Brick to the Future: Property Investment Show

OpenCorp client Matt details his journey from running a business to building a diverse property portfolio, emphasising long-term planning and overcoming scepticism. Matt shares his "light bulb moment," when his property portfolio outpaced his clinic's income.

Introduction:

• Matt transitioned from podiatry to property investment after realising his property portfolio was outperforming his earned income.
• He highlights his experience managing three podiatry clinics before entering property investment full-time.

Light Bulb Moments:

• Matt's "aha moment" was seeing his property portfolio’s growth surpass his business income.
• He addresses misconceptions about property investing, such as it being only for the wealthy, emphasising affordability and strategic planning.

Personal Journey:

• He and his wife Kristy began as "rentvestors," renting in Melbourne’s affluent Bayside area while investing in properties elsewhere.
• They overcame common concerns like holding costs and tenant issues by working with OpenCorp.

Property Portfolio Development:

• Matt started investing in 2020 with properties in Brisbane, achieving significant growth.
• He expanded his portfolio with properties in Perth despite challenges like construction delays, later benefiting from substantial rental yields and price appreciation.

Family and Mindset:

• Matt didn’t inherit investment knowledge but cultivated an abundance mindset through business coaching and learning.
• He advocates for setting clear goals and timelines, such as building a portfolio to generate passive income and eventually fund a dream home.

Transition to OpenCorp:

• As a property strategist, Matt applies his background in problem-solving to help clients achieve financial freedom.
• He emphasises the value of expert guidance, comparing OpenCorp’s role to that of a coach or personal trainer for property investment.

Advice to New Investors:

• Matt encourages starting as soon as possible, addressing fears by seeking expert advice.
• He underscores the importance of leveraging data-driven strategies rather than relying on anecdotal research or hesitation.

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In this episode of Brick to the Future, hosts Cam McLellan & Allison Lewison interview Pascal Butler about his unique journey into property investing. Pascal, from Melbourne's Box Hill, shares insights into his background and decision to pursue investment properties rather than purchasing a personal residence.

Journey to Property Investment:

• Pascal and Georgia preferred living in Box Hill but found purchasing a home there unattainable due to high costs.
• They decided to invest in property rather than buying a personal residence, also known as "rentvesting".

Motivation and Influences:

• Inspiration came after reading a property investment book by Cam McLellan. "My Four Year Old the Property Investor"
• Pascal’s father, after reading the same book, offered to use equity from his home to help fund Pascal's entry into property investing.

Myths and Misconceptions:

• Pascal challenges the idea that “rent money is dead money,” explaining that renting can be viable if you’re investing wisely.
• Discusses how outdated ideas like these often stem from industry marketing tactics.

Financial Support and Strategy:

• With OpenCorp’s assistance, Pascal’s father released $100,000 equity to fund Pascal’s first investment.
• OpenCorp provided a comprehensive plan, or “roadmap,” to help him grow his portfolio over time.

Challenges and Sacrifices:

• To prove his financial commitment, Pascal sold his car and adhered to a strict savings plan.
• Overcame initial fears about debt with guidance on the structure and financial viability of the investment.

Investment Progress:

• After purchasing his first property with OpenCorp, Pascal is on track for a second.
• His portfolio has already grown significantly, with $200,000 gained in equity within 18 months.

Advice and Takeaways:

• Pascal emphasises the importance of planning, education, and taking action rather than relying on outdated financial beliefs.
• Encourages parents to consider helping their children with equity to assist with getting into the market. 

Pascal’s experience showcases how family support, a clear investment strategy, and expert guidance can make property investment accessible and rewarding.

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In today's episode Cam & Al cover an in-depth discussion on negative gearing in Australia, focusing on its impact on property investors and the housing market.

Definition and Basic Concept: Negative gearing is a tax offset where investors deduct property losses from their taxable income, reducing tax liability. It’s commonly used by average Australians earning around $87,000.

Rationale for Negative Gearing: Negative gearing helps investors by having tenants, the government (via tax breaks), and the investor collectively cover the costs, making property investment more accessible, especially for first-time investors.

Historical Context and Political Debates: Previous attempts to remove negative gearing (e.g., 1987) led to rent hikes and investor sell-offs. The policy was reinstated due to the adverse impact on renters and the housing market. Politicians often debate negative gearing near elections, with concerns over housing affordability versus investor benefits.

Housing Supply Crisis: Australia faces a housing supply shortfall, worsened by high immigration and insufficient new housing construction (27% below the 10-year average). Negative gearing is seen as supporting housing availability by incentivizing investments in rental properties.

