- Good morning ladies and gentlemen. It's my absolute pleasure to have the head of JR Financial Solutions which is ahead of mortgage broking and lending James Brunacci with us this morning. James welcome on board- - Thanks Sean. Prosperity Point Episode two. I couldn't have hoped for a better guest actually than our very own financial wizard. So let's get straight into it. What do you see happening in the banking industry over the next five years? - It's too early in the morning for that. I've only had half of a white mocha. - So tell me about this. Let's get started with the soft stuff first. So you said it's up to me to decide what I surprise you with in the morning. So you were too polite to go for a scotch first thing in the morning. - I could say to be clear your asked me for a scotch in the morning and I turned that one down. - So now everyone knows that I'm okay to have a scotch at 7:30 am which you're too polite to say yes to, which is good. But with regards to our white chocolate mocha now. What are your thoughts? How do you find it? If you could describe it in a connoisseur sort of way. - Well you talked this right up. You said you had this every day. I have mocha from time to time. But, I'm really impressed. I love white chocolate so it sort of worked. I used to have a little white hot chocolates from Clay James when I was like 12. - Yeah. - They were my favorite thing. I don't know if they still got them. I haven't had one in probably 10 years. - I think where I learned about the white chocolate mocha was when I combined my love for hot chocolates and coffee at the same time. - Yeah. - But I needed something with a bit more caramel sort of essence. A bit more vanilla drip to it. So I can't complain. And yeah, you're right. This is my daily coffee and I have a little time-saving mechanism because I'm so close to the shop. I've been going there for the last five years. - Yeah. - Every morning I actually give them a call. I just say, "Hey, good morning. How's it going? There you go. Yep, sure. Cool." "Your coffee will be ready in 10 minutes." So I save a lot of wait time of coffees in the morning and then I just get all these angry white-collar professionals just staring down at me because I go there I pay, take my coffee and then I'd jet straight to work. So I did the same except today I had to order two. - Yes. - So they were asking me- - confused everybody. - It confused everyone, exactly. So they were asking, is that for you or T? And I said, it's not for me or T. It's actually for my colleague for the episode. So here we are. And we were talking about... First of all you're an absolute legend. Thank you so much for making it despite your hiccup last night. Do you want to tell everyone what happened and your passion for your indoor football? - So Sean's been setting up this podcast for a good what? Four weeks or three. - Yep. - Had to move it from the original date. We're going to do everything locked in for today. Last night nine o'clock I'm playing 6-a-side outdoor and I suffered a bit of a mishap. The shoe is gone. The foot's about three times its normal size. So I had to get the wife to drive me into the office today. - If you've been literally- - Jumped up the stairs She wheeled me into office. - And you've been wheeled around everywhere this morning so far. - It's not my most dignified morning. - But you're here- - I'm here. - I did it for you. You know. - And you were first- - Such a good thing to do. - We'll give you that your first in best rates. - Awkwardly standing outside the lift unable to hop through the door. - Yeah. But thank you for your commitment. And what I wanted to get from I suppose that the chewing your brains aspect is just a bit about... First of all 2020 has been a crazy year. - Yes. - For everyone. And there's been a lot of learnings I find. And I feel that you're such a value add to a lot of the clients that we pass on to JR Financial solutions because you take an approach of education along with the finance service. Is that because you're passionate about what you do personally like you actually love the world of lending and finance or is that because you prefer the service side where you actually help clients understand exactly what they're getting into. Or is it a mix of both? - Yeah it's a bit of both. What got me into mortgage broking was that need, that desire to sort of educate people. I think money is something that we all deal with every day. But so many people just really don't understand how it works. What strategies or structures make a difference. What ones don't. People would be happy to take their car to the mechanic but it's very hard for someone to go on pay money to get advice on money. Something about it doesn't feel all right. So mortgage broking was a real opportunity for me to be able to do that without having to charge people for it. It made it much more accessible. I could help out family and friends in a way that is harder if I had to send them a bill at the end of the session. So that education side is probably the number one thing that drove me into mortgage broking. And that I really love about the industry. The problem solving side it's just a fun part because with it- - Yeah. - Every person has got a different