On board today we have Amy Lunardi, an experienced property investor, buyers advocate, property blogger and podcaster.
“Amy is a Licenced Real Estate Agent, a Qualified Property Investment Advisor (QPIA). She holds a Certificate IV in Property Services and a double Bachelor degree in Commerce & Arts from the University of Melbourne (Economics), and modules of the Masters of Property (University of Melbourne).Amy Lunardi Property
Amy is barely into her 30s and has already built up an impressive property portfolio which she continues to grow. Initially working in the public sector, Amy found her true passion in property and took a leap of faith to leave her comfortable government job and pursue her dreams to start her own property business.
With over 6 years of economics and commerce study, and 10 years of practical experience behind her, Amy now heads her own successful property advocacy firm. She provides buyers agent and vendor advocacy services to help people make smarter property investment choices. Amy is passionate about financial education, and even runs her own blog and podcast all centered around helping first time investors into the market.
Today we explore more of Australia’s obsession with property, some of the mistakes and misconceptions I personally had, benefits and risks of property investing and how a property advocate might be able to help you make smarter property investment decisions. We also discuss Amy’s personal property investing strategy and explore how she is using property and her business to become financially independent
Episode 8 – Amy Lunardi Property
“Prior to working in the property industry Amy held an economics research position for the State Government at the Department of Sustainability and Essential Services Commission, and owned her own company in the environmental efficiency field before identifying her passion for property.
Amy draws on her professional experience in combination with her own personal property portfolio journey. She owns four properties across Melbourne, has project managed renovations on her investment properties and home, and has worked on property developments with her husband.
Her media contributions include the Australian Financial Review, the Herald Sun, Australian Property Investor magazine, Your Investment Property magazine, Smart Property Investment, Real Estate Talk, and Realestatebusiness.com.au, alongside regularly featuring as a guest on popular finance and property podcasts.
Amy resides in Fitzroy with her husband and cats, and enjoys the vibrant and dynamic inner city lifestyle (and quality coffee). Aside from all things property, she has a passion for horse riding, weight lifting, and good food. “Amy Lunardi Property
- Amy Lunardi Property – Amy’s Property advocacy business website for her buyers agent, vendor advocacy and market research services.
- Amy Lunardi Property Instagram
- Amy Lunardi Property Facebook
- The Buyers Bible Podcast – Amy Lunardi’s first home owner education Podcast series
- The Buyers bible Instagram – This is how Amy and I met, she posts great content!
Amy Lunardi’s top financial tips;
- Patience – investing is for the long term.
- Cash flow – understanding your balance sheet and surplus is important to drive asset allocation.
- Using debt correctly – do not take on depreciating debt, instead leverage only on productive or growth investments.
- Risk mitigation – this is essential; research, appropriate insurance and timing will prevent you having to sell at a loss.
- Personal reflection – Understanding your own risk profile to determine whats an appropriate portfolio for you.
Amy Lunardi’s top three Books
Atomic habits by James clear
Cant Hurt me by David Goggins
Why we sleep by Matthew Walker
Bear with me this transcipt is done by Otter AI, which is far from perfect but does a pretty good job. Sorry if there are any hilarious mis-transcribes, I guess I am going to say I deliberately left them in because they are funny? Ha-ha (the real reason is I am too busy atm to quality control!)
Captain FI 0:07
Ladies and gentlemen, this is your captain speaking. Welcome aboard Captain FI the Financial Independence Podcast.
Good day Welcome to an episode of Captain FI, the Financial Independence Podcast where I open the copy to some of the best and brightest in personal finance, as well as those who have reached or are on their way to financial independence. Before we get started today, remember anything on the show is provided for general information only, and should not be taken as constituting a professional advice. You should always do your own research when making any financial decision. On board today, we have Amy lunati, an experienced property investor and buyer’s advocate. Amy is barely into her 30s and has already built up an impressive property portfolio, which she continues to grow. Initially working in the public sector, Amy devoted her evenings and weekends to researching, buying, renovating, and even developing properties. In doing so she found her true passion and took a leap of faith, leaving her comfortable government job and pursuing her dreams to start her very own property business. With over six years of economics and commerce study, and 10 years of practical property experience behind her, she now heads her own successful property advocacy firm. She provides buyers agent and vendor advocacy services to help people make smarter property investment choices. Amy is passionate about financial education, and even runs her own blog and podcast all centered around helping first time investors into the market. Today we explore more of Australia’s obsession with property. Some of the mistakes and misconceptions I personally have some of the benefits and risks of property investing, and how a property advocate might be able to help you make smarter property investment decisions. We of course, also discuss Amy’s personal property investing strategies and explore just how she’s using property to become financially independent. First off, Amy, thank you so much for making time.
Amy Lunardi 2:45
Great to be here. Captain.
Captain FI 2:46
Can you tell us a little bit about yourself and how you got involved with property?
