You Should be Refinancing Your Property Right Now: Delaying will cost you!

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If you own property in Australia and you haven't reviewed your finances recently, you're making a massive mistake.
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And when I say recently, I don't talk about one to two years.
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I'm talking about in the last six months.
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Right now, there are a lot of things happening in the finance space.
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Property valuations are softening in a lot of markets.
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We've seen three interest rate increases this year, and the board is meeting today at the time of recording, and we'll probably see an increase.
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Banks are competing for interest rates.
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So today we're talking about all things with refinancing, what you should be looking at.
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And today we have Adrian from Ascent Property Finance on the podcast.
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Welcome to the show, Adrian.
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Thanks, Casey.
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Good to be back.
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It's good to good to have you on again, mate, and keen to unpack some bits and pieces with the finance piece at the moment.
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Yep.
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Yeah, 100%.
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Probably just before we get into it, just talking about, I guess, your background, your history.
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Yep.
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Just for anyone who doesn't know who you are.
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Yep.
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What's what's a bit of your history before getting into the broking space at Ascent?
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Yeah, 100%.
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So been with Ascent from I guess April, May now.
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Um and then in finance.
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Yeah, officially May.
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Then in finance broking from the 1st of 2025.
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And then prior to that at a commercial bank for about six to seven odd years.
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So at the commercial banks, I was managing a portfolio of about 160 mil, or business finance with clients with net worths up to 20 or 30 mil.
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Yep.
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And we did a lot of cash flow finance, did a lot of um goodwill lending, commercial property.
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Um and then prior to that was looking after small to medium businesses.
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So a lot of clients investing in the business, investing outside of the business, um, and just pretty much just the backbone of Australia, really.
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So a lot of different industries.
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Um so yeah.
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Yep.
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And you've also got an accounting background as well?
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I do, yeah.
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Don't forget that one.
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No, so I um I was actually studying full-time while I was working at um the commercial bank.
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So yeah, I thought it would just kind of work really nicely when I was working with clients.
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Obviously, working with business clients, you've got to understand how businesses work.
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Yeah.
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Um, obviously understand the numbers, and yeah, it just tied in really nicely.
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So I kind of have that financial acumen from that sort of things as well.
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Yeah.
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And I think it's super important.
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Obviously, you've got the finance piece and the structuring, but understanding that accountant side of things as well, right?
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Super powerful for the type of clients we focus on, right?
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Yep.
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Those people who want to build portfolios and start to use those sophisticated structures.
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100%.
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Super important.
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So getting into just the different topics that we're going to talk about today.
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The first one, when we're looking at those refinances, is don't assume your current rate is competitive.
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Yep.
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Um, obviously we spoke about it that in the opening, but talking to a lot of people at the moment, they could have refinanced in the last in the last six months, and it might not be competitive, let alone right at the start of the year.
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Yeah.
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Um so do you want to talk a little bit about that, why that's happening and why you should be looking at those rates at the moment?
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Yeah, definitely.
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Um I'd say even over the last four to five months, rates that they were offering are no longer really applicable.
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Things might be 0.15% higher, 0.25% higher.
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And it just really comes down to, you know, the the, I guess, current climate as what's happening around the banks.
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Obviously, with the tax reforms in May, um, a lot of applications with the banks have now decreased quite substantially.
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First home buyers decreased, investors decreased.
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Um, and so now banks are now fighting over, you know, the applications that are going on and they're much more competitive, which allows us to kind of go back to the banks that you know our clients have dealt with to then try and sharpen things up as well.
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So there's definitely a bit of that going on.
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Yep.
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Um, so it it's just the result of the current climate with the decrease in applications across the board.
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And that's I guess one of the positives that's come from it, right?
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It's like the the banks aren't doing massive lending like they were 12 months ago, so their revs down and trying to get more competitive so they're not losing stuff off their book.
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Yep.
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So that's where that competition piece can come into it, which is good.
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Um I guess another thing, and we're going to talk about structure a little bit today, but sometimes when we're looking at those clients as well, it's not only just purely a rate point of view and that being dated, but it's well, how have they structured the deal?
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Yep.
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If they've structured it incorrectly, sometimes they're on a rate that's higher.
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Yep.
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When if it's structured correctly, you can drop it.
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And we've spoken to a few people.
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Yeah.
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Their brokers just butchered the structure of things.
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Yeah, we've we've seen quite a few things recently where people have, I guess brokers have submitted stuff as um investment property loans instead of owner oct to get a bit of uh servicing capacity there, which is a bit disappointing from I guess just the industry in general.
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Um, but just understanding the cash flows of the business, understanding the structures.
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You know, if you've got home loan debt and you've got investment debt, your investment debt should never be on PI.
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You always want to try and focus on paying down your home loan debt first.
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So things like that, especially with the negative gearing changes as well, it kind of even makes even more sense to have that debt on interest only.
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So just things like that to obviously, you know, maximize your cash flows at it coming in as well.
