The Road to Wealth Creation for Tradies – with Special Guest Chris Gray

Ange
We’re your hosts, Andy and Angela Smith, husband & wife team and co-founders of Lifestyle Tradie. Are you ready to have some fun? 

Andy
Hell yeah!  Hello, hello, hello, and welcome back. to another kicking episode of the Tradie Show together in trade business. And by kicking, I mean, we’re about to kick down the barriers to wealth creation. Isn’t that right, Ange? 

Ange
Yeah, absolutely. So the words wealth creation might seem a little daunting and perhaps isn’t something that you ever think about, but this episode is dedicated to helping you take that first step into the world of wealth creation. And I do want to preface that the advice and strategies given in today’s episode are pretty general. We do urge you to speak with a professional about your specific position in life and business before you take any action. 

Andy
That’s right, Ange, and I’ll start things off with a generalized statement that most tradies start their businesses with an idea that they’re going to make some serious profit. And if you’re a long time listener, you’ll remember our episode with Kieran, who owns a dual plumbing and electrical business. Well, he joined a Lifestyle Tradie and he didn’t even have a business when he joined us. And within 18 months, he was turning over a million dollars and making great profit. 

Ange
Yeah, that’s right. He’s running a seriously tight ship. It’s really well organized. It has a great culture and he’s turning over an awesome profit.

Andy
The reason I mentioned this is because if you know how you can get your business in a really good place making consistent profit, but this is a big ‘but’, once you’ve got your business in this position, I see so many tradies out there just taking their foot off the accelerator. They think to themselves, Oh, I’m doing pretty good. I’ve got a good income. I can take holidays when I want for the most part, and I can afford a decent lifestyle. So you know what? I’m just going to cruise a little. 

Ange
Well, you know what’s worse? We watched them actually blow their newfound money on things that they reckon is fun, like a troopy, a jet ski, maybe some motorbikes.

Andy
That is fun. I  love that stuff. They’ve got to do this stuff. You know, living the dream, baby.  

Ange
You’re not wrong, Andy. But. You know what? Whilst they’re probably having the time of their life, after they’ve bought all this stuff, they’re literally back to square one. So, sure, they’ve got toys now that they didn’t have before, and they’re awesome. But in 10 years from now, those cars, those jet skis, and everything else they’ve bought has simply depreciated in value. And ultimately, You’re no better off than where you were before. 

Andy
What we are trying to say is, you know, buy the toys and have fun, but you also need to be investing in your future. And if you’re at a stage where you’re generating consistent profit from your business, maybe it’s time you start thinking differently. Give yourself a better long term outcome. 

Ange
Yeah. That’s what we’ve been spending a great deal of time on with our long term members who have a much more mature trade business and are making consistent profit. As we say, we want your money to work hard for you. And what we mean by that is wealth creation and passive income.

Andy
Yeah, I got my plumbing business to a point where I was working only a few hours a week and the passive income it was generating Allowed me to start multiple other businesses while supporting my family and lifestyle. And I could still afford the toys and a few decent holidays along the way, but there are other avenues to generate this kind of wealth. And that’s why today on the show, we are joined by Chris Gray.

Ange
So Chris Gray is one of Australia’s leading independent investment property experts. He shares powerful strategies to create wealth through property. If his name sounds familiar, it’s because he’s been the host of Your Property Empire on Sky News Business Channel for over 10 years. And was the real estate judge on the renovators on channel 10. And most recently at our exclusive member event, Chris gave a presentation on how our members could expand their financial portfolios. And today he’s joining us to share his insights and his expertise. Welcome to you, Chris. Thanks so much for joining us today.

Chris
Thanks so much for having me back again. 

Andy
Mate, you’re an absolute star at our last Lifestyle Tradie event, so we’re very happy to have you here today. So, Chris, you’ve mentioned you’ve been in the property industry for quite a while now and can you give us a rundown of your professional experience? 

