Hey there folks . It's Bryce here , and Ben and I are excited to bring you our new podcast mini series based on our best selling book , the Armchair Guide to Property Investing how to Retire on $2,000 per week where we give you an insider's look at the making of our book , chapter by Chapter .
Now , the reason this mini series came into being is because , back in 2020 , we did a series of Facebook Lives to help us bust out of COVID lockdown blues and , instead of reading the book word for word like an audiobook , we told behind the scenes stories , chapter summaries , anecdotes and back stories to bring each chapter to life in a unique and insightful way .
Now we've brought together all the audio from these sessions , so you'll see for yourself why more than 45,000 copies and counting have been read on the way to retiring on $2,000 per week through investing in property , and we talked about these concepts in our trademark casual and conversational style .
So if you've ever thought about retiring on $2,000 per week or wondered how to live a life by design , doing what you want when you want , or you've dreamed of travel or philanthropy or anything in between , then this mini series is for you .
We want to give you the Armchair Guide to actually do it for yourself , and if you'd like to get a copy of this best selling book for yourself to play along at home , you can get a free copy at wwwTheArmchairGuidecomau . We'll rush out a copy of the book to you on us if you simply pay for postage .
We hope you enjoy the series and you design a lifestyle that you want to live . So dive in and enjoy each episode as you learn how to retire on $2,000 per week .
Well , good day everyone . How are we all this afternoon ?
It's that time .
Good day , mate . How are you ? I'm great there you are .
Good buddy . Hey , for those folks who've just joined us , I'm Bryce Holdaway , he is Ben Kingsley and we are the hosts of the Property Couch podcast and what we've been doing . Now , ben , this is the fifth week we've been doing this .
We've been reading out all of the chapters in our best selling book , where we sold well over 20,000 copies , and so today we're up to a formula . We're going to dish out a formula today , which is pretty exciting , but I'm just going to quickly tell you the other chapters that we've gone through , ben . First chapter was building your own base . Got that ?
You did that one .
Yeah .
The second chapter was the psychology of investing . Yes , this will test me if I can get to the pages quick enough . Third chapter was five essential steps yes , remember that , don't you ? And then the fourth chapter , ben . I'll tell you what the fourth chapter is , if I can turn the page .
Here we go the fundamentals of investing , and now the fifth chapter is the property investment formula . So what we're doing , folks , is , instead of just going and reading through the book word by word , we're actually just pulling some of the anecdotes out , ben , and giving a few behind the scenes on what it was like for us to write the book .
Bring it all together , and what's really interesting is we wrote this , said this a couple of times now , ben . We wrote it back in 2015 , published in 2016 . And the concept stuck up in 2020 , don't they ?
They do , they do this . This is a formula right Job done , because it really Incapulates everything in terms of what you actually need to do to invest . So Chapter five is sort of the center of the book and it's sort of the pillar , the whole as the whole book up . How's that ? Do you like that ?
The center of the book that holds the whole thing up ? Yes , cool , come on , let's . Let's reveal the formula . Then you want to kick it off . Well , so what is a BCD .
Yes , well , asset selection is number number one . That's the a Look asset selection and the focus on asset asset selection is not all properties created equal price . So we do know that you can't just pick any asset and go out and buy it , because if you , if you do that , you're not necessarily going to get the best optimized return that you're looking for .
So we talk about asset selection in terms of With every different marketplace and sub marketplaces , you want to be going after the assets that you're going to give you the best return , based on also your needs .
Now , what I mean by that is it's all well and good that if I have a $500,000 to spend and I could comfortably afford a loan for that figure , that I would try and get the asset that gives me the highest return possible .
But the reality is , in some cases , so many people are reliant on the income that comes with that asset that sometimes they've got a hedge their bets a little bit . So we talked about different types of asset selection .
So we've got high growth assets , we've got balanced assets , which gives a nice blend between income and also growth , and then finally , we've got cash cows , which are really focused on yield plays .
So it does depend in terms of what your overall strategy is , but what we really want to focus in for asset selection is trying to Minimize the risk in terms of buying an ordinary asset in an ordinary location .
