'The banks rejected my loan application four times': Cam McLellan interview

Did you face any setbacks or were you discouraged at all in your initial investment journey?
I signed the contracts for my first house and had to apply four times to get my finance approved. The first denial was devastating as I had been banking with that bank my whole life. They’d given me a credit card which I managed well, but then denied me my loan application because I had a credit card that reduced my servicability.

I was angry at the time but I’m glad I kept trying until I was approved. Setbacks are faced at every investment level and I still face setbacks regularly. The trick is to not get emotional about things. Take each and every setback on the chin and find a way to move forward. There is always a way, you’re the only one that will stop you.

How should first time investors educate themselves before they enter the property market? 
I read every book and went to every seminar I could and I nearly fell for the standard property shark tactics, but I followed my gut feel and walked away from the hype. Instead I went and found lots of real investors. Investors who had at least a dozen properties. Investing is a skill like any other. It can be learnt. I paid for lots of lunches while I learnt the core rules to reduce risk and maximise my returns.

I signed the contracts for my first house and had to apply four times to get my finance approved

Your book My 4 Year Old, The Property Investor was written for your three young children to use when they are old enough. At what age can parents begin to educate their children about property investment and wealth building? And what simple financial skills can parents teach their children from a young age?
I was always taught that money was evil and should never be spoken of. I remember asking my Dad what he earned and swiftly got a clip over the ear for my troubles.

The first rule I taught my kid’s was to be humble and that is only taught by example. The value of money can only be taught when a child can associate time spent working with money earned.

Basic chores for pocket money are a start. I’ll have my kids in part-time jobs as soon as they are allowed.

My kids love those skill tester machines with the claw that picks up lollies. So I gave them $10 each and they spent it in a matter of minutes with little to show. I then took them into the supermarket and I got them to work out how many bags of lollies they could have purchased with $10, to begin to understand cheap scams.

Additionally, I ensure my kids spend lots of time with me when I research investments. I take them to my development sites regularly and even fly them interstate looking at our investments and developments.

We look over plans together and discuss what it takes to build something.

I remember taking Gus out to see our first large development. It was a three-level, 3200 square metre office complex. So we went out to look at “Dad’s big building”. When we pulled up out the front he looked at the building, and then at me, and said “Dad, it’s not that big”.

Kids really keep you grounded. But he’s happy now as most of our apartment building developments are around 10 levels and he gets to play in the lifts.

My kids spend lots on time at my office and everyone talks property there non-stop.

Recently, I had the private bank state manager out to see me from one of the major banks. My kids were in the boardroom and even though they were well behaved, I could see he was confused as to why there were children in the room when we were discussing such a large financing arrangement. I explained that I like to expose them to the general discussion around finance, and even though they won’t understand it all, they will become familiar over time. I also pointed out to him that if he plays his cards right, they will be his best clients one day. After that, he was more than happy to have them in the room.

Are you a first generation property investor?
Yes. My parents flipped a few properties renovated, but they lost money each time as they didn’t factors in all the costs. Real wealth comes from holding property long term, not from renovating.

How can/should investors be planning for the possibility of negative gearing being phased out?
I’m still buying investment properties. You can’t jump at shadows, but people should ensure they have a solid cash buffer so that any change doesn’t have an immediate impact to their personal circumstance.

Real wealth comes from holding property long term, not from renovating

Will the APRA changes affect investors’ current portfolios?
Currently banks are trying to get the percentage of investment loans down on their books by taking a look at their current loan book, and classifying any investment loans that should be classed as investment loans. The more they can move to home loans means the more investment loans they can take on. This, to my knowledge, hasn’t made any change in moving people to principal and interest from interest only, so no impact currently.

How many properties do you currently have in your personal portfolio?
I used to tell people if they asked, but I realised that it only made me look like a wanker. So I keep that to myself these days.

I can tell you that I’ve added over 30 properties to my portfolio this year. Our development company, Open Corp, currently has over $550 million in projects under construction across Australian capital cities.

Where are they located?
Most are Melbourne and Brisbane. Capital city, infill areas.

Where is your most successful investment property located and do you believe its success has a lot to do with its location?
I’d say it was the first one I purchased as it gave me the equity to duplicate.

It’s located in Bayswater, Melbourne. There is nothing special at all about the location or property.

Smart investing isn’t about picking a winner, it’s about ensuring you don’t pick a loser. People spend so much time procrastinating over what and where to buy, that they pass on so many worthy investments. The key is to have a strategy to continually select solid performing properties.

What is your view on the current real estate markets in Australia? Do you see any changes in the coming months?
I never do short-term predictions. I simply identify which markets I don’t want to be investing in at any point in time which then leaves a couple of good markets. Currently, I like Melbourne and Brisbane.

What are you personal property investment goals for the future?
I don’t have property investment goals as such any more. My portfolio does what it’s supposed to, which is to provide me with substantial equity to live and invest further. I’ll let it sit for 30 or so years and see if my kids are smart enough to take it over.

Smart investing isn’t about picking a winner, it’s about ensuring you don’t pick a loser

What kind of mistakes do you typically see first-time investors making?
Not correctly structuring finance, and not following a basic strategy to ensure they pick the best property every time out of the 9.4 million odd properties in Australia. Then if they do make some money, they change tactics and lose their path.

What kind of mistakes do experienced investors make?
Over-exposure to the banks, and not a deep enough cash buffer.

What has been your biggest challenge in your investment journey?
Valuations. Your net wealth is determined by the bank panel valuers, so getting good valuations is the key to duplicating.

What advice would you give to first time investors?
Understand an adviser's motivation and skillset. Don’t listen to people who don’t invest and be wary of people giving advice if it benefits them. Find out how advisers are paid and you’ll learn why they are promoting a certain product or service.

Set a basic goal to have two investment properties. Once you reach that, aim for five. If you let five investment properties double in value over 10 years, that’s a bucket of money for most people. Life’s for living so enjoy the ride. Your only limit is your imagination.