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Chapter 1: What motivated Owen to buy his first home during COVID-19?
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Chapter 2: What sacrifices did Owen make to save for his home purchase?
Hello and welcome back to another episode of the Australian Finance Podcast. And this week, we don't have a special guest. We have Owen as our guest. What?
A pretty special guest? I feel like this is an insult. I am a long-time listener of this podcast, Kate, and I've listened to all three episodes in the series so far, so I feel like it's about time I come on.
Now, I've got Owen behind the screen today because he actually, I think a few people got the hints from previous episodes, but purchased a property like a real adult recently. So we are going to dive right into all the things that were involved in the process, what he learnt, what he did wrong, why he ripped up his carpet and, yeah, how his rabbits are enjoying the new house.
So, yeah, this episode... I'm going to be asking Owen the questions and he's going to be providing his wonderful wisdom on the whole process.
So we should probably mention that this is actually, yeah, you said behind the screen, we're actually recording this for our YouTube channel. So if you do want to watch it and you do want to see the inside of this house, this masterpiece of a work in progress, you can. It's recorded via video. Anyway, you're the host, not me. So I'll just get back to being the guest.
Wonderful. Well, first question was, what factors were involved in your decision to finally start looking for a house? Because that certainly surprised me, given your affinity for shares. And I even have had a question from one listener on why does Owen hate property so much? So it was it was a bit of a change.
Interesting, interesting. I feel like that, is that anonymous? Did you make that listener up or is it actually a listener? No, real question, I saw. Thank you, dear listener, for that question. So, Kate, I don't hate property, but I think the Australian dream, quote unquote, is not necessarily all it's cracked up to be.
So I think if I could be a bit nerdy, if you pull apart, I guess the increase in wages, which is a real thing, but if you pull apart, say, interest rates, which have fallen dramatically, and if you pull apart a little bit of the migration and what have you, I think you'll find that property prices probably wouldn't have done anywhere near what they've done so far.
So if you go back over the last 30 years, so if you go back 30 years,
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Chapter 3: How did Owen prepare for the home buying process?
I reckon that housing in itself doesn't add as much value to your wallet, to your pocket, and it doesn't actually add that much value to society. So what I mean by that is, if you think about it, the house itself, so the physical thing that you associate when you say house, timber and concrete and whatever, that actually goes backwards in value. but the land is what increases in value.
So if you think about those two things, you have this massive negative force against your wealth creation. It's really the land that increases in value, which is why, again, I tell people that you should probably try and avoid apartments or that type of thing, or especially investing off the plant.
and so those two things combined but then you've also got a lot of costs involved you know there's a lot of cost involved in um buying and selling which i'm sure we'll talk about um and then even if you just it's an investment property in costs associated with your time to manage it or get or pay someone to do that
and you do all that you combine all this together and what you're left with is debt to finance something which half of it goes backwards in value so you use a lot of debt which for a lot of people for a long time we haven't known the risks associated with that because interest rates have fallen and that's been this huge like stimulus for our for our budgets and made it easier for people to repay their huge loans
any time things have got tough in the economy and now we're finding that maybe a lot of people can't repay their loans or if they do it's probably going to be with some assistance from the government and i don't want to say i told you so but i just i just want people to be realistic because at the same time you know property is a very big part of people's lives and it's a really important part
But at the same time, a lot of people are scared of putting $2,000 in shares, but they'd happily have a $500,000 mortgage. And so I'm kind of like, well, I'm obviously trying to fight the good fight for the share market because it has performed the best over the long term. But it's not that I hate property. I own a property now, so... I'm not completely against it.
But what I would say is that it's not an all, you know, it's not all one or the other. You can do both. And if you're saving for a property, if you're a first home buyer, you can start saving, you know, half of your money for shares, half of your money for your deposit.
um and for me at the end of the day this is a long-winded rant kate i love being on the show by the way um this is a long-winded rant the last thing i'd say is that i think of property as more of a lifestyle asset if you're living in it so obviously the house here um this is our property so we won't pay capital gains tax on it but um I think for me, I'd rather put money in shares.
If I have the same amount of money to only allocate to one, I'd put it in shares. But we know that that's not necessarily the case.
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Chapter 4: What factors did Owen consider when choosing a property?
