Episode 6: The Property Investment Toolkit: Strategies for Long Term Success
Smart property investing isn’t just about picking the right suburb – it’s about building a plan that supports your broader financial goals. In this episode of Navigating Property with Ben Plohl, Ben is joined by Devan King, the founder of Ikigai Wealth, a full-service financial advisory firm that helps Australians make better decisions about money, risk and wealth creation.
Ben and Devan unpack the essential elements of a successful investment strategy – from defining your ‘why’ to managing risk, understanding cash flow and reviewing your portfolio over time. They discuss how property fits into a diversified wealth plan, and why treating your portfolio like a business leads to better results.
If you’re thinking about long-term planning or working with an investment property buyer’s agent, this episode will help you sharpen your thinking. It’s also a great listen for anyone considering the guidance of a real estate investment agency to help make more informed, confident decisions.
Darcy Milne
Ben, welcome to navigating property with Ben plohl, the podcast that helps you understand the property market, make smarter investments and navigate your way to success. Join your host. Ben plohl, founder of BFP Property Group, as he breaks down real estate trends, interviews experts and shares insights to empower your property journey.
Speaker 1
Hello, coming up on this episode, we are going to chat about the property investment toolkit. We’re going to dive into key strategies investors need to consider to ensure long term success. We’ll also chat about how property can be used to hit your wealth creation goals. Here we go. So you may have decided to kick start your property investing journey and are a little unsure where to start. Property Investing can be daunting, especially if you’re early on in your journey. You don’t want to make a mistake obviously buy lemon or overpay. On today’s episode, we’re going to set the framework you should follow to ensure you maximize your chances of success. To help me, today, I’ve asked Devin King to join me. Devin is the founder of ikigai wealth, a full service financial advisory firm with a life centric approach that helps people make great financial decisions. Devon, welcome to the podcast. Thanks. Ben. Great to be here. Tell us a bit about yourself, your firm. How did you end up in advisory as well? That’d be interesting.
Speaker 2
I think, like a lot of financial advisors. I ended up as a planner by accident. I actually studied engineering and drafting many, many years ago. Just didn’t really enjoy being stuck behind a computer all day. Decided to get a role in sales, and that led me to the finance industry back in South Africa, had my own wealth management business there for almost nine years, which I sold in 2016 moved across to Sydney, started again. Got a job for a couple of years to learn the landscape, and then started ikigai in the middle of the two lockdowns during COVID.
Speaker 1
It was exciting. Yes, tell us a bit about the name ikigai. Moving
Speaker 2
to Australia was great from many, many perspectives, but having done my own thing for so long, I felt kind of stuck being an employee and wasn’t quite sure how to figure out my own path again. And I went to a life coach that helped me start my business, but also ikigai is actually it’s a Japanese phrase, and a lot of life coaches use it in their framework. It essentially means a reason for being, or a purposeful life. And that really spoke to me in terms of how planning should be done, and how you can have a bigger impact on people’s lives than purely the numbers and the tax it’s how do you use their money to have a big impact on the things and the values that are really important to them?
Speaker 1
Absolutely, I’m a huge fan of advocate for the financial planning industry. I think it’s something that service that I think everyone should have access to, or should be utilizing. And I guess in our business, in our property advisory business, we spend a lot of time on the planning side of things. I’ve been around property for a long time. It’s paramount. So there’s a lot of things that you need to consider for even thinking about buying a property. Talk to us about your process in in how you kind of go through that wealth management process, or building our plans for your clients. Yeah, absolutely. And
Speaker 2
you’ve spoken about having that plan and that. I feel like a lot of people go through life thinking just if I accumulate assets, it’ll take me to where I want to go. But a lot of them haven’t actually identified where that place is that they’re trying to get to. So we’re very big believers in starting with the end in mind, having a very clear picture and vision. What you want your life to look like. What do you want to be doing? Who do you want to be spending it with? How do you want to be spending your time and then using your financial assets that you have available to you, to take you in that direction in the most risk free manner, essentially. So yeah,
Speaker 1
I guess when you talk about, say you’re in your 30s or something, and you’ve got to think about, well, what does your life look like in your 60s? I think it’s I find it always challenging as well. But what kind of process do you take your clients through to start thinking about, what is that end goal? Because it’s one of those things that I kind of struggle with too. What is the end goal?
