Finance, Property Investment and Borrowing Smart as a Business Owner | Dan Steed

[00:00] Cold open

Kane: If someone had half a million dollars to invest today, what should they invest in?

Dan: You sit down at the pub and tell your mates, "Oh, I'd love to go and do that." Back yourself. If you're thinking about becoming self-employed and you think, if I don't do it now, I never will, it's time to do it.

[00:15] Intro and Dan's background

Kane: Hey, I'm Kane Tyler Smith, the founder and CEO of Smartfix and Hypotential. This is Unlocking Business, where we have real conversations around business, leadership, mindset and personal growth. If you've been getting value from these conversations, please take a second to like, subscribe and follow our channels. It helps us reach more people, bring on more guests and share more stories. Now, let's get into this episode.

Kane: Today, I'm joined by Dan Steed from Fundd. You've spent your entire career in banking and finance, working in senior roles at Barclays and Lloyds in the UK before moving to Australia, where you spent almost 11 years with Westpac in commercial and residential lending, becoming one of Western Australia's top-performing bankers before starting on your own. Having worked on both sides of the table, you have helped accountants, business owners, investors and families navigate finance, lending and wealth creation. In the financial year ending 2026, Fundd settled $552 million in new lending.

[01:05] Settling $552 million in a year

Kane: How does that make you feel?

Dan: Feels pretty good. It's nice to hear that out loud, actually. It's probably the first time that somebody's read out all my achievements in a 30-second space, but yeah, it feels pretty good. It's new news to us, but obviously you're not completely unaware of how you're doing throughout the year. But when you look at the numbers and you remember where you've come from to where you are now, yeah, for sure, it feels amazing.

Kane: Was it easy for you to pull that data for the end of the year?

Dan: It is. If you're spending too much time looking at the data of what would potentially be just an ego boost, then you're probably not spending enough time doing the stuff that builds into that in the first place. So, of course, we keep one eye on it, but we probably didn't fixate over it until it was the end of the year and you start looking at the numbers and drilling into what that looks like, I guess.

Kane: And what sort of settlement deals were they? Like, obviously finance for commercial, residential?

Dan: A little bit of everything, really. We were always really careful, especially at the beginning,

[02:07] Specialising and hiring the right people

Dan: of not trying to specialise in something that we weren't specialists in. If we specialised in commercial lending, but then an asset finance deal came across the desk and we weren't best placed to do it, we didn't pretend to be best placed to do it. We kind of niched ourselves and specialised in certain areas. But as the business grew, we realised that there's nothing wrong with specialising in everything. You've just got to get the right people into the business to do that, and that's all part of the growth of the business.

Kane: And how do you go with finding those specialists? Because what we've learned recently is we've sort of reversed. We tried to do multi-trades, like electrical, air conditioning, plumbing, everything within your house. We had up to 15 trades at one point, and we just really struggled to find experts in every single niche.

Dan: Yeah, it's probably harder when you're younger, I would say. When you're, I don't want to say an immature business, but a younger business and you're still building your credibility in the market. Three years ago you're working from your kitchen, and the brand is not a bad brand by any stretch of the imagination, but it's a new brand. And now, last I checked, and I don't want to be caught out by getting it wrong, but $552 million is certainly the highest amount of lending that we can see in WA under our aggregator, anyway.

Dan: So when you build a brand like that, you start bringing in different types of people because the brand is more trustworthy. People start seeing your success and want that success for themselves. I made the move of going from banker to broker at a time when I've got four kids, and I had a really good income and a really stable job, and I loved my job, actually. I had a really good boss. I had really good support. I worked the hours I kind of wanted to, which was still probably about 10 or 12 hours a day. But it was a big risk for me, and a lot of people struggle to take that risk, to leave a nice easy job to go and do something that can be a bit of a risk and a bit of an unknown.

Dan: Whereas when people have seen you do it, you do start to get some of the great bankers out of the banks that then want to come and do the same thing as you. I've got a really good example of that. We've just hired somebody from Westpac who had been there for, I think, 11, 12 years. Really highly thought of, and we're really proud to have him on board now. So, certainly something that probably wouldn't have happened three years ago.