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So and this is like this is something super powerful, and people ask this all the time: principal in interest or interest only, what should I do?
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Yep.
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And it's like if you get that asset right and we're holding long term anyway, yeah, as that value of that property increases, yeah, our LVR drops naturally, even if we're holding that debt at the exact exact same dollar amount.
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Yeah.
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And then we have inflation that comes in off the back of that and devalues that debt.
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So if we've got 500k today in 15 years' time, that 500k is going to be worth a lot less.
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Yep.
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And our property values reset as well.
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So it's super important to be conservative with that cash flow.
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And I I say to people too, it's like down the track, you can always flick one over to principal and interest if you want to start reducing that, right?
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That leads, we've already just led into number two.
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And it is really that bad lending structure from those brokers.
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They don't have, they just don't have the knowledge to really know how to structure that deal correctly, right?
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Yeah.
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It's there's a lot of brokers out there.
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Unfortunately, there's a low entry point to get in, they're not always quality.
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And sometimes because of that, they are better suited to maybe those vanilla deals where there's not as much structure, strategy to be able to continue moving forward.
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Yep.
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Refinancing isn't just about getting the cheapest rate.
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No.
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Um, I can think of half a dozen people I've spoken to this year.
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Yep.
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We don't want to do anything because it's going to end up in being a higher rate.
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And it it does my brain in to be honest, especially me.
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Yeah.
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I absorbed some of these higher rates with my lending.
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Yep.
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Are you able to talk on why that's the case from not always the cheapest rate?
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Because it just pigeonholes you.
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Yeah.
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Look, at the end of the day, it it really comes down to your strategy and what you're trying to achieve.
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So, you know, for yourself and me as well, really depends on, you know, what structure and strategy you're you're proceeding with.
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Um, obviously, rate is is always going to be a factor in your decision making, right?
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But there's going to be multiple factors there as well.
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So, you know, if you're going down that low doc method, you are going to pay that, you know, that additional kind of um interest rate adjustment there.
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Yeah.
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Um, but at the end of the day, if that allows you to continue progressing, it makes more sense to get in now rather than waiting another year just to kind of get your financials done.
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Like we had a client yesterday who's kind of in the middle of, you know, they're they've just started as a a self-employed business back in May, and now, you know, they're halfway, they've probably done, let's say, five or six months, but they haven't done a full financial year.
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Yep.
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They want to do something now, but you know, your traditional lending is look, you have to have at least one year's financials.
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Yep.
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Big four banks not going to help you.
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So, you know, how do we look at alternate income verification methods, whether that's an accountants deck, whether that's, you know, Bass or bank statements, there's alternatives there, but because it's a higher risk to the bank, then there's that that interest kind of adjustment.
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So yeah.
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And it's still like we because we might have a higher rate, but there might be multiple options within that.
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Yeah.
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And then we can still go for the lowest rate based on these two, three, four lenders, whatever that looks like.
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But unfortunately, unless you're the lowest risk to the lender, you're not going to get the lowest rate.
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No.
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And to get the lowest rate, you're typically only going to have one, maybe two properties.
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Yeah.
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Because once you start to build up, right, you're starting to explore other lenders and you're just simply not the lowest risk.
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Yeah.
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And look, even when our clients have, you know, even one or two properties, we're not just focusing on rate.
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We'll usually focus on the valuation.
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So, you know, we'll do value valuations across multiple banks, see who's got the highest value, and then kind of determine, you know, you might have three banks, and then depending out of those three, then go for the rate.
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So it's not just chasing the rate.
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Um, there's more to it rather than just, you know, who's got the cheapest rate because nine times out of ten, they probably won't have a high valuation and then everything's out the door anyway.
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So 100%.
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And it's like, let's call it, you might pay five, ten grand more a year in repayments.
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It wouldn't even be that.
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Like, you know, and that's that's being over-exaggerating, right?
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But it's like if you can get into another asset and that asset doubles in value over 15 years, like it's it's just an absolute no-brainer.
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And then if you get that asset selection right in the first couple of years, you pull equity, and you can go again into another one a lot sooner.
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Um and and not to mention, sometimes it's just increasing that borrowing capacity too, right?
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So you look at this lender with um a lower, lower interest rate, and one of the lenders I used to work with won't name him, and yeah, and dog them here today, but they they were vanilla.
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They wanted to work with the the mum and dads purchase their own occupied property, yeah.
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But then from a servicing point of view, their servicing isn't strong because again, it's coming back to that low-risk environment where we can look at other lenders, they got high interest rates, but their borrowing capacity is stronger.
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So instead of not being able to get into another one, you can as well.
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So there's a lot of levels to that and why you need to look at that, right?
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Loyalty to your bank is costing you.
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Yeah.
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It's one of those tailors of all time, isn't it?
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Yeah.
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The longer you stay with your bank, the more you pay.
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Um, unfortunately, banks are a business.
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Yep.
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So they're gonna try and, you know, have as much low touch as possible, and you know, hopefully you don't call them and essentially things just stay as is.