Chris
Yeah, so, um, qualified as an accountant, so that’s the background. I’m not a great accountant, but I’m just naturally good with numbers. Qualified as a mortgage  broker, I’ve never written a loan.  But it’s more to understand how banks think because really property investing these days is about borrowing money. The property part is the super easy bit. And then I guess really in the trenches. So I’ve been investing since I was 22, I’m 51 now. So  Kind of been, uh, investing for 29 years and just literally had four or five, um, conversations on live TV with various economists and stuff like that. So I’ve just got a really good insight into the property market because the great thing about media is you can go straight to who you want to interview and you can ask them all the questions you want rather than you’re doing it for the viewer. So, um, Yeah, it’s, it’s been a great, great background. 

Andy
Oh mate, you’ve got a wealth of knowledge and um, there’s been many a night I’ve been sitting there watching you on TV mate and going, this guy knows his stuff and we’ve been very lucky to have you um, a part of working with us recently. 

Ange
So Chris, we mentioned earlier that you’ve obviously spent some time with our members talking about wealth creation. Can you explain your definition of passive income and why it’s a necessity to achieve the lifestyle we know most trade business owners want? 

Chris
So probably one of the big things is whether you’re working with tradies or just businesses in general, or even employees, most people put everything into one area, i.e. themselves, and the whole income stream is and wealth creation is reliant on them being active. Yeah. And look, obviously, you’ve got some amazing businesses that have people turn over large amounts of money. But even so, a lot of people are banking on that way of off sale that may or may not happen. I mean, you know, with COVID and credit crunches and GFCs. Stuff happens in life and you don’t always get that payout. So I’m very much about diversifying, having a plan B or plan C to create, um, extra wealth. And where we talk about passive income for me with property, property doesn’t really give you an income. Commercial does a bit more, but residential doesn’t. It’s really about that million dollars doubling to 2 million. Yeah. And so when people talk about passive income, they think they need income, but actually they need cash. So I prefer capital growth. Because I don’t pay tax on it. Whereas if you receive passive income, you’re paying 50 percent tax potentially. So yeah, we kind of talk about passive income, but really, I want lump sums of cash. And  if I pay, say 5 percent interest to redraw it from my equity, it’s better than paying 50 percent tax. 

Andy
Yeah. So when we talk about passive income because, I suppose over the years I’ve heard there’s a million experts out there, right? So in regards, you need some type of passive income though, so you can use that income to buy more properties or do you just go straight to the best areas that you know, you’re going to get best growth over years. 

Chris
So I always kind of describe it and this isn’t exactly, but it’s, it’s a rough idea. So let’s say you could buy in Southeast Queensland, which a lot of people do for our income, and it maybe makes them 10 grand a year. So it gives them a grand a month, but maybe it only grows 25 or 50 grand. Yeah. So that means you’re going to make 35 to 60 grand. Whereas in Sydney, typically a million dollar property is going to cost you 10 grand. So that’s the negative gearing that we hear about. But ideally, the capital growth is higher here, and so you might make 50 to 100 grand. So you’re going to net 40 to 90, which obviously makes sense. So really, the main thing is, is for your average Aussie who hasn’t got that 10 grand to invest or forced savings. They need to buy the Queensland thing that’s positive cash flow. Whereas if you’re a high income man, or you’ve got your business owner with excess income, ideally, you want to lose 10 grand because you get taxed back on that. And then you really want that 50 or 100 grand capital growth.  So it’s kind of a seesaw, the more capital growth you get, The, um, the less income and vice versa. 

Andy
And it’s so true. Ange and I, bought a property in a place called Bigger Rewarders in the Southeast of Queensland and up there in the Gold Coast, Runaway Bay. And we paid 380, 000 for that probably six or seven years ago. And now it’s probably worth about 440. And that’s only raised in the last six months. It’s gone up where if we’d bought pretty much in our suburb next to us, we could have bought something at a similar price. And now it’s worth about 1. 2. 

Ange
Yeah, it’s tripled. 

Andy
You know, and when we bought it, some of the advice we were getting was, Oh, but the rent returns good and it’s going to help pay it off. But realistically, we look over those seven years and we’re probably around about six or 800, 000 worse off. 