Amy Lunardi 2:50
Yeah, absolutely. So my name is Amy Lunardi, and I’m a property advocate. So what that means is I’m a buyer’s agent, I help people buy property. But I also do bindles advocacy, which means I help people sell property, choose an agent and run through that whole campaign. I’m also a property investor, myself, and qualified property investment advisor. And I’ve done renovations and property development. So fair to say lots of property based stuff. And I got into property, I actually studied economics. So I originally started working in state government, which was totally the opposite to the property industry. And I felt like I should be doing that, because that’s what I’d studied. That’s what I’d spent six years doing my commerce degree. So I got a job in the economics department of state government, and just found that very slow, very, just wasn’t aligned with my interests. So always been passionate about property, I decided to do a total career shift started right at the very bottom in property leasing. So minimum wage, just a foot in the door, and then just worked my way up since then, that was nearly 10 years ago. Now.
Captain FI 4:10
You sound incredibly qualified, by the way,
Amy Lunardi 4:13
The thing about the property industry is that you don’t actually need any type of qualifications to be in the industry or to give property investment advice, which is quite horrifying. It’s not regulated at all. Yep. So you I mean, yes, I do have all of these qualifications and experience, but you don’t have to finish you 12 to give property investment advice. That’s why the industry has a lot of spruikers and has a lot of people who get caught up with bad advice, because there’s no minimum standards and the government does not regulate it.
Captain FI 4:50
That’s really interesting. I dare say if I looked at my social media feed, the majority of those ads would be for property investments.
Amy Lunardi 4:58
Yeah, hundred percent. It’s quite horrifying.
Captain FI 5:00
Why the shifting away from commerce in government into starting your own business?
Amy Lunardi 5:06
Well, I, I just always had this pool towards property. But I had no idea at the time what buyers advocacy was, I didn’t know that that was a thing. So I started in property leasing, knowing that was just an entry level position. And then I did I start actually started my Master’s in property to see if I was interested in commercial property, which I wasn’t. And then was just really fortunate to get an entry level position into buyers advocacy, which has just been life changing. For me, it’s something I absolutely love doing. Because unlike selling property, it’s just it’s purely advice. So I’m not selling a particular product, I’m helping a client achieve a goal through finding a property that fits their brief fits their, their goals and values.
Captain FI 5:55
I’ve had a number of colleagues and friends to get started in, in investing in property have used buyer’s agent. And I’m trying to think back when I did an interview with Simon and Emily, which was a couple that have a blog called smash demo, which is similar to similar to yours. They, I think they said they got started with a buyer’s advocate as well. And once they basically felt more comfortable with property investing, they’ve then relied less on the advocate and more on their own knowledge and experience. But I can see how useful a buyer’s advocate would be for someone who, you know, is quite frankly, a little terrified of making such a huge investment, when they don’t actually know anything about property.
Amy Lunardi 6:49
Yeah, and I look, I do think that anyone buying a property, whether it’s a home or an investment should consider hiring a professional because, you know, it is a massive decision. But also you’ve got that real estate agent who is acting on behalf of the vendor. So it does make sense to have someone on your side. That being said, as a homebuyer, it’s obviously a lot more personal. As an investor, I think that you absolutely need to consider hiring a professional, because there’s so much to it, there’s so much more that people don’t realize, to property investment,
Captain FI 7:24
I’m in the process of building everything that I thought was going to be easy and straightforward. Wasn’t I’ve never filled out so many forms in my life. I we didn’t go through a buyer’s agent. But we do have a property, sorry, a project manager and a mortgage broker who are helping in that process. But yeah, I the only reason I did that is because I teamed up with a close friend who’s done a lot of these before. And that was the only way that I felt comfortable to actually do it. I was actually previously looking at getting a buyer’s agent for an investment property. So yeah, it’s definitely
Amy Lunardi 8:10
throwing yourself in the deep end for sure. Starting with doing a development that is absolutely something that quite a few investors would consider later down the track, or perhaps if they have some experience doing it or if they’re in the industry, but to do it as your first project. I mean, that is a big undertaking.
Captain FI 8:30
Like I said, I’m just I guess I feel lucky and that I trust my partner in the development, but it’s certainly something I would not have attempted on my own. And prior to that opportunity presenting itself. I was actually just looking for something like a, you know, a four bedroom established house that I could literally just put on, on for rent that a family might move into the speaking of actually getting an agent, what is the process that someone would actually find a buyer’s agent? And how much do they need to pay? Like, is it an hourly rate?
Amy Lunardi 9:07
Or Yeah, so every buyer’s agent is going to have a very different model. There are percentage based models where some advocates will charge a certain percent of the purchase price. But then I do a fixed fee. So whether it’s a $400,000 property, or 4 million, it’s the same fee. For me, it is a similar amount of work and it’s also good for someone to know exactly how much they are paying at the start. I also think that considering I’m on the buying side, I shouldn’t be incentivized for my client to be paying more for a property. So every and every buyer’s agent will have a different, I guess specialty so some buyer’s agents might only work in certain locations. Some of them might only work with certain types of clients for examples, just investors or just homebuyers. So really he’s about shopping around and talking to a lot of buyers. And just saying what they specialize in, and then finding one that might work for your budget. It’s such a broad range in terms of costs.
Captain FI 10:08
So here’s the $60,000. Question. What does a BA set you back? Is there like an industry standard? How does one knows they’re getting a good deal?
Amy Lunardi 10:21
I would I would look at it more around, you know, what is their experience? And what value are they going to add? There’s no, there’s really no industry standard, it totally totally ranges. So I would be, it’d be misleading if I tried to give an average, I reckon. So my fee ranges depending on the level of service that the clients looking for. So I have three packages. And I really sit down with them at the start, and I tell the client, which package I think would suit them best.
