EP. 1430 What top veteran property investors are doing in today’s market

Ever wondered what happens to property investors after decades in the game? Our fascinating deep-dive reveals how the strategy and focus of veteran property investors dramatically shifts as they age, creating a blueprint of what your own investment journey might look like over time.

The magic number appears to be 40. Around this age, we're seeing a fundamental pivot in investment psychology. Younger investors happily chase capital growth, sacrificing immediate returns for the promise of future equity. They're working, earning good money, and can afford to wait. But something changes when investors hit their 40s and beyond – suddenly, it's all about cash flow.

"I want cash now," becomes the new mantra. After accumulating substantial equity across multiple properties, senior investors face a stark realization: what good is three million dollars in assets if it only generates $90,000 yearly while a comparable commercial portfolio might deliver $200,000? This awakening drives a wholesale shift toward cash-generating investments that can fund their lifestyle rather than just building more paper wealth.

But this transition comes with serious challenges. Many veteran investors find themselves trapped in what we call "mortgage prison" – unable to refinance loans they've held for years because lending standards have tightened dramatically. Even more concerning is the crushing burden of land tax, with some investors facing annual bills of $100,000-$300,000 – a cost that simply didn't exist at this scale when they began investing decades ago.

These pressures are reshaping investment strategies among the most experienced property buyers. Commercial properties, multi-income assets, and strategic downsizing are all becoming increasingly common as these savvy veterans adapt to changing economic conditions and life stages. If you're building your own property portfolio, understanding this evolution could save you years of misdirected strategy and help you anticipate the inevitable pivot in your own investment journey.

Episode Transcript

Speaker 1 (00:01):
Ladies and gentlemen, investors have changed their
appetite.
We're definitely seeing theadvanced investor do things
they've never done before.
Stay tuned, we're going to tellyou about investing today in
property, what the seniors aredoing.
I'm the ringleader so I canrock Karate Chop.

Speaker 2 (00:36):
Good morning everyone .
Welcome to Morning MinutesMyself, Michael Bergio, Mark
Novak.
Episode 1430 what are topveteran property investors doing
in today's market?
We always hear about firsthomebuyers getting into the
market.
Nearly a lot of the policiesare steered towards them.

(00:56):
A lot of the talk is steeredtowards the younger people,
which rightfully so.
We know that's where a lot ofwealth creation has been very
successful for the oldergeneration.
So we want to encourage andeducate people to get in the
market, but we don't often hearwhat are the older investors
doing?
What are the people who havebeen investing for 30, 40 years

(01:18):
doing with their property?
Is it the same to what theyoung 20-year-old is doing?
Is it different?
Mark, take us away Like first,what age are we talking about
with the older investor andmaybe how many properties?
What are we talking about?

Speaker 1 (01:36):
Look 40, 40 upwards.
I'd say 40, 50, 60, more 50, 60.
I think their appetite normallywhen they get to about 75 tends
to sort of wane a little bit.
I noticed with our old clients.
You know they won't be buyingstuff, you know at that age.
But what's definitely happenedis every single and these are

(01:56):
clients to answer your questionyou know upwards of five
properties.
They've had an appetite theirwhole life.
They've worked and most of themworked really bloody hard.
None of them are.
None of them are like geez, itwas lucky that I bought back
then that they've fought,they've worked hard.
They've got to this position.
They've got two things on themind transition of wealth.

(02:18):
Obviously we know what the kidsgonna do, but the main thing is
the whole world of the way theyused to invest in the 70s and
80s is completely different now.
It's completely different.
So the stuff they were buyingwhen you and I were growing up,
michael, when I was growing up,is completely different to the
stuff they're buying today.

(02:38):
As they get older, theirappetites change and as policies
have changed land tax, thingslike that their appetites
changed.

Speaker 2 (02:43):
And as policies have changed land tax, things like
that their appetites definitely,definitely changed a lot yeah,
and I think when people hearsomeone's got five properties
they think, oh, that doesn'tapply to me, they're like a ceo
of a fortune 500 company, butit's.
It's not the case like ifyou're looking at your, your
parents, where they bought, mayhave bought the house 40 years

(03:05):
ago and then nearly every 10years they've bought an extra
property and they've only beenon a school teacher salary,
nothing, it hasn't.
It hasn't been anything thatit's not.
It's very common around thenorthern beaches to see a family
with at least three to fiveproperties and I think, um, the
big difference between theyounger purchaser and the the

(03:27):
older is the younger.
When you're at your highestcapacity for working income, you
will forego a rental income onan asset that will have great
capital growth.
You see a lot of youngerpurchases by residential over
commercial because your capitalgrowth tends to be a lot larger
and while you've got the higherincome in your 20s, 30s and 40s,

(03:50):
you're happy to be just payingoff that loan, having the
capital growth that that will bedouble, triple in 30 odd years.
But I think the key shift iswhen you're, say, over 50, you
don't really necessarily care ifthe property is going to double
in 10 or 20 years.
You go I want cash now.
I've worked my whole life, umbeing very diligent with my

(04:13):
spending to pay off these debtsand I want to enjoy the money.
I don't want to have threemillion dollars tied up in
assets and be cash poor.
But I also want to stay inproperty because if I'm going to
live for another 20, 30 years,there's still a lot of growth
that I can leave the kids andthey're just not wired to switch
off the income, the value orthe property ownership.

(04:37):
So that's where we see a lot ofolder, especially with now,
land tax going like through theroof.
Where I know in Narraweena, ifyou have a house that's like
your second investment property,nearly the land tax would eat
away the whole income for thatasset and if that's what you're

(04:57):
trying to live off now, itdoesn't really serve you well to
be holding that asset.
So we're seeing a lot of olderinvestors getting into
commercial assets with higherrental returns or assets with
multiple incomes on the oneproperty.
I think that has been a keyshift yeah, I think there's this
.

