Property Hub - Investment Insights & Inspiration - Get Invested: Part 2 - Lawrie Moore on property as a game of finance

Episode Date: March 22, 2024

How you manage your property finance will make or break your property investment strategy, says Lawrie Moore.  And it has never been more important to put a plan in place to maximise your borrowing capacity and increase your purchasing power.  Yet many investors just follow the wind of rising costs and interests rates, waiting and hoping that circumstances will shift. So how do you get proactive with property finance and increase opportunity? Lawrie Moore joins us for part 2 of his chat. Lawrie is one of Know How Property’s very own award winning Senior Broker partners who consistently earns and builds the trust and respect of everyone he helps with, and has helped many safely secure their dream homes and property portfolios by maximising their capacity, while minimising their costs and risk. So today and next week we're going to deep dive with him on his own background and approach to help you to be able to separate a trusted top broker from the rest, so that you can set up your financial future the right way. Connect with Lawrie knowhowproperty.com.au Join our Facebook community Join the The Property Hub Collective, connect and learn from likeminded investors and experts. Join the Property Hub community on Substack! Sign up to get Australian property news, opinion and episodes in your inbox: https://propertyhubau.substack.com/  Three easy ways to Get Invested right now: Subscribe to this podcast now, if you haven’t already, and get the inspiration delivered to your podcast feed each week Get a copy of my book, Get Invested, for FREE, and find out what it takes for you to invest in living more, working less. Go to: https://knowhowproperty.com.au/get-invested-free-ebook Join the Get Invested community. Each month Bushy sends a free and exclusive monthly email full of practical ‘Self, Health and Wealth’ wisdom that our current Freedom Fighter subscribers can’t wait to get each month. Just visit bushymartin.com.au, scroll to the bottom of the page and sign up. About Get Invested, a Property Hub show Get Invested is the leading weekly podcast for Australians who want to learn how to unlock their full ‘self, health and wealth’ potential. Hosted by Bushy Martin, an award winning property investor, founder, author and media commentator who is recognised as one of Australia’s most trusted experts in property, investment and lifestyle, Get Invested reveals the secrets of the high performers who invest for success in every aspect of their lives and the world around them. Get Invested is part of the Property Hub podcast channel, your home for property investment insights, inspiration and stories from Australia’s top property experts, investors, leaders and analysts. Subscribe now on Apple Podcasts, Spotify and Google Podcasts to get every Get Invested episode each week for free, and also get full access to RealtyTalk, Australia’s top online property show for red hot property investing news and insights direct from property industry leaders and influencers. Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, show producer Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast networkDM Media.  For business enquiries, email [e-mail] omnystudio.com/listener for privacy information.

And there was also taken advantage of a bit of some fixed rates through some non-bank lenders. So that 3% buffer that I talked about has really only been applicable for deposit-taking institutions. So some of them, especially in the current environment where rates are expected to decrease, not increase, they are choosing to take a different approach as far as their buffers are concerned.

And there's one in particular that I've used have a five-year fixed rate which you know maybe you normally might not necessarily recommend but there are ways there are ways around this which i can talk through if you want to bushy but on that five-year fixed rate they don't have any buffer so if you take their five-year fixed rate which is currently pretty much in line with variable rates yep they're my buffer so instead of having to afford the loan at nine percent you're basically affording one at six percent And that gives you a significant amount of additional borrowing assets. Welcome to Get Invested on the Property Hub podcast channel,

the leading weekly show to help you unlock your full self-health and wealth potential. I'm your host, Bushy Martin. And each week, I go deep with the best investors, experts, leaders, and founders to find out what it takes to break free from the grind, discover freedom, and live by design. Subscribe now and join me and get invested in the life you really want. Let's get started. Hi Fred and Titus. How important do you think your financing and loans are to your property success?

Are you struggling to borrow enough to secure your next property or refinance your home loan? And you just don't know what you can do about it or what your options are? And how can you maximise your buying capacity and purchasing price power while minimising your costs as well as your risks? If any or all of these questions are of interest to you, then you've landed in the right place because they're all very closely related. Sadly for many, home loan lending or property investment borrowings are assumed to be just a means to an end because all banks are the same and it's just about getting the lowest

rate loan because that's all the banks and a lot of brokers are banging on about, right? Wrongity, wrong, wrong, wrong. As we constantly reiterate, property is a game of finance and an elite team sport. getting the right borrowing strategy and structure and the resulting loan to suit your specific needs will make or break your capacity your cost and your risk as well as your stress levels so to optimize all this you need to be working with a savvy mortgage broker who has the accumulated wealth of wisdom experience and expertise to craft the best financing solution to suit your specific needs and goals because when it comes to loans the devil's in the detail and the experience

required to fully understand the ins and outs of over 40 different banks and lenders policies and processes along with getting your head around over 2,000 different loan products takes years to master and in this regard the revolving door of bank staff and Johnny come lately brokers who might have been spray painters or hairdressers yesterday and brokers today is just not going to cut it if you're really serious about setting yourself up financially and achieving sustainable success in property. Let me give you a couple of quick examples to whet your appetite. As I've mentioned before there's over a 55% variation across the banks in terms of how much I'll let you borrow. In very simple terms this means that one bank may allow you to purchase a property of

