finance-advice

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

By Georgia Brown
Cam McLellan property advice

How old were you when you started building your first property portfolio, and what savings strategies did you follow to save for your first deposit?
23. I left home at 17 and worked two or three jobs at a time and had to learn to budget to survive. I slowly started putting a little away each week, but I was still short when I wanted to buy my first house. So I sold my car and rode a bike for six months. That seemingly huge sacrifice at the time has paid me back in spades.

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 BayswaterBayswater, WA Bayswater, VIC, 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.

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  string(144) "

Property investors are now able to identify and bid on auctions remotely using a new live-streaming functionality launched by Gavl.

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Called “Request an Auction”, the new functionality enables users to watch and bid on any Sydney or Melbourne auction remotely.

Through Gavl, prospective buyers are now able to register to bid on their preferred auction. The platform will obtain permission from the listing agent and confirm within 48 hours.

Vendors can also request to have their auctions broadcast to a larger buyer audience.

Co-founder Joel Smith said that auctions streamed on Gavl attract 47 per cent more viewers than traditional ones.

He said that Request an Auction will be valuable for remote buyers.

“Buyers are able to have Gavl attend any auction they nominate, so they will never have to miss out on an opportunity due to logistical complications in physically attending the auction.

“Vendors, too, have the opportunity to directly book an auction with us, so they can open up their event to buyers all around the world. With more potential buyers, they’re giving their property the chance to receive more bids and maximise their sales result.”

Mr Smith said that prior to the Request an Auction app, buyers were limited to what they could achieve through the Gavl technology.

Gavl is a live-streaming and bidding platform for real estate auctions.

Mr Smith said that it has streamed more than 6,000 auctions, which have achieved 3.5 million views from 50 countries.

Gavl’s Request an Auction function is currently being offered in Melbourne and Sydney only.

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Boost for investors as app sets up off-site bidding
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Having to split her time between Hong Kong and her original base of Sydney has not slowed Julia Tita’s goal of building a high-performance Australian property portfolio. Instead the resulting alterations to her strategy have positively impacted her investing success.

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Having recently purchased her 6th property, Julia joins host Tim Neary to discuss her journey, share her ups and downs over the years, and reveal her thoughts on why some properties are better than others.

Julia also explains why she no longer makes a move without the help of a buyer’s agent, why working with a strong team of specialists is extremely important and discloses her long-term property ambitions.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

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AREAS MENTIONED:

Eagleby
Charters Towers
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Sydney
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Melbourne 
Glen Iris
Bondi

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How a move to Hong Kong impacted Julia’s Australian property goals
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The practice of property investment firms sharing undisclosed kickbacks among the supply chain involved in development sales will be outlawed in NSW on 1 July this year under the Real Estate Reform being handed down by regulators in NSW.

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Property commentator and valuer, Suburbanite’s Anna Porter, said the reform will address conflicts of interest.

She said they arise when a mortgage broker, accountant or financial planner receives part of the commission from the property firm, who receive their fees from the developer or seller.

“This puts the broker into a position by which they are being paid on both sides of the fence,” she said.

“Until now this has been a grey area and there was nothing stopping this practice.” 

Ms Porter said this has been a common practice in the industry.

"Some well-known mortgage broking firms openly admit to receiving $5,000–$10,000 per referral in their pocket.”

She also said this process has been going on for decades.

"Property investment firms commonly pass some of their commission on to the mortgage broker, accountant or financial planner as a reward to them for passing on the referral. This means that many brokers or financial service providers are making significant amounts of money just to refer on to a property firm, often totalling hundreds of thousands of dollars a year," Anna Porter said.

Ms Porter said the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 will be in force from July this year, and will prohibit this practice unless the broker or referring partner also holds a real estate industry license.

"Under the new laws, if the broker takes a referral fee from the property firm, they will have to be a licensed real estate agent and also hold a corporation’s license,” she said. 

“Subsequently, every transaction that they receive a referral fee from, they will be putting their license up against the transaction and taking full liability for the conduct, practices and outcome of that transaction, even if they have little to do with the transaction; they are a party to it financially and therefore take as much risk as everyone else in the transaction.”

Mr Porter said where a referrer holds a real estate license, and receives a part of the sale commission, they may find themselves in breach of the ethical requirements under the act.

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‘Common’ referrer practice of being paid on both sides of the fence coming to an end

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