Speaker 2
It’s not necessarily just the end goal. It’s we look at a kind of whole of life approach. I think traditional planning focuses very much on retirement and live rudely now, and one day you’ll have lots of money in that we prefer to zoom out and work out. Having money in your retirement years is very important. But how do you balance that with living your best life now as well? And how do you achieve both of those things? We take our clients through a process to understand their personal values, their drivers in life. You know what really makes them happy? Who are they? We use that as kind of their North Star to set their financial goals. We never want their goals to be in conflict with their drivers and who they are as a person. And that’s the way, if you achieve a goal that has a big impact on a driver that’s important to you, that’s how you find fulfillment and happiness through your mind. You
Speaker 1
hit a really good point there where traditional planning, perhaps, is about live frugally now and then, have a great retirement, but especially post COVID, I think people’s attitudes around money or spending and investing definitely has changed. I know for me, my family, it’s changed. I think enjoying within your means throughout your life is crucial for me. I’ve got two young daughters, so there’s things that we want to do now that will shape their future life in terms of travel. Travel is really important to us, so we spend a lot of money on travel every year, right? And I think that’s something that is crucial again. So it’s about coming up with what those important. Aspects of people’s lives are and then building assets or whatnot to help them, I guess, live that life they want.
Speaker 2
Yeah, absolutely. And travel is a great example. People often feel guilty spending money on travel because it’s not cheap. But if that really is one of your family’s big drivers, and it’s, you know, it’s about adventure. It’s about time with the family. It’s about downtime, something that really brings fulfillment to your life, you should be allocating your budget absolutely something, absolutely,
Speaker 1
absolutely, I always say it’s an investment, right? Well, that’s it. Okay. Where do you see property fitting into the grand scheme of things around plans, with with your clients, and personally, what’s your kind of view on property as an asset class? We’ve
Speaker 2
got a very big property culture in Australia, so most sport, yeah, exactly. A lot of people, or most people that come to us, property is the main question they have. You know, whether it’s buying their own home, or can they buy an investment property, or how do they buy their first investment property, and that sort of thing. So property is always one of the biggest parts of our discussions. We’re not buyer’s agents, so we don’t recommend specific properties, but we understand the power of leverage and that sort of thing. So we help people build out projections that show them look if you take whatever you have and invest it, this is what it’ll look like long term, whereas if you take that and borrow some of the bank’s money, use leverage, how could you get there potentially quicker as well? So it’s always that type of conversation for certain clients. Others, it’s how they’re going to get into their first home and that sort of thing, but it’s a very big part of their overall life. And strategy
Speaker 1
would be any particular scenario where you would say perhaps property is not the right fit for for a client, perhaps they’re young or or even approaching retirement, where investing in property at that stage mightn’t be the right fit for them.
Speaker 2
Yeah, absolutely, we always have a life first approach rather than product first approach. So we want to identify what is the life that they want to live and what’s the most appropriate asset that’s going to, you know, get them there in the best way. So, you know, mentioned I have a client recently that was pretty young. They came to me they wanted to buy their own home. When we went through the planning process, it turned out their plans are to move to Japan in two years time. I said, you know, purchasing your own home. The home they wanted to buy was an apartment in a building they knew didn’t have great capital growth. The conversation then turned to, well, if you’re going to buy property, potentially an investment property is better if you’re not planning and being in Australia for much longer and have something that’s going to have higher growth, or something like that. So that’s often a conversation and retirement, yes, I often get people in retirement, or very close to retirement, saying, Oh, we want to buy a property and live off the rent, not realizing what level of asset you need in retirement to, you know, to get a yield high enough to cover your lifestyle expenses. And that absolutely, especially
Speaker 1
if it’s residential property where, yeah, it’s, it might be, if it’s a capital city asset making a 4% or 4.5% gross yield takeaway expenses, yeah, that’s not huge, right? You’re probably better off putting that money in the bank. Yeah, and passive sort of ETF or something like that, yeah, it’s
Speaker 2
about measuring how much they have as well. Because the, obviously, the limitation to property is you can’t draw down on the capital, correct? I always tell people you can’t just sell a bathroom if you need access to cash, you’ve got to liquidate the whole asset. So take some careful planning to work out if that’s the best option 100%
Speaker 1
