March 18, 2025 • 31 mins
With property prices soaring, the amount needed for a deposit has climbed too. And that's left many people with no option but to turn to the Bank of Mum & Dad. Parental assistance to get into the property market has grown, and yet there's a stigma around it - a stigma that doesn't exist for inheritances.
In this special episode, Canna and Michael are joined in the studio by Cam McLellan, CEO and co-founder of OpenCorp. A property investor with an incredible story to tell, he's also the author of ‘My four year old, the property investor.' He takes Canna and Michael through the Bank of Mum and Dad, exploring the strategies and stigma, and how investors can make it work for them.
OpenCorp is a supporter of this podcast.
The information in this podcast is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.
Canna Campbell is a Corporate Authorised Representative and Corporate Credit Representative of Wealthstream Financial Group Pty Ltd ABN 35 152 803 113 Australian Financial Services Licensee AFSL 412079.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to How Do They Afford That, The podcast that
peeks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm an author and the co host of the podcast
Fear and Greed business news. As always, I'm with Canna Campbell,
financial planner and founder of Sugar Mumma TV, the financial
literacy platform that you'll find on podcasts like this one,
and YouTube and books and Instagram threads, TikTok pretty much everywhere. Hello, Canna,
(00:24):
good morning. I want to talk to you about a statistic,
an incredible statistic, and I know what you're about to say.
I only saw the statistic because you sent it to me.
Speaker 2 (00:35):
Thank you.
Speaker 1 (00:36):
I'm giving credit where credit is due. But it is
about the Bank of Mum and Dad. And it is
the fact that the Bank of Mum and Dad is
now one of the top ten lenders in Australia, which
is just amazing, right when you think about that, it's
up alongside the big banks, right the banker Mum and
Dad parents are providing billions of dollars in loans and
gifts to their kids to help them get into the
(00:58):
property market. It is or the right person. It is
a perfect opportunity to get into the market. It is not, though,
without its challenges, because there's quite a stigma attached to
receiving some of these loans, particularly about kind of the
effect that it can have on fueling in quality within
the market. But it does beg the question which I
want to discuss a bit today. Would you judge somebody
(01:20):
if they received the money as an inheritance basically when
the person's parents, for instance, were to pass away. And
if you wouldn't judge them for that, then why would
you judge them for receiving that assistant early while the
parents are still alive and helping them to get into
the market. Then it is I know I'm biased, an
interesting topic. It is a topic.
Speaker 2 (01:41):
It's complicated, it's emotional. It's oh, it could be bitter
and twisted and resentful, but also it could be incredibly
like beautiful and filled with amazing blessings and opportunities. It's
it's Pandora's box in a good way that we all
we need to talk about this.
Speaker 1 (01:58):
Is there a good Pandora?
Speaker 3 (02:00):
Well?
Speaker 2 (02:01):
I think we can make it good?
Speaker 1 (02:02):
How about that?
Speaker 3 (02:03):
All right?
Speaker 1 (02:03):
Well, this is a good Pandora's box that we're going
to be opening today, and we are joined by someone
who knows this so well, knows it back to front.
Can McClelland is the CEO and co founder of Opencorp.
He is a property investor. He is the author of
the best selling book My four year Old The Property Investor.
He is a supporter of this podcast, Cam Welcome to
(02:24):
how do they afford that?
Speaker 3 (02:25):
Ken and Michael, thank you very much for having me on.
Speaker 1 (02:28):
Before we get into it, a couple of things. First
of all, we just need to make it very clear
that everything that we talk about on this show and
today is general in nature. It is never personal, investment,
strategic or product advice. It is purely for financial education
purposes only. And if you hear something that might be
relevant to you, because we don't know your circumstances, you think, hey,
that's interesting, go and get some professional advice. But before
(02:50):
we get into the meat of this topic, before we
open that good old Pandora's.
Speaker 2 (02:54):
Box, and want to say, it's a Pandora's box of opinions, like,
I feel like everyone's good opinion of this.
Speaker 1 (03:01):
I love how much you are working to redeem this analogy.
Now that we've gone we have gone all in on
Pandora's box here, but Camp your own story though, is
fascinating because you've had a lot of success as a
property investor and importantly had a lot of success helping
other people become property investors as well. How did you
(03:24):
get into it? Where did this motivation come from?
Speaker 3 (03:28):
It was a light bold moment that I had very
early on in age. I think majority of everyday Australians
and no disrespect to everyday Australians. Most people financially live
with their head in the sand, but at some point
they get that light bold moment where they realize they
need to do something about their finances. Now, this can
happen late at life, when they are the pensions the
financial option for them. I got it really early when
(03:51):
my parents had a small business the family home, sold
that to buy another business, which is a motel. The
books were cooked, they lost the light. We moved to
my grand parents farm in regional Victoria and after about
six months we bought a block of land build a
tin shed. So I spent my teen years living in
a tin shed. Realized we were reasonably poor when my
(04:12):
friends lived in houses and we lived in a tin shed.
But that light bulb moment when I wanted to provide
a better financial future for my kids was when we
pulled up at the exchange store on the way to
town and Mum and Dad were arguing over whether they
buy milk or bread because they couldn't afford both. So
at that point in time, I set myself on a
quest to understand how to build wealth and to look
(04:33):
at the financial mistakes that people make.
Speaker 1 (04:35):
I think that is remarkable because it is one thing
a lot of people experience hardship. It is another thing
to take that hardship and build something from it and
to use that as inspiration to do something different. So
I think that on its own is completely remarkable.
Speaker 3 (04:51):
Yeah.
Speaker 2 (04:51):
I mean so many people could use that pain to
stay stuck, and you've used it as a driving force
of motivation to do things differently and to make sure
that your children experience are very different upbringing. Can I
ask you just some about the strategies you've learned to
achieve so much and also in such a short period
of time, Like how have you developed these skills and
(05:13):
these I guess the blueprint? Was it trial and error research?
I imagine a lot of research if it was that or
just luck or did you have a mentor behind you?
Speaker 3 (05:23):
A lot of the above. The old saying that the
harder work, the luckier I got was definitely one of those.
But I left time at sixteen, moved to the city.
I was fortunate my late teens to come across a
mate who had a father who was successful investor, So Steve,
he's still one of the board members on our companies today,
but grabbed me by the scruff of the neck as
a young teenager, and I knew rich people had property.
(05:46):
I wasn't smart enough to go into the shear mark
or I didn't understand how to analyze company stocks. So
property was my path forward. Luckily, Steve showed us what
to buy, where to buy it at the right point
in time, and I'd go away and absorb information from
as many sources as I could. So I'd go to
the big ra ra semar seminars. The sharks were around
(06:06):
in the nineties doing those big runs, and they pop up.
Every time there's a property boom, the sharks come out again.
But we'd take the information we got this as pre
internet age, and we'd take it back to Steve and
he'd tell us what was bs, what was semi relevant,
and dissect the strategies that people were put in place.
Now I'm really good at business, growing businesses. We've got
about eighty team members and to get a measured outcoming
(06:28):
in business you need a process. But I was amazed
that people will invest in property without a process to
give them the right result they want, because you can
make really expensive mistakes. So that set us side a
path of setting up open Corp and building a property
advisory company with mortgage broking and property management and mentoring
around Australia. We analyze each of the capital city markets
(06:50):
to find that right property for everyday Australians. But that
was basically in a nutshell where it came from and
where we are today sitting here talking to you.
Speaker 1 (06:57):
That is amazing. The Bank of Dad is there are
so many different things that we could talk to you about,
because it feels like you could kind of explain an
awful lot about property investing and the market more broadly.
But if we were to focus on the Bank of
Mum and Dad, because as we said in the intro,
there is a lot to it, and there is this
there is an element of a stigma attached to it.
