How to build wealth through property. Guest starring Chris Gray, Property Wealth Expert

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 wanna 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 gonna make some serious profit. And if you’re a longtime listener, you’ll remember our episode with Kieran who owns a Jewel plumbing and electrical business. Well, he joined 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 is turning over an awesome profit.

Andy
The reason I mention 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, ah, 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 gonna cruise a little.

Ange
Well, you know what’s worse? We watched them actually blow, then you found money on things that they reckon is fun. Like a trophy, a jet ski, maybe some motorbikes.

Andy
That is fun. Like I love that stuff. They’ve gotta 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. Yes. 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 are 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 are 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. Yes. Who have a much more mature trade business and make 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, uh, 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, not to do mortgage broking. 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, 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 are working with tradies or just businesses in general, or even employees, most people put everything into one area. I, themselves, and the whole income stream is, and wealth creation is reliant on them being active.

Andy
Yeah.

Chris
And look, obviously you’ve got some amazing businesses there. People turn over large amounts of money. But even so, a lot of people are banking on that one off sale. That may or may not happen. And we know with Covid and credit crunches and GFC. Stuff happens in life and you don’t always get that payout. So I’m very much about diversifying, having it plan B or a 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 into 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% tax potentially. So, yeah, we kind of talk about passive income, but really I want lump sums of cash and I, if I pay say, 5% interest to redraw it from my equity, it’s better than paying 50% tax.

Andy
Yeah. So when we talk about passive income, because I, I suppose, over the years have heard there’s a million experts out there, right? So. In regards, do 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 gonna get best growth over years?

Chris
So I always kind of describe it, and this isn’t an exact thing, 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 income, and it maybe makes them 10 grand a year. So it gives them a grand amount. But maybe it only grows 25 or 50 grand. Yeah. So that means you’re gonna make 35 to 60 grand, whereas in Sydney, typically a million dollar property is gonna 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 a hundred grand. So I, you are gonna net 40 to 90, which obviously makes sense. So really the main thing is, for your average Aussie who, who hasn’t got that 10 grand to invest or forced four savings, they need to buy the Queensland thing, that’s positive cashflow. Whereas if you are a high income earner or you’ve got, you’re a business owner with excess income, ideally you want to lose 10 grand because you get tax back on that. And then you really want that 50 or a hundred 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 Waterers in the southeast of Queensland 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 and it’s tripled. You know, and when we bought it, some of the advice we were getting was, oh, but the rent returns good and it’s gonna help pay it off. But realistically, we look over those seven years and we are probably around about six or 800,000 worse off.

Chris
Yeah. And look, this is a classic thing because just like 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 10% capital growth in Queensland, but if you bought the average property, chances are it’s not gonna go up as much as if you bought in Sydney or Melbourne. Yeah. So if you can afford to get in the better suburbs, which look, Sydney is a million dollars plus. Yeah. And you can afford the negative gearing. Mathematically the numbers say buy more of those.

Andy
Mm. So, Mate, you got a lot of wealthy people are in a lot of amazing places, but from what you see, and obviously there’s no doubt, there’s the, 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 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, the weekend at, um, Darling Harbor, and I said the two bits of main magic and we talked about it when we did the session with your VIPs. Yeah, it’s really compounding leverage. So basically you wanna be in the market for 40 or 50 years if you can be so invested when you are 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% deposit and you need 5% costs, it may be 250 grand, but if that million dollar asset goes up by 10%, you’ve made a hundred grand. So you’ve made 40% return on your money. Yeah. Whereas that two 50 in shares is generally only gonna buy you 250 grands worth of shares unless you get into EFTs more complicated kind of things. Yeah. And so if that goes up 10% 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 as a return. The banks are happy to give you that leverage cuz they know it’s risk free. And so really take the sign from the bank. Mm. If they’re gonna lend you 90% on property and nothing on shares, there’s a reason for it.

Ange
Yeah. What I find really interesting about that, when I think back to when we bought our first home, we live in Mona Vale and the beaches. Mm. 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, can’t. My mom and dad possibly keep going up.

Andy
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
Oh no. And now we just think, oh my God. It’s like tripled.

Chris
I bought 1999 in Fiji before the Olympics. I paid 360 for a two bed with great views.

Andy
Wow.

Chris
And everyone said, oh, you ponds have got no idea. You’re from overseas. It’s, it’s gonna crash. It always does. After the Olympics, you guys have got no, no clue. And that’s probably, I don’t know, 2 million bucks now.

Ange
Wow. It’s crazy.