Captain FI 10:51
This is this is not financial advice. So just two people chatting about property… but what might be some of the reasons you might get into property.
Amy Lunardi 11:03
So property, when you’re looking at property as an asset, there’s two ways that you can get a return. One is your capital growth, and one is through your rental income. And the great thing about property is that you can have a really good combination of both, it’s really sitting down at the very start and saying what do I need this property to achieve for me, and therefore is my focus more going to be on growth is more going to be on yield? Is it a mix, and you should always tail out when you can always tail it that property to your brief, what a lot of investors do is they say, I’m just going going to go and buy an investment property, and I bought by somewhere local, or they might buy somewhere that you know, Uncle Bob is suggested is a great opportunity. Or they might buy one of these, you know, off the plan specials with where the sales agent is getting a massive kickback and then wonder why their property isn’t performing the way that it should, I think it’s really important for investors to understand that the very start that you actually can buy a property which is tailored to your strategy, it shouldn’t be the other way around
Captain FI 12:11
to draw a parallel to the stock market that stocks that produce dividends provide an attractive income to live off. And stocks has grown in value where you can sell them. And they each have their distinct tax advantages and disadvantages.
Amy Lunardi 12:27
Yeah, so it’s understanding that there’s a broad spectrum within each investment class. And within property, you can, you can find properties, which will have, you know, really amazing capital growth, but they’re going to cost you a lot out of pocket every month. So that’s not necessarily going to be achievable for everyone. It’ll also impact your ability to grow that portfolio depending on your servicing. And then you can find properties at the other end of the spectrum, which have really high yields, but they’re not necessarily going to grow in value. So yay, it’s just understanding that you can tailor it to yourself. Another thing that people like about the idea of property is it is that tangible asset, it is something that you can walk through, it’s something that you can touch, it is something which is in Australia seen as a very stable long term asset. And it’s also something that you can improve the value to, so you can add value through renovations or doing a little bit of work on it as well. So those are some of the things that I find investors, you know, excited about with property, especially those which are, which feel like the volatility of the Shamrock and other assets might potentially make them feel uncomfortable.
Captain FI 13:45
Also come across the term that, you know, you can’t really become an expert in investing in stocks or gold, because you can’t really change the outcome. Whereas if you become an expert in property, then you can change the outcome, just like you said, By adding value, renovating, purchasing specific property, like everyone says, you know, get the worst house in the best street sort of thing.
Amy Lunardi 14:13
Yeah, usually have a little bit more input into it. That being said, there are things within any market, but within the property market, there’s things you can control. And then there’s things that you can’t control. So you can’t control what is happening in the wider market and market forces and cycles. But then you can control the asset selection. So that is choosing the right property because you can’t necessarily renovate any property and then add value. It depends on the demand for that product. And it depends on it to pay well. You don’t want to over capitalize. So you don’t want to be putting $1 in and then not being able to get $1 back when you sell that property and that does happen sometimes.
Captain FI 14:57
Yeah. So needing to be strategic about how you act. Manage your property investments? Correct. Previously, I’d heard of negative gearing. And it all just sounded a bit crazy to me, I got I thought, why would I give away money now for potentially maybe getting a return in the future, and it almost felt like a little bit of gambling. And it almost felt like, I’ll never be able to retire on this strategy unless I sell these properties. So when I discovered like the idea of a positively geared property, instantly, my ears perked up. And I was like, oh, that Well, that sounds good, like this thing actually pays for itself. And then I could potentially put that towards a second investment property. Could you talk a little bit more about how investors might be able to use positive gearing to grow a portfolio? And sort of maybe how that compares to negative gearing?
Amy Lunardi 15:52
Yeah, yeah. So negative gearing, like you said, it’s, it’s a, it’s a tax office, acknowledging you’re making a cash flow loss, and then being able to claim that so the only reason you want to ever negatively gear or make a loss is if you think or you’re confident that property is going to grow in capital value. And, you know, you do obviously need to be strategic here. But as a very general rule of thumb, the higher the negative gearing for a property, the stronger the capital growth will be, and it will, it will very much return you more than you are putting towards that property out of pocket. So that’s all in theory, though, that’s if you get that asset selection, right. But because you’re really leveraged in property, so as an investor, you might be borrowing 80%, your returns are also magnified. That’s both up and down. So negative gearing is great if you get it right. And if you choose a property that will work quite strongly in value, because then that gives you a lot more flexibility down the track, it gives you equity, which you can then borrow against and purchase more properties. Or you can potentially sell down those assets, and then use that, that money to put towards other things as well. So if you get it right, negative gearing can actually be a great thing. That being said, if you are quite negatively geared, that’s also going to impact your service ability to be able to get more loans as well in the future. Whereas if you’re positively keen, or you’ve got positive cash flow, then it’s going to be a lot easier to build that portfolio. So it is really just understanding at the very start, what your strategy is, your strategy will be quite dependent on your timing. So how long do you have this strategy, if you’re quite young, you might be okay with being a bit more negatively gearing and aggressive if you’ve got more time. But that being said, it also very much depends on your income and expenses. So if you’ve got a lot of surplus cash and a lot of surplus cash flow, then you may be able to finance a negatively geared portfolio more, and I will mention at the very end, too, is that just because a property is negatively geared now, doesn’t mean it will be forever. And I have two properties in my portfolio, which have recently bought them about five years ago, and they were negatively kin, they’ve just tipped over to positively kids because the rent has increased a bit. Yeah, the rents gone up. And also, interest rates have gone down too. So that you know a property doesn’t necessarily have to be negatively geared for the long term.