Kane: Yeah, an interesting point, that you can get staff from having a good reputation, but also clients as well, obviously.

Dan: Yeah, absolutely. And we've always been lucky with our clients. Obviously, the landscape's changed quite a lot in three years, and it will continue to change. We'll probably sit here in three years' time and the landscape will have changed again. But the environment of lending back then was very different to the environment of lending now. We've had interest rate changes.

[05:13] House prices and bigger deal sizes

Dan: The prices of houses have just gone astronomically higher in those three years, which you could argue has made our job a little bit easier. Obviously, the more expensive houses are, the more lending that you do.

Kane: So your average deal size would be higher?

Dan: Massive in comparison to what we were looking at. And again, that comes from the maturity of the business as well, because you start building relationships with accountants, real estate agents, commercial real estate agents. I work with a great bunch of people at Ray White Commercial in the city as well. Three years ago you might have been doing $50,000 top-ups, and then all of a sudden you see properties on St Georges Terrace selling for $150 million, and it's a completely different landscape, complexity as well. There's always an education involved.

Kane: So, what do you mean by top-up? Is that people refinancing?

Dan: Yeah. So a top-up is, let's say you've got a $500,000 home loan and you want an extra 50 grand, you just top the home loan up by $50,000. But again, there's a thousand ways to skin a cat in finance.

[06:17] Refinancing, good debt and bad debt

Kane: It's interesting. I've probably done that like 10, 15 times with my own house.

Dan: Welcome to the world of finance.

Kane: Refinance the house, yeah. Use that for the business. With the housing market going crazy, do you think people have taken too much risk by refinancing their house to pull extra money out?

Dan: Not necessarily, because when a bank assesses a deal in the first place, or when they assess a transaction that comes through, they put a lot of buffers into the assessment anyway. So, let's say you're borrowing at 6.5%, the bank will assess that at 9.5%, because they're looking at changes in circumstance and the volatility of the rates. So, yeah, there's always a risk when you borrow money. You're putting your house on the line, and you're borrowing money that's not yours. But debt is good if you're using it for the right reason.

Dan: There's good debt, and there's bad debt. Bad debt is borrowing for a holiday, or putting it all on black at Crown. That's bad debt. Good debt is giving you something that you're trying to achieve, giving you something that will progress your life, whether that's for a house, or a commercial property, or for a business, or a car. People need cars.

Kane: Would you class refinancing your house to renovate the same house as a good investment strategy?

Dan: Yeah, as long as you're renovating properly. As long as you're not a person that has no idea what they're doing with renovations and thinks a YouTube video is going to do it for you, then yeah. I think it's a great idea, because all you're doing is, yes, you're borrowing more money, but then you're adding value to the house.

Kane: Mhm.

Dan: And also, people underestimate what that will do for your mental health as well. People love living in a nice house. We have done stuff to our house at home, and I can tell you my wife is much happier looking at the house now it's been done up a little bit than before. So it doesn't always have to be about, is this the right decision mathematically? It can be about emotion, too.

Kane: I find sometimes people will renovate just before they sell. They'll live in their house all these years. A friend of mine is thinking about doing this at the moment. Actually, two people I know are like, "I've got to finish my house now because we're going to put it on the market." So then at the very end, they do all this work, and one of them, for example, they're actually now considering staying. Like, "Oh, we should have done this ages ago. We've just finished the renovations that we started two years ago. We're actually going to stay."

Dan: You're basically explaining every episode of Selling Houses Australia. But yeah, it's funny, because I mentioned to you earlier that we're having our garage done at the moment, and it's a client of mine that's doing the garage ceiling. And he said exactly the same thing. We're doing our garage just in case we want to sell in the future, because we just want the roof to look nice and clean. And he said, "Our house was the best it ever was, and then we sold it the next week." It's just how it works sometimes. You get it to the perfect position, and then you want to upsize, or whatever. It always seems to be the way.

Kane: Yeah, it's an interesting one, hey. We've pretty much done the same things. We're in our fourth house now. And now, with the housing market, that's the most amount of money that we would ever make off one transaction, tax-free, because it's your principal place of residence.

