589 | Can Property Keep Outpacing Wages? - Q&A Day

0:00A lot of the time their policy doesn't reflect, actually, making meaningful change to affordability in the market. It's actually the net yield I think we need to sort of highlight. The pockets of the market that do really well is where. You're tuning in to the Property Couch, Australia's number one property, finance and money podcast. Featuring the Titans of the industry since 2015, we're trusted by tens of thousands of investors on their journey to financial peace. This show is powered by more. Hello, catchers and welcome to another episode of the Property Couch. We're talking about episode 589 and it's a Q&A day and we've got a lot of firsts for you on today's episode. We've got a couple of new couch crew who I'd love to introduce and they are first-timers. Polly, welcome. Thanks Ben. And Ben. Thanks Ben. Welcome mate. So first time on the couch. Got's how we feeling? We're pretty excited. Can you jump in? Looking forward to it. Well, it's Q&A day, so we've got some great questions.

1:01Now also a couple of other first time mentions. This is the first time ever that we've had three QPAs on the couch. Everyone's going, what's a QPA? A QPA is a qualified property investment advisor. So another first people, well, well done. It's first time for everything, Ben. Very good. Very good. A couple of obviously housekeeping matters. First up is the audio books gone. It's gone no longer available free on the property couch platforms. So you'll be able to find it at this URL address, which is how to retire on 3K. That's the number three and the letter K. .com.au. You can buy it there. Go and have a look, check it out. And we haven't spoken about 40 this year. We've had a few of our long-term listeners reach out to us and basically ask about the 40 story. I'm going to give the person I want, Ben. Well, it's also important for them to understand who you're barrack for. So ladies first, Polly. And then I'm actually all prepared.

2:02Oh, you are. Yes, I am. You are in the red and black. Very good. Yes, loyal supporter. Okay. Not going well. Rebuilding. Yep. Again, maybe for the third time. Yes. But anyway, we won't go there. And you just wanted to bring this up for today, didn't you? Yes, I did. No, it's a loyal Saints fan. Okay. Yes, very good. Loyal Saints fan. And how they started. Well, we don't want to talk about that. But, yeah, it's, you know, I'm a loyal person because I've committed to that club for a long time now. And I've got faith. We've just got to come together. Well, you've got, you've got the right talent. You've just got to get them working together. What is it about champion team versus a team of champions? Yes. There's a lot of money getting thrown around, isn't there? There it is. You've certainly tried to buy your way to the premierships. Let's see how it plays out. All right. Now, final bit of housekeeping is around the surplus challenge that we started in January, 2026.

3:02Here we are in March. And we saw earlier this week, the RBA lift the cash rate by 25 basis points. And so if you are thinking about what you need to be doing around your household cash flows, jump onto the more platform, adjust your repayments accordingly, work out how that's going to impact that surplus challenge because, and that's, you know, your household surplus because it's going to be important. And we don't expect where one and done here again, but this could be one of three that we're thinking about. So it is important that you understand how they are going to impact your cash flows, because that's very, very important. All right. Let's rip in now to the rest of the show. This is an important show, guys. We're obviously doing our Q&A. We've got some fabulous questions from our community. First off, we've got our first question. Here's from Blake. And it's a speak-pipe question. So let's listen to Blake. I've been just had some thoughts and a question based off your episode on a couple of GANS tax reforms.

4:05So you mentioned the factor of people getting married later, resulting in purchasing properties later, which was a fair point. I just found your feet also considered the growing cost of living, and the fact that people are staying at home, living at home for longer as part of that factor as well, given the cost of housing. And then there's someone who is looking to buy his first property and hopefully getting the property investing at some point, just wondering what your thoughts are on the feasibility of the growing gap between house prices and wages continuing to grow over the next decade, two decades, which it seems like it would need to for property prices to go up and be good for property investors. But it would seem maybe not the best overall for housing affordability. So we'd love your expertise on that subject. Thanks.

5:05Well Blake, that is a fascinating question, because it comes in two parts. And I'm going to obviously turn to my couch crew for their input. So again, ladies first, Polly, where would you like to start on this question? There I think it's for me, it's really coming down to demand versus supply, sort of fundamentals. I suppose with property, it's kind of like with any commodity we see, where we do have met a situation where demand outstrips supplies. This is what's going to put pressure for prices to go upwards and residential property. It's no exception to that clause. And so for me, thinking about long-term trajectory, Australia means such a livable place with that global lens. If I have, we've got good quality of air, first stable country, stable government, tap water, drinkable, all those kinds of things. So a global perspective is very attractive. So I feel like from that perspective, there's always sort of that demand,

