Trends in property finance

Transcript

Peter Fletcher

Welcome to the WA Property Q& A, the podcast where I explore the ins and outs of buying property in Western Australia. I’m your host Peter Fletcher and each week I interview local property experts to help you to develop a deep understanding of the nuances of buying property in WA. From markup trends to legal considerations, no topic is off limits.

But before we dive in, a friendly reminder. While we provide valuable information, it’s important to note that nothing discussed in this podcast should be construed as personal investment advice. Always remember to seek the appropriate professional advice for your specific circumstances. Now let’s get started and unlock the secrets to successful property buying in WA.

So, welcome Ryan Rawlins, the guru of finance from Amplified Lending in Money Street, Perth. Ryan, I find that funny that you should run a finance company from Money Street. Yeah, amazing marketing, isn’t it? Paid good money for that. Did you? We did. We did. Yeah. Oh my God. Yeah. No, it’s good. Great location.

Edge of Northbridge. Nice and central. Yes. Old character house. Yes. Mmm. And so, you’re a, you’re a finance broker. Mm hmm. And you’ve been doing that for a while now? How long? 18 years. 18 years? 18 years. Wow. Yep. It’s a long time. What got you into finance broking? Real estate, I’d say. Yeah, I guess I wanted to learn how to buy more property.

So, happened to sit next to a guy on a plane, randomly, around the UK or whatever. I was in Europe for a couple of years. And I had a house by then. And, yeah. He said so have you got any advice for a budding real estate guy? And he said, just go and learn the lending side of things. I kind of shelved that, didn’t really think too much about it, and then got an opportunity a couple of years later to get a start in the industry, which I embraced, and there was no glory in the early days.

It’s pretty tough doing your apprenticeship on commission only. So did you start in real estate? No, I’d had a house in 98. I bought my first house, just turned 20. And I’ve been the best thing I ever did. And that would me to go traveling four years later, I think, five years later. Yep.

My mates used to joke and say I used to leave bricks around Europe. Used to leave what? Bricks around Europe because I traveled on my equity essentially. So I took a larger loan than I needed and I, I used that to fund my my travels and. Trying to yeah, do as little work as possible basically for a couple of years.

So, yeah, minimum wage kind of stuff, but a lot of fun, a lot of fun over there. So got back and, you know, still had a lot of equity and was still a lot further I guess, advanced than the guys I travel with who were basically out of Sydney who’d saved a Big deposits but probably spent most if not all of that, come back to really nothing and had to start again, so.

Yeah, when you’re talking about time in the market yeah, I guess that’s now 20 years down the track and it’s gone pretty well. The guys that I was working with at the time I bought my house had said, you know, why don’t you buy just around the corner, Queen’s Park, large block, a little 1960s style.

House on it that needed renovation. Yeah, we ended up subdividing that, selling the front after a renovation and Yeah, bill to the back and yeah, it’s part of my portfolio still. Is that right? You’ve still got it? Yeah, it’s now room by room rental. So, yeah, do some stuff outside of the square in that.

But I guess for us, we kind of walk the talk. We’re doing what we’re doing. I guess if we’re preaching to anyone, we’re practicing what we preach. Yeah, we real estate people that get paid by the bank is essentially how it goes. You’re real estate people? Get paid by the bank. Paid by the bank.

Yeah. So our first love is real estate. There’s no doubt that in my mind, real estate’s a lot more exciting than dealing with banks and talking interest rates and stuff like that. They’re just basically a vehicle to get you where you want to get to, so we like to think that we get clients from A to B, whatever that looks like for them, faster than if they did it themselves, whether that be paying off of one house or building a portfolio of properties.

Off the back of that, we’ve done, you know, a heap of stuff in real estate. We’ve invested over, over east, done three or four major renovations. Three, three developments now, three subdivisions. We’re about to build a triplex in Mount Lawley as well, so. Yeah, we had our time on the sidelines too, when the banks pulled in their belts and weren’t really, or were making it harder for investors to add to their portfolio.

We had to sit on the pine for a bit longer than what we wanted. But, yeah. It’s exciting times when you do get back off that pine and you are able to get active in the market. So you started out virtually straight from a kind of a labouring kind of job? Is that right? Or a warehouse? Yeah, I was in a, yeah, I was in a warehouse at the time.

