We are introduced to Rentvesting | Australian Property Scout

Bryce: [00:00:23] Welcome back to another episode of Equity Mates. It's a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. If you've just joined us for the first time, a huge welcome. If you're feeling like you want to get up to speed with the basics of investing, check out our podcast. Get started investing. We also have a book to accompany it, so check that out as well. But with that said, let's crack on. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How are you? 

Alec: [00:00:52] I'm very good, Bryce. Very excited for this episode. This one not about stock market investing per say, but you and I are both in our thirties. We're slowly growing up and we would love to one day own a house and that sometimes feels out of reach. And so the expert that we're speaking to today has an alternative to us buying in the very expensive Sydney housing market where we live. 

Bryce: [00:01:20] Yeah, today is all about rentvesting. And I you know, this was an awesome interview. I genuinely learnt a lot throughout this and I think we've both sort of changed our views on it. We're not changed, but it's left us thinking lot.

Alec: [00:01:33] I didn't have a lot of view about rentvesting. Yeah. 

Bryce: [00:01:37] Now you do. 

Alec: [00:01:37] Well, yeah, it's, it's, it's really interesting. I mean, let's not front run the episode, but. 

Bryce: [00:01:41] Yeah, yeah, it was a great, it was a great discussion. We sat down with Sam Gordon, who is the owner and director of Australian Property Scout. They're an investment buyers agency that is on a mission to retire 500 people by 2030. Now this episode is sponsored by Australian Property Scout, and if you would like more information on building a property portfolio, you can reach out to them. The link will be in the show notes. They also do have a podcast called Scouting Australia Podcast. But again, let's get stuck. 

Alec: [00:02:08] In, let's talk before we do an important reminder that any advice you hear on this show is general advice only. Whilst Equity Mates licensed were not aware of your personal financial circumstances, so make sure you seek advice before making any investment decisions. 

Bryce: [00:02:26] So, Sam, welcome to Equity Mates. 

Sam: [00:02:28] Bryce, Alec Mate, thanks for having me here. 

Bryce: [00:02:30] Now we've got to start the Australian Property Scout, which you're owner and director of. You guys have a a mission to retire 500 people by 2030. So are you one of those people?

Sam: [00:02:43] So I retired myself before I actually started the business. So that was one of the really cool things. I started the business back in 2019, right at the start of 2019. And at the end of 2017, I'd actually replaced enough of my income that I could I could kind of leave work and kind of went and travelled and stuff, which was really, really fun. But again, I got to be bored like it wasn't enough to live like the crazies, the lifestyle sort of thing. I was I was backpacking and having a mad time. But at the end of the day, and it wasn't enough to like live a crazy lifestyle. And so when I kind of came back after that trip, I was it was it was kind of over a 12 month window. I travelled about nine, 12 months of that sorry, 9 to 10 months of that 12 year. And I was just pretty much looking for something else to do. And there's a few things I was tossing up real estate builder, kind of a few different things, but then buying property was saying I had a massive passion for and I'd actually been burnt by someone in the same industry like as a buyer's agent about two or three years earlier as well. And so, I mean, I just kept ticking over my head as I was as I was travelling. That was like, I should go back and be doing this as well. So yeah, and it's I like to kind of walk the talk amongst them. I just like sort of, you know, talk about something I have no knowledge on. They've definitely been there and done that and loved it. 

Alec: [00:03:53] So Sam, you said you retired in 2017 when you had enough to retire in 2017. You don't look that old. So you got a great skincare routine or you got a pretty aspirational story. So tell us. Tell us the story. 

Sam: [00:04:07] Yeah, man. Yeah. So I'm actually 33 now, so I was 20, 27, 28 ish, I think, when this all kind of kicked off, like in terms of being able to being able to travel, you know, essentially on my terms and not have to work. I mean, I bought my first property at 19. Funnily enough, I'm a farm boy from a few hours south of Sydney, grew up on a small, small farm with my family, trekking to school and stuff. Left school at 16 which the high school dropout just started working. And then as I got a bit older, I was I started saving a bit of cash. And this was in the year we're pretty similar here because I'm 33. So when you had older than you boys of like Fast and Furious, you're out in all their 60 seconds. And I used to go to school in Fairfield, a sports I in Fairfield. So I was a very big Asian community and so these jet cars were everywhere. So I had this mad love from my dad who was a mechanic by trade. And so we'd go out and we'd go and inspect these cars that are really one of the bollocks to prison skylines and yeah, 266 And he'd just pick every single one apart. And then in the end, I just got sick of it. And he kept saying to me, It may just go by house, by house. And then it just clicked in my head. One day I'm like, Why don't I go buy a house? Like, I knew a lot of people either made money in property or the super wealthy parked their wealth in property as well. I knew that even at a pretty young age. So. So yeah, I kind of started looking into it, realised that I could afford to buy something as well. And then yeah, I bought my first one at 19 and pretty much it was it was a two bedroom unit in Wollongong for 275 K full renovator. Got myself a nice discount on the way and just like always a bargain hunter my whole life did the renovation and then when, when I was kind of going through that piece, I mean I was at the dentist one day as I was doing the rhinos and stuff and he was running late and I'm never early. I'm there early. Right. And this one appointment, I was early and he was late and there was this property investment mag sitting on the table. And I picked it up and I was reading it and I probably read it for ten or 15 minutes, mate, I was hooked, left that appointment, asked me if I could take the mag and was like, Yeah. And I took it, went to the newsagent, bought or there was three magazines out at the time. Podcast one is big, this is Dili 15 years ago and then just absolutely devoured as much content as I could. And I joked that I kind of gave myself like a bachelors in property because I just consumed so much content. And then I just trialled strategy after strategy until I really, I guess, refined what I do now to, to a bit of an art form and a bit of like an algorithm of what we chase when we go out and do deals. Yeah. And then pretty much just built an entire portfolio off the back of that. So it was pretty cool stuff. 

Bryce: [00:06:33] Love it. Well, we're going to definitely pick up on that algorithm in a minute, But you know, we should address the here and now of Australian property. A lot of us are really struggling with housing affordability, including the two of us. And I feel like I'm going to ask a lot of questions for a mate. What advice would you give someone like the two of us who are struggling to get into the housing market right now? 

