Hello.
My name's Santasha Nabananga Bamblet. I'm a proud yr the
Order Kerney Whalbury and a waddery woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on a wondery country, acknowledging the elders, the ancestors and the next generation coming through as this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow.
Let's get into it. She's on the Money.
She's on the Money. Hello and welcomed. She's on the Money podcasts for millennials who want financial freedom. My name is beck Syed and with me is Victoria Divine.
How good is salt and vinegar chip?
Ah?
I was wondering if you'd be finished that mouthful by the time I'm talking.
Nearly finished the mouthful. That was quick. I'm very impressed.
It was not comfortable, no, very jagged going down, isn't it?
But there is no better combination than sultan, vinegar, chips and watermelon.
Oh my gosh, okay, I wouldn't have thought, but now they mentioned it, I can see yeah, because it's a bit juicy.
I mean, you're not putting them in your mouth at the same time. Okay, you've got like a little snack of watermelon, which I do, and then you've got a little snack of salt and vinegar chips, which I do.
Okay, got cha, gotcha?
Gotcha?
Anyway, were talking about Oh yes, okay, I forgot that we're doing a podcast so va it's actually a food podcast now for real shit foodies.
Honestly, I'd be happy with that. So obviously, as you know, we are living in a world where rental housing has been increasingly converted into investment assets. It has indeed, so we've seen much debate in our lives in the broader community that people shouldn't own an investment property till.
Everyone has a house. Spicy opinion.
I would tend to agree, but you know there's complications anyway. So today what we're talking about is ethical landlords, so mean, is it possible? Also, what are our Australian values around renting and more globally, what's the landscape? I think first things first, there was not one circumstance that created our current housing christ sure, but literally hundreds of years of contributing problems income inequality, colonization, car centric urban sprawl, and urban renewal.
To name a few.
With such complex societal problems, I just don't think that there is a single solution that fixes absolutely everything back.
So can an ethical landlord, in your opinion, exist or is this an Oxymoronah.
It's such a spicy opinion.
But there are so many different opinions on this, and it really depairs on your personal values.
We can't answer that for anyone. Really.
At the end of the day, it is personal, and that's the best part about it. You get to have your own opinion, and our entire community is a sea of different opinions and that's what makes us so beautiful.
But there are lots of things landlords can do to be.
More you could say, ethical and help with housing equality and access. In the second half of the show, Beck, we're going to talk about things to consider as a landlord to make the dynamic with tenants a little bit more ethical, and also discuss the difference between a residential owner occupier loan and an investment property loan, which I think are important to understand when it comes down to property ownership in general.
Okay, okay, okay.
As you know, Australia has very much had home ownership as one of our cultural aspirations slash expectations.
Beck, it is the great Australian dream after all. Well, exactly everyone should own a property, right Beck. Well that's what they say, it's what might be the authorities say it's actually just our dads exactly.
But obviously rising housing costs, economic recession and demographic changes have shifted that possibility in more recent history, and home ownership isn't a priority for many other countries in the world. Which countries are more rent happy and why.
It's actually interesting to dive into this, Beck, because I think we live in our beautiful Australia bubble, right Beck, Like, we have these ideals that have been handed down from generation to generation that we should own property, right, whether you do or don't, it's something that in school you learned about. It's just something that is ingrained in our
culture in a way. But that isn't the way most other countries are, to be honest, Like so many other countries actually have this expectation that you will rent for life and I mean, there's a lot to say around renter equality and how they're treated and how in different countries. There are lots of different benefits like longer leases, etc.
Etc.
That actually lean towards people being even more comfortable with renting. But here are the top five rent happy countries in the world. So Switzerland fifty six point six percent of their population rent okay, Hong Kong forty nine percent, Germany forty eight point one percent, Austria forty four point three percent, and South Korea forty four point eight percent.
Beck.
However, there are also, I guess on the flip side of that. When you keep going down and down then down the list, you could start saying that there are like people who own more than they rent. So in Singapore only nine point seven percent of their community rent oh Slovakia ten point seven percent rent Russia twelve point nine, Poland sixteen point three and Norway seventeen point two percent of people rent okay.
Is that crazy? It is crazy?
So what data is out there about countries within ingreen culture of property ownership?
Beck?
Because I'm a superherd.
Recently, in lead up to this episode, I was reading an apps from a twenty twenty one research paper out of America called Rental Tenure and Rental Burden.
Of course you were, yeah, of course, Savlos.
