He Bought 4 Properties in 5 Years (His First Strategy Surprised Me) | Lewis Johns

If you’re still trying to figure out how to start property investing, this episode shares a strategy you could use.

In this episode of The Property Investor Next Door, we’re joined by Lewis Johns (investor and mortgage broker).

Lewis shares practical insights on borrowing capacity, using equity, investment property strategy, debt reduction, and how to avoid the common mistakes - all from someone who’s actually investing in real estate themselves.

Tune in to hear about:

👉The main differences between standard mortgage advice and strategic investment lending
👉How you should think about your first property (if you want to be an investor)
👉How Lewis got started in both mortgage broking and property investing
👉How to use equity to buy an investment property
👉The real reason rentvesting can help first-home buyers enter the market
👉Thoughts on structuring your lending for long-term wealth creation
👉Why having the right team matters… and who should be on your team
👉The surprising situation where holding a property too long can actually hurt your portfolio growth

Key moments:

00:00:00 Intro
00:01:00 How Lewis Became an Investment Lender
00:04:00 Buying During COVID
00:06:00 The Brisbane Boom
00:07:13 Emotion vs Investment Mindset
00:11:00 Common Client Scenarios
00:13:43 Why Most Australians Are Behind
00:15:31 UK vs Australia Property Culture
00:18:00 Investing on a Modest Income
00:20:18 Rentvesting Explained
00:22:22 What Separates Successful Investors
00:24:40 Is Buy and Hold Outdated?
00:26:49 The Aggressive Paydown Trap
00:29:00 Working With Ripehouse
00:32:33 Advice for Those Feeling Stuck

Whether you're a first-home buyer, a homeowner with equity, or someone exploring rentvesting, this conversation will help you think more strategically about property investing in Australia.

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👉Get In Touch With ALIC

https://www.ripehouseadvisory.com.au/lp/24/8/investment-lending-sign-up

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🏡The Property Investor Next Door: 100 Property Stories🏡

This series features 100 real Australians sharing the unpolished truth about building a property portfolio -  what worked, what didn't, and how it actually felt.

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➡️About Ripehouse Advisory⬅️

Ripehouse Advisory is an Australian buyer's agency and consultancy that's helped over 11,000 investors take a patient, considered approach to building long-term wealth through property.

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📞 See How Ripehouse Advisory Could Help You📞

Book an obligation-free call here: https://www.ripehouseadvisory.com.au

Transcript

SPEAKER_01 0:00

Buying a property is not about making you feel warm and fuzzy. It's about getting the strategy right and getting the right asset in the right location that's actually going to increase in value and help you to grow your wealth. So we we do spend a lot of time talking to clients about trying to take that emotion out of it, try and look at it objectively from an investment point of view. Even if you're gonna live in that property yourself, think of it from an investment point of view because that first house that you buy is not gonna be the forever home. When we bought a first home, my wife was pregnant, so we had a child on the way, we had two dogs, we were sick of renting, so it was very emotional about buying a first home. Whereas now we look at it much more from an investment point of view. Property is the national sport in Australia, so investing is not exclusively for high net worth individuals. If you're on a more modest income and you get a strategy right, you can absolutely still get the same tax benefits, so you can still use the same strategies as someone who's on a much higher income.

SPEAKER_00 0:57

Lewis Johns, welcome to the investor next door 100 stories. Good to have you here. I wanted to start, I guess, with question number one. So you are a mortgage broker yourself, but you do invest, you do have a portfolio. Now, which came first? Was it a case of you were working as a mortgage broker and you kind of saw the power of it and then decided that you would build up your own portfolio or was it the other way around? Did you like property and then get into your current line of work?

SPEAKER_01 1:22

Mortgage broking came first, but what we do now as mortgage brokers is a bit different from your average broker. So to give you a bit of background, I started mortgage broking back in 2000, sorry, mortgage advice back in 2009 in the UK as a bank-based mortgage advisor. And then throughout my career, as most advisors do, it's sort of generic home loans, its products, its rates, and then I moved into investment lending. So what so what we do now is very different from your average broker out there. So we look at helping clients who want to invest in property and grow their wealth. So the whole finding the best bank with the cheapest rate is a small part of what we do. But our advice is tailored around investors, helping them on the wealth creation journey, understanding the more complex investment parts of lending in terms of getting the structure, the strategy right, understanding setting things up from a tax and gaining point of view. So it starts started off as a generic mortgage advisor and then have transitioned into the into the investment space. And then along along the way, also started my own journey as a as a property investor as well.