Sam: [00:06:59] Yeah, so there's a few big things in Australia right now. Obviously, interest rates have been on a ridiculous run. We've had I think it's 13 sorry, 12 interest rate increases over a three month window like wild, right. In terms of how fast it's risen. So affordability has just completely dropped out of the market. Combine that with the extremely tight stock right across the country as well and super tight vacancy rates cause there's no rental stock as well as our stock. It is a really hard time to get in there. You boys are also based in Sydney. And I'm originally a Sydney boy myself. Sydney's been on this crazy run for the last ten years from 2013 to 2017, doubled in its boom and then the COVID boom went wild as well. And yeah, man, it's like my honest advice would be like, I wouldn't be looking to buy in your hometown. So like, the idea of over investing is huge these days. Even myself, I used to be a homeowner. I always lived in my own home until, funnily enough, around that same window where I was able to replace enough of my income, I learnt a little strategy or Yeah, I know we're going to dive in a little bit about the rentvesting versus primary residence and owning it, but yeah, man, just really learned how, how much better it is to rent vest and actually get that debt back essentially from an investing perspective and then be able to go out and put that in the market instead. So I'd be looking to rent vest. Sydney's an extremely expensive place to live, get out there and invest in other capital cities, in big, strong regional centres and stuff like that. I'll be trying to build the wealth out there waiting for Sydney to come back to be the right point in the cycle to buy and then look to buy your prime residence. When is the right time to actually buy in Sydney again. And I've been a, I've always been a big believer and a big advocate of that, unless it's the right time to buy in a in a certain city for your own primary residence. I wouldn't be buying because you bought the tail end of a boom. You could be waiting ten years until you get any growth again. What's the actual point of holding that asset? You got to make money somewhere else and then bring that money back and put it into the market buyer And from your business when the time is right.

Bryce: [00:08:46] It's such a mind walk, though, because everyone always says, you know, this year, particularly at the end of last year, coming into this year, we're going to see correction 20%, you know, across major cities. It's going to be good. I haven't seen it. Prices are still incredibly competitive out there at the moment. It's one of those things over the last ten years, it just keeps grinding up. And everyone has said probably for 15 years there's going to be a crash, it's going to be a crash never comes. It's like, how do you just deal with that sort of mentality? 

Sam: [00:09:14] Yeah, I mean, I don't think a big correction has definitely come. So Sydney did come back about 10 to 15% since the peak of early 2022. So in around the 15 month window, it definitely has come back, if anything, maybe even eight month window since late 21. But the interesting thing, man, is like it's not so much. And that's why I'm saying it's like it may be ten years until it's like the right time to invest again. And that's when affordability comes back around. So even if the market doesn't grow any more, let's say it corrects by another ten, 20% and then just sits there and does nothing. There's actually no point holding that asset from an investing perspective is no point. Holding an asset is not going to do anything for the next 7 to 10 years. Whereas instead, if you invested elsewhere and then brought it back in that window, man, even if even if it did correct that little bit and then plateaued for a while, it makes it a poor investment. Yeah, it's, it's one of those funny things. I think the Australian housing market is resilient enough to not crash. I don't think it will ever crash. There's too much love for property, there's too much investment in property, but with great interest rates now, there definitely will be some hurt, there will be some pain. But 1010 to 20% in Sydney is huge. You know, if you're talking 20% on a $2 million, that's 400 grand. That's a lot of money. 

Bryce: [00:10:19] Where's that happening though? 

Sam: [00:10:20] It hasn't happened. Yeah. 

Alec: [00:10:21] Like stories. I feel like you told me that in the back end of last year Balmain had corrected like 20%.

Sam: [00:10:28] In Balmain, well that's going to be a four or $5 million suburb, right? 

Bryce: [00:10:31] Yeah, definitely. 

Sam: [00:10:32] So that's a million bucks. So yeah. But this is where it's like this is where it's a wild thing because like Sydney was never due for another boom. So it boomed and the unaffordability was there after 2017, the market corrected then, but then COVID it into another mini boom because no one's sold. There was no one traded, no one sold and stock was extremely tight. Yeah, and. 

Alec: [00:10:51] Interest rates are so low. 

Sam: [00:10:52] Yeah, that was a big thing. Whereas now stress is so high, prices are so high, there's no affordability. So it definitely will come back. But yeah, I mean, I'd probably be waiting a bit lucky. You've got to wait as well for interest rates actually set in. One of the boys in the team asked me other days, Oh you said in a podcast the other day like there should be all this hurt, right? Like, why are people selling already? Because I heard it hasn't really come in yet. And that's why they're talking about this fixed interest rate cliff that's coming off. People won't feel that until their interest rate rolls off and then probably a few months after that, if not six months, because if they're fixed at 1.99 and then roll off at six, it'll hurt at first, but it still will take a bit of time for that to actually you get three or four months of going from two grand a month to six grand a month. Like it's going to take a little bit for that to start to pinch. It's not an immediate effect. So I think that's a, I guess, important thing to note on that as well. 

Alec: [00:11:39] So you mentioned this term rentvesting. Let's unpack it because it is an interesting one. Bryce Price is from Wagga and you've certainly said before that, you know, there's an attraction of living renting in Sydney, buying in Wagga. Yeah, unfortunately. Well I feel like Wagga prices went up a lot. 

Bryce: [00:11:58] It's still more affordable. 

Alec: [00:12:00] So let's unpack the term for people who aren't familiar with it. rentvesting what is. 

Sam: [00:12:04] Yeah. So reinvesting essentially that you're renting at the same time that you're investing so you're not living in a primary residence. And I think that's one of the really big things. The important thing to note on this is the banks don't look at your house, your own home. They don't look at it as an asset. They look at it as a liability because it doesn't produce an income. So rentvesting is essentially you're renting. You don't have that that big primary residence. Debt. I mean, you're investing at the same time. So it's it's become massive, especially over probably the past 3 to 5 years. But it's becoming it has become a trend over the last ten years, really, you know, that I've witnessed as well. 

Bryce: [00:12:36] And so one of the we want to understand the pros and cons of rentvesting versus owner occupier, because on one side you have the dream and want the security of having your own home and your own place to live on the other side. You know, you work so hard for your money, you want to put it to work and have an asset that over time is going to produce income. Yeah, from my understanding, one of the biggest advantages of rent investing is being able to leverage the debt that is on there and to use that for tax advantages. But can you help us understand the pros and cons of each side? 

