Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby, the editor at the Australian. Folks. My guest today is Anissa Cavallo and she has an exceptional story as a property investor and I want you to hear it and I think you'll find her very interesting as a guest. She started in the funds management world at Mercantile and Mutual. She worked for various operations. Q. I see,
you'd know some of them. But at a certain point things changed and in some ways became very challenging for her, and she was divorced at one stage and ended up having to go back and live in her parents' house with her own kids in tow At that point she decided to get very serious about property investment and has since then and has become quite no since then for
building a residential property empire of sorts. She has about fifteen investment properties, she tells me at the moment, and we're going to talk about a whole bunch of issues relating to property and her particular perspective on it. And mister Cavello, how are you welcome to the show.
Oh, thank you for having me, James, it's a pleasure to be here.
I'm great to have you on. The first thing that struck me, even in the course of introducing you there was that you have now built up a considerable property portfolio of about fifteen residential properties. That's a hell of a lot of properties. That's a hell of a lot of issues. Yes, and I imagine you have a considerable spreadsheet telling you all the various situations and the various
incomings and outgoings with those. But one of the things that comes up all the time, perhaps not inside property investment, but in national debate, it's about people having multiple properties, and should people have multiple properties? And is it in some way a problem that people do. I don't know
where you come from that. Well, what I might ask you is we often have people right into the show when they're starting to build and they have this target in my Is there a number that you think is ideal in terms of investment property ownership.
I'm in pains whenever I'm interviewed or I have the privilege of being able to talk to the media about my journey, I'm at pains to tell people that I don't think people should buy fifteen properties, because you're quite right, fifteen properties fifteen headaches.
Right.
The only reason that I'm in that situation is because it's actually my industry, and so it's a lot easier for me to trade and move things around, and you'd expect me to have a larger portfolio than other people if this is indeed my expertise. Right. So is fifteen property right for everybody?
Know?
Is one right for everybody?
Know?
I say to people, for me buying property, the benefit of property, the really where you get the real goal out of property is two things, and I disagree with anybody that disagrees with me on this one.
Right.
It's leverage and capital growth. So it's where you can take a little bit of money that you've saved, and many of my clients take ten years to save fifty thousand dollars. If you put that in the stock market in ten years, it's not going to be worth very much, James, right, You take that fifty and you leverage it into five hundred, and you may indeed have a million dollars in ten years. So I'm at pains to explain to people that what's important in property is the benefits of leverage, and that
couple with capital growth. Now, that doesn't mean you need fifteen properties and fifteen headaches. It means that you need to just buy one, two, three, really good quality properties at the right price that you can afford, and hang on to them for as long as you can. I'm Italian, do the European thing. Never sell, hang onto them, let the market do the work for you.
Yes, it gets tougher as read school what, I'm sure, but just a couple of things there. So would you think we would be better or worse off if people didn't strive to have as many properties. We'd be better off with less land lords and other words.
Yes, And this comes up all the time, and I find it really interesting actually that even through my journey, which was a tough one but very also very lucky, and I realized that I'm privileged. I was able to live with my parents, many people can't. I don't take any of that for granted, But I'm always fascinated by
the people that are actually angry with me. You know, I've had comments saying that I'm responsible for the shortage of properties, But the reality is that we live in a society where everybody will never be able to afford property, and there are many other cultures first World countries where
properties are much more expensive. And as economies get more developed and become more sophisticated and population skilled immigration grows, that gap between affordability gets it gets greater and greater, and so I think if it wasn't for people like us that were purchasing properties to make it more affordable for renters, we'd have even more homelessness. And you think about what even the RBA is saying with interest rates that the people that have and hardest hit with interest
rates is actually it's the renters. Because there aren't enough people actually putting houses, buying investment properties for renters. We need to actually get the private sector, I think to solve the housing crisis, because we don't have enough money in the government to solve it. I think it's this utopian idea that everybody can afford a house is unrealistic.
We we live in a capitalist society, and so the more people we can get purchasing properties and making them affordable for people that aren't in a position to purchase and maybe don't want to buy. I know lots of people that don't want to be an owner of a property I think is a good thing. It should be encouraged.
Is there any one outstanding issue or measure that could be introduced that would acceleries that provision if you like supply of rented property.
I think an obvious one is a stamp. Due to interest rates, etc. I think the market will do the work for us. I think that eventually. I think markets go through cycles. As you and I have discussed before, fundamentals in markets, and those fundamentals don't change. It's just the market gets driven by sentiment until times are good and then they remember the fundamentals. So no, I think that I think making it easier for investors to produce
affordable properties would be helpful. And there's a myriad of things that would need to change, certainly making it more affordable to invest through stamp, duty, less taxes, etc. There are a lot of tax incentives for investors still though, and you know, I believe that as an investor, it is still very affordable to own property even with additional
taxes in Victoria. But I think other things like really getting more people into the construction workforce, because one of the big issues at the moment is just is building houses fast enough? So really scaling up construction workers could be could make a huge difference as well.