about $500,000 while one of the others can allow you to secure a $775,000 property based on exactly the same financial position. And this initial $275,000 difference adds the potential to add an extra $790,000 to your equity in 20 years' time, assuming that both value properties grow at the same rate. Now, similarly, when it comes to rate versus cost, a low-rate loan often ends up being much more expensive long-term because when you add in ingoing, ongoing, and outgoing fees, along with the impacts of offset accounts and other debt reduction features, a high rate loan can often end up being lower cost to the tune of tens of thousands and sometimes even hundreds of thousands of dollars. So focus on true cost, not initial rate, as low rate loans

often end up becoming what I call shagulator loans that end up costing you a lot more over time. Now, one of the other critical elements to consider when getting a loan to buy property is your risk. As we're going to discuss in more detail with our special guests shortly, most banks are more concerned about minimising their risk than yours. So what you may not know is that you're at risk of losing your house if all of your properties and loans are cross-securitised with the one bank. A serious risk that's rarely discussed that may also have the flow-on effects of reducing your capacity and your flexibility to do what you want with your properties, but more on this later. So from our perspective your finance and lending strategy and structure is

mission critical to your property success and working with an experienced and savvy mortgage broker right from the get-go before you even start looking at a property is absolutely essential. So how do you structure the best loan solution for you and how can you select and separate a great broker from the average low-rate loan broker or bank? Well this is where today's return it yes Laurie Moore comes to your rescue because this week we're going to help you answer all of these questions as we continue with part two of our great conversation with Laurie who I'm proud to say is one of Nyhau's award-winning senior finance broker partners or finance architects as we keep calling ourselves and in my humble opinion he's an expert at designing the best

loan structure strategy and solution to see you. Now last week we dug into Laurie's own personal journey and this week we dive into the nitty-gritties of property lending and finance breaking so that we can help you to get a much better understanding of what's important to you when it comes to financing your next property purchase or refinancing to reduce your costs as in the current lending environment it's never been more important to get your finance and your loans right so let's dive back in to our great conversation and let's get invested again lauren hi bushy thanks for having me back again wentz great mate uh really enjoyed our part one last week and uh now we're going to sort of dig deep into subjects that are near and dear to both of

our hearts and where I always like to start with this sort of an exercise mate is to get you to run through what you think are some of the biggest mistakes that many make around borrowing money to buy property. Well the biggest mistake people make is going directly into their bank right so the bank's got their own interests at heart so going directly to them is putting money in their pocket I guess like you should go you go there if you're happy to pay a higher interest rate so higher load costs to talk about from that perspective. You don't really – you've got money to burn, I guess, and you don't really care about the consequences,

then go directly to a bank. And if not, then if you've got the time and the energy and the expertise to compare 40-plus lenders and 2,000-plus load products, then I can assure you it's a full-time job because I do it all the time. So don't try and take it on yourself. So that's probably one of the biggest things,

either going to the bank or trying to do it all yourself. The other is sort of looking at lowest rate versus lowest cost. So it's not always the case that the lowest interest rate is the best loan. There's other aspects associated with that, such as the fees and charges and offset accounts that can help save you money over time and help save you tax over time too. if it's an investment property as well.

So getting that done properly. There's also the other aspects around capacity. So going to your own bank is going to just give you one answer in terms of capacity. Looking across a broad range of banks and lenders is going to give you a completely different sphere of what is actually possible. Other lenders are prepared to take on more risk than others

and have different policies. There's so many different variables and every person's situation is unique and you've got to try and match that with the right lender to get the best possible outcome in terms of price and in terms of capacity. So I think it's a mistake not to have someone on your team to be able to do that for you.

We talk about cross-securitisation. Now, that's probably a bit of an industry term, isn't it? But it just means tying up all your properties with your loans so that once you want to sell a property or transact on one of your properties, you find you can't do that without a lot of unnecessary administration and or that you can't do it at all

because the bank says you can't because everything's tied up together. So it's really important to not make that mistake and make sure that the loans are all standalone against property so that you can still transact on those properties independently. Rainy day reserves, I guess. people probably don't often consider that or probably would be guilty of that in the past as well

where they don't set enough money aside to ride out the highs and lows of being a property owner. Having all the loans with one bank is a bit risky. Sometimes it works okay, but most of the time it's not the case and potentially it could be as bad as having cross-securing your properties because if you've got them all with one bank, they can still treat them. In some cases, it's rare, but that does happen, right,

where they can treat it as if it is, even if it's not co-secured. Yeah. I think another thing I've seen people do quite a bit who might have bought their inverse investment properties when they haven't had the knowledge around this is they might have paid down their home loan a bit and they think, oh, we've got some equity, we've got some money in redraw,

let's go and take this money and redraw and that can be a deposit on our in-person investment property. But that's an estate because that money is not tax deductible, right? So the money is coming out of an owner-occupied home loan. It's difficult to make it tax deductible. So you don't want to be doing that. You need to be setting up a separate facility for investment purposes that can be used

