New Portfolio Protection Plan Without Negative Gearing - With Steve Ash & Todd Sloan

Added: 2026-06-02

[00:00:00]The most significant reforms to tax policy and housing policy that Australia has seen.

[00:00:06]>> What was supposed to help Aussies get ahead turned into more of a rot for business owners and investors. I'm so happy the government is helping young people. Hooray.

[00:00:15]>> Nah, you got it wrong.

[00:00:16]>> So, how can new investors still build wealth and protect their portfolio? I wanted to set the stage is really talking about strategy before we go into this. We just got to like pivot and and look at different things. Together with Steve Ash, former Goldman Sachs investment banker and property investor from Property Strats, we talked through two separate portfolio protection plans taking the federal budget changes into account. Really be strict on your portfolio. Look at your cash flow. Look at kind of like the downside. The great investors are risk managers. If CGT and negative gearing changes have you feeling stuck, you need to understand >> this actually isn't even the first time negative gearing has been removed. They did this in the mid 80s with the Keon government and u but that was abolishing negative gearing on all properties and we know how that sort of turned out. So now before we get into these different portfolio protection plans because a big thing about this is right now people that are looking at this going well I'm already in. I've already got these properties some of them are negatively geared. Am I still going to see the same kind of growth? Other people are looking at this from another scenario we've got together. I'm not even in yet. How do I even make this work now if I can't get any kind of negative gearing benefits?

[00:01:21]Again, we're going to be answering both of those. But for anyone that's just kind of like tuned in, like we're literally recording this the day after.

[00:01:26]This is probably going to air like a week or two later. But for anyone that's just got back from a holiday, got back from Barley and they're like, "What?

[00:01:32]What happened to negative gear? What happened to CGT? Can you give us a very quick rundown before we get into these portfolio protection plans?"

[00:01:38]>> We look at the policy changes at the moment. So what has happened is negative gearing as of last night seventh day if if you were able to get your transaction done before then that means that the the negative gearing benefits you've enjoyed in your portfolio previously and what you've held before will be honored but all transactions that have happened after then uh negative gearing will be removed on established properties um and that comes into a force from 1st of July in 2027 >> and when you say established so it still applies if someone wants to go and build a house and land package not that we really endorse that the same way or at all, but they would still get a negative gearing benefit.

[00:02:14]>> Yeah, they would get a ne negative gearing benefit if you'd get a house of land packages and you know already I've been inundated what what area should we go in to buy some land and it's like oh okay that's an interesting question to answer. So massive changes there. The interesting thing is obviously Labour said that they weren't going to touch a negative gearing policy but it's got to the point whereby they believe it needs to be done. It's greedy investors, you know, causing problems for first-time home buyers. I think the housing policy is all over the place. a 5% scheme came in uh prices just shot up in most of the capital cities in that in those price boundaries and and those it feels like the policyy's just flawed there but now it comes back to investors I don't think this is going to change much things but anyway we work with what we've got but that's the negative gearing then the other big change is CGT >> and so CGT um changes are going to go to an indexation model as of July the 1st 2027 um and yeah they're going to remove the 50% um discount on capital gains.

[00:03:10]So, that's a massive massive change and and and if you look at it kind of from brass tax on what's happening potentially, you're going to see a few people sell their investment properties next year.

[00:03:19]>> And and because this is a one-year window essentially to be able to go, wait a sec, I I want what I I signed up for. So, they're giving a 12-month period.

[00:03:28]>> And this is where I mean, this isn't really a market prediction episode.

[00:03:30]That's another one that we've actually got cooking in the works at the moment, but this is where there's potentially going to be more properties for sale in certain markets. because people wanted to go, I want that discount.

[00:03:40]>> Interested to listen to that episode when you put that out there, but I think there's going to be >> you'll probably be on it.

[00:03:46]>> There you go. I've got my strong views on on what's going to happen there. But, uh, yeah, I mean, these are massive changes. The biggest sort of taxation changes that I think we've seen in 20 30 years, isn't it? So, yeah, and one of the big change, Todd, is the changes to discretionary trust and the distribu and the and and the capital gains and distribution to the beneficiaries. So, uh it's probably better to leave you with an accountant like Jeremy or someone like that about that. But big changes there uh which is going to sort of affect the sort of entity and purchases and the and the structures when you go and buy properties or whatever entity it might be. So big changes there too.

[00:04:18]>> Absolutely. And this is more detail that we're going to discuss technically tonight at the time of recording, but you're going to be able to go back and watch it after this episode that Steve and I are making right now is published.

[00:04:27]We haven't actually made the live.

[00:04:29]Jeremy is going to be going through all of this answering questions. just go into the search bar on our YouTube channel and you'll be able to see this and yeah, get a lot more detailed answers around the technical tax changes on it. I want to start with someone that is just starting out. They're looking at this now going, "Oh, I was about to become a property investor. What do I do now? This whole negative gearing's gone away. I can't afford this. My borrowing power is going to change. This is going to change. What do I do? Where do I start?" And you and I are already talking about this this morning. You've built out a few different plans in here as well. And it's basically around looking at like what's the new opportunity that's come from some of these changes that are not very property investor favorable.

[00:05:08]>> And this is kind of why we were going to film this yesterday, but obviously we had a chat a couple of weeks ago. It's important to do this after the budget night. But what what I wanted to sort of stress, okay, the game's changed a little bit, but there's still opportunity. And so for people coming in, people we talk to day in day out, we're just going to have to pivot strategy a little bit and just work within the kind of confines. And certainly like anyone who's seeing this and don't get me wrong there's obviously people jumping for joy potentially are going to get a house or whatever where you know there's opportunities there anyway >> and cool. Yeah, that's awesome.

[00:05:38]>> Which which is great, you know, but like that's a kind of everyone's entitled to do that, you know, buy where they want, but for someone who wants to get ahead, they're in the early 20s and we model that situation out in a second. There's still opportunity. It's not just okay, all the doors have closed. It's just we need to play a different game. But as we go through these two strategies, you can see one common theme here which is going to thread the two together where there's still opportunity to get ahead. And uh and for someone wanting to kind of you get those other irons in the fire, build wealth while they work hard in their job, there's still still opportunity out there. And I firmly believe people people can get still get ahead. It's just a case of just um pivoting and and doing things a bit differently.

[00:06:16]Personally, I'm excited about this and I don't mean to go all big kev, but I think this is also going to really change a few of the the things that are floating around the market that were potentially going to get people in trouble and and get them away from that kind of stuff and towards stuff that is more of a sustainable portfolio and also a better portfolio to hold from a cash flow perspective because no one likes being 40, 50, 60 grand a year negatively geared and sometimes you need to take that hit in the short term if you got the long-term picture for sure, >> but as long as it actually complements that long-term picture and and this is why don't I actually open this up.

[00:06:52]>> Yeah, I just wanted to say just one other thing on that because I think that's a good point that you make and I think sometimes we we we've had a a good five six years of of of decent of decent growth or like all across the country there's good opportunity still, but we're going to be paying a bit bit of protection. You know, we want a bulletproof portfolio. We want to pay a bit of defense in the next few years. Uh and and with that there's just a bit of pivoting that that's going to happen just just with kind of what cards were being dealt with here. So okay before we get into this something I wanted to set the stage with is really talking about strategy before we go into this. So obviously I mean there's there's been a hybrid of strategies. you got the u kind of the capital growth buy close to capital cities and that's kind of worked well over the last 20 and 30 years but there's a cash flow strategy where you might be buying across regional and other sort of areas um where we've seen such price appreciation over the last five six years that not not seeing too many good yield plays here but now as we go through these two strategies we're going to really double down on that cash flow strategy now and we're going to start stacking these type of assets here and we've got real-time examples of stuff that we've been buying now where this kind of makes 100% and I So it does to you too.

[00:07:58]>> And let's actually be real about this for a second as well. That one of the things that is the key driver for capital growth is demand, right? If supply outstrips demand, we don't have growth. If demand is stronger than supply, we tend to have growth. So if right now the name of the game is going to be more around yield, I feel like this is going to be an episode that if you watch it in 12 months time, 24 months time, I don't think this is going to age too well. It's probably not going to be as very very helpful in two years the same way. Not to say that this strategy won't, but what Steve's going to talk about right now is potentially going to change. It's not about falling in love with this exact deal, this exact area. It's about right now, this is the kind of asset, the the kinds of locations that present those and that is going to grow and change.

