Unlock your equity and unleash it's potential

Learn how to access equity, calculate your borrowing capacity and connect with Alex here: https://linktr.ee/alexanderwatson

You've built equity. Now what?
Most Australians who bought a few years ago have quietly built up a chunk of equity — and most of them have no idea what to do with it. Alex and Bindi break down what equity actually is, why it isn't cash you can just withdraw, and the two ways to access it. More importantly:

Why the question isn't how you get it out, it's what you do with it given where you're headed.

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Finance, But Neat is hosted by Alex Watson, an accredited mortgage broker and director of Funded Finance. 

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Transcript

SPEAKER_00 0:00

G'day, ladies and gentlemen. Welcome to Finance But Neat, the home of the greatest lubricators of conversation. Whiskey and money.

SPEAKER_02 0:10

I was hoping that's the direction we're going with that one.

SPEAKER_00 0:13

My name is Alex Watson, and joining me as always is Bindy Holland.

SPEAKER_02 0:19

Cool. Well, today's topic is all about equity, which is cool. Uh, very relevant subject for us to be talking about right now. So I'm very excited. Um, but here's the thing about equity it's not really wealth until it's working for you. If someone's been in their home for a few years and they haven't had this today's conversation with their broker, they could be leaving a serious amount of money sitting on the table. But first, uh before we get into that, we'll do barbecue chats. Uh today, I'm gonna talk to you about um growing with the market. Uh, you and I both have uh someone in our lives that works with a lot of um workplace um payouts, work cover, that kind of thing, like people getting windfalls. Um and just recently what we've seen is an example of someone who is expecting uh a cash payout, quite a significant one at that. And therefore, what they chose to do was actually sell their entire property portfolio because they knew with this cash payout they would actually be able to then re-enter the market in the way that they wanted to. Um, and and so they did that in advance almost as preparation for this payout. Um, unfortunately, what we've actually seen is that was five years ago, and you know the changes we've had in the market in the last five years, right? So what they sold versus what they're gonna be entering back into is an entirely different ball game.

SPEAKER_00 1:55

Um they sold in 2021?

SPEAKER_02 1:58

Yeah, close to, yeah.

SPEAKER_00 2:00

Before or after?

SPEAKER_02 2:02

Uh before. Yeah.

SPEAKER_00 2:09

Yeah. So I in 2021 I was Combank, market went crazy. I left in 21 for Westpac, and I remember during that period speaking to people who wanted to get pre-approved to wait for the opportunity where the market would collapse again and then reinvest and buy infroperty, da da da da, getting ready to sell. I've never seen it work, firstly. I think just as a concept of buying, selling, waiting for the market to move. It's impossible to time the market. And even the most conservative financial people in the market, they're like, Well, if you're gonna sell, why not move now? Like, uh you know, the Dave Ramsey, the anti-debt guy, right in the US, he was saying the other day, he's like, Well, is this a real plan to move states? They're like, No, we want to sell to get rid of our debt. And he's like, Why learn the money management skills, pay that off and move and sell at the same time? Don't sell, clear off, wait for an opportunity. Yeah, you just can't play Nostradamus with the market. You just can't.

SPEAKER_02 3:14

Well, this was my question is if you can afford to keep a hand, at least one hand in the market, yeah. Like, should should you do it so you grow with it? Like, I know that's going to be different for every situation, but it's something to consider, right? Is if you have at least one property, you're growing with the market.

SPEAKER_00 3:33

Yeah, I think what two podcasts ago, we spoke about upgrading, selling, all that kind of stuff. Um, like, where are you putting that money in the meantime?

SPEAKER_02 3:43

Yeah.

SPEAKER_00 3:43

You're going to spend some of it.

SPEAKER_02 3:45

Yeah.

SPEAKER_00 3:46

You're going to. We spoke, I spoke to a client the other day who was talking about selling and oh what I talk about selling, doing something with the money, and I just said, uh, that's right. I just said to uh I said to them, you've been through a really, really hard few years. It's absolutely the right decision to sell. What are you doing with that money? Like, have you got a financial planner? Just making sure they've got the right advice coming at them to where to put it. And they're we're talking through that, and I just said, Awesome, as long as you're not going to buy a caravan with it. The husband blushed, like straight away, and he got a whack on the arm. Yeah. And it's like you go through a hard couple years, you've got something going on in your world where like you might be injured, or you know, this couple, like they've had some big stuff going on. Um, and I think I see like a lot of times, you know, this person we know, like they will chat to people who have gone through like injury claims, and you know, they're they're seeing dollar signs for suing and all this kind of stuff. Um like even my brother, he's got he's got a tradie that he works with who's missing part of his pinky. Yeah, um, got a massive payout, it set him up financially, and it's a rare situation that you get as big of a payout, like you have to lose a digit or a limb or something to get as big of a payout there. And he just said, every day of the week, I'd rather have my finger back. I know, like I know it's it's you'd think you'd think, oh yeah, just take that, right? Like, no, yeah, no, you want it back, and but the reality is he's done something wise with it. Every time I chat to someone, they always go, I just need to let the pressure valve off and go, I buy a caravan out of this. And like it just doesn't work.

SPEAKER_02 5:35

Well, I feel like like hindsight's obviously a beautiful thing, and if everyone could see what the next five years would look like, they would make different decisions. I know I don't know that's that's real, but these you know, this particular uh person that we're talking about, in reality, they've had you got to live somewhere, right? They yes, they sold properties and they have cash in the bank from selling them, but they've got to live somewhere, which means they've been renting for five years.

SPEAKER_00 6:01

And and what are the chances that money is that they got from liquidating properties is in shares?

SPEAKER_02 6:10

Oh, I'd say low. Yeah. And the other thing that I can't help but think is like like whenever you We're not that smart, are we?

SPEAKER_00 6:18

Like I sometimes think this. Brian and I Brian and I will chat about this, and it just the math doesn't math. And I'm uh I got a participation award out of high school. Yeah. Like we went to public school. Yeah. Your kids go to public school. I'm fine with it. I'm fine with it. Um I was fine with it until mine got accepted.

