Property Hub - Investment Insights & Inspiration - Get Invested: Godfrey Dinh on investing in Futurerent

Starting point is 00:00:00 One of the things that frustrated me as a young property investor you know being able to access the capital that I needed to grow my wealth was really really difficult um and similarly in a sort of parallel world working at the bigger end of town I saw how a lot of the commercial landlords do it and um you can't do this in the residential world but in the commercial world um a lot of landlords get paid their rent in advance sometimes quarterly Six-monthly, if you look at a specialised asset like a service station that has a lot of capex, often it's actually annually in advance. But residential investors just don't have that possibility. So that was, I think, the genesis, really, for FutureRent.

Starting point is 00:00:49 Welcome to the Get Invested podcast, where we share great conversations with experts from all walks of life to uncover their secret know-how and where they invest their time, their skills, and their money and the benefits that this has created. You see, the truth is that everyone invests. Every minute of every day, we're investing our time, our skills, our energy, and our money in something. Some of us are investing consciously, some unconsciously,

Starting point is 00:01:15 sometimes for good, sometimes for bad, and sometimes for no impact. Get Invested will help you to start living by design, not by default i'm going to help you to make it happen not let it happen you'll hear the top tips on how you can live with conscious intent so that you can live more work less and leave a living legacy by investing now listen to the show to discover the top tips on how to get started make the most of your investment journey and ultimately to be living your dream not someone houses. More episodes can be found on iTunes or at bushymartin.com.au forward slash getinvested.

Starting point is 00:01:54 Thanks for listening. And now, let's get invested. Hi, Freedom Fighters. What's your biggest frustration as a property investor? For many, it's the limit of their property purchasing capacity. They want to invest more and grow their portfolios quickly. But after a couple of properties, they're capped out because they either don't have the borrowing capacity or they run out of equity. And both are equally important to enable you to secure more property. For me, it all comes down to what I like to call the bear facts, where bear, as in B-E-A-R, breaks down into borrowings, equity, affordability and your sleep at night risk appetite. And the first two, the B&E or

Starting point is 00:02:47 borrowings and equity, determine your property purchase power. And the lowest of your borrowings or your equity drives how much you can pay for a property. What do I mean by this? Well, very simply, you might be able to borrow an extra million dollars based on your income liabilities, which is where many first-time investors start as they jump on an online borrowing calculator on a bank or other website and think they can borrow or buy a property for a million dollars. But they're sadly mistaken because your purchase price power is also determined by how much you need to contribute in equity. Now, equity is just a fancy word for the amount of savings and or available equity you have in your existing property or properties

Starting point is 00:03:32 to cover the shortfall on the loan against the property plus the establishment on costs that include things like stamp duty, bank and professional fees, conveyancing costs, adjustments to rates and taxes etc. Now in property terms equity is the difference between what the bank thinks your property is currently worth and sidebar here it's generally 10 to 15% below what you can actually sell it for minus how much you currently owe on it. Remembering that lending accessible equity is generally 90% of this value, less the balance of your current loan. So as an example, if your property is valued by the bank at about $500,000 and your current loan balance is $350,000, then your available equity is $500,000 times 90%, which

Starting point is 00:04:21 equates to about $450,000 minus the $350,000 loan. So your available equity would be $100,000. Now in broad terms this means that if you get an investment loan for 90% of the value of the investment property including lender's mortgage insurance which actually means you're effectively borrowing approximately 87 to 88% of the purchase price then you need to have sufficient equity to cover the shortfall gap of 12 to 13% plus approximately 6 to 10% for all of the establishment on costs. Now the 6% is the bare minimum, but if you are also engaging independent property strategists, buyers, agents, building inspectors, etc, then you need to budget for approximately 10% on costs. So as an example, on a property purchase price of $500,000, you need to come

Starting point is 00:05:13 up with a deposit from your savings or accessible available equity in your existing properties via interest-only investment loans against them to cover the $65,000 in loan shortfall plus the $30,000 to $50,000 for the on-cost. This means that on a worst-case basis, you need to have available equity of $110,000 to secure a $500,000 property. Now, these are worst-case numbers

Starting point is 00:05:43 and an investment-savvy mortgage broker like our know-how property finance architects are able to access special lenders and lending solutions and they're often able to come up with creative ways to reduce your equity contribution to help you secure a property. But even on a best case basis, you still need to be able to access a deposit of somewhere between $65,000 to $75,000 to secure a $500,000 property. And here lies the looming problem for most investors because after roughly two to three properties they hit the capacity ceiling because they either run out of borrowing capacity or they run out of equity or a mixture of both. So it's clear that

Starting point is 00:06:28 your achievable borrowing capacity as well as your access to equity can have a massive impact on your ability to continue to secure residential investment property in order to grow your portfolio. Now we'll put your borrowing capacity aside for today as I'll dive into how you can improve your borrowing capacity in a future episode. Except to say that your biggest asset when you're getting a loan for an investment property is your borrowing capacity, not the interest rate of the loan, which is unfortunately what most investors, brokers and banks tend to focus on. Now while we're on the subject of borrowing capacity, you may be surprised to that there's a 55% variation across the lenders in terms of how much you can borrow based on

Starting point is 00:07:11 exactly the same income and liabilities profile. To illustrate this, this is the difference between being able to secure a property for $500,000 and securing a property of $775,000. And if they both enjoy capital growth at the same average rate of say 7% over the next 20 years, then the difference between maximising your borrowing capacity versus chasing the cheapest rate will have put on an extra $790,000 in your back pocket. All by just maximising your borrowing capacity instead of focusing on the lowest rate loan. So again, make sure you're working with an investment savvy mortgage broker who has access to specialist lenders that can significantly boost your borrowing capacity. But I digress. Let's get back on the topic of equity, given its similar impact on

Starting point is 00:08:07 your ability to secure additional properties. If you're an existing investor who has already tapped out on your savings and you've used up all of your accessible equity in your existing investment properties and or your home by taking out investment loans against them of up to 90% loan to valuation ratio, including the lender's mortgage insurance costs, how can you access sufficient additional funds for the deposit on your next property? What are your options? Well, unfortunately, they're limited. You can start saving furiously by living on a budget of baked beans and dog food to put away an extra $75,000 to $110,000, but this is likely to take years unless you're getting large, lumpy and consistent bonuses. You can wait for your