Yes, yes, you know one thing that I have to say, and I like a property. I'm always been a property investor, but I'm a diverse fied investor and I'm across all markets and one thing that strikes me there And I'm not saying you said this, but there was the sort of implication that you mentioned, like a property pays off and part of that big payoff is leverage. Right, sure, but I mean you can leaver, that is, you can
take a loan on shares just as easily. In fact, you can negatively gear shares just as easily, and they're doing ten percent a year at the moment. So is there some part of property that makes you more confident that you personally feel more confident about property as an asset to leverage than shares.
Yes, of course, because it's a real asset, right, It's tangible, so it's easier to leverage, and you can't leverage to the same extent and the cost of leverage is not as much for property.
No, that's very true. Yeah, the banks won't go with you.
No, that's right. And if you leverage a lot into shares it is excitingly expensive and you can get a margin call, whereas with a property, as long as you pay your loan back you never get a margin call. Right, nobody says sorry, the property is now worth fifty percent less. You lbr too high. You hours some money. So I think that because it's a real ass ish, it's a tangible asset, it's a lot easier to levery. Are there other reasons? I think the scarcity issue. You know, we're
not making any more land we've got. I think one of the things that you and I have discussed, or a theme that comes up a lot, is are the fundamentals getting greater? Are there more reasons to invest, particularly in Australia, And as our population grows, as we encourage more skilled migration into Australia. I think that the fundamentals do get more compelling in Australia for property. I think that gap that is just going to get bigger and bigger.
What we might do is take a short break and we'll be back in a moment and we'll have a look at where anissa Is thinks in terms of both style, structure and location of good property opportunities At the moment, and she will also give give us her five minutes worth on the terrors of investing in the state of Victoria at the moment, with with its with its rush of unexpected taxes, and it is a very live and
real issue for investors in that state. Okay, back in the moment, Hello, welcome back to The Australian's Money Puzzle podcast. I'm James Kirby. Well that are at The Australian talking to Anissa Cavallo, property investor and property commentator. And Anissa would I always ask someone new on the show to do this because I think it's in terms of added value.
Every listener wants to know, is there in terms of types of property that are good value out there at the moment, without talking about locations, what is there a type that you are particularly attracted to? Just now?
Okay, so when we look but when I personally look for property, I look for when I go fundamental then and there's two parts to that. One part is what are the characteristics that are going to drive growth in property and what are the characteristics that are going to drive risk in property?
Right?
And I think particularly we talked about leverage, leveraging into property where you're leveraging into any asset, you want to reduce as much volatility and risk as possible, and so those two things have to come together. In financial services, we call it a risk adjusted return.
Right.
So what I'm looking for is I'm looking for understanding where are those pockets that are going to potentially experience the greatest capital growth. And I believe that when you're in property, if you really want to make some money in property, if you really want to change your wealth position, it's capital growth. It'll do it. It's never yield. It really is helpful to help you pay for the property while it goes up in value. And that's about it,
because it's not really a yield play. So I'm looking for capital growth and what is that? And there's two things internationally that are very common in films. For a country is that drive growth, right, the drive property price growth. And one of those things is population growth. But it has to be the right sort of population growth and access to money. At the moment, we've got the right
sort of population growth. Skilled immigration. And I won't tell you the stage because we won't give away our areas, but fifty percent of skilled immigrants go to one particular state in Australia. That's been a trend for a very long time now. And skilled immigration leads to something called family income growth. You've probably heard that term before, a household income growth. So where you've got households becoming wealthier, you generally have property price growth. Okay, So access to
money and is another one. Right, So a lot of people say, we'll interest rates are so high, there's no access to money. But we've got massive participation in the workforce, we've got some wages increasing for the first time in a long time. When you compare it to other property markets where interest rates have actually been a lot higher and unemployment's been a lot higher, actually got pretty good access to money.
That's interesting. I'll just pick up on two things there. Victoria is the skilled immigrant state, isn't it. I assume that they all come to and so you get that improved income here, but it's the weakest of the states. Just now, the numbers in Victoria defy the logic you're applying, but perhaps there's more to it. What's happening there.
So we've got these extra taxes that we're paying because of how for many of us, a lot of the community feels at the government. State government mismanaged COVID and set us broke, and as a result, they're taxing in different areas to try and make some back some of that money. And I think a lot of it is anger and sentiment. But when you do the numbers, and I've done the numbers, the average cost to add investor to the average investor, the average additional annual cost is
about one thousand dollars. Let's call it a thousand bucks, right, So one thousand dollars a year, which is taxed deductible not enough of a disincentive to continue affecting property markets when you've got these other true, really fundamental like skilled migration, population growth, the need for housing a shortage. We're building fifty thousand houses less than we should be annually at
the moment in Victoria. So sentiment's actually a wonderful opportunity for people to take advantage of a market that's potentially well underpriced.
