

Mhmm. That's not what we're referring

15:46

to. Yeah. It's more about all

15:48

those other pieces, finance

15:51

lifestyle, income, expenditure.

15:53

That's from a personal set of

15:55

circumstances, all the way through

15:57

to, well, okay, If we

15:59

know that this

16:01

analogy of timing the market

16:03

is the asset, what is

16:05

it that actually drives the asset?

16:07

property

16:07

doesn't wake up one day and say it's

16:10

time to go. It's the

16:12

beginning of the cycle or the end of the cycle.

16:14

Let's do our growth pattern

16:16

or our contraction and

16:18

value. It's clearly, it's not

16:20

as black and white as that. There

16:22

is a series of

16:24

components void

16:26

of the asset that happened well beforehand.

16:28

Mhmm. That's where the timing

16:31

should be. Once again, whether it

16:33

be personal, government,

16:34

state, federal infrastructure.

16:37

Let's replace the asset with the word

16:39

market, in other words, timing the

16:41

market in South Coast. what

16:43

creates the market. That's

16:45

the timing piece to be ahead of

16:47

the curve as opposed to following

16:49

everybody else. Yep.

16:51

It's just the stage reminder guys

16:54

of, you know, this

16:56

is veneer simplicity when it comes to

16:58

property and, you know, you you just guess,

17:01

mine or the other deposit get a loan and

17:03

buy a property somewhere, but there is so how many

17:05

moving parts to

17:07

property been dealt properly and and and what you've

17:09

just spoken about. You just sit there and most people just

17:11

go, well, no, no, no, no, no, the market is

17:14

just prices going up or down, but

17:16

you've just completely turned it on the head for

17:18

me, and you're telling me the market

17:21

is all of the different components,

17:23

which makeup trends and makeup

17:25

market movements, interconnected with

17:27

your own personal circumstances,

17:30

interconnected with your

17:32

borrowing behaviors and what loans that you

17:34

have? How do you make

17:36

headway with all of this? Because, again, I

17:38

could imagine a lot of people listening is

17:40

just going I'm so complicated. I'm

17:42

so confused now. I'm just not gonna do anything

17:44

because I don't understand it. Does all this stuff really

17:46

matter that much? What do

17:48

you reckon? III think that's that's the part. Most

17:50

people most people are too

17:52

anxious to get started without getting

17:54

all the foundations in place.

17:56

Mhmm. So you really building

17:58

a a castle on really poor foundations.

18:00

And the first sign of

18:03

adversity, it'll collapse. Right? Now,

18:05

obviously, you don't

18:07

wanna be spending twenty years

18:10

analyzing and and we are gonna,

18:12

you know, gonna do this, gonna do

18:14

this. we need to really be looking at it from a viewpoint

18:16

of, again, the earlier you start,

18:18

the more time you have with

18:21

the portfolio to work on

18:23

the portfolio. But at the same

18:25

time, you'd also be

18:27

very mindful of getting

18:29

swayed with, you know, slick marketing

18:32

your your Facebook breaks

18:34

in that sense to make sure

18:36

that you're actually making decisions based

18:38

on your circumstances now.

18:40

you'd be living on the rock not to know that properties

18:43

performed really well over COVID. And

18:46

practically, in some markets added

18:48

about sixty percent seventy percent of

18:50

its value. But for

18:52

some, the

18:54

timing for them was not right. So

18:56

if you're going to COVID and you're losing

18:58

your job, there is huge uncertainty

19:01

about your income. yet

19:03

you see all of these posts on Facebook. You see all

19:05

of these newspaper articles. You see all

19:07

of these TV shows about how

19:10

well properly is performing and how

19:12

then someone's made thirty percent in one year, forty

19:14

percent in one year. But you have

19:16

to actually set this out because the timing for you

19:18

is not right. Even

19:20

if you bought the best property, you're not

19:22

able

19:23

to hold on today putting undue

19:25

pressure on your financials. Well, let's

19:27

lay some examples to this. And because you

19:29

because people are probably listening saying,

19:32

I get it, I think. But give

19:34

me some examples. So you've

19:36

mentioned COVID. Alright. So let's use the

19:38

analogy of timing

19:39

the market. If

19:42

you

19:42

if you had purely

19:44

subscribed

19:46

to that moment in time and what

19:48

the media was perpetuating, then

19:52

you would look at that and say, well, the

19:54

timing

19:56

is

19:56

poor.