I was going through university. I didn’t last long at university, but you know, I’ve got half a certificate on the wall, but no, I just listened to older guys. I guess

that it. I’ve been there and done that a bit and, you know, for the price of 85, 000 for 930 square metres and that old house yeah, looking back it seemed like, seemed like nothing.

I remember the house next door to me coming on the market two or three years later for, and it got sold for 100, 000. I thought, geez, they got ripped off, but, looking back, you know. Now you’d take ten of them, wouldn’t you? Yeah, exactly. If you could look back on it. Yeah, hindsight’s a wonderful thing. I guess, where we see value is more land content Bigger blocks, and we’re pretty lucky in Perth, there’s still a lot available in that there certainly aren’t at the price that they were, but there’s still a lot of underdeveloped low density kind of areas that you can tap into that I think will perform really well.

Where are you targeting? What, you know, like if an investor comes to you, what’s the sort of places that you look at? The area, there’ll be no surprise to you, maybe, but Ashfield, Bass and Dean. I like the availability of public transport and the river is a nice thing to be in close proximity of.

Yeah, Eden Hill. Eden Hill, yep. I rate those areas. I rate them a lot. You know, I think that little area around Bassandine, Eden Hill Bayswater is just, it’s just lovely. You know, you’ve got some really nice little shops in there. It’s quite quaint. You’ve got some destinational coffee places and cake places.

And and then you’ve got that little strip of of old bric a brac vintage shops, antiques along. What, what is it? Just. Is it James Street or in, over near the hotel? Yep, that’s right. Old Perth Road as well. Yeah, yeah, yeah, that’s the one I’m referring to. Yeah. I love that little area in there.

Yeah. I mean, people will go like, sometimes you’re tainted by that. I’ve always lived here and therefore Ashfield’s not a suburb that I’d ever invest in. I mean, my first place was Queen’s Park and back in those days, people were going, what are you doing? It’s like, well, you know, they generally improve those areas.

It does sometimes take years, but they have to improve them, you know, so. Yeah, well, the thing with those areas that we’ve been talking about, they are quite close to the city, like they’re 10 or 11 Ks from the city. That’s right. And as you say, they’ve got really good data. Good transport and, and we’re talking really good transport, you’ve got those, you know, the Roe Highway and so on.

Approved all those. Yep. Oh, it’s really good. Yeah, well my wife’s got two properties in Redcliffe, side by side, right next to the new train station, you know, so we played the long game there as well. She’s had that for maybe 13,

14 years and six or seven years for the other ones, so. And we were waiting for that zoning to change, which hasn’t yet, but that’s, that’s inevitable.

It’s going to go to R100 and that’ll be our big play. You reckon? Well it’s got, yeah, it is, it’s just, I believe they’ve got some drainage issues with the, to do with the tunnel, but Michael Keel would know more about that, he was the one telling me about it, so. Oh, Michael, he’s been a guest of this. Yeah, he’s probably sold every house twice in those areas, but yeah, yep.

Yeah, so we’re playing the long game with those kind of things too. Getting through the development in Mount Lawley is the next thing for us. So after that we’ll have another play at a 10 to 15 year house, I guess, a forever home if you want to call it. What’s your difficulties with your Mount Lawley project?

What’s, 490 square metres abutting a industrial unit. On the train line. Aside from that, it’s the perfect size. It’s on 490 square meters, but we’ve squeezed three on, yeah. Really? Yeah, it’s the Highgate Inn. It’s where Guildford meets Lorde meets Walcott. There’s a Koo Yong bookstore and we’re in the back of that.

Wow. I got excited. I learned about the R codes in particular, the apartment what do they call it, the plot ratio. application, and I got, yeah, I went out and just bought something pretty quickly but it’s, yeah, it’s a little bit of an ugly duckling, but we’ll hopefully get through the construction in the next year or two, touch wood, and, how many levels are you going? Just two. It’s just two? Yeah, well the back blocks are 130 square meters, so, yeah, it’s just two. We had seven apartments. Approved back in the day, 7 one bedders, but we didn’t proceed with that. Yeah, so you’re stacking units on top of one another? No, they’re like townhouses at the back.

They’re townhouses, wow. Yeah, yeah. It’s only small. It is. I’ll show you the plans, Peter. You’d be impressed by the size of the rooms. I was. I thought they were just going to be little dog boxes, but pretty impressive, that space with the design and everything that those guys do. Yeah, yeah. Are you having them architect designed, or are you just It was designed through a builder that was, I guess And we’re focused on developing and investor market.

