Big data is reshaping industries and economies, and Real estate is ripe for disruption. In this wide-ranging conversation with Goose McGrath founder and CEO of Dashdot, you'll discover how data-based decisions are being used to inform savvy property investments that help people escape the status quo.
This is good old property, but not at all as you know it.
Also in this episode:
Resources and Links
Dashdot - Property Growth Partner
Dashdot Insider - Podcast
The Wild Goose Chase - Podcast
Goose McGrath - Linkedin Profile
Join the Private Podcast Community
Click here to access free courses and trainings, build new habits, and connect with us and others on the journey to financial self reliance.
Other links 👇
Money mentorship:
Click here to start putting what you've been learning into practice.
Corporate program:
Click here to find out more about our workplace program
Follow us on Instagram:
Click here to see behind the scenes of our business and learn more about personal finance in bite-sized chunks.
Big data is reshaping industries and economies, and Real estate is ripe for disruption. In this wide-ranging conversation with Goose McGrath founder and CEO of Dashdot, you'll discover how data-based decisions are being used to inform savvy property investments that help people escape the status quo.
This is good old property, but not at all as you know it.
Also in this episode:
Resources and Links
Dashdot - Property Growth Partner
Dashdot Insider - Podcast
The Wild Goose Chase - Podcast
Goose McGrath - Linkedin Profile
Join the Private Podcast Community
Click here to access free courses and trainings, build new habits, and connect with us and others on the journey to financial self reliance.
Other links 👇
Money mentorship:
Click here to start putting what you've been learning into practice.
Corporate program:
Click here to find out more about our workplace program
Follow us on Instagram:
Click here to see behind the scenes of our business and learn more about personal finance in bite-sized chunks.
G'day. It's Terry here, and welcome back to the Wealth Time Freedom Show. We are knee deep in the I guess the expert part of our series on being Dead Smart, and I've got a real treat for you in this episode because I'm bringing on one of Australia's most iconoclastic characters in the real estate industry, goose McGrath. Goose is the co-founder and CEO of Dash, which is the 12th fastest growing tech company in Australia. Now you might be thinking wait a second. You just said we're talking about real estate and we're bringing on people to talk about real estate and real estate experts, but this guy you've just said is the CEO of a tech company. What's going on? This is a very different kind of business, folks. I think the best way I could explain this for you is a very different take and a very different angle on Australian real estate. And if you've ever seen the Michael Lewis movie Moneyball or you've read the book Moneyball, what I'd say is it's very similar in that sense because the main character of that movie, billy Bean he disrupts baseball on the way baseball is played, because he understands that there's now big data and you can use big data to make database decisions and actually find undervalued athletes in the marketplace, and assembling a team of undervalued athletes is actually how he disrupted the whole gang, and everybody followed suit after that Because of this insight, the way that you can use data and the amount of data we have now, and how it can improve our decision making. Now, this is not the way that it was traditionally done, but technology did enable this, and Billy Bean really did take advantage of this, and that created an edge for his team, the Oakland A's, and they ended up going all the way through to the finals. Now, they didn't win the championship, but in terms of how much they actually spent on their athletes and how far they were able to go, it absolutely forced everybody to follow suit after that, and Goose is doing the Moneyball for Australian real estate. He has built a tech company that's focused on big data to help everyday Australians make better decisions, with building a property portfolio that can set them up, and so it's a really interesting model, very interesting approach, and, as you're about to find out, goose is a super interesting guy and what you're about to hear is a deep, deep dive.
Speaker 1:We start with really understanding Goose, his background, where he sort of came from with this and what he was influenced by how he got started into property and how he's built this thing, what it was going to like to grow this thing very, very fast. And it's actually two conversations in one, because we got to this part of the conversation where he just kind of went on this tangent, this philosophical tangent right at the end and I was like I'm going to let this go, because it felt like it was almost like channeling right. He's saying some really really interesting stuff about the way he looks at living life, taking risks and approaching adventure as well, and I think it was just very valuable to kind of let him go when it came to this. So we kind of left that in there. But I also wanted to really share the second part of that conversation because as soon as we stopped we were talking about the next part of the questions, the conversations. We ran out of time so I was able to reschedule and the second part of the conversation Ryan wasn't present for but I was able to get a sort of a bit more of a detail behind the strategy underneath this and really kind of push and look at this from different angles just to better understand really what this approach actually is, what it isn't who it's suitable for and who it might not be suitable for as well, and get Goose to kind of look at it, and look at it from both sides too. And at the end of this we start to kind of look forward as well and look at prospects for Australian property, particularly over the next 12 to 24 months.
Speaker 1:And I really wanted to make sure that we put this in here too, because there was some really counterintuitive, counterculture takes. And so this is a super media episode and I hope that if you're traveling somewhere, you've got the time to kind of listen to it all at once. But maybe you break it up. That's fine too. I just want to put it together because I think this is just a really different kind of take and it's really important, I think, to be really open minded to how things are changing. And that's why we've got two different experts.
Speaker 1:Goose is representing what is changing and what we can do to take advantage of these changes and what is different and new, and then our next episode is what's going to stay the same.
Speaker 1:So I think a different look at both these angles and different perspectives is very, very valuable, because you know, as we kind of said with debt.
Speaker 1:Most of the risk that you're going to take with debt is actually not necessarily the debt itself. We know that it's actually going to get easier for you over time to pay that debt off, but it must be secured against a very good quality property, a property that's going to do what it needs to do for you to be able to make your savings work harder. So it's really worth looking at this from different angles and coming up with what fits you best and sort of thinking through first principles and, like I said before, this is going to be really about what's changing and how we can take advantage of what's changing, but also you want to think about what never changes, and so, between this episode and the next episode, I think you're going to be able to pick up some really helpful and valuable principles around making decisions with debt and property here in Australia. So, with that said, let's get straight into it. I can't wait to see what you guys think of this one Goose. Welcome to the podcast, may. Thank you so much for coming on.
Speaker 2:It's a joy and a pleasure, Obviously. I had the chance to speak to you guys recently and I'm excited to expand that conversation here on your podcast.
Speaker 1:Yes, we've had a lot of people reach out to us about that episode. If you're interested in it, go to the dash dot inside our podcast. And what do we say? It starts with debt and it finishes with dying in black holes. It's a very interesting conversation, isn't it?
Speaker 2:Yeah, indeed, it was a lot of fun. Let's see where we go this time.
Speaker 1:Yeah, look, mate, we appreciate just the chance to be able to talk to someone in this property space. And it's interesting because three or four months ago Kelly, your awesome team member Kelly, reached out to me and just kind of mentioned should be looking for somebody who does kind of what we do off the back of guys that are coming through Obviously needing to get their cash flow things sorted for property. And since then we've been doing a bit of work together and I have to say all the team members, everyone that we've kind of been involved with, is just such good people. So really good job putting that together.
Speaker 1:And there is another link too with us as well Charlie Vala we've had on the show previously and I know that Charlie Vala is one of your success stories and I'm keen to dig into that a little bit later on as well. So we really wanted to discuss many things through this episode, but one of them is just property is a vehicle for wealth and you have very, very similar sort of philosophies around wealth to we do, and I kind of want to start there and then go back and actually understand how you got there and then talk about some of this property stuff that you guys are doing with Dash Shot and how you're doing it differently. So tell me about your three stages of financial freedom. It's a good place to start.
Speaker 2:So the three stages of financial freedom are financial confidence, financial security and financial independence, and the benefit about that is because most people think that it's kind of a binary Like you've either achieved financial freedom or you haven't, and it's some kind of like I need to go and become rich or wealthy or it's this exclusive enclave for people who've achieved some ginormous degree of success. We're in fact. It's just not true and in fact you can achieve financial freedom in stage one, which is financial confidence, which is actually just building up the capabilities and the skill sets they're aware, with all to know that you can actually make the decisions that you want in your life today, to live your life as you see fit today, without it being contingent on some kind of material outcome, which is a big issue for people, right, because a lot of people get trapped in this kind of vortex of obligation and expectation or just a lack of comprehension that there is a life that they can live outside of their current status quo, and they're doing that if they just persist in this gray zone of discontent for a long enough period of time that eventually they'll shoot out the other ends, like at some birthing moment where they suddenly spontaneously spawn into this existence they've always dreamed of, and it's just not true. The whole process is a process of continuous evolution, and the freedom that you seek, the freedom that you desire, the freedom to live the life you really want to see today, to be the best version of yourself, exists right now, in the capabilities that you have right now. And the only thing that's holding people back is their ability to perceive the world in a uniquely different way. That gives them that freedom, because everything in the world is made of perception, and so we can perceive our way to success.
Speaker 2:So, financial confidence, to get a little more specific about it, like, realistically, if you want to travel, right. So, for example, I've asked a lot of people okay, if you could remove all the current constraints in your life, what would you do? You know, maybe it's the cohort of people that I'm asking, but roughly 90% of people say, oh, I want to travel, and the other 10% of people say I want to move to the country and grow vegetables. The reality of the situation is you could do either of those things right now, like there's no reason that you couldn't go travel Now. I have copped a bit of heat from this on the internet for people like, oh, that's so privileged, you know, saying everyone can travel, it costs money, and it's like the reality of the situation is. You know, I didn't have a fixed address for over 10 years. My only belongings for about five years or more was a swag. If you don't know what a swag is, it's basically a mattress that you roll out on the ground, a bag of tools and a bag of clothes. Now I had a card that I basically inherited and I just traveled around. It was awesome. I had a great time.
Speaker 2:You can create mobility at a very low budget and in fact, you can see a lot of people like, yes, you need some money, but you need some money for basically anything. But to the degree that you can afford a cheap ticket to some destination and then have to wear with all to go and find a way to be economically viable in that environment is the ability for you to create that freedom that you want. Same thing goes for moving to the country and growing vegetables. Now, the assumption here is most people are going to be listening to this podcast. We've got some degree of income, which is the cash flow side of the equation. Cash flow comes not just from assets, but comes from the asset of you as the entrepreneur and your ability to earn an income, and so if you've got the ability to leverage an income in some way, you have the ability to create the freedom that you want. So that's where financial confidence comes into it.
Speaker 2:The thing I love about the first stage is that it's available to basically anyone if you shift your mindset. I know that was a long way to kind of start, but like just to quickly cap on the other two. The next stage is financial security, where you've basically expanded your income. You've taken your surplus income and started to invest that into assets. Typically, that is not going to create enough surplus cash flow that you never have to work again. So that's not about income replacement, that's about wealth creation, and on that wealth creation front you can create a baseline for your life.
Speaker 2:I like to call it hitting save, where you've got enough assets that, if the shit were to hit the fan, you would be safe. Now what that could look like is having at least 12 months, but probably something more like two or three years worth of equity in assets. That could be equity in real estate, could be equity in shares, whatever. It might not be liquid and it might not be cash flow, but you've got this buffer to know that, okay, I'm good, like I've got something working for me, it's growing, it's doing its thing.
Speaker 2:Probably, if I do nothing else for the rest of my life, I'm going to be okay, I'm going to get to retirement and if something terrible would happen, I've got a safety net I've got to back up. What that allows you to do is to take bigger swings at life, right. Bigger swings at life to achieve more, to become more, to become the best version of yourself. Then the next step from that is financial independence, when you've developed enough of an asset base and income base off those assets that you don't have to pursue active work because you have surplus income coming from your invested assets. And that's the point at which you never have to work again if you don't want to. But most people choose to Long answer. How would you rate my reply?
Speaker 3:Luffa, mate, take a breath for a second there, but brilliant.
Speaker 1:We can go literally anywhere from here. You know what? Before I let you guys respond.
Speaker 2:Let me give something to your audience right now, because there's a formula in here as well, and this will probably this may actually lead us in a pretty good direction. So I call it a minimum viable freedom formula, right? And so most people, when they think about financial independence this stage where you've got enough income to replace your assets they think that you need hundreds of thousands of dollars and all of this kind of stuff. You know, people have heard, say, 10 properties in 10 years and $100,000 cash flow. That's what you need. It's like, well, is that what you really need, seriously?
Speaker 2:And so there's a measurement that I thought about and I came up with a formula for it, called minimum viable freedom formula, and the thinking behind it is this just imagine for a moment that you wake up tomorrow and everything's exactly the same. You're wearing the same clothes, you live in the same house, you're eating the same food, everything's exactly the same from your lifestyle perspective, but you don't have to go to the gym, but you don't have to go to work. Ever again, ever again. Just think about how much time that gives you back in your day. You don't have to commute there, you don't have to clock in. You don't have to clock out. You've got all that time back. How would you feel? What would you do? Would you spend more time with your family? Would you finally start writing that book? That's freedom. It's not about Lamborghinis and private jets. It's not about being able to fly first class, although those things are nice. That's not freedom. That's luxury. That's obesity, right, financial obesity.
Speaker 2:So this freedom point could actually be a lot lower than you think, and so there's a formula that I developed called a minimum viable freedom formula, which is basically to take your current living expenses, so how much you currently spend on your life, minus your work related expenses.
Speaker 2:So, whether that be a second car so you can commute to work, whether it be train fares, whether it be buying lunch because you work in the city and you can, you don't have time to. Whatever it is the suits you might need to buy for your job, whatever any of those specific, cut those off your annual living expenses. What you've got left is your core living expenses. So then you multiply that by inflation average annual inflation, which is typically about 3% I know it's been higher recently and then times by inflation to the power of years to go. So if you think that you want to be financially independent in the next, say, five years, how much money would you need in that period of time? That formula there can actually help you to unlock how much you need to get to that number as well. So just sort of chuck that in there before we get away from it.
Speaker 3:I think that's definitely been an observation of ours as well, in the sense that when people feel they have the skills, they've got the confidence and the capability to figure it out, then that comes with it the ability to actually make changes and not be stuck on the path that they are on. And so I think there's a lot in that, in the sense that people think that there is an arbitrary number, that when they hit it at that point in time then I can make all these changes. But the people that figure out the financial confidence comes first and it actually unlocks most of that change is a really powerful insight.
