Welcome to How Do They af Follow That? The podcast that peeks into the financial lives of everyday Australians. I'm Michael Thompson. I'm a writer and the co host of the podcast Fear and Greed business news. As always, I'm with Canna Campbell, financial planner and founder of sugar Mama TV, the financial literacy platform covering YouTube and podcasts like this one obviously, and books and Instagram threads, TikTok and more.

Welcome to How Do They af Follow That? The podcast that peeks into the financial lives of everyday Australians. I'm Michael Thompson. I'm a writer and the co host of the podcast Fear and Greed business news. As always, I'm with Canna Campbell, financial planner and founder of sugar Mama TV, the financial literacy platform covering YouTube and podcasts like this one obviously, and books and Instagram threads, TikTok and more.

Hello Canna, Hello Michael.

Hello Canna, Hello Michael.

Today, Canna, This episode is really one for the property investors, isn't it.

Today, Canna, This episode is really one for the property investors, isn't it.

It's one that I've been wanting to talk about for a while from talking from because I want to come from personal experiences we are.

It's one that I've been wanting to talk about for a while from talking from because I want to come from personal experiences we are.

Yeah, it's a it is It's not even actually just for people who are already property investors. It is for people considering investing in property, because.

Yeah, it's a it is It's not even actually just for people who are already property investors. It is for people considering investing in property, because.

Just property investors people who buy property to live in as well.

Just property investors people who buy property to live in as well.

Yeah, that's a good point, particularly when we I feel as though I'm at risk of just kind of sidetracking ourselves entirely. Let me finish describing what we're going to talk about today. Is it is about you hear about kind of people that just buy property, and it's all kind of everything is everything is.

Yeah, that's a good point, particularly when we I feel as though I'm at risk of just kind of sidetracking ourselves entirely. Let me finish describing what we're going to talk about today. Is it is about you hear about kind of people that just buy property, and it's all kind of everything is everything is.

Fine, right, how much money they've made.

Fine, right, how much money they've made.

And I'm a sucker for clickbait, like I will click on any article that I see online that says I bought forty nine properties by the age of twenty three or something like that. Okay, smashing that that link, just trying to find out how they did it. And it's all kind of upside it's all positive, right. They kind of makes it sound as though it kind of just pays for itself. There is no hassle. But but and it's a big butt and we don't want to be kind of too much of a Debbie downer on this one, right, but we are going to look at some of the pitfalls of property investing.

And I'm a sucker for clickbait, like I will click on any article that I see online that says I bought forty nine properties by the age of twenty three or something like that. Okay, smashing that that link, just trying to find out how they did it. And it's all kind of upside it's all positive, right. They kind of makes it sound as though it kind of just pays for itself. There is no hassle. But but and it's a big butt and we don't want to be kind of too much of a Debbie downer on this one, right, but we are going to look at some of the pitfalls of property investing.

It's wide open here. It does rose tinted glasses off.

It's wide open here. It does rose tinted glasses off.

That's actually a really good way to look at it is with eyes wide open, because if you're going into property investing, you need to do it aware of certainly the benefits, but also some of the risks and some of the things that you could encounter along the way. So the first one, Canna, is a big one, the first pitfall, and it doesn't just relate to property investors. As we kind of mentioned before, this is for anyone who owns a unit, for instance, or any property that comes under a strata title scheme. Tell me about special levies? What are they kind of? Why do we need to know about them? And why is this such a personal issue for you? Because I know that this comes from a place of great.

That's actually a really good way to look at it is with eyes wide open, because if you're going into property investing, you need to do it aware of certainly the benefits, but also some of the risks and some of the things that you could encounter along the way. So the first one, Canna, is a big one, the first pitfall, and it doesn't just relate to property investors. As we kind of mentioned before, this is for anyone who owns a unit, for instance, or any property that comes under a strata title scheme. Tell me about special levies? What are they kind of? Why do we need to know about them? And why is this such a personal issue for you? Because I know that this comes from a place of great.

Pain, pain, massive pain. So special strata levees there are, for most people's unexpected costs that the property owners in the strata scheme may have to pay when the owner's corporation doesn't have enough money in the sinking fund. And this is normally to help raise funds to help pay for major repairs or even upgrades. And they can be significant, and sometimes it's tens of thousands of dollars or in our case, hundreds of thousands of dollars or even millions of dollars, and they are non negotiable, so you can't say, well, I refuse to pay that, or I'm only going to pay half of that. You get issued with your allocation and you have to pay that full amount. And sometimes I mean I had a situation where when I was a single mother, I got hit with a twenty three thousand dollars special struggle, maybe with three weeks notice because something had happened to the roof of the apartment block and it needed to be fixed as a priority.