Dan: Residence, yeah. But where would you live then?

Kane: Yeah. I mean, then you've got to buy somewhere else, pay stamp duty again.

Dan: Yeah, I get it. Well, we bought our house in peak COVID, before I was a broker. We've done work to it and stuff, but we're not talking a second storey or a new swimming pool. We're talking aesthetically pleasing things, like some flooring, or some river stone down outside. It's nothing drastic. That's just what the housing market's done.

[10:30] Rental yields in Perth vs regional WA

Kane: What has been the increase in the last three years, percentage-wise, on houses?

Dan: It depends. 200% in some areas. It just depends which areas you're looking at. We see a lot of people invest in the regional areas, like Kalgoorlie and Broome, because of their rental yield. A decent rental yield here in Perth would be 5 to 6%. A really good one would be sort of 6%. Whereas if you go to Broome or Kalgoorlie, you can get 10, 12%.

Kane: Because of the mining situation.

Dan: Yeah, exactly. Because there's a lot of infrastructure. Broome especially, there's a lot of infrastructure going up in Broome at the moment. So a lot of companies need housing for employees, governments need housing, and you could get a three-year or four-year lease. But the capital growth is slower in those regional towns. And in Kalgoorlie, you could argue that the value there is the mining, and if the mining ever stopped, and I'm not saying it will, I don't know, but if it ever stopped, is the value still there? Will people still want to live in Kalgoorlie at that point? It's a hard one.

Kane: So, will the house prices go up in those areas as well? How does that affect the rental yield, if the house prices go up?

Dan: Yeah, house prices will go up. House prices have gone up everywhere in the whole of WA. It's just quicker in some areas. Metro Perth will always have higher capital growth. Well, speaking about the last five years anyway, higher capital growth than some of those regional towns. But the regional towns have a requirement not for long-term residents, but for short-term residents, because of infrastructure or mining or whatever. So you do tend to get higher rental yields, but I don't know how long that will last.

[12:37] Changes for residential investors

Kane: What's the go with these new laws with the capital gains tax for investors in the residential market?

Dan: I don't think that you're going to hear too many brokers speak too positively about it.

Kane: Has it all gone through? Is it all official?

Dan: Yeah. So, most lenders pulled the pin very early on in the piece. I'm talking from a personal opinion here, I don't want to get taken to court by the government, but my personal opinion is that a lot has been said around how much it's going to help first home buyers because they're going to build all these houses, but the builders are struggling to build the houses in the first place anyway. So, to me, it sounds like a message that is designed to make it sound like they're trying to help first home buyers, but it's certainly not the magic wand that they're pretending it to be. And it has drastically impacted people's borrowing capacities for investment properties. It hasn't affected our business, not really. I'm sure it has, but we haven't noticed it. It's just a shame that it feels like the message that is being delivered isn't the right one, in my opinion.

Kane: So, just to double-check, if I buy an investment property, then I sell it in 10 years' time and it's made $100,000, I don't get that discount anymore?

Dan: No. And also the capital gains discount. And more than anything, it's your lending to buy that in the first place, if you wanted to borrow to buy it. Negative gearing is gone. When banks assess your application for debt on investment, if the negative gearing can't be taken into consideration, it means that the interest on the loan is no longer tax deductible. And that can make a difference. We had one guy that went from $800,000 borrowing capacity to like $500,000. And it makes a massive difference.

Kane: Yeah, that's huge.

[14:45] First home buyer schemes and Keystart

Kane: But if you were to build a house, because I don't know if this is true or not, if I build a house for investment purposes, can you still claim it like you could before?

Dan: Yes. New homes are okay. It's very clear that they're trying to, well, again, in my opinion, it's very clear that they're trying to push the new homes position.

Kane: How is this supposed to help new home buyers then?

Dan: Well, yeah. That's a really good question. I need to be careful how I answer.

Kane: What's their perspective? They say it's supposed to help them, and this is how.

Dan: I think it's because of the government scheme. So, a couple of things where there's benefit from buying a new house. If you're a first-time buyer, and all the limits are going to change very soon, but if you buy a new house, there's the first home owners grant, and there's the first home buyers scheme. So, generally speaking, if it's under $850,000, it's a 5% deposit.

