November 20, 2024 • 21 mins
Damien joins us in this episode, the longest-standing member of It's Simple Finance, who stumbled into the world of brokering after an unexpected encounter at a wedding.
With Damien, we explore Sydney's wealthiest suburbs to uncover the concept of "good debt" and how strategic financial planning with accountants can maximize tax efficiency and bolster property portfolios.
Shifting our lens to the broader economic landscape, we ponder the Reserve Bank of Australia's potential interest rate decisions, particularly given the festive season's approach. Reflecting on the property boom of 2020-2021, we voice concerns about the current inflationary pressures and their impact on consumer spending. Tune in to hear our take on these pressing economic issues and the potential shifts in consumer behaviour as Australians navigate this complex financial terrain.
Follow us for more property news and mortgage advice!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Welcome to the Finance Show with Joe.
He's Joe.
I'm just some schmo and we havea very special guest today,
Damien.
Speaker 2 (00:09):
So I've got to bring out a little bit of my Western
Sydney cuss right now, becausewe've got a very, very special
guest on here.
What's?
Speaker 3 (00:16):
up, cuss how you doing Good.
Speaker 2 (00:18):
Cuss yourself.
Longest tenured member of it'sSimple.
Currently.
Welcome to the show.
Pleasure to be here, boys.
How are we going Waiting tohave you on here for a long time
?
Just tell the audience of our15 listeners just exactly how
you came around to becoming amember of it's Simple.
It's a pretty funny story.
Speaker 3 (00:38):
So it all happened last year, in about, I want to
say, june, when it was good oldMichael Mankin's wedding.
I met Joey that night and thefirst thing he said to me is
nice to meet you.
When are you joining?
It's Simple, and I was like, oh, okay, and I was like, oh okay,
look man, I'm going to Europe.
But when I get back, like let'shave a serious conversation
about it, came back, spoke toJoey and Michael again and I was
(01:00):
off to the races in October.
And here we are a year later.
Speaker 2 (01:04):
So what made you so interested in becoming a broker?
I?
Speaker 3 (01:07):
always wanted to find a job where, at the forefront
of everything, it's helpingpeople.
So I did dive into a coupleother industries.
I looked at recruitment andthings like that.
Didn't really work out but Ifound myself in the bank.
So I was at Westpac CorporateLending for about two years, saw
the ins and outs of theindustry, how it all worked for
about two years.
Saw the ins and outs of theindustry, how it all worked, how
us as people in the bank canactually benefit people.
(01:28):
But then I was introduced tothe idea of brokering and loans
and mortgages and it kind ofinfused both of the two into one
.
So obviously, making good moneyobviously is always a forefront
, because making good moneymeans more possibilities in life
and your opportunities open upand secondly, being able to help
people.
Giving that phone call to acustomer when you tell them the
(01:49):
loan has settled is one of thebest feelings in the world.
So I just want to keep crankingthat and see how many more we
can settle and where we can takeit.
Speaker 2 (01:56):
So take us through the brokering process.
Take us through gettingsomebody conditionally approved,
getting somebody formallyapproved, getting somebody to
actually settle.
There's an attraction to that.
I want to say there's adopamine effect when each level
is surpassed.
Would you agree with me?
Speaker 3 (02:12):
It's a long journey.
So, like, obviously, a lot ofbrokers like to say it's a
customer journey.
Right, you get them through thefront door first.
These are people that you mightnot ever have spoken to before,
they might not be friends orfamily, right, they're just an
individual that has come to youbecause they have a goal in mind
and they want to get somethingdone.
And then that's when the realprocess starts.
You start getting the docs.
The docs might take a while.
(02:34):
You start massaging that deal abit.
You've got to let them knowthat, look, you can be
comfortable with me, we're goingto get this done for you.
There's a lot of hurdles acrossthe way.
Sometimes it might not be theclient, it's actually the lender
asking for specific things.
There's a lot of back and forth, sometimes depending on who
we're going to and submittingthe deal with.
Sometimes there's frustrationsand stuff.
But at the end of it, just atthat tunnel, you can see the
(02:57):
glimmer of a little bit of lightand you know you're almost
there.
So now you're at a conditional.
So now you're going back to thecustomer again.
Hey, I need this, that, etcetera.
Why do you need this?
Why do you need that?
We need it for the lender.
We're almost there.
Then you get the unconditionaland it's like, okay, cool, we're
waiting on a valuation.
Now Valuation comes in strong.
That's when you get a bitexcited, because now all you're
(03:18):
waiting for is that settlementdate and then from there it's
just a green light Through yourexperience, you've been exposed
to a lot of debt.
Speaker 2 (03:26):
And when I say you've been exposed to a lot of debt,
when you're at Westpac Corporatespecifically, you were dealing
with clients like Amazon, coles,woolworths Group.
What levels of debt were youseeing with those groups?
Speaker 3 (03:37):
We're seeing facilities of over 100 mil,
usually minimum per customer.
Coles will draw down a loan fora facility 300 mil one day.
It's paid out the next day.
So they're only leasing it for aday, right?
Amazon had rotating facilitiesper month where we're lending
out this amount, x amount ofmoney.
The amounts of interest youwere seeing on the loan were
(04:00):
insane, right?
So the same amount of interestthat a customer is paying over
the lifetime of 30 years, thesemajor corporations are paying
within days.
The playing field is sodifferent.
Right, by coming into the homeloan industry, people are
dealing with loans over thecourse of 30 years, right?
So it's like figuring out howto how to manage that debt and
with saying debt, this is gooddebt, right?
(04:21):
Yeah, so when you get a homehome loan, you're creating a
long-term future for yourselfand you also.
You can use that debt toleverage, cash out equity, build
your portfolio.
Right?
Everyone wants freedom at theend of the day, and if you do it
correctly, you leverage thedebt correctly and you're making
enough money to service a loan,there's chances that you might
(04:42):
end up with five to 10properties within a very short
span.
Speaker 2 (04:46):
The property market in Australia.
We've talked about this atlength, but it always seems to
be growing, regardless of thesmall lulls that Victoria is
currently going through.
