finder.com.au Money Podcast #37: Michael Yardney gives us his best property investment tips
This week we welcome Michael Yardney to the podcast who gives us his best tips for those looking to get into the property market. Michael is a best-selling property investment author and the director of Metropole Property Strategists. After buying his first investment property over 40 years ago, he has a huge amount of hands on experience in property investment. In the podcast we touched on:
- The most important difference between successful and average property investors
- Where an investor should be looking in Australia for their first property
- How important location is in the success of a property investment and how property type factors into this
- Why it's wrong to buy an investment property you would like to live in
- How you know when you're ready to invest in property
- Michael's personal property investment strategy and how he selects an area to invest in
- The difference between investment grade properties and investment stock
- Why Michael thinks Melbourne and Sydney are still good places to consider investing in
- What drives property prices
- Some of the mindset differences between the rich and poor
Also on the show Adam, Marc and Liz talk about how much the average CEO of an ASX-200 company gets paid, positive news for business payment times and APRA's inquiry into the CBA.
Listen or download the episode below
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Notes and links mentioned in the podcast
- How much does the CEO of the average ASX 200 company earn per year?
- APRA to conduct inquiry into the CBA after recent scandals
- Gag joke for new 1 pound coin wins television joke of the year award
- Glowing review of makeup staying intact after girl is hit by car
- New French President Emmanuel Macron's makeup and beauty costs for the first three months have cost €26,000
- Metropole Property Strategists
- Michael Yardney's bio
- Michael Yardney's podcast
Read the transcript of this episode
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Automated Voice: Welcome to "The Money" podcast from fnder.com.au. Australia's most visited comparison site. The find the "Money Podcast" is your weekly dose of financing consumer news, tips, and tricks without the boredom.
Marc: Hello, and welcome everybody to "Finder.com.au Money Podcast". With you as always, is your host Marc Terrano, Home Loan Publisher, Liz Barry, Financial Panther, and Adam Schmidty-Smith, Homeland Editor.
Adam: Hello, everybody?
Liz: Hopefully, eventually our nicknames will just replace our normal names.
Marc: Yeah, that's the whole goal, right?
Liz: Yeah. Hopefully, everyone gets used to it.
Marc: I don't have one though.
Liz: Well.
Marc: That's kind of a problem.
Liz: Awkward.
Marc: Yeah.
Liz: It's uncomfortable now.
Schimdty: This is the space where normally where you will be like, "Oh, we will give you one." no, we are not going to deny you that pleasure.
Marc: I'll just be full name, Marc Terrano. Marc Terrano, financial panther, and Schmidty.
Liz: That could be your nickname full name.
Adam: Or Marc Terrano-Terrano I think that's a pretty awesome nickname.
Marc: It's awesome, yeah.
Liz: That is good.
Marc: Why didn't I think of that?
Liz: I think your parents did.
Marc: They beat me to it. So we have an awesome episode planned as always we have Michael Yardney coming to the show he will be talking to us about mostly about property investments but also a little bit about wealth creation.
Adam: Guys that's what in the biz you call a good get.
Liz: Yeah.
Adam: In fact, we've got the financial guru...
Marc: Yes.
Adam: ...Michael Yardney.
Together: Yeah.
Liz: I think this is the second week in a row that Marc's just gonna [inaudible 00:01:39] out.
Marc: Yeah, we really got some good guests and how was [inaudible 00:01:43] going yes, yeah.
Adam: Even over Graham which is uncomfortable because Graham works just right outside the corner.
Marc: Yeah.
Adam: He like, you know, we work with him but Marc's still kinda follows him around like.
Marc: Well, uncomfortable for him I suppose.
Adam: Yeah.
Marc: Not for me.
Adam: Yeah, he's always asking him to sign stuff for him or pose in selfies.
Marc: And when he's working...when he's hard at work he raises his hand and I'm just there looking at him, figure him.
Liz: He has [inaudible 00:02:06] of his laptop just waiting.
Adam: "Sometimes when we touch."
Marc: I serenade him with that song. So we have that coming up soon as always if you enjoyed the podcast please review us and write us on iTunes it always helps.
Liz: Tear us down. Tell us what you really think.
Marc: Yeah, yeah. No. no, no. Be nice.
Adam: Our fragile egos can't handle it.
Marc: Exactly, exactly but enough of that it's time for some news.
Liz: Yes, so your report got released this week from [inaudible 00:02:44] Brad Street. As you remember a few episodes ago we chatted to [inaudible 00:02:48] from "Skipper" about light payment and business cash flow.
Marc: Yes.
Liz: So this is the latest report that talks about business payment times and apparently businesses are getting better at paying on time which is you know great.
Marc: That's pretty good.
Liz: Yeah, exactly 63.8% of Australian businesses pay their bills on time so that is a drop of 4.6% for this quarter.
Marc: Yeah. That's pretty that pretty decent.
Adam: That's not bad.
Liz: Yeah, exactly.
Adam: It's interesting because I was having coffee the other day with a friend of mine who is a freelance writer I actually asked him, "Is in invoicing like the toughest part of your job?" And he was like, "No, no it's fine," he said, "Everyone I ever worked with pays me on time."
Marc: Really?
Liz: I suppose it depends on the relationship as well. If you're going back to sort of the same clients and things like that and they need things from you maybe the payment time is a lot less.
Adam: Yeah, if you're not, you know, providing stuff for a big supermarket.
Liz: Yeah, well this is another interesting thing that the report pointed out that there are huge differences between business type industries and size and so ASX listed companies only 12% of those paid on time and...
Together: Wow.
Liz: Yeah.
Adam: Oh, my goodness.
Liz: And this is compared to none listed companies were 34% paid on time.
Adam: Well, that's pretty much precisely what Alister was saying, isn't it?
Liz: Yeah.
Adam: That basically, like the big guys they can afford to just jerk people around not pay on time.
Liz: Yeah, they use small businesses basically a lot of credit, yeah.
Marc: That's crazy and I suppose when you are just sort of on your own or, you know, you're freelancer or something maybe people free worse to not pay you.
Liz: You are like, "Hey, Bob."
Marc: Yeah.
Liz: Not, "Hey, Cole," but it's a specific person.
Marc: Yeah.
Liz: Yeah, there's a face there.
Marc: Yeah.
Liz: And family.
Adam: There's I mean there's a face and a family for all the other people that's the thing.
Liz: Yeah.
Adam: It is pretty frustrating, isn't it? Because it is just you know like Alister was talking about that it's not like they can be like, "Wow, then I'm just not gonna give you my product."
Marc: Yeah.
Adam: It's like, "Wow, then you're not going to sell our product anywhere are you?"
Liz: Yeah, yeah. We're Cole's.
Adam: What we are saying is shame on you big companies.
Marc: Yeah, give Bob a break yeah.
Adam: Yeah, gosh.
Marc: Actually [inaudible 00:04:58].
Adam: I know. Guy has enough problems in his life.
Liz: Yeah, all these invoices that are being paid late. And it's just to one guy. It's just Bob.
Marc: True...
Adam: It's just poor Bob he just doesn't have the, you know he doesn't have the self-confidence to stand up for himself.
Marc: I would assume that voice of the Simpson's guy.
Adam: Oh, yeah...
Liz: Oh, my gosh.
Adam: Yeah, and you know, with Bob it's kinda his self-confidence kind of got wrecked after the divorce, he's, you know, living in living in the youth hostel now.
Marc: Yeah.
Adam: Just still waiting on Cole's to pay him, "no I guess I can give you another week."
Marc: Cool so I have a question for you guys how much do you think the average CEO of an ASX 100 company gets paid?
Adam: More than Bob, that's for sure.
Marc: More than nothing.
Adam: Yeah, they're holding his money.
Liz: When they did the four banks and they were asking them about their salary's it was about AU$4 million.
Marc: Yes, well you're a bit shy off the mark. So...
Liz: Really?
Man: ...that was...
Liz: I think that was steep.
Marc: The Australian Council of Superannuation Investors, they published a CEO pay report in August and the average was AU$5.7 million.
Adam: Wow.
Marc: Yeah.
Liz: Damn. I applied for the wrong job.
Marc: Up AU$5.4 million from 2015.
Liz: Wow.
Adam: Wait, wait, wait up AU$5.4 million?
Marc: Oh, sorry. Up from AU$5.4 million, I was gonna say.
Adam: That's a big jump. Yeah, boy isn't that just frustrating because you look at statistics of, say the pay gap between a CEO and you're kind of mid-level employee, say 30, 40 years ago and now and it's just astronomical.
Marc: Huge.
Adam: I saw the numbers on one time it was I wish I can remember we should find them.
Marc: Yeah, we should.
Adam: Because it is obscene I would say.
Marc: Crazy.
