Property Hub - Investment Insights & Inspiration - Get Invested: James Bowe on investing in Ownhome accessibility

Starting point is 00:00:00 I'm building my own home because I'm deeply passionate about housing affordability. There's really a housing access crisis born of the fact that, you know, asset price growth has dramatically outstripped wage growth. And the consequence, you know, it's really coming home to roost for my generation, the consequence of that dramatic asset price growth. And we're seeing, you know, the average age of the first home buyer in Australia is now 36. So it's closer to 40 than it is to 20.

Starting point is 00:00:30 And the average, you know, first homeowner is now spending an extra decade in the workforce versus sort of our parents' generation. And so that's having, you know, cascading consequences throughout, you know, our society really broadly in terms of like, when are people choosing to have children? All of the things that cascade from this housing access challenge are really significant and really changing the way that we live. Welcome to Get Invested, the leading weekly podcast to help you unlock your full potential and enjoy your version of sustainable success that lies at the intersection of your three L's, yourself, your health, and your wealth. I'm your host and guide, Bushy Martin, and each week we go deep, sharing great conversations with proven experts in all walks of life, including the best investors, property experts, analysts, leaders, founders, sports stars, and health gurus, to uncover their secret know-how on where they invest their time, their skills, and their money, and the benefits

Starting point is 00:01:37 that this creates. To help you find out what it takes to break free from the grind and discover your flavour of freedom to create your freedom formula you see the truth is that everyone invests every second of 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 sometimes for good sometimes for bad and sometimes for no impact get invested will help you start living by design not by to fall. 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 live your legacy

Starting point is 00:02:22 by investing now. You'll enjoy the stories and secrets of high performers who invest for success in every aspect of their lives and discover the top tips on how to get started, how to make the most of your investment journey and ultimately to be living your dream, not someone else's. as you engage in each episode you'll glean the information inspiration and implementation that you need to get empowered and get invested in imagining and actioning the life that you've always dreamed about and get invested is proudly part of property hub your home for property investment insights and inspiration make sure you subscribe now on your favorite podcast player to get every episode of get invested and realty talk which is australia's leading

Starting point is 00:03:08 and longest running online property show that's full of red-hot property investing news and insights direct from all of the industry leaders and influencers. You can also connect with me personally and join the Get Invested community of fellow Freedom Fighters at bushymartin.com.au or on knowhowproperty.com.au. Now, let's get invested. hi freighted fighters given the recent passing of queen elizabeth i felt it fitting to pay a tribute to our lost queen who in many ways that many of us don't even realize has had a profound impact on our lives and her passing while not surprising given her 96 years has still been a shock and has left me with a somewhat surprising, deep and all-pervading sense of loss and sadness

Starting point is 00:04:01 that I can't quite explain or put adequately into words. In many ways, I feel like I've lost another mother for the second time. What about you? How have you been affected? Now, my personal thoughts and feelings here are not about the monarchy or republican debate, but for me, she was one of those very rare individuals who has touched my life with a sense of genuine care. And even though I never actually met her, I feel like I knew her. Yes, as a child of eight years old, I enjoyed the excitement of travelling to Swan Hill with my parents to see her on a street parade.

Starting point is 00:04:41 And my great-grandmother, who lived until she was 103, received a telegram from the Queen when she became a centenarian. But other than that, I've only heard about her. Yet in some strange and tangible way, she's had a subtle, profound influence on my life. Apart from my own parents and grandparents, who have now all passed, she's been the only other constant, consistent, stable figure who was always there in the background. In many ways, she's been a steady centre amid constant change. She's been the one element in our individual and collective lives that stayed reliably the same.

Starting point is 00:05:25 And her fixed, reassuring presence is now gone. It's as if she was woven into the cloth of our lives so completely that we've stopped seeing the thread long ago. And it was not just her presence on our coins, our banknotes and on our postboxes. our respect and admiration for her has been built around her lifetime of self-restraint her sense of duty and service and her incredible work ethic she's been the one element in our collective life that was consistently reliably the same as you know I talk a lot about the

Starting point is 00:06:05 enduring qualities of sustainable success and she was the living epitome of all of them Despite her position, her evident qualities of selfless humility, patience, persistence, discipline, hard work, wisdom, calm and stability are all bound by her genuine care for all living things. her ability to stay true and consistent with her values while remaining open and adaptable to change as well as constant reinvention under the relentless media spotlight has been nothing short of remarkable and while she had no formal power she commanded it by her presence her poise and her empathy and understanding about others as she lived and breathed the best example of true servant leadership I've ever seen. To many of the world's leaders, she's been their confidant,

Starting point is 00:07:03 their confessor and their conscience. So in many ways, the Queen has been the silent backdrop to all of our lives, a quiet, stable presence that was always there with us to support us in both good times and bad, a bit like our global mother. And in a strange way, she's allowed us to connect to ourselves at a deeply personal level. We remember not just her many milestones,

Starting point is 00:07:31 but how her milestones have connected to our lives. In many ways, she marks the end of an era and the end of the way the world has worked up until now. And as our Prime Minister so well put it, Her Majesty was a rare and reassuring constant amid rapid change. Through the noise and tumult of the years, She embodied and exhibited a timeless decency and an enduring calm.

Starting point is 00:08:01 So I think the reason that I care about her passing is because she genuinely cared about all of us. And it's fair to say that I can count on an amputated hand how many people I truly respect, but without even realising it at the time, she's been one of them. For millions of people around the globe, the death of Queen Elizabeth II will be one of those where-will-you-win moments.