6:08which I think is a long term, continue to put the prices to go upwards in that long-term perspective. And so what about Blake's point around this idea that it's just getting less and less affordable, or wages aren't keeping up, which I think is an excellent point. How do you make good on that view that property prices will keep going higher? Yeah, I think the people buying properties start always just as a function of the income. There's a lot of people who do buy much. Perhaps sometimes not even needing lending, depending if they're migrating here, they may carry a big deposit down. And I think all of that will play into, I guess, the demand piece, yeah. Ben, what's your thoughts? Love the question. I've always said it's when we went to dinner. The other night was the exact question that I asked Ben as well. It's something that I've thought a lot around as well. And to Polly's point, there's a lot of things that make up price performance

7:13or prices increasing in the property market. It's not just based on wages. And when we're looking at marketplaces to invest in, there's far more than just... I mean, don't go wrong. Ways to make up are really an important metric. But it's not the only metric. And I think something I think about a lot as well is... And it's interesting when you say in your question, you're thinking about the next decade or two decades after that. And that's really the lens in which you can view investing in property. It's kind of your short-term story and what type... And what I say to a lot of people is work out the type of investor that you want to be and try to align your decisions to that. And what I mean by that is there's some people that adjust focus on that short-term return and what's going to be the impact. And that's that classic sort of supply-demand story. But then if you focused on the next decade or two decades, it's what metrics are my looking at so that I can logically see further price performance.

8:15And that thing that you talk a lot about Ben is just that core economic activity. And where do you see that happening? And then looking into those marketplaces when you're choosing to invest as well. I mean, Blake, this is a wonderful question. And I want to build on what Ben's saying and what Polly's also saying. So right now, property is around $12 trillion. So residential property in Australia is valued at $12 trillion plus dollars. So it shouldn't be lost on politicians and economists that it is a significant portion of our overall wealth. In comparison to share markets and superannuation, it's double-triple in some cases. So the first thing we've got to understand that there is a risk that if we don't continue to keep building economic activity and economic prosperity and growth, that property prices will stall.

9:16And if you look at certain countries and nations where they don't get the economic settings right, and they don't bring in innovation and they don't improve productivity, and they regulate everything basically to a point where they are stagnant economies. And you get places like Europe who have done it, and you see certain areas and pockets of static price growth, or slower price growth than what we've seen as the young nation that we are in Australia. So if I start with that, but then you sort of unpeel the onion layer further down below that, and then you start studying, all right, what pockets of the market do really well? The pockets of the market that do really well is where they are closer to the economic engine room, the city locations. There is status and human attention to these particular markets where I've got livability, I've got convenience, and it's an expression, my property is an expression of who I am. And then you start to look at the people who live in those areas, business owners, investors, entrepreneurs, old money.

10:23So you know, we see that sort of old money, that money that's been passed down generation from generation to generation. So you've got a lot of new money coming in, new wealth being made, and they're competing for the same scarce assets in those areas. Whereas out wide, it's not necessarily the same story, and that's part of the insurance policy that we often talk about in terms of why we like prime locations over what we might call more affordable locations. And just on some of the big fan, there's, you know, Ben. So in episode 5169, for anybody that hasn't listened to that, go and listen to that episode. You do a deep dive on that of Townsville versus Brisbane, and that's an episode that I encourage all the clients I work with to go and listen to. I think it's probably one of the best out of the entire series, and just really unpacking what you're talking about there. That's the second point you're making around that long-term wealth cycle. I think that's something that the impact is yet to be known, but the inherent story long-term here around that transfer of wealth from the baby boomer generation,

11:33is the impact of the property market is going to be really interesting. Yeah. And yet to a little bit unknown. And Polly, what we have known is over time. We have seen a change in the way in which households generate income. Haven't we? We've gone from single household income to double household income. So take us through that journey and watch changed in terms of how we've been able to push property prices higher, not just investors, but generally how those markets have worked. Yeah, so it's true. I mean, I suppose it's a function of also boric capacity as well. When you do have one income versus two income, you've got more income coming in. And boric capacity is a function of that income at the end of the day. And nowadays, I think it's pretty common to see lots of families where both parents go to work. And that does translate in bigger boric capacity and their ability to spend more on that own occupier, on that home, like that, requesting as well. Yeah. And I think if you also, for those playing at home, we might bring up a graphic on this.

12:37But if we have a look at the long term interest rates that we've had in Australia, and we say long term back to the 70s and so forth, but the reality is, you know, sort of our financial system has evolved. We floated the dollar in the early 80s and we've got, you know, an independent RBA board who now governs, you know, in terms of monetary policy, sorry, fiscal policy and monetary policy is part of that sort of blend that we try and see, fiscal being government, monetary obviously being set by the reserve. And what we're seeing is, so off the back of single income, then double income but part time, now two young professional couples and, you know, double household incomes, two working parents, producing economic growth and activity and prosperity for their family, we've seen property prices move. But what we've also noticed is the actual long term interest rate. And, you know, when we talk about what the RBA's levers are to be able to do that. So take a look at that chart and you can see there that the long term trend of that is interest rates are getting lower.