Okay, So you see it as a moment in time basically where people have perhaps overreacted to the surprising position of taxes and perhaps the disposition of the particular state government just now about property around property and basically they seem to see it as something Yeah to trax, that's sill the investment point of view. So just back on one. Other things which didn't quite get was what type of
property then, irrespective of location. If I say to you, hey, you're so experienced in property, you've bought fifteen properties yourself, at least I want to buy one. What type of property is dollar for a dollar the best value do you think just now?
I would be houses, So I'm a very big one for houses, and there's a lot of history. We're don't to value air in Australia. We don't so in need Land, which is where the scarcity is right, and I'd be looking for growth suburbs where are these skilled migrants moving. And that's also for affordability. If you've got five million dollars to spend by all means buy in South Melbourne Middle Park, et cetera. But the average investa hasn't got that sort of amount of our average client doesn't have
that to spend. So there are many areas that are just on the outskirts of in urban Melbourne that have got incredible infrastructure growth, hospital growth, a lot of job growth. Are the Maturance State government's actually been very good at creating employment clusters instead of creating a commuter suburbs where the suburb has to commute to go to it to
get to work. There's a lot of local employment, so something like on average, seventy percent of the people that work full time I'm in Melshiam City Council actually live locally. They don't actually community and that's a great thing for local economy. So i'd be looking for local employment. I'd be looking for family income growth, skilled immigration, hospitals, education, that infrastructure that brings a community together.
Really interesting answer. It strikes me you're a feeling you're a very statistically driven investor. I won't say top down, but more than most, you're very across the demographics that you're investing in and the economics that you're investing in, not just the particular property. That's really interesting and a really interesting view. Okay, folks, now we have some really good questions for Anissa, and we will be back in one moment. Hello, and welcome back to the Australians Money Puzzle.
I'm James Kirby and I'm talking to Annisa Cavella of Eida Eda Property. She's the founder of that group and avery experienced investor, has some really good views, fresh views, I think on property investing. Great to have around the show. Okay, I have a few questions. You've seen them in advance. Let's just have a spin through them. I'll see how we go in this. I would be interested to hear your answers, obviously on the property. Some are more property
centric than others. Lorraine, my husband and I are keen to get on the property ladder here in Australia. Our dilema is what do we do we have saved in every if individual advice Lorraine. Okay, it's it's information only to all the Lorraines out there, But in any event, I think we could safely say she they have saved a few hundred thousand dollars, but less than the price of an average house. Let's put it that way. They
live in Sydney. They're debating between a house and an apartment, and they're debating between Sydney and Brisbane, which seems to me and if nothing else, they're wide open. They're wide open to what sort of property they will buy, even to the point of living in two different cities which are not a lot of people are. What would your broad observations be.
To the okay disclaimer right, not knowing everything about Lorraine.
And of course there's two.
Reasons to buy property. One is to make as much money as you can out of it. One is to enjoy the property. I always say to client, so decide wire twenty when they do it. Okay, I'm going to assume that what Loraine and her husband want to do is make some money out of property. So I certainly
wouldn't be purchasing an apartment. I'd be looking to purchase land, as much land as I can in a growth area, because there's no point buying land in Timbuktu, where nobody wants to live anyway, right, So buying in an area which gives me access to as much land as I can afford, in a growth area that has those attributes we discussed before, family income growth, skilled immigration, lots of infrastructure, growth, et cetera. I would also be I don't like timing
the market, James. I believe that we don't. We never time it right. The economists get it wrong, per will weed to get it right. But I do believe that there are particular markets that are very sicklical and when and unless you buy right at the right time, ten years before you get your money back. So I would be looking at markets with less volatility, markets that tend to just have a little bit of volatility, but they're always trending up woods so it doesn't matter if you're
by today. It might take you a year to get your money back, but it certainly won't take you five years.
Right, So what would that elimoned? Then?
I don't want to pay markets, but I certainly wouldn't be investing in Western Australia at the West Australia has a history of very strong volatility, and it doesn't mean that it doesn't have a bit more to go. But will it come back? Historically yes it will. It's red hot and very peaked to resources. Still it's a deeper market than it used to be, but it is still very peaked to resources.
Right.