19:57

Yeah. Why would I buy at

19:59

the beginning of COVID?

20:02

Because that piece of the timing of

20:04

the market everything shows me according to

20:06

the media, and I'm being quite general for

20:08

the general clients. I'm not

20:10

slandering

20:11

you all. Easy.

20:13

easy. It's but

20:16

and the economists and the banking

20:19

system were

20:19

saying, well, yeah, the

20:21

timing This is not the time to buy. Property is going to collapse

20:23

by twenty, thirty, forty percent

20:25

if you

20:26

subscribe to that theory about timing.

20:29

But if you look at the

20:32

components that suggested

20:35

otherwise at

20:36

that moment in time

20:39

it ticked just about all of

20:41

the boxes to enter the

20:44

market. So let's explore those.

20:45

What were some of them? If

20:47

you subscribe to the theory at that point in time

20:49

around what the market is going to collapse, you

20:52

got people out of work.

20:54

Well, okay. Yep.

20:54

I agree with that. You've got this

20:58

consumer

20:58

sentiment that is free falling

21:01

at the beginning of COVID because are we all going

21:03

to die? We have a banking

21:05

system that's telling us that the

21:07

market is going to collapse.

21:09

That's that side of the ledger platform.

21:11

People about it. pieces that would

21:14

support that. But if you looked

21:16

at the right

21:18

or the left hand side of the legend and

21:20

say, what are the market conditions

21:22

and the timing of those components that

21:24

would suggest that it is the time

21:27

to purchase. Okay?

21:30

Well, let's go back in history. Let's

21:32

have a look at some of those

21:33

the debts back

21:34

in fifteen, sixteen, seventeen,

21:36

and then around APRA.

21:37

who had, as we all know, pulled

21:39

the hand breakup by the banking system on

21:42

lending, so participation

21:44

rates

21:44

fell through the floor. So what I

21:46

mean by participation rates is people

21:48

had the want to purchase, but they

21:50

didn't have the ability in

21:52

a very loose way to explain it

21:54

than no one was providing or not as many

21:56

people were providing accommodation for

21:59

the future. So the stone was

22:01

carved or the seed was stolen.

22:03

back in fifteen sixteen via

22:06

that. Fast

22:06

forward to COVID, you

22:08

had a banking system

22:11

that dropped rates

22:14

to unprecedented levels,

22:16

which was gonna have an effect on

22:18

consumer confidence because cost of money was

22:20

just about nothing. you

22:23

had government incentives,

22:25

both state and federally,

22:28

to propel the economy, whether that was the

22:30

stay at home check, whether it was the first

22:32

homeowner grant, whether it was the

22:34

construction grant in

22:36

combination with easing of

22:38

monetary policy flow of credit

22:40

for the banking system was

22:42

starting to perpetuate and yet

22:44

we were still undersupplied.

22:47

and looking so. And we had no

22:49

immigration -- Mhmm. -- but we knew that that

22:51

would turn around. So when you

22:53

put

22:53

those components

22:56

together,

22:56

up in terms of

22:59

timing, it

22:59

ticked all the boxes

23:02

disregarding personal circumstances just for a minute

23:05

from my point. it ticked all the

23:07

boxes to enter

23:09

the market. And I remember we did

23:11

a video because I think we were in Perth

23:13

at the time. Yep. And we'll say, this this

23:15

is how it's going this is how it's going to

23:17

roll out. Now, mind your

23:20

peace and cares, be set for the what

23:22

ifs, but this is how it will roll out

23:24

because our timing

23:26

using that analogy, it was ticking

23:28

all the boxes. for

23:31

us. Because we're looking at

23:34

those micro components rather than

23:36

just the analogy of

23:37

time in the market. The time

23:40

in the market was the subsequent, let's call

23:42

it, three years where we saw huge

23:46

growth But because of all those

23:48

circumstances, because of all those components,

23:50

not because the media, the economists, or

23:52

whoever I have said, it was good

23:54

or bad. timing.

