Level Up with Duayne Pearce
I take on the role of an authoritative voice that fearlessly communicates truths drawn directly from my lived experiences. With a genuine sense of ownership, my insights are free from any hidden agendas – they truly belong to the audience. My stories and journey add remarkable value, the key now lies in harnessing its power effectively to help others.
My purpose is to create a new residential building industry. My mission is to inspire unshakable self-confidence in my colleagues in the industry, empowering them to orchestrate prosperous, enduring, and lucrative businesses that bring exceptional projects to fruition for our clients.
My goal is to foster a deeper comprehension among clients about the identity and functions of builders, redefining their perceptions.
Level Up with Duayne Pearce
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It's not hard If you've got money coming in. You just need to make sure that less money is going out. It doesn't help to put your head in the sand. A lot of people do it Like I did it for years. I always tell people marriage counseling is extra right, so go and get specific advice about your own situation. Not everything's about money.
Speaker 2:G'day guys. Welcome back to another cracking episode of Level Up. This one today is going to be an absolute cracker. I know I say that all the time, but today I have with me a good mate of mine. I've actually been thinking about the last couple of days. I think I've known you for probably getting close to 22 odd years now, maybe, maybe even 24.
Speaker 2:Yeah, back when you had all your fingers, but just let him know that I've cut my finger off. But anyway, look, today for you I've got my mate, jeff Gere from Home Loans Made Easy, world-renowned financial broker. Steady up, multi-award winning, has helped me get a lot of stuff throughout the years and definitely I chew his ear off quite often. But the reason I wanted to get Jeff on today is because I know finance, numbers, data, super, all that stuff that we have to do and should do is something that gets neglected a little bit in the building industry. So for the next hour or so we're going to be talking about finance and what you need to do and how you should do it and what you need to look out for and all those types of things. How are you, mate?
Speaker 1:Yeah, good, very good. I warn people, I love this stuff, so once I get going I might talk about it too much.
Speaker 1:So Jeff's got to do a little disclaimer I do have to do a disclaimer, because I did get a wrap on it. Well, I got instructions. I had to do this. So the stuff that we're going to talk about is general in nature, only does not take into account people's individual circumstances, and one of the issues with what we do is that everyone's situation is completely different. So you're going to have people who are listening, who, at all ends of the scale people are starting out, people are finishing, and not one situation sits everyone. So hopefully what we talk about will touch enough for lots of people. But, yeah, go and get specific advice about your own situation.
Speaker 2:Well, we'll touch on a little bit of everything today, because over the years Jeff's helped me out with everything from investments to personal developments, to our own homes, to vehicles, business, like you name it. So you know it all. So, mate, what's like for people out there? Like a lot of people, you know a lot of my story, yep, and you know I went through some tough times. You know a lot of my story and you know I went through some tough times and we've obviously managed to turn that around and we now run a really professional business. But number one is you've got to have your head around your numbers a little bit, don't you?
Speaker 1:Yeah, it is. Look, the word that we use is a budget, and everyone hates it because what that sounds like is what don't I spend, and everyone hates it because what that sounds like is what don't I spend. But whether it's a personal budget or a business budget, but just knowing, it's not hard. If you've got money coming in, you just need to make sure that less money is going out. If you make $100 and you spend 99, that's still okay because you'll be in the black. But if you make $100 and you spend 101, that's going to become a problem over time. And and if you don't know like you're doing a budget together um, it's hard with business, but, um again, regardless of which end of the scale you're on, if you can follow that through, you'll be far better off.
Speaker 2:So yeah, so just put taking the time at. Like you said, doesn't matter which level like whether you're a one-man band, you're contracting to someone else or you're a builder running a big business you have to know what's coming in and what's going out.
Speaker 1:Yeah, you do, and you can do that in a number of different ways. It depends if, at the higher level, you'll need support with accountants and staff and things. But if you're an individual, the government has some websites that are free. They're good. It's called Money Smart. You can go there and they've got free budgeting tools on there. And if you sit down and you go through that, sometimes when you first do it there can be a few tears because it comes out in the red. But again, it doesn't help to put your head in the sand, like if you actually know what's coming in with all the cost of living pressures that people are facing, like I'm just talking more and more about budgeting with people all the time.
Speaker 2:Yeah, I know one of my things, that, like I always wanted everything too soon.
Speaker 2:you're not lying mate, but um, like I remember, like through my 20s, like I'd be ringing you every few weeks I found this idea, I want to buy this, I want to do that and, um, you'd sort of say, oh yeah, that's not going to happen. Or look, if you want to do that, you need to do this. So, even though there are things that I haven't been able to do in the early days, it was just good to have someone to be able to talk to and run ideas past. And that's where a broker is better, isn't it? Because if you build a personal relationship with someone, you can ring them up and ask questions and, yeah, definitely gain some knowledge um, and look, most of my clients have become friends, like you know.
Speaker 1:Uh, because we do. We and you want to find someone who's willing to tell you the truth. So there's plenty of sales people out there that will just put the sales hat on and want to tell you what you want to hear, because they want to do business. What you really want is someone who's going to work with you and and and again, like in a, in a reasonable way, like listen, understand why? Why is dwayne asking me this question, you know? Is that? Is this something that I should just automatically say no to? Well, no, let me just hear why and then work through. And if it's a, if it's a step beyond what we can do right now we talk about, well, we can't do this now, and this is the reason that you can't do it now, but if you want to plan for it, this is what we have and we did that a number of times like we play a lot of times yeah, but?
Speaker 1:but you know, like, you told me what you wanted to do and we went through and said, well, we can't do it now for reasons, but this is what you will have to do to make that a reality and, to your credit, you always listened to that, absorbed it and would come back to me and we'd be doing what you wanted next.
