Vocal market commentor and fund manager, Chris Joye wrote in the AFR in November last year that Australian house prices could fall by 15% to 25% after the RBA starts increasing interest rates (here’s a copy of that article ). Of course, there are many property doomsayers that perpetually (and often inaccurately) predict property market crashes. However, Chris is not one of these people. In fact, Chris’ predictions are usually quite accurate. However, on this occasion, I disagree with his predict...
Mar 08, 2022•27 min•Season 1Ep. 200
The value of a property consists of two components being the land plus any improvements i.e., the dwelling. Generally, land appreciates in value whereas buildings depreciate over time due to wear and tear. It is possible to manufacture equity in a property by making improvements e.g. renovating/rebuilding the existing dwelling or constructing multiple dwellings. This occurs when the end value of the property exceeds its cost e.g. spending $100,000 on a renovation improves its value by $150,000, ...
Mar 01, 2022•26 min•Season 1Ep. 199
In my book, Investopoly, I outlined 8 investing rules that if followed, will help you build wealth and avoid making costly mistakes. These 8 rules are evidenced-based which I have refined over the past 20+ years. Rule number one is; play the long game . Arguably, it’s the most important rule because I’ve observed that this is the most common mistakes investors make i.e., they don’t play the long game. Whilst this rule is simple to understand, its often very challenging to follow. Short term prof...
Feb 22, 2022•20 min•Season 1Ep. 198
There is one property investing golden rule that is more important than everything else. And if you nail this ‘one thing’, you are guaranteed to build wealth over the long run. This statement might sound sensationist, but I honestly cannot overstate this point. The golden rule is that the quality of the property you invest in will drive its long-term investment returns. If you invest in an average quality property, your long-term returns are likely to be average. Of course, if you want above ave...
Feb 15, 2022•20 min•Season 1Ep. 197
This is the second part of a two-part blog about investing in commercial property (you can read part one here ). Now that you have a broad understanding of commercial property attributes, the next topic to discuss is how you can successfully invest in commercial property. Why type of commercial property do I recommend?Personally, at the moment I invest in commercial offices, and recommend the same to my advisory clients. Not retail property I do not invest in retail property because the profit m...
Feb 08, 2022•21 min•Season 1Ep. 196
I believe that most people would be well-served by investing in various asset classes, including shares and property. I do not believe that any one asset class is superior. They all have their pros and cons which you can balance out in a diversified investment portfolio, which could include commercial property. Commercial property does have some wonderfully attractive attributes but it’s important to introduce it into your portfolio at the right time (stage of life) and of course, invest in the ...
Feb 01, 2022•20 min•Season 1Ep. 195
Last week, I shared what risks and opportunities investment markets could offer us during 2022. These market expectations helped my wife and I set our personal, relationship, business and financial goals for 2022. It is stating the obvious to so say that goal setting is important. I believe that if you aim at nothing, often that is exactly what you will achieve; nothing! Goal setting gives you more control over where your life is heading. Drive the bus. Don’t merely be a passenger on it. Part 2:...
Jan 24, 2022•19 min•Season 1Ep. 194
It is stating the obvious to say that goal setting is important. The fact is, if you aim at nothing, often that is exactly what you will achieve; nothing! Each year my wife and I set personal, relationship, business and financial goals. We almost always achieve all the goals we set for ourselves each year. I want to share the process which we’ve just completed and share what I think 2022 might bring us investment-opportunity-wise, as this will help you set realistic goals. Part 1: Investment ris...
Jan 19, 2022•16 min•Season 1Ep. 193
For my final podcast for 2021, I thought it would be interesting to look back to see how various investment asset-classes performed. This is important for two reasons. Firstly, it is wise to benchmark your investment returns so that you can assess relative performance. Secondly, it serves as a salient reminder about the cost of delay and procrastination.Short-term returns are unimportantIn isolation, short term returns are meaningless. That’s because your focus as an investor must be on maximisi...
Dec 14, 2021•20 min•Season 1Ep. 192
Paying Capital Gains Tax (CGT) isn’t necessarily a bad thing because it means that you have sold an asset and made a profit, which is better than a loss, of course. That said, I’m certain that most people would prefer to pay less tax, not more. Therefore, it’s important to understand the ins and outs of CGT. Capital Gain Tax basicsThe amount of tax you must pay on any capital gain is calculated using the below formula (for any asset purchase after 20 September 1985). See here. (A) Net sale proce...