13:42Now, if interest rates are at zero, you can borrow affinity, right? So, and that's what we saw when, you know, the cash rate got to point one during the COVID crisis. So we do suspect, and as part of what will support also long term price movement, is that where the cash rate might be sitting at, say, 4.1% or late three's early fours, that over the next decade or so, that will probably come down to threes and then down to twos. And we can also see that in Europe where we can see a lot of the long term fixed rates and so that are in their sort of twos. And that makes a game, you know, for that sustainable sort of pressure on pushing, pushing property prices higher. And that's an interesting point, I think, like, sort of alluded to at the end of his question was around, and the impacts to long term affordability, almost as in, as a media narrative, that I guess maybe the government doesn't, or wants to fix the affordability of crisis, I guess what they're calling it, but I think we sort of all sit here and say, well,

14:46a lot of the time their policy doesn't reflect actually making meaningful change to affordability in the market in a lot of ways. They've got a challenge, haven't they, right? I mean, you know, two-thirds of the population own or are buying, and or are investors, and one-third are renters. And so you don't want to, you know, if you destroy the biggest wealth in the household, which is their family wealth, usually you have wealth effect changes off the back of that, which is less spending, less investment, less everything. And so that slows the economy down. So it is that wealth destruction that's at risk here in terms of that. So, Polly, what are some of the things that we have, you know, we talk about in terms of when we see situations like this, innovation does occur, right? And so where do we think innovation will go in terms of the cost of building housing, and what's going to happen in that space around modular or other types of opportunities to make the actual construction costs lower?

15:48Yeah, I mean, I know you want to talk about AI now. I think so we're talking, I think it's come a long way. Hopefully there could be some solution there. Is it like, it's just a model where you could just build it for you. Hopefully that because of economies of scale, that couldn't substantially help to reduce the cost of that, you know, to make housing a bit more affordable. Yeah, necessity is the mother of invention, isn't it, right? So ultimately what we're going to see is, so we think if we break down where the cost live, all right, you're obviously land, and that's the thing that sustainably appreciates if you've got long-term economic activity. Yes. If you don't have that and you don't have scarcity, then that land value, like if people leave the town or the region, that property price, then that land value is going to go because there's no economic productivity, right? So we've got that. But the other two big inputs are the material costs as well as the human labor, right? So if you're thinking about humanoid robotics, and you also overlay that with new materials that are going to come through inventions through AI, and then if you also think about modular in terms of what's going to come in, you know.

16:54So if I can build a factory, and I can have these humanoid robots inside that factory working until their battery runs out, and then they walk over and get recharged or change the battery, technically I could have those robots working, you know, 24-7. You know, I don't have to have a rest, they just need to be serviced. So I do think at some point in time, we will see the next iteration. And when I'm talking 10 to 20 years here, you've got to think long-term, that the cost of materials and construction will come down significantly. So anything has done that? Yeah. The module stuff is coming. That's really there. That's in. I mean, you're talking, you guys are reading, so I had 12, 16 weeks, and you're ready to go, right? Because there's no weather delays, there's no, it's just they build in the factory and ship it out. So that's real. I mean, I've heard stories, how you can sort of buy like a self-contained unit now from China.

17:54It's all built for you. It's got like, what bedrooms, got bathrooms, living areas, and all that kind of stuff. It needs to fit in a shipping container, but you can sort of cut it through parts and ship it, and then you can... Elon Musk has a pod. Yeah. And his target is to make them $50,000 for a one to two bedroom. It's basically on a pod, and it directs itself, but once it comes out of the container, right? And then it's just... So we know that, I think this is what I'm saying, necessity is the mother invention. But there's another part to Blake's question, which is the human element of his story, right? He talks about the challenges of having to live at home and the sacrifices that need to be made. And let's not lose sight of young people's struggles. This is real. And in terms of what we've also said around double household incomes versus single household incomes, we do worry about obviously people who are on single incomes trying to get into the market.

18:59But I think we've also got to talk about the substitution effect in terms of what happens there. What I'm talking about there is that whilst everyone might, you know, a single person might want to build a brand new home and have a nice home that they can showcase, the reality is if they want to live in a dynamic and, you know, a great country like Australia where the living standards and the quality of life is really high, there has to be some substitution to that. So trading off things like living in a unit or being realistic about where they live to be able to get that. That unfortunately is a trade off of capitalism. And there's, you know, I'd still, you know, capitalism's not perfect and open and free markets are not perfect, right? But the reality is they've been the most successful in terms of lifting people's living standards and taking them to that sort of area. So I think we've got to, you know, I've got my own notes here. We've got to adjust those expectations around those lifestyle changes and things that we've got to do.