situation or a different scenario that comes up. And you literally just matching their list of issues I guess. We've all got issues don't we? Their list of issues against the list of lenders who might be able to take it. And try to convince someone that you really do want to lend to this person. It's a fun game at times. - You've instilled in me I think just personally even when I was personally working with you for one of the deals you've instilled in me that in the lending world it's more about painting the right story as opposed to just ticking all the boxes. - Yeah. Absolutely. - Do you see that being a good thing for lending in general? Or do you see that as it should be more black and white where if you tick those boxes then you do get access to a certain bit of lending or do you believe more in building that right story? It's like in law as well. - Yeah. - We've studied law, right? - We have. - We've got equity and then we've got common law. - Yeah. - There's a big difference there? - Absolutely. - That's a really interesting one. So on one hand, if you've just got black and white rules you end up with a lot of borrowers that miss out. They should be approved then they don't get approved because missed this box by a fraction. You needed 50,000 in savings you had 48,000. I'm sorry that's a decline. Silly stuff. I've had clients before that have for example missed a few payments on their credit card. But overall they've got the money in the bank. They've got the history. They've got the job. It makes sense. So you do want lenders that are going to be able to sort of work outside the box there but at the same time when you submit a deal that meets policy and the assessor comes back and says I don't like it. I don't know how many worse things there are in lending than that. So it does go both ways. What you really want is a good mix of lenders. - Yeah. - So you want those lenders that really just the box tickers. Tick tick tick. And you made your banks often fit in that category. Does it make policy? Yes it does. Approve the deal. But then a lot of your mid-tier lenders have that more creative approach where you can go and you can tell the story. But at the end of the day you're talking about someone wanting to borrow half a million $1 million dollars. It's a lot of money to lend based on a few pieces of paper. You might see a payslip and a bank statement. But if that lender doesn't feel like they know you then would you lend half a million dollars to someone that you've never met and never going to meet? - Well if we're banks this is a different story. I'd love to be a bank first of all which I'm not. But if I was a banker I do completely understand where you're coming from. - Yeah. - When we're talking about lending and ticking the boxes I've realized that of the last four years working with JR the more experienced the investor I work with the less they care about bank loyalty. But bank loyalty used to be something back in the day. Like when do you think the last time bank loyalty really was a thing in Australia - Putting a year on it is probably tough. But I would say that the internet killed bank loyalty. And as the internet has taken those strong hole it's killed it more and more. In the past your bank manager was the one that would approve your deal. So if I know you and you know me and you come and ask me for money you don't necessarily have to prove that you can afford it. I'll show him look you don't have a job right now but you're good for it. You're going to get your home. And I wasn't quite that bad. But it wasn't far off to be fair particularly in some countries like America. - Yeah. - But as the Internet's come in you've seen a lot more people playing the system. Learning the rules and trying to manipulate it. And that's where you saw regulators like ASIC come in bring in their responsible lending acts and things like that. That suddenly put the emphasis on the bank to make sure that you could pay a loan back. So if your bank manager approved you and then you let him down and didn't pay it back well he wasn't coming to you and apologizing. Right? - Yeah. - But now the banks lend money and you stop paying. The first place they look is should they have not lent you that money? And they can end up in court and paying fines for that. So that's really... That's narrow the lending market. But then at the same time as the lending market's narrowed. You've got internet ads and online banking and everything that has made it so easy to switch. But at the same time banks are paying to attract those customers. - I think so. - Rather than paying to keep their current customers. Because people are comfy. If we don't pay for you probably you won't move. And if you do we'll just pay to get you back later. But in the meantime we'll just milk you for the money so we can get our other customers cheaper. I mean it's an approach that works. They're not doing it blind. They're making money from doing it. But I think because it's changed over the last say 20 years or so it means that people are just dying to catch on to the fact that being with a bank for 15 years is hurting them or helping them. Really. Yeah. - The same customers I see that are with the same bank for more than three to four years. I