Paul Nugent, the co-owner of Melbourne-based buyer’s agency, Wakelin Property Advisory , sadly passed away recently. I first met Paul back in 2004. Over the past 14+ years, Paul and I have given many presentations, shared a large number of mutual clients and have had numerous conversations and debates about property investment. Not only was Paul a true gentleman with an encyclopaedic knowledge of the Melbourne property market, he had a fantastic sense of humour (although I never dared to say tha...
Nov 28, 2018•13 min•Season 1Ep. 50
Nice family homes in blue-chip suburbs are becoming increasingly difficult to acquire from an affordability perspective. This also puts pressure on one’s capacity to fund an investment strategy whilst repaying a large loan. So, a few years ago, a strategy called ‘rentvesting’ was popularised. But this has some limitations. I have formulated an alternative strategy which I’ll call livevesting .What is rentvesting?Rentvesting involves renting a house in a location where you would like to live. One...
Nov 21, 2018•14 min•Season 1Ep. 49
With the tightening in credit and the reduction in borrowing power, many investors capacity to invest has been adversely impacted. For example, an investor who planned to invest in two properties worth say $750k each might find that when it comes time to purchasing the second investment property, they can only afford to spend say $400k due to a contraction in borrowing capacity. This begs the question, what do they do? As I see it, they have four possible options: Reduce the budget for the next ...
Nov 14, 2018•12 min•Season 1Ep. 48
No one wants to buy at the peak of the property market! Imagine if you buy a property and then a month later property values fall and it takes more than 2 years to recover to the amount you paid for it. That two years of holding costs (interest) for no gain. Would you kick yourself if that happened? This begs the question, how important is property market timing? How important is good timing? I used the graph below to pick two points in time to measure the importance of “good timing”. See chart ...
Nov 08, 2018•9 min•Season 1Ep. 47
You must have a robust methodology for selecting the right share, property or bond to invest in. If you select the right asset, your investment returns are likely to be very healthy in the long run. However, if you make a mistake, it is likely to cost you money – in terms of opportunity cost and/or in real terms. The best way to prevent making a mistake is to use a methodology for selecting the right asset that is proven to work. In this blog I outline the four different methodologies and the tw...
Oct 31, 2018•16 min•Season 1Ep. 46
There has been a lot of commentary in the media about the “credit crunch” that we are in at the moment. Why is the credit crunch going to impact you and your plans? And what can you do about it? Why has credit tightened?Over the past year I have written ( here and here ) about how the government has tightened up lending standards in an effort to cool the property market and reduce the volume of interest only loans. The reason for this is that they didn’t want Australians over-borrowing whilst in...
Oct 23, 2018•16 min•Season 1Ep. 45
How many properties do you think you need to own to generate enough wealth to fund a comfortable retirement? Most people think they need more than 3 properties to become independently wealth. Of course, the answer will be different for everyone because it depends on your income, existing assets, time until you retire, goals and other factors. However, having been involved in developing hundreds of investment strategies (possibly more than a thousand), I can tell you that 90 per cent of people ne...
Oct 17, 2018•13 min•Season 1Ep. 44
The two certainties: death and taxes There are two unfortunate certainties in life; death and taxes. And, unfortunately, tax cannot be avoided (legitimately) even by dying.Australia is one of the very few countries in the world that has no death taxes. However, although there is no tax levied on the property of a deceased person, there may be tax consequences flowing from the dealings with the deceased assets. This blog outlines some of the key considerations you must address. The deceased estat...
Oct 11, 2018•13 min•Season 1Ep. 43
The last thing you want to happen is that you work hard throughout your whole career, invest successfully and then lose a large amount of your wealth due to an unexpected event. Therefore, asset protection is just as important as asset accumulation. Asset protection is a subject that most investors fail to consider, don’t get good advice on and/or take the wrong advice. The goal of this blog is to give you an overview of the key risks people typically need to consider and what to do about them. ...
Oct 04, 2018•12 min•Season 1Ep. 42
Paying minimal tax probably appeals to most people. And as tax is often our biggest lifetime cash outflow, it might seem logical that minimising it is a great way to build wealth. However, I’m going to suggest that perhaps you need to pay more tax to build wealth. A higher tax bill typically means you have a higher income and therefore a higher borrowing capacity. I have seen lots of people cut their nose off to spite their face by focusing on the wrong things at the wrong times. Sometimes tax m...