Even New South Wales.
New South Wales is dipping atthe moment in quite a few areas,
but what I've noticed is debtis necessary.
You could do everything on yourown.
You're not going to grow at therate that you want to, but when
(05:08):
you can utilize debt and youcan utilize it effectively, that
is when you can truly start tosee possibility in your life.
So I want to go back to whatyou said about Kohl's and Amazon
.
You know they would get $100million facility, $300 million
facility, and pay it off in acouple of days, and then you're
also able to see how businessesare able to grow and maintain
(05:32):
their staff, their bonuses,their you know, the high
corporate structure.
Am I correct in saying?
Speaker 3 (05:37):
that, yeah, correct.
So sometimes you look at thenumbers, right.
For example, I want to bring upcalls, and this is all public
information.
Um, they had a statistic putout there that, on average, per
australian calls were makingabout $56 profit per Australian,
and I think it was 2022, theyhad a reported revenue of about
$40.7 billion Jesus In revenuein a year.
So you can imagine how muchmoney they're making right and
(05:59):
how much is in circulation, evenat the corporate level, you
could see how debts are good inorder to be able to grow.
Speaker 2 (06:05):
That kind of leads us to our topic of the day.
You know the areas with thehighest amount of debt in
Australia, and this is householddebt.
I'm not talking about corporatedebt corporates, all that kind
of stuff.
These are specifically thesuburbs.
So in the eastern suburbs wehave Double Bay coming in first
with 3.7 mil, bellevue Hillcoming in second with 3.6 mil,
(06:27):
darling Point with 3.5, doverHeights with 3.3 mil and then
Rose Bay with 2.5 mil.
Now what do we notice about allof those areas Wealthy as
suburbs?
They are the highest net worthareas in Australia.
Yeah, you know, per capita.
It's just known.
That's where all the doctorslive, that's where all the
judges live, okay.
Speaker 1 (06:47):
We talk about this.
I've said it time and timeagain you drive through Double.
Speaker 2 (06:49):
Bay.
It's where all the judges live.
Okay, we talk about this.
I've said it time and timeagain.
You drive through Double Bay,bellevue Hill, all those areas,
there's not a single speedcamera in sight.
And the specific reason forthat, you know, there's certain
people that are sitting incertain places that just kind of
make sure you know what.
We're not going to put a speedcamera or a safety camera here,
we're going to make sure it'sover an edge cliff.
And if you drive through edgecliff, there's actually two.
(07:11):
I don't know if you guys knowthat, but there's two safety
cameras, one after the other.
But the second you get to thatI think it's called Mages Bay
Road, yep correct as soon as youget there.
Speaker 1 (07:20):
there's nothing there .
They do a credit check when youget in.
Speaker 2 (07:25):
Then we got the northern parts of Sydneyney, so
palm beach 3.4 mil, mossman 3.2mil, kiribilli 2.7 mil, c4 2.1
mil, and then manly is 2.1 manlyshocks me, not like shocks me,
shocks me, I'm just shocked it'sin the top five.
Speaker 1 (07:39):
I know manly is expensive, but damn manly almost
feels like a different country.
Speaker 3 (07:43):
But right so far away I think you can get to
melbourne quicker than you canget to manly right.
Speaker 2 (07:47):
Alison and I did a staycation in Manly and I could
see Centrepoint from the hotel.
I could see it but I did notfeel like I was in Sydney.
I didn't see a single person Iknew okay, that is a weird
feeling for a guy that's got somany cousins, so many friends
you know, so many clients Notone person I knew I saw over the
four days I was in Manly.
(08:08):
It was the strangest feel andit feels very European.
Speaker 3 (08:11):
Manly.
Yeah, it does, yeah, definitelyit does.
Speaker 2 (08:14):
Then we've got the Western suburbs Hunters Hill,
2.4 mil, enfield, 1.9 mil,marsfield, marsfield, marsfield,
marsfield, 1.2 mil, dromoyne is1.2 mil.
And then Haberfield is $1million.
And lastly, let's round outwith South Sydney.
South Sydney, san Susie, $1million, cronulla, $900k.
(08:34):
Oatley, $880,000.
Kyle Bay $850,000.
And then Caring Bar $820,000.
Speaker 1 (08:40):
I'm surprised the South has far less debt than the
rest of Sydney.
Speaker 2 (08:45):
Basically, the South is disconnected to the rest of
Sydney, so you don't havemotorways to get in and out of
the south like you do withwestern Sydney.
Western Sydney, you've got theM4, you've got the M8, you've
got so many different ways youcan get anywhere from western
Sydney in.
Sydney yeah, to Sydney CBD, butthe southern part of Sydney.
Like I live in the southernpart of Sydney, I live in
Illawarra.
Thankfully I live closer toPatstow way to get to the CBD.
(09:06):
But people that live inCronulla if you live in Cronulla
, getting out of Cronulla takes25 minutes.
They're um nasty suburbs.
Once you live there you don'tessentially leave there.
Speaker 1 (09:16):
Yeah, I always thought the eastern suburbs were
similar to the south and likeit was a little island.
I know it's like literallygeographically closer, but I
it's so like there's no publictransport or anything and when
you're in the city it just feelslike you want public transport
at at least for me, because Ihate driving but the eastern
suburbs you can.
Speaker 2 (09:32):
at night you can get an Uber 15 minutes during the
CBD.
Speaker 1 (09:35):
That's true.
Speaker 2 (09:36):
During the day you can't.
But like you know my in-laws,they love Coogee.
They always ask beg me andAlison, let's go to Coogee,
let's go to Coogee.
Yeah, getting there during theis hell on earth.
But at night, you know, when Iwant to leave Coogee, it
actually takes me five minutesto get out of Coogee.
Cronulla is different Cronullano matter what, just to get out
of the suburb Cronulla.
(09:56):
It might be 20 minutes duringthe day because there's so much
traffic, but even at night it'sstill 10 minutes, 10, 15 minutes
.
There's so many lights beforeyou even hit carrying bar.
Speaker 1 (10:04):
Is there only like in two ways out, or something it's
?
Speaker 2 (10:07):
essentially like that .