23:54

Yep. Yep. And I think,

23:56

I guess, the question is to

23:58

be raised. Is that okay? So we've gone through

24:00

this major growth. And,

24:03

you know, after growth, that

24:05

does come contraction. Right? So is the

24:07

time right to jump into the market now

24:10

and start up a portfolio? What

24:13

changes is the phase of the

24:15

market changes is your approach

24:17

towards investing the type of property you buy,

24:19

the areas may not change.

24:21

but the type of property buy in that area may

24:24

change will change actually.

24:26

And that's the fundamental

24:29

understanding that one needs to bring to

24:31

to the table when they're investing is that

24:33

it's not set in stone. There

24:35

there are some rigid rules.

24:37

But

24:37

then you need to flexible with what the market gives

24:40

you, what your personal circumstances are,

24:42

and importantly, what's the state of

24:44

your wallet in in that sense. Right? So

24:47

it could be from the borrowing side of

24:48

it, but it could also be

24:50

from a household budget point of view. Right? So

24:52

we've we've come off a

24:55

large chunk of not

24:57

having spent money. And

24:59

there is a bit of revenge spending

25:01

as such. where people are just

25:04

buying stuff because we're not free

25:06

to move around. And

25:08

does that need to be looked at before

25:10

we jump into investing? So all

25:12

of those things need to come into

25:14

play before you jump into

25:16

into market. And a lot

25:17

of people think that you should only

25:20

only be buying in a upswing.

25:23

You

25:24

can buy in any market phase.

25:26

So long

25:27

as you're taking all the fundamentals, it's

25:29

the selection of the asset.

25:31

in terms of the approach, the strategy

25:34

of that asset is what changes

25:36

as the market turns. It's a

25:38

good point, Vic. And give some

25:40

sort of practical sentiments around

25:42

that. And and I and I agree, it's always

25:44

a good time to buy a property if you buy in the right

25:46

property for the right reason, the right place, at the

25:48

right price, and everything's about the

25:51

right property. The names

25:53

on the tin isn't it,

25:55

Steve? I was gonna say something

25:57

really smart name, but than that. But

25:59

it's true. So, like, you know, irrespective

26:01

of market conditions, it's the right

26:03

time to buy. But when you look at, you

26:05

know, we're we're sort of look back to

26:07

where we started, we've known each other

26:09

for six, seven sort of

26:11

major market cycles, plus a whole

26:13

bunch of mini market cycles inside of

26:16

it. So you know, you would have told me to any point in time feel it's

26:18

a right time to buy. This is where we're buying. This

26:20

is the reason why. So And this is What

26:22

do you buy? This market cycle

26:24

written right now, which is sort of identified

26:26

by rising rates,

26:28

fast as they've risen for a long time.

26:30

This is the first time I think

26:32

I've either been a rising rate environment. I've got into the market when

26:34

rates coming down for over a decade

26:36

period now they're heading back up, and I'm sort of comfortable

26:38

with that, you know, get

26:40

it I started probably we're paying, I don't know, six

26:43

percent on our mortgages. That was just the

26:45

way it was. So it's been

26:47

drooling into me. whereas

26:49

those people who are coming to market recently into

26:51

the market recently when interest rates are zero

26:53

point one percent probably think that's not what's

26:55

not. So considering this market,

26:57

higher inflation, rising rates

26:59

for a period of time,

27:01

different states, different capitals moving

27:03

at different speeds in terms of price growth,

27:06

Disparancy in price growth, disparancy

27:08

in prices. Vic,

27:11

where where should your average

27:13

Australian be looking to invest

27:16

right now. Yep. And

27:18

average being in vertical commerce kids

27:20

tell me inverter's commerce means it's the opposite,

27:22

by the way, but that's not true. Now

27:24

so where where they should be investing is

27:26

within their means. Yep. Right?