Adam: And there's a lot of research that shows that there is no correlation between CEO performance and salary.
Marc: Yeah, interesting.
Adam: Yeah, so if you look at the actual share price of a lot of the companies with very, very highly paid CEOs they don't perform any better than, you know, companies or in a lot of cases perform worse...
Liz: When you look at the case of Australia Post CEO.
Marc: Yeah.
Adam: Yeah, exactly.
Marc: Yeah, it's like so you can basically drive a business into the ground and walk away with millions of dollars.
Adam: Yeah.
Liz: Yeah, I'm still waiting for some of my mail.
Adam: The contact summarizing right now they took like five weeks sitting in Grandville for like two weeks.
Liz: Yeah, that's the thing.
Marc: I don't even want to get started on my post stories and was topped up by Westfield CEO Steven and Peter Lowy with a combined salary of AU$26.6 million.
Adam: Wow.
Liz: Oh, my gosh.
Marc: Yeah, next was Nicholas Moore from Macquarie Group's on 25 Milli and then [inaudible 00:07:49] at Domino's CEO was next at AU$21 million dollars.
Adam: Wow, and they've really taken a hammering lately.
Together: Yeah.
Adam: And I love their kind of their whole advertising like their whole marketing campaign is being basically based around, "Domino's we put food on our pizzas now." The brand must have been damaged so bad to actually like that's your kind of the point of sale like, "Hey, our pizzas are now edible."
Marc: They've really craned Pizza Hut though.
Liz: Yeah.
Marc: In the whole like visibility war. I've never seen Pizza Hut advertising I don't see them around so...
Liz: No, yeah definitely.
Marc: It's true yeah.
Liz: I always think single Domino's first.
Adam: I'll tell you what hurt Pizza Hut in my book is getting rid of the buffets.
Marc: Yeah, yeah.
Adam: I mean, Pizza Hut buffet.
Marc: It's never the same.
Adam: Okay, so speaking of companies that are having a rough go, with things, there's one company who's really taking a raw licking right now. And unfortunately, they don't have the option to change their branding to say that their products now include food.
Marc: Damn.
Adam: Well, maybe they could but be a real, you know, be a real game changer for them, Commonwealth Bank.
Marc: All right.
Adam: Having a rough go, with things lately with this the AUSTRAC money laundering scandal right? And now today APRA has said that it is going to launch an inquiry into governance, culture, accountability practices and frameworks within Commonwealth Bank.
Marc: Wow.
Adam: So it's a pretty big deal because obviously, you know, they're under federal court action for breaching anti money laundering regulations on nearly 54,000 occasions...
Marc: Wow.
Adam: ...they say.
Liz: Oh, my gosh.
Adam: In addition to this ASIC is investigating Commonwealth Bank to see whether or not its directors met their continuous disclosure obligations to investors. And there is a potential shareholder class action suit against the bank for apparently not diverging some of these things and shareholders are saying that this has affected the share price. Which doesn't that seem...it feels a bit counterproductive for a shareholder to be like, "Oh, my shares have lost value. I'll tell you what I'll do, I'll join a class action suit that's certain to help my portfolio."
Marc: That's interesting yeah because as we know in ASIC challenge every bit of news seems to like have an impact on prices.
Adam: Yeah, it sure does.
Liz: Yeah.
Adam: And so the APRA Chairman, Wayne Byres has said, you know, that it's a financially sound bank, it's well capitalized but that it's really taken a hammering in public confidence because of the series of scandals. He says the overarching goal of prudential inquiry said, "Identify any core organizational and cultural drivers at the heart of these things and to provide the community with confidence that any short comings identified are promptly and adequately addressed." Which, I don't know if that means, you know, people get fired or what? Will see I mean we already know that Ian Narev the CEO is retiring at the end of this financial year although the bank has said that it has nothing to do with the AUSTRAC thing.
Marc: Right.
Adam: Okay, but yeah so we will see what happens.
Marc: Yeah, very interesting.
Adam: Tough times for the [inaudible 00:11:15] to be there.
Liz: I wonder if he announced that just to be like, "I'm not gonna sit down because don't worry I'm retiring anyways, its fine".
Adam: Yeah, exactly, "You can't fire me, I quit."
Liz: That's right.
Adam: I'm going to Domino's Pizza.
Marc: They put toppings on their pizzas.
Adam: Yeah, you can eat their pizza now.
Marc: I think I have been suitably informed.
Liz: Yeah, I guess so.
Marc: Yeah. Do you, Liz, do you feel informed?
Liz: Yeah, I do.
Marc: What about you Schmidty?
Adam: I still feel pretty dumb you know what you gonna do.
Marc: Yeah, exactly, there's only so much we can do.
Adam: Honestly it's not your responsibility. At some point I got to take responsibility for myself.
Marc: So let's get on to some Funny Money.
[00:11: 52]
[music]
[00:12:02]
Marc: Okay, so this week I found one that is I'm just gonna say now don't get high hopes for it, okay? It's funny but it's literally a dead joke.
Adam: Man I'll tell you what our listeners must feel pretty lucky right now like they've got their headphones on they are listening to this they just got this part they are like, "You know what? This podcast is always time well spent."
Marc: Specifically for the Funny Money.
Adam: Yeah.
Marc: Okay, so...
Adam: That's why I come I stay for the interviews but I come for the Funny Money. And I'm glad...in light of this I'm glad I do.
Marc: You will be glad after hearing this trust me. So there's a new £1 coin coming out in the UK and it was recently the subject of a gag joke. Actually, there was a television comedy "Joke of the Year" competition in the UK and the joke was won by this £1 coin joke. So the joke is, "I'm not a fan of the new pound coin but then again I hate all charge."
Liz: Oh, my gosh.
Marc: And it's funny.
Liz: Wait. It won?
Marc: Yeah, so it's funny because the joke creator told the BBC that he was actually surprised the joke was picked because he said it was getting a lot of groans.
Liz: Surely there was something better to pick.
Marc: Supposedly not.
Adam: That made me just feel like bad about my life.
Liz: It made me question a few things.
Adam: Seriously.
Marc: It's such a dead joke.
Liz: Yeah.
Adam: Like it's more than a dead joke it feels like it sucks the joy out of a room.
Liz: It feels like...
Marc: Out of life.
Liz: ...one of those jokes that you would hear in you know "Australia's Funniest Home Videos" like the commentator that goes over the videos.
Marc: Oh, man yeah.
Adam: That's the worst.
Marc: So money is not off limits when it comes to those kinds of lame jokes.
Liz: Oh, dear.
Marc: Enjoy Liz. But credit me if you use it.
Liz: Okay, I'll definitely use it. Okay, so I have one for you so we all know how important online reviews are?
Marc: Yes.
Adam: Sure yeah I'll go with that concept. I'll go with that.
Liz: This is actually a makeup brand that I use. It's NYX. So a girl was so impressed by how good this makeup review was and it was a really honest makeup review and you could tell how honest it was. Now, I will read this review and you guys tell me if it was made up or not.
Marc: Done.
Liz: Okay, "I was hit by a car and through the hit itself, the rain the ambulance ride and the hours in the hospital my make up stayed completely intact the entire time. When I was discharged from the hospital I had to take off my makeup and none of it had moved if these settings spray can survive being hit by a car then that's all the proof that I'll need and I'll definitely be buying it again."
Marc: Whoa.
Adam: Okay a couple of thoughts, first of all, that sounds...it's got the ring of truth to it because...
Marc: Yes.
Adam: ...who would make up something like that up?
Liz: A marketing manager.
Adam: It could have been. Second, I think if you get hit by a car and you thinking about your make up you probably focusing on the wrong thing.
Liz: Maybe.
Adam: Third, who would assume that getting hit by a car would knock your makeup off your face? Yeah? How hard is this car hitting you? Literally, you fly off and your makeup stays suspended in the air for a moment before falling to the ground.
Liz: And it's just like a perfect face of the [inaudible 00:15:21].
Adam: Exactly, just a perfect face.
Liz: Has that ever happened to you before? You've been so shocked that you shocked the makeup off your face.
Adam: I can't say that it has.
Liz: It happens to me every day.
Marc: Wow.
Adam: Constantly, constantly or you run somewhere really fast your makeup just stays suspended in the air.
Liz: Yeah, it's my biggest fear that's why it's got to use the setting spray.
Together: Yeah.
Marc: That's crazy that's a nice little bit of...
Liz: Yeah.
Marc: ...[inaudible 00:15:42].
Adam: Now, tell us is that a real review?
Liz: I think so.
Adam: Wow.
Liz: It's gone viral at least.
Adam: Wow.
Liz: I'm gonna believe it I kinda wanna buy the settings spray, not get hit by a car.
Adam: Well, and then you...I was gonna say you have to put you to a test, don't you?
