New Budget Smackdown

The new Federal Budget has landed but what does it actually mean for investors, homeowners, and everyday Australians looking to build wealth? 🎙️📈

In this episode, we dive deep into the budget and unpack 21 key questions every investor should be asking right now. From interest rates, property market impacts, tax changes, borrowing power, inflation, and long term opportunities, we break down what matters most and how it could affect your financial future.

Whether you’re a first home buyer, seasoned investor, or planning your next move, understanding timing, strategy, and how to position yourself in today’s market has never been more important.

Inside this episode we discuss:
✔️ What the new budget means for property investors
✔️ Potential impacts on interest rates and lending
✔️ Market opportunities and risks moving forward
✔️ Strategies investors should consider right now
✔️ How to think long term in a changing economy
✔️ The mindset smart investors are using in today’s market

This is the type of conversation every investor needs to hear before making their next financial move.

🎧 Episode 18 of the TFS Wealthcast is streaming now.

Any information discussed or provided in this podcast is general advice and has been provided without taking account of your objectives, financial situation or needs, you should consider the appropriateness of this advice before acting on it. If this general advice relates to acquiring a financial product, you should obtain a Product Disclosure Statement before deciding to acquire the product.

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Transcript

SPEAKER_00 0:05

This is the TFS podcast. Where money gets real, financial freedom is more than just a gold. Without further ado, let's dive in. Hi guys, and welcome to another episode of the TFS Wealth Class Podcast. Last week's episode was around the new budget, and this week's episode, we're gonna dive deeper and we're gonna take a different approach to this episode. We're gonna we're gonna play 21 questions with Pramo, but it's the new budget edition. So let's let's I mean let's call this the budget smackdown. Are property investors the new endangered species? Right? So if you're not a property investor, you really want to uh tune into this episode. Alright. Without any further ado, Pramu, I'm gonna dive straight into the first question.

SPEAKER_01 0:59

Yeah.

SPEAKER_00 1:00

So Pramu, for anyone who doesn't know you yet, right, you need to finish this sentence. Okay. You are the kind of property investor who likes boring numbers and exciting results.

SPEAKER_01 1:19

I will kill a I will kill a sexy deal any day. Any day. If if the if the if the spreadsheet is going to be you know not good for me, I'll kill the sexy deal.

SPEAKER_00 1:34

Okay, if the spreadsheet is not good for you, you'll kill the sexy deal.

SPEAKER_01 1:38

Yeah.

SPEAKER_00 1:38

You'll spread that spreadsheet wide open. Because I like the boring numbers. You have to know the numbers, even if it's boring.

unknown 1:47

Okay.

SPEAKER_00 1:47

Property investing. All right, all right, all right. Question number two. Before we get into this budget drama, yeah, on a scale of one to auction pedal addict to auction pedal addict, how obsessed are you with property?

SPEAKER_01 2:08

I mean, if I if I put a number, I'll go nine. I'm I'm very much addicted to property. Uh but that doesn't mean that there are certain properties I'll buy. Yeah.

SPEAKER_00 2:23

Not every property I see, I buy. So you discriminate your property, you know. You discriminate your properties. I mean, yeah. Does it matter if they're old, if they're young?

SPEAKER_01 2:35

It does to be to be honest with you, before the budget, yeah, it didn't matter too much. Okay. Now the age is something that I will look at. You don't like them all. Actually, I like them young now. Property. Yeah, please.

SPEAKER_00 2:55

All right, question number three. What was your very first property deal? And if you did that same deal today under this new budget, would you still do it?

SPEAKER_01 3:06

Absolutely, yes. Uh I mean, a couple of episodes ago we did talk about first deal, yeah. Yeah. Um buying a land and building a house, creating values, paying less, getting all the government grants. Absolutely, yes. No doubt. In fact, if I'm if I'm a first home buyer now, I'll be doubling it down. I'll be going very quickly in into the market now. Get into the market sooner than later. Yeah, absolutely, because the government is supporting first home buyers, right?

SPEAKER_00 3:37

So all right, Ru. So when you heard about the new budget announcement, yeah. No, no, be honest. What was your uncensored first reaction?