But I found it really interesting and I have summarized it into four dot points that I can share with you so that you don't have to read.
It for yourself. Would you like me to do that?
Yes?
Please, So rentals around the globe accommodate for one point two billion people. The data they found that the more developed the country, the more people tend to rent, and vice versa.
Ah.
This was most obvious in.
Europe, where formerly communist countries have a high prevalence of homeowners.
It is first and foremost a.
Cultural thing, but laws and regulations in certain excommunist countries can make renting a nightmare.
Two.
While in Western and Central European countries like Switzerland and Germany, around half of the households were renting in twenty fifteen, in the czechs Republic, only two out of ten households were choosing to do so. Interesting in Russia and Slovakia, the share of renters is even lower. Only one out of ten households didn't own their home in twenty fifteen, and owning property is arguably the holy grail of the Eastern European society, a much coveted and highly valued right
that was once taken away. So long story short, the further east you go in Europe, the more people own, and the further west you go, the more people rent.
More or less.
That is so interesting. I wonder why that is culture communism.
I won like about the developed nations.
And it kind of makes sense, right, The more developed a country, the more people rent because property prices are significantly higher. Yeah, and you think about this in high density environments. And I think the best high density environment that I think we all know about is New York, right, So we all know inherently the New York property is cooked, right, Like, no one in New York basically owns. They all rent, and they do so because it's like a central business hub,
which is incredibly expensive to live in. So the more developed your country, not necessarily talking about America in general, it's just an example, but the more developed the country, as we know, Switzerland is pretty good. YEA, like Switzerland, they're bullers, they know so much stuff like, they are full of rich people as well, But fifty six point six percent of people rent there because I'm assuming.
Coperty prices are astronomy app Yeah, so that makes sense, That does make sense.
And Australia we are billions years old. Yes, but since the white people invaded Australia there has been two hundred years of development, and that is so little in comparison to the development that international countries have had right around the world. It's been thousands and thousands of years. And now Australia is kind of going, oh, actually we're becoming incredibly developed and land is becoming a resource that is actually limited, whereas before with our population and how big
our country was. It's a great Australian It's very easy to buy property as cheap as chips.
Sure not anymore, not anymore. This is a really good time to go to a quick break.
I think we should go to a quick break before we get real heated. Yeah, I think so.
On the flip side, we're going to be discussing the difference between a residential owner occupy alone an investment property loan. Sounds fun, plus some things to consider as a landlord to make the dynamic with tenants more ethical, stunning, don't go anywhere, I got it, okav We are back. And so, as I mentioned before the break, we are going to be talking about some key points of residential owner occupy alone and investment property loan. Are you ready?
I'm very excited.
Would you like me to read the key dot points that I listed for this part of the conversation?
Yes? Please?
You can't wait, can you?
I can't wait?
You're a liar, all right? So here are the main points. So, if you're getting an investment loan, borrowing is actually going to be different to if you're going to get a loan for a property that you're going to live in. Why because we need to take into account things like rent received, but also any rent payable or mortgages payable
for when you keep living there. When it comes to investment loans, you can opt to pay what's called interest only if you want, which is where you aren't paying the loan down, just the interest portion of that loan. Or you could pay what's called P and I, which is principal and interest, which is paying the loan off completely, like not in its entirety, but like a portion of what you would pay each month would go to the principle and a portion would go to the interest, whereas
interest only. You're only paying the interests, so usually it's much more cost effective in the short term, but you're not paying your asset off in the long term, right, so you can opt for interest only. However, it's actually way less common to choose this on the property that you actually live in and own right, So often it's an investment thing where an investor might go and purchase a property beck and go, I'm going to purchase this property.
I've worked out the maths on it. The reason I am purchasing this property is because in the next ten years, I think it's going to.
Double in price.
Really great area, really great location.
So I'm actually going to probably plan to sell it in ten years, so I don't want to pay any of the loan off stuff that that's silly to pay off the loan. What I'll do is I'm going to pay off just the interest portion.
Of the loan, so I'll pay the banks their fees so that I can get the property.
Then I'm going to sit on the property for ten years. I'm gonna get my rental income hopefully that covers some of that interest only portion, and in ten years we're going to look at my property and hope that it has increased in value.
And let's say you.
Purchased an apartment in Richmond for four hundred thousand dollars ten years ago, maybe that is worth six fifty seven fifty now, very very likely. So you go, actually, you know what I'm going to do going to sell that property. I'm going to pay back my loan, and it's entirety of that four hundred and fifty thousand dollars that I borrowed from the bank.