You're right there . What we wanted to do is because the challenge with some books , ben , is you can , you can pick up a book like ours , like any of the other property investing books on the marketplace , and you can actually go alright . Well , it says to buy property , and property Doubles every seven to ten years on average .
So therefore , all are going to do is go and buy property , and we want to actually dispel that myth and we want to do that right now . But just by putting your name on a title is not enough , and it actually is probably the number one rookie mistake that people actually make .
You'd agree , ben , that they , they , the the idea of buying an investment property is is , for a lot of people , a bit of a stretch anyway . So the thought of buying investment property is an emotional process that they need to go through to actually expand their mind to do it , and then , once they've done that , it's like , okay , let's just get a property .
Whereas we go , we go to some lengths and even on page 107 , Framework we go from the micro to the macro so we started state level because One of our biggest bug bears is and we get , we get asked a lot , don't we where ? What's your opinion on the property market cycle ? Which property market so we need to go ?
Are we at which state of territory level which is moving in the particular part of the cycle and therefore then drill down and , okay , I've identified from a borderless investor I'm going to be in Queensland or South . Australia or Tasmania .
And then we have to go down to suburb level because we we say it all the time on our podcast Ben Location does 80% of the heavy lifting . So if that is true , we actually need to look at suburb before we look at property . You're right .
Yeah , you do , and you need to understand the laws of supply and demand in a big way here . Right , because you can also still potentially do the right searching After you've done your research , because that's the other thing we also talk about . Searching is not research .
You got a Fundamental research is all about getting to the understandings of demand and supply . But you can then identify a suburb that's showing really strong interest , but then go and buy a silly asset in that suburb and from our point of view , that would include a medium or high density Product that could be replicated easily in a certain location .
So you could . So you've got to be very particular about the asset because ultimately , what underpins the value , are the value of the asset , is the land .
So the land to asset ratio is a really critical component of the research that you want to be Doing in this particular area , and that's why , when we get to that sort of localized Component , we're also then focusing in on the scarcity and the owner-occupy appeal of that , and we've we've spent countless Days , hours , weeks , months , years studying this element of
human interest and human behaviour and all of those sort of concepts around what it is that's driving value and what's so important about that , which puts the pressure on the capital growth or the valuation of that property moving forward .
So there's a lot of stuff that we could spend all day on here , bryce , but that gives you a really nice indication in regards to where we see asset selection as part of that formula .
True , ben . So if you want to actually get access to that , you can get that framework . As Ben said , we go through a fair bit of detail because we think it's really important that you focus on the framework the right way .
I think that's best summarised by the fact that we always take , you know , from a property point of view , people who are , who get a sense of desire to own that asset like if 70% of the property market is owned and controlled by owner occupies then they buy with their hearts and the emotion they don't necessarily buy with their heads .
So one of the other great takeaways where we're talking about character and we're talking about new versus old , is if you design a property that has really strong owner occupier appeal , the reality is that if you ever have to sell that property , it's going to be done under competition and that competition is going to drive up the return of that particular property .
So that's also another nice little takeaway that we talk about in there .
Very true , ben . So that's asset selection .
B is for borrowing power , and we talk about buying investment property is just as much a game of finance as it is a game of bricks and mortar , because when you're buying a house for yourself to live in , it's sort of that location your sister lives down the street or the schools around the corner , or you've got all the lifestyle drivers that you , as an
emotional being , want to surround yourself with . But when you're buying investment properties , it's a game of actually it's a game of buying . Sure , if you buy one investment property , that's better than doing nothing , because you can hold it for the long term .
Yep .
Gives you lots of choices right , but unfortunately , in our experience , through doing this professionally over 20 plus years and both of us investing for personally for over 20 years , we haven't seen too many people create a meaningful retirement outcome for themselves that's ongoing with only one investment property .