Kane: And no stamp duty?

Dan: So, stamp duty, but only on the land. Obviously you don't pay stamp duty on the build portion of it. So it alleviates a lot of that. If you're buying a house for $850,000, you're looking at, I don't know, $28,000 in stamp duty. Whereas if it's a $350,000 piece of land and then, say, a $400,000 to $500,000 build, stamp duty is going to be two-thirds of nothing. So it alleviates some of the pressure there for first-time buyers straight away. First home owners grant, at the moment I think it's under 750, you get 10 grand. Doesn't make a huge difference, but it makes a difference.

Dan: And generally speaking, trying to find an established house for under $850,000 at the moment is pretty difficult. I'm seeing houses in Butler going at the moment for over a million dollars. And that just wouldn't have happened three or four years ago.

Kane: Mhm.

Dan: Even getting a million dollars in Mindarie or Quinns Rocks or wherever in 2020, I wouldn't say it was rare, but it was rarer than it certainly is now.

Kane: I look at Mindarie almost every day, and I think the cheapest one at the moment is like 1.2, I think.

Dan: Yeah. If you found something under a million dollars in Mindarie at the moment, I would be very surprised. It would certainly not be something that you would have paid a million dollars for three years ago.

Kane: So, you mentioned before about first home buyers only having to pay a 5% deposit. Is that through a government scheme, or is that just what lenders are offering?

Dan: No, it's through a government scheme. Only certain lenders offer it. It's mainly the majors, but there are some non-major banks that do it as well, and not all the majors do it either.

Kane: Is that Keystart, or is that something else?

Dan: No. Keystart are completely different. Keystart are government backed. I don't want to call them a bank, but an institution that lends money. And they are genuinely designed to help people onto the ladder with a 2% deposit.

Kane: Yeah, okay. There's always pros and cons though, isn't there?

Dan: Yeah, interest rates seem to be a little bit higher. Lending criteria are a little bit more difficult in some instances. Whereas your Westpacs, your NABs, your ANZs, they have their 5% deposit. You just can't go over $850,000 as a purchase price. I think those limits will change, because it's becoming less and less likely for people to buy a house for $850,000 anywhere at the moment. But yeah, 5%, no lenders mortgage insurance, no maximum amount of income.

Kane: There's no lenders mortgage insurance?

Dan: No, none.

Kane: What's the downside of that deal then?

Dan: There isn't one.

Kane: Downside is interest rate?

Dan: No. For first home buyers, it's a game changer, for sure. It's just less of a game changer now than it was a year ago, when house prices were a little bit less.

Kane: Yeah, okay. I see what you're saying. So basically you can buy a house, but it has to be under $850k, which

[18:59] Why so many contracts land at $850k

Kane: there isn't any.

Dan: No. And what we've seen is, if you're listing your house in the northern suburbs of Perth for anything between $750,000 and $800,000, and there aren't that many, by the way, it's probably going to go for $850,000 exactly, because every single first home buyer is willing to go to $850,000. If it goes to $850,000 and $1, they're not eligible for the scheme at the moment. So we see it so often, where you tell people you need to keep it under $850,000, and they come to you with a contract and it's exactly $850,000. And I reckon we've had more $850,000 contracts come through than any other price range ever.

Kane: So, do you think that's increasing those house prices when they're not actually worth it?

Dan: Yeah, potentially. If I'd had investment properties worth $750,000, I would have loved to have sold a house at that price point, because it would have gone for in the 800s, for sure.

[20:03] Pre-approvals and your credit file

Kane: I suppose that's a good position for the real estates to be in, because they've got someone that's pre-approved with this scheme in position, but then you've got someone else that's subject to finance approval or whatnot, and they're not going to pay the 850.