[00:08:44]>> Yes, it is. You're going to you're going to need to be two, three steps ahead of the curve. You're going to be looking at those new markets. The markets we're going to talk about today are going to change, going to be different. So, so what while the sort of deals in the areas that we're going to be looking at now that there's opportunity there'll be different areas like in two to three years and it's always about being two to three steps ahead of the curve. The other thing I just wanted to point out you know talking about demand also looking at affordability.

[00:09:07]>> So some of these areas when you as you can imagine if you're seeing good yield that means they're cheap and affordable and I do think it's not just going to be investors that going to be looking those particular areas it's going to be first home buyers as well because they're cheap and you know they're priced out of other markets. So, so if if you kind of look at that sort of um you know kind of the the property clock if that's even a thing as we've gone gone across the country people have just been chasing yield and really because that's almost like the start of a market cycle and the areas that we're looking at some areas are off the bottoms and they're well into their sort of market cycle but others at the start of that market market cycle >> time to get off the bottom.

[00:09:42]>> Yeah. But here kind of like the nana for property investors is capital growth and yield and we're actually seeing that in some markets at the moment. So it's pretty pretty exciting.

[00:09:52]>> All right, let's talk about like the person first. So let's say they're a younger investor, whatever their age, but they're wanting to get into it now.

[00:09:58]But the whole name of the game with this is portfolio protection. This is about how do we actually start building a portfolio in a way that we're not going to go I I have to sell. I can't do this.

[00:10:08]I I whatever it is.

[00:10:10]>> Yeah. Whereabouts do you want to start with this kind of investor that's just getting in?

[00:10:14]>> I talk to this type of person quite a lot and I think something like this there's there's a few things to it.

[00:10:19]There's a lot of psychology to this and and hence why we've been talking about cash flow. So obviously the rules change. It might have been different a year ago before the negative gearing changes like maybe get into a house, maybe get that good um push of equity growth, extract the equity go again, but obviously you'd have the negative gearing benefits like propping that up if you wanted to do that because we're not seeing too many house type deals. um back then with a with say a five six% yield and so coming back now when you look at it if you if you do have the negative cash flow of say I don't know 25k and then even negatively gear that in 161 17 it's very different saying I can hold that rather than living it day by day by day >> and so something that I've kind of learned working with a lot of people now is that something you almost want this property especially when you're starting your career not to cause you too much time out of your pocket and not too much expenses out of your pocket. Hence, we're talking cash flow here. Hence, we're talking about the location that we can buy in. So, here we're going to be looking at a unit purchase of 450,000 with a minimum 6% yield. Here, we're going to look at some of the areas.

[00:11:19]We're seeing some pretty good steam in those markets. We're going to see some pretty decent capital growth. You can see some pretty good rental growth. But the great thing here is you can project it all out for me and I can just go easy and just um >> talk me through do the work.

[00:11:30]>> So, they're doing a cash deposit to begin with.

[00:11:33]>> Yeah. So, here we're going to look at a 20% cash deposit. 90,000 I don't think it's out of the realms. you know, we've all had to kind of stay at home, earn a bit of money um to to get our sort of grub stake up, if you will. Y >> and so here and that makes it easy to do an equity extraction down the track as well.

[00:11:47]>> Convenient thing that's also put in about 1,500 bucks thing. All right. And so if we go over here, so interest rates, what do you want to model this out on? Because this is the other big thing is like interest rates right now you can get high fives, low sixes. Are we we going ahead a little bit more into what like that six and a half territory or what do you want to do? Yeah, even though you could probably get better than that in tier one. Let's just try and be as uh you know kind of risk averse as we can and just just on the side of caution. 6.5 sounds good to me.

[00:12:11]>> 6.5. Okay. 1% vacancy or >> 1% vacancy. The areas that we're targeting would be a 1% vacancy rate there. PMV like >> oh actually I just I forgot to change this over here. So we're talking a unit and we're talking New South Wales to start with or >> Yeah, New South Wales to start. So let's let's be conservative with the PMV 6%.

[00:12:27]>> And I'll also put the land value in at about what 80 grand if we're talking about a unit.

[00:12:31]>> Yeah, I think that's about fine. Yeah, possibly not even that. And so in an entity or this is personal name?

[00:12:36]>> Personal name.

[00:12:36]>> Personal name. Okay, cool. And so PMC, you just said 6%. Um, cool. And I'll just go releting 0.5 and $15 a month admin fees.

[00:12:45]>> So now let's start talking like council rates, water rates, stuff like this.

[00:12:48]>> Yeah. So So council rates for for New South Wales unit. Let's go, 1500.

[00:12:53]>> 1500 water. Now obviously water is also going to be a little bit of a it's charge to the tenant usage. This is going to be a varies a little bit as well. Yeah.

[00:13:01]>> So, what are we talking about? 500 bucks a year >> as a placeholder. Yeah, I think that's fine.

[00:13:05]>> And insurance now because it's going to be in a unit like in a complex, the strata is going to be coming in for most of it, but that still doesn't cover your landlord insurance, etc. So, what would you say we should put down for insurance here, man?

[00:13:17]>> So, I reckon what you need contents insurance for the apartment for the unit. So, and you need the landlord insurance.

[00:13:22]>> All right. So, your your insurance is going to be more like what your landlord insurance.

[00:13:25]>> Yeah, landlord insurance. That's about $400. If you want to be ultra risk conservative, you can bung in contents insurance there. Some clients like to do that just for peace of mind. That would put it up to 700 800. But, you know, for purposes here, we can keep it 400 for landlord.

[00:13:38]>> 400. So, we won't bung it in.

[00:13:40]>> Yeah. Yeah. Yeah.

[00:13:41]>> I don't think I've ever heard you use the word bung.

[00:13:43]>> Bung. Yeah, I know. It's just like UK still. I I still have the odd sort of um slang that comes up.

[00:13:50]>> Why should we put it in here with strata? Because strata is the kind of thing that is going to change from place to place. And this is something that can absolutely kill the deal as well.

[00:13:57]Everything looks great.

[00:13:58]>> Um, but normally what? Anywhere between like 500 bucks and what, 900 a quarter?

[00:14:03]Like what's kind of an average?

[00:14:04]>> Let's just bang in 3,500. I've got to get it in there again.

[00:14:07]>> 3,500.

[00:14:08]>> I think I think that's about fair.

[00:14:09]That's what we'll be looking for. Um, there. I think that's that's cool.

[00:14:13]Entity. We're going to buy this in personal name, so don't need to worry about that.

[00:14:16]>> And land tax, we're not even worrying about it because the land value of it is so much lower.

[00:14:20]>> Yeah.

[00:14:21]>> Cool. Correct.

[00:14:21]>> All right. So, what are we looking at then for a a rent? Uh, this would be about what, 500 a week? Well, 520 >> and a 520 to 550 that that we're looking at. So, deals like talk suburbs just very quickly. We could be looking at Harris Park, could be looking at Maryland, could be looking at Auburn.

[00:14:36]Auburn would be my preferred pick of the three just if someone wants to look at them and you'd be able to get these sort of yields at the moment.

[00:14:42]>> All right. And so, we're looking at the main rental here. And so, this isn't doing any kind of value ad. There's there's no paint, carpet, curtains, nothing. We are just literally buying this as it is. and we've got about negative $106 a week on the low rent, $79 a week on the high rent. So, if we did get $550, looking pretty good. Uh otherwise, it's $520 a week would be negative 100 bucks.

[00:15:02]>> Yeah. Yeah. That that that's uh that looks pretty good on this this particular tool. And then you've got sort of like down here, you got average capital growth rate. I mean, over the last 10 years, units have looked pretty horrible, but in the last 12 to 18 months, they've looked pretty good. Some areas like Lake Kemba, for example, up 18%. So we're looking at someone something that's going to have decent >> capital growth in the next one to two years because you can't really model this at say six seven% peranom doesn't move that way >> exactly like if we actually look at this now and go like your stats here of 18% looking at that over a 10 a 10 10 year period that is going to give us a false positive I really I'd love to say that's going to happen uh but I don't think the Lembmber two better is going to be worth 2.4 million in 10 years time.

[00:15:44]>> Can you buy me some though?

[00:15:46]>> Maybe it sounds pretty good. But no, no, no. In seriousness, no, no, but we're looking for steam. We're looking to buy start the market cycle, bit of momentum, get some good capital growth, and that's kind of what we're going to see here.

[00:15:56]And then it might probably when it gets to to an unaffordable level. You're talking about afford, we're talking about demand and affordability. That's what we're seeing here at the moment, that's going to plateau in a few years.