20:02And we've got to think about those as part of that story. Is that fair assessment? Yeah, 100% and I think, I guess this is first time investor or first time home buyer. You're sort of, you've got to buy what you can. And so if it means, hey, you can't get a free standing house to start off with in their location, you grow up that, which is like most like I was in that situation. Yeah, yeah, yeah. A lot of us are in that situation. The property ladder. Yeah, the property ladder is really about just getting what you can get, getting the best asset you can. And then upgrading down the track, you know, like have the look to maybe work on the careers or if it's once, all side hustle or something. I mean, nowadays I've got to say, computer 20 years ago, you know, giving all the tech. It's easier to start up in a business idea or something. Right. And then upgrade when that opportunity comes. And couldn't agree more. And I think I try to look at, like, we're incredibly lucky to live here. Yeah. At the end of the day, we all have choice.

21:04I think in a lot of ways and, you know, personal anecdote. But, you know, made a choice to move 60 to 90 minutes out of the CBD to get more space and more land. And those things. And I don't care if you're wrong. Would I love to live? Yeah. 10 minutes to the city and have the space I have. I would. If I bake is, you know, in Hawthorn. No, I wouldn't have been nice. Right. So, but at the end of the day, you know, I had a choice. It's, well, I can live proximity to city, lifestyle, all those things and have something smaller. Or I can move further out and get space and those things that I wanted. So, the good news is we're in a, I feel like we're in a place where you do have that choice. Yeah. And it's then, again, just working out what's valuable to you and what's important to you and trying to align yourself to that. Yeah. I mean, you know, coming back to that point, I appreciate that it's really hard for the, you know, the next generation to come through it really is in terms of that story. But, again, you know, I'd much prefer to be born here with that hard as opposed to the heart of,

22:08unfortunately, being born in a impoverished nation or something like that where, or a country where you've got an authoritarian state where, you know, you're dictated to in terms of what your situation is. And, unfortunately, the ability to actually change your circumstances in a lot of cases may not be afforded to you. So, we've got to trade that off, you know, in terms of what it looks like. But, the other thing we also want to say to Blake and to anyone else who's, you know, sort of in this situation. And, Bryson, I've talked about this before, which is you're going to have to choose your heart. And, the best part about choosing your heart is, is that heart early or is that heart later? Because if I'm going to choose to travel and have, you know, enjoyment and burn my cash, burn that surplus that I'm making before. So, that's just a choice, right? Yeah. The best part about that is you're going to live a lot longer. The other part about AI is that longevity is going to be really, really powerful. So, you're still going to be potentially working 40 years for your future.

23:08I don't think that's going to change any time soon, but you just choose your 40, right? I mean, at this particular stage, you know, people of my age, you know, 20, 30, 40 years ago, or four generations ago, we're on our deathbeds, right? And now, you know, people who, when pensions kicked in, that was because you usually retired at 65 and died at 67, right? And so, now we're living well until, well into our 70s, 80s and potentially, you know, with some of these new, you know, medical interventions. We're probably going to be living, you know, for 100 plus years. So, again, that 40 years for your future is always going to be an important part of that story. Yeah, I guess, just speaking to Blake's question. And, you know, if you're actually at home, you're staying longer for home. It's time for people to save as much as you can, see if you could start investing really well. Yeah, if you're better and let you start, you're not kicking you out, you know? Sure. And if they are, then look, you're going to look, share homes or work out different ways in terms of what you know. I'm not saying it's easy.

24:08We're all not saying it's easy, but you're going to have to pick, you know, that process. I hopefully, Blake, we've given your questions and due consideration. We could talk about this topic for a long time. Yes. But it really is something that, you know, will continue to see certain elements come in. So, we're going to absolutely see affordability continue to be challenged. Unless we, you know, basically crash the goose that's laid the golden egg in this country, which is residential property. But we are definitely going to see innovation and different ways in which is that that's going to take shape. And, as I said, I think we're going to see interest rates over the longer term go down because the RBA won't have to throttle interest rates up as high to slow the economy down if people's debt levels continue to remain higher. So, that's what we're seeing is the counterplay to, as debts are going up, the Reserve Bank doesn't have to do as much in terms of changing the trajectory of supply and getting control of inflation. So, there we have it. That's question one. Let's move across now to question number two.