Andy
I’m gonna 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, yeah. Ballpark, I think they will double. Look, I’d love it for it to be seven years, but whether it’s 10, 12, or 15, it doesn’t really matter. Yeah. 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 Residex, which is now, uh, CoreLogic RP data. Yeah. 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 more for properties. And he says, look, we understand that, but we’re not parents. They had the quarter acre blocks, uh, they had one income earner. Now we have two income earners. We have smaller properties. They were paying 10 to 20% interest rates we’re paying north to 10. So that explains a lot of S in government grants. But he said the overriding factor is basic economics that we’re taught at schools. Supply and demand. Yes. 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 a three story height limit. There is no more physical property. You can’t build another single unit or a house in no suburbs. Mm. If all of the young, wealthy people with high incomes that work in suits work in the city, they’ve got wealthy parents to give them deposits and stuff. If they want to buy more property, they will buy those areas cuz it’s got the beaches and the transport. The cafes. The pubs, 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 wanna invest in the next up and coming thing that may or may not take off? Or do you wanna go with what has always grown for the last 50 or a hundred years? And so that’s what I’ve done. So quite often we say that the strategy is too simple for most clever people, cuz they’re always trying to outthink it, thinking they’ve gotta get the latest, greatest thing and things are gonna change. But slow and steady wins the race. We know the hair and the tortoise. And that taught us, keep on climbing up.

Ange
I read an article in Nine News recently that talked about this senior analyst in, uh, doing some industry research from I B I S world, and they predicted in 22 23, the Australian house prices would fall by 5.2% in some locations like Sydney in the 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%. They claimed in 2021 to 22, 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 are 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 buy property cuz you don’t need to.

Andy
Don’t listen to the stone called experts.

Ange
Don’t listen to the media.

Andy
No freaking idea. Yeah, that’s great, don’t listen to the media.

Chris
So even though I’m in the media and I’ll write those articles, I say sorry, listen to it, . Um, so basically I, 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 a hundred columns wide. So with statistics and accounting, you can prove any number you want. You tell me, right, where’s it gone up 6% 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.

Ange
Yes.

Chris
And so I’m not looking at 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, it doesn’t really matter. So look, with all these statisticians, with Covid, they said it was gonna drop 20 or 25%. It dropped five or 10% temporarily. Yeah. When we had the boom of 2021, they then said, oh, it’s gonna rise by five or 10%. It went up 20 or 25%. Mm-hmm. . Now they’re saying, oh, it’s gonna drop 10 or 20%. They’ve never got a ride anyway. And look, I’m not blaming them because it’s an impossible task. I’d hate to have that job. But again, John Edwards, this guy from Residex who explained all this stuff about, um, 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 it for myself. And so he, then, he’s retired now, but before he retired he bought quite a lot of property. But 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, 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, and other stuff. And 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 are 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
A hundred percent. Yeah, definitely.

Andy
So if you were someone that hasn’t bought a property 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 wanna buy because they say it’s gonna crash. Yeah. Then when it’s peaked and it’s coming down, they don’t wanna buy it because it’s gonna 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% overnight, so they miss out. So basically they’re always missing out. Mm-hmm. And so the, the golden rule is, is by 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 median time. So yes, it is a great time to buy now, just as it was when Covid was there. And everyone was panicking. Yeah. Same as the GFC, the Royal Banking Commission, the credit crunch. But no one does it. They all buy when the market rises. So ideally you 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 are doing the opposite to what everyone else is doing.

Andy
And I just wanted to touch on, it takes courage and sometimes you shouldn’t be listening to all the negative NA’s all around 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 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 afford it, try and buy in the more blue chip areas. That would be your advice.

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

Ange
Exactly. So the challenge I have with that though is you passed 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 buyer’s 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 to build an income. But how much time did they spend learning how to look after that income followed, whereas 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, 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. Whether it paid any money or didn’t pay, didn’t really matter. So again, it’s trying to put it in reverse. The second question about should you trust other people, look, it is a hard thing because say in the bars 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, or you’ve, you’ve bought a few. Being in the trade, we are gonna get better deals, so we are gonna 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 in that. You’ve still gotta 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, all trade is out there. So you are the king of building property portfolios. Are you a fan of buying a property and trying to maximize the profit? You know, most tradies sync will buy a property. We’ll get in there, will work really hard, will put in a new bathroom, will put in a new kitchen, and will try and flip it. And over the years I’ve sort of seen people make money from it, 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
Yeah, look, we, 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, I, I still haven’t got any more money. And I said, yeah, but the problem is, is only 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’ve paid tax on that. So really, you’ve made 15 grand. And that’s the thing is. They’re too busy doing the, the doing. They understand the big numbers of buy 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 you, again, you need your accountant on board. To tell you, you are actually not making any money. But look, if you are a trade, the main thing is 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, and then keep on repeating. So I think that’s the, that’s the perfect scenario. But again, So many properties now, most of the money is in a million doubling to 2,000,002, 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 a hundred grand or even a few hundred grand, but the real money is in the long term. So the best one I did, I, I got a, a block block of five units. I bought it for roughly 1.9 million. I put 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 8 million. Yes. So that 1 million was great, but the real money is passive. Probably three or 4 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 build for cheaper than outsourcing it, sometimes everything now with 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, I don’t wanna lose this client. So then they’re over here. So the Reno that we’re gonna do that was gonna take a month. Now it will take 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, doesn’t really matter their age, but say you 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 and or maybe I’m living with mom and dad. Would you put that million dollars into the Sydney market and get something smallish, 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. Mm. And going back to that supply and demand argument is ideally you wanna be in places with no supply and lots of demand. So yeah. In Sydney, if you went to the eastern suburbs, lone or shore in the west, you’re probably gonna get a studio, maybe a one bedroom if you’re lucky. Yeah. Done 50 or 60 square meters. Mm-hmm. . 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 right.