SPEAKER_01 3:50

I mean, the couple of sway words came out, I would say. No, just kidding. Um, look, it it's it's not what most of the property investors, conventional property investors want. Right? When you when the budget is talking about taking the negative gearing out of the equation, conventional investment is going to be it's not the best anymore. I actually liked it because it started me to think totally out. So I look at the portfolio, what Nial Sanali currently holds and and and see are there any changes we need to do. You know, now it's got me thinking, it got me start looking into different avenues, avenues looking at the same property in a different way. Right? So if uh if you have read the budget, if you see look, by the way, negative this this whole thing hasn't been passed yet, it just uh they need to pass it in the parliament. Okay, whether it happens or not, you don't know that yet. Yeah, but if you assume that it's gonna negative good, it's gonna come out. Personally, I looked at all my properties in the portfolio. I looked at it, okay. It comes out, what are the changes I can do? Yeah, there are so many changes I can do. So, moment it's become live, I'll be doing those changes. So again, it all comes down to strategy, right? Absolutely. Knowing how to do it, yeah, and when to do it, and what path to take to do it as well. That that is very important. So, me and Sonali is already done that strategy for ourselves. Yeah, um, we will be doing a couple of those things regardless whether it's gonna come or not. Yeah, yeah. Because we want to share the same experience with our customers after we doing it and and experiencing it. And what we have done numbers and looked at it, so it'll be actually pretty cool. You know, something new.

SPEAKER_00 6:02

Yeah, all right, all right, Pramos. So questions one to four. This is just the warm-up, okay, right? Questions five to nine. This is these are the budget hot takes. Oh, okay. These are these are the investor angle questions, right? All right, in one sentence, what did this new budget say to property investors? I don't think you can. Can you summarize it in?

SPEAKER_01 6:26

I don't think you can say it in one sentence, right? I mean, if I put it in one sentence, we we're not banning you. We will give what you want as long as you play our game. Yeah. If you want me to put it in one sentence. Yeah. So they their game, as long as the property investor, you if you if you play their game, they'll give you what you want.

SPEAKER_00 6:52

The government wants you to be their little sensor word. Yeah. Okay.

SPEAKER_01 6:57

Yeah, but uh, to be honest with you, it's alright. Because there are so much of opportunities in there. Right. So if I try to elaborate, this is a bit more to you. Buying an established property, it's not that lucrative anymore for a property investor. Right? Because negative gearing, see later. But then depreciation is still there. So, how can you get the depreciation? Is by buying a brand new property. For seven years, you get the maximum depreciation on a yeah, on a property.

SPEAKER_00 7:35

So basically, this new budget just changed the investors' focus from established properties towards brand new properties.

SPEAKER_01 7:43

Yeah, so so basically the government won't use, they want to boost the construction industry and create more jobs so they can get more tax from those jobs, yeah. And get more income by land development approvals, stamp duty. You know, it's there's multiple industries going to come into play. So, investors, you want to play property investment game, buy brand new. And we'll give you negative gearing.

SPEAKER_00 8:14

Yeah, all right, all right. Question. Next question. Give me your spiciest hot take. What's the most underrated change in this budget that investors aren't talking about yet? I think CGT, right?

SPEAKER_01 8:32

CGT. And what I've seen in Instagram and Facebook, um, a lot of people have quite a lot to say about it. I think the trust side of it, um, inheritance. Yeah.

SPEAKER_00 8:49

And it's just not on uh your capital gains that they imposed uh they reduce the tax on. Yeah. They're also taxing shares.

SPEAKER_01 8:58

Shares, you know, whatever. That that was a surprising one. I think the previous episode Sonali was talking about it as well. She got surprised as well. Um, I think CGT is something that uh investors and a lot of people haven't actually grasped into their themselves to understand what is going to be once you invest and make make a good profit out of it. So that opens up different avenues, by the way. Yeah, okay. So so I looked at it in a way, all right, CGT there, cool. What if I just do it this way? And I don't have CGT, I just do it that way. What kind of way is that? I mean, I can spill spill the bills, all right. Cool, I mean think about it in the company aspect, right? So company is all about revenue, expenses, profit or loss. Yeah, so if you make a profit, you pay tax on the profit. That is uh 26.5%. Yeah.

SPEAKER_00 10:06

Do that. Change the approach. Again, comes down.

SPEAKER_01 10:11

It used to be company investment used to be not that attractive because when you have family trust, you know, property trust, you know, you have different different different structures, right? And you know, corporate trustees, two individual trustees. Now all of a sudden companies investments become a no-brainer. No-brainer. Yeah. So you rather pay 26.5% tax versus whatever your indexing tax.

unknown 10:44

Right.

SPEAKER_01 10:45

Definitely not going to be 26.5%. It's going to be more. Right? It's always going to be somewhere between 35 and 40. Yeah. Or for most investors, it's going to be about 46%. So it's a good time to capitalize now on a different strategy like that. Absolutely. That's what we discussed in in TFS. We we've gone through some training programs with our brokers just to you know refresh them into the uh you know. Changing market. Changing market, the company uh uh structures, company lending, yeah, how it works, and and which banks, what rates, yeah, how it works. We've already done the training. We're ready to go because we know what's coming. I've already had a couple of conversations with different investors. Um, while I was in Sri Lanka, I've we have some really long chats with a few investors, and we, you know, it'll be most likely going to be PT by limited. I mean, we we have to wait till the parliament passes, so so let's see. All the government changes, or who never knows. I mean, this is the way things are going with the this government, you know, they like changing things.