Speaker 2:Yeah, well, or I just went completely off it. Completely off it. Like having being able to run ideas by you, like in a 10 minute conversation, like you would give me enough information to go well, yeah, no, that's a shit idea. Like we won't run with that anymore. But I think the other thing that's been really beneficial for me and very valuable, like in the earlier days, probably before I met Camille and settled down a little bit, like it was more about the toys, so like you helped me out by several toys over the years, and like at the time it was just like I was just living life and having fun and I didn't realize how um, buying those toys was affecting my borrowing capacity. And then, when it did come time to settle down and start investing in property and houses, and and even like there's been a few times where we wanted to do our own developments back in the early days and we weren't able to do them because there was too much debt tied to toys the toys, which, the toys are great too, by the way.
Speaker 2:Yeah, and don't get me wrong, we had a fantastic time with them. But if I didn't have that relationship with you and be able to bounce those ideas around, like I wouldn't know, like I was actually having this conversation with um, with another mate last week. Um, one of his clients, quite a wealthy client, was trying to buy more commercial property and they told him that because, like he had two mercedes and because those two mercedes alone were reducing his borough capacity by whatever it was, six or seven hundred thousand dollars, and even though the cars were only worth $120,000 or $140,000 each.
Speaker 1:Because of the repayments monthly repayments on them, yeah.
Speaker 2:So it's something I've definitely learned through everything in business and life. Once you know more about the bigger picture, it gives you a lot of clarity to be able to make better decisions.
Speaker 1:Yeah, look, I say to people like your choices will lead. I have this conversation all the time. So the choices that you make, in the end everyone will have an opinion for you. You know, oh, you should do this or that, but in the end it actually only matters. Your opinion's the only one that matters. It's the only one I really want to listen to.
Speaker 1:If you want to buy toys and not invest, that's a decision that you can make. But if you understand the choices that you're making and you can work with somebody, um, and find look, you just find someone that's got a gray beard and been doing it for a little while, but, um, but if you find someone who can, can work with you, um, on those um scenarios, what that will do is just always make sure that when you're making those decisions, you're doing it with knowledge. So if you decide to buy a you know a boat or a caravan or a you know the fanciest four-wheel drive in in town, that's okay, as long as you understand what that will do to your other decision making and what your priorities are. And and sometimes our wives can have different priorities I always tell people marriage counseling is extra all right. So, but yes, yeah but it's important.
Speaker 2:Like I see a lot of tradies like I I remember what, how I like I built a very successful carpentry business at a young age and like I, I did, like I went a bit silly for a little while and spent money on things that um, looking back now I wouldn't have, but like I had a great time and I. But I see I look around now just driving around sites and stuff, and I see so many young tradies like early 20s and they've all got brand new jewel like they've. They've driven around in one to two hundred thousand dollar like four wheel drives, fully kitted out yeah and I like I don't.
Speaker 2:I see it like is it an image thing or everyone's trying to sort of keep up with each other or whatever. But I think look at them and think like, do you know how that's affecting your the rest of your life, like when it comes to purchasing property or settling down?
Speaker 1:Yeah, look, one of the challenges that we're facing right now is we've come out of an incredibly low interest rate environment and an incredible amount of money flowing through the system, so a lot of my younger clients are not afraid of debt. They haven't been through recessions or GFCs or things that we talk about, like they've heard the names but they've never actually had to live that and when they're making the decisions, my problem is I've got too many stories.
Speaker 2:We've got lots of time.
Speaker 1:Yeah, but look so one of the this is like a young client who was a tradie Ramey talked about needing to buy a new Ranger. We just got them into a house and they were having their first baby and I said to them it's too early. Like you can't pick the cheapest car that you can make work, then you know, make that work. And they, I hung up, you know like, expecting them to heed my advice. The next call that I got from them they'd gone to a car yard. They'd borrowed $65,000 to buy a Ranger and the repayments were killing him. So in six months they hadn't like, they hadn't realized the the effect, they hadn't done the budget yet um, they didn't listen to that um advice that we talked about.
Speaker 1:But the problem once you've got the debt is like selling the car they're not going to get enough to pay it out the penalty. You know like it's actually quite a hard situation now because they didn't do that and and things have changed dramatically. So anyone who's had any of your tradies, who've got fixed rate loans, they will have either been coming off them or or about to come off them and the rates are going from, you know, a two point something to six point something and that what that does in terms of those repayments is significant. So again, all my clients who, um have I have a chance to talk to, we I talk about, let's not put our head in the sand. Let's just start to have a look. If that's going to be another two hundred dollars a week that you've got to find, then let's start to work out a way to do that before it becomes reality, because the bank's not going to, it's going to come Like it's going to come, that you're going to have to Someone.
Speaker 2:I think it was maybe six or eight months ago. I was having a conversation with someone and they were saying like there's this whole like similar what you just said, like there's, there's this whole age bracket that correct me if I'm wrong like from 2010, 12 to almost 2020 or so, there was no interest rate rise. Yeah, so people got into people, people bought houses, they bought cars, they bought investment properties at reasonably low rates and just that's where they stayed and so they just got used to paying these repayments. And then, obviously, all of a sudden, things change and, like after 10 years of paying the same thing, they've started to see these interest rate rises creep up and they're like freaking out, like what's going on? Like this isn't meant to happen.
Speaker 1:Yeah, yeah, well, during covid, rates got cut to historic lows, so obviously that was 2020 and interest rates were in. Not only were they not rate rises, there were significant rate cuts and and the whole idea behind that was there was stimulus, there was uh, there was rate cuts and the idea was that the government wanted to get us to spend again, and spend aggressively, so that they, the economy, would recover and their plan worked. But it worked too well, and so we all get used to spend like we get used to the. The shackles were off. Cheap money cheap like like 2%. What that means is, for every $10,000 you borrow, you're paying $200 interest for a whole year. It's just nuts, right.
Speaker 2:Mate. Those cars are 0%.
Speaker 1:Yeah, so just go and buy, go and spend, but we're coming back. So the challenge is now the government's trying to slow that down because inflation is is high, but it's, um, yeah, it's, it's actually more about our. We get used to it. And the challenge again is that there's people like me and maybe some of your parents or, depending who's listening, but, um, people who are older. Some of them will have no debt, so it won't matter what rates do. They've done very well out of their investments over the last decades, and so the choices that your parents can make are different to what you can make. Starting out, and I often say to my first homeowners when I'm chatting to them that a lot of them want to start where their parents finished. Um, but talk to your parents about what they. You know, when they bought their first home, they wouldn't have had fancy furniture.