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Yeah.
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Um you'll find that, you know, to actually get a competitive rate, you'll need to file a discharge to actually, you know, at least get the tables turning for them, which is very frustrating for a lot of customers because, you know, if you've been with the bank for a long time, you know, yes, you might have some loyalty, but it's just more the um not difficulty, but just the I guess the admin work of moving to the banks can be, you know, frustrating at some point.
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So a lot of people would rather just stay where they are, but it's just gonna cost you.
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You've got to be proactive.
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Yeah.
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You've got to be proactive.
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Yep.
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Um I'm sure you probably know the person I'm I'm talking about, which is someone who could have refinance, move, save money, yep, thousands of dollars in repayments per year, and says the admin's too hard.
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Yeah.
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Couple hours work for two, three, four grand.
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Like you can't get that in your job.
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No.
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Prioritize getting that done.
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Working at the the banks as well.
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Sometimes you're on a product for one to two years with that low rate, and then it moves across to a different product, and then your rate increases dramatically.
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Yeah.
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And look, obviously discussing as well, banks are being competitive at the moment, but it's not always the case.
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So you it's up to you to proactively look at your finances and make sure you're on the most competitive rate.
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And sometimes that means you've got to put a bit of work in to move and get better rates.
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100%.
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Banks want quality borrowers and it's getting competitive.
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We've kind of already touched on that, right?
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Like right now, and it's not always the case with the market that we're in, but they want your business right now more than ever because their revenue's down.
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They make money off the interest, the the dollar amounts they're doing is less.
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Yep.
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So being able to look at that now is just going to help you get some of those more competitive rates.
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Yeah, definitely.
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And I suppose from the bank's point of view as well, they've kind of got tiers.
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So, you know, from your 70 to 80% LBR, that creates more of a risk to the bank.
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Um, but then, you know, once you go over to that one million dollar threshold with the bank, again, they've got more appetite to reduce the rates.
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So, you know, you I guess if you're comparing your friend that's got, you know, one and a half million at the door and you've got 200k at the door, it's going to be very two different conversations with the bank.
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Yeah.
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So, you know, once the lending really goes below, say, four, maybe even five hundred, they almost don't even want to know you.
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Yeah.
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Like they they they don't care because it's such little, I guess, lending to them.
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It's it's it's nothing to them, but it's obviously a lot to you, right?
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So it's you know, it it's working with the lenders who don't have those thresholds.
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You know, there are lenders out there that, you know, that's their rate across the board, no matter what the lending is.
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So, you know, having those conversations is look, you know, you might be paying a high rate, you might want to talk to a lender that doesn't have those thresholds.
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Yeah so it's just understanding what those banks are and where to go.
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Um, but I guess also with that as well as you've got to be mindful of if you only own owed 200 grand, even if you switched for half a percent, it's probably not gonna be almost worth it, right?
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So it's understanding the opportunity cost to actually doing that.
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I've had quite a few conversations where I said, look, you aren't on the most competitive rate at the moment, but for you to move, it's not gonna make sense.
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And if you're not doing anything else, yeah, then it's not worth your time.
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Yeah.
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So it's understanding where that opportunity cost is for the clients as well.
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Yeah, for sure.
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And I think like sometimes you have that conversation, you look at it and you go, okay, sweet.
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Well, I at least I know right now that I'm on it makes sense, right?
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Yeah.
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But it's just something, again, you've got to be so proactive with.
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Yeah, just having those conversations at the very least, right?
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Understanding where you're sitting.
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Because, you know, I see this every single day.
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You might see an ad on the news or your friend might bring something up.
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So you're not having those conversations every day.
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You don't know what's competitive, what's not.
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So I think it's for me, seeing some of these people that have refinanced in the last six months and their rate is outdated now.
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Yeah.
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I don't think I've ever seen it, probably as much disparity as that, right?
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Like it can be so outdated so quickly.
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And again, at the time of recording, the RBA's meeting, the Savo, we're gonna get a rate increase.
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Yeah, I'm happy to be very wrong on that, and they hold it.
00:16:02.639 --> 00:16:08.559
Um But it's just you just gotta you just gotta revisit and look at things too.
00:16:08.799 --> 00:16:18.480
100% and me trying to be optimistic with this whole rate thing, it's like are the banks gonna pass on the the 0.25% if it increases today?
00:16:18.720 --> 00:16:31.440
Obviously, they will they will they will all flow, but it's like will they only pass on 1.5 to try and remain competitive and encourage people to still look at those refinances or purchases?
00:16:31.679 --> 00:16:34.799
It it'll be interesting to kind of see.
00:16:35.200 --> 00:16:37.919
Um valuations are softening.
00:16:38.159 --> 00:16:38.559
Yep.
00:16:38.960 --> 00:16:44.320
And this is this is something that people don't get, depending on your area.
00:16:45.279 --> 00:16:46.480
And it depends.
00:16:46.559 --> 00:16:50.080
Like higher quartile, they're gonna be correcting and dropping a lot more.
