“Property Doubles Every 7 to 10 Years”

Negative gearing is really just a socially acceptable way of saying ‘I’m losing money’. So why do some push the concept so hard?

Every once in a while I get to turn my hand at talkback radio – in the non-ratings period when the real stars are playing golf.

This last week in the host’s chair has reinforced the idea that everyone has an opinion – some good, some bad, and all of them angry with Julia.

Of the hundreds of conversations I’ve had this week, here are three you can learn from:

Girl Power

“You’re a prick.”

I probably deserved that. After all, I’d interviewed Sarah, a confident twentysomething from the Gold Coast, a couple of years prior on my television show – and it was a robust debate. My producer called it ‘car crash television’.

“My financial plan is to own seven properties before I turn 30”, Sarah said at the time. She was so convinced she was on the right path that she began offering tips to my audience on how they too could become financially free by gearing into multiple investment properties.

Focus on paying off a good amount of your own home before you take on the world.

My advice she could have got from her gran: “Focus on paying off a good amount of your own home before you take on the world. That way if things turn sour you’ve got something to fall back on.”

I left that interview feeling old and boring. Sarah was a bright, enthusiastic young woman who was convinced she had an exciting plan that would see her becoming a millionaire Donald Trump-type.

This week I caught up with her again on talkback:

Barefoot: “How’s the plan going?”

Sarah: “Fine. I now own three apartments on the Gold Coast.”

Barefoot: “Respected independent property researcher Louis Christopher has described that market as ‘a blood bath’.”

Sarah: “Well, I’m getting the taxation benefits from negative gearing.”

Barefoot: “Negative gearing is really just a socially acceptable way of saying ‘I’m losing money’. So how much are you out of pocket?”

Sarah: “About $650 a week.”

Barefoot: “How much money do you earn a year?”

Sarah: “Close to $80,000.”

Sarah is now in considerable mortgage stress. Her properties are all 90 per cent geared, and their value has fallen considerably.

“Property doubles every seven to ten years”, she told my audience, matter of factly.

No it doesn’t. If it did, by the time she retires the average suburban three-bedder would sell for $16 million (and if you held it another seven years it would rise to $32 mllion).

Ever the optimist, Sarah has worked out how to turn her lemon into a tequila shot. “You learn a lot when you take on risks, and given that I now have my financial planning licence, I have the ability to share it with people.” Lick, Sip, Suck.

The Three Talkback Callers

The Press Release Pusher
“We should increase the grant to help struggling first home buyers.”

The Ruthless Numbers Guy
“These people are idiots – they deserve to lose their homes.”

Girl Power
“Property doubles every 7 to 10 years.”

I really enjoyed my time on talkback this week. The listeners were smart, good hearted, everyday types of people. Ironically, the only problem calls I had on a radio show devoted to talking about money turned out to be the callers who were licensed professional advisors.

Now read: My guide to managing your money in 10-minutes.

Tread Your Own Path!