The Finance Show With Joe

Interest Rate Cuts Don’t Matter If You’re Poor

• It's Simple Finance • Season 2 • Episode 21

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The long-awaited 0.25% interest rate cut from the Reserve Bank of Australia has finally arrived, bringing welcome relief to homeowners after rates reached their highest point in 15 years. But beyond the modest monthly savings—about $180 for the average New South Wales mortgage holder—lies a much more significant opportunity that savvy Australians shouldn't overlook.

First-time buyers with median NSW salaries now have an additional $12,000-$14,000 in borrowing capacity, potentially bridging the gap that previously kept them from entering the market. Investors gain even more leverage, with borrowing power increasing by $15,000-$20,000. This expanded capacity coincides perfectly with the government's new residential housing scheme that has relaxed zoning laws across numerous NSW hotspots, creating a perfect storm of opportunity for those previously priced out of the market.

Unlike previous rate cuts, we're unlikely to see an immediate property price surge. The two-year ban on foreign investment in existing properties, combined with depleted savings across Australian households due to prolonged high interest rates and inflation, means the market response will likely be measured. The Northwest corridor of Sydney, with its significant infrastructure investments including the metro line that connects Barangaroo to Bella Vista in just 38 minutes, stands out as a particularly promising investment region.

Rather than putting small sums into Bitcoin or stocks, Joe advocates investing in yourself—developing marketable skills like video editing that could generate exponentially more income than the interest savings alone. This entrepreneurial mindset, combined with understanding Australia's business tax advantages (25% flat company tax versus up to 46% personal income tax), offers a pathway to true financial independence and wealth creation that goes far beyond the impact of a single rate cut.

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Speaker 1:

Interest rates had not been that high for a very, very long time From memory of the headlines.

Speaker 2:

it was like 15 years.

Speaker 1:

at least the Reserve Bank of Australia finally met together and cut the interest rates by 0.25%.

Speaker 2:

With the interest rates going down, will property prices then go up again? Will it balance out or will they again exceed? This is a pity.

Speaker 1:

So I think it's. I get young people coming to me all the time. What should I invest in? What's going to make me? What's going to drive my wealth? Should I invest in Bitcoin? Should I invest in the stock market? Should I do this? I'm going to tell them shut the fuck up. And the reason I'm going to say that out loud is because Australia is a growing population. There are a lot of individuals here competing for your job and in order to be able to succeed in Australia truly, truly succeed and make it to that next level, you have to f***.

Speaker 2:

Welcome to the Finance Show with Joe. He's Joe, I'm just some schmo, and today we're going to talk about why interest rates don't matter, if you're poor.

Speaker 1:

You are not a schmo, I'm just going to highlight this. So we've done about, you know, 20 episodes now 20 or so yeah. And Michael's been calling himself a schmo for quite a while. But look at him today he's wearing a nice black shirt. He looks quite corporate. He's a homeowner.

Speaker 2:

This is true. This is true. Who has?

Speaker 1:

recently completed his renovations.

Speaker 2:

Uh, yeah, yeah, Still got to put in the TV racks, but it's done. It's on the low priority list.

Speaker 1:

It's um at your age.

Speaker 2:

Not many people would be able to achieve that no, and I was able to, because of my entire family.

Speaker 1:

I understand, but don't sell yourself short. Oh, thank you, because you were still able to contribute towards it and you were still paying off your mortgage and you're doing some amazing things, and the reason I wanted to bring that up is because you entered the mortgage market when it was at its toughest. Yeah, it wasn't wasn't a good spot it was not, so I believe that we got you an interest rate of six point I think six point three, five or six point four, something around there it was somewhere around there.

Speaker 1:

Yeah, interest rates had not been that high for a very, very long memory.

Speaker 2:

the headlines it was like 15 years, at least something like that, Since I think it was the GFC that makes sense right.

Speaker 1:

Somewhere along there. Last time, inflation was crazy, that's right, and it was rather remarkable that you and your family were able to get together to be able to purchase a property.

Speaker 2:

We also had a star broker Definitely helped make it all happen.

Speaker 1:

That's a cheap plug. That's a cheap plug, but the reason I wanted to bring that up is the headline of today's episode. Yeah, the Reserve Bank of Australia finally met together and cut the interest rates by 0.25%.

Speaker 2:

Yeah, which is good news for homeowners across Australia.

