EP.1 | Why Property Became Australia's #1 Wealth Builder in 2025

Parag Dixit

All right, hi. Welcome guys. Welcome to our first ever podcast, property portfolio podcast team, and we are bringing across to you today a very important topic. And what we are wanting to discuss today with everyone and to understand from along with everyone, is to see, why do people really invest What's this whole thing about investment? What factors do really people consider when they are wanting to invest? Why do they think that they should be able to they should make an investment. They should go for doing something like this. Why has investment come up the curve in all these years, in the past few years, and how people have become investors. What are the typical reasons, what they look at, and what kind of factors really command that bit of an investment thing which is happening. But just just before we start off, let me quickly introduce the panel to you guys. All right, okay, let's take a quick recap of how the investment stuff has moved on in the in the in the past. If you look at all these while, what's happened is the generational wealth which is being built across Australia has now started becoming more and more mature. It's being passed on to people. It's there's lots of stuff is happening in terms of making people aware, making people grow richer, making people grow wealthier, if you will, see starting from the Baby Boomers to the millenniums and to the next generation and to the next generation, right up to the alpha, we are finding that there is a phenomenal transfer of wealth which is happening. And mostly the transfer of wealth is happening because of the factors which are, which are something which are, which are more and more dynamic with the way years have been growing. So what do you think? Why do you think that there has been this change, and there has been this movement across where people are wanting to invest, and how it has moved across the generations. Now,

Mudit

very interesting. Parag, so what has happened over a period of time is people, there have been multiple asset classes in which people have been investing. Over a period of time, there has been stock market is there? Then people have more who are less risk prone, they invest in FDS savings properties over a period of time and then gradually earlier. It used to be that a lot of people properties were invested by people who had more money, because property is not a an asset which is which comes in small amount of money, right? It? So you need to have a big corpus of money. And it used to be mostly with people who have who are thinking about investing in larger quantum of money, invest in property. And over a period of time, people realize that property market generally gave good returns. The returns were phenomenal. People started earlier. There used to be a lot more land supply available, so people would invest in bigger plant sizes, and over a period of time, there was much, a lot of wealth created in that, in that, in that land mass and in the property sector. And people who have been in that age who invested 30 years, 40 years, 50 years ago, 20 years ago, when people in current age see what kind of wealth they have created, what kind of multiple portfolio they have created. It has become aspirational for the new generation to see that how it can be translated, how can best money, best investment, be made out of how, how they're seeing people have

Parag Dixit

done absolutely right. No, it's absolutely right. If you look at how, and I was reading a report a few days ago, if you look at the richest people, or the people who have made the most money today are the baby boomers, that generation is now really, really wealthy. And that's an inspiration to all of the newer guys, all the new millenniums, all the guys who are into Gen alpha, that they are also wanting to do that, they're also wanting to maybe mirror that, right? Do you? Do you see that pattern?

Julius

Julius, yeah, that's right. Generally, there are few things which have made lot of impact into the property investing. Number one is awareness about the property investing. So over the period of time, the awareness was very strong because of the media news. And then there are two reasons which I can see there was like pre covid and the post covid. Pre covid, the awareness about the borderless investment was not great. But during the covid, there is lot of exposure to data, as well as lot of people. And then when Lot of people were investing in Sydney and Melbourne, type of markets. So Sydney started becoming more expensive, generally in investment, we see, okay, either the capital growth, that is a prime objective, and then second, next objective is the cash flow. When Sydney started becoming inexpensive, then yields becoming a lot of issue, and then, because of our. In the market, about the data, also what kind of markets are available. Then, due to that awareness, people started looking for more kind of property where you can split your risk and start getting into the smaller properties where you can spend around 300 $400,000 with around six to 7% dental yield. So that is the main reason why people started looking for more amount of properties, because equities has been generated from the signal properties, and then they have started getting multiple properties with the more rental income. Yeah, that awareness is the biggest

