Season 2, Episode 1: Using Your Super to Buy Property Like Never Before

In this groundbreaking episode, we welcome Andrew Swinson, a long-time expert in property investment and finance. Andrew shares how to leverage your Superannuation (SMSF) to unlock property purchasing for all buyer types like never before. This a one of a kind, and first-of-its-kind product that Australians can use like never before. 

Are you sick of your Industry Fund underperforming? Overcharging and limiting the outcome you can achieve? Then this is the episode for you! Take control of your future again and acquire the number 1 asset that Australians hold by a considerable margin. 

Key Topics Covered:

1. The SMSF Revolution: Discover how Australians can now harness the power of their self-managed super funds to invest in property or occupy it like never before. Andrew breaks down the mechanics, benefits, and potential pitfalls of this game-changing approach.
2. Strategies for Success: Andrew shares practical strategies for maximizing your SMSF’s property investment potential. From tax advantages to diversification, he provides actionable steps for listeners to take charge of their financial wellbeing with this new approach to investing with or owner occupying with your super. 
3. Learn how to now buy a property: (maybe multiple) with your Super with no restrictions! This involves; 

- First Home Buying 
- Owner Occupying 
- Investing 
- Home and Land 
- NDIS & Multi Liv (High-Income) properties 
- Development sites 

Whether you’re a seasoned investor, first home buyer or just dipping your toes into the property market, this episode promises valuable insights that will empower you to make informed decisions.

Don’t miss out on this opportunity to supercharge your SMSF and unlock the true potential of your hard-earned assets.

Subscribe to The Property Now Podcast on Apple Podcasts or Spotify to stay informed and elevate your property game! 🏡💡

Transcript

Speaker 1 (00:01):

Welcome to the Property Now Podcast, where we talk all things property, investment and new homes with your host Matt elo. Speaker 2 (00:09):

Yes, there's bad debt. Yes, there's good debt. The good debt is not bad. It will never send you broke. Ever rich people rely on debt to expand because without debt it's pretty hard to expand. It's almost impossible. Speaker 1 (00:20):

If you want to learn more about what's happening in the market and how to benefit from property investment, then go no further. We dig deep as to why our sector is a key to building financial security and safety for your family. Never before has it been more important to understand the playing field than now, Speaker 2 (00:39):

And I would say this, this is probably going to raise some eyebrows with some people, but your family home is not an asset. It is a liability. It's taking money out of your pocket from a cashflow position. Speaker 1 (00:49):

So let's get on with the show. Happy listening and we'll see you on the other side. Speaker 2 (00:53):

Hello, hello and welcome to the Property Now podcast. Welcome to 2024. This is officially our first episode for the year, and I'm really excited about this one. I have a very smart and proactive guest in here that has achieved something that is very exciting, so I'm looking forward to speaking with him about that today. Andrew Swenson from your prop, CEO of your prop group is with us. Andrew, how are you mate? Speaker 3 (01:17):

Yeah, well thank you. Thanks for that introduction as well. Very, very kind. Speaker 2 (01:21):

No, all good mate. Well, you've got some good decorations there on your resume and we'll pick your brain on a few of those, but it's really good to have you on board, mate. The nature of the topic today that we're going to run with is superannuation and using your superannuation to acquire property in a totally different way that we have seen in the past. I'm excited to have you share the knowledge that you've shared with me with our listeners. So why don't you start by just telling us a little bit more about yourself. Got a fair bit of experience within the space. What have you done mate, and what's led you to where we are now? Speaker 3 (01:55):

Yeah, I guess it's a little bit scary going back through my history and then realising how old I'm actually getting now, which is probably a result of how much hair I'm losing on top of my head as well. Predominantly I'm evolved from real estate and then got into finance and funds and funds management. So look, started off my career, what was over 20 years ago now as a general real estate agent, listening and selling property. Moved pretty quickly into project marketing, got heavily involved with a number of developers and builders, very large organisations predominantly here in Melbourne due to that. Spent quite a bit of time overseas showcasing those developments and seeking Asian buyers looking to buy property in Australia and then what was probably close to eight or nine years ago actually found myself living over in Asia and things were going well. Business-wise set up a very large real estate business in a sense, a buyer's advocate for the Asian market buying brand new property back here in Australia Speaker 2 (02:52):

And what was that called? I think a lot of people would probably, yeah, Speaker 3 (02:55):

That was called Sunny Field Group. We did everything there. I sort of evolved the business over time, but we were promoting selling projects, then helping the customers in regards to finding a property manager moving into doing their accounting. It was a real end-to-end service for them, which Asia really hadn't seen in the past. It's typically you go in, you do your weekend exhibition, you sign a contract, grab your 10% deposit, then jump on a plane head back to Australia and the customer never hears from you again up until sort of three months prior to settlement. So we offered a high level of service was permanently based over there. Things were going relatively well there until all of the banks stopped lending to overseas purchases and it dried up overnight. I've never seen a market tighten and just dissolve so quickly. Speaker 2 (03:40):

How much power the government have with these kinds of things, don't they? That's Speaker 3 (03:43):