Speaker 1:

It's good news for homeowners. It's good news for first-time buyers. It's good news for first-time investors, people who are looking to finally break into the market. People are going to hear and they're going to read a lot of headlines in regards to how much does 0.25% actually affect me? Yeah, yeah, if you've got the average mortgage in New South Wales, you're saving about $180. Something around that. Yeah, max per month. Yeah, what's $180 a month? $180 a month. Multiply that by 12. You're looking at about $2,160. Something like that. $2,160 a year is not a huge amount in the grand scheme of things, considering. Groceries cost you $300 a week.

Speaker 2:

Yeah, exactly, I mean, in one sense it does help with said grocery bill. You've got an extra $180 a month to put towards that grocery Again. How much does that change things? Not sure yeah.

Speaker 1:

But it's how much more borrowing capacity you have, and this is something I wanted to highlight in today's episode. I've seen a plethora.

Speaker 2:

Good word You're the journalist.

Speaker 1:

I've seen the people jumping online and being like it's only a 0.25% rate cut. Why are brokers celebrating? Now, anybody that knows my personality I'm the freaking wolf of wall street when it comes to this shit you should have seen the day the rates were dropped.

Speaker 2:

You would have popped champagne if you could however.

Speaker 1:

However, it isn't so much about the money that we are saving. It's the opportunity that is created. It's the opportunity that's created for first-time buyers. It's the opportunity that's created for first-time buyers. It's the opportunity that's created for first-time investors. It's the possibility that's created from this. So I crunched the numbers as I do.

Speaker 1:

If you are a first-time buyer, okay, you are purchasing your first property in New South Wales and you are going for all the schemes the first-home guarantee, the first-home owner's grant and you know you've got a 5% to 10% deposit and you really want to tap into the market Because of these 0.25% interest rate cuts. Okay, and let's say you've got the median salary in New South Wales, which is roughly $95,000 to $98,000, you can borrow $12,000 to $14,000 more, Okay. So as opposed to thinking about how much you're going to be saving, it's about how much more you can achieve. I've seen people be priced out of purchasing apartments because they couldn't make up that extra $10,000. Look what you got in your pocket now Exactly.

Speaker 1:

So now there is more capability, there are more options to explore. Yeah, If you are purchasing an investment, it increases even further. I don't know why. This is just how these mortgage calculators work. Okay, but if you are purchasing an investment, this is including your notional rent. For our listeners that don't know what notional rent is, the bank considers that you're paying your parents rent of $650 a month.

Speaker 2:

Really Like if you live at home. They think you're paying rent. Yep.

Speaker 1:

They didn't do the study on what kids I was going to say but so there's notional rent.

Speaker 1:

There's quite a lot of things, but we've included that. We included the rental income, the possible negative gearing, all those items. You can borrow $15,000 to $20,000 more, okay. So on one side you can borrow, you know, you go from $600,000 to $615,000 in borrowing. On the other side, if you're investing, you're going from $800,000 to $820,000. Okay, so that opens up a world of possibility for you if you are looking to purchase property. The exact same time, interest rates were cut. The government also released their low to medium residential housing scheme, where they highlighted all of these little hotspots all across New South Wales that you would now be able to build more apartments more homes, density laws have changed and stuff like that.

Speaker 2:

That's correct.

Speaker 1:

So what they've done is they've opened up the opportunity for people like yourself two years ago, your sister a couple years ago, a videographer, liam.

Speaker 2:

Anyone who is in that age graph age Everyone in their late 20s and early 30s, basically.

Speaker 1:

You took the words right out of my mouth, but what they did is they opened it all up for them to be able to purchase, and not only purchase a property, but purchase in New South Wales, yeah, and have that opportunity to be able to grow again.

Speaker 2:

Yeah and that's really good. But just counter to that, with the interest rates going down, will property prices then go up again and will that change? Will it balance out or will they again exceed? Like you know, you get extra money now, like extra 15K. Will property prices go up past that point?

Speaker 1:

I don't think so. Okay, and this is opinion, the government came in and they've put a two-year ban on foreigners being able to invest in existing properties. Yes, I heard that All across Australia. Okay, that makes sense. So that's the first thing that has come in to prevent, like, a huge property price surge. Yeah, that's the first thing. The second thing is the effect of high interest rates over the last two years. Okay, because interest rates were so high. What did we see in that time? We saw coals and wool words increase their prices because of production line bullshit and interest trades. Still don't really know why they did it, but sure Nobody knows the reason why. We've seen restaurants increase their prices. We've seen I bought a bottle of water from McDonald's the other day and it was like $4.55.