SPEAKER_00 2:27

Yeah, okay. And uh so you've been with um ALIC for three years now, is that right? Yeah, just over three years, yes. Yeah, yeah. Have you found it so far?

SPEAKER_01 2:36

Uh very good, very good. It's very um very interesting, very challenging in a good way, in that it's uh a lot more in-depth and complex and a lot more mentally stimulating than just generic mortgage broken. So um, yeah, I've really, really enjoyed it for the last three years.

SPEAKER_00 2:53

Yeah, well, it sounds like it's obviously a more holistic thing, right? It's it's building wealth rather than just, like you said, you know, getting an individual rate from one bank or just for one property, isn't it? So it's a it's an overarching thing. It's it's on their journey, you know, on the client's journey for a longer period of time.

SPEAKER_01 3:08

Yeah, it is. There's there's uh there's over 20,000 mortgage brokers now in Australia. But what we do, there's a real gap in the market for where we sit in terms of giving that strategic lending advice around property investing. Because there's a there's a lot of brokers that don't touch property investing. There's a lot of financial advisors who don't like to touch on property because it's not what they know, they're more focused on shares and managed funds. So there's this real gap somewhere in the middle where there's property investors who are looking for strategic advice on how to set up their lending, and then that's where that's where we come into play.

SPEAKER_00 3:41

Fantastic. Well, now let's talk about your specific journey. Okay, so you know, before I guess you got into property, before it was a thing at all, what was your I guess your situation? Can you paint us a bit of a picture of what life looked like before you bought that first property?

SPEAKER_01 3:55

Yeah, so we we bought our first property. I'm gonna say me, myself and my wife, just about, was it five years ago? So we'd have been in around June 2020. So in the in the midst of COVID. Um but prior to that, um, as I said, be working as a mortgage advisor. Um but prior to that, we were waiting for our permanent residency to come through because we're from the UK originally. So up until that point of time, we've been renting, and then just with that air of uncertainty around is our permanent residency going to come through, do we have the ability to actually stay in the country or are we gonna have to upstick and leave? So we just had that little bit of uncertainty around our own uh personal situation as to where we were going to be, which um stopped us from being able to buy our property because we didn't know what the future held, but also there's a lot of restrictions around foreign uh foreign buyers being able to purchase property in Australia before you actually have your permanent residency. So prior to that, we'd been renting uh renting since we moved to Australia, back in, oh, we've been here for 12 years now. So we must have rented for about seven years before we we eventually bought our first property here in uh in Brisbane.

SPEAKER_00 4:58

Great. And now you're still holding on to that property? Do you still have that?

SPEAKER_01 5:01

No, since then I have um since then I've bought four properties in total. Okay, current currently have two. So uh we bought our first house in Brisbane back in 2020. Uh we used the equity in that uh the equity uplift in that house to then leverage into an investment property. Then we had um a second child and actually outgrew our first property. So we we then made the decision that we actually had to upgrade. So then that was offloading both properties that we had in order to upgrade our home and move into where we are now. Um, and then since then, um fairly recently, we've again had the same strategy of using the equity uplift in our house to then leverage into the next investment property. So I have purchased four properties altogether, sold two, and then we we're in a position now where we currently have two.

SPEAKER_00 5:50

That's great. Were there any uh particularly big wins of those properties that you're most proud of?

SPEAKER_01 5:55

Yeah, the the the first home that we bought in Brisbane, not through any uh strategic decision ourselves, it was through a bit a bit of luck, which often happens with first first home buyers. Um we we bought in Brisbane in 2020, so it was during COVID. It was a period where there was a lot of uncertainty in the market, nobody knew what was gonna happen. Sorry, I shouldn't say nobody knew what was gonna happen. The smart data-based property advisors knew what was gonna happen, but I wasn't in that position back then. Um so we bought our first home and we managed to catch that boom that was happening in Brisbane, which probably started about 2019. And then we got a lot of growth out of our first property um that that we bought in uh in Brisbane as our first home, and then because we lived there, it was capital gains tax-free because it was uh it was owner-occupied as well. Um, and and then the the house that we've upgraded to in Brisbane, we bought here um just over a year and a half ago. And again, it's still a very strong market, so we we've had a decent amount of equity uplift in that time as well.