Starting point is 00:08:28 She may not have had an obvious impact on our day-to-day lives, but in a world of rapid change, Her Majesty was an evergreen guiding constant. And like losing a mother or grandmother, she leaves a gaping hole in our hearts and lives, and it's now difficult to imagine a world without her. So thank you, Queen Elizabeth, for the genuine care and selfless dedication that you demonstrated

Starting point is 00:08:53 throughout your time with us, your role model of grace and consistency that you've always adopted through thick and thin, and the positive impact you've had on all of our lives by sharing our silent guiding light. Vail, Queen Elizabeth. Hi, friend and fighters. Do you own your own home or an investment property?

Starting point is 00:09:18 And if you don't, would you like to? Or maybe you've got a son or a daughter who'd love to own their own home, but it's locked out because of the huge savings of poverty that's required, and it just keeps getting larger and out of reach as home values increase. So what's holding you back? Because chances are, it's the massive and growing deposit hurdle. Because for as long as I can remember, there's been an ongoing public debate about housing affordability, where the dream of home ownership is always just out of reach for millions of

Starting point is 00:09:48 hard-working Aussies who are forced to chase their tails trying to put together a deposit only to miss out as home values continue to rise. But to me it's never been an affordability issue but an accessibility issue because a lot of working couples can afford the loan repayments but what's stopping them is the massive cash deposit that they need to come up with to cover all of the property purchase costs for stamp duty and conveyancing etc plus the extra a 5% to 20% cash deposit required to cover the shortfall on a home loan. So getting onto the property ladder is a big deal for everyone, but the biggest hurdle for first-home buyers is the sheer size of the deposit that's required. As an example, if you look at the current national

Starting point is 00:10:30 medium house value of roughly $730,000, you need to outlay somewhere between $102,000 using a maximum loan, jumping right up to $190,000 upfront if you don't want to pay lenders mortgage insurance to cover the loan shortfall plus the stamp duty and on-cost. And this jumps up even higher to an upfront deposit of somewhere between $150,000 right up to nearly $300,000 if you want to live in Sydney where the current medium house price is now well over $1.1 million. Yes, you heard that right.

Starting point is 00:11:02 It's an upfront cash deposit of nearly $300,000. Now, you might be saving like crazy, but when house prices have been growing up to eight times faster than wages, you're left chasing your tail as the housing bus just keeps accelerating further away as you sprint to try and catch up. So you've either got to win the lottery or turn to Australia's other top 10 lender, and that's the Bank of Mum and Dad, to beg, borrow and steal enough to make your own home ownership dream come true. Now, this is the main reason why the Australian dream of home ownership is now fading to pale for many Aussies. Until now, that is. Because what if

Starting point is 00:11:40 there's an innovative solution that covers the initial cash deposit required and allows you to get into home ownership now, while allowing you to put the required deposit together over time on a bit of a buy now and then rent to own arrangement. Because there's a recent Australian startup that's helping to solve this problem and give you an earlier pathway to home ownership that has an innovative business model based on the old lease to own approach. Now, rent to own isn't new and it's had a bit of a checkered history here in Australia, but in simple terms, it's a bit like a buy-now-pay-later approach to home deposits. Now, this innovative startup is called OwnHome, and it's off to an absolute flying start with a

Starting point is 00:12:21 recent $31 million funding round from investors, including a stake by Australia's biggest home line lender, the Commonwealth Bank. And the founder of this groundbreaking deposit hurdle solution, James Bauer, has developed the OwnHome model after experiencing his own property purchase challenges in parallel with his work at Bain & Company, a global management consulting strategy firm that's based in San Francisco, where he was advising high-growth technology companies and global investors on new business models, including businesses tackling housing affordability challenges in the US. So to deep dive into this unique housing accessibility innovation, welcome and let's get invested, James.

Starting point is 00:13:04 great to be here bushy thanks for having me awesome james look i've been looking forward to deep diving for a while since we first i spoke on realty talk some months ago but that sort of kicked things off for those who don't know who you are can you sort of give us a bit of a rundown on what you do differently and most importantly james why you do what you do of course bushy so i am one of the founders of own home and i think you summarized it really well in your introduction. We're a business that's backed by the Commonwealth Bank, Square Peg, and others. And we're a novel path to home ownership in the context of Australia, but we're certainly not novel when we look around the world and the pathways to home

Starting point is 00:13:47 ownership that are incredibly mature in the US, Canada, UK, Singapore. We're a rent-to-own pathway to home ownership. And what that means is we fundamentally allow folks to save towards their home while they're living in it. And we're looking to pull forward that experience of being a homeowner. And in terms of why I do what I do, I'm building my own home because I'm deeply passionate about housing affordability. And the word you used really resonates with me, which is housing access. There's really a housing access crisis born of the fact that asset price growth has dramatically outstripped wage growth and the consequence you know it's really coming home to roost for for my generation like the consequence of that dramatic asset price growth um and we're

Starting point is 00:14:36 seeing you know the the average age of the first home buyer in australia is now 36 so it's closer to 40 than it is to 20 um and the average you know first homeowner is now spending an extra decade in the workforce versus sort of our parents' generation. And so that's having, you know, cascading consequences throughout, you know, our society really broadly in terms of like when are people choosing to have children? Like all of the things that cascade from this housing access challenge are really significant and really changing

Starting point is 00:15:13 the way that we live. I love it. We'll dive into that shortly in a bit more detail because I want to sort of really unpack what the ripple and flow-on effects are because I don't think many people have really got their head around it. I didn't realise until you just mentioned then that the average age for a first-time buyer is now 36. That's way older than what I would have imagined.