Starting point is 00:08:55 existing properties to go up in value sufficiently to create the equity deposit, which may have been the case over the last 12 months due to the 20-30% rise in property values, but this is the exception rather than the rule, and it generally takes 5 years plus to see this level of property value and equity increase. You can roll the dice and investigate the time and headache of refinancing with the possibility that another lender's valuation will come in higher and give you enough equity for your next deposit. You can get a contribution from the bank of mum and dad who may be able to access equity in their property to give you the deposit or you may be able to get a good friend or colleague to do the same but both of these come

Starting point is 00:09:36 with inherent risks for you and them and they need to be very carefully documented. You can also sell an existing property to avail funds for your next purchase, but this is costly and a taxing changeover and doesn't allow capital growth accumulation to build your wealth easily and affordably. Or you can try to take out a personal loan, but this is expensive and really chews into your borrowing capacity. So if you're taking this option, you're often robbing Peter to pay Paul Lean with this approach. So where do you turn in order to get your hands on the required deposit funds. Apart from the options I've just mentioned, there really aren't any other cost-effective alternatives, or at least there hasn't been until now. And this is where today's

Starting point is 00:10:26 special guest Godfrey Dinh and his disruptive industry innovation of future rent comes to your rescue. Godfrey is an experienced property investor on a mission to revolutionise residential rent. He's over 15 years experience in property investment and finance both professionally and personally for organisations such as Deutsche Bank and Investec, as well as buying and selling his own investment properties in Australia and the US, which led him to create FutureRent, as you'll hear in our great chat today. So what is FutureRent? Without stealing Godfrey's thunder during our great reveal in today's awesome conversation, FutureRent gives you, as a property investor,

Starting point is 00:11:09 your rent in advance, giving you access to up to $100,000 for each rental property you own, fast and simply, to help purchase another property, or you can access up to one year's rent in advance if you're looking to renovate your home or the investment property,

Starting point is 00:11:27 invest in a business, or buy some shares, as some examples. create specifically for property investors like you and me future rent is a loan-free financing solution with no interest no hidden fees and no credit impact and you can access these monies in just two business days now godfrey and his team have cut out all the typical drawbacks of traditional finance as they simply provide investors with access to their rent in advance, rather than have to jump through all of the hoops while being a contortionist to lend money from a bank. And the good news is that you still receive ongoing rental income

Starting point is 00:12:05 throughout the term, and you have the ability to pause instalments if your tenant vacates and stops paying rent. So if you're a property investor who's looking for quick and easy access to equity funds to secure your next property or for other worthwhile purposes, check out www.futurerent.com.au. And if you're fired up about taking your property investment to the next level, no matter where you're at, whether you're a beginner or a seasoned investor that's struggling with your portfolio, I'd like to invite you to join me on our unique know-how property freedom formula flight program, where I'll personally guide you through my proven process for property investment success. And or we can complete a review of your current portfolio

Starting point is 00:12:53 to see how you can improve it, how you can reduce your costs, reduce your risks and how you can increase your property purchasing capacity. To book your ticket or to find out more, just jump on knowhowproperty.com.au forward slash Freedom Fighters. And if you want to hear more from Godfrey along with all of Australia's leading property investors and independent professionals, join me and the other 120,000 plus regular listeners every week as I anchor host the country's most popular and longest running property show, Realty Talk. So I look forward to seeing you on channels.realty.com.au

Starting point is 00:13:33 forward slash Realty Talk, where we share short and sharp take-home tips and tricks on all things property. In the meantime, enjoy this ear-opening conversation with Godfrey Dinh. Hi, Freedom Fighters. Now, traditionally, one of the biggest challenges that you face as a property investor is the inability to grow your portfolio quickly due to the difficulty in accessing equity easily, fast, and affordably. So for anyone who invests in property, you know that it's expensive and often your equity is tied up, which makes it hard, time-consuming, and often stressful for you to make your next investment unless you refinance or sell existing properties. But as an active property investor, you're likely to be ambitious with goals of buying

Starting point is 00:14:22 more property or renovating existing properties ASAP. So how do you overcome this significant financing hurdle? Well, what if there's a better funding option than refinancing to achieve this that avoids the endless and expensive paperwork, the extensive delay times, the expensive costs and fees, as well as the impact on your credit report? Well, that's exactly where today's special guest, Godfrey Dinh, the CEO of industry innovator and disruptor Future Rent comes in with this exciting new funding innovation that we're going to reveal and unpack today.

Starting point is 00:14:57 So welcome and let's get invested, Godfrey. Thanks so much, Bushy. Mate, I've been looking forward to having this chat since you and I first connected on Realty Talk recently and I sort of want to do a really big deep dive on the exciting innovation you bring to the table. But before we get stuck into that, I'd sort of love for you to just give us a quick intro on who you are, what you do, and most importantly, why you do what you do, please, mate. Yeah, so I'm the founder and CEO of FutureRent. And that's, in short, basically a loan-free alternative for property investors to get up to $100,000 of their rent in advance.

Starting point is 00:15:40 You know, I do what I do because property investing is really, I think, the number one way that everyday Australians secure financial independence. But generally, property investors have been deprioritised by the banks and access to finance is generally their biggest issue. Accessing 50,000 is as difficult as getting 500,000. so we really wanted to provide a better funding solution to help property investors grow their wealth love it love it and we're going to have some fun really diving into the details of that shortly but before we do that mate i'd love for you to take us on your personal journey so far and go back as far as you'd like and talk to us about where you've invested your own time energy and money where has it led to you what have been the highs and lows what have been the learnings

Starting point is 00:16:32 and how has that brought you to what you're now doing? Yeah, so to go back to where it started, I actually studied property economics at UTS and I started working for Investec and then later Deutsche Bank in their property investment and structured finance areas. And I was a super eager young property investor. So, you know, the minute,

Starting point is 00:17:01 And I was still at university when I started working. I was on one of those sort of grad program, undergraduate program things and, you know, managed to save up a little bit of money and bought my first investment property, which was a house on a decent sized block of land in Irmington. This would have been 2006. And the land was big enough to subdivide. So I always thought, you know, great. I could, you know, when I have the money, I could subdivide this property. But even though I was in a decent job, albeit a young guy, on a decent income, I never managed to save up the money to do the subdivision work. So I ended up just prioritizing different things.