Captain FI 18:31
For someone who’s maybe starting out on their journey to financial independence and you know, might have 10 or more years ahead of them earning a negatively geared strategy could be one that they take. And as they do that they’re basically getting a bit of a tax deduction along the way, and their property is rising in price. And then when they reach financial independence or say, you know, 10 years down the track, those properties may actually have become cashflow positive, or you might be able to then use that equity that you’ve built to, as you said, refinance, and maybe put that money elsewhere,
Amy Lunardi 19:13
and see if you do have equity and also just just bearing in mind as well, with property investing, it’s about the quality of the asset, and how it fits in with your strategy, not the quantity, you don’t need 1020 plus properties to be a successful property investor, you can have three or four really great assets, which will give you you know, a potentially a similar result in the long term. So I don’t necessarily think you just need to think, alright, I need to have a minimum of five properties. You need to just sit down, I think with a strategic advisor, ideally, if this is all over your head, and talk about your goals, your timeframes, the cash flows, and then how property could fit in with them
Captain FI 19:54
go out so the overarching theme I’m getting is that it’s not a one size fits all answer. And when it comes to property, you really need to have a solid strategy or direction before you buy the first property.
Amy Lunardi 20:11
Absolutely property as an acid, it’s, there’s a lot of bad transaction costs. So you’ve got your stamp duty, you’ve got other associated purchase costs, you’ve got a lot of selling costs as well. And it’s a very illiquid asset. So you can’t just turn around tomorrow and say, I need that cash, I want to sell it. So for all of these reasons, you want to be investing for the long term. And also, you don’t want to be buying the wrong property and then having to sell it, because you’ve made a mistake, because you might actually end up finding that you’ve gone backwards. But what do you think of some of the risks of property investing? There’s many, many risks. But I suppose it’s a very broad risk, it’s not getting the strategy right at the start and buying a property that either that either doesn’t perform for you in the right way. So if it’s supposed to be a capital growth property, and it’s your negatively geared and it doesn’t grow, you haven’t achieved that outcome. Or if it needs to be returning you a certain amount and you haven’t done your cash flows correctly, or you’ve got a lot of vacancy, because you haven’t looked into the rental demographics of that area, then that’s not going to achieve your goals as well. So you can buy the wrong property, and then it doesn’t serve you correctly, and then you may need to sell it. And then if you don’t sell it at the right time, then you may I mean, you might not necessarily make a loss, but you also always with investing need to factor in your opportunity cost. So say you sell it in a few years, because you can’t hold on to it. And you’ve broken even Well, you’ve missed out on a couple of years of potentially investing that money elsewhere. Yeah, you’ve also got risks in terms of your I mean, your tenant, a lot of people say what if I get a terrible tenant, I mean, I, I’m confident that you can very much reduce those risks. If you do corrective research into the area, make sure you get your rental appraisals correct. Always get independent rental appraisals, not just from the selling agent, and then having a really great property manager. And then always getting professional advice. And that is, at least with a mortgage brokers strategic mortgage mortgage broker at the very beginning, potentially a financial planner, if this is something that you feel like you want to build a portfolio over time. And then also making sure that you have quite a big buffer account, in case things happen. And I mean, we can only look at COVID this year. And you know, that’s totally unpredictable. But we’ve got landlords here in Melbourne that during lockdown, they couldn’t get a tenant for six to eight weeks. And if you didn’t have an emergency buffer to deal with that, then you know, you might have been in a position where you could potentially need to sell. So we just want to make sure that we understand the risks, but you can you can reduce a lot of risks in property investment as well.
Captain FI 23:14
Wow. So it’s all about thinking ahead. being strategic and doing your research.
Amy Lunardi 23:20
Yes, with all with everything, but particularly with property investing,
Captain FI 23:25
where it’s so I mean, I guess I champion and index investing approach when it comes to the stock market. And it honestly, it’s the complete opposite, you literally just buy a parcel of index funds through an ETF or an LLC. And you don’t, and you don’t really have to do any research. So I guess what this means is that, as a property investor, you need to understand that it sounds like it’s going to be very much an active investment. It’s going to take a lot of time and ongoing effort, as opposed to something
Amy Lunardi 24:04
you don’t think. Yeah, if you don’t think that you can put that time and energy and research in at the very beginning. Because you feel like it is, you know, you just don’t have enough experience or enough desire to want to teach yourself all of these things you need to get in you need to get advice. You can’t just rush you know, go out there and buy a property and think it’ll all be fine. It might be fine. But if it’s not, then there’s a lot of costs involved. And also, you know, being aware that the property industry like we talked about before, it is unregulated. There are a lot of people out there who are spruiking mes and I use a quotation marks here like investment opportunities that if you haven’t done your research prior you can get sucked into and they’re selling these crappy off the plan properties or house and land packages where there’s no capital growth prospects and That’s where some and that’s where a lot of investors go wrong. Actually, they don’t put the energy in at the start. And then they wonder why they didn’t get a result. I
Captain FI 25:08
feel like I probably should have somehow spoken to you maybe last year before I started getting involved with my, with my property. But I think the more I actually talked to the more I feel like I am personally going to be someone who’s going to benefit from a buyer’s agent. Not that I don’t know that I’m not willing to put in the effort. But I feel like I have a lot to learn. And I feel like this is probably something that I need to look at going forward.