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 a 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 gonna 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 Yeah. Lots of supply. So even though there’s an argument to say, um, land appreciates and buildings depreciates, so buy as much land as you can, I buy Queensland or the Northern Territory, but there’s also an overriding rule. It’s the quality of the land. Yeah, so that’s 60 square meters in Bondi, Manly or, or Balmain or something in such short supply, like a diamond or a bit of gold or something that people will queue and they’ll pay, they’ll pay an extra five or 10% just to get it. Mm-hmm. Whereas I think when you move to regional places and Brisbane and Southeast Queensland and stuff like that, or in Perth, like with mining, then there may be no demands.

Andy
Yep. Not exactly.

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

Andy
Yeah, exactly. You gotta get off your button, make sure you’re making a move. So we play a game here, um, on this podcast and it’s really, uh, rapid fire questions and we’re gonna 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 gonna get me to sing and dance, so I’m happy with these questions.

Andy
We might do that a bit later.

Ange
Up too.

Andy
So a bit of a cheeky question cuz 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 suburb to keep an eye on right now?

Chris
Kuchi, I’ve got about 15 million personally invested in there. So the more the merrier.

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

Ange
Increase the value.

Andy
Yeah, exactly. So in your opinion, the current interest rates, inflation, you know, there’s a lot sort of happening now. 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 gonna be back at six or 7% at some time. They might be back at 10, and then they’ll be back down again. But look, the next six or 12 months, then look maybe half a percent, maybe a percent. But as long as you’ve got your cash buffer and you’ve got income coming in and your properties let out, chances are rents are gonna rise as well. So it doesn’t really matter.

Andy
You know, I, I, I just wanna touch on that. I love how you just look at the worst case scenario and where it’s gonna go and you go, well, listen, it’s gonna 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 gotta get in the market. You know, cuz a lot of people think that 7% is like a real danger for everyone in the property market because 7% is almost equivalent to the 17% 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 Effortless Empire, which I wrote back in 2008. I calculated interest at seven, eight or 9%. We’ve produced 60, 70,000 copies of that. And we recently rewrote it on 17 2017. The only thing we changed was the examples instead of being 500 grand or a million, and really we need to remark it again to say a million and a half. Yeah. But I kept the interest rates in my examples of seven, eight, and 9% 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 gonna rise. Mm. So if it works at seven, eight, nine, it’s still gonna work at two or three or four or five or something like that. Mm-hmm. . So the main thing is it’s working out the breakeven point. It’s, it’s actually not the interest rate, it’s the difference between the rent and the mortgage. Cuz that’s the difference you pay. Yeah. So at the moment we’ve got 3% rent. We’ve got 3% 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 mm-hmm. Chances are people are talking, rents are rising now as well. Some of the rentals we’re buying were getting three and a half, maybe even 4%. Mm-hmm. 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.

Andy
Yes, exactly.

Chris
But when you understand the whole puzzle, sure. I don’t mind interest rates or rent. Dropping 2% because my interest rate went down four, so I’m better off.

Andy
Exactly, mate, that is so true. So I’m gonna 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’s got an independent valuation. So even though we are 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, they guarantee that you are not gonna overpay for that property. And it makes our job 10 times as hard because they’re super conservative valuers.

Andy
Yeah, they are.

Chris
But it means that if we bought a property for a million bucks, chances are at auction, it would’ve got 1,000,050 or 1.1. So all of the mistakes I hear about like people buying in mining towns, buying off the plan, over paying for properties. If they paid for that valuation, they wouldn’t have ended up in that trouble because the value in a, in a mining town would’ve said this is a high risk area that generally a bank doesn’t wanna 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 properties, by far the one that stands out, you know, above the rest. So, uh, 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, cuz 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? Yeah, I think after listening today, the answer is buy more property. Chris, that was absolutely awesome. We just wanna say a really big thank you. You, you’re an absolute superstar and, 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 look, 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
Exactly. Most people need to understand a bit more. I 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. . I reckon so, thanks mate. You’re a superstar.

Ange
We’ll chat soon. Thanks.

Chris
Thanks a lot guys.

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 wanna 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 I say, you need to learn to walk before you can run.

Andy
Speaking of which, if you did wanna 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.