So if that's the case , if if you need somewhere between three and five investment properties , you're going to have to understand lending , you're going to have to understand how to structure lending and you're going to have to understand that lending is so much more than just going to the bank and saying what's the best interest rate you've got or what's the lowest
establishment fees , because you need to be able to set yourself up for success , so it's more about having a borrowing strategy .
Yes .
Is more important than just having a borrowing capacity , isn't it ?
Yeah , that's right . I mean , the blend of borrowing and cash flow is absolutely critical , and there is a distinct difference between money and cash flow , and I want to sort of just delve into that a little bit more to try and explain that . But a lot of people just think that their savings is really their cash flow . Well , it's obviously not .
Cash flow comes in many forms . It can come in in terms of the working income that you do . It can come in in terms of the investment income that you get , ie the rent that you're getting on a property . But it can also come in the form of equity , our nor savings .
So you know we've seen through these difficult times right now that you know when you you may have cash flow but no savings , and if that cash flow goes , then you're cooked all right .
So what you need to be able to do is get that blend right in terms of releasing that equity , having those buffers in place and making sure that you're segmenting your borrowings correctly so you can separate deductible debt from non-deductible debt .
So there's a blend of things that are going on between borrowing power and coming back to that point that I was making around , cash flow is not necessarily just money management .
Cash flow is buying yourself time and understanding the fluctuations that occur during that piece , and the borrowing power is about going to the bank with your income story and getting that amount of money that you need to be able to facilitate the execution on accumulating more than one property that Bryce was telling you about .
So if you think about it like that , what we're basically saying is the accumulation of two , three , four really good properties can set any typical Australian household up for life as they go through that . But if you don't set it up correctly and you don't have then that access to borrow that money , then you won't get there .
So that's why borrowing power and borrowings are a critical element of the property investment formula .
Very true , ben . Second pillar is B for borrowing power and concepts like how much deposit do you have ? Are you going to be cross-securitised ? Do you know what lender's mortgage insurance is ? Should you have a variable interest rate ? Should it be fixed ? What about offset versus redraw ? There's many , many concepts that we need to be understanding and work out .
What is better ? What allows us to make sure that we maintain the maximum tax deductibility ? What means that we're actually reducing an expense rather than earning an income that's tax payable ? All these things come when you start to drill down on some of those concepts around .
You know , as I said , offsets and redraws , so there is a fair bit there is productive debt so that you know leverage is really powerful .
You can then understand and appreciate the benefits of cash on cash returns , which we talk about in here . But leverage , you know , is a powerful thing . It also carries risk with it , so you need to understand what you want to leverage into . So we always talked about you know people often have talked about good and bad debt .
We actually talk about it more as productive debt and bad debt . So we want to take on leverage to control the bigger assets so we can be in a position to get the appreciation on the higher valued asset . So all debt is challenging , but if you use productive debt to be able to get to where you want to get to , it's very powerful .
So that's why borrowings is our second critical pillar for us .
Property investment formula has been made up of A for asset selection , b for borrowing power , c then for cash flow management , and we think that we've been we're really proud of the contribution that we've been able to make through the property couch into this particular pillar , because we've introduced the MoneySmartz program and we've introduced the fact that you need
to plan to become what you plan to become . We've talked many , many times about okay , it's not just about acquiring properties without any end goal . It's about going okay , where's my line in the sand ? What do I want ? How much do I want ? We talked earlier , in one of the earlier chapters , about the four foundational levers .
Well , that forms part of our cash flow management . So we go okay , if I'm actually chasing , as our book says , ben , $2,000 a week , but for some people it's 1500 , some people it's 3000 , some people it's a thousand . So it's anywhere where you want it to be .
But if we know what the end finish line is , we can actually then put a plan in place to go well , this is , this is the reality of where I am right now and this is the , the strategy that I need to take to actually get to where I want to go and what's for you , ben , being that four years older than me , seems .
I'm such a you , so I'm so much younger than you .
Oh , yeah , just a pop .
I've got those four up my sleeve , so that means the plan that I might need to do Ben might be different to the plan that you need to do , and vice versa , for a whole range of reasons . So it's about making sure we're clear where we're going , but but trapping more .