25:10And we're going to ask Opti to read out our question. Hey Ben, here's question two from an anonymous TPC community member. Hello, I've been listening to Property Couch on and off for about a decade now. We haven't got around to investing in property during that time because we've been deliberately investing in and growing our freehold accommodation business. Over the last eight years, that focus has allowed us to significantly increase the value of the business. And if we sold, which is on the cards, we'd likely walk away with around $2 million debt free and we already own our principal place of residence outright. I'm 46 and we've got four children under 13. So, the motivation for selling wouldn't be to retire completely, but to buy back time during these years and avoid being forced into high pressure, high income jobs, just to serve as debt and take us away from the kids more. From a property only perspective, how would you think about deploying roughly $2 million

26:10in a way that's income-producing from day one? And how much capital do you think it would realistically take to generate around $100,000 per year in passive income from property using sensible gearing and risk? Other considerations I have are balancing growth versus yield when PAYG income may be modest. And whether you'd favor fewer high-quality properties versus broader diversification. How would you structure a property portfolio that supports lifestyle choice first without killing long-term wealth creation? Thanks. Hey folks, Ben here. I hope you're enjoying the podcast. Now, if you want to take your property finance and money knowledge, even further, check out the new mind knowledge in more. We've packed mind knowledge with over 120 plus free resources from free reports to educational video series to fact sheets, on-demand courses, and heaps more.

27:12Get started today at theprobablycouch.com.au forward slash mind knowledge. Well, thanks Opti and obviously thanks for that important question. Polly, this is in our wheelhouse, Ben it's in our wheelhouse, isn't it right? But this is what we do when we sit down with clients and we sort of work out their process. So what's your initial thought? Yes, good. That's just understanding the cash flow side of things. He touched on wanting investing strategy to make up for lost time, but making sure cash flow positive or cash flow is neutral, not costing you money that compromise this is lifestyle is what he talked about. So really, just to understand at that point, I guess, is to understand what his cash flow is. Household cash flow is what the current spending is like. Let's make sure we're provision of all that. And with the investing side of things, how do we, I guess, give us structure, the number of properties you need,

28:12how much to spend, how much leverage is appropriate? Because for me, we've been looking at a lot of these things, cash flow modeling and all that. At the end, just comes down to how much leverage you take for the property and all the fruit to be cash flow. So I unpacked that a little bit more for me in terms of we've got a clue around 100,000 as the goal. So we've got two million to try and work through to that 100,000. Again, I think you make a really good point around we need to know what the out-goings are. Like, you know, ultimately, how much is it costing you to run your household with four children? Are they super active kids, you know, if they're into horse riding and if you're, you know, anything that's really expensive, how's that going to play into that? Do we want to put those kids through private school? So take us through, you know, some of that sort of detailed discussions that you would have around looking at that. Yeah, so I guess it's understanding, you know, if we're looking at the household, how old is it the kids are? Yeah. Yeah, like you touched on, is it public, private, Catholic schooling?

29:14What does it look like? Is it seven and eight, one fee, nine, ten, one fee? Do we need to consider buffering for that? You know, swimming activities. It should correct you. You just talked about, so it's just unpacking what sort of those expenses look like from, I guess, the next 12 months, but five, 10, 20 years, when do they drop off those kinds? And once we've got those sort of cash flow or expense insights, talks about modest incomes rather than a high-pressure, high-income jobs. So then we start to talk about the income story in terms of what we would need from you as we start modeling that out. Okay, so yeah, firstly I'd say congratulations, I think. Yes. The position is fantastic. Yeah. Yeah, I've had a few clients in similar positions. And, yeah, even clients where we've sort of spoken around the, when they're selling the business as well.

30:14And, you know, obviously they've got a very good understanding of their own numbers around that, when they're giving you advice on their business. Just not, but in terms of, yeah, if they come back and say, if we sold it here, it looks like this, if we sold it here, it looks like this, if we sold it here, it looks like this. And then, so you can sort of develop. So, yeah, what I would say is, I'd love to just give him the answer, right? There's really this clear process you could follow to come to the answers that he's looking for. I mean, if you just want to pluck out random numbers, right? And you want to work off $100,000, where you can just work out whether you're looking off three or four or five percent yield profiles and then work back your asset value from that, which is pretty simple to do. But, in terms of what asset versus two assets versus three assets, high growth versus high yield using leverage, not using let all those conversations, there's answers to be had, but you'd have to go through more of a process, to actually unlock what that looks like. And I think so to Polly's point, first and foremost,