or easily explained to the tax manager at the time when you're coming to make your tax deductions. Yeah, exactly. And then it's sort of, I guess the other thing is staying with the bank forever and not refinancing, negotiating with them regularly. And I've seen some unbelievable, I mean, I did this with a family member recently and they were just astounded. We couldn't really refinance them, but they hadn't spoken to their lender

for about five years and they were 2% higher than the almost standard variable rate, which pretty much no one's on. Also, I thought they were paying 2% more than what they should have. So it was just a quick phone call in and the rate gets dropped and a much better result. So I think there's a fair bit of that

and just staying too loyal to one bank for too long is going to cost you money. yeah and i think that's a big one actually because the sleepers out there lorry are the ones that concern me it's like and i think that the perceived headache and hassle of oh god i've got to go get all this paperwork and go through the rigmarole and and you know i already can't scratch myself because i'm flat out work and then after hours of looking out for the kids and and all of that stuff that goes with that uh is a bit of a hurdle that gets in the way but the amount of money that people are costing themselves by sticking with a bank. And on similar lines to

that too, Laurie, I'd like your thoughts on this as well, but what a lot of people had, I don't think, realised is that lending policies are changing almost by the day and the week. So just because a bank says no now doesn't mean that you shouldn't be revisiting it on a regular basis because things are changing constantly and it's not a set in stone exercise that if no one can say yes now, that doesn't mean it's lopped away forever. It's because it's a constantly changing feast

and banks are businesses like everyone else and therefore are often very competitive and thinks at times it's up, they'll find ways of being able to borrow money because it's a big part of their income streams. I think that regular revisiting, whether you're refinancing or looking at it, is something that if people aren't doing,

they're potentially costing themselves a lot of money. And we're not just biscuits, we're talking thousands of dollars, tens of thousands of dollars over the longer term if they're not on top of that. So I guess you cover a lot of stuff there. Without going into infinite detail, given those mistakes, what are some of the best ways to overcome them, you think? Well, I guess it probably is just the opposite of what I see. It really isn't. It's using a broker. 70% of loans now, I think, are written by mortgage brokers. So people are voting to get their feet as far as that is concerned.

We've got access to 40 lenders. We've got, you multiply that across a number of products and there's thousands of loan solutions that can help to maximise your capacity or minimise cost of risk, I guess. So it's just making sure that the structure is right because the structure is still going to be the key to making sure that you're paying

the lowest amount as possible, that it's costing you as little as possible and that you're not opening yourself up to risk, I guess, and then also you're in the most tax-advantageous position in conjunction with talking with your accountant about that, of course, but certainly we have lots of experience around that, so making sure that that's the case. I guess that standalone loan structure as well,

we talked about cross-securitisation, making sure that we stick with standalone securities and minimise risk across that way. Yeah, let's dive into that one a little bit because that's one of the most common ones that I see, people not getting their heads around. And again, it's very difficult for us to explain that verbally and add to this if you can, Laurie. but very simply, ideally, if you're going to the extreme of risk protection and maximising your capacity, each property would have its own separate loan without any other property or any other loan. And in some instances where it's appropriate, having each property have a different

lender attached as well. So there's not one lender who potentially has got control over the whole portfolio as you said a couple of times it's you know you've got to look at that on its merits and weigh the pros and cons there but certainly that standalone structure then allows people to buy and sell properties out there will not at the bank's control because as we all know if a bank if it's cross-securitized and the bank does and you want to trigger a change either sell or buy a property then the bank will automatically revalue everything and if bank value is being conservative at the time or the market's down and suddenly you don't have the equity to do what you want to do then suddenly you're locked out whereas going standalone you decide what what to do with

the properties and what you're going to do with the loan so putting more control back in the in the hands of the property owner and the investor you any other thoughts around that one yeah i think that stand that standalone i mean you've summed that up pretty well mate the standalone structure is is something that um we will always try to do like a number of times i've i've had people come to me where the broker's been pretty lazy and just gone all the loads with one bank and everything's co-secured across multiple properties. And that's the first thing you try to do is to unwind that for them and put them in a better position to be able to make decisions moving forward. Because it might not be that you want to sell a property now, but at some point

that's going to happen, whether that's for personal reasons or for investment reasons or a myriad of reasons that could come up. So you want to make sure that your loan portfolio is best structured to enable you to act as quickly as possible rather than have to go through a whole set of hoops in order to achieve what you want. So yeah, I think that's a kick. The other things that we probably need to talk about is making sure you've got those rainy day reserves as well. If you're investing in property, just making sure that there's six months' worth of costs set aside, six months' worth of income potentially.

