Episode transcript
Parag Dixit
Hi, Julius. How are you?
Julius
I'm good, Parag. How are you?
Parag Dixit
I'm going very well. Thank you very much. How you enjoying the post-budget blues?
Julius
Yes, different strategies, lots of different kind of properties. We are buying lots of different questions,
Parag Dixit
lots of lots of changes, lots of questions. Yes, and that's why we are all here. Welcome, guys. Welcome to our brand new podcast. We will be discussing why affordable and positive cash flow properties are now becoming important again. Why people are vying for that. We will take you through why investors, you know, start whether ignoring all these cash flow positive properties for all this time, but interest rates, higher interest rates, holding cost changes have now changed the debate between capital growth and cash flow investing, which kind of suburbs are investors talking. We'll talk about that, new strategies, what new investors are thinking, what are they thinking differently from others. And then, obviously, we'll touch upon at the end of, is the landscape changing forever now with this new budget and all that stuff, which has come up, but all right. Okay, let's, let's, let's get on to virtually. What do you think investors really ignored cash flow for all these years, right?
Julius
Yeah, so when the interest rates were okay, when you compare between 2021 to 2023 four multiple scenarios, so during pre-COVID, it's around 4%
Parag Dixit
Yeah,
Julius
property prices were not that great. Yields were okay, so lots of people were investing in Sydney and surrounding 22 onwards. Lot of options have opened, like lot of people start buying in Perth, Adelaide, Brisbane. Over there, the property prices are in mid fours to 500 in very good support with 600,000 yields of more than 6% interest 4% Lots of properties were positively cash flowed,
Parag Dixit
correct.
Julius
So, only agenda was to getting into high capital growth investments, correct? Yeah, correct. During Covid, the interest rate suddenly went down, property market have gone up immensely high in lot of pockets and across entire Australia, so investor had a choice. Okay, the cash flow was not an issue at all.
Parag Dixit
Absolutely correct,
Julius
because you still have a lot of buffer, your expenses for the properties is lower because the major cost to hold the property is interest plus all your cost, but the major cost was not that high because of the lower interest rate, and then expectations was getting it towards the higher capital growth properties. When interest rate started rising, still there was a hope that they'll go down, and property prices were moderate for the last 22 years. With interest rate rising, the supply was lower, demand was extremely higher towards the property market, and then what we've seen is property prices have gone up significantly, so there is a situation where property yields are close to four and a half percent, but interest rates are around more than 6%
Parag Dixit
six and a half, seven six and a
Julius
half to 7% depends on what kind of loan you get personal, yeah, and now the property prices have gone up significantly, that the amount of gap between the yields is significantly higher in $1 value,
Parag Dixit
yeah, yeah, correct, correct, yeah, you're so right, so when you're talking of an interest rate of 2% 3% then even a 4% your rental yield is good enough, you know. I, it's, it's covering my cash flow, even some kind of cost. Also, it covers, doesn't bother me, doesn't impact my lifestyle. That was my old investment property mindset, you know. I'll get even if it does, but I'm getting negative gearing, so it chuck it away into the tax return. It takes away some of my income, some part of it comes back from the income tax, so I'm fine with it. I'm happy keeping my rent slower. Let the tenant be happy, you 30 $20 $30 you don't bother about it. So you're all good, you're looking at long term appreciation. You wanted capital growth, and capital growth was the objective, because cash flow was a given. You know, you never have a problem with cash flow. Everything was fine. That's why you know, in those low rates, when you're at a 2% rate of interest, a three or 3% rate of interest. Before Covid, you know, we were used to be around three, three and a half ish rate of interest. Yeah, that's fine as well. You're not, it was not earth shattering when you have a 3% or 4% rental yield properties, you're all good. But it's changed now. The post-budget scenario is completely changed. Now it is now you're sitting at a 7% six and a half percent interest rate, three, three and a half percent, 4% rate of interest higher than what it was earlier. 