Alright , folks , welcome back to the Property Couch podcast , and today's episode is all about a man who used a heart attack as a reason to trigger a property portfolio bin .
But it gets even better , Bryce . We're also talking about someone who has started building their property portfolio in their fifties . It's never too late to get started .
It's a great episode , folks . Let's rip into the show .
Welcome to the Property Couch where , each week , you get to listen to two of Australia's leading property and money experts Bryce Holdaway , co-host of Location Location , location Australia on Foxtel's Lifestyle Channel and co-host of Escape from the City on the ABC .
And Ben Kingsley , chair of Property Investors Council of Australia and a back to back winner of the Property Investment Advisor of the Year Award , and both are partners of the multi-award winning Empower Wealth . Co-creators of Moor , the free lifestyle design app , as well as best selling authors of the armchair guide to Property Investor . And make money simple again .
Stay tuned as they bring you the Insiders Guide to Property Finance and Money Management .
Alright , ben , we've got a very special guest today . We are chatting with TPC listener Tom Decker . Welcome to the Property Couch , tom .
Hey guys , how you doing .
We're doing pretty good , thanks . I'm looking forward to chatting with you . You've got a wonderful portfolio that we get to unpack with you shortly , but we're going to start it off where we always started off , tom .
We're going to go back to the very beginning around money conversations you may or may not have had around the dinner table when you were growing up .
Yep , well , from my point of view , money wasn't really a discussion point . My parents were quite conservative , so money didn't really enter the conversation of no idea what dad earned . Mum was a stay-at-home , mum looked after the kids .
But the one thing I did get from growing up , my father encouraged us to work with him around the house to earn some pocket money , and that inspired me to start working around the neighbourhood Doing lawns , resurfacing people one in particular resurfacing a floor and doing ester poles . It was called then Earning money , saving it .
That sort of put me in the right direction , I guess , to learn to save , work hard , that type of thing . In terms of talk around the table , it didn't happen .
We should build some context here for those just listening . You're in this wonderful part of the world . In New South Wales . It's full of trees which we can see , but lots of dogs and everything in the background . You're at the back , which is good , so we get to experience it , I am , I am yes .
The nature as well , to explain why you can hear dogs barking . Your parents were conservative and they got you understanding jobs and working hard . What were the observations then ? That you were making around money that you got from your parents ? If you weren't having direct conversations ?
I guess . Put simply , the observation I had was if you wanted , you got to work for it . Pretty simple .
Was that similar to the way in which your dad approached life ? Was he a hard worker , did he ?
Yeah , I think he was . My father wasn't the greatest of communicators , so he wasn't an open book , so to speak . My mother was , but my father was sort of fairly closed door . But he certainly worked hard . We saw that He'd leave early in the morning , come home late in the evening .
And who did the home economics ?
Dad , dad .
So he managed the finances as well as working full time .
Absolutely .
Yep and household composition as you're growing up , sort of number of brother's , sisters .
Yeah , We've got three siblings an elder brother and then a younger sister and a younger brother .
And so , without giving too much away , I always liked to sort of pry a little bit here around your behaviour . You've obviously been very successful . We're going to unpack that story shortly , sure , but did your other siblings also develop some of those habits as well , in terms of working hard , money management , delayed gratification ?
I really know I'm sort of the odd one out in that respect . One of my brothers has done quite well . He's a professor , he works hard , he's worked in the same place for a long time , from day one pretty much . But yeah , I guess the only one that sort of had that focus on investment property and that type of thing .
Where did that spark come from ? Why are you the pioneer there ?
Yeah , it's interesting , bryce , because 30-something years ago when I was in my mid-20s , I bought my first house with my then-wife , and probably three or four years after we bought that house , after begging the bank to lend us some money , we bought an investment property and that investment property was two minutes walk from where we lived .
We kept that for five or six years . I did it up a little and then sold it , so that was sort of my first entry into it and then I sort of forgot about it , just didn't do anything for another 20-odd years . And it was only five or six years ago . I had a life-changing moment , had a heart attack and was just sort of a wake-up call .
Started the journey again , bought an investment property on the Central Coast . At that point I was actually renting , so I'd been divorced and just renting , treading water , living a life , nice cars , all that type of thing . Had the wake-up call , reality check , bought an investment property up on the Central Coast .
A year later bought a primary residence , again on the Central Coast , and about a year , 18 months , after that my partner was diagnosed with Parkinson's . So traveling from the Central Coast down to Sydney for work was a bit too much and we bought here on the North Shore .
Now , there's a fair bit in that .
There's a lot to know .
So , first of all , what struck me in what you just said , tom , was you have a heart attack and then you start thinking long-term yeah , like that is so inconsistent with a lot of people who experience a significant health trauma and then think I've got to make every day count . You actually start planning for your future .
So can you unpack for me that story around ? What triggered you to think , well , ok , now I've got to get serious about my life , or what was it ? That sort of drove ? You into that story .