Starting point is 00:15:32 So it's clearly having a fairly significant impact. But, mate, before I sort of get you to sort of go back through your journey so far, share with us something that's unique or interesting about that you've never actually shared publicly before. yeah um i think you know maybe a few things to to share um i i grew up on the central coast uh one of five uh siblings had a really idyllic childhood um but certainly no access to the bank of mom and dad um my folks were incredibly focused on education and i felt a real sort of sense of responsibility to make the most of that investment um that they'd been sort of incredibly focused on

Starting point is 00:16:13 And I'd like to think that I'm paying that back, not to them per se, but rather, you know, in the process of paying it forward and making the most of the short time that I have on this rock to do meaningful things with great people. I'd say one of the most foundational and kind of related elements was growing up with an older brother who had brain damage from birth. And I think for me, that was just like a very proximate, um, daily reminder of how precious, um, uh, you, you know, our own ability to be the, you know, determinants of our life, uh, and, and really to sort of make the most of, um, the simple opportunities that we, that we have in front of us. And for me, that was making the most of, you know, the wonderful education that my parents had sort of invested in and I think really set me up for what has felt like a really wonderful life to date. Awesome, mate.

Starting point is 00:17:15 It's interesting. I think we seriously believe we live in the best country in the world at the best time of the world. And a lot of Aussies take that for granted. So the fact that you've, you know, firsthand had experience with your own family as someone who for no fault of their own has had had challenges that that we don't need to tackle what's a a great way to uh shape your outlook on life and sort of speaking of that matter i'd love for you to almost give us a reader's digest of your journey so far then

Starting point is 00:17:48 uh from that point on and just focus on we've invested your time and your money over the years and why and some of the highs and lows you've experienced and how has this led you to what what you're doing and where you are today? Yeah. So I, I won't, you know, go, go all the way back. And I think we covered, you know, childhood there very briefly. Um, maybe just before own home. Um, I was with Bain and company for seven years. And for most of that time, I was based in San Francisco as, as you referenced in the introduction. And it was just a really phenomenal time to be, I was drinking from the fire hose of innovation. So I was working with our venture and growth equity clients, helping them think through investment opportunities that

Starting point is 00:18:37 were coming across their desk or that they were actively seeking out. And so I was fortunate in that context to just look at hundreds of different business models, really with that critical sort of evaluative lens of, um, how do investors think about, uh, you know, needle moving opportunities that are, uh, going to, you know, return the fund for them. And I was really, I guess, fortunate in that context to, um, look really deeply at, at the thematic of housing affordability, um which is one you know you know it's an asset class that's absolutely enormous and it's a problem that's just acutely felt right around the world housing access and affordability but it's certainly a challenge with no easy solutions but we're living at a time where there's the capital and

Starting point is 00:19:36 um willingness on investors part to invest behind innovative pathways um to to make you know meaningful inroads to housing affordability and so it was really fortunate i guess to have that opportunity overseas and um and so see myself as like bringing back um a model that is tried and tested so we're not reinventing the wheel around um you know trying something in australia for the you know it's not globally novel and so feel very fortunate to be standing on the shoulders of giants overseas and a model that's tried and tested. Love that if we sort of look back over that time then in the lead up to what you're doing now with Own Home what's been the most challenging event in your life that has brought about some of the greatest learnings

Starting point is 00:20:29 and some of the best changes that you've seen so far. Yeah. So during that time, well, actually, one of the catalysts for even moving to San Francisco was born out of my younger brother, so not my older brother, was in a, I'm sorry to constantly take these in seemingly bleak directions, but was in a bad car accident. And for me, you know, and was in a coma for quite a few months, for me was just a real wake-up call of just how short life is and and how much can change

Starting point is 00:21:04 in an instant and my takeaway wasn't that you should necessarily you know live each day as your last because i think that's you know a potential recipe for disaster and hedonistic depression but a remind you know reminder to live with intentionality and um to to make the most of um you know our time here and so for me that was uh you know drove a real desire to go out and see the world um i spent longer in san francisco than maybe i originally intended um but feel very fortunate to um have spent all the time that i did there and if i trace back you know what was the catalyst for um i guess upping and leaving i i definitely sort of attribute that to that sort moment which um yeah like i said was was a real wake-up call um and so i'm grateful for that um

Starting point is 00:22:03 uh as as yeah as tough as that was for for my brother yeah well imagine you've certainly had some very close uh family experiences then that that a couple of times have really jolted you if we if we sort of switch to the other end of the spectrum and given that you were really living and eating and breathing in a hotbed of innovation and achievement as far as that goes. How is that synthesized into your own definition of sustainable success? Yeah. So for me, I think it really has boiled down to making sure that I'm spending my time with people that I really respect and enjoy. And an exercise that I've done each year for, I think the past decade that I found incredibly valuable is this, um, thing called the life

Starting point is 00:22:57 purpose report, um, that maybe some of your listeners already do, or, you know, in some form or another. And it's an hour exercise that I do each year and it's 20 minutes, um, spent writing down everything that you could possibly want to do in your life, you know, brainstorming. And you realize that 20 minutes is, is, is a really long time. And maybe the list of things that you want to, um, you know, do isn't necessarily that long. And, you know, it's climb out Kilimanjaro or learn Spanish or, you know, read X number of books. And then it's 20 minutes of, um, describing your life quite vividly five years from now, you know, who are you, who are you spending your time with? What are you spending your time on? Like what is a day in the

Starting point is 00:23:40 life of you look like five years from now? And then the final 20 minutes is one year from now. And the intent is to, you know, instead of living with, I guess, the incrementalism that can come from, I guess, living in the here and now and the short-term focus, by zooming way out to what are the things that I want to do before I die. ideally you know the version of your life five years from now has more is more informed by that list than necessarily being x degrees course correction from where you are today and i think it's a helpful thing to do each year because 20 year old you shouldn't necessarily be defining the roadmap for the entirety of, of one's life, but it at least has felt like it's added a real sense of, um, intentionality. And there's been a few themes that have, um, crept up. And, and I think finally for me, there was, um, sort of an increasing sense of a lack of, um, sort of

Starting point is 00:24:56 mission in in how i was spending my time um you know strategy consulting is really intellectually stimulating yeah but it's certainly at the mercenary end of the spectrum in terms of um being a sort of gun for hire um but very little control over what are the problems that you are working on um if you step back yeah yeah no that's a great process that you go through there So let's dive into that. Let's look at your most recent five-year vision and paint a word picture for us as to what you're doing where and what does that look like?