SPEAKER_00 6:51

Yeah. How would you say your mindset? You know, obviously you you increase in your knowledge as you as you go through the property journey. How has your mindset, I guess, toward property and investment changed from, you know, say day one on that first buying that first property to now being at four? What do you think's changed and how how do you think differently, I guess?

SPEAKER_01 7:11

The big difference would be now I see it more as a financial and less of an emotional decision. And uh I maybe say this to be my customers as well. Buying a property is not about making you feel warm and fuzzy. Okay, it it's about it's about getting the it's about getting the strategy right and getting the right asset in the right location that's actually going to increase in value and help you to grow your wealth.

SPEAKER_00 7:37

I imagine uh emotions are the biggest block to a lot of people coming to see you, right?

SPEAKER_01 7:41

Yeah, they are. They are a lot of people, um, and it's the classic um Australian dream of owning your home. So a lot of people have that emotional, we want to be in our house, we want to get the forever home as quickly as we can. And a lot of the time, uh potentially you're not in the right financial position to do that. It might not make sense because to get that house you might be over-leveraging yourself, um, it might not make sense because the area that you're living in is potentially not the best place to actually buy a property and invest if that market might be stagnant in your local area. So we we do spend a lot of time talking to clients about trying to take that emotion out of it, try and look at it um objectively from an investment point of view. Even if you're gonna live in that property yourself, think of it from an investment point of view because that first house that you buy is not gonna be the forever all. So at some point, you're gonna make the decision. More than likely, maybe some people live in the first house forever, but most don't. At some point, you're gonna make the decision to upgrade that house or to relocate somewhere else. So that first property, uh either then you're selling it or you're holding on to it and renting it out. So, really, that first property is an investment property because it's not the forever home. So try and take that emotion out of it and then try and look at it from an investment point of view. And then that's been a big change for me rather than when I bought my first home before I was working in the investment space where I am now. Um it was very emotional. Um, I don't mind sharing when we bought a first home. My wife was pregnant, so we had a child on the way, we had two dogs, we were sick of renting. So it was very emotional about buying a first home. Whereas whereas now we look at it much more from an investment point of view.

SPEAKER_00 9:14

Yep. That's yeah, a lot more clinical, I guess a lot more data-driven uh as well. Do you find that it might be the case when clients come to see you that there might be one partner who's, you know, gun-ho, data driven, this is the best growth area, let's do this, and the other one's a little bit more like, well, I don't know, let's do you find a difference in emotion? How do they how do they work with each other? How do you work with them?

SPEAKER_01 9:35

That that happens a lot. So it's very it's very, very common for um one partner out of the two to be fairly analytical, fairly investment-minded, and just look at the financials in terms of what makes sense, and then the other the other partner is looking at it emotionally in terms of where do you want to live and this is not the perfect house, and and they're trying to picture themselves living there. Sometimes we'll have clients who are both in the same mindset of we just want to get into the market, we want to invest, we want to get our money working harder. Uh, but a lot of the time you've you've got two different mindsets, and there's no um there's no one right or wrong answer to that, okay. And that that's not a cop out to not give advice, that is everybody's different. And for some people, that emotional pool is really, really strong, and it makes sense for them to move into the house and touch it and feel it because that's it's such a strong emotional pool. For other people, that that emotional pool is not as strong, and it makes more sense to go down the financial pattern and actually to be more of an objective viewpoint and to be a property investor. But yeah, very, very common to have two partners who they could be aligned in everything that they do, and then when they go to buy the first house, they realize how different their mindsets are when it comes to property.

SPEAKER_00 10:42

I imagine you're partly a marriage counsellor as well. Is that one of the hats that you wear, just radiating between the two of them?

SPEAKER_01 10:47

Yeah, it is, it is. We we we wear many hats that um, yeah, that probably is one of them.

SPEAKER_00 10:52

Now, is there a I guess looking at um you know your work with ALIC, is there a common scenario that your clients are in when they come and see you, or are they coming from all walks of life? Talk about some of the similarities and I guess some of the differences between the people who come and seek your advice and your help.