[00:16:05]But this should be able to give us that equity extraction where we're looking for >> because we're looking at that then over a 10-year period. And this these are literally unit plays that they haven't done anything in 10 years. in in some cases they've gone backwards. Yeah. Um what what are we realistically putting in here as an average annual growth then if we're modeling this more so over a 10-year period not a 20 or 30.

[00:16:25]>> Okay. So I mean this is crystal ball and I it's it's always tough to tell. We do have precedent before like um and I know you don't buy into the 186 sort of land cycle and go too much into that but when property prices have and house prices I'm talking about have got too much like it's the affordable items that kind of lag towards the end of that particular cycle. That's kind of where we're looking at town houses, where we're looking at units. We've seen a precedent now. I've said that word a couple of times. Sorry, Todd. You're going to you're going to beat me in a second. But maybe not.

[00:16:55]It's just long long words after the budget. I'm pretty fried after last.

[00:16:59]>> People are going to be thinking about the backstage behind this then. ME STEVE WAVE.

[00:17:04]>> YEAH. I think I think I think these policy changes have set us all a bit crazy. But but what what we've seen like what we've seen in Brisbane, you know, I always come back to this and hark on like Brisbane's have been on this massive tear since 2019. House prices got crazy up to about 2022 and there was this big gap between house prices and units. Now units outperformed for for a period there karoo ascot >> uh annally and now units aren't looking too to kind of attracted like four to 4.4% yields on units in Brisbane. Now >> this is literally my point what I was saying beforehand. If we had have talked about this two years ago with Brisbane, we would have been like, "Hey, here's where it's looking good." Yeah. Now we're talking about it with Brisbane, it's like it's still not terrible, but it's not what it was.

[00:17:44]>> No. No. It's not the play anymore. They they've gone too much. And so, yeah, >> 18%'s way too much. What do you want me to put in there then? 6% like 5% 7%. How how conservative we being?

[00:17:54]>> Let's go 7% because I do I do see units doubling in these areas like over the next 7 to 10 years.

[00:18:00]>> That means we're we're basically going to 885,000 in the next 10 years. I know it's hard to see and it's but but you know when you look back 10 years and look at some of property prices that we're seeing now >> you just wouldn't think it. So I think it's a hard one to sort of model out like you know because you can't look at the last 10 year growth rates etc and put them in because they'd be 2%. We're looking for those assets that have stagnated. I don't buy into say okay say an area like Bulgam Hills or something has grown 11 12% over the last 10 years it's going to continue to grow at that rate. I think there's going to be a cool off and then you look at those kind of like areas of stagnation. So here, >> you know what does make sense about this though? Let's let's actually have a look at this, right? So if we go capital growth, no value add 7% per year, we're looking at $885,000 in 10 years time.

[00:18:45]>> Yeah.

[00:18:46]>> Now if we actually look at that from more of a rental yield perspective, if the rent growth stays at 4% peranom, which realistically like right now over the past five, six, seven years, I think the average annual rental growth is like 6% plus. Yeah.

[00:18:58]>> I think that's too high. like we have had have had a rental boom. It's normally more around that kind of three and a half, four, like around there.

[00:19:05]Four might even be a little bit more.

[00:19:07]But if as long as you're comfortable with this, I think if we put four in here, there's this belief that an investor is going to sell their investment property. A first home buyer is going to walk out of their rental property and walk into the investment property and everything is just kosher.

[00:19:21]It's all like, oh, this all just works perfectly.

[00:19:24]>> I don't think it's going to work like that. And this is purely my this is my opinion. This is anecdotal. I don't have any data on this. If anyone does have any data on this, please send it in. I would love to see it. But I feel like we're actually going to see less rental stock. I think there is going to be more people going, I I am I needed that negative gearing benefit. I'm going to sell that. And then when there's been a sharehouse, people living at mom and dad's, whatever, they will jump in.

[00:19:47]They'll buy and there'll be some great opportunities and good on them. Get into the market.

[00:19:51]>> Yeah. But I think because of that, we're potentially going to see more pressure on the rental side of things because it's also more expensive to build now than ever before.

[00:20:01]>> And as Yeah, I I want your thoughts on this because if you think I'm overshooting, let's change it. But I think 4% kind of makes sense cuz then also when you look at this, in 10 years time, it would mean the rent would be $770 a week. That doesn't seem out of this world. In 10 years time, if you've got an $800 and something thousand property renting for $700 and something a week, what does that >> No, no, it doesn't. And and quite simply, like the last time we had negative these negative gearing changes, we saw the the the rental growth in Sydney and Perth particularly go bananas.

[00:20:33]>> And so from what you've just talked about, if anything, we're going to be looking at a higher amount. And if we could and if we currently look in Sydney, if you look at areas like Zetland for example and the big towers and the newer type blocks, I mean the rents are 800 900 anyway. So so you know they're different markets. They're markets within markets as we always talk about. And so kind of when we're looking at 550 that's really at the low side for a two better anyway. And so we are going to see rental growth because of like the the the changes. Not too much stock on the market for people to rent. And there's going to and there's still a lot of people coming into the country. I'm not going to go into all of that, but they're going to gravitate towards Sydney, Melbourne, Brisbane, you know, the the major hubs and so there's going to be more pressure on that affordable end of the market. So, I actually think 4% is pretty conservative, but let's just keep it there just to for for illustration purposes.

[00:21:21]>> I'm I'm Yeah, I'm I'm sounds like you and I are exactly on the same page, man.

[00:21:24]>> Yeah.

[00:21:25]>> All right. So, we're looking at year one. We're going to be negatively geared around sort of four and a half grand a year. So, if you were to buy a property, there's obviously no tax concessions with that. Yeah, this is now you're starting at at zero negative grand 4.5 what is that $80ish a week and so you'd be neutral at around that kind of like 56 years sort of mark again depending on high rent low rent to seeing where you're sitting.

[00:21:48]>> Yeah. Yeah. No. No. And and while we're talking about cash flow cash flow positive you it's simply just you know where interest rates are and where how much asset prices have grown. We're still looking at in in major capitals and this is about as good a cash flow as we can get. It's still very affordable for people, but we're again we're looking at those areas with a bit of steam where we're going to see some pretty decent appreciation I think in the in the near term. So that's very doable for someone and it will set themsel up. They've obviously got some money in here with 20% deposit and so when we come to equity extraction when we'll talk about in a second, there's there's there's kind of a refi aspect and there's there's something that someone can go and do. Okay. So while you're still looking at the uh this particular property being negative in four to five years time, you've got to take away that sort of um that thought process. What we're trying to do is build the snowball. We're trying to build that portfolio. I always kind of relate it to a snowball throwing it down the mountain and as as the snowball gets bigger, it kind of gathers speed and that's where equity comes from. But at the moment, when you start building a portfolio, we've got to go higher LTV and uh and where interest rates are at the moment, we've got to go, you know, slightly negative cash flow. But, you know, the sum of all parts, the idea is to try and get to four properties here over a two to three year time window and try and get that portfolio. It's not about trying to get to whatever person size, 10 million, whatever it might be.

[00:23:03]We're looking to try and get as much as we can do, then use time. Time is the most important thing when it comes to investing and going through those cycles.

[00:23:10]>> And you and I are both very similar on this. Like my when I unlocked myself, I was positively geared toward 70 grand a year. I wasn't buying Ferraris with that, but I it was enough to be like, cool, I I can actually just do stuff. I can start a business. I can do whatever.

[00:23:25]It's the same thing. This is not going to get you to like 10 Lamborghini status, but this is going to get you to life on your choice status.

[00:23:32]>> And that and that's kind of what we're looking for, especially, you know, over the next 10 to 20 years. Like financial freedom. We talked about it a few times.

[00:23:38]Like if you're the kind of person that builds this, you're going to need to do something, but it's going to give you options. It's not about the Lamborghinis. It's about having time to go and do these things. And you don't need, you know, kind of 8, 10, 100 properties to do it. You can just get started. This is going to give you the options. This is going to give you the equity. Like so when you do get to sort of like mid-30s or whatever your kind of situation looks you've got a bit of growth in your wage or whatever like might be married whatever it might be you're going to have options to keep going that or you can just you know go that's that's enough for me you know I'm I'm earning this amount of passive income but that if you don't do anything you don't have any choice so it's all about getting that snowball as big as you can as young as you can let time do its thing as it going down that mountain getting as big as it can that velocity's going and then you start to see the options when it's 2 million, you might have your 10% growth. You might have a good year like, you know, 2, three years, might be this year, you know, we see really good. We're picking those assets at the start of a cycle.