Speaker 2:Yeah, and just to jump in there as well, have you guys familiar with the concept of anti fragility? Yep, so I've been kind of like getting in and around that concept recently and I think it kind of relates to this scenario as well. So, and for the people who've listened to this, who aren't aware of what anti-fragile means so a wine glass, for example, is fragile, you knock it off the table and it smashes. A plastic tumbler is robust, knock it off the table and it won't break, but it'll be fine. It's no better, no worse, it's okay.
Speaker 2:But an anti-fragile system is a system that gets better when it's put under stress, right, so your bones, your muscles, the actual human body and the human condition typically, is actually a system that gets better when it's put under stress. And so the outcome of this is post trauma growth, ptg. That concept around that as well can actually lean into your capability to understand how to create that confidence base as well, because as you face different challenges and as you continue to grow through those challenges, you develop more of the confidence to know that well, whatever happens, I'm going to be okay. And the degree to which you can find those challenges and build that post trauma growth and get those kinds of outcomes is the degree to which you can unlock freedom because you know that nothing's ever going to go wrong, that you can't conquer.
Speaker 1:Yeah, I love that. Yeah, we see it a lot too. It is when people do get across where their money is actually at and then understand what they want. In your words, you said that is freedom. What is freedom, if I can define freedom and actually understand where my money is actually at? Now we start to see people make those decisions, take those actions, follow those pathways, pull on those threads. Just before this, a couple of days before this, we just released this episode with Mitch and Brooke a couple of our exemplars off the back of this couple series, and you said, like a move to the farm and grow vegetables, they're not quite doing that, but they're doing the lap around Australia with two kids, but giving themselves permission to do that. And they were sort of saying they would never have done that under those circumstances in the past. They would have just burnt themselves out and it's kind of would have been this more of a reactive thing they never would have enjoyed. So it is really interesting to see that and see that all the time.
Speaker 2:That's really interesting, right, because people think freedom is this ability to like not have to do it, but like just taking that example, right, which is a perfect example, because the reality of the situation is the cost to travel around Australia, depending on how you're going to live, is you got to put a bit of logistical thought into it. You got to be like I how am I going to have internet on the road If, just in the context of doing it, whilst you still have a job, by the way, right, yeah, because you can still be earning money? Right, you can still have a job and go do that. And if you're living in Sydney, I mean the cost of rent. You know, you're probably spending several thousand dollars a month on rent, depending on where you're living, right, and food and what costs of living through the roof.
Speaker 2:If you just took that and said, well, that's my travel money, I'm going to keep this, I'm going to spend the same amount, which is effectively what I did, by the way. So I was living in Sydney and I was like, well, it costs a lot to live here, where else could I live for the same amount of money? And we started looking around Australia and we thought about moving to Queensland and we ended up moving to Bali because we were like, why not, let's go there? I mean, it's basically the same time zone as Perth and you know it wasn't to live cheaply, it was because we can have more of what we want out of life. You know, by spending the same amount of money we would in Sydney, we could live a better quality of life. So just reframing how you're allocating your marbles can actually unlock that degree of freedom.
Speaker 1:Yeah, and let's go back, mate. Let's go way back to the start here, because I wanted to start with that sort of philosophy, because it's very much in line with how we see things as well People too much seeing money as this sort of wealth, as this mirage off into the future, instead of actually making it happen. Now I want to actually go back to how you got here and what you've been building, what you've been working on, because I feel like there's a lot in here for people to around their own transformation but also what you're doing now with Dash. So talk to us about what you were doing beforehand. Right, because you didn't start in poverty. You started in the music industry, correct? Yeah, that's correct.
Speaker 2:So not to go too far back, but just to contextualize it. So when I was 14, I broke my back in a motorbike accident, which at the time I grew up in a small country town area and you know, I was bedridden for quite a long period of time and the only thing I had was music and I loved music. So I was listening to CDs and I was like man, when I could walk again, I really want to go to some gigs. But there was no gigs in my area. I couldn't go see any live music. I never really had that experience and so as soon as I could walk again, I mowed lawns, did some odd jobs and still earned enough money to go and hire a haul and start putting on gigs you know, getting local bands to play and stuff like that and I thought this is awesome, I loved it, and so at that point I decided that's what I wanted to do.
Speaker 2:During that period of time. Some of the CDs that I was listening to, they were like live albums from these bands playing at festivals in Europe, and I'd never been to a festival. I didn't know what a festival was, and this is before the internet. It was dial-up internet and there was no computer in my room, there was no smartphones, right, so I could listen to a festival, but I couldn't look up what a festival was. There was no search like that. I was 14 years old and so I was listening to their crowd and these things and I was like man, man, this must be so in a couple of little photos in the CD, booklets and stuff and I'm like, fire out, the festival is awesome. So I decided then that I wanted to work at festivals and I actually wrote down a list of a bunch of festivals that I managed to get off these albums. That was the only reference I had and I was like, yeah, I'm going to go work at Glastonbury and like all of this kind of stuff. I wrote these down on a bit of paper and forgot about them. And then fast forward a few years later I ended up working all of the festivals and managing all the big day out and stuff like that. I ended up in management roles at all of those festivals that I wrote down.
Speaker 2:But so I dropped out of school early at 17 because I was already organizing events already on this path to pursue festival management and that was going pretty well, and so I tracked that for a really long period of time. I had a few moments where I kind of stepped in and out of it. You know, moved to Vietnam as an adventure motorcycle tour guide, I worked in Ethiopia as a permaculture teacher and a few other things, but the kind of like common thread was that I kept going back to organizing festivals. So that was the predominant feature in my life for good 15 years and that was great. But along the way I developed some pretty bad habits, lifestyle habits, and I wouldn't point to the fact that it was the festival industry that kind of caused it. I actually think there was like other kind of deeper personal considerations that led me to end up basically being an alcoholic drug addict. So by the time I was 30 years old I was basically homeless. I had nowhere to go. I was living on my office floor with this cheap dingy office in the western suburbs of Melbourne and I was living on the floor there because I had nowhere else to go and we were already paying rent on the office and I couldn't afford any other rent. So I just kind of moved into one of the rooms there, sleeping on a mattress on the ground, drinking heavily, taking drugs every day, just completely going nowhere fast. Now I was extremely high, functioning, mind you, so I was able to do that and still continue to operate. I was persisting in any environment, but I was killing myself as a person.
Speaker 2:Around that time I met my partner, Gabby. She actually came to work in the event business that we were running. I'd fallen massively out of love with the work that I was doing. I realised that I was going nowhere fast. I was unhappy, I was depressed, I needed to create change and obviously when you fall in love, that can be the ultimate catalyst. It was like, oh okay, now I've got someone I want to build a life with. Where is this going? It wasn't instantly likely to go build a life together.
Speaker 2:In fact, for the first year or so that we were together, my drug and alcohol situation continued to get worse and worse and worse. I got to a point where, basically, I realised that if I kept on the path that I was on, I was going to kill myself not from suicide, but my body wouldn't be able to handle it and I'd also lose Gabby. And it wasn't the me dying piece that was the concern, it was the losing Gabby piece. I suddenly realised that if I didn't change drastically, I would lose her, and I realised that I finally had something to live for, because I didn't care about myself. There was no self-love, there was no self-worth, none of that kind of stuff and so it actually took an external catalyst for me to go. She's worth saving myself for.
Speaker 2:So I wanted to show up, and so March 2018, I got sober for the first time and we had been having discussions around like what's next in life, like where are we going to go, how are we going to get out of the events, industry and stuff, and basically, 1st of April 2018, that was sober day one. I went fully sober, quit all the drugs and alcohol, quit cigarettes, quit sugar, quit carbs, started going to the gym Like I'm a pretty extreme kind of dude so when I went to it, I was like right, we do it all right now and just went fully in that direction and it was pretty interesting. I don't specifically remember it being difficult, but I'm sure that it was. What I really remember was that it I felt like I could see the world for the first time. I suddenly felt clarity and I felt like my brain started to turn on. Like you know I've got a pretty active mental faculty, in case you guys haven't picked up that, but it's like it moves pretty quickly.
Speaker 2:That had just been under this blanket for a tremendous amount of time and I took the blanket off and all of a sudden the brain starts going big, big, big, big, big. Right, what are we doing here, hello? Hello, we're awake. We started getting interested in investing in real estate. Now, the reason we started getting interested in investing in real estate is because we were in the western suburbs of Melbourne and there's all these properties in food's gray that we know somebody's parents bought for 70 grand and now they're worth 2 million and we're thinking that's how you get rich, is it? I know what we'll do We'll buy an investment property and we'll become financially free.
Speaker 2:We had no idea what we're doing and I remember speaking to my business partner at the time a great guy, but he had about as much idea about property investing as I did and I said how does this work? And he said I think you just buy and it doubles every seven years. That's what I heard. And I said you just buy any property and it doubles in seven years. He goes yeah, pretty sure, that's how it works. I was like fucking sweet, I'm just going to go buy something there.
Speaker 2:I love it. So that was literally about as much knowledge as we had. Look, we've done a little bit more research and that was the kind of where we're at, and one Sunday was bored and I said, hey, gabby, do you want to jump on the bike? So let's go for a little cruise around. There's some display units or whatever on this stuff. We got to do a bit of window shopping and we walked into one of those and got sold to by a very good salesman. We walked in there bored, just to have a little look, and walked out there with a signed contract to buy an off-the-plane apartment in food's gray In 2018, literally at the moment that the market was starting to crash.
Speaker 2:And so it's funny because we were signed in the contract, we had to go back on the Wednesday to finish signing the paperwork and we were rushing because we're like, dude, come on, hurry up, we've got to get to this seminar. And he was like, oh, do you want your bottle of wine? And we're like, dude, shut up, sign the paperwork, Got to go. We celebrated our first property purchase with a halal snack pack. On the way to this, in the car, we're feeding each other in cars, we're racing across town to get to this property investing seminar. We go into the property investing seminar and they're talking about things like positive cash flow and manufacturing equity and buying below market value and all of these things. And I remember looking at Gabby. We were like, oh, we're fucked up, didn't we?
Speaker 1:We made a mistake.
Speaker 2:And that moment, literally the night that we signed the contract, we realized we made a mistake. And that was before we realized the market was crashing as well. So in pretty much the same day that we signed the contract, we were like, whoa, we have really miscalculated this. And so we had too much ego to pull out of the deal. There was a cooling off period, but we'd borrowed money off family and friends because we didn't have any money, because we were broke, basically. So we'd borrowed money off family to get the deposit and we had too much ego. We're like, nope, we've convinced our family that this is a good idea. We're going to stick without shit ideas.
Speaker 2:Shouldn't have done it, but nonetheless, that kind of was a real big motivator to try and work out. Okay, well, how do we not stuff this up again? And you know, for me again, as I said, it was like my brain had switched on for the first time, right, and so, having not the substances to kind of latch that kind of addictive mentality to, I suddenly had this big problem to try and work out. I was like, why do some properties go up? Why do some properties go down? How could you find the right property? What would the right property be, but there must be some kind of formula to this. There must be some way to work this out right. I was like you've got to be able to solve this. This must exist, and so that I was just obsessed with just deeply on trying to solve this problem. Thankfully, I've been completely sober since Christmas Day 2018. And I'm delighted by that too, but that quest to solve the problem was the kind of thing that led us to develop DashDot.
Speaker 1:As you're going through that journey and that immersing yourself in this new world, trying to figure out this problem, what are the big things, the big insights that you kind of hit on? Because the thing that's interesting to me, it's a little bit similar to myself in the sense that you're outside, is looking in, and so you actually aren't a part of the bubble that the insiders have, so you have a different perspective and you see things differently. What did you see differently when you were going through that immersion process?
Speaker 2:Well, I couldn't tell you what I saw differently, because we could only see the things that we could see Because, to your point, we didn't have property investors around us. We didn't have a property investing family. We were going to all these different seminars and stuff and they all had slightly different ideas and so which was kind of good, because we had a blank canvas mindset so we were just trying to understand all of this information, see how we could piece it together. We didn't have a mentor saying this is what you do, go do X. We were sort of trying to work it out and that was the best possible scenario. It's like first principles, starting from first principles. Yeah, exactly, we're starting from first principles and trying to go okay, does any of this kind of stuff that we're hearing, does this withstand robust logic and how might this work and how might this not work?
Speaker 2:And we tested a whole bunch of different stuff. I mean, we were trying to do options strategies on bloody 200 acre farms out near freaking sunshine and stuff like that. We were sending letters and we tried all kinds of different things just to kind of feel through these ideas. What it really sort of started to come down to was trying to understand, like what are the drivers? Which didn't seem to be a big question. A lot of people were asking, like, what fundamentally could drive a market or a decision or any of that kind of stuff.
Speaker 2:And we picked through just the aggregated approach of trying to see what all of these different strategies were pointing to, but then also realizing where there was a big, big gap.
Speaker 2:And the big big gap seemed to be around how do you find the right property in the right place at the right time.
Speaker 2:There was a lot of strategies around like hey, you can subdivide and you could do this, or you've just buy and wait 30 years, and there was kind of these kind of broad generalizations but nobody seemed to be able to say, well, here's why would? You would select a specific location and you can give them point in time. And so we've worked out that, broadly speaking, 80% of the wealth creation that happens in real estate comes from the location selection and the timing. You can make far greater returns, not to say that you can't make money doing developments and flips and stuff. You can. You can make way more money and way more risk adjusted money if you just find the right place. It's kind of like what's the big, what's the one big lever, like what's the big domino that you could knock down? That if you just got that right, it kind of almost wouldn't matter what you did, because you'd be so likely to make money and, honestly, we had walls covered in spreadsheets and maps and it was very organic early on.
Speaker 1:I've got the picture of that meme with the guy with all the stuff behind him.
Speaker 2:It's like exactly like that.