Pain, pain, massive pain. So special strata levees there are, for most people's unexpected costs that the property owners in the strata scheme may have to pay when the owner's corporation doesn't have enough money in the sinking fund. And this is normally to help raise funds to help pay for major repairs or even upgrades. And they can be significant, and sometimes it's tens of thousands of dollars or in our case, hundreds of thousands of dollars or even millions of dollars, and they are non negotiable, so you can't say, well, I refuse to pay that, or I'm only going to pay half of that. You get issued with your allocation and you have to pay that full amount. And sometimes I mean I had a situation where when I was a single mother, I got hit with a twenty three thousand dollars special struggle, maybe with three weeks notice because something had happened to the roof of the apartment block and it needed to be fixed as a priority.

Wow. And often it's related to water damage, all these kinds of things. And there's been a lot of issues lately over the last few years where there's been buildings perhaps with cracks in them, things like that, where structural problems, and often it comes back to the owner's corporation and that the strata scheme needing to find the money to do it. And if it's not there in the sinking fund, if it's not there kind of in the savings essentially for the scheme, then that is when owners are going to have to put their hands in their pockets exactly.

Wow. And often it's related to water damage, all these kinds of things. And there's been a lot of issues lately over the last few years where there's been buildings perhaps with cracks in them, things like that, where structural problems, and often it comes back to the owner's corporation and that the strata scheme needing to find the money to do it. And if it's not there in the sinking fund, if it's not there kind of in the savings essentially for the scheme, then that is when owners are going to have to put their hands in their pockets exactly.

And that's what Tom and I went through. And it was all due to water damage.

And that's what Tom and I went through. And it was all due to water damage.

So what happened there? What kind of tell us the story?

So what happened there? What kind of tell us the story?

It's huge, I'll be quick, I'll be quick. But to cut a long story short, for eight years, Tom and I had been complaining about water damage. There had been two situations where the water damage was so bad when it came to a storm. I had sees out twice.

It's huge, I'll be quick, I'll be quick. But to cut a long story short, for eight years, Tom and I had been complaining about water damage. There had been two situations where the water damage was so bad when it came to a storm. I had sees out twice.

This is an apartment apartment.

This is an apartment apartment.

We complained year after year after year, saying this has got to be fixed. There's a hole in the roof. There's a hole in the roof. It's causing all this damage. They ignored us for eight years. If there's any lawyers listening, please let me know. They feel free to reach out to me. So they ignored us for eight years, eight years of mold and rot in the roof of the apartment. It wasn't until eight years of damage festering. And then obviously we had Alnino over the last couple of years, but three years ago. Then those problems then trickle down into the other apartment blocks. So then they started jumping up and down.

We complained year after year after year, saying this has got to be fixed. There's a hole in the roof. There's a hole in the roof. It's causing all this damage. They ignored us for eight years. If there's any lawyers listening, please let me know. They feel free to reach out to me. So they ignored us for eight years, eight years of mold and rot in the roof of the apartment. It wasn't until eight years of damage festering. And then obviously we had Alnino over the last couple of years, but three years ago. Then those problems then trickle down into the other apartment blocks. So then they started jumping up and down.

The heavy rain ones. I think that's that's Lanina.

The heavy rain ones. I think that's that's Lanina.

Sorry Larino.

Sorry Larino.

Al Nino is the dry one.

Al Nino is the dry one.

Sorry, my poor geography.

Sorry, my poor geography.

That's why I'm going back to high school. You learn it in year ten something like that. Yeah, and the only kind of Spanish words I know. And it's just because of the weather gone.

That's why I'm going back to high school. You learn it in year ten something like that. Yeah, and the only kind of Spanish words I know. And it's just because of the weather gone.

Well, anyway, it caused huge damage, and then it caused a huge legal issue because the special strata levy was huge, like in the millions of dollars, So we had to and we had to wear the bulk of it like a huge chunk. That's why I say hundreds of thousands of dollars.

Well, anyway, it caused huge damage, and then it caused a huge legal issue because the special strata levy was huge, like in the millions of dollars, So we had to and we had to wear the bulk of it like a huge chunk. That's why I say hundreds of thousands of dollars.

Wow, Because it is based on kind of the size of your apartment in terms of the number of kind of square meters and things that you actually own within the building is and that's how they calculate it exactly.

Wow, Because it is based on kind of the size of your apartment in terms of the number of kind of square meters and things that you actually own within the building is and that's how they calculate it exactly.

And we own some of the space, so they basically had to deconstruct a level and rebuild it in its entirety, and it was a very difficult body corporate to work with. We had to have a not only do we have to pay this huge special store levee which is still going by the way, we also had to have a lawyer involved because it became so complicated. We needed to make sure that we protected our rights and we were paying what was fair and reasonable. So it became really challenging and extremely stressful, and it's something we flagged over and over again multiple times previously.

And we own some of the space, so they basically had to deconstruct a level and rebuild it in its entirety, and it was a very difficult body corporate to work with. We had to have a not only do we have to pay this huge special store levee which is still going by the way, we also had to have a lawyer involved because it became so complicated. We needed to make sure that we protected our rights and we were paying what was fair and reasonable. So it became really challenging and extremely stressful, and it's something we flagged over and over again multiple times previously.

