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Chapter 1: What inspired Nicole Haddow to write 'Smashed Avocado'?
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Welcome to the Australian Finance Podcast, a podcast for people who want to learn more about their personal finances and get the most from their money. This series is hosted by Kate Campbell from HowToMoney and Owen Rascovich from Rask Finance.
The Australian Finance Podcast is provided for educational purposes only. The information is general in nature and does not take into account your needs, goals or objectives. What that means is the information does not apply to you specifically. So consider getting the advice of a licensed and trusted professional before acting on the information.
Okay, Kate, welcome to this episode of the Australian Finance Podcast.
It's good to be back and we've actually got a special guest on today.
We do indeed. Nicole Haddo, you've just penned a book on millennials and investing in Australia. So it's great to have you as part of the show and take us on a deep dive through property and your experience. Perhaps you can kick things off with just telling us what the book is, the motivation for doing it and some of the lessons learned so far.
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Chapter 2: How did Nicole overcome her financial challenges before buying her first home?
It's my story. So I moved home with my parents when I turned 30 and I had $11,000 worth of credit card debt. So I talk about how I turned it around to buy an investment property. It's also all of that nuts and bolts advice for young people who maybe are a bit bamboozled by the concept of applying for a loan, how much money you need, that sort of thing.
And there's a stack of really amazing creative case studies in there as well. So really clever young people who found interesting ways to enter the market.
Yeah, great. I know Kate was recently away in New Zealand and got stuck into the book because it's only just come out, right?
Yeah, it's been out for about three weeks now.
Yeah, cool. How long did it take you to write?
Well, I wrote it pretty fast because there was a pretty strong demand for it. So I signed with my publisher in September last year and I had the first draft. I'd started the first draft earlier in the year and I'd completed it by the end of the year. And then the first half of this year was editing. Wow, that is quick. It was pretty quick.
So editing, was that the harder part, more trying part?
Yeah, editing is definitely difficult. The challenge is a lot of the information in the book is based on market movements. So every time something happened in the market, I had to check and make sure I had the most up-to-date information and obviously it's evolved even since the book's come out.
You know, I tried to make it as up-to-date as possible and the facts and figures, although some of them have changed slightly, you know, the nuts and bolts of it remain.
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Chapter 3: What creative strategies can young people use to enter the property market?
It was what do I need and what don't I need and everything that I didn't need was off the list.
Yeah, it seemed like a pretty tough approach to take with yourself.
It was, but I felt that because I was already 30, I really needed to make up for lost time. So this was when my parents had said to me, you can stay for a year. So it wasn't this open-ended invitation. So it was an opportunity to save as much as I could in that 12-month period. And I really did everything I could.
I think I saw a video of you. I think you said you started to cry in a restaurant. Is that right?
I did cry in a restaurant. I've talked about that so much lately. Yeah, it was my 30th birthday. So I spent the day drinking champagne with some friends. We were posting pictures on Instagram of us, you know, living this lavish lifestyle. But it was a lie. Like I was not living the lifestyle that I had posted on social media.
And it was just sort of this compounding of all of the things in my life that A, had been amazing in my 20s, but B, I was now going to pay for in my 30s and working out that I really needed to do something drastic and being quite emotional about that realisation.
For sure, I would have been. Because I remember you said something like you're in $11,000 of debt. Is that right?
Yeah. So I had two credit cards. And the reason I had those credit cards was because I was just really, I was trying to get ahead. So I worked as a freelance journalist a lot in my 20s. At one point, I moved to Sydney to work for magazines up there. So I was paying really high level of rent. I had unstable income. And sometimes the credit cards were just a way to cover the gap.
I was moving a lot in share houses.
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Chapter 4: How does social life impact financial decisions for young homebuyers?
I was absolutely spending money on things I shouldn't have, travel and clothes and that sort of thing. But a lot of it in my mind was I'll sort this out later. It'll all come together. And when I realised at 30 that it hadn't come together and I was no closer to finding a solution, I knew that I had to make some serious changes.
Mm-hmm.