Speaker 1 (05:17):
There's two things there, um, one is that they're
never going to tell you, noone's ever going to tell you.
These older guys, older girlsthat are investors, are in a
mortgage prison.
What that means is, you know,the loan that they had the
ability to get when they were 10years ago or 15 years ago.
They can't actually get thatloan for that property any

(05:39):
longer.
It's a legacy loan that they'rein.
It's probably a little bithigher interest rate and if they
went to any other bank, anyother bank wouldn't refinance it
because responsible lending'schanged, open banking's changed.
It's much harder to get theloan.
So that's different.
So that's making them chasecash harder, because the next

(06:01):
property they want to make sureis kicking in a shitload of cash
.
So they're not in a mortgageprison.
Um, do you, do you reckon?
Do you know what mortgageprison is?
Does everyone know whatmortgage prison is, or did I?
Did I cover that?

Speaker 2 (06:14):
I think run through, just yeah, run through it okay.

Speaker 1 (06:17):
So just just to detail what I just said.
So some people have got loansat the moment, they own property
at the moment.
They own property at the momentand if they went to the bank
and asked for the same loan forthe same property, another bank,
all banks would say no.
So that means mortgage prison.
So they're stuck with the bankthat they're with, and the bank

(06:40):
that they're with often hikesrates pretty much harder than
than the the overall market.
So they could be stuck in andalone.
They'll never get again,they'll never get to go and
refinance and an interest ratethat's too high.
It's mortgage prison and Ithink a key yep, yep, sorry.

Speaker 2 (07:00):
And I think a key thing for the senior investor
especially they're trying tomake a transition from equity,
equity rich properties withgreat capital growth to a higher
yielding asset is they can'tleave it too late because,
exactly what you just said, itgets a lot harder to get a loan
and if you want to betransferring, you may have three

(07:21):
million dollars worth ofresidential assets bringing in
ninety thousand dollars a year,and you want to transition that
to three million dollars of, say, commercial assets bringing in
200 grand a year.
There may be something that youwant that's 3.5 and you think,
well, surely I can get a loanfor 500 grand.
When I've got all this cash, itbecomes very difficult,

(07:43):
especially when you're gettingolder.
So you don't, you don't want toleave it too late because you
can get stuck where you andclients say all the time I've
been a client of that bank for50 years and they won't let me
do this, I've got all thisloyalty yeah, they get very,
very upset with it all and alsoum, there's the, there's a big

(08:05):
transition at about 40.

Speaker 1 (08:08):
Yeah, that looks like this.
So what starts happening isthat going the right.
Now that gather right.
What starts happening is yourequity starts, um, you know,
continue, it continues to grow.
Um, you know, continue itcontinues to grow.
But the necessity for thatequity is very different.

(08:28):
So when these guys are sort of20, 30, 40, they're chasing
equity hard, which is the valuein the property growing.
They can't spend that money.
They're not really concernedwith the rent that it brings in
because it's sort of pittance.
But when it gets to that xfactor, when that sort of starts
going the opposite, is it about40.
So at about 40, people startgoing.
You know what?
Actually I've got more equitythan I can spend.

(08:50):
Like you know, if I may have amillion dollars in equity, but
what am I going to do with that?
I would like something per week, per day.
So then they start laboringless on equity, the property
value going up.
So they look at asset classesor properties that are not
kicking in as much capitalgrowth, but they look at asset
classes or properties that arekicking in more cash per week,

(09:12):
per year, per month.
So that's when you see theinvestors come to us saying, hey
, we just want something with ayou know, seven, eight percent
return per year, and you go tothem that's a if I get your son
on that, it may be a shitproperty.
They're like we don't care aslong as it kicks in the cash.

Speaker 2 (09:32):
Yeah and and that's what we see, the the big shift,
um, and then that's when it's agood chance for the, the older,
the senior investor to help thekids out, sometimes when they're
downsizing and they've gotaccess to the cash so you can
swap to an asset with a higherrental return.
Help the kids or the grandkidsout with a deposit as well, so a

(09:55):
lot can be done in thattransition.

Speaker 1 (09:59):
Yep, so it's chasing the cash.
And then the land tax, michael,you mentioned and really I want
to labour on that because theseguys are getting, you know, a
lot of my clients.
It's not unusual for me, in thecourse of a week, every day, to
hear about a client that has a$100,000, $200,000, $300,000 a
year land tax bill.
So every year they're payingthat out to the government.

(10:22):
It's crippling and you know,again people go oh yeah, it's
good that they've got enoughproperty to, you know, have to
pay that.
But it's like, yeah, but 20, 30years ago this thing didn't
exist.
The land tax thresholds were somuch lower, the valuation was
so much lower, they weren'tcutting checks for two or 300
grand every year.

Speaker 2 (10:43):
And they had an income and they were working.
So it gets a lot tighter whenyou're not working.
Yeah, but yeah, I think it'sanything else you want to cover
on the seniors.

Speaker 1 (10:55):
Nah, look, it's real.
It's real guys.
So if you, if you try, and Ithink, don't model yourself on
what the seniors are doingeither, because they've got a
different appetite, they'remaking different moves than what
the younger people are doing.
So you know, the youngerinvestors are chasing capital
growth.
The property value go up.
That's where the big cash istwo to one and they're saving it

(11:18):
.
And then the older guys arewanting to spend it a little bit
more and they're chasing thecash.
They want that rent to be huge.
So capital growth is not asimportant because they've sort
of built it in already to theirlives.
They think what do I need morefor?

Speaker 2 (11:31):
Exactly Well said.
I think that's enough.

Speaker 1 (11:35):
Giddy up, have a great day.