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The Finance Show With Joe
Welcome to the Finance Show with Joe hosted by It’s Simple founder, Joseph Daoud. We chat about the financial issues facing ordinary Australians from managing the cost-of-living to investment strategies in order to help you make more informed financial decisions.
Join us as we discuss finance, mortgages and home buying in Australia!
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The Finance Show With Joe
Australia's Biggest Lender: The Bank of Mum & Dad
Welcome It's Simple broker, Anthony Fontana, to the Finance Show with Joe!
Tackling today's challenging homeownership landscape, we explore how the "Bank of Mum and Dad" is reshaping the property market. Discover strategic financial solutions like guarantor loans and the First Home Guarantee that are helping families overcome housing affordability issues. With expert advice on navigating lending options from institutions like First Mac and Macquarie, we underscore the importance of diverse financial planning and consultation.
We wrap up with a focus on the benefits of starting early in property investment. Learn how time in the market can lead to significant growth and how regions like Newcastle and Adelaide offer promising opportunities. Anthony shares his advice for maximizing borrowing capacity through investment properties, while parents and young adults gain practical tips for leveraging support and building solid financial habits.
Follow us for more property news and mortgage advice!
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Welcome to the Finance Show with Joe. He's Joe, I'm just some schmo who's about to lose his job, and we have a very special guest, anthony.
Speaker 2:Anthony, thank you so much for coming on the show today. Just a brief introduction to Anthony. Anthony used to be an underwear model for Calvin Klein and then he decided, rather than pursue a career in modeling, which you know is affected by age and stuff, anthony decided to get married and, you know, settle down, become a broker. It was just. It's been a bit of a journey, but thanks for coming on, mate.
Speaker 3:thank you, thank you for having me. It's, uh, yeah, great australian dream, isn't it to just?
Speaker 2:keep working and being on this podcast all 15 of our viewers would love to see that smile on camera. So tell us a little bit, Anthony. You've been a broker for the last 10 years prior to coming on with it's Simple, Is that?
Speaker 3:correct. Yeah, that's correct. I started in finance about 12 years ago. It was mainly like a part-time thing. I was still working and learning the skill behind the scenes as well, and then, you know, trying to get clients on board.
Speaker 3:I guess why I've made the jump. I pretty much was a sole broker for a long time and I then actually had a meeting with a BDM and he said if you want to join the Premier League, you have to join the big leagues. And it was kind of a moment for me where I was like, okay, this guy just said you've got to switch on and jump. I'm a big believer in getting out of your comfort zone as well to grow, like you don't have cold showers because you enjoy them, right. So that was like I needed to change things up and see how other brokers are doing it and I wanted to become part of a team that was growing. And that's when I made a call. I had a few other meetings as well, but I made a call and Michael actually said one of the other brokers had left and they were. You guys were looking, said okay, come out and see. See what's what it's all about.
Speaker 2:It's simple and working within a team as opposed to being a sole broker, you do get to experience that support, that camaraderie, the jokes, but also I think there's a bit of there's a lot more opportunity, because if someone doesn't know how to structure a deal, that's when you can kind of come in and create that opportunity for another broker. Would you say that?
Speaker 3:I 100% agree. I think, like you get to see how other brokers workshop things, when you're by yourself, you're stuck in a certain way that you think, okay, this is how I should run the business. But when you see it from a team of other people and you've got that support, that's when you can really like, grow and thrive. So that's where I see myself, um, in this space going because you've got that support from the other brokers as well so what have you noticed over the last, you know, four months since you've jumped on board with?
Speaker 2:It's Simple.
Speaker 3:Like what are the key? There has been deals that I haven't seen before coming across for sure, which is good, because that's how you learn, but just the speed at which we work at as well, like I got that the first day, I was like, okay, you just need to like get stuff done, which I'm a big believer in, you know, so it just all aligned I do want to share this story because anthony was sitting next to me during this meeting, if you remember.
