A few months ago, a reader of this blog asked me to analyse two options. Option one is to borrow more money to fund an upgrade of your family home and consequently enjoy tax-free capital gains. The second option is to invest in property. The reader wanted to know which is the best option, net of all taxes such as capital gains and land tax? Widen the scope of the questionI’d like to widen the scope of this question and add one more option – investing in shares. I have concerns with investing lar...
Apr 29, 2020•19 min•Season 1Ep. 110
CBA Economics stated last week that property price declines are “inevitable”. It has forecast that prices will fall by circa 10% in Melbourne and Sydney over the next 6 months. It cited many reasons for this forecast including higher unemployment, lower economic activity, lower mortgage volumes, falling rents and fewer overseas buyers. I wanted to take some time to look at this forecast and provide my commentary. This exercise serves as reminder that all forecasts are inherently uncertain and te...
Apr 22, 2020•20 min•Season 1Ep. 109
If there is one certainty in life, it’s that there’s always going to be some uncertainty. Of course, there are times in our lives where there’s higher levels of uncertainty, which can be very stressful. But, to a degree, we all have to become comfortable with some level of ‘uncertainty’ and learn how to dance with it. This is especially true with financial decisions. Markets never exhibit zero risk (i.e. no uncertainty). This blog considers how to financially navigate uncertain times, much like ...
Apr 15, 2020•17 min•Season 1Ep. 108
We provide answers to a number of frequently asked questions below. We will continue to add new questions and update our answers as events and government announcements unfold. Questions about pausing loan repayments How does the loan repayment pause work?Banks are offering customers the ability to pause residential loan repayments for up to 6 months if they have been impacted financially by coronavirus. I provided links to each lender’s relevant webpage at the bottom of this blog post . It is im...
Apr 08, 2020•18 min•Season 1Ep. 107
With most people being required by their employer to work from home, I thought it would be timely to update you on what deductions you can claim and what evidence you need as substantiation. Start keeping record nowRemember, the onus of proof is on the taxpayer to substantiate any deductions they claim. If you use a tax agent, you probably won’t have to lodge this year’s income tax return until March 2021. How likely is it that you will remember everything you did and all the purchases you made ...
Apr 01, 2020•15 min•Season 1Ep. 106
Author and property investor, Michal Yardney says “real estate investing is a game of finance with some houses thrown in the middle”. People think that the scarce resource is investment-grade property. But the scarce resource is actually borrowing capacity – as everyone has a limit to how much they can and should borrow. In a normal market, investors that seek professional advice from a buyers’ agent will eventually be able to identify and acquire a quality asset. And if you had an unlimited bor...
Mar 25, 2020•18 min•Season 1Ep. 105
Given many people are worried about the unknown consequences of the Coronavirus, I thought it was timely for me to share my thoughts and advice. Like in all ‘crises’, it is important to not let emotion or fear drive your responses. ‘A steady hand on the tiller’ is the best approach when navigating any storm. I acknowledge that the Coronavirus may have caused significant emotional and heath distress to people around the world. I fully empathise and understand this situation and do not seek to dow...
Mar 18, 2020•24 min•Season 1Ep. 104
Borrowing to invest, particularly in property, has been a very popular investment strategy in Australia. A mortgage is a wonderful servant but a terrible master. If you use mortgages properly, in a risk adverse way, it can be a very powerful wealth accumulation tool. However, if used poorly, it has the power to destroy more wealth than it creates. After almost 18 years since establishing this firm, I thought it was timely to share some insights and observations about borrowing to invest. Inflati...
Mar 11, 2020•21 min•Season 1Ep. 103
Coronavirus’ impact on share markets is a hot topic at the moment. We’ve seen global markets fall by over 10% between 21 February and 2 March 2020. It seems that the market’s sentiment shifted literally overnight from a state of being arguably ‘over-optimistic’ to being ‘very fearful’. Some of my clients have voiced their concerns about the impact that coronavirus might have on their investments. I wanted to share my thoughts on this and what actions, if any, you might take. The share market can...
Mar 03, 2020•21 min•Season 1Ep. 102
Over the last few weeks, lenders have aggressively cut fixed rates, particularly for investors that borrow on an interest only basis. Three and five year fixed rates now range between 3.18% and 3.40% p.a. This means the cost to hold an investment property is as low as it’s ever been. This doesn’t mean we all should run out and buy an investment property. The cost to hold a median propertyThe graph below charts the annual after-tax holding cost of a median value house (average of Melbourne & ...