Sep 26, 2018•10 min•Season 1Ep. 41
Significantly tighter credit, the potential abolition of negative gearing and increase in the capital gains tax rate, falling property prices, new apartment supply… these are some of the head winds facing property investors today. Given these challenges should you give up and not invest in property? I don’t think so. In fact, good investment opportunities tend to reveal themselves during times where there is negative sentiment and/or uncertainly. I would like to share with you four tactics that ...
Sep 20, 2018•16 min•Season 1Ep. 40
According to the ATO, over 70% of people engage the services of a tax agent/accountant. However, according to Blackrock , only 15% of Australians have a relationship with a financial advisor. I believe that many people would benefit from having both. In fact, to crystallise the most value it is imperative that they have a close working relationship. To make my point, I would like to share some real-life stories about how integrated financial advice and tax advice can be and the value created whe...
Sep 13, 2018•16 min•Season 1Ep. 39
Over the past few weeks I have seen a couple of financial plans produced by firms that have experience in providing advice on investing in residential property (i.e. not the traditional managed fund/shares type advisors). Unfortunately, the quality of the advice was very poor and not worth the fees paid in my opinion. It upsets me to see people pay several thousands of dollars for financial advice and receive virtually nil value. Therefore, I wanted to write this blog to tell people what questio...
Sep 06, 2018•19 min•Season 1Ep. 38
All the clowning around in Canberra last week is likely to have increased Shorten’s chances of winning the next election. Given the ALP’s proposed changes to negative gearing and capital gains tax, will these policies spell the end for property investor? Why the change? According to the ATO[1], approximately 2 million Australians invest in property and 61% of them claim negative gearing benefits. Negative gearing occurs when you borrow to invest in a property and the income from that property is...
Aug 30, 2018•15 min•Season 1Ep. 37
I typically strongly recommend to property investors to never contribute any cash into an investment property acquisition. I’m not suggesting that you should blindly borrow more and therefore pay more interest. What I am suggesting is that if you have cash to contribute towards an investment that you do so indirectly using an offset account.Contribute cash into the offset instead Instead of contributing your cash and only borrowing the difference (i.e. what you need), I suggest that you borrow 1...
Aug 23, 2018•9 min•Season 1Ep. 36
Whilst historically ATO audits were targeted at big business and the wealthy, this has changed. Now more than ever, individuals, business and self-managed superannuation funds are at risk of being selected for an audit, investigation or review. The Tax Commissioner, Chris Jordan has confirmed the ATO has been instructed to undertake random audits targeting over claiming of business expenditure and work-related deductions. The ATO is using real-time data to compare taxpayers with others in simila...
Aug 14, 2018•9 min•Season 1Ep. 35
Last week, I highlighted some evidence that indicates investment-grade apartments in Melbourne are perhaps intrinsically undervalued. The topic of this week’s blog is all about whether a house or apartment makes a better investment, specially: 1. If your investment budget is $1.3 million or more, should you invest in one house or two apartments?2. If your investment budget is in the range of $700k and 800k, should you invest in an investment-grade apartment in a blue-chip suburb or a house furth...
Aug 09, 2018•17 min•Season 1Ep. 34
I wrote this blog in February suggesting that I thought investment-grade apartments were intrinsically under-valued. Well, according to Jarrod McCabe, director of Wakelin Property Advisory , “the investment-grade apartment market in Melbourne is showing signs of growth this year”. My view that apartments are intrinsically under-valued has become even stronger over the last 6 months and I would like to share a few reasons why. House prices have appreciated significantly over the past 5-10 years a...
Aug 02, 2018•14 min•Season 1Ep. 33
Some interesting information and data has been released this week which I would like to discuss with you. Variable mortgage rates will probably rise soon Interest rates that apply to interbank lending have increased significantly since the beginning of the year. These benchmark rates are used to set the banks borrowing costs. This benchmark rate has increased significantly compared to the RBA’s cash rate as depicted in the chart below (from Montgomery ). Essentially, this means it costs more for...
Jul 26, 2018•13 min•Season 1Ep. 32
Are you a spender or saver? Do you find it hard to stick to a budget? Do you find it difficult to save towards a goal? For some people, saving money comes easy to them. For others, it’s like pulling teeth. You might need to adopt a different investment strategy depending on your answers to the above questions. Success requires some income Surplus cash flow is oxygen for any financial strategy. Without it, no financial strategy can survive. As I have said in the past, it is critical that you cont...