Really interesting because if you go back and you look at stamp duty and stamp duty levies for foreigners, the first year that the government of Victorian government introduced a levy for foreigners buying, China actually increased their sales volume by 25% in that year compared to the previous year. Wow. So stamp duty is not a big issue for the Asia market. You're looking most of those evolve countries, Singapore, you're looking Hong Kong, all of those sort of areas. As soon as you've acquired more than one property, regardless to whether it's principal place or residency or investment property or whatnot, stamp duty kicks in and it's a big, big amount. So even now they sort laugh at, we're still charging, I don't want the government hear this, but do we still charging seven to 8% foreigner lefty? That's still relatively low for what's happening over in Asia, getting back to it, look, business shut down overnight, literally shut down.
(04:37)
I had over what was close to 90 staff across the Asia region, we just could not find a sale to help ourselves. Was calling every broker I knew back in Australia, every finance person, everything, nobody had a solution. Nobody had any idea when the government was going to release the restrictions that they had put on the major banks to doing the foreign lending. I rallied up a number of high net worth individuals that I knew created a fund over there and we started doing non-resident lending to foreigners, and I thought I had a pile of money that would probably last me probably 12 months, and I was hoping that a bank or an institution back here in Australia would come back into play. I sold out of that fund within six weeks and we were charging what was 15% interest rate on a 6% LVR on a five five-year term. So it just showed how much demand there was. So yeah, luckily enough I was introduced to some other key people in institutions and was able to create a much larger, larger fund and then sort of rallied my way through that period of time, and ever since that point in time, from about 20 15, 20 16 through to now, I've been still within the property sector, but more so in the finance area in regards to funds and equities and a private equity fund is what I'm doing now. Yeah, Speaker 2 (05:53):

Awesome mate. I mean it's so critical. Funding is what really property most of the time. It's not something that many people have access to buying without funding, so it's so pivotal, especially with what we do as well. We're always looking for new solutions to be able to help people get into the property market or expand their portfolio. So jump forward to now 18 to 24 months in with your prop, is that Speaker 3 (06:17):

Yeah, that's right. We incorporated it through 2022. In saying that it was a good close to 18 months in regards to the works and getting it prepared and bringing it to market. There was a lot of work behind the scenes in regards to governance and facilitation of funds and getting lenders on board and all of those sort of things in regards to our main core structure in regards to what we do, which is a shared equity model. But yeah, look, coming to market, I guess we tested it. We found a real niche in the market that even myself that as said, I've been in the property industry for what is over 20 years now and really didn't realise how typically real estate agents and project marketers and people in your space, we typically talk about three markets. One is first homeowner, next market is investment market, third market is upsize, a downsizer.
(07:03)
When we talk about that first category being that first home owner, everyone's mind goes to younger person, maybe first job, limited income, limited savings, buying a relatively affordable property, whether that's a one bedroom apartment, whether that's an established house out in the suburbs, whether it's a house and land package really out on the fringe of metropolitan areas. But what we found really interesting when we did our market testing was understanding how big the first homeowner market is for age group between 35 to 45 years of age, those people who are earning in excess of $200,000 a year as an individual. For us, a main core of our business is exactly at 35 to 45 years of age, individual income, two 50 household income in excess of three 50, typically buy a brand new car, Mercedes Benz w Audi, every sort of two years or so, overseas holiday once a year, eating out three, four times a week, Speaker 2 (08:00):

Designer close, Speaker 3 (08:01):

Correct, paying $1,500 a week in rent. But speaking to a lot of these customers who have become our customers nowadays is that they have savings. They've got savings, they're earning really good money, but they look at it and they say, I'm not moving from where I'm living now. It's either they're pushing forties and forties and above and they've got children and their children are going to schools in the area that they're living at or they're more corporate sinks and dinks, those sort of things that are just going, I want the lifestyle and when you look at the banks, what the banks offer, banks typically will go as high as a 95% LV home loan and most of these customers have the 5% to go and do that. But what people often forget is you've got a lot of purchasing costs that are go on top of that as well.
(08:45)
So even though you've got to give the bank 5% here in Victoria, you've got to give the government for stamp duty 5%, so already you need 10% and most of these customers are buying a million million two $1.5 million property, so all of a sudden that's a hundred grand at lease that you need and then you've got to pay mortgage lender insurance on top of that as well. It's another 3% to go and buy that million dollar property on a 95% interest rate or 95% LVR that the bank's going to give you. You still need $130,000 to go buy that property. So you're really behind the eight ball already Speaker 2 (09:17):

With so much wasted money as well. Speaker 3 (09:19):

Correct? Correct. They just say, look, I don't get any government assistance. I earn too much money to qualify for any government low deposit schemes. The property that I'm purchasing exceeds any stamp duty thresholds. Again, they're buying that million dollar plus asset. There's no stamp duty concession, so they've got to pay the full amount of stamp duty. We did some market testing for Roundabout, we ran it for about two months just to get a real good understanding of what it was. We worked with a couple of credit agencies, Equifax and Alliances, which are the two largest credit agencies, and we said to them, look, we want to target your database. After introducing who we are and what we do, we said, we want to target your database and we want to speak to a customer who's got a credit score of 700 or above has an individual income of greater than 200,000, no credit implications whatsoever, but doesn't have a mortgage of any type, regardless of whether that's unoccupied or investment property. We sent out our first EDM to that database because they really loved our product in regards to what we did, just Speaker 2 (10:17):

An email for people who dunno what an EDM is. Yep, Speaker 3 (10:19):