So that's a really crap answer to your question. But basically, we were ready to buy a house because we think of it as a lifestyle asset and our families were looking to build a family. So we need a place, a consistent roof over our heads.
And I think there's often that debate on whether your primary residence should be included in your net worth or not. And yeah, so for you, it's not or it is?
It probably isn't, to be honest. When we bought this house, which again, we'll get to in a minute, when we bought this house, I said to Sarah, who's my wife, I said, the one thing that is so important to me is if we are going to put money after this property or into this property, it must be quote unquote investment grade. So it must be an asset that increases in price.
And from my ramblings just now, you would have noticed that a big part of that, what makes it investment grade property is the land value. And so that's what we went out and searched for was high quality land so that if we are putting money into our personal wealth into a property, we put it into a property that is more than likely going to increase in value.
So when you were making the decision to start preparing to buy and then buying a house, what were some of the sacrifices you had to make in order to do that?
Well, one thing I can tell you for sure, Kate, is that we actually had to dip into our emergency fund a bit. So that's something that we've always had cash put aside. I think it's the single most important insurance policy anyone can have is putting aside cash. But we also were able to save rapidly.
So what we did is we were renting in a pretty nice part of Melbourne, if anyone knows it, is Hawthorne in Melbourne. Not quite as nice as where you live, Kate, but close second. But we had to give up our rental there and we moved back in with the in-laws. As someone going on 30 years of age, I can tell you that's heaps of fun. For me, it was all right.
For Sarah, being directly involved with her parents in COVID, maybe it wasn't as much fun. But for me, it was okay. But that's a sacrifice we had to make. We started saving. We already had some money put aside. We started saving before we moved back in. But then we moved back in for the last four or so months to really supercharge our savings.
And so, yeah, people have often asked me in the past, you know, you're a finance guy, you should be able to afford a property and all this sort of stuff. Well, it's never been about that.
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Chapter 5: What challenges did Owen face with financing and mortgage brokers?
It's also been about like, where's the best place to put my money? And for us, it was a business and our own stock portfolio and ETFs and all that type of thing. And so we kind of had enough money, but we didn't really have to dip into the stocks. We really just didn't put as much into that while we're saving rapidly to get this deposit up and going.
So you reprioritized.
Yeah, I should have just done that one word. I should have just answered that question with reprioritize. No, but that's true. We did. And you're right. Like effective budgeting is all about sacrifice. It's not about, you know, just a thing on the spreadsheet. It's about what you're prepared to give up.
And what we gave up is a bit of autonomy and living in a nice part of town to go back and supercharge our savings. Did you have to cut much else out from the budget? Well, this is the wonderful thing about COVID. If we're looking for silver linings is that we didn't have anything else to spend money on.
So we, you know, we were very fortunate that we couldn't go out and, you know, have a burger down at the local burger place, or we couldn't go out for after work drinks or anything like that because we're simply weren't allowed to. And frankly, we still aren't allowed to, but we could, we could save a lot more. Right. So we weren't driving the car. We weren't getting on the train. So getting that,
public fair and we were saving a lot of money so we were very fortunate to use that to our advantage i mean i'm saving a couple of hundred a month not having to go into the city every day it's just it's amazing so all these expenses that
accompany our day-to-day life that we've suddenly got to get rid of at the moment during covid so it's quite fortunate timing for you totally and even our next door neighbor i was chatting to the other day he was saying that he he drives a holden commodore and he usually drives about 15 or 20 minutes down to his um his work and he was saying that he saves 500 a month based on that.
So for not having to do that anymore. And that's incredible when you think about it, the ability to save for something that you're going to do anyway, that is not driving.
It's, it's pretty, it's pretty good. So on the journey to buying a house, apart from the episodes we did with Amy, which I'm sure you learned plenty from, cause I, I definitely did.
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Chapter 6: What lessons did Owen learn about property investment?
How else did you learn about the house buying process? What people did you talk to websites you looked at? Did you read a book?
Yeah.
Well, it's safe to say, Kate, that I've read a few finance books in my life. And I've also done a little bit of study. Just a tad. Just a touch. So I'm quite lucky. But saying that, like, even if I... put myself in Sarah's shoes as my wife. She's not a finance person and she was very knowledgeable of it too.