Chris
Yeah. And this is a classic thing because just on people talk about the property market in Australia or around the world,  and they talk about wealth creation strategies. It’s different for someone earning a few hundred grand to someone earning nothing or 30 or 40 grand. Yeah. We need different strategies to suit our profiles, our incomes, our risk profiles and stuff like that. So that Queensland story is a classic thing. And it’s not to say you can’t make a Timpson Cabaret in Queensland, but if you bought the average property, Chances are, it’s not going to go up as much as if you bought in Sydney or Melbourne. Yeah. So if you can afford to get into better suburbs, but look, Sydney is a million dollars plus, and you can afford the negative gearing, mathematically, the numbers say buy more of those. 

Andy
So mate, you’ve got a lot of wealthy people that are in a lot of amazing places, but from what you see, and obviously there’s no doubt there’s The, you know, the people that can make a billion dollars in their business. But most people are just really making a good income and a good life. It’s really the property acquisition that is the best route for a passive income. Is that what you see with the people you hang around?

Chris
Yeah. So look, I was just speaking at the Sydney Property Expo at the weekends at Darling Harbour, and I said the two bits of main magic, I mean, we talked about it when we did the session with your VIPs. Yeah. It’s really compounding leverage. So basically you want to be in the market for 40 or 50 years if you can be, so invest when you’re young because the longer you’re in there, you make more money. And the next thing is leverage. So if you bought a million dollar property, say you need 10 or 20 percent deposit and you need 5 percent cost, so maybe 250 grand. But if that million dollar asset goes up by 10%, you’ve made a hundred grand. So you’ve made 40 percent return on your money. Whereas that two 15 shares is generally only going to buy you 250 shares unless you get into EFTs and more complicated kinds of things. And so if that goes up 10 percent as well, you only make 25 grand.  So I love property because it’s passive.  The residential property, you don’t have to be a genius. It’s just like buying the home next door. Just like you said, or in the suburb next door, you leverage four or five times. So you get four or five times the return. The banks are happy to give you that leverage because they know it’s risk free. And so really take the sign from the bank, if they’re going to lend you 90 percent on property and nothing on shares, there’s a reason for it. 

Ange
Do you know what I find really interesting about that? When I think back to when we bought our first home, we live in Mona Vale on the beaches and we bought our property 16 years ago. I remember thinking property will never, it just won’t keep going up. It just can’t. 

Andy
My mum and dad said,  Properties will never go past half a million dollars. There’s no way it’ll go past half a million dollars. It’s crazy. 

Ange
I know. And now we just think, oh my God, it’s like tripled. 

Chris
I bought 99 in Kiji before the Olympics. I paid 360 for a two-bed with views. And everyone said, oh, you poms have got no idea you’re from overseas. It’s going to crash. It always does after the Olympics. You guys have got no clue. And that’s probably, I don’t know, two million bucks now. 

Andy
Wow. It’s crazy. I’m going to ask you a question straight away. Do you see property values? The rule of thumb is that properties increase, they double every 10 years, right? That’s a rule of thumb. Do you see properties increasing, doubling in the next 10 years? 

Chris
Yeah, I honestly do. Right. So whether it’s 7, 10, 12, 15 years, you know, Yeah, ballpark. I think they will double. Look, I’d love it for it to be seven years, but whether it’s 15, it doesn’t really matter. So I still think the fundamentals are better. And probably the best bit of advice I had on Sky News was a guy called John Edwards from a company called Resodex, which is now called, uh, CoreLogic RP Data. And everyone around the world says wages aren’t rising enough to keep up with properties. So there’s something wrong there. We can’t pay for more properties. And he says, look, we understand that. But when our parents were around, they had the quarter acre blocks. Uh, they had one income earner. Now we have two income earners. Um, we have small properties. They were paying 20 percent interest rates, we’re paying 10%. So that explains a lot of this in government grants. But he said the overriding factor  is the basic economics that we’re taught at school, supply and demand. So if you get an area like a Bondi or a Manly or a Balmain  that’s close to the city, but it’s got three story height limits, There is no more physical property. You can’t build another single unit or a house in those suburbs. If all of the young, wealthy people with high incomes that work in suits, work in the city, they’ve got wealthy parents, give them deposits and stuff. If they want to buy more property, they will buy in those areas because it’s got the beaches and the transport cafes that pass the rest of it. Prices rise. Yeah. So there’s an argument to say, look, that’s not fair because the poor average Aussie, they can’t afford those top suburbs. But what we’re, we’re not trying to debate what’s fair or what’s not. We’re trying to debate what’s happening. If that’s happening, do you want to invest in the next up and coming thing that may or may not take off? Or do you want to go with what has always grown for the last 50 or 100 years? And that’s what I’ve done. So, quite often we say that the strategy is too simple for most clever people because they’re always trying to outthink it, thinking they’ve got to get the latest, greatest thing and things are going to change. But slow and steady wins the race. We know the hare and the tortoise. And that tortoise keeps on climbing up.