Speaker 1:

Because of all these increases in prices, the savings has dwindled. So the average amount of savings that somebody in New South Wales had in 2022 was $36,000, $37,000. Huge amount of money. That's five figures In 2024, that is around $31,000. Now listeners might be sitting there and thinking to themselves that's a $5,000 difference. It's not that big. But wait, because of inflation, your $31,000 is actually worth less than what it would have been two years ago. Yes, yes, yes, because the cost of goods, the cost of living, has gone up so high. So I don't think that property prices are immediately going to boom again. And I think I made a reel of this the other day. I specifically highlighted the fact that because genuine savings, or savings in general, are down, you're not going to see an immediate rush to auction. You're not going to see an immediate explosion of property prices. It will go back up. It's Australia, we are a blue-collar country and everything is based on property Every barbecue, everywhere you go. I'm doing this, I'm building a granny flat, I'm doing a duplex.

Speaker 2:

You've heard it a million times.

Speaker 1:

It is the ticket to be able to create wealth in Australia.

Speaker 2:

Property is the way, especially generational wealth as well, if you want it for your kids.

Speaker 1:

Very easy to pass that on 100%, but it's not going to be an immediate boom. Okay, especially because they're increasing the supply of housing, as mentioned earlier yeah, and at the exact same time, they've cut the foreign investors for existing properties. Yeah, the genuine savings aren't built up, so I actually think there's going to be another rate cut. Well aren't built up.

Speaker 2:

Yeah, so I actually think, there's going to be another rate cut.

Speaker 1:

Well, there is predicted to be at least two, even though the rba said like, oh, don't you know, don't bet on it. I think they're always going to say that. Well, not necessarily after philip lowe's. Uh, yeah, you know, interest rates won't go up for this period of time yeah, you know what?

Speaker 2:

yeah, take it back.

Speaker 1:

Yeah, I think they're being very cautious yeah and selective with their wording.

Speaker 2:

now, that's smart from a PR point of view, you don't have a potato on TV going no, interest rates aren't going to go up.

Speaker 1:

Everybody going out and buying property and then all of a sudden, I can't afford my property. This is the RBA's fault. So it's actually super interesting. But there's two sides of the coin of the interest rates going down. It's opportunities being open for people that are looking to create that wealth yeah and then there's opportunities being created for people looking to save money at the exact same time explain to me the savings thing.

Speaker 2:

What do you mean by that?

Speaker 1:

if you've already got a mortgage, you're now a hundred hundred eighty dollars a month in the clear. Okay, that might be one and a half to $2,000 a year in savings on a mortgage. What if you have four investment properties?

Speaker 2:

Well, that's all going to add up, isn't it Exactly?

Speaker 1:

Yeah, what if you were the type of person that at the age of 40, 45, you've built up a property portfolio and I'm not saying you've got a house in Dover Heights, you've got a house in You've portfolio and I'm not saying you've got a house in dover heights.

Speaker 1:

You've got a house in. You've just got multiple properties. You've got multiple. You could have bought regional, you could have brought rule, you could have bought tassie, queensland, kingswood, everywhere, yeah. So the savings that you have now it's not a hundred dollars a month, it's four hundred dollars a month.

Speaker 2:

Yeah, that's five thousand dollars a year yeah, because even if you've got like this is and this is goes back to what I was saying at the beginning of the episode the rate cuts don't matter too much when you're poor, because and I honestly I say that more as rage bait, let's, let's be clear because it does make a difference, especially, you know, especially with grocery bills and cost of living going up. It does make a difference. But who it's really making a difference before is like, if you've got a two million dollar property, you're paying $12,500 per month right now. Now, with the rate cut, like you said, that's $400 in your pocket.

Speaker 1:

There's a whole subsection of people that I do want to discuss, and that's business owners. Now, you know, we're doing a bit of prep for this podcast and Michael's asked me, you know, for someone who's a little bit younger, between the age of 25 to 30 yeah, they've bought a property. They can now save a hundred dollars a month. What can they do with that extra hundred dollars a month? Yeah, I will add on top of that what can they do with that extra 14, 15 000 a year that they could borrow?

Speaker 1:

One thing I always want to highlight australia is a growing population. Yeah, always. There are a lot of individuals here competing for your job, and in order to be able to succeed in australia truly, truly succeed and make it to that next level, you have to own your own business. You can be on as high of a salary as you want. You could be on a $200,000, $300,000 a year salary. You know what happens when you enter those brackets it's the taxes. Right, correct? So I think it's after $149,999, somewhere along the lines of that you start getting taxed at a rate of 46% on every dollar that you earn past that. So you might be on a great salary. You might be on $150,000 a year and then you get $200,000 a year bonuses, whatever. You could be a solicitor, you could be one of these people. Yeah, what ends up happening is you will get smashed on tax.