Speaker 2:They some of them would have had bean bags and not chairs, and well, it's a huge problem now, I think, with social media, isn't it like everyone wants the end goal straight away. We see it with young people. They, they straight away want the four bedroom, double garage, four bathroom house, like it's like you know what my first few houses were like well, up until like our last couple of houses, like our houses were all 80 90 square meters, old fibro houses that we renovated and worked in but everyone wants the the good stuff straight away it's human nature.
Speaker 1:Yeah, yeah, and I, and look I again my. I tell people my role is not to shatter your dreams, like and it's never whenever you've rung me with your ideas. So find someone you could like, because again, listening, there'll be this massive range of some people. It's okay to buy a new Ranger and probably you should, you know but then there's other people who you know now's not the right time.
Speaker 2:You know and like on that with the COVID and stuff, like I know some people that have done it.
Speaker 2:I think it's one thing you've always been very good at guiding me with like't use equity in your home to buy toys oh, it's so hard um so so these people that, like housing prize gone through the roof, they've bought all this equity out gone and bought the, the big american truck and the flash caravans and spent two, three, four, half a million dollars their equity out of their homes on things that are in five' time are worth half of what they paid for them.
Speaker 1:Yeah.
Speaker 1:It's nuts and again the sales. There's actually a so everything that you see on TV like who watches TV now? But all the ads, all the social media now, but all the ads, all the um that, all the social media, um, everything is designed to want, make you want the next step. And people are always choosing, like when you've got the ability to do it. And then the choice is do you want to do it or not? And and I joke with people I say, look, you know, the more you borrow, the better for me. You know, like, the more you borrow, the better for me. You know, the more I get paid. But people who know me know that the less you owe, the happier I am.
Speaker 1:My first goal for everyone is to be debt free on their own home, and we talk about how we could achieve those goals. But when people are pulling out that equity some people, you know five hundred thousand dollars for a house three years ago. Um, that house is now worth 750, 800 000 and the bank will let you owe 600. You can, oh, rather than even the deposit that you've made. You're exactly right. The bank will give you, they're happy to give you the money and there's a a reason that Commonwealth Bank makes $10 billion profit in a year. They know how to make money and that is very happy to keep lending to people who want to buy stuff.
Speaker 2:So mate for people out there that are well at all sorts of levels, like what's Because it's not something I was ever taught and it's only through, obviously, becoming mates with you and then chewing your ear off all the time Like what is something like? What should people be striving to? Like what's a minimum people need to have in place to look at getting finance? Let's create an example A trader out there that's maybe got their own um, got their principal place of residence, and they want to start maybe getting an investment property or something like what's the minimum requirements the bank's going to be looking for?
Speaker 1:yeah, well, um, obviously again every situation is different, but but in that, one of the things I do talk to people and this is a great time, so we're coming up to 30 june and all my self-employed people I say, look, when you do your tax return, as of you know, when you're working with your accountant and you're doing your tax return, if you're, if you're self-employed, you're going to get one pay slip that's going to last for 18 months. So what you do when, when you lodge that tax return, every time you go back to a bank, now, for the next 12 or 18 months, that's what they're going to look at. And so just work with your broker or your bank whoever you're talking to and get them to. When your accountant sends you the draft tax return to sign, just forward that to your broker. Get them to have a look at it, because there's a whole pile of.
Speaker 1:So the one that I use as an example when I'm talking to people is the way that we write off cars. So there's two ways that the accountants do it. One is they claim depreciation and interest and the other is they do a cents per kilometre method. Now, when you talk to your accountant, all they're focused on is tax, because that's what you're paying them for and that's what they should be focused on. And they might come back to you and say, hey look, the cents per kilometre method is the best for you and you'll get more back on your tax.
Speaker 1:But if you do the depreciation and interest, the bank will add the depreciation back, so it'll actually increase your borrowing capacity in a simple twist. Both options are fine and if you're working with your, if you get your broker to look at it, they can give you that feedback to your accountant before you sign it, before you lodge it, before you're stuck with your payslip for a year. The other part is that you can talk about those ideas. I'd like to buy an investment property and there's a bit of a tension between how much. When you write off all of your expenses, it's great for tax and there'll be a lot of your people nodding listening to this because it's not great for borrowing. Yeah, it's great for tax, but it's and there'll be a lot of your people nodding listening to this because it's not great for borrowing yeah, it's terrible yeah, so, and and that tension is always just something to work with.
Speaker 1:There are low dock loans and stuff, but they come with a cost, so yeah, higher fees and stuff.
Speaker 2:But yeah, again, that's stuff that I've learned a few and, and I guess that's another good thing to talk about like you and I talk about having a team, like in my live life, build business like that's we talk about a lot. Like you've got to create it. We call it a pack process. You create a team with the builder, designer, the homeowner, all the consultants, and I'd like to talk about that's what I do with my life now. Like, um, you know, like you know, we have meetings together. Like, like yourself, our accountant, we all sit down Like Camille and I throw our goals on the table, what we want to achieve, what we want to do.
Speaker 2:Investments, like super, now has sort of become a bigger subject that we're getting older, but having everybody involved because I never understood the value of it but, like you just said, like having those team conversations, yes, it might be good on paper to try and just write as much off as possible and pay less tax, but, as you said, that's going to affect our borrowing capacity. So is it better to leave some of that on the table and pay a bit more tax, which is going to increase what we can borrow and allow us to reach our goals more.
Speaker 1:And then, once you buy investments, you're going to get income from those investments so and then you end up with more assets that you can depreciate and and look that just really the team is the right word, so you just need to be working with.