4% on a million dollars is 40 grand, that's that's a lot of money. Three and a half, 4000 per month, that's an impact if you got one property or a loan, which is about a million dollars, that changes the dynamics for you, that changes the dynamics for how investors have started thinking. Okay, they say, "All right, okay, there's an amount of money which I can put in from my salary, from my income, from my business income, and now there's a limit. I don't want to cross that limit. And now there's a point, which is coming, where investors are saying, "Okay, do I now start looking at cash flow as equally importantly as I used to be taking care of it earlier? It's now the new budget is kind of kicked in that thought again. All right, if you can't negative gear in your regular income and you have to accumulate that negative gearing over the years, then do I look at it differently when I'm don't have that tax refund cash flow support, which is going to be there for me, and that changes a bit, specifically with these high rate, high interest rate scenario. When I'm looking at a high interest rate scenario, I would always look at what is going to be my outflow and what is going to be my inflow, because a lot changes this, not only interest rate, the interest rates are there, my property holding cost tremendously increases, and if my rental yields are not rising to the extent which your interest rates are rising, or if my rental yields are stable at where they were, or they are going down, because, like we rightly said, property prices have gone up. My newer property, my rent in year is going to be lower. My gap keeps on increasing, and when the gap keeps on increasing, I'm saying, How long do I sacrifice my lifestyle to afford a property? And that, that becomes a discussion point for investors to look at what
Julius
that's right, because net dollar loss is higher, and then the amount of prices it's gone up from last four to five years, that that amount is even significantly increasing.
Parag Dixit
Yeah,
Julius
second thing is there is a great hit on buying and renting affordability.
Parag Dixit
Correct, correct.
Julius
So renting affordability is a toss, that's why, because rentals were growing from longer time, and now there is a limit for the rentals, even though there is extremely lower supply for the rentals, still there is a renting affordability limit.
Parag Dixit
Yeah,
Julius
in a lot of states that's already been hit, so you can't see a rental rises, but still the expenses towards the properties are increasing.
Parag Dixit
Yeah, yeah,
Julius
and then the last bit was there was little hope as a negative gearing, whatever the net loss you're doing, still the investor can claim those negative gearing benefits now from July 2027 Probably you're not going to use it, so the net negative still higher, and it is going to be higher for a longer time. So that's why when we look at the portfolios, right. I've seen the with the investors, there are different kind of portfolios. There are portfolios which are pretty weak. Where I had a client who was holding a property in Sydney during, he bought it during a lower interest rate, around 2% scenario. During that time, his negative was close to 1000 bucks, and then now at the 6% probably he'll be spending around 3036 grand a year on a single property to hold in Sydney. That's not only impacting his daily cash flow, but it's impacting his borrowing capacity as well. As he's not in position to buy next property, that means just because of one property, he's not able to either sustain that entire portfolio, or he's not able to scale the portfolio.
Parag Dixit
Yeah, plus, if you get into it, some kind of unknown expenses, which come in, any kind of maintenance, which comes in, or you need some money for your personal stuff to go for a holiday, to go for a trip, to do some something in your owner-occupied house, you're kind of stuck, you know how much cash, because there's a, there's a cash sucking machine, which is put in there, and then it's, it's troubling you all the time, right?
Julius
Yeah, it is. It is. So that's why it's a personal cash flow crisis versus your entire portfolio is stuck because of the wrong selection of properties. Yeah, because previously, Lord, what lot of investors used to do is, okay, I'll go and buy property in my backyard, like go in Sydney, and buy, since because the interest rate was not that great, it was on the lower rate. There is a bit of affordability, which we changed, but I've seen the people where they have balanced their portfolio well as well. Few clients where they hold more than eight properties, few are high capital growth, where few are well balanced between the cash flow as well, so in this entire scenario the behavior of the investors are changing from holding a high cash flow, so from holding high capital growth property, which are severely negatively geared, correct, which is very, very hard to hold at this scenario versus they're going towards the more balanced kind of portfolio, stronger portfolios.