think 99% of the time could get better deals elsewhere. - Not 100%. - So it's not that easy anymore as well when you just call up your current bank and say, "Hey this competitor is offering me this. Could you match it?" I think that bank answer is always no most of the time. Right? - Depending on where rates are going it's usually not no. Banks will help out but I describe this to clients as a game of poker. Right? You're calling your bank and you're saying, "Hey. Your rate sucks. How about you give me a better rate? And I won't leave." And they're saying, "Well you're not going to leave are you?" "I might leave." And somewhere in the middle they'll give you a rate. So something that we've actually done in the past is where a client will come to me and they want a refinance. The first thing we do is we go back to that bank. Can we get a better rate there. The bank will say, "Look, send it to the team. We'll find out for you. You have a 20 basis point discount." And then no worries. That's not good enough. We're gonna go to the other bank. The other bank approves it. Logs to discharge authority. And suddenly first bank comes back like, "Oh, you had a 20 point discount. How about an 80 point discount? And we'll give you two grand." - Right. There you go. - So stuff like that is rampant. And really what that comes down to is whether you wanted to stay with the bank that was willing to screw the first time. For rule of thumb I remember learning from my mentor back in the day was that you should change banks roughly as often as Australia changes prime ministers which unfortunately at that point was about once every six months. But in theory that actually means once every three years or so. - Yeah. - If it's more than two years, like more regular than every two years, you're gonna start building a bit of a bad rep for yourself with the banks. They'll see it. Had a mortgage, paid out a mortgage. Had a mortgage, paid out a mortgage. You can find that they may not want to lend you as much or as easily or give you as good a pricing. But at the same time if you're there five years or more you're almost certainly paying too much. - And is that the same? Does the same go for like private banking clients as well? Or is there like an extra sort of service that the other banks sort of can't offer? - Private banking is really different. On one hand you're bringing a lot more money to the table which is more money to the bank. On the other hand you're also really time pull. So probably you don't want to leave. - Yeah. - But then they've got to consider whether somebody else will come and just do all the work for you. It's the same game of poker. It's just got slightly different hands that have been dealt. - Okay. - And that poker game is like it's logical when you get to see it. If you're sitting on a property that you owe 95% on the bank's not gonna give you a better rate. They know you can't leave. Right. If you're sitting on a property at 20% over here you're probably going to have pretty good bargaining power. It's hard for them to guess that you're not going to leave. So the strength of you as an applicant really does make a difference in that. And that's the number one thing they're looking at in their retention terms. - Yeah. You mentioned something interesting about when lending happens let's say you've got ASIC that looks at who approved and then they can breathe down someone's neck if they've done the wrong thing. - Yeah. - Do you feel those changing attitudes if passed on to our clients which is the general misconception I hear more often than not is well banks don't really like lending anymore. And I couldn't disagree more because I realized that if you're a strong applicant on your own I feel a bank would still lend you based on your numbers and your story. But I feel the attitude shift is still that banks don't like lending anymore. What do you think being in the businesses of lending... How do you think that attitude shift can be a bit more clear for everyone out there? - Yeah. I think the attitude shift hasn't been so much they don't like lending as there's just so many more rules. So you had your responsible lending that came in the end of 2009. And then over about six or seven years that continued to get more and more intense. ASIC started looking more closely at these lenders and what are you doing? And then suddenly we have a Royal commission. And now the lenders are freaking out because they know they've got dirty laundry in there. - Yeah. - So they've tried to clear all that up and tried to show the Royal commission that actually look at us being super tight on everybody. - Dirty laundry there. - Also true actually. They look a little bit too deeply. Westpac and CBA- - I'm so much shocked- - But yeah. So in the lead up to the Royal commission or the lead up to the final report you saw lenders sort of go to a whole new level of strictness. It was a bit crazy to be fair. And that's slowly starting to come back. - Yeah. - But again it wasn't that they don't want to lend. It was just that they all wanted to lend differently. So I'd work with a panel of roughly 50 lenders. - Wow. - I didn't find that the loans that could get approved changed particularly. It just the number of vendors