and when we see people come to us, and there’s been times where we say, I don’t think properties the right fit, whether it’s their borrowing capacity or whether it’s their access to to cash or their available buffers, they’ve got access to property is a great asset class, and I’m a big advocate for it. But there’s obviously other products that you can consider, and properties perhaps not always the best fit for some people. I think for the majority, it’ll it’ll work phenomenally well, but, but others, perhaps not so much so. So so I guess we wanted to talk about, you know, the property investing toolkit, right? So I guess just to give listeners a bit of an idea as to, you know, things that that you should go through, be it on your own, or with a with a with a planner, or if you’re using a buyer’s agent, one that that’s qualified to give you some support around that. But I think you’ve touched on too, and it sounds as though you spend a bit of time going through that with your clients, it’s the defining your why. It’s why property? Why investing? What are you working towards? Goals and objectives? Sometimes not so straightforward in in really documenting, but it’s really defining what’s important to your life. Fair to say,
Speaker 2
yeah, absolutely. And that’s the whole ikigai concept. Is purpose. First. It’s about identifying what’s important to you and using your money in alignment with that. You know, I always thought if you set a fund that purely analytic or purely financial goal, I want to have a million dollars in a share portfolio or property portfolio, whatever it is once you hit that goal, if it’s not linked to anything meaningful in your life, you can’t actually use it for anything, because if you’ve linked your success to the million dollars, once you hit it, you can’t draw it out to buy a home or go on holiday or something, because then you won’t have a million dollars anymore. Now you’re not as successful anymore, so you’ve got to link your money to something that truly moves. You and makes you feel happy and fulfilled. That way, you can actually measure that you’ve achieved it, and it makes you feel good about accomplishing that goal. Yeah, absolutely.
Speaker 1
Next one I’ve got is risk profile. I think it’s crucial understanding what level of risk a particular investor is willing to take on, and that can then result in defining Are you open to only capital city assets, or are you open to consider regional assets? And there’s probably a misconception around how people define risk profile, but in your business, how do you sort of go down the path of, I guess, trying to narrow down what a client’s risk profile is? Yeah,
Speaker 2
there’s the standard ways planners use, you know, they get a questionnaire, which I don’t love because it tries to psychoanalyze someone in seven questions, which I don’t believe works. Well, it comes down more to the conversation with the client, asking them leading questions to really understand what their tolerance is for debt, and that people often don’t think of property as a risky strategy, and it isn’t to certain degree, but when you ever you’re using debt and that sort of thing, there are certain risks, like losing your job and that sort of thing, which we need to accommodate for by way of liquidity or whatever it is. And very often, people we’re speaking to don’t realize that. And yeah, it just takes a certain structure to make them feel comfortable that there’s a backup plan that sort of thing as well. Yeah, absolutely.
Speaker 1
I guess I touch on it to a light degree when, when I’m speaking to clients, and it really just helps me define, okay, is it, you know, are you open to a capital city asset, or are you open to it, to a regional asset that may outperform an alternative? And it’s Yeah, asking certain types of questions, and then you start to get some really interesting answers so you can then go away and and give that client the best advice around locations or whatnot. It’s one off topic question. But I guess for in my industry where what we do in terms of telling people or giving suggestions around asset selection or location selection, then we’re a completely unregulated industry, which I quite very opposed to. I think we should be heavily regulated. I guess, as a planner, you’re quite regulated. But what’s your view on on our industry around as unfortunately, it’s a very low barrier to entry. Industry probably heard some, some pretty shocking stories, yeah, probably
Speaker 2
no more than you’ve heard about financial planners, though. Yeah. Look, I can’t comment on the regulation of buyer’s agents and that sort of thing. I’m very pro using professionals in any industry. It’s about shopping around, making sure you have you resonate with that person, and there’s rapport. Very often, I’m talking to clients if they’re buying their own home, I explain it that if you’re buying your own home, it’s very often an emotional decision. You’re buying in the area you like, near the people that you’re friends with, and that sort of thing. You can definitely look at doing that on your own, unless you want to look at off market properties and that when it comes to investing, though, investing is a completely different discussion. You’re no longer making an emotional decision. You want if you’re buying an investment asset, you want to make sure that you’ve bought the best asset that gives you the best chance of capital growth and income in that and speaking to a professional who knows that a lot more than the average person who has a different career goes a long way. And yeah, every time one of my clients has used a buyer’s agent, there’s always been a great outcome that’s good on that. Yes,
Speaker 1
the next point I had was your view on constructing portfolios and what’s the again. Now, talking from the product side of things, what’s the kind of process that you would go through in terms of giving a client of yours advice or suggestions on which path to go down to, in terms of selecting the right products to help them get to where they want to get to?