Parag Dixit
Yes, yeah, correct. You know, you know, I look, thinking about a stronger portfolio. In fact, I know when we were doing mortgages, I know someone, he's, he's got about 1011, properties, and a lot of these properties have a good balance. So, you've got a, he's got a couple of granny flat properties, which are having a positive income, he's got a couple of properties where the rental yields are about six six and a half percent. He's definitely got a couple of properties with about three three and a half percent rental yield, but what he's done is it's he's brilliantly managed the portfolio in a way that each property is able to take care of the other weaker one, so a balanced portfolio of ways. Strong portfolio has been created in this manner, in which someone is saying, okay, even if I have something which is going to give me a large capital growth, and I want to have that, because I'm going to earn my wealth from there, I am balancing it with something which may not have that large a capital growth, but it's, it has a high cash flow, which is coming in, and it's balancing that bit out, then hence the cash flow impact on that portfolio is taken care of within the portfolio itself, and it is allowing him to be able to sustain what he's got and to be able to hold on to what he's got, because it's important, holding costs are a very, very important factor when you're looking at a property and cash flow property investment, a positive cash flow property investment really takes care of those holding costs. It's dangerous. Holding costs can become very dangerous for people when they suddenly come up, you know. Because, besides interest rate, we're talking of interest rate, but besides interest rates, you'll have council rates, you'll have land tax, which comes in, you'll have insurances, you'll have government levies. States like Victoria have got a large government levy, which is coming in. I heard that NSW is also planning to levy, put a government emergency levy on the on the people on the who have houses. Maintenance, maintenance can be large, right? I've seen people who've got various kinds of maintenance bills and issues, which have come up, and you can't do much about it if they come. If they come, and those in this investment property, those holding costs for the investment property become troublesome if they go out of proportion, and you need, and you already have a higher rate of interest regime, which is going on, and then you have this that brings more and more cash flow problems. With more and more cash flow problems, you will start becoming weaker and weaker in the portfolio, which you carry. When you are weaker in the portfolio which you carry, any kind of a vacancy, if it hits you, that's a double whammy. Yeah, then you're not able to manage it. You are, you've got too much of a pressure on you. One, you're already negative in cash flow, then you don't have rent coming in, and even if you have rent coming in, you get desperate. You may lower down the rent, or you may not get the rent which you want, or you not get the quality of tenant which you want, and it starts bothering you more. So, it's a, it's an unending cycle, which you get sucked into, which doesn't really keep you out somewhere and give you a benefit there. Yeah,
Julius
correct. So, that's why a lot of investors are feeling pressure now, because multiple rate rises had happened. Then, when interest rates are rising, then actually it gives you, it will not give you more leverage towards your entire cash flow. That means there is a lot of impact on your cash flow.
Parag Dixit
Yeah, so
Julius
that means you're reducing your savings, plus then it impacts on your cost of living as well, because the inflation is rising, so everything is expensive. Yeah, it's further eating up your saving. There, I've seen a lot of investors have lower leveraged.
Parag Dixit
Yes, so in
Julius
between there was a phenomena that a lot of people were buying properties under the trust. Yeah, yeah, so like due to the bad advice, a lot of people support properties under multiple trust.
