Book Review – Smashed Avocado by Nicole Haddow
I first picked up this book at my local library, and while I know the name is a reference to typical Millennial cuisine, I also remember listening to a podcast recently where a young couple were building a property portfolio and they called themselves Smashed Avo. At first I assumed that Nicole was one half of that couple, however, after reading the first chapter I saw that Nicole did not own a property until after she turned 30, and I remember the woman in the podcast bought her first property either in her late teens or early 20s.
I was pretty confused at the start, but it turns out there are two property investment bloggers with essentially the same name, so I guess you can at least understand why it was a tad confusing.
https://www.smashedavocado.net/ – this is the blog associated with Nicole Haddow
https://smashedavoaustralia.com/ – this is the blog associated with Simon and Em (the couple I heard on the podcast)
Review
Alright, now that is out of the way, time to review the book.
I need to start out by saying that I am definitely not the target demographic for this type of book, so my review may be a bit biased as I could tell this book was not written for me in my position. The book’s intention is to somewhat dispel the myth that property ownership is impossible for millennials. It goes deep into why property ownership is deemed to be so difficult for today’s generation compared to previous generations.
It talks about the two main reasons why property ownership might seem out of reach for today’s younger generation (even though technically I am a millennial), and that is the significant rise in property prices (particularly with respect to median income) and the higher cost of living associated with a modern lifestyle. The book definitely acknowledges that it might be harder than previous generations, but the best thing it does do is at least go on to say that property ownership is not impossible and that although it will take sacrifice, it is definitely an achievable goal.
I did also appreciate how this book did not just constantly rant about how much easier it was for earlier generations, it did talk about the ridiculously high interest rates that were faced in the late 80s early 90s. As well as long term industrial disputes which occurred which significantly affected income. I do appreciate that the book did not look back on the past with rose tinted glasses and acknowledge the reality that there were hardships faced by earlier generations.
Smashed Avocado explores a variety of different ways that younger people have been able to step into the property ladder. It explains that due to the skyrocketing property prices, that being creative in your approach is almost a necessity for young people to being property owners. Some of the creative approaches are the following:
- Rentvesting (this was Nicole’s approach)
- Renting out rooms in your home
- Adding Airbnb accommodation (using a tiny home, granny flat or self-contained studio)
- Renovating and flipping properties
- Moving to more affordable areas
There are several case studies of people who used some of the above strategies to get a foot hold into the property market. All of them did end up with a similar message though, and that was it took a lot of sacrifice to reach their goal. Property ownership is not an easy goal and unless you are very lucky, there will be sacrifice every step of the way.
Nicole talks about her sacrifice having to first save up for a deposit (living with her family, reduced social gatherings), and then even when she finally got a property the sacrifice continued. She could only afford an apartment on the outskirts of Melbourne, her commute to work was long and she become isolated from her friends. And even when she owned the property, she still needed to stick to a careful budget to make sure she could make the repayments.
That would have been my favourite part of this book, it really did show an in depth look at the reality of property ownership. Nicole went into detail about the goal of owning a property impacted her life, which then continued into after achieving the goal. This sort of resource would be really useful for any person who is currently looking at getting into the property market.
Capital Gains Tax Issue
Now I might get into some of the parts which I did not like quite as much. This first one, may be relatively minor, but for some reason it really did stick with me. I will quote the paragraph, so I do not misrepresent the words. This section is in relation to capital gains tax for reference.
“Here’s a sense of how it works: if you bought a place for $550,000, and sold it for $650,000, then you made $100,000. That ‘income’ is added to the money you’ve made through your salary. It’s kind of like having a second job. When you have a second job, you’re usually taxed at 50 per cent, so any capital gain you make will also be taxed at 50 per cent. But while your boss, if you have one, most likely withholds tax from your salary over the course of the year, so you don’t owe a lump sum at tax time, that’s not the case with property. You’ll need to be prepared to pay up, because your taxable income will be higher.”
I had to read that section a few times over, just to make sure that I was not making a mistake while I was reading it. But eventually I realised I was reading it correctly, and it was wrong (unless there is some special CGT law in Victoria I am not aware of). I know it may not be a big thing, but I feel this is a relatively major mistake to make for a supposed educational book, so it really should have the facts correct. I would have assumed someone would proof-read it to make sure all the information was factually correct, but maybe it was just missed?
Anyway, my understanding of CGT for the above situation would be more of the following:
“That $100,000 income is added to your existing income and is taxed at your marginal tax rate for the year. Although given the significant increase in income it is likely to push you into a higher tax bracket. This is only applicable if the property is only owned for less than 12 months. If a property is owned for over 12 months, then you obtain a 50% CGT discount when you do sell, this means you will only add $50,000 to your taxable income. This is only applicable to Investment Properties as PPOR are CGT exempt.”
Positive Gearing Issue
There was another section which also bothered me slightly, and it was talking about the cost of property management with the expected cost to be around 6.5% of rent received. The book then said “But if your property is negatively geared, then these fees are tax-deductible.” Now, I could be wrong (but I am pretty sure I am not), but even if your property is positively geared then these fees are tax deductible. There is a bigger section on positive vs negative gearing, and it talks in detail about only Negative Gearing has tax advantages. I have found this sort of talk in a lot of property investment books which do not promote positively geared property as much as I think they should.
Flow Issue
The final issue I did have with the book, I just do not believe it flowed as well as it could have. It seemed to jump around a lot and sometimes it did get confusing to keep up. For example, in Chapter 16 it starts out by talking about potential for homelessness and how a woman is doing wonderful things with a charity to provide affordable housing for people to rent who would otherwise end up on the streets. Then, in the next paragraph without a new heading or anything, it goes on to talk about a woman who specialises is small development homes and suggests it could help people be able to afford homes.
Now, they were somewhat related, but this sort of thing was pretty regular throughout the book where it would talk about a generic issue faced by people trying to get into property. And then it would randomly jump into a case study of somebody who did something creative to get into property. The case studies are great and really inspiring, so I am really appreciative they are in there, but I just think they did not flow too well with the rest of the book.
Specific Issue
I am not sure if this is really an issue with the book, because I feel like it is a common issue among just about every property investment book out there. The issue is that it provides a lot of specifics regarding property in the time the book was written, but things change so fast that they soon become outdated. This book was written in 2019, and even though it has only been 2 years since it came out. Interest rates have changed, First Home Buyer Grants have changed, stamp duty exemptions have all changed. Property prices have increased dramatically in some areas. Some strategies are potentially no longer viable as well. While I understand it is really useful if you were reading this book in 2019, and more specifically if you were in Victoria, if you do read the book a few years down the track it might be difficult to get the same impact.
Finally, I remember reading in an early on chapter where it was talking about property prices over the past few decades, property ownership among demographics and all sorts of statistics. It was in the first chapter and it was difficult to understand and follow. I do hope it does not intimidate too many people inexperienced with property as, although it was factual, it was quite heavy and difficult to digest. In the end the summary was just, prices gone up, ownership gone down.
Conclusion
Maybe I could be a little too pedantic with some of my criticisms, like I said maybe because the book was not written for someone in my position, I did not get a great deal out of it. But I always like to read about potential strategies to make property investment more lucrative, so I did learn a thing or two.
Also, I have similar gripes regarding millennials not owning property, but continuously complaining about how expensive it is. If there is a book that can help convince millennials to sacrifice and make it work, then that can only be a good thing.
If I knew someone who had minimal experience with property, then I would definitely recommend this book to them as I do like how it goes into really fine detail about a lot of aspects of property ownership.