So special levies, these kinds of things can happen to basically anyone who owned a property that is part of a strata scare, and so you're already paying levees, You're already paying your strata fees, and you were paying those typically quarterly, Yes, but how do you prepare for a special levee? If you are a property investor or if you're living in one of these properties, how do you should you be budgeting for one? Or is that kind of one of the rainy day kind of expenses that you might say, go, I don't need to be specifically saving for this, but maybe I will allocate some money within my emergency fund.

So special levies, these kinds of things can happen to basically anyone who owned a property that is part of a strata scare, and so you're already paying levees, You're already paying your strata fees, and you were paying those typically quarterly, Yes, but how do you prepare for a special levee? If you are a property investor or if you're living in one of these properties, how do you should you be budgeting for one? Or is that kind of one of the rainy day kind of expenses that you might say, go, I don't need to be specifically saving for this, but maybe I will allocate some money within my emergency fund.

Emergency money. Definitely this was where these funds would come from. But obviously not everyone has access to large amounts of money. Necessarily if it's a big strata levey, obviously you need to be very careful as to what is the health of the sinking funds, so knowing you know, looking at the strata reports before you purchase, or making sure you keep in contact with everyone who's part of the body corporate to make sure that there is always sufficient funds in the strata, and also making sure that there's good maintenance. You know, I walk around where we live and now there are so many buildings around me just covered in scaffoldings, and you know a lot of water damage is things like where maintenance hasn't been done. You know, pipes have been clogged and blocked because they haven't had the leaves cleaned out. That was one of our issues with our home. So you know, it's you need to make sure that special strata is there to help protect for when big things need to happen, but also what responsibility and proactive management has happened along the way. So to answer your question, and it's normally taken out of emergency money, and that's why you should have some emergency money because this is a realistic cost. But also there are situations for people that don't have that set aside, which was the case for us because it was such a huge amount of money. And that's where the value of having a really good mortgage broker who literally went to our bank on our behalf and said, look, this is the situation, this is the special strata levy, this is the amount they've been allocated with. And the thing I will point out, and this is why I want to talk from a personal experience. We had previously tried to sell that apartment and we even agreed to pay for the special strata levy and we didn't actually know what that was going to be, what that amount was, but we said in the contract we will pay whoever buys this apartment. We will fund that ourselves. So you don't need to worry about this. If you want to go and sell something it's got a large strata livy attached. I'm starting to get a bit tongue tag because I get so passionate about this. It also may be really hard to then sell that property if it's got dramas going on.

Emergency money. Definitely this was where these funds would come from. But obviously not everyone has access to large amounts of money. Necessarily if it's a big strata levey, obviously you need to be very careful as to what is the health of the sinking funds, so knowing you know, looking at the strata reports before you purchase, or making sure you keep in contact with everyone who's part of the body corporate to make sure that there is always sufficient funds in the strata, and also making sure that there's good maintenance. You know, I walk around where we live and now there are so many buildings around me just covered in scaffoldings, and you know a lot of water damage is things like where maintenance hasn't been done. You know, pipes have been clogged and blocked because they haven't had the leaves cleaned out. That was one of our issues with our home. So you know, it's you need to make sure that special strata is there to help protect for when big things need to happen, but also what responsibility and proactive management has happened along the way. So to answer your question, and it's normally taken out of emergency money, and that's why you should have some emergency money because this is a realistic cost. But also there are situations for people that don't have that set aside, which was the case for us because it was such a huge amount of money. And that's where the value of having a really good mortgage broker who literally went to our bank on our behalf and said, look, this is the situation, this is the special strata levy, this is the amount they've been allocated with. And the thing I will point out, and this is why I want to talk from a personal experience. We had previously tried to sell that apartment and we even agreed to pay for the special strata levy and we didn't actually know what that was going to be, what that amount was, but we said in the contract we will pay whoever buys this apartment. We will fund that ourselves. So you don't need to worry about this. If you want to go and sell something it's got a large strata livy attached. I'm starting to get a bit tongue tag because I get so passionate about this. It also may be really hard to then sell that property if it's got dramas going on.

That was my next question for you in terms of what this actually means. Say for an investor, right if you have a special levy attached to your property that something has gone wrong, it would have an impact on resale.

That was my next question for you in terms of what this actually means. Say for an investor, right if you have a special levy attached to your property that something has gone wrong, it would have an impact on resale.

Definitely, it would have an impact.

Definitely, it would have an impact.

Like we couldn't.

Like we couldn't.

I think we've gone through about seven different real estate agents trying to sell this place, and we just it was like we had a curse on it. We couldn't even though we agreed to pay for this. Thank good as we didn't sell, because we'd have sold it at a ridiculously low price, and we would have happily sold it at a ridiculous though ridiculously low price. But also you know things like you can you get the social strata work done whilst the tenant is still in there, or whilst you're still living in there. You know, for us, no one could it was inhabitable, roof was taken off, you couldn't live in it. And that was for about nine months, or maybe not nine but just up nine months. And then for other people, you know, maybe you've got to get the tenant out. Now. Is that tenant out for a month? Do you have to then pay that tenant's rent somewhere else or pay for them to stay in hotel? What about access that tenant may say, well, hang it, I'm being massive inconvenienced here with scaffoldings, noise, you know, people coming and going, I want a rental reduction. So there's lots of things that you've got to sort of face, and it may devalue the price of the property, you know, because you're not getting that yield anymore.