Ange
I read an article in Nine News recently that talked about the senior analyst in, uh, was doing some industry research from IBIS world. And they predicted in 22, 23, the Australian house prices will fall by 5.2 percent in some locations like Sydney inner suburbs and they predicted to plunge by as much as 9.2%. So it’s worth noting that perhaps during COVID housing prices surged by 18.1 percent they claimed in 2021 to 2022, which was the largest annual increase in Australian history. So, I guess a drop would be expected as things settle. So, hearing that kind of statistics, Chris, I imagine you’re watching this like a hawk. What are your thoughts about this? Do you think we’ll actually have a price decrease? Do you think they’ll go down? 

Chris
It’s actually the opposite. So, I don’t watch it like a hawk and that’s why I buy property because you don’t need to.

Andy
So, don’t listen to the so-called experts who’ve got no freaking idea. Yeah, that’s great, don’t listen to the media. 

Chris
So even though I’m in the media and I write those articles, I still say don’t listen to it. So basically I get the stats like the rest of the guys and say, if you’re looking at right, what’s the auction clearance rate or what is the median price in property? There’s like 100 columns wide. So with statistics and accounting, you can prove any number you want. You tell me, right, where’s it gone up 6 percent or down 6%. I’ll find you a property or suburb that’s done it. So it depends. And especially when they talk about the property market, just in one suburb like Bondi, there’s like 10 or 15 markets in there. Yeah. So I’m not looking at an average. I know if I’ve got better properties that are in scarce resources, they’ve got parking, they’re well renovated, they’ve got the right property manager. I don’t care if the vacancy rate, for instance, 10%, as long as mine’s rented, it doesn’t really matter. So look, with all these statisticians, with COVID, they said it was going to drop 20 or 25%. It dropped 5 or 10%. Temporarily. Yeah. When we had the boom of 2021, they then said, Oh, it’s going to rise by five or 10%. It went up 20 or 25%. Now they’re saying, Oh, it’s going to drop 10 or 20%. They’ve never got it right anyway. And look, I’m not blaming them because it’s an impossible task. I’d hate to have that job. Yeah. But again, John Edwards, this guy from Resodex who explained all this stuff about supply and demand. He said, I’ve made millions for so many people around the country. But I was concentrating so much on giving everyone else the information I never did for myself.  And so he, then he’s retired now, but before he retired, he bought quite a lot of property. But that’s the thing is a lot of these people are so clever, but they’re not actually doing it. They’re not living and breathing it. And they’re generalizing on stuff. 

Andy
And I, and I think all of us in a way think we’re clever and we know what we should do. But we blow it on boats and jet skis and other stuff instead of getting that property. And there’s no doubt about it. People say in our circles, especially the tradie circles, a lot of people don’t listen to the media. It’s crap, but everyone still listens to the media. So what you’re saying is take it on board. But make your own decision. I mean, the way I sort of see it at the moment is it’s probably cooling. Would you admit it’s cooling off a little bit at the moment? 

Chris
Oh, a hundred percent. Yeah, definitely. 

Andy
So if you were someone that hasn’t bought a property as yet, is in the next six months the perfect time to look at purchasing a property? Or would you wait, tell them to wait a year or two and see what’s going on? What’s your advice on that?