SPEAKER_01 6:41

Now you've got that one little flex on top of me, yeah.

SPEAKER_00 6:44

Um, but no, like it's you know, I got I got an OP21. Like, yeah, I literally got like I'm not out of 24.

SPEAKER_02 6:53

Oh, one's good, right?

SPEAKER_00 6:55

Yes, yeah. And I got a three. Yeah. Yeah. This is why you yeah, but she went to Craig's Lee, so uh um she would have gotten a one at my school, I think. But the reality is like where like I don't think I'm that smart, it's just a logic. It just what makes sense, what does the math say? Let's ditch emotion. Yeah, like it's not an emotional.

SPEAKER_02 7:20

Well, I mean, when you're dealing with some sort of crisis, that you you it's hard not to be led by emotion, right?

SPEAKER_00 7:26

It's like well, you should have been the two greatest uh lubricators of decision making emotions, emotional, like financial pressure and whiskey.

SPEAKER_02 7:38

I think they actually say like there's like every single purchase that someone makes is driven by emotion. Like none none of them aren't. They all have emotion in them. Um, but yeah, I just can't help but think like when someone's injured and they're getting a payout, it the payout, the purpose of the payout is to relieve pressure for the rest of their life on their their like need to work as hard as they did or as differently as they did or whatever. Like that's the point of the payout, it's to compensate them for what they now can't do. Yeah, and like the these this these people they they will be absolutely able to enter the market again. Like they will and they'll do really well, like for sure. Yeah, but I just can't help but think that if they had just kept even just one house in the market, they they would now be paying off a very small debt versus buying a house for today's prices.

SPEAKER_00 8:28

It's this whole concept, I think, uh, with an old school concept of stewardship, like just taking a step back from your money and going, you know, uh I think we should really dive into this a little bit deeper another time around, careers, professions, and all that kind of stuff, but going, what is my business? Because mortgage broking, funded finance, it's my profession. Yeah, my business is the money that we pay ourselves to survive and live in and where we spend and all that kind of stuff. And I think ultimately, if you look professionally at you know how you do that, you take a step back, you start managing it differently, you start stewarding it, you stop making these kind of dopamine get out of jail decisions because you're under pressure. You go actually, what is the next right thing to do? Yeah, and to my mind, I always like to think of what pilots do in like a uh disaster. You know, in in aviation, there's this thing like they've got this triage process that they've got to go through, like you know, check anogens, all this kind of jazz when when a Mayday emergency happens. Step one every single time is aviate, keep flying the plane. Right. And I think when a disaster happens in our world, step one should always okay, what how do we keep this plane flying? Yeah. And how we do we steward what we've got as best as we could. Years ago, I sat in, this is the last time I stopped shaving when I was a mobile banker. I sat in this family, this household where this woman had uh been given some sort of lung disease situation, um, like diagnosis. She had decided that she wasn't gonna live beyond two years, and it had been five, six years since she got diagnosed. She had decided. She decided that she wasn't going to live, and you could tell, I could tell the husband was at the end of his tether. Yeah. And what she'd done is she'd just gone and lived life, maxed out her credit card. They had this giant 15 grand credit card debt. He was a Queensland Health public servant. Uh, she had been a teacher, and they had no way to get the income to clear it up. Like he was on, you know, this is circuit 2019. Like he would have been on 60-ish grand a year. And one of the things that I said was, guys, I like you need to close this credit card, and you need to actually start managing your money successfully because having a credit card is not going to work for you. Like, it's just not going to work. You've got plenty of equity, yeah, we can do it, but you need to close this credit card for me to go. The this is why. Because I I rightly or wrongly, I will not do a credit card debt consolidation if you were going to keep it open. Yeah. And I've been in trouble for that over the years at Bankland. Uh, but I always take the test that we learned years ago. Could we do it? Yes, should we do it? Absolutely not.

SPEAKER_02 11:27

Yeah, because if someone got themselves into that position, it's fair enough to say they will do it again. Yeah. Yeah. Actually, on that on the subject of windfalls, I actually had, you know, a similar I saw a similar thing back in the day where there was a payout of some sorts, and her first um move was I've got all this credit card debt, I've got all this personal unsecured debt. Yeah. Uh paid off because it's costing me interest and I can't get rid of it, and da-da-da. And actually, a financial planner said exactly what you just said is if you've managed to get yourself in this situation, you're gonna do it again. Yeah. You're better off keeping the credit cards and learning your lesson and paying them off and putting all of this money into bonds or something like that, so that when you have learned the lesson, you've still got the money rather than use this money to learn the lesson.

SPEAKER_04 12:16

Yeah.

SPEAKER_02 12:16

Um, and I was very, very, very new to finance at that point, and I thought, well, there's a whole different way of thinking about it.

SPEAKER_00 12:23

It's a really wise way. I think the whole discussion around finances and optimizing and every leverage and everything quite often misses what is the next right thing in a wise manner to do with my finances. Um, like we we've seen over the years people come to us and go, I'm about to inherit like a million dollars. I want to buy this house now, and they've already spent the inheritance, and they're trying to use that when they've got no income to justify the purchase. Like, yeah, I I'm almost of the opinion. Like, if I if I won the lotto tomorrow, I'm calling my financial planner and I'm not spending a cent. I'll probably pay my home out, but we're investing everything. Like, literally, just put in the shares, 12 months, let's get used to this real normal normality. Let's keep running this business as usual because I know in 50 years' time, if I blow up this business to go live a lifestyle that from Lotto, it's all gonna be gone. Yeah. I don't want my lifestyle to change. Like, let's actually steward this for long term, let's keep it for long term.

SPEAKER_02 13:31

Yeah. I think your analogy with the pilot, that's really profound. It's it is just if there is some sort of disaster, rather than letting that emotion drive your decision making, it's let's just keep flying the plane in the same direction that we were and try and keep everything as it is and make whatever tweaks we have to do to adjust and land safely in our new position. But let's not just let go of the wheel and forget about it.