Parag Dixit

I think that is right. So that's, I think the awareness is something which is the key to people finding out how and what they can do, what their options are. I think if it's a very good thing, which you pick up, you know, awareness, I think with some point of time, when our forefathers were there, landlords used to be like rich guys, you know, your big, bigger guy, biggest guy in the village or the town would be the guy who would have the largest land. And now and then, slowly, people would be working for them. And that's the time where I think the whole segment called renters and segment called investors started coming in, and that's where the nature of investment changed into, okay, I this is something which I can get into. Maybe at that point of time, people used to get food for or just shelter when they are working, but now people are looking at for, okay, I can also get wealth created from there. And that's something which has inspired a lot of these guys, a lot of the generation which is coming in now, because they're getting aware, okay, that's a route which we can take. That may be a route which is good with respect to say, you can look at, say, stocks, or you can look at properties, and you can look at these two these asset classes have still given similar returns over the years, but it's it's more it's easier to invest into properties versus to invest into stocks. Property is still a more defensive way of investment, right? Do you think that is

Mudit

absolutely in fact, what you mentioned is absolutely right. If you look at not even last 20, 3040, years, but if you look at last 100 years data, both stock market and property market have given very similar returns in the range of 10 to 11% CAGR. So people have seen that over a period of time, and property is something which is more natural in the terms of, like you said, that if you look at centuries ago, it has been more natural as an asset, which you feel and it's right in front of you, kind of thing. You can feel it, touch it, and you know that you have that kind of land. Stock Market, of course, started much later, a lot of so there's also people's comfort about which asset class do they are they more comfortable with? Which asset class do they understand more so stock market has its own nuances. It has its own learning. Learning Curve. You need to understand about various parameters, EBITDA and all that, about various companies, and you have to be more active. Stock Market is relatively more active market, because you can trade more frequently when you look at property, it's a very different asset class in that context, right? One is the comfort of having your own property and and one is that. And then, of course, once you start doing then it's not that you're gonna buying, be buying properties every day. So it becomes more like that. You you done some research, and you invested. So it becomes more comfortable, for comfort factor from that angle, and has given great returns as well.

Parag Dixit

That's such a nice point. So it's, it's the comfort, which is easy. It's a transparent thing in front of me. I don't need to do too much. I know. Okay, there is a place there, I mostly, I think earlier, it was mostly cash, but now, okay, you're taking a loan, you know, okay, your loan is getting covered, or something's happening there and rent is coming, so you don't need to bother too much about it. You just need to let it be, and then let the tenant be. That's right.

Julius

And leverage is easy. Now, Yeah, correct. So basically, around 10 years ago, the interest rates were around, probably Eight 9% now during covid, we have witnessed the interest rates around 2% Yeah, versus when we all got we are aware about border investment and when we can divide the risk. Also, historically, if you can see the data last, from last 35 years, property is delivered consistently around eight to 9% unless you commit a huge mistake, then that was the issue. But still, it's the safest investment, rather than you getting into the stock market and lose lot of money all in crypto. Second biggest thing about the properties, basically, when you look at the returns with the leverage, and nowadays, the manifestation of that returns much earlier. Previously, it is to take around so growth was around like five to 6% a year, and it is take around seven to 810 years to become that entire property cycle to become double. So after covid, what we have witnessed is, in three to four years, most of the markets have been doubled, and when lot of people have seen that type of growth. Growth, then there is more activities are happening into the property market because of the extremely low supply in Australian market. Historically, we are running at the low inventory plus the the bulk, plus it's the safest investment. What do you think? Yeah,

Parag Dixit

yeah, correct. No, that's right. And I think one big factor has been that the people are able to think and people are able to see and believe. And I've seen examples that the property investment has mostly been safe unless you've done a real big mistake, or unless something which has been there, which is rare or which is far and few, then you are still able to do an investment which is relatively safer and which relatively gives you a good return over years. But Do you Do you also think affordability has played a role in in terms of investment, when you people are looking at investing into properties,