And I definitely think Instagram's a massive part of the problem here because we see these completely fictional lives and maybe they're just doing it off a credit card. We don't know how much of the Instagram profile is funded by a credit card.
Well, that day I was sitting by my friend's parents' pool. So, you know, we looked like we were having this lovely time by the pool and we were having a lovely time by the pool but the reality was that we were at my friend's parents' house and I'd just moved home with my mum and dad. So... Trying to break that cycle of creating that persona was also part of the challenge.
I don't think my Instagram feed would have been nearly as interesting in the year that I was power saving, unfortunately. But that's what you've got to do.
Do you think that the decisions, the hard decisions that you made impacted your social life?
Absolutely. So I talk about this a lot in the book and that was something that was a real shock to me because I was moving in circles where people really went pretty hard, to be honest with you. We had pretty good social life.
It wouldn't be unusual to go out and spend $80 on dinner and drinks on a Thursday night and then there was being out on the weekend and the taxis and the brunch and all of those things. And when you stop doing that, you put pressure on the friendships because all of a sudden you're asking people to change their lifestyle. And if they don't want to do that, they don't have to do that.
But it absolutely creates some friction.
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Chapter 5: What is the concept of 'rentvesting' and how does it work?
But for me, it was either go and... watch everybody increasingly get merrier and merrier or just go home and and you know sit on the internet and and look at what properties were online and try and make it you know a useful period of time rather than feeling sorry for myself which i got to eventually it took a while though
And you kind of work out who the real friends are, the people that are happy to come over and just have a bottle of wine and maybe some cheese.
Yeah, well, that's exactly it. And I mean, I'm in a different stage now. I've sort of come out the other side and I'm able to go out with everyone and even buy dinner for friends who sort of let me sleep on the couch when I was, you know, trying to do that power save. So you come full circle.
But it was really rewarding in the respect that the people who did stay in my life and support me in those choices are even better friends now than they were then.
For sure. One of the things I heard you say in one of the interviews or videos that you've done on the website is you've mentioned some of the creative ways people have made property work for them. And I think there was one instance where a couple had bought an old barn and turned it into an Airbnb shack or something like that.
Can you recall any particular cases that really struck you as impressive when you were talking to these young people?
Absolutely. It was one of those things where I wish I'd read my own book before I entered the property market. It was really important to me to go out and find people who were finding creative ways to buy entry-level properties. I'm completely aware that for most millennials, the idea of buying an $800,000 or a $900,000 property as their first property is not feasible.
So I wanted to find people who were buying entry-level investments but finding a way to turn the concept of having a mortgage on its head so that it worked for them. So Jacob and Brad who bought the barn were a really good example. It was literally a barn.
It had a dirt floor and exposed insulation when they bought it and they spent some money renovating and they had some handy tradie mates that they could call on and they'd paid $220,000 for that property. And it's now on Airbnb for $200 a night. So they're doing really well. It's a beautiful property. There's demand for it because it's in Heathcote. So here in Victoria?
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Chapter 6: What are the common pitfalls young buyers should avoid in the property market?
There's plenty available now that people can put on a truck and move to a piece of land. So that was incredible. That was what would have been a million-dollar house where it was and they put it on a truck and moved it to cheaper land.
And then it's just people who are, you know, buying properties that need work and fixing them up and building that equity or buying in an area where nobody wants it at the time and then all of a sudden it's the place where everyone wants to be.
Mm-hmm.
And I think one of the tough things definitely as a young person is being realistic and knowing that you probably can't start off with your million-dollar home and you might have to start with something a lot smaller.
And I think having to come to that realization is really important when you're getting started because having to come up with a 20% deposit for a million-dollar home is going to take a long, long time.
Yeah.
For a $300,000 home, it's probably a lot more feasible. So do you have any sort of suggestions on how young people can be a bit more realistic with their goal for their first home?
I think it's really hard because I think a lot of young people today would have had parents who were able to buy a freestanding home as their first house. It's not realistic to think your first home is going to be a double-fronted, renovated Victorian house in a blue-chip suburb. But it is disappointing to realise that you're probably going to have to reset your expectations.