SPEAKER_00 13:57

Well, and what a like this isn't finance related, but I do wonder if that that couple is still together. And their parting thing to me when I said I wouldn't do it was, well, this is why I don't shave. Uh yeah, I was actually wondering how that tied in. I just realized uh their parting thing to me was look, we know you're a senior mobile banker, but you know, like you are quite young. Is there anyone older and more experienced? Um, didn't put didn't softball that to anyone. Um but it's just like, hey, I'm really curious as to whether that relationship is still around. They had one daughter, they lived in like uh in Newmarket, inner city, yeah, I can't do it. Windsor.

SPEAKER_04 14:40

Yeah.

SPEAKER_00 14:40

They'd been there forever, it wasn't an income thing, they just owned that home for a long time. Lovely home. And your actions have just said, I actually value my current comfort because I think I'm like I'm in trauma response and dopamine and like I can't handle this. I value my current comfort more than my daughter's future and my husband's finances once I am gone, if that's a response. And I think just knowing how your actions affect them long term financially and show them where your priorities are, like that's a big, big piece. Yeah.

SPEAKER_02 15:18

So yeah, well, I guess back to today's topic, equity. Um, here's something that I see a lot of, and I'm actually very guilty of this type of mentality myself. Um, it's it's something that I constantly have to work on in in multiple areas of my life. But if I'm going to think about using the equity that I've got in my property to buy another house or whatever, my first thought would be let's start cleaning things up so I'm ready for that. As in, let's, you know, a lot of people want to pay off if they've got a credit card or if they've got a an uh like a small unsecured debt, they want to pay that off and tidy it up. Some people might want to uh reduce some of their discretional spending that they've been using, you know, that they've been living at large for the last few weeks, whatever. They want to tidy that back up to show that they can make an a higher repayment. Um though, like, or even the the one that really gets me is always if I'm close to a particular milestone and paying off my home loan, my existing debt down, I want to reach that milestone before I start a conversation because that was my goal or whatever. But I'm I'm just keen to hear from you as a broker. Like, when is it in this huge journey of people's thoughts, when do you actually want to speak to them and start putting your influence on things?

SPEAKER_00 16:37

Before you actually make any decisions. I think you never know what that move will unsettle. And so we've we've had clients in the past where they've come to me and gone, hey, we've just gotten 50 grand, we're gonna go and pay this off, and then we feel like we can buy a house. And I I have no issue with paying debt off. I think it's a wise thing to do. But I think you need to know that if you came back to me in six months and said, Hey, we paid the car off, and I go, awesome, well, you you've not got enough cash to buy.

SPEAKER_02 17:09

Yeah, yeah, we need that money.

SPEAKER_00 17:11

We need more cash, how would you feel about that? And so it's not about helping, it's not about making the decision for the client, it's about letting them know what that decision will actually do and how it affects their options. Yeah, so if I went to someone, hey, you can buy a house now, or you can buy a house in two years' time if you pay your car off, most people are gonna go, well, I'm probably gonna pay my car off in two years anyway.

SPEAKER_02 17:38

Yeah.

SPEAKER_00 17:40

Might as well buy the house now and get the growth, get into the market now.

SPEAKER_02 17:43

Yeah, and in reality, like what we've seen happen. Yeah, in two in two years, maybe you actually can't, maybe you can't maybe you pay the car off and you can't buy the house anymore because you need to have a triple deposit or something.

SPEAKER_00 17:55

The I one of the examples that I always come back to is like, you know, you walk into a branch, the branch doesn't do the right thing historically and get you to a lender. Instead, the the teller or the CSS or whoever the the front person is tries to give you a little bit of wisdom that they picked up in the lunchroom, you know, which we've both seen those conversations, right? And they go, Oh, you just need to save five percent, another whole nother conversation. Uh, and you know, just focus on paying off your debt. And the I can probably, I don't think I could count the amount of times I've had that advice being given when I worked in Bankland, and then they come back to me and go, I did everything the bank told me to do six months later. I'm like, I could have gotten you into a house six months later and now you don't have enough cash if you had to spent that. Like, honestly, save the money. Uh it's always the thing, right? Save the money, but be really clear and defined around what what you're working towards because you can make financial decisions, all this type of stuff. Like living expenses is a big one. All I need to do is have a discussion so you understand what's discretionary and not. We're not gonna grill it and go, you can't because of this past history behavior. Yeah, like we're not gonna roadblock, but we're just gonna really have a good conversation around okay, do you understand what's discretionary within your budget? Yeah, absolutely, Alex. I do. Awesome. Let's what do you actually need to spend to live by? And I think that's a really, really big thing around what is the decision-making process. Well, let's just actually get clarity. Clarity is a big thing.

SPEAKER_02 19:35

Well, I mean, it it makes sense rather than just trying to figure it out on your own. It actually does make sense to get an understanding of what are my options in each scenario. The reality is, is maybe you do put that money towards paying off the debt. Maybe that is the best thing, or maybe that's just what you want to do and you choose to do it anyway. But at least you're making an informed decision after you've sort of heard your options.

SPEAKER_00 19:57

And everyone's got like there's a lot of cope in the world for how we spend. Like, there's a lot of cope. And most of it is generally, oh my kids.

SPEAKER_04 20:06

Yeah.

SPEAKER_00 20:06

Like that's the biggest cope. Um, you know, Kmart is a very, very big beneficiary of that. But like just I I think if you've got the equity and you've got the borrowing capacity and you can see a clear path to the cash flow, why wouldn't you just act now?

SPEAKER_02 20:26

Yeah.

SPEAKER_00 20:28

Like Anna and Anna and I are in the bit of a crossroads at the moment where bought our house 2019, got a huge amount of equity out of that move. Like, so thankful we bought when we bought, where we bought. Probably could have done a little bit better, but like we're north-south. We want to go wherever we want. We're 20 minutes away from everything. It's awesome. Yeah. Um, I I started looking the last few months going, okay, we're not, we're outside of where the first home buyer guarantee stuff is impacting at the moment, price range.