[00:24:33]>> If you can get that 10% growth, that's when the the penny really drops. It's like, oh, blime 100,000 and a year and my portfolio, my wealth creation 200,000. Like, it's like, oh, this is pretty cool.

[00:24:44]>> And uh and so it's not all about, you know, the passive income, negative cash flow that you're getting. It's also the passive wealth creation that you're creating by adding an asset at the start of the cycle. And there's opportunities out there. And people shouldn't be scared off by what happened last night.

[00:24:58]If you just even think about it that way, for every million dollars that you hold an asset, if the market grows just by an average of 5%, which I think historically it's 5.4% like Australian average, like everywhere, >> you you're making 50 grand a year in gains, like in wealth, in equity.

[00:25:14]>> Yeah.

[00:25:14]>> Like and that's from doing nothing. and like yeah anyway let's let's keep going ahead with this because I can see what you're saying and looking at this from not an individual property level you're saying let's let's take the whole broader picture and look at this from the portfolio level because it's still going to be negatively geared by a bit and there will be a few years of okay this this is actually going to suck you're going to be negatively geared by a little bit more >> but it's those those first few years that if you can structure this right minimize the amount that you're negative geared by to then have life on your terms this is where the magic really happens we go to Next one then. So if we're looking at this, are we we're still in New South Wales for for number two and are we doing in the same year or a year apart?

[00:25:51]>> I'm going to I'm going to go across to Victoria and and there's many reasons for this at the moment and so like obviously I've talked a lot about houses but we are going to be repetition and good investing sometime well good investing is repetition. Now the reason why I quite like this so if we go back to unit number one >> like this market is already moving okay so we got some good steam in there.

[00:26:12]We're going to see some we've seen some good growth in some areas that we talked about. I think that's going to translate to some surrounding areas. That's that that's going gang buster. So, it's good.

[00:26:19]Here we're going really start the cycle here in Vic. I think that you know the message is out like be we talked about it on an episode. We're talking about buying Victoria properties at 350. Like you can get them at 350, but let's just keep it like we want it to we want this portfolio to enhance your life. We want it just to kind of not impact on your day-to-day. So, we're going to go 450 purchase price on this one.

[00:26:40]>> 450 purchase in here as well.

[00:26:41]>> And we're going to be buying in a blue chip area as well. So, And are we doing cash deposit or equity deposit this time?

[00:26:46]>> This time we're going to do a mixture of both. And so here we would have been some sort of savings like from from the first first area. Might get some, you know, money from the parents, etc. But we're also going to do a little bit of an equity extraction from the first one.

[00:26:59]So we'll have a bit of a split between equity and cash for this one. So maybe 50/50. Okay. So the deposit this one, we're going to do a mix of of cash and then equity. You can also get parents to potentially guarantee. I've seen that happen a few times recently with a few different options. Exactly.

[00:27:14]There's OP. I mean, the people who do well at this are trying to push as much and never take no for an answer and always seeing how they can get this done. So, maybe we'll look at a split.

[00:27:22]Not maybe, we'll do a split of 50,000 cash deposit, 30,000 equity.

[00:27:26]>> 30,000 equity. Okay.

[00:27:28]>> And we'll do 40,000 equity here.

[00:27:29]>> Cool. Right. And as far as the interest rate, this is also 6.5. We're just going to go on the conservative again.

[00:27:34]>> Yeah, we'll go 6.5. See if we can stay on the tier one lender. All depends.

[00:27:37]Talk to broker, but yeah, stay there.

[00:27:39]Keep it simple.

[00:27:40]>> And rent 520 as well. Here we're going to look a little bit better. Okay. So, I'm going to think about somewhere like Brunswick West where we're seeing some pretty decent sort of rental yields at the moment where we'll be looking at maybe 530 to 550. Let's start putting in a few expenses as well. So, our vacancy rate what around 1% again.

[00:27:59]>> Yeah. 1% pretty tight there at the moment.

[00:28:01]>> Yep.

[00:28:01]>> Yeah. 6%.

[00:28:03]>> 6% for our PM fee. Uh let's go 0.5 for our weeks of letting and 15 bucks for our admin fee. Council rates, water rates. Anywhere between 1,200 to500 let's say on the side of caution 1500 there >> 1 1500 >> water rates 500 insurance here like we did this before let's just go 400 again about >> 400 maintenance about $1,000 a year >> yeah sounds good to me >> y and strata strata is a little bit better in Victoria it depends on where what building but >> it is I mean I've seen strata below 200 in in a lot of areas so maybe yeah so so yeah I mean you can be quite picky in the type of asset so maybe let's have 2,000 strata here >> 2,000 stratum >> okay so land tax I think we got to go and fill up the land value here.

[00:28:42]>> Land value.

[00:28:43]>> And again, if we're putting it in a block, what are we saying? What? 50 grand, 100 grand. What do you want to put in?

[00:28:47]>> I would say 100 grand might be a little bit more than that actually, but uh yeah, the upshot of it is not going to be too dissimilar for cash purposes.

[00:28:54]>> $500. Yeah, yeah. So, that's cool.

[00:28:58]>> And again, now that is going to change um quite a lot as soon as you put it into an entity. So, if you put it into an entity, it jumps up um quite a lot more. But if this is all personal name, because again, this is where it's going to change things as well. Yeah.

[00:29:09]>> And we're looking at similar kind of growth or do you want to have this one sort of a little bit more subdued? Where are you thinking for the capital?

[00:29:16]>> Well, this is it. Like I don't have a crystal ball and it's really hard making, but as a value investor, my downside's minimal because these areas have stagnated for so long, but what we're seeing now is good yield and we're seeing a very attractive first-time home buyers still in that sort of market. So, I actually think the growth is going to be pretty good. Now, for this one, let's put in 8%. And the reason being is is that in in these markets uh what we've seen in the equivalent markets where we've seen these sort of these yields um so cheap what we'll see in my opinion we'll get see investors go into them first-time buyers go into them so I see pretty decent capital growth I think eight's being conservative here I think these markets can do very well and we've seen what's happened in Sydney >> 8% even all the changes that just happened last night you're still tipping like 8% for these >> I am in fact I'm even seeing it stronger because of the changes from last night I don't think we're going to see people go and buy houses now at 700 750 where they can't use the negative gearing benefits.

[00:30:10]They're going to need to put their money, they're going to need to chase cash flow and there'll be a competition between first home buyers and investors trying to get into these assets and I think we're going to see pretty big appreciation like we've seen in Brisbane, like we've seen in Perth and like we've seen in Sydney over the last year.

[00:30:23]>> Mate, this is very interesting.

[00:30:24]>> Come back in a year's time and see see confident that that it's going to be be the case.

[00:30:30]>> All right. And is this going to be a purchase that's in the next year or in the same year?

[00:30:34]>> Uh we're going to look to try and do this towards the end of the first year if we can. So the good thing with these units because you got the decent cash flow on there, the you're going to get a decent because we're going to be with tier one lender these could be good refi aspect to these. And so because we've got an 80% lend, that's why it's structured this particular way. Ripping equity out there will give the options to be able to go again. And so we're looking to try and get go aggressive and and try and get those two properties done in the first year. And so if we're looking at uh the end of year one, basically we're negatively geared by around that kind of $10,000. So this means we're going to be about about 200 bucks a week.

[00:31:08]>> Yeah.

[00:31:08]>> Yeah. Okay.

[00:31:09]>> It's pretty good >> realistically for holding two properties that really have like growth potential set up in front of them.

[00:31:16]>> And actually holding that, if we compare that to to holding something that was more like a >> yeah an $800,000 on a 3.5% yield, >> bit of a different story. Um, so even if we go go ahead and let's go to year two.

[00:31:28]Obviously, this is now reducing. It's going to be more like around that kind of eight and a half uh that you're actually going to be negatively geared.

[00:31:33]But I'm assuming though that we're then going into 27 because this is financial year. So 26 27 we've loaded up. Now if we move on to 27 28, are you going like two purchases again in those years or you kind of slow down a little bit?

[00:31:46]>> It'll be slowing down. It'll probably be towards the end of 26 27 because we got to let the snowball run a little bit.

[00:31:52]Um, and we need that sort of equity growth because we're going to have to go into 100% lens coming go going forward.