Feb 26, 2020•13 min•Season 1Ep. 101
I wrote a blog in December last year about how difficult personal risk insurance (e.g. income protection, Life and TPD) is becoming to obtain. Also, in December, the government directed Australian insurers to make some very significant changes to their products. I have been waiting to measure the insurers response to these directives. These changes will have a significant impact on your future insurance options. What is currently offeredBefore I discuss the changes that the government has asked ...
Feb 19, 2020•16 min•Season 1Ep. 100
With share markets at an all-time high and sentiment in the property market recovering, it is a great opportunity to divest of any underperforming (dud) investments. Not all investments perform as expected. Therefore, it’s important you regularly review them. This review should be completed without any influence of emotion – it’s all about the numbers. Let’s first discuss why now might be a good time to do this. The US share market is high, very highOver the past 11 years, the US share market ha...
Feb 12, 2020•18 min•Season 1Ep. 99
Over the past few years I have observed a strong trend of investment-grade house prices growing stronger than apartments. It is true that all markets move in cycles and all cycles come to an end, eventually. It’s my thesis that several factors (such as the fall in the volume of new apartments, contraction of borrowing capacity and high population growth) are conspiring to create a growth cycle for older-style, investment-grade apartments. Supply of new build apartments drying up, fastDevelopment...
Feb 05, 2020•18 min•Season 1Ep. 98
With term deposit rates currently ranging between 1% and 2% p.a., and the prospect of further rate cuts by the RBA, many investors are contemplating where to invest their cash. Most commentators and economists agree that it looks like the interest rate environment will be lower for longer. If that turns out to be true, term deposit returns won’t even keep up with inflation. Therefore, most people will need to consider alternative investments. However, there is one potentially costly mistake that...
Jan 28, 2020•19 min•Season 1Ep. 97
Investing in shares can produce tax benefits. But it can also result in tax liabilities too. Terms such as “franking credits” and “imputation credits” (same thing) were frequently used during last year’s federal election (the Labor Party proposed to ban franking credit refunds). However, many people do not understand these concepts. So, this blog seeks to provide a simple overview of the possible taxation consequences resulting from investing in shares. There are two types of taxes that could re...
Jan 22, 2020•17 min•Season 1Ep. 96
An independent financial advisor does a lot more than just tell you how to invest your money. In fact, a lot of the work they do is ‘behind the scenes’ so I thought it was a good idea to share this information in a blog. This will give you a better idea of what a financial advisor does, and therefore whether you might benefit from having one. Develop a long-term strategy for youOne of the predominant reasons people engage a financial advisor is to help them map out a long-term investment strateg...
Jan 14, 2020•20 min•Season 1Ep. 95
Personal insurances such as Income Protection, Life insurance and Total and Permanent Disability (TPD) are becoming impossible to get unless you are in perfect health. This change has occurred gradually over the past few years but has now reached the point that it’s become a real concern. This has a number of consequences which I discuss below. Insurers have a bad nameWe heard some shocking stories last year via the Banking Royal Commission about insurance companies including questionable and ev...
Dec 11, 2019•18 min•Season 1Ep. 94
The bushfires in NSW and Queensland recently reinvigorated the conversation about global warming and whether the Australian government is doing enough to combat it. I’ll refrain from sharing my thoughts on this topic (I’m sure no one cares what I think about this anyway), but I thought it was timely to write a blog about sustainable investing. If you are concerned for the environment, this is a way of ‘putting your money where your mouth is’. Sustainable investing grew by 35% between 2016 and 20...
Dec 03, 2019•14 min•Season 1Ep. 93
With the 2019 calendar year quickly drawing to a close, I thought it would be good to have a look at what next year might bring in terms of investment risks and opportunities. Over the years, I found that its best to form opinions on the economy by reading analysis/insights and attending economic briefings, whilst being careful to not overindulge. Too many opinions and viewpoints can confuse and sometimes send you down a rabbit hole. This should be complimented with real-world observation such a...
Nov 27, 2019•17 min•Season 1Ep. 92
According to global bank Standard Chartered, the Chinese and Indian economies are expected to more than triple between 2017 and 2030. In fact, China’s Gross Domestic Product (a measure of a country’s economic output) is predicted to be more than double the USA. This is because the International Monetary Fund predicts that emerging economy growth rates will be nearly three times higher than developed economies. However, investing in emerging markets is not for the fainthearted. Developed versus e...