31:14you try to understand the actual lifestyle drivers and what is valuable to the whole family in terms of their personal position. And then, from there, it's probably more around a conversation regarding different options in terms of, well, this is what it does look like if you go down the path of one, this is what it looks like when we go down the path of two, we go down the path of four, because there's different pros, different cons, different opportunity costs, different risks associated with all of those decisions. And I think, and this is something I said, I guess, before, was as an investor, you want to work out, I guess, what type of investor you want to be and try to align your strategy to that? Because, I mean, we can see 100 people a year, all with the same financial profile, but the other day, they'll all have a different strategy to get to the end goal, because they've all got different risks, they've all got different timelines, they've all got different profiles that they're trying to match. And that's right, and there's still a little bit of extra

32:14that we need in there. And I suppose, you know, if there's a knowledge gap, Polly, between understanding growth assets versus yield assets, versus balanced assets, when it comes to residential property, it's our job to explain the trade-offs that happen in there. So it sort of take us through a little bit of that. Yeah, absolutely. I think that, in terms of capital growth and rental yield, we talk about a lot about this in property. They do have an inverse relationship with each other, so something with that stronger capital growth that they appreciate better yield is often not that good. Vice versa, something a bit higher in that yield. You know, you sort of compromise a little bit more on that capital growth. But at the end of the day, you're just understanding what you need from a numbers perspective, because at the end, capital growth is important as part of that overall story that does dictate whether your ability to overall lift rent down the track as well. So, you know, it's just you want to make sure the strategy does have a

33:14just sort of spending the right amounts, right parameters to ensure you have that income stream, that are always based inflation in the future. Yeah, that's a very, really good point to make in terms of, although the time what gets lost in the yield versus growth conversation is your asset that's getting a 3% yield today in 20 years' time gets 3%. Right? Now, assuming you keep the asset in the same condition, which is the only asterisk on that, like if you don't spend a dollar on maintaining your asset for 20 years, you're not going to get 3% in 20 years' time. But if you assume the asset's in a similar condition in 10 or 20 years, well, you're still going to get you 3%. Now, it doesn't happen exactly at the same time as growth. They tend to happen at different periods. But I think a lot of people talk about the equity uplift and overall portfolio when they're talking about growth, but they forget about how much your rent grows with it. And because if your asset's not growing in value, typically your rent doesn't either. And then, by definition, to your point, inflation's beating you. Right? Because if your rent's like growing, well, it really doesn't mean anything.

34:14So that's a really important part of your growth balance is making, if you assume you keep your asset in the same condition, is therefore making sure that your actual dollar amount of rent is increasing over time as well. Yeah. And if I put my mortgage hat on, as the mortgage broker on the couch as well, the borrowing story, I need several things for that borrowing story, right? And the most important one is I need the income. So OK, I've got a cash balance of the proceeds of the sale of the business. But in reality, I've now got to then start to work on OK, well, I can't just automatically borrow or against that because that's not going to service a 30-year loan tin. So I'm going to have to have some income coming off that. And when I'm looking at the, and I'll put my QPA hat on now, I'm then looking at the gearing story like, so if I want income coming straight away, then technically my loan-to-value ratios are going to be in that sort of 40, 50, 60 range

35:16that I'm going to be playing around with right in terms of getting that story. So OK, this one's cash flow positive. So am I looking for more balanced assets as opposed to the growth substitute? Because I want to buy some time. Yes. It's obviously clear, if you run an accommodation business, you are running long hours. Yeah, 24 hours. No, we don't know whatever it might be, but it's taking your time. So now he wants to spend more of those time with the kids. So I've then got to look and say, well, you still need income coming in because we've got to get the borrowing capacity. So you're going to have to have, you're going to be working in concert with your broker and your qualified property investment advisor to model out those types of scenarios. And I mean, the good news is that that $2 million will get to work for you in a productive and sustainable way. And of course, you've asked the question from a property-only perspective. Of course, it would be remiss of us, not to also talk about looking at your age

36:17and potentially getting an alternative view from a financial planner who may be looking at your super or other means by which you can also get there. So property is not an exclusive strategy and, you know, again, rather than sort of a lot of property podcasts spend a lot of time basically all in on property and telling you that you have to do this. And this is the only way to do it because they're trying to win your business. You know, at the end of the day, you know, they're providing a educational service and the hope that, you know, you'll come and work with them. But I think it is important that when you are in a position like this and you know your situation that you get all of the cards on the table and then you and your wife then consider what might be the most appropriate option for you because you're going to have advisors who might have a vested interest whether it be super or whether it be managed investments through financial planning or you might have a property advisory business

37:17who's going to be focusing in on trying to get you to do a property portfolio plan. So there's those types of considerations that are also in play. So there's plenty there. Just to add, I think, you know, we talk about yield a lot. Yes. 3%, 4%, or 5%, depending on who you talk to. It's actually the net yield. I think we need to sort of highlight this. Yes. Because property has some kind of significant cowholding points. Yes, yes. You know, where there is property and you know, there's insurance. Let's be honest, insurance is probably not going to get cheaper at the time. It's only going to go up, climate change and all that kind of stuff. We'll sort of feed the numbers in there. You know, you've got your some land taxes working again. Yes. I don't really see that coming down. So you just be mindful. It's not just, it's 5% yield. You've got to look at that. What's that net yield? You know, for our planning business, we use 1.5% of the property value. So, you know, 4% yield net yield. You're looking at it's three and a half cents.