Sam: [00:13:08] Yeah. So essentially, I guess the point I made a second ago about like the debt level that the banks would look at of your primary residence, that's that's primary residence debt. So it's not investing debt, right. So they'll factor that in as a liability. Not the same as like a car loan, but kind of in the same vein, like in a negative way. Right. Whereas if it's investing debt, it's actually producing an income. So there's a very, very big discrepancy between the two. And it was something I learned back literally that was the time that I was talking about where I was able to transition. I'd sold out of the Wollongong unit. Funnily enough, the very first one I ever bought, I sold that and put that money back out into other properties and really start to build out some solid passive income. And at the same time I actually moved out of the house. That was, that was my primary residence and I was at a debt ceiling, so serviceability ceiling. And then I moved out of that and rented it and went rented something for almost exactly the same money. And my serviceability went up enough to buy another property. And so that was like the light bulb, the penny drop moment for me. I was like, hang on. Like I shouldn't be the other way around. Like, shouldn't, shouldn't actually work better for you to, to be in your primary isms, but it's because it doesn't produce an income. And when you're out renting something, the bank's factored in that if the worse worst thing happened, you could downgrade and go rent instead of 600 for 400 or something, you know, take a cut if you really needed to. Whereas with your own primary residence debt, they buffer right you hire. So it's actually it's a big discrepancy and it's a big variance on that front as well. There's there's pros and cons both ways. I think the biggest pro is what you said before, the security and the stability of a primary residence. My biggest issue with it and what I really realised a couple of years ago when I almost pulled the trigger and almost pulled the trigger and every year if you're doing well, I've been doing well in property for a while now, so you kind of aspirations keep changing every year, but if you trade every, let's say every couple of year, even every three or five years in terms of primary residence, because you can instead of being able to afford the 715, I can afford the one and a half and now you've gone from one and a half to three. But maybe you dream homes 5 million every time you trade in and out of that asset, you've got stamp duty costs on the way in $3 million house. You took a $200,000 in stamp duty under 5200 grand, depending on your state, your spouse costs on the way out. Similar sort of numbers, you know, 160 to $100000, depending where you are. So second can be a quarter of $1,000,000 in terms of in and out costs just for owning the owning owning the asset. And if it's not your dream home and this is what I've come to realise, if you're going to buy your dream home as your primary residence, there isn't that much point owning it because yes, you have stability, but it depends what you're doing. If you are going out there and investing, it makes sense to rent vest until you can afford that dream home that you really want If you're just going to live in a home and that's all you're going to have, it probably does make sense to buy it and paid off if that's the avenue you want to go down. But like we're talking about investing, right? So like if investing is the aim of the game, I would be and I literally am still now I've got a $24 million portfolio ridiculous amount of passive income. I still rent vest because at the moment what I want, I actually haven't even figured out exactly where I want to buy exactly like and when you start talking about a $5 million plus primary residence, you don't want to go buy something that you're not 100% set on because the trading costs are going at a four on five mil. You're talking like 300 grand stamps in like $100,000 sales costs on the way out is huge cost to get in and out. So like unless you know exactly what you want, exactly where you want to live and you can afford that dream home. And actually in my opinion, it just doesn't make sense to buy it. The idea of stability and security, it's like, yes, it is, it is good. But if you can have if you can live in the same place and you go to change every two years because you don't have as much stability, I see it as a very small cost. It's a pain in the arse to move. We all know it, but it's a small cost in terms of what you can do. On the flipside, instead of owning that primary residence, so and I've witnessed that firsthand with what we've been able to do as well, what I've been able to do.

Bryce: [00:16:47] So yeah, it's another mental dilemma of being like finding the perfect place for now and just wanting to be in. And it feels like there's obviously different ways that you can achieve that with the other. 

Sam: [00:16:58] The other point on that as well, that's actually a great point because what you can buy, most likely you could rent like if you can't afford exactly what you want to live in, in terms of buying, you could probably afford to rent there. And so one of the other massive trade offs you make off there as well, but one of the massive trade offs with this is so often you can actually afford to rent in a far superior suburb to where you can normally afford to buy. 

Alec: [00:17:19] I feel like I feel like you're living through that.

Bryce: [00:17:21] I'm living through that right now. Yeah. Like wanting to buy where we. Even. It's just increasingly becoming more difficult to buy where we live. And we would be settling on something that is a you know, we're buying it to get in with the knowledge that it's now not going to be the dream home or anything like that. And so then it's an interesting one because speaking of the debt, you then have these conversations with the mortgage brokers and or advisors, and they're kind of saying, if it's not going to be your one, you then need to think down the track. Are you going to likely use that when you move out to rent out, keep it as an investment property? If so, then you need to keep your debt as high as possible because then that debt turns into negative gear. And so it's all these things flying around to consider. And it's just like, all right, let's just move to Wagga. 

Sam: [00:18:12] To the farm.

Bryce: [00:18:12] And it's just the thing that at the end of the day, it is just such a large amount of money that you can't, you really can't play around, you know what I mean? You want a little. 

Sam: [00:18:23] Bit of advice on that as well. 

Bryce: [00:18:24] Yeah, well, we can take the cell phone.

Sam: [00:18:27] I know what to say. That honest man. Like where you and I would want to live. It's not the place where you and I should own investment properties. So like, if we're talking million dollar suburbs, especially million or suburbs in Sydney, they are for the ultra wealthy. In my opinion. No one like no one else should be owning them because they are not a great investment. They will bleed you way too much like you look at. If we run the cash flows on the place you could afford to buy right now to live in. And then you run the cash flows on as an investment to just really cost you 4050 grand a year to hold that. Which means if you have to wait ten years until the next cycle, you're $4 to $500,000 in the red, not even taking inflation into account, just talking negative cash flow until the next cycle kicks off. It's actually not a good investment like holding something like that. It's not a good investment. That's why you're better off building your wealth somewhere else and then coming back and being able to and buying that when it's actually the right time to buy. And Sydney, because you're going to get the double whammy. The beautiful part of primary residence, the best part of prime residence is no capital gains, right? So if you're going to buy in Sydney, bond Sydney before it booms next, like that's the time to do it. Not at the end of ten years of like the biggest growth cycle we've ever seen. It's the time to like walk away from Sydney rent where you really want to live and go invest somewhere else. 

Bryce: [00:19:36] I need to bring my wife in. 