Chris
And this is the whole thing. So when the market’s rising, people don’t want to buy because they say it’s going to crash. Yeah. Then when it’s peaked and it’s coming down, they don’t want to buy it because it’s going to be cheaper tomorrow. And so then they pick the bottom of the market. And then when the bottom happens, It almost happens overnight. And so suddenly everyone rushes in the market together, like a herd of sheep. Yeah. And suddenly the market rises 10 or 20 percent overnight. So they miss out. So basically they’re always missing out. And so the golden rule is, is by the, when you’ve got the deposit to buy, when you can get a mortgage from a bank, when you can buy a property at the right price, and you’ve got enough, enough cash to hold on for the short to medium time. So yes, it is a great time to buy now, just as it was when COVID was there. And everyone was panicking, saying it’s the GFC, the Royal Banking Commission, the credit crunch, but no one does it. They all buy when the market rises. So ideally, yeah, be contrarian, do the opposite to what everyone else is doing. But it takes a bit of courage though. It takes courage when you’re doing the opposite to what everyone else is doing. 

Andy
And I just want to touch on, to take courage, and sometimes you shouldn’t be listening to all the negative Nancy’s all the round, because we do, we take opinions from everyone and a lot of people’s opinions aren’t the right opinion. So the moral of the story there, Chris, is that the right time to buy is when you can afford it, get out there. And if you haven’t bought anything yet, get out there and buy something. And if you can’t afford it, try and buy in the more blue cheap areas, that would be your advice. 

Chris
Yeah. And especially if you’re investing property investment should be for 10, 20, 30, 40, 50 years. Yeah. So, the property I bought at 360 in Coogee, in reality, whether I paid 300, 400, or even 500, it wouldn’t have really mattered.  Yeah. So, you need to get in. 

Andy
Exactly. 

Ange
So, the challenge I have with that though is you passed a comment earlier about saying this is basic economics what we get taught like in the early days. I actually challenged that by saying that’s the problem. We don’t get taught this stuff in the early days. We just don’t get taught. So, unless you take a vested interest in learning about property and how perhaps you can make your money work better for you, it becomes quite challenging for a lot of people. It’s quite scary, right, to actually just go buy a property. They don’t really understand what they’re getting themselves in for. So, knowing that, and I understand they need to be listening, so this is the challenge, right? Listen to the gurus and then you go, so who is that? But in your opinion, is there a benefit to perhaps using someone like a buyers agent to actually help you buy property or do the research yourself?

Chris
So, I guess that the first question is so many people put so much time and energy into educating themselves at school, university, maybe doing degrees, maybe doing trade things. And all of that’s to build an income, but how much time do they spend learning how to look after that income? 

Ange
Valid. 

Chris
Because I actually did the opposite. So when I was young, I studied money.  And I thought, rather than studying my career, and I haven’t had a big career, Um, I basically studied money. And by understanding that, it made me much wealthier than, uh, than the people around me. So I could choose what I wanted to do for work, and whether it paid any money or didn’t pay, didn’t really matter. Yeah. So again, it’s trying to put it in reverse. The second question is should you trust other people? Look, it is a hard thing because saying the buyers agents game, which is the business I run now. Sure. If you come to us and we’ve bought hundreds and hundreds of properties and we’ve done it for 30 years versus you’ve never done it, or we’ve, you’ve bought a few, being in the trade, we’re going to get better deals. So we’re going to get better properties for cheaper prices. But at the same time there’s that trusting.  And so there are plenty of unscrupulous people out there. Like that’s why we had the Royal Banking Commission. There’s people that will take advantage of you. So you still need to have some knowledge, even when you’re hiring professionals. And I really believe that you’ve still got to hire the professionals at the same time. 

Andy
Yeah, exactly. So we’ve got a lot of trade business owners, as you know, that’s who we work with. And a lot of people listen and trade business owners or tradies out there. So you’re the king of building property portfolios. Are you a fan of buying a property? And trying to maximize the profit? You know, most tradies think we’ll buy a property. We’ll get in there. We’ll work really hard. We’ll put in a new bathroom or put in a new kitchen and we’ll try and flip it. And over the years, I’ve sort of seen people make money from that, but sometimes they go, I just made a hundred grand. And I’m thinking you could have done nothing and still made a hundred grand. Did you really make money? What’s your thought around this whole flipping strategy?  