And I think it was kind of a combination of learning from the people around you, but also learning from books, you know, some really good books out there. One of the ones that I read a very long time ago, and I'm not saying it's like the best book out there for learning about being a first home buyer,
is it was Richard, I think it's Richard O'Malley, who wrote the book about real estate in Australia, Australian real estate. And it was about how you can kind of use the sales process to your advantage. I'll put the book in the show notes, but basically he was talking, I think it's Peter O'Malley. He was talking about how,
you can get into a property and the things that you should look for long before you buy. And one of the things that he looked at and it kind of stuck with me, even though it's very hard to do these days. One of the things that he told me and Amy talked about this is using, he's buying a property, sorry, that is positively geared.
meaning that it generates cash flow for you and it covers the costs of what that property would be rented out for. So a lot of people talk about negatively geared properties, which is when you effectively run it at a loss. So then you can take a tax deduction.
Whereas a positively geared property, in my opinion, is much better because it means that the property is able to be rented, meaning it's valuable to someone at a price that's more than your interest costs or the cost of the loan. And I think That's something that I learned a lot from that book, just kind of those basic strategies.
But of course, there are heaps of others like Smashed Avocado and Nicole Haddo. We've had obviously Amy Linardi on the show. I've interviewed Pete Wargent and read his books.
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Chapter 7: How did COVID-19 impact Owen's home buying journey?
I've interviewed Chris Bates from Wealthful. So there's plenty of other great resources out there for people to find, which we can put in the show notes.
So you think the podcasts help you?
This one?
Yeah.
No, it definitely did. We have an advantage, right? We get to interview great people. And if we weren't interviewing people, Kate, I'd probably be listening to this podcast anyway. So I think we're very fortunate and so are our listeners.
And did you talk to anyone else? Did you talk to a broker or a buyer's agent throughout the journey?
So Amy said to me when we interviewed her the last time, she said, hey, if you need any help with your property, let me know. And like... here's me, the finance guy saying, yeah, you should probably consider using a buyer's agent, a good one. And there's one right in front of me, but I didn't use Amy because it turned out that we'd already had our property lined up.
So I also was perhaps a bit smug in so far as I thought I didn't need anyone, but it turned out we did. We did need the guidance of an expert mortgage broker because, and I was reflecting on this before, the thing is our situation financially was atypical. So I run my own business obviously.
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Chapter 8: What advice does Owen have for first-time home buyers?
And that business is pretty much a startup. Um, even though it's quite big now, like in terms of the team and whatever. Um, but my financial situation is probably about as cloudy as you could get. Like it was not vanilla. Yeah, I don't want to lean to that guy. And the way we wanted to structure the property was a bit different too.
And so when I think about it, having a good mortgage broker on your side and speaking to them well in advance of when you wanted to buy the property, we put down an offer without having building and pest on it because we wanted it so bad, which is this one. And we hadn't even got our finances sorted yet.
So we kind of just, we're just a couple of, a cowboy and a cowgirl just going out there just putting bids on properties without actually giving it much thought. But no, we were reasonably confident that we could get financing. But now I know that with, for example, some, when you go to a bank and you get a mortgage and some of the better banks that are offering like low rates are
they're offering these specials, if you like, on these mortgages, the application time for them can be two months before you even get back from them. So if you're trying to buy a house on 45 days like we did or 30 days settlement, it can be a bit tricky if you've got a two-month waiting period just to get an answer from the bank. So, yeah, those are some of the experts that we're relying on.
It seemed like you had a few stressful days trying to get everything organised. Yeah.
Well, I think you know this, but at one point with the financing, it was kind of like, okay, either we're spending the next year in Italy, and we're going to use our deposit just working from Italy, or we're going to buy this house.
So at a point there, you know, we received some feedback that because of my financial situation being different, you know, having a finance business during COVID and being a little bit unique in that respect, like, I think you know this, Kate, I think I've said this in the podcast, I didn't take a wage from the business for like three years or more.
And so that doesn't look great when you're applying for a mortgage. Yeah, don't worry, I'm good for it. I didn't take a wage, but don't worry, I'm good. Trust me, it doesn't float very well with the bankers. So, yeah.
Yeah, I think something we both sort of discovered this year, especially from our guests, is that if you've got a scenario that's not that cookie cutter, nine to five, normal salary, full-time job, it's good to speak to people early like a broker just because it's a little bit harder and to some people a lot harder.
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