SPEAKER_00 0:20

Hey, listen up. This is gonna be an interesting one because Elizabeth has sent me a challenge. This is a podcast, me versus

Setting The Challenge

SPEAKER_00 0:30

her. Her versus me. Investment advisor versus a mortgage advisor. Let's go. What do you have for me? Bring it on.

SPEAKER_01 0:38

Okay, I feel like you made this into way more of a challenge than I was expecting. All right. I feel like the question of property versus managed funds comes up quite a lot. Maybe people don't like say it like that, but also in New Zealand, where everybody

Property Versus Managed Funds Framed

SPEAKER_01 0:53

is so property-centric, I feel like the underdog trying to get people to go into managed funds and get them to invest in something that isn't bricks and mortar. So I thought it could be interesting for us to share our different ideas on when you should invest in a property and when you should invest in a managed fund. Do you want to jump in with a pro for property first? Absolutely.

SPEAKER_00 1:16

I've just realized I'm not wearing my headphones. I hope people heard you all along. All right, property. I think this is the greatest time right now to invest into property because we are at the lowest in the property market. You don't need much to

Case For Property In A Soft Market

SPEAKER_00 1:32

get in. You if it's a new build, you only need 10% deposit, sometimes 15% if it's a if it's an investment property. If you're buying for you, you can even get in less 5%. So compelling. Right? And it will only grow in value over time, we hope. Yeah. Because we are at the lowest of the market. And the interest rates are very low as well. So we're talking about 4.5% to five. In terms of home loan rates, we have not seen it this low in the last three years. So definitely we're sitting at the bottom of the market right now.

SPEAKER_01 2:04

Go. What do you have for me? I think that that's it's a really good point because actually now is a terrible time for me to issue the challenge because actually it was a really good time in terms of accessibility. I mean, as

Low Barriers For Managed Funds

SPEAKER_01 2:16

much as possible in the Wellington market, accessibility into property. However, we have talked about, you know, with managed funds, you can start with as little as $500. So even though, you know, you could get into a property with 5% deposit, that's still going to be tens of thousands of dollars that we're trying to scrape together during a cost of living crisis. And often while people are trying to scrape that together, they're just putting it in a bank account and it's actually eroding with inflation. But they could be putting it into a managed fund, even a moderately sort of conservative to balanced one if they think they might use it in a couple of years, just to keep it ahead of inflation, just to actually get that money working for them while they save up, because property is a much bigger step. You do need a bigger start point.

SPEAKER_00 3:00

True. So people that want to invest into investment funds, they can come to you and they can just have $500 saved up from the birthday monies that they would have received from someone or a little work bonus, right? They can start investing. Versus for me, I guess, yeah, they need to work a little bit harder or maybe wait for their Kiwi service to grow to get to that 5 to 10% point.

unknown 3:21

Yeah.

SPEAKER_01 3:22

Yeah. So I would say a lot of the time when I talk to people, it comes down to do they have equity but not cash? Then probably we're gonna talk more about property.

Cash Versus Equity Decision Path

SPEAKER_01 3:33

And I'll, you know, send them to someone like yourself. And if they've got cash but not equity, depends if they're like negative equity on their home, probably they're gonna be paying down their mortgage, is what they're gonna do. But if if they're just kind of like ticking away at their mortgage, but they don't really have a lot of equity there, but they do have a little bit of surplus every week, we could just be tucking that away into a nice little investment for them that's actually gonna grow.

SPEAKER_00 3:57

Yeah. Yeah. My question to you, do they have a commitment to continue to pay into the managed funds? So let's say they've started with $500. Yep. Do they have to contribute a minimum amount each month?

SPEAKER_01 4:11

No. So you can set up a you can set up a direct debit and do it regularly. You can do sporadic things. So a lot of contractors will kind of like save up and then a couple times a year when they've got they've paid their tax bill, they know what they've got, then they'll put it in their investment, or you can just leave it alone once you've started. So it's not, I feel like maybe you're going towards like compulsory savings almost. Yeah, which is like the argument towards mortgages. Yeah. Yeah. So you talk to that.

SPEAKER_00 4:38

Yeah, because I guess now I'm shooting myself in the foot by saying, look, if you do end up buying a property, you know, you do have to make payments. You have to make regular payments. And here

Contributions And Accountability

SPEAKER_00 4:48

you don't. Yeah. So I made an argument.

SPEAKER_01 4:51

It's like it's there is a chance that people just are spending the money instead of making regular investments. So then a mortgage is often like a compulsory savings thing where they actually have to do it. So then the asset grows. But on the other side, for people who want to invest but they're not confident that they can meet a regular amount, they don't have to. Like they can just start investing now. And when they get a pay rise in a year or when their expenses drop, then they can start contributing at that point. And probably where an advisor comes in is that my job is often accountability. So I might say to people, hey, we're due for our review. And you said you were going to start a direct debit once you got past XYZ and we're there now. So here's the direct debit form. Let's start setting you up with these contributions so that that investment actually grows even more. Grows. So that the accountability piece, I think, is quite helpful. Whereas with a mortgage, the bank is your accountability.

SPEAKER_00 5:50

The bank will chase you if you don't pay. Exactly. Yeah. All right. What could be another me versus you point?