Starting point is 00:17:47 And as a result, I never did that subdivision. I ended up, you know, I held on to the property for a number of years. I sold it, made a little bit of money, but the next buyer came along, subdivided the block and, you know, made a decent amount of money. And, you know, that was really sort of one of the things that frustrated me as a young property investor, you know, being able to access the capital that I needed to grow my wealth was really, really difficult. And in a sort of parallel world, working at the bigger end of town,

Starting point is 00:18:22 I saw how a lot of the commercial landlords do it and you can't do this in the residential world but in the commercial world a lot of landlords get paid their rent in advance sometimes quarterly six monthly if you look at a specialized service specialized asset like a service station that has a lot of capex often it's actually annually in advance but residential investors just don't have that possibility um so that was i think the uh the genesis really for future rent yeah got it perfect well i'd like to sort of circle back and and dig in a little bit deeper to some of that if you don't mind before we sort of get stuck into the nuts and bolts of future rent uh and the first question i'd like to sort of better understand is why property i mean where did that initial

Starting point is 00:19:12 interest in property emerge and before you even made the decision to do property economics? Yeah, for me, what attracted me to property was, well, first thing, I like the fact that I can look, see and understand it. But secondly, what really drove me towards it was your ability to really influence your outcome so much more than if you were just investing and buying shares in the share market and you're just one of thousands of investors with with no influence or control and no visibility um i think you know to do really well in any sort of investment there needs to be a little bit of um uh sort of i guess an edge you need to really have an edge um and getting an edge

Starting point is 00:20:05 in, for instance, like the equities markets or something like that is really, really difficult. Whereas property is something which, because the information is a little bit more opaque and the markets, you know, I guess no two properties are the same. It's a very, you know, heterogeneous sort of market. Your ability to do well and your ability to control your own destiny is so much greater.

Starting point is 00:20:32 um so yeah i think that was like a big influence for me and um i um yeah it was was introduced to a couple of people who had sort of done the course and um it sounded like sort of a really interesting career path and and a and a um in an area where you know you could actually achieve financial independence off your own back. That's a fairly mature insight for someone at a fairly young age, mate. What sort of a pond were you swimming in to be able to sort of come up with that sort of revelation? Because a lot of people don't get to that point until they're sort

Starting point is 00:21:14 of a lot older. Was your family heavily involved in property? What was the sort of environment that led you to get to that point so quickly? well i think um you know my i sort of um i grew up in probably a very um very sort of standard australian family um in um the northwestern suburbs of sydney um so um my uh my dad actually moved to australia from vietnam in the 70s um just before the fall of saigon um and my grandfather he was actually a um a self-made sort of architect builder and developer in vietnam who was actually

Starting point is 00:21:58 very involved in the revolution um when vietnam was initially fighting for independence from the french um and um as a result of the the war his family actually lost everything so they went from being one of the you know wealthiest families in saigon to actually one of the poorest um um and um i think that influenced and sort of influenced my relationship with with money in a way where it made me realize that money can really come and go um but you're your biggest asset um and it's all about what you can do um and you know very much so about you and your journey as a person so um so i think that that influenced me to a degree where i sort of saw property as something where you could really um sort of carve out your own destiny and your own journey um but

Starting point is 00:22:55 you know other than that like my parents i think they bought a couple of investment properties when we were growing up and and that for them was probably a you know i think really materially in terms of being able to um provide for their retirement um but you know they weren't big property investors in any way um so it was probably more just like a kind of awareness of the family history that sort of made me think this way yeah love it love it mate i've been very fortunate in a way i mean and it's you know i'm not belittling at all the the obvious challenge that your grandfather went through uh in must have been very testing time for the family in saigon but uh some some really important learnings that have come out of that that have

Starting point is 00:23:40 clearly influenced you and your direction at a relatively young vintage. So you did some work with Investec. I also understand you then joined Deutsche Bank and rose to some pretty serious heights fairly quickly with some significant monies under management. So talk to us a little bit about that experience. Yes. So I mean, I sort of worked my way up. I started at the very, very bottom, and when I left, I was vice president of Deutsche Bank's commercial real estate business here in Australia.

Starting point is 00:24:18 So I, you know, over my time, invested about $1.3 billion for the bank into property deals between Investec and Deutsche. And, you know, we did some really interesting things. So there was a lot of actually sort of opportunity around 2010 to 2014, where some of the banks were exiting, some of the European banks post-financial crisis were exiting the Australian market and selling their positions and a lot of bad loans and situations that we could basically take over. and sort of fix a lot of these broken assets. So it was a great learning opportunity, and I think it allowed me to, at scale, get a lot of experience with property deals that I would never be able to, you know, in a million years,

Starting point is 00:25:18 have the amount of capital myself to do those sorts of transactions and deals and get that kind of experience at scale. So I think that was a brilliant way to sort of start a career and go really, really deep and get a lot of specialised knowledge, which, yeah, was a fantastic start. Yeah, I love it. Well, let's look at the parallels with that because you sort of mentioned your first property investment was a house in Irvington that you just physically and financially weren't able to subdivide given the limitations of what Resi Electra do.

Starting point is 00:25:57 Take us further on your own journey because I imagine if you're playing with big numbers and big projects in that commercial arena with Deutsche Bank, for an early-time investor, they'd be like, okay, well, this is going to be pretty easy for me given the comparison between the two and the scale of what you were dealing with. But often not the case when it comes to the cut and thrust of residential. So take us further on your own investment, personal investment journey in terms of what

Starting point is 00:26:29 you invested in, why, and what were the highs and lows and the outcomes? yeah so probably the the biggest change for me came about when i left the corporate world so um and that really happened by chance um in some ways because i was actually initially planning on moving overseas to um to work in private equity over in the uk um and i had a couple of months off because my sister was getting married um so i was in the u.s visiting some friends and started looking around at property i just couldn't switch off and started to think wow there's there's actually like some decent yields and some good buying opportunities in the u.s so this was 2014 so 2014 i actually thought that the market in australia was overheated and i was you know

