Many people are attracted to borrowing to invest in property because of negative gearing tax benefits. That is, the (income) loss that an investment property generates helps reduce the amount of tax you pay on your salary or business income. However, investing in shares also offers unique tax advantages. I thought it would be interesting to quantify and compare the taxation outcomes of these two investment options. Taxation of share market investments Investing in shares can result in some attra...
May 16, 2023•18 min•Ep. 257
Borrowing capacity has reduced by around 30% over the past year due to the impact of higher interest rates and the increased 3% interest rate buffer that banks must use to calculate your borrowing capacity. This was eloquently depicted in this chart by CBA in February 2023. I wanted to explore the common strategies that people can use to safely maximise their borrowing capacity. How to borrow safely I’ve written several times that building wealth is a marathon not a sprint. Whilst it is good to ...
May 09, 2023•17 min•Ep. 256
The unrefuted trend in all investment markets is mean reversion . It means that a period of below average returns is always followed by a period of above average returns. It is my thesis that investment-grade property in Melbourne looks attractive compared to other markets and that there are several economic tailwinds that may result in the median house prices doubling over the next decade. The macro environment is positive for property In short, property prices are driven by the law of supply a...
May 02, 2023•18 min•Ep. 255
I was listening to Morgan Housel’s new podcast recently (which I highly recommend by the way), and he said something along the lines of; once you define your investment philosophy, you won’t be distracted by any noise that doesn’t align with it. It really resonated with me. Success with investing is more about avoiding mistakes than anything else. Therefore, having a clear, well-defined (evidence-based) investment philosophy will help you avoid getting distracted by any unhelpful ‘noise’, and ke...
Apr 25, 2023•13 min•Ep. 254
Most people struggle with knowing how to invest their money. Do they upgrade their home, contribute more into super, buy an investment property, invest in the share market, or something else? In fact, this common challenge was the reason that I decided to write my book, Investopoly . I knew that if people understood the fundamental financial planning concepts (i.e., the 8 rules outlined in Investopoly ), they might be able to figure out the answer themselves. Whilst everyone’s situation is diffe...
Apr 18, 2023•19 min•Ep. 253
Every few months, there’s a story online about an investor in their 30’s that has amassed a property portfolio of 12 properties…and how you can do it too. Firstly, we shouldn’t be impressed by the number of properties that someone owns, as it doesn’t tell us anything about their wealth (equity). Boasting about the number of properties you own is like a business boasting about the number of employees it has. It’s often an ego trip. Secondly, there’s nothing impressive about borrowing huge amounts...
Apr 11, 2023•17 min•Ep. 252
Everything you must know before you refinance: https://www.prosolution.com.au/ebook/ =================== Share markets have been highly volatile over the past couple of years. Markets fell by circa 30% when Covid hit in March 2020 and then proceeded to boom until the end of 2021, fuelled by government stimulus and zero interest rates. However, markets fell by circa 20% in 2022 after central banks aggressively hiked rates. It’s been a wild ride. Arguably, these large volatility events should have...
Apr 04, 2023•19 min•Ep. 251
Typically, you need a budget of circa $1.5 million to purchase an investment grade house (investment property) in Melbourne, less in Brisbane, and a lot more than $1.5 million in Sydney. Of course, not everyone can afford this budget, so I wanted to discuss how to buy the highest quality property possible within your budget. This blog will still be useful even if you do have a budget of $1.5+ million, as it will help you understand what “investment-grade” property means. What makes a property in...
Mar 28, 2023•25 min•Ep. 250
eBook Download: https://www.prosolution.com.au/ebook/ We are all aware that central banks around the world have been hiking interest rates to reduce inflation back to normal levels. The US economy, and particularly the labour market, have been more resilient than most expected. This means the US central bank might have to hike interest rates higher than in other jurisdictions to tame inflation. A consequence of this is that it will probably send the US economy into recession. And if history repe...
Mar 21, 2023•20 min•Ep. 249
Ensuring your accountant collaborates with your financial advisor is important, as they will be able to discuss and workshop ideas to improve your financial position. However, in my 20+ years of experience, this collaboration almost never occurs, unless they work in the same firm. Theoretically, there shouldn’t be any impediments to these two professionals working together. Practically, it doesn’t happen and depending on the complexity of your situation, it could be costing you. Accountants and ...
