Paul Glossop: Hello and welcome once again to Property Investment one on one. I’m joined today by Tristan Scifo. Tristan, thanks for coming, mate.
Welcome to the studio. Question I have. You’re a financial planner, you’re a wealth coach, and I’m sure you get this question posed to you quite a bit. We get a little in our office as well, is that we get investors having bought their first investment property, or potentially their second, third and so on, and might get to the point of saying, “I’ve achieved that milestone. What do I now do with my surplus cash, and what’s the next steps?” Because it’s kind of like climbing Everest to some people – I’ve achieved that, now what? And a lot of that comes down to I’ve got surplus cash flow or potentially I’m going to be earning an income for the next 30 years of my life, what should I be doing, and how should I be funneling that money, things I should be considering.
Mate, I’ll throw it to you, because you’re probably more qualified than I to answer different things that people should consider.
Tristan Scifo: Look, it’s a great question. Simple couple of answers. First thing is, celebrate, have a really good meal, some people tend to go on a holiday, don’t blow it, but yeah, yeah, pat yourself on the back you’ve got yourself into something that not everyone manages to get into, an investment property, let alone their own home. But second, and straight after that, book in for a meeting with a coach. Get yourself some accountability. You’ve just achieved this goal that you’ve probably been working at really long and hard, and no doubt you’re feeling a bit of relief. And a lot of the time it’s very easy to sort of rest your legs up and go, “Look, I did it, I’ve got that property, I’m in”, and 2 years can go past, and you’ve saved half as much as you would have. Without that motivation and drive, and particularly the accountability of a good financial planner where you’re headed, there’s a good chance that you’ll lose some steam.
So, if you’re an investor and you’ve got your first investment property, you’re going to have to find a way to allocate your surplus, whether you have a negatively geared property that you have to chip in a bit to hold, or a positively geared property which is giving you additional income before or after tax, you’ve got your savings, and your regular savings at that to do something with. The simple answer is, look at another investment property. But we all know it’s not so easy to get straight into it. You might have used all of your borrowing capacity, you might not have any more to borrow from the banks. You also might tend to give it a bit of a breather, and you might not have some options available straight away, so you do need a vehicle. The first place you could look is obviously an offset account, you know, an alternative to paying off the loan and putting it all in redraw, you could set up an offset account which would give you a guaranteed fixed amount of income.
A bit complex, offset accounts in some cases, but really, whatever your interest rate is on the loan, it’s almost like an offset account is an investment with a guaranteed fixed income at the exact same rate. So, if you’re paying 4.2 % variable on your loan at the moment, your offset will give you 4.2%, or the equivalent thereof. Few implications to it, but that’s pretty much as simple as it gets. Now, can you do better? Is there anything better than 4.2? In the short term, it’s difficult to do better. If you’re going to invest for 6 to 12 months, Paul, I would be very reluctant to recommend a higher risk market-linked investment. Under a year, there’s a lot of volatility. If the market drops, then you might only even get your 4.2, you might get a negative 4. So there is definitely risk involved, but there are some investment vehicles which have lower risk, that we can look at including diversified investment portfolio and cash term deposits and cash-like investments. This is a space that’s highly unregulated.
There’s actually a lot of new products popping up in the market. A few things that people often look at – peer to peer lending – that’s where you become a bit of a bank, and you start lending your money to other people, without sort of using a big bank as an intermediary, you kind of lend directly to them via a platform and there’s a few of these sorts of products on the market, and there’s also a few hybrid high interest savings. It’s not just a normal high interest savings, there’s a bit of added risk to it. Now when you get higher risk, you get added returns, so can be playing with knives at times, but there’s definitely a lot of options, from as simple as putting in the bank to using your offset account to sort of these hybrid type cash investments, then you’ve got your general portfolios with high risk. There’s a thousand other things you can do, but if you’re wondering what it is you should do, you should really get that coach on board, get a plan in place, and choose an investment that suits your risk profile.
Paul Glossop: Yeah. Excellent advice, I think. One thing personally as an investor for the last decade plus myself, and with a property portfolio that spans that time, one thing I’ve realized, one thing that motivates me more than ever is making sure that every single time a property or a purchase or an investment irrespective is made, having a plan after that plan, because the worst thing you can do, and I’ve been guilty of it personally, where probably after 5 years I hit a milestone that I’ve wanted to achieve and I probably went on a hiatus for about 18 months which cost me. And I only went on that hiatus because we kind of, my wife and I kind of achieved what we wanted to achieve, and then didn’t really refocus when we could have refocused straight away, and then hit that button and then gone straight ahead, and that’s probably cost us delayed gratification aspects, which we really haven’t been able to achieve because we probably celebrated a bit too long and took out foot off the pedal when we shouldn’t of, and I think a lot of people are guilty of that. Whether it’s getting your first investment property or getting your fiftieth, or even diversifying into other things and other investments strategies.
Having a plan, having a coach and getting someone to say, “This is what you said you would achieve, this is what you’re capable of doing, now just go and do it”. Sometimes you just need that proverbial kick in the backside, and it’s as simple as that. Others need genuine mechanisms to get it happening, but I think the first step is always saying, once you get there, engage that person. If you haven’t engaged them before you get there, get those plans in place before you buy that property, or your next investment property or invest that money into an offset account or different asset classes, etc.
The key for me is having the right support people around you who’re going to give you objective advice based on the outcomes which you want to achieve, and, for me, that’s key, is that getting the right advice by people that have the right intention and also the right knowledge and skill sets to be able to get that outcome achieved.
If you do want to contact Tristan or anyone from his team, guys, everyone’s welcome to, and his contact details are at the bottom of the screen. Feel free to give him a buzz. He would be more than happy to set up some time to go through those aspects and likewise, from our side of things our contact details are at the bottom of the screen, and we’re always happy to have a chinwag. Chat soon.