The rest is profit.
Obviously, you have to pay tax on that because it's investment income.
But a lot of people do it this way.
Very uncoman to do that for your family home, because usually the intention is to get your family home, pay off your family home, live in it without having any mortgage or rent or anything overhead. Right, So the priorities are usually different, which is why often you don't see that many people putting their home loan on interest only.
If you are choosing that, it usually is for a short period of time, beck And usually that short period of time is because you know, interest rates have gone up to seven point two percent and money and cash is really tight, So you go, you know what, I can take a bit of the pressure off right now, beck by going to interest only for a short period of time while I rEFInd my feet, or interest rates come down a little bit and take a bit of pressure off because this is all.
Too much, right?
Does that make sense as why you would and wouldn't do that? For investment loans, you actually need a larger
deposit than you do for owner occupyer loans. Most banks for investment, although you can totally go down the LMI space, they want you to have a minimum loan to value ratio of ninety percent including l am I, although exceptions for some banks will you know, go slightly higher here, whereas most banks actually allow ninety five percent including LMI for owner occupy, which is kind of cool, right, So it means that banks, essentially, you know, this is not
including any government schemes. Essentially, there are some banks who will let you purchase owner occupied properties for a five percent deposit back, or as for investment property, that.
Is not the case.
Okay, I understand, because there's a lot more risk in investment property than there is a property that you're going to.
Live in, yes yourself, Yes, I see. Okay, this is.
Probably a really really good time to plug the guys at Zela Money, the guys, the gals, the team at Zela Money to be like, if you're thinking about this and this conversation about interest rates and mortgages is overwhelming, yeah, go talk to Kate and the team. Honestly, they're good eggs doing good things. And if you don't have a five in front of your interest rate at the moment, if it's higher than that, go see them to get
it all fixed up. Because often when you have an investment loan back, what happens is you're usually more likely to be on a variable interest rate, which means it might have gone up. And if you haven't checked your interest rate recently and just assumed it's the same as what it always was, triple check it because it could be higher than what you're expecting it to be. I don't mean to scare people. I just want to make sure everyone's in a good financial position.
I love that about you, V.
Thank you trying my best.
So if you're buying an investment back to the actual episode, sure it means that if you're a first home buyer, you actually don't get any discounts on stamp duty or like the first home buyer benefits that exist, and you can't go with any of the first home buyer schemes if the purpose isn't owner occupier, even if it is
your first property. So if you're planning on purchasing your very first property and it's all very exciting, make sure that you've looked into it and you're not just assuming that you get access to the first home super savor scheme immediately or you're going to get the first home you know grants in your state or territory, because it doesn't necessarily mean you'll get it for an investment property.
In fact, the expectation would be that for you to access that, you would live in the property for a minimum of six to twelve months before then renting it out and making it an investment property.
Sure makes sense, That does make sense.
So rates are higher with investment loans than owner OK, which is interesting but also worthy of consideration because I think you just go into it often just assuming the same right or just get a home loan whether I live in it or I have it as an investment property, And that's not the case, not.
The case, not the case.
Interesting pun intended. Yeah, that's a good pun, pretty good, so V what are some things to think about as a landlord.
I feel like there are a lot of things the world has enough not so nice human beings.
So be a nice human, I think is at the crux of it.
And remember that your tenants are human beings as well, and they deserve to be treated as human beings. You have taken on this responsibility of becoming a landlord completely consensually. Beck Like you did accidentally become a landlord and you hated the idea of it. You decided that investment property was for you, and one of the ways you were going to make money from investment property was to tenant the property.
And that makes sense.
But that doesn't mean that you get to treat those people like trash. It's absolutely not the case. And I think that it doesn't take that many brain cells to just be a kind human like. It's actually, from my perspective, your responsibility to make sure that if you're going to
have tenants, you've thought about your emergency fund. You've thought about all of the things that could potentially go wrong, and maybe you have a separate property emergency fund so that if something goes wrong, because inevitably improperty it does, and unlike it going wrong in your own house, it usually has to be fixed immediately. Water goes off, beack, like the hot water system completely breaks.
I would look about it at my house for a minimum of a week. I'd probably go and you're like, share it.