Speaker 1:So, if, if you talk to and again, this is tricky, you know, because if you talk to your, your bank or your broker and and they don't seem to be understanding, you know then ask for a second Like, go and find someone else that you can talk to, because you really need, if this is some, if you're listening to this and you're a person who would like to, you know you want to plan ahead again. What you do on this tax return that's about to come is going to carry you right through to, like in a year from now, when you're when you're wanting to buy a car or upgrade your house or whatever you want to do, the banks are going to go back to that tax return. So whatever we've done now lasts for such a long time that it's it's actually you have to in some ways, if you're self-employed, definitely think a little bit about the next step rather than just get there and hope it all works so I laugh like I don't listen to the radio, I watch the news anymore.
Speaker 2:But when I hear people talk about it I just laugh and think, man, like I'm so glad I've changed that mentality. Like leading up to end of financial year, like all these ads on the radio and people like um, spend money, save on tax, like so two things.
Speaker 2:Like you, you physically have to have the money to spend, whatever it is, the new tools and new vehicles, whatever. So you're going to go out and throw this money at purchasing something, just so you can save 30 cents 30 cents you spend a dollar to get 30 cents back. So um, and again, you, like a lot of people, do it like I did it for years.
Speaker 1:I remember like um being told oh, look, it's coming up in for niche, you're gonna make a lot of money, go and spend it, yeah, um look, there is a tension because you don't want to pay more tax than you should, and you know, in our conversations that's always been something that I'm very focused. If there's a way to do things that's tax friendly, then again, just make sure you're talking to someone who understands and you know that that's something that's important. But if you get your financier and your accountant working together and having a conversation, you'll find that a whole pile easier.
Speaker 2:You long term yeah, as you're borrowing. Yeah, so like if the if someone's thinking about going to the bank and getting something like they like a lot of the time. Now you've got a, it's minimum two years or something in it for most self-employed, like yeah, well, this is where it gets really so.
Speaker 1:So the standard with, like you know, as a broker, you're licensed with 26 different banks, so you've got 26 different rules. So the standard is that everyone wants two years financials. There's a lot of banks that will rely on just one year's financials. Now, if it's, um, if it's a clear, full 12 months, and it's straightforward, there's even some banks that yeah, and then we can move into what they call I called it low dock, but it's straightforward.
Speaker 1:There's even some banks that, yeah, and then we can move into what they call I called it low dock, but it's actually called alternate verification, where you could use BAS statements or bank statements to verify your income rather than tax returns. But if you've got two clear, full years, then you'll have access to more banks. If you've only got one year, that'll cut the number of banks you've got access to down. And then, if we get into the alternate verification and I actually do very few of those Like I work with my clients very hard because there's no, if we don't have to pay rates that are a percent higher, like that. I know there's lots of people who just are that's what they write, because it's easy, um, whereas I'd actually rather work with the client and say, look, if we work towards this and we can get past 30 june and we can get a tax return, then we can do this at a you know an interest saving for you.
Speaker 2:yeah, oh, it's so beneficial building relationships with someone like yourself, jeff, and we've done things over the years where we've had to get in and get the deal done.
Speaker 2:We've had to go with a higher interest rate, and then once the deal's been done or we've finished the development, we've refinanced and so like again, without having that relationship, having that team, that stuff just isn't achievable. So yeah, I think it's so valuable for people to be able to Like. A lot of people out there, I feel, would just be going to the car yard or going to the bank and probably I don't know, maybe not even thought about going to a broker.
Speaker 1:Oh yeah, look, brokers write. I can't remember. It's like 75% or something.
Speaker 1:Oh no, 70% of all lending is done through a broker name so yeah, it's of home loan lending, but commercial lending I think they do like 20 or 30% so, and most people do just go straight to the bank for that sort of stuff. Car lending is, you know, probably 50, 50. I don't do much car lending, but look, again, everyone's need is different. Like I've got people ring me all the time and I'm like no, just go back to the car yard. Like I'm actually happy for you to do that stuff, but I'd rather, again, if you're working with someone whose best interest is.
Speaker 1:So again, I'm going to say this in a way but I know that if I always focus on the client and do what's right for the client, then I'll actually do more loans than someone who's out trying to do what's right for them and not look after a client. And I know it's just the way that I've always worked and so whenever anyone rings me, I always if the right thing for you to do is to do it through a car yard or it's to do, go directly to a bank for some reason I've had clients who've had fixed rates with banks and I've said, look, you know you need to go back to that bank and you can't deal with me and um, but I know that those clients will actually then always come back. So, and if you're, if you're working with someone, and that's what you're hearing, then you you've got the right person on your side yeah.
Speaker 2:So what about structures? Like structures definitely, uh, can muck you up. I've learned over the years um all my tradie friends.
Speaker 1:I I've got lots of clients who are tradies. Some of my favorite people and um and structures are um. Often what happens is on the job site.
Speaker 2:People talk and um, and so look that's well, actually they don't anymore, because nothing sits anymore. I turn up the site and everyone's just scrolling oh, they're all sitting around on their phone, just. Oh, okay, see it's changed?
Speaker 1:yeah, uh, because it used to be that everyone talked on the old people like me and um, and what happens is I'll get a phone call and someone will be like I need to do this in a company or a trust or I've got to do it in, you know. And when you drill down, this is one way you do need to get specific advice, because company and trusts and self-managed super funds and all sorts of different structures can be right for lots of different circumstances and you and I have worked through that with your stuff a lot, but it's not right for everyone and there's again too many stories. But just recently I had a fairly high level guy rang me and he was like I'm going to do it, I want to do this way. And I asked him well, why do you want to do that? And in a company trust?
Speaker 1:And he was explaining it to me and I guided him back to his solicitor and accountant and they couldn't agree because the solicitor was focused on asset protection and the account was focused on tax and um. And when he told me what he wanted to do, I said I explained to him this is what they're going to be looking at and you have to work out which is more important. Do you want to pay less tax or do you want to have the asset protection? Because one will tick the box and the other one. And when he got it he actually went with a completely different structure that I suggested. In both the accountant and um solicitor are sort of happy, but um, but it doesn't. It doesn't like it depends what your priorities are as to and that's where we have the team.
Speaker 2:Yeah, that's right.