Starting point is 00:25:35 Well, yeah, I mean, at a high level, you know, I often speak about now, you know, own home as my life's work. I feel really fortunate to have found a problem that is, frankly, you know, quite enormous and I'm now surrounded by a group of people that I think are whip smart motivated and drive me to be better um every day and so I I really do think that I've landed at some version of sort of like the perfect setup that I you know articulated just a few years ago and that's you know now working with my best mate on a problem that's deeply motivating and challenging um I'm surrounded by people who

Starting point is 00:26:15 have that challenger and also I think positive some view of the world you know fighting to make the pie bigger and as you said bushy now living on the greatest um city on earth uh on some metrics yeah um and right now i think in this sweet spot of having a lot of freedom to still travel i um you know don't have children at the moment and so i'm uh conscious of how much life uh can change um when you know or if if children come along and as contradictory as this may sound to to sort of that intentionality exercise i'm also um hyper conscious that there isn't necessarily a destination per se that's going to be better than today and so i think i'm starting to do a progressively better job of channeling that knowledge as i get older you know i think it's

Starting point is 00:27:08 very tempting to think, oh, everything will be, you know, amazing when we may reach, you know, XX million in revenue, or the company is valued at Y billion, or we have, you know, X thousand customers. But I think that, you know, I'm just as likely to get to that destination and then look back wistfully on the time that it was just Tim and I in the room above an old bar, you know, looking at some aircon vents as the most carefree and wide open possibility days of, you know, my life and so each chapter um to date has been has been really great um but certainly right now and for the past sort of 18 to 24 months of being completely focused on own home it feels like a really great sort of culmination of some of those like um that in that intentionality

Starting point is 00:27:56 totally agree totally agree i'd love for you to talk to us about then apart from your obvious and probably pretty massive personal investment in own home to make that happen. What are you and will you invest in to continue to achieve that sort of shifting ideal lifestyle that evolves as you continue to look at that every year? Yeah, well, I think you're absolutely right. Like I'm investing almost entirely into own home, certainly all of my time, energy and willpower. um separately though as i think of you know maslow's hierarchy of needs shelter is right there at the base and for the longest time uh you know the desire to own my own home um was certainly a hugely motivating factor and frankly probably concern is also um the right the right

Starting point is 00:28:51 word so i find myself relieved now that i own or more precisely the bank owns most of our apartment in bondi um and as irrational as it may you know sound as an investment given the opportunity cost that is certainly something that i want to pay off as a mortgage um and i'm and i feel a sense of like or a confidence that you know a certain sense of financial liberation will will flow from that um achievement and so that's certainly you know a modest um investment focus over the near term. Makes sense. And I guess given the pool that you're now swimming in with Own Home and you're a quasi-investor that's doing due diligence for first-time buyers, effectively, which we'll get into shortly, what part, if any, do you think property is going to continue to play in your own

Starting point is 00:29:40 journey as far as that goes? Yeah, it's a really good question. I mean, I'm conscious that there's um definitely a hedonic treadmill of you know the larger home will always be alluring um and so uh i'm sure like the the family home will like and the focus on some level of financial security of having that paid off will certainly be um a really important part of um sort of my my sense of like financial investing focus. Property more broadly, I think you're absolutely right. I find myself swimming in it every day. What I do find myself swimming in though is definitely the owner occupier problem. And so I don't have a lot of advice necessarily for the person with the fourth negatively geared property per se but i do have a lot of thoughts around um the value that flows

Starting point is 00:30:45 from having your own um place place to call home and so so for me yeah a long way of saying um certainly um my own sort of family home will be you know a central part of sort of my focus on you know financial liberty yeah of course yeah no i totally get that and i guess here's the interesting thing that a lot of people often don't realise that if you are investing in property, you need to think and act like an owner-occupier because 70% of properties are owned by owner-occupiers and investors really just slipstream on the emotion of owner-occupiers because that tends to boost and add value over time. So even though you might be thinking like an owner-occupier and you're helping owner-occupiers, you're actually in the perfect place to understand

Starting point is 00:31:38 the drivers that will ultimately give you personal and business wealth as far as the property side of things is concerned. But I sort of take a bit of a sidestep there. What I sort of would love to dive into now quickly before we get stuck into the ins and outs of our home is that, can you share with us what's been your best and worst investment so far and what you learned from both of them? Yeah. So I'd say hands down, my best investments have all been relationships. I've been an enormous beneficiary of people paying it forward to myself. And my most important relationships have certainly by far and away been the most life-changing investments. For instance, I take my co-founder, Tim, we've been best mates since we lived together.

Starting point is 00:32:34 um at law school uh in sydney at college and so what's flowed from that relationship and all of the you know wealth of possibilities that's flowed from that has been a really phenomenal investment and i don't mean investment in any sort of like machiavellian uh sense but just it you know relationships do take um in investing it and um and so i've been you know I'd say that's definitely been the best set of investments that I've made. I'd say on the worst investments, they're probably almost certainly the risks I didn't take rather than the risks that I have taken. So if I run the counterfactual on some decisions that I decided against, I can find a treasure

Starting point is 00:33:21 trove of missed opportunities that would have, with hindsight, been really quite transformational. I saw a good tweet on this over the weekend. And I think it was like a VP at Shopify reflecting that, you know, they always had a really high risk tolerance, but every time they look at their choices critically before they turned 30, they look back and wish they'd taken more risk and that the human brain massively overemphasizes the downside risks. And so his call to action was, you know, if you're young and reading this, take more risks.