Julius

yes, we do see that. So when we measure the affordability, there are two things when we were discussing about the Sydney kind of investment. So there was only options available in your backyard that you go visit the property and buy a property. So during covid, when the markets were started booming, and then when, because of the rental yields, the Sydney market started become expensive, the lot of people started looking for an options. So if and then, if the family incomes are higher, around most of the when we look at the data from the abs as well, lots of lots of families earning around in between 304 $100,000 in Sydney, which is giving them a lot of opportunity to take a leverage that comes because of that higher income, the affordability is higher. But on the other state, because of the access to the data, you can actually pinpoint which locations are still available in that limited borrowing capacity, plus the structures. So because of that affordability and then access to the data, it's much easier to reach to that location and get this property, plus in few places that come up with the good rental use,

Parag Dixit

absolutely, absolutely no, no. It's a very good thing, which you pointed out that people are looking at other areas in other states. Now, why I'm saying this is, say, for example, if you're looking at in Sydney, the phenomena for affordability is kind of a bit changed. Changed a sense that maybe 10 years ago, with about five to six or seven times multiple of your income of maybe five to six or seven years is what you really need to have, a 20% deposit saved, whereas, because of the price rise, now, it takes about nine to 10 years to have the similar kind of a deposit saved for you to do, and to do an investment with a 20% one if you don't get into LMI. Similarly, if you look at income multiples, the same six to seven income multiple, which you used to have versus your repayments, has now become 1011, times, 12 times. So do you think buddhi that's also influenced on the other side of why people have started diversifying and looking beyond the states where they were staying in, to look at more affordable areas and more affordable places to invest in

Mudit

no 100% product. You bang on it, and what has happened is like affordability simply defined, like you said, is what's the value of the asset ratio compared to what's your income is, right? So overall, affordability, in general, over a period of time, has gone down. When we say affordability has gone down, that means it takes much higher multiple of your income to own an asset. Now in capital cities, property values have gone have have gone up by a much higher margin than the incomes have risen up, and that's the reason why many people are finding it a little more challenging compared to what it was, how it was, 10 or 15 or 20 years ago, to buy a property. And that's a reason why in a lot of but people also realize that the sooner they buy a property, a lot of people come to us and talk about it to have that the sooner you buy a property, the better off you are, because then it will become even more costlier over a period of time. So that is one reason, and in capital cities, because they have become much more expensive, people have started looking out to in areas where they where their income allows them, where their savings and incomes allow them, where they have the borrowing capacity, because there are a lot of areas which are seeing growth. It's not only that the capital cities are seeing growth. Lot of areas are seeing growth. So invest where you can afford it easily, because you don't want to take a very high risk or and go under a financial distress while trying to generate wealth by investing.

Parag Dixit

That's a similar thought which Julius said about a little while ago that that term, I really love, that term called boundary less investors. Now what, what do you? Can you? Can you just elaborate on, what do you mean by boundary less investors?

Julius

Yes, yeah. So when we are touching on the affordability. So affordability, I have two types actually, buying and renting. I. So for an example, if I'm living here, and then generally Sydney, if you look at the latest data, so affordability in years is around around 45 to 48 years to own your property fully, versus there are lot of states where we could see the affordability is below 30 years. Or there is another affordability type is times your income, times your income. So Sydney is sitting at around 24 to 426 times of your income, rather than there are lot of states where you can actually afford the property in around six to seven times of incomes. Australia is sitting at around eight times of your income, which is the standard, if you look at the global standard, is around five to six times of income in Australia, new normal is around eight to nine times. But still, they are access to the lot of states and the regional markets where supply is extremely low, demand is higher. And actually I could see, I was surprised, in few regional locations, people are earning around 2300 $2,400 a week. So because of that margins, the locations are more affordable and then, and since they are earning pretty good, renting affordability is extremely higher. So when we have exposed to that data with the buying affordability and the renting affordability, lot of investors have found out, okay, I can't buy something in Sydney, then probably yes, I can go and look it into Perth. Yeah, I can go and buy there. I can afford a good property with, for an example, $700,000 with the rental income of 750 week. Yeah, that means, rather than I'm putting lot of money from my pocket, I can have that property if the if suppose the interest rate is around 4% then my properties around current gross yields are very close to 4.7 to 5.2% that means I don't have to pay anything from a pocket. So lot of investors are aware about the portfolio invested now. So rather than getting a single property and grow with that all the time, there is another concept of portfolio based investment. So that means, rather than getting into one property, divide my risk and get more properties with the similar kind of incomes and with the moderate cash flow, and grow with the portfolio. Yeah.