00:16:50.399 --> 00:16:50.559
Yep.
00:16:50.879 --> 00:16:54.000
High quartile's probably dropped off 10% in some areas.
00:16:54.159 --> 00:16:58.399
Some areas sat flat, some areas might have only dropped a percent or two.
00:16:58.559 --> 00:16:58.960
Yep.
00:16:59.279 --> 00:17:07.519
But those valuations coming in softer means that if you wait another month, yeah, you're you're not gonna be able to pull as much equity, right?
00:17:07.599 --> 00:17:07.680
Yeah.
00:17:07.839 --> 00:17:14.400
So if your goal is to continue building, take advantage of the environment, like you want to be looking at those valves now, right?
00:17:14.480 --> 00:17:14.799
Yep.
00:17:14.960 --> 00:17:18.319
To get the most equity that you can constru extract.
00:17:18.640 --> 00:17:19.039
Exactly.
00:17:19.119 --> 00:17:22.640
And I think there's, I guess, two things at play there, right?
00:17:22.720 --> 00:17:28.079
Is that you know, there's a what's going on in the market and what the valuers are doing are very different.
00:17:28.400 --> 00:17:36.240
So you might have a market that's sitting flat, but it's still, you know, it's potentially that lower entry level point, still very active.
00:17:36.319 --> 00:17:49.680
A lot of people are buying, but because of everything else that's going on at the moment, those valuations are becoming much, much softer because you know, they valuers as a I guess as an industry, they don't want that risk.
00:17:49.839 --> 00:17:53.279
And, you know, it again it comes back to an insurance point of view as well.
00:17:53.359 --> 00:17:53.440
Yeah.
00:17:53.680 --> 00:17:58.079
But they don't want that risk associated to them, which then obviously exposes the bank.
00:17:58.640 --> 00:18:07.519
So, you know, it's it's safer for them to provide a softer valuation in case you know you've got people over-leveraging, which, you know, as people do, that's what happened, right?
00:18:08.000 --> 00:18:13.680
So, you know, it's it's more of a safety option for them to soften it because of what's going on.
00:18:13.759 --> 00:18:14.000
Yep.
00:18:14.160 --> 00:18:21.440
Um, but then, you know, things I mean, over the last month or two, we've seen things soften quite a bit.
00:18:21.920 --> 00:18:25.440
Um, and it's it's changed applications quite significantly.
00:18:25.599 --> 00:18:26.000
Yeah.
00:18:26.240 --> 00:18:30.559
So and again, we we're talking about, we just picked Adrian up from the airport this morning.
00:18:30.799 --> 00:18:38.079
We're talking about valuation shouldn't fluctuate so much on one property between multiple values.
00:18:38.160 --> 00:18:39.599
But at the end of the day, it's their opinion.
00:18:39.680 --> 00:18:39.759
Yeah.
00:18:39.920 --> 00:18:43.440
And they're reading all these things and they're starting to be more conservative.
00:18:43.839 --> 00:18:48.000
And part of that valuation and their assessment is talking about the market as well, right?
00:18:48.240 --> 00:18:48.559
100%.
00:18:48.960 --> 00:18:49.839
They're gonna rate that.
00:18:49.920 --> 00:18:50.240
Yep.
00:18:50.400 --> 00:18:52.079
And that forms part of it.
00:18:52.240 --> 00:19:06.559
So if things continue to correct again, we get another rate reduction to uh sorry, rate increase today, it's gonna it's gonna hurt our borrowing capacity a little bit, and then it just naturally flows through.
00:19:06.640 --> 00:19:07.440
So pull it out.
00:19:07.519 --> 00:19:10.079
And sometimes you you're not even gonna touch that equity, right?
00:19:10.160 --> 00:19:10.480
Yeah, exactly.
00:19:10.640 --> 00:19:11.920
You might just sit it there.
00:19:12.319 --> 00:19:17.680
If if the valuation is gonna be 50k shorter in six months' time, just pull it, sit it in your offset account.
00:19:17.759 --> 00:19:18.960
You don't have to do anything with it.
00:19:19.039 --> 00:19:19.119
Yeah.
00:19:19.200 --> 00:19:23.200
Don't get it down and spend it at the pub or on the gambling or anything.
00:19:23.519 --> 00:19:28.880
But it's just again, it just comes back to being proactive to be able to do that.
00:19:28.960 --> 00:19:30.160
Like I've personally done it, right?
00:19:30.319 --> 00:19:30.640
Yeah, yeah.
00:19:30.799 --> 00:19:33.440
Um pulled equity and just let it sitting there.
00:19:33.519 --> 00:19:38.240
Some of it's just as a bit of a cash buffer to absorb holding costs and the rest of it.
00:19:38.319 --> 00:19:38.720
Yep.
00:19:38.960 --> 00:19:47.440
But again, just being proactive because one of my properties, my owner Oc, I was looking at it the other day, it's it's starting to drop and correct.