Speaker 1:Have the conversations with multiple people and I step out and say you know, you get your big baseball bat and you know, have a fight and whoever wins on it, when you come back to me I get the easy bit right alone.
Speaker 2:So yeah, um, but it is hard, like it's hard to know everything, and that's why we do this podcast, like it's getting information out there and I don't know everything.
Speaker 1:I tell people I don't. I don't even pretend to know everything. There's parts of um, parts of you know a lot of my history, but, um, I'm not very good at agribusiness. In actual fact, I'm not only not good at it. Anytime people read me about agribusiness I'm like I'm not your person. You know, it's not what I'm good at. And you again, you want someone who's willing to be truthful, like we all think we're fantastic. It's a builder who doesn't. You know, there's some-.
Speaker 2:We are fantastic. You've won some awards with the home loan stuff, haven't you? I have Like quite a few.
Speaker 1:Look, I'm in a small group, so in my group I'm in the top. I've been in the top 10 in Australia for a number of years and number one in Queensland for a while as an individual broker for my.
Speaker 2:But for my group, yeah, which is awesome, mate, thank you. Gotta give yourself a pat on the back. It's good to. That's why we get people on the podcast that are best at what they do, mate, because we spread the good information.
Speaker 1:I don't know about best. How about I just say I'm okay, all right, I'm okay.
Speaker 2:Look, I don't know, can we, can we take it up a notch and talk about like because I know a lot of traders and builders think that, like, the goal is to get to their own developments and not have to deal with clients and things like? Yep you know a bit of that type of lending. Yep, and again, like I, again, I wouldn't be able to have done some of the things we've done without having someone like yourself around, just knowing some little tricks and hints.
Speaker 1:But yeah, um, look, no, look, that's a really good one. So the words owner builder, um in banks and anyone who's tried to do this will know is is pretty hard um, they set the bar incredibly high for all my owner builders, which doesn't make any sense.
Speaker 2:Dwayne can build a house when you say owner builder, like builders building their own properties people going to an owner builder no, no, builders, no, and that's right so, but the problem is the banks treat it the same way.
Speaker 1:Yeah, so, even though you've got your own license and you know you, they're happy for you to build houses for anybody else, as soon as you want to do it for yourself, they set a different bar and it's crazy, and so, again, you just need to be. If that's something that you want to work towards, then you need to. The bar will be higher, and you've experienced that when we've done some things and then you just got to get through. Through that. It's a, it's a time thing, so it's a, it's a staged. We do it under this, this bit, initially, and then we move on to something else. Um, but all of those people, if you want to do your own developments and work through it, um because there's all, there's all sorts of stuff comes in.
Speaker 2:hey, Like one of the unit developments we've done, like, depending on a box, we ticked like affected GST, GST, yeah.
Speaker 1:Which is where your accountant is really important. To have them on board how you're doing that. If you're doing a development, your accountant is actually one of the really super important. You want to again be talking to someone who seems like they know what they're. When you're asking questions, they're giving you good answers like they're not going.
Speaker 2:Well, knowing what I know now, that my best advice to anybody that's thinking about doing their own development would be talk to the broker, your accountant and your solicitor or lawyer, like before you even go and make an offer on anything Because, depending on the purchasing person, you put on the contract or all types of things it might not change when you purchase a property but it can change the profits dramatically.
Speaker 1:Dramatically. Yeah, that's right. Big numbers, yeah, and when you were talking. So the challenge a little bit is also about timing, of when, so a few years, like we are in a cycle, so property moves in cycles. So one of the challenges after we've had such a big rise like we've just had, is that everyone is still in the you know the honeymoon phase of oh, we buy property and we make money and this guy did the and all those stories that you hear like tell them to you.
Speaker 2:Hey, I know this guy's just done this. I want to do it.
Speaker 1:Yeah, that's right well, well, but we work through a cycle where that all has been good, like that works, whereas the last, like the last time we had a growth, like we've had a very high growth. So that four-year period, what came at the back of that growth was a time, a period we called GFC and developers and people like there was a lot of people like the, the rubber band stretched and right now, if you're super cashed up, I have no problems with people doing development. But if you're trying to stretch and borrow a lot to get into a development, I would be working with my clients very much to heed caution at the moment at not not to say you can't do it, but just you want to make sure there's a good margin in what you're doing.
Speaker 1:Um, is what I'd be yeah like the cycle at the moment is is one that it'd be something that you'd be planning for rather than yeah, doing, but yeah, planning is everything, isn't it like you gotta?
Speaker 2:you have to have those conversations with other people and talk to them about what your goals are.
Speaker 1:Yeah definitely.
Speaker 2:Like I said, it makes a big difference to the final profits, depending on the identity that you purchased the property in right at the beginning, and if you don't think about it before you go and purchase a property or go to an auction or Get the margin scheme sorted out for the GST on the land. So can you dive into that a little bit, Like what the margin scheme like, because that affects.
Speaker 1:No, well, you've got to go talk to your accountant for that one. But yeah, so it basically is because when you buy a residential property, there's no GST, but then when you convert it to a commercial property, there is, and so, um, once you do a development, you'll be triggering a gst component, and so you need to make sure you work with your accountant when you're buying the residential property up front to make sure that the back end is protected.
Speaker 2:And that applies to? Does that apply to only if you're making it a multi-dwelling property or even if you're just doing a flip or a renovation on a property?
Speaker 1:Yeah. So this is where it gets really confusing and I tell people go and talk to your accountant, and maybe we shouldn't do this on a podcast, but the ATO.
Speaker 2:This is all just general, no, no, no. So hopefully the general. So hopefully this gives people enough information they go and talk to their accountant yeah, definitely so.
Speaker 1:If you go and read the ato website and it talks about, it talks about if you are.