It's interesting , ben , because you're going to look at it two ways . You can either count your days and think it's all over short term , in which case it would have continued to live the life .
But I thought I'm in a relationship , I've got a serious partner , got a good career , time to think positively , start exercising , looking after myself and according to my cardiologist , it was a setback . I had a triple bypass , but outside of all of that and that scary moment , he assures me everything is OK . I'm not that old .
Did you say that happened five years ago ?
Five , six years ago yeah .
So , for context , you're now 59 for our audio listeners and you've got a beautiful wife , crystal , who's currently 60 . So Crystal was your partner at the time . Which was she the one who ? So she's the one who diagnosed with Parkinson's Correct , yes , ok , and so she watches . You have a medical episode and she's also got her own challenges medically as well .
And you both decide to go and build a multi-million-dollar property for Theo .
Sort of yeah , I mean , I had the heart attack before she was diagnosed . Okay , and it's quite a story behind the heart attack , because I actually went in for a general procedure what they call an angiogram so they just go and have a look and the cardiologist told me I needed to have bypass surgery . He couldn't put a stent in .
And whilst I'm debating with the cardiologist in fact the thoracic surgeon that I'll go home and I'll come back three days later for the surgery , whilst I'm having that debate , I had the heart attack . Wow , how fortunate . And within minutes she was scrubbing up and getting ready to operate .
Wow , so good it did , and it taught me that some things happen for a reason . I was in that hospital and one of the best hospitals in Sydney having a simple procedure when my heart gave out and it just sent that message to me that they're a guardian angel . She was obviously one of them the thoracic surgeon and it was a real wake-up call , obviously , wow .
Yeah , now can I then touch on that .
Right , you've had this moment . This is obviously pre-crystals diagnosis . Yes , and so are you thinking , all of a sudden , what happened if something happens to me ?
Because you're right , you're in a good career , moderate to high income I think you were saying so , you've got a good financial , but if you're gone , the major breadwinner in the household is no longer , how does crystal then survive ? Was that part of that trigger ?
It was certainly part of it , absolutely , but it might sound wrong , but I was focused on us being together , not us being apart . Yeah , okay , yeah . That's good , but it was certainly something in the back of my mind .
Yeah , so , tom , okay . So there's a couple of things I want to lean in . First of all , you forgot about an investment property . We absolutely need to unpack so that everyone knows how to forget about an investment property .
No , I didn't actually think it took 20 years . No , it's not quite like that . Sorry , I should backtrack a little . So I bought this investment property , as I said , 20-odd years ago and we sold it after five or six years .
I did a minor renovation , sold it , used that capital growth and upgraded our PPR at the time and then just wasn't focused , was busy with career and travel and all those sorts of different things , forgot about property investment and what it could possibly bring . Gotcha .
All right , so why ?
property . Why property ?
Just easy to understand for me . Yeah , just , I tend to think I get it .
Who are the influencers ? Then , back then Mid-20s , you said I think I picked you up by saying it was 30 years ago . There's no podcast , there's no seminars , there's no webinar . Who are the influencers .
Just reading . There was nothing in particular , just something that seemed like a good idea .
I mean , you have that 20-year hiatus and then you picked it up again , so you had this little renovate flipper for 500 years and now you're back into it . So when you did say , okay , why property ? Because you think you can understand it , we're talking only what ?
Six , seven years ago now , where you've accumulated this portfolio in your 50s , let's not forget that . So you started post-50 . You probably started around my age now . And here we are with a number of properties , six properties in the portfolio .
So to Rice's point what were the sort of go-to educational aspects of building out that knowledge , to act so aggressively over the course of the last few years ?
Well , a lot of it has been listening to guys like yourself and , as I said , I'm a bit of a content freak so I absorb as much information as I can from as many people as possible . But that property that we had , it'd be almost 30 years ago now , the reason I sort of reflect back on it .
We bought that place for I think it was $212,000 in a suburb called Ride in Sydney .
We sold it five years later for $550,000 .
And three or four years ago it sold for $1.7 million .
So we need to pause here , Ben .
We need to pause here because we're talking about a three-decade experience here . We've gone from $212,000 to $1.7 million , and one of the things that Ben and I have been trying to do on this podcast , Tom , and you've just illustrated it beautifully .
You're saying if you can hold it for 30 years , the majority of the actual dollar value growth will happen in the third decade .
And what you've just illustrated , then , is beautifully that if wonderful hindsight we all hold these properties , we never sell them , but if you had of the experience that you would have had is in the third decade , you would have had this wonderful amount of dollar value bank that you would have been able to do just because you played a decade's game rather than
a year's game . And I guess the reason I want to labour on this point is because that is the very thing that Ben and I are trying to get everyone in our community to understand .
Yeah , look in hindsight , I would have held it for that entire period but I didn't . I sold it . But I thought it was great back then to go from $200,000 to $550,000 . And we spent a little on it , not a lot , maybe $30,000 or something . So it was really good capital growth In the perfect world . Yes , I'd still have it today and that would be wonderful .