(07:17):
There is also this idea that with property prices rising
over time and at times going up very very quickly,
and people struggling to get young people in particular really
really struggling to get their foot on the ladder, that
the banker Mum and Dad has a purpose within that
(07:38):
to help young people, particularly onto the property, into the
property market, onto the property ladder, the nuts and bolts
of it. Can you explain to us how the bank
of Mum and Dad actually works? What's it look like?
Speaker 3 (07:50):
Yeah, so it refers to parents assisting their kids financially
to enter the property market. You're right, it's a big
stigma thing, and there is a Pandora's box that we
have different impressions we do need to unto. It's a thing.
It's catching on.
Speaker 1 (08:04):
You have done that just to kind of dose, just
to make her feel a little bit better.
Speaker 3 (08:09):
This is good.
Speaker 1 (08:10):
I think we're going to get on very nicely in here.
Speaker 3 (08:12):
Yeah.
Speaker 1 (08:12):
Yeah, So there is a lot to it, though, isn't that.
Speaker 3 (08:15):
Yeah, Well, let's look at the first stigma. You look at,
say the boomers, and just to be clear on gen X,
I saw Navan alive. So, but with the boomers, with
boomers the standard. You know, your silver spooning your kids,
and we had to do it hard. We save for
a deposit. We had eighteen percent interest rates. When I
hear that, I just need to debunk that a little bit.
For the new young people getting into the property market
(08:36):
and for the boomers, I would love eighteen percent interest
rates today in today's market, I would love to be
back there. So this comes down to income versus the
cost of property. So back in the nineties, when there's
eighteen percent interest rates, the average wage was forty thousand dollars.
The average property is about one hundred thousand dollars, so
you're looking at about two and a bit times income
(08:58):
to property value. Now the average wage is about one
hundred thousand, but you're looking at a million dollars for
a property, so it's ten times to get into the market. Now,
getting a deposit together for kids and young people nowadays
is really tough because our client's on average at the moment,
property is going up around ten thousand dollars per month,
So just to maintain pace with the market, you need
(09:18):
to be saving twenty percent of that. So you've got
to save two thousand dollars just to maintain pace with
the market and save a deposit on top of that.
So when we think back of each is probably generation
in the past. You want each generation, the next generation
to be financially better off. We're at a point now
(09:38):
where that's not the case. So people need to understand
that right now, if you're not helping your kids get
into the property market, the gap between the have nots
is getting wider, and the next generation will be worse
off financially. So there's a choice to make. Tell your
kids go on rent and if you can't help them
into the market or help them out, because it's very,
(09:59):
very difficult and much harder than it was twenty thirty
years ago to say for a deposit. So there's a
choice that needs to be made. So hopefully I unpacked
that stigma a little bit. Yeah.
Speaker 1 (10:07):
Absolutely, And when you are seeing this happen, when we
are talking about parents helping their kids into the market,
what does that actually kind of look like? And I
know that that cana. You and I were talking about
the various forms that this can take.
Speaker 3 (10:22):
Yeah, So there's two main ways that we help clients
with that. The first is providing a deposit and the
second is acting as a guaranteur. There's also co investing
in trust structures, but we probably won't delve right into
those to day. The main two forms are providing a
deposit or going as a guaranteur. Providing a deposit is
the parents have got their own home which has gone
up in equity. They've got some usable equity in that
(10:42):
which they draw down and use it to deposit for
the kids to get into the market.
Speaker 2 (10:47):
Sorry, I just want to see you, you know. Use
is it the main two? A loan or a gift?
What do you see as the more popular choice?
Speaker 3 (10:55):
It's probably fifty to fifty at the moment with drawing
down equity or going a guarantee. There's complexities with both,
and there's benefits and I suppose issues. There's family dynamics,
and this is what I want to get into and
unpack a little bit. The family dynamics. You can get
into pretty nasty situations if things aren't outlined clearly in
these when you're doing banker mum and dad. So what
(11:17):
we usually look at is the property that the kids
are buying is an investment property. It's not a primary
place of residents, and this de risks the property and
the situation for the parents. So let's say we'll use
they're getting some equity out and using it as a
deposit for the kids to get into the market. If
they buy an investment property and let the kids go
and live in the cool suburbs and go to the
(11:38):
nightclubs and those things. But buy an investment property in
a suburb that's got a tenant that's paying rent, it
de risks it because you're not worried about the kids
paying it back. The concept of paying mom and dad
back doesn't happen on a drip feeding paying you back
amount of money. There's a set agreement put in place
where after a period of time the investment property's gone
up x amount, the money is out of that and
(12:00):
the parents are paid back in a lump sum. So
we keep it really clean and that stops that family
dynamic issue happening. Guarantee is very similar in that instance.
Obviously save some stamp duty interests, but lender's mortgage insurance.
Obviously that can be saved, but there is that once
the equity's gone up in nothing in the investment property,
then the guaranteur can come off that loan. So both
(12:23):
are similar. We provide a simple basic template for agreements
on those for clients.
Speaker 2 (12:28):
Can you share with us a success story, you know,
say someone in their sixties won't help their kids get
into the market.
Speaker 3 (12:35):
Yeah, one really good one. So we've got our team
used this, like we've said, eighty team members in Australia. Australia.
But Pascal and Georgia, Pascal works for us and his
dad wanted he actually read my book and said to
past this is before password for us actually, so we
want to get you into the property market. And in
there it talks about helping kids out and getting them started.
(12:56):
But what Pascal and Georgia have done, they've had Mimi
come along, which puts a little bit more pressure on lending.
They living in Bauxhill, in a suburb in Melbourne, couldn't
afford that primary place of residents, so Pascal's father in
law gave them an equity loan got them into the market.
They were able. They bought a property in Brisbane in
a suburb called Polara that went up about four hundred
(13:19):
thousand dollars over about a two year period. Yeah, I
should say we've got a straining financial services license. Past
performances and owndication of future performance. But that's the sort
of results we were getting for clients. They were able
to pay back George's dad and they've now just purchased
their second investment property. So they're on the road now
where they've got two investment properties living in the suburb
(13:41):
they want to live in. They're renting there because they
can't afford it. But those investment properties that go, I
can we value Their plan is in ten years time
to draw down the equity of that and by their
primary place of residence in the suburb they love. So
that's a really good story about our team members are
using it. And yeah, I actually and that's concepts called rentvesting,
so you yeah, I use that concept. All my business
(14:02):
partners use that. We've got so many of our team
members that invest currently.
Speaker 1 (14:06):
And you mentioned I have an aversion to jargon. I
just partly because I don't understand most of it. But
you referred to an equity loan, and yeah, that situation.
How does that work?
Speaker 3 (14:18):
All right? So think of equity as profit in the property.
It's gone up in value. So to keep it really simple,
so it's gone up in value, you then create what's
called a line of credit and you can create that
with your current bank. So if the property's a million
dollars value, you've put in two hundred thousand dollars and
then the property goes so that deposit is required to
(14:38):
be there to keep an eighty percent loan to value ratio.
Once if the property goes up another two or three
hundred thousand dollars, you're able to access that equity out
and utilize that for a deposit for the next property.
So that's how a lot of people first get into
the property market. For an investment. You can use the
same process as We've got a lot of clients who
have bought three or four investment properties and then have gone,
(14:59):
hang on, I want to use some of this equity
growth to help my kids get into one. So that's
it's the same concept of just drawing equity out of
a property. So the profit out of a property that's
gone up in value to use for the deposit and
costs for the next property.
Speaker 2 (15:11):
Can we come back to the kids again and the stigma, Yeah?
Speaker 3 (15:15):
Sure.
Speaker 2 (15:16):
Why do you think people consider it dirty money when
someone helps their kids out.