00:19:47.519 --> 00:19:53.920
So the val that we got six weeks, eight weeks ago, whenever it was, is naturally going to be lower than it is today.
00:19:54.160 --> 00:19:54.400
Yeah.
00:19:54.559 --> 00:19:59.279
And you bring up a very good point that market risk is actually on every valuation report.
00:19:59.359 --> 00:19:59.519
Yeah.
00:19:59.759 --> 00:20:07.920
And so from I think about, I mean, from memory of between 2020 to 2025, it's usually between one to five.
00:20:08.000 --> 00:20:08.160
Yep.
00:20:08.319 --> 00:20:09.680
And it would be number four.
00:20:09.759 --> 00:20:09.839
Yeah.
00:20:10.000 --> 00:20:18.319
It would be a high risk almost every single time, no matter what the valuation, no matter where it was, that market risk was a high risk every single time.
00:20:18.799 --> 00:20:25.839
And from a commercial point of view, back in the banks, you'd have to talk about it on every single application because it was a high risk to the bank.
00:20:26.000 --> 00:20:30.960
And you know, it it it was just the time at the point of the the climate.
00:20:31.440 --> 00:20:34.000
Like it's just it was just standard, right?
00:20:34.240 --> 00:20:34.960
Yeah, exactly.
00:20:35.119 --> 00:20:40.000
Yeah, and this is some of the things that people don't realise that come up in invaluations.
00:20:40.160 --> 00:20:46.720
There could be um we have one recently, I've only had it a few times with the Bail, but it's like urgent work's required.
00:20:46.880 --> 00:20:47.119
Yep.
00:20:47.279 --> 00:20:49.200
Um so that flags something with the bank.
00:20:49.279 --> 00:20:49.359
Yeah.
00:20:49.519 --> 00:20:54.240
And it's like on the pest and build, it wasn't identified and not an issue, but now the value wants something.
00:20:54.400 --> 00:20:54.880
Yep.
00:20:55.039 --> 00:20:58.319
Um, but the value doesn't know how much it's actually going to cost.
00:20:58.400 --> 00:21:00.720
But they said you need to fix it and then you need to provide it to the bank.
00:21:00.799 --> 00:21:07.839
And there's just so many little things in that report that they are assessing that you you don't realise are going on.
00:21:08.079 --> 00:21:08.559
Exactly.
00:21:08.799 --> 00:21:23.119
Um another one is and probably in the last two weeks we've seen this conversation a couple of times is people that are obviously rates have increased, right?
00:21:23.200 --> 00:21:25.839
So they've got less surplus cash.
00:21:26.000 --> 00:21:26.240
Yep.
00:21:26.480 --> 00:21:34.160
They're they're putting more into that mortgage at the moment and uh living more week to week holding some of that property.
00:21:34.319 --> 00:21:34.720
Yeah.
00:21:35.519 --> 00:21:39.200
And they might be looking to sell the property now to pull it.
00:21:39.279 --> 00:21:43.119
They know it's gone up 200, 300k, some of the properties we're bought over the last few years.
00:21:43.279 --> 00:21:43.519
Yep.
00:21:43.759 --> 00:21:49.680
But it's simply refinance, pull that equity we just discussed, sit it there as a cash buffer.
00:21:49.759 --> 00:21:50.000
Yeah.
00:21:50.240 --> 00:21:54.000
Or you pull 50k out, and then it doesn't have to come from your income anymore.
00:21:54.240 --> 00:21:54.480
Exactly.
00:21:55.039 --> 00:21:56.240
I think people don't get that.
00:21:56.319 --> 00:21:58.000
They're like, fuck, I've got to sell this property.
00:21:58.160 --> 00:21:58.319
Yep.
00:21:58.559 --> 00:21:59.759
So no, it's just the it's in the form.
00:22:01.119 --> 00:22:01.759
Yeah, 100%.
00:22:02.000 --> 00:22:06.880
Pulling equity and using it for expenses is just going to alleviate your cash flow a bit more.
00:22:06.960 --> 00:22:07.119
Yeah.
00:22:07.279 --> 00:22:10.880
And you're just gonna you're not gonna feel that that pressure as much.
00:22:11.119 --> 00:22:16.240
You know, as residential property, nine times out of ten, it's going to be, you know, negative cash flow.
00:22:16.400 --> 00:22:21.440
So it's having those buffers in place to make sure that you're comfortable with affording it.
00:22:21.519 --> 00:22:21.599
Yeah.
00:22:21.839 --> 00:22:27.519
Because the last thing that you want to do is be selling a property out at the wrong point of the cycle, right?
00:22:27.599 --> 00:22:27.839
Yeah.
00:22:28.000 --> 00:22:32.799
So, you know, it's important to make sure that things are being done at the right time.
00:22:32.960 --> 00:22:33.519
Yeah.
00:22:33.759 --> 00:22:46.880
And it's I I see clients and because things have done well in some of their properties over the last couple of years, 200, 300, 400K increase, whatever it is, they want to check out of that now.