But now we sort of zoom forward , 25-odd years later , and I start getting back into property . But that was sort of the background and it gave me reason to trust property again .
Tom , can I just jump in there ? I know you're in flow there , but because it's a Bryce's point about that game right now where we are in the property cycle and we are seeing a spike in the number of investors selling properties at the moment . So I just wanted to .
Sorry to jump in there , but for the last sort of month and a half we've been really stressing do whatever you can to hold on to your property . Do whatever you can to hold on to your property .
Take a second job , do whatever you can for this hump , because this hump might only last for the next six months and then , if you're absolutely forced to sell , you're going to be selling in a seller's market rather than a buyer's market . We're at this lull period here right now .
So those people who are listing their properties because they're tapping out , please try whatever you can .
So just because you just heard , if we , if you know , benefit of hindsight , we don't want to go back here 20 years from now and say to those people we told you to just do whatever you can like , find a way , if you've got loved ones , family , friends , borrow five grand , whatever you can , just to trade through this period , because it will return and spades
that opportunity . So I'm terribly sorry to interrupt what you were just saying because I want to now pick up on what you were just talking about . But if that message lands for the majority of our community , we've just made them hundreds of thousands of dollars in the future . So now pick up the story from .
Okay , you're now back into thinking about property in your 50s .
Yeah , so , look , I reflected back on that particular property and what we achieved with that property . So for that reason it was , it felt safe , so we bought the first property up on the Central Coast . That was probably this is going to sound a bit bizarre , but it was probably four months after the heart attack .
I bought the first property up on the Central Coast and about a year later , bought a PPR and at the time I remember actually , I had a fixed rate at 4% or something it might have been a little bit higher and I actually paid the bank a penalty to drop the rate down right Because we saw where it was going . The rates just kept declining .
So we bought that property . Crystal was diagnosed , so we then sold that one and moved down to Sydney . But it was as we moved to Sydney , which was in June , July of 2020 . So , just as the pandemic had started , I knew I had to do something . Superannuation wasn't where it was .
I was listening to you guys and I started talking to various property buyers and I had several conversations , ended up with this one guy that we just connected , you know , had a number of meetings with him , face to face as well as virtual , and , next thing , you know we start the property journey .
So in 2021 , we bought three One in Adelaide , two in regional New South Wales . Then early I might have the time yes , early 22 , we bought another one in Queensland and then in February this year bought another one in Perth . So I think that's right . That's five , six in total , including the one on the Central Coast . So it's happened fairly quickly .
Fortunately , the timing seems to be right . You know , we seem to have gotten the timing right . The yields are pretty good . The growth on all of those properties has been fantastic , To say the least . Yeah , it's been fantastic , and even with all the media talk about the downturn and everything I saw , it stabilised , but nothing much beyond that really .
And you know it's an interesting market when agents are calling you , asking you if you want to sell your property .
Can we build some context around the value to Tom Can you share with us ? Can ? We build some context around value here , just for the investment properties you've shared with us , the value and the debt . You okay with me disclosing that ?
Yeah .
Yep , so you sure yeah . So 5.54 million with a debt of 2.16 million . So your net position is 3 , my math is 3.3 . No , 3.39 . That seems pretty good .
It's very good Starting in 2020 .
Oh , you started Central Coast earlier , but you started the rapid development in 2020 .
Yeah , the property on the Central Coast was 2017 . So February 2017 . That's grown quite well . I've sat stagnant for quite some time . Well , I bought in 2017 , you guys know what the market was like then . I bought probably at the top end of the market so it was slow for a few years , but that's now had some rapid growth . That's done very well .
The property where we live , our PPR , has also performed quite well and that would be the bulk of the equity . I guess you know in the total portfolio , the balance depending on what is held in superannuation . So that's got a very low LVR and the balance , I would say the LVR on those alone would be 70 , 75% .
Now Tom , the Central Coast property in 2017 . You tell the story early on that the property you very first purchased for investment was in the same suburb and that's very common in terms of you know , five minutes away , two minutes drive , two kilometres up the road or whatever that looks like , and that's the ride property .
Do you think , if you had your time over again , if someone told you to be a boredless investor straight away and buy interstate , that you would have been confident enough .
No , I didn't hesitate . So my buyer's agent when he started talking to me about buying interstate . It was easy for me Adelaide was actually the first one we bought .
Did you think that that was the case because you'd tested the water and that you sort of had some familiarity in terms of buying locally versus buying ? Yeah , possibly .
I spent a lot of time listening to podcasts like yours before I engaged a buyer's agent and it became very clear that buying close by or in the same state didn't really make a lot of sense .
There's diversity in spreading that risk .
Yeah , and you know the house in Adelaide . I've never seen the one in Queensland , never seen Perth , never seen the ones in regional New South Wales , though I have seen . I've been to both of them . I'm fairly hands-on sort of guy , so it was a security thing initially .
The house up on the Central Coast it's easy for me to get in the car , drive up , have a look , you know . But now I'm relaxed . You know , probably the best performing properties are the ones outside of New South Wales .