SPEAKER_00 11:51

So on the on the topic of thinking of sign the box and restrategizing, right? So who gets slapped the hardest here? The over the over-leveraged growth at all costs investor or the conservative long-term investor. Look.

SPEAKER_01 12:15

See, the way I look at it, if you have if you're holding properties, established properties, thinking of you're gonna be doing some developments later on, or thinking of you're just gonna sell it later on with a profit, you're slapped hard because your negative gearing gone. Yeah, right. Yeah, it's it's it's gone. Yeah, right. So now even if you go and think about okay, then I'll just subdivide it and make a profit, then CGT hits, yeah. Yeah, right. CGT, then you I mean when you're subdividing, you're gonna pay other fees to the councils, local councils as well. So you add all the cost, I think establish property market for investment, for investors, it's a bit leafy. Yeah, I think they they've been hit pretty hard.

SPEAKER_00 13:09

All right, so if you had to pick, are you more worried about the uh new tax changes or the fact that your borrowing power is now being squeezed?

SPEAKER_01 13:23

Borrowing power being squeezed is is always the problem, right? Because if you can't leverage your equity, what's the point of having equity? So the only way you can have the equity is by selling it. You sell it, you have to pay CGT, unless it's your own home. Then what are you gonna do? You're gonna keep rolling yourself to one house for 10 years? I think taxation, again, this is my opinion, right? Yeah, no financial advice or no taxation advice. I'm not a tax accountant, so do not take my word as tax advice.

SPEAKER_00 14:06

But if anyone needs a financial planner, you know you should speak to TFS. We have a financial planner.

SPEAKER_01 14:12

Sonali is the best person to speak to, um, financial planning side of it. But the way I look at it from the very logical perspective, if you can't borrow your equity that you have gained to go and reinvest in whatever the asset class you want, yeah, there is no use of that equity anymore. Right now, you're restricted how to use your equity or how much you can access your equity because of the borrowing power coming down, right? That that is the restriction. So I'm really hoping the banks will understand this because banks are in the business of lending money, they're gonna lose a lot of money if they're gonna lend less money, right? So I'm really hoping the bank will understand this. Yeah with with the help of APRA and AFCA in the right way, ease up certain borrowing restrictions. Right? I just don't understand certain borrowing restrictions that um currently we have. I mean, take I always be vocal about this in the office. Household expenditures expenditure measure, him. It's a bag full of you know, yes. What are you talking about? Just because you earn 200,000 doesn't mean that you're gonna go and spend $12,000 of expense. You you you you you you that person will never do that. Yeah, who's gonna do that? If somebody is doing that per month of $12,000 expense, that's $144,000 gone. They need a financial planner and a therapist. Yeah, so that person won't even have a deposit to buy a house. Yeah. True.

SPEAKER_00 16:00

So think about it. Yeah, because if they actually reassess how they calculate the hem, right?

SPEAKER_01 16:08

That'll really I think bring back, come back to a better way of doing this. So they'll go and look at the actual expenses of the person rather than putting a benchmark. Because they've got the bank statements, anyways, right? So yeah, right. What's wrong with that? Yeah, I know a lot of mortgage brokers will say, Are you crazy? You know, that's me. A lot of people can't borrow. Uh, a lot of people better understand how to do their expenses. Yeah. Because if you if you're if you're hiding your expenses and asking the bank to give you more money, you're gonna struggle. Yeah. If you don't get rid of your expenses, yeah, yeah. Right? So go go to the old school way, look at look at the actual expenses the people have. Yeah, then borrow. Measure the cost, measure the person based on that person's expense, income, creditworthiness, back to four four C's.

SPEAKER_00 17:00

Because like you said, so they this new these new tax changes, the new budget, it can also affect the income of banks, the revenue, right? Absolutely.

SPEAKER_01 17:13

You lend less. What are they gonna do? What are they going to do? Exactly. That means a lot of people are gonna lose jobs. How long the bank is gonna keep certain employees when they're making less money, less money, yeah, right?

SPEAKER_00 17:27

And AI in in in the equations and also in a market where uh interest rates are going up, yeah. Less people, anyways, not now gonna want to borrow. Yeah, right. Yeah, people who are renting, who are thinking about buying, might be like, yeah, I'm just gonna stick to renting.

SPEAKER_01 17:42

Certain ripple effects. I don't think the guy this comedy, I don't think they even factored them into an equation to to see, you know, if you do this.

SPEAKER_00 17:52

Uh I mean this government has been one of the most controversial governments in the past decade, right? Yeah, yeah. I mean the memes and videos and videos online. I shared you one day that was pretty cool.