It doesn't necessarily have to be savings. You can set that up as an equity loan against one of your properties, just an equity loan that has a buffer in it of $30,000 or so, $30,000 or $40,000, depending on the size of the portfolio. Yeah, and the important thing to emphasise on that one because people are going, oh, what do you mean I have to take another $30,000 extra on the loan? The key part is that if we've set it up the right way as we do

as an interest-only loan, then they're not using the money, it's not costing them anything. So all this is doing is building some fat into the exercise so that if something does go wrong, I lose the job or something comes to the property or the tenant doesn't run or whatnot, then they've got the low-cost funds to fall back on without costing them anything in the interim. So as you say, building in that contingency and that risk

protection to cover unforeseen events that are not going to put them in financial stress if they have to be putting their hand in their savings or spending salary to make that happen. Yeah, that's right. So you're not having to sacrifice your lifestyle, basically. Yeah. Lifestyle continues on if there's a period of non-tenancy or unexpected cost and you've got really access to funds that you can draw on that is not costing you anything whilst it's there because it's sitting in an offset account

and you're paying no interest on it effectively. So yeah, I think that's the only other thing. There's probably a few other things in there, but mostly it's just making sure, we talked about this before, but having those regular home loan health

checks as well and just making sure that preferably every 18 months but at the most every two years that there's a bit of a review going on of the portfolio and how it sits and whether it should stay the way it is. The start of that really is to negotiate directly with the lenders that the loans are with

and we can have a great variance in results with different lenders determined by their appetite and their pressures on their own profits and margins at the time. So in some cases they're happy to drop the pants if that's allowed to be said on this and i've got some amazing results for people and i talked about one of those before but it's just incredible really there was there was a period where you know there was this whole cashback

process going through for people to refinance where lenders were offering up to four thousand dollars really to to win your business so offer you a low rate and then also offer you a cashback but if you play if you played your cards right you can you could actually um uh take advantage of that from what the banks were offering and put the money in your pocket. I did that for a number of people who were successful and negotiated rates, lower rates. And even if people weren't going to leave the bank or couldn't leave because of borrowing capacity concerns or something like that, the bank has no idea around that. So it's really just playing that game a little bit, getting access to lower interest rates, potentially getting

a cashback for those clients when they would not otherwise have got one. Unfortunately, well, fortunately or unfortunately, depending on which way you look at it, most of those cashbacks don't exist anymore. There's still a couple of lenders with them, but that's probably a good thing because it was distorting the market a little bit and it got a little bit out of hand. They started at $1,000, they went up to $2,000, they increased to $4,000, and we're one or two lenders offering $2,000 per property. So if you had five properties and you were refinancing all of them,

they'd give you $10,000. I think your manager would take that prep for you, didn't he? Yeah, I did manage to get a couple, mate. It was, as I said, mate, taking the opportunity while it was there because we could see that it was short-term until someone realised why we're giving away all this money and what impact is it having on our margins and our profits. So we did do that.

There was a time there, I think, where I got one client to refinance to two different banks to get the token advantage of cash back. So they had two different loans, a home loan, an investment loan. We did a refinance with one lender to get their cash back, and we did the investment loan with another lender to get their cash back. So we got two lots of cash back. I think I've done that with a few people, actually, when I think about it. So we have a few of those.

But it wasn't just about the cash back. It was the cost of the loan as well. the existing lender wasn't prepared to come to the party. So it made sense to do it because you really got to look at that in our environment. Now there's a high level of compliance. So unless it is in your best interest as the client, then we really can't consider it.

It's pretty hard for it not to be in your best interest if you're getting $7,000 or $8,000 in your back pocket through a cashback situation. I think that's it. Yeah, yeah. I mean, that's what I was focusing on there. Yeah, no, that was – I'd love for you to share any – because I've seen you do some amazing things just with some clever structuring

and whatnot over time. Do you want to share some of the other examples of some of the approaches that you've utilised to get better outcomes for borrowers over the years? Well, there's those retention team tricks that I talked about. and role retention teams quite a lot and got great results from people. And then there's multiple cash back side that we talked about.

There's also, look, what's happened over the last 18 months is that interest rates have gone up significantly. I think everybody that would be listening would be well and truly aware of that. And the impact that that's had is that borrowing capacities have fallen away because rates are higher

and the APRA reinforces a buffer on the banks as well. So if interest rates are 6%, then people have to be able to afford it at 3% higher than that, so at 9%. So this has been a bit of an issue over the last 18 months because what you can afford today might not be able to afford tomorrow because rates have continued to increase.

Every month, rates will go up by 0.4% or 0.5%. And if I did a pre-approval for you today, I could never be really sure with some lenders whether you were actually going to be able to fulfill that pre-approval in three months' time if rates had gone up by 0.75%, which did happen, right? So that was about choosing the lenders that will honor those pre-approvals. There's a period there when a pre-approval is supposed to be in place for nine days. So it should be valid for nine days. It gives you three months to go out and find a property and get the loan approved basically. In some cases, that's not difficult, but in the height of the property

boom, that was hard because you were competing with a lot of people to find property. At least you had those 90 days to actually find something. And you were guaranteed that if you did find something, the bank was going to honour the pre-approval. There were a lot of lenders that didn't do that. So I certainly did that for me. It was just about choosing the right banks and making sure that there were no surprises. If someone was potentially going to bid at auction up to $500,000, $600,000, whatever it was, and then find that rates had been brought up by too much and they couldn't afford it anymore.