Amy Lunardi 25:38
Yeah. And on the flip side, you know, what, what you are talking about in terms of the share market and these other investments, I don’t have very much knowledge in that side of things, too. So if I was ever investing there, I would either be absolutely educating myself or outsourcing it. I feel like when we’re talking about so much money here and so much, we’re talking about, you know, setting ourselves up for the future. I think that expert advice, if you aren’t able to do the research yourself is invaluable.
Captain FI 26:06
If I was to go out and find a buyer’s agent, I guess first of all, how do I find one? What should I be doing to select one? And what are the kind of questions I should be asking them.
Amy Lunardi 26:18
So if we’re talking specifically around property investment, I think maybe we’ll just focus on that, because that is kind of the theme of today. When you’re sitting down with a buyer’s agent, in the very beginning, they should really be uncovering a lot of information about you and your personal situation, because and then be able to provide you advice around what property and location could fit within that, not the other way around. If you sit down with someone, and they don’t take into consideration your personal circumstances, and they’re just saying, Well, here we go, we’ve already got a property for you already got something in mind, then understand that they may be getting paid, you know, by a developer or by you know, by an off the plans broker to sell you that particular product. So it needs to be tailored to you. So for example, when I’m sitting down with an investor at the very start, I need to have an understanding of what their timelines are, what their goals are for this particular property, if they’re planning on purchasing multiple properties, because we’ll need to factor that in. But very importantly, very importantly, is the cash flows. So I don’t need to know their income or expenses, or, you know, real personal details. But I do need to have an understanding of this surplus cash flows, that they are willing to contribute towards their portfolio or this particular property. Because then what I do for a client is I give them a cash flow spreadsheet for that particular property, we’re considering purchasing and say, This is how much once all of the rent comes in, and all of the expenses go out, this is how much this property is going to cost us. And then we’ll tailor we’ll play around with those numbers until we get the right metrics to suit that investors cash flows. So that’s the process that I go along. And that’s what ideally, advise advocate, who is going to be helping you buy an investment property will do for you as well, when you’re into when you’re sitting down with them. And that first strategy session,
Captain FI 28:22
when you when someone is looking for an investment property, like how do you know? What percentage of that to use? Like? Do you want to use it? Or do you want to use half of it? Are there any rules of thumb, when selecting property to make sure that you can’t have not overstretching yourself,
Amy Lunardi 28:39
there’s no rules of thumb, because within within that sort of surplus bucket, you also need to be having savings. So you don’t want to be spending all of your surplus in just putting towards an investment. And then with that surplus, ideally, you were putting more money, we’re putting a portion of that money into a buffer as well. And then what we’re left with, we need to decide and this this will generally come from the investor themselves potentially with some financial planning advice is, well how am I going to diversify myself within that asset pool to and diversification could be between different asset classes, or it could be within one asset class and different different, you know, types of properties, for example, so that is really going to be dependent on that individual investor, and also their risk tolerance, what they feel comfortable with, there’s so many layers here. If I look at my portfolio, we have shares and property but very much very much heavily weighted towards property. That’s because that’s what I do. I’m an expert yet my my husband works in property as well. And we are confident that that is the best use of our money. But that is us. That is US based on our personal situation and our experience and our knowledge Lynch,
Captain FI 30:01
I remember trying to compare the asset classes, I guess stocks and property for ages and ages. And I didn’t look, I don’t know if I’m right or not. But I came to the conclusion for me personally, that if I was just gonna invest, like, conventionally, like I had $1, like I wasn’t talking about leverage that I could get potentially a higher return in the shirt in the share market with an index fund. But when I factored in the, like leverage and the fact that I could borrow, it looks like the cash on cash returns on a property investment with fosse significant than what you would get in the share market.
Amy Lunardi 30:46
This is the power of property, which is that leverage, but like I said earlier, that can go both ways, you have compounding positive returns, but if the that asset drops in value have compounding, negative returns, as well. So leverage is very powerful. And you have to use it right, you have to use it correctly. Talking about risk.
Captain FI 31:06
You know, like I’ve seen the the articles, you know, the property investor of the year who geared themselves and board all the mining town, property isn’t was winning and winning awards one year, and then the next year, they’re obviously bankrupt. So how do you begin to quantify risk? We sort of talked about negative gearing and positive gearing, is there like would have positively good house be lower risk than a negative good? Or how do you how do you even begin to quantify risk?