Speaker 3 (15:21):
I think it's the oldest strain thing of anyone who
doesn't do it themselves and work hard, You've just had
it gifted to you. It's the old silver spoon. We
don't like the uber rich, and I think it sort
of pushes people into feeling like anyone that gets a
helping hand is that uber rich sort of you know
this sort of when I grew up, anyone who had
(15:42):
a helping hand from anyone. If you've got a car
gifted to you, well you're a silver spoon. But the
reality is people need to understand now there is a
big difference. Like I said, generationally, we're not getting financially
better off anymore. So to keep your next generation going,
getting into the copy market earlier enables them to keep
that generational financial improvement happening.
Speaker 1 (16:05):
It's tough, isn't it, Because I think a lot of
people would want to do it themselves. You would want
to be able to say, hey, I worked hard, I
saved up and I was able to scrape together a
deposit and get into the market. But the reality is
that it is just not possible for so many people
in so many cities around the country that no matter
(16:25):
how hard you work, no matter how much you cut
your spending in order to save the amount required for
a deposit goes up faster than you can actually save.
So it does make total sense that if you are
fortunate enough to have parents or someone who is in
this position who was able to help you, that you
do look to those people to give you a hand
in this case, so that the stigma it doesn't seem fair,
(16:47):
it doesn't seem like an appropriate stigma for the market
that we're in at the moment.
Speaker 3 (16:52):
Yeah, I think if parents understand, and that's why I
outline the difference between income versus the property prices nowadays,
and once you understand and that it is tougher nowadays,
it is over twice as hard to get into the
property than it was twenty thirty years ago. Now, people
can also be a little as a parent, you can
also be a little bit greedy. I'll use my example.
So I've got four kids, three girls and a boy,
(17:14):
teenagers and a nine year old, and so Felicti and
I realized that in ten years time to get our
kids into the property market, they're looking at two hundred
thousand dollars a posit each. They're not going to save that.
It's just that's not going to happen. So that would
mean that we're forking out two hundred thousand dollars for
each kid if we want to get them into the
property market, so eight hundred thousand dollars. So probably at
(17:35):
five years ago we decided that we're going to chip
in one deposit. So we purchased a property out in
the east of the turbobs of Melbourne for them around
six hundred thousand dollars and I've got that set up
in a trust. So this gets a little bit more complex.
My Fuya of the property investor has got a section
and a visual untrust, so people need to understand how
they work. They're not as complex as they seem. But
I've got set up a trust structure, put a property
(17:56):
in that for my kids once I control it, But
what's that property doubles in value. I'll then sell that,
pay the tax and split the profit between the kids
and they can only use it for a deposit of
their own home or an investment property. Now, I'll make
sure the kids are budgeting and saving and show that
they're financially responsible before I do that. But as a parent,
(18:18):
that saves me six undergrand and flicty.
Speaker 1 (18:22):
That is huge, and I want to get into that
in a bit more detail, in a little bit just
about the idea of doing this as a long term
solution rather than just a short term fix to help
someone get into the market. Now that you're actually kind
of thinking ahead towards financial future, financial freedom, We're going
to take a quick break before we go there, I
want to ask you one very broad question about the
(18:47):
intergenerational kind of transfer of wealth.
Speaker 3 (18:50):
Right.
Speaker 1 (18:50):
And I'm sorry to get so caught up on this
stigma idea, but I love talking about the attitudes towards money.
I find this fascinating and this idea of do we
need a reset now? Do we need a reset in
attitudes towards the bank of mom and dad? Because we
are on the verge of and it's already starting the
biggest intergenerational wealth transfer in history, right, we are rapidly
(19:14):
approaching it. It is already starting. Isn't the bank of
mom and Dad? This whole idea just actually getting in
slightly early on that, And is that what we should
be looking at?
Speaker 3 (19:24):
Yeah, I think you nailed it in your intro. If
you look at it, if I just held out and
gave all my wealth to my kids, when I died.
What joy in that is there for me? Yeah, I'd
rather give them a little bit. Now. I believe in
giving your kids enough to get started, but not enough.
They need to do nothing for themselves, and that's really important.
Make your kids do work, make sure they know finance,
(19:45):
how to control their finances, how to budget, how to
plan for the future themselves, before you just hand something
to them. But I'd rather see him enjoy it. What's
the point of handing over when I'm dead and they're
gonna get it anyway, I completely agree.
Speaker 2 (19:56):
And also, if you're in a position where you can
actually help to some capacity and your kids are stressed, overwhelmed,
exhausted and like burning themselves out trying to get together
this deposit, whilst, as you say it, whilst you're alive
and healthy, you can help them and you can watch
them and also watch their growth and as you said,
guide them. So I completely agree with you. If if
(20:18):
you're in a fortunate position.
Speaker 1 (20:20):
Yeah, And that's the thing that this is not for everyone,
and it's not going to suit everyone, but for those
people who it does suit, And because we are coming
up on that big transfer of wealth, there are a
lot of people that do find themselves in this. But
so really that is kind of who we're talking to
right now.
Speaker 3 (20:33):
Yeah, and it is the majority of Australians. Anyone who
has owned a home for ten twenty years. As a parent,
you're in a position now you can help your kids
get into the market, do it safely. So it's not
just for the uber rich.
Speaker 1 (20:44):
Yeah, Okay, Look, there's a bit more we want to
talk about. We want to talk about some more strategy
side of it and also some of the risks and
how to kind of help to mitigate and navigate some
of those risks within it. We'll take a quick break
and we'll be back in a moment. Canna, We are
talking today about the bank of Mum and Dad, and
(21:06):
we have a guest in the studio. We are joined
by Cam McClelland, CEO, co founder of Opencorp and the
author of the brilliantly named book My four year Old
The Property Investor, which has been a best seller now
for a number of years, hasn't it Cam?
Speaker 3 (21:21):
Yeah, it's very well. I've actually wrote it fifteen years
ago and Tennish was going overseas and said to my wife,
I've got a list knowledge on property investing that I
put together. I write a journal for my kids. A
year later, I was still writing it and send it
out to a couple of people and edited. A publisher
grabhold of it and it's been the number one property
investment selling book for the last decade. So I speak
(21:43):
fairly simply. So I've taken complex subjects and outline them
so people can understand them in a simple fashion.
Speaker 1 (21:49):
That's a ripper. And I want to delve into a
couple of the kind of strategies within this. And we've
got a little bit of time left, so I want
to talk to you about co investing because it is
a big chunk of what you do and you've got
a lot of you help a lot of people with this.
What is co investing? How does it work?
Speaker 3 (22:06):
Yeah, so people who may not be in the position
to use the bank of mum and dad. Often it
comes with friends who want to invest together. So you've
saved up half the deposit, knowing that the property market
is moving so fast and it's really hard to save
ahead of the growth of the market if you've got
half a deposit each We provide a basic agreement template,
but the basic concept of co investing is two people
(22:29):
will pull their money together as a deposit and costs
buy an investment property. It's really important that you use
that as an investment property. So you've got rental income
that covers the cost of the holding costs of the property,
so that individually, you don't want to be waiting on
your friend to chip in some money. So there's some
basic rules we put in place to keep it really
safe and keep friends happy. That rental income covers the
(22:52):
holding costs of the property with some taxation benefits. Then
the agreement is after a certain period of time or
a certain amount of growth in the property, the property
is sold, the tax paid, and the profits split. Now,
the profits of that time should be enough or a
larger amount to go towards the deposits of each individual's
(23:13):
property themselves. So it's about making sure you get into
the market, get the growth of the market before it
goes up too quick. If you can't do it yourself,
come investing is a really good second option.
Speaker 2 (23:22):
Okay, this sounds great, but what you need to look
out for and how do you avoid those risks?