Thank you. That's all right. And within 48 hours we were inundated and swamped by inquiry. I'm talking hundreds of inquiries and all of these people were just high income, great credit scores, no issues, but just are going, there's no way I'm ever going to be able to get into the property market because there's no assistance for me. The government's great in regards to bringing out a lot of these programmes and stuff, and I like to say that Albanese has brought out his shared equity and I'd like to say that we came out with ours before he did, so I think that they've copied our model trademark Speaker 2 (10:51):

Infringing, Speaker 3 (10:52):

But again, you're talking about very low income levels to be able to qualify for that product. You're talking about ceilings in regards to property price that you've got to fit within to Speaker 2 (11:03):

Occupy Speaker 3 (11:04):

And Correct, and you get assessed annually based on your tax return. As soon as you exceed potentially if you get a pay rise, you get a new job, whatever happens, if you push yourself out of those income levels that the government sets for you, you have to refinance the property and get out of that scheme. The government won't allow you to stay in that scheme. As good as those programmes do come to play, they just don't really accommodate. I think it's a little bit more of the government can go, good news story. We've put something out there, we've put a solution out there, we've ticked that box. Correct, correct. Whether or not it actually fixes the problem, Speaker 2 (11:34):

We're going to build a million homes. Speaker 3 (11:36):

Correct. Look, I won't name one of the major four banks just for their respect, but we speak with banks and lenders quite a lot and one of the major four banks has said that they're not going to support the shared equity programme that the government has because they just see that it's going to put more pressure on a housing market that they don't see the potential of the capital growth within those areas because all of a sudden you've got a very, very low ceiling point. You've got a certain demographic that is buying those particular properties. There's not the potential for the uplift that everyone typically sees within property. Typically Australia, you see, and historically you can go back 40, 60, 80 years typically doubles in value every seven to 10 years. Speaker 2 (12:18):

I think we've been tracking house price growth for about a hundred years in Australia, and it's consistent to that doubling seven to 12 years. Speaker 3 (12:25):

Yeah, Australia is great as well in regards to you look through some major domestic and international affairs and issues and you always see what Australia has done in its property market after that, so you can go all the way back through to the seventies and eighties where the government at one state actually pulled negative gearing, and if you go back to the data on when they pulled negative gearing for the two years that they didn't pull into place anymore, property price still steadily increased. They reinstated it and the property market shot up. You then move into an area in regards to the Asia financial crisis where a lot of the Asia Pacific area where Australia is in crashed and had major issues. Asia really, really suffered during that time. If you look at property prices in Australia, when that happened again, they skyrocketed after that. You move a little bit closer into more recent times in regards to the global financial crisis. Australia property prices settled for about three to six months, just stabilised again when the whole world collapsed, but after six months, our property market went through the Speaker 2 (13:28):

Roof. Same with Covid. Speaker 3 (13:30):

Covid is another prime example as well. As I said in the intro, I lived in Asia for what was seven or eight years. We still have some property back over there. I'm struggling to find tenants for properties over there and I can't sell the properties because the market's dropped so heavily over there that if I went and sold those properties, I still owe the bank money, so I'm stuck in this position where I'm having to top up the rent. I'm in this vicious cycle, but whereas you look at Australia, Australia is robust and a lot of that's to do with as much as we all probably are not so keen on the government at certain times, but the government has been able to protect us, particularly through the global financial crisis. We were one of the few countries that were able to maintain our triple A credit rating through that period of time. We've got a very, very tight banking sector and industry over in the us. You default on your loan, you hand back the keys, the bank absorbs any losses there. Here in Australia you default. You hand back the keys, you're still liable for whatever the shortfall is, so that helps us in regards to protecting what is for everyone. Pretty much their major asset is bricks and mortar, their family home. Speaker 2 (14:34):

It's interesting to hear your feedback on what happened with property prices during those periods of time compared to what happened with superannuation balances, which is a different topic all itself, but we are here to talk about super and for people that don't know, I'm sure they do know because they probably experienced a fair whack of it, but I think super prices at some point or super performance was down 25%, 30% funds were dropping off at massive rates, which is probably not the end of the world if you're young and you've got time to work and build your wealth, but if you are just about to retire and you've set yourself up a certain way because your super's there and that's to protect you, then all of a sudden, oh, what happens now?
(15:13)
Whereas the ones with property, which is actually a small percentage of people, so when I say small percentage, I mean people who have multiple properties and above. It's a very small percentage population. Hence why my mission is to try and help people get more property because it's as we know, probably the safest approach that you can have to buying or to building wealth for yourself. I want to jump into the super stuff, what we're here to learn about. You have designed something incredible that I love and are very much invested into introducing to our community and our friends and people that we work with and help. I guess maybe give us an introduction to how it started, the shared equity approach, which you've mentioned briefly in the chat so far, and then let's get into the juicy stuff as to how this works and how you can now potentially subject to your position, utilise your super to buy any type of property that you wish in any way. Speaker 3 (16:07):