Speaker 2:Yeah, um, we went out and we saw a referral partner of ours. Yeah, went out to a lunch and this this is sort of the kind of opportunity that gets presented, you know. So we sat across from this accountant. Could you just say the story, because I think it's one of the funniest stories of my life.
Speaker 3:We were just sitting there. It was the first time we met this guy. Lunch was going great, but he was just so straight to the point. He was like do you want a $50 million deal? I kid you not. And Joey was just like yeah, Are you going to say? No to it that was like first pretty much referral meeting that we went to. I was like, okay, you're talking some big numbers and you're talking to the right referral partners, so you don't always get those opportunities.
Speaker 2:This is why you kind of need to take every opportunity that's at your feet, regardless of the loan size. It's never the deal in front, it's always the deal behind, right? So a previous client of ours had introduced us to this accountant because it was his accountant. A previous client of ours had introduced us to this accountant because it was his accountant. And this previous client, you know the loan size, was a regular mom and dad's loan size. Okay, I'm not going to say what it was, but it was a regular mom and dad's loan size.
Speaker 2:One property, another property, another property, you know three properties, a cumulative. You know it was low, seven figures, but it wasn't you know a huge amount. And he's a good friend of mine, he's around, same age group, and he just turns around. He goes to us you have to meet my accountant, and I go, okay, I'm like I'm more than happy to. And he goes, no, no, you have to. Like we're going to lunch this friday. I'm like, okay, can I bring a broker that's what I called anthony up. And I still remember sitting across from this guy.
Speaker 2:And here I am with my little referral partner guy just ready to give it up and be like it's like I fucking want it. I was like okay, it's like don't fucking put it near me. I'm like, okay, because you want a 50 million deal, I'll go. What? And he goes, do you want? And the reason why I was so confused by it is because how rare are those opportunities like I've never seen anything like it.
Speaker 3:I was like like at first we actually thought was he taking the piss?
Speaker 2:I still think he's taking the piss.
Speaker 3:He's got the middle finger and I'm like I don't know. He was being dead set and, like you could tell, like after that.
Speaker 2:Yeah, so that's been a very fruitful relationship. So give us a little bit of chime into your day-to-day and where you've helped individuals over the last few months.
Speaker 3:Yeah, leading back to kind of like those opportunities are great. I want to be able to deal with like high net worth clients as well, but a big part of me coming to it's Simple as well is because there was a big presence out at Orem Park and you know that's a real community feeling real like mum and dad vibe out there and I've just become a parent as well, congratulations.
Speaker 2:Thank you.
Speaker 3:How is little Hugo? He's doing really well. He's so happy. Every day he's growing and just, yeah, more and more active. So it's so good to see. But that's like now. You know the reason you do everything. And my biggest responsibility and I guess, leading into the episode about mums and dads and bank of mum and dad, that's a big responsibility of mine to make sure that he's well looked after in the future and the kind of clientele that we're dealing with. I wanted to have a big presence at Orem Parkway because I'm moving further out to Camden, so for me that's a really big thing.
Speaker 2:Family- it's more common, like you're mentioning Bank of Mum and Dad you're mentioning, you know it's more common than ever to get a loan from your parents or a gift from your parents to be able to afford a deposit now?
Speaker 3:Yeah, 100%. We do a lot of guarantor loans. You know how mum and dad help doesn't always need to be with this massive gift, but you know um how mom and dad help.
Speaker 3:It doesn't always need to be with this massive gift. But you know that that does help. But there's so we're just seeing a lot more lately where they might not be purchasing their own ARC but they might be purchasing an investment near their parents so that in the future that's where they're going to reside. So there's a lot of strategic ways you can do it, but it does take a bit of planning. These days it's not maybe. Okay, I want to live five minutes from mum and dad, and that's it. My dad, when he first came out to Western Sydney, he had to move 20 minutes out, you know, and that's just how it was. But it kind of is an evolving landscape where, yeah, you might have to move out a little bit further, but there are ways to do it.