Starting point is 00:33:50 And that really resonated with me. You know, I can absolutely result back and, you know, say I wouldn't be here if not for the choices that I've made along the way. But if I'm really critical with myself, could I have taken more risk? Like, absolutely. Not to live with regret, but that would be certainly a reflection on my worst investment was probably the overemphasizing of short-term downside risks. Yeah, it's a really good point. And it is something that, because time's a great healer and gives the opportunity for great learning. And it's often in the cut and thrust of things, as you say, psychologically, we tend to overemphasize the downsides and underplay the positive sides.

Starting point is 00:34:37 And as a consequence, can sort of back away from opportunities that could really take us in a certain direction. So, you know, great sharings there on that front. Thanks, James. Now, Matt, I sort of wanted Itching to jump into Own Home to really sort of break it down and unpack it so that people are really clear on it. But before we do that, just to sort of set the scene, I guess, I'd love for you to share what you see as the major challenges that aspiring homeowners face when trying to secure their first home in Australia at the moment.

Starting point is 00:35:07 Well, I think you summarised it really well in the introduction, and that is that the major challenge is the deposit hurdle. We lived through an election, you know, a federal election just recently where cost of living was certainly the focus, but more specifically housing affordability. And then more specifically, again, it was the deposit hurdle that was front and center. And there's no housing crash that's suddenly going to make this deposit hurdle meaningfully more achievable. um and you know referencing the age there of the first home buyer being 36 um the and and you reference sort of the the upfront cost so it's if you actually include stamp duty for the medium priced home in sydney uh now it's 350 000 for the medium priced home so that's the upfront cash

Starting point is 00:36:03 la if you're going to contribute that 20 plus stamp duty towards um the medium priced home in sydney and so that is really the challenge that aspiring homeowners face in my view um there is almost you know like a meme amongst our generation which is you know rejected from a mortgage that would have cost me two thousand dollars a month don't mind me i'll just go back to paying my 2500 a month in rent and um and and so that's the lived experience of of so many aspiring homeowners today is they're so capable of making those monthly payments, but are locked out because of that unequal access to that deposit. Totally agree. I've been thinking the same for many years now, James, in real terms. How many Aussies are affected by this, do you think?

Starting point is 00:36:54 Have you got any stats or research you've done around that? Yeah. So there's four and a half million young Australians who don't own the home that they live in. So that's 18 to 36, i believe is is the age threshold there and so there's some folks in there that are rent vesting um so they own a property but not the home that they live in but that's sort of the um the rump so to speak of of folks that are in a position that you would ideally think would love to you know be living in the home that they own um but it's four and a half million so some other it is a big number. And maybe just as relevantly, if we think about the flow of first home buyers, of which there's something like 140,000 each year, the majority, so now 60% of those rely on

Starting point is 00:37:46 the bank of mom and dad for some form, direct financial support. And that is certainly not available to all. And so there's really, to your point around housing access, that access to the intergenerational wealth has certainly become sort of an increasingly just you know deciding factor in in access to home ownership 100 we touched on some of these earlier uh when when we first started chatting today yeah but i'd like to expand on this a bit in terms of the flow-on effects that the accessibility issue is having well there's a great um report that's called the housing theory of everything. And I think it does a really fantastic job of setting out all of the flow on effects of unequal access to, to affordable housing. Um, and one of the most

Starting point is 00:38:39 surprising, but also perhaps least surprising is how it's impacting some of the biggest decisions that people make. So when to, you know, when do folks have children, if they, if they want to have children. That has been overwhelmingly established as being delayed as a direct consequence of how unaffordable people feel housing is. And so they're delaying having children in order to save up for that deposit. And that is just objectively taking far longer. Yeah. The wealth impact is really significant. Homeowners at retirement are currently 20 times wealthier than renters. Of course, there's some causal correlation challenges in there, but it's well established that housing has been a huge wealth creation engine in Australia. And

Starting point is 00:39:34 that is sort of the magnitude of difference that exists there. And maybe another is this sense of security. And so if we look at the numbers, the average tenure of a homeowner is over 10 years, while the average tenure of a renter is around 18 months and so that gives you know some glimpse into the relative uncertainty that's associated with being a tenant and also you know there's some very you know obvious and natural consequences that flow from that in terms of people's ability to you know have a sense of community or how certain am i that my child is going to be in this school catchment area or am I actually going to have to move in 18 months and so all of those sorts of flow-on effects are really real that flow from that difference in experience

Starting point is 00:40:27 of renting versus being a homeowner. There's almost an invisible insecurity that's built in the exercise if you don't have that place called home and while it might be directly in front of you it sort of would tend to impact on your thinking your actions as a result so it's a really good read uh tell me the with the you've sort of touched on the intergenerational wealth exercise that's starting to come into the exercise how is that influencing things in this regard do you think um yeah it's a it's a it's a really good question um i i think it's clear that um intergenerational access to intergenerational wealth has become a deciding factor in access to um housing and it's painfully obvious that that is very unequal um and has nothing to do with

Starting point is 00:41:27 uh with who you are other than you know who your parents were and that is sad that that um luck factor is having such a significant role in something that is so clearly established as having such real you know consequences for folks quality of life um yeah it's what i'd say on that yeah good call now you touched on this already also in terms of the the raft of policy promises that being made by all parties in the recent federal election. And I guess you've had the benefit of, you know, living and working overseas and seeing what other countries and the study that you've done around, you mentioned Canada