Amy Lunardi 31:38
Well, it just depends on what type of risk you’re talking about some, you know, if we’re talking about cash flow risk, and that that investor really relies on that cash flow, because they don’t have a certain amount of surplus income to put towards that property, then you need to make sure you’re buying in an area which has really low vacancy, really strong tenant demand, you’re buying a type of property that has bought appeal to a tenant, so you can define what type of risk that investment is susceptible to, and then try and minimize it. You look at these mining towns, and yes, they they, you know, really exciting, and a lot of people made some money, but those are the people who timed it correctly, they got in at the bottom and out at the top, the people who got in at the top or even halfway up, and then it came crashing down. You know, those are horror stories, those are awful. And now they’re stuck with assets that are worth way less than their loans. And in the areas where all of those workers have now left, the yields have plummeted as well. So with property, if something sounds too good to be true, it generally is. You’ve got to have patience with property.
Captain FI 32:46
So Amy, can you talk a little bit more about how you went around defining your own property strategy and how you went about finding the properties?
Amy Lunardi 32:57
Yeah, so I was in a really fortunate position already been in the property industry before I bought my first property. So I was very lucky to get free advice from the professionals around me. And when I started my investing journey, I would I wasn’t married yet, I didn’t have a dual income, I was doing it all by myself. So my strategy was more at the very beginning around probably fair to say medium growth, medium yield properties, so that I could easily sustain them. But they were still in, you know, in a metro Melbourne. And there was still properties that had good capital growth potential. And then later on, once my income grew more once we had a double income in our relationship, then we focus more on much more Capital Growth Properties, which have higher out of pockets, but that’s something that we’ve factored into our long term strategy. And because I was in the industry as well, very fortunate with my first two properties, bought them off market and bought them for arguably, under market value. And then our other two was we bought at auction. So I it’s interesting I, whenever I created the strategy for myself before each purchase, I then bought the first one that I saw, because the right one came up at the right time. Whereas that’s very uncommon for clients. Usually we have to go through quite a bit of a process. That being said, I have seen thousands of properties. So when a good one comes up, I know it’s a good one. So yeah, timing is timing it right is important as well. When I’m working with clients, sometimes the right property will come up in the first week and I’ll say to the client, why it is one which takes all of their boxes and it is a green light, but if they’re not comfortable already, mentally to commit to that then we keep on that journey because sometimes they need to get that exposure, even though they do know that I have seen thousands of properties before that everyone Different everyone feels everyone has a different different risk profile. And sometimes they just need that familiarity and exposure to the market before they can make a decision.
Captain FI 35:09
So what’s your overall goal with property? Are you going to continue to add negative feeling good properties to your portfolio? You did mention that some of them have been becoming cashflow positive as the rents increase and with the interest rates going down. So are you planning to live off a off the rental income or what’s your strategy,
Amy Lunardi 35:35
it’s a mixture of both. So it’s a mixture of potentially holding on to some quality assets and letting them grow over time, and then having that flexibility with the equity to do what we need to do in the future, but then also having a couple in the mix, which are positively geared, and therefore that money is contributing towards our other loans. So we’ve got our home that we live in, as well. And any surplus funds go into that offset account, because that is obviously not a tax deductible debt. So it is going to be very much a blended strategy going forward, we did plan on buying another property at the start of this year. And we had, we’re ready to go we had the borrowing capacity. And then COVID happened and the banks have changed a lot of their, you know, lending assessment, so our borrowing capacity dropped quite a bit. So that’s on pause, especially because I have my own business as well, and my husband has his own business, it just adds an extra layer of complexity with lending. So it is really about for us, when we get to the point of having a certain borrowing capacity, then being in a position to make a decision on what we want to do. I reckon with our portfolio data probably won’t be overall cashflow positive, at least for a very, very long time, because it is quite a highly, it’s quite a negatively geared portfolio. And it is it is really more of the growth that we’re focusing on. But then in the future, that growth just gives us that flexibility. If we wanted to sell one asset and use that to bring our leverage down on some of the other properties, then that cash flow will be higher. So it is very much a blended strategy.
Captain FI 37:20
Interesting. So how do how would someone go about extracting that equity is you simply need to refinance with the bank.
Amy Lunardi 37:30
So you can borrow against that equity to then contribute towards another investment loan, but you need to have the borrowing capacity to do that. Just because you’ve got equity doesn’t necessarily mean you can leverage against it, you still have to have that income and serviceability to demonstrate to the bank that you can afford that loan. So equity is great, but you can always use it. In some instances, you may choose to liquidate that asset and have the cash.
Captain FI 37:59
That’s a really good point, Amy, hey, that if you just because you’ve got equity doesn’t mean you can refinance and get it out. This is probably a segue into a bit of a minefield, we did sort of chat briefly about this before we recorded. And like you said, it’s probably best not to go too deeply into it, because it’s a very tricky situation. And that is property, and superannuation. So, I’ve, I’ve seen not so much lately, but certainly a couple of years ago, I was seeing so many ads for buy this property through your self managed super fund. Yes. Have you had any experience with that? Or what would your warnings be?
Amy Lunardi 38:46
So, so SMSF, self managed, super fund it to, you know, it’s very heavily regulated space. And so it should be it’s a financial product. And as an advocate, I have worked with clients buying within their super fund before, but they seek they need to seek the advice of a financial planner who puts that strategy together for them. And then they come to me and say, all right, this is my budget, and this is the yield that that property needs to achieve. And then I go and implement that for them. And we property in Super, there’s also a couple of rules around that too. For example, everything has to be on one title. So if you buy an apartment and the car parks on an accessory title, that might be an issue. Plus, you’re not allowed to live in it at any point your kids aren’t allowed to live in it. So you need to adhere to all these extra rules. So it is quite complex. You absolutely need to get financial advice to set it up. There’s also a lot of costs involved. It is a lot harder to borrow to buy property in new super funds these days. So, yeah, a lot of extra stuff you need to be aware of there.