Dan: I think pre-approval is a dirty word. There's nothing wrong with a pre-approval, and we do them, of course we do them. Especially for people that are building, because land developers are more insistent on pre-approvals. But a pre-approval doesn't guarantee you the lending that you've put in place. A valuation can still fall over. The lender might not like the property because there might be power lines next to it. A pre-approval doesn't guarantee you an approval. If you've got the right broker and the broker knows what they're talking about, then if we tell you you can borrow that money, you can borrow that money. Sometimes a pre-approval can feel in some people's minds like it's a magic wand, and I don't see it the same way.

Kane: So, is it a document that, okay, if I was buying a house, I have this pre-approval letter that I give to the real estate agent to say I've actually got pre-approval for this?

Dan: It's built to give the real estate agent comfort. And if any of my clients listen to this, they've probably heard me preach this a few times, but if we have a decent conversation with the real estate agent, that should hold just as much weight as a piece of paper. A lot of pre-approvals nowadays, bank assessors don't even look at them. They're system generated. So it just means that we put in the information that the bank likes, and the bank's gone, "Yeah, that looks fine," and they've generated a document. I mean, I could generate a document and tell you that it was all going to be okay.

Dan: At the end of the day, it comes down to the property, your income, and the assessor at the bank liking it. And we only put things to banks that we know are going to be liked. We don't have a habit of throwing mud at the wall and hoping it sticks. If we tell you it's going to work, it's going to work. And if we tell you it's not going to work, it's not going to work.

[22:08] Commercial vs residential property

Kane: Because if you were to throw mud at the wall in that situation, does that leave a mark on the credit file as well?

Dan: Every time that you put an application through. And that's another reason why, I don't want to say that I'm hesitant to do pre-approvals, because if you're listening, we'll do pre-approvals for you all day, every day, if that's what you really want, but why hit your credit file unnecessarily? You might ask for the pre-approval in January, and that lasts for 90 days in most instances. Then you don't find anything for nine months, so you roll the pre-approval over three times, which might mean three different enquiries on your credit file. It just feels like needless damage to a credit file. You're not going to go from 1,000 to 200, but it raises more questions than is required sometimes.

Kane: Mhm. So, with buying an investment property then, what's better, buying commercial or residential?

Dan: That comes down to personal choice. I think you're going to see a lot more commercial because of the new self-managed super fund ruling. I personally invest in commercial property just because I like it. I like the lease terms. As you will know as an owner of commercial property yourself, when you get a decent tenant, you can get 5 or 10 years out of it. Sometimes 15, 20, 25 years out of it, and it's almost like a set and forget, and you don't need to worry about it too much.

Dan: Whereas with residential property, there's always the risk that you're going to have a new tenant every six months, paying a leasing fee. They might do damage to the house. Not that people wouldn't do damage to a commercial property, but generally speaking, if you own commercial property, it's somebody's trade and business that's going in there, and they're going to look after it because they have the integrity of their business. That being said, there is no right or wrong answer as to what is a good investment with property. It just depends what's important to people. Some people love residential property. Some people don't understand commercial property, and actually that's pretty common. Unless you own a business, or unless you have somebody like me saying commercial property is really good, people don't tend to understand it.

Kane: It's not something you hear as you go through school and your younger years. It's always, buy an investment house, buy an investment house.

Dan: Ironically, I had no experience in commercial until I was a bank manager for Westpac for years and years. And obviously you mentioned Barclays and Lloyds back in the UK, but I had no idea. I actually told myself I didn't want to work with self-employed clients because it all just seemed a little bit too hard, or a little bit too confusing. And then I got a role in commercial at Westpac years ago, and instantly I couldn't believe what I'd been missing. Only when I did that did I start to really understand it and really engage with it. And now I love talking about it.

[25:17] Commercial yields and outgoings

Kane: So is there a difference in rental yield between residential and commercial?

Dan: Yeah, there is, depending on the type of property. I would say that it's probably a little bit more volatile in residential than it is in commercial. In commercial, if you're a commercial investor and you're going through realcommercial.com or whatever, you're probably looking for something with a yield of, the sweet spot is 6 to 8%. 8% is pretty rare, but at that sort of 6%, you put a decent deposit down, you're getting an interest rate of 6.2 to 6.5%, you're probably breaking even or making money, depending on the deposit you're putting in. Interest rates are quite high at the moment. You'd expect them, hopefully, one day to come down. When I look at commercial property, that's the kind of return that I'm looking at. The other thing is, generally speaking, the tenant pays for all the outgoings.