Alec: [00:19:42] So I want to get to where we should be looking because I think a lot of people will be interested in that question. But a couple of questions about the pros and cons of rentvesting. Yes, I'd before then. Yeah. I think one of the most common things you hear from people who are, you know, all in on buying property is that rent money is dead money. So, you know, the. 

Sam: [00:20:07] Old adage of out of our parents generation.

Alec: [00:20:10] So how do you respond to that when we're talking about reinvesting? 

Sam: [00:20:13] Man, it's, um, I would ask them to please show me their portfolio and how well they've done in property. I literally don't take advice from anyone that has not done what I want to do or what I essentially even what I've done on my level. If you're going to take advice from someone, get them to show you the books of what they've actually done before. Like it's it's so many of these old adages and sayings from our parents generation that are so wrong. They also say they say that you should never sell property. And if you never sell property goes in The strategy of what we do at Australian Properties Scout, if you never sell property, we'll take you like 30 or 40 years to retire. But if you build a portfolio that some of us generate it towards cash flow and some of it's generated towards growth and you see significant growth, you sell it, you bank the profit and you pay out your cash to use. You can retire in an extremely short window of time. And this is where it's like so many of these sayings and these, these, these, you know, things that our parents generation talk about. That's why they were all retiring at 70, you know, or some some young, some 60, some seventies, you know. And it's because they hold onto these beliefs that their parents told them that are incorrect. Like, yeah, you in my opinion, do like you want to be listening to the people that have done what you want to do. Rent money is dead. Money is like, yeah.

Alec: [00:21:27] Talk us through the myths because I'm just trying to get my head around it. So let's say we take Bryce's situation. I love how we can just be. Bryce buys a place in Wagga. Yeah, rent it out. Yeah it's income and then services the mortgage in Wagga. Yeah. Let's assume that the rental income there doesn't quite cover the mortgage. Okay. And then in Sydney he's paying rent. Yes. So the rent he's paying in Sydney is more than the rent he's getting in Wagga. Yeah. So there'll be a gap there and then he's got to service the mortgage as well. Is that.

Sam: [00:22:01] Yeah. Like I wouldn't even be taking into account the fact that it's more expensive to, to rent in, in Sydney compared to what it costs to hold the property, the rental income that comes from Wagga. I'm, I would be looking at the Wagga investment as a standalone investment because where you live and what you're doing, that's almost like a separate entity or separate to what you're doing. So separate 100% man. So like yeah, and I'd be looking at that more as how much are you saving renting compared to owning it? Because if owning it's costing you, let's just throw figures $100,000 a year to own it with your now interest rates at 6%. Principal and interest. Pretty big council rates, water rights, you know, all that sort of stuff that you cop as an owner, let's say sitting at 100,000. But to rent, let's say it's 50 or 70 or 70,000. 

Bryce: [00:22:43] So it's cash flow. 

Sam: [00:22:44] Yeah. And I would be looking at that. And because the banks look at the cash flow, right, they look at the income coming in and going out and said there's 100,000 with no rental compared to 60-70,000, which is your say, primary residence compared to what you rent. They look at that, that's additional servicing. And it's not only that gap, it's actually it's a different calculation even entirely because instead of than factoring it like that, they actually probably will factor an extra 20 in on top of it because it's primary residence debt, which is non-tax deductible, is not producing an income. So again, it's it's it's it's a liability. It's not an asset. So it's a far superior situation. And that's where I wouldn't even bring Warrego into the equation because that's the investing portfolio. 

Alec: [00:23:21] Yeah. So just on that, you just mentioned taxes, so that's actually something that it would be good to get my head around. Investing debt. Yeah. If you've got debt to earn an income, the interest you pay on that debt is tax deductible. Yes. If you if for your primary residence it's not tax deductible. 

Sam: [00:23:37] Okay. So the difference is it isn't unless you do an equity release on top of this, say you had a one and a half $1 million loan, your property is worth two mill, that's your primary residence debt. And then you pull out. Let's just say you pull out half a mill purely for investing purposes. Obviously you guys put disclaimers in. This is not financial advice, but essentially isn't. 

Alec: [00:23:56] Isn't the you don't need a financial services licensing. 

Sam: [00:24:00] I always worry about so very beautiful you know so like let's say you're. Sitting at one mill property, one mill debt primary residence debt right. And then your properties were two mill and then you go pull out the half a million, let's say, you know, 75% of our and that is, half a million up to one and a half mill. If you pull that out and do not touch it for anything else that is, investing debt and if all you use it for is investing, yes you can fully write that off. Can't write off the one mill, you can write off the half a million interest cost. One of the other cool things is if you have that sitting in an offset account or radio or whatever, you're actually pay that you don't pay the interest on it except for what you use. So you can literally have the whole thing sitting in there. It's almost like, you know, bullets in the chamber ready to pull the trigger. And that's what always, always have a large sum of equity or cash sitting there ready to go to go and deploy into the market and start putting it to work. 

Bryce: [00:24:50] Yeah. Again another toss up like 70 crazy.

Sam: [00:24:56] It's alright boys. And so it's. 

Bryce: [00:24:57] Like using like using deposit at its maximum or just putting in the minimum deposit required and sitting the rest in. In offset. 

Sam: [00:25:09] So it always depends on the individual. Are we talking prime residence or investing. 

Bryce: [00:25:12] For this site? Primary residence. Asking for a friend. 

Sam: [00:25:15] Asking for a friend. Man, you probably you probably it's always an individual situation, right? And it depends how much you've got. If you had an offer like a 40% deposit, I'd be looking at interest rates of like a 60 to 70% or 70 to 80. If you had no plans to invest, if you were just purely purely buying the primary residence because your rates are lower, the lower your LVRs. So be worth looking at. But if they weren't considerably lower and you're wanting to invest, I'd be buying 80% Oh yeah. I'd be sitting the rest in offset if it's a minimal difference. You better off doing that because again bullets in the chamber, you know, keeping the gunpowder dry for when you're ready to go pull the trigger on something. 

Bryce: [00:25:53] Anyway, back to what we were telling. 

Alec: [00:25:54] I reckon. Let's get to the question of all those people living in a place like Sydney, Melbourne or wherever that they can't afford and they're interested in where the best rentvesting opportunities are. What are you saying at the moment? What are the towns, cities, locations we should be thinking about? 