Captain FI 39:55
Okay, well, it sounds like a lot of red flags. Maybe Do you notice easiest
Amy Lunardi 40:02
with these companies? Like you said before, you need to understand, well, they tailoring this property to my investment strategy, or are they just trying to sell, you know, this, this crappy product off the plan? Because people get really excited about the idea of potentially buying property and so far, but is yet it’s a minefield, and there is a lot of the property industry is full of big commissions, and therefore, a lot of unscrupulous advice. Unfortunately,
Captain FI 40:35
I’ve previously described it, as you know, there’s too many hands in the cookie jar. So
Amy Lunardi 40:42
a lot of dirty hands, this is the problem. There’s a lot of people who haven’t washed their hands before.
Captain FI 40:50
If they’re coated,
Amy Lunardi 40:52
exactly. It’s just, you know, these people don’t need any qualifications to be doing what they’re doing. The government, I think, really needs to sit down and look at this, this is a massive issue. And there are horror stories of, you know, people approaching retirement, and they’ve been sold this product, which they think is going to help them achieve a better outcome in retirement, and it does the opposite. So yeah, it’s horrifying.
Captain FI 41:17
This has actually been very educational for me. So thank you very much for taking the time. Basically, what I’m sort of getting coming to the conclusion is that, you know, property is a very complicated asset class, it’s not something you want to cheap out on, you really need to do your research. And that means getting professionals that know this shit. Whether that’s a financial planner, or advisor, a mortgage broker, and a buyer’s agent, would seem to be the minimum of three people that you need, right?
Amy Lunardi 41:49
Yeah, yeah, absolutely. And I mean, that being said, not all financial planners love property. So if you want to invest in property, that’s what you’ve chosen to do. Finding a financial Prophet, finding a financial planner, that has an understanding and appreciation of property. I mean, we the buyers advocate, I always recommend an investigator. But even if you’re looking to buy a home, your home isn’t technically an investment, though, if you can make the right decision on buying an investment grade home, then, you know, hopefully, that property grows in value over time as well. And that will just give you a little bit of an advantage in the future.
Captain FI 42:30
Well, that’s right, and your home is free from capital gains tax as well. Is that right?
Amy Lunardi 42:37
It is it is we don’t we don’t want to consider it as a specific asset, because it’s not something that you can just sell. It is something that the purpose of that is providing security for you that housing security, but yes, it is CGT free. So in the future, if you wanted to downsize, then having more equity is better, because it’ll just give you more options to then, you know, use whatever you want to use that cash for.
Captain FI 43:05
What’s your opinion on Super? So do you? Do you like super Do you invest more? And is that a part of your overall financial strategy?
Amy Lunardi 43:14
So I don’t contribute any more to my super. So I don’t sacrifice any extra super for me. I see. As a bonus. I’m in my early 30s still, so I have a little bit of time. And my strategy is to achieve financial independence, mobile overtime and well below the official retirement age. So I see supers bonus for me. That being said, if I was closer to retirement, then obviously the tax advantages of using your Superfund correctly are really great. Also, side note here for any first homebuyers, I would definitely advise looking into the first home Super Saver scheme. It is a bit complicated to get your head around, I did an episode on it in my podcast. But that is a great way of using your super fund to turbocharge your savings for a first time.
Captain FI 44:05
I’m not going to try and say it because I can’t even pronounce it. First HSA, okay, so as bad as I thought then what advice could you give to someone who’s looking to basically do something similar and start up their own business, follow their passion,
Amy Lunardi 44:21
what I’ve learned the most, through doing my own business, but also just being in the property industry is networking. And this is just, I mean, this is how you and I met I mean, that’s kind of a form of networking, it’s connecting with each other and you know, realizing we have something in common and then forming relationships out of that. So whether that be doing it in person going to networking events, making connections on LinkedIn, or Instagram or whatever you want to do. That’s where I have found the most opportunities. And I have reached out to people this year in people that I really admire in the in the Finance and property industry and ask them to connect. And they’ve all said yes, but the worst they could have said is no. So just mustering up the courage to reach out and talk to people. And also then working and fostering on fostering those existing relationships you’ve got because your previous clients and professionals you’ve worked with are your best reference. And always your warmest refers to so they’re the ones who are going to say, you know, Amy’s great, she does an amazing job. I’ve used her I’ve got clients who have used her that you have to speak to her. So people, it’s all about the people putting yourself out there actually, that’s another thing too, don’t be afraid to put your face out there. So my business is mean my business is if you come to use me as an advocate, you get me and only me, therefore it’s called Amy Lunardi property. And therefore, you know, mustered up the courage to put my face on the website and on Instagram and just being having that connection with people I think, is really important.
Captain FI 46:02
So Amy, what, what would be your three favorite personal finance, investing or self development books?