Chris
We’ve had a number of builders over the years say, look, Chris, I’ve been flipping properties for 10 years. I’m making a hundred grand a pop. And I still haven’t got any more money. And I said, yeah, but the problem is, on your million dollar property, you’re paying 50 grand for stamp duty. Yeah. You’re then paying an agent 25 grand to sell it. So you haven’t made a hundred. You’ve made 75 and then you pay tax on that. So really you’ve made 15 grand. And that’s the thing because they’re too busy doing ‘the doing’. They understand the big numbers of a part for a million and sell it for 1.1 or something, but they don’t really see kind of, um, the intricate, intricate numbers. So again, you need your accountant on board to tell you you’re actually not making any money, but look, if you’re a trade, the main thing to do is it’s really that property you’re holding it for, for 30 or 40 years. If you don’t sell, you don’t pay the capital gains tax. You don’t pay stamp duty. You don’t pay, um, the agent’s fees. But ideally, by refinancing, you can pull your profit out, put it into the next deal, and then keep on repeating. So I think that’s the perfect scenario. But again,  so many properties now, most of the money is in a million doubling to two million and two doubling to four and to eight. Sure, with the reno, you can do a quick profit on day one, and you might make another 50 or 100 grand or even a few 100 grand. But the real money is in the long term. So the best one I did, I got a block of five units.  I bought it for roughly 1.9 million up at 600 in, so it cost me two and a half. And we had it revalued at three and a half, three months later. So I made a million dollars in, in three months, which is great, but I can only do that once. And if I sold, I’d have paid half a million capital gains tax, a couple of hundred grand to the agents. But that property now is probably worth seven or eight million. Yes. One million was great, but the real money is the passive. Probably three or four million I’ve made since then. 

Ange
And to your point, being able to refinance that so that you’ve actually pulled some money out so that you can, you know, use it as a buffer and or buy again. Perfect. 

Chris
Yeah. So sometimes even though the tradies can, can build for cheaper than outsourcing it, sometimes everything now with the property investing is about serviceability  with the banks. Yes. So they’re probably actually spending that time getting another customer that then pays them an income that increases their taxable income for the bank that then allows them to buy more property.  So, you kind of need to think of the big picture really. 

Andy
Yeah, and I’ve seen people, they buy a property and they think, oh, we’ll buy this property and we’ll start doing a reno on it. They start doing a reno, but then they get too busy. So then they go, oh, wait, I’m going to lose this client. Then they’re over here. So the reno that we’re going to do that was going to take a month now takes six months. They’ve got no rent and it just all backfires. So listen, I know there are tradies out there that do this and they’ve made some good money along the way, but I agree, I don’t think everyone looks at the big picture sometimes with this. Now, Chris. If you had a million dollars right now, or you could borrow a million dollars right now and, and say, you know, it doesn’t really matter their age, but say you’ve got a million dollars right now and you live in Sydney and you’re sort of thinking, well, I’m sort of renting at the moment, or maybe I’m living with mum and dad, would you put that million dollars into the Sydney market and get something small ish, or would you look at putting that million dollars up in Queensland or another state in the country now?

Chris
Sure. So look, I’m all about quality and going back to that supply and demand argument, ideally you want to be in places with no supply and lots of demand. So yeah, in Sydney, if you went to the eastern suburbs, line or shore in the West, you’re probably going to get a studio, maybe a one bedroom if you’re lucky on 50 or 60 square meters, whereas in Brisbane, you could buy maybe a three or four bedroom house. And I say, if you went to the territory, you could buy a thousand acres or something. 

Andy
That’s alright.