Sam: [00:26:15] So as a little caveat, I'm always, I'm always very cagey on, on, on locations. Yeah. Yes. So I'll throw that out. I'll give you a little bit though. So so essentially the way that we just because that's what people pay us for at the office, it's in terms of the IP, what I'd be looking for and what we look for out there at the moment is areas that are affordable relative to incomes, right? So if you look at Sydney and Melbourne, huge, the income to house price ratio is massive, right? In some suburbs it's like 15 times the median income of that area to house price world. Right like absolutely crazy and when you then when you go and throw in interest rates doing a 4% increase in a little over 12 months, affordability is gone. If you turn that on its head and look for the other locations that and this is where I would go for about cycles and that's why I like I don't think the idea of buying in Sydney is smart for now because I feel like the cycle will come back around where that affordability comes back a lot, right? So that's where I would be looking to kind of come back into Sydney at that point down the track. But if you look instead at the other cities that are at their point in the cycle where they're actually quite affordable and quite low, that gives them a lot of room for propensity for growth. If you combine that with areas that then also have big infrastructure plans, big projects going on, super, super tight housing market, sub 1% vacancy rate, all these different things and factors that are really aligning for a great run and a great market. Yeah, essentially a great market run there. The areas I'll be targeting says a huge amount of regionals that really tick the boxes on that that didn't boom during COVID. That's the caveat on that. A lot of people like Wagga Man went crazy. A lot of a lot of the regional hubs around around Sydney and Melbourne, a lot of the cities really, especially Sydney and Melbourne, because they were so much cheaper than the Capitals and Sydney and Melbourne like during lockdowns were terrible black Aussie during it as well. It's one of the big reasons I moved and it was terrible, right? So many people tried to get out but a lot of those areas, especially in the vicinity, had massive booms. I'm originally a southern islands boy like I grew up, down, down, down that way. And I had a I had a bit of property down there and literally the tail end of that in 21, I knew that there was going to be a market shift as COVID started to ease when they when they pretty much just said, we're never getting back to zero, it's going to be as is. I took a couple of properties to market because I knew it was immediately going to ease and some of the stuff I brought down there had doubled again. So it had doubled in 20 2030 and 2017 doubled again in the COVID boom. So stuff I bought like three 5370 is now worth like 1.2 mil in a ten year window. But it wasn't realistic like it was an inflated boom. So I took them to market right? So they are the sort of area you could be really careful of and the regional areas, they haven't felt the full pinch of it yet. A lot of them have but not in the way that they probably will. So again, there's all these layers of what you look at and what you need to be careful of in the capital city, like I see I like I'll give you a couple of things. Yeah, I like Brisbane, Adelaide and Perth. They're both still, still quite affordable for what they are. I still think they got a fair bit of run left in the tank. Income to house price ratio is very good and there's a lot of projects going on in the different areas. So you got to be honing in on those different areas and really picking apart the best ones there. The region was I can't really do too much because they're so isolated you on the housing market wise. But I'd go back to my point before, not the ones that were booming because of a COVID boom, the ones that have really strong individual economies and almost, if anything, didn't boom off that because they have, again, more room to grow. 

Alec: [00:29:39] I always used to hear Tasmania thrown around as a place for investing. I don't know if that's come off. 

Sam: [00:29:44] Tassie went crazy in Tasmania, crazy 2015 to 2020, but it has come off since then as well. It was probably actually through COVID as well as the 2021, like early 22. 

Alec: [00:29:55] I think I had a big run when we were at uni that I first started hearing. So if it went crazy from 2015 to 2022, we just could have got the start of it 

Bryce: [00:30:07] I often think back about early days of grade and stuff and like what our serviceability would have been versus obviously the deposit aside. But like the prices of housing back even six or seven years ago, like you just got into a $300,000 something and then anyway, anyway. I reckon What we should do is just start listing regional places and Sam says so. 

Alec: [00:30:34] Bryce. So we went to Uni in Canberra and Bryce and we can even feel it at the time in the mid 20 tens that there was a lot of building and a lot of a lot of stuff happening. We were in a shitty student house and all the houses around us were getting renovated. Yeah, yeah, yeah. 

Sam: [00:30:51] Going through gentrification. 

Alec: [00:30:52] Yeah, yeah, yeah. Bryce went back like, a couple of weekends ago. You loved it. You applied like. Yeah. So what are your thoughts on Canberra? 

Sam: [00:31:00] Canberra is another one that's actually had a really, really long run, I think because it's had such a condensed housing market with so much, um, government like employees. So it's such a huge income population. Yeah. Yes it really can was a tough one for me because yields are so soft. I don't like to invest anywhere that's got super soft yields. I think it could still keep going. Okay. But it's not going to shoot the lights out. So there's different levels of different ways of investing on the way. The way to invest isn't isn't a blue chip store, right? So we don't go pocketing something and hope for three, four or 5% growth, maybe 7% growth annually over a ten year window. What we like to do is position ourselves early in a market just before a market goes. So we're always looking for those markets at the bottom of cycles. Like, man, if you bought something in Sydney now in 15 years you probably have done it, right? Yeah, but like if you go put that money in somewhere else now you probably could double it and you could cash out in five years and probably go double it again before Sydney starts its next cycle. And so that is the way that I like to invest and that's the way that I would be investing. So I personally am not one to look for ones that are like plotters and will go, okay, over the long term. I looked, I like to look for the ones that are severely undervalued and have that really good, really good chance of of a massive upswing. So like if you look at even Brisbane and Adelaide, they're both still got run left in the tank but we got in quite early 2018, 2019, 2020 and then those markets really started to kick off 20 2021. They've still got run left in the tank as well, but we're positioning ourselves before the waves like a lot of a lot of our guys who got in super early and we bought really cheap, bought really well and there's plenty of guys there, myself included, that doubled money in those markets since then as well, in literally less than five years and not doubled capital in doubled house price. So if you look at the actual if we talk about the equity and like how much you've actually put into the deal, let's say you put a hundred thousand into a deal worth 400, not 400 now even six, seven, 800,000, you growth isn't the actual growth obviously on the house price, but you growth is on the capital you've put in. So if you've gone from 4 to 7 straight $2,000 growth on a 100 grand, look, it's a pretty good return. So that's why I always like to look at it and literally you can strip that one out after the first couple of years of growth. You can strip that out and go roll it elsewhere. What's the ROI when you continually stripping equity and rolling into deals as well? So I should work mine out one day because I always when I bought when I was 19, I was making 35 grand a year, putting like a $25,000 deposit. And it just I never made that much money before. I obviously started the business and I do well now. But like before that, I never made never made that much money. I'd love to work out the ROI on on pulling money out of deals and what that initial capital bought me say. 