Yeah, correct, correct. I'll introduce a little bit about ourselves and then guess jump into what everyone wants to sort of hear about and whatnot. As you said, your prop group was established what was close to about two years ago now we have a suite of business lines and companies that fall underneath that. One of the major components and business off that is your prop home loans, which obviously does home loans, does normal home loans, does a shared equity home loans under what we'll talk about very, very shortly, refinancing investment properties, whatever it is. We handle all of that. We've got a legal operation and business as well, and management company, a real estate business as well. It's not your typical everyday real estate business. It's actually a product that we've got that helps landlords just get, it's a more astute way for a landlord to hold an investment property. Then our main core business, as I said a little bit earlier, is your prop capital, which is a private equity investment fund, and that investment fund is what typically provides the, we will go to a maximum of 30% exposure on a property, but typically we talk about 20%, 20% shared equity in a property, Speaker 2 (17:11):

So for people listening that might not know what that means, explain it in layman's terms, so Speaker 3 (17:15):

What it is in a sense that's to a approved customer who comes in and is introduced via like you introduced customers through to us or customers come to us, we will approve them for finance and typically we'll go and get them a 80% Speaker 2 (17:29):

Homeowner. They don't have access to a deposit, correct. Or a small deposit. Speaker 3 (17:32):

Correct. Correct, and we as the private equity fund, a shared equity component provide the 20% that they need. The reason why we do that 20% component is because you avoid things like mortgage lender insurance and a interest rate on an 80% LVR versus a 85 90 or 95% is significantly cheaper. The more you borrow from the bank, the higher they slug you and it's upwards to seven and a half, 8% if you're pushing that 95% LVR at the moment. Yeah, Speaker 2 (18:04):

And then obviously for you to provide that money, you charge fees and you charge a percentage of growth in the property, hence shared equity. Speaker 3 (18:11):

Correct? Correct. We take an interest in the property. It's really key to understand that under the shared equity model, the customer is the full legal owner of the property. They're just supported in buying that property by two parties, one being the bank who provides the mortgage and they place a registered first mortgage on title, like any property, if you went and bought your own property, you had enough deposit, you went to the bank and said, look, I want to get 80% home loan or 95% home loan. The bank will give you the money, but they'll always place a registered first mortgage on that title. You're supported by two parties, one being the bank, one being the shared equity component, and we place a caveat deed behind the mortgage and that shows our equitable interest in the property. What we're banking on is like what we said, properties double in value typically every seven to 10 years. We're anticipating that the property is going to increase in value, so if somebody was to go and buy a $500,000 property, we in a sense would be providing 20%, which is a hundred thousand dollars, and we're hoping over a 10 year cycle that that property is probably going to get close to a million dollars and our 20% would've increased from a hundred thousand dollars to $200,000 over that period of time. Speaker 2 (19:20):

And then there's fees on the money that's provided as well. Speaker 3 (19:23):

Correct? Correct. So we charge an occupancy fee based on the 20% amount, so ensure what you're getting is a hundred percent home loan with no mortgage lenders, insurance and cheaper interest rates than if you went and got a 90, 95% home loan. Speaker 2 (19:39):

That's awesome. Not what we're here to talk about, but it is relevant because it's what led you into creating the next product which people are waiting to hear about. A big part of our business at Bayfair Property Group is in helping people use their super to get into property, and traditionally it's just an investment approach. That's all that's been available to them. It's quite a few restrictions around what they can do. Now, that's obviously not the case with what you've created, so let's talk about the self-managed super fund option that is now available. What can you tell us about it? Speaker 3 (20:10):

Sure. Yeah, so you introduced it. Well, there historically, SMSF super when you buy a property has only been able to allow you to go buy an investment property, and it's not you buying the property. It is your super fund that buying it. It's buying it in trust as the property increases in value, it's your super fund that benefits from that. Any rental income that's generated, that goes back into your super fund. So that's all well and good for people who were maybe pushing closer to retirement, people who are in their 50 fives moving into sixties, those sort of things, but for the younger generation who are potentially in their thirties or forties that can't touch their super until they're 60, 65, 67, determining on what year you were born. When we look at how challenging today is, we look at the cost of living has just gone through the roof at the moment. We talked, I think it was last year or so, how expensive it was to go buy ahead of lettuce from the supermarket. Speaker 2 (21:06):

Like capskin, brutal. Speaker 3 (21:07):

You have to go and get a mortgage just to go to buy your shopping, but we still see that the shopping and supermarket groceries are through the roof. Fuel is so expensive. Speaker 2 (21:15):

Couple that with interest rates on property mortgages, Speaker 3 (21:18):

School fees, everything's gone up and yeah, we've seen what is close to 18 months now of interest rates continuously going up and there's always that story coming back for investors. Oh, it doesn't affect investors in regards to those interest rate rises because you pass it on to your tenant. The issue is that you only get one chance a year to increase your rent. If you miss that cycle where we saw 10, 12 consecutive interest rate rises and you've just rereleased your property or put a new tenant in, you can't claim any of that money back until we'll start getting back some of that rental income until you've got a new lease in place. Speaker 2 (21:50):

There's a ceiling on that too, so I think it's 15%. Speaker 3 (21:53):

Yeah, and you've got some state governments that are talking about putting rental freezes in and that sort, so who knows where that's Speaker 2 (21:58):

Going to. It's not going down that path. Yeah, Speaker 3 (21:59):