So, but they’re aesthetically pleasing. I’m sure when they’re finished, you and I will just go, Ooh, ah, when we see them, but, he’s fallen in love with his own product. How dangerous. I’ll give you the sale price soon. Yeah. Yeah, no, I mean, there’s a lot of ugly stuff that gets done in this space, so in particular.

Yesteryear where there wasn’t so much I guess red tape around what you can and can’t get approved. Mm hmm. I think it’s a good thing that the councils are a bit picky about what goes into their suburbs because they do stand the test of time generally and it can be quite a nice or, you know, the suicide flats of Maylands and Mt.

Longley or whatever they were just, you know, It’s not a lot of design that went into them. No, they were ugly blocks. Well, they were terrible designs. So it’s yeah, just designed to stack people in on top of one another. And well, it is a definite need for improving or increasing the density in certain areas.

But you can do it in a, in a. in a way that’s better than other ways. Yeah, yeah. Yeah, you want you want your home somewhere where you come home from work and it lifts your spirits. Yes. But some of these places, like, and I think we’re lucky here in Australia, where by and large we have a Pretty high standard of accommodation as compared to some of the, you know, other countries.

Definitely. You don’t know until you travel, though, Peter. A lot of people that whinge locally haven’t really seen what it’s like overseas, you know. Yeah, yeah. We are very lucky. I’ve heard of even people in Australia living in laundries. I know that I actually did when I was a student. I was living My bedroom was the laundry at my brother’s place.

A luxury accommodation.

Yeah, and that was on a, on one of those shearers beds, you know, those mesh shearers beds. Wow. Giving us a glimpse of your age, Peter, or is it, what is it? I mean, what kind of shearing gets done? Are you a country boy and that’s where it was? Yeah, yeah, 100%. Yeah, that’s why I’m so rough around the edges.

I just think maybe you’ve got a fleece that needs trimming once in a while. No.

Tell me old matey on the aeroplane that you were telling us about earlier and it sounds like he, his advice had a pretty big impact on your life. Did you ever stay in touch with him? No, not at all. No, he’s just one of the, one of those guys that’ll always chat to the person sitting next to you or the checkout chick or whatever, you know, Sarah’s always rolling her eyes about, you know, here’s Ryan coming in with a conversation just to a random, but no, I’ve got a lot to think about.

You know, I mean, you have people in your lives for a reason, I don’t want to get too cliched or whatever, but like, you’re learning off everyone around you

anyway, that’s what I say. You’re a bit like Mick Dundee in New York, just walking down the street, Hi, I’m Mick, I’m from Australia. All that and off.

Right, I’m from Australia. Yeah. No, I guess when you meet someone that’s doing the thing maybe that you aspire to do, you want to learn off them. So just let the guy talk. Yeah. And he seemed to own half of the UK. We were living in a a very basic accommodation, kicked the guy out that was living there before that I think was smoking in the bed and stuff like that.

But yeah, it seemed to own all these rooms and stuff like that. And yeah, I just, I guess the basic need of real estate and people needing a roof over the head was just attractive with that. How you can provide that and how you can use it to generate wealth, hopefully. What I find interesting about that story is it’s a little bit the same as my story, but I got into real estate and you got into finance, but we were both in the same industry.

Thanks a lot. We were both tackling the same problems from, with different tools. Tell me so when I see a real estate like problem, I see it as a real estate problem, but you see it as a, more as a finance problem. Yeah, I’m sure there’s some famous guy that said real estate is a game of finance.

And that’s the truth. Is that Ryan Rawlins? Well, yeah, you can quote me on that if you want. Circa 2024, but no, look, I, it is your ability to Fund the projects unless you’re going to stay out of the market and save up a massive deposit and pay cash for it. You need the banks. They’re just a necessary evil.

A lot of people balk at interest rates or they balk at lenders mortgage insurance, and you know, I’m never gonna pay LMI. I’m gonna stay out of the market and save my 20 percent deposit. Good luck. You know, next year you’ll be paying 100, 000 more for that property, you know. To save 10, 000 worth of LMI just makes no sense at all.

Mm. So, yeah. No, you’ve got to take those kind of things with a pinch of salt and we, I guess we pride ourselves on keeping the banks at bay and not giving any one bank absolute control over your situation. So, if you’ve got multiple properties, we’ll often have them with different banks. We certainly don’t cross secure any banks.