Bryce: [00:33:32] So for someone, you know, listening at the moment and thinking, you know, this sounds, this sounds great, it's when you're looking to reinvest or invest, should we be optimising for income or optimising for growth to kind of get started. 

Sam: [00:33:47] From the deal. 

Bryce: [00:33:48] From the investment? 

Sam: [00:33:50] Okay. Just to break one thing down, right? Rentvesting is like rentvesting is the strategy. Yeah. So rentvesting isn't like going and buying somewhere. rentvesting is like I'm going to rent a vest, so I'll be renting where I am and investing somewhere else. Right? Okay. Actually, to answer that question, it's a couple of things because the way I always assess a client's portfolio or client's position when they come in, let's say they got nothing and they're coming in with an income with $100,000 savings or something like that. You're going to run out of capital before you run out of serviceability. So for that person, we need to make sure we're putting them in a good, strong growth location, making them a bit of a discount on the way in so they can strip that equity and get into the next deal sooner. If someone comes in with half a million dollars but they're making 100 grand a year, they'll run out of serviceability before they run out of capital because they've got so much so different strategy. So you go and target cash videos. And one of the really important things to note is a lot of people you remember years ago, you guys would have about excuse me, remember years ago, people were like, oh, you buy ten properties, one a year, and then in ten years you sell half, you own the other half outright. The big fella. Yeah, Remember that? 

Alec: [00:34:49] I don't remember that. Oh.

Sam: [00:34:50] Oh. I always read it in the stock market. It was usually for years. Everyone always talked about it and the issue was everyone was doing it on like aa3 400,000 and divestment with it with a standard yield. And it's like when you get to the back end of it, the net cash. Fellows are so average because all you've done is buy a standard house like, yes, if you bought in the right age, you would have had great growth and all that. But like your net cash flows are average. So the way that I always look at it is you invest for growth with a decent yield. So kind of takes care of itself, right? So you invest but the property predominately and primarily is there for growth. And then you also go out and you invest for cash flow, even if you invest and the two different property types, growth, property cash flow deal, the cash flow deal is still in a growth area and the growth property has still got a decent yield and a decent cash flow. But they're in the portfolio for two completely different things is where a lot of people get it wrong. They go all hand for the cash flow and they run out of capital and they're cooked or they go all hand for growth and they run out of serviceability and they're done. You need to build a portfolio with a balance. And then really what you want to do is, is you want to keep structuring and building it like that balance as much as possible. Keep pushing yourself, keep leveraging as much as as much as you can to build this out with the whole idea that when you get to the back end, the growth properties going against what our parents used to say of never sell when those growth properties have their growth cycle and they essentially pick out you wanting to sell them down, clear the debt bank the profit, and with that profit, use it to pay out the debt of the cash videos. And so if you building them almost in unison, let's say you doing one for one and every growth property, it's literally there to recycle equity to buy the next one. But then let's say that's any 60, 70, $80,000 to pull that out. The rest of the profit in that deal is actually in there to pay out one of the cash videos that it's paired up with as you go through and you build out that you go through and you build out that portfolio, when you start going through your sell down phase and your your debt consolidation phase, you're not just selling down a growth property to pay out a growth property with an average yield, you're selling something down to pay out something with a much higher net yield. And so if you give a, you know, a simple scenario of, say, a deal for for 400,000, that's running for four 400 a week, right. So 5% yield, which could be a great growth, probably could be a great growth location And that's a that's a, that's a normal yield normally yield. Right. In today's market. That thing, after all costs would only be yielding you like that. That's 20 grand a year in rent. But after your holding costs, you're probably only sitting at 15,000. You have five of them. That's what, 75,000 a year. But if instead you did dual income or triple income on one title in your Newcastle ideals and you pair them up maybe instead of 400 thou, 500 or something like that, but you've got the same number. Let's say you still had the five of those deals instead of sitting at 15 grand per property, 75,000 total from five deals, you'd be sitting, let's say you had, you know, maybe around an 8% plus yield or something like seven off a per cent yield on a deal like that. You may be sitting maybe $30,000, 25 to 30 K per annum net passive per deal once it's paid off. So sit a 75 K and having all these things and very exposed from it from a very low cash flow level, you have these things that are really high net cash flows and you might be sitting at 125, 250 k net passive from the same number of deals. 

Alec: [00:37:57] You make it sound so simple. And my my biggest question is where is paying 8% rental yield 

Sam: [00:38:04] So what we do, what we do have. It's like a 20 room hostel. So now it's like what we do is what we call manufactured cash flow deals, Right. So we'll go. So I said the kind of like two or three rentals on one title, so like the simplest way and you've always been Sydney show, you would know at least about an eight. I do much property but granny flats are not simple strategy when it comes to this and actually quite effective if you're doing it in the right location is something like a granny flat. And so you're getting to building something brand new at the back. So you've got depreciation, you're very low maintenance costs and very easy to rent as well. So you've got now you've got two rental incomes on one title and so on. That one title is the key because you've got one council you don't have to council rates and that's that net holding cost of the singular asset is where you lose so much because you always have, you always have council, you always have water insurance, all this sort of stuff that's at full freight on a singular property, singular tenanted property. When you have you dual in your triple income assets on one title, you you literally have that one set accounts, right? Even if it's a slight top up water rights, water rights, you pass on the usage to that to the tenant anyway, insurance. A lot of time you actually you just increase your building insurance, which might cost 100, 200 bucks a year and then a second landlord's policy, which might be three or $400 a year. So it's a very incremental small net holding cost addition might be another thousand. But you've added this entirely new rental income stream on top. 

Alec: [00:39:32] So here's the question: What's the most number of granny flats you've ever put on one property. 