00:22:47.119 --> 00:22:47.359
Yep.
00:22:47.680 --> 00:22:53.440
But it's like sometimes you just want to hold for that little bit longer because you haven't held quite long enough yet.
00:22:53.680 --> 00:22:54.079
Exactly.
00:22:54.319 --> 00:22:57.599
Just to really get that net wealth base out of it.
00:22:57.839 --> 00:23:06.000
And it's the same thing again, coming back to we're helping clients at the moment pull equity, and then they've got like a cash buffer.
00:23:06.079 --> 00:23:07.680
So they're buying an investment property.
00:23:07.759 --> 00:23:07.839
Yeah.
00:23:08.079 --> 00:23:10.240
It's not going to cost them anything to hold.
00:23:10.480 --> 00:23:12.160
They haven't had to put a cash deposit in.
00:23:12.319 --> 00:23:12.559
Yep.
00:23:12.960 --> 00:23:18.240
But uh it might be enough cash there that doesn't come from their income for 12 months.
00:23:18.400 --> 00:23:18.640
Yep.
00:23:18.880 --> 00:23:20.880
And they've been able to get into that next asset.
00:23:21.119 --> 00:23:21.359
Yeah.
00:23:21.680 --> 00:23:25.359
So it's really important just again, look at that equity.
00:23:25.519 --> 00:23:25.759
Yep.
00:23:26.000 --> 00:23:26.720
What you can do there.
00:23:26.799 --> 00:23:28.400
And it's that sophisticated piece.
00:23:29.279 --> 00:23:30.799
So you can you can keep building.
00:23:30.880 --> 00:23:38.720
Because a lot of people just don't understand that that cash buffer can help you absorb that to keep going, keep building.
00:23:38.799 --> 00:23:42.640
And it can be quite powerful if someone thought they couldn't get into an asset.
00:23:42.720 --> 00:23:44.559
They can get an asset for two to three years.
00:23:44.960 --> 00:23:45.759
Client last week.
00:23:45.920 --> 00:23:46.000
Yep.
00:23:46.319 --> 00:23:54.240
Going to get them into an asset, maybe another one, and then they're going to then look at offloading one of those in the future so they can upgrade their owner oc.
00:23:54.400 --> 00:23:54.640
Yep.
00:23:54.799 --> 00:23:56.720
But their debt level will remain the same.
00:23:56.880 --> 00:24:01.039
If not, might be able to reduce it, but they're getting a better quality exactly.
00:24:01.359 --> 00:24:01.519
Right.
00:24:01.759 --> 00:24:08.480
Instead of trying to save up, slog away, and then increase their debt on their owner oc.
00:24:09.680 --> 00:24:10.640
Principal and interest.
00:24:10.720 --> 00:24:13.279
We've already kind of talked through that one.
00:24:15.759 --> 00:24:19.200
Again, you don't have to have everything principal and interest.
00:24:19.440 --> 00:24:27.200
You don't have to pay it down, especially if you've got that sophisticated strategy where you're building wealth, you're getting two, three, four, five properties.
00:24:27.759 --> 00:24:37.599
At some point you're going to enter a phase where you're not in accumulation phase, you're now looking to exit, you're looking to a debt reduction phase.
00:24:37.759 --> 00:24:40.240
You don't have to be manually paying that shit off each week.
00:24:40.559 --> 00:24:44.160
It might be, well, what asset can we offload now?
00:24:44.480 --> 00:24:47.920
It might be a lower yield asset with a high net wealth position.
00:24:48.160 --> 00:24:50.160
We can sell that asset and start to reduce debt.
00:24:50.400 --> 00:24:50.640
Yep.
00:24:50.799 --> 00:24:51.519
Yeah, definitely.
00:24:51.920 --> 00:25:01.200
And I think that's, you know, once you're in a position where you can start doing that debt reduction, then you know, it doesn't have to be immediately.
00:25:01.359 --> 00:25:10.319
Like let's say, for example, five years down the track, your own aux paid off and you don't have any home loan debt anymore, that's when you can start paying that debt down if you want.
00:25:10.400 --> 00:25:10.559
Yep.
00:25:10.720 --> 00:25:12.319
And you have that additional cash flow.
00:25:12.480 --> 00:25:27.680
But if you've got five properties that are all you know leveraged to say 80 or even 105% loan to value ratio, each property, if they're on PI, that's going to be around five to seven grand additional every single year for each of those properties.
00:25:27.839 --> 00:25:30.559
So if you're at five, that's you know 35 grand or something.
00:25:30.960 --> 00:25:33.839
So it's like it it adds up a lot.
00:25:34.000 --> 00:25:46.160
Um and the other thing is when it's on interest only, with that additional five grand or seven grand or whatever that is in principal repayments, you can just put that back into the offset account and it works the exact same way.
00:25:46.400 --> 00:25:46.559
Yeah.
00:25:46.720 --> 00:25:48.960
And you've got the flexibility to spend it however you want to.