So I did quite a bit of that. And I also had taken advantage of a bit of some fixed rates through some non-bank lenders. So that 3% buffer that I talked about, it's only applicable for deposit-taking institutions because that's who they look after from a compliance point of view so some of the non-banks most of them have chosen to follow that guidance anyway but they are not forced to so uh so some of them especially in the current environment where rates

are expected to decrease not increase they are um but they are choosing to take a different approach as far as their buffers are concerned and there's there's one in one in particular that i've used had a five-year fixed rate which you know maybe you normally might not necessarily recommend but there are ways around this, which I can talk through if you want to, Bushy, but on that five-year fixed rate, they don't have any buffer. So if you take their five-year fixed rate,

which is currently pretty much in line with variable rates, there's no buffer. So instead of having to afford the loan at 9%, you're basically affording the loan at 6%. And that gives you a significant amount of additional borrowing capacity. So I've done that with a few clients, So there's no timeframe you have to be in that fixed rate,

really, if you wanted to break that fixed rate. And this is sort of the advice I've given to people along the way, is that, yes, it's a five-year fixed rate, and sometimes it can be costly to get out of fixed rates if variable rates go down by too much and you're stuck on a higher rate than your variable rate, but at the moment, they're pretty much at parity. So provided we monitor that

and we get you out of that fixed rate, at the moment, variable rates look like they're going to go down again, you can break the fixed rate, go back a little variable rate, probably cost you a few hundred dollars um you're back on the variable rate down on that on the down downward path as rates come down so you're really um going to be better off um from that point of view as well so so i've done that a few times is i've had a few instances where we've got it's called property share arrangements for siblings right often siblings buy properties together when they're young it seems like a good idea at the time but it can and it is because it

gets them into property earlier because they can combine their deposits and their borrowing capacity. But at some point, it gets in the way because they meet a partner or they want to buy a property with a partner or they don't know if they want to live together if they've bought together and are living in the property

and one wants to stay and one doesn't. There are a myriad of issues that can get in the way of this. So there are ways around that because what happens is as a borrower, you are jointly and certainly liable for a debt. So if you take out a loan with your sibling, then all of the cost is associated to you because if your sister doesn't pay it back, then you have to pay it back. That's certainly how the banks look at it. So that can restrict your borrowing capacity because they say, well, again, we know you've got a joint loan with your sister, but

really we're going to take it all into account because if she doesn't pay, you have to pay, right? But there's a couple of lenders there who will look at that differently and they will say, it's an arrangement called property share and we know that you own 50% of it but we also know that the other party is earning an income and they're contributing to this. So we will apportion that according to the ownership structure. So if it's a joint tenant, they own 50% each, we'll only take into account 50% of the debt. And so that puts you in a much better position moving forward in terms of what your borrowing capacity might be to do something independent of your sister or sibling or whoever it happens to be.

So it's about taking advantage of that sort of thing as well. There is another product that you can use, if you come to me at the right time, right, where we can actually, if the siblings are willing to buy something, where we can actually set it up and apportion it properly right from the outset so you don't have to, you know, utilise that particular part of the apportionment down the track when we're looking to do something else.

But if two siblings were coming to me today, I could definitely set the load up in a way through a few different lenders that would enable them to have several – that's probably using terminology there that probably won't make sense – but to have the loads independent of each other so that one is not going to restrict the others for a capacity we can afford. Yeah, and that's really important. And that's a thing that a lot of people don't get their head around.

And again, you've just demonstrated in great detail the benefits of it. So I'll talk to someone who really knows the ins and outs of this. Something I wouldn't mind you expanding on too, Laurie, because this is something that we constantly come up against, particularly given accountants have been on the front foot in strongly suggesting a lot of people buy properties and trusts. and as we know, there's really great asset protection with trust structures but does have an influence on the ongoing holding cost.

Can you sort of share with us a little bit of some of the things that we need to be looking out for in terms of the different types of property ownership and entities and what impact that has on both the property lending process as well as the other impacts? Yeah, there's, well, there's a number of different ownership structures that you can have, I guess. So if you're talking, most people just buy their house in their own names and it's joint with a partner, and that's perfectly fine.

Sometimes people set it up and say, well, I'm putting in law deposit, so there's what's called a tenants-in-common approach where someone might own tenants-in-common, like be 60% to one party and 40% to another, and that's perfectly fine as well with most lenders. Then you start to get into trusts. We might have, you know, Laurie and Stephanie as trustee for the Laurie family trust.

Those things are set up and generally pretty acceptable and don't act that much differently. All the lenders are in that space than what you would if you just bought it in a personal lane. But then you get to the next level, which is a company set up. So you might have Laurie Moore Proprietary Limited as trusting for the trust and that's a company so it's a different entity altogether than the individual under law. So from that point of view you can run into some issues in terms of pricing.

The banks, not every bank will lend you money in that respect. They don't play in that space but But they also generally see it as a slightly more higher risk, so they'll charge you higher interest rate and some more fees on that side. And they'll also restrict your borrowing capacity a bit because the negative gearing benefits of trying to buy an investment property, and let's be honest, that's the only way you would generally buy a property in a company with a trust, unless you were a doctor who was trying to asset protect or something bushy, but that's a whole different kettle of fish. But if you're buying a guestful property in a trust under a company name, then because

it's in the company, then the company gets the benefits of the tax deductions, not the individual. Therefore, the individual's borrowing asset is going to fall because the bank doesn't take into account those tax deductions when they work out their loan borrowing asset and calculations. So yeah, there's some restrictions around that. I mean, there's a lot of ... There There are plenty of people who buy that and there's a lot of the buy-in in that sort of structure and certainly we get a lot of feedback from accountants, don't we, that buy-in-wise structures is advantageous for various reasons. But it does come with its drawbacks and it needs to be carefully considered