I think we've gone through about seven different real estate agents trying to sell this place, and we just it was like we had a curse on it. We couldn't even though we agreed to pay for this. Thank good as we didn't sell, because we'd have sold it at a ridiculously low price, and we would have happily sold it at a ridiculous though ridiculously low price. But also you know things like you can you get the social strata work done whilst the tenant is still in there, or whilst you're still living in there. You know, for us, no one could it was inhabitable, roof was taken off, you couldn't live in it. And that was for about nine months, or maybe not nine but just up nine months. And then for other people, you know, maybe you've got to get the tenant out. Now. Is that tenant out for a month? Do you have to then pay that tenant's rent somewhere else or pay for them to stay in hotel? What about access that tenant may say, well, hang it, I'm being massive inconvenienced here with scaffoldings, noise, you know, people coming and going, I want a rental reduction. So there's lots of things that you've got to sort of face, and it may devalue the price of the property, you know, because you're not getting that yield anymore.

Interesting to see though, that you had so many agents attached to it and so many kind of potential buyers over those those years and none wanted it. It does show that buyers are doing their research and going through this because we've talked about the importance of if you're buying property, to go through and check the strata reports and do all of these things and make sure that you're doing your research and assessing these things objectively. It's I do find it extraordinary though, that no one kind of jumped at the opportunity when you were offering to pay, yeah, the special levy that okay, here we go.

Interesting to see though, that you had so many agents attached to it and so many kind of potential buyers over those those years and none wanted it. It does show that buyers are doing their research and going through this because we've talked about the importance of if you're buying property, to go through and check the strata reports and do all of these things and make sure that you're doing your research and assessing these things objectively. It's I do find it extraordinary though, that no one kind of jumped at the opportunity when you were offering to pay, yeah, the special levy that okay, here we go.

Well and thank goodness, I mean Tom and I did tried to work out what the strata special strata would be and what we had in our minds, and from speaking to our Laurie about what it could be, it was not even a quarter of what we were actually eventually hit with. Wow, So thank goodness we didn't agree to it. It shows you how scared people are when there is a complicated strata issue going on. But obviously an experienced investor, if they had seen that, they might have thought thought, oh my gosh, what an amazing opportunity to buy something at a dirt cheap price and not have to worry about ever having to fund this special strata levy. Because over time, obviously you know, time hills, all wounds, water wounds, you know, they're building more obviously increase in value, and there are special stratle levees. I should point out that actually add value, you know, giving the building a facelift, updating the windows, the balconies, repainting. Those are things that actually can increase the value as well and make it more attracted.

Well and thank goodness, I mean Tom and I did tried to work out what the strata special strata would be and what we had in our minds, and from speaking to our Laurie about what it could be, it was not even a quarter of what we were actually eventually hit with. Wow, So thank goodness we didn't agree to it. It shows you how scared people are when there is a complicated strata issue going on. But obviously an experienced investor, if they had seen that, they might have thought thought, oh my gosh, what an amazing opportunity to buy something at a dirt cheap price and not have to worry about ever having to fund this special strata levy. Because over time, obviously you know, time hills, all wounds, water wounds, you know, they're building more obviously increase in value, and there are special stratle levees. I should point out that actually add value, you know, giving the building a facelift, updating the windows, the balconies, repainting. Those are things that actually can increase the value as well and make it more attracted.

Especially when it's not like remediation work, not not trying to fix a problem that it is actually just improving what's already there. They are are kind of two different categories, almost, aren't they exactly? All right, we have spent a bit of time on special levees, but it is an important one, and it's obviously one that that you have experienced. And then you say that the time heels all words, it does sound like that WORND might still be a little bit raw.

Especially when it's not like remediation work, not not trying to fix a problem that it is actually just improving what's already there. They are are kind of two different categories, almost, aren't they exactly? All right, we have spent a bit of time on special levees, but it is an important one, and it's obviously one that that you have experienced. And then you say that the time heels all words, it does sound like that WORND might still be a little bit raw.

Well, we're still paying special strateg levies.

Well, we're still paying special strateg levies.

All right, Well, let's take a quick break. When we come back, we're going to go through some of the other pitfalls for property investors, things like challenges with tenants or damage that's done to property, kind of market fluctuations, interest rates, all of these things that you do need to take into account if you are considering investing in property. Don't go anywhere Cana today we are talking about property investing, but in particular if you are investing in property, some of the pitfalls that you need to be aware of. This is not to discourage anybody from investing in property. It is just making sure that here we are very upfront about some of the risks and that you go into it with your eyes open.