[00:31:58]And so all depends on kind of what the market's giving you. I mean, we might see out performance. We might see some really good sort of refi. I've seen some really strong refies recently from the tier one banks. And that's kind of like you got to think about banks need to grow their loan books etc. And so I I I just think from a conservative point of view towards the end of the financial year two for this third purchase.

[00:32:19]>> And what state are we going in? looking at current market conditions. I still think within suburbs within New South Wales, let's look look there. I think with this kind of what we're looking to and one key thing I want to distinguish between Victoria and New South Wales, the purchasing cost in New South Wales are cheaper than Vic, lower stamp duties, etc. And so there there's still enough suburbs that I'm seeing as of now where I think there'll still be value where you can get close to maybe a mid to high five% yields say in a year and a half time comes really hard sort of look into the future. But I'd like to have that kind of like spread between New South Wales and Victoria for these two.

[00:32:52]And this is going to be one of the really important things with making a plan, whether it's a really detailed plan like this or whether you're going into a plan yourself that as soon as you start looking two, three, four years ahead, it already gets a little bit murky. When you look 10 years ahead, it's really it's educated guesswork to a certain extent. It's forecasting. But at the end of the day, if we had have done this plan 3 years ago, it's not about ah the plan didn't work. It's about no, no, no. You can put in the best information that you've got so you know the direction that you're heading in, but then you are going to have to potentially pivot because some markets actually will stay the same and and they won't grow the same way and maybe you can actually load up more and really back it other times it's like wow that window closed in 12 months.

[00:33:33]>> Yeah.

[00:33:33]>> And and now it's like where's the next opportunity?

[00:33:36]>> That's exactly it. It's the strategy stays consistent here. We're going to go pure on cash flow strategy like there's not going to be no pigeon period. No kind of like mixing say a cap a capital growth and a cash flow type asset. We're going full in on on cash flow and I can tell you when you were buying in Perth and you were getting the seven to 7.5% yields in Mandura back in 2020 that was pretty scary. No different in my my eyes to looking at these unit players at the moment.

[00:34:00]>> Absolutely. And so I'm just filling all this out in as as you're chatting here.

[00:34:03]So our interest rate 6 and a half% vacancy rates and we're going that the 6% as well for for PM. And again I'm just going to put all this in as a bit of a standard. This is nice and easy.

[00:34:13]$15 a month. And so for our council rates, again, similar kinds of these are going to vary all the time depending on exactly where you are, but roughly around this kind of mark. Well, not 5,000 for that's way too much water being used. Uh insurance again, we're looking more like that 400 because we're talking about the actual landlord insurance side of it. Then and strata.

[00:34:34]So for our strata fees here, if we're back in New South Wales,00 >> you said 3500.

[00:34:40]>> Yeah. Yeah. Yeah.

[00:34:41]>> 3500. And let me actually just change that from house as well to unit. And estimated land value. Again, we're going to do what? About 100 grand.

[00:34:48]>> Yeah. Let's let's keep it straightforward. Yeah. Yeah. Cool.

[00:34:51]>> Okay.

[00:34:51]>> Nice and easy.

[00:34:52]>> Now, the interesting thing, obviously, we've gone at higher purchase price here, 500,000. And so, rents. So, we're going to maybe take a bit of a hit on the yield because obviously prices would have moved in that particular time.

[00:35:02]Okay. So, for the rents here, we're going to still try and hog that 6% yield if we can. And so we'll look for say 570 to 600 uh a week rent which should kind of put push us up to that um that 6% yield. Now this this is the interesting thing as well. So we're negative $241 on the low rent uh 213 per week on the high rent. It's like why why are we so much more negative? But it's because there's a 50% uh sorry $50,000 equity deposit.

[00:35:28]Yeah. And so because of that, we're we're not going to have as as good a cash flow because if I change that to a $50,000 cash deposit, that means essentially our debt that's 500,000.

[00:35:38]Yeah. Is is lowest. And now it changes into $178 to $150 a week >> and you're capitalizing the LMI as well, aren't you? So that's it's almost like 105% >> pretty much.

[00:35:47]>> So you know, I mean, that's that's to be expected. It's uh as we talked about, you know, we're starting out here. We're trying to build the snowball.

[00:35:54]>> This is the whole thing. Do you remember being like 9010 LVRs? Like my cash flow wasn't great when I started and it was all about who cares if you're you're positive, negative at this stage. It's like you said, it's building the snowball. The snowball is the thing that's going to change your life.

[00:36:06]>> Yeah. Yeah. You remember the cheese and pickle sandwiches? Yeah. I'm I'm sure we we talked about that.

[00:36:11]>> Pickles. Yeah. Yeah.

[00:36:12]>> Bloody pickle.

[00:36:13]>> I thought you didn't like me bringing that up. You're bringing that up now.

[00:36:16]>> It's okay. I don't mind it. I don't mind it.

[00:36:18]>> All right. So now if we're we're looking at year two, basically we're negatively geared roughly around $20,000 a year.

[00:36:25]This is by having three properties. If we're adding a fourth to this, and I'm just going to run through this really quickly now as well. Okay, so the for the fourth asset, like we're going to go 500,000 again. We're going to do this one in Victoria. Um there might be another market here. We could there's other markets around the country, but we're really going to target the best yield that we can try and get here. What we're going to be looking for is right around about a 6.5% yield. try and really knock it out the park. There are opportunities out there at the moment where you can get this maybe with a lower purchase price at 450. Um but let's call it 500 because markets change, we'll see rental increases, etc. Um vacancy rate. You've got it. You've done this before, haven't you, Todd?

[00:37:04]>> Yeah. Yeah, man. Well, this this is um not my first rodeo. While it makes you feel filling this out, can you talk us a little bit more about the market? So if this is a purchase that's going to happen potentially in a year's time. So after we've started the portfolio. So we're almost 2 years down the track. Now >> talk me through a little bit more about how this would actually come together with like changing that asset selection.

[00:37:23]>> So if something's going to be working, we're just going to keep pressing the button. And now we did a podcast a year ago where we talked about units and we talked about oh you know they don't grow as much as houses and we talked about the opportunity in Sydney units. And then kind of fast forward now Lake Kembber's grown 18.2% 2% in the last year and other areas Belmore's done very well. So here we're looking at $500,000 purchase and the reason being is that we're kind of almost expectant of that first purchase in Victoria at 450 growing that 10% mark to sort of 500,000. Now these areas I you know from what I'm in some in the areas that we kind of look at some pretty good blue chip type areas. Uh there's decent rental yields here. it becomes pretty hard to to to to select an area which is going to be I mean if we can get into the blue chip areas in that sort of um kind of St Kilda Balaclava Windsor Elwood these type of pockets if we can do that then then awesome because I think these will be great capital growth plays great yields if not we can look at kind of something maybe in the likes of Seden um uh it's Kingsville maybe lower socioeconomic dandog but we're really trying to look for a yield play um because with yield we'll get that capital growth.

[00:38:33]>> So with this now I've got as a 6.3% yield. So this is definitely a higher yield play.

[00:38:38]>> Yeah.

[00:38:38]>> And again we're not doing any subdivisions, any renovations, any anything to this. This is about going out maybe into an area that complements it at the time. And that's the whole thing. That area is not going to complement it forever. There's a window.

[00:38:50]>> And so he's saying jump into that. So we've got about 610 a week rent. Um and we're looking at being negatively geared by $252 a week. So on year three, we're going to be negatively geared by around $26,000 a year. So that is $500ish a week.

[00:39:06]>> Yeah. And it's going to hurt a little bit. But what we got to be cognizant of is we've had we've got that portfolio value up to sort of 2 million circa maybe a little bit more with with capital growth on the first two.

[00:39:16]>> Two 2.2 after 3 years.

[00:39:17]>> 2.2. There you go. It's all in all in the tool here, which is awesome. So we've got a bit of equity growth there.

[00:39:22]>> About 340,000 in equity growth if if uh you've picked it well. And and this isn't picking it like you've just said before about uh some areas already doing like 18% with their units. This is also looking at 7% 8% 6% and 6% capital growth.