Speaker 2:So why do you think it is that kids need to go to their parents for these deposits? Why do you think that they need to ask their parents? Hey, can you go? Guarantor for me.
Speaker 1:Yeah.
Speaker 2:Is always here. You know, there's always some random politician that goes oh, you know, rent, save and then you can buy. Oh, you're spending too much money on what was it? Avocado, avocado on toast.
Speaker 3:Avocado on toast. You can cut your avocado on toast out, but really you can't save as quick as property has been going up.
Speaker 3:So that's why you need your help from your mum and dad. Truly, it just escapes you because you think, okay, how can I save? And then you do your budget and you're like, okay, next year I'll be able to afford it. Then you go back into the market and you're like, okay, it's moved when you can. That's why it's important to crunch your figures and speak to a broker, because you can plan for the long term and then see where your parents are at why is it important to speak to a broker?
Speaker 3:because you might just go to your lender that you've been. You know what I remember as a kid, going to cba having your, your little deposit yeah and like, but like, that's how they got everyone in.
Speaker 3:You know, and it's like you think okay, my homeland, my home loan is going to be with CBA. What if CBA says no, then where are you going to go? Brokers have a whole list of lenders on their panel and there might be a 1% buffer somewhere. There might be a 2% buffer somewhere else that you can borrow a lot more. So it makes sense that if you can get into that property and hold it, then you need to explore your options.
Speaker 2:Tell me a little bit about the different lenders.
Speaker 3:So I just want to do a comparison right now.
Speaker 2:So let's take a lender like First Mac and then let's take a lender like Macquarie. They might offer the same interest rate, they might both be at 6.14% or 6.09% or something along the lines of that, but what is the difference in the borrowing capacity between those two lenders?
Speaker 3:It can be huge. I've had clients even recently. They can't purchase a second property with your mainstream lenders, but then we take them to First Mac and they're able to afford a property because they assess income a little bit different. The buffer on existing debt is smaller. Their assessment rate is smaller compared to a 3% buffer, for your normal bank as well. So all those things might seem small, but they add up and then it can be the difference between $300,000, $400 000, 400 000 sometimes.
Speaker 2:I did a loan recently, I think it was a 1.5 million dollar deal at saint george. If they were to go for this loan, they would be out of pocket, like that means they'd be bankrupt, obviously, but they would be negative. I think it was negative 300 000 or something like that. Okay, yeah, but for some reason, at first mac, they fit and you listed the reasons why they've got a two percent buffer. Right, yeah, they account for the negative gearing and they also make sure that you know, uh, they, I think it's an 80 of the rental income, but they don't factor in you know, nine million different expenses. That might not be the expense level of another lender.
Speaker 3:Very true, Like even like people purchasing their first property. They tend to maybe go for a strata build you know, it could be a unit, could be a townhouse. Some lenders treat strata and obviously that's within their expense, their normal HEM expense, but others exclude it. So your borrowing capacity can change dramatically there as well.
Speaker 2:It gets smashed out.
Speaker 3:That's literally just for a strata complex. So that's where it's affordable for some first home buyers as well. So that's why it's important really to speak to brokers so they can assess all that.
Speaker 2:So take me back to using the majors and then possibly, let's say we don't have bank of mom and dad let's say somebody is using the first time guarantee. Yeah, now we've been exposed to the first-time guarantee quite a bit, especially over the last few months. You know first-time buyers wanting to come in A few years ago. The way that we would calculate someone's income is $100,000, you know they would probably be able to borrow seven times what their income is. That's now dropped to about 4.3 to 5. So if you're earning 100K, the maximum you're going to be able to borrow from NAB, cba, anz, if you've got HECS debt or if you don't have HECS debt, it's probably going to be about 500K. What can you buy in Sydney for 500K?