Speaker 1:

Okay, I'm going to advise something right now. The advice on this channel is general in nature and not specific to you or your circumstance, and if you do need any specific advice, please consult a finance professional. Yeah, financial advisor, accountant, someone along the lines of that. So I get young people coming to me all the time. What?

Speaker 2:

should.

Speaker 1:

I invest in? What's going to make me money, what's going to drive my wealth? Should I invest in Bitcoin? Should I invest in the stock market? Should I do this? I'm going to tell them shut the fuck up. And I'm just going to say that out loud. And the reason I'm going to say that out loud is because if you buy $1,000 in Bitcoin right now and it goes up 20% in a year We've seen Bitcoin do this in the past yeah, 100. How much more money is that? 200? 200, yeah, what's 200 going to do for you in the grand scheme of things? By the time inflation comes around and everything, guess what you might? Might have bought yourself a, an extra cart of groceries. Yeah, okay, then you're gonna get the bitcoin, bro saying, oh, it's long-term investment. I'm not saying Bitcoin is bad for once. What I'm trying to say is that $1,000 might be better well spent.

Speaker 2:

Yeah, yeah, like better return somewhere else, yeah.

Speaker 1:

Invest in yourself. Yeah, invest in yourself and create a business, and I'm going to highlight two reasons why. When you can depend on yourself and you can make yourself a living okay, you are not under the control or the direction of someone else yeah, you are able to create this wealth for yourself. At the exact same time, and you can get started with something as simple as a laptop, few pieces of software and you can start yourself a side hustle. Now, what that side hustle is, that's 100% up to you, but I've seen people turn side hustles into six-figure businesses.

Speaker 2:

Yeah, I mean, you look at a lot of YouTube channels. A lot of them start as like yeah, I had a couple, you know, I saw one person that said their parents gave them a challenge, turned $200 into $1,000. So they bought some cheap camera equipment and some editing software. They already had a laptop, yeah, and they started a YouTube channel and off it went and they made enough money, like it wasn't their only job but it was a side hustle that made extra cash. And that was just from $200.

Speaker 1:

Yeah, but it was a side hustle that made extra cash and that was just from too much bucks, yeah. So it's investing in the equipment, yeah, and it's investing in yourself and learning how to be able to control your own destiny.

Speaker 2:

Yeah, If you want to get some quick money well, relatively quick money. Learn how to edit video. Yeah, Quickly learn how to do that. You can just do that on the side and if you're good at it, you could charge a premium because there's no set rate for editing video. How do I know this? How do you know this Well?

Speaker 1:

let's see. Some genius cousin of mine gave me the idea to go to Upwork. Okay, I hired a video editor on there. This is not a knock on Upwork, no it has good stuff. It does have good stuff, but there is a saying the poor man pays twice. You pay peanuts, you get monkeys. Okay, so is that the saying? I don't know. You pay for peanuts, you're going to get monkeys, something along the lines of that.

Speaker 2:

Something along the lines of that. But that makes sense to me. I get what you mean. You pay cheap, you get cheap.

Speaker 1:

So it took two weeks for the video editing to come through. It took five or six reworks to get the video done and by the time everything was completed, the video was so out of date and so non-useful that I couldn't I couldn't upload it to the channel. Yeah, it's useless at that point. So I wasted my time and money and money didn't get the product that I wanted, and now I've got an asset sitting at home back from 2021 that I can never use it's like buying shoes you know you buy cheap, you get like you'll.

Speaker 2:

You're running through in three months, 100 and you would just be. Yeah, it was 60 bucks at the time, but now you got to buy it again. Three months that's 120 bucks. You could have bought just a decent pair of sneakers at that point a million percent.

Speaker 1:

So think about jobs that people need, jobs that are valuable. Okay, people all across australia have small businesses, whether it be restaurants, whether it be mortgage brokerages, yeah, whether it's um, you know, law firms. Every single one of these law firms, every single one of these people accounts. Every single one of these people need some sort of advertising. And you highlighted video editing. Okay, you could charge a premium for video editing if you get really good at it. And the reason you can charge that premium I've seen people charge 200 300 an hour. Yeah, for video editing. That's solicitor level money at some point, you know.

Speaker 2:

Especially and what I like about those ones. It's like, yeah, you're like, oh my God, that hourly rate's crazy. But then, because they're so good at it, they're like, oh, yeah, but I'll get it done either in the hour or two. And you're like, oh, and at a high level as well.