SPEAKER_01 11:08

They do, they do come from all walks of life. So our our niche focus and area of expertise is on uh is on property investment, as I said, but we've got investors who are at all different stages of that investment journey. So it could be the first home buyers that we just touched on, it could be the the clients who are moving closer to the retirement, and now they're thinking about investing with a view to how that's gonna support them when they stop working. Um, but the bulk of our clients are probably in that middle ground. And what I mean by that is they already have an owner occupied house that they live in, and they've got they've got a mortgage on that property. Um, there's been some equity uplift, and then they're thinking about are we now gonna use that equity in our house to look at property investing? So it seems it seems to be part of the psyche and part of the mindset of once we buy our house, we then start looking at property investments as the next thing to do. Um, so the most of our clients are in that space of we have a house and we want to invest. So we we're then spending a lot of time talking to them about the strategic part of that and why you're actually investing and what what makes sense in that situation. And a lot of the time that is investing so that we can get other assets that are going to increase in value and grow the wealth with a view to after a five-year period or potentially longer, we're gonna sell those assets and use that to pay off our mortgage, right? So that's that that that's a fairly common strategy. So we we call it a debt reduction strategy, if you like. Um or we might have clients who are doing the same thing in terms of their leveraging into other assets, but the long-term goal is we're actually trying to upgrade and buy the dream home. But rather than rather than upgrading and buying the dream home now and massively overextending yourself and taking on this huge mortgage that you're working for the next 20 or 30 years to pay off, we stay in the house that you want to live in, that you're currently living in now. We use that equity to go and get some smarter investments that are going to help you grow your wealth. And the long-term goal is we offload everything, we move into the dream home, ideally with no mortgage, but realistically with a much smaller mortgage compared to if we pull the trigger too early.

SPEAKER_00 13:10

Right, okay. Yeah. Do do you do you find that um a lot I guess a lot of your clients are probably planning for it, you know, and they're that the fact that they've taken that step means that they're looking forward and they're planning and going for it. Do you think most or many Australians are are kind of ready, are planning ahead like this for retirement? Like, what do you think the average Aussie is when it comes to their retirement? Do you think that they are generally well positioned, or does it really take real active efforts like this to set yourself up for the future?

SPEAKER_01 13:41

Uh the the vast majority of people are massively behind the eight ball in terms of that longer-term retirement plan. Okay, so we're in a fortunate position now that uh super contributors are mandatory, so everybody has some sort of retirement savings that are going to help support them later in life, which obviously in previous generations didn't exist. So that is beneficial, but I don't think people realize exactly what they need to be worth to be able to stop working at a reasonable age and not work until you're 75 or 80 years old. So, how how much do we actually need to be worth to get there? Now we're not financial advisor, so we can't give you that number.

SPEAKER_00 14:17

But I was about to ask for it too. Thank you for telling me.

SPEAKER_01 14:19

But so what what people need to start thinking about is well, if I want to be able to retire, do I need to have my house paid off? Yes. And then outside of my own home, how much do I need to be worth so that I've got sufficient funds to be able to retire? What sort of a lifestyle do I want to be able to live? What a lot of people do and they get into a bit of a trap is they don't do any additional investing towards the retirement and they just focus on paying off their house. So they get to retirement age, whether that's 60, 65, 70, whatever it might be, and the only real asset that they've got is the family home. So then the only way they're able to retire is they've got to sell the home, downsize, and then live off the rest of the cash. So it's so there's a lot of a lot of people who don't really think about what do we actually need to do to get there. So yeah, that most of the population is really, really behind the eight ball. And it's not it's not something that gets taught about at school or university or so that that financial financial education piece is really missing out there.

SPEAKER_00 15:14

Now, you spent obviously uh a lot of time in the UK. Now, have you noticed a difference, I guess, in the mentality toward investment and finance and property there to Australia? Are we are we unique or different in any in any way? If you're serious about building wealth through property, it's not just about buying a property, okay? It's about buying the right one. That's where Ripehouse Advisory stands out. Their team are experienced property investors themselves, combining deep data from LGA right down to suburban street level analysis with hands-on human due diligence that goes beyond the spreadsheets. So to find out more and see how they can help you with your property strategy, head to the show notes and book a call with Ian and the team. Now, back to the video. Property is the national sport in Australia.

SPEAKER_01 15:59

So the the the difference, the difference between the UK and Australia, without boring you with all the tax details, in the UK, people will generally pay off the mortgage and then they'll save their money into cash or shares. Okay, because you you get what's called an ISA, which is a tax-free savings account in the UK. You can put money into cash, you can put money into shares, whatever you make, and that's completely tax-free. So you give them limits for that every year. That doesn't exist in Australia. So the mindset here is generally to uh pay off the house, and then the next natural progression seems to be once you've got your own house to give an investment property. Whereas whereas in the UK it seems to be payoff house and then save into shares or managed funds of some sort. So there is so there is a difference in mentality and a difference in psyche here. Um there's also um the tax benefits of property in Australia are better than the UK. They got rid of a lot of those tax breaks in the UK. But in Australia, you've still got the ability to claim uh negative gearing against the property. So that that can help to reduce your tax. But yeah, but that Australia is very, very much more aligned to property investing rather than to uh the UK, which is which is more of our own stocks and ships.