Parag Dixit
Yeah, yeah,
Julius
each trust maintenance cost for each trust, each trust, so much of negative. The lot of people I've seen that, okay, sometimes you have to balance your portfolio with the good kind of properties as well, like few properties should be good, few property could be old property will have a good land size, where in future you can put the grannies, but sometimes those properties are very, very difficult to hold, because they're very old properties. Yeah, yeah, true. So, I've seen investors who are only buying this kind of properties under the trust by saying, okay, in future I'll put the granny, but now suddenly, if you have any cost to prepare that house, that's an additional expense, so that's why, because of the over leveraging problem, because of trust, because you've got into it. Yeah, so you're actually, you are reusing your borrowing capacity multiple times, and then, but you still have to pay that money,
Parag Dixit
you have to still pay the cash flow gap, and that's where the becomes troublesome, and let's not forget building costs have been rising, so maintenance costs have been rising as well, extremely, tremendously high maintenance cost right now. Anything easy to spend $500,000 and that's not easy for everyone to spend in a particular month, and that's that makes it very, very bad. And that's why the one of the most important aspect of managing the dangerous holding costs is to have a buffer with you. Yes, you need to have a buffer if you are looking at investing, and if you are looking at having a property which is negative, and that brings into that brings you more and more comfort if you've got a good amount of buffers sitting on the side, so you know you're not going to have monthly problems, but again you're dipping into your savings, which is what is the problem, because when you're dipping into your savings, you are finding, okay, I'm kind of stuck, you know. What should I look at? Do I re-look at having a strategy, which is a capital growth strategy, which I was been carrying as a legacy, or do I look at a new strategy, which is more cash flow positive strategy? G, and it keeps on bringing me a question all the time, that capital growth was nice, but I am not able to afford the property. How long do I wait to encash my capital growth to encash it now, and then invest into something where I would get a good cash flow, and maybe get a couple of properties like that, which give me good cash flow, so that I can get my lifestyle back. I don't want to be just feeding a property, I just want my lifestyle back as well, and hence, do I rebalance my portfolio by looking at, okay, I've got three or four properties, or two properties, or five properties, okay, this one is the biggest draw on cash flow, and it may or may not be rising at much, so let me just put this one out and get a positive cash flow property in, so it completely changes my scenario. I may not need to do too much to do that. Maybe one property out of the whole portfolio can change the way I look at, or I don't know, whether can I have a can I have both, in the sense of I get two properties out of what I'm selling, and then I'm able to get better benefit out of that. Can I, can I have more positively geared portfolio itself, which allows me to generate wealth for me in terms of my cash flow in a year and also growth in the longer term.
Julius
Yeah, that's right. That's why I can see a lot of investors are trying to rebalance their portfolio now. Yeah,
Julius
because of the fact that yes, most of the investors, when they are building their portfolio, it's not thoughtful portfolio. Okay, a lot of people were just looking for capital growth perspective, where not a lot of investors are looking at higher cash flow properties.
Parag Dixit
Yeah,
Julius
so but now the current scenario is basically the interest rates are rising, affordability is tough, and still, whatever the incentive, you're gonna get it from the government, they're going to be stopped for the property, which you're going to buy next. That's why the rebalancing of that portfolio is very important. It
Parag Dixit
is very important, and that's very critical, and that is that always brings us to the point that now with this new world, with this new budget, and all this complete revamp of the way investment landscape is in Australia. What kind of suburbs would you think that investors would now be targeting? What kind of suburbs do you think they would be looking at? What are the factors where they would be looking at to invest now?
Julius
Yeah, so now the current landscape of investment is changing, so at this stage the lot of investors can either afford a little bit of negative gearing or close to null, but and then borrowing has a lot of impact as well. So there are a lot of suburbs are still offering the property prices are in between 305 $100,000 and that's where most of the affordability is rising, plus there is that's where most of the property investors can afford to buy properties,
Parag Dixit
correct.
Julius
So, wherever the rental yields are more than 5% because your interest rate would be very close to six to six and a half percent, but if you're buying something at around five to five and a half percent with 300 to $500,000 then out of pocket expenses won't be extremely higher, yeah, just a few 100 a month, few 100 a month, and then there are a lot of suburbs are still available, doesn't mean that you go blindly and buy anything in Australia, right? Because you could find more than 1000 properties of such, but when you're getting into this type of properties, then you have to be very careful about how to select those suburbs properly. All
Parag Dixit
right, that's very important, right. Yeah, very important, because not every cheap property is going to be a great property, correct.