Amy Lunardi 46:11
Alright, I’m going to go to self development ones here.
When I finished recently, it was atomic habits, which I’m sure everyone has heard about. And that was great, because it just, it talks about how little tiny changes here and there can snowball into bigger results. I also really loved that book by David Goggins, you know, him that, you know, the fittest guy in the world.
Captain FI 46:34
Is that… can’t can’t hurt me.
Amy Lunardi 46:36
Can’t hurt me. Yeah, you know, I love that book. I think he takes things very much to the extreme. But to me, it really kind of made me like, you know, suck it up a bit. You know, when I’ve found that things were getting hard or things are getting difficult. I’m like, not David Goggins. Like, just get through it and toughen up. And I also finished a book just recently, which is called why we sleep. And I thought that was amazing, because, you know, it’s something that especially in the ear away, you know, like the hustle, everyone’s talking about hustle and grinding, and, you know, working really hard and, you know, forgetting that things like downtime, and things like sleep are important. So that book was really amazing to reinforce that more self care side of things in this book it it said, you know, the equivalent to not having the correct amount of sleep. And this is eight hours, it’s not seven or six hours, eight hours of sleep, you know, I’ve over even awake is like having a full night without sleep, or it’s like being under the influence of alcohol. So it’s really compelling.
Captain FI 47:45
Well, in aviation, we talked about sleep deprivation, and I think it’s 17 hours awake, which, by the way, that’s very common for airline pilots to be awake for 17 hours. Now you are given a an opportunity to rest with because you have multiple crew members, but it’s not the same restful sleep you’d get on the ground. But 17 hours a week, I think that’s equivalent to point O five, like the legal driving limit. So yeah,
Amy Lunardi 48:13
yeah. How scary is that?
Captain FI 48:16
Yeah. And so if you have delays and things that mean, all of a sudden, your parts now awake for 20 hours? legally, they, you know, their impairment is the same as someone who’s not able to drive a car. So yeah, now that’s a that’s a really great question. I’m really glad you brought that up. So I haven’t actually read why we sleep. And that’s going on my reading, what would be your top piece of advice or to someone who’s on the path to financial independence.
Amy Lunardi 48:44
So firstly, it’s about patience. It’s about understanding that investing, whether it’s in property or anything is for the long term. And sometimes it feels like you might not be achieving anything that you just have to be patient. It’s about cash flows, or understanding everything that comes in, everything goes out, and then what you do with that surplus, it’s about using debt correctly. So not going out and buying depreciating debt buying, if you’re going to use leverage buying something like an investment property, which will appreciate hopefully, in time, and it’s about those risk mitigation methods. So doing a lot of research at the start having your emergency buffers having the right insurances, absolutely when you buy any property. And by doing all of that, it will mean that hopefully, you don’t have to sell your assets at the wrong time. So being able to hold on to them and again, being patient for the long term. And then also just working to your risk profile as well. So there’s no point in being really aggressive with your investing in your portfolio if you’re just going to lose sleep over it and lose sleep over the natural, you know, fluctuations in the market. So if you’re really conservative by nature, Then just understanding that you might want to tailor your portfolio towards them.
Captain FI 50:05
I’ve had a great time chatting here this afternoon. I’m just looking back, is there anything we haven’t covered today that you’d like to bring up?
Amy Lunardi 50:16
So my my whole, I suppose my passion is around property education. And I totally acknowledge and understand that not everyone can afford to use a buyer’s agent, especially first home buyers. So I’ve got my podcast, which is called the buyers Bible. That’s specifically for first home buyers. I’ve also got a free first time buyer course coming out soon with, you know, the tainment, the Australian finance podcast. Yes. So keep, keep an eye out for that. And then I’ve got a new educational product launching later this year. So this is just being able to get all of this information out to people who really need it, and people who may not be able to afford or want to use a buyer’s agent.
Captain FI 51:05
Fantastic. Well, I’m definitely going to be getting into those. And I’m sure everyone’s I’m sure everyone’s going to be pretty keen for it to come out. If people want to get in touch with you. You mentioned you have, of course, the podcast. You’re on social media where whereabouts can people find you
Amy Lunardi 51:21
best to go straight to my website, everything’s on there, including the Instagram and the contact details, which is just Amy lunati.com.au.
Captain FI 51:32
all wrapped up in one neat little package. Fantastic. Hey It’s been great. It’s been a educational experience for me. And, you know, expect potentially an email from someone looking for their second property.
Amy Lunardi 51:50
Thanks for having me, Captain.
Captain FI 51:53
Thanks for listening to another episode of the Captain FI Financial Independence Podcast. To read the transcripts, or check out the show notes, head over to www dot Captain fi.com for all the details. If you have a question for the captain, make sure to get in touch. You might even make it on the airwaves. You can reach me online through the captain fire contact form or get in touch through the socials. I’m active on Facebook and Instagram as well as a number of online finance and investing forums. And finally, remember the information presented on the show and the links provided for general information purposes only. They should not be taken as constituting professional financial advice. You should always do your own research when making any financial decisions and make sure it’s appropriate for your personal circumstance.
Captain FI is a Retired Pilot who lives in Adelaide, South Australia. He is passionate about Financial Independence and writes about Personal Finance and his journey to reach FI at 29, allowing him to retire at 30.