Starting point is 00:42:15 and a few other countries in terms of how they've tackled it. Putting all that together, give us your take on, you know, what are some of the things that are being done elsewhere and as a precursor to us then sort of getting into the own home model? Yeah. So, I mean, what we saw in the last election was that there was bipartisan recognition that housing affordability is a real and meaningful problem. And we saw both parties sort of throwing the proverbial kitchen sink at the challenge. What we also saw, though, was that a lot of that was demand side focused

Starting point is 00:42:56 and what you would imagine you would love to see the government enacting are policies that really support on the supply side and counteract some of the very natural nimbyism that's a handbrake on infill development and most likely to be able to support folks being able to live where they want affordably um but and so both major parties solutions were very clearly demand side focus whether that was accessing your super early to go into housing

Starting point is 00:43:34 or if that's the co-ownership model um very little of it was directed towards um supply side solutions um interestingly though you've got some conflicting policies you know even within the one party so you've got the federal labor government as having rent to own um within affordable housing as a core pillar of their housing affordability program um but then in victoria um they have a which is a labor um government they have a ban on rent to own so um it's funny to see you know even within the one party some almost like schizophrenic approaches to um tackling housing affordability in terms of what we've seen overseas though um we've seen um rent to own you know rolled out um as a core pillar of many uh governments and

Starting point is 00:44:38 governments that you'd think of as like closely analogous in terms of like commonwealth states like Canada, the UK, even Singapore, have very mature rent-to-own programs that are government supported. And really, I think that stems from this notion of what are the key ingredients of home ownership and how do we deliver on those? And they're really fundamentally probably security, the ability to participate in the wealth creation, and three, the freedom to invest in turning your house into a home like that's what we tend to think of at own home as those the three core tenants of that and so um that in our view is what the government should be focused on facilitating and supporting is the achievement of security um the ability of the broader access

Starting point is 00:45:35 to that wealth creation engine and the certainty of tenure and the ability to therefore invest in making your space your own. Yeah, love it, love it. That's a really good summary and a great segue now into Own Home itself because I'd love for you to break it down into really simple and basic layman's terms so that anyone that's listening in can clearly understand what Own Home does and how it works.

Starting point is 00:46:05 So can you sort of give us a run through on that, please? Yeah. So in a nutshell, Own Home is a path to home ownership that allows you to save for your home while you live in it. And what that journey looks like is really four simple steps. So that's one, applying to Own Home and getting approved for a buying power. So we might say, Bushy, based on your income and expenses, you can afford a $1.4 million home. So just like a bank application in effect really is what we're saying, yeah? Exactly.

Starting point is 00:46:38 Asking the exact same question as a bank there. And it's really important because all of our customers are eventually going to need bank finance to buy their property back from Own Home. So we can't solve the serviceability challenge. We can help you solve the housing deposit challenge. Yes. So step one, yeah, applying to Own Home, getting your buying power approved. Step two is finding the home that you want to purchase off the open market. And so that means, you know, participating in the national sport of refreshing realestate.com.au

Starting point is 00:47:11 or the domain app and finding, you know, your dream home on the open market. And their own home is actually effectively acting as your buyer's agent, undertaking all of the due diligence, reading the strata reports, getting the building and pest inspection reports carried out. because we're focused on making sure that that is a really sound investment because step three is you move into your home and you enter into a lease and option agreement and that gives you the right but not the obligation to buy that property back from own home at a pre-agreed price and then step four is buying that property back from own home and putting part of you know the deposit

Starting point is 00:47:55 that you've been saving through your monthly payments towards that eventual purchase so that's the very simple summary but happy to dive into some of the detail there yeah let's do exactly that because i think the the first two steps are uh self-evident yeah they are and and i what i love about the uh part of the equation that our own home is assisting people with is actually buying a quality property to live in, not just anything they can get their hands on because if it's not going to make the grade as far as you're concerned and therefore have the confidence that that property is going to perform well long term, then obviously it wouldn't do for them either if they were left on their own devices to try and do the same. So I think there's an inbuilt value

Starting point is 00:48:41 out there just from the due diligence perspective that comes into the equation as far as that goes. But I'd sort of love to know more a little bit about the costing side of the equation. You mentioned there's a contribution from the lease rental. There's obviously a buyback formula that comes into equation. Can you sort of shed a little bit of light on those for us? Absolutely. So each month the customer is making monthly payments and 35% of those monthly payments are going towards the accumulation of a deposit or purchase offset for that home. and what the customer has is that right to buy that property back at that pretty great price

Starting point is 00:49:21 and that price is the price that we buy it for on day one growing at 3.8 percent per annum so what that you know if we take simple numbers a million dollar home today you can buy that back five years later for 1.2 million less the 165 000 that you've accumulated in those pre-determined monthly savings and so you would need to in that case you know five years later finance 1.035 million from a bank to purchase that yeah yeah sure makes perfect sense I guess the the challenging environment that we're coming into now may test it a little bit in some areas given that you know after the COVID catalyst and the petrol that's been thrown on the fire of property values and we always expect for those of us been in property long enough know that property follows sort of an

Starting point is 00:50:17 s-curve growth over a sort of an 8 to 15 year cycle and there are periods of you know anywhere between one to two years where property values will come back and then quite often they'll plateau for five to eight years before they start to go through a a spike of growth again given the times are coming into is that is that affecting your thinking around uh the locations and the types of properties that you're going to invest in and uh the is the approach changing at all given the prospect of softening values in some some areas yeah it's a really good and important question um there's a there's a few elements to that you know one is the customers that we're focused on supporting which are aspiring owner occupiers so we're not supporting um investment property owners

Starting point is 00:51:08 uh buying that you know third or fourth negatively geared property one of the implications of that is that as a result um our customers are you know relatively committed to this property in the sense that this is the community that they're looking to put down roots um and and build a life in And so that comes with it, an important form of sort of resilience through the cycle. And as you well know, Bushy, the property market is subject to cycles. And so we at Own Home have looked to really study sort of the last century of property market performance and understand how can we structure Own Home in a way that's overwhelmingly likely to generate positive and great outcomes for our customers. And one of the most important

Starting point is 00:52:08 elements of that is that locked in rate of property price growth. And so that 3.8% over the last century in Sydney, you would have had to have purchased in the worst 14% of years to experience a growth rate lower than 3.8% over the course of seven years. And I say seven years because that's the default option period that our customers have. And very importantly, there has never been a seven-year hold period in Sydney that has resulted in negative growth over a seven-year period.