Speaker 1:Well, you can't or call Logic Data. There's no Sydney suburbs where an average income owner can buy without a guarantor Sydney suburbs where an average income owner can buy without a guarantor, without the bank of mom and dad?
Speaker 2:Really there's literally no suburbs.
Speaker 1:There's no suburbs that you could buy, not with an average income.
Speaker 2:Not with an average income.
Speaker 1:No.
Speaker 3:Yeah, that's a wild stat. Like, the average earner can't, in their suburb, afford any.
Speaker 1:So it's, even with dual incomes, like I think, if a couple, yeah, a dual average income couple, will still be short, 270k that is. So what are you supposed to? Terrifying, yeah what are? You supposed to do? You have to ask your parents yeah.
Speaker 2:So when you're structuring these types of loans, you know with the parents, or you know you're structuring it with the borrowers, the individuals themselves. How are you explaining to them that, hey, you what? You really can't do this on your own. You need family support.
Speaker 3:Once we're crunching those figures and we've explored all options and they might not be able to have any other avenue. That's when we have to say is there any way you can get a gift? Or, if your parent how's their property looking, if we can use their property as security so you don't have to pay additional fees and things like that? But it's always an important conversation to have. It's just a really hard landscape at the moment with how interest rates are and property prices. They didn't really drop too much in that COVID period to make a difference.
Speaker 2:It's only just started to drop.
Speaker 1:Yeah, and only very slightly.
Speaker 2:This is the thing I post it on my Instagram stories every week Chester Hill, patstow, anything in the Bankstown, south West Sydney, canterbury Council area it's still booming. We saw a house in Patstow the other day. They bought it in 2019 for $900,000 and they have not done a renovation nothing and they sold it two weeks ago for $1.6 million. And that's just because of the way that they've changed the development laws in that area. And you know we always mention CDC, the way that you can get private certified to come in and assist you in building a duplex. All those areas are booming. Come in and assist you in building a duplex. Yeah, all those areas are booming. And I just want to come back to Oran Park, and that's a part of Western Sydney. Yeah, oran Park's growing like crazy.
Speaker 3:Yeah, it's crazy how much development has gone out that way and like it's really good for the area and it really brings everyone like to. I think because with COVID as well, people were like, okay, maybe I can do like a work from home, split or whatever. So that way it's moved all the infrastructure out that way and people have the flexibility to be able to look at those areas and set their family up and see them staying there for a long time because they've got everything around.
Speaker 2:I want to bring up one valuation that Ali Ali, I was about to call him by my wife's name. Do you want to be my wife? No, I'm just kidding. One valuation we did recently and it was for an apartment in Orem Park. Yeah, Do you remember how much they purchased that property?
Speaker 3:for it was 550, wasn't it? Or just over 550.
Speaker 2:And what did the recent valuation come back?
Speaker 3:This is two years, yeah, two years. 735, we got it.
Speaker 2:That is a 27% growth on an apartment on a strata complex. So even areas like that are still growing, and if you're a mom and dad or if you're a young investor looking to tap into the potential of Sydney, there is still a lot of opportunity out there, definitely, yeah. So where are your favourite areas right now?
Speaker 1:Caught him off guard.
Speaker 3:Well, I'm moving out the west, I'm going to Camden, so like that's just for me. You got a bit of like more land and there's new schools, new, like new. Everything is going out that way. So that's how, like when we came out to the west, I was very much brought up in that kind of area where everything was brand new. So I thought I kind of want the same for my kid as well. So, yeah, we're kind of we're going out that way and that's where I want to be.
Speaker 2:They had a statistic the other day the camden lga, so I know lga is a naughty word because we all remember it from um covid I was like why is it a naughty word?
Speaker 1:what have I missed? I just, I just remember, like lgas, and then everybody in bondi is partying.
Speaker 2:And then there was helicopters flying over paramata and I was like yeah, something ain't right here.
Speaker 3:The math ain't mathin'.
Speaker 2:But, the Camden LGA is actually the fastest growing.