Speaker 2
Yeah, look, it still comes down to starting with that end goal in mind. So identifying, you know, let’s say someone’s 40 years old. They’re going to live to 100 What do they want to be doing over the next 60 years? And let that dictate how they should structure their investing and that sort of thing. You know, I wouldn’t be a financial planner if I didn’t talk about things like diversification and risk and that sort of thing. There’s no doubt going heavily invested in property on its own can have great results, but we always want to balance that out with things that are potentially more liquid and can provide a bit more of a backup or protection behind that as well. But yeah, it’s, we always make sure it’s client LED. And you know, how quickly are they wanting to achieve their goals? What level of risk are they willing to take? I was going to mention earlier as well. You’ve often got couples when you talk about risk profiles, and that they could be different, different risks and that so, yeah, it’s, it’s a challenging conversation to have, and it’s about finding that balance. Yeah, and
Speaker 1
just on your portfolio diversification. I guess I’ve seen phenomenal, very successful investors who literally have their entire portfolio in one suburb. I guess diversification in theory is a great concept. You asked me, I’ve got the portfolio spread across four cities, so it’s probably overly diversified, but, but I’ve seen your games. What’s the view on, you know, diversifying your property assets? Is there a science to doing it, or is it really concentrating on a particular market is also okay, which I feel it is provided. You know. The market really well, yeah,
Speaker 2
that’s what I was gonna say, is if you know that market extremely well, then potentially concentrating in that could pay off really well. I always explain people as someone like Elon Musk didn’t get become a billionaire through diversification. You know, he’s heavily invested in what he knows. So it’s definitely a way of being more concentrated. Can give you the opportunity to grow much quicker, accelerate your results. But then it comes down to what’s your appetite for risk at the end of the day, like I’ve met a client before. They came to me and they had four properties in the same complex units on the same thing. Would I necessarily do that for myself? I don’t think so. But
Speaker 1
well, ask Harry trigger off what he thinks about diversification. He owns only apartments, right? So he’s got $20 billion worth of apartments across the country. But, yeah, I think if you have some intimate knowledge on a market, and you can buy really well, or if you’re a developer or something, you can add value, then I think that’s great. It’s something I get asked about a lot, and I’ve spent years and years, I guess, refining. It’s about research methodology around, okay, where should a particular client invest? What’s the sort of location criteria that they should consider? I think for us, we always go through the process of looking at the health of a market from a economic perspective, making sure it’s got a diverse economy multiple economic drivers, allows for creation of jobs, and it’s not relying on one industry in a mining town or something like that, and having a robust population base and not too small, and you can see that sort of spend from an infrastructure perspective that’s going to create economic growth. Any things that you’ve seen work well from a location selection sort of perspective, or any takes on what you would want to see in a market that gives you the confidence, I guess, that it’s actually clients that’s investing in the right location. It’s
Speaker 2
a little bit removed from how deep we go with clients. I did, generally do, refer out to buyers agents if they are going, if my clients are looking to invest, if someone’s looking for investment properties, from what I’ve seen, they’ve had better results when they’re purchasing in more regional areas, not in your capital cities, both from a capital growth perspective, but also the level of negative gearing or the yield that they’re getting from those properties as well. But I’m certainly not an expert in locations. If, when I’m purchasing investment, probably I use a buyer’s agent. Yeah, it’s not my forte, and I leave that to you guys.