Parag Dixit

So, okay, yeah. So we'll come to portfolio. So that's a that's a different discussion all together, but we'll, let's discuss. Let's go back to our point. So boundary less investors, they have come up the curve, because people have seen that like like you rightly said, One awareness second affordability. So both of these have told me that, okay, me, as an investor, I can afford to pay an X amount of money towards investment. And now if I'm staying in a Sydney, or if I'm staying in Brisbane, or if I'm staying in Melbourne, or if I'm staying in Perth, or wherever I'm staying in Adelaide. Now I can't afford in my city, but there is another city where I can afford to invest, and I'm aware that that city is there where I can get in return which is commensurate to my requirement, and hence I am going there out and looking at investing in that area, because I have exposure to data, because I have an opportunity where I can see what's happening, because I have an opportunity to be to be able to read, to access there are various institutions. So let's so which is allowing me to get into that investment mode without any fear of unknown, without having a fear that there can be a problem there, or how will I do management, or I, how will I do any kind of renting out there for the for being an investor? Do you see that as well with it?

Mudit

Absolutely So there has been a sea change in terms of, like you, rightly said, in terms of awareness, especially because of data availability. If you, if you look at people who are investing 20 years, 30 years ago, for them to understand if I'm living in Brisbane, I know about Brisbane, if I have not, if I want to understand that, is it possible to invest somewhere in, let's say, Western Australia. Then just getting that information and knowledge was very, very difficult. You would have to travel to figure out things. The data was not easily available. But in the last five years, seven years, a lot of data about, not only about a lot of data about a lot of parameters which make you understand better about investments economy related data, property related supply, demand related data, how the migrations are happening, how population is changing. So much data is available, it has become easier for people to understand that when I'm investing in something, then it is not blind. I'm not just playing blind. I can look at the data, I can understand, I can analyze, and I can compare and see that if my, if I'm putting my 100k where is the, where is the chance of getting the best return out of that $100,000 and that data has, just like any other field we talk about, anything that we do, if there is data to back up, then you have more than. Conviction in what you're doing, and that has definitely helped

Parag Dixit

a lot, absolutely right? And I think over these years, like you, again, pointed out at the start, Julius, over these years, people have started getting access to data, to information, and have started seeing the benefits of investing across I think one of the trigger points. Obviously, there have been many trigger points in the last few decades. GFC was one of the trigger points. And in between, labor wanting to withdraw the negative gearing, and then they did not, and all that stuff happened. But one of the key when the most recent trigger point for people wanting to become boundary less investors and have people seeing exposure to investing in interstate has been post covid era, right? But I think post pre covid era, we still were not having so many people who were looking to invest everywhere in Australia. But I think post covid It has opened up the eyes that okay. Why should I just look at this? I should look at Australia as a whole country, and I should find out my opportunities, and I should see where I can get a better benefit out of and then we start looking at investing like that. Do you really think Julius that that's post covid has been a different world altogether for investment?