For me, that was buying an apartment, for starters, and it was buying 25 kilometres out of town, not where I necessarily wanted to live. But to buy in a high-growth area, that would ideally ā the property would go up in value with a reasonable pace and allow me to take my next step over time.
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Chapter 7: How can young people realistically set goals for their first home purchase?
Yeah.
Bigger picture here, in your mind, should everyone be striving to own a home or is renting okay?
I don't necessarily think everyone should be striving to own a home. The thing that I love about our generation is that there are people with all sorts of different values. Maybe they're investing in shares. Maybe they're building a startup from scratch and that's how they intend to make their money.
My concern is that if you get to retirement and you don't own your home and you don't have enough in savings and superannuation to live for the next 30, 35 years, you've got a challenge on your hands. You really need to be certain that you are going to have enough money in the bank to cover your life and your health care for the rest of your life after you retire.
So, my other concern is if it's not your own home, then you need to consider what it means in terms of your landlord kicking you out because they've decided to sell. The instability, if you're renting in your 70s or 80s, is obviously not going to be ideal. So...
For me, the priority was to get an entry level investment and hopefully work up to something that I would be in an owner-occupier situation eventually. That's important to me. I appreciate that it's not for everyone, but I would encourage people to think about what they want their later years to look like.
Correct me if I'm wrong. Before you wrote the book, you were writing for the Australian Financial Review and you were covering some of the really exclusive properties in Australia. Do you think someone that didn't have that insight into property would have gone on the same journey as you?
I don't know. So I was writing the executive property column for the financial review, but I was doing that as my side hustle in my first year of home ownership. So I had underestimated how much that first year was going to cost me.
And so I just happened to end up writing the executive property column which turned out to be a real gift because I got to learn about the top end of the market and the amount of time I spent thinking about the top end of the market got me thinking about the bottom end of the market and the fact that a lot of young people aren't getting that inspiring optimistic advice that they need to believe it's achievable.
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Chapter 8: What resources does Nicole recommend for first-time homebuyers?
So that's like a reduction in stamp duty and that sort of thing. First-time buyers now are in an even better position in Victoria because there is no stamp duty under a certain threshold. But the ultimate aim for me was to rent that property out. So the advantage of that, well, there's a few advantages really.
The first is that you get to set up the lifestyle that you would prefer by getting someone in your property and renting where you want to live. So I now live in Richmond, much closer to the city than where my investment property is. My property is also negatively geared, so there are tax benefits that come with renting paying for things like the gap in the mortgage.
So say, for example, off the top of my head, say, for example, your mortgage is $2,000 a month, but your rent only brings in $1,500. There are tax breaks on that gap. Even the cost of the water bill, which I pay, and the council rates, all of those sorts of things add up as a tax deduction at tax time. And ultimately, I now have someone in my property.
I really don't think about it on a day-to-day basis. And I am allowing it to sit there and hopefully build in value so that I can eventually use the equity in that property to take my next step. Had I waited to buy something that I wanted to live in, it would have been far harder to enter the market and it would have taken me longer.
so that's kind of like a you could buy maybe say if you're a younger person you might buy a house in a suburb but if you wanted to rent in the city or you want to be closer to work or activities whatever it is you would maybe rent an apartment or something like that something that probably doesn't make a lot of sense to buy financially but it's the lifestyle you're after right
Absolutely, absolutely. So when I moved out of my property, I managed to get hold of a two-bedroom house in Richmond, which I would never be able to afford to buy as an owner. But because it had two bedrooms, I went back into a housemate scenario. And so I was splitting the cost of that with someone else.
And it meant that my rent on that property where I wanted to live was actually less than my mortgage. So there were a lot of advantages there.
For sure.
Now, one other thing that you pointed out in your book is about that property is not a get rich quick skip, which we do talk about a lot when it comes to any investments that you should be looking for a longer timeframe. Now, something I see going around quite a bit is all those property spruikers.
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