SPEAKER_00 17:08

Yeah, and I guess you can probably tell from the massive uh percentage of home loans that banks give out here compared to banks elsewhere in the world. I know it's just massive here. Now I want to I guess I want to talk a little more about uh your work with ALIC. You know, maybe maybe there's a perception that you need to be a kind of a higher net worth individual to come see you guys or to really get into investing, but I don't know, maybe if you could tell me a story or or if there's any client that you've had who might have had a pretty modest wage, but it's still being able to see success in their investment journey through you guys.

SPEAKER_01 17:37

Yeah, we we do have we do have all walks of life. So so you yes, yes, we've got the higher net worth clients um as part of our overall portfolio, but we do have a lot of clients who are at the start of their journey or at the start of their careers who eventually they're gonna get to that stage, but they they might start off in a much more modest income. So a lot of those clients who are on a much more modest income, and it's really relevant for the first home buyers just now as well, who are thinking about on the income I'm currently earning now, how am I ever going to be able to get into the market? How am I ever going to be able to buy a home? So though those clients who are at that um end of the spectrum in terms of their income, whether they're in a profession where there is a limit to how much they can earn, or if they're in a higher earning profession, but they're right at the start of their career. For whatever reason, they're earning a more modest income now. You can still invest and you can still build your wealth if you're more strategic. So, what we talk to a lot of these clients about is not trying to go and buy the, for example, in in Brisbane just now, average house price is a million dollars, right? And the the government's just opened up the 5% first home deposit scheme. So if you so if you're on a modest income, you don't have a huge amount of savings behind you, it can be very tempting to say, well, I can go and buy a house for a million dollars, I just need a five percent deposit plus stamp duty. So it's so maybe even though I'm on a lower income, I've got the ability to save that up, or I might get some help from mom and dad, and I can go and buy a million-dollar house. But if if you're in a modest income, that's going to be massively overextending yourself. You're working for the next 20 or 30 years to pay off that mortgage. It's not potentially a very smart financial decision. So a lot of those clients will talk to them about doing things like rent vesting, where they will continue to live where they're currently living. They could be renting and sharing with friends, um, they could be still living at home with parents, or potentially just living um somewhere where they like the area but they can't necessarily afford to buy a house in that area. So keep renting and living where you want to live, and then use your money to instead of massively overextending yourself to get a house to move into, get your money working harder by buying some investment properties or buying an investment property to get into the market. So you've you've then got there's a couple of benefits to doing that in terms of you don't need to buy the million-dollar average house in Brisbane. You could buy in a regional area where you're still getting properties in the five to six hundred thousand range. So the amount of debt you're taking on is much less. The cash flows that then are much less, so there's not as much burden on your financial position. Um, and then as well as that you've got rental income coming against that property, you've got tax deductions that are also coming against that property as well. So investing is not exclusively for high net worth individuals. If you're on a more modest income and you get a strategy right, you can absolutely still get the same uh tax benefits, so you can still use the same strategies as someone who's on a much higher income.

SPEAKER_00 20:25

That rent vesting uh that you mentioned is an interesting one because it kind of goes to, like you mentioned earlier, how there's this idea that you know, very much on a the Australian dream where you've got to get in as quick as you can, own your own home, because a lot of our parents did. But, you know, to to rent vest is something that people might be a little scared of because they're like, well, isn't that dead money? What would you say to someone who says that?