Speaker 1:There's actually examples where it says if you're a builder and um and you're doing buying a property and flipping it, then technically it would fall under those rules, that it's a development and you've got to pay GST and all these sorts of things. And everyone listening is going that can't be right. But the reality is, if you buy an investment property and it's residential and you choose to, you know if you do one, you're probably going to be okay, depending what your accountant says. Yeah, you know you just you bought an investment, you renovated it, you sold it. But if you start to do that more than once, you might find that you'll get a knock on the door if you ever get audited or something. But the example on the tax website that I I just go people to the ato website, um, because, again, I'm not licensed to give tax advice in any way, shape or form, um, and so you should just go and read that and. But the example that's there would actually say that, yes, you would open yourself up for that.
Speaker 2:Yeah, so the margin scheme is a real thing, and if you haven't ever heard of it before, go and talk to your homework.
Speaker 1:Yeah, that's right.
Speaker 2:Yeah, definitely yeah, get do some homework on it. Talk to your accountant and see, because it does, it makes a massive difference, like, especially if you're talking multiple dwellings yeah like it adds up really quick and it definitely affects the final outcome that you put in your pocket, so yeah, and I will say that is one of those areas.
Speaker 1:That's not my area of expertise, and if there is any accountants who are listening to this and say that that's not quite right, please uh listen to your accountant and not to uh jeff or duane we're putting it, we're just talking about like that's my, but it is one of those things where I would like I'm not really all over it, yeah yeah, the um.
Speaker 2:I just I just like getting information out there, mate, because I know like the only reason I've managed to get to where I am is from, like, just talking to people and asking questions and learning. And we've had some. As you know, we've had some very expensive lessons over the years and we've had to learn the hard way. And it's funny, I um someone said it to me the other day, I can't remember what it was, but they'd done something wrong, uh, on a job and it was.
Speaker 2:It was a big stuff up like it was a couple hundred thousand dollars, and they basically just said, oh, we're putting that down to education. And when you think, like, about what people pay to go to uni or whatever for two, three, four years, like a lot of tradies do have expensive lessons along the way, because the only way we have like we learn is if you ask questions of other people or you look up to, like you find mentors or whoever to look up to and learn from. But, yeah, if it wasn't having conversations with people like yourself, obviously, like you personally know our accountant, we've got a great relationship with them.
Speaker 1:You've got to get good people around you don't you yeah, to be successful definitely and look, lots of my tradies have, um, they're good.
Speaker 1:Like I could, I couldn't build a house right, so you know no one's going to come to me and ask for advice on how to build a house. But so when I do, you know I annoy you when I need to to get stuff done, um, and it's the same like no one can know everything. So you find people who are good at what they do and then you work with them to, yeah, yeah, to make that work. And, and I look, a lot of my tradies have a bit of a hole in um in their super, because if they're self-employed, they haven't. You know so. Also, at some point, you know, working with a financial planner becomes important. Or you know, um, there's another level of you know advice there as well, that that needs to, and it's maybe not for people starting out, but you know if you're in your that's definitely something I I didn't, and again, it was just who I was like as the bosses.
Speaker 2:I had doing my time and and growing up and then like even, even like my old man's a trading like they.
Speaker 2:He doesn't have super or anything like you, just so you don't really think anything of it yeah whereas now, like we take it really seriously, all all of our guys in our team all get paid super and work cover and salaries and all that, like it's all done properly. Yeah, um, and I know in our industry it's something that there's still a lot of gaps out there, like you're saying a lot of people aren't doing it, but like you have to be putting stuff away like money away.
Speaker 1:Yeah, you do and and when I cat, when I look at my um, when I'm talking to my clients who are um self-employed, one of the things I'm always looking at is looking at their super and even if it's not something that I address, like if they're in their 20s and we're starting out, then we might not address it straight away, but it's always something that I'm working with them on terms of saying, look, if we don't, we can't wait till we're old like me and get to, you know, in your 50s, and then go oh gee, I should sort out my super because it won't work. Like we need time to um to start to think through that, because over time and there are ways like you can um, you can borrow in your super, you can you know, like there's things that you can do to help bridge that gap if you haven't been putting money away yeah, I definitely wish I had got into it sooner.
Speaker 2:Like, um, as you know, like we're trying to do stuff in our super now self-managed super fund, but I wish I had ramped it up a lot sooner than I did. Like I don't know if it's like since I've turned 40, I'm like holy shit.
Speaker 1:Well, you're still young enough, Like you've still got 20 years in your you know, in your time, like so and and. Again, it's a little bit like that conversation that we had at the start, like you can't do everything, so you've just got to choose what is most important at the time. And yeah, like I don't there's and when I talk to lots of traders will talk about their investments outside of super, and I don't have any issues with building wealth outside of super, but then at some point the idea of starting to get some of that wealth into super is actually super, is um. You know, again, I'm not licensed to talk about superannuation, um, but superannuation is um is something. It has tax advantages for people um long term.
Speaker 2:So yeah, it's just about setting yourself up like we, like I see it in my um, in my old man like you, like tradies, work their ass off their whole life and then they they don't do the super and stuff correctly and that they get to the end, yeah, get.
Speaker 1:To the end and there's nothing to show for it, like all the time yeah um and and again, that's not throwing stones at people like I know there'll be a lot of people listening who, again, you know it does sort of hurt a little bit when you know someone who's worked in a nine to five job all the time and had super since they were 20, like you've worked. Just, you probably worked harder than some of those guys but the way that the pay structure was, you just didn't receive super for 20 years or 30 years. So again, just trying to work Like there's no point, ignoring it, it's trying to work with someone about it.
Speaker 2:But again it's just, we're not well Told about it yeah well and just educate enough Like we might.
Speaker 2:I think we probably get told about it, but like if you're someone like me that takes a few times they're getting things told to you to for it to sink in. Like you, you don't realize the long-term benefit of it. But the thing and I know for myself for a long time it was more about the short-term gain of keeping that money and living life with it at that point in time rather than putting it into an account that I couldn't do anything with well, super does feel like when you, when you're in your 20s, it does.
Speaker 1:You know, 40 years seems like forever. So I do get that. But but the effect like again, the effect of compounding of interest on your interest over that period of time getting the earlier you can start putting away stuff like there is no magic formula, but a little bit over a long period of time makes a massive difference yeah, mate, can we talk a little bit about, um, like, what banks are looking for if people are like they're doing, all right, they've got their own home and they are thinking about maybe buying a second property or whatever.