One thing I want to dial backto is out of these 20 suburbs,
what have we noticed most?
They are affluent.
They are the most affluentsuburbs in Sydney.
Speaker 1 (10:19):
Maybe we're missing Castle Hill here, or one of
those Like the hills and stuff.
Speaker 2 (10:24):
Yeah, but there's 20 suburbs right here that you look
at it and you think to yourselfthis is where the wealthiest
actually live, this is where youhave all your doctors, this is
where you have physiciansCronulla right now, 400 square
meter block.
Okay, Knockdown, rebuild twomil.
I'm not even talking about abrand new house, I'm talking
about a knockdown rebuild For400 square meters.
You're not able to do adevelopment site at 400 square
(10:46):
meters.
You can't put a duplex on it.
This is just for somebody toknock down, build their dream
home and go play golf at theprivate golf course down there.
And that's what these suburbsbring.
And it brings me to my point.
The most amount of debt existsin the most affluent suburbs,
and that's because they havegood debt.
Previously, Damien, we weretalking about using good debt.
(11:06):
What have these individualsdone?
They've paired up with anaccountant to be able to create
structures.
Would you agree or disagree?
Speaker 3 (11:14):
with me.
They're the ones that haveaccess to your financials, right
, so they're always able to seehow you can reduce the amount of
tax you're paying.
Usually, an accountant willtell you hey, you're paying X
amount of tax.
Let's get you an investmentproperty because you have the
income there to source it.
I have a mortgage broker thatcan help you with getting
finance.
Let's build your portfolio alittle bit, as we can see, like
(11:35):
a third of the market, it's 800Kminimum mortgage in Australia.
Now, right, and with that alsocoming is obviously there were
rates rising for a long time, Ibelieve I truly believe in about
February March they should begoing down.
There's a lot of people thatmaxed out, and what we're seeing
as well in terms of statisticsis that one in seven people that
have a mortgage will actuallylook to sell their property by
(11:56):
February March if the ratesdon't go down, because they
actually can't afford to liveanymore.
Speaker 1 (12:00):
Yeah, I saw that.
It's like they need repaymentsreduced by like 500 bucks, or
that's it they're selling it'scrazy.
Speaker 2 (12:06):
Definitely they're selling.
It's crazy.
It's crazy to me that the UShas just had two rate drops and
we held, we held, so theydropped 0.5 and then another
0.25.
That's correct.
They're trying to re-stimulatetheir market.
Speaker 1 (12:20):
Doesn't America's property market work completely
different to ours, though?
Speaker 2 (12:22):
It's very different over there.
So they've got the population,yeah, but they've got a lot of
flyover states.
So, yeah, but they've got a lotof flyover states.
So a city like Chicago, that'sexpensive, right, it's expensive
in the CBD, like all CBDs, yeah, okay.
But when you go to the outersuburbs, everything stays flat
I'm not saying stays flat, youknow, for a year and then spikes
.
It's consistently staying flat.
(12:44):
And they invest in property forthe rental return.
So I had a cousin turn to me andhe goes to me oh so, like
you've got an investmentproperty?
I go yeah, yeah, I do.
This is back in 2018.
And he goes oh so, what areyour repayments?
I told him my repayments andthen he goes oh, what's what's
your rental?
And he goes how are you makingmoney?
And I go what do you mean?
And he goes and I'm like cool,like that's $3,600 a year.
(13:14):
And he's like but like, how doyou guys make money?
I don't understand it and I gowell, the way that we make money
is on the capital gain.
We don't make money on therental.
What's the rental yield inSydney?
2%, 3?
, 2%, 3, yeah, 3% if we're lucky.
But over there their yield isanywhere between 8 to 10.
Speaker 1 (13:30):
And that's just because property, like in
general, is cheaper there, likeon average.
Speaker 2 (13:34):
I think the average house price back in 2020 was
$415,000.
Speaker 1 (13:38):
That's insane.
I know what was that like$800-ish in Aussie dollars.
Speaker 2 (13:42):
No, $415,000 would be $670,000 Australian dollars.
Okay, where are you going toget $600,000?
What are you going to buy inSydney for $670,000?
Speaker 3 (13:51):
No, you're not, Unless it's an apartment in some
random suburb that's not closeto the CBD at all, or right away
.
No, Oran Park is even morevalued than that you want to
talk about Oran Park, all right,the apartments there go for a
minimum of 900K.
Speaker 1 (14:03):
Really Damn the properties there go for about
1.3 mil.
Speaker 3 (14:06):
It's the fastest growing LGA in Australia, I'm
pretty sure.
Speaker 1 (14:09):
Well done in that Camden way yeah.
Speaker 3 (14:12):
Orrin.
Speaker 2 (14:12):
Park specifically, and then I think we're talking.
What's the one that starts withG?
Right next to it, Gregory Hills.
Speaker 1 (14:18):
Gregory Hills as well .
My cousin bought a place there.
Speaker 2 (14:19):
Yeah, so that area there is all growing and it's
all booming because of the newairport.
But then you've got areas likeWestmead where I've got clients
that bought an apartment for900K and now it's valued at 800.
Yeah, so there's certain partsof Sydney that perform well in
the apartment market and thenthere's certain parts that don't
(14:41):
.
But even those apartments, theexpectation is because we have a
low supply of developmentapproval.
They're going to expect to goup after the interest rates drop
and the reason is more peopleare going to have borrowing
capacity Right now everyone.
Why is Perth growing like crazy?
Because that's all people inAustralia can afford.
Exactly, house and land packageover there last year was 500K,
now you're lucky to go 800.
Yeah, very, very differentmarket.
(15:02):
It's spiked up like crazy, butit doesn't always perform like
that.
The only reason why people arestill buying there is because
it's like oh okay, I could stillmake my money work for me over
there In Sydney, in Victoria.
Victoria brought in all thoseinvestor laws.
It's very, very different.
Once the borrowing capacitycomes back, those properties are
going to spike in value.
(15:22):
And to go back to our originalpoint when it comes to America
and stuff, they've got New York,san Francisco and parts of Los
Angeles.