Starting point is 00:27:25 obviously wrong there was a lot more gas in the tank and the australian market went on and on and on um but um so i um actually sold i sort of sold everything i sold my house um and um sold my car sold everything everything in storage and um and i was yeah in the u.s and started then thinking oh wow hang on a sec this actually looks quite reasonable so um i bought a multi-family property in boston um so uh right near the universe it's a big university town there so right near northeastern university and um so basically that's just like a block of units with a couple of units in it um which you rent out to university students and yeah the yield the yield's good so the yield was better than what you could get in australia we're getting about a seven percent

Starting point is 00:28:23 gross yield um but the thing that you know i didn't really appreciate was obviously access to finance is just the biggest thing and this is probably the mistakes that i made so um over there you can't qualify for you know the same loans as everyone else um but i was able to qualify under like a commercial style loan because we were essentially buying more of a commercial style property but that means lower leverage right so we've got about 60 percent leverage um we're paying a touch under five percent um and we'll grow you know grossing about seven um so you know we're making a bit of a yield on the equity but not great um so yeah it was one of those things which i think as a result of for instance even the leverage meant that i did way less than what i

Starting point is 00:29:18 would have been able to do if I'd just taken that money and invested it in Australia right and um and as well um it meant that recycling that capital was a whole lot harder because the you know asset was in the US and if I wanted to do anything else in Australia you can't really do the same things that you would do if you had that equity here in Australia um so I think in some ways um in some ways it was it was amazing because it sort of put me on a path which was more of an entrepreneurial path um where i went on and set up you know my own um or with a couple of other guys like a commercial property investment and advisory business um and you know and that was terrific but in other ways um that that investment itself came with a big

Starting point is 00:30:11 opportunity cost yeah um so you know the business we had here we'd do our own small deals but with a reasonably limited amount of capital and then would help other developers and commercial investors with bigger deals so we were constantly trading properties right we're constantly trying to find something um find something that needs a bit of fixing needs a bit of love and you can improve the rents or improve the values in some way and sell, right? You'd make money, but the problem with that is that after taxes, the profits, they're really not much better than a salary. So you're actually just constantly on the hunt for the next deal.

Starting point is 00:30:58 So I should have been more focused, I think, on how we could buy, fix, and keep the real estate. Right. And that was one of the other factors that made me realize like that inability to access capital is such a limiting factor and the power of being able to access your rents in advance, which is now, of course, what we do for investors around the country. Yeah. Yeah. You still hold the US properties? no no we we sold and look you know we made a little bit of money but um not a fraction of what we would have made if we had invested that money in australia you just look at what the market's done locally here um over the same period of time it's it's just been been unbelievable yeah i reasonably asked that on properties in the u.s myself and it's been a very interesting ride

Starting point is 00:31:53 But God forbid to say the least, I went a little bit earlier than you when the GFC hit. I just thought this was a once-in-a-lifetime opportunity given how low property values were in the US at the time. So we jumped on a plane and spent three months over there really getting a feel for the market. And while it's been okay, it's been very challenging given the time differences, but more importantly, the lack of professionalism that we experienced in the industry players over there compared to what we were used to here in Australia. We are head and shoulders above the rest in my own experience

Starting point is 00:32:30 as far as that goes. I'm not sure how that went for you. Yeah, I think that's right. I think there's a lot of things we think that the US is, and in many ways it is, very, very advanced, but in many ways it's also poured in another century. Like, you know, tenants still pay their rent. I don't know if you're still getting cheques, but you're getting cheques, right?

Starting point is 00:32:52 And, yeah, I think that there's a lot that in property comes down to really knowing your own backyard and having those local connections and having that local knowledge, which is just really difficult to do well if you're only there for three months or if you're only there, you know, part-time. Yeah, yeah, no, it's a good read. So tell us about your ongoing personal journey then. So you're certainly, from a business perspective, doing some active work in the sort of flipping exercise essentially,

Starting point is 00:33:32 which you clearly learnt reasonably quickly has got hairs on it when you look at the amount of risk for the sort of reward that you're returning. Did that change your both business and personal investment strategy to more a hold type approach? Tell us about where that led you from there personally. Yeah, I think for me that really led me to realise the problem that I was facing. And that was really the genesis for Future Rent in terms of thinking, well, what should people be really doing? I mean, I think it's really about buying, fixing and keeping assets, right? Because when you keep the assets,

Starting point is 00:34:21 you're able to get that capital growth over the long term. And, you know, it's really just even inflationary pressure that with leverage generates you the real, you know, real returns in property. Yeah, totally. Exactly right. It certainly takes a lot of the pressure out of it and allows you a fair bit more time to put into other activities. So talk to us about then that next step, both from the personal and professional side of the equation, that directly led into future rent.

Starting point is 00:35:00 Is that what I'm hearing? Yeah. So I sort of started thinking about all of these things in my own frustration with the property investor and my own inability to pull the capital out of the deals without selling them and incurring a huge amount of tax and incurring a huge amount of friction costs in the whole process. and um and it made me think wow there's actually no one out there that's supporting property investors and giving property investors something that's built for them and a solution that gives them easy access to the money that they need so they can grow their wealth um and um so it was a combination of all of those experiences and my um my experience you know personally and professionally that led me to come up with the idea for Future Rent.

Starting point is 00:35:49 Yeah, I love the whole concept. So let's do a deep dive onto that now, Gopri, because it's certainly an exciting innovation that is really going to open the ears of the listeners. So in really simple terms, just to break it down, what is Future Rent? So, yeah, Future Rent is a loan-free alternative to the banks. So it gives property investors $100,000 of their rent

Starting point is 00:36:14 paid up front and we're just giving people easy access to the money they need so they can grow their wealth yeah i love it it's uh it's in in elemental terms it's it's such a simple concept it's one of those you think well why hasn't someone done this before and and that's often often the case so where you've been smart enough to leap into that space so if we sort of just stating the bleeding obvious what's the real problem that future rent solves so it's all about access to finance access to finance is the biggest issue for property investors and really there's three problems with it it's complex it's painful and it's not fit for purpose so generally the banks have made borrowing money harder and harder so they've been laying