That's right. That's right. That's not what we're here for. The other component behind it is you can only buy an investment property. The super fund absorbs everything. What a lot of people say, I want to buy it in my super because I only pay 15% tax rate on that, which is great, but you miss out on a lot of things like depreciation tax credits if you move into the NDIS area or that surplus income after paying off the mortgage and that positively geared income goes into your super. I think it's fair to say that most people could do with an extra 500,000, $2,000. Sometimes we see these NDIS properties generating surplus income per week. I think a lot of us could do with that money today rather than waiting until we're 60, 65 or 67 years of age. Speaker 2 (22:44):

Yes, please. Speaker 3 (22:46):

The other thing is with typically in the normal area with a self-managed super funds, you need a really high cash balance to go and buy what is typically a real entry grade property, so your rough figures are you need about $200,000 to go buy something circa five 60 $600,000. Speaker 2 (23:04):

Talk about interest rates on traditional SMSF lending as well because there's not as many providers, so you don't have that supply and demand advantage. Your disadvantage in that respect, Speaker 3 (23:13):

So none of the major for DO SMS lending. Not many of the second tiers do it, so you're really into third tier lenders, private institutions because of that. It is, as you said, it's a monopoly so they can charge what they want. Again, we're seeing interest rates on that scenario, pushing high sevens well into the 8% mark for a self-managed super fund loan, Speaker 2 (23:32):

Which choose a lot into future perceived profits. It's costing you a lot more to hold the asset. You're not feeling the pain, which is a good thing because it's totally done through your super. It's a brick wall in between you and your super, but there's a lot of different things there that come into play that can chew into your end outcome. Speaker 3 (23:49):

Well, one main thing is just your SMSF set up and ongoing fees, like you're talking five to $10,000 per year just in fees in regards to being able to go buy an investment property in there, so what you're banking on when you buy a property in an SMSF typically is all that you're banking on is capital appreciation. You want that property to grow in value so that potentially that $500,000 asset becomes a million dollars down the track and you've grown your super significantly greater than if you left it with an industry fund who last year they sort of creeped up a little bit. They were somewhere in the range of four to 6% returns a year before that. They were somewhere negatives up to 3%, Speaker 2 (24:29):

And they always say there's the fees that you do see and the fees that you don't see with industry funds. They're capping the returns. It doesn't have the best name unfortunately. I just want to touch quickly on the fact of the setup costs for SMFS and ongoing management costs. I don't want you to release what you can do with that just yet, but I'm excited for you to share that when you explain this product in detail because it's a big component, a big advantage to people and just one thing I wanted to touch on is the non ability to be able to use any kind of growth in an SMSF property to build more wealth and build more property. That's not something that's possible in my understanding. Is that correct? Speaker 3 (25:08):

For the everyday family, I won't say mom and dad nowadays, but for the everyday family now is that you go buy a property in your SMSF, you buy as an investment property. What most accountants and financial planners will say is that you are one and done. You've spent years upon years upon years to get a big enough cash balance in your super to now go buy a property. Most of the properties that you're buying aren't going to be returning huge amounts of cash back into your super fund, so it's going to take you a long, long time to build up another $200,000 in your super. You're capped out again at a ceiling point. You and your partner have got two 50 in super. You use 200,000 of that to put down on a property. You're never going to build another 200,000 up in your working lifetime again, so I might jump into about our product now. I think that's what everyone's sort of waiting and wanting to hear about. Speaker 2 (25:57):

We've kept everyone waiting with bated breath. It's time to go. I'm looking forward to hearing you to share it. Speaker 3 (26:03):

So ultimately what we allow is people to tap into their super and be able to buy a property regardless of whether it's investment property, but more importantly probably for a lot of listeners and own occupied property. The other big upside for our product as well is that there's no restrictions on regardless of whether it's apartment, a house, a house and land package, what we call a two park contract. Typically, a lot of the lenders in the SMS area won't do two part contracts as an SMSF home loan, so you have to then go to a third party provider who you pay upwards of $85,000 to convert that two part contract, the two parties, one being the land contract, the second part being the bill contract, hence the two part contract. Converting that into one part, so you've got huge amounts of fees in regards to doing that. You've got to pay double stamp duties. There's big issues in regards to doing Speaker 2 (27:00):

That, so you're kind with the $85,000 mark as well. I think it's more like 1 20, 1 30 plus for an affordable house. Sure. Speaker 3 (27:08):

It's incredibly, again, that's another cash amount that you have to pay. It's a big, big amount. Ultimately, what we do, we allow you to tap into your super, be able to use what is in a sense 20% of the property value out of your super to then go and put that into a shared equity model that allows you to go buy any type of property that you want to buy. If you want to buy an owner property, investment property, house and land off the plan, apartment established property, whatever it is, you can go off and do that. Speaker 2 (27:36):

That's amazing. The reason why the shared equity model was important to understand is because your SMSF or your super fund is now acting as the shared equity component to the purchase that you are making through your personal name or whatever structure, you want to set it up. It's your personal name. Yep. Okay, so that's amazing. Talk about the benefits, obviously interest rates, ability to be able to build a portfolio, access to depreciation and rental incomes and tax offsets and all of those kind of stuff. This is where it gets really juicy, Speaker 3 (28:06):