Trapping more cash , turning it into an opportunity for us to leverage that into a destination that we know exactly what the path looks like .
Bryce , if there had never has been a more important time that's really shown up in this country about people's ability to manage their money . We've seen it evidenced in terms of not saving for rainy days . We've seen it evidenced in people accessing super , which is their money and all power to them if they want to take it .
But it just highlights that budgets don't work , and you know this is the one of the first times we've talked about you know , we had the foresight of understanding that from the late 2000s , when we were teaching people how to budget and they weren't budgeting very well , and then we implemented the Money Smart system , which is a rules-based system that gets people
into that sort of formula . So it's absolutely critical if you're going to invest in property , you need to be organised in regards to your money management , because you're going to be taking on debt , and debt is dangerous in the wrong hands and it can also ground you out if you don't do it very well .
So from that point of view , I'm really pleased that we made sure that we weren't just talking about leverage and buying properties and that's all you need to worry about when it comes to property investing . It's not the truth .
The truth is that there's two other critical components , and that is obviously cash flow management , and then the final element that we're going to be talking about in a moment forms that piece as well .
So I'm really pleased that we rounded out the truth and didn't just focus in on the sexy stuff , which is the buying of the asset and basically getting the money and bragging about how many properties we've got . It all comes undone if you don't manage your money properly and if you don't have risk mitigation elements attached to it as well .
Yeah , cash flow management's the hardest bit to get to , ben , because you're actually having to deal with a huge up in the present , aren't you ? You're trying to deal with an outcome where you're creating a passive income . Here we are in 2020 and we might not be retiring until 2040 or 2050 or 2033 or whatever it looks like .
So what we do know is a cup of coffee today is cheaper than a cup of coffee tomorrow because of the fact that inflation will do a little bit of the work to erode that . So that really is where not only do you need to know the moving parts , but you also need to be able to project into the future and bring it back . Now . There are some some .
One of our business partners , michael Pope , is very , very smart at that sort of stuff , ben , so it's allowed us the benefits of being able to to do that , and our clients get the benefit of that wisdom and that experience . But for most folks , it's really okay .
Well , I can put a cash flow management in place for the next three years , but it's really about the 37 years after that , ben , which becomes the challenging part .
Yeah , I mean if cash flow manages about getting a return on your money and making your money work as hard as possible for you .
If you master that component and then divest yourself of that surplus into accumulating assets whether it be property shares or other elements of that you are going to be well served in terms of having buffers , having emergency funds and being in a position to give yourself some financial peace of mind over the longer term .
So a critical component of the property investment formula , and that's why I'm proud that we made sure we put it into our framework when we originally developed it in the early 2000s .
Now folks , ben and I are reading from chapter five of our book , the R&G Guide to Property Investing . So we've been doing this week by week and we're pulling out the property investment formula today . We've done the A , which is asset selection . B borrowing power . C cash flow management , before we go to D in defence .
Ben , if anyone wants to play along at home , they don't have a copy of our book . Ivis will pop up on the screen .
Now that you can go to the armchair guide , stay on the screen all that time , which is really nice of Ivis .
Thank you all for doing that work .
yeah , it's great , she's good , she's good , she just knows .
So , if you want , to get a copy of that . Feel free to go to that website . We'll send it out to you . Just tell us where to go pay for the shipping , we'll send it out to you . Ben D is for defence .
I reckon this is easily the forgotten pillar , the analogy I like to build , ben , if you've got a four-legged stool and you've only got three legs , it's only going to be , you know , a small amount of time before she falls over , right ? So you've got to have got to have all four legs .
So defence is really about okay , well , if we're going , if we know where we're headed , we know we're going to buy properties , we know we're going to get some finance to do that , we're actually putting ourselves into a position where , all right , we're prepared to self fund our retirement , but we are .
We are taking a leap of faith in the fact that we know how to buy the right assets and we can manage the debt that comes with it . But some things are out of our control , ben , and really you've .