Starting point is 00:37:04 contingency on contingency and a lot of these are inappropriate in the short term so for instance Even recently, there was the increase from the 2.5% buffer to 3% buffer, which isn't actually about responsible lending. It's actually about artificially trying to restrict prices, right? But it comes at a cost, and that cost is people's ability to borrow money that they can actually afford. um so you know the banks have really made borrowing money a terrible experience with the paperwork the wait times the impact on your credit but property investors just haven't really had a choice um when you you know you're in a position like i was um your only option generally is to refinance or take out a personal loan or otherwise sell to get access to the capital you

Starting point is 00:38:01 need and often those things are just painful or impractical yeah i agree i've often jokingly said godfrey yeah that and i think this is a quote by the the u.s comedian bob hope many years ago and that is that the banks are only prepared to give you money if you can prove to them that you don't need it exactly it's it's a crazy it's a crazy setup i think and and you're absolutely right The layer upon layer of policy restriction that has now been brought into play by, forced by APRA and ASIC and every other regulatory body has made it very challenging. And unfortunately, property investors have been demonised in that whole process, quite unfairly, I think, as being the cause of the blowouts in property values across the country. If we look at what's happened in the last couple of years with COVID, it's been an owner-occupied-led gross cycle, but unfortunately, investors tend to cop the nasty in. Maybe it's just favourable because, you know, from a voting perspective, politically, it's easier to kick an investor than it is to have a go at vote-getting owner-occupiers.

Starting point is 00:39:17 but certainly the whole industry is lacking an opportunity like Future Rent to really open up the gambit so that investors can continue to grow their portfolio without going grey trying to manoeuvre through the minefield of the lending environment. So that's... Yeah, it's purely political. and it actually bears no impact on the actual reality of it all. It's a supply issue, right? If the government wants to control prices or rate in prices,

Starting point is 00:39:57 they need to address supply. And, you know, it amazes me that they haven't done anything, you know, more significant yet in this regard. There was a white paper a few years ago on medium density development which basically proposed look as long as you comply with certain basic standards then you don't need to go through a whole da process you can submit under a complying development for decent medium density development which you know really is just updating a lot of the stocks where which is no longer

Starting point is 00:40:37 relevant where someone doesn't need to have a house with a thousand square meter block of land you know that ideally should be a couple of townhomes or you know something more appropriate for you know a growing population um but the whole issue has become politicized and um and the terrible the ridiculous thing is is that you know the um property investors themselves don't fit that stereotype that the media really tries to portray right um 90 percent property investors and certainly all the people we speak to are regular hard-working australians who are simply trying to plan for their retirement um and um and and and and and you know their financial future 100 agree and what astounds me is that given that uh anyone with that that's been in

Starting point is 00:41:30 the game for five minutes knows that relying on paying off the home and sticking money into super is going to destine a lot of hard-working Aussies to penny-pinching poverty when they get to retirement. You would think that they'd be getting right behind property investors because their ability to self-fund their future is going to take a lot of pressure off the public purse in having to fund that long-term. So it always confuses me. But this is where the short-termism of politics gets in the road of long-term decisions.

Starting point is 00:42:04 But I digress a little bit there, Godfrey. But, mate, let's drill back into future rent then and get you to break us down exactly how it works. Yeah, so I guess we give property investors up to $100,000, right? But our most popular product is someone gets a year's worth of rent up front. And that's paid back over three years from a third of the rental income. So that way the landlord still gets two-thirds of the rent, less out costs, which is 6% of the rent. So they're still getting over 60% of the rental income. So the basic process is someone applies online in probably two, three minutes.

Starting point is 00:42:51 It's really basic info. And we basically get everything else that we need from the property manager. And we can do that because you're not borrowing money when you deal with future rents. So as a result, we're not assessing you as an individual. So like a lot of people think that it depends on how long he's left on the lease. It actually doesn't matter. Even if he's vacant or month to month, you can still get a full year's worth of rent up front for any reason. And then if the reason is actually to help you find a property, you can actually access two years rent up front.

Starting point is 00:43:32 So that can be really significant and powerful in terms of giving people that access to capital. Yeah, love it, love it. That's certainly going to go a long way towards a deposit that they can't access with equity that's locked up in the other properties if they just can't jump the finance hurdles to get their hands on. So are there any, what other, and you mentioned a very important point there, I think,

Starting point is 00:43:58 that clearly, from your own risk management perspective, there needs to be a professional property manager involved to give you confidence around both the rental and the management of the property. Are there any other key criteria there that need to be met to satisfy your requirements? So really, all we need is, yeah, a professional property manager to be in place.

Starting point is 00:44:22 We do do a credit check, but we do it as a soft check, which doesn't leave any footprint on the file. And there we're really just checking that, you know, the people we're dealing with are currently sort of meeting their repayments and they're not in any financial difficulty. But otherwise, it's a really seamless process. Almost sounds too good to be true.

Starting point is 00:44:45 So, I know the listeners will be going, wow, the idea of upfront rental payment seems absolutely fantastic. What's the catch? What's your response to that? yeah i mean it's just one fixed cost so uh which is basically just six percent um of the uh amount advanced each year so um so that's all it is and it's it's terrible that there's actually that kind of response i think sometimes with with people and and and that's because people have become almost accustomed in financial services to expect a catch right because there's all of these fees

Starting point is 00:45:20 and all of these different charges and all of these crazy terms and conditions, and we've tried to design something that's completely the opposite of that, where we're giving people simply simple access to the money they need in the form of rent that they can use for whatever they want, right? So it's, yeah, I think if anything, there's probably, when you think about the alternatives, which are really refinancing, is the biggest alternative of topping up your loan or refinancing,

Starting point is 00:45:51 it's actually there that most of the catches lie, where, you know, most people don't realise this, but if you're doing a top-up, you're probably going to pay about $2,000 just in costs to set the thing up, right? This is in terms of valuation costs, application fees, all of the hidden charges that are buried in the fine print. And then, you know, the actual cost of that money,

Starting point is 00:46:21 even if you think you're getting like a great headline rate, you're like, oh, look, I'm borrowing at 3%. That 3% is so much cheaper. Most people, they just say they need an extra 25 grand. They top up their mortgage with that amount, and that ends up costing them over $15,000 in interest over the life of their loan. because that interest just keeps eating and eating away.