So in my talk, we'll break it up in regards to an own occupier and then jump into an investor as well, so for an own occupier, it means you don't have to wait. What we see on the east coast, Melbourne, Sydney, Southeast Queensland, you're upwards of 70 to a hundred months to save a deposit to go buy a property. That is now pretty much squashed for most people because most people have enough in their super to actually be able to tap into and get into it. The other big upside is, as said a little bit earlier, was your interest rate components. When you start borrowing greater than 80%, the interest rates really spike up at 80%. You're typically paying somewhere in at current interest rates. We're talking end of January of 2024. You're looking at low to mid sixes is what you're paying interest rate wise. You jump into the 95%, you're paying upwards of 7.5%. The banks are a lot more stricter in regards to what they want to see about you. When you start borrowing 90, 95% as well. They want a lot, lot, lot more detail because the bank Speaker 2 (29:06):

Looks or the pub, what are you spending your money on? Yeah, yeah, Speaker 3 (29:09):

That's right. They want to see every bank account that you've got. They want to see where money's moving, what you're doing with it. Are you heading to the pub on a Friday? You're spending a hundred bucks. We're going to put that into your living expense every single week, even though you might've only done that once in a month. They're going to charge you that and assess you that. You do that every single week, so it becomes very challenging because a lot of it's worse than a tax audit really, when you start borrowing that much money, 80% the bank looks at it. As we've said a couple times, the bank understands what happens with property prices in Australia at 80%. They know if worst case scenario in touch wood, you never did this, but if you defaulted on your loan, we can go off and sell the property and we can sell 'em. We're going to recoup back the money that we've lent to you. We've, again, touch wood, I'm touching the table pretty hard, mate. Laminate, Speaker 2 (29:51):

Laminate looks Speaker 3 (29:51):

Like wood. We've never seen the Australian property market crash significantly where we've seen 20% losses for an own occupy, get into the market much sooner. Use your super that you've never been able to utilise before. Get out of that rent rut that a lot of people, I saw something on social media about an apartment in Sydney that had over 300 people lining up outside the building to go in and see one apartment for rent there to rent, yes to rent. There's an ability there for people now to get into the property market where they've historically thought, we can't do it. We could service, but we just don't have the savings, Speaker 2 (30:25):

And that might be to buyers an investment for their first property as well. I think that's really important to understand is that this product gives us the ability to come up with different approaches, be strategic, not just go the one dimensional approach. Now all of a sudden it might be, oh, well, let's do this first. Speaker 3 (30:43):

That's right. It might be, look, let's go buy it and let's rent it out for a year or two and get married or go have kids or do whatever it was and then we'll move into that property. That's it. For an own Occupy, avoid that 70 to plus hundred months in regards to saving a deposit. You're paying incredibly cheaper interest rate, your much better terms. You've got control, Speaker 2 (31:03):

And that helps with servicing as well. Obviously when someone's going, oh, I love that house. It's 700,000, I've only got a 5% deposit. Well sorry, we can't give you that much because interest rate's higher with this. It might be, well, the interest rate's a lot lower and you've got this deposit. It might work for that. Speaker 3 (31:18):

Even when we look at our blended rate of the interest rate on the 80% home loan and then that occupancy fee on the 20%, when we blend those two rates together, what happens for a customer is that their repayments are lesser than if they went and got a 90 or 95% home loan, but their serviceability and buying power increases, so they actually can go and buy a more expensive property under our model and pay a lesser repayment amount than if they went and got that 95% Speaker 2 (31:47):

Home loan and they're building their super at the same time, which you can explain after you do the investment Speaker 3 (31:51):

For investors, I talked about before, a big upside for self-made Superfund buying a property and that is that you're capped at 15%. For those that are unaware, you buy an investment property in Australia, if you sell that property after 12 months, you get a 50% reduction on your capital gain. So if you use that $500,000 property, let's say it went to a million dollars after 10 years, you'd be paying tax on $250,000 because you get that 50%. If you sell it within the first 12 months, you pay a hundred percent tax on that. That's often one part that people go, I'm only paying a flat 15%. You don't get any tax concessions with stamp stamped. It's just everything is a flat 15%. In saying that though, you miss out on things like depreciation, particularly on a new build. Depreciation can be huge. It's incredible. It can be a tax credit of upwards of $15,000 in year one. Speaker 2 (32:43):

It still blows me away. This is not a judgement in any way or form, but it still blows me away at how many people have no idea how depreciation works. If anything, if you're listening to this and you're interested in property investment and you don't know how it works, ask the question, don't feel silly because it's a massive, massive component that should come into your decision making process. Speaker 3 (33:01):

Correct, correct. So that depreciation and reach out to Madden, he'll explain it to you better, but in a sense that for the first 10 years of that property, there are huge, huge, huge tax credits that you get. As I said, that first year can be circa $15,000. It dilutes over that 10 year period to the last 10 years probably looking at three or $4,000, Speaker 2 (33:20):

But then 40 years for the structure. Correct. Speaker 3 (33:23):

For the build itself. That's right. Yep. That's a key component. So typically your self-managed super fund absorbs all of that. You don't get the benefit, so if you're a high income earner, you're earning a lot of money, you're paying a lot of tax. Depreciation is huge for you because that gets deducted off your tax bill each year. Tax credits in the property itself, so everything that you put towards the property that happens with the property, your accountant just holds onto all of those tax credits along the way. So when you get to the time of selling the property and you look at that $500,000 property increase to it, a million, I've made $500,000 profit, I'm going to have to pay tax on its tax on 250,000. You're not paying 250,000 in tax. It's tax on that two 50, you've probably got a smart accountant or if not, you can contact us and we can let you know.
(34:08)
I'm sure you've got some good contacts as well, but your accountant will be able to help you absorb some of those fees. That might be simple as splitting out the ownership of that property. The husband might own 50%, the wife might own 50%, so all of a sudden that 250 tax bill is now divided in half to a hundred twenty five, a hundred twenty five. You then start looking at those tax credits that you've accumulated along the way. It all sort of dilates, so at the end of the day, when you wash it all out over that 10 year period, if you've got a good accountant, not trying to cheat the system at all, but if you've got a good accountant, you're probably only going to be paying around that sort of 15% tax rate anyway. Speaker 2 (34:43):