Is that right? So, you wouldn’t put all your eggs in the one basket? Absolutely not. They want to, obviously, but it’s like, you know, if they make it harder for you to leave, then you won’t, because it’s going to be a pain in the neck, because you’ve got all your banking with one bank. They’ll often unnecessarily cross secure you, so when you go and sell one, you think you’re going to get X

amount from a sale, but they’ll go, oh, hang on a minute, we’re going to revalue that other property that you’ve kept, and lo and behold You’re not going to get what you want out of that sale.

So, and especially in business, you know, that the first thing they’ll go for is bricks and mortar. 100 percent yeah. Yeah. So you’ve got to kind of sell your soul to get that. First Business Loan or whatever, but as soon as we can unravel that and free you up and get your owner occupied home at the very least out of that kind of security position, we’ll do that.

Yeah, I mean, they offer you great interest rates, you know, the more borrowing you bring across to a bank, they’ll give you a sharper rate and those kinds of things. So there’s The enticement there to bring everything across, but no, it certainly doesn’t work out for you overly overly well. What’s your advice to first home buyers?

Buy the most expensive property that you can. Really? Mm hmm. Mm hmm. Yep. I mean, the bank’s going to put 3 percent on top of your interest rate and qualify you at that. Mm hmm. And they’ll buffer other things, like some parts of your income might be buffered, they’ll take 80 percent of that. So then no one’s putting you under financial stress, but essentially if the bank’s going to lend you X amount of money, you take that.

What would you say to, to somebody who goes, and I agree with what you’ve just said by the most expensive home that you can what would you say to somebody who is, who says, Oh, but you’re just trying to saddle people up to a lifetime of debt? I am. Yep. Absolutely. We get trail. We get the trail payment every month.

No, I mean, all that’s true. I mean, we disclose that to the dollar, but it essentially is like, if you were going to take a 5 percent average return on a 500, 000 property over the life of your time. Right? That’s not going to perform as well as 5 percent of 1 million, you know, and compounding interest, once you understand compounding interest, which is a double edged sword, compounding interest on your home loan, but also the compounding interest on growth, you know, any financial planner will tell you that, you know, a difference of 2 percent is a massive difference over the life of your investing.

So, yeah, look, I just know that a higher priced property will outperform a lower priced property. Cheap properties have cheap problems. It’s, you know, with property management, with tenants, with everything. Maintenance, there’s a whole host of things, you know. Why would I buy that million dollar property when I can buy two 500, 000 properties?

Well, let’s just have a little more of a chat around that. I I like the idea because If you buy a property, let’s say for 700, and you’re stretching, you think you’re stretching yourself, but you could have actually gone to, let’s say 9, or let’s say 8. So you go, well, I’ll buy something for 700 because that, I feel reasonably comfortable.

At 700, you’re going to be making a lot of compromises in this market, like a lot of compromises. Especially now, that’s right. You’re buying the 500, 000 property. And, yeah, yeah, yeah, so you’re buying this property that is probably, let’s say it’s a bedroom, too small, it’s 200 square metres too small, it’s a, There’s some sort of problem with it.

5 years down the track, 3 years down the track, you decide you want to start a family. In your case, you’re going to have 12 kids but you’re going to start a family. And very quickly, that 700, 000 home is too small. That’s it. So, you go, well I’m going to sell that, so You’ve got 20, 000 in agents commissions, plus 10, 000 worth of staging expenses.

So there’s 30, 000. And then you’re going to buy a property worth, let’s say, now it’s 1, 000, 000 and well let’s roll it back to 900, 000. So you’ve got 30, 000 worth of buying expenses. Yep. 30, 000 plus 30, Yep. You would have been better off paying a little bit extra in interest payments and living in an 000 property from the start, having that extra bedroom, having that extra bathroom, having that extra land and being able to say, well, I started there, I had my kids here, I stayed here and been happy.

That’s right. A hundred percent. We see it all the time. You see the first home buyer that buys something that’s They can afford, but they’re comfortable with, but a lot of those parameters are put in by themselves. They have these glass ceilings that they go, up here. Yeah, that’s right. I can only afford this or what are you basing that on?

The bank thinks you can afford that. Yes, your savings pattern and your spending, it makes me think that you can afford a lot more. It’s just, you know, that’s why we’ll always work with, back from the maximum and give you a range off the back of that. So if your maximum loan is, you know, 800, we’ll give you 700 and 600.