Starting point is 00:46:48 So, yeah, I think it's this unfortunate reality where people sort of expect the catch, but something that we've really intentionally designed away from. Yeah, I love it because, I mean, you know, looking at the breaking side of our own business, in the current day and age, and it didn't used to be this, but, you know, given the changes since and before the Royal Commission, uh just to get a 25 grand top out you've now got to go through a full application process

Starting point is 00:47:19 uh so there's as you say there's money there there's time there but there's stress and complexity around the exercise because you're reassessing you're revaluing which which has a number of risks that attach to it and quite often where investors are looking to access equity they're crossing the border into lenders mortgage insurance territory which then adds a further complexity around the approval process but also another significant cost that then gets amortised into the loan and that $15,000 that you spoke about over the length of the loan is substantially increased

Starting point is 00:47:55 because of the lender's mortgage insurance impact on all of that. So certainly what you're offering is just such a clear road to accessing funds quickly, simply, without the stress. Absolutely love it. Now, you're sort of emphasising the fact that you're really building future rent for property investors above and beyond what we've already spoken about. What does this actually mean? Yeah, so I guess it means that we've got a lot of things that are built in that are designed specifically with property investors and their needs in mind. so for example if your tenant moves out midway through the tenancy if you were borrowing the

Starting point is 00:48:42 money you'd still need to make the payments but with future rent the repayments actually pause right so we're we're giving you rent up front and we're repaid from that rent as and when it comes back in right so you know that's a big one and then you're actually you know you're not borrowing money. You're just accessing your rent up front. And that means to put people through any of the usual rigmarole. Yeah, I love it, mate. It's just the simplicity of it is supreme. Now, you say that future rent is interest-free. So apart from that 6% cost, how else do the repayments need to work? Well, the thing about that 6% cost is we actually do that to effectively fix the cost. So say, for instance you um decide that you want uh you know say 100 grand and um you know you've got a

Starting point is 00:49:40 nice investment property that's rented for two thousand dollars a week um so you want 100 grand and you want to pay it back in 18 months then what we'll say is we say okay well the cost of that hundred grand over 18 months is nine thousand dollars in rent right and if that then takes you know 24 months to pay back because there's some vacancy or there are some issues it doesn't cost you any more than nine thousand right so it's not interest that can compound and snowball and where you don't have any visibility into you know what the ultimate cost will be It comes at just basically a fixed cost and there's no interest and no other fees, no late fees, none of those things that you'd ordinarily see. Absolutely love it.

Starting point is 00:50:30 So what are the main use cases for future rent with the clients that are currently using their upfront rent money? Yeah, it's really about in the main wealth creation, right? So, that's in the categories of like renovations, both people, you know, renovating their own homes and their investment properties, and then people buying additional properties. And that's, again, both investors and then owner-occupiers as well. So, people who are, for instance, rent investors who are then looking to use the capital to buy, you know, their first home. even the banker mum and dad we're seeing a lot of you know parents who have an investment property who want to help their child with the deposit and you know this is a really simple clean way to do it um so you know then there are also things like for instance people investing in

Starting point is 00:51:27 small business small business lending is really expensive and really really difficult whereas this seems to be a great option for people and then other things like investing the share market again a better option than you know a margin loan or something like that um so like to give you like some examples like some of the returns that people are getting using future rent really cleverly are phenomenal so we um have a client for instance darren who has an investment property up in darwin and um he spent 25 000 on a simple pretty cosmetic renovation and he managed to increase the rent from 500 to 800 a week um yeah so that's an extra 15 000 a year right um so and that's every year you know 60 plus percent return on investment

Starting point is 00:52:18 um most common like obviously that's big most commonly we see people maybe spending 20 000 on a reno and getting an extra 100 to 200 bucks a week um but you know that's 20 to 50 percent a year right massive yeah yeah which is huge plus obviously it often then leads to high evaluation which helps what you can do with the bank um and helps your refinancing strategy and all the rest of it totally totally so just allow me to ask this probably a dumb question or might appear to be a dumb question so what i'm hearing is that there's pretty much no limits on providing they satisfy their criteria there are no limits on what they spend the money on or am i misreading that no that's right so if you're getting a year you

Starting point is 00:53:09 can access a year's worth of future rent up front for any reason um if you're looking to you know purchase an additional property you can access two years but otherwise there's there's no restrictions it's just uh yeah a magic opportunity there mate so um uh okay well let's you've given us a couple of examples already uh of how future rent works uh how how do you think future rent is used most effectively then uh by the clients that you've seen today well i think it's um it's when may use future rent in a really um deliberate way with their overall financing and investment strategy right so for example at the moment there are some really incredible low fixed rates right where you know you you might get half a percent less or sometimes maybe more um by getting that

Starting point is 00:54:12 fixed rate but a lot of people they're on a variable rate purely because they want the flexibility to maybe change that in the future right but if you know that you don't plan on selling and you're in it for you know the next three or five years or however long you can fix for then you know you're much better off um sort of getting a great low fixed rate and then dealing with your more short-term needs and your investment capital with something like future it. So, you know, to give you an example, we have a client in southwest Sydney who told us that he was able to basically fix his rate at like just over a 50 basis point discount to what he was paying on his variable rate. And then basically his whole strategy is around dual income properties.

Starting point is 00:55:06 so buying properties on blocks of land that are just big enough to add a granny flat get that extra you know 350 400 a week right and then use future it there again to recycle that capital and do it again and pay for the next deposit and the next um the next granny flat um we have clients doing you know similar things all around the country um another client who you know does it really well in um in canberra um where you know in that area in particular there's been a lot of rental growth recently um and some other areas like the central coast where sometimes i think you know rents can almost be a bit of a leading indicator for prices as well yeah um and where you you know use future rent um with that especially that sort of dual income strategy i think you can

Starting point is 00:56:02 do incredibly well yeah love it love it well can you sort of run us through some of the numbers on future rent uh and then as a as a flow on from that summarize the key benefits yeah so say for example your rent is three thousand dollars a month um so the whole proposition is instead of getting that three thousand dollars a month get thirty six thousand up front and you can pay back that $36,000 or that one year's worth of rent over three years from about a third of the rental income. So that means that each month $1,000 goes to repay future rent, which leaves you as the owner with $2,000 less the cost, which is 6%, so $180 each month. so you as the owner you're still getting you know eighteen hundred dollars every month um which is

Starting point is 00:57:00 over 60 percent of the rental income right but what it's allowed to do is bring forward that rent right and when sort of people think about the cost um i think um a couple of things to note so firstly um the cost is effectively uh tax deductible in the sense that you're receiving less rental income which reduces your rental income and then reduces your declarable income right by that six percent yeah but what it allows people to do is gives them the equity they need so they can make their next move right and they can work that rental income harder and you know to put it in terms of numbers say for instance like the average yield say three to five percent or to make the numbers easy say five percent if you're buying a property on like a five percent

Starting point is 00:57:51 sort of yield right yeah giving someone sort of five to ten percent of the property value right yeah um and it's costing them six percent of say that five percent right so it's costing them maybe 0.3 percent of that property value every year right so say as the property goes up in value by 3% each year, you're making 10 times the cost of future in every year. Yeah, it's a great way to put it. It puts it in much more perspective. And this is the old trap. People get stuck on rates without understanding what the actual cost position is.