Julius
So that means yes, I would like to get into property which is 350 $200,000 Yeah, but then what kind of data I should look at? Yeah, it is very important parameter research. So, like, for an example, there are suburbs where only 1000 people are living,
Parag Dixit
yeah,
Julius
you can still find the property for $200,000 yeah, and you could see the rental is higher, the gross yields are higher, but if you look at the council rates, when you look at the tenant quality, when you look at the vacancy, sometimes when you look at, if you want to get a trade, it's so expensive that your net will be extremely lower,
Parag Dixit
yeah, absolutely, and even
Julius
though, because of that area, doesn't have good fundamentals, then you will not see that. Okay, the property price is rising. Yeah, so in that, when you're looking for this type of properties, certainly you are getting into original locations.
Parag Dixit
Yeah,
Julius
but they are better locations where the markets are under supplied. Yeah, the locations where affordability is still better, the locations where you could see buying and renting affordability is good, and then population is more than nine to 10,000 people, and then because of the diversified employment, it is attracting a lot of people, so that means you have a rising population, vacancy rates are extremely lower, demand is higher, that means you will have constant tenant demand, and also because of the higher population or population growth, your rentals are rising, which creates additional demand for population growth, as well as the property price growth. Yeah,
Parag Dixit
yeah, and it allows, see, it allows this good points, because it allows, because this is a good population, so there is an economic activity happening there, so people are earning well, so that rental yield is sustainable.
Julius
Yeah,
Parag Dixit
it's not that, because of. Somebody came because he had some work for a few months, so he gave you a higher rent, and then he moved away, and then you're back to where you started from. You have a continuous rental yield, which is going to be at a similar point or growing, so and so. And as an investor, you would look at areas which is a mix of all of this and affordable as well. That's most important that I can afford a property there. There is a good demand out there. There's a good rental yield out there. It's a sustainable property there, right?
Julius
Exactly. So it's not always necessary that it has to be capital city, but at least it has to be either close to a significant urban area or that area should have at least a good employment opportunity where it's not dependent on a single employment to where risk of that employment can have lot of job losses, and probably it will have a bigger impact on the property prices. We should not get into properties cheap, means you can't go and buy anything, like you need to select the right asset. Sometimes you find properties which is on the stump or subflows where property is too old, like 100 years old, required lot of maintenance, pattern required maintenance properties as best, or so asset selection has to be very good, like okay, when you buy property, okay, when you select the suburb or region, then probably type of property should be at least a good weather board or brick home, should not be like okay, if it is 4050 years old, should be fine, but should be in a good condition when you do a structural inspection. When you do a visual inspection, then property should have a good tenant demand, so someone can come and live there. So it's not always necessary that go and buy any property which is available in the market,
Parag Dixit
correct?
Julius
Rather, selection of that good property, selection of good areas, selection of good tenant, it's very, very important as well.
Parag Dixit
Correct, 100% that is very, very important of what kind of area it is there. Cheap is not good all the time,
Julius
correct.
Parag Dixit
Cheap can give you high maintenance. Cheap can be so far off from trades, like he was saying, cheap, like it's a lot of mining towns you find cheap, but some mining towns have gone crazy in terms of the price range, but some of them you find it cheap, but that that place, God forbid, if there's a maintenance which comes in, that it's practically impossible to get something, somebody to come there and do some work there. So, cheap is not great. Cheap may not give you a long-term price rise. Cheap cannot give you something continuously higher or good for that.
Julius
Yeah, yeah, so long-term growth is also very important. It's just not about the short spike.
Parag Dixit
Yeah,
Julius
so always focus towards the asset selection as well as long term growth.