And instead of giving you 600 and then, oh, funnily enough, the market’s going really well and your 600, you need to be at 700 and then at 800, you know, then you’re chasing down the market. If we give you the maximum straight up and get you pre approved at that maximum, you go out there with a lot more confidence.

And, yeah, you should be thinking about if you’re buying with someone or you’re buying your first house, you’ve got to have those. Discussions around what’s the next 5 10 years look like and part of that is kids. Well, maybe you should take a bigger bite, you know. That’s what I think. Have you ever seen someone who has gone down that path that you’ve suggested and gone hard, gone, gone long And gone, yeah, did really good.

Oh, all the time. All the time. I say to my clients, you know, you’re going to give yourself a high five if you go at the top end of your range, rather than your bottom end. I don’t want to be having this conversation, just like you’ve described just before, where we’re now going to have to turn that back around.

Koso Konnections, Leigh, Ella Davar, Dr. Z, JAS, Japanese Agricultural Standards, Koso Can’t over lend to you. No one wants to put you under financial stress. If the bank’s giving you the money and you can live comfortably, I mean, we always talk about keeping a buffer set aside, you know, 10, 20 grand depending on the client.

You know, if all your other fail safes fail, you’ve still got that and you’re still able to sleep at night. We’ve got no interest in having conversations around you can’t afford the house and what are your options? Are you going to sell up? That’s not, we very rarely land that. So we will regularly see Clients follow our advice and that’s great.

They still come back to us in a few years, funnily enough, and want to go even larger. Go again. Yeah. Yeah. Because the thing is that on the day that you settle on the home, in all likelihood, that is the lowest your salary will ever be. Yeah, correct. Unless you’re at the other end of your career and you want to get outsourced.

Yeah, but by and large, the majority of people are always going to earn more. If you’re buying your first home, it is almost certainly that the day that you sign up for that offer, for that loan contract, your salary is never going to be less than it is at that point. That’s correct. So you might as well go, well, in five years time if I’m on any sort of growth path in my career, my salary is probably going to be somewhere, somewhere north, somewhere around about two thirds to a hundred percent more than it is today.

Yeah, potentially. That’s right. So it’s certainly not going the other way. That’s for sure. Yeah. So you might as well get, get stuck in and have a crack. That’s right. Yep, but a lot of people are tainted by that person at the barbecue that’s had that terrible experience. Uncle Bob. Uncle Bob bought with no advice around that, just bought throwing darts at a dartboard with a blindfold and, you know, had to sell within a year or two and funnily enough took a loss.

They’re the most parochial at the barbecues, they’re the ones that have got the most to say unfortunately. So most people go, well, real estate’s not that great and, you’ve got to be careful out there and you’ve got to, You know, live within your means and buy the cheapest property and just pay that one off.

And once you’ve paid that off, you’re going to have the best life. The reality is that’s just not true. I mean, it might suit some people. People that way. Some people don’t even want to ever to pay off a house, so you know, they just stay renting. Mmm. Good luck to them. I don’t have too many of those clients, Peter, funnily enough.

Oh, well you probably do. Don’t have many cash offers, buyers either, as clients, but yeah. No, yeah. So I know someone that is, is buying a home. In the process of buying a home, they have somewhere north of 400, 000 deposit. Mm hmm. And they’re only comfortable going to 700, 000. And I just think well, why?

And so one of the, one of the the factors here is they’ve spoken to a financial planner. I’d poke the bear, Peter. Please do. Yeah. Well, that. What’s your experience there? Yeah. I’m at the risk of making a mistake. Gross Generalizations, which is probably where you want me to end up, but look, they’re not, I mean, they’re not paid to give real estate advice, are they?

I mean, they get paid for shares, manage funds. Well, real estate is not a financial product. Yeah, that’s right. Exactly. So they’re generally not real estate people. I’ve yet to find too many financial planners, financial advisors that are into real estate. So first of all, Understand that. I think they’re well worth their money and should be taken a lot more into consideration as you’re moving towards retirement, obviously.

I think they’re part of your A team. I think good finance broker, accountant, financial planner, buyers agent, settlement agent, all those things are key people around you, especially as we get older and make more mature decisions. But I’m yet to be blown away by a financial planner and their love of real estate.

It just doesn’t happen in my experience. Fair enough. You stick with what you know. They stick with how they get paid as well. Their financial models change, so they’re not necessarily getting the commissions that they were, they’re charging more fee for service and things like that. But the more generally just shares, managed funds and things like that.