Liz: Yeah, I know, well.
Adam: Yeah.
Liz: Thanks, for wishing I get hit by a car.
Adam: Well, speaking of makeup I'll tell you who could use a bit of setting spray is the new French President, Emmanuel Macron.
Marc: Wow.
Adam: Okay, he's no stranger to a bit of makeup in fact in his first three months as President he's makeup and beauty costs have run €26,000.
Marc: Wow.
Liz: Stop that's...
Adam: Twenty-six thousand.
Marc: On what?
Adam: So this is, for a freelance makeup artist for television appearances and trips aboard and actually what's interesting is he's not the first French head of state to rack up a big bill on this. His predecessors François Hollander who's name I'm sure any French listener is like, "Oh, oh [inaudible 00:16:44] you know like [inaudible 00:16:46] it. But he had a hairdresser on contact for €10,000 a month.
Liz: Wow.
Marc: He did have nice hair I seem to remember.
Adam: Yeah, but €10,000 a month and at the time the government spokesman said, "Everyone has their hair done, don't they?" Yeah, but everyone spends €10,000 a month on it.
Liz: But to be honest, if I was gonna have my photograph taken constantly...
Adam: Yeah.
Liz: ...constantly being you know analyzed I would have them retainer.
Marc: He's probably getting a haircut every week style of thing but it's the same haircut.
Liz: Yeah, I'm gonna call sexism on this because if a girl had...if it was a woman I don't think that it would be in analyzed the same way.
Adam: Wow, you are claiming misandry, here?
Liz: Yeah.
Adam: Wow.
Marc: Interesting.
Adam: That's a bond choice. That's a bond choice.
Liz: It's interesting isn't it though because, you know, you expert this makeup and beauty costs for women and not for men but they still need their hair done their photos are still getting taken every day. And what if they have like that hair they turn a whole...you know, cover bald patch or something?
Marc: Yeah, and it's not like he can wear a baseball cap if he has a bad hair day.
Liz: Exactly.
Marc: He's like chop it off.
Liz: That's right.
Marc: Let's start again.
Adam: I do have to say that I think for any public official eye brows would be raised at a €26,000 make up costs for three months.
Liz: Maybe I'd rather included.
Adam: Eye brows don't even have to be raised they are already drawn on our eyes.
Liz: That's right.
Marc: Yeah, I wonder how much the average Australian for example like Malcolm, Prime Minister...
Adam: That would be interesting to find out...
Marc: ...Malcolm Turnbull...yeah.
Liz: It would be interesting yeah.
Adam: ...how much is spent on hair and makeup for him.
Marc: Maybe it's always expensive for every head of state.
Liz: I suppose if they have to...because I think the thing is they have to travel with them that's probably where the majority of the costs are coming.
Marc: Interesting.
Liz: Maybe if he was happy to kinda use whoever whatever country it wouldn't be quite as pricey but obviously he has certain preferences that need to be met.
Adam: What's funny is he's office has confirmed the report on spending. It's said it's looking for a cheaper alternative. I'll give you a cheaper alternative, don't do that.
Marc: Just Cuts.
Adam: Right, exactly if it's good enough for Grant Denyer.
Liz: He could just call up you know each country that he is visiting he would be like, "Oh, I'm just confirming my visit also do you know a good hairdresser before I come I..."
Adam: Yeah, or call up the Just Cuts in that country and be like, "Can you squeeze me in?" [inaudible 00:19:06].
Liz: Yeah, by the way, I will be bringing a few [inaudible 00:19:08].
Together: Yeah.
Marc: Do you have do you kill a bomb resistant shop windows?
Adam: Yeah, I will say...
Liz: But that's kind of requirement.
Marc: Yeah.
Adam: I would say, Now, Marcon, you know, he's a good-looking dude and so I can imagine that you know he spends some money to look that way. He's predecessor spending that much on haircuts if you've seen his hair it's basically a patch work of wispy comb over.
Marc: It wasn't that much it wasn't much.
Adam: That cost €10,000 a month? Wow.
Marc: It's steep. It is steep, but you know we don't know we just don't know enough.
Adam: How bad would it have been like?
Marc: Exactly.
Adam: And yet the best €10,000 a month can do is a wispy comb over.
Liz: Yeah.
Adam: How bad would it be if he was going down to the old Just Cuts like it would have been a nightmare.
Marc: Interesting.
Adam: Like his skull might have actually shown through.
Liz: Maybe that's the best they can do with his hair, unfortunately.
Adam: That's what I'm saying it's like my goodness that's the best money can buy.
Liz: Do we really wanna see the worst?
Marc: Yeah, exactly.
Adam: Wow.
Marc: Exactly.
Adam: To look on it would be to go mad I actually have another one.
Marc: Whoo! Two for the price of one.
Liz: The old [inaudible 00:20:14] play.
Marc: I like a do play.
Adam: Let me ask you something for your funeral.
Liz: Oh.
[crosstalk 00:20:20].
Marc: Yeah, it's not funny at all.
Adam: For your funeral, that's the joke [inaudible 00:20:28].
Liz: Yeah, we are planning your funeral.
Adam: Yeah, exactly hilarious. Would you look to save our cost or do you really care you pass them on to your family you know?
Marc: Yeah, I suppose yeah.
Adam: Do you wanna save money on it?
Liz: I don't wanna crappy [inaudible 00:20:44].
Adam: Yeah, exactly see I don't care I don't care.
Marc: Yeah.
Adam: I'm not paying for it.
Marc: Through me at sea oh, no sorry I'm the opposite yeah.
Adam: No, no I want you to go all out I mean I've stipulated it in my will.
Liz: I mean I don't want people to like you know get into debt over it but you know I feel like...
Adam: I don't care.
Liz: ...I'm dead.
Adam: Yeah, exactly I'll haunt the crap out of you if you don't spend big on me. Well, look for people who are looking to save a big cost potentially could be the officiant. Well, this is an area where a savvy company is looking to automate things, so in Japan, a company has created a funeral robot that can step in and perform Buddhist funerary rites when a priest is not available. And it would cost about AU$450 per funeral versus more than AU$3,000 for a human priest.
Marc: Wow.
Adam: Right, so the robot has been trained to chant and beat a drum.
Liz: Trained or programmed?
Adam: Yeah, no they just trained it. They sent it to school they sent it to, yeah, they sent it to seminary I don't know. Yeah, so it chants in a computerized voice which I'm sure will put everyone at ease at your funeral while tapping a drum. It was on display actually at a funeral industrial fair which must be just the cheeriest...
Liz: Oh, my gosh...
Adam: ...kind of convention.
Liz: ...what else do they show there?
Marc: Yeah.
Adam: Just dead folks, I guess.
Liz: It's just one morgue.
Adam: Yeah, so now not only...I think that this really is the neatly booking ending the roboclypse because...
Together: Wow.
Adam: ...robots can not only murder you but they can perform your funerals as well so it's really an end-to-end service.
Marc: Wow.
Liz: If they will be able to deliver best, then we will be sorted.
Adam: I think so. But they can...
Liz: The whole life cycle.
Adam: Yeah, exactly they can deliver your child kill you and then perform our funeral and then raise your child to be a cold unfeeling automaton.
Liz: Wow, amazing.
Marc: Wow, that an interesting service because you know generally for births, deaths, marriages you want the human touch, you know.
Liz: Yeah, yeah.
Marc: You don't want just this cold robot with this computerized wail beating drums.
Liz: He can press a button and will be like cry now and we will show you how to hold back tears.
Marc: Human setting at 50%.
Liz: Yeah.
Marc: Just starts cracking jokes at the funeral.
Adam: You see I would want mine to be programmed not to chant verses but to sing "Rock You Like A Hurricane" by the Scorpions.
Liz: I kinda want the robot at my funeral probably not to perform the ceremony but just to kind of to go around comforting people maybe.
Adam: Yeah, that's a comforting is you know.
Marc: You might need to calibrate the comforting back pats at like 10% strength.
Liz: Yeah.
Adam: You don't know how...
Marc: Well, the natural inclination is going to pull people's still beating hearts from their chests.
Liz: Yeah we...
Marc: Because it's a robot and therefore murderous.
Liz: Yeah, we only want one dead at the funeral.
Marc: Exactly. Well, that was a great Funny Money segment we had a two for the special one for the special from Schmidty just out doing us, making us look bad.
Adam: I live to give.
Marc: Yes, so shall we play the interview from Michael gets property investments insights and some good knowledge on wealth creation.
Liz: Yes.
Marc: Today in the studio we have another rare treat we are having some really great guests lately we have Michael Yardney. So Michael is the Director of Metropole Property Strategists and he's one of Australia's leading property investment advisors and commentators. He's also the best-selling author of many property investments books one of which my personal favorite actually on property investment "How To Grow A Multi‑Million Dollar Property Portfolio in your spare time" welcome Michael.