Julius

Yeah, that's right. So pre covid and post covid, the exposure to the data was very different. Second thing is, affordability plays a major role. Pre covid interest rates were higher, even your backyard was more accessible. Post covid interest rate dropped, and then affordability changed a lot, and then first impact happened into your backyard that become an expensive Plus, there was a lot of media articles as well as lot of people will started discussing about the data in the open forum. And since your backyard was not accessible, then someone has to look for something else. And that's how people started looking for new rules, and then, because of that exposure to the data, and then we could see lot of net internal migration started happening. So because of the net internal migration, property prices started going up in interstate, because initially there was a balanced demand and supply. Because of the net internal migration, the demand towards the property was great, and then supply was moderate, and that was started reflecting into data as well. So that builds more confidence in lot of investor and due to the confidence and the statistical reliability of the data, plus the affordability, lot of people started looking for interested

Parag Dixit

investment. All right, no, that's fair. Now that's a good point that that really brings us up to the factors which have really impacted investment. And it's two key factors which you mentioned really stand out, if I can just see them. One of them is the demand and supply, which has been a very big factor. Post covid, there has been a Skewness in in terms of demand, supply ratio, the demand has been much more than what supply could really catch up with. And that's that I think, continues till date today, where a lot of areas, or maybe most of the areas, have a much higher demand than what supply can bring in. One of the points definitely is that government has been trying to push more and more construction. Has been trying to do something, but it's still lagging in the effort. I think the population rise and the migration which is happening is not allowing them to play catch up. It's going much faster than what they can really do that in terms of construction, but two second second point of migration, which is also there. But do you think moody that have interest rates played out a low role in this? Have has there been something which, with that's that's also caused the whole bit of post covid as a factor?

Mudit

Interest rates, like always have been an important factor. People look at interest rates and affordability depends a lot on how much interest do they have to pay at the time of covid, interest rates dropped down drastically, which was an anomaly, and it was lifetime lows. People really saw an opportunity because of the low rates, and there was a lot of sudden rush towards owning a property, whether for investment or for living in and that that resulted in a sudden surge, and definitely because of covid, there was lack of the raw material logistics, construction industry was really struggling at that point. It has not come up back to where it was even now, and that's why the supply and demand gap has been increasing, and that's why we read every day in the articles, that the gap is not bridging interest rates, although they are not that low. Now, they have gone up again. And now, of course, if you're reading news, anybody who's reading news this year, RBA has started cutting down the rates. The rates have come down next week again this. Speaker, yeah. In the coming week, interest rates are to be announced again, although it is highly, very, very high chances that they will not, not, not bring it down further, but definitely a big factor which has been keeping

Parag Dixit

people through no that's that's fair, and I think a lot of these are also that time, when you're touching about construction. That time post covid was a major bump up in construction which had happened because of the government policies which came in, both to support the owner occupier and investors. Construction, that that whole phenomena of knock down, rebuild, came up there where you had government incentives which had come into to people to do something in their house, or even to buy an investment. And people found out that, all right, I can really do up my house. I can have a newer house, a better house, more land supply was made available. Obviously, builders had their own set of issues, but there was so much of a construction pipeline that that whole industry became completely new, and property prices rose because you could afford a newer area, and maybe as a sub divided land or as a bigger land itself. And that brought in a lot of benefits to people as well. Right? Government policies have played a much bigger role. Right? Do you think that?

Julius

Yeah, it is. It is, and other thing which we have fitness in the entire covid duration. There was a major government projects which were announced like, especially towards the in Perth. For an example, they were looking at the Metro NET project, where they are connecting the entire Perth with the with the trend line. So most of the labor were busy involved into those big projects, and because of that, there was very less supply of the labors which were available into the construction industry, and that have built up lot of construction pre approvals, but they were not able to deliver. And that builds lot of issues that builds lot of supply crunch in most of the places across the country.