Speaker 2:It was exactly like that, honestly, and all my friends thought we'd gone completely mad, like because I'd gotten sober and so most of them didn't have anything to talk to me about anymore. But they were still coming around to sort of visit and stuff. And you know, they would walk into the place we were renting. And there's all this like zoning maps of all these different cities and suburbs and stuff. It was like rain. Many type like well, how does this connect, you know? Type of session, staying up until two in the morning, running different scenarios, and it was hectic, but it was the kind of pursuit that comes with like an obsessive passion. It was for the purpose of solving a problem. We didn't have the concept of like let's build a business around this. We were just trying to work out how does this problem work? Like what the hell is this? It's crazy. And it seemed like a worthy problem to solve Just before you go on.
Speaker 1:I really want to double click on this moment here because I think it's important not to skip over. Essentially, you sort of said early days, what's the broad understanding of property? You buy it and it goes up in seven years, right, because everybody assumes that there is a property market, like it's one thing, but the thing that you've kind of been pointing to here is that there isn't one property market, there is many property markets, and actually the way I kind of look at it now is it's more of an alternative asset class, and in an alternative asset class it's inefficient, and where there's inefficiencies there's opportunities, and that's what you've kind of hit on right. That's where you've gone to stone. If you can find this inside information, then this is where you can outperform, and so I know a lot of people would argue with that, but that's the key insight, isn't it?
Speaker 2:You're 100% right about finding inefficiencies in the market. So there's 15,264 towns and suburbs in Australia and every single one of those represents an individual market. You can go far more granular than that, by the way. So you could, roughly broadly speaking, times that by about four or five and you would get some pretty distinct numbers of actual micro dynamic markets that operate within the property. It's kind of easier to just stick to the suburbs because more granular than that gets pretty hyper granular, somewhere between 15,000 and 45,000 to 60,000 different unique pockets of property market activity that happen across the country. So it's not Sydney property market. There's hundreds of markets within the Sydney property market. There's not the Australian property market, these things.
Speaker 2:It's just a fallacy to think about it like that. Now, if you believe that it is not possible to time the market, nor is it possible to try and find the right place, buy anything anywhere, you don't need a strategy. Just go buy anything anywhere and that's it. You don't need a strategy. But the problem is most people, if they really think about it, will realize that that probably isn't true. Right, there must be better places to buy than others and in fact not all markets go up all at the same time, and in fact, while broadly speaking, property prices may double every seven to 12 years is kind of the better heuristic it's between seven and 12. What you actually might find is that in some markets, property prices might double in five. If the window of measurement is 10 years, you could say the prices doubled in 10 years, but in fact the doubling might have happened from year three to eight, and so what happens is property markets tend to move in S curves. There's a whole kind of like matching market dynamic type thing that goes on there, which kind of points to that there is an opportune time to find the right time to enter into a market and a right time to exit a market. Now, if you buy and hold forever, yes, your gains will actually go beyond exponential. So when you can compound exponents, you get five gradients beyond exponential. So it's pretty interesting what can happen over time if you play the market in a really long game. But if you also recognize that there's probably going to be optimal times to enter and exit a market, you can actually really massively expand your gains, and understanding that is, I think, the key to unlocking the property markets. Understand here's.
Speaker 2:The other thing, though, is that it's not the same drivers in all the markets in the same ratios. So we've built very sophisticated forecasting and market identification models. So we've got algorithms that can tell us when to get into the market, when it's at the bottom of the S curve, like when the markets are about to go up and wild. But then we've also got forecasting models that can tell us where the market's going to go over the next 15 months, so we can see into the future. Now the thing about those forecasting models a lot of people think the property market is this basic set of assumptions population or vacancy rates, infrastructure spending that's the thing that drives property markets.
Speaker 2:To be fair, we kind of believe that kind of stuff too and in fact this belief, for example, that infrastructure spending new hospitals, for example leads to property price growth. We believe that to be true. We thought that that was true. We were going to do a research paper on that specific topic just because we thought that would be an easy pin to knock over. All right, we'll do a research paper that explains how infrastructure spending leads to price growth. We thought that would be an easy domino.
Speaker 2:The problem is when we started doing the research on a very granular level with our PhD data scientists and all of this kind of stuff, we realized it wasn't true, or at least it wasn't absolutely true. And it was sometimes true in some ways, based on different types of infrastructure in different types of markets. So, for example, in an area where the predominant demographic makeup is of people in the financial services or professional services industries, infrastructure spending on entertainment centers that actually did lead to price growth, right, in most cases not all cases, but most cases in an area where the industry makeup was more geared around, say, farming and manufacturing and stuff like that, you might have a different driver, could be schools, could be hospitals, and so all these started to dissipate. So, in order to understand the market, we had to actually invent new ways to understand the market, because the more threads we pulled on here, the more we realized that it just was crazily complex, which is why no one solved it before. We've been saying for years we want to solve the property market, which is a pretty big claim. I don't think we understand it the way that hasn't been understood before.
Speaker 2:And so, in order to build the forecasting models, we analyzed, we processed several billion data points. We cooked it down to an initial 500 potential features or metrics. A feature is what you would call data science methods. So for example, vacancy rates might be a feature. We then had to invent a new technology we called it FAST the feature automated assessment technology to help us process to try and work out what features correlated with price growth. We managed to cook that down to about 60 features. But of those 60 features, 39 of them we had to invent. So 39 of them don't exist outside of what we've had to build.
Speaker 1:You mean there isn't data for them? You had to create the data yourselves.
Speaker 2:Well, we had to create complex data combinations to create new features. So, for example, we had to invent a specific socioeconomic index indicator. That we had to develop didn't exist, but that actually is a really key feature yeah, it's proprietary to you. Yeah, in defining how markets move. So we've got these 60 features that we've defined that actually really dictate, kind of like, what's going to happen in the market. But what's interesting about that is that those features are weighted differently in different markets. So, for example, bondi may be more heavily influenced by interest rates than Bundaberg, and so you have this make up of these 60 features, but feature 27 in Bundaberg might make up 20% of the dynamic price movement, but in that feature 23 in Bondi might have 12% or whatever, and so you have this kind of like dynamic model. It's an extremely sophisticated beast, but what's interesting is it can be mathematically solved.
Speaker 1:What I love about this is when I think about mastery and excellence. It always has a handle on the detail and you're talking about the most granular details. The way we sort of think about it is there's always principles you can use, but the way those principles need to be configured is always contextual and it never will change. And so you've kind of built this machine that helps you to figure out what is the context here and now, what's the correct configuration for this context? And I want to make sure I'm understanding this correctly. Just to kind of go through your logic with this. The key insight you've had is everybody thinks there's a real estate market and underneath that assumption is another assumption, which is that market is efficient. And you're saying it's not efficient, it's completely inefficient. And if it's inefficient, that means there's opportunities to have asynchronous risk and reward if you have the right information. So I want to optimize everything around finding and getting the right information to be able to make that happen. Have I got it right?
Speaker 2:Yeah, that's a great assessment. And also I would say those inefficiencies are fractal, Right, so they continue all the way down. Just as a very brief example, People think that you can't buy properties under market value because market value is whatever someone's going to pay for it, but the market value is determined by the impound rate of knowledge, not by what someone pays for it. And so if you can find an inefficiency where your impound rate of knowledge ie if you have an insight that the market does not have, you can find an opportunity that the market cannot find. And the impound rate of knowledge, the simplest way to think about this right is let's say, Tim Cook was flying on his jet and the jet blew up in midair. If everyone in the world knew that Tim Cook had died in a plane accident, what would happen to Apple share price? It would go down massively, Right. But what if five people or one person knew five hours before everyone else? Could they exploit a market inefficiency and capitalize on it? Of course they could. So the impound rate of knowledge is really really important in understanding how to find inefficiencies in the market.
Speaker 2:And so the second property we bought. We did our research, we found a property that we could buy for, like it was significantly under market value I can't remember it was like 15%. It was chunky under market value, so under market value, in fact, that 90 days later we were able to refinance it and buy another property. We spent $1,250 out of our own pocket to buy the second property because we just took all the equity out of the one that we just bought. The property didn't grow that much in 90 days. Guys like like so you can do it.
Speaker 2:And so to that degree that you can find those inefficiencies in not only markets but also assets is really really unique, and it's also it's not just about finding the inefficiencies, it's also about trying to understand where the market is going. You started to go into kind of like quant dynamics, which is sort of one of the things we sort of tried to model on. We were like okay, so you've got this quantitative trading philosophy that exists in capital markets and in shares and stuff like that, where, scientifically, you can assess, like, is the market, is this asset or this piece of the market going to move in a specific direction, and why, and can we capitalize on that? Now, the real estate market is really no different from any other market right, and so if you look at it with the right level of zooming or zoom out, you'll see that trend lines are basically the same. They're not going to be an up and to the right, it's going to be like up and down and all over the place. It just operates on a slightly slower time horizon.
Speaker 2:Imagine if you could take the stock market, turn the speed down by to about like 0.2 or something like that Could you do. You reckon you could make more money if you could do that. Probably right, and so sort of same philosophy.
Speaker 1:It's sort of interesting to me because it feels like people have gone in two directions, right, so you might have an insider who themselves in their own head has slowly developed patents that have helped them get really good at this over time. But that's locked in their head, right. And then you've got these other people that have created these board brush assumptions about. It's probably what they have done is taken the assumption that all markets are efficient and then just got lazy with their thinking and just going okay, that's another market, so it's efficient, and that means that there's no opportunities there. There's no way to kind of time the market right, Because that's just something you hear all the time. The person has got it in their head, it's just for them. But what you've done is kind of productivise the knowledge but go out and get information that you can get more broadly. You probably couldn't have built this business in 2000, could you? You had to have built it later, yeah that's a good point.
Speaker 2:Yeah, probably yeah, and I think this is where a lot of people go wrong. People romanticise property a lot. Yeah, they do. They romanticise it, and the reason they romanticise it is because they grew up in it. We all live in it. We all live in houses. We all have these dreams of having a nice house. The Australian property dream is extremely prescient, you know. And the people who fall in love with property, the people who are the least successful investors Let me just put that out there.
Speaker 2:The problem that I see that pervades the industry is that you have professionals in the industry who are in love with property. That might sound like a good thing, but it's not. Because they're in love with property, they have all these preordained beliefs. No, this is a good street. Look at the petunias, you know. Now, some of these beliefs may accidentally be true, but the fact that they're based on beliefs and not fact is dangerous, because you can't see beyond the beliefs. I don't care what the property looks like. I don't care what the reputation of the market is. What I care about is can we validate it with data, and quantitative and empirical, like we do? Both right? We don't just blindly trust the data, because that would be a mistake as well. But you've got to be able to test the relevancy of what you can see in real life versus what the actual underlying logic is. Everything that you kind of say needs to be able to be supported in a kind of robust way.
Speaker 2:There is a relationship between schools and prices, but it's probably not the like. It's in a good catchment zone. In fact it's not. Here's a little tidbit for you. If you actually want to know how schools affect property prices, there's a thing called the ICSEA score we call ICC ICSEA, and that is the rating of a school. There's this big rating system. They rate a school based on demographics of the parents and quality of the teachers and a whole bunch of other stuff. When the ICSEA score meets a certain threshold to come in with the exact number. But there's a specific point once it moves beyond that point, the degree to which it moves impacts property prices. So it's not the actual score, it's not just that a high score equals better prices, it's the. If the score moves from here to there, the prices will move from here to there in a kind of similar fashion. But when it's there, if it doesn't move, the prices won't move as much, so it's very interesting relationship between this ICSEA score and prices. Of course, that's just one of many, many things to pick apart.
Speaker 1:I was going to ask you about my line, so I'm glad you shared it, because that is one of the ones you hear the most.
Speaker 3:There's a little bit more nuance to it, which is good. What happened to that first property? Good question.
Speaker 2:We hung onto that property for a while and then construction was getting delayed and delayed and we ended up on selling the contract to somebody else. So we lost a few $10,000 to dollars but we never settled on the property. We flipped the contract basically to somebody else at a discount so they'd take it over just before it settled. We went to that apartment block in footscrave when we were in Melbourne on time. We were like, oh, it's built, let's go have a look. And then we got there and we were like I'm so fucking glad that we, because we were going to move into it. So it was a very good choice. Big learning lesson.
Speaker 1:But how did you get from here, right? So you've got this insight and now you've started to kind of go. What could other people use this insight Like? Take us on that journey.
Speaker 2:It was not that sophisticated. We didn't have this big insight of like, aha, we've discovered this thing, let's go and change the world. It wasn't that at all. We realized that we had kind of worked out some stuff. We hadn't worked out all of this stuff. This is five years of investing millions of dollars in building a very smart team. I'm not the smartest person on the team. There's way smarter people than me doing all of this research Right. So we've got data scientists and researchers and they're the real brains of the operation. They're the ones who have taken the insights and turned them into fact, which is wild.
Speaker 2:But at the time, you know, we had some assumptions that would seem to hold true and seem to withstand some robust logic, seem to work. We also wanted to find a new opportunity to be able to walk away from the events industry, and so, at the start of 2019, gabby and I sort of looked at each other and just after we bought this property the one that I mentioned that we bought got for very under market value and we're like this feels like a successful purchase to us. We're like man, okay, look, we're not experts, but there's probably heaps of other people that are going to make the same mistake that we just made. Imagine if we could just help some of them not make that mistake. And we were like, man, imagine if we could help 10 people. Wouldn't that be crazy? That was it. That was all we wanted to do. It was help 10 people. That was how it started and we said, all right, let's do it, we're going to do it.
Speaker 2:I remember a mortgage broker that I'd just been picking his brains about all kinds of stuff and he started to realize that I'd become a bit of a research nerd around on this stuff. He was surprised at how much I knew and he's like dude, have you ever thought about becoming a buyer's agent? And I was like, what's a buyer's agent? He's like well, basically, they help people to buy investment properties and whatever. And I was like there's a thing that I can do that'll miss that. But that I was like, oh my God, all right, I'm going to do that.