Michael: Thank you for having me, Marc.
Liz: The title that book just grabs me how can you in our spare time not that I have well I have a little spare time but I fill it with pretty useless things such as TV shows that are just wasting my time. I mean how...I want a multimillion dollar property investment portfolio how do I do that?
Michael: I wrote that book in 2006 it's had its 10th-anniversary last year and I had to change some of the strategies but in general the principles are still the same. And one of the concepts Liz, is that takes time. So it's not a sort of thing you can do over night. If you've got the same emails in your inbox that I do they will probably tell you can get seven properties in seven minutes 10 properties in 10 years and it doesn't work that way. So the concept is to have a real full-time job and in the background build your asset base over two or three property cycles and then slowly lower your loan to value ratios and eventually live off your property portfolio real estate investment is not a get rich quick scheme.
Marc: There's so much media out there these days and like you said Michael there's so much messaging around like, "Oh, I have 15 properties and 30 properties and..."
Liz: Or like 23-years-olds who have just 10 properties and it's so de-motivating you are like, "Well, I'm older than this 23 and I don't have 10 properties" so yeah it's easy to put it in the too hard basket but you are right it is a long-term game.
Michael: Well, let's put it another way, most property investors fail so even those with 10, 15 properties and those who win the awards and the Property Investor of the Year. I've followed them over the years and seen how five 10 years later they've lost it all there's a couple of reasons for that but if we go back a step all those who are getting property investment in Australia 50% sell up in the first five years. They either put the wrong property they have made a finance mistake they can't hold on through the ups and downs. And those who stay in 92% never get past a second property and less than 1% of the two million Australians who own real estate as investments own six or more properties. So you really talking about a small percentage who own large portfolios but it's not the size of your portfolio that is important. It's the asset base, how big is this and how hard the properties work. So those who mess largest portfolios quickly tend to buy second properties in cheaper locations. And then end up with a hell a lot of headaches and have to unravel it and at the moment as the market cycle has turned meaning they get running into problems.
Marc: That's interesting yeah.
Liz: Because you always think of, you know, if you say you're a property investor you always think of property as such a certain, you know, return but obviously it's not if you don't play it right.
Marc: Yeah.
Michael: That's one of the myths. So when I first started one of the things I was told was property investment is easy and it's not. And actually, it's simple if you follow the rules. Because there is a system that works and all you got to do is find other people who have achieved what you want to achieve and do what they do. So it's not a play on words it's not easy but it is simple if you get it right.
Liz: So what are some of these hard and fast, you know, rules that you've learned over the years?
Michael: Well, the first rule is that in Australia as opposed to the overseas residential real estate is a high growth relatively low-yielding investment. So, in other words, you buy it for capital growth rather than for cash flow. Now, I know most people think they need cash flow. Cash flow keeps you in the system so you need to have the cash flow to be able to pay the mortgages but cash flow will never get you out of the rat race and the asset base will. So property investments is a journey and three stages the first stage is asset accumulation. So you got to build a big asset base.
The second stage and it often takes two maybe three property cycles so it can be 10, 15 years 20 years. And the next stage is then lowering your loan to value ratios so that you're starting to generate cash flow and the third stage is the stage of living off your property portfolio. So the hard and first rule that you asked about is to build assets first not cash flow but keep cash flow in mind because you got it ride the ups and downs of the cycle. The other rule over the years is particularly relevant now and particularly relevant to a lot of the listeners of the Finder Podcast, because it's about money, is that real estate investing is a game of finance with properties thrown in the middle. If you don't have the finance right you're not gonna come out the other end.
Marc: So what are your thoughts generally about the property market this year and in the last couple of years? Is it the right time to invest? What are your thoughts on all that?
Michael: When I first started investing Marc I had read the stories about Warren Buffet about be fearful when others are greedy, be greedy when others are fearful. To try and invest counter cyclically and have the market do the heavy lifting but that's wrong. I've actually recognized that successful investors seem to make money in good times and in bad at all stages of the cycle. And that the majority of the investors lose money in the good times and lose even more in the bad times so it seems like it's something external to them it's like it's not the market that is causing it so what is it?
Some people say oh, good investors have more knowledge. That's actually not the case because there's a lot of very smart academics who do all the market research know all the hot spots and still aren't successful. In my mind, the biggest difference between the average investor and the successful ones is they have spaced their mindset the way they think.
So having said that at this stage of the cycle you can't count on the market doing the heavy lifting I think we are heading in the period of lower capital growth. The significant capital growth we had in Melbourne, in Sydney double-digital capital growth is unsustainable when interest rates are low, when wages are low, when wages growth is low, I should say, when the inflation is low. So we are getting to a period where the market won't do the heavy lifting and correct asset selection is critical. But getting back to my earlier point successful investors can make money at any time and the right time to do this when you're financially ready rather than picking the top or the bottom of the cycle because that's really any two days in the cycle and even the experts get that wrong.
So you don't want to buy right near the peak where you gotta wait for a couple of years but I still think there's some live left in Melbourne and in Sydney markets but there's no [inaudible 00:31:00] market in Melbourne or mountain market in Sydney.
Marc: Right.
Michael: There's sub-markets and it has to do with price points, it has to do with geographic areas, it also has to do with the type of property. So correct asset selection is critical at the moment.
Marc: Yeah, and I notice that your book actually goes the one specifically I'm talking about is "How to Grow a Multi-Million Dollar Property Portfolio in Your Spare Time." Goes into a lot of the different ways you can do that especially things like the five stranded strategic approach which is awesome and, you know, different rules. My question is what is the sort of the single best tip you can give someone who is looking for where to buy right now? Because that's the position I'm in I'm jealously asking for myself.
Michael: The answer is location will give you back 80% of the performance of your property and the right property in that location will give you the other 20% so it's location that's going to do the heavy lifting you can't change it. When you're looking to buy an investment property Marc there are three things price and this is gonna be determined by your budget, location by and that is not able to be compromised in my suggestion because that's not gonna change over time and the property. So I would rather you buy the best property in a good location even if it's one bed roomed apartment than a secondary property because it's bigger or got more land in a different location.
I think the other thing you got to think about is what's gonna be the sort of property that's gonna be a continuous form of demand in the future? Because the property is lumpy it's expensive to get in expensive to get out, so you want the sort of property that will be in strong demand in the future and in my opinion, less than 2% of the properties currently on the market are investments grade. So we just got the vast majority of the properties because to be successful you got to do things differently with the average investor you got to buy different sort of properties to what the average investor does. And you've got to buy the sort of property that will outperform the averages with regard to capital growth because it's going to appeal to a wide range of interestingly not investor Marc, owner-occupiers. Because it's owner-occupiers who'd buy with their heart with their emotional will buy not because they gonna sell by similar properties to yours and lift up the value of similar property pushing up our property value.
Marc: Right.
Liz: Yeah, because you know whenever I think about buying property not that I'm in the market right now but whenever I think about it I'd always think about buying a property that I would wanna live in. Obviously, that's not the way a lot of investors do it but is that you know terrible strategy? I've asked this question before.
Michael: The answer is it's a way a lot of investors do it, and it's wrong. Having said that that's exactly what I did to start with. I bought my first property investments in the early 1970s. There wasn't a research, there wasn't the internet, there wasn't Australian books, so what did I do? I bought close to where I went to school, I bought to where I lived where my mom went shopping. I couldn't afford at all so I went to the house with my parents we paid AU$18,000 for a property in [inaudible 00:33:49] streets of Coldfield got AU$12 a week rent was excited.
Marc: Oh, wow.
Liz: Oh, my gosh.
Michael: And took it a 30-year mortgage because I had no idea how I was gonna pay it off interestingly early 1970s Gough Whitlam came into power, rampant inflation, the property market went up. And it went up so much the value of the property I could refinance and borrow and buy a second property the worst thing that can happen to a beginning investor is get it right the first time because you think you are smarter. You think you know what you are doing and I learned lots and lots of lessons along the way but what you were suggesting is the way a lot of people do it they buy it in their comfort zone close to where they live close to where they want to live. How they want to live and that's not necessarily the right thing because as a beginning investor yourself how you live is properly not how you gonna live in 10 15 years' time when you have a family when you have kids when you've got more money behind you. So you've got to I guess follow the rules otherwise you gonna fall in the trap that most investors do and not own any investment-grade property.
Liz: And you were talking before about sort of being in a position where you are financially, you know, ready how do you know that you are financially ready? Because even people who have a huge deposit or something like that might have a little bit of credit card debt or maybe they've got a car loan or something like that I mean when do you know you are in a solid financial position?