Defence is really about saying you , as an income earner , need to be protected , because the house of cards can come crashing down if , for whatever reason , for something outside of your control , your ability to earn an income , either temporarily or , worse , permanently , becomes an issue that is not only going to be a problem for your accumulation activities , but it's
also going to be a problem for you going forward , being able to provide a level of lifestyle . So D is often forgotten , ben , but very , very important yeah , so we're talking about several elements .
I mean Until the next 20 years , when your property is probably more important from the valuation point of view than you are when you start to stop producing income . You're the most important you and your partner or the household . Income is the most important element of building wealth for retirement . So we need to protect you .
So , income protection , life trauma , tpd those types of things should be blended into your cash flows and blended into your plan In terms of from a property point of view , yes , we ensure our car that in reality , their cars are worth nothing these days .
We absolutely need to ensure the property , the building , the contents and , of course , when you do get pandemics like these types of situations , you also need to be ensuring against the tenants in terms of loss of rent or damage and those types of things .
So , mitigate that risk , mitigate the tenant risk , mitigate the property risk , and you can understand where we're going with this .
And then the other one that we sort of round this off in terms of defence , and that is , surround yourself with a team of experts who can bring it all together for you and spell it out , who spend their time doing this work , and I was talking to a very successful mortgage broker the other week , bryson . He had a great analogy around .
When you're starting to play sport and we've used an analogy before about the coach is the most important thing , but isn't it interesting ? When you're socially playing , you spend less time practising .
When you actually become an amateur and just do social sport , you might train once a week , and then actually you know what , as you get to a better grade , you start to train once to twice a week , and so you start to build that up , and then when you get to the professional ranks , you actually train more than you play .
Well , that analogy sort of rings true for advisers . They obviously practise what they preach the good ones do anyway and then , secondly , they're basically bringing groups of people through , from novices and beginners right through to the pros , and they do that through designing a plan and executing on that plan . They just get to do it more often than not .
And so the reality is most advisers who have your best interests at heart , do it on the grounds that they have more time to spend on it , and no matter how quickly you try and catch up to them , the reality is that they're going to have the 10,000 hours to get their expertise level up better than anyone else .
So it's always good to lean on that expert team around you , which consists of a property investment advisor , an accountant , an investment saving , mortgage broker , the conveyances , the building inspectors , all of those types of people , the buyers' agents who execute on the asset selection .
So you round all of that out and you have this A team , this team that is going to deliver the goods for you as you invest in property .
I like it , ben . I like that coach analogy . It's always good to try and draw a picture . The other one , for defence , is really about the old fashioned castles that have the motor around them , ben , which is really setting them up to secure their interests their base from anything that's going to attack . So there you go , folks .
The property investment formula is chapter 5 of our best-selling book . Here the property investment formula is A , b , c , d . You need to master all four pillars asset selection , borrowing power , cash flow management , defense . So hopefully that's been helpful . We've pulled a few stories out .
Ben you and I get to revisit some of the evergreen concepts that we wrote about five years ago to just prove that they still stuck up , not only in 2020 , but they stand up stuck up in a pandemic as well . So we'd love for people to get their hands on this , ben . So thearmchairguidecomau is where you can get that will send it out to you .
We have a podcast also , ben , that we do each and every Thursday , so people can check that out at thepropertycouchcomau . Hey there , folks . Bryce , here again to say thanks for tuning in to the latest step of the armchair guide to property investing mini series , which we hope is adding value for you as we show you how to retire on $2,000 per week .
Now , before you go , ben and I are keen to get a copy of the book into your hands , so we've bought a copy for you . All you need to do is to get your hands on it is to go to wwwarmchairguidecomau and give us two things One , tell us where to send it , and two , simply pay for the shipping and we'll do the rest .
Once you leave your details , we'll rush a copy out to you and you can start reining along with us as we unpack the book chapter by chapter here . And if you like the audio book version , we've got you covered too . You'll receive an option to get that when you enter your details , and you'll be able to get your ear buds on that too .
Go to wwwarmchairguidecomau today to get started . Enjoy .