38:18Right. Yeah, 5%. It's a good point, Polly, in terms of 3.5% as net income. And I mean, you know, the broad rule of thumb, starting point is what? Well, yeah, I guess to give you some actual feedback, right? Yeah, if you're working off $2 million with no leverage, you're going to want a 5% net yield. Yeah. Now, we're utilizing some leverage as part of that. Then that conversation is going to change because that costs are going to be higher. But if we can reduce that over time, before we get to retirement, then, yeah, so there's moving parts. Yeah. But, yeah. That debt story really is quite interesting in terms of how those parts do move. And I'd also be sort of thinking about from a 5% point of view, I wouldn't necessarily be thrilled in chasing properties that are delivering 5%, because I'm probably going out wider, you know, in terms of what that story looks like. Yeah. You know, where, so if I can use a balance of debt and falls and 3.5s, and potentially get a little bit more up, lift on capital growth,

39:18and that's why it becomes fun. I mean, that's what we love modeling as, as advisors. We can, you know, run those scenarios and then, you know, do a couple of scenarios as well. And that's where the timeline, the cash flow, the actual income, so that, all that stuff comes so far into play, because, yeah, that's, and to your point, that's the fun part. It's, yeah. So let's start like this. Goals, priorities. Once they're all really clear, then risk appetite and risk profile. And then, obviously, what we're talking about here is the trade-offs. And the judgement calls that you and your wife are going to make about your particular circumstances. And that's why I tailored solution, where you may get to look at several of those options as part of that decision is where the value comes in in talking to a property investment advisor and preferably a QPA. If it is going to be a risky property that you're looking at. But we love that question. It allows us to, to obviously explore what it looks like, but we don't have all the details. And, you know, once you have all those details around,

40:18costs, future plans, one off and ongoing expenses, that will then show itself when you do the financial modeling and the scenario modeling, so shout out with that. So we love the question. Thanks. And hopefully, our community also got some value out of that because that's the type of discussions that are occurring with the client in terms of how we design tailored solutions. And that's what you're looking for. You're not looking for an off the shelf. You know, one size fits all solution that some advisors or so-called advisors are offering. This is all about your journey. And, as I said, also consider what other alternatives you might have, depending on your risk profile. But thanks again for a ripper question. And our final question for today's episode comes from Sam. It's an email question. So, Opti, I'm going to throw to you so you can read out the question about precious metals and real estate. So, it's a good question, Sam. Over to you, Opti. Sure, Ben. Here's question three from Sam on how precious metals relate to real estate.

41:18With Gold and Silver currently at record prices, I'm curious about the relationship between precious metals and real estate. Given Gold's role as a traditional store of value, how have long-term movements in Gold and Silver prices correlated with land values in the Australian property market? Is there evidence that precious metal price trends can signal future shifts in Australian land prices or are they largely independent? Thanks, Opti. And great question, Sam. So, let's have a look at a couple of charts here. The first one we want to look at is the long-term picture. And so, we can see here that dwelling value. So, this is normalized dwelling values from around 1980. You can say, well, is it almost correlated? Because it's such a broad look. And you can see silver down the bottom there. It's such a small value that it just gets dwarfed in this particular picture here. But in terms of that, you might be thinking, well, it might look a little bit like there is some sort of trend.

42:19But in reality, that's just the accumulation or indexing and value moving in the same direction. You can see, obviously, Gold and Silver have teared it up in the last sort of 18 months or so. But when we get a little bit closer to the detail, we can potentially see whether there's truth in this story. So, let's move to the second chart. So, when we strip out inflation, we can then see that gold prices and precious metal prices can be quite volatile. So, one of the key takeaways is we can see here that our property prices is significantly less volatile. And that's the reliability of land that we're seeing as part of that particular story. And so, in terms of indexing, from 1990 onwards, it's actually, you know, you've seen a really strong result there. Even though this chart obviously starts from 1980, you can see that there has been different movements. Look at that big movement in the gold price during and silver price during that time, silver particularly.