At the gym, and just like put off purchasing a new hot water system for as long as possible. You know, yea, if it breaks in your tenant's house, it's classified as an emergency. You have to fix that immediately. Like that's not an if a butt a. Why There's so many different things that could go wrong that are your responsibility, Like and I just don't think it takes that many additional steps to make your tenants feel warm and welcome,
like small things. Could you just leave a little nice note, maybe like a box of roses and be like, hey, Beck, so excited that you're moving into our property. We love this property. We hope you love it as much as we do. You know, if you've got any issues, contact your property manager.
They're amazing. We've picked them because they are kind. Or you could say, here's my number.
If anything goes wrong, you're more than welcome to contact me. I remember moving into a rental and being mind blown. When someone did that to me, I was like, oh my god, that's wild.
They care.
But there's so many different things that you could do. One just don't be a trash human.
Sure.
The next is really understanding, like why are you trying to increase rent? Is this an ethical decision?
Right?
I think there is a big conversation to be had, especially right now around all right, Beck, so you've got an investment property. Interest rates they're cooked. They've gone up so much. You didn't see them going up this much. Totally get it, Totally understand that you're under some financial pressure. Is that financial pressure your tenant's responsibility.
That's a tough one.
You're the one that chose to have an investment property. Your tenant chose to rent a property for less, pretend five hundred dollars a week. At that amount, they thought, oh, we'll go up, you know a little bit each year in line with inflation. In Line with inflation is usually between two and three percent. I think most of us
calculate for that. Sure, but your landlord, their mortgage repayments have gone up, and it couldn't possibly come out of their back pocket to have to cough up some money for the investment property that they own because interest rates are doing what interest rates do and fluctuate. I find it incredibly rich and I'm going to get people jumping
down my throat about this. You want bring it on, that's fine, sure, But if you are astronomically increasing your tenants rent because you cannot afford the mortgage, the actual question here is when are you selling your property right?
Because what you've just.
Told me is you cannot provide ethical housing, fair housing. You can't afford to do that, meaning you can't afford the property that you own right now, right So what are you going to do? Is it coming out of your back pocket? And the end of the day, that money should be coming out of my personal savings, It should be coming out of my offset. It should be coming out of that because I'm funding this investment property
that ultimately should be an investment. It's not your tenants responsibility to pay your astronomical mortgage or payments because you're the one that committed to that. They didn't commit to that. True, they committed to paying the average rent. Maybe they're paying a bit more because you've got a real fancy house. Yeah, they committed to that area because it was making sense to them. And you know what, there are a lot of people in this world and in our community who
choose to rent because they like consistency. Like they might not like the idea of variable interest rates. They might like the idea of the flexibility of being able to move whenever they want, only having a one year lease. They might like the fact that they can guarantee that their property costs are going to be five hundred dollars a week and if the hot water system breaks, it's not their responsibility.
And that's fair.
Yeah, because that's the deal that you and I have when we sit down and I go, Beck, I'm a property owner, I'm going to lease it out, and you go, no worries. Here's this lease agreement outlining the terms and conditions of this lease. This is what I'll bring to the table, the cash holder. Ah, And this is what you'll bring to the table, yeap. It really grinds my gears when people say, oh, Victoria have no other option but to put up the rent. Have you seen the
mortgage repayments? You can't afford your mortgage of payments? Okay, Well, one, you should factored this in a good mortgage broker would have sat you down and made sure that any fair variability was accounted for, that you could have paid more that you know there was a plan in place. Any responsible and ethical landlord would have their own property emergency fund. Any responsible and ethical landlord would know when.
To pull out.
That is a micdrop mode.
Like if you cannot afford to keep the investment property that you currently have, that's actually okay. That's the risk you took on when you got the investment property, is that your circumstances might change and this investment asset might not work for you forever.
Sure, you don't get to keep it just because you think that you deserve it. It makes me very, very angry.
I think the other conversation is really around you know, and obviously there's so many legalities around that in some states and territories you can only put rent type X amount, or you can only do xyz every twelve months or
everywhere it's different. But I really think it comes down from my personal opinion, which you know, this podcast should be really about putting all the information on the table then being like beg you make your own decision, but like my opinion right now is don't be a dear. And I think that's really relevant. Sure, And I think that if it comes down to it and you're listening to this and you're like, oh, Victoria's off her rocker, like she doesn't understand it. Oh no, Bay, by my
own property, I understand that I have an investment property. Yeah, And if I can't afford that one day and it was tenanted, I know deeply that that's not my tenants responsibilities to carry the weight of my investment.