Michael: Well, that's why you need a good team around you. If you are the smartest person in your team you are in trouble. So to become a successful property investor on your own in today's fragmented market is just too hard. So you need a good financial broker to help steer you through the maze. Currently, finance is a real issue for, not just beginners but for experienced investors as well. You also have got a plan, you've got to have a strategy, you got to know what you are doing because if you don't know what you are doing, any road can get you there but any road will get you lost as well. So my strategy is to buy investments grade properties in the top location that you gotta hold in the long-term that are gonna go up with capital growth. In my mind in Australia currently, the minimum entry-level for an investment grade property is around AU$400,000 in Melbourne that will buy you a good one bed roomed apartment. In some well-located inner and middle ring suburbs, you see it will buy you a double garage.
Liz: Yeah, like I need to go to Melbourne.
Marc: Buy you a dirt path.
Michael: So, therefore, you really have to be a boardless investor to think that I'm just going to invest in Sydney because I live there and because I know it makes it hard but it's too hard to go into the state it's too hard to fly and look. That's what the local state agents love when somebody from interstate from Sydney comes and suddenly they see a property that's worth AU$400,000 but it's marketed for AU$450, and then, "Gee, that's cheap," because in Sydney it would cost lots more. Or much the same in Harbert or Adelaide or Brisbane where you can buy a house for a price of an apartment in Sydney and so, therefore, you really need somebody on the ground to give you advice.
So how to get in the market get finance broker to get you through the maze get you a good loan understand that there are all those upfront costs when you purchase a property. And then there is the ongoing cost maybe it will be negatively given for a while maybe a bit of negative cash flow so you really have the right budget to see you through and get somebody on your side to help you select the property. It's interesting, all successful investors have a team they have advisors they prepared to pay for them well the average investor who isn't successful, get free advice from sales people.
Marc: Yeah, it doesn't really make sense when you think about it right?
Liz: It's so true, isn't it?
Marc: Yeah.
Liz: You just go and be like, "Oh, I got this crazy advice," and be like "Oh, I also got all this stuff I didn't need."
Marc: "I wanna spend money. Help me, spend my money."
Liz: Yeah, help me spend this huge deposit that I took years to save.
Marc: That I slaved away.
Liz: Yeah.
Marc: So Michael going back to...well I want to touch on two things you mentioned investments grade properties and I wanted to ask you what the difference is between an investment grade property and a non-investment grade property, I suppose?
Michael: Okay, well, every property can be an investment to keep the owner, the landlord up, put a tenant in, it's an investment property but that doesn't mean it's gonna outperform the market. So to me, investment grade is a property that's going to grow above average capital growth but also be stable. So it's got to be strong but stable. By stable I mean it's not gonna be fluctuating in price a lot. So for example, people are suggesting at the moment investing in the Gold Coast because of the Commonwealth Games. The Gold Coast's got reasonable capital growth but it's very volatile because of the nature of the sort of properties that are built there and on that basis then we gonna have ups and downs and that's how to cope with. I also want a property that's going to give me good tax benefits and one that's going to be in strong demand by a whole range of potentials and/or occupiers, a wide demographic in the future.
So to me then investments stock is what we tend to see advertised in the newspapers where they built high-rise apartments aimed at investors, that's investments stock, but it's not investment grade.
Marc: Right.
Michael: Because if you have one of those high-rise buildings full of investors imagine what the Owners' Corporations meetings are like. The body corporate meeting's once a year. Especially when three-quarters of them live overseas how are you gonna end up getting anything done? I would rather you have owner-occupiers in my building, I don't mind investing in partners but rather have an owner occupiers who in general are going to look after the buildings better. So an investment grade property is one in the right location, one that's gonna outperform the averages because the demographics in those locations are running a high disposable income. The census recently came out the last census and it showed that while wages growth hasn't been this high in the last five years in some municipality's wages went up double the average.
Marc: Wow.
Michael: If you think about that, that's more likely the area where people are earning money in a number of ways not just wages but also they are getting commissions in sales, bonuses they've got investments. People in those gentrifying areas who have got more money, they've got more disposable income so they can buy big plasma TVs they can buy big cars they can spend more on their houses. So I'm looking for areas where people can afford to and are prepared to pay an extra to leave there. So we choose the right area first of all, then, you've got to have the right property in that area. And investment grade property will have an appeal to owner occupiers not investment stock the cheaper smaller apartments but owner occupiers.
And that can still be one bed roomed apartment because a lot of people are single can get married later, older and single again so there's room for smallish apartments as long as they got the right floor plan. As long as they are in not a high-rise building with lots of lifts and pools and other expenses investments grade property's got street appeal, it gives a little security. And the other thing is location, as it is mature walk ability to shops accessibility to the local public transport is got to be critical. Interestingly as our cities get to five million people, Sydney's there, Melbourne is getting there.
They start to become unlivable unless the infrastructure can cope. So it's be shown overseas proximity to the YouTube in the... to the tube in England to public transport increases the value of properties considerably. And the other thing I like is a property with a high land to asset ratio that makes it investment grade property.
Let me explain. It's the land bit that goes up I'm not saying it's got to have a lot of lands you can go to an outer suburb and buy a large amount of land where the land doesn't actually go up much because of the location. I would rather own a 10th of a block of land under my apartment in Edgecliff, in Randwick in Kuji, in Bondi, in Elwood, St. Kilda in Melbourne and its good locations. The other capital cities have rather a smaller portion of the land in the good location in a whole block in one of the regional towns in Australia where property values aren't going up. Long winded answer but there are the sort of things that we look at to find what's an investment grade property.
Marc: That's great that makes a lot of sense.
Liz: That was really interesting the way what you were just saying what you said. I'm like looking at how people had more money to spend, I just never even thought about that when you looking at an investment, you know, where to invest that would never even close my mind.
Marc: Yeah, same.
Michael: Well, remember its capital growth that drives your investments. So buying the first property is the most important, if you can get that right you can build on others. But if your property doesn't increase in value how are you ever gonna get to the next deposit? The other thing to think about in 10, 15, 20 years down the track when you're wanting to retire or live off your property portfolio. The majority of what you are going to own is not gonna be what you saved, it's not rent that you've got, it's actually going to be the capital growth. It's not gonna be what you pay down your mortgage, so you, therefore, going to want capital growth and sure you've seen the graphs that over time the compounding the effect of compounding on compounding it tends to occur all over the world. I don't know if you've noticed all over the world the rich people tend to live close to the city close to the water close to the CBD have you noticed that?
Marc: Yes.
Michael: If you lived in New York, if you lived in London, you wouldn't be wanting to buy a house, you wouldn't be able to afford a house, you'd would be prepared to live in an apartment but closer to where the action is, where the CBD is. And Sydney has Manhattanized in many ways really for such people as your self-don't expect to buy a house so it's always being difficult it was difficult when I first started. It's actually is easier in many ways for first home buyers today than it was 40 years ago when I first invested.
Marc: Interesting how so?
Michael: When I first invested, you actually had to have a record with the bank. It was less bank or choices you didn't have finder.com we could go online and look all the options. But you had to have a banking record, you had to put a suit and tie on and go to the bank manager cap in hand and bank, and beg. They didn't allow dual incomes. So if you and your wife worked they didn't take the wife's income.
Marc: Oh, wow.
Michael: Into account.
Liz: Really?
Michael: And also, they charged you more interest if you were an investor than if you are a home owner and that started to creep up again at the moment but only by a small amount. Then deregulation comes in and competition came in so the trouble at the moment we're going through a credit squeeze. In the past every other property cycle has stopped because of rising interest rates. This time around they are doing it differently. APRA is controlling it by creating an old fashioned credit squeeze making it harder to borrow but in a low-ish interest environment. In my mind that's good, we had to slow the market down so it didn't crash. Having said that in a low-interest rate environment it means the average homeowner's not gonna default on their mortgage.
So we are going through a tight credit squeeze I have not seen it is difficult as this for investors since the early 2000s. But the banks are looking for lending opportunities, they are money shops, they want to get their money out. And currently, they are taking the opportunity to lend to first time buyers. So it's easier to get your first home loan than if you are an investor with a couple of properties. Because you currently looking at all your loans up to a stress test to make sure you can cope with an 8% interest rate raise and principal and interest.
Marc: Right.
Liz: Yeah.
Michael: So we're seeing a lot of people who can afford to borrow more but the banks won't lend them more because they have stripped their serviceability criteria and making it hard.
Marc: Okay, so Michael the second question I wanted to ask you tying to what you have mentioned before was so you said if you buying your first investment property look to spend around 400,000 or you know...
Michael: Or more.
Marc: Or more, if you can. Minimum 400,000. So obviously this is really hard for you to kind of give specific places that you will be looking to invest but what sort of places would you recommend I consider looking at in you know the main capital cities or...?