Speaker 3 (23:30):
Yeah, making sure that you're both putting in enough deposit
that the property is cash flow positive and you keep
a small buffer on the side should you lose a
tenant because you don't want you you want the property
to wash its own face financially. Then the other thing
is making sure that you both have a clear agreement
that one of you may it might be ten years
down the track, you agree to sell this thing. So
(23:51):
it's a matter of looking at it long term. It's
not a get rich quick. It's a matter of trying
to build some wealth over the long term. And you've
got a set agreement in time about selling that property
and splitting the profits out after the tax is paid
and then you can go on your own merry way.
But the agreement needs to be really clear that if
one person wants to sell beforehand, that that's not the case.
Speaker 1 (24:12):
So can I ask you about open corp And I'm
just interested in and when we're talking about the risks,
right and we're talking about the importance of having everything
documented and having everything kind of done legally and carefully
and making sure that it is all out in the open,
nice and transparent. When someone comes to you at open
(24:33):
Corp and you are sitting down with them, is it
as much about kind of discovery and trying to find
what is going to be the right solution for them,
and then kind of helping them through navigate those risks,
making sure it is all set up in a clear
and transparent way, and tailoring the solution to the person
and going okay, you know what, You're probably not in
a situation where the bank of Mum Dad's going to
(24:54):
help you, but co investing might work. This is what
you need to be aware of.
Speaker 3 (24:57):
Yeah. Correct. So we set the business up twenty year
year ago. Now it's twenty years this year, so it
use time flies. But when we were looking at it,
the strategy that I put in place when the Melbourne
prices had grown and I wanted to then invest in
a different capital city to get that growth, I needed
a process to basically analyze each of the capital cities.
Where we created a process called MAP, which is Market
Area Property. Now that you think about the ten point
(25:21):
six million properties in Australia, if you try and compare
property A with property B, and then the winner of
that compare with property C, it's impossible to do. So
we wanted a process to knock out large portions of option.
So what we wanted to get is the best property
the right point in time in the right market, which
you'll get the growth that you can duplicate. So we've
got an analytics team about eighty team members around Australia
(25:41):
who analyze each of the capital city markets, look at
the growth corridors and then find the optim sized quality
property for each area. So when a client comes for us,
we'll sit down with them have a look at a
ten to fifteen year strategy. We've got an Australian Financial
services license. There's some specific advice we can give, some
we can't. We'll work through the strategy with them. Depending
(26:03):
on what their outcome is, we'll set up the finance.
We've got in house mortgage broking. We then find the
right property for them. We've got property management around Australia,
and then we've got a mentoring team which look after
clients for life.
Speaker 2 (26:14):
I have to ask this question. I know, I understand
you obviously do all the dotting, all the eyes and
crossing the t's, but have you ever seen it go wrong?
Speaker 3 (26:22):
Yeah, we made a mistakes ourselves early days when it
came to I like your honesty.
Speaker 1 (26:28):
Yeah, no, that's good. Actually it's really And the fact is,
of course across twenty years, you're going to see a
range of things.
Speaker 3 (26:35):
Right, Yeah, so there's different levels of going wrong. Now,
I'll do this clearly really quick. My father in law,
I talked my wife who my now wife, plus he
was nineteen at the time. We came home and I
talked her into buying a property. So I've done a
few due locks and triocs, small developments by that stage
myself in my early twenties. And we came home and
told her father, Pete, that I just bought that. She
(26:55):
she has just bought her first property without the influence
of her father. So he fully got the He was
not happy about this situation. And then we told him
it's not just an investment property. He didn't speak for
about now it's not just an investment property. We're going
to build four units on the back of it. Now.
The problem we had this is one of the biggest
property mistakes I've made. So we bought a three hund
and seventy thousand dollars, got plans made up, we had
(27:17):
a huge amount of land on the back of it,
got the design made up. But because we had a
lot of land, the designs by the draftsmen were quite large.
They were going to cost about forty thousand dollars per
unit each to build over what we'd get in sale value,
so it was going to cost one hundred and sixty
grand too much. We over capitalized on the designs. We
ended up selling that property for five hundred and twelve
(27:38):
thousand with the plans and permits got out of it.
But the lesson we've got which has been instilled in
open Corp now is building the optimal size and quality
property or buying the optimal size and quality property for
a specific area. Every suburb in Melbourne, in Sydney, Brisbane,
Perth is different, so we make sure we analyze each area.
So we've taken the mistakes and lessons that we've made
(27:59):
and built to reduce risk. Probably one of the other
big impacts where we haven't got it perfect. In Perth.
We put a lot of clients into Perth twenty twenty
twenty twenty one. Now those clients have got hundreds of
thousand dollars worth of capital growth. But there was a
long period of time there where there was a trade
and supply shortage in Perth where building was just slow,
(28:20):
so there was a cash flow impact to some clients
that had to hold that property while it was getting built,
that weren't getting rental income in so a lot of
them we worked with to get through that situation. Now
the outside of that is that they're two hundred of
clients who have got that growth in Perth are now
buying over in this coast over here. But it's not
if it was easy everyone to be doing it. But
(28:42):
it's a matter of looking at all the risks along
the process and reducing it and putting buffers in place
to make sure people aren't financially impacted.
Speaker 1 (28:49):
All right, can I We've only got about sixty seconds left,
so I wanted to ask you one question to wrap
things up, because your story is inspirational. What you have
been able to achieve yourself as inspirational. How then do
people use this the bank of mom and Dad as
a long term strategy that it is not just kind
(29:09):
of okay, getting a place to live now or getting
an investment property now. How can they do it so
that it is perhaps creating like an intergenerational kind of wealth,
changing the path of a family by getting into it now.
And I know I've asked you a lot that I
use probably half you're allotted time just in the question,
(29:30):
but in kind of sixty seconds or less.
Speaker 3 (29:32):
How all right? So you create two plans, one for
the parents, one for the kids. The plan for the
parents is how do I use some of my equity
or guarantee to get the kids into the property market.
Plan for the kids is over fifteen years. What are
you trying to achieve? Do you want to build a
property portfolio? Do you want to get your own primary
place of residents in the suburb that you desire? And
(29:55):
those two plans are outlined, and we find the best
properties for those individuals to get the to that goal,
and we hold the hand and mentor them along the
way to make sure we get there. We've got clients
we've been dealing with who are grandparents, parents and kids.
So with three generationals of investors in working with open Corps,
so it's a good feeling. We're not solving cancer, but
we're making the lives financially of thousands of Australians better
(30:19):
down the track.
Speaker 1 (30:20):
That is amazing.
Speaker 2 (30:20):
That sounds pretty good to me.
Speaker 3 (30:22):
Yeah.
Speaker 1 (30:22):
Yeah, as soon as you start talking about kind of
long term change and financial freedom, it is a pretty
enticing prospect.
Speaker 3 (30:30):
Rich quick equals lose money fast. It's all about long
term play.
Speaker 1 (30:33):
It's starting to sound like Canna. That's hard think, Oh yeah,
of course it's great. All right, Well, I think we
can close Pandora's box having fully explored it's a terribly
mangled metaphor.
Speaker 3 (30:47):
It's a thing now.
Speaker 1 (30:49):
I don't know whether it's going to catch on. Cam,
thank you so much for coming in. It's been great
to talk to you.
Speaker 3 (30:53):
Pleasure to talk to both you.
Speaker 1 (30:54):
That was Cam McClellan, CEO and co founder of Open Corp,
the author of my four year old The Property Investor,
and a supporter of this podcast Canna.
Speaker 2 (31:05):
Fascinating stuff, brilliant and you know we've just had International
Women's Day and this year's themes accelerate and it really
does touch on you know what we've just listened to
about making generational change, but making that change hopefully happen
a lot quicker.
Speaker 1 (31:22):
Yeah, that's amazing now can it? If we want to
find more information from you, where do we find you?