Parag Dixit

Yeah, absolutely right. I think government policies did play a major role in that one more important role, which maybe I can request you to touch up with it. But I think we're very sure that one of the important thing was how taxation also has played out in all these years, and that's played more favorably towards investors, rather than to owner occupier. Negative gearing, capital gains, we hear about all of these things, right?

Mudit

Is that true? You're right negative gearing. And I think people who are thinking about investment would have definitely heard of negative gearing. Negative gearing is just, just for, for for sharing with those who are not aware. Is basically that if you are an investor, and if you have income, you have a rental income coming in, and then you have expenses in the property which are, which could be property management related council rates, and then you have interest which is going then if your cash flow is negative, if you're losing money on the property on a yearly basis, then that negative money you can save on your personal tax so the government, in the government has the policy is there that you can use the negative or the money which you're not making the property as for tax saving tool. It has played a very big role. It has been in news a lot of years that some governments are saying that they will remove it, not remove it, but every time kind of controversy, all kinds of controversies, and this has been for there for years, but it is, it is not, not so easy to take away something which has been the core of the whole investment thing, absolutely, especially for people who are in the higher the tax bracket, the better returns they see on negative gearing. So definitely a big factor. And many people invest with keeping taxation as one of the important parameters of saving money on the tax front, why give it to government if you are able to invest and save some money

Parag Dixit

there? Absolutely right. No, that's a good point of why, why people are looking at investments, looking at taxation into their mind, and looking at tax benefits, or their income or whatever the benefits have to be offered. Now that brings us, us to the very important next kind of a bit, which I would want to maybe chew your brains on, for both of you, is, is goals, right? So when you've touched upon that it's a very good topic to trust. So what kind of goals have you seen Julius people looking at when they are wanting to invest into properties.

Julius

Property Investment should be objective based, because when you have an objective, then you can build a strategy. Lot of people, they would like to repay their mortgage faster, or they would like to build a passive income. The lots would like to retire early. And property investment is a tool which will allow you to do that. So for an example, when we look at lot of investors, when in Sydney, for an example, if you have heavy mortgages and if you have to work for other. 30 years, sickness, affordability sitting around 45 to 50 years. Then how to repay that? So if you have a clear objective in mind that, yes, we would like to repay our mortgage faster, or I would like to retire early, then according to that objective, there are enough strategies available in the market which we can easily build in, and then we can get into that.

Parag Dixit

Yeah, correct. No, that's That's right, and that's a good point which you make so people would have goals like trying to pay off the mortgage faster. That can be a long term goal. That can be or maybe having a retirement plan of settling down in a different country or stepping down along the coast can be a good long term plan, which people can have. I have seen medium term plans also to be there for people where they would say, okay, all right, I want to upgrade my house because my kids are going to go to high school. So I want to live in an ex area, and that's more affordable, but some more expensive area. Or I would love to live in a larger house, or I would love to start a business, or I want to save money for that, or maybe even short term as well, that, okay, just pure short term, that maybe in two years, three years, four years, I want to achieve an X thing. And that kind of a goal setting. And you've been seeing that as well, right? And then terms of people having a clear objective, or the or do you see people who just don't invest with an objective? As

Mudit

I think there are people on both the sides, people, some people come with very, very clear objective, that this is what I want to achieve. And then on the other side, there are people who come and when you have discussions with them, when you talk to them, then you realize that it is not very clear. A lot of things are hazy. Of course, we can't plan for 1020, 30 years ahead. It's not it's very difficult to see that long so. But if, if it, if you, if someone can think through a little bit more and put a little more thought behind, what do they want to achieve in five years, 10 years, 15 years, the more clarity there is, then it I think it becomes easy. If you have more clarity there, it becomes easy to objectively define something. And if once you start defining that, then it becomes easy to think about that, okay, there could be a path towards it, yeah, and that's where a whole idea about what is currently happening in your life in terms of circumstances, financials. And then, if you have a objective, okay, I want to go there in five years or 10 years. Then, like maps, right? You can find a path to there. There could be five different paths. But then choosing a path depends on where you want to go. Yeah,