27:28

So that could be any state. It could be any property,

27:30

but it still needs to be within the

27:33

means. And what that prills down

27:35

to is not just the

27:37

cash flow on the the

27:39

overall cash flow, the household budget

27:41

to begin with and catering

27:44

for a interest rate -- for the

27:46

interest rate rise one or two. knowing

27:48

that, you know, we're still not back to normal rates at

27:50

this stage. Right? And if you're still doing

27:52

your sums of the of the

27:55

years of two and a half percent,

27:57

You just simply asking for trouble. And

27:59

we've always said right from the beginning, and

28:02

you can go to any of our

28:04

podcast, any of our Facebook clients. We

28:06

always talk about cash flow, looking after

28:08

the cash flow. Now that doesn't mean cash

28:10

flow right here right now. It also

28:12

means cash flow down the track as well in

28:14

terms of the property the portfolio

28:16

putting together, and that is woven

28:18

into the household budget. So

28:20

they cannot be isolated. A lot

28:22

of people think I'll I'll

28:25

probably decide five hundred

28:27

dollars a month for my portfolio,

28:29

and then the rest is for my household

28:31

budget. Right? you need to add that to

28:33

your household budget and see whether you're

28:35

still in the black in that sense because

28:37

otherwise, you need to simply run into trouble

28:39

you compromising lifestyle there

28:41

needs to be some level of compromise of lifestyle

28:43

if you're overspending to begin with.

28:45

But you need to find the efficiencies

28:48

within within the household budget in

28:50

terms of maybe if

28:52

we

28:52

didn't want it significantly

28:54

changed lifestyle. Let's talk about

28:56

Mokul's restructure. Let's talk about turning all

28:58

of our loans from principal and interest

29:00

to interest only and the cash flow that you

29:02

free up from there

29:04

becomes the cash flow that you can help

29:06

hold on to a portfolio.

29:08

a whole lot to a property, if that's

29:10

that's the only property that you

29:12

could buy. And making sure that

29:15

where you're buying does not put

29:17

you against the wall and

29:20

looking at it from a liquidity point of view with

29:22

the approach, negative approach to say that

29:24

it will go wrong. Life will go wrong. I

29:26

need to sell this down. What's

29:28

my downside? And I need to sell that

29:30

in a bad market. Yeah.

29:32

And that comes back that comes back into the

29:34

the components of timing. So if

29:37

fill in to sort of time with

29:39

your question, where should

29:42

someone by, well,

29:44

have you got everything else in terms

29:46

of timing

29:47

in shape?

29:48

So we've been going as an

29:51

example, we've been banging

29:53

on now for probably in the vicinity of

29:55

nearly two years. for everybody

29:59

to get

29:59

liquid, be

30:00

liquid, liquidize that

30:04

equity position because it's gonna cost

30:06

very little to nothing to be in a

30:08

position should you want

30:10

to perpetuate the portfolio. But

30:12

that timing piece

30:15

is in and around the finance

30:17

environment at that time. So

30:19

an example of that would be, let's

30:21

imagine, Phil, that you went to liquify

30:23

your equity position at

30:25

the moment. Well, it is

30:26

a hell of a lot harder to do

30:28

it today than what it would have been

30:30

eight months

30:31

ago -- Mhmm. -- remarkably

30:33

different for clearly

30:35

all the obvious

30:36

reasons. So you may have missed

30:39

the boat. In fact, I know people that have missed the boat

30:41

because they sat on their hands and

30:43

didn't do anything. If

30:45

however you got back timing

30:47

piece right and did so.

30:49

Well, now fast forward today, where

30:51

would I buy and hit something to go

30:53

against the grain and against the

30:55

the data, go back and listen to that

30:58

podcast as well against

31:00

some of other people within the

31:02

industry in terms of

31:04

market timing. I

31:06

hi personally

31:07

am looking to buy throughout

31:09

select parts of Australia,

31:11

but I'm

31:11

also looking to buy in Sydney.

31:14

that

31:14

that would fly in the face of

31:16

a lot of what a lot of

31:18

people are saying. Mhmm. But

31:21

I

31:21

believe

31:22

that the timing of

31:24

my components

31:27

sits fairly and squarely for

31:29

me to activate. a

31:30

purchase in Sydney. Now whether that happens tomorrow

31:32

or in six months time is yet to

31:34

be seen because it's not

31:36

just about what the

31:38

market conditions are. It's about what the market

31:40

conditions are for what I need in

31:42

my portfolio and the type

31:44

of

31:44

asset that I'm looking for.

31:46

So

31:46

when you look at the sort of

31:49

theoretical structure of property

31:51

investing, the where should you be

31:53

buying is right at the end sequentially

31:55

of all of the other stuff. Right? The the

31:57

who, what, when, where, how type of

31:59

thing, when it comes to investing probably, where

32:01

you should be buying is your last real sense.