Proposed Policy Adjustments: One proposed change is to allow negative gearing only for new builds, thereby increasing housing supply. This could balance the need for affordable housing with economic growth while avoiding the creation of ghettos or segregated low-income areas, as seen in the U.S.

Economic Implications: Immigration is crucial for economic growth, but it raises housing demand. Increasing construction could offset this demand, but high property taxes (up to 43% on home costs) hinder affordability. Reducing taxes could make housing more affordable without eliminating negative gearing.

Future Policy Speculation: The likelihood of abolishing negative gearing is low due to past political backlash. The discussion speculates on the government’s strategic use of this topic to gain votes, despite a low probability of actual reform.

Negative gearing as an essential tool for maintaining a balanced housing market, where its modification, rather than elimination, could address both investor and social needs.

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Listen Now for a breakdown on leveraging lenders Mortgage Insurance (LMI) to overcome barriers and secure your spot in the property market!

In this episode, we dive into the challenges young Australians face in today’s property market. With median house prices across capital cities now reaching $855,877 (up from $596,018 in 2019), saving a 20% deposit has become a daunting task. Rising living costs, inflation, and low household savings make it harder than ever to achieve homeownership.

Key Topics Covered:

1. Challenges of Saving for a 20% Deposit
   • The average deposit needed is now $159,000—a 50% increase since 2020, meaning it can take up to 10 years to save the full amount in today’s market.
   • Median property prices jumped 7% from 2023 to 2024, highlighting the financial cost of waiting.
2. Why Paying LMI is a Strategic Choice
   • Lenders Mortgage Insurance (LMI) allows buyers to enter the market sooner with a 5-10% deposit.
   • Although LMI is an additional cost (typically 1-2% of the loan), it enables buyers to capture property appreciation immediately.
3. Outpacing Rising Prices and Building Wealth
   • By opting to pay LMI, buyers may achieve faster equity growth than they would by saving for a 20% deposit.
   • For investors, LMI is often tax-deductible, further reducing its impact on overall costs.

Takeaway:
For many, paying LMI is a stepping stone to get into the property market today, potentially offering more financial benefits than saving for years. If you're ready to learn how LMI can work for you, tune in to hear why it’s a tool worth considering in your property journey.

Questions?
[email protected]

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"Understanding Your Mortgage" At OpenCorp we focus on strategies to manage mortgages and optimise property investments.

Mortgage Types: Explaining the difference between principal and interest loans and variable loans, emphasizing that investment properties often benefit from variable loans due to flexibility.

Lazy Equity: The term refers to equity in properties that homeowners often overlook. By leveraging this equity, investors can purchase additional properties and accelerate their financial growth.

Investment Strategy: Using "other people’s money" (OPM), like bank loans, to finance property purchases. They stress buying multiple properties to benefit from market appreciation, which can significantly reduce long-term mortgage repayment time.

Cross-Collateralisation: A key caution is given against cross-collateralising properties (linking multiple properties under one loan agreement), as this can risk both the investment property and the owner’s home.

Accumulation and Consolidation Phases: The strategy involves accumulating properties quickly to maximize growth during market cycles, followed by a consolidation phase where investors enjoy passive growth from their portfolio.

Be proactive and strategic in using mortgages and equity to build wealth and reduce dependence on long-term repayment schedules.

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In this weeks episode, Jeremy Bishop - OpenCorp General Manager Property Management and Jess Brandy, Head of Property Management QLD, discuss the importance of insurance for investment properties, focusing on two main types: building insurance and landlord insurance. 

Building insurance covers the physical structure, while landlord insurance protects against issues related to tenancy, such as loss of rent or tenant damages. 

Jeremy and Jess share their hot tips in what to look for in finding the right insurance for your property assets. 

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OpenCorp CEOs Cam McLellan and Alister Lewison, discuss the appeal of a diversified investment portfolio. It feels safe. But when you’re serious about building wealth, safety isn’t enough. Control is what you need.

Cam McLellan’s strategy emphasises the importance of control, leverage, and strategic action in property investment. By using equity, leveraging other people’s money, and accumulating assets quickly, you can cut years off your working life and enjoy financial freedom sooner than you ever thought possible.

So, if you’re considering diversifying your investments, think carefully about what that really means. Do you want to spread your wealth across different assets with little to no control? Or do you want to take control of your future by building a property portfolio that works for you?