SPEAKER_02 21:00

As in like low, like your no price range.

SPEAKER_00 21:03

So my house is not increasing as aggressively as a lot of the investment properties that have been bought over the last six months. Uh-huh. So we've seen a huge increase since October of properties increasing in that seven to eight hundred mark, closer to a million, because the first home buyer guarantee gives you the ability to negotiate up to that. So it's been a huge increase there. We're not feeling that, and we've been quite stagnant. And so because we spent the last what year is it, four years since the girls were born building like paying for IVF, buying the business, starting the business, doing all this, getting that going.

SPEAKER_02 21:39

Putting them in a public school. A private school, sorry.

SPEAKER_00 21:42

Do you know how much cheaper it is than daycare? Is it actually? Yeah.

SPEAKER_02 21:46

Oh, daycare is the worst, isn't it?

SPEAKER_00 21:48

I think we figured out we're going from 24 grand a year or something stupid with daycare to six thousand a year.

SPEAKER_02 21:54

Well, when you put it like that. Yeah. Yeah.

SPEAKER_00 21:57

Yeah. Even Cindi this year.

SPEAKER_02 22:00

Really? I thought there was like all these fantastic Kindy things.

SPEAKER_00 22:04

No, no, Kindy this year is saving us a ton compared to last year. Yeah, our savings is like it's good to know that I'm not actually the financial problem and that it is our kids, yeah. Um but it's uh man, I don't need a tangent, Bindy. Sorry. So like um That was a really good stream of where was I?

SPEAKER_02 22:32

Uh you were talking about IVF and all of that.

SPEAKER_00 22:35

Yeah, so we were investing into these things. We're going, hey, we can see the market going crazy, but we're in the market without an occupied house.

SPEAKER_04 22:42

Yeah.

SPEAKER_00 22:43

We're investing into the business. We invested into having kids. Now we're investing into the business. The business is getting to this mature stage, year three. Cash flow is going well, ongoing revenue, it's all feeling a lot more comfortable.

SPEAKER_01 22:55

Yeah.

SPEAKER_00 22:55

And I've realized that our property is not increasing in value.

SPEAKER_01 22:58

Right.

SPEAKER_00 22:59

And I'm gone, I've got the equity, I can see a clear path to the cash flow. Borrowing capacity is there. The next call was our financial advisor to put a plan in place. And the only reason I went financial advisor first is because I know my borrowing capacity. Yeah. I like as soon as I got my financials, I ran it like this year. And I actually need someone to be in between Anna and I. Because I know what the options are, and I am not going to educate my wife well.

SPEAKER_02 23:27

Yeah.

SPEAKER_00 23:27

Like it's going to be heavily biased. I'm going to get grumpy and angry. I need a tiebreaker on that conversation, which that's what we're doing. So I think just looking at we've got the borrowing capacity, we've got the equity. I've had some investment cope. Yeah as like a like I've gone, hey, this is why I'm not doing investment properties. And now I'm going, all right, I've got super, I've got borrowing capacity there, I've got uh personal, we can get all of our equity out, and as a physio, so we've got some more ability to get equity up to 90% there. What are the pathways and options that we can go through? I've got way too many options, so I've just gone, give me a plan.

SPEAKER_02 24:06

Yeah, yeah. I Dan and I are in a a bit of a spot as well, actually, in that uh when I was working full-time uh and well we both were, we had certainly borrowing capacity. We've never had a borrowing capacity issue. Um we've always kept any debts very minimal, if at all. Um, like whether the vanilla customers, good income, very little debts, etc. Um, and and our problem was we were we were having to save to get back into the market after a uh a stint of like eight years out of the market almost. Uh so a long time.

SPEAKER_00 24:50

In in saying that, it didn't we we I'm not gonna I'm not gonna spill the tea, but that phone call when you wanted to buy a property was one of my it's I still think it's one of my favorite conversations. Just I'm very glad you're very frenet frenetic.

SPEAKER_02 25:02

Yeah, I'm just very glad that we got back in when we did, like we made a good move. Yeah. Um and what it's resulted in is we're we're in this position now where we have so much equity in this property. Um, and we should be doing something with it, but actually uh our incomes aren't where they used to be, and that was by design as well, like that's part of the plan. And I actually really want to maintain that. Um, and I don't necessarily want to work as much as what I was. Um and why I guess one of my questions is, and and maybe I can uh use this platform as like as a place for me to learn as well, but like what what is it that I can do with like accessing my equity to actually increase my borrowing capacity if my income is not exactly where it used to be for whatever reason. Do you know what I mean? Yeah. Like, is it is there things that I can do in terms of cross-collateralizing versus cash out that actually influences my borrowing capacity?

SPEAKER_00 26:05

I I think the biggest thing that you haven't done is you haven't used the equity already and incorrectly. It is financially, it makes a lot of sense. And this is the whole optimal situation. If you optimized your financial world, you would never get a car loan, you'd use equity. No one has paid off a car loan attached to a house over a 30-year loan term in three, four years.

SPEAKER_02 26:29

Unless they put it separately.

SPEAKER_00 26:30

I've never seen it. I my comment stands. Like it may be a very rare few. Yeah.

SPEAKER_02 26:36

Um because that temptation of putting your payment over 30 years and not really noticing the car being bought is so strong. Yeah. Yeah.