32:03

You know, it's what I should

32:05

be buying, when I should be buying, you know,

32:08

how I should be buying it, and how is do I do it

32:10

myself? I do use and buy his agent,

32:12

for example. whereas a lot of people put the

32:14

cup before the horse or the wear at the front of

32:16

all investment decision making where

32:18

they go, I'm gonna buy

32:20

a house here. And now let me

32:22

go back and work out all the other stuff, which

32:24

includes why my volume, i e,

32:26

what is my strategy, what am I gonna do with it, how am I

32:28

gonna do it, etcetera, etcetera

32:30

stuff. a good example of that would be we should only buy

32:32

we should only buy ten

32:34

minutes or ten kilometers around

32:38

yeah, CBD is two thousand, three thousand, four

32:40

thousand post That's weird because yeah. And

32:42

that's that's where you should Last shapes your whole

32:44

strategy when it comes to debt, when it comes to

32:46

structure, when it comes to everything.

32:48

Yeah.

32:48

Now we don't subscribe to that at all.

32:51

Never have. Never. But let's

32:53

just imagine if that was the truth, though. So you should

32:55

buy Woolsey Avenue Point Pipe, so it

32:57

stays most

32:57

That's main shopping

32:59

road. Of course, it is the state's most

33:01

expensive road. And because

33:04

the experts tell me ultra

33:06

ultra blue chip is the one that

33:08

performs best over time. So

33:10

that's now that's in my that's in my head, but I've

33:12

got to buy Woolsley Avenue Point Piper.

33:15

But I'm a first year apprentice plumber and

33:17

I'm on forty thousand dollars a year

33:19

plus over time. So I'm gonna be saving for

33:21

the rest of my life. to be

33:24

able to scrounge up

33:26

stamp duty. While that

33:28

market is powering ahead, while that market

33:30

is powering ahead. So the analogy

33:32

that, well, the timing of the market in that

33:34

particular area is the only place to

33:36

be. Once again, you see the

33:38

top down. You timed you

33:40

timed out. There you go. So it's

33:42

still reverse spacing. It's still

33:44

reverse spacing. Yep. Mhmm. Once again, look

33:46

at federal and state legislation and what that's going to do to

33:48

a market. Look at the banking environment,

33:51

the finance environment, how's that going

33:53

to shape a market? those

33:55

timing pieces, population growth

33:58

infrastructure projects, timing timing

33:59

timing, those pandemics,

34:04

GFCs, APRA,

34:05

the reversal

34:06

of the low dock loan back in two thousand

34:08

and three, or the invention

34:10

of the low dock loan. in

34:12

two thousand. Like, all of these are the timed pieces

34:15

that you're looking for. The

34:17

markets will follow

34:18

suit. Yep.

34:20

I think one of the things that people tend to forget

34:22

and can agree with everything you

34:24

said, Steve. They forget that there's

34:26

a lot of pre work

34:28

that needs to happen before you're looking

34:30

at buying anything. Right? So that's the pre

34:33

w's of investing. So

34:36

though First

34:37

of all, you need to look

34:39

at why you're looking to

34:42

buy.

34:42

Right? So what's the outcome

34:44

you're after? then

34:45

that determines what

34:47

you need to buy.

34:49

We

34:49

then determines

34:51

where

34:51

you buy. Most people start on the other

34:54

side, where am I buying? What

34:55

am I buying? And

34:58

then,

34:58

why did

34:59

I buy? Yes. So you

35:02

gotta

35:02

look at it from the right way. But

35:04

that's the key tagway for this

35:07

Victor rather than time in the market versus time in the

35:09

market versus your time out of the

35:12

market. It's good to be able

35:14

to discuss those

35:16

particular ideas and give some sense to it. But, you know,

35:18

the conclusion is is that the

35:20

market is is more than just

35:23

suburbs going up or down. It's

35:25

really integrated with macro

35:28

macroeconomic conditions, with global

35:30

conditions, with you know,

35:32

sentiments, media, all this sort of stuff,

35:34

which is driven by and and and it's gonna

35:36

change overnight all the time. And that's what you

35:38

need to be reactive

35:40

to, but largely, if your strategy should never change or you can

35:42

tweak it, but the why

35:44

is largely consistent with with property

35:46

investors, the best property investors,

35:48

I know. Yeah.