Speaker 2:Now, for the record, we don't consider ourselves buyers agents. When we started out, we sort of we used that moniker, but the businesses evolved so much. In a way, we deliver our service and what everything we do is just far beyond what the scope of a buyer's agent would be. We can go and dig into that a little later. But yeah, when we started, the official day one was 1st of April 2019, which, you'll note, it's 12 months after the first day of sobriety, by the way.
Speaker 2:So end of March, I handed over the keys, metaphorically, to my business partner for the event. Business said dude, I'm out. Thanks, you know. Look, we talked about it beforehand and whatever I said, done, finished my last event. So it's over to you. Man, you can have everything. See you, I just walked away, walked away with nothing. We had $5,000 in the bank, no safety net, no backup, didn't know anyone in the industry, nothing. Did a course and got my real estate license and you know we don't know all that kind of stuff but we had no idea what we're doing.
Speaker 2:We'd moved into this property that we bought we affectionately called the Crack Den. It was a renovator, it was a fixer upper, and we thought, yeah, we'll move in and we'll start this new business and we'll start the renovation. We started the business and not the renovation. So we were living in this crack den with no money, trying to work out how to start a business. Never done sales before. Never done marketing before, never really run a business before. I'd had a business previously, but hindsight it was never really a business in a meaningful sense. Didn't understand what a panel was, for example, and so we're trying to work out how to make this thing go. And we had so little money that we had to decide where we're going to spend the money on the business or food and we chose the business because we had to. If the business didn't work, we had no plan B, like we'd burnt the boats. So it had to work, and so, in order to eat, we'd walk around the supermarkets.
Speaker 2:At lunchtime, we'd go around the supermarkets and eat food. We'd just walk around the supermarket eating food off the shelves and then we'd walk out again. That was how we'd get lunch. That was how we persisted. We were getting pretty trim and lean and stuff, because we were intermittent fasting and we were keto. So we pretty much walk around the supermarket eating cheese and salami and then walk out again, and we did that for a while and it was very hardcore, and we were working 18 hours a day, seven days a week, because the bloody thing had to work.
Speaker 2:Here's the thing, though it started to work. People started giving us money, and I remember the first time somebody gave us money and they said, okay, and of course we didn't tell them that they were our first client, right? They believed that we had a functioning business and they were like, okay, cool, all right, no worries, I trust you to help me. They were really anxious too. They'd had property failures in the past, they'd lost heaps of money, and he was really anxious about getting into the market and he was like, look, I can't afford for this to go bad. You know, this is not going to work out well for me. It's my last shot, sort of thing. And he trusted us. It wasn't just him, but it was also the subsequent people that gave us money. And people started giving us money to help them do this.
Speaker 2:And I wasn't like, yeah, you hear about people making their first dollar in business. And they're like, look, yeah, we're a success. And look at us, we're making money and it's going. I was like, holy shit, this is real. Yeah, what if we fucked this up? What if we do our absolute best?
Speaker 2:The real estate industry is a grimy industry with a bad reputation, and we were like, man, imagine if we tried to do everything right but we still fucked it up. We would be tired with that grimy brush. And not only that, we're jeopardizing people's future. Imagine that. Imagine if we were the reason that somebody never achieved the things they always wanted to achieve the life of freedom, choice and abundance that they deserved. Imagine if that was our fault. Fuck it was. That was Christ. Today is still crushing, because it's like that is a heavy weight. When someone says I trust you with my future, that's just full on. Better not fuck it up.
Speaker 2:And so because of that, we went very hard on not only how do we make sure we've got a world-class service, but how do we basically make sure we don't make a mistake. That led to us continuously investing deeply. The reason we've solved all of these problems is because I just haven't wanted to stuff things up. Yeah, curiosity and all of that kind of stuff, but it's like how do we minimize the chance of failure? You can never get it to zero, but, man, you can get pretty bloody close if you really put your mind to it. And it was really about how do we minimize risk and how do we set up our clients for the maximum chance of success. Because of that simple function and the whole reason we've built the business as I say it's didn't start because we're like, oh, there's a market opportunity for us to start this kind of real estate business and we're going to get rich. Yeah, it was like imagine if we could help 10 people and then 10 people became 100 people, and then 100 people came to 1000 people. And the missions always remain the same, like how do we help people to create a life of freedom, choice and abundance? How do we create transformation, wealth and create a massive impact on society?
Speaker 2:And for me personally, I've always been a bit anti-establishment or anti-system in a sense. In my teens I was a bit of an anarchist punk and you know, down with the government and all of that kind of stuff, and I was always into politics and it was either going to be like destroy the government or join the government, one of the two. And then I had thought that I was going to join the government and then I saw what happened to Peter Garrett and I thought, if Peter Garrett can enter into the government and get chewed up and spat out like he did, I thought, well, what chance have I got? And I started wondering, well, if I really want to change the world, it's not going to be by that mechanism. So what mechanism is it going to be? And I tried permaculture, I've tried a few things. I just want to create impact.
Speaker 2:The further I walk along the path, the more I realize the biggest impact that we can have on our community, on our society, is to help people to build wealth. That is the biggest single lever that will lift people up, more than investing in healthcare and education and all of that kind of stuff. It's building wealth. It's transitioning people from a state of scarcity to a state of abundance.
Speaker 2:And if you look at Abraham Maslow's hierarchy of needs, I haven't come to all the levels, but the first two levels are basically taking care of your basic needs. You know food, shelter, water, things like that. Once you get beyond that, then you get to start assessing things like relationships, impact, like you just get to progress towards self actualization. And so my personal belief is self actualization is the only true, worthy goal. It's not about cars and houses and money and whatever. It's self actualization. But the catch is you can only pursue self actualization from a place of abundance, and so the best thing we can do for our society is get them out of this place where they're wondering how am I going to pay the rent? How am I going to keep the roof over my head? How do you lift a people up? And the way you do that is through wealth creation.
Speaker 1:That's where there's so many parallels between our businesses. It's a very fundamental belief of ours as well. Tell us about some of these examples of yours. We know Charlie's been on the show. You've gone through that process building this up and now actually helping people achieve this stuff. There are a couple of examples that really would stand out for you, beyond Charlie's or Charlie's.
Speaker 2:Charlie's a great example and we use that example a lot because the numbers look good.
Speaker 1:Yeah right, they look pretty good.
Speaker 2:They look pretty good. What I find most interesting is that the amount of everyday people like them, kind of the mums and dads who get several hundred percent return on investment in a very short period. In fact, I'll tell you about one of our clients, sandy. She'd done a bunch of courses and kind of felt like they weren't going to give her what she needed. And she came to us and she was investing solo. When she first came and spoke to me. She didn't have enough money and so she was trying to invest with her brother and her partner and all this kind of stuff. So I tried to scrounge together enough money to get started. And then the brother was like, oh, actually I don't want to do it. And she's like shit, I kind of want to do this on my own.
Speaker 2:And she owned a little one-bedroom unit, I think, down in like Frankston or something in Victoria. That was her only bit of nest egg was this tiny little one-bedroom unit. But she was so committed to transforming her situation and pursuing what we were doing that she sold the unit to unlock the only last bit of capital that she had. And she said right, I've got this little pocket of money, let's have at it, I just want to go for it. And in 12 months we bought three properties. On each property she got to return on invested capital of like in the triple digits percent wise, and plus she created enough cash flow to be able to then move to her dream place, with enough cash flow coming from her portfolio to pay the rent of the property that she just moved into. So she could suddenly live the life that she wanted. And that was in the space of 12 months and like that kind of transformation. She was like bang, she's just created her dream life in 12 months. And I was like dude, that's sick, like that is sick.
Speaker 1:What does that do for you? I mean, this is similar for us when you see people doing this stuff, backing themselves, betting on themselves. Yeah, what has it done for you as an individual, what has it done for you and Gaby as a couple To?
Speaker 2:put it bluntly, without the stories that our clients success, we wouldn't be doing what we do Running a business really freaking hard right, particularly growing as fast as we have grown. We've been one of the fastest growing companies in Australia for the last few years.
Speaker 1:Yeah, just quickly tell us about that growth. Where are you at now?
Speaker 2:Well, it's hard to kind of say like we're at now specifically, but like we grew. I think something like 15,000% in four years Yep, something like that, which is pretty fast. And we grew from a team of four to a team of 85 in 18 months from January 2021 to June 2022. So pretty quick and that's pretty painful doing that kind of stuff too. Now we grew because we could see an opportunity to help people. I want to be really clear. I haven't gone on and bought a boat or anything like that. In fact, gaby and I basically haven't taken any money off the table and just been reinvesting in how do we develop research better? And so, given that we haven't been taking, we haven't been rewarded personally in any kind of like material sense from this extremely hard journey for the last five years. Now, that can be wrong. That'll change. It's not a sub story in any way, shape or form. It's all by choice.
Speaker 2:The thing that has kept us going is probably two things. Number one the transformation we've seen in our clients. You've got to be like that's what we're doing. That's why this is worth it. That's why the sleepless nights, that's why the stress when you see people whose lives change and their families change. It's phenomenal. The other thing that motivates us is the team, the transformation we have on our team. So we specifically decided to like, deliberately said let's build the best place to work in the world. Let's build the kind of place that people want to be but they don't feel like they need to be, where. They would be there by choice, even if they didn't need to be there. That allows them to live a meaningful life today and create transformation for all of our team members. That was a choice and we've done that.
Speaker 2:And so, seeing the transformation in our team, not only from their experience at Dash Stop, but also they've also been on buying properties through Dash Stop as well, so watching all of them get of their own transformation. They've lived in their best life, working in a business that they love, that they're passionate about, and also basically getting rich. Nobody in Australia likes the term rich. It's a bit cheesy, but they're making hundreds of thousands of dollars in real estate. Some of them are in their mid-twenties and they're smoking it. It's like that's wild. And so looking at that kind of transformation, that's the motivation you need in order to feel fulfilled, and the fulfillment piece is really, really important.
Speaker 2:It's come back down to the kind of financial freedom thing as well. It's like what is important to you, and for me and for Gabby, it was far more important for us to see impact than it was for us to see a Lamborghini in the driveway, and that is different for different people. Status is not one of our values. Impact is one of our values. Gabby and I are very different people, different personalities, but we have the same values. That's important and so that works really, really well because we're both aligned with the things that are important in the same way, and for us it was always far more important.
Speaker 2:We realized a couple of years into the journey that if we wanted to, we probably could have sold the business, had enough money to go and sail off into the sunset and be good with it, and at that point we realized it was not about that. It was when we had the ability to do that and chose to not do that that we realized that it was all about the impact we could create on the world. That's kind of been the main focus.
Speaker 3:How big is the team now, mate? Yeah, how's it all evolved now and what's the dynamic look like within the team?
Speaker 2:We kind of grew a little bit too fast and we did have to right size the team a little bit late in 2022. And that was really really tough. We also carved out the technology side, so it was all one, and then we carved out the tech business into its own company called Dash Technology. Dash Technology has a very, very, very exciting future because we've taken the technology layer that's made Dash Technology so successful and we're finding a way to distribute that in a very large scale format that will help democratize property investing globally, not just in Australia, and that is really interesting. And so our mission has really been to democratize property investing, which can seem a little bit like highfalutin in some way, but we found a way that we can do that, and so what we've actually been able to do is take the, as I say, the underlying technology layer of Dash, turn it into a multi-sided platform which we can then distribute through large existing networks.
Speaker 2:I can't give away too much of what's actually going on there, but we'll be able to distribute that through large existing networks to basically put property investment within reach of any individual in Australia, whatever their starting position is, to be able to go from like, hey, I'm a renter and I have bugger all savings. But hey, here's your pathway to financial freedom. If you want to take it, you can get from here to there. Here's the plan and here's how to execute it and the actual execution. Not just some kind of like nice picture, but like the execution, so you can go from anywhere to anywhere. And that taking that is going to be pretty wild and we're going to take that into the US. So Dash Technology don't quote me. I think it's got 12 people in that team now, and then Dash, I think, is about 70 people. Don't quote me on that, because it's kind of changing. Are you VC backed?
Speaker 1:None, no, no, not at all. All bootstrapped from day one.
Speaker 2:Yeah, so we've taken on debt. A lot of people don't like debt. I love debt. I think debt's awesome, particularly in business, risky Sure.
Speaker 1:Yeah.
Speaker 2:But everything's risky. I think risk only exists if you're not prepared to back yourself. Risk only exists if you quit, basically. And so to the degree that I was able to have the financial confidence, kind of to a certain degree, to go, well, let's not fuck it up, basically, let's just go. We were able to carry that risk and when you grow as fast as we grow, growth eats profits and it's been a wild ride to put it that way, that trajectory that's got to be dizzying and painful and stressful, rewarding and no doubt, but all those things right Invigorating and so fun, and it's like climbing around Everest like physically torturous Feel like you're about to die but also one of the greatest things you'll ever do.
Speaker 2:So we have used debt on our journey as well, but we've never taken on a VC, so I don't have any outside investors. That being said, gabby and I aren't the only people on the cap table, which is really interesting as well, so the only other people on the cap table that aren't Gabby and I are team, so we created that capability for people to have a stake in the outcome. Not all of our current team have got that, have had that opportunity, but early on we did open that up, and so we tried to create a way for our team to have a stake in the outcome as well, which has been pretty cool.
Speaker 3:What I love about your story, mate, is that a picture you write at the start, there where you're like I just want to figure this out. But you started with this ending mind, which is I want to be in a place where I know how this works and I can do that for myself. And then it seems like the whole way throughout you've been quite the explorer. If you think about those early stages, you know going off to in the horticulture, you know going on the adventures around Australia, and it's the ability to just kind of explore what else and not think that the next thing needs to be the thing, but it needs to just take you closer. And this is such a trap that we find so many people in because they go well, if I don't get this next thing right, then I'm going to have to come back to this one and just accept a feat.