Can we get a ? Can we fill in your backstory to around what sort of line of work you do ? You said your hands-on sort of guys , that the sort of work that you're doing .
No , I'm well . Yes , I am hands-on in my profession as well . I work in the video game space . I've been doing that for the last 30 to 33 years .
What does that mean ? You're building games .
No , no , I actually distribute the product . So , sales marketing , that type of thing .
Now , tom , one of the biggest barriers for investors coming in because yours is a success story . You know 2X , 3x you've done really , really well , and a lot of older investors . You know there's a lot of people in their early 40s who are thinking is it too late ? Have I missed the boat ?
And here you are really getting serious about your portfolio in your early 50s . The common concerns that most people have around properties is what are the tenants going to be like , and so can you just share some experiences around maintenance , upkeep and how your tenants are looking after your properties ? Have you had any challenges in that area ?
Yeah , I've certainly had some challenges . I've had some horror tenants . I shouldn't say horror , just challenging , difficult , yes , yeah , difficult . Some are over-demanding and the biggest mistake I made is I got personally involved . I didn't leave it to the agents the way I should have .
How did that play out . What did that mean ?
Well , you know I'd have a complaint from a tenant , so I'd actually so we're referring to the home on the Central Coast I would actually go up and attend to the matter , get involved . You know , and I've learnt it's not the thing to do . You know , if you can avoid it , leave it to the agent .
So a lot more , let's say , direct in managing the tenants , probably more experienced with knowing what is just a demand for the sake of a demand versus an actual required repair .
Yeah , there's a removal of emotion , there's a professionalism that comes from it . There's a not first rodeo about it as well .
So yeah , but now I focus on managing the agents rather than managing the property directly . But I did have one other issue . One of the properties I bought in regional New South Wales had . It's the gift that keeps giving . Anything that could go wrong went wrong .
The tell anything .
you know , it was just nonstop cracks appearing in the wall . So we turned out there were foundation issues , had to get the foundations returned . Kitchen started falling apart , the oven stopped working , the heater stopped working , you name it . Whatever could go wrong went wrong . And this particular property is a bit of a land bank , if you like .
It's on a thousand square metres . So the retirement plan was to either put a granny flat in and increase the rental return or subdivide . But it's just been nonstop .
So I decided , after just doing lots of bandaid type of work , you know , little fix here , a little fix there vacated the property for three months and did everything in one shot had the foundations redone , the kitchen redone , the bathroom redone , everything painted throughout .
Now I've got some wonderful tenants in there , hopefully long term , and I've not had a problem touch wood for about three months .
How did you navigate that ? Mentally , like , because there's people listening to this who what you just described is the very , is the very fear that they have that lifts their action threshold up so they don't want to take any , any steps forward . How did you navigate that ? What would be your advice ? What's the wisdom that you took out of it ?
Yeah , it's interesting , bryce , because at first I got emotionally involved , got stressed and it just got to a point where I thought , hang on , I'm going to have another heart attack . Yeah , but the the trees of the matter is . I looked at the , the growth , I got fed up with it and I actually had an agent go in and appraise the house to sell . Yep .
And , as I said , it's on a thousand square meters the assessment he gave me with the house the way it was , I would have been 100 grand up . Yep . Given that I was 100 grand up if I sold it the way it was , I decided long term fix it . Give it another 510 years , it'll be another 100 grand , or whatever the amount is .
So , I saw the potential in it .
Yep .
And whilst it was a bit of a shame that you know we bought this house and it had all these issues that weren't picked up as they should have been , I decided it was time to just bite the bullet . I bought it at a good price as it was , so it was time to just realise well , you bought it cheap , if that's the right word .
Invest a little more and make it the property it should be . That's what I did .
So those without a vision will perish . So what was your vision in all of this ? What was the North Star ? What were you ? Simple it was an accumulation in itself , but what were you aiming for ?
Well , as I said , this property is a bit of a land bank , so , whether it's a granny flat or a subdivide , probably granny flat . To be honest , I just saw the road to what ?
about the portfolio , because to navigate everything that you're navigating there in the moment . That's stressful and anxiety filled , but you must have been able to zoom out and see the vision that you had for the portfolio . What was the drive ? Was it a number of properties you were chasing ? Was it a passive income that you were chasing ?
What was the fruit at the end for you ?
In terms of the total portfolio and not this particular property .
It's just going on that land bank .
Yeah , well , there's a few things . So I have three grandchildren and Crystal has four , so we've got seven between us . So it's sort of twofold . One is self-undubriotignment , passive income so that we can actually enjoy retirement , and the other is to be able to pass on a legacy to our grandchildren and children .
Now , that particular property that we're talking about was a critical part of the mix . Well , at least that was the plan have a house and a granny flat , or subdivide and lift the rental return on that particular investment . And that's why I did want to give up .
Now , tom , as you've built a relationship with the buyer's agent and you've sort of executed on property by property plan , what was the conversations around location , price points that's got you to where you needed to get to ?