SPEAKER_01 5:57

Well, another thing that I talk to people about is probably the hassle. Do you know? Like for me, investment property doesn't appeal because it seems like a lot of work.

Hassle Factor And Hidden Costs

SPEAKER_01 6:07

Even if I have a property manager, which then is an added expense, I still feel like I need to be across things. I need to make sure it's healthy, homes compliant, and all of that stuff. Whereas a managed fund, I can just set it up and then, as we've just said, contribute or not, but I don't need to do anything for it. So for me, one of the pros is for time poor people, which is a lot of my client-based. They're they're busy professionals, they have kids and work and sometimes side hustles and all of this stuff going on. They don't have time for another job or another obligation.

SPEAKER_00 6:42

Oh, it's an expense, right? This year alone, I think I spent over $50,000 on my investment properties because they were absolutely ruined by the tenants as they were leaving, and I had to get full renovations done. And this is, you know, plastering, painting, carpets, roofing. Sometimes it's really unexpected, right?

SPEAKER_01 6:59

Like something just goes wrong. Absolutely. Yeah. Whereas managed fund, the worst that happens is the market goes down a little bit, but you leave it there and it will go up again. But you don't need to be doing any work with it. So it's it's really quite hands-off other than meeting with me once or twice a year.

SPEAKER_00 7:15

But see, my counter-argument to that would be even though I spend all this money renovating, I agree with that. But my counter-argument would be I'm a person that needs to see and touch and feel. And at least with those properties, I know they are there. You know, they're on a piece of

Tangibility And Control Versus Abstraction

SPEAKER_00 7:29

land. And worse comes to worst, I can always sell that, or I can always demolish it and build, you know, six townhouses, et cetera, et cetera. At least it's there and it's I can eyeball it versus managed funds. You can't really eyeball the companies that you're buying in a way.

SPEAKER_01 7:47

Yeah, it's really interesting because I mean, there's probably two aspects to it. One is a lot of people will really like having it on an app for that reason, is that they can actually, even though they shouldn't be looking at it all the time, because what are you doing? You're not touching this for five to ten years, like we've already discussed your plan. But they can open up their app and they can see what the balance is doing. They can reassure themselves that the money's still there. And the other one is then we have really cool niche funds. So things like an innovation fund with one of the providers where they're actually investing into startup companies. It's almost like venture capital. So it's a very high-risk fund. You wouldn't put all of your money into it. But they genuinely did like a breakfast with the founders of the businesses that you're investing in. And you could bring your clients to that breakfast and they could meet the founders of the companies that they are investing in. So it makes it real, it makes it much more tangible.

SPEAKER_00 8:42

Okay. I like that.

SPEAKER_01 8:43

So there are, if you want something that you can actually know more about the investments, I think there are some funds that are really suited to it. And also you can actually ask your advisor if you wanted to know, hey, what am I actually investing in? What are the top 10 things in this fund? Tell me about them. Then that would be my job to go double check based on the latest reconfiguration. What are the top 10 things? And if there's a company I don't know in there, it's probably my job to go look that up and be able to tell you about it.

SPEAKER_00 9:10

So love that.

SPEAKER_01 9:11

Yeah. That's where the advisor piece comes in as well.

SPEAKER_00 9:14

Okay. I love this. I think we both covered really good and bad points to each one. Because look, in my opinion, there should always be a balance. Yeah. There should be a balance of what you're comfortable with and what are your big goals and

Risk Profile, Money Stories, And Goals

SPEAKER_00 9:30

plans, as you say. So for me, you know, it's all about I'm passionate right now about money personalities and money traumas and financial therapy. Like I'm really into that, and I'm getting deeper and deeper into this rabbit hole of understanding of how we all have money story, right? We all come from somewhere. And for me, having a property, having something tangible comes from my own money trauma. And now that I've got few properties and I can go, okay, cool, I've got a few properties. That's now done and dusted and healed. Now let's experiment over here with investments and stuff like that. So before you go down the rabbit hole of me versus you, I think people need to understand their own, as you say, money risk profile, money traumas, and you know, where do they sit in all of it?

SPEAKER_01 10:23

It really is a personality thing. Because, like I said, like I just don't want to rent a property for a range of reasons that, to be honest, my personal reasons aren't really money reasons, they're personality reasons of like why I don't want to buy an investment property. But then when I talk to clients, it's it's what they enjoy. Some of them really love the idea of had someone who wants to set up a luxury Airbnb in Queenstown because that to her would be like a project, you know, that she's gonna really enjoy doing that. And so the aspect of oh, it being more work, yeah, but it won't feel like work to her, you know? Whereas to me, I just I want to focus on other things right now and just know that the money's doing its own thing, and so that's where that personality thing comes in.

SPEAKER_00 11:10

Yeah, and the goals, goals for the future. So absolutely great, Elizabeth. This has been a fascinating podcast, I think. I really enjoyed it. I think we should do it more often and dive a little bit deeper into our own money stories. And um, and

Wrap Up And Listener Invitation]

SPEAKER_00 11:24

look, guys, you can also share your own money stories with us. We'd love to hear from you. Thank you so much and uh see you soon. See ya.