Speaker 1:LGA in Sydney. I believe that my cousins live there and I drive there pretty regularly.
Speaker 2:You drive from Quakers Hill to Camden.
Speaker 1:Yeah, how long does that take you About 40 minutes, 45 minutes and that's the thing that we've got to bring up about Western Sydney.
Speaker 2:They're investing. I've got no infrastructure. No, I've got no metro. I don't have no tunnel. I don't have any highways being built.
Speaker 2:All I've got is NIMBYs in my backyard, not in my backyard, not in my backyard, not in my backyard, that's it. They do not give a single shit. Oh, a national park there? Too bad, you can't build a train line Like. There's just so many things, lost opportunities in the southwest portion of Sydney, but where you guys are kind of situated because there's so much space, so much development, there's actual opportunity there. Yeah, I still remember when Ed Square was being built, my brother-in-law and I drove through it and all I could think to myself was I don't know about this area, I don't know if it's going to do well, it is the most booming area.
Speaker 2:You go there at night.
Speaker 3:You know for one of the restaurants about, yeah, like there's so much life going on, yes, food everywhere, so people want to like be around that you know. So they're bringing different hubs out there and um, that just, yeah, brings that culture and um, yeah, people were happy to to spend a little bit extra and and, look, it's really I think everyone's kind of that goes out west or is accustomed to driving a little bit as well, yeah, you got it right.
Speaker 2:You got it. Coming back to the original topic, the bank of mum and dad. Yeah, okay, which banks I want to say are assisting the most right now when it comes to guarantor loans or the first-home guarantee?
Speaker 3:Yeah, so you've got your majors and we do a lot of guarantor loans with like Westpac CBA. But and there's, we do a lot of guarantor loans with like Westpac CBA, but actually there's a stat 60% of all applicants, first home buyers, are getting help from mum and dad. You know it's a growing theme. You're not alone if you feel like you need to get help from mum and dad or like there are the government schemes that are trying to help as well. So there are heaps of options. But yeah, you're not really refined to like 30 lenders if you think you need to get help from mum and dad or whatnot.
Speaker 2:But one thing I do want to bring up about the guarantor loans.
Speaker 3:Yeah.
Speaker 2:It doesn't need to be owner occupied, does it?
Speaker 3:No, it doesn't. It doesn't. It can be an investment and it can be your parents' investment property as well, so there are so many options really to cover the security aspect of it.
Speaker 2:What's the difference? If somebody wanted to buy an investment as their first property as opposed to an owner-occupied property, how much more could they borrow?
Speaker 3:potentially. Look, it makes a substantial difference because we can factor in the rental income, which is a big help. Then there's negative gearing and all of that. So you'd be surprised, like I had an applicant that I told him sorry, your borrowing capacity is 400k. Again he was like what am I going to do with 400k? I said no, well, if you buy an investment property, he was up 750 and with his deposit he was up over 800k. It nearly doubled, yeah, you know, and um, that's massive. That opens up so many different avenues to buying property. And then the leverage that you can do with to get the gain on 400 versus the gain on 800, it's gonna propel your, your wealth so, like when you're buying for 400 000, you're buying a studio yeah studio or one battle yeah, you look, you can go interstate as well.
Speaker 3:Yeah, if it's investment, but but when?
Speaker 2:you're buying for 800k, you're you're probably getting a block of land and a house.
Speaker 3:Exactly, yeah. So markets open up so much. They ended up buying like a really nice property just before Newcastle. That area will grow as well, but big block of land, four bedroom good rental. You know that just opens up so many different property markets for the applicants.
Speaker 2:So with rental yield in those sorts of areas Newcastle, wa, even to a lesser extent, you know Adelaide, south Australia we do see a lot more opportunity in those regional areas. Is it because of the fly in, fly out? Is it because of work opportunities? Do we really know why the rental yield is better in those locations?