Starting point is 00:52:50 And so that's really, I think, important. And you'll remember from that sort of summary of own home that effectively the customer is freezing the amount that they're going to need to finance via a bank or, you know, should they be so lucky, some form of inheritance to fund the purchase of that property. So the amount that they're going to need to finance is not growing because the deposit that they're accumulating effectively offsets that locked-in rate of price growth. I think another important point is the alignment of interest. So we're really focused on entry price for our customers. And that means, you know, I think what we've seen is just how much opportunity there is to be a source of counsel on that home buying journey. So we're, you know, we're not going to be funding, you know, studio apartments in Zetland or Waterloo, you know, for folks listening around Australia, like geographies that have seen like quite a significant and rapid buildup of housing stock. um but but there are also a property profile that has performed historically uh underperformed in

Starting point is 00:54:10 terms of capital price growth and so we're really conscious of what are the property profiles um that have historically uh performed well and and how can we look to replicate those learnings because while history doesn't necessarily repeat itself it certainly rhymes and so what are the lessons um that we can learn um and and carry those forward love that do you mind sort of breaking down given the experience you've had to date what are the property profiles that have performed well and and there's a there's a locational plus a a profile link that comes together with that i'd love for you to share that and then folding on from there where is a sweet spot what type of person for what type of property is that is the sweet spot for own home yeah

Starting point is 00:54:58 So maybe I'll start with that last question first, which is the sweet spot profile of customer for own home are folks that are more than capable of making the monthly payments on a mortgage, but just don't have access effectively to the bank of mom and dad. And that might be because they literally don't have access to it or they're choosing not to put their parents in the position of needing to go guarantor on a loan. So that is a huge swath of the community who doesn't have access to that intergenerational wealth transfer. But there are certainly pockets of folks who, you know, universally don't have access to that. And, for instance, first-generation migrants to Australia don't have access to the bank of mum and dad in any meaningful way because that collateral certainly can't be pledged in any useful way to the extent that that exists. But, yeah, so Profile, it's high credit worthy, disproportionately, you know, great incomes. Like I said, we tend to operate above the threshold of where the government support programs kick in

Starting point is 00:56:18 in terms of first-time loan deposit schemes or stamp duty concessions. Our average purchase price has been around $1.2 million, so above most of those caps. And so it tends to be folks who don't have access to those government concession programs. yeah so which which makes perfect sense yep yeah um in terms of the the property profiles we um the the profiles of our sort of portfolio to date 10 of our portfolio as apartments which

Starting point is 00:56:59 is under indexes versus the sydney housing stock which is about 25 to 30 apartments and so we are disproportionately freestanding homes or townhouses where land is a larger element of the value of that property. And that has certainly been a really important and significant driver of capital growth, the fundamental underlying value of the land. There's then, as you would well know and we were briefly speaking about um this element of quality and there's lots of dimensions to the word quality in the context of property but location um is huge and so you know disproportionately sort of like the inner ring of sydney um you know a 10 to 15k radius. But we've also seen an overwhelming amount of demand for regional hubs like Newcastle,

Starting point is 00:58:05 Central Coast, Wollongong, as part of, I think, a newfound level of freedom amongst professional folks to work from different places. And the homes that we've purchased there have all been for folks making the sea change from Sydney, moving to those centres. Yeah, yeah, I love that. And you may not realise it, but you're talking very much like an investor. All those parameters that you just spoke about,

Starting point is 00:58:36 a good investor that we help educate and guide will be looking at exactly those things. So we tend to avoid units and apartments. If we're looking for capital growth, the land content is important we're looking for scarcity so with limited supply landlocked locations we're looking for strong demand we're looking for diversity of industry and employment we're looking for strong income demographics so that people can pay good money for property and continue to pay good money for property as the values in that area increase and then you overlay

Starting point is 00:59:12 that with lifestyle factors uh access to amenities uh any infrastructure change and then uh also overlay that with school catchment zones as you touched on earlier because people want to be in a place where they can send their kids to school well you've just given us a list of the the key qualities that you're looking for in investment so you're an investor whether you realize it or not I think, yeah, James, in that context. No, exactly right. And we see ourselves as like really bringing a lot of data to bear on behalf of our customers. And all of those data points that you referenced there are incredibly important.

Starting point is 00:59:49 And I'd say getting better each day in terms of the availability of that data to support aspiring homeowners. But then there's also just some really simple, you know, 101 elements of that data-driven diligence process that we've supported customers through as simple as um getting a non-vendor sponsored building and pest inspection report you know and we've seen that reveal really extensive termite damage when that was written off as a as a low risk in the vendor supplied um program and so you know we avoided a property that that builder said would only be should only be sold for land value uh which was about 600 and then it went on to sell for 980 and so our customer was like i

Starting point is 01:00:30 just feel for that customer uh that or that homeowner that went and bought that property not knowing um the level of you know damage um that existed within that property yeah love it and as i'll say i think the one of the major probably uh unspoken benefits is is the due diligence that you're doing effectively on behalf of the future own home uh homeowner that's protecting your risk but also majorly protecting their risk at the time when they officially uh take the keys and and get the bank to support the ongoing uh personal ownership so i love that uh we've covered a fair bit of it are there any other things that we haven't covered in relation to our own home that we need to know james i i think um yeah we've covered on