Chris
But the thing is, on a summer’s day, how many people are queuing up outside to rent it or to buy it? Yeah. Now I’d say if you had your million in Sydney, there’d be a queue all the way down the street if you presented it right. Yeah. In Brisbane, sure, there might be a small queue, but there’s a lot more houses around, there’s a lot more supply of land, there’s not going to be a queue all the way down the end of the street. And the territory, you’re lucky if you’ve got one or two people in the queue, because there’s obviously lots of supply. So even though there’s an argument to say, land appreciates and buildings depreciate, so buy as much land as you can, i. e. buy the Queensland or the Northern Territory, but there’s also an overriding rule, it’s the quality of the land. So that 60 square meters in Bondi, Manly or Balmain or something, is in such short supply, like a diamond or a bit of gold or something. The people will queue and they’ll pay, they’ll pay an extra five or 10 percent just to get it. Whereas I think when you move to regional places and the Brisbane’s and Southeast Queensland’s and stuff like that, or in Perth,  like with mining, then there may be no demand. 

Andy
Yep. Nah, exactly. 

Chris
But it’s still better than doing nothing. So if you’re not comfortable with that and you’re from Queensland and you want to go and do that, go do it. At least do something. 

Andy
Yeah, exactly. You got to get off your butt and make sure you’re making a move. So we play a game here, um, on this podcast and it’s really a rapid fire question. And we’re going to ask you three questions and you’ve got about, you know, between 10 and 30 seconds to answer them. Are you ready? 

Chris
I thought you were going to get me to sing and dance. So I’m happy with these questions.  

Andy
We might do that a bit later.  So, a bit of a cheeky question because obviously, you know, you’re a buying agent and you do what you do. But if you have one suburb in the whole of Australia right now, where would you put your money? Which is the suburb to keep an eye on right now? 

Chris
I forgot. Coogee, I’ve got about 15 million personally invested in NASA, the more the merrier.  

Andy
Okay, let’s drive all the tradies to Coogee and then your portfolio goes to 20 million.  

Ange
Increase the value. 

Chris
Yeah, exactly. 

Andy
So in your opinion, the current interest rates, inflation, you know, there’s a lot sort of happening now and we’ve talked a lot about it. It’s still a good time to buy right now, but where do you see interest rates going, say, you know, in the next six to 12 months?

Chris
I really haven’t got a clue. And so I look long term. I look decades. They’re going to be back at six or seven percent at some time. They might be back at 10 and then they’ll be back down again. But look, the next six to 12 months, then look, maybe half a percent, maybe even percent. But as long as you’ve got your cash buffer and you’ve got income coming in and your property’s let out, chances are rents are going to rise. Prize as well. So it doesn’t really matter. 

Andy
You know, I just want to touch on that. I love how you just look at the worst case scenario and where it’s going to go. And you go, well, listen, it’s going to go to six or 7%. It could take two years. It could take 10 years. And you talk a lot about that today. You’ve talked about. Well, property could go to this and it could go to here, but you just got to get in the market, you know, because a lot of people think that 7 percent is like a real danger for everyone in the property market because 7 percent is almost equivalent to the 17  percent of the days that our parents sort of grew up. Do you agree with that? Or I suppose you’re talking about dual income and all these other factors now that come into play. 

Chris
Yeah. So in the main book, I’ve got the empire, which I wrote back in 2008. I calculated interest at seven, eight, and nine percent. We’ve produced 60, 70, 000 copies of that book, and we recently rewrote it on 17, 2017. The only thing we changed was the examples, instead of being 500 grand or a million, that really we need to rewrite it again to say a million and a half. Yeah. But I kept the interest rates in my examples at 7, 8, 9 percent. Because I knew if I wrote it at two or 3%, people would say, Oh, that doesn’t work long term because interest rates are going to rise.  So if it works at seven, eight to nine, it’s still going to work at two or three or four or five or something like that. So the main thing is just working out the break even point. It’s actually not the interest rate. It’s the difference between the rent and the mortgage because that’s the difference you pay. Yeah. So at the moment we’ve got 3 percent rents, we’ve got 3 percent mortgages. So that the gross change is zero. And look, if interest rates go to four or 5%, which I’m sure they’ll do at some point.  Chances are people are talking, rents are rising now as well. Some of the rental we’re buying, we’re getting three point half, maybe even 4%.  So  if it rises by 1%, but you get a 1% rise in your rent,  the actual net difference is zero anyway. 