Parag Dixit

absolutely. Where do you want to go? You can see that so many times that people will come and say, All right, I want to do an investment. And as soon as you ask them a question, why? And then I just want to invest, because my friend's invested, and he's got two properties, and I've got no properties, and I'm earning more and I'm earning less and all that. And that's where it gets a bit trickier, and that's where you start losing your direction. And that's where you start losing you know you don't know what you're doing and why you're doing, and you make mistakes when you don't know that, you really make mistakes, right? So goal term, goal setting. How important do you think that having a goal is critical for somebody to make get into investment in properties.

Julius

Goal is very important. I have seen multiple type of investors where they have committed a mistake, because if you are investing, it's a big financial decision if you don't have a clear objective in mind, and if you're just buying a property. Because for an example, there are a lot of people who are invested only in Sydney because it's accessible or during covid, when the interest rate for 2% the borrowing money was very easy, and then as soon as interest rate reached up to 6% because of the poor yield, either they have to distress and sell the properties, or it's very, very tough to manage those properties. So when you're investing, when we define a clear goal, we need to look for both the things like capital growth as well as the right cash flow. So you have to prepare for worst. So in a case, when you set up the goal, for an example, my objective is in next seven years. I've seen a lot of people who are doing an investing nowadays because they were not able to afford the property where they would like to live. So instead, keep the money in a bank which is not working out well, just invest in a property market. Build a good portfolio. After 567, years, withdraw that equity and then buy a property of your liking. So until, unless you will have a clear objective, or if you don't work on your financial well, then it would be a very bad investing as well 100% right?

Parag Dixit

So I think goal setting is very important to make a clear strategy about how you want to lead your life, how you want to retire, how you want to have a wealth accumulation, how you want to really go forward with all your financial decisions. Otherwise, it just becomes another decision, which you've taken, another thing, which you've done, and it can, if you not, don't have a proper goal, you just shooting in the dark, right? And you can, you can just get hurt. You just by doing that. I've seen so many people getting

Mudit

hurt, right? You're right. See none of us, and nobody out there is sitting with a crystal ball, yeah? So it's not that everybody has a clear idea of where they're going or clear vision into the future, but it's about defining something that you want to achieve, and then finding path and finding a way where the probability of happening, that happening is the best. So it's about chances, taking chances, but not just chances. Measure chances. The risk cannot be just doing something. It has to be calculated. And that's where it becomes important. If you have not defined, if you have not defined, then you wouldn't know how to go, and if you don't know how to go, then the risk that you're taking whatever. Because it's like Julius you said, like it's a big financial decision for most people, buying a house, buying a property, is the biggest purchase of their life. A lot of hard earned money goes into it. So any kind of decision you take the it has to be a calculated risk. And of course, there, there will always be a risk. But then, if not even, not even acting, is also a risk, yeah, yeah. So that has to be clear in the mind. Yeah, that

Parag Dixit

has to be clear in the mind. Risk is so, so important to understand about when you're taking a decision, and that's, that's where it comes from. So when, so when people are investing, so when they make goals. And I've, I have seen, and that's my understanding, when I've seen people making goals, typically, they would their goals would come will get drawn out from two critical factors, which is, I think cash flow and capital growth, right? I would aim to either have a good cash flow that, okay, all right. I want an investment property, and I want the investment property to be able to take care of itself, or it can be an X amount negative, or I can afford to say, as a good strategy, say I define earlier itself, that I can say that I'm able to afford 1000 bucks negative, or 2000 bucks negative out of my pocket is what I can spare from my savings. So that's one way of looking at it, and making a strategy about how you want to go. And the second way of making that strategy is also about capital growth, which is there and when capital growth also allows me to tell me, okay, I don't really, am really worried about cash flow, but capital growth is the most important reason for me to have to look at a property. There will definitely be people who are hybrid, right? Yeah, but let's, let's talk about cash flow. How do you think people measure when they are wanting to look at cash flow as in factor, or then to make their goal strategy,