Parag Dixit
Yes, correct, 100% That long term growth is most important, because that long term growth is not going to come in. Then people, then people, then you don't like investing, then what are you there? What are you doing that for? You want to balance both of that, but if long term growth is not there, my traction is not there, but if my cash flow is not there, I am not able to manage that correctly. If I'm not able to manage that, then I get into trouble, and that's where, when I was talking at the earlier times, loan strategies have also become very important. Right now, in terms of loan strategy, I mean that, okay, what do you want to do? How do you want to structure your loan? Whether you, the cash flow is kept intact by taking an interest-only loan, whether you in these high-rate environments, whether you have a mix of a fixed and a variable rate loan, whether you are looking at a good rental yield. So, you start off with saying, okay, I want a 6% rental yield, or I want a six and a half percent, or a five and a half percent rent yield, so it keeps my borrowing power intact. It gives me a full round structure and a strategy on how do I plan out my portfolio, so that whenever I'm looking at doing any kind of an activity, whenever I'm looking at looking at my whole portfolio in itself, I find that okay, I am pretty well off. I am not too stressed off with what I'm doing, and I'm not too much of an issue. So, when I'm looking at a loan strategy, I always look at how we are going to do that, and that's why younger investors are now thinking differently. They are saying, okay, my property strategy should have a strategy in it. It should just not be something which we have just thought of. I want to know where am I going to invest. I want to know the data which I'm going to be there. I want to have a good loan strategy worked around it. I want to have a proper long term plan, because right now the way it is investing, it's changed away from there. It's not I just buy anything which is available on the online platforms. I go and buy something which is data backed. I go and buy something which has a strategy. I go and buy something and hold it for a longer period of time. I want to have a sustained longer portfolio, because right now the taxation laws which have changed, they don't sustain something which you can buy and sell tomorrow, they sustain something which you can hold for a longer period of time, but the taxation strategy now tells us that I should have a portfolio which is more long term, so my chances of doing a mistake today are not there, because if I do a mistake, I have. Hold that mistake for such a long period of time that it's a, it's a whole new bunch of problems, which is getting me, it's getting the opportunity cost, which is a, which I am taking a hit on. I'm not, I'm taking a hit on the growth, I'm taking a hit on my wealth, or whatever plans, which I'm doing, and I'm taking a hit on the cash flow as well, and it's, it becomes a problem. So that buy and hold strategy is something which is coming into new investors' mindset very straight away. They don't want to buy anything under the sun. They want to buy something which is, which is defined through smarter investing. They want to define something based on yields and demands, and
Julius
yeah, research focus, right? Because we had seen a time when you buy anything and then it's growing because the market was in a good market cycle timing, and that is across Australia. It's not only in one market. Then we had seen a time when there was a lot of government incentives available, so that to help you to grow your portfolio. So, but now the time it changed, so now interest rates are higher, affordability has an issue, borrowing capacity have an issue. Then government incentives are going to stop. So now a lot of investors, now this is a time when you just research before you buy. You need to know what you're going to do, how you're going to achieve, what kind of strategies you want to use. What are your objectives, and according to and to meet your objectives, how exactly you're going to approach and what kind of assets you're going to buy.
Parag Dixit
Absolutely right, absolutely right. People are very focused on the kind of asset we are going to buy, because you want to now hold it for a long, longer time, and when you want to hold it for a longer term period, a cash flow positive strategy, correct, or a cash flow neutral strategy, at the worst, is becoming more and more critical now, because that cash flow positive strategy is going to let me enjoy my lifestyle and also hold on to the property for longer, property for a much longer period of time, which allows me to get the gains, allow me, allows me to be there with the way it is happening and allows me to be more realistic with the market, which I am now in, right? Yeah, and that's why it is a completely changed landscape, I suppose. I think it's changed forever now with these new taxation laws and the new trends which have come in, right?