All right, Well, let's take a quick break. When we come back, we're going to go through some of the other pitfalls for property investors, things like challenges with tenants or damage that's done to property, kind of market fluctuations, interest rates, all of these things that you do need to take into account if you are considering investing in property. Don't go anywhere Cana today we are talking about property investing, but in particular if you are investing in property, some of the pitfalls that you need to be aware of. This is not to discourage anybody from investing in property. It is just making sure that here we are very upfront about some of the risks and that you go into it with your eyes open.

And we're showing things that people don't actually often share willingly.

And we're showing things that people don't actually often share willingly.

Tenants, what happens if you get if there's a problem with your tenants, for instance, in the property. Could you be looking at things like damage done to a property, unpaid rent for instance, which I suspect is probably quite a delicate kind of thing to have to resolve, particularly in the current cost of living crisis. But these are factors that the owner of a property would have to deal with.

Tenants, what happens if you get if there's a problem with your tenants, for instance, in the property. Could you be looking at things like damage done to a property, unpaid rent for instance, which I suspect is probably quite a delicate kind of thing to have to resolve, particularly in the current cost of living crisis. But these are factors that the owner of a property would have to deal with.

Yeah, the breaches of the lease agreements. I saw a situation where someone the tenant was running in a legal brothel in what Yeah, and the apartment You are.

Yeah, the breaches of the lease agreements. I saw a situation where someone the tenant was running in a legal brothel in what Yeah, and the apartment You are.

Well that one that one to me would be more kind of clear card get out. But that's a that's extraordinary.

Well that one that one to me would be more kind of clear card get out. But that's a that's extraordinary.

But you know it's the laws are different now, they protect the tenants, and you know, obviously there's legal costs involved and the loss of rental income and obviously the emotional stress. You might have insurance in place, And that's why landlord insurance can be very valuable and is highly recommended. So at the end of the day, the best way to try and mitigate that risk is to have a property manager or do your own solid screen of tenants before you agree to let them move in, and do as much as you can to reduce that risk. Have a good line of communication with the tenant as to you know what's reasonable, what's expected, and how you'll be handling problems. To make sure that you know they are safe, they're protected, and they're in they can make that property their home.

But you know it's the laws are different now, they protect the tenants, and you know, obviously there's legal costs involved and the loss of rental income and obviously the emotional stress. You might have insurance in place, And that's why landlord insurance can be very valuable and is highly recommended. So at the end of the day, the best way to try and mitigate that risk is to have a property manager or do your own solid screen of tenants before you agree to let them move in, and do as much as you can to reduce that risk. Have a good line of communication with the tenant as to you know what's reasonable, what's expected, and how you'll be handling problems. To make sure that you know they are safe, they're protected, and they're in they can make that property their home.

You mentioned insurance, How does that work in this in this situation.

You mentioned insurance, How does that work in this in this situation.

Well, you can take out landlord insurance and it's not actually that expensive and it's for most people it's tax deductible. But obviously always talk to your accountant. But this can help cover any damage. For example, Okay, I know someone who had some tenants destroy the property and the insurance company paid for everything to be fixed, not to improve it, but to bring it back to what it was before their tenants moved in.

Well, you can take out landlord insurance and it's not actually that expensive and it's for most people it's tax deductible. But obviously always talk to your accountant. But this can help cover any damage. For example, Okay, I know someone who had some tenants destroy the property and the insurance company paid for everything to be fixed, not to improve it, but to bring it back to what it was before their tenants moved in.

And when we're talking about this kind of damage, it's not always not necessarily talking about malicious damage as well. These are accidental kind of things that can happen within your investment property while you're owning it, and so it does makes sense to have your insurance, just as you would ensure the house that you're living in, the car that you're driving. It is an asset that you are looking to ensure. Another pitfall can be the time taken to get new tenants into a property, because you kind of think that in the current kind of environment, with essentially a housing crisis, that it should be really fast if one tenant finishes their lease and they move out, that it should be quick to get new people in. But really you are probably looking at a few weeks anyway, while the apartment is being shown to potential tenants, while the screening process is going on, while you're perhaps going through a cleaning process or any repairs that are being done in between paint new carpet. Absolutely, you might actually be looking at a month or more without tenants in there, and that is time when you are still paying the mortgage.

And when we're talking about this kind of damage, it's not always not necessarily talking about malicious damage as well. These are accidental kind of things that can happen within your investment property while you're owning it, and so it does makes sense to have your insurance, just as you would ensure the house that you're living in, the car that you're driving. It is an asset that you are looking to ensure. Another pitfall can be the time taken to get new tenants into a property, because you kind of think that in the current kind of environment, with essentially a housing crisis, that it should be really fast if one tenant finishes their lease and they move out, that it should be quick to get new people in. But really you are probably looking at a few weeks anyway, while the apartment is being shown to potential tenants, while the screening process is going on, while you're perhaps going through a cleaning process or any repairs that are being done in between paint new carpet. Absolutely, you might actually be looking at a month or more without tenants in there, and that is time when you are still paying the mortgage.