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Open Corp CEO's Cam McLellan and Al Lewison discuss the financial impact of property investing on lifestyle, with a focus on taxation strategies to mitigate costs. Key points include:

Lifestyle Concerns: Many people avoid investing due to fears that property investment will impact their lifestyle, such as limiting holidays or dining out. However, with proper strategies, investments can be managed without sacrificing lifestyle.

Negative Gearing: Negative gearing allows investors to offset property holding costs (such as interest and repairs) against their taxable income, reducing the amount of tax they pay. This can make holding an investment property more affordable.

Tax Depreciation: Depreciation schedules allow investors to claim deductions on the value of the property’s building and fittings over time, reducing taxable income. New properties have higher depreciation benefits, making them more attractive from a tax perspective.

Tax Withholding Variation: A tax withholding variation form can be used to adjust the amount of tax withheld from an investor’s salary, allowing them to receive the tax benefits throughout the year instead of waiting until their annual tax return.

Finding the Right Accountant: It's essential to work with an accountant who understands property investment. Not all accountants are familiar with the specific tax deductions and strategies related to property investing.

Repairs vs. Upgrades: Investors can claim repairs as tax deductions but should be cautious when making upgrades, as these may not be immediately deductible.

The conversation emphasizes using tax benefits to maintain a good quality of life while growing a property investment portfolio. It also encourages consulting knowledgeable accountants and using the right financial tools.

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Stay up to date on legislation changes that could affect your investment property and tenancy outcomes! OpenCorp General Manager - Property Management, Jeremy Bishop & Team Leader - QLD, Jess Brady, discuss the recent legislative changes in rental laws for New South Wales and Queensland. Key points include:

New South Wales:

1. Removal of No-Grounds Evictions: Landlords must now provide a valid reason for ending a tenancy, similar to Victorian laws. Reasons may include property sale, moving in, or renovations.
2. Rent Bidding: It is now illegal for landlords or agents to solicit offers above the advertised rent.
3. Minimum Standards for Habitation: These include structural soundness, lighting, ventilation, plumbing, and disclosure of property issues like flooding or significant repairs.
4. Rent Increases: Rent can only be increased once per year.

Queensland:

1. Rent Bidding Changes: Landlords cannot accept unsolicited higher offers from tenants, emphasizing the need for accurate rental pricing from the start.
2. Rent Increases: Linked to the property, not the tenancy. This affects situations like break leases, where previously rent could be adjusted if tenants left early.
3. Minimum Housing Standards: Effective from 2023 for new tenancies, and soon for all properties, these include standards like mold-free environments and privacy for all bedrooms (e.g., with blinds).
4. CPD (Continuing Professional Development) Points: Upcoming changes will require property managers to complete annual training monitored by the Office of Fair Trading to stay updated on legislation.

These changes reflect a growing emphasis on tenant rights, transparency, and professional standards in property management.

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In this episode, OpenCorp CEO Cam McLellan and Director Allister Lewison delve delve into the differences between investing in premium (blue-chip) areas and more affordable (growth) suburbs, with an emphasis on portfolio growth and wealth creation.

Key points include:

Entry Price and Borrowing Capacity: Blue-chip properties require higher entry prices, which limits growth potential as they are more expensive and often yield lower rental returns. Growth suburbs offer more affordable entry points, making it easier for investors to buy multiple properties.

Cash Flow and Holding Costs: Investing in blue-chip areas typically results in higher holding costs, which can negatively affect cash flow. Growth suburbs, on the other hand, allow investors to hold more assets for less out-of-pocket costs due to lower entry prices and higher rent-to-purchase ratios.

Emotional Attachment: Many first-time investors make emotional decisions by purchasing properties in areas they are familiar with or emotionally attached to, often leading to less favourable financial outcomes. A more strategic approach involves purchasing properties based on financial fundamentals.

Leveraging the System: TIPS:  Experienced investors understand how to navigate  the financial system, particularly through understanding valuations. Properties in growth areas, bought strategically under the median house price, tend to be valued comparatively to their greater counterparts, where this can lead to greater equity growth over time.

Market Cycles: In a market driven by affordability and supply-demand dynamics, growth suburbs consistently outperform blue-chip areas. Blue-chip properties may see short bursts of high growth during favourable economic conditions, but growth suburbs tend to provide greater, long-term capital appreciation.

Data-Driven Decisions: At OpenCorp we have over 20 years of client data that consistently shows that investing in growth suburbs delivers superior returns compared to blue-chip areas, with clients outperforming the market by significant margins.

The conclusion is that while blue-chip properties may seem appealing due to their prestige and location, they often underperform compared to well-chosen growth suburb properties in terms of portfolio scalability and wealth creation.

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