Speaker 1:

So imagine you get five of those clients a week. Yeah, you get five hours a week. Yeah, you do it on a Saturday. That's an extra $1,000 in income.

Speaker 2:

Yeah, granted, that's not going to happen right off the bat once you get started, but it's a goal, right.

Speaker 1:

A hundred percent, but this is what I want to highlight. Let's say you are working as a marketing agent at the moment. I think marketing is like the number one course taken at university.

Speaker 2:

I imagine it would be because there's a million bloody jobs you can get.

Speaker 1:

So I'm just going to you're a marketing agent. You're on a base salary of $70,000. Okay, $80,000. Let's say $70,000. Your tax rate at that point is 22% for every dollar that you earn over X amount. Yeah, not an accountant, don't come to me. All right for that sort of stuff. These are just roundabout numbers. These are just roundabout numbers. If you magically got your salary bumped up to 120 000, okay, so from salary jump. So from 70 to 120 000 your salary magically jumped up. That doesn't mean your take-home income is going to increase dramatically by that much because you're hitting different tax rates. You're all of a sudden hitting that tax rate of about 36%, 37%, yeah.

Speaker 2:

So that one hang on which one's stage, three Hang on.

Speaker 1:

I'll let you look it up. You seem to be enjoying this.

Speaker 2:

I do enjoy this.

Speaker 1:

Taxes, oh, nothing gets me going more, but but if you do start a company, companies all the way up to 50 million dollars in profit have one tax rate, that's 25 on all profit. So instead of you being forced to pay 37 46 tax, you can instead bring that down to that 25%. So let's say you make $50,000. Okay, 25% of that is $12,500. So your take-home income from starting that company is $37,500. If your income shot up from $70,000 to $120,000, I can guarantee you I'm not going to run the numbers right now, we don't have that long of a podcast I can guarantee you it's going to be less than that $37,500. And the beautiful thing is, if you've got a gun accountant on your side, they'll claim the depreciation, they'll claim interest, they'll claim all these expenses that you were going to pay anyway on your books. So you might actually take more than $37,500 home.

Speaker 2:

Yeah, especially because a lot of stuff is tax deductible when it comes to businesses as well, like car trips during business hours and things like that.

Speaker 1:

So let's bring this all back. You highlighted something to me. What does this extra $100 a month mean? That $100 a month means go invest in your fucking self. Okay, take a course, learn, okay. Stop sitting on the couch and waiting for shit to happen. You control your destiny. You need to go out there and you need to learn, okay, and upskill yourself so that you can be in a better position to be able to start demanding more money, to be able to start creating more money, to be able to start creating more money for yourself. And that's a ticket out. That 0.25% interest rate okay, it might seem so small to the general public. They might just think I'm saving myself a little bit of extra money. There is one person in Australia one out of the 27 million that has now taken advantage of that little bit of a break that they've gotten on their interest rate and they are going to make themselves a multi-millionaire because of it.

Speaker 2:

Very aspirational. Sorry man, sorry, it was very good.

Speaker 1:

I just like people being able to take opportunities and run with it. I don't like people that just sit on. Man, I've been on Reddit. I've been on Reddit. I've been on Reddit. I've seen some of the stuff that they complain about. Man, I've seen people complain oh, my boss called me into a Sunday shift and I had to do this and I had to work four or five hours. I would never forget this Reddit thread. I will never forget it. There was a Woolies worker or a Coles worker complaining.

Speaker 2:

I think I saw this one.

Speaker 1:

It was a couple of years ago.

Speaker 2:

Okay, continue.

Speaker 1:

There was a Coles or Woolies employee complaining about a DoorDash driver coming in and asking him for where certain groceries are Okay To pick up certain things. Yeah, and he went on this 500-word rant about why he should not be helping DoorDash workers pick up groceries. And this is the perfect example. Okay, doordash is a self-employed business.

Speaker 2:

Yeah.

Speaker 1:

Okay, when you're working DoorDash, you are a contractor to DoorDash. You've got your bike, okay, okay, you pay the fee to door dash to be able to get these delivery jobs, yeah, okay. But the more you work, the more money you can make. That's a side hustle, right for a lot of people. They'll do. They'll do door dash, they'll do uber those sorts of things so that guy on one side has found an opportunity.

Speaker 1:

He's making more money. He's asked somebody at Woolies can you just help me find these apples so I can make sure I'm on time for these people? Whatever it was, the Woolies worker was complaining. He's like I don't know why they have to come to me and ask me for these directions just because I work at Woolies. They should be able to find it themselves, all these sorts of things. I just worked a four-hour shift. This is the issue. You've got one person who is now venting to an echo chamber. Okay, because they have to do their job. That was outlined when they signed their employment contract. They actually have to adhere to their roles and responsibilities.