Speaker 3:I would say, yeah, it's job-dependent as well, but I also think it's because of affordability in certain areas where it might look very appealing to an investor, but there's still a lot of owner and people needing to live in that area. So the investors flood there, they get in, they make their money and then people still need to live around those areas. Like you said, they're earning a good income because it might be fly in, fly out, work or whatnot, but it's probably about having a balance in terms of your portfolio, I think. Mom, coming back to mom and dads, um, they're actually, it's actually a 35 billion dollar market and it's the ninth largest lender in australia yeah, huge, I 100 believe that it's 35 billion dollars.
Speaker 2:It's huge. We've got a population of 20 mil let's say, 6 million of them are parents. It's massive, that is a huge amount. That's $150,000, $180,000 per person.
Speaker 3:It's a top 10 lender. So mom and dad's doing their weight for their kids. Australia is a very multicultural country that we're all kind of migrants. You go back further enough and you know they helped their kids and we've got to help our kids. It's a bit of a responsibility on our shoulders for the next generations as well.
Speaker 2:What's your piece of advice to parents out there that are stubborn I'm talking very, very wog parents, okay that are like no, save on your own. What's your advice to them when it comes to assisting their kids, especially if they've got a house with plenty of equity in it?
Speaker 3:I'd say start earlier, like I guess it's hard to change your ways in certain aspects but, like for my kid for example, I've started already investing. So in 25 years, when he's ready and he finds the love of his life, he's got some funds there, you know, to help him out, because I think this landscape is only gonna get harder. But if you've got the security there, it's not the biggest risk. If you're not, if you don't have the money there, but you've got the security, it can make a massive difference to getting your kid to then stay in a fairly local area compared to you. Or they're moving. You know the stats say as well. Two in every three are moving out, so your family's just going further and further away. So it depends on how much you want to keep your kids close by and I think you know a lot of people do do and that's why we see it's such a big market share and especially with parents already having the equity there, I think they're usually pretty open to making sure they use that security to help their kids.
Speaker 2:And what's the advice you'd give to kids out there? I'm talking 18 to 25.
Speaker 1:I don't want to go beyond that After 25,.
Speaker 2:You're an adult, you can make your own decisions. Talking 18 to 25, I don't want to go beyond that. After 25, you're an adult, you can make your own decisions, you know but 18 to 25? What's your advice to those individuals? Yeah um, looking to get into the property market but don't have the strong enough deposit, like, how would you go about?
Speaker 3:hey, mom and dad, this is what I want to do. If you've got your mom and dad and they've got security there, it's not always the deposit so you still can enjoy your life, travel. I'm a big, big advocate for traveling while you're young, um. But then there's you've got to be smart with your money. You might have to make a sacrifice, like you can't have a personal loan with a to to travel, or like your massive car loan as well, because those things are going to affect your serviceability. So work hard, hard, get a good career going for that period of time. So the deposit save while you can, while you're at home. That's the easiest time to save, right, if your parents have the security check, if you've got a good job, you'll be probably surprised with what you can buy as an investment. So we can structure it in a way where you can purchase a property fairly young and then you're still living at home and then saving as well. So then you've got that growth in that property to when you're ready to move into a no-knock.
Speaker 2:You highlighted something earlier starting them off early. Yeah, why is that so important?
Speaker 3:Well, it's time in the market. So it's very hard to time the market, but you know if you're in it long enough and in property investing like it goes in its cycles. But we've seen really strong growth. So if you can get in early, I always say the best time to buy was yesterday, when you can crunch your figures and see where you're at and then have a plan in place Fantastic.
Speaker 2:Well, Anthony, I want to thank you so much for coming on today. I really appreciate it. Thanks for giving us some ad libs. That's what I'm here for Introductions, some ad libs here and there and a good old fashioned quote. If you want to reach out to Anthony or if you need any help with your finance, you can reach out to us at wwwitsimplecomau. As always, my name is Joe, that's I'm Shmoe, and thank you for listening to the Finance Show with Joe.
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