Speaker 1:So look, all banks look at two major things. So one is how much do you earn? And the other is how much income or equity do you have? And those are the two questions that you'll always be asked, whether you're buying your first home or your next home or the 10th home. Do you have enough income to pay it? And what are you gonna do? How do we get our money back? The bank wants to know how they get their money back if you don't make repayments. Um, but one of those two things will always form a ceiling for you.
Speaker 1:So whether it doesn't matter how much equity you have in property, if we can't prove the income, then you won't be able to do. It doesn't matter how much income you're earning. If you don't have equity or a deposit, then you won't get the money. So you've got to be able to tick both of those two major things. But then after that, there's a whole pile of other things, like how long you've been at your job and whether you're self-employed or an employee, and the property that you're purchasing. Is it like if you're trying to buy a property in like? Well, I had a client today who wanted to buy a 29 square meter property, which a studio bedroom in. He's a one like because he's a first time owner. But the banks won't lend against the 29 square meter property. It's a closet, you know's um.
Speaker 2:It's pretty small um so but but um one of the things I've tried like a long time ago, I think, I know probably 15 years ago and you said mate, like you need, like, I think it was like 60 or 70 percent. Well, that was it.
Speaker 1:Yeah, you need um 60 is what they would sometimes would do, but right now, like the banks aren't. Even so, super funds can buy them. If you've got I think this one was $240,000 or something if you've got $240,000 in your super, you're not borrowing. You can just go and buy one and rent it out.
Speaker 1:That's fine because they get good rent, crazy rent, yeah, that's right and for him as a single guy, you know like it would work fine for him to live in. But it's a bit of a problem with the banks, because I call it self-fulfilling prophecies. They go we won't lend against that. But we won't lend against it because it takes forever to sell and we can't get our money back. And well, it only takes forever to sell and we can't get our money back. And well, it only takes forever to sell and get your money back. Because you won't live against it. Yeah, if you learn against it, you know um, but it's the same.
Speaker 2:If you're trying to buy 150 acres somewhere, like you know um, there's properties that are too small and properties that are too big, you know and then, like it, it gets easier the more you get. Like, doesn't it like? If they once you get some rentals, because the rental income yeah, look, it sort of does.
Speaker 1:But when you model what's happening with the banks is they're modelling. Can you do repayments if rates were 9%, not 6%? So? And the modelling of that is even when you actually get three or four properties even my doctors and lawyers who earn lots of money the modeling becomes really hard, like your borrowing capacity at those ceiling, like at those when you multiply it out over a number of properties, becomes really hard. So it doesn't it. The getting one investment property is sort of okay, but getting two or three becomes harder. And again you just need to work with someone because the price of them is high, like if you're buying a property and yeah, and then, like when doing that, you've got to think about what your long-term goal is as well, don't you?
Speaker 2:because you can either buy something in a high growth area that's going to get a lot of capital gains very quickly, or you can buy something maybe further out in rural areas that may be a lot lower purchase price but will be long-term rented.
Speaker 1:You'll get constant income out of it, so yeah, so all, all investments have two types of return. Or most investments have two types of return, or most investments have two types of return. One is the income and the other is the growth, and with a property, it's the rental income what we call the yield and the capital growth is the value going up, and usually what you're doing is choosing between those two. So properties with high yield will often have a lower capital growth.
Speaker 1:those are the regional areas that you were talking about. Other properties that might have a higher capital growth will have a lower yield, like buying in Brisbane and the unicorn. What everyone's looking for is something that has fantastic yield and crazy good capital growth.
Speaker 1:so when you find that, you know yeah tell me where it is, yeah, that's right, um, but, but usually, and that's, and again working with someone, um, because when people are starting out, often what they have to choose is a yielding property, um, and and yeah, so that's again, again work with your broker in terms of what you can borrow.
Speaker 2:But it's good to think outside the box, isn't it?
Speaker 2:And you've taught me that as well. Like I, originally we were always looking close to Brisbane and stuff and then we've sort of spread our wings a bit and reached out. But you look at some of these regional towns and they're screaming for investment, like they generally, well, you know from some of the regional towns and like they're screaming for investment, like they generally, um, well, you know from some of the ones we have, like they've always got constant income, um, because people in town might be on welfare or they, there might be mines or there could be power stations, like, yeah, there's, there's a whole other world out there when you get outside the big city that has a lot of potential yeah, and and a lot of those choices are it's what you're able to do.
Speaker 1:So you know we all want to buy. I'd love to you know, put everyone in a 1.2 million dollar house at stafford or something you know. Go and buy that as an investment property. Right, it's going to be great, but that's often not doable, so it doesn't. I tell people look, it doesn't matter what.
Speaker 1:There's no point talking about what you can't do yeah you know, if you, if you want to do it, then we just need to again put our thinking caps on and have a look at different areas and and you're right, like um, there's actually places where you know you get great yield and potentially you have some all right growth and yeah yeah, well, and especially now, like the people are just moving further and further away, like because obviously the price is pushing people out further and and the growth is actually happening in those regional areas because because people are being pushed out of the big city, so there's actually not just yield, but there's also been some growth as well.
Speaker 2:Yeah it's insane, like when you I know a couple of my mates do big developments and you hear some of the stuff that they have going on. Uh, like roma, bloody bundaberg, um rockhampton, like it's unbelievable the money that's getting spent on these aerials and that's only because people are going there going there yep, and like knowing I think that's something that's helped us make a few decisions as well.
Speaker 2:Like not just looking at the property, like looking at what government's spending there, like are they upgrading airports, are they upgrading hospitals, are they is mining companies looking at doing stuff there, like I like it. I think it's like a um, it's like a I don't know.
Speaker 1:it's better than looking at social media properties, what I know and love and I sometimes I love it too much, you know like, but um, the fundamentals that you've talked about are always so. If you're buying property, you just want to be, you want to make sure there's infrastructure in the town so you know if there's hospitals and universities and mining is around it, you don't want to be in a little town where the only thing is mining there's no. Yeah, so, but if you're in all those places you talked about.