Michael: Sure. Well, home buyers are different because home buyers has to do with what your life style is, what your plans are, are you having kids and how important to schools, how close is it to jobs for yourself. So home buyers are very, very different don't look for regional towns or mining towns. The census again gave us a lot of information about the past now we have to extrapolate it to the future. So in my mind it's economic growth and jobs growth that's going to cause property values to go up. So what we are looking for here is whether there's going to be job growth. Because job growth leads to wages growth so population comes in the majority of the jobs are occurring in capital cities. And then you dig down deeper the majority of the of the jobs are occurring in Melbourne and Sydney 62%, 66% I think in last year but all the jobs creation occurred in the capital cities of Melbourne and Sydney basically.
So I'm looking for areas where people can...remember what I said a while ago...afford to pay more and you are prepared to pay more. So that's where the big jobs are. In the future the majority of the jobs are going to...new jobs are going to be created in this service industry we are no longer are a manufacturing country. When we think about Australian exporting I'm sure we think about things that we dig out the ground, whether it's health, whether it's education, whether it's technology, whether it's service like what finder does intellectually. And so, therefore, that's where job growth is going to be and wages growth is going to be and interestingly the majority of that is going to happen in Melbourne and Sydney.
Marc: Interesting.
Michael: So, therefore, invest in capital cities if you can invest where the jobs growth is gonna be and I believe Melbourne and Sydney are decupling. People say, "Oh, but every capital city is gonna have its day in the sun there's a property cycle every market will eventually turn around." I believe there are some places in Australia where the property cycle is dead and will never occur again. it might seem as I say hands up the intelligent people in the room, hands up the analytical people in the room, guys you are in trouble Because what they do is they try pick a bit of this information and a bit of that information and don't fight it go where the growth is where the job growth is where the wages growth is because that's where the population growth is going to be. And property value go up for lots of reasons but basically, two, population growth or household information to be exact, in other words, new houses that need a combination...
Marc: Right.
Michael: ...and the wealth. Last year we went to Mexico. Pam and I went to Mexico and the whole of Australia in one city in Mexico City, but property values weren't going up because the people were poor and didn't have jobs. Look at Japan a very wealthy nation but a declining population and so they have been deflating in property values haven't gone up for a long time. Can't adjust either, you have to have both population growth and wealth to be able to afford it. And both sides of government agree the argument big Australia small Australia is gone. We know we have to employ people, bring people into replace the baby boomers moving out the market if you believe you can have strong population growth. And if you believe in the wealth of our nation because our economy is generally pretty good and we've got a lot of resources. We are in the middle of Asia which is the Asia century at the moment it's gonna drive us. If we get it right and wealth is going to increase that's going to underpin the value of properties in Australia.
Marc: So once you buy your first property what are the key sort of metrics that you should be watching to know that it's a successful investment?
Michael: That's a really good question Marc because most people just buy and sit and forget. I say you got to treat it as a business. So you got to understand is it performing as you expected it to? So ones a year you should sit down with somebody but probably somebody independent because most people get emotionally involved and they like the property and they like the colors and they've had so much emotional involvement in it that they actually don't asses the property. So you've gotta see is it performing as I expected? Which means you already had an expectation anyway. Did you set yourself a strategy? Did you have a plan?
And you also got to accept that in every 10 years period or so every decade there will be two or three years where your property won't perform well. Interest rates have gone up just the wrong time of the market cycle things aren't working so you've got to understand yes why doesn't it work this year? Maybe it's just the wrong time, maybe you just got to wait a little while longer, or is there something that you can do to improve it to make sure that it's going on well. And the other thing is maybe you decide that you've got to get rid of it. So my strategy is buy for the long term and hold but that doesn't mean buy and never sell if you bought the wrong property.
Marc: Right.
Michael: But in today's instant society with instant news and daily price indexes it's a little bit easy to forget the long term perspective. It actually is going to take time for your property to improve in value so you want to make sure it's rentable that your mortgages are right. That you are not over paying that it's in a good area that's going to improve in that you are not wasting money of unnecessary outgoings.
Marc: Good, great that sounds some really good tips there.
Liz: Yeah.
Marc: Okay, so moving more towards just generally wealth creation. this is a really interesting topic because there are so many [inaudible 00:50:56] that really set up from the beginning to, you know, to build wealth for their family and take care of themselves financially. But you know it doesn't really always happen, so why is it that most Australians never really get out of the rat race despite like you said Australia just being such a wealthy country?
Michael: I think that they've got poor wealth operating systems. They've got the wrong habits, they don't get to think right. So in Australia, we are so lucky that we've got the ability to become wealthy and when you the rich 500 list 200 list all those you will find that the majority of those people in those lists is self-made millionaires. Some have come from wealthy families some have gone to private schools a lot of migrants a lot haven't finished school. So in Australia, there are a lot of opportunities but the difference between the successful people and the rich people the two are not necessarily the same. But they all have similar traits is, they've got habits they think in a certain way they do certain things.
In Australia, there are only three ways to become wealthy through shares through real estate or through businesses, that's it. And so everyone's got the same opportunities but unless you've got the right mindset if you suddenly become wealthy if you suddenly win the lotto. If you don't have the right mindset you are going to lose it all. You've heard the stories that people win the lottery and within five years they've lost it all.
Marc: Yeah.
Michael: I also believe if you've got all the money in the world and you distributed it evenly within four five years it will be the same again.
Marc: I have heard that yeah.
Michael: And that's because unless you grow to be the sort of person you want to be, unless you change now, improve your...what I call your wealth operating system where you mind thinks about money. Unless you do that if you certainly get money and you haven't grown to be the person who deserves that money understands how to use that money understands how to make it work you got to lose it. That's the biggest reason most Australians aren't financially free they are not financially fluent they don't understand how money works but they also just don't have the right head space. And that's why I have written a book with American called Tom Corley "Rich Habits Poor Habits" because we found a whole lot of habits that the wealthy people have and their very, very different way of thinking to the average person.
Marc: Interesting can you give us one example?
Liz: Yeah, I wanna hear some poor habits.
Marc: I wanna know if I got them.
Michael: Wealthy people look at the big picture while the poor people tend to get involved in the details. Wealthy people think abundantly while the poor people think scarcity. Wealthy people play the game to win while an average person plays the game not to lose, they try, they're scared. It's a different way of thinking about things. Wealthy people take responsibility they are the pilot of their life while the average person's a passenger. So you got to be different with people, if things don't work out don't blame the government doesn't blame your parent for not giving you a good education don't blame the interest rates. Take responsibility and move forward. You got to be the part. There are no rich victims.
So wealthy people don't complain they get upset things go wrong then they find useful beliefs and say, "Okay, what am I going to learn from this?" While the average Australian will blame and complain. There's so many different ways the wealthy people think to the poor. Wealthy people build their asset base they are prepared to borrow while the average Australian gets a good job buys a home pays it off and they are scared of debt. So how they use money is different as well so the average person if they take on debt use it badly, get themselves to credit card debt, they've got poor money habits. While wealthy people use leverage and gearing they use debt to buy appreciating assets that go up in value. While the average Australian will buy depreciating assets and then end up with a credit card debt at the end.
Marc: Interesting.
Liz: There's a lot of interesting...while you speaking about the mindset thing I was thinking about the property market as it is now. Because it's extremely easy to say, "Oh, the property is too expensive so I'm not even gonna try."
Marc: Yeah, so true.
Liz: But obviously that's not a good mindset.
Marc: No, no Liz.
Liz: That's right.
Marc: We can end up poor with that mindset.
Liz: Yeah.
Marc: So if you have to get one piece of advice that the average Australian can take onboard right now to get on track, what would it be?
Michael: First of all recognize why you are where you are today. In other words, you are where you are today because of all the things you have chosen to do or all the things you have chosen not to do. So that could be the bad mindset the bad thoughts bad credit card debts not saving, spending more than you earn. So accept the situation and don't blame other people, don't blame the system.
Liz: The rotten banks.
Michael: That's right basically recognized where you are understand where you are become financially fluent learn about money. And then hang around different people say if you are a bike rider you're really likely to hang around people who are fit and get up early in the morning and wear [inaudible 00:56:06] and...
Marc: [inaudible 00:56:08].
Michael: And ride their bikes and you are lucky to be fit like them. so if you want to be around people who are financially fit and think good things and say good things because they appreciate other people's success. While a poor habit is the tall puppy syndrome and making fun of people and knocking people who are successful.
Marc: Right. Yeah, you see a lot of that.