SPEAKER_01 20:44

Yeah, that that's a really old school mentality. That's that that's good, that's going back to um, I mean, I guess that's going back to my parents' generation where you move you moved into a house and you paid off the mortgage, and that that was it. And that was the strategy, and nobody kind of deviated from that. Um, so that that view that rent money is debt money, that well, that doesn't really make sense because if you're rent vesting and you're putting your money into a property that's appreciating in value, yes, you're still paying rent where you are now, but your money's working for you because you've managed to buy an asset, hopefully in a growth area where it's going to help you increase your wealth, but that property is also has rent coming against it as well. Okay, so yet yes, you're yes, you're paying rent yourself, but you've got rental income coming against that property. Okay, and the the rent that you might be paying, particularly if you're you know younger and you're still sharing with friends or you're still living at home, that rent that you're paying might be much less than what you'd actually have to pay on a mortgage for yourself. The the other the other benefit as well is if you buy a property that you move into yourself, that there's no benefit in that debt because that debt is not tax deductible. Okay, whereas if we buy an investment property, the interest on the loan on the investment property is tax deductible. So it's not as simple as saying you should move into property because rent money is debt money, it's more it's more. Complicated than that in terms of how much rent you're actually paying where you live now versus what you'd have to pay to get a mortgage to move into property, uh, and then also the tax benefits of actually owning an investment property versus owning an uh an owner of property as well. And then I mean that the other thing that uh I guess a lot of people don't touch on too is when you're renting a property, if the aircomb breaks, you phone the landlord and they fix it for you. Okay, as soon as you move into a house when things start to go wrong, you're the one that's paying for it.

SPEAKER_00 22:27

That's right, yeah, yeah, yeah. It's all coming out of your pocket, isn't it? That's right. Now, in terms of I guess the successful investors that you've seen, whether they're, you know, with ALIC or you know, you just you know of them or you've seen them, what is it you think that's separating those who are doing really well versus those who might just be plateauing at a couple properties? Is there something that they're doing? Is there a is it a mindset? What exactly is it?

SPEAKER_01 22:48

Well, if if every every investor is different. So the the ones that are doing well are the ones who they follow the strategy. Okay, so they they they take the emotion out of it, they follow the advice in terms of um buying the the right assets in the right location and getting that getting that professional advice. That's that's probably the number one thing to get right when you're investing in property is getting getting the right asset in the right location that's actually gonna help you grow your wealth. So the the mistake that people can make is they don't want to pay for professional advice from a buyer's agent who's got the data, who knows where to buy and what to buy and which areas are gonna grow. Okay, they don't want to pay that fee, so they want to do it themselves because they think they're gonna save money. But that can be a very, very expensive mistake. Because if they if they then just buy the property down the road because they drive past it every day and they and they know the local area, if that property is not actually growing in value, that's gonna put a real handbrake on your ability to then grow and scale your portfolio. Because we we need the portfolio to be increasing in value. You need to be having that equity uplift so that you can use the equity out of the first property to then leverage into the next one. Okay, we need that equity uplift and that capital role so that it's actually growing your net worth over time. Okay, so the the the biggest mistake I probably see people make is getting is getting the asset allocation raw. Okay, the the ones that are successful are the ones that get the right advice. Um they they buy the right property in the right locations. There's the the there's also, I mean, people have different mindsets in terms of their risk appetite as well. So some sometimes risk appetite is just to have one or two investors. Some clients might have one investment property and that's it, and any more than that, they can't sleep at night. Right? We we might have other clients who are have a much different risk appetite and they're really gunbo and they just want to keep buying property after property. Okay, most people will be somewhere in the middle, but we've just got to be more strategic around what actually works, how can we help you build that portfolio over time?

SPEAKER_00 24:45

Yeah, I like that you mentioned that actually. I guess it's not about what's the absolute maximum I can borrow, what's the biggest and best property I can possibly get, but yeah, like you said, how can you sleep at night? Is there a um can you still live a comfortable and happy lifestyle uh in the position that you're in? So I guess you guys are helping them find something that suits their lifestyle, not just what's the most that they can possibly get.

SPEAKER_01 25:06

Yeah, there's there's uh a lot of people out there who is telling clients, uh and it's you know generic advice that they give to the whole market to buy as many properties as you can and hold on to them all for 30 years. Right. So we we we disagree with that because all of the um all of the property markets are gonna move in cycles. Okay, so you you've got the um you've got the market in Perth, which is a great example, which I think 15 years ago was roughly the same average price as Sydney. Right? Sit Sydney's got absolutely gangbusters, it's one of the most expensive capital cities in the world. Perth did absolutely nothing for about 10 years, and they've just had four years of massive growth. Okay, so but buying a property and holding on to it for 30 years, you don't want to hold on to it for that 10 years of absolutely no growth. Okay, so so that that advice that some people get around just buy as many properties as you can and then hold on to them for the next 30 years. You you can be much smarter and much more strategic than that in terms of timing the market, getting a property early in the growth cycle, holding on to it to get as much growth as you can, and then if that market looks like it's gonna stagnate, then exit strategies come into play. So exit strategies along the lines of do we actually look at selling that property? If we sell that property, does it give us the ability to then potentially reduce the debt on our owner occupied house? Okay, the debt goes down on an owner occupied house. We've now got more borrowing capacity for the next investment. We've got an element of debt recycling that's going on there as well. Um, so the the there's much smarter strategies available to you than just buy as many properties as you can and hold on to them for the next 30 years.