Mar 14, 2023•13 min•Ep. 248
It is stating the obvious that private school education is expensive. If you are uncertain whether you would like to send your kids to a private school, I thought it would be interesting to consider some alternatives and put the costs into perspective. The public versus private school decision is a very personal one influenced by many considerations, including financial. I acknowledge that many factors may be more important than financial consideration. However, in this blog I would like to focu...
Mar 07, 2023•14 min•Ep. 247
It has certainly been a wild ride for property investors over the past 6 years. In 2017 and 2018, the banking regulator demanded banks reduce the volume of interest only loans, particularly to investors. The media called this the “interest only cliff” and predicted that many borrowers would face financial stress when loan repayments switched to principal and interest resulting is higher arrears and default rates. It didn’t. Then in 2018-2019, Bill Shorten (you will recall that everyone was expec...
Feb 28, 2023•23 min•Ep. 246
It is often debated which is a better investment, property or shares. It is my thesis that property is an okay investment, but not as good as shares. However, when you factor in gearing (the ability to borrow to invest), property becomes a wonderful investment – better than shares. Property versus shares The main advantages of shares (compared to property) include: § You can outsource the management of a share portfolio to an advisor. However, as a property investor, you may need to spend time t...
Feb 21, 2023•15 min•Ep. 245
I’m a big advocate of value investing . If you buy high a quality investment for fair price and hold it for the long run, you can’t help but make a lot of money. But if you can buy the same quality asset cheaply (below its intrinsic value), then it’s likely that you will make even more money. This is what value investors attempt to do. You can adopt a value investing approach with many asset classes, which I’ll discuss later. However, for most of this blog, I’ll use shares as an example because ...
Feb 14, 2023•18 min•Ep. 244
It has been very well reported that many mortgage holders will soon be paying much higher interest rates when their fixed rate terms expire. It is estimated that $478 billion worth of fixed rate mortgages are due to expire in 2023. In addition, borrowers may also have to navigate the end of an interest only term, which typically apply to investment loans. This blog sets out our advice on how to navigate these changes. What are your options? Fixed rate expiry If your fixed rate is maturing, you h...
Feb 07, 2023•19 min•Ep. 243
It is often suggested that it’s a lot more difficult for people to buy their first property compared to many decades ago. It is true that property is a lot more expensive. However, I would like to suggest that in many respects, buying a property today is easier than it was many decades ago. I would like to start by highlighting the main advantages that property buyers enjoy today compared to many decades ago. I’ll address the affordability issues once I’ve done that. Abundant access to informati...
Jan 31, 2023•27 min•Ep. 242
Good cash flow management is by far the most important practice that you must master to be successful at building wealth. I realise that it’s not a particularly popular topic, but bear with me, because it’s an easy thing to master if you know how. It won’t take you much time, and you will feel more empowered and in control as a result. You can’t expect to build wealth if you spend all your income Investment returns alone won’t help you build wealth, unless you already have a large investment bas...
Jan 24, 2023•15 min•Ep. 241
In 1905, George Santayana wrote; “Those who cannot remember the past are condemned to repeat it.” That’s why it is always worthwhile to reflect on the past year to identify any lessons that we can learn. Below I share the investment lessons that I believe last year taught us. Review of markets in 2022 Firstly, let’s review what returns various asset classes generated in the 2022 calendar year. The US market lost around 20%. However, if you were an Australian investor (unhedged) you would have on...
Jan 17, 2023•17 min•Ep. 240
This was the third most popular podcast episode in 2022. My aim for this topic was to give investors an insight into the strategic process that I follow to develop a holistic, long-term financial plan for my clients. The topic obviously resonated with people. I hope you enjoy it and here’s a link to the blog in case you want to read it (instead of listing to the podcast). 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...
Jan 10, 2023•23 min
This was the second most popular podcast episode in 2022. My aim for this topic was to educate investors about the fact that investing a little bit each week, fortnight or month is much better than investing on an ad hoc basis. You may have seen the idea that improving something by 1% each day for one year results in a 37x improvement – small, regular improvements create massive results over the long run. The topic obviously resonated with people. I hope you enjoy it and here’s a link to the blo...