that would do it. So where in the past year out of the box scenario might've had 10 or 50 lenders that were keen now you had two. All right. Or three. You had to know who they were. You had to know how to package it. And they all had special rules. Which meant that it was very very hard for an individual to go straight to a bank. The rules are the same. I don't play by special rules. But which bank are you going to go. If you happen to get it right, beautiful. But if you get it wrong five times now your credit files hurt. Now you hold jaded about it. Probably just give up and don't go ahead. So similarly to the same way an accountant or a lawyer does something that you could have done yourself you just didn't have the time or the knowledge to do it. Same idea. - Yeah. That makes sense. It makes sense. And talking about things like interest rates now tail end of 2020 we're at a historical low interest rates right? And banks are passing on a lot of these cuts. Where do you see the interest rate environment sort of heading towards over the next three five years given what its historic trend has been over the last 10 years? What do you think is going to unfold in the interest rate space for specifically home loans? - Well I think we got a really good signal on that from the RBA just recently. They've refused to cut the interest rate to zero which is good. I think negative interest rates have not helped any nation that they've been implored in. But at the same time and at the risk of a little bit too much economics the way that they're buying government bonds on the secondary market is specifically designed to drive down fixed medium-term interest rates. That sort of three to five years. So they're trying to make sure that there's cheap money available for a long time to come as long as anyone can see. So there will be a time. And I warn people about this all the time. If you're taking a 30 year mortgage interest rates are not going to be at 2.5% for all of those 30 years. - Yeah. - But are they're going to be there for the next five years? Yeah. I would expect so. - Yeah. - And beyond that which of us can see beyond that really? - Yeah true. - I'm just guessing at that point. - True. But when we're looking at what it used to be let's say 20 or 30 to 40 years ago when we were looking at it being 16% 17% 18% and that was the norm. - Yeah. - Right now the norm is around that three is believable. Two is really low. So they can see being believable going back up to that three four mile. But do you think we'd have the tendency to go all the way back up to 17% 18% anytime in the next 40 years? - I can't see that happening personally. But I've lived 40 years. Same goes for you. - That's true. - But the thing is that there's these wide economic forces. Okay is it impossible that interest rates go back there? It's not impossible. But look at what else was happening at the time. You had high wage growth. - Yeah. - You had high asset price growth. The whole economy moves together. You didn't... If we suddenly like jumped today to 15% interest rates half the country goes bankrupt. Right. Nobody can afford their mortgages But that wasn't happening 40 years ago. People were still paying their mortgages. You could still afford to do what you were doing and live your life. The whole economy moves together. So I don't think like crazy interest rate changes like that is something to be worried about. It's not going to happen overnight. And if the economy is in an environment where that could happen a lot of other things are going to be benefiting you as well. - Yeah. I see that if we're looking at wage growth as well I think that's important that you mentioned that point. We've got what I think some of the slowest wage growth in recent years now. - True. - A few reports that have come out. One thing that I'm happy to see though is that a lot of the deferrals that were taken up during coronavirus are actually back to full set of repayments. Is that right? - That's true. This data is all buried in the annual reports from the banks. - So it's not out there in the media full steam ahead just yet. - You could find that information if you really felt like some light nighttime reading. But the one that interested me the most was ANZ who publicized a lot of this stuff. So they granted about 90,000 Homeland deferrals. - Okay. - For between three and six months during the first few months of COVID and of those only 11,000 have continued now. So we're seeing a 10% roughly and continuation on those referrals which is cool. But then of those 11,000 only 500 have actually asked for hardship assistance. - Wow. - The rest of them expect to be fine. They're just not quite fine yet. Which I think really indicates a strength in the market then. And something else that I wrote to a few of my clients about now at the time was that the profit reports from these banks came out and all of them are showing big drops in profit. Which makes for great headlines. - My next question to you. - Yeah, okay. - Because I loved- - ask a question I'll answer. - All right. Well how do you think... Well given that the banks are showing less profit tell us the real story behind the scenes because you actually had a look at where the money's