Speaker 3:But you've always just kind of been like well, what else? What else is out there and even in business there you see that coming out and being like what other technology, what other research members could actually help us take as close as that goal? And maintaining a really, really clear vision or at least clarity of values that you want to hold and build towards in the future, and then it's always just been like how can I get close to that? What can support me in moving me closer to that? And I think that's so interesting for people to look at and kind of question for themselves where they might be getting stuck in that line of thinking. Do you feel like that's always been the way for you in terms of just being open to explore something new, something different, and then finding tools and people to help you get there?
Speaker 2:Absolutely. That is one of my fundamental core personality traits is to do that and to the degree, just to kind of segue back like when I was 18, I made a specific choice. I remember making the choice by the way, this isn't a choice in retrospect. I wanted to know what it was like to go to the extreme edges of drug and alcohol use. I was like I want to know what it's like to kind of hit the bottom, Like I see these people on the street that are homeless and like crackheads and stuff like that, and I'm like how would I ever know what that's like unless I at least go and find where that edge is Right, which might sound pretty wild, right, but it's fact, not fiction. So I made a choice and from 18 to sort of 21, it was kind of a three-year journey for me to go. I'm going to walk down this road because I want to see where that road goes Right. And you know, was that a good idea? Was that not a good idea?
Speaker 2:I can tell you what certainly gave me some perspectives and I think the pursuit of that understanding is very characteristic of me and kind of drives like pretty much why I do anything. Because I'm like well, I wonder what that's like. But you also then got to kind of like deconstruct that and kind of go well, why is that important? Why is that important to me? And then also, what kind of learning could exist for other people in that as well? And I'm not suggesting that who I am or the life that I live should be a model for anyone, but there's probably some stuff that people could take away. So nothing exists. Right, the universe as we know it is 99.99999% nothing, and so we live in this very thin slice of anything substance, energy, matter, whatever you want to call it. We are somehow, in this moment, blessed with this ability to experience. Like, what the fuck is this Like? Just think about it for a second. Like, what is this Like? Why the hell am I experiencing anything? Are you?
Speaker 1:in the simulation camp.
Speaker 2:There's a probability that it could be true, but it also maybe not. So I'm not like firmly in that camp, but the fact that we're even experiencing anything is just so mind blowing. It's just so freaking mind blowing, given that the universe is 99.99999% nothing. And that's not going to last forever, by the way, and you don't know when it's got to be over. And so it's like we all get this ticket to the world's best theme park. It's huge and there's all kinds of rides. There's horror rides and adventure rides, and there's like little park areas and you've got a ticket to go on any ride you want in that entire theme park. But here's the catch you don't know when you're going to get kicked out, and when you get kicked out you can never go back. And then it's like holy smokes.
Speaker 2:Okay, so I've got in the world's best theme park with all the best rides and I can go on any of them and I could get kicked out at any minute. What rides am I going to ride, and how many times would I ride the same ride? If I found one good ride, would I ride that forever? And then I'd just get kicked out. I've only ever experienced that ride, or would I try heaps of rides and understanding it like that. It's like, oh my God, I'm all over the freaking theme park and I'm like, where are we? Let me try. I want to try the popcorn. Let me get on that I'm going to spew. Make me scared, make me happy, because you never know when it's going to be over.
Speaker 1:It's interesting. You seem to have this ability flexibility of identity, I would call it when it's very easy for you to sort of drop one version of you and pick up another and pursue something completely different. I think that's something that's who does hold a lot of us back is the letting go of who I've been to become, who I could be, or try something different or do something else. What advice would you have for folks who do feel kind of stuck in that sense? I mean, I love that analogy, but how would you advise that person who's standing at the front door of that theme park and still a bit too scared? It's a good question.
Speaker 2:It's not an easy one to answer because you first have to have empathy for the people who might be in that position and for most people, for the vast majority of people, the concepts and constructs within which they exist are so ingrained that it's very hard to realize that the reality of the world is not the reality that they live in and to a very real degree they're in a cage of their own making or their own mind. And stepping out of that cage, understanding that there is anything out of that cage, is very hard because it's like, well, nothing could exist out there. It's like the Truman show is the whole world beyond those walls? So developing that understanding, that belief, is actually pretty tricky. But I think it first comes with understanding that that, trying to develop an understanding that that could be true. And I think if you could understand in the first instance that you can have anything you want, you can become anything you want, you can achieve anything you want within three to five years. I believe that for anyone, no matter what the starting point is, five years ago I was an alcoholic drug addict living on my office floor. So I think anyone can achieve it in three to five years with deliberate focus and the right intention. But you first got to recognize that it could be true and then have the courage to go and pursue that.
Speaker 2:Now fear. Fundamentally it's a fear of death at the end of the day, the fear that you may feel that you're going to say, ostracize yourself from your community. Let's say you're going to look stupid, right? Why is that a fear? That's a fear because you, on a tribal level, might be ostracized from your tribe. And if you get ostracized from your tribe, you might be left out in the metaphorical cold, in a kind of like developmental sense, and you might die. So every fear at its root is a fear of death or a fear of exposure to death. And the fear of death is in fact the fear of not living, which is actually more insightful than you might first give it credit, because oh well, of course death is not living. But it's actually the not living part which is the most interesting thing, because the only reason you fear death is because you fear that this experience that you have the immense joy to be a part of might suddenly be over before you've had the opportunity to experience all of the things you would truly desire. Because if you didn't, you wouldn't care about death, or if death didn't exist, you wouldn't have fear. And so, at the end of the day, the only reason anyone feels fear is because they have a fear that on some level, conscious or unconscious, that this will all be over before they've ever had the opportunity to truly live the life that they really believe they deserve.
Speaker 2:And if you can follow that thread, then it suddenly becomes an imperative for any person to try and understand what is that life that they believe they deserve? Because most people don't know what that is. Most people have never really given themselves the permission to ask that question. And it's in the asking of the question where all the answers start to form, and it is from there that you can ask yourself questions like how might I make this vision a reality? What would have to be true?
Speaker 2:And it's not easy, and it's a process. It's not like you can just say five affirmations every day and all of a sudden you'll create the thing you want. It's a continuous process of deconstruction and realizing that you are both the experiencer and the creator of everything in your life, and every single thing that you experience is a joyous moment, because it is the experience of life, and so having that ability to kind of deconstruct those edges allows you to realize that you can create and become whatever you want. There's no reason. Your identity is nothing. My identity continues to evolve, and everybody's identity should, because it's just an idea.
Speaker 1:You use the word tribes when you're explaining that and I think, whether we know it or not, we all are thinking we're in tribes all the time. So the tribe of my industry is a tribe, the tribe of my family is a tribe, and we can't even put words around those fears, I think, until we label them and you need to be able to say I'm afraid that tribe A is going to judge me and tribe B is going to judge me. Maybe I'll get criticized and I love you just to see, from your point of view, going through some of these transitions. For me, I feel like you need to be able to face that fear, experience it, even in some regard, and realize it's actually fine, it doesn't matter. Maybe it's true, maybe it's not true, but actually the sun comes up tomorrow. The people who really know you and care about you still love you. What are your thoughts on that?
Speaker 2:I think it's really, really true. So I thought about this a lot, like I think about all this stuff a lot, and yet the idea of belonging is really, really interesting, because what do you ever really belong to? At the end of the day, your whole existence only exists in your mind anyway. So in a very true sense, you're aligned, and that can be a pretty daunting concept, but you know, at the end of the day, realistically, you're the only one that's experiencing your life. Nobody else is experiencing it, and you never truly belong anywhere.
Speaker 2:In my opinion, now you can create associations and all that kind of stuff, but all you need to do is think back through your childhood. Like, how many of your childhood friends do you still really have? Some people have still got a few, fine, great. But that soccer club that you're a part of, the footy club you're a part of the school that you're a part of, and all of these jackets you put on at various points in time. You take those jackets off as you go and at a fundamental level, you need to get to a place at a personal level to go, I'll be OK whatever happens. And you only get to that place through cultivating a sense of self-confidence and self-determination. In a very real sense, it's like I obviously want the people that I love to be healthy and happy, but they're all going to die. All kinds of things are going to happen. I might be successful, I might fail, I might be rich, I might be poor, I might have kids, I might not have kids. The only thing that you can actually know for certain is that you're going to experience great tragedy and you're going to experience great moments in your life where you're not going to have the things that you think that you wanted or that you made as iron. So just recognizing that the beauty of impermanence is actually the thing that gives life meaning and actually gives you the flexibility and comfort to go OK, I'm going to walk, I'm going to be the traveler and the adventurer.
Speaker 2:I think different people with different values dictate different things. So family is not really high on my values list. I love my parents and whatever, and all good, but family is not high on my values list. So for me, a good life is not staying close to my family so that I can spend time with them on the weekends and all of that kind of stuff. For me, for somebody else, that may very well be the good life Right, and so don't let me say hey, you're not living a good life unless you're out there, carve it a new path and climb in mountains and discovering new lands, like for me that might be true, but for you that might not be. So I think just understanding where you kind of sit on a value spectrum but then really kind of taking that self-determination aspect to it and going OK, what does my version of a good life look like? Because most people live in a shadow of other people's expectations and that's not a recipe for happiness, mate.
Speaker 1:I love that little rant that we just went on. That was epic, and what you just ended on there in terms of who you are and what you value is really, really important, and I want to come back to that in just one second, but just before we wrap this up, I feel like this is going to be one of a few conversations. There's a couple of things I wanted to talk to in terms of property. Managing risk in property and the irony of the risks that you've taken to help other people manage their risks is pretty cool. So I want to get into that, and I also wanted to get into current state of play and how you kind of seeing things play out in the future, because I know there's some contrarian takes there that we wanted to discuss. But I want to be conscious of your time as well. So between now and then, where can people find more about you and where would you hand people off to, if you want?
Speaker 2:to engage with property stuff, just go to dashcomau Best place. Or you can look up dashproperty on Instagram. You can find me on Instagram. Goose McGraw you can find me on YouTube. Put a bunch of stuff out there A bit more about business and personal evolution and self-actualization. No, that's YouTube at Goose McGraw. Or I've got a newsletter if you want to sign up for that as well, and the newsletter digs into, you know, basically putting your life around freedom, business, self-actualization, all these other wonderful things and how do you create the life you desire. And if you just get a bloggoose, mcgrawcom, you can get that there.
Speaker 1:Beautiful Mate. Last question for you. I just want you to finish this sentence for me, Wealth is Freedom, freedom of Self-determination, freedom to be who you want to be. Is that what you say? Yeah, what is?
Speaker 2:wealth. Wealth, I think, is when you have the capability to experience life in the way that is most aligned with your personal values. It's probably the best way to put it. It's not about money. For some people, it's not about spending time with family right, but for some people it is. But if you've got the capability to experience your life in a way that is truly aligned with your values, whatever that may be because there are some people who truly love the minimalist kind of existence and all they want to do is they want to have the least amount of income, be self-sufficient on a farm, because that's the way they have the most impact. Now, they might be poor financially, but they might be rich emotionally and spiritually in all of these other ways, and so I think wealth is the ability to experience your life fully in a way that is most in line with your values, and if you can do that, you're free from the expectations and opinions of other people, because you are truly living in your Dharma.
Speaker 1:That's what wealth means to me, love that Probably couldn't have even said any better ourselves, to be honest.
Speaker 3:Love it, brent. Great to have you on, mate, and I think that sounds like there's going to be another important conversation coming along soon, because I want to know the answer to some of those questions Terry mentioned before too.
Speaker 2:Yeah, well let's light up another one where we talk about property and I'll give you guys all the goss and because it's like really simple formulas in how it works right, we could go through like the three constraints to sell for and a whole bunch of other stuff, because property is really misunderstood and if you can understand some simple things, you can make a whole bunch of freedom start to pour into your life. It's actually not that hard and if we can kind of break that open a little bit and I also, by the way the next sort of 24, 36 months are going to be one of the biggest wealth creation moments in Australian, kind of in our generation's history, and so I think that there's a real opportunity for people to participate in that and to remove some of the fear around it. Thank you, mate, appreciate it.
Speaker 1:Hi guys, good to see you All. Right, quick segue here for you. I hope you enjoyed that first part of the conversation. How good was that rant there at the end? Now, we couldn't find a real clean kind of splice to be able to put these two conversations together. So I want to jump straight back into this conversation and it'll pick straight up and we'll get straight into the meat of things. There's a little bit, so we sort of get through at the start, that you might have heard a little bit over in our first conversation, but it's kind of good to go back over that before we jump into the meat of the strategy, what's underneath it and looking at it from all these different angles. So I want to take you straight back in this episode. If you need to grab a quick drink, maybe press pause for a second, take some notes you can absolutely do that. But otherwise please enjoy the second part of this conversation with Goose McGrath. I'm here again with Goose McGrath. Goose, welcome back, mate, I'm so excited to be here.
Speaker 2:Thanks for having me back again.
Speaker 1:You've been very gracious because we actually had this epic second discussion and then, for whatever reason, technology, gods hated us and we've had to actually come back to this.
Speaker 2:It was so epic I went for over 90 minutes and then a storm hit and it cut the internet out as we were partway through the upload. And then we lost so much gold. I'm devastated.
Speaker 1:I spent a week with our producer going what can you sell, which can you sell?
Speaker 2:I was like well, look, the good thing is, you know we're friends and so if you want me to come on again and again and again to try and eat out that juice, we can do that too. So all good, careful mate. Yeah, I don't mind, I'll tell you off on that. I mean, like, put me in front of a camera and get me talking. It's not really that hard, so all good.
Speaker 1:Well, look, I wanted to pick up on the discussion we had last time because we kind of went on this really awesome philosophical tangent, but there was a couple of things that I really wanted to touch on for our listener that we didn't get to, and then, as soon as we hit stop, we had this epic conversation where it's included a bunch of other stuff that I was like I want that in there as well. So there were some interesting observations you made around property, some counter narrative takes on the prospects of property. So in this chat I'm just really keen to get a better understanding of the overarching strategy, because last time we really talked about the big insight underneath your approach. So really keen to talk about the strategy, what it actually is, who it's for, who it's not for, then share some of those observations on the property market and then how you see things play out over the next 12 months. But just quickly to summarize, come back to that insight for me.