Sam: [00:39:37] You can get? I wish you could do so. Not normally. Normally a limited to the one, but sometimes you can do advance strategies and turn the front house into like a dual income or a dual rental on that. And then she'll have the granny out the back. But they're very like state dependent. And this that's just like one strategy out of out of many. We also do duplexes triplexes, you know, unit blocks, things like that that we help clients with to the beautiful part of those. And the same as say, the granny stall development too is you have from a land tax perspective, right? So a lot of people start racking up a. If you use the SAT racking up land tax again, you go back to the singular asset. You just got that one property, that one set of land tax, two sorry, one set of rateable and value, which is a fair bit of exposure if you have to rack up heaps of those to get your your net cash flow position. But on your higher cash flow ideas you need a lot less of them, which is a lot less of a rateable land value exposure to achieve the same net income. This is a lot of I realised this very early on where like I was like, I'm not you don't get I'm not getting enough from these singular purchases. And that's where I started because I was very low income earner. I had to look for these higher cash flow plays. It would take me to that different level. That's when I started really discovering, uncovering all this stuff, all the grannies, duplexes, unit blocks.

Bryce: [00:40:44] So Sam, obviously, you know that we're looking for houses at the moment and through our broker there's, you know, he's kind of advised on what you should be looking for. Yeah. Even though it's an owner occupied, just to ensure that when you do go to sell, you're giving yourself the best chance to have put yourself in a good position. Yeah. What are some of the like, non-negotiables for you when it comes to like looking for features of a house location, those sorts of things from a either invest or owner. Like does it face north. Yeah that's a classic that is Yeah. Aspect I know North facing such a premium on north schools. 

Sam: [00:41:19] It always comes down to what it is right. So when it's primary residence it's a very, very different basket And so primary residence, Yemen, all that stuff super important. It's probably more super important from a desirability perspective as opposed to a growth perspective. And I think the one thing to note on that is you may be out of buy somewhere that you really like that doesn't have the schools isn't north facing blah blah blah. All some of the suburb that you really like and maybe pay you know, primary residence maybe $500,000 less the growth in that suburb with the same. Right. So it's not going to grow by considerably more because you buy the best one. It'll grow at the same level. But relative to what essentially what the value is of that property, it will grow in line with that. So that's why from an investing perspective and an owner occupier, it's a bit different really. Go to the suburb you want to get in and what you can afford When it comes to the investing side. Man, I'm actually a really firm believer of, I guess what I said just then in the sense of like your growth rate will essentially be the same, even though they're more it will be more desirable, always be more desirable, it will always be more desirable, but people always pay a premium for it. Now, whether it's in five years. So you're going to pay that premium now as well and your growth rate will be the same. So the funny part of this, and I've butted heads with a lot of people on their blue chips and always going for that sort of stuff. From an investing perspective, your chance for growth is actually higher on the cheaper ones because they're less desirable, less competition. You can normally actually get a better deal. And so let's say you pick it up at a better discount, your growth rate is actually better than the one that's at a premium that you can't get a discount because it's so desirable. So from an investing perspective, that's the way that we look at things and we don't invest in in multimillion dollar suburbs. So it's a little different from from our end. But when it comes to investing, man, I take those into account. But then like not non-negotiables really. For me, the non-negotiables are the correct market. In the correct market cycle, you bond the right market to do 80, 80, 90% of the heavy lifting, you know, So like get the market wrong, it's the same way like that's where you do yourself out of the majority of your growth because you're buying in the wrong market. For us, we're always looking for that. The little value as I can we convert something or add something to create an extra bedroom and bathroom. You know, is there something that we can do a cosmetic facelift on these different things for? So we kind of look more for the manufactured roots down that avenue. That's because that's really the way that I built my portfolio. I know, I know it works. It doesn't really come down to, I guess, like the different stuff that it would from an owner occupier perspective. So it's always we always looking for that value add when we're building portfolios as well. We typically always looking to try and make a bit of a discount on the way in as well. 12 months ago, 24 months ago during COVID, it was every year kind of back from now, it was a lot easier where we are right now with stock as tight as it is, it's extremely hard to get really good discounts. We still do it, but it's a lot harder than it was back in the day. I would be feeling for the average punter going out there trying to start their portfolio now, doing it themselves because stock is so tight, majority of majority of what we do is off market. We at the moment over 90% of what we transact on every month is off market. It's that tight. 

Bryce: [00:44:19] I've just got one question on that. Obviously that would be one of the biggest benefits of having a buyer's agent. Yes. Yeah. Is that off market access? 

Sam: [00:44:27] Yeah, definitely. It's also understanding market value. So even if we actually even go back to yours before the average person who maybe doesn't understand aspects of a property or location or anything like that, whether it's for the really expensive ones or the cheap ones, that market knowledge, that person should have really, really good deep market knowledge like we actually get on the ground. I'm actually on Sunday flying to the interstate force go. 

Sam: [00:44:57] So like we're flying interstate, like with it with a bunch of us, right? And getting on the ground and getting on the ground for a full week. Right. And we do that regularly. So we normally do that once a quarter and it's from an investing perspective, most people won't most buyers agents won't do that. But you don't understand a market well enough unless you're doing it. And Sam, and it's very important from that end to understand market value, even down to the street level and to the suburb level as well within a council or within a state, you know, a city, whatever. So that should be kind of the primary thing. And that also is getting access to so much more like, man, the average punter that at the moment in all our markets that we're in, if we haven't seen it, someone else has seen it as well. Potentially almost everything that's gone to market, someone's passed on it right now because the market's so tight, everything has probably been passed on. It's hitting the open net. So it's been passed on. It means it's probably too expensive or there's nothing wrong with the deal. So when you kind of factor that in at the moment, Yemen, the off markets are a huge part of it. But again, it's understanding the value just because off market doesn't mean it's a great deal. You got to understand it really from a deeper level as well. 

Alec: [00:46:00] We should also that's the reason why you want a buyer's agent. But you mentioned earlier that you had a bad experience with the buyer's agent. Yeah. So I guess what are the watch outs? What are the red flags? What are the things to avoid? Not with you guys now.