because if you want to have your tax deductions properly applied to your income position, and then you really want to ensure that it's in your individual names first, when you run out of those ORE capacity deductions or when you run out of those taxation deductions, then that might be the time to consider ORE in a company and going down that path. But there are other ways. And look, we're not accountants,

so we have to be careful about what advice we give with that. And I can say, we should go, thank God he said that. But, yeah, we can certainly help with what we think is possible and you run that by your accountant. So it's just sort of the guidance as well because each individual is going to have a different income position. The accountant has that. If you've got an accountant who's properly savvy,

they will certainly understand that and make sure that the structure is correct. Yeah, and I think sort of joining the dots between what you shared with us there, it's important to look at the overall situation. and as you know firsthand different types of ownership entities require different processes the banks treat them a little bit differently in terms of their risk and potentially cost it has an impact on capacity at times as well so it's again it reinforces the need to talk to

someone like you who's very savvy around not just the specific finance exercises but how that then influences and is affected by other parts of the equation so that ultimately the borrower is making the decision considering all the facts rather than just, you know. So extremely well said there. I guess that sort of leads beautifully into something that I would like to briefly talk to you about, and that is for those that are listening to this going,

gee, there's a lot more to this whole finance thing than I thought there was, and I can really see the merits in talking to someone like yourself to really get down to the nitty-gritties of what's going to be the best solution for them and their ongoing journey. What sort of key things do people need to look out for or key questions do you think borrowers need to be asking of brokers in particular to make sure they're actually getting the right person that's going to give them the best result?

Well, I think, well, can I start with a stat? You know, I was astounded by the other day. Well, it wasn't the other day. I think it was late last year, actually. That 22% of brokers were completely inactive over a six-month period. Wow. So how many brokers are there? Because I don't know the actual numbers.

I think it's about 70,000 or something. 70,000. So, over a six-month period last year, 22% of brokers did not write a single loan. It just astounded me, right? So, I think that's that proliferation of the one million van brokers that we spoke about last week and a lot of new entrants coming into the industry and think that this is easy. In my view, the barriers to entry into broking are still quite low. So, you can get into it, but that doesn't make you a good broker, right?

it's not an easy job it's not and there's a lot of experience and knowledge that goes goes into being a good broker um experience resilient grit um determination you know if you've really got really really got to enjoy getting in and going down rabbit holes and finding solutions um where there might first appear not to be one so so i think you know that'd be the first question i'll be asking you about you know what what experience someone's got I mean, where they've come from. But also you're trying to avoid a one-man band type of situation where someone's trying to be all things to everybody

and doesn't have the support of a team around them, such as we have at NOGA. I think I talked about this last week, but having been able to have a team where it enables me to focus and do the things well that I do well and know that someone else in the team is looking after the things that I don't do well is highly advantageous. So there's a lot of aspects to the job that you really,

I don't think you can be fully across all of them. Yeah, extremely well said. And given that, as we've already mentioned, that bank policies and approaches are changing every week, it means that there's no set and forgetting of this. So if you're not on top of it and you really don't have your finger on the pulse, then an unsuspecting borrower can be missing out on opportunities

that they don't even know about. So we love you sharing that. The final question that's always in everyone's lips in terms of getting out your crystal ball and looking at what the future holds, what's your read on where interest rates and lending policies are heading and the impacts it's likely to have in the medium to short term? Yeah, well, what I feel is that rates have reached their peak. I think we're at that stage now where most economists seem to agree that that's the case. Although, you know, if you start polling 100 economists and they all come up with the same answer, they're probably wrong. So let's see if that one's done. I noticed that the Reserve Bank is keeping quite coy about it and still talking about data supporting it and interest rate cuts and all that might be.

But I just feel like, you know, we went through 18 months of rate increase. The cash rate's gone from 0.1% to 4.35%, I think is the current run. It's the biggest increase since the early 80s, I think, since the recession we only have to have. So it's been tough. And most people, if they'd only taken mortgage out over the last 10 years, have never experienced it. No.

Or a fairly tumultuous time in terms of people getting used to that. But the good news is I think we've reached the people. Well, we'll certainly see some cuts come, I think, later this year. It's just a matter of when. It could be mid-year. It could be towards the end of the year. It just depends on how the data, where the data supports that. I mean, I think the lenders have their own mortgage cliff to some degree.

We'll talk about the mortgage cliff and all these festivals coming off fixed rates and why we had a lot of those, didn't we? We had people getting in 1.89s and 1.99% interest rates fixed in for two or three years, and all of those have either come to an end or will come to an end soon. So that was the interest rate cliff as far as individuals are concerned. But the banks all had that too because during COVID, they were all getting free money from the government, basically 0% and adding their margins to that,

which is where the 2% rate comes from, basically. Yeah. So cost of funds plus 2% margin. So they all come out at the end of that because they're all rolling down over onto normal rates. So what I'm seeing in the market as a result of that is that they're currently in margin management mode, most of the banks. So they're not really offering,

they're not steeply discounting as much as what they were even six months ago. And because of that disappearance of the cashbacks that we talked about before as well, there's less incentive for people to refinance and the banks are aware of this. So if you came to me today as an existing client and you said, look, Laurie, we're paying 6.5%,

what can you do? And I'd say, well, let me talk to you then. And I would go, I would know the best rate that I would be able to get would be around 6%. So I'll go to the bank and I would say, Bushy's got to leave. You give him 6.5% and I've got to refinance him to this bank and they're going to offer him 6%.