Speaker 1:You know Brockhampton, bundaberg, roma, like there's infrastructure there, there's. You know there's. No, yeah, so, but if you're in all those places you talked about, you know um brockhampton, bundaberg, roma, like there's infrastructure there, there's. You know there's other industries, so, um and so buying investments in those towns long term, um can give you both good yield and and and the price range allows people to get in. When they might not be able to buy an investment property at price range allows people to get in when they might not be able to buy an investment property in Brisbane?
Speaker 1:Yeah, this is all only a personal opinion as well. Yeah, yeah, that's right Reiterating.
Speaker 2:You need to do your own homework on this type of stuff. But, mate, what else do we need to share with people that want to know more about brokering and financing? Oh look again.
Speaker 1:Everyone, look, everyone's situation is different. One of the reasons I love my job it's a bit like what, but every day is different. Um, and there is definitely not a one size fits all in what I do. Um, I actually the thing I love most is sitting at a kitchen table with someone and understanding what has brought them to a certain point, because that starting point. You know, sometimes people have regrets and you know they spend a lot of time saying, oh you know, apologising almost for why they're in the situation that they're starting. But I say to people we can never go back Like that doesn't worry me at all. All we can do is look forward and the, the woulda, coulda, shoulda. With the benefit of hindsight, we'd all be geniuses, right, and million, multi-millionaires, but we, we don't have that benefit.
Speaker 2:Sitting there and, and I say, that we do have the ability to reach out to people like yourself and ask questions well and move forward like it's then this is our starting point.
Speaker 1:It's it's actually good for me to understand how people get to that starting point, but then where to go next is always just it's, you know, like understanding what's important to them. Not everything's about money. Like sometimes, you know, people's decisions are more about lifestyle or catchment areas for the kids at school, decisions are more about lifestyle or catchment areas for the kids at school, or like there's a whole pile of different things that actually, um, that you know a broker should be listening to yeah um, and not just about how to you know, like make some money for you you know it's um.
Speaker 2:We haven't talked about risk like risk there's no risk the um, like I, and you've noticed, like I'm you've got a risk profile, that's I well, I don't mind risk.
Speaker 2:I think, yes, risk is you've got to take risks to get ahead and reach goals and things. But, um, like camille has been, I think, like since I've obviously met camille and had family and done what we do, camille's completely against risk and so I've come down in my risk limit, she's come up in hers and we've really found a happy meeting which I think has made us work a hell of a lot better.
Speaker 1:Look that marriage counselling is extra thing is real. And often I'll sit at a table and people start, you know, indifferent, and again, it doesn't make one party right or wrong. And and the challenge is, with the benefit of hindsight, like someone will say we should be doing this investment, or someone will say we shouldn't, and the challenge is, someone will be right, like you know, you'll look back and go lucky, we didn't do that or wish we should have. And and you just have to be gentle with each other because you, because that whole, we don't have a crystal ball, um, and and I tell people, like you know, I, um, I very in the like, I have a personal risk profile that's lower than my wife's. She's the other side of the risk, oh it's carrying the risk tugger.
Speaker 1:Yeah, definitely, I thought it was you. No, no, she's far more willing to do things. She's ready to do things quicker than I am All right.
Speaker 2:I think it's really good having a balance, yeah me too, being able to take each and often our partners are actually really.
Speaker 1:They've got these antennas.
Speaker 2:It's like listen to your partners, alright have you got anything else you'd like to talk about?
Speaker 1:mate, I could pour you to tears any day of the week thank you mate.
Speaker 2:I really appreciate you coming on, mate, and sharing some stories, but I think the big takeaways are for people out there that are maybe sitting on the fence and just unsure what to do. Don't be afraid to ask questions. Talk to your find a broker. Talk to your accountant, talk to your lawyer. Create that team, get everyone talking to each other. Talk to your lawyer, like, create that team, get it, get everyone talking to each other, cause, like, even just talking to you, you put us onto a really good what's Carl?
Speaker 1:Oh, financial planner yeah.
Speaker 2:Financial planner Like. So. Everyone's all working towards our best interests, like to get the best outcome, so it's bloody fantastic.
Speaker 1:Hopefully. No thanks, mate. And look again, it is it's just, and again, uh, no thanks, mate. And look again, it is it's just and again. Everyone's situation's different, so what's right for you might not be like everyone's gonna, but having someone who's able to work through that with you, your personal circumstances, is what you're looking for so build your team and and set some goals. Pick someone's brain, pick their brain Like just ask lots of questions and think a little bit long term.
Speaker 2:Don't just think about the next 12 months. Good man, now look. So how can people reach out to you, mate, if they need a loan?
Speaker 1:Oh, they'll ring you. Zero double four, eight.
Speaker 2:No phone double four, eight no phone numbers, just home loans, mate easy home loans.
Speaker 1:Mate. I don't have a webpage, can't?
Speaker 2:find me, you're the busiest broker in the world. Seriously, that's because you do good work yeah, I know you can't find me.
Speaker 1:No, look, if you just well send us, you can reach out through the podcast and we can pass on Jeff's details.
Speaker 2:I don't want your phone ringing our hundreds of thousands of listeners. What, mate? Look, really appreciate your time. Thanks for coming on. If you do want to reach out to Jeff, then look. Yeah, shoot me a message or reach out to the podcast and we'll put you in touch with Jeff. He's the best in the business. But, as always, look, if you like this podcast and you like what we talk about like share, comment, all those types of things and we look forward to seeing you on the next one, are you ready to build?
Speaker 1:smarter, live better and enjoy life. Then head over to livelikebuildcom forward, slash, elevate to get started.
Speaker 2:Everything discussed during the Level Up podcast with me, dwayne Pearce, is based solely on my own personal experiences and those experiences of my guests. The information, opinions and recommendations presented in this podcast are for general information only, and any reliance on the information provided in this podcast is done at your own risk. We recommend that you obtain your own professional advice in respect to the topics discussed during this podcast.