Michael: That's another point of the way rich people and poor people think differently, the rich and poor habits but if you hang around people who...let me give you a really good example. A couple of years ago I saw a client who is a young guy from Melbourne western suburb which is the poorest social economic areas and he was a trades man and he [inaudible 00:56:49] two investment properties he worked hard. And he said to me, "I speak to my mates at the pub after work and they tell me I'm stupid they tell me I shouldn't be investing I shouldn't buy another one what do you think Michael?"
And I said there's no judge of people in the lower social economic areas you think I haven't talked about pretty and they're gonna talk about spending their money on a new car, their new [inaudible 00:57:09] that they bought and putting a big muffler on it. But maybe if you actually went to the pub around the corner where our office is in Brighton, in the high social economic areas they are actually gonna be talking about the next share investments they have done the dividends they've got the properties they've bought. So you are hanging around the wrong people and that's what's holding you back.
Marc: So you really have to choose who you hang out with or you know find like a group of investors that you can chat with regularly something like that.
Michal: Sure.
Marc: Yeah.
Liz: Yeah, exactly there's also made up groups and things like that so you can definitely find people even if you still wanted to talk about footie at the pub.
Marc: With investment properties.
Liz: That's right.
Marc: [inaudible 00:57:40] we kinda coming towards the end so I want to ask the last question about wealth creation before we move on to our final three. So if someone wants to start getting on track what are the best resources TV shows, radio podcasts whatever?
Michael: Okay, TV shows probably not because reality TV isn't so the block would suggest that you go and buy an old place and do it up and you can sell it and make a fortune.
Marc: In one month.
Liz: Is that not how it works?
Michael: So a couple of good resources can I give a plug properly update my blog is over 15,000 subscribers it was recently voted by...I got an email out of the blue from somebody called [inaudible 00:58:17] in America rating saw that we are the number one rated real estate blog in the world.
Marc: Oh wow.
Michael: Well, not just Australia and it's not just about real estate but it's about success and money and money habits. I've also recently started a podcast and boy I'm having a lot of fun doing it and the "Michael Yardney Podcast" where we talk again about success, money and property because I think they are all interlinked. Real estate really is an avenue, you don't want the properties you want the choices in life it gives you the financial freedom it gives you. And I've written a whole lot of books michaelyardneybooks.com.au is gonna a kick it's gonna give you a whole a lot of resources there as well.
I think getting good mentors around you and there are so many good websites that have got that. One of my favorites is somebody who died many years ago but still I learn from him every week when his newsletter comes out. That's Jim Rowen who taught me the importance of personal development. You've got to work harder on yourself than you do on your job or on other things success.com is another good site. My good friend Tom Corley in America who co-authored my last book has got a richhabits.net website richhabits.net where every day he talks a bit about the head space the mind set to success.
Marc: Great, okay so we are on to our last three questions that we ask all our guests Michael. So our first question is and this is pretty obvious what do you like to invest in?
Michael: I'm biased towards real estate but why I'm biased toward this is because it works. I've got a substantial property portfolio and I'm still adding to it. I get involved in medium density property developments. So I've currently undertaking four all in Melbourne they what some people call duplexes I call town house developments, I've bought old land...no. well actually an old house with good land with the good suburb. The right suburbs we talked about and over time get development approvals pull them down put two new town houses and then keep them as long term investments. So I see in the future more people are gonna want land but they're not gonna be able to afford a big blocks or town houses, a preferred style of accommodation for more people. So modern accommodation in a smaller compact block. So I've got residential, commercial, industrial, real estate and still adding to my portfolio.
Liz: I would love to rock up to an auction and just to see you there I will be like yes I've chose awesome property because you're trying to buy it too.
Marc: I would be a little scared though as well.
Michael: Well, we have an advantageous buyer's agent working at auctions. So I've got teams on the ground, locals in Melbourne, Sydney, Brisbane who are ex-state agents who know what's going on. And I use psychology at auctions. I don't know, I don't go to auditions much anymore but I had a client a short while ago who wasn't sure that our fee was justified at auctions. So I showed him and I happen to go there and I knew the auctioneer well and I knew his brother who happened to be one of the agents. So there was a big crowd before the auction started and everyone was out there, it was on site auction on the street. First off I go up and I speak to the auctioneer and I shake him by the hand and I actually happen to know he was getting married in a couple of weeks' time.
So I spoke about personal stuff and shook him and I patted him and there's the crowd thinking, "Who is this guy who's best friends with the auctioneer?" And then I go across and speak to his brother who's standing next to him and shake hands and talk small talk about how he's been helping some of their buyer's agents. So I set the scene already for the crowd who's this guy? They thought I was one of them and then all over sudden I start bidding but I talk to them by name. So when he actually makes asks for a bid his name was [inaudible 01:02:14]. "[inaudible 01:02:15], I will offer you," and "what are you doing on first name basis with the auctioneer?" Now, the psychology doesn't always work because if there's somebody smarter than me or dumber than me and has bigger pockets I can't necessarily win but in that case, I did. I also rock up with my Bentley and pack it right next to pack it right up front.
Liz: You are ruthless.
Marc: I know up front.
Liz: I would be absolutely terrified. I'm scared now.
Marc: That's awesome. Okay, so what's the single best piece of advice I suppose we kind of touched on it before but what's the single best piece of advice to somebody looking to be a wealth?
Michael: Don't try to do it on your own. It's too hard it's too demoralizing when you get it wrong. Get a mentor. So mentors are people who've really achieved what you want to achieve who have done it. Be careful though there are lots of gurus out there at the moment there's lots of people who are self-proclaimed experts who haven't got a reputation so be careful what they've...make sure that they've done the right thing. And be prepared to pay for it or so some of the mentors I have had over time like Jim Rowen I have never ever met and I get things for free, I also have business coaches and mentors currently I pay over AU$100,000 a year still annually for business coaches. But that's an investment for me rather than an expense because it keeps me accountable. Somebody just recently asked me, "Michael, you are wealthier than your business coach you've got more properties than them why would you pay somebody?" And I said, "Look at the top golfers, top tennis players, their coaches are not better tennis players or golfers than them but they actually they have transformation conversations with them and they keep them accountable they keep them on track."
Marc: Right, and sometimes you can't notice what you are doing from the outside.
Michael: Totally, totally yeah, yeah so you need somebody who is an unreasonable friend.
Marc: That's great advice. Okay, so what's the worst piece of financial advice that you've ever received?
Michael: I mentioned it a while ago the concept that I was told earlier that investment property was easy and in actual sense, it's not. As I have said it's simple if you get it right but it's not easy because clearly, most people don't get it right.
Marc: Right, yeah. That's so true, yeah.
Michael: So you can just go off and buy any property and think it's gonna increase in value and be a good investment it won't be.
Liz: I wish it was.
Mike: Yeah, me too.
Liz: Actually, no because everyone would do it and...
Michael: Well, that's exactly right don't wish it was easier, wish you were better.
Liz: Yeah, that's true.
Marc: Oh, that's great advice, yeah. Well, thank you so much, Michael, for coming in I think we could have easily have done a half an hour to an hour so we definitely need to get you back when you next in Sydney.
Liz: Yeah.
Michael: I have to do it again one time thank you.
Marc: Yeah, but thank you so much it's been really great having you here.
Liz: Yeah, thank you.
Michael: My pleasure.
Marc: Well, that was awesome. Really enjoyed chatting to Michael about all those topics and like I said we really need to get him in for a part two.
Liz: Yeah, definitely.
Adam: Student listeners may know that I become incredibly shy during the interview. I didn't say a thing or even announce my presence as is sometimes my custom at interviews I was just star struck much like Marc is when he sees Graham.
Marc: Exactly, it's a thing we share.
Adam: Yeah, I just couldn't even bring myself to even speak.
Marc: There was some really good tips in there from Michael specifically just around...I loved this point about how a property investment is a financial game with property thrown in like it really is if you want to build a portfolio. It's all about how much you can borrow, you know, you are kind of the play between your borrowing power and your deposits so your equity and it's really interesting.
Liz: Yeah.
Marc: So speaking of interesting money A-S-X.
Liz: Oh, I just it's been an emotional rollercoaster and I don't...I was on top of the world and now I'm really not I'm you know...
Marc: It has been tough.
Adam: It's hard out there.
Liz: Yeah.
Marc: Slim pickings.
Liz: I'm 9th in the world now. It's very depressing.
Adam: Yeah, I'm I've slipped a place to 4th place from my comfortable 3rd place spot. My portfolio value as of this morning was AU$50,381.86 I'm still in positive territory. But it's getting nerve racking because I'm seeing myself approach that starting point with stunning [inaudible 01:06:46].
Liz: Yes, so I'm officially in negative territory as it was still you know from the last time I gave an update I'm AU$49,559 which I think is slightly up from where I was but I'm still a doing that sort of doing that set and forget thing. Just because I don't know what to do at this point but I wanna everyone to know that I'm still ahead of Marc so its fine so yes.