SPEAKER_01 18:04

I cracked myself yesterday or look watching that music.

SPEAKER_00 18:11

What's what's one part of this budget that looks good in the headlines? Right? But it's kind of a useless in real life scenario for investors. Investors, okay. You the question is about investors. Yeah, yeah, I know I know I know you're thinking about first tombers, huh?

SPEAKER_01 18:29

Um no, no, no, no. I mean, look, so in so there are there are so many types of investors we work with, right? Now, now, uh, what hilarious to me looking at the budget is you know $250. And then there's a thousand dollars. Investors could think, oh, that means I have more money coming into my household, which means I have more borrowing capacity. But you and I both know $1,000 of per annum net increment is bugger all you get. You probably get a six thousand dollars more of borrowing if you're lucky.

SPEAKER_00 19:10

Uh what's that enough for pay the legal bank fees?

SPEAKER_01 19:13

Yeah, right, right, it's pretty much it's gone, right? So, so that is one of the hilarious things I've seen. Yeah, I just don't understand the fact that uh look again, I I it's not a political command, but I just don't understand the mindset you have that this government have, then they're marketing it, saying, Oh, it's 250, it's good for you. Oh, yeah, and he takes so much pride in it.

SPEAKER_00 19:43

We're giving back 250 dollars, I guess. 250 dollars, right? What are you gonna do with it? There are parking tickets, there are more cases and that, you know. Yeah, yeah, at least reduce fines there.

SPEAKER_01 20:00

That would have been a really good move, but no, I think they should have gone down the path of income thresholds, and then and then given the discounts. Okay, you know, if you're earning less than $100,000, give them a bigger discount of the tax.

SPEAKER_00 20:16

That will have been a better approach, you know.

SPEAKER_01 20:19

Yeah, that'll help them.

SPEAKER_00 20:21

Yeah, all right. 21 questions with Pramu. Now it's time to move on. What do we want to borrowing power and finance? Yeah, questions 10 to 14. Uh right, okay. Let's talk bank reality. How has your borrowing capacity actually changed after this budget?

SPEAKER_01 20:39

Oh, significantly for investors, if you're gonna rely on negative gearing, that I mean all of the investors relied on negative gearing. So, you know, depending on your portfolio, depending on the properties that you're planning on buying, this can vary between hundred thousand to half a million dollars as well. Yeah, it depends on your portfolio, it can even go beyond half a million. So, what does that mean that you are borrowing less? What does that mean? That you're not in the market. I think this is what the government wanted. You're not in the market, so you buy property. So you don't buy property, but please come and buy the um brand new houses or land and build that, build. Yeah, so that is not affected because the negative giving is factored into that. So the borrowing power already we've seen from the banks have said, Yep, if it's brand new, we're gonna factor the negative gearing into the service ability. So you have the your optimized borrowing.

SPEAKER_00 21:39

Yeah, but then the issue with that is when now in now when brand new property starts looking attractive to investors and they start flooding that market, yeah. First home buyers uh realistically, if they want to go down the path of buying established properties, they have to pay full stamp duty, correct? Right? You you can't buy a property under 600,000 in Victoria, exactly. I mean. They run up. And not a lot of custom buyers we we've seen have such a high deposit to factor in the cost of stamp duty and also the deposit to buy the house.

SPEAKER_01 22:09

Take a simple example of a purchase of a $700,000 property in Victoria.

SPEAKER_00 22:13

Yeah.

SPEAKER_01 22:14

Right. So you're looking at about $16,000 worth of stamp duty about. Yeah. That's a house and land build. No, established property. Yeah. Right. This is what saying we get a fair go for the first home buyers. Fair go. All right, let's let's let's do the numbers. $700,000. $16,000 you need for stamp duty. 5% deposit is a must, which is $35,000. That is $51,000 you must have even before you sign the contract. Contracts. You're gonna have another $2,000 towards your lawyers, maybe depending on where you buy, thousand, fifteen hundred, two or three thousand dollars towards the council race, water rates.

SPEAKER_00 22:56

And also the gas connection levy, that's thousand five hundred now? Add it up here.

SPEAKER_01 23:00

Add it up here. Right? Keep adding up insurance. Right, then content insurance. I mean, if you start adding all these things up, you gotta have about sixty thousand dollars. At least. At least to buy a seven hundred thousand dollar property. What happened to the five percent deposit mind?

SPEAKER_00 23:17

And also if the customer and if they're currently renting, then they have to keep paying the rent while but let's assume they're buying an established property. Yeah, right?