[00:39:36]>> Yeah. Yeah. We we're looking to outperform that and our job as investors is to outperform kind of what you can do at the moment. And that's why it's so important to get into the start of market cycles. And so quite simply, I do, you know, with all the kind of negative news that's going to permeate over the next few weeks after what happened last night, I firmly believe there's still going to be opportunities around there's markets within markets within markets, etc. And I there's still undervalued areas and so there's opportunity to get into but the the important thing I just can't stress it and I've talked a lot a lot about it on your podcast about like especially if we're doing this in our 20s late mid to late 20s early 30s or whatever you need time to to to let the snowball do its thing and now's the time to sort of maybe sit on the hands and wait like you'll have the options in a few years if you want to keep growing the portfolio you got to work on your wage increase etc. I don't want to sound like the, you know, the boring dad when it comes to that, but we've all had to do that. But you don't even need to do that. You can just sit on your hands.

[00:40:32]>> And it's just like some things just take time.

[00:40:34]>> Yeah.

[00:40:34]>> Like, but it's about setting yourself up from the beginning because right now this this like let's actually just look at this year by year. So like 3 years.

[00:40:40]Yeah. You negatively get 26 grand a year. That's not amazing. Then all of a sudden it's more like around 22. And again, everything's staying constant.

[00:40:46]These are projections. Sometimes you're going to outstrip this. My plan I was set to unlock in 10 years. Did it in four. Sometimes you're really happy with how you're actually wrong. Yeah. So, but if we keep going through it, it's like even if you're looking at six years, you're negative 13. But it's not the negatively geared per year that's actually the game changer. And this is the thing that so many people miss that Steve and I were talking about this before. Steve starts playing with like different stuff with the calculator and going, "Well, Todd, what if we actually look at more of a sellown?" And Steve, I'll let you pick it up from here, man, and walk us through what you and I were talking about before.

[00:41:18]>> Okay, Todd. So, the good thing here is we've we've modeled this out. We're kind of in year 10 here. But the important thing I just want to stress, the individuals that started out here now has options 10 years later.

[00:41:28]>> They can actually sell a couple down, get some passive income, they can continue to hold, they can sell the whole lot down and sort of um put it into into a high yielding sort of commercial asset or or an index fund or whatever. But the important thing here is you built that equity. You've done something that others weren't doing at the same time where they're kind of like, oh no, the sky is falling in like no negative gearing. It's too hard.

[00:41:49]you've actually gone and created something tangible where you've got options down the track in year 10.

[00:41:54]>> Well, and three and a half million portfolio if all holds consistent about $1.8 million worth of debt. So, this is also modeling off of interest only saying you've just paid down nothing.

[00:42:03]So, you've got around 1.6 million essentially in uh equity gains and you're looking at about 6,000 cash flow if you were just to go, "All right, cool. I'm just I'm not going to do anything just yet." But talk me through one of the the options here, Steve. So, one option that you could do if you if you're really like, okay, I'm going to take it take it a little bit easy, maybe go part-time in my job, whatever it might be, you could sell down property number one, number two, and then you can sort of model that out. Now, one of the caveats here is is that CGT obviously changed last night, and so there will be, you know, a few differences when we come to sort of look at this, but this gives you a rough idea on kind of how things are looking. So, if you sold down both of them, you'd essentially have around that if you used all of the profits to pay down debt, around $140,000 debt left, and then you'd be positive by around $52,000 a year. But again, yes, you're right. There's a lot that's gone into building this. And because the change literally happened last night, we need to update the tax changes. But essentially, we're we're talking about reducing a lot of your debt. Even if that actually goes down to instead of it being 142 left over, maybe you've got more like 250 300 debt, you're going to be paying more tax, but it's not like your tax bill is going to take all of your profit.

[00:43:13]>> No, no, absolutely. We're looking at a sort of positive cash flow. It will give you the options to do what you need to do. Um, but but that that's the important for me. I wouldn't do that, but everyone's risk profile is different. But that's why we're talking about options and and again like keep going back to this this this notion of time. If you're doing this in your mid20s >> now, like in mid30s, I mean, I'm an old fddy duddy. Yeah. When you get to my age, if you put that forward 25 years, you know, >> well, if we go 25 years, this is changing everything. This is a long time.

[00:43:41]>> And you do nothing. But that's the important thing with investing.

[00:43:43]>> That's 112,000.

[00:43:45]>> There you go. There you go.

[00:43:46]>> Actually, I mean, if if you want to do that, why don't we look 20 years in the future? And actually, let's let's even say that these you you held number one and number two. So you hold the whole thing for 20 years and then you actually sold this both of them off in 20 years time you then got a passive income of $121,000 a year and that was even selling them off uh that's 25 years sorry. So if you got uh let's go 21 here $102,000 a year. This is by buying four units not building a 10 20 $30 million portfolio. And this is essentially by selling down two and keeping one.

[00:44:18]>> Yeah. And I don't know how much 1002,000 is going to be worth in that particular time frame. But again, what we're do illustrating here is is the holding. And and for people thinking these these numbers might be pie in the sky, just go back and look 25 years at prices and then they'll tell you.

[00:44:31]>> The only thing that I will say to be careful with with this is when we are talking about average capital growth rates of more like around that 8 7 9 when you're modeling that over 5 10 years, you you can actually achieve that. There's plenty of areas that have done 10 12 13 14% as 10 year average annual growth rates.

[00:44:47]>> 20 years. Yeah, I'm with you. This is when things start to get >> you need to Yeah, you need to obviously amend that down and we're not we don't want to sort of um >> uh kind of kind of fudge the figures just to kind of like, you know, solve an outcome. But but again, like if you do nothing, there's going to be zero.

[00:45:04]>> So here we're going you can show that you can still do something and come out ahead, but we just got to be cognizant.

[00:45:10]You got to work with negative gearing sort of like is isn't going to be in the picture anymore. It's looking at cash flow assets and it's stacking them one on top of the other. And this is also presumes you don't do anything else and you might be, you know, there might be another couple of purchases in there should you choose to do it. But again, it comes back to options. But the other thing about this Todd is protection. So you note here that we're talking about cash assets. I don't care if they're houses, tan houses, units at the moment.

[00:45:34]This is units. Units have the best in my opinion option for cash flow and capital growth. But if we had to model out four houses here and let's just kind of roughly look at kind of if we're looking at a sandbox of say a $600,000 purchase a we wouldn't be able to do four anyway.

[00:45:49]Uh we probably run out of capacity about at about two. But if we just look at two the negative cash flow would roughly be if we're doing a 80% lend for the first one.

[00:45:58]>> Actually I think there's a here's one we preferred prepared earlier.

[00:46:02]>> So this is two houses now. This is actually the other scenario because one of them is I want to get started. I feel like it's just been taken away. The opportunity is gone. It's 100% not. And again, the portfolio plan like this, like it's a framing plan. This is something that you then take to your accountant, take to your broker. Make sure that you're sitting down, if you're using a BA, going, how how realistic is this? Getting it fine-tuned on a borrowing perspective, on a yield perspective, but you've got direction then, instead of just going, I'd like to make money. That's great. We want to do that, but there's a little bit more of a map now. You're driving in the car with direction. This is different. This right now is someone that's maybe going, "Wait a second. I bought super blue chip. I all of that stuff that I had negatively geared. I might still be able to claim that, but I was planning on continuing to do that. I can't do that anymore.

[00:46:51]What do I do?"

[00:46:52]>> So, do you want to walk us through the scenario, Steve?

[00:46:55]>> Yeah. No. and and and you can sort of obviously amend the numbers to sort of your own own sort of uh kind of portfolio because there has been a lot of people kind of especially if you're buying in Vic for example which hopefully there's a lot of value in in buying land but what we're going to do is look at say an asset in Brisbane 2 three years ago um where we're looking at kind of like those northern suburbs we're looking at 1.1 million purchase price um we're looking at say 650 a week in rent um and so the yield on this is is low >> 680 actually yeah 680 low 3.2% yield.

[00:47:26]>> Yeah, this is why you need to give me glasses before I come on. I can't even look that far.

[00:47:30]>> I thought the big screen was good.

[00:47:31]>> I know. I know. Yeah, you need an 80 in screen. Okay. I don't know. Help me out here.

[00:47:37]>> But okay, but but this is this is a scenario we're seeing quite a lot. We just put the numbers in. Just thinking of something. But here what we've got here is now we're looking at kind of tax changes. This is what I wanted to talk about. So this 1.1 million asset, we've seen since the first home buyers boom, like those kind of middle ring areas push up a lot in many areas, but something like this is now worth 1.4 million. We know how how much Brisbane has grown in in the housing market. And something like this, I can think of a number of of examples in the likes of Stafford, Stafford Heights around two, three years ago, which would now be about that 1.4 million mark for this particular asset. So now the question you've got as an investor is okay, yep, my negative gearing, as you said, is is grandfathered. So, I can still claim my benefits here, but is this going to help me get through to the next cycle? And we've also got the CGT um question to answer as well.