I'm not going to say all of LosAngeles, parts of Los Angeles
that perform that well.
The rest of Los Angeles,nobody's buying a place in
Compton for a million dollars.
Nobody's going to South CentralLA and expecting to pay that
(15:44):
much.
No, like there are certainparts of Los Angeles that don't
perform well.
San Fran looks like Melbourne,genuinely same climate as
Melbourne.
Parts of Seattle becauseSeattle has a good climate as
well 5% of the time, but it'sgot a good city and a good
infrastructure that performsreally well.
Chicago, same thing, wherethere's major city hubs, they
perform well, but it doesn'tperform well like Sydney does.
Even New York doesn't climb asfast as Sydney does.
(16:05):
Go try and buy a place inBarangaroo.
I could guarantee you persquare foot I'm not saying per
square metre per square foot itis worth more than the best
places in Manhattan.
I know we segued massively,massively from that that's
fascinating Okay.
We segued massively from ouroriginal point.
You know of the debt levels inAmerica and why they've dropped
their interest rates they needto re-stimulate the market and
(16:27):
we need to re-stimulate themarket in Australia.
So I do want to ask you, damien, do you think they're going to
drop the interest rates inFebruary?
Yeah, I think they will, andwhy do you?
Speaker 3 (16:35):
think they didn't drop it in November.
So my honest opinion aroundthat is we're heading into the
festive period of the year,people already know how much
they need in terms ofexpenditure.
To drop that now in the eyes ofthe RBA would be a bad thing,
because then people can't reallyadjust to their spendings right
.
They don't know how much theyneed to put aside for something
(16:55):
like that.
Also, heading into the new yearaustralia day there's a lot of
different holidays coming up foraustralia.
Yeah, february is where we startto see nothing really and it's
just before easter, right soeveryone gets back into the
groove of things people comingback to sydney or wherever they
live, they might go on holidaysover the shutdown period and
things like that.
That's why I believe that RBAwill hold it till February, but
(17:16):
before Easter comes they need todrop it, because that way more
people will enter the market,and this is a positive and
negative thing, depending onwhat side of the scale you're on
.
If you're a first home buyerand you have the funds ready to
go, I'd definitely recommendtrying to buy now.
Yeah, general advice, generaladvice for sure.
Sure, but the problem is whenall these um existing investors
(17:36):
get their borrowing capacity upagain, they're going to want to
pull the trigger and buy anotherproperty, yeah, which again
prices out the young generationin australia from buying a
property, right.
So again they get delayed onhow they go about getting an
investment property becauseprices will climb.
As rates go go down, propertyprices go up.
That's the trade-off and peopleneed to understand that too.
Speaker 2 (17:58):
More people enter the market, more people want to buy
.
You remember 2020, 2021?
The boom that was then becauseinterest rates were up 2%.
We were seeing apartments, nothouses apartments.
One day they'll go for $450.
A week later they'll go for$500.
A week after that they'll gofor $520.
I still remember.
I still remember theseone-bedroom apartments in Cogger
.
That was the trend.
(18:19):
Now try and get one for under600.
You can't, but it's extremelyinteresting.
On that note, damien, what doyou want to?
Speaker 3 (18:27):
finish with Pretty open-ended question, the way I
look at it, to any Australiansout there who are struggling
with rates at the moment.
But to any Australians outthere who are struggling with
rates at the moment, keep inmind that they are going to go
down.
Although as villainous as theymay seem, the RBA something
needs to give and I honestlybelieve it will go down in
February and March.
This country is one of thegreatest places on earth in
(18:48):
terms of investing in propertyand it's almost a guarantee that
you're going to get a return onwhatever you put in.
Speaker 1 (18:55):
I also think that they won't.
Why they didn't drop interestrates recently is because the
whole reason is to tackleinflation.
If you ease the rates rightbefore Christmas, that's
consumer spending going right up, that's inflation jumping right
up.
Speaker 2 (19:10):
I'm going to disagree .
Speaker 1 (19:11):
You're the economist, not me.
Speaker 2 (19:14):
I always feel like Sydney, oh no, sydney.
I've always feel likeAustralia's late to the party.
They're so cautious and they'reso just inefficient with their
decision-making.
You know when the rates wereclimbing and you know even that
extra 0.10,.
I still remember when the rateslike just they put them up 0.10
and it was unnecessary.
The inflation rates we'reseeing now are from the effect
(19:35):
of three months ago.
Okay, like people are used toit, and I have a feeling that
come February the inflation rateis going to be so low that it's
not going to be.
Oh, should we drop interestrates?
It's going to be.
We need to because thefollowing people are employed
over Christmas casual employees,retail.
(19:58):
We're going to lose so muchthis Christmas because people
just don't have the money tospend.
I'm pretty sure the averagesavings in Australia dipped from
like $10,000 to a few hundreddollars.
Speaker 1 (20:09):
Yeah, no, people are burning through all their
savings.
That's why they're sayingthey're going to sell up in
February if rates don't drop,because they've been using their
savings to keep the house.
Speaker 2 (20:16):
I think their rates should have dropped in November.
People are used to not spending.
I know that for a fact.
I see it every day.
We have to ask clients theirexpenses.
We know, we know, we see it, wesee it on their bank statements
, we see it all.
Are you spending money?
No, absolutely not.
Speaker 1 (20:31):
When was the last?
Speaker 2 (20:31):
time you went out for a drink, Mark.
Speaker 1 (20:32):
It was a birthday so two weeks ago, okay before that
Before that?
No, it was ages ago, yeah.
Speaker 2 (20:37):
It was a wedding.
Speaker 1 (20:38):
Again, it was only like large events.
Speaker 2 (20:40):
It's not just because Damien, when was the last time
you went out for a drink anddon't include the work dinner
the other night.
Mate, I can't even remember soyou're going to have hospitality
not operating at the level thatthey should be.
They employ a lot of peopleyou're going to have retailers
not operating at the level thatthey should be.
You're going to see pain thisDecember and come February if
(21:03):
they don't drop the interestrates.
Oh my god, I'm going to riot.