Those vacancy periods are a bit of a hidden cost, and again one that people just don't really talk about. But you know, a couple of weeks or if up to a month, that's a huge dent on your cash flow, because you've then got to dip into your own pocket with no income coming in or rental income coming in to help them cover that. So there are things, though, I think you can do to help reduce that. And I should also point out, while you're paying that mortgage phone, we've still got to pay the council rates and strata levies and all those other things on top of But what I would say to people is if in this situation is try and avoid tenants if you can moving out during periods like Christmas time.

Those vacancy periods are a bit of a hidden cost, and again one that people just don't really talk about. But you know, a couple of weeks or if up to a month, that's a huge dent on your cash flow, because you've then got to dip into your own pocket with no income coming in or rental income coming in to help them cover that. So there are things, though, I think you can do to help reduce that. And I should also point out, while you're paying that mortgage phone, we've still got to pay the council rates and strata levies and all those other things on top of But what I would say to people is if in this situation is try and avoid tenants if you can moving out during periods like Christmas time.

Oh yeah, because no one's going to want to move in or be attending inspections on kind of boxing that exactly.

Oh yeah, because no one's going to want to move in or be attending inspections on kind of boxing that exactly.

So if you can have an open, frank conversation and say, look, can you you know, can we work with you, even if it means slightly reducing rent to avoid them moving out at such a crucial time, that can really help reduce that gap. And you know, I've seen situations where tenants have asked for a rental reduction whilst the open inspection period goes on. So they'll say, look, I'm going to be moving into state, going to vacate this property, and the landlords said, okay, Well, if you would let us do an open inspection, say five weeks before you move out, will reduce your rent accordingly, give you a certain discount just to help bridge that gap and help make that in between period much smaller.

So if you can have an open, frank conversation and say, look, can you you know, can we work with you, even if it means slightly reducing rent to avoid them moving out at such a crucial time, that can really help reduce that gap. And you know, I've seen situations where tenants have asked for a rental reduction whilst the open inspection period goes on. So they'll say, look, I'm going to be moving into state, going to vacate this property, and the landlords said, okay, Well, if you would let us do an open inspection, say five weeks before you move out, will reduce your rent accordingly, give you a certain discount just to help bridge that gap and help make that in between period much smaller.

Funnily enough, it's coming back to a common theme that we've talked about, and that is communication. Yeah, right, and whether that is directly with your tenant, if you have that relationship, a direct kind of landlord tenant relationship, or through your property manager kind of observing all the rules and everything that are in place around it. But communication really helps. And as a tenant, I know, speaking from past experience, you appreciate good communication and open, honest communication about what is going to happen with the property exactly.

Funnily enough, it's coming back to a common theme that we've talked about, and that is communication. Yeah, right, and whether that is directly with your tenant, if you have that relationship, a direct kind of landlord tenant relationship, or through your property manager kind of observing all the rules and everything that are in place around it. But communication really helps. And as a tenant, I know, speaking from past experience, you appreciate good communication and open, honest communication about what is going to happen with the property exactly.

And another other little hack is always have some good quality photographs of the apartment or property I should say this massive such of the property inside and out. So the moment you know, someone says, okay, we're moving out, you've actually got something at least that can go up online and to engage the interest and the bites as to whether you'll be able to move this property into another tenant quickly.

And another other little hack is always have some good quality photographs of the apartment or property I should say this massive such of the property inside and out. So the moment you know, someone says, okay, we're moving out, you've actually got something at least that can go up online and to engage the interest and the bites as to whether you'll be able to move this property into another tenant quickly.

That's a great tip.

That's a great tip.

I thank you. I'm very experienced in this area. That's a lot of stressful situations to try and avoid myself.

I thank you. I'm very experienced in this area. That's a lot of stressful situations to try and avoid myself.

I'm going to bundle a few things into one question now, market fluctuations, interest rates, over leveraging themselves. How does a property investor prepare for all of those? I'll get thirty seconds to answer.

I'm going to bundle a few things into one question now, market fluctuations, interest rates, over leveraging themselves. How does a property investor prepare for all of those? I'll get thirty seconds to answer.

All right, Budgeting a cash flow obviously number one. You've got to be run your numbers actually before you buy anything like this and go okay. And I've always said this, can you afford a three percent interest rate rise? Not three interest rate rises? A three percent interest rate rise? If you had followed that advice, which I've been saying ever since I've launed sugar Mom on TV, which is like ten years ago, that would have allowed you to see exactly how much stress can you take on before it actually buckles. So be realistic as to the fact interest rates can go down, but they can also go up, and as we've seen, they can go up consistently and in not just quarterly increases twenty five basis points, but obviously fifty basis points as well at a time. So do as stress test beforehand and also review your finances as well, so that if you've got multiple properties with different loans. You can see how each of them manage. Also look at things like the impact obviously if someone moving out, If you have over extended yourself and the rental market has softened and you're not getting the returns, you've got to speak to a mortgage broker, a good quality, experience mortgage broker who deals with this all the time and can look at tweaking and changing your existing loans strategy or if necessary, refinancing with another institutional lender so they can maybe get you a lower interest rate, or perhaps they can change your terms from interest only to maybe principle and interest because will bring the interest rate loan down. So in it obviously is subject to what's going on in the market and what's a competitive rate. But you've got to work with people and people who are experts when things go wrong. So also obviously no brainer talking to your accountant as well, making sure that you're claiming all the deductions that you can, as speaking with the property manager can help make sure the whole process is managed more smoothly. Understand what your legal entitlements are with mental increases and so forth.