SPEAKER_01 23:26

Established property, then your rent is gone, you've been bringing, right? You're looking at about sixty thousand dollars for a seven hundred thousand dollar purchase. Okay? Yeah. Whereas if they bought brand new, then bring back the ten thousand dollar grant for established as well. If you want to if you want to help the first term buyer. So the uh $10,000 grant used to be eligible for we used to have it, right? Okay. I just don't understand some of the areas you missed in the budget. You want to help these guys out, first term buyers might help help them. We want first-term buyers to come so we can help these guys to get the loans.

SPEAKER_00 24:00

It's like they just thought of this new budget. Oh, let's do this change. Let's take the investment. They didn't take the time to think about okay, what are the ripple effects of this? And uh it just don't make sense to me.

SPEAKER_01 24:11

It's like a demo product that hasn't been tested yet. I just don't understand how come they missed the first-term owner's grant. Give them ten thousand dollars. I mean, given that you are spending money anyway, inflation is going up anyway.

SPEAKER_00 24:25

I think I think this new budget is actually just to get more money in the government's pocket to cover up all the uh investments. All right, yeah. If an investor was approved for let's say a million dollars before this new budget was announced, what kind of a haircut would their borrowing have uh taken now? Yeah, and how should they mentally prepare prepare for it?

SPEAKER_01 24:49

Uh it depends on your portfolio, by the way. Right? So um if you have num, I mean, negative gearing is gone now for your established properties because even though you I mean all your portfolio is established, so it's gold. If you buy a brand new, that negative gearing will get factored into your serviceability. But let's say you're not doing that, you're buying an established. You're looking at depending on your income, depending on your portfolio balances, you're looking between, as I said before, hundred thousand to half a million dollars gone. Yeah, but for a million dollars, you're looking at at least about my opinion. Again, don't quote me to this because I haven't done the specific numbers, it depends with the person's income as well. You know, average person who has a million dollar borrowing power towards investment, you're looking at about a 200 to 250,000 off. Now you're you're having about you know seven, eight hundred or seven fifty borrowing. So now it's a drastic change, yeah. So asset class is also changing now because of that. So I'm not being yeah.

SPEAKER_00 26:04

What's the dumbest mistake an investor could make with finance in this new environment, probably? Oh are you gonna take a diplomatic approach to this question, or are you gonna just give it to them straight? Dumbest mistake, yeah. What's the dumbest mistake an investor could make in terms of their finance in this new environment? Selling properties. A lot of people would panic say no.

SPEAKER_01 26:37

Oh yeah.

SPEAKER_02 26:38

Oh yeah.

SPEAKER_01 26:40

That's the dumbest mistake they're gonna do. But they don't understand it. What if the government changes? Yeah. What if they can come back? Yeah. Right? They they sell at a point where the market is a bit iffy. Yeah. So you might get a very you might get less what you should be getting. Yeah. Because a lot of people can't borrow too much to pay the money that you want. Yeah. So you will end up, you've been forced to sell it cheaper. But if you hold it for the next three years, four years, if you have done your numbers, if you've done your financial planning or your cash flow projections properly, you're gonna be making a lot of money. But what if the CGT rule also changes? Yeah. Dumbest mistakes I reckon investors will be doing right now, selling.

SPEAKER_00 27:32

Panic selling. Yeah, not understanding. So that that also creates an opportunity to smart investors to buy. To buy. Absolutely.

SPEAKER_01 27:42

Absolutely. That's why I said it it's it's not it's not an end game here. In fact, it's a it's a new game. It's exactly a new game. Yeah. I mean, I'm excited. I'm excited, I'm waiting for this. Yeah, you're ready to play. I'm ready to play. Putting certain things in place. I'm I'm I'm ready to go. Yeah. Uh moment these things come out. Uh, me and Sanali is definitely gonna press the green button. Bang, go, go, go.

SPEAKER_00 28:14

So, what do you think this new budget does to new uh to small everyday investors?

SPEAKER_01 28:21

Everyday investors? Yeah, I think the everyday investors need to start thinking about how to invest in a in in in the property asset class uh as a semi-pro. As a semi-pro, yeah. Okay, yeah, because because the end you you you're gonna be invest, you should be investing in different entities now. Now, I'm not gonna say which entities it is because you've got a if you won't call our team, then entities are, you give us a call and uh because if I start look, it's not about business. If I start telling you how the entities work, then I have to actually finish how it works. That'll be a good whole episode for you. Yeah, that's an episode on itself. So straightforward question, straightforward answer for your question.

SPEAKER_02 29:11

Yeah.

SPEAKER_01 29:12

Um, first time investors to the market, they need to start now thinking like a semi-pro. You don't need to be a pro to make money, just be semi-pro now. Different entities, the way you borrow, the way you structure, the way you also repay. Yeah, that's also coming into play. Um, I'll give you one hint. Um, a lot of investors go interest in areas and start thinking about interest in advance. See how it works. So then you again see this is a problem. If I start telling I gotta finish it all properly, right? So you factor your investment, your interest in advance at the beginning of your investment time. Yeah. So then you're not paying interest for the next whatever the advance you make.