going. - Great question sure. - Yes, thanks. - I wasn't expecting that one. - That's really interesting to me when I came out. You saw the big headlines saying that profit drops 50% like CBA puts aside $3 billion for COVID losses might even be more than that for CBA. And it makes for great media. These huge losses that the banks are making. But when you actually look at what these are they're projected losses for the future. And so they're not money that the bank has lost in the last financial year. They're money they're worried they might lose in the future. And when you add that projected loss back into their profits because they're just claiming that at the tax deduction. Suddenly their profits look pretty much identical to last year. Which admittedly wasn't an amazing year in banking on the back of the Royal commission. But still to have gone through COVID and to have not changed your profitability at all. - It's phenomenal. - It's pretty pretty amazing. And I mean I just wish that I could be a bank and not pay tax on $3 billion of income just because I might lose it in the future. - I like how this conversation has already referred to us both liking the idea of being a bank. It always comes down to that, doesn't it? - I don't think it's a foster money-making strategy than being a bank. - Yeah. Yes, of course. In terms of balancing the ever evolving changing world of lending which is what you probably have to stay on top of I think you have to do a lot of CPD in your world where you're keeping up to date with certain changes in rules or you're keeping up to date with certain regulatory bodies. Is there a lot of that going on the way that GPs would or accountants would have to keep up to date with a few things? - It's interesting right. For our space. So yes, absolutely there's safe bidding. And similar amounts to an accountant or something like that. I think GPs do a bit more but that's good because they keep us alive. - So they say. - We are all dying so maybe not. - There you go. - But most of the work that we do to keep up to date is more to do with understanding how lenders are changing their rules. Any of 50 lenders that all feel like changing their rules every week or two. There's not an official CPD measure for that. But my goodness. Like that's what takes up all the time. Staying on top of that stuff because it's a game with constantly changing rules. - Yeah. - Keeps you on your toes. - Yeah, definitely. And in terms of working from home or working from the office a lot of people have got this split going on now. What have you enjoyed over the last few months? Do you prefer having a bit of a mix? Do you prefer enjoying staying at home and zooming it up with clients? Because I know we personally like face to face interaction and feeling that energy with people especially if it's the first time we're meeting them. And once that relationship is set you can then carry on with email trails and phone calls and so forth. So what's your preference. - Yeah. Look, I've certainly enjoyed spending time at home. And my wife's been at home for like eight months now. Not quite. About eight months. But there's nothing that really beats the sort of being in the same room as someone being able to understand them. I'll start at the beginning. My role is to understand you understand what you need understand who you are and how to position that to a bank. So as soon as we're able to get back in the office and back in front of people I was absolutely chasing that. I don't think Zoom can really match that. - I think so too. We're going to go for a chocolate break. And there's the chocolate. It's just like magic. Chocolate with a white chocolate mocha. - Hope you got some good sponsorship money from Gloria Jean's and- - Cadbury. - Cadbury this morning. - This episode is proudly brought to you by Gloria Jean's Stan hope. No, I'm just kidding. - But also you just gave them the advertising they would have paid for. - Well what do you think I get my free coffee from? I just keep endorsing. I send the referrals they throw with free coffees. - You know, it's really funny. I keep telling my clients about these Rewards Points and Reward Vouchers right. So loyalty points for flights or loyalty points for coffee. So I've spent probably the last year and a half or the last two years with getting coffees regularly from Gloria Jean's. And I've got this loaded card now. And I've got approximately about 35,000 or 40,000 Gloria Jean's points on there. So I did the math. I think I've loaded that card to the point where I've got free coffee a day for 40 days straight. - Not bad. - That's like two months worth of morning coffees almost, right? And maybe even a bit more. If I just get the small ones instead of the large ones. So I'm very proud of my ability there. But here's what always happens right?. I feel every time I rack up enough loyalty points the world and the economy decides to throw a spanner in the works and Gloria Jean's changed its loyalty card. So I have to now transfer those points onto a new card which I just haven't had the time to do. So I haven't been racking up points for the last two weeks. And every time I went into Velocity I used to fill up with BP. And then BP stopped velocity. - Don't talk to me