I'll come in and they'll offer 6.15%, something like that. They'll go, okay, well, we know that there's a cost of refinance and we're probably going to retain him if we don't squeeze our margin too much. So they're sort of playing that sort of game and we'll see that come along. I do think that'll change though. I think they're in business to write loans

and that's how they make their money through their growth and their mortgage book. So the competition will come in and I think that'll be around about the time when the rates start to reduce. At the moment, they're doing it through policy tweaks here and there. They're changing little bits of policy here and there just to try and eat down a little bit of extra capacity for people.

And I think the other thing that's going to change things is that this 3% buffer that we've got, where if you're at 6% and you've got to reform it at 9%, that only came in because interest rates were expected to increase by so much, right? It's not 2%. So I think it'll go down. It's only a matter of time.

And I think it might be in time when the Reserve Bank puts their first cull in place, was when APRA will come out and announce that the 3% buffer is no longer relevant because we're now in a downward interest rate cycle rather than an upward interest rate cycle. So I can see that changing and that impacting on the ability of people to move from lender to lender, but also to take on more debt if that's what they are choosing to do in terms of buying more properties. But I think the other thing that's happening is there's the supply side still recovering,

right? So there's still a shortage, real shortage of properties. Everyone's probably heard stuff that's been going on with builders, a lot of builders under pressure and insolvencies and still lots of supply-side problems in terms of labour. There's a lot of labour working on infrastructure projects instead of on houses. There's still increased demand for limited resources in terms of those who are required to build houses.

So you bring all that together and there's not a lot of new houses getting built. So there's a lot more competition amongst the existing stock of houses, which has put in pressure on property prices. So I can't really see the property prices are going to go down. I can long to continue to go up, coupled with the fact that the net migration level is just so high. I never remember the numbers around this,

but it was heartwarming to see the side of Canberra that came in last year or later the last two years. So it's crazy, crazy numbers. So they've all got to live somewhere. So it puts upward pressure on property prices. But on the negative side, You know, you've got all that geopolitical stuff that's going on. And it will really.

So who knows whether we're headed for World War III, mate. I know it'll be doom and gloom about that. But, God, there's a lot going on in Ukraine and the Middle East and Taiwan and all this. I don't know how that's all going to play out. And on to that, from a local point of view, we've got a world election in the States this year. So Trump might be back in. Who knows what that might bring and what sort of world we might live in after that. But Australia's got another election next year as well.

So, no doubt there'll be some promises that'll be coming through that. It should be about the time when the interest rate environment's starting to improve. The lenders are back on board, as I'll talk about before, in terms of increased level of competition. So, let's see what each of the parties can come up with in terms of supporting the property industry further. I know that when you think about the home guarantee scheme, that's been huge for first-time buyers in terms of basically the government acting as your guarantor for a property purchase. and that's 30,000 people a year allowed on access to that now. The property price levels are probably just a little bit low so I could probably see those being increased a bit

to enable more people to get access in it because it helps in terms of the amount of deposit that people need coming in to get their first home. And of course, if people are buying their first home, well, that means they're buying someone else's home and it moves up the property chain in terms of value and just has more upward pressure on property prices. So if you're thinking about buying a personal property,

I think even now is definitely a good time. Absolutely. And, you know, sort of putting a circle around that, some pretty positive indicators of where things are heading in that regard. You know, the old demand-supply equation, very limited supply, very strong demand, improving lending conditions moving forward. So it's painting a pretty positive exercise. It's certainly indicating that, you know,

if anyone's got an interest and they see an opportunity this year and they want to either buy a home or get into an investment property, then they certainly need to be talking to you sooner rather than later, Laurie. So let's jump into the old infamous ambush round where I give you the blindfold and the cigarette and I ask you the quick questions that we ask of everyone. To kick straight into that, mate, what's your favourite quote and why? Well, Bushy, there's an interesting one this one because there's so many

that come and go on you, but there was a couple I thought about, but in the end I went for a bit of Lottie Python. Oh, excellent. The life of Brian, mate, and always look on the bright side of life. If you can imagine Brian up there on the cross, you know, during his terminal breath, as he talks about at the time, and he's still looking on the bright side. So I love that.

It's just a reminder not to take yourself too seriously. Beautifully said, mate, and a great memory there from me and very appropriate. On the literary side of the equation, Laurie, what's the top book that you recommend we read and why? Well, you know me well enough, Bushy, to know that I'm not into self-help books at all, which is not what I think.