[00:48:25]>> And this is the whole thing. So, currently this portfolio now, so if if it was just sitting at 1.1 million, it's essentially 100% lend as well because they've used equity as all their deposits, which again, pretty common for a lot of people to do this. That we're looking at a negative gearing of uh this is in the first year, like just the current $76,000 a year. They would still get the benefits from that. So that's going to then for their cash flow reduce depending on what their taxable income is anywhere down to what like $50 $40,000 >> but they're not going to get that for other ones that they're moving forward with. Plus depending on their income going back to the bank with we're negatively geared 70 $80,000 a year.

[00:49:01]>> Yeah.

[00:49:02]>> You you you tap out pretty quick.

[00:49:03]>> You do tap out pretty quick. And as you as you saw with the first scenario, like when we're buying these units and we're buying them at 100% lend, and as we're going to talk about this obviously in a second, the net cash flow, negative cash is going to go up even more um because you're going to be able to negatively gear. So when I look at this, I kind of look at kind of, you know, what's going to help me get to my end goal. You've got to look at your northstar, what your end goal is going to be, and how you're going to get there. Okay, Todd, can you do me a favor? Can you just change that if we've already made that equity? So it's 1.4 million. So, let's say that they've had this for for a couple of years. So, basically, we're looking at um 1.4 million.

[00:49:37]>> Yeah.

[00:49:38]>> And then I'm just actually going to put 300 grand in here as cash to offset that as like previous equity gain, if you will, like it's it's there. Yep. Gotcha.

[00:49:45]>> So, we're going the old traditional capital growth type strategy. Buy as close to the city as we can and and and and sort of try try and grow. But now we're kind of knowing that sort of if we wait till after July 2027, yeah, we're not going to get as much um we're not going to get as much equity if we come to sell that property here. So there's a in my mind there's a good argument even though you do get the negative gear gearing benefits on the cash flow to go one step backwards to go two steps forward. And so I think there's a really good argument given what's happened last night to divest that asset. We're talking about a market that's probably got some some good legs still in there, >> but they we want to be in in market or markets which are towards the start of their cycle with cash flow now to really unlock yourself and get you to the next level. So here Todd, if you can do me a favor, use your tool to maybe sell that down and let's see how we're looking.

[00:50:34]>> All right. So if we sell this property off and we're looking at then having total equity, so total debt of about 450,000 on our f second rental. So, we're keeping the second rental here. This is the one that's worth about 800,000 with an equity deposit of 160,000. And it looks like we've still got a decent gain here, but we're basically using all of it to pay debt down. That's essentially the the name of the game. But now our cash flow has changed from 70 odd,000 togative $8,000 a year.

[00:51:04]>> And and what I wanted to talk about here, you can see that the second property is in fit. Um and and kind of like we're roughly using this was bought maybe, you know, a year and a half ago.

[00:51:13]We're looking at kind of those markets like Frankston that have done really well.

[00:51:16]>> Mh.

[00:51:17]>> And so you've got some decent capital growth there. Um it's obviously going to be a negatively geared type property. Um those are the kind of type of sandboxes we're talking about earlier whereby made a stack load of sense a year and a half ago. You know, really undervalued. You could negatively negatively gear them of say 4% but now we've got to pivot into a slightly different uh type of asset. And here's the common thread I was telling you about at the start of the episode, Todd. Like we're going to pivot 100% into a cash flow type strategy here. And we're going to be repetitive, but repetitive is important here. And we're going to look to once that that kind of Brisbane house is divested. We got that equity. We're going to then put that into four units spread across New South Wales or Sydney and Melbourne. Let's just call it as it is because that's where we're looking. There are some other markets in New South Wales, but that might be for another podcast.

[00:52:03]>> All right, Steve. I'm going to fill these out as I'm doing this, mate. So, if we're doing four in New South Wales, I'm going to do very similar numbers to what you and I talked about beforehand.

[00:52:11]Can you actually start pulling a little bit back around the curtain of uh like addresses, areas, like talk through a little bit more about what some tangibles people can go, all right, I'll look into this. I'm picking up what you're putting down.

[00:52:23]>> Yeah, I'm going to do this as you're doing that.

[00:52:25]>> We're going to go in a blue chip area in uh Victoria. This one uh the address was 2/13A Lewisham Road in Windsor and this was purchased for 470,000. It's a two bed, oneb unit. This is only purchased two weeks ago.

[00:52:40]>> Mhm.

[00:52:41]>> And so very hot for the press. This this would rent uh 570 upwards in our opinion. So a really strong yield on this particular one. It makes no sense that this should be 470,000 and I think it's going to do extremely well.

[00:52:53]>> All right, Steve, if I can pull us away from the areas for just a second. I've modeled the rest of this out, man. As per your specifications, and we're looking at So, if our one that let's say this is roughly Frankston essentially, and if we're looking at more like 7% growth and and we're looking over a 10-year period, but then our other units here, even if we're being more conservative, did you want me to keep them at 6% super conservative or did you want me to really push this more like the others? No, I think in this instance, we can keep it conservative 6% because we can see like the results.

[00:53:20]What we're looking at is options after 9 to 10 years. And uh and I think that's the important thing as I said before I think these will the these will perform really well and in the near term you should be a able to have equity extraction if you wanted to keep growing a portfolio if serviceability is here but for illustration purposes we can do a million permutations. So let's try and stick on the track and see how it's looking after year 10.

[00:53:40]>> Well let's have a play with that because like I mean within the first few years like we're looking at this going already from like year three negatively geared beforehand like around that 70 80 grand a year. now you're negatively geared more like $38,000 a year. And this is a really interesting thing as well because this is so fresh. The first thing that came to mind and I actually like started chatting with brokers straight away of like if you've got a property that was still uh in that category of you can claim the negative gearing, could you potentially move majority of the debt to that property so that way maybe a larger portion of that 38 >> is actually claimable? Not all of it's going to be, but don't know that that's that's a big question mark for me at this stage. You look like you've got some thoughts on that.

[00:54:22]>> I think it's a good good idea. I think obviously we got to see these changes passed, you know, the legislation get ratified, etc. But once that's done, yeah, I think for for sure you got to talk to your accountant, you got to talk to your your broker. But yeah, for sure if you've got a couple of assets there in individual names that are kind of negatively good, but you know, maybe at say a 50% LTV, you might be able to sort of like recycle them back on. I don't see why not. But again, it's very early days on this.

[00:54:46]>> Well, it's not only that, but this is also modeling out at 6 and a half% interest rates. No one likes to be negatively geared by that much. However, when you look at the future options and where this one's taking you opposed to where the other portfolio is potentially taking you, we we zoom out to around more like that 10year mark, all of a sudden we're positively geared by $1,000 a year. We got around 4.6 million portfolio, 2.2 million in debt, and around 2 million in created equity as well. This is an equity growth. Bearing in mind as well, this is pretty much deposit city from uh uh equity. So, this isn't cash deposits. If we changed all these to cash deposits, well, heaps better. That's that changes everything.

[00:55:22]But talk to me about options at this point, Steve.

[00:55:24]>> Well, that's what it's all about. And and and and kind of that's been really the theme going through this podcast.

[00:55:29]We've had these big changes. We shown the first scenario. Now we're in the second scenario here is by kind of like cleaning up the portfolio, recycling, using the tax advantages uh to your benefit to to to remove the negatively geared portfolio here when we go 10 years down the track, you've got options. You can sell down like maybe the Frankston type property, which is the negatively geared one, get a bit of passive income to free up maybe go part-time. Uh might need a little bit more money to to be able to go part-time, but >> turns it into around 60k passive. And again, we need to update the tax implications on this side of things as well. So, it's probably not going to be quite that much.

[00:56:04]>> Not. But, but the other thing could, you know, you can do, you've also got a lot of usable equity to be able to keep growing the portfolio and looking at those extra markets and and who know who knows what's going to happen in 10 years. There'll be different markets maybe you if the negative gearing stays in depending on what happens. We'll see rental growth, but there'll be other areas with decent sort of yield, but it's going to give you the options. or you can divest the portfolio down, put it into whatever asset you want to do.

[00:56:27]Have a talk to your professionals or what you want to do. But it all goes back to sort of like if you don't do anything or if you don't kind of fix up the problems that there in the portfolio because the old strategy doesn't kind of mesh with the new changes that have come in, you need to adapt and you need to roll with the changes. And that's kind of what we're trying to demonstrate here. And I think we've done a good job of it.