Dec 07, 2021•20 min•Season 1Ep. 191
After almost 20 years of interacting with investors (and potential investors) on a daily basis, I’ve noticed some common themes that prevent investors from achieving their potential. If you can avoid all three, you are almost guaranteed to achieve financial security.Whilst some of these matters seem relatively simple, you should not let their simplicity fool you into thinking that they are anything less than critical.Why do we tend to overcomplicate matters?I believe that investing is simple. If...
Nov 30, 2021•17 min•Season 1Ep. 190
With property and share markets trading at all-time highs, it’s reasonable and perhaps prudent to consider whether we are in a (asset price) bubble. Bubbles cannot grow indefinitely and at some point, all bubbles burst. Is the share market about to crash?Share markets around the world have been incredibly resilient throughout the pandemic and almost all markets are trading above pre-pandemic levels. That probably shouldn’t come as a big surprise, as government fiscal support here and abroad has ...
Nov 23, 2021•21 min•Season 1Ep. 189
A financial advisor’s job is to develop a plan and help you implement that plan over many years, so that you achieve your financial and lifestyle goals. This includes navigating the inevitable changes in your circumstances, markets, investments and so forth – knowing when to stick to the plan and when to alter it. Achieving your financial and lifestyle goals is an incredibly valuable outcome. Therefore, it is very likely that financial advisory fees will be a small fraction of that value. Just l...
Nov 16, 2021•23 min•Season 1Ep. 188
It is becoming increasingly difficult to buy an investment-grade house for under $1 million in Brisbane, Melbourne and Sydney. This begs the question; if your investment property budget is less than $1 million, where and how do you invest it? Brisbane is becoming more difficultIn early August 2021, I presented an investment case for buying an investment-grade home in Brisbane. My wife and I subsequently followed this advice (I put my money where my mouth is) and we purchased an investment-grade ...
Nov 09, 2021•21 min•Season 1Ep. 187
The topic of rising inflation and its potential impact on interest rates has been dominating the financial press over the past few weeks. The bond markets expect that higher inflation readings will force central banks to raise interest rates. It’s my opinion that higher inflation is likely to be temporary. And it’s also useful to remember that “markets” (and popular opinion) are not always right. Bond markets priced in higher inflation in February 2021 but eventually normalised after a few month...
Nov 02, 2021•20 min•Season 1Ep. 186
Will the property market ever crash?I started ProSolution almost 20 years ago and if there’s been one common theme over that time, it is how “expensive” property is. This theme can be expressed in many ways such as predictions of property market crashes, housing affordability “crisis”, comparison of Australian property prices to other parts of the world and so forth. This noise is often unhelpful for property buyers. The reality is that property has always seemed relatively expensive. And it’s p...
Oct 26, 2021•20 min•Season 1Ep. 185
I wrote a blog in February 2020 highlighting the first phase of government mandated changes to income protection insurance products. The second phase of changes were implemented at the beginning of this month, and they are very significant. This blog discusses these important changes and how they may affect you. BackgroundIn December 2019, the insurance industry’s regulator (APRA), released a report outlining a number of compulsory changes that it mandated for income protection insurance product...
Oct 19, 2021•22 min•Season 1Ep. 184
I have noticed that more people are attracted to seeking out work that they have a personal connection with, particularly since the beginning of Covid. That is, for a growing number of people, the emotional rewards (satisfaction) that their work offers is becoming more important than the financial rewards. This might include working in the not-for-profit sector, working for a socially conscious organisation or starting their own business. Of course, not everyone has the flexibility to immediatel...
Oct 12, 2021•19 min•Season 1Ep. 183
Federal Treasurer, Josh Frydenberg has asked the Council of Financial Regulators to investigate the fact that credit growth is materially outpacing growth in household income and to advise on any policy responses. In lay terms, the Treasurer is worried that people are borrowing too much money compared to their incomes and that could be risky for the economy. Increase in home lending is pronouncedIt has been well documented that house prices in Australia have been rising at a fast pace over the p...
Oct 05, 2021•19 min•Season 1Ep. 182
Personal insurance is becoming more difficult to obtain and increasingly costly to maintain. This blog outlines the approach we take when formulating how much insurance our clients need and strategies to manage its cost. What is personal insurance?This blog refers to personal insurance only. That typically includes up to four products:§ Income protection insurance – which pays a monthly benefit if you are unable to work due to illness or injury;§ Life – pays a lump sum benefit if you die;§ TPD –...