Speaker 1:I've got here that property is not like a stock market. It's an inefficient market. So there's opportunities with information. If you have the right information at the right time, you can outperform. Is that right?
Speaker 2:Yeah, that's absolutely true. And so, to give you a little bit of context to that, real estate as an asset class is the single largest asset class in the entire world, but it's also the least understood. Now, if you want to understand how and why markets move, it's typically one of the interesting defining characteristics is the impound rate of knowledge. Now, with the stock market, everything is typically known and gets priced in very quickly. Just a kind of thought exercise on this Imagine Tim Cook, the CEO of Apple, was flying across the Pacific. All of a sudden his plane explodes. If no one knows about it, what happens to the stock price? Nothing. As soon as everyone hears about it, what happens to the stock price? It drops. Now, in between those two points, the thing happening and then the rest of the market knowing. That's the impound rate of knowledge. It's like how informed someone could be. So the first person who hears the news. They are suddenly far more informed than the rest of the market. So the first person who hears the news could go and sell all of their Apple shares before everyone knows about it, and they would have a competitive advantage because their impound rate is faster than the general market. And that's where inefficiencies exist in markets is the lack of understanding about the market, and that's a really specific thing that we've sought to cause. Like it's a fascinating.
Speaker 2:The real estate market to me is just so tremendously fascinating. I'm not actually that passionate about real estate, I'm not one of those guys who sits there like fornicating over properties or whatever, but this context around this phenomenally powerful asset class and our ability to understand it at a deeper level is really religious, because real estate, as an asset class, is the single greatest wealth creation tool for the masses. Now, it's very hard to become a billionaire through real estate, but very few people become billionaires, right. So you want to become a billionaire? You probably need to focus on business.
Speaker 2:It's very hard to get there through investing in the stock market, too, just so we're on the same page, right. But for 99% of people, real estate is going to be the single largest wealth creation tool they're ever going to create. They say 99% of millionaires have made through real estate. 100% of billionaires have made through private equity and business. Now, this is why I'm so interested in it, because my genuine passion is how do we change the world, like, how do we have the most amount of impact and the ability to effectively decode a complex system in a way that we can start to take advantage of it is really, really, really fascinating. So before I keep waffling on to Jordan to get into anything there, just an observation from my point of view.
Speaker 1:I'd say probably three to five years ago, with the property comment that you make there around, the best way to do it, prior to really digging in and understanding the monetary system not the finance system, but the monetary system I would have kind of gone. What do you mean? It's the best. You know what I mean? It's the best for the average person, and it really just does come down to how hard you can make your money work in a given vehicle, doesn't it? It does. It's about how hard you can make your money work.
Speaker 2:And it's also about your risk adjusted return. I think this is where a lot of people go wrong is they don't think about the risk adjusted basis. Now, if you just were investing in real estate, 100% in cash, and if you were uninformed, and if you were investing and you were comparing that with investing in the stock market, and you were investing with cash and no leverage and you were uninformed, broadly speaking, the return on not going to be wildly different right, they're not wildly different and depending on what you're investing for, I mean, you could potentially even if you're only paying cash for real estate you could potentially get higher yields and higher cash flow off a high dividend stock. And then, when you look at that as well, then you go oh okay, well, on a cash purchased basis, real estate has got more entry and exit costs, it's less liquid, higher barrier to entry and then suddenly becomes a lot less appealing. However, if you zoom out a little bit and look at the actual in the situation, the reason the real estate is so good is because you're going to play a leverage right.
Speaker 2:The old adage safest houses exist for a reason. Banks really like lending on real estate because it's really low risk. A lot of people and there's some really fundamental stuff. I want to kind of talk about strategy so that anyone can kind of take this and work with it. But one of the really interesting things people get concerned about is like, oh well, I don't want to have all this debt on a property. Like, let's say, 90% LVR debt on a property. And if people don't know what that is, lvr stands for loan to value ratio. So to put it in simple terms, a 90% LVR would mean you're putting in a 10% deposit and borrowing 90% of the money to buy the property. Very simple context.
Speaker 2:And a lot of people go, oh my God, isn't that risky? And it's like, well, no, not really. No, as long as you keep paying the mortgage, right, because, let's just say so, number one for that to go into negative equity, that specific property in that specific market would need to fall by 10%. That's almost unprecedented, right? Like a couple of times that kind of thing, right, like a couple of times that kind of things happen really. And outside of that, what would happen if it were negative? Let's just say it dropped by 20% and so you were under water by 10%, right, in terms of your equity. What would happen then Do you think the bank would say, oh well, now it's worth less than what you paid for it. We're going to like recall the. That'd be the stupidest investment decision ever for the bank.
Speaker 3:They're going to be like great, let's capitalise our losses.
Speaker 2:No, they're going to say OK you still?
Speaker 2:pay that mortgage. You still have tenants in that property. Are you able to continue to service that debt? If yes, good, let's not do anything other than just keep going, because it's a stupid decision. So it's not actually that risky.
Speaker 2:Now a lot of people think they've seen the big short and all of that kind of stuff and they've seen the US real estate market and they're like but the real estate market might crash, and but the thing is, looking at phenomenally different markets, the US real estate market is typified by two things. You can borrow against a property based on the property, not the individual, so you can go hey bank, look at this property here. It costs whatever $200,000 and it yields at this March. Therefore it can self service its own debt. Can you give me lending on that property?
Speaker 2:Because that property can self service its own debt, so it's based on the property, not the individual. And also there's non-recourse lending, which means you can buy the property and then, if I don't know, the tenants move out and I don't know you don't want to pay the loan anymore. You just check the keys on the front door and walk away and jobs are good and they can't do anything about it. That's why it's a volatile market, whereas in Australia the lending is based on the individual and also it's recourse based lending. So if you decide to walk away, they go okay, that's fine, we'll take the house back. We still owe us all the money.
Speaker 1:I really want to double click on that point there, because you would have heard this statement right, the Charlie Munger show me the incentives, I'll show you the outcome. So our incentives here are so, so different. And what does that mean? It means people will do almost anything not to hand the keys back when they. Yeah, totally.
Speaker 2:There's no incentive Like what are you going to do? Like you, then you don't have the asset and you have all the liability. I mean that sucks right. And so banks are incentivized, by the way, to make sure that you are able to continue to pay the debt. If the real estate market did happen to go backwards, they would be really incentivized to make sure that you didn't default on the debt, because then they would end up with an asset that's worth less than what they've lent up. Like. There's all these reasons that people are incentivized to like.
Speaker 2:All parties that are participating, all of the actors that participate in the market are incentivized for things to go well and to be able to support the market to go really well. And if you think about a risk-adjusted return basis, you've also then got to look at like what's the inherent volatility of other asset classes? Now, real estate by and large is very stable, but you can also get really, really high returns, and so, just to give a little bit of context, so our clients, on average, get about a 67% return on invested capital in the first 12 months. Now that's averaged across over a thousand purchases over four and a half years.
Speaker 1:Now, that's decent sample size here.
Speaker 2:So what that means is, on average it's not every individual, but on average someone puts in $100,000. That's for a deposit, stamp duty, all of the conveyancing, all of the cash they've got to put into the deal, and a year later, through growth and cashflow or whatever they've, $100,000 has turned into $167,000 of equity and so on and so forth. And so then, when you look at the stability of the market, you look at the underlying structural integrity of the market and you look at those capabilities to get returns. Yes, that's based on using leverage, but it's really safe leverage. Go show me how you can invest in an index fund and get 67%. You just, yeah, you can't do that. No, you can't. So it's the fastest, safest way to build wealth that I have seen. Now there are faster ways to build wealth, but not on a risk-adjusted basis. So a faster way to build wealth, for example, would be entrepreneurship and business, but it's inherently really high risk and sort of risk-adjusted basis. I actually don't know whether it is actually better, you know.
Speaker 1:Yeah, that makes sense. I'm really keen to contrast these two different approaches. What I hear from what you say and the way you're approaching this is let's make database decisions to be able to time an inefficient market, to be able to get in at the right time and out at the right time. Is that a fair characterization? Yes, I think of it as scientific investing, scientific investing great, okay. So scientific investing versus I've kind of heard it called blue chip and sit, you might call it buy and hold, that kind of more traditional approach when it comes to property. How would you argue for buy and hold? How would you argue against scientific and then the other way, and why you still think about it this way?
Speaker 2:Well, I'm going to segment that a little bit further. Buy and hold right is where you buy an asset to hold it for the long term. Buy and hope is when you buy an asset and you've got no fucking idea whether it's going to go up down or sideways, but you're just buying real estate, because you get told, hey, let's just buy real estate.
Speaker 2:Now, here's the thing If you genuinely believe that you can't time the market, then it doesn't matter what you buy, when you buy it, where you buy it, just go and buy any property anywhere, anytime. Now if you say that people would intrinsically go well, no, that'd be stupid. You wouldn't do that. You wouldn't do that because, inherently, people understand that there probably is a right time to get into a certain market. Even just look at the Sydney market. Some people bought at the peak and then it went down. You know, oh, look, guess what. There is market timing capability, right. And the question is can you work that out? Can you start to work that out in advance? That's the interesting question. And how would you know? And so, just kind of laboring on this point of like, a lot of people think that there is different types of like macro strategies for investing in real estate. There's buy and hold, which is like buy properties and hold them forever, right, so buy properties, wait 30 years, over a long enough time to rise in real estate has 100% success rate. So just wait long enough and you'll be fine. Then there's the idea that, because you can never truly understand what's going to happen in any market, then the only way to guarantee your returns is to add value. So that could be flipping subdivisions and all that kind of stuff. And then there's a more scientific approach, which is much more akin to the quantitative trading strategies that you see in hedge funds, which is actually being able to understand the market. So then you can actually decide when to enter, when to exit or, if you do want to hold, why you're holding.
Speaker 2:Now. Real estate markets typically follow an S curve pattern, and the reason for that, by the way, is because they follow a matching market dynamic, and the matching market dynamic it's similar but different to a commodities based market dynamic. So commodities based market dynamic is something like oil. Okay, so, based on the supply, the price goes up because there's an inherent under loan demand. A matching market model is much more like the dating market, so it's mostly more like Tinder. And this is where you have a market that is based on not just the specific commodity itself, but emotionally based contexts, because home owners move markets far more than real estate investors do. So the thing that actually drives real estate markets is homeowners. Investors can benefit from homeowner activity Right. So investors get painted as this, like force that can move markets, and realistically that's just not true. In any given market, there's typically only about 30% investors and about 70% homeowners owner occupies so by far owner occupies are the biggest drivers of that. And the thing about owner occupies is it's an emotionally based decision, and so when you have an emotional based decision, based on things like subjective beauty and things like that, you have a market that operates much more like a relationship based market, so like Tinder. That actually creates a super interesting dynamic. And then also you have these other you know flocking activities that happen and all of this kind of stuff. But effectively, if you can start to understand what can drive the different markets, you can then work out okay what is a good time to enter and what is a good time to exit, based on the S curve dynamic.
Speaker 2:Now, because of the S curve dynamic, what we typically see is that there's an old adage that real estate doubles every seven to 10 years, which is both true and not true. If you take the right tenure sample of a any given market, you would probably find that the real estate market would have doubled in that 10 years If you take the wrong tenure sample, you might find that it didn't double in that 10 years. So it really kind of depends on when you're taking the sample set, and if you dig a little deeper what you'll actually probably find is the real estate market in that specific suburb or whatever the case may be, might have doubled in three years or five years or seven years. But you're just taking a 10 year sample and it's like oh I can well over a 10. So well, actually the doubly happened in three. You just measuring 10. But there's 15,264 towns and suburbs in Australia and every single one of them has got a different market dynamic. So when you break that down, there's 15,264 S curves happening all over the country and all uncorrelated, broadly speaking, uncorrelated from each other, which is just fascinating. So then you've got this capability to understand.
Speaker 2:Okay, so the real estate market, broadly speaking, might go flat for anywhere between three and 15 years, and then it will go up steeply for anywhere between sort of three and sort of seven to 10 years, maybe on the outside, but it's typically sort of five years, three to seven, right. And then it'll go flat again for sort of anywhere between three and sort of 15 years, right. And so you get this. There's these windows of time where it pops. Now, if you buy at the bottom of one market and then it goes up steeply let's just say for five years, let's say doubles, right, and then it goes flat, and sometimes during the flat, it declines a bit as well. So you've got to bear that in mind. It sort of might actually taper down before it pops back up again. If you hold it for long enough, you'll experience another rise in the S-curve. So over a long time horizon, yeah, I mean like yeah, you might actually participate in multiple S-curves, right? Yes, and I think that is totally cool to do that, by the way. So I'm not actually a proponent that everyone should be trading properties, but what I am a proponent of is that people should be making informed decisions, and those informed decisions should also be based around what is the right time to enter, but also the right time to exit, Because some assets you might want to hold and go look, I want to own this property for the next 30 years and 40 years or whatever, so I'm just going to keep holding it but other assets you might want to trade out.
Speaker 2:So, looping this back, we started to try and work all this out, because when we started the business, I never had some grand aspiration to be a real estate guy. We just realized that there was an opportunity to help people avoid making mistakes. And then people started giving us money and said okay, we will trust you to go and do it. And I freaked out. I was like holy shit, what if we get this wrong? What if somebody's trusted us with their financial future and we get it wrong? Best intentions, but we accidentally stuff it up? I couldn't live with that guilt and so we invested literally millions I think about $5 million we've invested so far just in trying to solve these problems.
Speaker 2:How do you identify the right property, right place, right time so that you can get the best results? But here's the footnote to that we started by going okay. So what we need to do is we need to make sure that we can get the best returns. And how are we going to do that? We're going to try and find the right time to enter the market. So we developed algorithms to do that, so we could get in at the right time to get the maximum return. But then the question you've got to ask yourself is that all that is required to get your goals.