00:25:49.359 --> 00:25:49.759
Exactly.
00:25:50.079 --> 00:25:51.839
So yeah.
00:25:52.160 --> 00:25:55.039
People people don't get that sometimes, do they?
00:25:55.279 --> 00:25:55.519
Yep.
00:25:55.599 --> 00:25:56.079
Yep.
00:25:56.400 --> 00:26:05.759
And like that additional right, you're putting it back into that offset account and still offsetting it, still saving your interest the same way.
00:26:05.839 --> 00:26:06.079
Yep.
00:26:06.240 --> 00:26:08.079
And again, you've got a cash buffer there.
00:26:08.400 --> 00:26:20.160
So whatever happens, worst case scenario, you've got access to some of that cash where you can put it towards whatever you need to, which is quite powerful.
00:26:20.400 --> 00:26:24.799
And I think it just comes down to managing from a transactional basis as well.
00:26:24.880 --> 00:26:26.240
You know, we've talked about it quite a bit.
00:26:26.319 --> 00:26:34.000
I talked about it with all my clients is you know, you've got one offset account, you've got all the rentable income coming in, you've got all the expenses going out.
00:26:34.160 --> 00:26:34.480
Yep.
00:26:34.720 --> 00:26:44.720
Before you even purchase that property, you know exactly what every single expense is going to be and run through that cash flow with a client so that they know how much each property is going to cost them.
00:26:45.039 --> 00:26:52.079
Then if they want to go one step further, if the property's going to cost them 10 grand, they can put 10 grand into the offset account.
00:26:52.240 --> 00:26:54.000
You don't have to look at it for the next year.
00:26:54.160 --> 00:26:54.480
Yeah.
00:26:54.720 --> 00:26:56.400
Like it can be as simple as that.
00:26:56.480 --> 00:26:58.480
It can be as low touch as possible.
00:26:58.559 --> 00:26:58.720
Yeah.
00:26:58.960 --> 00:27:07.920
That's what I do myself because I don't want to, you know, be fussing around transferring funds in, transferring funds out each month just to make sure that things are getting paid.
00:27:08.400 --> 00:27:16.799
Or, you know, a lot of people what they do is they've got rental c income coming into one account, they've got expenses going at it for one account, and they've just got shit going everywhere.
00:27:17.119 --> 00:27:18.160
Feel sorry for their accountant.
00:27:18.480 --> 00:27:26.400
And it's just, you know, that's where the issues arise, that's where the cash flow strains strains come from, is because they don't know where things are going.
00:27:26.480 --> 00:27:26.880
Yeah.
00:27:27.119 --> 00:27:37.920
So, you know, you can you can manage it in such a low-touch way for you know things to just run smoothly year on year, yeah, and you won't even know that it's there.
00:27:38.000 --> 00:27:38.319
Yeah.
00:27:38.799 --> 00:27:41.599
And this, like I say it all the time, and it does my brain in.
00:27:41.839 --> 00:27:48.160
I'm desensitized to this doing it all the time, and obviously have a lot of debt.
00:27:48.480 --> 00:27:50.240
Um don't dwell on that.
00:27:50.480 --> 00:27:54.400
But it it's not as scary as you think it is.
00:27:54.640 --> 00:27:57.839
Like, yes, you're increasing your debt, right?
00:27:58.240 --> 00:28:02.160
But it's getting into an asset that's performing, and it can literally be that simple.
00:28:02.240 --> 00:28:09.119
You don't have to worry about it coming out of your pocket each week if you've just got that structure set up in the first place.
00:28:09.200 --> 00:28:09.279
Yeah.
00:28:09.599 --> 00:28:10.799
Again, it's just being proactive.
00:28:11.039 --> 00:28:11.839
Yep, 100%.
00:28:12.400 --> 00:28:18.640
Um the last one I want to touch on, and it's more for I guess more for investors.
00:28:18.880 --> 00:28:21.039
And there's a couple of reasons why.
00:28:21.440 --> 00:28:27.359
And right now, in 12 months' time, rates are most likely going to be lower than they are today.
00:28:27.519 --> 00:28:28.000
Yep.
00:28:28.400 --> 00:28:31.119
Rents are going to be higher than they are today.
00:28:31.359 --> 00:28:34.079
And that's because of so many of these changes.
00:28:34.559 --> 00:28:36.559
Vacancy rates are going to drop with less investors.
00:28:36.640 --> 00:28:36.720
Yeah.
00:28:36.960 --> 00:28:38.160
Rents are naturally going to increase.
00:28:38.240 --> 00:28:39.839
It's just a supply and demand issue.
00:28:40.000 --> 00:28:40.160
Yep.
00:28:40.319 --> 00:28:46.240
So in 12 months' time, we're going to have increased rents, we're going to have lower repayments.
00:28:46.319 --> 00:28:46.480
Yep.
00:28:46.720 --> 00:28:49.359
So our position is going to be a lot stronger than it is today.