It's important as well, and I'm not a financial planner, so this is not financial advice, but it is important to understand as well that you don't always need to be purchasing a property equally, if that makes sense. Yep. If you're a husband and wife or a friend, brother and sister buying property and it's an investment, you can alternate, you can change the amount of percentage that one of the individuals is owning that. Correct, which can be very beneficial from a tax standpoint. Speaker 3 (35:07):

If one of the owners of the property is a stay at home person, not earning income, obviously you're going to absorb more of that earnings into their earnings for that particular year to help solve some of those fees and those taxes that you've got to pay. That's a big upside for our product. That's why a lot of financial planners, tax accountants love our product. It's also the ability that I alluded to before, for most people, they can only buy one property in their SMSF. Under our model when we've dealt with a lot of accountants and financial planners is that they model it where the customer actually has the ability to go buy another property three, four years later and do the same thing again and they're building their wealth. The biggest ticket, the biggest upside for our product as well, all of the rental income goes to the purchaser. It doesn't go back to the SMSF, goes back to the purchaser. The purchaser benefits from 80% of the property's capital growth today. They don't have to wait until they're 60, 65, 67 years of age to capitalise on that money. We use that scenario of NDIS. We've seen customers who buy NDIS property under our product, they have now got an additional income coming through every single week and we're talking five to $1,500 per week in positive cashflow coming into their bank account, every single pay Speaker 2 (36:30):

Without having to work 25 hours a week for. Speaker 3 (36:32):

That's it. We're working with somebody at the moment who's looking at totally replacing all of his income just through NDIS. That's a huge upside, but the bigger piece is that capital growth component. You don't have to wait until retirement to tap into that. You get the benefit of that. 80% of that property increases in value. That 500,000 to a million dollars, 200 Ks has got to go back to the shared equity component. You've got $800,000 there. You might have a mortgage with the bank for another 400,000, so you pay off that component. You are left with $400,000 for not putting any money down yourself. You've now got $400,000, Speaker 2 (37:10):

Ding, ding, ding, ding, ding. That's right. All from something that wasn't available previously because you didn't have equity or deposit slash savings. Correct. Or super that you could use Speaker 3 (37:20):

For this. Correct, correct. Speaker 2 (37:21):

Leverage. Leverage, leverage. Speaker 3 (37:22):

That's right. You read any financial book, you read any wealth creation book, anything like that. They always talk about you someone else's money to grow your money. OPM here is a scenario where you're able to get a hundred percent home loan now and not pay mortgage lenders insurance. There are no a hundred percent home loans out there at the moment, and when you're pushing in those higher home loan amounts, you're paying significant interest rates. Speaker 2 (37:43):

Hence the excitement that I have in obviously learning more about this product and working with you, because I think for anyone listening to this, at the very least, please reach out because we're talking with people at the moment that have no idea whatsoever that they've got the ability to do something and it's really just a hit and hope approach. Oh yeah, look, we've seen you advertise this, but it won't work for us. We get some information from them and go, well, hang on. Oh, no, no, no. That's not possible so well, it is. That's Speaker 3 (38:11):

Right. Yeah. Even when we get called every day and we get called, probably our biggest market at the moment is financial planners and accountants, and it takes them probably half an hour to actually absorb it and understand it because for 10, 15, 20 years they've been, this is the only way you can use your super. This is the only way that you could do it, and now all of a sudden there's this new product that we've been able to bring to market and a of them just say, now, why would we ever advise a customer to go buy a property in an SMSF when there is this option available? Speaker 2 (38:42):

If you go back into history and you look at the modern technologies that have come into play, like it might be the telephone or the TV or simply being able to close your blinds by clapping your hands or whatever it is when it first comes out, AI is a prime example of that. Now, when it first comes out, there's a lot of resistance and there's a lot of, come on, when the internet came out, people didn't think it was going to be a big thing. Have a look at it now. Can we live without the internet? No. I think a big part of this has that effect on people. It's like, well, it's not possible. You can't do it that way, but this is how we advance our world. This is how we advance the different economies within our world, which is what you've done, which is why I think it's so special. So I feel like our job is to really explain it well, so it's taken me time to get my head around it as well because there is complexities involved with it, but once you start understanding all of the benefits that can come into play with it, it's incredible. Speaker 3 (39:35):

You touch on a good point there. It is complex. We spent years bringing this to fruition. There's a lot that we've had to do behind the scenes to do that, and that's the reason why we have your prop group and we have our business lines underneath that in regards to the home loan because our home loan team knows how to structure the loan for the bank for them to understand how this works because the first question any bank says, when you send through an application, where's the cash? Where's the 20% and where did the 20% come from? We want to see it in a bank account for six months. We want to see that money coming into that bank account every single month or every single pay cycle. We want to see the customer putting that away. Pretty Speaker 2 (40:14):