Speaker 2:Now, 71% of property investors get stuck at the first property, 90% never make a pass a second and only 1% get to the fifth property.
Speaker 2:Why?
Speaker 2:Because the specific asset you select within that context is going to actually dictate whether or not you get stuck, and I'd love to dig into that, because there's three constraints.
Speaker 2:So the context around that then is like oh okay, so you know what if for me to know what types of assets I need in my portfolio is actually possibly more important than the performance that I get? So you've got to work out how to create a portfolio based approach, so we could probably touch on modern portfolio theory. And then you've also got to know it's not enough to know what markets to be, and it's also you have to know where they're going. Because if we've just established that markets grow for sort of somewhere between three and seven years, well how would you know if you were getting to the end and what would be the right time to exit? When would that be? So then we had to develop forecasting models to be able to see 15 months into the future, so we'd have enough time to exit markets if we wanted to. So that layers in the context or the platform on which we should be discussing how people should be thinking about property strategy.
Speaker 1:Yeah, what I'm hearing there is, the argument for database decisions is that information now does exist and the information to your end has been tested. How are you thinking about like multiple cycles for the business to back test and kind of think forward about like what would this look like in these different environments?
Speaker 2:as well, yeah, 100%. So we've got 40 years worth of data and so we back test everything. Just to be clear, I think we back tested most of our stuff over 20 years. Yeah, we've got loads of different pieces of the puzzle, right. So the market timing algorithms I think we back tested those over 20 years.
Speaker 2:The forecasting algorithms which, by the way, we actually just got number two most innovative company in the property space, sandwiched in between several billion dollar companies, specifically for our price on rent forecasting models, and they were back tested over, I think, seven years, but across 5000 suburbs and stuff like that. So we're suitably pressure testing the context in loads of different markets and we look and there's the interesting thing is that the things that make one market move aren't the things that make another market move, and that's the interesting thing. You can't just cook it down and go ah, now I've got the 10 things I need to know about markets. It's like the thing that makes the Bondi market move is different to the thing that makes a Bundaberg market move, right, so the dynamics are specifically different.
Speaker 1:It almost makes back testing very hard to do, well, doesn't it?
Speaker 2:We had to go through several developments in order to be able to try and work this kind of stuff out. So, firstly, we had to realize that, well, how could we categorize markets differently? So what are the different market characteristics such that we could reasonably group them in a way that makes sense? So, for example, we had to look at socioeconomic factors, industry types. We had to look at all of this kind of stuff to actually kind of create these kind of groupings. Because even in somewhere like Sydney, right, let's say, the Sydney market, the Bondi market, is different from the bloody Bankstown market, right, they have completely different dynamics, they behave in completely different ways. So you then have to work out how do different categories of markets move and in what way. So, just for our forecasting models, by the way, we had to invent a technology called the automated selection technology, which allowed us to analyze billions of pieces of data to try and work out what specific characteristics mattered, in what ways in different markets and why. And then to make up the forecasting model, we narrowed it down to 60 key metrics, or key features is what they're called 39 of those we had to invent. So, yeah, it's a super complex market, and so the argument for buy and hold versus, let's say, we're called a trading strategy, and when I say trading strategy, I'm not talking about buying and selling within a year. I'm talking about buying hold for sort of three to five or whatever seven years maybe. Yeah, not flipping, yeah, no, not flipping. I think flipping is just, it can work and I think there's better ways to make your money.
Speaker 2:The reason you would buy and hold is if you believe that the market that you're in is inherently going to be a good market over a long period of time and you don't have a need to solve one of your three critical constraints that any portfolio faces, which we should talk about Yep, and it's a longer term wealth play, then that can make sense, right, because you're going to remember, like, as you hold a property for longer, your returns increase, rents typically go up, so you don't want to yield based on the asset, based on the purchase price that goes up over time. So all of a sudden, you could buy a property for 5% yield, and I don't like. 12 years later it's a freaking 10% yield or something like that, just because rents have gone up and the price you paid for it hasn't, and you can experience really exponential growth over the long term if you hold something for a long enough period of time. So there's arguments for it, and I think that sometimes it makes sense.
Speaker 2:A reason that you might not want to do that, though a reason you might want to buy and then exit a market is if you've bought effectively and you've made a significant amount of return, and if you can see that a market is starting to reach its peak or you're happy to kind of take the capital off the table and reposition it into another market where you can get the timing right again, then you can stack returns on returns and you can actually grow a lot faster.
Speaker 2:It's more, a bit more active, and every time you make a change there's risk, but every time you do nothing, there's risk as well, and I am a proponent of both. But I typically don't advocate for people to start investing with this idea that they're going to buy and sell, I think just going to the idea that you just got to buy properties and hang on forever until you've got a few properties under your belt maybe a couple years under your belt and you've got some context and some experience. Now I'll give this a little bit of context. So in my portfolio there was one property we bought in a market in Port Augusta in South Australia which I don't think Port Augusta like it and ain't Bondi, let's put it that way, right.
Speaker 2:So, but if all of the data told me I was like man, this is going to pop, this is going to pop, but I probably don't want to own here forever. Right, and based on my knowledge, I was able to assess the risk effectively and I was like, yeah, cool, this boy. We bought the property for like I don't know 200 grand or something, maybe like 180 cheap, right, it was a cheap, cheap property. I think we bought it for 90%. I think we put like 50 grand into the deal or 40 grand into the deal or something, Right, it was so not a huge amount of capital. Oh, she's like, don't quote me on this, but I think it's grown by like 100 grand or something like that in like a year or something, Right, and I'm like okay, maybe we're holding it for another year Maybe you know what I mean. But like, but that's about it. But there are other properties that we've bought where it's like okay, maybe we'll hold it for the next 10 years or maybe next 15 and we'll see how that goes.
Speaker 1:So yeah, in my mind I've got this visual of I don't know if it's a right visual, but it's like a snakes and ladders thing. So you're like you're choosing the ladder that's about to move and then, as it slows down, you jump to another ladder that starts to move and it's just like you're going all right. So what is the ladder? Which is the what, which is the actual ladder? That's kind of like. What you're talking about is that when you're basically going yep, in and out, in and out, so that one's about to run and then moving across to this one about to run, and so you're going faster because of that, your capital is working harder because of that. What is the long term with this Because I wouldn't imagine that you're always going for growth Is there a point where you start to consolidate and you start to move towards cash flow and reduce the jumping around?
Speaker 2:Yeah, so broadly speaking, a portfolio will go through three phases, and I say broadly speaking because this is generally true, but not absolutely true based on people's situations. So, broadly speaking, in the early stage of your portfolio you want to focus on growth because you need to accelerate your capital. Then you need to transition your portfolio into a more balanced approach to kind of solve for the three constraints that I'll talk about those now, and then you move into a more cash flow based strategy over time. That's, broadly speaking, the three phases. Right, we call those foundation, acceleration and legacy. Now the three constraints.
Speaker 2:Let me zoom out a little bit, because a lot of people think that the most important thing in real estate is getting the most returns. But that is not true. Coming from someone who's invested millions of dollars to try and work out to get the greatest returns, it's not true. It's actually not true. The most important thing is to make sure you don't get stuck, because, with the exception of one person ever, I have never met a single person who wants to invest in real estate that doesn't have a common goal of financial freedom. Now what that means to the individual might be different, but the common goal is the same they want to be able to live life on their own terms, build wealth and create the ability to escape the status quo. That's what I call it. Now, in order for you to do that through real estate, you're probably going to need about five properties.
Speaker 2:Everyone has this idea of 10 properties in 10 years and $100,000 cash flow. Well, that may or may not be true, right, but realistically, what I've seen is that the big shift you go there's three stages to financial freedom there's financial confidence, financial security and then financial independence. Financial independence is when your assets are producing enough passive income and cash flow to be able to support your lifestyle, so you no longer have to work. Financial security comes from when you have enough assets such that, if you liquidated them or whatever, you could basically take care of yourself and your family for a decent amount of time, right, so it's like you got a base there, where it's like you're pretty defensible.
Speaker 2:Some people would consider that to be fucking money, right? That typically happens in four or five properties. Even on a long time horizon, you're probably not going to achieve your freedom goals through real estate without having four or five properties. The problem with that is only 0.86% of property investors get to five properties. So let's round that to about 1%, right? Getting to five properties, which means that 99% of property investors aren't ever getting to enough assets to actually achieve the goal that they want, which is pretty wild when you really think about it. 99% of people investing in an asset class never get to the goal they want. What the fuck?
Speaker 3:Like that's insane.
Speaker 2:Look, that's insane. So people are chasing this dream that they're never going to get to it, and why is that the reason that they get stuck? So then you got to ask yourself the question of why do they get stuck? And there are three constraints that can cause you to get stuck. In your portfolio there's capital, cashflow and debt.
Speaker 2:Now I like to think about the portfolio of you, not just the portfolio of your real estate context. So when we talk about cashflow, it's not just cashflow from the real estate assets, it's a cashflow from any other income sources you might have, business salary, whatever. It's money into the portfolio of you. Then there's your ability to get debt. And then there's your access to capital, so your ability to come up with deposits and all of that kind of stuff.
Speaker 2:Now, typically early on in real estate journey, they typically have more borrowing capacity than they do available capital. So, to contextualize that, let's say you've got $100,000 in cash and let's just say you've got $2 million borrowing capacity. Well, there doesn't exist a scenario where, with that amount of capital, effectively use all of that debt, because you've got far more debt to capital ratio than you could sufficiently use based on the amount of deposit you've got, yeah, and so therefore, in order to take up the latency or that gap, to actually be able to use all of that debt because you've got a surplus of availability of debt you actually need to accelerate your capital faster, which means you don't need to focus on cashflow or any of these other kind of things. You need to focus on capital acceleration, which basically translates to growth. Now, what will happen over time when you do that is, slowly debt to available capital will start to compress and you will need to then transition to a place where you start to bring more of a focus to things like yield and cashflow so that you can support more availability of debt.
Speaker 2:Yeah, because it becomes a service. You can strain Bingo, but you should still be focusing on, like how do you get the maximum growth without compromising, without getting to a point where you have collapsed your debt too much and you can't buy, so it's like dance. Then you get to a point where you're like I've got shitload to capital, I've got millions of dollars of equity or whatever the case may be. Then you use all that equity to focus purely on cashflow assets and that's how you then retire. If people understand those three constraints, it really helps to kind of shape the thinking around it, because you could buy the best performing property in the world, but if you have stuffed up one of the key constraints in your portfolio, then you might have got to buy anymore properties.
Speaker 1:I'd imagine the middle part of that's the riskiest, where you're trying to balance the two right, where you start to try to bring cashflow in to keep things growing enough. Well, maybe not the riskiest but the hardest, that'd be hard.
Speaker 2:Well, I think it's hard if you've got no way to understand it Right. So if you've got no measurement systems, then yeah, it's hard. But if you've got measurement systems that you can reliably use, then it's actually pretty good. And so we built technology to do that. So we built portfolio planning software so we can kind of like better measure and kind of understand, okay, we're going to hit a ceiling here or whatever, and what if interest rates change? And you can kind of model for that if you've got sophisticated enough tools. And this is where it all comes down to, like the knowledge or the access to information piece. Access and understanding is kind of the critical thing. But the other thing to consider there as well is that let's say you've bought, say, three or four properties and then all of a sudden you can't borrow any more money. Is that the end? No, probably just wait 12 months or something Right, like the reason I say that is because rents are going to go up, and so then the cash flow side of the equation starts to change because the relative income of your portfolio shifts, and so then all of a sudden you'll unlock more borrowing over time, and so sometimes you just got to let your portfolio, just rest and breathe, and stuff like that.
Speaker 2:A lot of people think it's really hard to get investing in real estate. It's actually not that. The hardest part is getting started for sure, getting your first deposit and all that kind of stuff is the hardest part. But I see every day people buying two properties in 12 months. See that all the time They'll buy one property or grow well, they'll flip that, they'll pull out that equity and buy a second one. And then I see some people who are buying three, four, five properties a year. So I've seen all kinds of spectrums of it and sometimes in any portfolio it's okay to just kind of like just take a break, let it breathe. Oh, to define that approach works well. Who?
Speaker 1:does particularly well with this approach for you. If you could categorize the kind of person that absolutely just gets this and they do very, very well with this strategy how would you describe them?
Speaker 2:I would say optimistic people, because it'd be easier to say oh, business owners do well this because they've got a typically greater access to capital. But the characteristics needs to be someone who is prepared to lean in, because it's really different. A lot of people think real estate is like slow and confusing and all of this kind of stuff. But it doesn't need to be. It can be whatever you want it to be. And just to be clear, I'm not telling everyone to go fast. Yeah, you should go at whatever pays suits you. Yeah, but the point is you should be informed. Maybe you don't want to sell your properties? Great, don't do it. You know, like whatever, do whatever makes your life the best possible life for you. Don't let me try and you know, drum you up and say go fast and go harder. Just do whatever is going to be confused, as long as you make an informed and intelligent decision. That's the only thing that I want.
Speaker 1:Is the inverse of that true, as well, the people that struggle with this approach Not positive or more pessimistic and more doubting and more kind of struggle to actually just see it through.
Speaker 2:Yeah Well, those people struggle more in life generally. So the most common characteristic of the most successful people is that they're inherently optimistic because they able to see the upside. Now, our brains are wired to be biased to assume that everything's going to kill us, and so, on that basis, if someone is completely even killed, they are still going to have a bias towards negativity because our amygdala is going to be telling us no, no, no, all of us going to kill you. So we have a bias towards inaction, we have a bias towards not taking risks, and so I'm not talking about risk taking behavior, but when you've got someone who leans more to the pessimistic side of this or well, I'm not sure about this Sounds too good to be true, can't work for me. But it's like yeah, okay, cool, well, whether you think you can or think you can't, you're right, basically right.