I totally think about mindfulness and I immediately fall asleep. So I'm not into the self-help stuff. But I do love a good novel. The problem with novels for me is that I technically want to get through all because I'll get through 10 pages and I'll fall asleep. It's probably showing my age a little bit there. But there are times. It's hard to find a good break in time where you can sit through

and read a whole book, which I know my wife Stephanie does. But it's not something that I'll master over time. But I thought I'd go, or William, if I can, Bushy, to 1984. That was an old book. It's probably about 10 years since I read it, but it was a bit of a hard slog. And the reason I chose it is it sort of prophesies a society controlled by fear of lies. So I think it's really got some relevance in 2024, given the various dictatorships that we're currently influencing the world view and our recent experience with COVID. You know, it was driven by fear, a lot of that stuff.

And besides that, I'm a big fan of the Hunger Games, and that was all William as well in its own way. So there you go. There's a book. Get into it. If you really want to fall asleep, probably don't read that book. Well, I was like that. Yeah, some great shares there, mate.

But where I always like to finish these is getting you to share a personal happy habit or rewarding ritual or daily discipline that you think that you've employed over the time that's contributed most to your success? What would that be? Well, they kind of go over the years, don't they? But one motto I've always sort of stood by, what has stayed with me,

is about never leaving till tomorrow what you can do today. Yeah. basically on some of those times where i get to three to four o'clock in the afternoon i've got three things to get through and i know that if i get them done it's going to mean that tomorrow is going to be a brighter day and and it's going to be much less pressure on so i will always get myself to get it done um because otherwise it's a shit show the next day right absolutely and you might think oh well it's not going to take me long tomorrow but it always does and you always get a thousand interruptions so taking that bit of time to get it off the table

where when you can it certainly gives you a clean slate to start the next day with with some confidence mate so it's a timeless classic mate really enjoyed the chat if you were to sort of put a bow around this one of the key takeaways that you think we need to take from the conversation, particularly from a homeowner or refinance or property borrower perspective? Yep. Well, I think it's engage an experienced and knowledgeable mortgage broker. Don't be afraid to do that. They can help you on your property journey. Look for a broker that's part of a tight-knit team. Try and steer away from the one-man bands. Those have only been in the industry for a very short period. Never trust your bank because they're going to look after

their best interests and not yours. I'm paid to look after your best interests. That's what I'm here for. Makes you already interested in profits, really. If you don't ask, you don't get. Regularly review your loans or better still, get me to do it for you or your mortgage broker to do it for you. Otherwise, it would be about loan structure. Loan structure is important. Ensure your best interests are considered and maximized, really. The lowest lowest interest rate doesn't always equal lowest cost. There are alternative lenders. There's solutions that you probably haven't thought about.

Don't do co-security, as we talked about. Make sure you've got buffers in place and safety nets. Safety nets? Did I say safety nests? No. Make sure you've considered those and got them all in place and engage a professional who can talk you through that, who's done it thousands of times and can help you on your due.

Beautifully said, mate. Wrapped it up very neatly. There's a lot of gold in what you shared with us, mate. So for those that are listening and are really resonating with what you're sharing, how can they find out more and get more involved with you, mate? Well, look, we've got all the socials, mate. So I'm sure we share all the website details, some personal details. But yes, I'm happy for you to drop me a line.

Should I share my email address, Bushy? Absolutely. Yep. So my email address is Laurie, which is L-A-W-R-I-E at knowhowproperty. So that's K-N-O-W-H-O-W property, knowhowproperty.com.au. So if you're happy for anyone to email me directly for that,

we can hook up over Zoom, Teams, Whatever works, we'll meet face-to-face if you're in the same location or we'll be in the same location soon. So all that stuff, mate. Well, I really appreciate it. I feel like we've only really just scratched the surface of the wealth of wisdom that you bring to the table in this area, Laurie. And before we go, for those that are listening in

and are really enjoying the conversation, make sure if you've got any other questions that you want to ask of Laurie or other team members and other experts in the area, make sure you jump onto the Property Hub collective interactive Facebook community where we all get to share with other like-minded hardworking Aussies in a very safe environment

without any fear of it being sold to. So just jump onto Facebook or click on the link in the show notes and we look forward to continuing the conversation there. And finally, before we go, I just want to ask a big favour of everyone watching and listening today that's only going to take a couple of seconds

because only about 71% of you that watch and listen to the Property Hub podcast don't subscribe. So if you've ever enjoyed our shows and videos, I'd really like to ask you a big favor and that's to hit the subscribe button because it helps our channel more than you know. And I promise you that the more subscribers we get,

the bigger the channel is going to get, the bigger the best you're going to get and the better the content is going to get for you to help you moving forward. So thanks again for your time, Laurie. You've given us some great food for thought. And as always, we need to remember to get invested. So thanks, Laurie.

Thanks, Bush. See you, mate. Thanks for tuning in to Get Invested on the Property Hub podcast channel, your home for property investment insights and inspiration. And don't leave yet until you've taken the next step towards living by design by getting my award-winning book, Get Invested, absolutely free when you sign up at knowhowproperty.com.au or busheymartin.com.au.

And finally, make sure you subscribe to Property Hub to get your weekly dose of Get Invested inspiration along with every episode of Realty Talk, Australia's leading property show for red-hot property investing news and insights direct from industry leaders and influencers. Remember to always get invested in your knowledge and I look forward to seeing you next time.