Queensland is expensive. It's more expensive than Melbourne. It's never been like that before. We've got a bigger market, we've got a greater larger need for housing here where a shortage of housing is great, and yet it is currently more expensive. So I would be wondering whether it was getting to the top of a cycle. I don't see it as the same as certainly don't see the time as a Western Australia. If you're a Mark Thomas certainly wouldn't be investing there. You can afford New South Wales.
I think New South Wales has a much smoother ride, a lot less volatility that I would be telling her to consider Victoria, and I want to I want to preface that with I don't just invest in Victoria. I just think Victoria is really good timing at the moment.
Yeah, in terms of the investment clock, that is worth knowing. And I'm sure Lorraine is familiar that if she's listened to recent shows. It is very much a consensus just at this time that the Victoria market is is weaker than it should be and has an element of catching up to do. And if you believe in the reversion to the mean, which again is another sort of economic notion which I can I think that is probably backing on there. It is worth more than it's showing at
the moment. Okay, two quick ones. One Imran, I've been looking for a financial advisor. I'm wondering about their minimum account size requirements. Look at Imran. The nature with financial advisors is that there are some that have a minimum. They want you to have whatever, a million, half a million. Generally, what they want is to be able to justify their time with you. Very roughly on average, they're charging four thousand,
three hundred a year. Now if you reverse that and say, does it make sense for me to have to pay this person four thousand and three hundred a year, then that is that makes sense for you. Don't worry about whether you make sense for the advisor. The only thing I would say to you, which is tough, but it's true. If you have nothing, If you have no money and you don't look like you're going to make any an
advisor is not going to spend much time with you. You may have a very valuable home, for instance, and you might have a good depension arrangement or something, but that's no good to an advisor. The advisors in the business of making money for you, and they want it to make sense for both of you that they share your time. I might sound a bit severe on that one, but I do no advice quite well, and I've been obviously involved in it for a long time, and Lisa can
I ask you, actually, which just struck me. Do you use any outside services in the way I've say, buyers, advocates or whatever. Do you do it all yourself?
No, I do it all myself. But I've come from financial services as well, so I'm a little bit different. I'm a bit controversial with that whole thing. I think it's a shame that commissions because one of the things that we used to do with charged commissioners financial services, and I think they threw the baby out with the bath water a bit by no longer allowing a client to have the supply and pay has meant that we're
quite underinsured and underrepresented. Now. I feel like there was probably a better model so that people that don't have five ten thousand dollars to spend on a financial planner can still get really good advice and it's worth the advisor's time. But I tend to agree with you that if you don't have a lot what the financial planner doesn't have a lot of incentive to work with you.
Un Fortunately, it's difficult, it really is. There's no such thing as chief financial advice. That just isn't. I'd have to tell either isn't. But read and listen to shows like this and you will learn a lot. That's that much we will try to bring through for you. Okay, Ben, this was on lender's mortgage insurance. He says, surely if there is not much risk and it's a free market price, then the price of it should drop. What's to go? I don't know, Ben, but I don't see it dropping.
I don't see it dropping anytime soon. I know it's a market, but I wouldn't be waiting for that one. All right. Finally from Dean, Now this is a detailed question. Again, we are not going to give advice and we're not going to be too precise here, but generally, what Dean is asking is he has a townhouse and the townhouse is in wa and here's the thing. It's one of six.
The others are freestanding. He's got a joint wall. Is your expert able to provide general advice on the pros and concept converting right converting a townhouse from strata title to a freehold title to realize potential capital growth? What did you think of that issue? And this said, is there anything you can add to it?
Well, I've got to say this is not my expertise, and this is how I would think about it, that there'll be additional costs by separating, because you'll all suddenly be charged to lots of rates et cetera, et cetera. So there are some benefits of keeping it together. I'm not sure how much difference it will make in terms of capital growth, and it depends on what he wants to do with it in the future. If it's a buy and hold, which is my advice with most properties,
I wouldn't bother paying the cost of it. If he's wanting to sell one off, then absolutely, But to be honest, I've got to admit this is not my area of expertise. You needs to speak to a conveyancer and a lawyer about the repercussion.
Yeah, okay, And just one last thing. It struck me that in earlier the show you said you like houses, and I'm sure that wasn't a casual comment. Do you mean to say more precisely that your efforts are largely in the investment and management of standalone houses as we know them, and that implies you, to some extent steer away from town townhouses, units, apartments very much.
Sometimes for my detriment, I've just found in my history that the performance has been very different. It's a lot harder to you don't have as much flexibility with what you can do with them. And I just haven't seen the capital growth, certainly the EELD, but I just haven't seen the capital growth in units and townhouses.
Very good, Thank you very much, and that was really interesting, interesting story, interesting perspective. Thank you very much for coming on the show, Thanks for having me terrific. Okay, folks, some more questions would be very welcome on any issue you like. The email is the money Puzzle at the Australian dot com dot au. Talk to you soon.