about velocity. - Yes. - It makes me cry at night. - But I heard... Or I didn't hear this. Maybe a little buddy told me that nothing's actually going to happen to our Velocity points. I think they will still be able to be used. Is that right? Or you cross that scene at all? - Yeah I don't know. I spent a good like three years collecting Velocity points like got my credit cards with the 75,000 bonus and everything. - Oh my goodness. - I know. I have like 300,000 points. - Yeah. - And then they go on and shut down. I can't transfer them to KrisFlyer. I can't do all the things. I'm not good friends with Velocity right now. - I don't think a lot of people are. - I just want to know how many actual dollars you spend at Gloria Jean's to get 40,000 reward points. - Well if I spill those beans out I'll be sad. It'd be a lot. I could have maybe half a property deposit because I think the points racking up has only been for a year and a half but the actual commitment spend has been for about six years. Daily. Every single day. And I think the inflation on the coffee hasn't been too bad but it's still been about $5 96 years ago. - So your endorsement was actually stan hope Gloria Jean's - Yeah. - Brought to you by Sean Floyd. Funded their own business. - They've got a great team that they're all very annoyed at me because I annoyed them in the morning for that coffee to be made before I reached. It is what it is. I can't complain. What's new in terms of just your personal planning your personal business vision over the next coming years. Do you see yourself taking up any interesting projects? Do you see yourself trying a few things over Christmas this year that you wouldn't have tried before? What's going to new in 2021 for James Brunacci? - Yeah look probably one of the biggest things on the horizon there is we're looking at bringing a trainee on into the business. So working with other experienced people in the industry is one thing. But to train someone from scratch most likely a school leaver or something like that should be a really interesting next step for the business next step and for me professionally. Being able to pass on some of that knowledge and that passion for the industry. So yeah really excited for that. I think with the gradual loosening of some of the restrictions as well it's becoming a real market where people are keen to take that next step to save their interest to buy that next property. But navigating those releasing restrictions is complicated. So again. Sort of really focusing on how we can make that experience work for people. Yeah. That's where it's got the business where it is now. And I think that's really going to be the main focus for next year. But speaking of personal I heard that you picked up a new toy a couple of weeks back. I haven't met this new toy yet, but. - Yes, yes. The new toy is in the secure Batcave across the road. I don't intend to bring it down to this car park just in case some of the angry lawyers are dented up. But it's been a very very fulfilling few drives to work and a few drives on the weekend I'll be honest. The new toy is great sir. - Do you want to tell us where your new toy is. - It's a product of delayed gratification instead of instant gratification. So I've made sure I ticked a few boxes first but I'm very proud to announce I did pick up an AMG C 63 Coupe and it's been keeping me happy and it's been keeping my neighbors unhappy I would say. So luckily all my neighbors are my friends so they were quite happy in the beginning but the noise does get to people sometimes. But I love cars. And I think that the biggest spend in my life dollar wise would be cars more than property even I feel. Because that's just how passionate I am about sports cars. And I know you love cars as well. When talking about daily drives and enjoying Canyon rides actually I've been driving up close to where I used to grow up near Wilberforce Road and Park road. - Yeah. - So I've been enjoying those roads and I think that's where everyone goes for a good drive, right? So I'll be enjoying this Christmas for sure. And because we're not leaving Australia I'm more than happy staying on the roads. But we'll definitely drive safe. There's no speeding going on whatsoever. - I was going to ask you about the removal of the warnings on mobile speed cameras. How does that tie in with your C 63. Of course very safe. - There's going to be actual removals- - Yeah they're taking them away. The no warnings on mobile speed cameras and they want to triple the alarms on them. - Wow. Okay. I'll probably have to go far away then. Get out of town for real. - That's where the reckon are going to be though. - Oh. - There was one of the regional MPs was really upset that it was going to target regional drivers too much. So pick out what's a safe place for you. That's where your bi turbo is really gonna work its best. - Well, the best thing about the C 63 S ride is that you can have a lot of fun in it without actually speeding. You can have a lot of fun going from a dead stop to just 60 and that's enough- - That's true. but you get the whole grumble effect. And these are essentially big German muscle cars that handle quite well. But the car that I've got a bit too tail happy. So if we