Speaker 2 (31:27):
Best place to get contact with me is on Instagram
at Canna Campbell Official or obviously each for God on
my TV.
Speaker 1 (31:32):
And you can hear me every day with Sean Aylmer
on Fear and Greed, Daily business news for people who
make their own decisions. Thank you for listening to How
Do They Afford That? Remember to hit follow on the podcast,
and the very best thing you can do is tell
somebody else send them the link to this episode. Spread
the word about how do they afford that? Thank you
for your company. Join us again next week
Welcome to How Do They Afford That, The podcast that
peeks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm an author and the co host of the podcast
Fear and Greed business news. As always, I'm with Canna Campbell,
financial planner and founder of Sugar Mumma TV, the financial
literacy platform that you'll find on podcasts like this one,
and YouTube and books and Instagram threads, TikTok pretty much everywhere. Hello, Canna,
(00:24):
good morning. I want to talk to you about a statistic,
an incredible statistic, and I know what you're about to say.
I only saw the statistic because you sent it to me.
Speaker 2 (00:35):
Thank you.
Speaker 1 (00:36):
I'm giving credit where credit is due. But it is
about the Bank of Mum and Dad. And it is
the fact that the Bank of Mum and Dad is
now one of the top ten lenders in Australia, which
is just amazing, right when you think about that, it's
up alongside the big banks, right the banker Mum and
Dad parents are providing billions of dollars in loans and
gifts to their kids to help them get into the
(00:58):
property market. It is or the right person. It is
a perfect opportunity to get into the market. It is not, though,
without its challenges, because there's quite a stigma attached to
receiving some of these loans, particularly about kind of the
effect that it can have on fueling in quality within
the market. But it does beg the question which I
want to discuss a bit today. Would you judge somebody
(01:20):
if they received the money as an inheritance basically when
the person's parents, for instance, were to pass away. And
if you wouldn't judge them for that, then why would
you judge them for receiving that assistant early while the
parents are still alive and helping them to get into
the market. Then it is I know I'm biased, an
interesting topic. It is a topic.
Speaker 2 (01:41):
It's complicated, it's emotional. It's oh, it could be bitter
and twisted and resentful, but also it could be incredibly
like beautiful and filled with amazing blessings and opportunities. It's
it's Pandora's box in a good way that we all
we need to talk about this.
Speaker 1 (01:58):
Is there a good Pandora?
Speaker 3 (02:00):
Well?
Speaker 2 (02:01):
I think we can make it good?
Speaker 1 (02:02):
How about that?
Speaker 3 (02:03):
All right?
Speaker 1 (02:03):
Well, this is a good Pandora's box that we're going
to be opening today, and we are joined by someone
who knows this so well, knows it back to front.
Can McClelland is the CEO and co founder of Opencorp.
He is a property investor. He is the author of
the best selling book My four year Old The Property Investor.
He is a supporter of this podcast, Cam Welcome to
(02:24):
how do they afford that?
Speaker 3 (02:25):
Ken and Michael, thank you very much for having me on.
Speaker 1 (02:28):
Before we get into it, a couple of things. First
of all, we just need to make it very clear
that everything that we talk about on this show and
today is general in nature. It is never personal, investment,
strategic or product advice. It is purely for financial education
purposes only. And if you hear something that might be
relevant to you, because we don't know your circumstances, you think, hey,
that's interesting, go and get some professional advice. But before
(02:50):
we get into the meat of this topic, before we
open that good old Pandora's.
Speaker 2 (02:54):
Box, and want to say, it's a Pandora's box of opinions, like,
I feel like everyone's good opinion of this.
Speaker 1 (03:01):
I love how much you are working to redeem this analogy.
Now that we've gone we have gone all in on
Pandora's box here, but Camp your own story though, is
fascinating because you've had a lot of success as a
property investor and importantly had a lot of success helping
other people become property investors as well. How did you
(03:24):
get into it? Where did this motivation come from?
Speaker 3 (03:28):
It was a light bold moment that I had very
early on in age. I think majority of everyday Australians
and no disrespect to everyday Australians. Most people financially live
with their head in the sand, but at some point
they get that light bold moment where they realize they
need to do something about their finances. Now, this can
happen late at life, when they are the pensions the
financial option for them. I got it really early when
(03:51):
my parents had a small business the family home, sold
that to buy another business, which is a motel. The
books were cooked, they lost the light. We moved to
my grand parents farm in regional Victoria and after about
six months we bought a block of land build a
tin shed. So I spent my teen years living in
a tin shed. Realized we were reasonably poor when my
(04:12):
friends lived in houses and we lived in a tin shed.
But that light bulb moment when I wanted to provide
a better financial future for my kids was when we
pulled up at the exchange store on the way to
town and Mum and Dad were arguing over whether they
buy milk or bread because they couldn't afford both. So
at that point in time, I set myself on a
quest to understand how to build wealth and to look
(04:33):
at the financial mistakes that people make.
Speaker 1 (04:35):
I think that is remarkable because it is one thing
a lot of people experience hardship. It is another thing
to take that hardship and build something from it and
to use that as inspiration to do something different. So
I think that on its own is completely remarkable.
Speaker 3 (04:51):
Yeah.
Speaker 2 (04:51):
I mean so many people could use that pain to
stay stuck, and you've used it as a driving force
of motivation to do things differently and to make sure
that your children experience are very different upbringing. Can I
ask you just some about the strategies you've learned to
achieve so much and also in such a short period
of time, Like how have you developed these skills and
(05:13):
these I guess the blueprint? Was it trial and error research?
I imagine a lot of research if it was that or
just luck or did you have a mentor behind you?
Speaker 3 (05:23):
A lot of the above. The old saying that the
harder work, the luckier I got was definitely one of those.
But I left time at sixteen, moved to the city.
I was fortunate my late teens to come across a
mate who had a father who was successful investor, So Steve,
he's still one of the board members on our companies today,
but grabbed me by the scruff of the neck as
a young teenager, and I knew rich people had property.
(05:46):
I wasn't smart enough to go into the shear mark
or I didn't understand how to analyze company stocks. So
property was my path forward. Luckily, Steve showed us what
to buy, where to buy it at the right point
in time, and I'd go away and absorb information from
as many sources as I could. So I'd go to
the big ra ra semar seminars. The sharks were around
(06:06):
in the nineties doing those big runs, and they pop up.
Every time there's a property boom, the sharks come out again.
But we'd take the information we got this as pre
internet age, and we'd take it back to Steve and
he'd tell us what was bs, what was semi relevant,
and dissect the strategies that people were put in place.
Now I'm really good at business, growing businesses. We've got
about eighty team members and to get a measured outcoming
(06:28):
in business you need a process. But I was amazed
that people will invest in property without a process to
give them the right result they want, because you can
make really expensive mistakes. So that set us side a
path of setting up open Corp and building a property
advisory company with mortgage broking and property management and mentoring
around Australia. We analyze each of the capital city markets
(06:50):
to find that right property for everyday Australians. But that
was basically in a nutshell where it came from and
where we are today sitting here talking to you.
Speaker 1 (06:57):
That is amazing. The Bank of Dad is there are
so many different things that we could talk to you about,
because it feels like you could kind of explain an
awful lot about property investing and the market more broadly.
But if we were to focus on the Bank of
Mum and Dad, because as we said in the intro,
there is a lot to it, and there is this
there is an element of a stigma attached to it.
(07:17):
There is also this idea that with property prices rising
over time and at times going up very very quickly,
and people struggling to get young people in particular really
really struggling to get their foot on the ladder, that
the banker Mum and Dad has a purpose within that
(07:38):
to help young people, particularly onto the property, into the
property market, onto the property ladder, the nuts and bolts
of it. Can you explain to us how the bank
of Mum and Dad actually works? What's it look like?