00:28:49.920 --> 00:29:00.480
But you can get in now and take advantage of some of the really good buying because in 12 months' time everyone's going to be scratching their head going, fuck, I should have bought back then at a discount, competing with less people.
00:29:00.799 --> 00:29:01.119
Yep.
00:29:01.440 --> 00:29:05.680
Even some of the macro changes as well, you know, they've got the election coming up in Melbourne.
00:29:05.839 --> 00:29:09.680
That's going to be a big play to see what happens there.
00:29:10.000 --> 00:29:13.920
Um, but yeah, it it just comes down to supply and demand, right?
00:29:14.000 --> 00:29:25.759
So and again, if you can get those structures in place now where you've got holding costs for 12 months, where you don't have to worry about it coming, you don't worry about it whatsoever.
00:29:25.920 --> 00:29:28.480
12 months time, it's costing you less, your rents are gone up.
00:29:28.559 --> 00:29:28.880
Yep.
00:29:29.119 --> 00:29:32.960
It's it's just a no-brainer to to take advantage now.
00:29:33.119 --> 00:29:42.880
And there's a lot of negativity out there, but it's not it's not that scary, especially if you're going into the right marketplaces in that more affordable um piece.
00:29:43.039 --> 00:29:43.200
Yeah.
00:29:43.440 --> 00:29:45.039
Some are going to sit flat for a period of time.
00:29:45.119 --> 00:29:45.279
Yeah.
00:29:45.440 --> 00:29:50.720
They're not correcting 10% like the high quartile, the one mil plus, the 1.5 plus.
00:29:50.960 --> 00:29:56.720
And some assets that we're competing on at the moment going to market, they're going 10-15% over list price.
00:29:56.880 --> 00:29:57.119
Yeah.
00:29:57.599 --> 00:30:01.440
Um, so there is demand in the right asset still now.
00:30:01.680 --> 00:30:02.799
And I think people don't care.
00:30:03.119 --> 00:30:11.839
We've we've kind of, I mean, you've you've changed as far as, you know, we've shifted the kind of asset type as well that's kind of targeting because of the tax reforms.
00:30:11.920 --> 00:30:12.079
Yep.
00:30:12.319 --> 00:30:17.200
Because of that cash flow strain, you know, that negative gearing piece was never a strategy.
00:30:17.279 --> 00:30:17.519
Yeah.
00:30:17.680 --> 00:30:19.759
But it obviously helped with your cash flow, right?
00:30:19.920 --> 00:30:25.200
So, you know, it made a big difference, especially when you're on 45 cents in your dollar from a tax point of view.
00:30:25.359 --> 00:30:28.559
Instead of paying 20K out of pocket, you're now paying, let's say, 12 grand.
00:30:28.880 --> 00:30:30.000
Makes a big difference, right?
00:30:30.079 --> 00:30:30.240
Yep.
00:30:30.400 --> 00:30:39.839
So it's now targeting, you know, potentially a more, you know, stronger cash flow asset type, which, you know, doesn't have that same kind of burden.
00:30:39.920 --> 00:30:40.799
So Yeah.
00:30:41.119 --> 00:30:45.039
And it's like it's not something like where we're just looking from a cash flow perspective.
00:30:45.119 --> 00:30:45.279
Right.
00:30:45.440 --> 00:30:45.680
Of course.
00:30:46.079 --> 00:30:52.160
It has to be fundamentally in that in that position where it's going to grow strongly over the next year.
00:30:52.240 --> 00:30:54.000
100%, right?
00:30:54.079 --> 00:30:55.279
So it's that delicate balance.
00:30:55.759 --> 00:30:57.039
Never chasing a yield, right?
00:30:57.119 --> 00:30:59.519
You're just always chasing the growth and the resi.
00:30:59.680 --> 00:31:00.319
So Yeah.
00:31:00.400 --> 00:31:00.720
Yeah.
00:31:00.880 --> 00:31:04.720
The growth is what really gets it, gets it there.
00:31:05.039 --> 00:31:06.160
That's it for today.
00:31:06.319 --> 00:31:15.759
I hope that adds a lot of value to everyone from that finance piece on those those different topics.
00:31:16.000 --> 00:31:27.200
If you're listening to this, you need help with uh a rate review or a restructure review, make sure everything is structured in the way you want it to be.
00:31:27.279 --> 00:31:31.200
Um, you can go over to Ascendpropertyfinance.com.au.
00:31:31.519 --> 00:31:33.119
You can book in a call with Adrian.
00:31:33.200 --> 00:31:45.759
He can catch up, assess everything, and we can see if we can add some value to be able to help you reduce that, get it structured right, or continuing to build the portfolio.
00:31:46.079 --> 00:31:47.200
Thanks for coming on, Adrian.
00:31:47.279 --> 00:31:47.599
Thanks for having me.
00:31:47.759 --> 00:31:48.240
Appreciate it.
00:31:48.480 --> 00:31:50.240
And see you guys on the next episode.
00:31:50.480 --> 00:31:50.880
Bye.