SPEAKER_00 26:36

Yeah. I guess, yeah, those are probably that's probably another barrier that you're coming across where it's not just you know the emotions at the time and and people getting scared and that kind of stuff, but also, I guess, tradition and uh like we mentioned earlier, what what did my parents do? You know, for example, my parents still live in the same house they they lived in when I was born. So they've had that for now 32 years. But yeah, so I I guess you're probably butting up against that quite a bit. It's it's the emotion and and and how they're um how they're interpreting it, but then also maybe people's mindset is really far back, whether it's from their parents or just you know what worked 10 years ago they still think is working now, but I'm sure you're helping keep people up to date and here's what's happening now, here's the best thing to do right now rather than 10 years ago, you know?

SPEAKER_01 27:16

Yeah, I mean the there's a classic example that I see quite a lot where um uh clients bought their first home and they've really aggressively paid it down. So there's so there's very little debt left on the property and they think they've done the right thing. Okay, and and the traditional mindset that was the right thing to do, but then they go and upgrade and get the next house. Okay, and and the next house, instead of being the first seven or eight hundred thousand dollar property that they purchased, they go and buy the two million dollar house. Okay, but they don't have any cash because you've used all the money to pay down the first house. So they end up with the $1.8 million mortgage on the house they're living in, and they've got $200,000 of debt left on the investment property. Right? So their loans are completely the wrong way around from a tax point of view. Their cash flows are just getting smashed with paying this mortgage on this big house. And the the only way to fix that within the rules of the tax office, you can't just jack up the debt on the investment property to pay off the house. The only way you can really fix that is well, you've got to go and sell the first property, you've got to use that cash to then pay down the debt on the house that you're living in now. But sometimes it's this emotional pool of well, we don't want to sell our first house because it's our first house. They're getting rent from that property, and they think because that property is now positively geared, they've got rent coming in, that's a good thing. But yes, that's a good thing, but you're also just adding to your tax problem because that property is now positively geared. So you're getting all this rent income coming in, that's adding to your taxable income. You're paying more tax on the rent that you've paying on this than that you're getting on this first property at the same time as paying off this massive mortgage on the place that you're living in as well. So there's a bit of education right there by getting out of those old mindsets of holding on to all these properties. I don't want to sell my property, I've got to hold on to it. Well, a lot of the time it can make sense to sell that first property. What's the right exit strategy? How do we clear the non-deductible debt on the house that you're living in? And then what's the next step? Okay, just because we sold that investment property doesn't mean you're out in the market. Okay, we can then replace that property that you just sold with the next investment property, which is potentially somewhere else in the country in a different area that's at the start of its growth cycle, where you're actually going to make more money over the next five years compared to just holding on to that first property because it was your first property and you just can't bear to let go of it. Yep.

SPEAKER_00 29:22

Now, how how do you uh work with Ripehouse? I know you guys are pretty close, and you've actually bought some properties yourself through Ripehouse, is that right?