Speaker 2:

Yeah, I used to work at Woolies and yeah, if a customer which essentially this DoorDash person is like, granted it's more of a representative for the actual paying customer but it is.

Speaker 2:

He's still a customer at the end of the day. Yeah, um, yeah, you've got to help them. That's. That's literally the job you have the uniform on. So, like I, if you're like, I used to work in the online department and like I'm, you know I was um for for the actually kind of these door dash deliveries, um, but the wo Woolies version and you're on a timer and everything and like I'll help, but if they keep going, I'll find someone to go. Hey, I need to keep doing this. Can you help them if you've got time? If not, yeah, just do it, and then I don't have to explain. I was running the department.

Speaker 1:

But do you see what I mean? Like you've got two sides of the coin. You've got somebody that's creating the opportunity and then you've got somebody that's complaining. Don't be the person that's complaining. Don't be sitting there and saying my boss hasn't given me a raise. Don't be sitting there being the person that's saying I'm not earning enough money to go help a door dash worker. Be the person that's actually creating an opportunity for themselves so that they don't have to worry so much in the future. I can guarantee you, if that Woolies person doesn't have a change of heart and they don't start changing the way that they think they're probably going to be in debt for the rest of their life, they could possibly be living in rent for the rest of their life.

Speaker 2:

And now they'll probably be working at Woolies for the rest of their life. I know this because I knew them. That sounded so much meaner than I meant it to.

Speaker 1:

And then you've got the DoorDash employee who there's a good chance he's going to buy a property soon. You get a lot of DoorDash employees. A lot of the time they're foreigners. Yeah yeah, they can't find work in Australia because their English isn't their strong point Not amazing yeah, but guess what?

Speaker 1:

They know the value of a dollar, they know the value of hard work and they know what's going to make them money. And they're going to approach me and they're going to say, joe, I want to buy a property. And you know what I'm going to do. I'm going to get them a fucking mortgage. And you know what happens when I get them a mortgage, in a year's time I'm going to see how much that property grew. I'm going to tap into some equity there and I'm going to get them another mortgage and then possibly in 10 years time, they might have All from what, taking the opportunity and not sitting down and complaining on.

Speaker 2:

Reddit. That's actually a good question. Do you actually get many Uber drivers and stuff like that in the books? Not just Uber drivers, they're the sole income.

Speaker 1:

Yeah, go on. Lay it out. Daddy's coming to work.

Speaker 2:

All right, I think we need to highlight something. Okay, I am Lebanese, let's start with that.

Speaker 1:

I need to highlight something. Okay, I am Lebanese. Let's start with that. I need to highlight another thing. My uncle owns a taxi company. Ah, okay, what do taxi drivers a lot of them do on the side? Are they Uber drivers? They're Uber drivers as well. What do accountants like to do? That seems like very broken but okay, continue, no, no because they don't have their own taxi license. They'll borrow a friend's car, and then they'll use their own car for uber yeah, okay, that makes sense okay what is the number one thing that every wog thinks about in australia when it comes to tax?

Speaker 2:

don't pay it?

Speaker 1:

yeah, how to avoid it? How to avoid it, how to avoid tax and how can I make sure I pay the least amount possible? Yeah, yeah, that sounds about right so every week I get someone that, yep, I want to buy a two and a half million dollar property Me, great. Have you done your taxes? No, okay, fantastic. Have you done last year's taxes? Yes, what was your net profit? $12,000. I can't help you. As much as I would love to help you, you can't.

Speaker 2:

Okay.

Speaker 1:

And this is general advice again If you want to borrow, pay your taxes, because the banks want to see you making money, not losing money. They want to see you making a profit, not declaring everything as an expense. Yeah, okay, that is one thing I want to highlight.

Speaker 2:

Because you've got to think about it from the bank's perspective. They're looking to get their money back. Yeah, if you don't look likely to give them the money, they're not going to give you the loan. They get.

Speaker 1:

I think the Australian mortgage market is in the trillions. Now I would be Absolutely. Why wouldn't it be?

Speaker 2:

No.