Because with your age , definitely yield would have played a role , because ultimately , if you're looking at a retirement timeframe of 65 or around that sort of area , you need these properties to do some of that sort of heavy lifting and cash flow lifting earlier .
Is that sort of why you've linked into some of the more regional areas or those types of areas where yields are quite high ? Was that part of the strategy that was developed between you and me ?
Yeah , definitely part of it , then , and still undecided what that portfolio mix looks like when we do retire . And as part of what I reached out to you guys about , We've got that .
Well , we're gonna have that . Yeah , yeah , I know we'll get to that .
So it's what that mix looks like in five and a bit years time . I'm not entirely sure . But you're right , the yield was critical . I mean just from a cash flow , and to be able to build quickly I needed them to be cash flow positive , or some of them .
Yeah , and so that's some of the trade-offs you get . You're going into areas which are price point lower , but also some of the areas where the demographics of the tendency profile is also a little bit lower , and they are the trade-offs .
So anyone who's thinking of these types of strategies , you just got to be clear that you might bump into a difficult tenant who's not respectful of your property , and these are the again , these are the headaches you're going to get .
But if you then lift your eyes up , get into that higher grade of thinking and you can see that the juice is worth the long-term squeeze , then ultimately that's when you start to your point on the example that you use with the land bank property . It's like , wait a minute .
I mean , yeah , I'm getting some early headaches , so I'm going to clear some of those headaches away . But now I've got , I've improved the asset which I'm allowed to depreciate , those renovations 30 grand you might have spent . I've now got a better tenant in the property , potentially because it's newer and more modern .
So it's attracted a better tenant and so it's now starting to be a set and forget asset which is part of the portfolio .
Yep , no , 100% , 100% . But it's interesting that those regional properties , I've actually not had problems with the tenants , I've had problems with the house . Yes , but good point , good point .
Yes happens .
So one of the questions you asked for us as you were preparing to come onto the show , Tom , was you know , you believe you're in a good position , but you're curious as to whether you purchase again or focus on consolidating debt . Given your age , we're happy to give some feedback on that , but what is your instinct say to that question ?
My instinct is to consolidate , and you know I've got all the loans run P&I . I've still got two on fixed . I'm about to roll off . But my instinct is to pay down the debt as quickly as possible . Consolidate , have a look what it looks like when I do decide to retire , maybe sell one , pay everything off and live off the rent . That's my instinct .
So what's the payoff for you to then consider buying another one ? What's the opportunity cost in your mind that you're wrestling with ?
Well , you know , I look at the performance in the last , I'm going to say six years , but in particular the last three . It's been fantastic , you know , and if I knew 150% that that was going to happen for the next 10 years at the same rate we're at all . We can't much X .
Yeah , absolutely .
So you know , it's just one of those things . I'm at that point I turned 60 this year . I'm at that point where retirement is a thing . You know , I get emails every other week from my superannuation fund inviting me to seminars about retirement and income streams and all that type of thing . So it's coming .
So I'm just undecided as to whether I consolidate , pay down , live off the rent , you know , or whether I go again . Don't know , but I said that probably nine months ago and I bought one in February this year .
Well , we all know that obviously , property doesn't move in that perfect linear direction , right when . It goes in cycles and we've come off a pretty good cycle . We know that what's stopping that cycle right now is these higher interest rates , which is reducing borrowing power , reducing activity , and we also know general market sentiment is in the negative space .
So you know , if I was your advisor , tom , here's some of the questions I'd be asking you how much is enough in terms of for you to live out a comfortable retirement and to also then pass on that legacy to the seven grandchildren ? Like , let's start thinking about what that legacy story looks like ?
Are we talking about an amount of money that is enough for education ? Is it amount of money that's enough to get a deposit started for them to be able to get onto the property ladder ?
They are the types of questions that you and Crystal need to be thinking about because at the end of the day , as you've realized , you've got a wonderful portfolio , you've generated millions of dollars of paper profits , but now it comes down to all right . Well , what are we gonna execute on what this story looks like ?
So when you get closer to knowing the answers to those questions , you then get more informed and the decision becomes easier in terms of what that story looks like . So you know the the risk you run of going again is that you have it .
We have a 2017-2018 moment where , for 18 months , basically , the property is treading water and given you're rolling off your fixed interest rates .
If I was to see all your cash flow models , I'd then be seeing the impact of that and I'd be saying , even though it's negatively , positively geared now we still run the risk of slight negative and we've got maintenance and holding costs that are also attached to that and we get any silly governments , you know , trying to introduce higher land taxes and all all
of those things are a variable that may be out of our control . So your core instinct of basically saying , have we got enough ?
And seeing that model roll out over the next five to ten years in terms of how that compounding story will happen and then how the improvement of that cash flow story will happen in the acceleration of getting that debt down , is also going to inform the story as to if we need to sell one , if we need to sell any or if we want to accelerate that story
where we can be more active in in our younger retirement , as opposed to , you know , when we're 90 , we're probably not going to be jumping out of planes . You know that type of story . So it really is . You know , this is a bottle of red moment for you and Crystal to sit down and start to think about . You know , what are the ?