Starting point is 00:58:33 So a very important distinction to underline there. You touched on the tax treatment. And let's break that down a little bit because that will be something that I know a lot of interested parties will want to understand better. Can you just sort of drill down into the tax treatment in a bit more detail? Yeah, so how it works is even though you're getting the money up front, that is spread out over the life of the deal. So say, for instance, you get a year worth of rent up front, instead of you being taxed on that all at once, you're taxed from an income tax perspective progressively. So you'll recognise, you know, a third of that income in the first year, a third in the second year and a third in the third year, right? and um and then the cost of future rent being that sort of six percent that's um going to future rent

Starting point is 00:59:28 that's rental income that you're not receiving so it effectively then reduces your taxable income um which reduces the amount of tax you pay yeah of course yeah love it love it right by effectively a third so that's that's pretty substantial uh in terms of depending on the income position of the actual investors, potentially that's going to keep a fair bit of their own hard-earned in their pocket as a consequence of that, and so you sort of get the flow-on effect as a result of that. No, I love that, mate. I love that.

Starting point is 01:00:02 Yeah, that's really exciting, mate. There's ample opportunity there, very easy process. What's next for Future Rent then? Yeah, so we're really in the scale-up phase. I mean, we're national now. We've got some really solid foundations. We've got a great team. We've got like a $20 million debt facility that is sort of helping us keep up with the demand that we're experiencing.

Starting point is 01:00:30 And so, yeah, we're really just going to continue to grow out the business and help property investors with their goals. But we're also, you know, sort of building out or starting to build out more of the B2B partnerships, so partnerships with real estate agents and mortgage brokers and the like. But, yeah, we just want to keep doing what we're doing and start to do it at real scale. Love it, mate. Very exciting times. Anything that finally to add in relation to future rent

Starting point is 01:01:01 that we haven't discussed that's important for people to know? I think that's a really great overview. I mean, you know, we're really about just giving people a simpler, better, purpose-built solution. Yeah, yeah, absolutely love them, mate, without the headaches and the hurdles that the banks keep increasing, let alone adding to them, unfortunately. Now, I love that, mate. I absolutely congratulate you on the innovation and the ease. What I love about this is, you know, as we all know, property,

Starting point is 01:01:36 particularly when you're talking money can be a very stressful exercise and the uncertainty around being able to get your hands on the money is one of the biggest issues that investors face so you've just removed a significant number of those hurdles and the stress time and complexity that's associated with it normally so I absolutely take my hat off to you mate and really very supportive of an initiative that you're driving there. Mate, I want to switch now into what I affectionately refer to as the ambush round or, you know, the fast five questions that all podcasts tend to hit their guests with.

Starting point is 01:02:15 So to share your words of wisdom, what's your favourite quote and why? Well, it's actually probably a tweet, right? So if I can, there's a tweet by a guy called Naval Ravikant, who's the founder of AngelList in the US, and um and it's playing long-term games with long-term people all returns in life whether in wealth relationships or knowledge come from compound interest and you know i i love that because people they usually think about compound interest in terms of just investing and they think about investing in terms of just the asset right but it's so much more than that it's the knowledge

Starting point is 01:02:56 that you've got it's the experience that you've got and it's by specializing and getting that you know accumulated experience um that people you know are able to actually start to do really really well totally agree and that you made a really good point there because uh you know growth in anything i've always said growth in anything is exponential and it means that there's you'd see very little results for it early on but if you hang in there long enough then you really reap the rewards and it's not just the physical rewards we're talking about it is that investment in your knowledge it's investment in relationships in networks and it's that combination of things that ultimately then create sustainable success in in whatever you're achieving so you know that's

Starting point is 01:03:43 a great quote mate i haven't heard that one before and that that is an absolute cracker Mate, turning to the literary field then, what's the top book that you'd recommend people read and why? I'm a big fan of Thinking Fast and Slow by Daniel Kahneman. And I love it because I think it helps people see the world as it really is. And that often requires people to overcome biases and overcome their initial gut reaction and slow down and actually really think deeply about whatever situation or investment or whatever it might be. So I think it's a really good one because it's not just investment related. It applies to so many aspects of your life. Totally.

Starting point is 01:04:35 It's one of my favorite reads. And I 100% agree with you where, unfortunately, we live in a world of, you know, faster, bigger, better, and it doesn't really encourage or allow that deep thinking time where you sort of take time out and really contemplate and meditate on what is the right course of action. But those who are smart enough to do that always make much better choices and much better decisions as a result of that, mate. So, yeah, that's a cracking read. mate this next question is a little bit left field but and most Aussies still believe they pay way too much tax so what's the top legal thing that you've done to minimize the tax that you pay you know probably a maybe a good one for some people but not for others but start a startup you won't make any money at least for the least right so that's uh one way to do it so

Starting point is 01:05:28 But no, look, jokes aside, I think the biggest thing is don't sell, right? You don't need to sell. Keep the property and recycle the capital, right? It's when you can defer that and defer that and defer that. I mean, that's all that the tax game is in Australia. But when you can defer that by not actually selling, that's when you can really get the benefits of that compounding. Yeah, absolutely agree, mate. That's music to my ears and 100% agree with that approach.