Speaker 3 (07:50):
Yeah, so it refers to parents assisting their kids financially
to enter the property market. You're right, it's a big
stigma thing, and there is a Pandora's box that we
have different impressions we do need to unto. It's a thing.
It's catching on.
Speaker 1 (08:04):
You have done that just to kind of dose, just
to make her feel a little bit better.
Speaker 3 (08:09):
This is good.
Speaker 1 (08:10):
I think we're going to get on very nicely in here.
Speaker 3 (08:12):
Yeah.
Speaker 1 (08:12):
Yeah, So there is a lot to it, though, isn't that.
Speaker 3 (08:15):
Yeah, Well, let's look at the first stigma. You look at,
say the boomers, and just to be clear on gen X,
I saw Navan alive. So, but with the boomers, with
boomers the standard. You know, your silver spooning your kids,
and we had to do it hard. We save for
a deposit. We had eighteen percent interest rates. When I
hear that, I just need to debunk that a little bit.
For the new young people getting into the property market
(08:36):
and for the boomers, I would love eighteen percent interest
rates today in today's market, I would love to be
back there. So this comes down to income versus the
cost of property. So back in the nineties, when there's
eighteen percent interest rates, the average wage was forty thousand dollars.
The average property is about one hundred thousand dollars, so
you're looking at about two and a bit times income
(08:58):
to property value. Now the average wage is about one
hundred thousand, but you're looking at a million dollars for
a property, so it's ten times to get into the market. Now,
getting a deposit together for kids and young people nowadays
is really tough because our client's on average at the moment,
property is going up around ten thousand dollars per month,
So just to maintain pace with the market, you need
(09:18):
to be saving twenty percent of that. So you've got
to save two thousand dollars just to maintain pace with
the market and save a deposit on top of that.
So when we think back of each is probably generation
in the past. You want each generation, the next generation
to be financially better off. We're at a point now
(09:38):
where that's not the case. So people need to understand
that right now, if you're not helping your kids get
into the property market, the gap between the have nots
is getting wider, and the next generation will be worse
off financially. So there's a choice to make. Tell your
kids go on rent and if you can't help them
into the market or help them out, because it's very,
(09:59):
very difficult and much harder than it was twenty thirty
years ago to say for a deposit. So there's a
choice that needs to be made. So hopefully I unpacked
that stigma a little bit. Yeah.
Speaker 1 (10:07):
Absolutely, And when you are seeing this happen, when we
are talking about parents helping their kids into the market,
what does that actually kind of look like? And I
know that that cana. You and I were talking about
the various forms that this can take.
Speaker 3 (10:22):
Yeah, So there's two main ways that we help clients
with that. The first is providing a deposit and the
second is acting as a guaranteur. There's also co investing
in trust structures, but we probably won't delve right into
those to day. The main two forms are providing a
deposit or going as a guaranteur. Providing a deposit is
the parents have got their own home which has gone
up in equity. They've got some usable equity in that
(10:42):
which they draw down and use it to deposit for
the kids to get into the market.
Speaker 2 (10:47):
Sorry, I just want to see you, you know. Use
is it the main two? A loan or a gift?
What do you see as the more popular choice?
Speaker 3 (10:55):
It's probably fifty to fifty at the moment with drawing
down equity or going a guarantee. There's complexities with both,
and there's benefits and I suppose issues. There's family dynamics,
and this is what I want to get into and
unpack a little bit. The family dynamics. You can get
into pretty nasty situations if things aren't outlined clearly in
these when you're doing banker mum and dad. So what
(11:17):
we usually look at is the property that the kids
are buying is an investment property. It's not a primary
place of residents, and this de risks the property and
the situation for the parents. So let's say we'll use
they're getting some equity out and using it as a
deposit for the kids to get into the market. If
they buy an investment property and let the kids go
and live in the cool suburbs and go to the
(11:38):
nightclubs and those things. But buy an investment property in
a suburb that's got a tenant that's paying rent, it
de risks it because you're not worried about the kids
paying it back. The concept of paying mom and dad
back doesn't happen on a drip feeding paying you back
amount of money. There's a set agreement put in place
where after a period of time the investment property's gone
up x amount, the money is out of that and
(12:00):
the parents are paid back in a lump sum. So
we keep it really clean and that stops that family
dynamic issue happening. Guarantee is very similar in that instance.
Obviously save some stamp duty interests, but lender's mortgage insurance.
Obviously that can be saved, but there is that once
the equity's gone up in nothing in the investment property,
then the guaranteur can come off that loan. So both
(12:23):
are similar. We provide a simple basic template for agreements
on those for clients.
Speaker 2 (12:28):
Can you share with us a success story, you know,
say someone in their sixties won't help their kids get
into the market.
Speaker 3 (12:35):
Yeah, one really good one. So we've got our team
used this, like we've said, eighty team members in Australia. Australia.
But Pascal and Georgia, Pascal works for us and his
dad wanted he actually read my book and said to
past this is before password for us actually, so we
want to get you into the property market. And in
there it talks about helping kids out and getting them started.
(12:56):
But what Pascal and Georgia have done, they've had Mimi
come along, which puts a little bit more pressure on lending.
They living in Bauxhill, in a suburb in Melbourne, couldn't
afford that primary place of residents, so Pascal's father in
law gave them an equity loan got them into the market.
They were able. They bought a property in Brisbane in
a suburb called Polara that went up about four hundred
(13:19):
thousand dollars over about a two year period. Yeah, I
should say we've got a straining financial services license. Past
performances and owndication of future performance. But that's the sort
of results we were getting for clients. They were able
to pay back George's dad and they've now just purchased
their second investment property. So they're on the road now
where they've got two investment properties living in the suburb
(13:41):
they want to live in. They're renting there because they
can't afford it. But those investment properties that go, I
can we value Their plan is in ten years time
to draw down the equity of that and by their
primary place of residence in the suburb they love. So
that's a really good story about our team members are
using it. And yeah, I actually and that's concepts called rentvesting,
so you yeah, I use that concept. All my business
(14:02):
partners use that. We've got so many of our team
members that invest currently.
Speaker 1 (14:06):
And you mentioned I have an aversion to jargon. I
just partly because I don't understand most of it. But
you referred to an equity loan, and yeah, that situation.
How does that work?
Speaker 3 (14:18):
All right? So think of equity as profit in the property.
It's gone up in value. So to keep it really simple,
so it's gone up in value, you then create what's
called a line of credit and you can create that
with your current bank. So if the property's a million
dollars value, you've put in two hundred thousand dollars and
then the property goes so that deposit is required to
(14:38):
be there to keep an eighty percent loan to value ratio.
Once if the property goes up another two or three
hundred thousand dollars, you're able to access that equity out
and utilize that for a deposit for the next property.
So that's how a lot of people first get into
the property market. For an investment. You can use the
same process as We've got a lot of clients who
have bought three or four investment properties and then have gone,
(14:59):
hang on, I want to use some of this equity
growth to help my kids get into one. So that's
it's the same concept of just drawing equity out of
a property. So the profit out of a property that's
gone up in value to use for the deposit and
costs for the next property.
Speaker 2 (15:11):
Can we come back to the kids again and the stigma, Yeah?
Speaker 3 (15:15):
Sure.
Speaker 2 (15:16):
Why do you think people consider it dirty money when
someone helps their kids out.
Speaker 3 (15:21):
I think it's the oldest strain thing of anyone who
doesn't do it themselves and work hard, You've just had
it gifted to you. It's the old silver spoon. We
don't like the uber rich, and I think it sort
of pushes people into feeling like anyone that gets a
helping hand is that uber rich sort of you know
this sort of when I grew up, anyone who had
(15:42):
a helping hand from anyone. If you've got a car
gifted to you, well you're a silver spoon. But the
reality is people need to understand now there is a
big difference. Like I said, generationally, we're not getting financially
better off anymore. So to keep your next generation going,
getting into the copy market earlier enables them to keep
that generational financial improvement happening.