Speaker 1:

I think it was like 50 trillion or something. It was something absurd. I can't remember the exact figure. Anz not approves this many mortgages discharges. They discharge like 5,000 mortgages a day. Okay, 5 to 50,000. I can't remember the exact figure. Okay, they discharge so many loans. Do you think that they are going to care? And they're going to sit there and look at your paperwork and go, oh, you know what? I know he makes cash on the side. No, he's doing cashies. I get it. No, they're going to process your application. They're going to see if the numbers stack up and if they don't, they're going to put a red X on it. They're going to send it back to me and it's going to give me more work. Pay your freaking taxes, people. Okay, side hustle. So roundabout answer Okay, yeah, 0.25% rate $100 extra. Go start a side hustle.

Speaker 2:

If you're going to go freaking taxes so you can borrow more money. That way we could get you a loan and that way we could create for you more wealth in the future. Well, speaking of more wealth in the future, now, with this rate cut, investors are going to be looking where can I invest? Now? Corelogic has some ideas based on data, and Sydney, melbourne, will benefit from the rate cut by far the most. The rest of the capital cities they're not really affected by the cash rate as much, mostly because their property values don't go up and down as great Like Perth is more affected by mining boom and busts. So, for example, to get an idea, rich areas typically will fare the best. So, like Leichhardt, historically 1% rate cut, we'll see property values rise by as much as 19, which is pretty crazy. Where do you think is a good spot to start looking at investments? Because it does seem to be more towards the wealthier areas. It do well, I mean driven by the data, but do you think that's true?

Speaker 1:

if you look, this is my opinion. Yeah, this is all. This is my opinion. Yeah, this is all opinion. This is opinion okay. Anybody goes by property in these areas and goes bust not my fault, yeah, but this is opinion. States, okay. After doing a little bit more research on the land tax rule in Victoria, I still like Victoria, but Victoria is good for your 500 cases and others.

Speaker 2:

Okay.

Speaker 1:

The reason is the rental is still good. You can still find places around melbourne that you would be positively geared. Okay, but unfortunately because of the land tax elements, I think it's one percent every year. It's something absurd. I know someone that's got a property that's fully paid off. Okay, well, he said this to me on the phone and it was his dad, so I don't know how verified the story is. Something that was positively geared is now negatively geared because of the new land tax element that has come in. Okay, yeah, so you have to put that into consideration. So, victoria, I don't have enough data and I don't have enough case studies to say this is a strong opinion and this is where I would go invest Sydney, however, yeah, I live here, I know it. If you look all along the Nor-West I was trying to say Nor-West and then I was trying to say North-West and then went Nor-West.

Speaker 2:

Joe's developed a lisp.

Speaker 1:

If you look all along the Northwest corridor or that area, you've got the hills. Cherrybrook, you know? Northwest yeah, my old hood. If you look at all the hotspots for the new zoning, it's all there. Okay, it's all there.

Speaker 2:

Yeah, that makes sense because I remember even in Glenore there's a tiny little. It's all acreage there. They're all big properties. A lot of it used to be farms and hobby farms and stuff like that. And in and around the shops there's a small like a suburbia region where it's like normal houses with medium backyards and they were trying to put up apartments in and around the shops, which got a lot of people, very NIMBYs basically got very upset about it. And yeah, I heard it was spreading Castle Hill. I watched that go up all around them because the metro station got put up there, huge apartment buildings going up there. So yeah, from my own eyes I've seen this, uh, these density laws taking effect.

Speaker 1:

I think those are the best areas to invest in in Sydney right now.

Speaker 2:

Yeah, and they're nice too.

Speaker 1:

You can purchase at a reasonable price, but they're still growing up. They're still going up, yeah, and you will see, sydney has invested the most in this area. They have motorways to the city. They've put the metro line in. Yeah, I've been in the metro. It's quick, it is fantastic. Yeah, I took the metro from our office in Barangaroo up to Bella Vista.

Speaker 2:

It took me 38 minutes.

Speaker 1:

Yeah, it's really good.

Speaker 1:

It is so connected to Sydney CBD that you are going to see so many people move out that way. And where do you invest? Not where other people are investing or other people live when people are purchasing owner-occupied properties. Now, I know what I just said was counterproductive, counterintuitive kind of thing, but people want to live in their areas, they want to live in neighborhoods of familiarity, they want to live where everyone else is living. There is a chance that that person can't afford to buy yet. Yeah, but they can afford to rent. So what you can do is look at the houses in that area, look at the townhouses, look at the apartments those are my key areas right now to be able to purchase, especially with this 0.25% rate cut Chances are. If you're purchasing in that area, you are on a higher combined salary with you and your partner than someone who is not looking at that area, because you just go on realestatecom and you can see the area is expensive.

Speaker 1:

I was looking at Eastwood as a suburb Even during the boom of the rates. Okay, I'm talking when rates went from. We were doing fixed rates at 1.99%. Imagine we went from 1.99% to 6.5% in a span of two years. Eastwood still grew by 20 odd percent as a suburb.