SPEAKER_00 26:44

And so I think like that's kind of step one. And this is first home buyers, like we say it all the time, just do the next right thing, invest well, cash flow renos, do all that, get equity. So you guys have done some smart things in terms of you got into the market, you made moves, sweet, all good to go. Um I think realistically, like everyone is so different that it's just a borrowing capacity analysis. Right. And then like the equity side of things, I'll get RP data, it'll take two minutes, I'll figure out if I don't like just using my local knowledge around the country. Sometimes I look at places and go, this doesn't seem right. Like I did that to a place in Adelaide the other day. I was looking at the price going, I don't think this estate is kept up with the surrounding areas on RP data. Let's have a quick look. Um, and we yeah, the client was like, Yeah, it's worth way more than what that's saying online. Like clients always know what their property is worth. Yeah, they'll inflate it slightly. And then some, yeah. Um, but everyone knows what their property is really worth out there. And I think once you start kind of like you get the equity really quickly, you get it like literally five minutes I'll run through just the questions that I ask everyone around borrowing capacity, see. It's not even I don't even need the right answer. I'm just trying to figure out what you know about your finances, yeah. So I can ask for certain documents and you know kind of go down that rabbit hole a little bit. But the reality is like within 10 minutes, we know exactly where you stand and we can start going, okay, we we can structurally access X amount of equity, which is more than sufficient. So what do we need to nail that next purchase? And what does that overarching strategy look like? So, do we need to access equity separately because we've got a better borrowing capacity rate over here? Do we need to restructure your own occupied home to maximize borrowing capacity? What are you comfortable with? What is your need, your goal, and like balancing all that and doing the right thing by the client compared with do we need to restructure everything? Maybe we've got plenty of equity and like I've got clients who just they just don't want three loans, four loans, five loans, right?

SPEAKER_04 28:59

Yeah.

SPEAKER_00 28:59

Um and I think the industry has done a really poor job of actually giving people that option and or explaining why that option is the best in terms of accessing equity and going to another bank or cross-collateralizing. Yeah. It's it's very, very kind of poorly done. But accessing equity, super easy. It's it's more than like it's really just a paper exercise mirrored by physical cash coming out and getting ready for that next purchase, deciding what the next purchase looks like, and taking action with the right buyer's agent and expert that's helping you put the strategy together.

SPEAKER_02 29:36

Yeah. Cool. I mean, strategy is a whole nother thing, I suppose. That yeah I suppose your mum and dad investor like wouldn't know where to start with. I don't know where to start with. Yeah, well, you do, you've got connections.

SPEAKER_00 29:54

Well, I I know who to start with. Yeah, yeah. I think that's the reality. And yeah, uh when we talked about like earlier about people wanting to buy property and invest and they're waiting for the right opportunity, it's just like it's almost a fool's errand because by the time that you know the property market is moving, yeah, you're dealing with lagging indicators.

SPEAKER_04 30:15

Yeah.

SPEAKER_00 30:15

Not like I guarantee, I guarantee you don't have the relationships that you need to get the pre like change indicators. You're always going to, I don't know what that word should be, but you're always going to get lagging indicators through data. Um otherwise you're relying on anecdotal evidence up front to know the market's moving. Yeah. So, like, what are you going to trust there? So there's no, in my mind, there's never been a point in terms of like, can I do it? Should I do it? Is this the right timing? It's, hey, there's an opportunity, let's investigate and see what we can do. And whatever that opportunity looks like, let's take action and not get stuck in that analysis paralysis.

SPEAKER_02 30:55

Yeah. And maybe as well, just it's like a mindset thing. You have to go into it holding it loosely, like putting putting your effort into it, but holding it loosely, and that if it doesn't work out it's not the right thing, it's just the learning curve to to whatever is.

SPEAKER_00 31:10

Yeah. I don't know. We've had a couple clients choose not to go down that path of investing in the last few months.

SPEAKER_04 31:19

Okay. Okay.

SPEAKER_00 31:21

And I got no issues. Ultimately, I think they will. Yeah. But they probably got to get they probably, I don't think in each of those cases, I don't think they can see the pathway to cash flow being okay.

SPEAKER_02 31:32

Yeah.

SPEAKER_00 31:33

So they've got to get some things right in their world first. Yeah. And that's a really like, I don't think your cash flow should be perfect, but you should have a clear indication to good cash flow to achieve that goal. Um but like even even really, really like 500 grand borrowing capacities, we can probably find something.

SPEAKER_02 31:55

Yeah. And maybe it's that strategy of even year where we're living, maybe it's buying a property in Adelaide or somewhere else where the market is a little bit different. Yeah. If it allows you to do something to like that that sort of steps towards your goals, maybe it is the right step.

SPEAKER_00 32:13

I did a video last year on YouTube about why where should you buy and why your backyard's not always the right place. Yeah. And it's it just, yeah, I can't think of anything worse than driving past an investment property every day.

SPEAKER_02 32:26

I know. It's the the thought of it is is awful. I my thing though is and this is where I keep getting stuck. And every time you say something like maximizing your momentum and just going and and and getting in, I'm I'm like, that's me. I need I actually need to do that.

SPEAKER_00 32:43

To be fair to you, you did half ask me a question, and I said, Yeah, you got access to the boring capacities and left you. Yeah. That was like three, four months ago.

SPEAKER_02 32:52

So what is my biggest mental roadblock at the moment? Is that I have about three or four years before my eldest daughter will be probably moving out looking for. You're so old, Billy. I know. Um you would have been so ungrouping five years ago, I reckon, if I just like I said, it ages you at a different rate when your kids are teenagers. But but they're gonna be moving out soon, right? And if they were moving out right now, like rent is so much, like renting is not like it was when we moved out. Um it you know, you could rent a whole house in the suburbs for like $300, and that was a good big house when when I first started moving out of home. Now, my kids won't be able to do that. Certainly not around here.

SPEAKER_00 33:39

Are you across what rent it like what you pay for rent these days?

SPEAKER_02 33:42

Well, only from a conversation I had with someone yesterday. Um like a little bit, yeah. Enlighten me, please. Um, you don't know, right. So I'm so much genuine, yeah. So much like um, like realistically, you're not gonna get anything in in around where I live for like even a very small older house or or unit, even or anything like that, like you're like $7.50 minimum. Maybe, maybe late sixes, but like that for for a first-time worker, potentially uni student, like what are my kids gonna do? Like, they can't afford that, and I they're not living in my house. Like, they have to go somewhere. And so, what I want to do is I want to buy an investment property that uh like that I'm able to let them live in and control how much rent they pay.

SPEAKER_01 34:35

Yep.