Julius

cash flow is an important parameter. So for an example, if I know my financials, and according to my financials and the family income, as well as my expenses, if you could afford only one to $2,000 negative, or as my cash flow will be civil impacted. In that case, if I'll only look for properties which will have a higher capital growth or sometimes people just start investing into a very heavy capital growth markets where you could afford only one property, and that means your entire risk of your portfolio is tied up with the one property. So that means you only look for a capital growth, and then you can't move further in property investment rather than getting one property or two properties, always look at the property portfolio. So if you divide the risk, and then if you can build a sizable property portfolio with the decent cash flow. That is very important.

Parag Dixit

So, yeah, so decent cash flow, okay, so when we're talking of cash flows, what are the maybe elaborate, and ask you to elaborate. When I look at a cash flow, what factors do I have? So I have income on one side right, and I have expenses on the other side. So in terms of expenses, you will take an interest expenses or principal and interest repayment expenses, and then you will also take your depreciation or your agent management fees or your property rates, and all that is what you take. So eventually you will see as cash expenses and cash income, and that is the difference. What you're looking at cash flow, is that right?

Julius

Yeah, that's correct. So when you look at the properties income, it's gross in the net, yeah. So when we only look at the gross expenses, the lot of people commit the mistake by saying, okay, my properties cash flow is around seven to 8% they try to get into the areas where they just look at the gross income. But if sometimes, if you go to the super original areas where property growth potential is low, but sometimes you see, because of the higher cash flow would go there. But in that case, the property rates insurance, as well as your expenses towards the properties. Extremely higher, that basically your net income would be very close to three and three to three and a half percent versus at this interest rate. For an example, your properties interest rate is very close to 5.5 to 6% then you each property will be around 2% negative net. And so that's what managing the cash flow in terms of the net dollar value, it's very important.

Parag Dixit

Yeah, absolutely. So if I if I will understand from what you're saying, a positive cash flow will give me sustainability. I can afford to keep the property for a longer period of time without taking any risks, whereas, if I have a negative cash flow, then I'm in trouble. I may not be able to afford to keep the property for longer. Or worse still, I may have a property where my expenses are so high that I can't just afford to do that repair or that maintenance or something of that sort, and it eventually leads me to become more and more stressed out with respect to that

Julius

property could be a distressed sale as well. I've seen that in lot of investors, not naming the state, but a lot of people have bought land, house, homes and land packages in towards Melbourne, where the yield is very close to three to three and a half percent with additional tax and all probably it's around 3% net since they were not aware about or they haven't taken the informed decision, or just piling up all the properties in the single state where the cash flow is the severe concern. Now, there is a situation that lot of people are either distressing and then selling the properties at the loss because they are not able to afford the property.

Parag Dixit

So again, how much of an impact does a proper I can understand, and I'll maybe touch on with you. Mudit, maybe ask you, what interest rates create an impact on cash flow. But before we go there, do you even think that when you're saying that property management and maintenance and repair and land tax and all these also create a large impact in terms of a property

Julius

it is so they are states or the Councils where you could easily pay seven to $8,000 negative from your entire cash flow year, plus your property management charge is extremely higher, yeah. And if, suppose, if you're getting super original with all those expenses, and if you want to call off the trades, even the call out fees for the plumber is around four to $500 so when you look at the net value, plus with the gross, if net is below 4% or three and a half percent, then it's not a great investment

Parag Dixit

at all. So yeah, in today's market, when we're looking at five and a half, 6% kind of rate of interest with a three, three and a half net yield, because that's what's coming to you, to repay the loans exactly, then you are in trouble, right? And that's where I think I would want, how do you think interest rates, that's, that's something which is very nice, that we touched upon, interest rates will play a large role, right? In making me a good positive or a negative cash flow problem,