[00:56:45]>> And this is the thing. If you're looking 10 years ahead, you sit down with your broker and you're like, we got $4.6 million in assets. We got around $2 million in in debt, $2 million in equity or two 2.2 like you're and and you're neutally geared essentially. It's positive like a thousand bucks a year.

[00:57:00]So you're essentially neutrally geared.

[00:57:02]>> You got a lot of options in front of you.

[00:57:03]>> You do. And and this kind of like you know is um proposing we don't do any else. I mean there's opportunity to add to this as well as time goes on depending on serviceability etc. and changes. So, exactly. Again, it just boils down to like we're looking at kind of what people can do with the taxation changes.

[00:57:21]Like, you know, it is scary, but it's exciting at the same time. It it doesn't change anything. You just got to like roll with the punches and and and amend the strategy and and it will be a good time to take stock, really have a think about what you can do and and maybe I talked about, you know, one step backwards to go two steps, three steps forward. It might be a case of that. And um yeah, I think I think we've modeled this out nicely.

[00:57:44]>> And I want to show you guys something with the appera changes because if we look here at lending policies and actually have a look at what happened appa round three and this wasn't exactly great. This was uh what was it 2017 round two. Sorry my mistake. And the the Australian median house price changed from uh was this 730 to around 700 to around 650,000.

[00:58:05]>> But we don't talk about those days. And and if you look at it now and go, "What?

[00:58:10]You're an idiot. Why would you buy then?" It's like, "Well, have have you looked at where we are now?" It's like we're looking at a million dollars now.

[00:58:17]Sydney, I think, felt this more than anyone. Sydney and Melbourne, probably more. Adelaide and and Perth. And we can even sort of uh break a few of these over here. So, if we we look at Sydney, Melbourne, Brisbane, Adelaide, Perth, it's you can see that these guys didn't they kind of went a little bit more flat, but then Sydney felt it. But it's the opportunity. It's it's looking into this and going are are we going to to potentially see markets that move backwards uh nothing 5% 10% they're not all going to move in unison. This is the whole thing with this is we're talking now if we look at this as a Australiawide average some markets are probably going to move ahead with a lot of steam in them some we've been talking about some markets are probably going to be a little bit more subdued and some markets probably will feel it.

[00:59:00]>> Yes. But I feel like this is the opportunity though because it's easy and this is you see all the naysayers that laugh at people in here and it's like idiot. It's like yeah the >> yeah who who's >> that but that was a good buying opportunity if you could have just loaded up in a Castro type strategy in Logan Morton Bay um you know and Adelaide as well like there were opportunities there but but no it it really is it's it's being brave and tuning out this this news. It's pretty easy to go onto a news site at the moment and just it looks like Armageddon and and everything and your job as an investor is to tune tune that out like you know you have these bad moments you look at the stock market you look at the I always talk about the dot crisis you know um when when that kind of enveloped there was great companies great opportunities to buy there same with the GFC and so >> you would have seen that big time at Goldman >> and Australian Super like everyone else is running away and you like I'll run towards this >> well yeah I mean What I always go in that particular time, go back to 2008, 2009, Microsoft was $20 a share. Bank of America, I think got down to $1.5 a share. Um, like down down prices are down that coal thing. Yeah, that that really was the the absolute. It took a lot of boldness to buy bank stocks back then, but here kind of like we're we're kind of looking at this like the Australian property market's done well. I mean, we've been on a tear. The appraiser sort of example you've given is a good example because we could go into in in into sideways uh mode but within those markets there's always something where there's value and there's opportunity to to get some bargains to keep stacking and then just to keep moving forward and looking at your options and uh where other people are sort of like losing their minds maybe and pulling out it's too hard basket. we're just gonna sort of put the head in the sand, go back to work and then just not do anything and then come back a few years and and then there would have been some markets that would have performed well and could come back to we talk about a lot is like well that was obvious but there are options I've given some addresses there it's a no-brainer that I I I think about like a kid in a county store there good opportunities still around you've got to make sure the deal economics work you've got to be cognizant of your portfolio makeup if you do that you're going to you're going to do well over the next property cycle Right. I I think I want to ask you for an action step. And I' I've actually got one as well, and you might have a similar one, but for me, I think the big action that I want everyone to take is is to actually put some kind of a plan together and talk with your expert team about it. Because now, if you're just making assumptions because of what you're hearing secondhand, thirdand from the cab driver, the barbecue, that kind of stuff, you're not going to do anything because I'm pretty sure they're going to be telling you some pretty negative assumptions. But if you actually sit down with people that have got the runs on the board, that have got the expertise to go, actually these are your options. Actually, this is the thing that we can do to actually bring that plan to life, then you're going to be sitting exactly literally where Steve is. You and I are going to be chatting in an interview about how you killed it over 26, 27, 28 when everyone else was running away. But it all starts with actually like understanding your plan and having the right experts around you.

[01:02:03]But Steve, what what's your action step, mate? What do people need to do right now? pull out the headphones and put into place.

[01:02:09]>> If you have a partner, sit down, really have a look at the cash flow situation, look at your portfolio, be very honest with how it's looking and uh and and and look at potential sort of opportunities you can do. You talked about talking to your team, talk to your talk to your broker, talk to your accountant, etc. Think about trust structures or or whatever purchasing entities in and where you're going to take this going into the ford and maybe look at think about that one step backwards to go two steps forward. Really be strict on your portfolio. Look at your cash flow. Look at kind of like the downside because really the great investors are risk managers.

[01:02:43]>> Yeah.

[01:02:44]>> And and and kind of like what's going to get you to that northstar, that end goal, what you're trying to achieve and uh and and and and just get the house in order. Make sure the buffers are there, etc. But it's really a case of doing play defense, play protection, bulletproof type portfolio and uh and start planning to to to prosper through a period where there there will be opportunities. Look at sort of dry pattern. Maybe look at a bit of a refinancing sort of you know area where you can get sharper interest rates, maybe extract equity, have those buffers in place. But uh don't be scared. Don't don't go and sell everything and just do something crazy. just really kind of be strict, stern, evaluate what you've got.

[01:03:26]>> And I think one of the things that I I want to just poke into a little bit more with that action step is scenarios and want your thoughts on this. Like you're saying, like what get your dry powder ready, get everything ready, if you you can refinance, but what's your situation now? One of the most powerful things I think you can do is when you sit down with your your accountant, if you're using a buyer agent, your broker, whatever, to go like, "Hey, we got this idea and this idea. Which one is actually better?" and like model them both out to understand actually no that one that is not going to lead you down the path you want but this one yeah this is actually pretty good because I talk to so many people and you must have this conversation daily where they're like oh I I went to whoever with this idea and it was like cool we did it and now I stuck it's like >> yeah because you told them you wanted to do that and then they helped you do that so that's not really the purpose of it it's like which option is going to be the best for me so if you start looking at a few maybe units are exactly the option for you maybe they're Maybe not, >> but it's about comparing.

[01:04:23]>> Maybe it's a time to sort of part. But then the other the other important thing to do is also look at the CGT. You might be in some markets which you've had incredible growth over the over the last five, six years. I mean, you've had enough guests on here talk about areas and how successful they've been. Now might be the time to maybe look at kind of divesting some of them down depending on what entity you bought them in. But again, it's really, you know, talking amongst yourselves, talking with the experts because you might be worth now divesting some of those assets because, you know, down the track, you know, with the indexation model, you might be paying a lot more tax. So, it's uh it's there's there's a lot of time to contemplate. Don't make any sort of hasty rash moves, but but you know, take stock of that and then come up with an action plan to go forward.

[01:05:06]>> Love it. Steve, I feel like we could have gone through so many different plans with this, so many different situations, but I know the one thing that I want everyone to take away with it is actually take action. Make sure you're weighing up your options, but don't let this be the thing that sits you on the sidelines. Whether you're the person starting out and you've just vibed with that very first scenario, whether you're the person or people that are locked in going, "What do we do?

[01:05:27]We're super negatively geared now and we don't think the markets that we thought were going to grow are going to grow the same way." Again, take stock of it. Talk to your experts. Make sure you're doing everything you can to move forward.

[01:05:37]Steve Ashler, thank you so much for putting these together, man. And thank you so much for your time walking us through them.

[01:05:42]>> No, thank you, Todd. And I'm going to get a pizza now. Thank you.