Speaker 3 (21:07):
I'm just going to be a one man riot at the front of
the at the front of the.
Speaker 2 (21:11):
RBA down here in Martin Place.
And, on that note, this hasbeen the Finance Show with Joe.
That's Sam Schmo, that's Damien, I'm Joseph Dalwood, and if you
need any help with your finance, whether you're looking to
refinance or purchase a home,you can contact us at
wwwitsimplecomau.
Welcome to the Finance Show with Joe.
He's Joe.
I'm just some schmo and we havea very special guest today,
Damien.
Speaker 2 (00:09):
So I've got to bring out a little bit of my Western
Sydney cuss right now, becausewe've got a very, very special
guest on here.
What's?
Speaker 3 (00:16):
up, cuss how you doing Good.
Speaker 2 (00:18):
Cuss yourself.
Longest tenured member of it'sSimple.
Currently.
Welcome to the show.
Pleasure to be here, boys.
How are we going Waiting tohave you on here for a long time
?
Just tell the audience of our15 listeners just exactly how
you came around to becoming amember of it's Simple.
It's a pretty funny story.
Speaker 3 (00:38):
So it all happened last year, in about, I want to
say, june, when it was good oldMichael Mankin's wedding.
I met Joey that night and thefirst thing he said to me is
nice to meet you.
When are you joining?
It's Simple, and I was like, oh, okay, and I was like, oh okay,
look man, I'm going to Europe.
But when I get back, like let'shave a serious conversation
about it, came back, spoke toJoey and Michael again and I was
(01:00):
off to the races in October.
And here we are a year later.
Speaker 2 (01:04):
So what made you so interested in becoming a broker?
I?
Speaker 3 (01:07):
always wanted to find a job where, at the forefront
of everything, it's helpingpeople.
So I did dive into a coupleother industries.
I looked at recruitment andthings like that.
Didn't really work out but Ifound myself in the bank.
So I was at Westpac CorporateLending for about two years, saw
the ins and outs of theindustry, how it all worked for
about two years.
Saw the ins and outs of theindustry, how it all worked, how
us as people in the bank canactually benefit people.
(01:28):
But then I was introduced tothe idea of brokering and loans
and mortgages and it kind ofinfused both of the two into one
.
So obviously, making good moneyobviously is always a forefront
, because making good moneymeans more possibilities in life
and your opportunities open upand secondly, being able to help
people.
Giving that phone call to acustomer when you tell them the
(01:49):
loan has settled is one of thebest feelings in the world.
So I just want to keep crankingthat and see how many more we
can settle and where we can takeit.
Speaker 2 (01:56):
So take us through the brokering process.
Take us through gettingsomebody conditionally approved,
getting somebody formallyapproved, getting somebody to
actually settle.
There's an attraction to that.
I want to say there's adopamine effect when each level
is surpassed.
Would you agree with me?
Speaker 3 (02:12):
It's a long journey.
So, like, obviously, a lot ofbrokers like to say it's a
customer journey.
Right, you get them through thefront door first.
These are people that you mightnot ever have spoken to before,
they might not be friends orfamily, right, they're just an
individual that has come to youbecause they have a goal in mind
and they want to get somethingdone.
And then that's when the realprocess starts.
You start getting the docs.
The docs might take a while.
(02:34):
You start massaging that deal abit.
You've got to let them knowthat, look, you can be
comfortable with me, we're goingto get this done for you.
There's a lot of hurdles acrossthe way.
Sometimes it might not be theclient, it's actually the lender
asking for specific things.
There's a lot of back and forth, sometimes depending on who
we're going to and submittingthe deal with.
Sometimes there's frustrationsand stuff.
But at the end of it, just atthat tunnel, you can see the
(02:57):
glimmer of a little bit of lightand you know you're almost
there.
So now you're at a conditional.
So now you're going back to thecustomer again.
Hey, I need this, that, etcetera.
Why do you need this?
Why do you need that?
We need it for the lender.
We're almost there.
Then you get the unconditionaland it's like, okay, cool, we're
waiting on a valuation.
Now Valuation comes in strong.
That's when you get a bitexcited, because now all you're
(03:18):
waiting for is that settlementdate and then from there it's
just a green light Through yourexperience, you've been exposed
to a lot of debt.
Speaker 2 (03:26):
And when I say you've been exposed to a lot of debt,
when you're at Westpac Corporatespecifically, you were dealing
with clients like Amazon, coles,woolworths Group.
What levels of debt were youseeing with those groups?
Speaker 3 (03:37):
We're seeing facilities of over 100 mil,
usually minimum per customer.
Coles will draw down a loan fora facility 300 mil one day.
It's paid out the next day.
So they're only leasing it for aday, right?
Amazon had rotating facilitiesper month where we're lending
out this amount, x amount ofmoney.
The amounts of interest youwere seeing on the loan were
(04:00):
insane, right?
So the same amount of interestthat a customer is paying over
the lifetime of 30 years, thesemajor corporations are paying
within days.
The playing field is sodifferent.
Right, by coming into the homeloan industry, people are
dealing with loans over thecourse of 30 years, right?
So it's like figuring out howto how to manage that debt and
with saying debt, this is gooddebt, right?
(04:21):
Yeah, so when you get a homehome loan, you're creating a
long-term future for yourselfand you also.
You can use that debt toleverage, cash out equity, build
your portfolio.
Right?
Everyone wants freedom at theend of the day, and if you do it
correctly, you leverage thedebt correctly and you're making
enough money to service a loan,there's chances that you might
(04:42):
end up with five to 10properties within a very short
span.
Speaker 2 (04:46):
The property market in Australia.
We've talked about this atlength, but it always seems to
be growing, regardless of thesmall lulls that Victoria is
currently going through.
Even New South Wales.
New South Wales is dipping atthe moment in quite a few areas,
but what I've noticed is debtis necessary.
You could do everything on yourown.
You're not going to grow at therate that you want to, but when
(05:08):
you can utilize debt and youcan utilize it effectively, that
is when you can truly start tosee possibility in your life.
So I want to go back to whatyou said about Kohl's and Amazon
.