Speaker 1 (16:05):
It's tough, isn't it, Because I think a lot of
people would want to do it themselves. You would want
to be able to say, hey, I worked hard, I
saved up and I was able to scrape together a
deposit and get into the market. But the reality is
that it is just not possible for so many people
in so many cities around the country that no matter
(16:25):
how hard you work, no matter how much you cut
your spending in order to save the amount required for
a deposit goes up faster than you can actually save.
So it does make total sense that if you are
fortunate enough to have parents or someone who is in
this position who was able to help you, that you
do look to those people to give you a hand
in this case, so that the stigma it doesn't seem fair,
(16:47):
it doesn't seem like an appropriate stigma for the market
that we're in at the moment.
Speaker 3 (16:52):
Yeah, I think if parents understand, and that's why I
outline the difference between income versus the property prices nowadays,
and once you understand and that it is tougher nowadays,
it is over twice as hard to get into the
property than it was twenty thirty years ago. Now, people
can also be a little as a parent, you can
also be a little bit greedy. I'll use my example.
So I've got four kids, three girls and a boy,
(17:14):
teenagers and a nine year old, and so Felicti and
I realized that in ten years time to get our
kids into the property market, they're looking at two hundred
thousand dollars a posit each. They're not going to save that.
It's just that's not going to happen. So that would
mean that we're forking out two hundred thousand dollars for
each kid if we want to get them into the
property market, so eight hundred thousand dollars. So probably at
(17:35):
five years ago we decided that we're going to chip
in one deposit. So we purchased a property out in
the east of the turbobs of Melbourne for them around
six hundred thousand dollars and I've got that set up
in a trust. So this gets a little bit more complex.
My Fuya of the property investor has got a section
and a visual untrust, so people need to understand how
they work. They're not as complex as they seem. But
I've got set up a trust structure, put a property
(17:56):
in that for my kids once I control it, But
what's that property doubles in value. I'll then sell that,
pay the tax and split the profit between the kids
and they can only use it for a deposit of
their own home or an investment property. Now, I'll make
sure the kids are budgeting and saving and show that
they're financially responsible before I do that. But as a parent,
(18:18):
that saves me six undergrand and flicty.
Speaker 1 (18:22):
That is huge, and I want to get into that
in a bit more detail, in a little bit just
about the idea of doing this as a long term
solution rather than just a short term fix to help
someone get into the market. Now that you're actually kind
of thinking ahead towards financial future, financial freedom, We're going
to take a quick break before we go there, I
want to ask you one very broad question about the
(18:47):
intergenerational kind of transfer of wealth.
Speaker 3 (18:50):
Right.
Speaker 1 (18:50):
And I'm sorry to get so caught up on this
stigma idea, but I love talking about the attitudes towards money.
I find this fascinating and this idea of do we
need a reset now? Do we need a reset in
attitudes towards the bank of mom and dad? Because we
are on the verge of and it's already starting the
biggest intergenerational wealth transfer in history, right, we are rapidly
(19:14):
approaching it. It is already starting. Isn't the bank of
mom and Dad? This whole idea just actually getting in
slightly early on that, And is that what we should
be looking at?
Speaker 3 (19:24):
Yeah, I think you nailed it in your intro. If
you look at it, if I just held out and
gave all my wealth to my kids, when I died.
What joy in that is there for me? Yeah, I'd
rather give them a little bit. Now. I believe in
giving your kids enough to get started, but not enough.
They need to do nothing for themselves, and that's really important.
Make your kids do work, make sure they know finance,
(19:45):
how to control their finances, how to budget, how to
plan for the future themselves, before you just hand something
to them. But I'd rather see him enjoy it. What's
the point of handing over when I'm dead and they're
gonna get it anyway, I completely agree.
Speaker 2 (19:56):
And also, if you're in a position where you can
actually help to some capacity and your kids are stressed, overwhelmed,
exhausted and like burning themselves out trying to get together
this deposit, whilst, as you say it, whilst you're alive
and healthy, you can help them and you can watch
them and also watch their growth and as you said,
guide them. So I completely agree with you. If if
(20:18):
you're in a fortunate position.
Speaker 1 (20:20):
Yeah, And that's the thing that this is not for everyone,
and it's not going to suit everyone, but for those
people who it does suit, And because we are coming
up on that big transfer of wealth, there are a
lot of people that do find themselves in this. But
so really that is kind of who we're talking to
right now.
Speaker 3 (20:33):
Yeah, and it is the majority of Australians. Anyone who
has owned a home for ten twenty years. As a parent,
you're in a position now you can help your kids
get into the market, do it safely. So it's not
just for the uber rich.
Speaker 1 (20:44):
Yeah, Okay, Look, there's a bit more we want to
talk about. We want to talk about some more strategy
side of it and also some of the risks and
how to kind of help to mitigate and navigate some
of those risks within it. We'll take a quick break
and we'll be back in a moment. Canna, We are
talking today about the bank of Mum and Dad, and
(21:06):
we have a guest in the studio. We are joined
by Cam McClelland, CEO, co founder of Opencorp and the
author of the brilliantly named book My four year Old
The Property Investor, which has been a best seller now
for a number of years, hasn't it Cam?
Speaker 3 (21:21):
Yeah, it's very well. I've actually wrote it fifteen years
ago and Tennish was going overseas and said to my wife,
I've got a list knowledge on property investing that I
put together. I write a journal for my kids. A
year later, I was still writing it and send it
out to a couple of people and edited. A publisher
grabhold of it and it's been the number one property
investment selling book for the last decade. So I speak
(21:43):
fairly simply. So I've taken complex subjects and outline them
so people can understand them in a simple fashion.
Speaker 1 (21:49):
That's a ripper. And I want to delve into a
couple of the kind of strategies within this. And we've
got a little bit of time left, so I want
to talk to you about co investing because it is
a big chunk of what you do and you've got
a lot of you help a lot of people with this.
What is co investing? How does it work?
Speaker 3 (22:06):
Yeah, so people who may not be in the position
to use the bank of mum and dad. Often it
comes with friends who want to invest together. So you've
saved up half the deposit, knowing that the property market
is moving so fast and it's really hard to save
ahead of the growth of the market if you've got
half a deposit each We provide a basic agreement template,
but the basic concept of co investing is two people
(22:29):
will pull their money together as a deposit and costs
buy an investment property. It's really important that you use
that as an investment property. So you've got rental income
that covers the cost of the holding costs of the property,
so that individually, you don't want to be waiting on
your friend to chip in some money. So there's some
basic rules we put in place to keep it really
safe and keep friends happy. That rental income covers the
(22:52):
holding costs of the property with some taxation benefits. Then
the agreement is after a certain period of time or
a certain amount of growth in the property, the property
is sold, the tax paid, and the profits split. Now,
the profits of that time should be enough or a
larger amount to go towards the deposits of each individual's
(23:13):
property themselves. So it's about making sure you get into
the market, get the growth of the market before it
goes up too quick. If you can't do it yourself,
come investing is a really good second option.
Speaker 2 (23:22):
Okay, this sounds great, but what you need to look
out for and how do you avoid those risks?
Speaker 3 (23:30):
Yeah, making sure that you're both putting in enough deposit
that the property is cash flow positive and you keep
a small buffer on the side should you lose a
tenant because you don't want you you want the property
to wash its own face financially. Then the other thing
is making sure that you both have a clear agreement
that one of you may it might be ten years
down the track, you agree to sell this thing. So
(23:51):
it's a matter of looking at it long term. It's
not a get rich quick. It's a matter of trying
to build some wealth over the long term. And you've
got a set agreement in time about selling that property
and splitting the profits out after the tax is paid
and then you can go on your own merry way.