Adam: Comfortably, comfortably.
Liz: Very comfortably so.
Marc: I'm getting hammered in this game.
Liz: Yeah, as you did the ASX game. But that was still early on so I mean you still could bounce back like you did in the [inaudible 01:07:20].
Marc: I did start I don't know if it's possible this time Liz you know I think...
Liz: What are you down to?
Marc: So...
Liz: Oh, dear. Oh, no.
Adam: Oh, boy.
Liz: Oh.
Marc: Basically what happens is so specifically today I noticed my banking stocks just crushed they literally I think I've made it a buck on them literally a dollar.
Liz: Are you invested in CBA?
Marc: No, that's funny I think the banks won't have taken a hit I have actually looked into why so far why specifically my bank has but that wiped off like literally AU$300 just in a space of a day. So I don't know what's going on with that and I off loaded I mentioned in the last episode I had some really creepy tech stocks so I got rid of those and then I basically just really just...this time around was lost where to invest. So I just reinvested into stocks that were doing really well so I'm kind of seeing a little bit of improvement but as you can see from the numbers it's really is not looking good for me.
Adam: You're a long way out. Can I ask you something Marc and this may be embarrassing to answer so look if you don't feel comfortable sound then you don't have to but did you buy stock in the Japanese funeral robot company?
Marc: Yes, I bought stock in that and also the [inaudible 01:08:29]
Liz: He's whole 50 grand.
Marc: ...[inaudible 01:08:29] foundation in Japan.
Adam: See Liz was all about that. She's all about renting people for functions.
Liz: I was the other stock holder.
Marc: We now own 100% of the company. So yeah it's been tough this game is so much tougher than the last one.
Liz: I think it's realistic.
Marc: Yeah.
Adam: And it turns out that share trading is difficult.
Liz: Yeah.
Adam: And that you just can't just walk into it and expect to make hips and hips of money like over a couple of weeks.
Marc: Yeah.
Adam: That's a surprise.
Liz: I have to say people the first seven people are positive territory so I think that it really speaks to the strengthening of our league.
Adam: That's right although our league is ranked number 572.
Liz: I mean you don't have to tell people that.
Adam: Our average portfolio value is still below the starting point.
Liz: Okay.
Marc: Probably thanks to me.
Liz: Yeah, thanks to Marc.
Adam: However, yeah dragging all us down.
Liz: Yeah.
Adam: But yes we do have quite a few people still in positive territory.
Marc: Who's leading us so far on our leader board?
Adam: Okay, so Lee is leading pretty comfortably he's stayed in that number one or two spot kinda switching spots with Nadia.
Marc: Yeah.
Adam: Over the past few weeks those two have been very comfortably at the top of the leader board for a while now.
Marc: Doing really well.
Adam: Yeah, so just taking it to us showing us what's done?
Liz: I'm not too happy about it.
Adam: Not at all.
Marc: We definitely...
Adam: The nerve.
Marc: Yeah, I'm keen to hear about their experiences so far Lee and Nadia you know shoot us a line drop us a line. Let us know...don't let us know your strategy because we don't want people cough Liz, cough myself to steal those strategies but...
Liz: I disagree with Marc please find me on Twitter at [inaudible 01:10:18].
Adam: Well, I'd like to know how come you waltzed into out thing that's like our cool thing we did and now you are like running away with it.
Marc: I don't wanna play anymore.
Adam: I know. it's like you came to our birthday party and like whipped out a guitar and started playing music and like everyone is crowded around you while we are sitting out in the corner just like Shame eating cake.
Marc: Yeah, and chips.
Adam: Yeah, like, "Fine, no one pay attention to me and my birthday party. It's good you got a guitar and you know like five John Mayor songs jamming is cool."
Liz: I feel like that happened to you like so many times it was way too specific.
Marc: Yeah, it's been awesome so far especially for Lee and Nadia for myself it's been a learning experience I think so far I have realized that like if I wanna do well in this I probably need to put more time monitoring things and all that.
Liz: Yeah.
Adam: Well, speaking of learning experiences I believe you had one on the weekend, didn't you?
Marc: Yes, so astute listeners will realize that quite a few episodes ago we had Daniel Byrne on from easyMarkets and we floated the possibility of myself going along to road test and learn about forex trading and see what it is like. I went to the active trader's group meet up on Saturday at the easyMarkets HQ it was awesome really good experience I learned hips. So it was just an intensive session on you know strategies risk management the basics of trading using the MetaTrader 4 platform so it was really good I've got my strategies down part and I've started to, you know, monitor the market and put some demo trades on actually just before...at lunch.
Liz: It's very exciting.
Marc: Yeah, and then so then I'm gonna be making my actual first live trade ones I see how those trades go.
Adam: Interesting.
Marc: It's very interesting it's very different to shares it's obviously it's the biggest market in the world foreign currency so...
Adam: Yeah.
Marc: It's huge and [inaudible 01:12:13].
Adam: And do you have to pay attention to it like constantly to kind see moment to moment what's happening?
Marc: Well, it does move like hips obviously because you know we are talking about currencies of massive countries here so you do but it depends on your strategies. So we learned three strategies and one of them was used for time frames of half an hour to two hours which is called the London Breakout strategy. And then there was also a long term strategy and then there was also like sort of one like a few days' worth of strategy so yeah it depends on your strategy really. So I haven't gone for really the short term strategy because I'm really bad at this kind of thing, but I'll keep everyone updated.
Adam: That's something I would wanna go for because it is exciting.
Marc: It is very exciting though like ones you put a trade on because there's so much movement there's like, "Ah, doing well, not doing well."
Liz: Very emotional kind of yeah, cool.
Together: Yeah.
Adam: And it's called the London Breakout.
Marc: It's a great name.
Adam: That is a great name why would you not wanna use that?
Marc: I know I feel like a bank robber.
Adam: Yeah.
Liz: Yeah, like a cowboy. So cool.
Marc: Yeah, exactly.
Adam: That sounds like a...
Liz: Where's your hat?
Marc: That sounds like a wrestling move.
Adam: Yeah.
Liz: Oh, my gosh, yes.
Adam: The old London Breakout like he did a double duplex on me but I, fortunately, was able to pull the London Breakout and I was like, "Oh, no, no not the London Breakout" it's his signature move, "off the top rope. It's London Breakout."
Marc: And then you have to say some cool witty slogan after it.
Schmidt: Cheerio.
Liz: Oh, my gosh, yes, hold it like the London bridge.
Marc: But yeah it was it's been really, really interesting to find out like the forex market is the biggest market in the world but you often, you know, especially me being so ignorant I was like, "obviously there will be shares, right?" but no, it's not.
Adam: Interesting.
Marc: Yeah.
Adam: Very interesting. I won't have thought that out either.
Marc: But when you think about it it's actually incredibly obvious any time a business needs to buy to buy things overseas.
Adam: Of course.
Marc: It's trades currency, yeah.
Adam: Yeah, and whereas people usually are just trading on the stock exchange general in their own country I guess.
Marc: Exactly, yeah.
Adam: Yeah, boy it shows we are a bunch of dummies we are.
Marc: Ones again.
Adam: Yeah, if this podcast proves anything week after week it's that we are just morons.
Marc: But yeah I'll keep everyone updated on that and I'll also be writing those so we'll be finalizing those and realizing them later after my trial finishes. Anyways, guys, we had a great podcast.
Adam: Yeah, it will do.
Marc: It's up there. It's up there. As always please write and review our podcast on iTunes we always appreciate it.
Adam: Yeah, and the thing is just to remember that if you are hit by a car that our podcast will stay in place it won't even move.
Marc: Yes.
Adam: So leave us a good reason review based upon that.
Marc: It's a mental setting spray.
Adam: That's right.
Marc: But we will catch everyone again next week for another awesome episode thank you, crew Liz, Schmidty.
Adam: Thank you.
Liz: Thank you, Marc-Marc Terrano-Terrano.
Marc: And we will catch you again next time cheerio.
Automated Voice: Thanks to listening to the "Finder.com.au" money podcast. Head over to www.finder.com.au/podcast to find the show notes for this episode and more greater episodes. The finder podcast is intended to provide you with tips, tools and strategies that will help you make better decisions. Although we are licensed and authorized we don't provide financial advice so please consider your own situation or get advice before making any decisions based on anything in our podcast. Visit finder.com.au to learn more about how we are regulated to compare your options or to access our terms and conditions.
ASX sharemarket game instructions - join us!
- Go to the ASX website and create an account for MyASX
- Complete your registration for the sharemarket game
- When registered, go to 'Game play' > 'Leagues' > 'Join Leagues'
- Enter in the following details: League ID: 19917, password: angusrox123, league: finderAU