SPEAKER_02 34:35

Um, obviously they would still have to pay some rent, but I can control that they don't get these huge hikes. Because that's the other thing as well, is yeah, like like in this market where we're seeing a huge increase in um the owner's equity, like they're they're charging alongside how much their property value is. Like they're they're increasing that massively. So each time someone renews their lease or whatever, like it could go up 50 bucks. Um like that can make or break some low-income households.

SPEAKER_00 35:05

Yeah, there are there's some pretty big legislation around rental increase. So rental yield is lagging at the moment behind valuations, yeah. But costs are increasing for investors. So there is a disparity. Like investors are not raking it in at the moment from that. I've just I'm doing a rental estimate on my house. Yeah, 700 to 800 a week, 750, 800. Yeah. That's crazy.

SPEAKER_02 35:29

Can you imagine that when we first moved out of home? You couldn't do that. And I know things were different then, but like I lived with my financial planner.

SPEAKER_00 35:38

My now financial planner. I lived with him and his wife for like 150 a week or something. Exactly like that.

SPEAKER_02 35:42

Yeah. Anyway, I so therefore my interest is in buying something within a reasonable distance of where I live now because that's what the the ultimate purpose for it would be. And I I just I can't mentally told me this before, yeah. I can't mentally get over the fact that I would be spending double what I paid for my house now on an investment.

SPEAKER_00 36:05

I would be more interested in giving the girls an opportunity to forge their own path and investing in the best assets around Australia.

SPEAKER_02 36:16

Right.

SPEAKER_00 36:17

Than setting up their living situation.

SPEAKER_02 36:19

Yeah, maybe I'm like too pinpoint on it.

SPEAKER_00 36:21

I think you'd go on two motherhood on that. Yeah, you're devouring mother. Um the devouring mother archetype. Yeah. Um I just don't want my kids living in my house. Stay close.

SPEAKER_02 36:31

I don't want them living in my house. Get out.

SPEAKER_00 36:34

Yeah, minor four. Uh it's too messy. Yeah. Um, I would, yeah. I I had this exact conversation with uh Ryan, one of our clients, and he and I were going back and forth around property, and he was getting really depressed. And I said, mate, why why are you upset? Like, what's the issue? And he's like, just you know, very much looking at property prices, how do the kids go in? I'm like, it comes back to the concept of stewardship. If you're having a go, your kids are going to benefit from it. Yeah, you don't necessarily have to quote unquote solve their housing need. But step one, I think, for Anna and I is how can we make sure we're taken care of in our retirement? How can we make sure that we have the ability to not be a burden on the girls? So that's like point one, right? Point two, okay, we've we've done that. We're okay, we're gonna power pay our house off. I think we're currently 12 years earlier than planned. Um with the rate decreases recently, we never like I've not felt the rate increases recently personally.

SPEAKER_04 37:42

Yeah.

SPEAKER_00 37:43

Because I never decreased my repayments. So like I'm I'm loving it. I'm like, Yeah, it is my redraw is gonna start decreasing like my redraw is not going to increase as much as it was. That's the reality. So that's kind of like option one. Option two, we're going, okay, we've taken care of that, we're gonna pay our house off, we're accumulating money in super, that is going to be a baseline nest egg. If nothing else, we're going to be okay through those two things. Our housing need is gonna be taken care of, and we're gonna keep creating money in now our super. How can we multiply it to have a better lifestyle long term? Because we're in 2026, we have a robot vacuum, we've got a pretty good lifestyle.

SPEAKER_02 38:22

Yeah.

SPEAKER_00 38:23

How can we elevate and take care of the hard work we're doing now to make sure that there's something for the girls to be able to leverage off long term? Yeah, we can be guaranteed for them, yeah, we can make sure there's an opportunity for to get them in the market. We'll create a business that potentially they want to work for if they want to one day and have an opportunity to earn money and and be well off there. There's just layers to it. Yeah. And I think Ryan, when I was talking to him, I was just saying, mate, you've got like you've had a crack. You have a home with that you're about to buy your dream home. Where getting that done, you're in a really great position, you've got these investment properties around the country, they're not condensed in one place, they're all functioning really well. Like, why are you feeling the pressure over this? Because you've taken the steps to make sure that your kids are never going to have an issue with housing.

SPEAKER_02 39:15

Yeah. It's an interesting like sidestep around the same problem in that if I was to let my kids live in a house that I was renting to them and I charged them a reduced rate of rent, I would be losing some money myself, which I want to do. I want to help them. And I and I could do that, but I could obviously rent it to someone else for far more. If I had an investment property somewhere else that actually, you know, ended up by this time being potentially positively geared or something like that, I could just give them that money. I'm doing the same thing, it's just shuffling it around in a different way.

SPEAKER_00 39:48

I would actually argue, I think this is probably where like I don't know where the girls are gonna land financially, mentally, like where how what their approach and management of money is. I'm gonna do my damnedest, and they better be listening to this podcast in 10 years' time. Um, I'm gonna work really hard to make sure that they're set up with not really aspirational financial goals, but just really solid stewardship. Yeah. Like they don't have to be psychos like me. Yeah. It's like that's irrelevant. Let's hope they're not. Sorry, Rony. I just want them to have sound financial skills. Yeah. And if we are like if I go too far, here's housing, here's this, here's that, is that actually gonna give that like how many times have you fallen it flat on your face and had to learn how to fix it?

SPEAKER_02 40:38

Yeah, but you always do too.

SPEAKER_00 40:40

But if we if we rob our children of that, like the lesson of paying for rent, like how much are we actually robbing them of the opportunities to become the people who we're happy to be in our lives? Yeah, it's like I just think that's an element. The other thing I'm way off topic.

SPEAKER_02 40:56

The other thing I just thought of is my parents had an investment property, um, which you know served a few purposes for them in that um, you know, it it was, I think, positively geared for a long time and things like that. Like it was a good little investment for them. But I think ultimately one of the reasons that they had it was so that myself and andor my sister could live in it if we wanted to. And do you know what? Neither of us ever wanted to touch it. We were like, absolutely not, I don't want to live in that house, gross, and went and live somewhere else. Um, we we wanted none of it, so you could put in all of this effort into what you think your kids want to do, and then they don't anyway.