SPEAKER_00 30:04

Yeah. So if anyone wants to know how to do this for themselves, you can always call us on a hotline. Yeah. Accounters will be very much busy these days. Yeah. All right. Questions 15 to 18. This is all about the shift in strategy and the moves you need to be making in your portfolio. All right. So, what part of your own strategy Pramo are you tweaking because of this budget? And what are you doing less of, and what are you doing more of?

SPEAKER_01 30:38

Oh, um, see, being being very direct, if I be very direct to you, yeah. My old strategy actually works very well in this budget. Buying brand new.

unknown 30:52

Yeah.

SPEAKER_01 30:54

Old school strategy. It actually works very well because I had majority of my properties I bought brand new. Because I always believed in the fact that why should I pay more money to buy an investment property? I pay less money to buy an investment property. That works very well in this budget.

SPEAKER_02 31:12

Yeah.

SPEAKER_01 31:13

Right? So that's coming up. I'll be definitely buying brand new. Are we looking at certain pockets now where to buy land and build? Not land banking. I don't think I'll be doing land banking, it's pointless. Yeah. Buying the actual land and build a house or maybe a brand new property and just use all the benefits out of it.

SPEAKER_02 31:40

Yeah.

SPEAKER_01 31:40

It's all about using the benefits while you last. Right. So now my approach will be more towards brand new. Um doesn't mean that I will close my eyes for establish as well. Yeah. But again, I'm not to be we see, I'm not scared about these all these budgets. You know, they come and go, who cares? It's all about how much money I can make, how how successful my property portfolio can be. And how you change your strategy at that very moment. It's not a short, it's not a short-term game. It's not I'm buying a property now and selling in six months. I'm not doing that. Yeah, you're in it for the long run. And I'm gonna pass it on to my children, and what properties I'm gonna pass it on to them. Now, those things I might tweak. Okay, okay. Right, but I'll keep accumulating as much as I can.

SPEAKER_00 32:33

Yeah. All right. Since we're going old school, are old school negative gear the place dead now or just on lifespot?

SPEAKER_01 32:45

Well, I think it's dead, right? If it gets passed on from the uh parliament, yeah, I think it's dead, right? So now it's a simple mathematics. Yeah, income, you're making a loss on a property, you're making a loss on a property. Unless it's brand new, unless it's brand new. Unless it's brand new.

SPEAKER_00 33:11

Alright, so if you were starting from zero today, under these new rules, right? How would your first three properties, what would be the game plan you would use? What kind of game plan would you use to acquire your first three investment properties?

SPEAKER_01 33:30

Yo, I mean, if I had to start from zero, that means I'm talking about my first home.

SPEAKER_00 33:34

Yeah.

SPEAKER_01 33:35

Buy a land, build a house, get all the government grants. Yeah, I won't lose a single grant, I'll take everything. Yeah. That's number one. Then I'll buy it at the place that has more demand and less supply. So that will enable me to have more equity quickly so I can borrow. I won't overcapitalize and I won't overborrow. Right? If my borrowing is only 700,000, I'll make sure I'll only borrow about 550,000, 600, leaving a bit of room so I can access the equity. So that will enable me to go and invest in a again, a brand new property. Yeah. From zero to five, you gotta now think that way. That's why I said old school, the way I used to do things myself and sonal, it's literally there for you to do it now. But then after well, sometimes, or maybe three to four, probably three to five properties, then I look into some established properties because I would have enough equity, I would have enough borrowing power to borrow, to subdivide it, and build two more houses on it. Or one, you can't do one. You gotta do two. It's no point of doing one. Lockdown rebuild also no point now. Yeah, that also goes away according to the budget. So you gotta do two. It's a construction boost, right? So do it, do it two, two rental income. Right? So, yes, you will borrow a bit more, but you'll have two assets if you do it right.

SPEAKER_00 35:12

Brand new, you'll have your negative yielding benefits anyways.

SPEAKER_01 35:14

It comes, it comes into you. So, see, even again, it's very hard for me to say, like for me, where where I I would be in my income terms and and what the taxes I'll be paying myself and Sonali. Yeah, depending on that, I might buy your old property or I might buy the slightly old property too. Right? While I get ready to subdivide, I might as well get some good rental income. But I will really focus on properties that will give me higher rental income now as investments. If I can make things neutrally neutral cash flow, I'll make it neutral cash flow.