So I think a well balanced portfolio across the board with real estate in there is, we obviously real estate people. So. Our investing is primarily done in that regard, but we’ve got shares and we’ve obviously got super as well that’s indirectly in the shares as well, so. Yeah, look, I am a fan of finance, of of what do we call them wealth, what did I just call them?

Financial planners. Financial planners I’m a fan of financial planners. Yep, me too. And, know, we’ve got a mutual connection that we’re, you know, really, I’ve got a lot of respect for. Me too. In fact, I’m, I’m going to, it’s Cora Drage from Vizia. I had Cora out to my office just yesterday and she did a presentation to my team about about salary sacrifice to super and all those sorts of, you know, things.

Tricky things. Yeah. And Cora is, I would say a fan, a real estate fan. She’s and. Only in the last few years, Peter. I’ve known her for over 10 and most of those have been not so much of a fan. Yeah. That’s fine. And that, that, that’s fine. But my point is this, finance, financial planners are great, but when they get too theoretical, I think they lose the plot for me.

As in, the lived experience of good real estate moves is very different to the lived experience of a share portfolio. Yeah, I think you’ll find it. Like, I can live in a home, live in my home. I don’t have a property manager coming around and, telling me to keep Clean the soap suds off the shower screen.

I don’t have, you know I can paint the walls whatever color I want. I can park my car on the lawn if I want. I can let the plants die or I can, you know, do whatever in my home. Yep. Now what value do you place on that? Yeah, absolutely. And, to me it’s not a, it’s not a financial decision at all. Yeah, well look, if you’re talking strictly investing, then maybe the owner occupied house is out of the equation anyway, in a true sense.

I mean, it often gives you the vehicle to open the door for investing, but I think, By and large, and Cora would say this herself, most people are very comfortable with bricks and mortar. They want to go and touch the tangible being, you know, whereas you’re talking about shares and these future projections, when you retire that, you know, this amount of shares is going to end up with that and all those kind of things.

Most people are a little bit sceptical of that. It’s almost like make believe really, like, you know, this crypto, you know, as well. I know that’s never going to be part of a financial planner’s advice, perhaps, but you know, there’s a whole lot of stuff that you just can’t see and touch. And I think that cornerstone of investing in something that people, you know, need a roof over their head is just Paramount, I guess, for people’s safety and their risk profile, I suppose.

I think you should have a mixture of both at some point. Look, you know, for our personal circumstances, being self employed and things like that, we’re just not contributing to a super like we should. I’ve always thought that I’ll back myself and make that contribution to another property and that’ll go better for me than not.

Some kind of managed fund or share portfolio that I can’t even see. So, yeah, I’m a little bit sceptical with that, but I think those that want to go down that path, and I certainly, Cora is my financial planner too. So, we will be asking her for some very tailored advice in the, off the back end of our Mount Lawley development sale when that finally goes through Yeah.

There’s going to be some hopefully sexy things that she can do with minimizing our tax and setting ourselves up for our retirement whenever that is. So well worth the money. I think just on that point, I think you should pay for good advice in that regard. I think there’s nothing wrong with that at all.

And I think as long as people are transparent and they know what they’re getting into which she is and she gives different models of compensation as well. But yeah, that, I think it’s a great conversation for her. I’m sure you’re going to have her on. I’ve already had her on. Oh, good. I’m glad I’m second fiddle, Philip.

Yeah, yeah, yeah. Well, I don’t think you are. It’s just that the last two episodes that we’ve recorded have Full disclosure, this is our third go at this, everyone. This is our third go, my God. We’ll finally get you on. Hopefully it makes the cut, Peter. I hope so. Takes a little snippet, anyway. Yeah, yeah, well Yes, we’ll get a snippet of it, yeah.

So on that advice thing I had a an accountant and I probably should still have him, to be honest, a guy called Mike Beer from Munro’s and I was renting an old office down in Maddington where, you know, I had my then business and and I thought, There’s no future renting this place at Unit 6, 1, 2, 3 Bur drive in Maddington watching the lads from the local TAFE do burnouts through the through the roundabout.

And there was some good burnouts, I’ve gotta say, but I just couldn’t see a great future Yeah. Staying there. And I thought, well. I reckon I should buy a property and rent it through my super fund and then get my business to rent it off, off my super fund. Beautiful. So, I went looking and in fact it was my wife, Rita, that said this office, we saw this office and had views out over the park and whatever, you know, the one that we’re in.