Julius
Yeah, so trends are bit different now. So we had seen a time when lot of markets were in boom cycle, every market was growing. There was a good cash flow, interest rates were dropping. Now, when you see the trends, so lot of regional markets under supplied, and now there is a lot of focus going towards the regional markets, because of the fact that, okay, affordability changed, because of the fact that borrowing capacity have changed, because of the fact that that's where, okay, a lot of investors can go up to and afford to hold properties, so that's why when you look at the properties for next two to three years, when rentals are rising in capital cities, yes, there will be time when people will move towards the capital cities as well, but now if you want to buy something at 809 $100,000 where the gap between your cash flow will be around three to 4000 or two to $3,000 at this interest rate scenario. At this affordability, it's not affordable, and not lot of people are able to achieve that kind of borrowing capacity because of the change in scenario. So, trends are more towards getting into the affordable section, getting into the SMSF kind of strategies, see, so this is kind of a future of the property investing,
Parag Dixit
100% This is the kind of future of the property investing, balanced portfolios, very sustainable portfolios, that's the future. My portfolio cannot be so lenient, so dependent on cash inflow all the time, from my side, from my savings, from my this thing, it's not going to work out right. It is to be more strategic buying, which I'm getting into. It has to be a resilient long-term portfolio, which I am wanting to do. It's no more like you said, lazy investing, easy investing times have all gone away, right?
Julius
It's gone. Those all the capital cities have grown. Yes, there are a lot of opportunities still available, but in that case, your borrowing and cash flow will not support if you're on a scale, and if you go into the extremely higher negative years in IO, then you can't scale.
Parag Dixit
Then you can't scale
Julius
if you go towards the affordable segment properties, then you can do mistakes as well. Then research has to be precise.
Parag Dixit
Research has to be so now
Julius
to make a portfolio, you need to have a different strategy. To get a portfolio, you need to have a good borrowing capacity. You need to retain that borrowing capacity to find the right property. You need to have right research. So it's been difficult, and it's more kind of research-oriented. It's more scientific now.
Parag Dixit
It's more scientific now, and that that will bring on even more focus to getting advice from your financial planner, from your professionals around you, from your accountant, from your buyer agents. I think buyer agents' role is becoming going to become even more important, more evolved. I suppose buyer agents will also have to evolve into becoming more data focused, more scientific to be able to give out research which is authentic and their data. Sources, where are they getting data from, and how they are analyzing will become even more important. Because a client now needs, before a person now needs an investor, now needs more strategy into it. They need more long-term investment, they need to see the future of the property to be secure, to be in their future also to be safe, they want high, good cash flow properties. They do not want cash suckers right now, right?
Julius
Correct. So, now you need properties which will grow in capital value. You need properties which has good capital, sorry, rental yields to balance your portfolio. That means you can't just buy a property which is having a capital growth and not good cash flow. So, that means you need to have a mixed approach. You should buy in a pairs where you buy one property of good capital growth, another property of good cash flow. Arrange or buy properties where, okay, should not buy all the older kind of property where required a lot of maintenances, because you need to get a lot of money as well. So, buy good quality properties, buy older properties which will have a grainy potential, so in future, you can withdraw equity, put additional dwelling, and improve your cash flow. So, this is mix and match, is very, very important. Match
Parag Dixit
is important by dual income properties, by properties which are, which have something nicer nearby, correct, grows in value. But again, the whole mix of your portfolio becomes extremely critical. Now, that mix has to be right, this mix in terms of even structure has to be right, which states you are buying has to be right, what kind of cost, which are holding costs are going to come in, has to be right, so that it brings down to the fact that your strategy has to be spot on, you just can't pick and choose and buy something, and that's where cash flow is going to become even more and more critical in these times to in the future times to invest into, right.
Julius
Yes, correct. So, cash flow is important, strategy is important, right? Research is very, very important, and right asset selection is very important.
Parag Dixit
Absolutely fantastic. No, I think very well summarized, Julius, on that part. Thank you very much for coming in today. I think we had a wonderful session. Thanks. And let's, let's connect again for something new.
Parag Dixit
Thank you.
Julius
Thank you.