Sep 28, 2021•18 min•Season 1Ep. 181
How to value stocks – an introduction to valuation conceptsTwo years ago I wrote a popular blog that explained some simple share market concepts and jargon (see here ). Building on this introductory information, I thought it was timely to discuss basic share market valuation principles to help investors assess whether a stock is over or under valued. To be clear, I’m not advocating investing in direct stocks. In fact, there is an overwhelming amount of evidence that demonstrates direct share inv...
Sep 21, 2021•24 min•Season 1Ep. 180
Over the past 20 years, the US share market has risen 5-fold, the Australian share market 5.4-fold and Australian property 4.2-fold. That means if you invested half a million dollars 20 years ago, in either shares or property, it should be worth between $2 and $2.5 million today. You’d have even more money if you added some gearing . This observation raises an interesting question. That is, why aren’t more people independently wealthy? I suspect the answer lies in their actions, or more correctl...
Sep 14, 2021•21 min•Season 1Ep. 179
Borrowing to invest in property is a popular and highly effective wealth accumulation strategy if it’s implemented correctly. However, loan structuring can often be an afterthought. The reality is that loan structuring and maximising your borrowing capacity is almost just as important as buying the right property. This blog sets out how to structure your loans to build a property portfolio. A step-by-step exampleThe video below takes you through an example of how to structure your loans. See vid...
Sep 07, 2021•23 min•Season 1Ep. 178
Investing in the share market is a relatively easy, simple and a low-cost investment strategy to implement, if you know the right way to do it, of course. However, if you don’t know what you’re doing, it’s easy to mess it up. In this blog, I set out how to implement a highly successful (over the long run) share market investment strategy using a low-cost, evidence-based approach. Of course, the information in this blog (and in fact, in all my blogs) is general in nature. It’s not written or tail...
Aug 31, 2021•25 min•Season 1Ep. 177
Approximately half of Australia’s population is currently in a lockdown, and this may continue for another few months until vaccine target levels are reached. I wanted to discuss what impact this may have on the property market and the broader economy. Of course, there are wide ranging impactsThe impact of Covid lockdowns can be wide-ranging. Dealing with the challenges of home schooling, not seeing family, not enjoying your normal pastimes, business failures, job losses, mental health challenge...
Aug 24, 2021•21 min•Season 1Ep. 176
Land tax is levied on the value of an investor’s landholdings on 31 December each year. It is an insidious tax as any land tax is relatively small when you initially purchase an investment property but typically increases each year. As such, the problem is that it can become quite costly by the time you reach retirement – a time when it’s preferrable to pay less tax, not more. There may be several opportunities to minimise land tax which are discussed in this blog. Land value is a vital attribut...
Aug 17, 2021•20 min•Season 1Ep. 175
As a completely independent advisor, I have no vested interest in how my clients invest. Whether they invest in property, shares or any other asset class makes no difference to my life. Of course, I want them to invest in (1) assets that are most appropriate for them and (2) assets that provide the highest returns without taking unacceptably high risk. I know that if I help my clients invest successfully, they will continue to remain clients and therein lies my firm’s success. Often investors co...
Aug 10, 2021•19 min•Season 1Ep. 174
I hosted a seminar in August 2018 where I presented an investment case for (investment-grade) houses in Brisbane in the $800,000 to $1m price range. It was my thesis that they represented excellent value and had a high probability of delivering above-average returns in the medium term. An investment grade house that sold for circa $800,000 in late 2018 would be worth well over $1 million today. Depending on your financial position, existing assets and investment strategy, an investment-grade pro...
Aug 03, 2021•19 min•Season 1Ep. 173
It is not unrealistic to expect your super returns to be over 20% for the financial year ended June 2021. Of course, this is a great outcome in what has been a tumultuous year. However, I would like to highlight some important observations and considerations. And the 2021 winner is…The table below sets out investment returns for the largest 8 industry funds based on a Balanced investment option (data from Lonsec). The table is sorted by 1-year returns, highest to lowest for the financial year en...
Jul 27, 2021•21 min•Season 1Ep. 172
One of the challenges that many investors face is deciding what to invest in, how much and when. There are three methodologies that you can employ to help make this decision, but only two are supported by evidence. What is mean reversion?Mean reversion is a financial theory that suggests a period of above average returns is often followed by a period of below average returns, such that the average return over both periods is close to an asset class’ long term mean (or average) return. Many acade...
Jul 20, 2021•13 min•Season 1Ep. 171