You know they would get $100million facility, $300 million
facility, and pay it off in acouple of days, and then you're
also able to see how businessesare able to grow and maintain
(05:32):
their staff, their bonuses,their you know, the high
corporate structure.
Am I correct in saying?
Speaker 3 (05:37):
that, yeah, correct.
So sometimes you look at thenumbers, right.
For example, I want to bring upcalls, and this is all public
information.
Um, they had a statistic putout there that, on average, per
australian calls were makingabout $56 profit per Australian,
and I think it was 2022, theyhad a reported revenue of about
$40.7 billion Jesus In revenuein a year.
So you can imagine how muchmoney they're making right and
(05:59):
how much is in circulation, evenat the corporate level, you
could see how debts are good inorder to be able to grow.
Speaker 2 (06:05):
That kind of leads us to our topic of the day.
You know the areas with thehighest amount of debt in
Australia, and this is householddebt.
I'm not talking about corporatedebt corporates, all that kind
of stuff.
These are specifically thesuburbs.
So in the eastern suburbs wehave Double Bay coming in first
with 3.7 mil, bellevue Hillcoming in second with 3.6 mil,
(06:27):
darling Point with 3.5, doverHeights with 3.3 mil and then
Rose Bay with 2.5 mil.
Now what do we notice about allof those areas Wealthy as
suburbs?
They are the highest net worthareas in Australia.
Yeah, you know, per capita.
It's just known.
That's where all the doctorslive, that's where all the
judges live, okay.
Speaker 1 (06:47):
We talk about this.
I've said it time and timeagain you drive through Double.
Speaker 2 (06:49):
Bay.
It's where all the judges live.
Okay, we talk about this.
I've said it time and timeagain.
You drive through Double Bay,bellevue Hill, all those areas,
there's not a single speedcamera in sight.
And the specific reason forthat, you know, there's certain
people that are sitting incertain places that just kind of
make sure you know what.
We're not going to put a speedcamera or a safety camera here,
we're going to make sure it'sover an edge cliff.
And if you drive through edgecliff, there's actually two.
(07:11):
I don't know if you guys knowthat, but there's two safety
cameras, one after the other.
But the second you get to thatI think it's called Mages Bay
Road, yep correct as soon as youget there.
Speaker 1 (07:20):
there's nothing there .
They do a credit check when youget in.
Speaker 2 (07:25):
Then we got the northern parts of Sydneyney, so
palm beach 3.4 mil, mossman 3.2mil, kiribilli 2.7 mil, c4 2.1
mil, and then manly is 2.1 manlyshocks me, not like shocks me,
shocks me, I'm just shocked it'sin the top five.
Speaker 1 (07:39):
I know manly is expensive, but damn manly almost
feels like a different country.
Speaker 3 (07:43):
But right so far away I think you can get to
melbourne quicker than you canget to manly right.
Speaker 2 (07:47):
Alison and I did a staycation in Manly and I could
see Centrepoint from the hotel.
I could see it but I did notfeel like I was in Sydney.
I didn't see a single person Iknew okay, that is a weird
feeling for a guy that's got somany cousins, so many friends
you know, so many clients Notone person I knew I saw over the
four days I was in Manly.
(08:08):
It was the strangest feel andit feels very European.
Speaker 3 (08:11):
Manly.
Yeah, it does, yeah, definitelyit does.
Speaker 2 (08:14):
Then we've got the Western suburbs Hunters Hill,
2.4 mil, enfield, 1.9 mil,marsfield, marsfield, marsfield,
marsfield, 1.2 mil, dromoyne is1.2 mil.
And then Haberfield is $1million.
And lastly, let's round outwith South Sydney.
South Sydney, san Susie, $1million, cronulla, $900k.
(08:34):
Oatley, $880,000.
Kyle Bay $850,000.
And then Caring Bar $820,000.
Speaker 1 (08:40):
I'm surprised the South has far less debt than the
rest of Sydney.
Speaker 2 (08:45):
Basically, the South is disconnected to the rest of
Sydney, so you don't havemotorways to get in and out of
the south like you do withwestern Sydney.
Western Sydney, you've got theM4, you've got the M8, you've
got so many different ways youcan get anywhere from western
Sydney in.
Sydney yeah, to Sydney CBD, butthe southern part of Sydney.
Like I live in the southernpart of Sydney, I live in
Illawarra.
Thankfully I live closer toPatstow way to get to the CBD.
(09:06):
But people that live inCronulla if you live in Cronulla
, getting out of Cronulla takes25 minutes.
They're um nasty suburbs.
Once you live there you don'tessentially leave there.
Speaker 1 (09:16):
Yeah, I always thought the eastern suburbs were
similar to the south and likeit was a little island.
I know it's like literallygeographically closer, but I
it's so like there's no publictransport or anything and when
you're in the city it just feelslike you want public transport
at at least for me, because Ihate driving but the eastern
suburbs you can.
Speaker 2 (09:32):
at night you can get an Uber 15 minutes during the
CBD.
Speaker 1 (09:35):
That's true.
Speaker 2 (09:36):
During the day you can't.
But like you know my in-laws,they love Coogee.
They always ask beg me andAlison, let's go to Coogee,
let's go to Coogee.
Yeah, getting there during theis hell on earth.
But at night, you know, when Iwant to leave Coogee, it
actually takes me five minutesto get out of Coogee.
Cronulla is different Cronullano matter what, just to get out
of the suburb Cronulla.
(09:56):
It might be 20 minutes duringthe day because there's so much
traffic, but even at night it'sstill 10 minutes, 10, 15 minutes
.
There's so many lights beforeyou even hit carrying bar.
Speaker 1 (10:04):
Is there only like in two ways out, or something it's
?
Speaker 2 (10:07):
essentially like that .
One thing I want to dial backto is out of these 20 suburbs,
what have we noticed most?
They are affluent.
They are the most affluentsuburbs in Sydney.
Speaker 1 (10:19):
Maybe we're missing Castle Hill here, or one of
those Like the hills and stuff.