It's not.
I love that at the end of the day, you need to know when an investment is serving you, and when an investment is not serving you, and when to dispose of one. I love as you took that on yourself as a perpetual tenant.
I thank you.
It just makes sense.
It's not about thanking me, it's about going Actually now we talk about it, because I think that there's just so much conversation coming from tenants and then being like, Oh, they're just annoyed because they're tenants, right. No, no, No, I'm a property owner. I now own an investment property of my own, and I cannot imagine putting that responsibility
on somebody else. Love that sis it makes me so mad. Also, when you have to put up rent, I think clear and honest communication about why when we're and how Like I know a couple of my friends who own investment properties have had to put up their rent because during COVID they offered their properties for really really discounted rent. Sure and now it needs to be brought back to
market value. But it was articulated at that point in time, like oy like it significantly discounted COVID rarah, like it might have been an apartment in the city or whatever. I think that conversation is really valid. But it's about clear, consistent communication and putting timelines in place and going hey, Beck, like so unfortunate, but like maybe in six months we're going to have to put the rent to X, like
can we see that? Also negotiate with your tenants because it doesn't mean that just because you think it's only twenty bucks a week more, what's that matter to a lot of people. Twenty bucks a week is eating or not eating. Yes, So if you could just stop pretending that small amounts of money are flippant because it's not an issue for you, that would be great. So it
just it really frustrates me. Obviously, I will always advocate for prioritizing lower income tenants, in fact they are probably good long term tenants, and actually having a conversation around well what does that mean?
How does that work?
Because sure, nowadays landlords have all the applications put in front of them and they see, oh, no couples a lawyer and a doctor. Well let's put them in my house because they earn a lot of money. Who cares are they paying the rent?
Like?
Can you pay the rent or not?
It's very fair to check if service ability exists, Yes, but why are we prioritizing the lawyer and the doctor is better tenants than somebody who's on a lower income who might arguably be more respectful of your property.
Right?
The other thing, can we start offering longer than twelve month leases?
That would be pretty cool.
Financial still, ability for people is really important, and I know that when I was a renter, I would have loved the opportunity of signing a longer lease because I was always so scared that if I signed a one year lease, oh my gosh, what's rent going to go up by next year? Am I going to have to move around? What does that actually look like and it
also gives people that longer term financial stability. It's like, I know that in Australia they've just started offering not everywhere, but I know a few people who have offered ten year leases. Oh that is cool, And I just think it just makes sense, like home would then feel more like your home. Yeah, and you've got a long term
secure tenant. And I mean, you're going to have all the same issues that derise the hot water system, the xyzed But I think it's important to put other people's financial security at the forefront of decisions that you're making, because you're in a privileged position to be able to afford property to begin with. Anyway, Beck, I think that the crux of this is if you're a landlord, know
when to tap out. I get it, Like saving for a property is so hard, Beck, Like getting your then finally getting loan, it's like you've achieved a life goal, right, like it's a status symbol.
And then going backwards.
I get that it could feel terrible.
And you're like, well, I don't want to give that up, like that sucks.
But if you're not in a financial position to be a fair, equitable and reasonable landlord. Yeah, maybe you're out, like you have to make the decision that is not just right for you, but it is right for the asset class that you've chosen.
And that's an option.
It's not like you bought shares and they're just sitting over there and you can't make your monthly contributions to them and they just sit there and they continue to grow and do their own thing. If that's the case, maybe that's a better investment opportunity for you. So at the end of the day, I think a healthy city
needs a mix of affordable rentals of different sizes. I think that some people will always prefer renting over owning for various points in their life, and for that to work, they need access to affordable, diverse, and safe rental housing. It's too hard at the moment, and I think that people are too entitled at the moment.
You see it.
I'm sorry real estate agents and property managers and everybody else who thinks it's like, oh, but the landlord. No, no, no, the landlord has just as much responsibility I.
Ask in this as anybody else.
Yes, you can probably tell them, really sitting on the fence here, just to be safe because I don't know enough about the market. But I really like everything you're saying, and I tend to agree. But I think that's a fantastic place.
To leave it.
I think it is a fantastic place to leave it. Let's get some lunch.
Let's do it fish bowl ten out of ten, ten out of ten, and we will see you guys on Friday. By the advice shared on She's on the Money is general in nature and does not consider your individual circumstances. She's on the Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS TMD and obtain appropriate financial.
Advice tailored towards your needs.
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