Starting point is 01:06:02 Back on the investment arena then, what's both the worst and the best piece of investment advice that you've ever received today? I think the best piece of investment advice I received was pretty simple and pretty early in my career. I remember sitting down with a sort of colleague at a pub and he basically was just banging on, telling me that it's just all about leverage and telling me to just borrow as much money as I possibly could, as long as it was money from the bank, residential mortgage debt, right? and um you know working in that area i really begun to appreciate the differences in terms of the different types of debt right but that kind of debt is the safest most stable secure debt you can ever have and it doesn't appreciate as long as you are buying an asset that can generate a great enough return to pay that cost of funds right which at this point in the cycle is you know very, very easy to do.

Starting point is 01:07:13 It's all about leverage. So, you know, I think often that feels risky for people. It feels, you know, uncomfortable for some people. But as long as you're investing in, you know, assets that can pay you a good enough return to cover the cost of that debt, then, you know, it's the type of thing you often do want to maximise. Obviously, I'm not giving you the best advice here,

Starting point is 01:07:44 but I think that is probably the best piece of advice I've ever received. Yeah, I totally agree, mate. And, you know, I guess the unseen and the hidden aspect of that is that, as you well point out there, by leveraging it to debt, over time, inflation and the growth in the property value actually minimises that debt position. So what might feel expensive and scary now diminishes over time.

Starting point is 01:08:14 And, you know, a quick example of that, the very first investment property that we bought over 20 years ago for the, you know, bought a property for the princely sum of $84,000 and we borrowed 97% of that then because we could. So we're only talking a bit over $70,000 in terms of borrowings. that property now's last valuation just recently was about 650 and we pretty much eliminated that debt and and at the time it was a bit scary for us because that was our first first investment and we weren't really sure how that was going to go but if we look back now at the cost of that

Starting point is 01:08:54 rent against the sort of the cost of that debt against the rental income and the growth and the they would have probably achieved it. It's nothing. So, yeah, that's absolutely nailed that. And it's not only leverage of money, it's leverage of other people's expertise. So I've always said it's other people's money and other people's knowledge that also contributes to it,

Starting point is 01:09:14 but it all comes back to leverage, mate. So that's awesome. What about the worst piece of investment advice you've ever received? You know, I think there's so much bad advice out there, um especially like even in the like superannuation space um you know i um i had my super with one of the uh groups which you know ended up i wasn't even a party to it there's like a class action against the um against the uh the bank-led um sort of super group um there's just such bad advice out there like in relation to super i don't have all my super with um just basically

Starting point is 01:09:51 low-cost ETFs, right, and the amount that you save in fees is unbelievable, and the returns that you actually get, especially if you're someone like me who's still, you know, in the sort of accumulation phase, I'm not planning on accessing my super for, you know, for a very long time. So, really, I, you know, can withstand the short-term volatility, so I'm much better off me personally um going for more of an equities exposure rather than diluting it with you know gold and fixed income and all this other sort of stuff which i know over the long term is going to generate much lower returns um so and it's incredible like you know even when i sat down with the financial advisor which was compulsory to do before i switched everything into like a

Starting point is 01:10:44 to ETFs. They were trying to convince me not to do it. Of course they were. They're not going to earn any of your hard-earned coin. Yeah, it's unbelievable. You've got to have your own mind, for sure. Very strong vested interest in that area. Mate, final question then in this Fast Five round. What's a personal happy habit or a daily discipline or a rewarding ritual that you've embraced that's contributed most to your investment success today? I think the closest thing that I've

Starting point is 01:11:18 got is really about thinking creatively about, you know, your investments, which for me has been a really powerful thing. And, you know, there's always a million ways to skin a cat. But if you go back to first principles with everything, and if you ask the why on everything, then you can usually find a solution or cut a deal right um and i think that's something you can do you know in um in in so many different aspects that you're doing and if you don't understand the why then you're missing the picture yeah yeah love it love it beautifully said so the final question then that sort of allows you to put a big bow around everything we've spoken about uh if i gave you a microphone that spoke to every single one of the 7.7 billion odd people that are

Starting point is 01:12:09 currently alive in the world and I gave you a minute to talk what would you suggest I invest in look I think it sounds cliche but you've got to invest in yourself and you've got to look at your own property investments as a as a holistic business that's more than just the property you buy right it's your personal income put together with your loans put together with whatever equity capital you've got and if you can line all of those things up then and you can do that successfully to invest in property then even if you just get inflationary returns at two three percent a year the return on your equity is going to be phenomenal right and it's going to be something that most fund managers are going to struggle to replicate and it's something that you

Starting point is 01:13:01 as an individual can do yourself yeah i love it mate and again you point out something that most people overlook and that is the return on money invested uh you know if the bank's carrying most and doing most of the hard and heavy lifting on a property then if you look at the real cash on cash return, then there isn't an asset in this country that will outperform property in that context. So, love that, mate. Been a really great conversation. Really opened our eyes to the exciting opportunity

Starting point is 01:13:37 that Future Rent brings. So, for those listeners who are pretty keen to investigate further the Future Rent opportunity, how can they get in touch with you, mate? Yeah, so I guess they can drop us an email anytime at hello at futurerent.com.au or otherwise they can, yeah, feel free to give us a call. So we'll head to our website at futurerent.com.au. We'd love to hear from you.

Starting point is 01:14:05 We're talking to investors every day. And, yeah, we'd love to see if we can help any of your listeners do more with their rental income. Yeah, fantastic. I'll certainly also be encouraging any of the listeners that are finance brokers or accountants or buyers' agents and some of the real estate fraternity to reach out to you as well because as an opportunity opening potential,

Starting point is 01:14:34 the future in exercise has some real power there to free people up to really start turbocharging the growth of their portfolio. So, mate, it's been a great chat. We'll stay in touch. Appreciate you coming on board today and I know that the future is looking very rosy for the future. Thanks so much, Bushy. Such a pleasure.

Starting point is 01:14:56 Thanks, mate. We'll stay in touch and talk soon. To get a summary of all this investment gold in the show notes, just email me on hello at khgroup.com.au. That's H-E-L-L-O at khgroup.com.au. or check us out at www.bushymartin.com.au forward slash GetInvested. I look forward to joining you next week

Starting point is 01:15:23 for another episode of the GetInvested podcast. So thanks for listening. And as always, dream as if you live forever and live as if you die tomorrow.

Property Hub - Investment Insights & Inspiration - Get Invested: Godfrey Dinh on investing in Futurerent

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.