What does this money mean to you and what is it going to ? How is it going to enrich your life and how is it going to enrich the life of those that it's going to serve ?
And as you get more clarity around that guess what the actual execution decision itself becomes easier , and that that's consistently with how we would talk to any clients that we're working with .
It really is about your individual story , what you are individually trying to achieve , and also acknowledging that the work that you have done , the heavy lifting you have done over the last effectively nine or so years , has yielded some incredible fruit .
That's through good timing , but also good location selection and good property selection , through your advisor as well . So all of those are , you know , give you an A plus story . Now it's about landing the plane and how you do that .
Yeah , no , I think you're right , ben , and look for us . You know you asked a question how much is enough ? It's enough . Yeah , it's not a question of more . You know , it's not about that at all . You know we're not looking for fancy cars and five-star hotel holidays and all that type of thing . It's more around what we've got .
Is that enough to be able to consolidate by selling a property or two ? It's more around that . It's more the back end of it . I've done some modeling and you know , if we retain all the properties into retirement , then there's plenty of income stream . There's no issue with that . It's more around . Can we actually retire all that debt in five years ?
You know that's a big ask . So then it comes down to which property do you sell . Do you invest a little more , grow a little more and so on ?
Sorry , no , that's all right . So what I want to ? So how we model that . So , just so you know and this is a game for the community's benefit we model on we've always modeled on liquidity story , right ? So we look at basically total access to liquidity , which is a combination of money and offsets .
It's a combination of access to super and what that story looks like . The trigger point for us in our models , when we do these long-term models , is when we get to a hundred thousand dollar cash base . So when we're doing long-term projections , when we get to that hundred thousand dollars , that's our trigger to do a hypothetical sale at that moment in time .
Now , of course , when you get closer to that and in your case what you're just saying is if we're able to go for one or two more years and we don't have to sell any of those properties . Well , you've already learned from your story early on with the first property , you bought not to sell it .
So if you can land the plane , have the comfortable retirement , just means you've got more , more spoils to be able to do that . So that might be also something that might inform your judgments around just how much liquidity you need . And of course , we also know people make silly mistakes in selling properties too quickly in the same tax year .
So we make sure that you sell them in , if you , if anyone's in a situation , the way in which we would then model , so , as we do a divestment model if we need to . We do a divestment model where we obviously then work out the capital gains that we have to pay and then that obviously then we get a lump sum of cash .
That cash goes into our cash buckets and then , when that that one gets down to $100,000 and that might be you know , three to four years from that first one and then all of a sudden , as you get closer to them , you can , you can make a more informed decision .
And so , from from where I sit , over the course of the next couple of years you can sit on your hands , let everything sort of continue to keep playing out like it is and as you're getting closer to that , around the amount of money that you want to spend , that'll inform your decision as to whether you need to trigger a sale . Yeah .
Yep Makes good sense .
I think the other benefit that from this question is for the for the benefit of the community , time is it's kind of a . It's kind of a question around what game are you actually playing ?
Because in this conversation there's a 48 year old and almost 52 year old and a 59 year old and so , with all different time horizons , we could all have different views that we could project onto this situation , and I'm more comfortable with that than you , or Ben's , more aggressive than me , or whatever .
So that's why we're such advocates of actually of having a plan so you can actually work out some of these questions that you've got , because it's kind of like , if it's kind of like asking a power lifter advice on how to prepare for a marathon , they're playing two totally separate games and in maths , two plus two equals four .
No matter what your age , what , no matter what your background is , no matter what your demographic is , no matter what your salary incentives are , two plus two equals four . But we apply the same logic when it comes to money and say , well , there's only one solution .
Well , it does come down to a lot of those things that Ben just talked about your risk profile Are you okay carrying a bit of debt in retirement , if there's enough to provide you with an income that's satisfactory to what you require while still having surplus left over , that'll support you so you can support the portfolio , so that we can still have that ride
story in 30 years time that you haven't told that would be holding on and the rents as long as it's not in Victoria . we're not going to put them up more than once every two years .
Don't start me .
Bryce , you will get some rental growth in that portfolio that , over time , the rent that you're receiving will make the interest that you're paying look like your kids lunch money Right . So so that's that's . That's the important lesson . Here . We're all playing a different game . Your incentives are different to my incentives .
What you consider fun may be different to what I consider fun . So therefore , it's having a base understanding around you and crystal . How much is enough ? How much do we need to give the kids all the things that Ben just said , whilst being very mindful of the position you're in .
There's a bit going on , but I guess at a headline level , you're in a strong position . Yeah , what we haven't said yet is in the notes that you gave us . You got an 18 month buffer , so what that does is gives you 18 months of time that you can buy .
Have this conversation with the maid at dinner last night who was a bit nervous about whether to keep his investment property . I'm like , mate , you just got to buy time . Well , with an 18 month buffer , you get to buy time .