SPEAKER_00 36:00

Then it's a win. Yeah, it doesn't cost me exactly. Alright, Prabhupada. But moving on to the last three questions. Okay. 21 questions. Uh I did I did skip question number 18. It's because it's asking what type of properties would you buy? And we discussed, you know, you would avoid established, you'd buy brand new. So I'm not gonna ask that question again. We're gonna skip that. Yep. Questions 19 to 21 are around mindset, opportunity, and advice. Mindset, opportunity, and advice. Okay, we got a point. So are investors overreacting or underreacting right now? What are you seeing in your circles? You know, are your friends in panic? Are they in denial or are they quietly plotting?

SPEAKER_01 36:47

I think investors are waiting for the market to react. Right. These are your this is in your so within your circle. Yeah, yeah. So it's not that they're waiting in the sense of I'll wait for six months. Yeah. They want to see the first reaction what the market does. We are in month of May. Yeah. We are in the month of May and we'll be in June. So with the winter markets coming in. Anyway, it's a slower market. Okay. Yeah. So investors will look at the slower market and see how much movements in this market, the borrowing effects of the first home buyers, investors. We are looking at month of May, month of June. We might even see a rate hike coming in. Most likely will be.

SPEAKER_00 37:39

Most likely.

SPEAKER_01 37:41

So we'll have a closer look at the auction rates, sale prices, discounts, wendo discounts. So I think the activities start happening in the month of July. Because you know, there's a there's a saying, you know, early bird gets gets the worm. Yeah.

SPEAKER_00 38:01

There's also saying second mouse gets the cheese, but you know. Which which bird does get the cheese? No, no. Early bird gets the worm. Uh-huh. Second mouse gets the cheese because the first mouse gets caught in the trap trap.

SPEAKER_01 38:12

Oh yeah, so we're not we're not playing that. We're not we're not we're talking about the birds, not mice. You know. But if you think about it, so people will look at most of the savvy investors looking at it right now, they will suss it out in June. They are back into the market in July. Because what I we what we see, a lot of people are going to wait. Patience, yeah. Right? They will wait till the spring market hits, they're gonna get a shock. Yeah, they're gonna get a shock. One of those times I always say, right, if the rates go up, do your do your numbers right. Yeah, get onto the market as soon as possible. When the rates start coming down, it's you. That's when it starts flooding, anyway. You're the one who's gonna benefit. So we all all the savvy investors and then in certain certain circles that I hang out with, uh getting into the market.

SPEAKER_00 39:11

They get into the market when no one else is looking at getting into the market.

SPEAKER_01 39:14

Yeah, most likely by the end of June, we're in the market. Yeah.

SPEAKER_00 39:18

All right. All right, Pram, you know, uh, one of our old episodes you spoke about the poor man's mindset.

SPEAKER_01 39:25

Yeah.

SPEAKER_00 39:26

Uh that quote you used was quite a quite the hit. So here's another question on mindset. Okay, what's the one mindset shift every investor needs to make after this new budget if they want to stay in the property game?

SPEAKER_01 39:41

Yeah, I mean, you know, I I can go back to the same same thing I I told, right? It's poor man's mindset. Yeah, get your head out of that. You can complain about this budget, you can complain, oh, the negative is gone now. I can't do this, I can't do that, I can't. Everything if you start telling yourself, can't, can't, can't, you can't. True, you will never do it. That's it, done. See you later, mate. Nada. Right? But my advice to to young investors or savvy investors, whoever you are, look at the things that you can do within your means and and do it. Don't just put it on a paper or Excel sheet, and I can do this. But I'll wait. What you're training to your mind, or what you're telling yourself is I can do it, but not today. But not today. I'll do it tomorrow, or maybe I'll wait a bit more. Automatically, your mind will go to a level, don't do it. Yeah, right. So you won't even know when you wake up. No, I shouldn't we no, no, I have to wait. I'll wait for a year and buy. Yeah, we know for a fact that you're gonna wait for a year, we know that you will never buy. We know that we move on from you.

SPEAKER_00 41:08

You go on to a person, right? Yeah, right. So I mean, we've had plans like that last year, about about two years ago, 2024, if a property uh on a 400-350 square meter plot of land in officer 650,000, 607,000. Oh, that's too expensive. I don't want to pay that much. Yeah, two years later, today that's way too expensive. Way too expensive mindset.

SPEAKER_01 41:29

My god, yes. Like, you know, it's it's it's it's amazing. Um, but uh you know, to answer to your question, work out what you can do and do it. Yeah, uh pretty much the poor man's mindset. Get out of the poor man's mindset.

SPEAKER_00 41:47

Yeah, every journey starts with the first step.

SPEAKER_01 41:49

Absolutely.

SPEAKER_00 41:51

All right, all right. So, Pramu, finish this off for the investors listening. If you get your strategy right in the next 12 to 18 months, this budget could actually be your takeaway problem.