Speaker 1:And so there's a big human behavior component to this managing yourself Through that journey. Yeah, yeah, 100%.
Speaker 2:And I think the world belongs to the optimists, right, because they're the ones that actually go and do things. They're the ones that go. What if it all works out? Yeah, whatever it actually does work out, yeah, most of the time in my experience it does. Like, most of the time it does you really think about it? It always works out. If you really want to get down to it, it always works out. And so then, really, what are you going to be afraid of?
Speaker 1:We actually recently did an episode where we talked about decisions and we said every decision is either a raspberry or a blueberry. It's sweet now or it's sweet later. It's just actually just a matter of how, on what timeframe, you're assessing it against. I think that's such a powerful model to kind of think about, particularly when you think about these decisions. Right your decision, and it's the same with any investing decision. They're not short term decisions, these are long, long term decisions.
Speaker 1:But we have two hour news cycles. So if you keep assessing yourself on a two hour news cycle against a 10 year decision, you're bound to think you're losing every shock and take. We probably use a good segue into the really last thing I want to discuss with you here is the news cycle, the popularity of the new cycle, the natures that's out there. This is where I wanted to get your take on this, because if you are to believe the news, then property is about to crash and it's all about to fall over and the whole thing is going to implode. But there are some things we talked about off air last time that I really would love you to share around how you see things playing out over the next. Let's call it 12 to 24 months, because I think that's what the news is talking about.
Speaker 2:The first thing is to ask yourself like why is it that the newspapers have said the real estate market is going to crash pretty much every month for pretty much as long as I can remember? Because it gets a click is to get the click. Now, media companies are incentivized by attention because they sell advertising space. As I've already mentioned, real estate is the largest asset cost in the world. In Australia, where, particularly property management, everyone's got all their wealth in real estate. So people and the amygdala context that I just spoke about, where we're wired to look for danger. If somebody says, hey, the one thing that you think you can rely on is about to blow up, people pay attention, right, and so it gets the headlines. Now it's almost never true.
Speaker 2:It doesn't mean that real estate markets don't go down. Technically, there's 15,363 towns and suburbs in Australia now, based on last census, but you get the idea. There's always markets that are going up. There's always markets that are going down. There's always markets that are going sideways and back in 2020 and 2021, whenever I was saying go buy in Sydney, I was saying don't buy in Sydney. That's mad, like there's no fundamentals that are going to support that growth and it went up and then it went down. So markets go down. That happens. So I'm not sitting here saying, oh just, real estate markets do go down and you've got to know how to identify it. But the idea that the Australian market is going to crash is just a fallacy. Everyone said when interest rates went up the real estate market would crash, and very publicly on record saying that's complete nonsense because we did scientific studies that prove that there's almost zero correlation between interest rates and property prices.
Speaker 1:Now that is generally true and not absolutely true, it's a great narrative fallacy, that wasn't it. It's a simple story that makes sense. Yeah, yeah, totally, totally, at the surface level it makes sense. Yeah, exactly.
Speaker 2:Except that the evidence that we can see now is that it isn't true. Most markets in Australia have gone up over the last 18 months. Some markets have gone down. Now the problem is the markets that have gone down or struggled have been the highest value markets. So if you think about the stock market, if BHP, which is the largest cap company on the ASX, if that suddenly dropped by 20 percent, what would happen to the Australian stock market? On aggregate, it would, oh my God, the Australian stock market has dropped, even if all of the other companies stayed the same but BHP dragged it down. That's effectively what happens when Sydney moves. Right, so Sydney moves and it's like look, the Australian market is going up or the Australian market is going down, but Sydney is only a very small portion of the Australian market. You know, it's like there's a few hundred locations in Sydney but there's thousands across the rest of the country, and so, on a very basic level, if you want to think about what makes the local market the local market makes an ideal market to be in, there's three characteristics lifestyle, jobs and affordability. Now, the affordability piece is not. I live in Sydney and I can see somewhere else where the property prices are $400,000, therefore, that's affordable. It's relative local affordability and that's based on incomes and all that kind of stuff, and so you've got to look at relative local affordability specifically. And so over the last 18 months, all of our clients have had double digit growth. The real estate market even has crashed. It's just completely incoherent and if you look at where the market is going, it's really really interesting as well.
Speaker 2:Now we may see some more rate rises. There's going to be a rate announcement a few days after. We're recording this as well and you know, potentially it's going to go up. I don't care, and I've been saying I don't care about rate rises since I started going up. I was like what do you mean? You don't care, it sucks for like the cost of capital, and it sucks because it stops some people being able to participate, because it compresses the access to credit. But it kind of doesn't matter if you can bypass those two things.
Speaker 2:The problem when interest rates go up is that people go oh, you know what I need to do. I need to focus on cash flow. And it's like well, maybe that's not true, because, number one, it's going to be pretty hard to find cash flow in today's market anyway, because the interest rates are so bloody high relative to rents because interest rates have risen faster than rents. It doesn't mean that we'll be the case forever. It just means that rents haven't caught up yet and people can chase this golden cow of cash flow and compromise it over a better approach to building wealth.
Speaker 2:So, and that means that people are either going to potentially make suboptimal asset selection decisions, like buy the wrong property in the wrong place at the wrong time, based on one simple and incorrect metric on is this cash flow positive or neutral or not, or they'll choose not to participate because they're like, oh, unless it's cash flow positive, I don't want to buy it, and therefore they actually opt out, which is just madness as well. Because you know, let's just say you buy a property and let's just say theoretically, say, $12,000 a year, negative cash flow, $1,000 a month, but if it goes up by 100 grand, is that good or bad? Well, it depends on your measure, doesn't it? It does depend on your measure, right? But you know you could be giving up on a significant wealth building opportunity just by focusing on the wrong metrics If you're trying to grow capital is really good.
Speaker 2:Yeah, yeah, yeah, if you try to get cash flow sure. But in my experience most people are in that kind of earlier stage where they need to focus a bit in capital, because if you're trying to grow, capital.
Speaker 1:Yeah, you give up $10,000 cash flow to get the 90 for sure.
Speaker 2:Yeah, exactly and so, but anyway, where do I think it's going? Even if interest rates go up, I don't see anything that's actually going to stop the market going up. We've got tremendously high immigration, which is a great thing. I'm a big proponent of immigration. I think it's awesome. I think it's good for the economy. I think it's good for our culture. I'm a big fan. We have extremely low building approval rates and lots of builders have gone bust, so there's bugger rule properties getting built and interest rates will go down over time as well and relative yields are going to change as well. So I can't see a scenario where prices don't continue to rise. I actually see a scenario where they start to grow very, very, very quickly up to probably all, probably something like 2026.
Speaker 1:This is what I was keen to dig into with you, because I think people are going to hear that and go what the hell are you on Like? That is the complete opposite of what I'm hearing. I actually said the same thing. I'm like, I'm actually a little bit worried about what happens when we go back to an easing cycle, because anytime rates have risen this far, this fast, within nine to 12 months they're on the floor again. And if they're on the floor again in prices are here. What are prices going to be?
Speaker 2:Yeah, I'm really glad you brought that up, because whenever I formed my opinions, I formed them based on research, not just gut feel. Yeah, and so you know my thinking around interest rates. I actually sat down and did a whole bunch. But go back to COVID. When COVID hit, I said to all our clients I said just, we're putting a pause on buying properties because I don't know what's going to happen and so I need just, I need time to think.
Speaker 2:I took a couple of weeks just to think, read, study, really dig into it, to form an opinion based on. And then when I go, cool, we're good, let's go, let's fucking go and just go quickly and go hard, and all the people who participated fucking crushed it. Now, the same thing about interest rates is I was like, ok, well, what happens if interest rates rise? Oh yeah, I'm incentivized because we've got a property investing company, but also I'm incentivized to make sure our clients don't stuff up because we've got reputational risk. And what I saw is that every time interest rates go up so there's actually a higher correlation with interest rates going up and prices going up, by the way, and every time interest rates go up, they typically go down again pretty quickly and it's typically.
Speaker 1:You said nine to 12 months and what I looked at it was sort of like between nine and 18 months sort of point is that when they spike they always go too far and they realize I've gone too far and they go oh, oh, oops, we put the brakes on too far. Oh, we've got to put the accelerator back on.
Speaker 2:Basically Big O when you look at the underlying demand. So at the moment the demand side is just so high Like there's almost no stock on market. It's very hard to buy properties at the moment and there's a tremendous amount of demand, and the thing that's constraining people is access to credit. So it's never been interest rates, it's access to credit that can slow things down. And so as soon as people can get greater access to credit, ie when just rates come down again and borrowing capacity assessments start to read all the license stuff, it's just going to mean more participants in the market. That can only really mean one thing, particularly when you've got a such an imbalance in the market.
Speaker 1:And so I would go as far as say, concerning the reason we bought was because I came to the same conclusion you did. I was like I want to get my money out of this fairy land place. I want to get it into something real that's going to have consistent demand. That is, as to your point, it's an emotional demand that never goes away. Have you heard of that concept of inside money, outside money?
Speaker 2:No.
Speaker 1:Inside money is basically money that can be manipulated, tampered and corrupted, so we can make more of it if we want to. Outside money is property, is Bitcoin. It's very hard to create more of these things, people. It's harder than the actual currency itself. And so you see that cycle happen every time there's an easing event. And so you look at that and you say, well, as soon as they're going to do that, as soon as they go back to an easing cycle, what are they doing? They're debasing the currency again because it is going to be inflated. It's actually just proven itself every time. So what do you want to do? You want to get your money out of the currency and you want to get it into something else that stores and grows the value faster than the beats inflation, and that's not just CPI inflation. You want to be writing the asset inflation. That happens, because those aren't the same thing asset inflation and CPI, not the same thing.
Speaker 2:Yeah, and your money's getting devalued, like the more you've got it sloshing around in cash and other kind of more liquid beaches and stuff, it's devalued. But yeah, I think the way the real estate market is going is concerning, for from a social context, but from a wealth building context, I think anyone who wants to actually change their wealth story probably needs to think about participating in the center out there later.
Speaker 1:Yes, like swim against the kernels, swim with it. Yeah, exactly, exactly so. Last question I've got here on this point. You know the government's big initiative, it's big scheme we're going to build all these houses. It won't build enough properties fast enough. I looked at the numbers and I was like that you've got to do the world record for five years in a row and we've got half the building industry in that time. Yeah, how are we going to do that?
Speaker 2:I actually think the idea is good because I actually care about the community. So I care about the community and I think the only actual solution, by the way, is government intervention, and I think the government needs to go and build tons of houses. So I actually think it's a good thing. Let's just say it was somehow successful. Do I think it would collapse the market and do anything like that? No, I don't. I really don't. I think that we're at risk of the market behaving unnaturally unless there is some intervention, and I think that the best case scenario is that it would cause the market to operate a little more naturally, which I think would be really good.
Speaker 2:I think everyone would agree that the kind of boom that we saw in 2021 was not sustainable and, generally speaking, not good for the country, not desirable at all. Not desirable Like kind of cool if you participate in it, but geez, imagine if that went on and on and on and it'd be no good for anyone. There's already enough meat on the bone. Like if you were to be able to build tremendous amounts of wealth. If they do act normally, I think it would be a good thing, but the problem is the project is not big enough to make a difference and it won't be done quick enough. I don't believe they're able to execute the plan they think so. Even if they did the plan that they're talking about doing, it's not enough fast enough. Then the question is like can they even do the plan that they're talking about doing? And I don't think so, and so you've sort of got like a well nice headlines, but what does that actually kind of translate to Probably bugger off, yeah, that's how I read it as well.
Speaker 1:I was like I directionally. I love the idea, but I just don't know whether reality is going to play out the way they think it is. My concern is my kids. I want my kids to have a. I hate the words fair go because I think they use a lot. If it isn't fixed, I just don't know that they would get a fair go.
Speaker 2:I think this is a words hot question to pose, because everyone's like oh, what am I kids about to have a fair go? Because and what they really mean by that is like I want my kids to be able to buy a real estate too. And the question you've got to ask around that is like why is that specifically important? Is it because you want them to feel like they've got a safe and secure roof over their head, or is it because you want them to participate in wealth creation or what's the kind of overarching story? And I think that functional narrative will need to change over time.
Speaker 2:The question you've got to ask yourself is like what do you really want, and what is it you want for your kids? Do you want your kids to be able to live a life where they feel free and happy and do all the things I wanted to do? Maybe homeownership is not actually going to be a feature in the future, and maybe that's okay, as long as we can let go of that emotionally Right and like I'm quite happy renting and you know I do get the emotional like, oh man, I'd love to go buy this thing and this like dream house. I got an agent buying that and then I logically walk through it and I'm like why the hell would I want to tie up that much capital in that kind of an asset? I'm just like I can't do it.
Speaker 1:You're measuring that against the current, the way it works now. But if housing was just a utility and it wasn't an investment, then the opportunity cost wouldn't be that big. It would actually be just be oh yeah, that's just another expense, just like rent, just whatever it is. I don't like the fact that it is it's been turned into an investment this way, but I'm not also a realist.
Speaker 2:Like you've got to play the card you dealt, so that's how I play it Totally, and so we are very comfortably the best in class at what we do in real estate. But I'm also not like. The only reason it's a real estate is because it's currently the best thing that I can see to help people to grow their wealth. If it was something else, like great, let's do that, because the thing that I care most about is not real estate. The thing that I care most about is how do we help people create a life of freedom, choice and abundance. How do we allow them to live life on their own terms? For the majority of people, I can't say a better way of doing that than real estate right now. But if that wasn't the case, then I'd be advocating for whatever the appropriate methodology is at the time, including wanting less, because the real problem we all face is desire. That's where the real suffering comes from, and so if we could work on that side of things, maybe we wouldn't need as much stuff anyway.
Speaker 1:Interesting that could take us in a whole nother direction. Thank you, mate. Talk soon. My pleasure Speak soon. Take care.