Speaker 2 (10:24):
Yeah, but there's 20 suburbs right here that you look
at it and you think to yourselfthis is where the wealthiest
actually live, this is where youhave all your doctors, this is
where you have physiciansCronulla right now, 400 square
meter block.
Okay, Knockdown, rebuild twomil.
I'm not even talking about abrand new house, I'm talking
about a knockdown rebuild For400 square meters.
You're not able to do adevelopment site at 400 square
(10:46):
meters.
You can't put a duplex on it.
This is just for somebody toknock down, build their dream
home and go play golf at theprivate golf course down there.
And that's what these suburbsbring.
And it brings me to my point.
The most amount of debt existsin the most affluent suburbs,
and that's because they havegood debt.
Previously, Damien, we weretalking about using good debt.
(11:06):
What have these individualsdone?
They've paired up with anaccountant to be able to create
structures.
Would you agree or disagree?
Speaker 3 (11:14):
with me.
They're the ones that haveaccess to your financials, right
, so they're always able to seehow you can reduce the amount of
tax you're paying.
Usually, an accountant willtell you hey, you're paying X
amount of tax.
Let's get you an investmentproperty because you have the
income there to source it.
I have a mortgage broker thatcan help you with getting
finance.
Let's build your portfolio alittle bit, as we can see, like
(11:35):
a third of the market, it's 800Kminimum mortgage in Australia.
Now, right, and with that alsocoming is obviously there were
rates rising for a long time, Ibelieve I truly believe in about
February March they should begoing down.
There's a lot of people thatmaxed out, and what we're seeing
as well in terms of statisticsis that one in seven people that
have a mortgage will actuallylook to sell their property by
(11:56):
February March if the ratesdon't go down, because they
actually can't afford to liveanymore.
Speaker 1 (12:00):
Yeah, I saw that.
It's like they need repaymentsreduced by like 500 bucks, or
that's it they're selling it'scrazy.
Speaker 2 (12:06):
Definitely they're selling.
It's crazy.
It's crazy to me that the UShas just had two rate drops and
we held, we held, so theydropped 0.5 and then another
0.25.
That's correct.
They're trying to re-stimulatetheir market.
Speaker 1 (12:20):
Doesn't America's property market work completely
different to ours, though?
Speaker 2 (12:22):
It's very different over there.
So they've got the population,yeah, but they've got a lot of
flyover states.
So, yeah, but they've got a lotof flyover states.
So a city like Chicago, that'sexpensive, right, it's expensive
in the CBD, like all CBDs, yeah, okay.
But when you go to the outersuburbs, everything stays flat
I'm not saying stays flat, youknow, for a year and then spikes
.
It's consistently staying flat.
(12:44):
And they invest in property forthe rental return.
So I had a cousin turn to me andhe goes to me oh so, like
you've got an investmentproperty?
I go yeah, yeah, I do.
This is back in 2018.
And he goes oh so, what areyour repayments?
I told him my repayments andthen he goes oh, what's what's
your rental?
And he goes how are you makingmoney?
And I go what do you mean?
And he goes and I'm like cool,like that's $3,600 a year.
(13:14):
And he's like but like, how doyou guys make money?
I don't understand it and I gowell, the way that we make money
is on the capital gain.
We don't make money on therental.
What's the rental yield inSydney?
2%, 3?
, 2%, 3, yeah, 3% if we're lucky.
But over there their yield isanywhere between 8 to 10.
Speaker 1 (13:30):
And that's just because property, like in
general, is cheaper there, likeon average.
Speaker 2 (13:34):
I think the average house price back in 2020 was
$415,000.
Speaker 1 (13:38):
That's insane.
I know what was that like$800-ish in Aussie dollars.
Speaker 2 (13:42):
No, $415,000 would be $670,000 Australian dollars.
Okay, where are you going toget $600,000?
What are you going to buy inSydney for $670,000?
Speaker 3 (13:51):
No, you're not, Unless it's an apartment in some
random suburb that's not closeto the CBD at all, or right away
.
No, Oran Park is even morevalued than that you want to
talk about Oran Park, all right,the apartments there go for a
minimum of 900K.
Speaker 1 (14:03):
Really Damn the properties there go for about
1.3 mil.
Speaker 3 (14:06):
It's the fastest growing LGA in Australia, I'm
pretty sure.
Speaker 1 (14:09):
Well done in that Camden way yeah.
Speaker 3 (14:12):
Orrin.
Speaker 2 (14:12):
Park specifically, and then I think we're talking.
What's the one that starts withG?
Right next to it, Gregory Hills.
Speaker 1 (14:18):
Gregory Hills as well .
My cousin bought a place there.
Speaker 2 (14:19):
Yeah, so that area there is all growing and it's
all booming because of the newairport.
But then you've got areas likeWestmead where I've got clients
that bought an apartment for900K and now it's valued at 800.
Yeah, so there's certain partsof Sydney that perform well in
the apartment market and thenthere's certain parts that don't
(14:41):
.
But even those apartments, theexpectation is because we have a
low supply of developmentapproval.
They're going to expect to goup after the interest rates drop
and the reason is more peopleare going to have borrowing
capacity Right now everyone.
Why is Perth growing like crazy?
Because that's all people inAustralia can afford.
Exactly, house and land packageover there last year was 500K,
now you're lucky to go 800.
Yeah, very, very differentmarket.
(15:02):
It's spiked up like crazy, butit doesn't always perform like
that.
The only reason why people arestill buying there is because
it's like oh okay, I could stillmake my money work for me over
there In Sydney, in Victoria.
Victoria brought in all thoseinvestor laws.
It's very, very different.
Once the borrowing capacitycomes back, those properties are
going to spike in value.
(15:22):
And to go back to our originalpoint when it comes to America
and stuff, they've got New York,san Francisco and parts of Los
Angeles.
I'm not going to say all of LosAngeles, parts of Los Angeles
that perform that well.
The rest of Los Angeles,nobody's buying a place in
Compton for a million dollars.
Nobody's going to South CentralLA and expecting to pay that
(15:44):
much.
No, like there are certainparts of Los Angeles that don't
perform well.
San Fran looks like Melbourne,genuinely same climate as
Melbourne.