Speaker 1
Yeah, absolutely. The next one is you’re all over its cash flow, which I guess, as any investor, and be it investing in property or other asset classes, I think understanding your cash flow position is crucial. And the old saying cash is king is very true. I guess, when you’re working with clients, mapping out plans, how much emphasis do you put on, you know, really understanding the family’s cash flow and what level of detail? Yeah,
Speaker 2
absolutely, one of the most important things. So we build out every single client we speak to, we build out a 50 year cash flow projection for them, personal cash flow, we explain to them that look anything over five years is probably pretty inaccurate, but at least it’s providing us kind of a flight path on where we’re going, and we can tailor it along the way to update it based on how circumstances change along the way, but you’ve got to be aiming in a certain direction. What we’re trying to do with cash flow, with the client is obviously the accumulation of assets immediately is going to lead to better net worth down the track. But what’s the impact on your cash flow in the present? We constantly want to be measuring what’s the trade off for future wealth versus short term flexibility as well. You don’t want to be impacting their lifestyle, of the young family and that too heavily, just so that they have money in 20 years time. There’s got to be that balance between the two, and we’re constantly measuring those two items, those projections,
Speaker 1
I agree. I think, yeah, for the next five years, perhaps you can reasonably forecast out your your cash flow. Anything beyond that is really, really tough. And I always go back to my days as a CFO chartered account by background. And it was you be asked by the board, you know, build us a 2030, year plan. It’s like, well, you know, we can reasonably say the next three, four years what the business will do, but anything beyond that is really open to quite a bit of risk. I guess it is, yeah. And like you said, it’s a fly path, right? It’s a it’s a model.
Speaker 2
Well, yeah, we use it as the direction that we’re going to aim. And actually, if you get in an airplane, the pilot’s got a flight path that they’re going to follow, and they’re going to accommodate for weather changes along the way. That’s the same as your cash flow projection. We’re aiming in a certain direction, but we’re going to accommodate for circumstantial changes along the way. But if you’re not aiming anywhere, it’s anyone’s guess where you’ll end up,
Speaker 1
in terms of, you know, asset structuring. So we’re talking about, you know, who holds assets. I know it’s going into kind of legal and sort of tax stuff. Do you see your clients predominantly buying assets in personal names. Are they getting advice to get things like trusts, family trusts, or self managed super fund, I guess is one that you probably see quite a bit of now. Yeah, absolutely.
Speaker 2
I mean, all of those. I think most of what we see younger people starting in their own names. And then the more they accumulate, they start branching out into using a family trust. And then, depending. On the balance in their Supers. It often becomes, yeah, a self managed super fund conversation down the track. I’ve got one client who has 19 properties. They’ve spread out between his his wife’s name, the trust, and an SMSF. So, of course, depends. Yeah,
Speaker 1
I always say that my accountant always gives me that advice to where it’s try to absorb as much of that land tax threshold in whatever state you’re buying in your individual names, and then, I think, once that’s exhausted, then go into a structure. Unless you’re in a an industry, or you’re running a business, you’re in a you’re a doctor or a brain surgeon that can easily be held for liability or whatnot. So protecting your assets is great. So
Speaker 2
something I would also suggest, though, is, if they’re going to use different structures is to understand how those structures work. So for example, I have a client recently that came to me. They purchased a property in SMSF before they met me, they didn’t get any advice on how that works. So the more money they had, they just paid off that loan, not realizing they couldn’t use that equity to roll into another property. So now they’ve just got a really well paid off property, which, yeah, they could have potentially used that cash for? Yeah, absolutely. And
Speaker 1
I think the one thing that is probably not spoken about much is people that are buying properties in a self managed super fund, once they hit retirement, these properties will have to be sold, right? Because you can’t access that equity. You can’t live off the equity, and in that property, once you’re retired, you can’t draw a pension from that, that’s, there’s going to be, at some stage, a mass exodus of properties being sold to fund pensions for people, yeah,
Speaker 2
100% and I think that’s where a lot of people don’t realize. I think people think we’re going to buy properties and we’re just going to live off the rent one day, not realizing what how much you actually need in property to live, or 4% of that, but in an SMSF as well, the older you get, you’ve got minimum drawdowns as well. So that often does end up in a bit of a cash deficit in the future, and you’re forced to liquidate those properties. So it’s about having diversification then as well, if you want to hold them longer. And there takes quite a bit of planning around that.