And she said, you know, that looks like a beauty, so, you know, thanks Rita. And I went to the accountant and I said, look, Mike, I want to buy this property in the super. I want to take out one of those super gear borrowings inside the super. I think, you know, it was up to 60 percent you could borrow, right?

And and I thought, well, I’ve got to come up with the rest. And I was going to sell my shares in, and dump the, you know, to fund the rest of the purchase price. And Mike said to me, Pete, why would you do that? Now, Mike’s not a financial planner, but he is a pretty clever tax accountant. And he says, well, you’ve got some really good shares in your super fund.

Why would you do that? Why wouldn’t we borrow? Money inside your family company, dump that in as a, I think it was called a concessional contribution or whatever it was. Sounds like words. Good words. And I’m just sitting there and I’m just, you know, suddenly I’ve gone from, You know, having almost no debt to this big debt to buy this whole office.

Yes. And we talked before about comfort zones and you’re pushing people out of, out of comfort zones. And that was one of those moments for me where I got really, really nervous. I thought, you know, do I really want to take this extra, extra debt on? It, to be frank, it frightened me. And I went, listen to the advice that you, you’re paying.

I think, I think he was. 500 bucks an hour or whatever it was. Like he’s a, he’s a, he’s a good accountant, but he knows how to charge and he, like, listen to the advice you’re paying to receive. So, and I did. And and that was 2016. And I have now, I’ve got 46, 000 left on that loan. I could pay it off now.

Sounds like you need to talk to me. More debt. More debt. Yeah, amazing though. That is, that’s, it’s just, and that, there’s an office that is, you know, is going to be very shortly, I’ll own it outright and it’ll be, Like, that’s just pumping money into my super and, who knows what I can do with that.

So, the first time by our listeners out there, please, thoughts and prayers with Peter as he’s paying off his second property and outright and. Oh, well, it’s, the, the point isn’t to. Is get the right advice. Yeah. It’s get good advice. Get there and go with it. And trust the good advice that, that you.

That you’re actually going to be okay, you know, like it’s so easy to get freaked out by, you know, these, you’ve lived all your life with no debt or, a 20, 000 credit card debt, and then suddenly you’re, you’re now in the, you know, seven or 800, 000. Just go for it. Absolutely. I mean, what’s the alternative?

Are you going to pay rent for the rest of your life? Those kind of things, you know, when you weigh that up and everyone’s well aware of how much rent is growing. I mean, that’s the canary in the coal mine and that goes first and all those kind of things. But, yeah, that in itself would You start equating the rent payment and your mortgage repayment and it’s Pretty close these days.

So, it’s quite an easy step in that regard, but you’re right seeing zeros on your on your mortgage on your own, like, and you think, you sit there at the start of a, you know, a 600, 000 mortgage, and you go, Yeah, particularly for first homebuyers, you know, the first repayment and you look at, you know, the principal is now 699, 999.

You’ve skimmed two, two cents off what I’m, yeah. Am I ever going to pay this back? Yeah, well that’s the first homebuyer range these days. You know, so that’s first homebuyer bill. They’re taking out that kind of mortgage to, for that. And that’s first homebuyer. It’s going to get a lot worse. And that’s First Home Buyer Range in Perth.

Yeah. Think about what you’d be buying in Sydney. Yeah, it was seven figures. We’re very conservative over here. Ah, seven figures easy, you know, like any day of the week over there. Yep. Unless you were buying a little one bedroom unit in one of the western suburbs. Yep, yep, yep. They call them all Westies over there.

I’m a Westie. That’s what my Sydney mates tell me. Is that right? Well, I’m living in the West, but yeah. Anyway. Look, I think we’ll wrap this episode up here. Mm hmm. Look forward to it, Peter. Thanks for having me. And that wraps up another episode of the WA Property Q& A. We hope you found our discussion valuable and gained some valuable insights into the world of property buying in Western Australia.

Remember, while we strive to provide useful information, it’s crucial to consult with the appropriate professionals before making any investment decisions. Don’t forget to tune in next week for another exciting episode where we continue to unravel the mysteries of the WA property market. If you have any questions or topic suggestions, feel free to reach out to us.

Until then, happy property hunting, and remember to seek the right advice for your personal circumstances.

Thank you for listening.