Jan 03, 2023•17 min
This was the most popular podcast episode in 2022. The idea behind this topic was to share some basic economic principals to help people understand economic commentary, political rhetoric and so on. The topic obviously resonated with people. I hope you enjoy it and here’s a link to the blog in case you want to read it (instead of listing to the podcast). 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...
Dec 27, 2022•20 min
As you are aware, the RBA has aggressively hiked rates by 3% p.a. over the past 8 months, so variable home loan rates are now more than 5% p.a. (and investment loans approaching 6% p.a.). Fixed rate borrowers have avoided these higher interest rates. However, a lot of fixed rates will begin expiring next year. As such, many borrowers are facing much higher (40%+) mortgage repayments next year. These higher interest rates will have a huge impact on consumer discretionary spending and economic gro...
Dec 13, 2022•13 min•Ep. 239
I was interested to watch this YouTube video produced by ETF manager, BetaShares which compared the differing views of Warren Buffett and billionaire fund manager, Ray Dalio. Both men have been some of the most successful investors over the past 50+ years, yet they have opposing views regarding investing in gold, which I find very interesting. How well has gold done? As depicted in the chart below , the (USD) gold price has appreciated by 7.66% p.a. since 1970. However, between 1980 and mid-2002...
Dec 06, 2022•13 min•Ep. 238
The Albanese government’s first Federal Budget last month was a bit of a fizzer in that there wasn’t much in the way of changes that affected investors and superannuants. However, subsequent murmurs by politicians’ hint at proposed changes that the government may be contemplating. In particular, I wanted to address these potential super changes and how they may impact you. Higher super contribution taxes for higher earners In 2011, the Gillard government introduced a higher rate of tax that appl...
Nov 29, 2022•18 min•Ep. 237
CoreLogic data indicates that property prices in the 5 largest capital cities have fallen by 7.1% since May, when the RBA started hiking interest rates. Sydney has seen the largest price fall – down by around 10%, and Melbourne has fallen by 6.7%. But it’s not all bad news. House prices in Brisbane, Adelaide, and Perth are still materially higher than they were a year ago . I wrote a blog in March in response to fund manager, Christopher Joye’s prediction that property prices would fall 15% to 2...
Nov 22, 2022•18 min•Ep. 236
There are many large and powerful institutions that have a vested interest in rising property prices. But all levels of government (i.e., federal, state and local) probably have the most to gain, as I’ll explain in this blog. This leads to two important observations. Firstly, the government is the main contributor to housing affordability pressures i.e., making housing less affordable. Secondly, government tax revenues are dependent upon rising prices and demand for property. I don’t want to deb...
Nov 15, 2022•19 min•Ep. 235
I recently appeared as a guest on The Australian newspaper’s Money Café podcast , where we discussed the FIRE moment. The acronym stands for Financially Independent, Retire Early , which involves living as frugally as possible, investing as much as possible so that you can afford to retire as soon as possible. A listener that works in the mental health sector wrote into the show to say that she would actively discourage people from retiring early. Instead, perhaps work less, she suggested. She b...
Nov 08, 2022•16 min•Ep. 234
A common question I receive is how much should I invest in property? That is, how do you know when you have enough, and should you start investing in other assets? It’s a good question because it invites people to consider their goals and develop a long-term strategy to achieve them. I set out some of the factors that you should consider below. But ultimately, it really depends on personal circumstances. Rule of thumb is you need 20 to 25 times income The first consideration is the value of the ...
Nov 01, 2022•18 min•Ep. 233
Calendar year to date, the stock and bond markets have produced some of the worst returns on record, which is unusual because bonds and stocks are typically negatively correlated. In fact, this has only happened two times over the past 96 years, as illustrated in this chart . Even gold, commodities and property have lost value this year. It’s really been a horrible market for investment returns. I discuss the key risks that have driven markets lower below, as well as highlighting the investment ...
Oct 25, 2022•17 min•Ep. 232
The very first article that I wrote for a magazine was published 19 years ago! No wonder I feel old. The article was called ‘Unlimited finance…’. My thesis was that investing in high yield properties, doesn’t magically extend ones borrowing capacity allowing them to invest a lot more. Some investors believe targeting high rental yielding investment properties will allow them to borrow a lot more and therefore buy more properties. And the more property they hold, the more wealth they accumulate, ...
Oct 18, 2022•17 min•Ep. 231