Andy
Yeah. Yeah. 

Chris
And so where people were complaining that rents have gone from five to 3%, they’ve dropped 2% in the last 20 years. But interest rates have gone from seven to three. So they’ve dropped by four. Yeah. So you’re in a better position. So again, if you only know half the puzzle, there’s a lot of negativity. Yes. But when you understand the whole puzzle is sure, I don’t mind interest rates or rents dropping 2 percent because my interest rates went down four. So I’m better off.

Andy
Exactly, mate, that is so true. So, I’m going to ask you a question, doesn’t have to be property related, but what is the one best piece of advice you’ve ever received? 

Chris
On property, it gets an independent valuation. So even though we’re professionals buying, I tell my clients, don’t trust me, don’t trust anyone. Yeah. If you go and pay 660 bucks for an independent valuation for this million or million and a half dollar unit, It’s an independent person that you could serve if they made a mistake, the guarantees that you’re not going to overpay for that property. And it makes our job 10 times as hard because they’re super conservative valuers. 

Andy
Yeah, they are. 

Chris
It means that if we bought a property for a million bucks, chances are at auction, it would have got a million and 50 or 1.1. So all of the mistakes I hear about are people buying in mining towns, buying off the plan, overpaying for properties. If they paid for that valuation,  they wouldn’t have ended up in that trouble because The value in a mining town would have said this is a high risk area that generally a bank doesn’t want to lend on. 

Ange
Absolutely valid.

Andy
Unbelievable. 

Ange
These tips have been so epic. Absolutely. I know trade business owners are definitely when you talk about wealth creation and assets in general property is by far the one that stands out, you know, above the rest. So it’s really fabulous to have you here, Chris. And I love the fact that you say this all comes down to just understanding your numbers and looking at this as a long term strategy because we totally agree with you. We love property too.

Andy
And tradies out there, you know, the ones that are running successful businesses are making really good money. And the question is, what are you doing with that money? You’re just paying off your home loan or you’re actually buying more properties. What are you doing? I think after listening today, the answer is buy more property. Chris, that was absolutely awesome. We just want to say a really big thank you. You’re an absolute superstar and all of us here at Lifestyle Tradie love you and we love your advice as well.

Chris
Wonderful. Well, thanks for having me. And I know the viewers can’t see the smile on my face, but I love talking about property. I can talk underwater about it. And it’s just, it’s an interesting conversation because everyone loves it. But ideally, most people should be trying to do a bit more. 

Andy
Yes, exactly.

Ange
Most people need to understand a bit more and think a bit differently, don’t they? 

Andy
I think you could go to Any age group and say to them, what’s your biggest regret? And they’d say, I didn’t buy enough property.  So thanks, mate. You’re a superstar. 

Ange
Thanks, Chris. 

Andy
Wow, Ange, what a great conversation. That was absolutely gold. I’m sure a lot of you out there are thinking about how you could be making more money by using your business profits wisely. 

Ange
Yeah, absolutely. It’s an awesome subject and yet again, something you don’t get taught enough growing up. But you know what? Something that is super important if we want to live the lifestyle that I know that most trade business owners want to live. It’s never too late to learn how to manage your money better and learn more about wealth creation. 

Andy
That’s right, Ange. It’s certainly helped us along the way building wealth through our property. 

Ange
Yes, but first things first, you have to be making consistent profit through your trade business first. As they say, you need to learn to walk before you can run.

Andy
Speaking of which, if you did want to have a chat with me to learn how to systemize and grow your business to a point where you can look to start creating wealth. Then click on the link in the show notes or head to lifestyletradie.com.au to book in a strategy session with me. I think that’s all for today, Ange.

Ange
Yep, that’s right. We hope this conversation with Chris has inspired you to make consistent profit in your trade business, knowing the possibilities of what you can do with it. Well, that’s it. Look forward to chatting with you next week.

Andy
It’s definitely inspired me. Hell yeah! 

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