SPEAKER_00 41:36

I would, yeah. I I would always argue that take care and manage your money to the best of your ability and give your family an opportunity to come along that journey with you. It's going to do far better than if you were to make sure they've got every little trampoline ready for when they fall over. Yeah, yeah. Like, you're not a helicopter parent. I'm not, no. You just want your kids out of the house. Yeah. So yeah, I I think just kind of that that base starting point of like you can, why not? And like it's not you've got all your ducks lined up in a row and dominoes are suddenly falling over and everything. Like momentum is real, so you've got to start trying to piece them together, but it's not piece them together, knock them over, then act. It's as you're piecing everything together, it's okay, let's start knocking the dominoes over, and we haven't actually finished the trail yet. I think that that's a I like that analogy. I'm running with that one again. Um and so for me, it's then going, okay, we've got the momentum. We're sitting down in the practical with myself, broker, and I'm I'm looking at their momentum, going, okay, I've got a process that's going to honor this. What is going to give us the best opportunity to access that equity and go and purchase? And really, it's then do we need to refinance, restructure the existing loans, cash out the equity so you've got it as a deposit, to pay for you know, buyers' agents, fees, anything that has to happen up front, how much liquid cash have you got? It all comes into that discussion around how do we cash out, how do we position it. And that is all a half-hour, 45-minute discussion, unless I build way too much.

SPEAKER_02 43:21

Unless you've got a few tangents, yeah.

SPEAKER_00 43:24

It's gonna happen. Yeah, it's really gonna happen. And that is really just like it's not even a hey, let's apply, get the cash, refinance, do all that, and then we'll go and get the pre-approval. We do it simultaneously, like it's so easy these days. How good is Pexa? Um, it's so good. The and from there it's just a matter of all right, I have this pre approval, it's fully assessed, I've physically got the equity in my bank account, or this letter that I've been given says I can access it through this purchase. Let's go. Like that's all the equity is. It's either a physical draw out or it's a paper, a piece of paper saying you can access it. Let's go.

SPEAKER_02 44:10

Yeah. Yeah. Go going back, I suppose, maybe a step before having that. If someone's in the thinking stages or wondering whether or not they're going to be wasting your time, how like I do enough of it.

SPEAKER_00 44:27

You don't need to worry about that.

SPEAKER_02 44:31

I feel like most people would be able to get a a a basic understanding of what their equity position is. In that, like you said, most people know roughly the value of their property. Um, and if they didn't, they could probably pretty quickly figure it out to within a normal range. Yep. And then the sum of your property values minus the sum of your secured home lending debt against those properties would give you equity position, Ryan. But my question is, is all of that usable? Like if I if I've got, let's say I've got $500,000 of equity that I've worked out in my property portfolio. Do I have $500k? Like, can I just can I use that to buy other properties?

SPEAKER_00 45:11

Yeah, I I think the usable equity is kind of this, like, there's a lot of caveats that can make it a bit more like it's not most people go, yeah, usable equity, 80% of your property's value, you can access two and go from there. Right. But there are opportunities to access LMI easily. There's a lot of solutions out there that mean that you can kind of avoid LMI. And so for me, it's always going, okay, step one, to your point, property value minus debt. But that let's look at 80% of the property's value first and then minus the debt, and that'll give us the baseline of usable equity. Can we do something with that? And then it's okay, yes, we can, sweet, let's run with it, or no, we can't, we've got to go to XYZ Bank, which could actually dictate whether we cross-collateralize or not. Right.

SPEAKER_02 45:59

Yeah, well, that informs that strategy as to whether or not we cash out. Yeah, right.

SPEAKER_00 46:03

And it might just be a point of hey, we can access 80 to 95% of you know your property's value, but we need to pay LMI, or we need to cross-collateralize and use a bank that doesn't charge LMI. Um, there's banks that may refund LMI if you, you know, pay off or take the loan elsewhere within six to 12 months. Like there's, you know, if you're in a high growth, you're gonna do something. We might be able to access some stuff, not fully pay all that LMI over. There's a lot of strategies around LMI that I don't think it really gets the fair, you know, kind of cop for.

SPEAKER_04 46:34

Yeah.

SPEAKER_00 46:34

Um, and then like there's professional LMI waivers. I talked about it earlier with Anna. We can go to 90% because she's a physio and ARPA registration, and so medico, uh medical specialists, accountants, uh, some bank staff get it from their employers. Yeah.

SPEAKER_02 46:50

Um so that allows you to go to 90%, which effectively means that sum of your sum of your property value at 80% minus debt now becomes some of your property value at 90% minus debt. So you get an extra 10% of usable equity without paying fees. Yep. Yeah.

SPEAKER_00 47:09

Yeah. Yeah. And it's uh like honestly, I think I referenced it earlier. You just we just have RP data up while we're doing the appointment. It's just really easy. And generally I ask, what's your property worth? Yep. And then I'll just go, sweet, they're probably right based on what I can see on RP data. Yeah. Um I think a lot of people are undercutting how much equity they've got these days. Yeah. Realestate.com.au has made it easier to know. Yes. Yeah, that's very different than what it used to be some years ago. Hey. Yeah, you used to literally have to pay for a report or an appraisal or you would just be trolling through. Yeah. And I think realestate.com helped a lot of people with that. Um, but ultimately I think like it feels like a much bigger problem than it really is. It's something where I think accessing equity, being able to leverage it, combining it with borrowing capacity, you might not think you've got a big borrowing capacity and go, hey, in 12 months I will because this is changing. Like, you know, we've got self-employed clients who they're at the two-year mark.

SPEAKER_02 48:20

Yeah.

SPEAKER_00 48:21

The one year is helping them refinance their existing stuff, but we're looking at the current position over the last six months, going next year is going to be a lot bigger borrowing capacity. And they're going, yeah, get us a six-month solution to keep investing in the market. And so there's all these things where you go, okay, I'll pay eight percent, I don't care because the market long term, like that's six months, long term, I'm back in the market again. Yeah, and it's not, it's not really like I'm not going to project my risk appetite. It's what the client wants to do.