Parts of Seattle becauseSeattle has a good climate as
well 5% of the time, but it'sgot a good city and a good
infrastructure that performsreally well.
Chicago, same thing, wherethere's major city hubs, they
perform well, but it doesn'tperform well like Sydney does.
Even New York doesn't climb asfast as Sydney does.
(16:05):
Go try and buy a place inBarangaroo.
I could guarantee you persquare foot I'm not saying per
square metre per square foot itis worth more than the best
places in Manhattan.
I know we segued massively,massively from that that's
fascinating Okay.
We segued massively from ouroriginal point.
You know of the debt levels inAmerica and why they've dropped
their interest rates they needto re-stimulate the market and
(16:27):
we need to re-stimulate themarket in Australia.
So I do want to ask you, damien, do you think they're going to
drop the interest rates inFebruary?
Yeah, I think they will, andwhy do you?
Speaker 3 (16:35):
think they didn't drop it in November.
So my honest opinion aroundthat is we're heading into the
festive period of the year,people already know how much
they need in terms ofexpenditure.
To drop that now in the eyes ofthe RBA would be a bad thing,
because then people can't reallyadjust to their spendings right
.
They don't know how much theyneed to put aside for something
(16:55):
like that.
Also, heading into the new yearaustralia day there's a lot of
different holidays coming up foraustralia.
Yeah, february is where we startto see nothing really and it's
just before easter, right soeveryone gets back into the
groove of things people comingback to sydney or wherever they
live, they might go on holidaysover the shutdown period and
things like that.
That's why I believe that RBAwill hold it till February, but
(17:16):
before Easter comes they need todrop it, because that way more
people will enter the market,and this is a positive and
negative thing, depending onwhat side of the scale you're on
.
If you're a first home buyerand you have the funds ready to
go, I'd definitely recommendtrying to buy now.
Yeah, general advice, generaladvice for sure.
Sure, but the problem is whenall these um existing investors
(17:36):
get their borrowing capacity upagain, they're going to want to
pull the trigger and buy anotherproperty, yeah, which again
prices out the young generationin australia from buying a
property, right.
So again they get delayed onhow they go about getting an
investment property becauseprices will climb.
As rates go go down, propertyprices go up.
That's the trade-off and peopleneed to understand that too.
Speaker 2 (17:58):
More people enter the market, more people want to buy
.
You remember 2020, 2021?
The boom that was then becauseinterest rates were up 2%.
We were seeing apartments, nothouses apartments.
One day they'll go for $450.
A week later they'll go for$500.
A week after that they'll gofor $520.
I still remember.
I still remember theseone-bedroom apartments in Cogger
.
That was the trend.
(18:19):
Now try and get one for under600.
You can't, but it's extremelyinteresting.
On that note, damien, what doyou want to?
Speaker 3 (18:27):
finish with Pretty open-ended question, the way I
look at it, to any Australiansout there who are struggling
with rates at the moment.
But to any Australians outthere who are struggling with
rates at the moment, keep inmind that they are going to go
down.
Although as villainous as theymay seem, the RBA something
needs to give and I honestlybelieve it will go down in
February and March.
This country is one of thegreatest places on earth in
(18:48):
terms of investing in propertyand it's almost a guarantee that
you're going to get a return onwhatever you put in.
Speaker 1 (18:55):
I also think that they won't.
Why they didn't drop interestrates recently is because the
whole reason is to tackleinflation.
If you ease the rates rightbefore Christmas, that's
consumer spending going right up, that's inflation jumping right
up.
Speaker 2 (19:10):
I'm going to disagree .
Speaker 1 (19:11):
You're the economist, not me.
Speaker 2 (19:14):
I always feel like Sydney, oh no, sydney.
I've always feel likeAustralia's late to the party.
They're so cautious and they'reso just inefficient with their
decision-making.
You know when the rates wereclimbing and you know even that
extra 0.10,.
I still remember when the rateslike just they put them up 0.10
and it was unnecessary.
The inflation rates we'reseeing now are from the effect
(19:35):
of three months ago.
Okay, like people are used toit, and I have a feeling that
come February the inflation rateis going to be so low that it's
not going to be.
Oh, should we drop interestrates?
It's going to be.
We need to because thefollowing people are employed
over Christmas casual employees,retail.
(19:58):
We're going to lose so muchthis Christmas because people
just don't have the money tospend.
I'm pretty sure the averagesavings in Australia dipped from
like $10,000 to a few hundreddollars.
Speaker 1 (20:09):
Yeah, no, people are burning through all their
savings.
That's why they're sayingthey're going to sell up in
February if rates don't drop,because they've been using their
savings to keep the house.
Speaker 2 (20:16):
I think their rates should have dropped in November.
People are used to not spending.
I know that for a fact.
I see it every day.
We have to ask clients theirexpenses.
We know, we know, we see it, wesee it on their bank statements
, we see it all.
Are you spending money?
No, absolutely not.
Speaker 1 (20:31):
When was the last?
Speaker 2 (20:31):
time you went out for a drink, Mark.
Speaker 1 (20:32):
It was a birthday so two weeks ago, okay before that
Before that?
No, it was ages ago, yeah.
Speaker 2 (20:37):
It was a wedding.
Speaker 1 (20:38):
Again, it was only like large events.
Speaker 2 (20:40):
It's not just because Damien, when was the last time
you went out for a drink anddon't include the work dinner
the other night.
Mate, I can't even remember soyou're going to have hospitality
not operating at the level thatthey should be.
They employ a lot of peopleyou're going to have retailers
not operating at the level thatthey should be.
You're going to see pain thisDecember and come February if
(21:03):
they don't drop the interestrates.
Oh my god, I'm going to riot.
Speaker 3 (21:07):
I'm just going to be a one man riot at the front of
the at the front of the.
Speaker 2 (21:11):
RBA down here in Martin Place.
And, on that note, this hasbeen the Finance Show with Joe.
That's Sam Schmo, that's Damien, I'm Joseph Dalwood, and if you
need any help with your finance, whether you're looking to
refinance or purchase a home,you can contact us at
wwwitsimplecomau.
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