Yeah , look exactly . But that just to put some context around that . During the fixed rates I couldn't make extra payments , so I focused on putting it all into buffers . So one of the properties we bought it under a variable , so I just dumped everything I could into that .
Perfect , everything Into the offset .
Yeah .
Yeah .
Yeah , everything possible . So it essentially the way it worked .
When the interest rates started going up , coincidentally , I calculated what my repayments would be on the entire portfolio at 6% and I increased the payment on that one property with variable loan to an equal amount of that 6% for the entire portfolio , less the payments I was making on the fixed , if that makes sense .
So my total fortnightly payments were equal to what it would be P and I 6% , and I was doing that for almost a year before they started coming off .
And that's another perfect learning lesson for people who are planning to build out portfolios is that you cannot have all of your loans in fixed if you don't have offsets against them , because there is going to be surplus coming into those portfolios .
So you want to model how much surplus you anticipate to get over the course of the next few years and then give yourself a 20% ceiling in terms of that number , because , yeah , we've had situations when the rates collapsed down to those cheaper you know , 1.9 to 2.2% interest rates .
People will like I've run out of space in the offset account and it's like and so you know they didn't know what's the problem . Yeah , it's again .
It's a lovely problem to have you know so , but it also just goes to show that plan to become what you plan to become and do the modeling right and then , ultimately , your money's working as optimized as it should be , because you've done the sequencing , you've done , you've done the number crunching and so , to your point , Tom , you haven't made any of these
decisions without doing some type of model , and you know what does this impact , how it's going to impact cash flows negatively , positively .
So I think it's again a credit to you in terms of you have planned that out and you know , even though you started stage two of this investment portfolio journey in your fifties , it's just , it's just such a good new story , and so I want to make sure that people feel empowered by that story , that it's not too late and that you should potentially be asking a
professional in terms of how that looks and the strategies may be different for some people in their fifties . Chasing those , you know , sort of high inner city area , higher value assets where you've got to contribute , versus you know , chasing those sort of entry level , first home buyer places or regional or , you know , sort of commutable locations .
That's why , to Bryce's point . Everyone's situation is different . Every plan that you'd be having is different , so you should never get any cooker cutty solutions from any salesperson who's trying to flog you a house . You're an off the plan package thinking .
You know they just do what they sell you on the tax story and basically it's not going to cost you anything to control this fancy asset which does nothing , whereas you've been able to hand pick or , to your , to your point , your , your buyer's agent has been able to hand pick quality assets . Even so , some of them still had maintenance .
We that happens to the best of us in terms of unexpected maintenance . That should be planned for as part of that particular story . So again , I want to credit you .
My final question to you is really around what's happening in the marketplace now and the sort of negative connotations around investors and the fact that you know renters are doing it tough at the moment , and there are definitely renters that are doing it tough at the moment .
When you look at your portfolio , when you consider a rental increase , how much of that do you think about when it comes to the tenant that you've got in the property , as opposed to just going for the most aggressive rental increase that you can get ?
Yeah , it's interesting because I hear a lot about it on the media . You know landlords are being unreasonable and taking advantage of tenants and so on . I look at the increases over the past 12 months and they've been moderate . I would say , yeah , I take guidance from the agent , but I've never looked to profiteer or take advantage in a tough market .
So I've got some tenants one in particular has been in the same house for almost three years now and you know the rent increases there . I respect them as tenants . They've been really good . They always pay on time , maintenance is really good and it's negligible . So it was a very modest increase .
My analysis yeah , my preliminary analysis that I've done and I've obviously done it on my portfolio my interest costs have gone up over basically 100,000 . Now . So it's roughly for those people who have got a reasonable amount of debt against their portfolio .
You're talking around a 25 to maybe a 35% increase in rent rental income that you've been able to achieve , but your cost base has gone up enormously .
So it's about so we're recovering around a third of the costs that have gone up for most investors , and you'll find that those investors who have been more aggressive and have built their portfolio too quickly , and the ones who are potentially now selling out that being able to only recover 30% was not enough to keep them in the game , and so they've had to
divest of a couple of those properties , which is a gain . Another lesson for beginners is that property investing is a long term gain . Be patient in the way in which you approach it and don't get aggressive .
Like getting wealth is easy , staying wealthy is hard .
Yeah exactly .
Yeah , look , I've taken the approach of being reasonable . I want the tenants there for 5 , 10 , 15 , 20 years . If they stay there forever , happy days for me and , you know , driving the rents up too drastically . I think short term thinking Correct In my view .
My final question to you , tom , is this I put the call out to say come on to the property couch . I'm always intrigued as to why someone would come and be so transparent about what they've done and the lessons along the way . Why did you come on ? What was it about your story that you hope would benefit our community ?
Yeah , I don't know if it's my well , maybe it is my story . I've listened to you guys for a few years and I get a lot out of what you guys talk about , whether it's with each other or with other people . In various shows the building , my buffer I learned from you guys .