All right, Budgeting a cash flow obviously number one. You've got to be run your numbers actually before you buy anything like this and go okay. And I've always said this, can you afford a three percent interest rate rise? Not three interest rate rises? A three percent interest rate rise? If you had followed that advice, which I've been saying ever since I've launed sugar Mom on TV, which is like ten years ago, that would have allowed you to see exactly how much stress can you take on before it actually buckles. So be realistic as to the fact interest rates can go down, but they can also go up, and as we've seen, they can go up consistently and in not just quarterly increases twenty five basis points, but obviously fifty basis points as well at a time. So do as stress test beforehand and also review your finances as well, so that if you've got multiple properties with different loans. You can see how each of them manage. Also look at things like the impact obviously if someone moving out, If you have over extended yourself and the rental market has softened and you're not getting the returns, you've got to speak to a mortgage broker, a good quality, experience mortgage broker who deals with this all the time and can look at tweaking and changing your existing loans strategy or if necessary, refinancing with another institutional lender so they can maybe get you a lower interest rate, or perhaps they can change your terms from interest only to maybe principle and interest because will bring the interest rate loan down. So in it obviously is subject to what's going on in the market and what's a competitive rate. But you've got to work with people and people who are experts when things go wrong. So also obviously no brainer talking to your accountant as well, making sure that you're claiming all the deductions that you can, as speaking with the property manager can help make sure the whole process is managed more smoothly. Understand what your legal entitlements are with mental increases and so forth.

Because you do worry about people that have borrowed to their absolute maximum in order to invest in a property. And again it's kind of like the mistake and belief that when you borrow money when rates are low, that they will stay low forever, and it doesn't happen. And just the same as thinking that the high rental rates and the yields that are available now that they will continue forever. And sure, they may remain elevated for some time, but markets can go both up and down, and so you need to be prepared for perhaps the rent on your property to fall exactly. There is a lot in that one. You mentioned an accountant then just in passing to make sure that you are claiming the deductions to which you are entitled as part of this that is then linked to another pitfall, property pitfall, which is not understanding the tax implications of property investing. For instance, everyone talks about negative gearing and it is a really big political issue as well, kind of whenever it is frequently in the headlines. But if you asked some property investors, can you define negative gearing for me and how exactly it works and how it affects your income and your tax that you pay at the end of the year, they may struggle to do it like it is about actually understanding the tax implications of your investment.

Because you do worry about people that have borrowed to their absolute maximum in order to invest in a property. And again it's kind of like the mistake and belief that when you borrow money when rates are low, that they will stay low forever, and it doesn't happen. And just the same as thinking that the high rental rates and the yields that are available now that they will continue forever. And sure, they may remain elevated for some time, but markets can go both up and down, and so you need to be prepared for perhaps the rent on your property to fall exactly. There is a lot in that one. You mentioned an accountant then just in passing to make sure that you are claiming the deductions to which you are entitled as part of this that is then linked to another pitfall, property pitfall, which is not understanding the tax implications of property investing. For instance, everyone talks about negative gearing and it is a really big political issue as well, kind of whenever it is frequently in the headlines. But if you asked some property investors, can you define negative gearing for me and how exactly it works and how it affects your income and your tax that you pay at the end of the year, they may struggle to do it like it is about actually understanding the tax implications of your investment.

Absolutely, you need to understand not just negative gearing, but also all the other taxes along the way and what you can legally claim and what you can't.

Absolutely, you need to understand not just negative gearing, but also all the other taxes along the way and what you can legally claim and what you can't.

Capital gains tax as well. These are things that you should have a conversation with your accountant.

Capital gains tax as well. These are things that you should have a conversation with your accountant.

And active conversation. Don't go and sell the property then book the appointment to see your accountant. That could be disastrous. Go and see your accountant saying I'm thinking of selling this, what are my tax implications and they can run some numbers and scenarios for you where they can help reduce that tax legally.

And active conversation. Don't go and sell the property then book the appointment to see your accountant. That could be disastrous. Go and see your accountant saying I'm thinking of selling this, what are my tax implications and they can run some numbers and scenarios for you where they can help reduce that tax legally.

And would you recommend having a conversation You're talking about proactive conversations about even before you are buying as well, just to go, okay, this is what I want to do. I want to take advantage say of negative gearing. Is it actually going to make any difference to me if I do this? Is this going to actually be a good decision?

And would you recommend having a conversation You're talking about proactive conversations about even before you are buying as well, just to go, okay, this is what I want to do. I want to take advantage say of negative gearing. Is it actually going to make any difference to me if I do this? Is this going to actually be a good decision?