give it too much it's not really going to be in control. And they're not meant to be known for control. Like if I wanted control I would get a Mazda MX-5. You know what I mean? Or a Porsche- - No offense to you MX-5 drivers out there. - No of course I was actually praising them. The handling is better than my official. They corner better than mine as well. - It's true, it's true. - But we'll have to just see what's next, I suppose. So maybe what we'll do is for our next podcast catch up. We'll do it while we're in the car with a few GoPro's. And we'll drive up to- - Car chats with James and Sean. - Car chats with James and Sean. And then we might have a scotch. Probably not on the AMG C 63. - Good decision. - But we will definitely have a large white chocolate mocha I think. - Car karaoke. - Car karaoke why not? I think these will fit quite well. - Snooker table would. - What I love is the fact that there are backseats but they're not really that usable. So I don't have to invite too many people to come in at once. Just one nice passenger that I like which is more often than not my partner. And then we cruise around town which is good. Speaking of personal acquisitions what was really interesting for me to see was everyone in my close circle and even in the office you and myself we all acquired during 2020. - True. - Which was... - And we acquired at times where the confidence level wasn't where it is today. - True. - And I think we're seeing the rewards or the benefits from something like this. Do you see property being a vehicle that you personally will continue to keep acquiring over time and keep cultivating and restructuring? Or do you feel... Or are you one of those guys where it's just five and I'm done or 10 and I'm done and that's enough for me and then I'll focus on other instruments. Or do you generally don't mind property as a personal investment tool for your success? - I think I'm getting there. I'd be in trouble if I sat here and told you Sean look I think property's a scam. I'm not into it. But no of course. I see property. I'm quite pragmatic with property and I think if you've seen some of the webinars that I've done before I see it as an investment vehicle the same way I see shares or bonds or gold or anything like that. The key difference with property is its gearing. - Yeah. - So the same amount of money I can invest in six seven eight times as much property as I can anything else. So to me that just simply makes it a very sensible asset to be picking up. I also look around and I'll say that the government is specifically legislated to protect property. - In Australia for sure. - Absolutely. - We learnt that this year didn't we. - We have so much of our National wealth caught up in it that it's something that government protects. So if the government is going to go out of their way to support an asset class I want to be on board with that. And so absolutely I see that being something that continues. And I'll also say there's a really good way to create a legacy. And you look at some of the people whose parents or grandparents owned land in Bondi or land in Chatswood. And the impact that that's had on them now or even more recently families that had acreage in Schofields or in- - Oh, the Box Hill averages right now have just gone on another level. - That's right. So like all that stuff is pretty incredible. So yeah. - It reminds me of that story that Munzurul was telling us- - It was what I was thinking of. from March this year before the pandemic really took its full effect on the workforce. We realized that there were these people that were complaining about properties in Bondi that were just annoying to keep. And imagine if they held it now they'd be sitting on millions. - Yeah, absolutely. - So of course I see property being a good tool purely because of the leverage which is what you said. I put down my 10% or 20% and then the bank gives us the rest which is great. - Making money with other people's money. - Exactly. - Number one rule of have a income creation. - Yes, yes exactly. - And another thing that would be really interesting is there's a lot of younger professionals out there that are earning more that are now of the realization that renting while investing. So virtually rentvesting is actually good thing for their lifestyle. - Yeah. - And it's actually good thing for their wealth building. What's your comment to high-income young professionals out there that are paying too much in tax that do want to invest that do want to get properties but still want to live in rent in maybe Manly or rent in Cremorne for example rent close to the city or closer to Para. What's your advice to people like that when they are on board with rentvesting. Or they might be considering rentvesting. - Yeah. I think people over complicate a lot of these things. People think about it too much. In practice what you're looking at is rental returns. So if you buy a property in Cremona in the inner city what's your rental return going to be? The answer is going to be- - Really low. - It's probably going to have a two in front of it. - Two point something percent, right? - Yeah. - If you buy a property in Queensland anywhere Victoria almost anywhere your rental return even at its worst