You know I picked up certain things and put a strategy together to give myself that protection or us that protection . So I thought , you know , if I can pick up those sort of things from you guys , maybe some of my experiences others can pick up and benefit from .
Hopefully , you know , maybe they learn a few things not to do and , better still , learn a few things that might help . Yeah , well said , Thank you for that contribution .
We've been hinted earlier , or probably didn't hint . He said it . We get a lot of questions from a lot of people about am I too late to start ? We get a lot of questions around that so you , you can be an inspiration for our community that's listening to go , hey , all right . most of the heavy lifting was done in the 50s . We had an experience .
We had an experience back in the mid 20s , but most of the heavy lifting was done in the 50s . So well done You're . Thank you . It's a credit to you and Crystal and I'm I'm excited for all the times that you get to spend with the seven grandchildren and getting the fruit of everything that you've done within your portfolio .
So , on behalf of everyone here on the property , couch Tom , thanks for coming on sharing your story .
Thank you .
Yeah , thanks Tom , it was terrific . Thanks guys .
Oh Ben , how , how enjoyable was that having someone who you and I we talked about it in the episode there or talked about in the interview . But we had so many questions where people just say , am I leaving it too late to start ?
Well , hopefully Tom is an inspiration that with the right advice and the right moves and the action threshold being low enough , it's never too late to start .
Yeah , I think there's a message in there that you know .
He was clear , that he got professional guidance , made a connection with someone to help him in that process and and I think that is important I mean one of the things when you are thinking about investing later in life is you really can't afford to make any mistakes , and so getting the sequencing right , getting the planning right , understanding the strategy and the
tactics of terms of how you're going to do that is really important . So I cannot emphasize enough that if you are thinking about starting later in life , it's best to have a really clear runway , make the invisible visible and see how that journey plays out for you , because when you do that , you get results , like Tom got .
And so Tom and Crystal , it's just just wonderful that you see these types of people . However , the trigger was , whatever the event was , being the heart attack and so well , just that's a great story , and so all credit to them , all credit to the people who have helped look after them in terms of guiding them on that story . It hasn't been smooth sailing .
We heard also In terms of you know , you're always going to have maintenance issues . There's always going to be potentially challenges when you've got a multiple portfolio around some of the tenants that you do attract from time to time , but on the whole , the juice has been worth the squeeze . Juice has been worth the squeeze , ben .
Isn't it interesting , too , that in an indirect way , it promotes why borderless investing is so important , ben ? Because Tom was blessed to grow up and live in New South Wales , which is a high population center , and properties done very , very well for him in that area .
But if he actually was born in another part of the country that wasn't so blessed with property performance , would the story have been the same ?
Well , people who haven't been born there actually still get the same opportunities because in this country you can go and buy into these markets that have the big metropolises and the big population drivers and the big income drivers that allow you to be a part of that .
So , but clearly , new South Wales was dominant , then regional New South Wales , and then went to Adelaide and then went to Queensland , went to Perth . So that is definitely a story about getting borderless right , but if you haven't been born in those states , you can still take advantage of it . So I thoroughly enjoyed that .
You could just have this sense of calm , didn't you , tom ? It was measured and peaceful , and I mean he also reminded me of .
You know , my biggest mistake too was when I sold , you know , that Bundura property . So we've both got that wall wound where there's hundreds of thousands of dollars of lost value . And again , you know I want to double click on that point to anyone who's thinking about selling properties do whatever you can to try and avoid that .
Where possible , go back , see if there's obviously new opportunities around refinancing . At the moment , in refinancing terms , you can do lower buffers . So some of the lenders are out there and there's even a couple of lenders out there who are doing a little cash out piece as well . So up to $50,000 in cash out .
So if you're not familiar with who that lender is , connect in with your mortgage broker and have a bit of a yarn about that . Because , to Bryce's point when he was talking to his mate at dinner recently just trade through this period . It's all about just buying you . That time is my final message for today's episode .
And just for the avoidance of doubt , ben , if you don't have a mortgage broker that can help you with that , just reach out to ours , just send us a note and we will connect you up and make sure that you get access to that as well .
But just to pour a little bit of salt on that wound that you just brought up in , bought that ride property for $212,000 , sold it for $550,000 . That's not bad , that's pretty good . But if you actually stay the journey , $1.7 million .
Yeah , well , you don't go broke making a profit , but there's opportunity cost to such a . We've all got those stories . So , tom Crystal , focus on the positive . We bought Folly out . There was at 5.54m . You know , a little bit of debt still in there , 2m of debt . So you know , trade that out and you're on your way .
It's pretty good , but , folks , it's a decades game .
I don't know .
Have we refined our message down to two things now , Ben , take action and play for the decades game .
Is that as simple as ?
the property couch gets . Oh very good , tom , we appreciate you . I think everyone who listens to that will appreciate you as well .
And Ben , until next week knowledge is empowering , but only if you act on it .
This is very true . See you next week , folks . Hey folks , bryce , here again . I just wanted to catch you real quick before you go .
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