Jul 18, 2018•12 min•Season 1Ep. 31
Employers must contribute 9.5% of your salary (up to a maximum of $20,050 p.a.) into super. But should you make additional super contributions? This is a question I’m asked regularly. Of course, like many financial planning matters, the answer does depend on your individual circumstances. However, there are some fundamental concepts that help us understand whether additional contributions are going to help you achieve your financial goals. The power of starting early Susie is a 30-year-old earni...
Jul 12, 2018•9 min•Season 1Ep. 30
Over the past two years lenders have been incrementally increasing interest rates on investment loans and loans with interest only repayments (as opposed to principal and interest). As the chart below illustrates, the average interest rate margin between a principal and interest home loan and an interest only investment loan is now 1.04% p.a. As recent as January 2016, interest rates for these loans were virtually identical. This begs the question, should you switch your investment loan to princ...
Jul 05, 2018•9 min•Season 1Ep. 29
Tax is most people’s largest lifetime expense! Therefore, it is not difficult to understand how taking proactive steps to minimise your taxes can produce significant financial benefits. Different taxes will impact you at different stages of life depending on the wealth you have accumulated i.e. types of investments, amounts and ownership structures used.The common mistake that people make is that they are too short-term focused. That is, they focus on reducing taxes immediately, with little rega...
Jun 27, 2018•11 min•Season 1Ep. 28
Financial stress is a terrible thing. I’m sure everyone reading this blog has stressed out about money at some point in their life. But the thing is, stressing about money doesn’t change the outcomes. Instead, it just ruins your day.So, am I suggesting that you should never worry about money? Not really. I believe that if you are doing all the right things then it will all work out well in the long run. And worrying about it in the interim won’t help. Taking all the right actions and still worry...
Jun 22, 2018•9 min•Season 1Ep. 27
Over the past couple of years there have been many changes that have dramatically reduced your borrowing capacity. The Financial Services Royal Commission, government has put pressure on the banks to reduce investment lending and a directive to tighten lending standards just to name a few. If you are unable to borrow then your only alternative is to invest your after-tax income/savings… and that is a much slower path to wealth.But don’t despair. You can still leverage your assets and income to b...
Jun 15, 2018•10 min•Season 1Ep. 26
Over the last few weeks we have been working closely with our advisory clients assisting them with end of financial year tactics. I provide a list below of some of the tactics that we have been implementing. It is worth taking a couple of minutes now to see if you can benefit from any of these.Additional tax-deductible super contributionsIf you are under 65 and generate some taxable income (i.e. working), you can make up to $25,000 of tax-deductible superannuation contributions per year (if you ...
Jun 07, 2018•10 min•Season 1Ep. 25
The Productivity Commission released its draft report this week into the efficiency of the Australian superannuation system. Its findings are concerning, and all Australians must take an active role in choosing the most appropriate superannuation fund for them. If you don’t, the Productivity Commission suggests it could cost you between $61k and $407k, depending on your age.What the productivity commission foundThe productivity commission found that many superannuation funds recommended by emplo...
May 31, 2018•11 min•Season 1Ep. 24
The ultimate aim of investing is to build wealth. Current and future tax liabilities can have a significant impact on your ability to build wealth. Simply put, the less tax you pay, the more money you keep for yourself. Therefore, taxation is a major consideration.That said, tax consequences should never drive investment decisions alone. Tax is one of many considerations so its important to not become too tax focused. Balance is the key here.Income versus capital gainMost growth assets provide a...
May 25, 2018•6 min•Season 1Ep. 23
In this episode I discuss some of the financial life hacks that my blog subscribers have shared with me. A list of these life hacks and related links are contained on this page: https://www.prosolution.com.au/financial-life-hacks-list/ My new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au . If you're interested in working with our...
May 16, 2018•8 min•Season 1Ep. 22
I know. You have probably seen lots of news about the Royal Commission and the financial advice horror stories. I don’t plan to rehash anything that’s already been said.The only thing I will say is that the publication of these horror stories is a very positive thing. At a minimum, it encourages people to educate themselves about their advice options and maintain a healthy level of scepticism (not blindly trust). At best it will force the industry to change.The point of this blog is to help you ...
May 08, 2018•12 min•Season 1Ep. 21