is going to have a three in front of it. - That's right. - Right. So straight away, you're going to be better off financially buying investments and renting in the lower rental market than buying in that market and having a non tax deductible debt that burns you then. The math is very straightforward. The problem is the lifestyle. Do you want to be in that renting lifestyle? Right. And that goes both ways. But I see it the same as anything else. Do you buy your 90 inch TV thinking this is a good investment? I'm really excited for the future capital growth of this. The same thing goes for your car. Did you buy that thinking I can't wait to get ahead in my life because of this car. Of course not. - I was only thinking I'll get to where I have to go faster. That's it? - But all these purchases people still make. - Yeah. You still buy the TV, you still buy the car. So you still buy the house. But people need to see it as what it is. It's a lifestyle item. It's a cost to your future wealth. In exchange for something that makes your life easier now. And once you start seeing it like that those decisions are easy. You don't go and buy your car if you don't have the cash for it. You don't think oh I can't live my life unless I have this nice car. You work in your life. And then when you have the ability you buy the car. Same thing for a house. Renting is financially better. But at some point you will reach a position where you want that stability of a house or you want that lifestyle improvement of a house. - Yeah. - So you buy it. But as long as you see it as what it is not a waste of money but a cost to you. That makes the whole decision-making a lot easier. So if your pure goal is I want to get ahead financially. Absolutely. That rentvesting and particularly for people living in Sydney makes so much sense. - I think so too. - Yeah. Absolutely. - I really think so too. And the other fun part is before we wrap up I could talk to you for hours and hours and hours. - And we have. - Yeah, we have. We always have But what's good piece of advice you'd give to someone who's out there right now young let's say from between the age of 30 and 40 or between the age of 25 and 40 and they're thinking about how can I get ahead right now even if I'm not in the property market. What are some tips you'd like to share for people to prepare to be in a position to get into that first property or that first investment? - I think the most important piece of advice that I ever heard was that the investment that you make is just a pathway to get where you want to get to. Yeah there are better paths than there are worsts paths but it's just a path. The number one thing that will define your financial situation is your relationship to money. How do you personally relate to money manage money deal with money? If you're sitting there and you're not saving anything you don't have a good relationship with money. It's controlling you. Right? If you are sitting there and saving comfortably and controlling your money well you will create wealth. You will be wealthy. If you invest it well you'll be more wealthy. If you do nothing you'll still be wealthy. I see clients that have that good relationship with money come to me with no properties but $100,000 $200,000 in the bank. - All the time. - Right? - Yeah. - Is that person going to be wealthy even if they do nothing and just keep saving that money. - Yeah, they will. Right? They've saved for 10 15 years and they're in that position. If they keep saving they're going to retire with $600,000 $700,000 in the bank. Is that going to be enough for retirement? Probably. But could they have left a legacy instead? Could they have created flexibility for themselves in their life and for their children? Absolutely. So that relationship with money would define your financial success. The pathway will just amplify that. - Makes sense. - The number one tip that I would have for a young professional is to spend the time seek out the advice seek out the knowledge to sort out your relationship with money and how you control it. Once you've got that everything will fall into place for you. - That's awesome. That's actually a good piece of advice I reckon. Seek out the right people build that team and then execute take an action on it. - Absolutely. - Don't just dwell on it for the next 10 years and keep saving. - Absolutely. - What we'll do is probably the next time we catch up we'll wait till your foot gets better so that we can- - I'll walk into the next one. - We'll drive around town and then enjoy some crackles and pops for our next podcast. I think that'll be fun. - Apparently I'm not a good passenger. According to my wife who I passengered with for the first time in a long time this morning. - This morning? - What was the feedback? - A little bit controlling apparently. I liked the drive. - Yeah. - Well James you've been an absolute pleasure this morning- - Thank you Sean. - I really appreciate your time. And I look forward to having many more of these with you but I couldn't have hoped for a better opening to our subsequent set of talks. - Yeah. - And I look forward to learning a lot more from you into the future as well. - Thank you very much for having me. Appreciate it. Let's do it.