Yes, your accountant, but also your financial planner as well, because your financial planner might say hang on, like ease up, we actually need to pay attention to your superannuation here because there's greater tax savings for you by using a superannuation vehicle. Or perhaps we need to look at buying a property but buying through a self manage super fund.

Yes, your accountant, but also your financial planner as well, because your financial planner might say hang on, like ease up, we actually need to pay attention to your superannuation here because there's greater tax savings for you by using a superannuation vehicle. Or perhaps we need to look at buying a property but buying through a self manage super fund.

Yeah.

Yeah.

So you know, there's lots of things stones to unturning before you make any big decisions.

So you know, there's lots of things stones to unturning before you make any big decisions.

I like that place to finish out proactive conversations, actually getting in there, talking to your financial planner, talking to your accountant about the tax implications and about the right strategies for it, because really that will then help you kind of prepare. If you're having those conversations with your financial planner, that will prepare you for the other pitfall that we were talking about. Market fluctuations and interest rate rises and perhaps potential drops in in kind of rental yields and things. If you have those proactive conversations, then you are more likely to be prepared for all of those things.

I like that place to finish out proactive conversations, actually getting in there, talking to your financial planner, talking to your accountant about the tax implications and about the right strategies for it, because really that will then help you kind of prepare. If you're having those conversations with your financial planner, that will prepare you for the other pitfall that we were talking about. Market fluctuations and interest rate rises and perhaps potential drops in in kind of rental yields and things. If you have those proactive conversations, then you are more likely to be prepared for all of those things.

Right, absolutely, And can I say one last thing, Oh, yes, have a strategy.

Right, absolutely, And can I say one last thing, Oh, yes, have a strategy.

So many people great idea, but so.

So many people great idea, but so.

Many people go and buy a property. They great, I bought a property. I bought an investment property. But if you ask them, okay, well what's the plan? Oh I don't know. I'm just going to rent it out? All right? Okay, how's that going to work? So? Is it the planet to have it paid itself off over time? Or is the plan on it to build up the equity within it and then buy another one, or is the plan to actually flip it and by crystallize that gain and then by a bigger property, or what is the actual strategy behind it? We can all very easily get caught up in that herd mentality and that properties the bill and end all to build wealth. What's your game plan? And everyone is different with what they need and this is why you need personal advice.

Many people go and buy a property. They great, I bought a property. I bought an investment property. But if you ask them, okay, well what's the plan? Oh I don't know. I'm just going to rent it out? All right? Okay, how's that going to work? So? Is it the planet to have it paid itself off over time? Or is the plan on it to build up the equity within it and then buy another one, or is the plan to actually flip it and by crystallize that gain and then by a bigger property, or what is the actual strategy behind it? We can all very easily get caught up in that herd mentality and that properties the bill and end all to build wealth. What's your game plan? And everyone is different with what they need and this is why you need personal advice.

Yeah, absolutely, all right. Well, we started with kind of special levies and understanding the implications of those and making sure that you are saving and preparing just in case one of those do actually does actually hit the property that you are investing in. We've talked about tenants, unpaid rent, the time it can take to get new tenants into a property, a bunch of strategies they're dealing with, market fluctuations, interest rate rises, drops in rents, and understanding the tax implications. We've covered a lot, and we've made it probably sound like there are a lot of potential pitfalls. For property investing, and there are, but there's also a lot of benefits to it as well. But you just need to go into this kind of thing with your eyes open, exactly, Cannah. If we want more information from you, where do we find you?

Yeah, absolutely, all right. Well, we started with kind of special levies and understanding the implications of those and making sure that you are saving and preparing just in case one of those do actually does actually hit the property that you are investing in. We've talked about tenants, unpaid rent, the time it can take to get new tenants into a property, a bunch of strategies they're dealing with, market fluctuations, interest rate rises, drops in rents, and understanding the tax implications. We've covered a lot, and we've made it probably sound like there are a lot of potential pitfalls. For property investing, and there are, but there's also a lot of benefits to it as well. But you just need to go into this kind of thing with your eyes open, exactly, Cannah. If we want more information from you, where do we find you?

If there any lawyers listening to just going she might have it, they might have a case. Please feel here to reach out to me at Sugar Mamme tiving can a cable official.

If there any lawyers listening to just going she might have it, they might have a case. Please feel here to reach out to me at Sugar Mamme tiving can a cable official.

And you can hear me every day with Sean Aylmer on Fear and Greed, daily business news for people who make their own decisions. Thank you very much for listening to how do They Afford That? Remember please to hit follow on the podcast, and the best thing that you can do is tell somebody else send them the link to this episode if you think that they might benefit from hearing it, spread the word about how do they afford that? Thank you for your company. Join us again next week

And you can hear me every day with Sean Aylmer on Fear and Greed, daily business news for people who make their own decisions. Thank you very much for listening to how do They Afford That? Remember please to hit follow on the podcast, and the best thing that you can do is tell somebody else send them the link to this episode if you think that they might benefit from hearing it, spread the word about how do they afford that? Thank you for your company. Join us again next week