But the agreement needs to be really clear that if
one person wants to sell beforehand, that that's not the case.
Speaker 1 (24:12):
So can I ask you about open corp And I'm
just interested in and when we're talking about the risks,
right and we're talking about the importance of having everything
documented and having everything kind of done legally and carefully
and making sure that it is all out in the open,
nice and transparent. When someone comes to you at open
(24:33):
Corp and you are sitting down with them, is it
as much about kind of discovery and trying to find
what is going to be the right solution for them,
and then kind of helping them through navigate those risks,
making sure it is all set up in a clear
and transparent way, and tailoring the solution to the person
and going okay, you know what, You're probably not in
a situation where the bank of Mum Dad's going to
(24:54):
help you, but co investing might work. This is what
you need to be aware of.
Speaker 3 (24:57):
Yeah. Correct. So we set the business up twenty year
year ago. Now it's twenty years this year, so it
use time flies. But when we were looking at it,
the strategy that I put in place when the Melbourne
prices had grown and I wanted to then invest in
a different capital city to get that growth, I needed
a process to basically analyze each of the capital cities.
Where we created a process called MAP, which is Market
Area Property. Now that you think about the ten point
(25:21):
six million properties in Australia, if you try and compare
property A with property B, and then the winner of
that compare with property C, it's impossible to do. So
we wanted a process to knock out large portions of option.
So what we wanted to get is the best property
the right point in time in the right market, which
you'll get the growth that you can duplicate. So we've
got an analytics team about eighty team members around Australia
(25:41):
who analyze each of the capital city markets, look at
the growth corridors and then find the optim sized quality
property for each area. So when a client comes for us,
we'll sit down with them have a look at a
ten to fifteen year strategy. We've got an Australian Financial
services license. There's some specific advice we can give, some
we can't. We'll work through the strategy with them. Depending
(26:03):
on what their outcome is, we'll set up the finance.
We've got in house mortgage broking. We then find the
right property for them. We've got property management around Australia,
and then we've got a mentoring team which look after
clients for life.
Speaker 2 (26:14):
I have to ask this question. I know, I understand
you obviously do all the dotting, all the eyes and
crossing the t's, but have you ever seen it go wrong?
Speaker 3 (26:22):
Yeah, we made a mistakes ourselves early days when it
came to I like your honesty.
Speaker 1 (26:28):
Yeah, no, that's good. Actually it's really And the fact is,
of course across twenty years, you're going to see a
range of things.
Speaker 3 (26:35):
Right, Yeah, so there's different levels of going wrong. Now,
I'll do this clearly really quick. My father in law,
I talked my wife who my now wife, plus he
was nineteen at the time. We came home and I
talked her into buying a property. So I've done a
few due locks and triocs, small developments by that stage
myself in my early twenties. And we came home and
told her father, Pete, that I just bought that. She
(26:55):
she has just bought her first property without the influence
of her father. So he fully got the He was
not happy about this situation. And then we told him
it's not just an investment property. He didn't speak for
about now it's not just an investment property. We're going
to build four units on the back of it. Now.
The problem we had this is one of the biggest
property mistakes I've made. So we bought a three hund
and seventy thousand dollars, got plans made up, we had
(27:17):
a huge amount of land on the back of it,
got the design made up. But because we had a
lot of land, the designs by the draftsmen were quite large.
They were going to cost about forty thousand dollars per
unit each to build over what we'd get in sale value,
so it was going to cost one hundred and sixty
grand too much. We over capitalized on the designs. We
ended up selling that property for five hundred and twelve
(27:38):
thousand with the plans and permits got out of it.
But the lesson we've got which has been instilled in
open Corp now is building the optimal size and quality
property or buying the optimal size and quality property for
a specific area. Every suburb in Melbourne, in Sydney, Brisbane,
Perth is different, so we make sure we analyze each area.
So we've taken the mistakes and lessons that we've made
(27:59):
and built to reduce risk. Probably one of the other
big impacts where we haven't got it perfect. In Perth.
We put a lot of clients into Perth twenty twenty
twenty twenty one. Now those clients have got hundreds of
thousand dollars worth of capital growth. But there was a
long period of time there where there was a trade
and supply shortage in Perth where building was just slow,
(28:20):
so there was a cash flow impact to some clients
that had to hold that property while it was getting built,
that weren't getting rental income in so a lot of
them we worked with to get through that situation. Now
the outside of that is that they're two hundred of
clients who have got that growth in Perth are now
buying over in this coast over here. But it's not
if it was easy everyone to be doing it. But
(28:42):
it's a matter of looking at all the risks along
the process and reducing it and putting buffers in place
to make sure people aren't financially impacted.
Speaker 1 (28:49):
All right, can I We've only got about sixty seconds left,
so I wanted to ask you one question to wrap
things up, because your story is inspirational. What you have
been able to achieve yourself as inspirational. How then do
people use this the bank of mom and Dad as
a long term strategy that it is not just kind
(29:09):
of okay, getting a place to live now or getting
an investment property now. How can they do it so
that it is perhaps creating like an intergenerational kind of wealth,
changing the path of a family by getting into it now.
And I know I've asked you a lot that I
use probably half you're allotted time just in the question,
(29:30):
but in kind of sixty seconds or less.
Speaker 3 (29:32):
How all right? So you create two plans, one for
the parents, one for the kids. The plan for the
parents is how do I use some of my equity
or guarantee to get the kids into the property market.
Plan for the kids is over fifteen years. What are
you trying to achieve? Do you want to build a
property portfolio? Do you want to get your own primary
place of residents in the suburb that you desire? And
(29:55):
those two plans are outlined, and we find the best
properties for those individuals to get the to that goal,
and we hold the hand and mentor them along the
way to make sure we get there. We've got clients
we've been dealing with who are grandparents, parents and kids.
So with three generationals of investors in working with open Corps,
so it's a good feeling. We're not solving cancer, but
we're making the lives financially of thousands of Australians better
(30:19):
down the track.
Speaker 1 (30:20):
That is amazing.
Speaker 2 (30:20):
That sounds pretty good to me.
Speaker 3 (30:22):
Yeah.
Speaker 1 (30:22):
Yeah, as soon as you start talking about kind of
long term change and financial freedom, it is a pretty
enticing prospect.
Speaker 3 (30:30):
Rich quick equals lose money fast. It's all about long
term play.
Speaker 1 (30:33):
It's starting to sound like Canna. That's hard think, Oh yeah,
of course it's great. All right, Well, I think we
can close Pandora's box having fully explored it's a terribly
mangled metaphor.
Speaker 3 (30:47):
It's a thing now.
Speaker 1 (30:49):
I don't know whether it's going to catch on. Cam,
thank you so much for coming in. It's been great
to talk to you.
Speaker 3 (30:53):
Pleasure to talk to both you.
Speaker 1 (30:54):
That was Cam McClellan, CEO and co founder of Open Corp,
the author of my four year old The Property Investor,
and a supporter of this podcast Canna.
Speaker 2 (31:05):
Fascinating stuff, brilliant and you know we've just had International
Women's Day and this year's themes accelerate and it really
does touch on you know what we've just listened to
about making generational change, but making that change hopefully happen
a lot quicker.
Speaker 1 (31:22):
Yeah, that's amazing now can it? If we want to
find more information from you, where do we find you?
Speaker 2 (31:27):
Best place to get contact with me is on Instagram
at Canna Campbell Official or obviously each for God on
my TV.
Speaker 1 (31:32):
And you can hear me every day with Sean Aylmer
on Fear and Greed, Daily business news for people who
make their own decisions. Thank you for listening to How
Do They Afford That? Remember to hit follow on the podcast,
and the very best thing you can do is tell
somebody else send them the link to this episode. Spread
the word about how do they afford that? Thank you
for your company. Join us again next week
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