SPEAKER_01 29:28

Yeah, I have. So Ripehouse, um Ripe House is one of our trusted partners. Okay, we're we're we're two completely separate companies. So we're here to give you the advice on lending, structured strategy, how to set up your loans, what's your borrowing capacity, what makes sense from a tax point of view, etc. The things that we can't advise on, we are firm believers of stay in your own lane. We specialize in lending. That's what we do. Okay, we don't try and be the jack of all trades, we're not trying to be property advisors, we're not trying to be financial advisors, we're not trying to be accountants. So we need to partner with other companies who share that ethos of stay in your own lane and specialize in what you do. So we want to partner with the best companies in the country in those areas where we can't advise. So Ripe House are uh trusted property advisor for us. So they buy more properties for our clients than anyone else. So my meetings with clients will be along the lines of understanding the strategy, understanding the goals, what makes sense for them. And then when it comes to, well, where are we actually gonna buy a property, what's the right price range, um, do we buy capital city, do we buy regional? We'll then introduce them to Ripe House as our trusted property advisor, and then they help them on the actual um asset allocation of where we're gonna buy the property, which markets is the data showing us that's gonna give us good capital growth. Um, so we like Ripe House because um the results are exceptional. Um, we've we had a very um they won't mind us saying this, we had a very long look at their results and their track records. If we're gonna partner with a company, we've got to make sure that their um ethos aligns with ours as well. But between ourselves and Ripehouse, there's no money that changes hands, there's no kickbacks, there's no conflict of interest. We purely use them for their expertise, they use us for our expertise. And then because there's no money that changes hands, there's an expectation there, you have to perform for our clients, or we're not gonna use you. Okay, if if Ripe House sent me a client who needs help on their finances, I have to perform for their client or they're not gonna use me. So it's it's a very, very clean model. So we we like that they uh are similar, have a similar mindset to us. We like what they do in terms of the types of properties they buy. It's very low risk. They stay away from off the plan, they stay away from developments, subdivisions, apartments. They stay away from anything where you're lighting the developers' pockets, okay, rather than actually helping our clients who are trying to buy properties to build their wealth. Um, so we've got a very good close uh working relationship with Ripehouse. They buy a lot of properties for my clients. Um, I keep a spreadsheet, so I know all the properties they boxed for my clients. I know what the purchase price was, what the current valuation is on realestate.com. We can track how they're doing, we can pull them up if we don't think they're performing. Um I can tell you from tracking this closely, they're all performing very, very well, so we're really happy with them. Um, to the extent of uh myself and my wife bought our first property with Ripehouse just this year. So we used the equity in our house to purchase. I'm in Brisbane, as I said. We've purchased the property down um in regional Victoria in a place called Druin, about just over an hour outside of Melbourne. Used Ripehouse, that was the very first property they presented to me. It ticked all the boxes. I trust their data, I trust their analytics, and I had a very good experience with them. Um, we're in the process of getting into the next zone as well, getting the house revalued, using that equity, and getting into the next property, which I'll use Ripe House for again.

SPEAKER_00 32:43

Fantastic. That's very good. Good, good relationship there by the sounds of things. Now, I guess wrapping this up today, for someone who's watching, someone might be watching this who, you know, they're interested in investing, do a bit of research, but they still feel stuck or they're still unsure. Do you have any advice to give them? What would you say? Yeah, you've got to get the right team around you.

SPEAKER_01 33:02

So when people are stuck and when they're unsure what to do, it it tells me that they want to make the right choices, but they just don't have the right advice and they just don't know where to go. Okay, so you've got to get the right team around you in terms of getting the lending side of things correct, understanding the strategy, understanding cash flows on the properties, make sure you're not gonna over-leverage yourself and get into a bad financial position. Okay, so that that that to me is the first piece of the puzzle is understanding well, what can we actually do from a financial point of view? How does that work? How much can I borrow? What are the repayments going to be? What's it gonna cost me before tax, how much is my tax even gonna be? There's a whole uh list of things that we go through with the client so they really understand that picture. And then it's getting the the next part of that team is getting the right property advice from a company like Righthouse. And so making sure that we we get the financial set of things set up properly, but then making sure you buy the right asset as well. So you don't get you don't get lured into buying a property off the plan from a developer where the you know somebody's giving a kickback, right? We want to stay away from all of those high-risk things that can go terribly wrong. There's a lot of them out there. So get the right team around you from a finance point of view, from uh uh property and then asset allocation point of view. Um, if if you need more advice than that, if you need advice from an accountant, if you need advice from a financial planner, get the right team around you, make sure that everybody on that team understands the goals and everybody's moving in the same direction so you're not getting different conflicting advice from different people and you'll just end up getting stuck.

SPEAKER_00 34:30

Yep. Lewis, thank you very much. I think we'll probably uh wrap that one up there. We are going to have some notes in the show notes if you want to draw on Lewis's expertise or you know, chat with every anyone at uh ALIC. Lewis, thank you for joining us today on the Investor Next Door 100 Stories podcast. We'd love to speak to some of your clients, actually. We'll get I'd love to get you back on, but uh it'd be great to speak to some of your clients as well, you know, see how they're tracking along. But otherwise, have a great day and uh thank you very much, Lewis. Lovely. Thanks for having me, Agent.

SPEAKER_01 34:58

Talk soon. Cheers, man.