43:20But we didn't see any direct correlation with house price movements there. So, let's go to the third chart. And this does bring it home, where we can see here in terms of the 10-year role in correlation or a five-year role in correlation. There are definitely some different periods in terms of where precious metal prices are moving, but residential property might be less responsive in terms of that. So, you're not drawing a strong correlation there in terms of that relationship. And then finally, when we look at chart number four, we want to see whether the gold is a leading indicator, okay? And normally, when we are doing this, what you want to see is a trend whereby the correlation is in the other direction, meaning that the correlation relationships and the coincidence of those should be in the other direction. They shouldn't be tapering off. If gold is a leading indicator to where property prices are going to go, the indication or the strength in that correlation should be going in an inverse direction than the chart you're seeing on here.

44:21So, let's wrap it all up with the final chart. And this chart is, again, just looking at gold versus residential land values, we can see that residential land values do move differently compared to, you know, overall gold values. So, there has been stronger growth in residential land, also considering dwelling prices have been flatter. And that's because, again, land appreciates land is the scarce asset here, as supposedly gold is as well. And so, that also tells you that particular story. Now, I want it to just, you know, sort of turn our attentions to why this might be the case. Because in terms of Sam might be thinking that there might be situations where there has been some correlation and strength in that. And that is when ultimately we see significant toppiness in equity markets or we see economic and global geopolitical instability, there is a flight towards gold, right, as a safe haven.

45:22And so, when we see that flight towards gold as a safe haven, we also see other things happen around what the Reserve Bank does. And what the Reserve Bank's do is obviously, if it stalls the economy, or if there's a shock to an economy, the Reserve Bank starts to tinker with monetary policy. And so, where Sam might be thinking, well, during, you know, the COVID and the global financial crisis where we did see strong gold price movements and also strong property price movements. The relationship was more around potentially cheaper money than what it was around the gold price. Do we have any final observations off the back of that polly? Yeah, I guess residential property, as an asset class, it's actually in this essential need. So, it's not just a pure investment. Yeah. An asset class like gold. So, for me, I would expect it not to always move in line, just because whether there's a shock to the economy,

46:22whether there's a recession, people still need to recover their heads. So, yeah. I thought it was a great question, but I think sometimes the doubt it doesn't lie, right? And I think, yeah. Yeah, I think, I think, you know, as an investor, we've got to make decisions about where we put our money and what residential property has traditionally been, is perceived as another safe haven, but it also produces income. Yes. So, I get rent off that, where is potentially my gold that's sitting in a reserve somewhere, or, you know, I've dug it into my backyard. I'd like some people might of who knows, right? It's under my pillow. I think I check. I'm not necessarily getting that sort of income off the back of that in a game. We also know, with residential property, power of leverage is also potentially influenced. The demand for buying land and obviously building improvements, and then producing a business off the back of that,

47:22whereas gold isn't a business. You're in the business of trading that asset, as opposed to producing an income off the back of that. So, great question, Sam. But obviously, to Ben's point, the data doesn't lie. Ultimately, that's where we currently sit in the correlation. There's not a strong correlation. There has been periods, but they're not consistent over the long period of time. But we love the question. We always love looking at those data questions, as well, as part of that. Well, thanks, guys, for appearing on your first episode as CouchCrew. Thanks a lot. Great. Thank you. Having us. As they say, I am sharp and zined, so it's always good to get the best minds in the industry on the couch to help you make informed decisions and build out your knowledge and education as part of that. Just a quick also shout out. Polly is on our Friday Fun Demental, so we do a little bit of a deep dive. In terms of the hill that you'll die on. So what are we talking about?

48:22Just a little sneak peek. Cache buffers? Ooh, okay. Cache buffers. Polly's always right, Ben. Oh, Polly's always right. There's a good story. Okay, guys, well, that's it for another episode of The Property Couch. Hope you've enjoyed the information. Always remember that it's important to understand what we're talking about here and make sure you get that education right. Because knowledge is empowering, but only if you act on it. So until next week, bye for now. Hey folks, Opti here. Your smart money sidekick inside more. Just one quick thing before we sign off. If you're new to The Property Couch community, welcome. One quick tip to help you get the most value from the show. Our first 20 episodes cover the foundations we build on every week. And yes, listening on one and a half speed is totally acceptable. If you're short on time, download our free binge guide. It distills those episodes into one easy read with heaps of visual diagrams. Alongside free tools inside more, you're all in one financial home to help you organize your money and plan your next best move.

49:22Check out all the links in our show description. And just a quick reminder before you go, anything we cover on this podcast is general in nature. It's not considered to be financial advice, and we certainly recommend that you seek out professional advice before making any financial decisions. Once again, everything mentioned is linked in the show description. Ready when you are. Catch you next week. Thanks for watching.