Sam: [00:46:15] I mean, it's not me, it is a great question, dude, because like, the fella that I got burnt by, man, I grew up reading about him in the magazine, so, like, he was like my ottoman. But his business had turned into this huge volume game. And so, I mean, I signed on and this is where we actually hey, you guy, he's he's, he's one of your key ones. How much do they charge? Like, what's their fee structure? So for them, at the time it was, it was 9900 this was six years ago and he was making 70 grand a year or something. It was 9900 upfront. So someone's charging you the whole fee upfront. You got to ask why because what's their incentive to actually do a great job? That should have been my red flag. But I was a lot younger, naive, and and didn't really pick up on the fact that that was I also never I never asked any of the buyer's agent. So I didn't know if that was the norm. I just thought 100% I was going with this guy. So we split our fee. We've got a very small upfront and then the balances rest on the balance due on completion, essentially on settlement of a deal, because it leaves skin in the game, it leaves it leaves essentially the dollars on the table to actually have to earn your earn your right. And then you crossed essentially off of doing a good job. They're the big ones, I'd say go online. But the issue is, I've looked at this guy before like recently as well, and like they kind of scrap the old accounts and start the new stuff. And so like the review side of things, you still should be able to find bad reviews on people who have done bad jobs, but it is a bit harder to find on that front as well. But yeah, you have a good look around from that ending and kind of ask around that fee structure as well. One of the big things is like asking the questions in terms of what you're trying to achieve as an investor. Have they done that themselves as well? There are a lot of buyer's agents that have popped up in the last one or two years that have literally done a course. They think you can just go by off the Internet and they have no actual understanding. They've never bought property or they only own a couple of properties and not nothing against them. From their investing perspective, that's fine. But I exactly as you joked about earlier, in terms of its extremely unregulated industry, I don't think someone should be paying him a substantial amount of money when they don't have the experience or they don't really know what they're doing in that end as well. So the experience is a really big one, the fee structure and yeah, probably the review side of things as well. 

Alec: [00:48:14] Yeah, nice. That's some good, good tips. So my last question, like I find it really interesting, this whole idea of rentvesting, but the last ten years held the last 30 years in Australia has just been an almost uninterrupted bull market. Does this if the market trades sideways for a while or even if it trends down for a while and, you know, I'm not saying like a 2008 style catastrophic crash in the US, but just like prices come down to go in line with affordability, does this strategy work still? Like does it or how does it change? 

Sam: [00:48:46] Can I ask you an interesting one? You said the it's been like for the last 30 years been a wild like a bull run, not what market are you referring to in particular. 

Alec: [00:48:54] Or just Australia as a whole. 

Sam: [00:48:56] Right. 

Alec: [00:48:57] So I understand that is a different submarket. Yeah. 

Sam: [00:49:00] Well that's why it's an interesting comment, right? Because like a lot of people said that and it's a funny thing man, because I remember seeing buyers agents and actual people who were deemed as professionals in the industry after Sydney and Melbourne finished their run in 2017 saying we'll never see another boom like the Sydney boom. And then a couple of years later, well, actually at that exact time you guys were laughing about Tassie before and it was in the middle of a crazy boom and it hadn't been seen in 15 years. But the reason I ask about what Mark you're talking about, is because everyone calls like Sydney's king, you know, it has all this crazy growth and it never stops. And the rest of it, man, everyone's It's such a short memory because the last ten years has been wild, but the ten years before that 2003 to 2013 Sydney trend sideways, it came back in 2003. You paid more in 2003 than what you could buy property for in 2012 2013. So that's why I was saying before, man, and literally, dude, have a look at like a 2030 year trend and look at the way markets move in cycles. Like a lot of people say cycles, leadership and all the rest of it may have a look at like a 20, 30 year trend. Don't just look at the last ten years, almost every market has seen a 10 to 15 year flat or sideways period. But if you look at 23 to 20. 13. Have a look. Sydney traded sideways, came back. Have a look at Breezy, Adelaide. Perth. What did they do in that time? They all doubled. Or more. Right. But in the last ten years, or between 2007 to 2020, they all went sideways and went and did nothing. So that's why, like I'm talking before about that example, I would be looking at where can I double my money in the next five years and then work and double it again in the five years after that. And then I'd probably come back to Sydney and I'm a Sydney boy originally and I've made great money here. But I understand the market is cooked and it is unaffordable and I do not see any way up in the next 5 to 10 years. I honestly don't. But if you look at those long term averages and see how they sit. That's why I laugh, because so many people, people that like big names in the industry have said and I'm like, Dude, how can you say that? Like it's. Yeah. If you look at those long term trends, it's so obvious the way that it plays out. And obviously, like I'm a I'm a, I'm a property, you know, boy, you know what I mean? Like, I love it on that end, so I know from that end. But that's all I'd say. Stress. How? Have a look at that. And I think you'll be surprised, man. And there are a lot of graphs out there around that as well, that show that breakdown of that long period. And then the all the other markets peak in in that time as well. It would be interesting read for you then. 

Bryce: [00:51:14] Well, I guess I'm going to have to take one for the team, become a client, then come back on the show and tell it Tell everyone where The regional Areas are. 

Alec: [00:51:26] As soon as your in as a client, you're not going to want anyone else to know. 

Sam: [00:51:32] Because that's the make is like literally. Yeah that's that's exactly what is because I try and keep where we buy under wraps for as long as possible because that allows us to get the best deals, the biggest discounts for as long as possible. And then when areas start to go nuts, that's where we're where we don't really care so much because algo us and our clients have made so much money in those times. They've bought in early, they've made discounts. The market started on a bull run. That's perfect. It's fine to kind of talk about it at that point. Then you wanna then you go on podcast. Yeah. And so it's, it's yeah, it's a funny thing. So it's, it's our people always laugh about how cagey I'm about it, but it's because like we're very diligent on what we buy and and mean. I handle every deal that comes through the business. We're pretty decent size now. We are one of the one of the biggest buyers in the country now. And but I still handle every deal that comes through because of the experience of me getting burned back in the day as well. Every property for every client is crucial. Like if one person gets a dud or overpay for something or buys in the wrong market like it just it it's it's it's terrible for that person, you know what I mean? And I wasn't. I wasn't just that only person, but obviously was in there from it. It was a volume game they played there. So yeah, I mean very diligent on that front and I guess that's why I'm so protective on it as well.

Bryce: [00:52:43] Well, if you'd like more information or if you'd like more some help from Sam and the team. Reach out to Australian Property Scout. They've supported this episode, so thank you so much. They can assist with building your portfolio. They also have their own podcast called Scouting Australia Podcast soon with I imagine plenty more tips and lessons and everything that we've spoken about today, but I've genuinely learnt a lot. I don't know if I've left any clearer on what my strategy is, but it's been super interesting and I know that a lot of people out there, whilst it might be the owner occupier sort of strategy, might be out of reach, it feels like there are other alternatives to at least get into the property market and start in alternative ways. If it's not in my hometown of Sydney or Melbourne or some of the capital cities. So. Sam, thank you so much. It was great. 

Sam: [00:53:32] All right, boys, thanks very much for having me on. 

Alec: [00:53:33] Thanks.