SPEAKER_04 48:48

Yeah.

SPEAKER_00 48:48

And accessing equity is getting easier and easier every day. Like 1% assessment buffers, and there's just the all these are little levers that we can pull to help with borrowing capacity. And that's just ultimately all it is is to unlock equity.

SPEAKER_02 49:04

It's sort of a lot of our conversations, I feel, comes down to like have you got the right team to inform your strategy again, right? Like it's if if any of these things that you're explaining to people, they're not sure how to go about them, there's I guess there's it comes down to the the broader team of people that you're working with. Yeah. Yeah. As in like getting a buyer's agent to help you to see what other people are doing or what success other clients have had and things like that.

SPEAKER_00 49:37

Yeah, and financial advisors I find, like we work with a f a few that um they'll go, Hey, we've got this strategy, and a lot of them, like some of them will lean on me for the buyer's agent conversation because they know the client needs that that expert. Um, but they're really good at for figuring out borrowing capacity. They're really, really good at figuring it out these days. And so I think that element of getting the right advice, you've got the right team. As a broker, like I firmly believe that we are the current location. Like, if you need to know where you're at and what you can do before you start that destination, back to your early point, like when do you chat to a broker? Just do it. Yeah, just just have the conversation, get into the process, get the momentum. Yeah, and you just don't know what your options are going to be until you've actually had them presented. Yeah. Um, and it might like I think increasingly what we're doing is going, we're actually meeting two traditionally is like appointment, game plan review. And so appointment will understand, discuss. Maybe I've, you know, you've been introduced and I've had a quick conversation, I've got a bit of an idea, we can build on that in an appointment. And then awesome, we're going to present options to you in two days, like or what at 24 hours, whatever you know, we can to get you the options. Increasingly, it's going, hey, these are all the options in an email, but these aren't the products you need to choose, but this is the options that we need to decide out of before we actually start the research.

SPEAKER_02 51:07

Yeah.

SPEAKER_00 51:08

Because people have away more options than they can.

SPEAKER_02 51:10

Yeah. So they actually have to like narrow it down and sort of choose a path almost, and then and then you get presented with your actual Yeah.

SPEAKER_00 51:18

And it used to be like, hey, you've got a borrowing capacity of 1.8, let's just get you approved for 1.8. Yeah. And then you can decide whether you do want to do a million dollar property or two, eight hundred thousand dollar properties or whatever that looks like, or three, six hundred. Increasingly, it's like, hey, you've got five hundred thousand dollars worth of equity, that's gonna buy a million dollar commercial property or whatever. Uh, you know, what do you actually want to do? What is the option? And so when it's going into things like commercial, suddenly your personal borrowing capacity isn't as important, but your equity is really important.

SPEAKER_02 51:52

Yeah.

SPEAKER_00 51:52

So if you can service that initial one, like there's just all these little policy niches the other day like that are coming through that are apparent that allow us to just maximize and leverage your financial position to achieve that goal. Yeah. Um, I'm doing it on my own. I can definitely do it on clients. Uh there's a reason, yeah. I have not shown my our borrowing capacity calculators to Anna. I don't I don't I think it would overwhelm some of the stuff that I'm I practice. I I practice to see what, like especially with self-employed, I've got a more complex structure. Uh not complex, just more pieces. And I think without having that structure personally and managing that, how to access equity and all that kind of jazz gets a little bit complicated. And then I'm just like, okay, let's just play around with my numbers so I know when the next client comes along with something similar.

SPEAKER_02 52:53

Yeah. Oh, it's a yeah, I know the answer. That's a smart way of doing it, actually. Yeah.

SPEAKER_00 52:59

So think kind of summarizing everything through. For me, equity without a like without a destination, it is purely just potential, right? Yeah. And so when I look at borrowing capacity without so equity without a destination, it's just potential. Borrowing capacity without a strategy is just permission. And so what we're talking about today is just turning both of those things into a plan, and that's where I think the right team stops being optional to your point. You actually just go, I've got these things, I've got options, I've got potential. Why am I not using it? Yeah. And it's not like as a broker, I'm not making an assessment as to whether you should be in debt or not. We will facilitate it. I just think as uh mums and dads, as you know uh sons and daughters as well, who've seen their parents kind of go before. It's just about actually taking and giving our kids a chance. Yeah. Beyond the, hey, you're clothed, fed.

SPEAKER_02 54:02

Yeah, exactly. Yeah.

SPEAKER_00 54:04

What are we actually taking care of in the future to make sure that I'm not under a bridge or living in your house in 30, 40 years' time?

SPEAKER_02 54:10

Yeah, for sure.

SPEAKER_00 54:11

So uh look, I think we would love if this any of this is resounding within people's heads to share this around and get it out. Uh we are enjoying making these episodes. Uh Bindy Keep. Yeah. And Bindy Keep's trying to quit, so we're not gonna let her. Um, but we want to help as many people as possible use leverage, manage their money, understand what their options are, uh, and just get educated around this stuff that we talk about all and every day. So if this could be shared, let us know. We or let everyone know about it. Um, we just want people to understand these concepts. They're not hard. They're not hard at all. They're just really, really things that need to be learnt and dove into. And through time, uh, they just become really simple. And quite often you just need reps, you just need to buy a property, you just need a second property to know how easy it can be. So subscribe, share, talk to you in the next one. Oh, and actually, let's get a buyers agent in.

SPEAKER_02 55:11

Oh, yes. Start introducing the team. Yeah, yeah.

SPEAKER_00 55:14

Let's get our team in. So we'll do the call to action in a second again, but let's get we'll get a buyers agent in just to talk about the rationale. I think that he is like he go I and I see this guy that I've got in mind talk about this with his clients all the time about how he makes decisions on their strategies and recommends and does all that. Um, I think that's gonna be an awesome conversation. So we'll tee that up uh and don't miss it because accessing equity, borrowing capacity, let's turn that into potential.