Starting point is 01:01:18 covered off uh a lot of the really important elements um and so i just really just reiterate that who we're here to support are aspiring homeowners who don't have access to that bank of mom and dad, which is a huge number of Australians. And we started with this observation that because the deposit hurdle is so enormous in Australia, greater than pretty much anywhere else in the world, the consequence is that it cuts right across the income and the creditworthiness spectrum so in the u.s where folks are struggling with you know to save towards the 350 000 you know median priced home which is about the median price time in in the u.s yeah when in contrast that's actually just the deposit you need you see that it naturally cuts across that income and credit

Starting point is 01:02:08 worthiness spectrum and so we see so much opportunity to really just support folks that fall outside of the pretty narrow remit of those government support programs and there's a huge amount of opportunity um to to meaningfully move the needle for for folks like you know tim my co-founder who's an own home customer yeah i totally agree i think it's a very timely inclusion in the mix to what is becoming a uh it's always been a big problem but it's a growing problem in terms of that depositorial accessibility. Love your discussion on that. And I'm really going to encourage listeners, whether you are personally faced with that challenge, or you know people who are facing that challenge, it's going to be well worth reaching out to James and the team at

Starting point is 01:02:57 Ironhome. And we'll have the contact details in the show notes, and we'll get you to summarize those for us shortly. But before we do that, James, I'd love to jump into what I affectionately referred to as the ambush round, or the bushfire lightning round, which is just four quick questions that the listeners always like to glean your words of wisdom on. So to kick that off, what's your favourite quote and why? Robert Frost, two roads diverged in the wood, and I took the one less travelled by, and that has made all the difference. Yeah.

Starting point is 01:03:30 An awesome read as well, the book that that's attached to. I love that. And talking about books, what's the top book that you recommend people read and why? It's a bit of a textbook, but Thinking Fast and Thinking Slow by Daniel Kahneman, I think, is just such a treasure trove of the mental shortcuts that are both so powerful, but we also fall victim to every day in our lives. So that one is certainly top of mind for me. Totally agree.

Starting point is 01:04:04 I've got it on my bookshelf, and it's a great go-to. Really, the whole thinking element is something that not many people of us, not many of us actually sit down and work through how we do things. So some great insights have come out of that. Let's return now to the sort of investment piece. What's both the worst and the best piece of investment advice that you've ever received to date so far, James? Yeah, I think just to, you know, echo on the worst investment advice, I'd say it's anything

Starting point is 01:04:35 that over-indexed on short-term pain, like the potential pain of, you know, leaving an employer and that that can definitely feel, the proximate pain can feel far more acute than it is as you look back on it. I'd say the best advice would have to be, as cliched as it sounds, you know, being conscious of the five people that you're surrounded by again not in any sort of machiavellian sense of curating that but just a reminder to be intentional with two of the most important elements of our lives which is who we spend our time with and how we spend our time frankly said absolutely brilliantly said and and sort of to round out the ambush session what's a personal happy habit rewarding ritual or daily discipline that you've employed over

Starting point is 01:05:23 time that's contributed most to your success so far there's there's probably a lot um but one that i am recently um recommitting to is doing a lot more of surfing um i find it so therapeutic and uh when i'm out there i'm only able to focus on you know the moment of watching the next wave come through so i find that to be such a zen experience that i'm redoubling my commitment to Yeah, awesome. I used to surf many years ago. I still make a nuisance on the hockey pitch, but I haven't hit the waters for many years.

Starting point is 01:06:01 But there is some science around the actual atmosphere that you're in when you're in the ocean. It creates a sense of in the moment and serenity that has some really strong health benefits. So without even realising it, mate, you're probably being drawn to that as a consequence of how you'll feel after you jump out of the water. There you go.

Starting point is 01:06:24 Awesome. Love that. Okay. Well, look, just to bring it to a close then, to sort of summarise our awesome conversation today then, James, what are the key takeaways and actions that we should be taking on board? I'd say that, you know, one of the key actions for anyone out there listening struggling with the deposit hurdle is to find out

Starting point is 01:06:45 and understand your options. And there's a growing set of options out there. in own home as you said bushy is is part of the quiver of solutions um to expand housing access um so uh check out ownhome.com um we've got a calculator and a you know three minute sign up form that'll reveal what's possible uh with the own home pathway love it uh sort of looking to the future then what's what's new and next for you and own home as we continue on that journey for us at own home it's continuing to i guess champion um housing accessibility reform and so we're on what is you know really a state-by-state um expansion agenda and that's really driven by

Starting point is 01:07:32 the fact that the rules and regulations vary so considerably um by state and so we're going to be methodically um tackling those so that we can make uh the own home path available to as many australians as as humanly possible as quickly as possible yeah i love it the always frustrates me the the layers of government from federal to state to then council uh tend to get in the way and contradict each other as you mentioned earlier if you're able to influence that in any meaningful way then you're going to have a massive impact mate so i really appreciate you coming on the show today. I love what you're doing to address what is a major and ongoing problem. And I love the solution that you're putting on the table that's got the potential to help not only people

Starting point is 01:08:21 with home ownership, but all those other flow-on benefits that we spoke about during it. So thanks for your time today and looking forward to staying in touch. Me too, Bushy. Really appreciate the time. Thanks, James. Talk soon. thanks for getting invested now here's three easy ways you can take action to start making it happen to ensure you build momentum and start living by design not default so that you're following your freedom formula firstly subscribe to this podcast if you haven't already and keep the weekly inspiration coming secondly get a copy of my book get invested for free and find out what it takes

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Property Hub - Investment Insights & Inspiration - Get Invested: James Bowe on investing in Ownhome accessibility

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