35:49

I think the strategy does change that feel over time. You

35:51

know, just, you know, by degrees, not by by

35:53

degrees. Yeah. Yeah. And

35:56

I think rather than the the takeaway that I'd

35:59

like people to think

36:00

about is that

36:03

is that the

36:04

market is not the asset. The market is everything

36:07

before

36:07

it. That will drive the

36:09

asset

36:12

no matter what

36:12

that asset is in relation to its to itself.

36:14

The vehicle is proper.

36:16

It's just a vehicle.

36:19

I

36:19

think it's probably it's probably in right now.

36:21

Why do we just we'll only look

36:23

at everywhere what are

36:24

all those other pieces that we look at? But I

36:26

think, ultimately, though, Phil, you know,

36:29

you do it when it's right for

36:31

you. Mhmm. And if people can

36:33

grasp that and have

36:35

time on their

36:38

side Well, and

36:38

that's a different podcast altogether. And that's the

36:41

question that all probably versus Victor

36:43

need to consider you know,

36:45

the wine is the timing right for

36:48

me. And and that's what you guys do and and

36:50

helping them unpack that and give them sense

36:52

of direction. I know things are running

36:54

hard at the moment for you guys at the moment, but you're

36:56

free. You're available. You happen to have these

36:58

conversations with with all the investors may

37:00

do and looking for some sense of guidance and

37:02

what next for them. Yeah. Absolutely.

37:04

Well, obviously, there is a little bit

37:06

of a process to get down in and

37:08

sit down with myself and Steve. We've

37:11

got a very well Very well

37:13

experienced investor, Melissa. She is

37:15

the first point of contact. She gets

37:17

you ready to then have

37:20

a conversation with myself

37:22

and Steve so that we can have the best

37:24

of our time. So she gets make sure that

37:26

you're fully prepared. And then we

37:28

we then look at the

37:30

why first and then we look

37:32

at, you know, the what in the way afterwards because we really wanna set the foundation

37:34

right right in the beginning

37:36

to make sure that we actually

37:40

being strategic with the purchases,

37:43

not transactional with the purchase

37:45

so that we can then safely

37:48

ignore what the media

37:50

hype is and bring it back to what

37:52

your personal hype is. In other words, what you're

37:54

trying to achieve. And it

37:57

is it is fairly detailed process. And it's

37:59

not a matter

37:59

of just calling up and we we say,

38:02

well, he is a property for you because

38:04

it's it's specifically

38:06

selected based on the goals that you're

38:08

trying to achieve your personal

38:10

circumstances and what's the best

38:12

fit before you based on what you're

38:14

trying to achieve. Okay.

38:15

Sounds good. It's a process. I've been through that

38:17

process, and these guys are very good at

38:20

the right property group or questions at right

38:22

property group dot com that they have anything Facebook track

38:24

it out, Victor. That's correct? That's right. Yep.

38:26

Right probably with the ROI GHD.

38:28

Gents, really informed discussion

38:31

day. Thank you has got me again thinking differently about

38:33

how I view the market, timing the market, timing the

38:36

market, whether you're timed out of the market. And to me,

38:38

the big

38:40

thing is you know, timing to market. Sometimes, timing get

38:42

out missed opportunity cost or

38:44

opportunities cost if you're trying to hold on,

38:46

thinking that time will

38:48

fix everything. sometimes it

38:50

doesn't property, but often,

38:52

you better off just taking me to the haircut and sort

38:54

of redeploying those assets somewhere else. We can have a

38:56

chat about that. Next time we get together, Steve Waters

38:58

and Viktke Kumar, from the right product group. This is

39:00

investing insights with the right product group. We'll see you

39:02

next time until then. Bye bye. The information featured

39:05

in this podcast is general in nature.

39:07

Does not take into consideration your natural

39:10

situation or individual needs and should not be

39:12

relied upon. Before making any investment,

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insurance tax property financial planning

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decision, you should

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consult a licensed professional who can advise

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whether your decision is appropriate

39:21

for you.