Speaker 1:

I saw properties that were $2 million now gone for 2.6, $2.7 million. It outgrew the rate. It was remarkable because, even though it was more expensive to borrow, people were still investing in these areas. So if you're going to look for areas that are going to grow the most, look there. Areas I think are going to grow the least okay where I live.

Speaker 2:

So what down south Illawong?

Speaker 1:

Manai menai patstow. Patstow will actually do well bangor, barden ridge um crinola caring bar, and the reason is they haven't invested in the infrastructure in these areas okay, so the yeah, like there's no metro coming out, there's no metro, there's no highway, there's no motorway.

Speaker 1:

So I believe that if you do want to invest in Sydney, go look at those areas, go get yourself a girlfriend, get your combined incomes and go yep, we're going to buy a new spot, we're doing this, yeah. And if you're looking to go regional or you're looking to go interstate, go to Queensland.

Speaker 2:

Yeah.

Speaker 1:

It's still going up. Go to Victoria for one reason you have a lot of investors exiting and you are able to purchase. Yeah, you've got space for yourself. You're able to purchase at a lower level. Yeah, and Victoria will come back. I always like to highlight this. My business mentor his name is Adrian Hondros. He's the former director of NAB and CBA.

Speaker 1:

This guy knows his shit and he just turned to me and he goes. Victoria will have its comeback. Of course it will. Some government official is going to get in, they're going to look at this land tax rule and they're going to go. This is rubbish. Everywhere else in Australia is benefiting, except for some reason our properties are taxed at 1% wide because we don't like investors. Some government official is going to go in there and go fuck socialism. Let's actually make sure that whoever comes to Melbourne, stays in Melbourne, invests in Melbourne. We want to be the number one city, because they do want to be the number one city in Australia.

Speaker 2:

I mean it's always between Sydney and Melbourne 100% so anyone else who thinks they're throwing their hat in the room, he's kidding themselves.

Speaker 1:

There's always different price points, but those are my main takeaways right now. Right, okay.

Speaker 2:

All right, well, to wrap this up, let's end it on a fun one, and we'll do our client profile. And now I've got a pretty funny one that I found online from a real estate agent and I'd like to know your opinion on it.

Speaker 1:

All right, just so you know, I've done no research on this and Mark was going to just throw a bloody curveball at me.

Speaker 2:

Yeah, I kept this one off. So, all right, we've got a couple. They're checking out a few houses in town. The real estate agent has told you, joe, that the wife keeps bringing a broom to each tour. He thinks it's pretty strange. So eventually the couple does discover the perfect house and the husband is really keen on it. The problem is the wife has said no, why? Well, the reason that she's been bringing the broom is because it tells her which house is the right one, and it didn't speak during the tour. So it really is the perfect house for them and they have pre-approval. Do you try to convince the wife or do you just sort of wash your hands of this? Now, allegedly, this is true Allegedly, but you can't believe everything you read on the internet.

Speaker 1:

You haven't thrown at me a borrowing scenario.

Speaker 2:

You've thrown at me a crystal ball Because the husband is keen. So if you can technically make inroads with him.

Speaker 1:

So the Wicked Witch of the West has taken her broom. She's gone to house one, house two. I am then going to download the property reports, I'm going to download the rental reports, I'm going to download the suburb statistics and then I'm going to present that to them. I'm going to show them that if where the broom didn't speak has grown 18% more than where the broom did speak, I'm going to tell her, sweetie.

Speaker 1:

This is the one no, not this is the one, because I can't say that. I can't say that. Yep, that's true, but, sweetie, maybe you gotta put the broom in a wood chipper, because property number one is going to help you in the long term.

Speaker 2:

Potentially, potentially in the long term.

Speaker 1:

Don't ever throw a curveball like that at me again when I saw that, I went.

Speaker 2:

I don't even care if that's real, that's great, that's hilarious.

Speaker 1:

That's hilarious um, okay, all right, so well, that's all the time we have today for the finance show with joe yeah as discussed. If you or a friend family member need help with your mortgage, visit us at wwwitsimplecomau. Book in a time with me. Don't be calling me at 11 pm. Like some of my clients, I've got to do an episode on invasion of personal space. I'll tell you that and we'll be more than happy to assist you with you or your financial needs. As always, I'm joe I'm michael.

Speaker 1:

I'm not the schmo this week and we'll see you on the next episode.

People on this episode

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Joseph Daoud

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Michael Lozina

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