SPEAKER_01 42:06

I mean, that's your wealth reset. This is this this budget is actually wealth reset. You've been doing the same wealth creation for the last for bonkers years. Negative gearing, negative gearing, negative gearing. Reset. That's why I said I secretly I like it. Yeah, I I actually like it because it it now drives me to do something new. You always know when I do something new, it's it's pretty cool. Oh, yeah. Right? Do something crazy stuff. Yeah. Now I'm excited. Like property game is changing a bit. Now people like us become very excited about this thing.

SPEAKER_00 42:54

So by the time uh the people who are saying, Oh, I'll do it tomorrow, the moment they make the head to get into the game, you've already run.

SPEAKER_01 43:04

Most of the people have done it. You've already run the taxi view. We've done it. Yeah. Right? So it's a wealth reset. It typically is that how you build your houses, how you build your uh investment properties, how you structure them, and what sort of rental income you're gonna expect out of it. It's a it's a reset. There are certain questions the real estate agents will be bombarded with, which I will be having very soon. Okay. Yeah. No negative gearing. What's the rent looking like now? Yeah. When was the last time you increased the rent? There are so many of my properties I haven't asked that question for ages. Now I'll be asking the question.

SPEAKER_00 43:50

So that that's actually that's actually a good uh that's actually a good point. I think we should be touch a bit more on that. Yeah. Right? And then maybe we who knows we can do a separate. Episode on that. Yeah.

SPEAKER_01 44:01

Yeah.

SPEAKER_00 44:02

As a now, now as a as a property owner who who's in uh rented out his properties, yeah. Since you don't have your negative gearing benefits on your properties, yeah, you're looking at increasing rent. Absolutely. I tell you why.

SPEAKER_01 44:15

Yeah. Don't hate me for this. Yeah. I pay land tax. Yeah. I paid stamp duty. Now you've taken the negative gearing out from me, which means I'm paying quite a lot of tax to hold the property. Yeah. I'm paying it out to the government. Okay. Um I need a return back. What's my return? Only return is my revenue. I'm going to increase my revenue. The way I run business is that way. It's a business for me. I will have to increase my revenue. If that property is not going to give me higher revenue, I'm going to get rid of it. Exactly. Right? How I get rid of it? Maybe not selling. There are other ways we can do things.

SPEAKER_00 45:03

Right. So this is the renters. That's that's a demographic that it's a scary world for the renters.

SPEAKER_01 45:10

No one's talking about that portion of people in the I I just can't understand how come the the the treasurer missed it.

SPEAKER_00 45:20

Yeah.

SPEAKER_01 45:21

And a large majority of people are renting, right? I'm not an accountant by trade. I didn't do C Maya or CPA. But these are basic fundamentals. Yeah. Right? You increase the expenses of a business. What is the business going to do? Either close the business or lay off stuff. Lay off staff to to, you know, yeah. Or increase the revenue. Or increase the revenue, exactly. Right. So how do you increase the what are you going to do? Lay off stuff. What are you going to do in a property? There's not no staff to lay off. Get rid of your manual uh uh uh rent.

SPEAKER_00 46:00

Yeah, you have to you have to increase the rent.

SPEAKER_01 46:01

You have to ring tell me what are the ways you can cut cost in an investment property. There are no other ways but to increase the rent. Then look at what's the impact of that. You're talking about first home buyers who want to get into the market. They were paying about $600 per week rent. Now the landlord must increase it by 660.

SPEAKER_00 46:24

Either that or you stop maintaining the property and the property uh really become exactly shit.

SPEAKER_01 46:32

Because because the the negative gearing is gone.

SPEAKER_00 46:35

Yeah.

SPEAKER_01 46:35

Right? Why do you why why do I have to put a new um uh new kitchen or new floorboards or new account? Why? I'm not getting benefits back on this. I'd rather put it to my house. Yeah. I'm just don't hate me to this. What I'm saying is this is how all the investors are looking at it.

SPEAKER_00 46:55

Yeah. So I think that's definitely another topic on its own that we just uh dive deep into. Absolutely.

SPEAKER_01 47:02

I think we need to bring a couple of investors and actually do it a forum uh uh podcast.

SPEAKER_00 47:07

Yeah, uh there you go. Look, 21 questions. We actually ended up asking 21 questions. The last question was like the bonus question, uh, which is gonna lead to its own episode. Yep. So thank you so much, Pramu, for you know, doing this episode today. We wanted to do it differently, you know, because everyone's doing podcast videos on the new budget. It's good. 21 questions, you know. Yeah, one of your favorite songs also by 50 cents. Alright, so guys, thank you so much for tuning in, and we'll catch you guys on the next episode. All right, see you later.