Easy to demonstrate with super, Speaker 3 (40:17):

So under our model, our lenders understand what we do. We have a home loan team that knows how to package up the home loan. We run the legal component as well because what we're trying to do is take all of the unnecessary stress away from the customer. We have a team that will facilitate everything for us. It's a matter of like you, Matt, you introduce a customer through to us. We handle that customer in regards to that entire process all the way up until settlement. They've not had to worry about anything. They haven't had to worry about their contracts. They don't have to worry about when settlement's happening. They don't have to worry about is the bank ready with finance on the days, the fund ready with its 20%, is the title ready to be issued? All of these sort of things. That's why we have the home loan business. We have the legal operation, we have the management component, and ultimately we have the equity fund because all of those businesses are individual businesses, but they all work connectively to assist the customer. Speaker 2 (41:08):

Yeah, that's amazing. For example, I haven't actually shared it with you yet, but one of my best mates has come to me because he's heard me talking about this and he said, oh, same thing. He said, oh Matty, I don't think this would work for us, but this is our situation and we've been wanting to buy a house for 5, 6, 7 years. They've just had their second child and they're miles off being able to do it in the traditional approach, and I've looked at it and I've said, no, I think this should probably work, and the look on his face was phenomenal to me to be able to help someone now use what is rightfully theirs. You might've seen my face change when I said that Your superannuation is rightfully yours. You shouldn't be able to use your super, this is my opinion, shouldn't be able to use your super to just go on holidays to Thailand and party and do whatever. That's absolutely 100% something I agree with, but restrictions around what you do with that from a property standpoint or an investment standpoint, absolutely not. You should be able to do what you want with it as long as it's responsible, so for you creating this opportunity for people. Now, I'm not going to take my hat off. I've got the headphones on, but hats off. It's very good and I look forward to working with you for a long time to come in. Finish, mate, is there anything that you want to touch on? To finish off with Speaker 3 (42:18):

Just talking on what this product's for, it's about own occupies to assist on occupies. It's also to help investors as well. Typically, most people will look at using the family home and pull equity out of that family home to go buy another property or the next property or investment property, whatever it is, because of all the interest rate rises that we've seen so dramatically over 12, 15 months and the cost of living becoming so expensive. Although property prices have grown over that two year period, available equity nowadays, people will have less available equity today than they did January of 23 and even lesser amount than what they would've had in January 22 because money's becoming more expensive to obtain. Cost of living has gone through the roof, wage growth has stabilised, unemployment has risen. All of those factors come into it, so when the bank looks at it and goes, look, your property's worth this amount, but based on current economics, we're only going to give you a lesser amount of equity nowadays. Again, rightfully yours as you said, that super is rightfully yours. Here's an opportunity to tap into that. Another big upside for a lot of people who are buying their first investment property as well is that there is no cross collateralization on the family home. If again, this table's never been touched so much before, but Speaker 2 (43:36):

Touch laminate, Speaker 3 (43:38):

You look at Covid, a major issue for property ownership during Covid was vacancy rates increased. A lot of the foreign students headed back home, vacancy rates increased, rental amounts dropped, all of those sort of issues. Let's hope that never happens again or something like that never happens again. But if you did default on your investment property because you couldn't get a tenant or your tenant wasn't paying their rent and those sort of thing, the bank's still knocking on its door saying, we want you to pay. The bank has no direct recourse back on your family home. Whereas if you've pulled the equity out of your family home to go buy that investment property, the bank will sell your investment property. If there's a shortfall, they're going to be selling your family home as well, Speaker 2 (44:20):

And most of the time when you are pulling an equity loan from your family home, it's a hundred percent loan, so you're putting yourself at more risk and there's more damage that can be done if that happens. Yep. I think that's a great point. Well, mate, it's been really good having you on and I hope that the listeners got value out of that. I'm pretty sure that they will. I'm going to welcome all of our listeners to send through questions and we can bombard Andrew afterwards with those so that he can get them answered. He's very generous with his time and I can attest to that by the amount of time that he spent with our clients, which we're very grateful for. Congrats again, mate, and hopefully everyone enjoyed that and we'll get lots of people reaching out to speak with you. Yeah, Speaker 3 (44:58):

Absolutely. Ultimately, we want to see everyday Australian be able to succeed in property. Understanding property is one of the biggest drives in Australia on an economic component, on an employment component, it's solid, its sound. That's why there's so much interest from overseas to buy Australian property. There's the ability there to actually create something and create wealth, so we're involved, we're keen, we're interested to help people achieve something out of property that they potentially weren't able to do. Speaker 2 (45:26):

Yeah, unreal, mate. That's great. Thank you again. Yeah, so for everyone that was listening, thank you as well. A little bit longer than normal, but I think it warrants a bit more time with this topic and with this product because it's a special one. Reach out to us and as always, be brave. Go above and beyond and back yourself. Thank you. Speaker 1 (45:42):

Thanks for listening to The Property Now podcast with Matt elo. We hope you learned something valuable and enjoyed the show. Should you wish to reach out to us, you can do so by calling 1 302 8 9 3 2 4 or you welcome to email matt@hellobayfairproperty.com au and he'll be more than happy to help. However we can have a great day.