Speaker 1
Yeah, absolutely. And I’ve seen a couple of clients over the last 1218, months that I’ve approached retirement, they’ve got paid off properties, they’ve then sold them, and then just put all the funds into ETFs, or passive kind of index funds or something, to just live off that income source. And it’s got then liquidity, so you can draw down on the capital quite easily, as opposed to property, which is really, really challenging, something that I stress with my clients, and we do on an annual basis. It’s like sitting back and reviewing your portfolio with your clients, and you’ve come on board, you’ve built a plan for that client. What’s the typical touch points that you go through moving forward? It
Speaker 2
depends very much on the client and what their level of support is needed. We almost run our advice business like a coaching business, so we do provide advice, obviously, like a normal planner, but then there’s a lot of hand holding and support along the way for people that need that. So a lot of our clients will meet with quarterly and those quarterly catch ups are not a review of their investments or anything like that, but talking about cash flow, what’s working, what’s not working, what changes have you had recently? We believe that the more involved we can get to give them the data behind any decisions that they’re about to make goes a long way. Like compounding works. You know, compound interest compounding works in your decisions as well. If you the more great decisions you can make, those great decisions compound on each other Absolutely. Yeah. So we have some clients that we only meet once a year where we’re doing limited work for them, just managing a portfolio, but most of our clients we’re meeting at least three times a year to go through everything. Last
Speaker 1
point that I wanted to talk about in the property investing toolkit was, was the power of leverage, right? So I think that’s what, what I find most appealing with property there’s not many asset classes that you can go to a bank with a contract of sale and they’ll fund 80% quite comfortably, if not up to 90% if you’re a nurse or a different profession, you can get 95% LMI waiver, which is pretty cool. I guess with leverage comes risk, right? Obviously, with which something we’ve seen over the last few years around the rate hiking cycle, and sure, you’ve probably seen people that have panicked and had to sell down assets. I saw it as well, that perhaps some clients that that over committed. What’s your take on leverage? And I think it’s the responsible use of leverage is probably the point to make. There’s
Speaker 2
no doubt that leverage is accelerates your wealth creation over time. Absolutely the responsible use of it as well, and also not looking at your cash flow purely in the moment, but thinking about what’s coming up. So for example, a mortgage broker is going to do an assessment and say, Yes, you can afford this property, but they haven’t considered that. You’ve got three kids all starting private school in three years time, or something like that. You need to factor that, and you don’t want to be over committed. Now, when those future expenses come in, and that’s where it’s it’s good to plan ahead or in advance for things like that. But yeah, 100% using leverage is going to get you to where you want to go quicker, but it’s about just thinking of those other things that could throw you off that path as well. Yeah, I
Speaker 1
always say it’s the responsible use of leverage is not over leveraging yourself and and preparing for rate hike cycles, right, which inevitably can. Come, we’re probably in the process of seeing a downward cycle. Okay, great, but yeah, a lot of people did feel some pain over the last few years. Yeah, and
Speaker 2
just planning for that as well, having liquidity in your portfolio and that, like I was mentioning before, I spoke to someone recently, they didn’t become a client because I told them, probably not going to be having too much of a property conversation that $3,000 in savings and we’re leveraging against an existing property into a new one earning $70,000 a year. I’ve splint and that is a massive amount of risk that they lose one month’s rent, they’re in the red, and they’re in trouble, and that’s where you’ve got to be careful. You’ve got to be carrying. The more properties you have, the more liquidity you need to support things that could potentially go wrong, like maintenance and that sort of
Speaker 1
thing. Yeah, absolutely. Well, Devin, thanks so much for joining me today. It’s it was a good chat. Hopefully listeners, you know, get some some really good value out of our chat, and I’m sure they will. But No, how can people reach out to you or find you on the on the website. So if you’re on online, our
Speaker 2
website’s probably the best. Yeah, ikigai wealth.com today, yeah, yeah, awesome.
Speaker 1
I will put you put it in the show notes, but and I appreciate it. Thanks for joining us. Lovely to be out. Thanks very much. Ben. We hope you enjoyed this episode, and the key takeaways for you are, have a robust financial plan. Look at diversifying into different asset classes with property you need to go through a methodical process, or the toolkit, as we’ve called it, to give yourself the best chance of success. And a financial advisor will help you understand your risk profile, build a plan that considers your goals and life stage big. Thank you to Devon for joining me today and sharing his knowledge and we’ll get his details in the show notes. Feel free to reach out to him. Thank you.
Darcy Milne
Thanks for listening to this episode of navigating property with Ben plow. Be sure to click follow so you never miss a new episode, and for more insights, visit bfpproperty.com catch you next time you.