Nov 20, 2019•16 min•Season 1Ep. 91
Not more than 7 months ago, according to the media, investing in property was no longer a smart way to build wealth. Labor wanted to ban negative gearing, increase Capital Gains Tax (CGT), commentators were predicting that the market would crash by more than 20%, banks were tightening lending standards and so on. Since then, the world has returned back to ‘normal’ and most of these concerns have abated. According to the media, property is now a good investment again. But what if Labor had won?Of...
Nov 13, 2019•16 min•Season 1Ep. 90
Most investors and some homeowners have interest only loans. However, the option to repay interest only doesn’t last forever. Most mortgages have a term of 30 years. Typically, the first 5 years is interest only. After that term has expired, repayments automatically convert to principal plus interest. If you have an interest only loan that is approaching the maturity of its term, what are your options? The government forced banks to curb interest only loansThe volume of interest only mortgages p...
Oct 22, 2019•13 min•Season 1Ep. 89
It feels like there is more global uncertainty at the moment. Things such as a global or domestic economic recession, US/China trade war tensions, Brexit, Trump’s rhetoric, the prospect of zero (or negative) interest rates, what property prices might do here, all seem to dominate the news. You may find these matters confusing and they can create inertia. So, how do you navigate these seemingly turbulent times? Consider issues in a long-term contextLast week, the Australian share market fell 3.7%...
Oct 09, 2019•18 min•Season 1Ep. 88
According to the Australian Bureau of Statistics, first homeowner activity has increased by 51% since March 2016. First home buyers now account for just short of 20% of all new home loans. Whilst housing affordability has improved slightly recently, it is still tough for first home buyers to get onto the property ladder. However, the current low interest rate environment and the recent dip in prices is clearly encouraging more first home buyers. So, what is the best way to help your kids get int...
Oct 02, 2019•21 min•Season 1Ep. 87
In my experience, it is common for one spouse to have a greater interest in the family’s finances. In fact, the spouse that is ‘most interested’ typically takes fully responsibility for making the family’s financial decisions. However, there are some fundamental and important flaws with this approach which I’d like to share with you. What happens if one spouse unexpectantly passes away?If the spouse that is the ‘financial decision-maker” passes away, particularly if it’s unexpected, it does caus...
Sep 25, 2019•13 min•Season 1Ep. 86
The media loves to talk about the property market; will prices rise or fall over the next year? It’s really not that important. “Timing” the market is virtually valueless, as I concluded in this analysis last year . That said, I understand the psychology behind it. People want to buy at the bottom of the market, just before it takes off and only experience the upside. There has been a lot of commentary recently about improvements in auction clearance rates, uptick in lending volume in July and s...
Sep 18, 2019•15 min•Season 1Ep. 85
Many people feel investing in the share market is a complex and scary concept. This is often due to a lack of understanding. I have written a number of blogs about the advantages of index investing. However, I thought it might be useful to take a step back and take a look at the basics of share market investing. How does the stock market work?The share market is merely a place where people come to buy and sell shares. Some people will be buyers, and some will be sellers. They will each bid what ...
Sep 11, 2019•22 min•Season 1Ep. 84
Australian’s have a well-documented love affair with property. Many people pursue the “great Australian dream” of owning their own home and over 2.1 million taxpayers invest in property. Most Australian’s also invest in the share market too, via their superannuation. However, one of the decisions that many people struggle with is whether to invest in property, shares or both. And if the answer is to invest in both, how much do you invest in each and is it wise to do one before the other? Like wi...
Sep 03, 2019•14 min•Season 1Ep. 83
You would be excused for thinking that developed economies all over the world are gradually making their way to a zero interest rate environment. Long term fixed mortgage rates in the United States are less than 3% p.a. In the UK, rates are under 2% and even lower in Europe (circa 0.50% p.a. in France for example). In Australian this week, 5-year fixed home loan rate fell below 3% p.a. And in Demark the other week, Jyske Bank announced it would pay borrowers 0.50% p.a. to take out a mortgage! An...
Aug 27, 2019•18 min•Season 1Ep. 82
We all want to stay on the ATO’s good side. No one wants to invite a tax audit. But, at the same time, it is prudent to investigate all opportunities to minimise the amount of tax we pay. This often requires a balance between minimising taxes wherever possible, but not being too aggressive that you risk getting into trouble with the ATO. My view is that you always stick within the black letter of the law – never transgressing into any grey areas – as it’s never worth it in the long run. The ATO ...
Aug 22, 2019•17 min•Season 1Ep. 81