Kane: That was the important question I was going to ask. So with commercial, do the tenants pay the real estate fees, all the strata fees, everything?

Dan: All outgoings plus GST. Obviously it's flexible. I've also known people to give someone six months off, and especially in the city, that's quite common. You might rent out an office floor or whatever, and you might get the first 6 to 12 months rent free. But if you're signing a 15-year lease with, say, 5% increases every year or whatever, then giving six months free is nothing over a 15-year period.

Kane: Yeah.

Dan: Whereas in residential, you're still paying the council rates, you're still paying the water rates. In residential, they'll pay their water usage and their electricity, but they're not paying your rates for you.

Kane: And shorter leases, like you said before. Sometimes it's 6 to 12 months, whereas with commercial, really nothing's less than three years, is it?

[27:20] Lease lengths and tenant turnover

Dan: It could be, rarely. I have seen a few one-year ones going around. But me personally, I mentioned to you earlier that we're potentially renting out or selling one of our units up in Butler, and I wouldn't take anything under five years, I wouldn't have thought. Just because, A, you don't need to, and B, it's just a waste of time when we're all busy and having to worry about re-renting it out again. I've owned residential investment properties in the past, and you can feel attached to tenants sometimes, because they say they're there for two years and you think this is perfect. And then when they want to move, you just think, "I just want to sell this now, because I can't be bothered to deal with it." And you don't always sell it. You find another renter and it all ends up being okay, but it's just stress that you sometimes don't need, in my opinion.

Kane: So, you mentioned before as well that under a commercial lease, the people moving in take more care of it because it's their place of business. Obviously with people living in a house you would think the same, but from my experience having residential investments, every time we change tenants, we've got to repaint the whole house. It's an absolute nightmare. Not necessarily because they've done it intentionally. It's just genuine wear and tear on the property.

Dan: Yeah. Have you ever done a vacate clean before? That was probably what sucked the soul out of me every single time, because people would leave and you'd think, my god, if this is a vacate clean, it's not great. And then you have to go over everything, and then you have to present it, and then you have to have home opens, and it can feel a bit like that. It sounds like I'm saying residential investment isn't good, and we do so much in terms of residential investment. It's just you've got to have it for the right reasons, and you've got to be prepared for it. Is it okay if I'm going to turn over tenants every year? As long as you're willing to accept that, that's fine.

Dan: And on the flip side of that, you see loads of people making a ton of money on Airbnb. We see people that might get $600 or $700 a week in rent on a standard long-term lease, or a 12-month lease, that are making double that on Airbnb. Speak to your accountant about tax advice on that, but outside of that, it's a good earner, for sure. But again, triple the effort.

Kane: Yeah.

Dan: Every time someone leaves, you've then got to clean it up, change the bedding. You do have to accept the fact that things will go missing. It's part and parcel.

Kane: Pros and cons to everything.

Dan: Yeah, for sure.

[30:28] Self-managed super and commercial property

Kane: You mentioned before about the law changing with self-managed super funds and commercial. What's the go there?

Dan: So, to put it very cleanly, you used to be able to buy residential property with your self-managed super fund. You can't anymore.

Kane: Not at all?

Dan: No. A contract has to be signed by the 10th of August. So, if you want to buy residential property in your self-managed super fund and you haven't set up your self-managed super fund yet, you should have, because you're running out of time very quickly. And people are panic buying at the moment. We're seeing that a little bit. People have set up their SMSF, maybe not prioritised finding a property, and then they've found out these rule changes are coming in, and you're seeing people quickly rush in.

Kane: That's almost like two months' notice.

Dan: Yeah.

Kane: Jeez. And is this part of trying to help new homeowners get into the housing market?

Dan: Apparently, yeah. Fewer investors, more owner occupiers. Yeah, it is, I think. One thing that they haven't done is, you can still buy commercial property within your self-managed super fund.

Kane: Is there a chance that will change?

Dan: Personally, no. I don't think so. It took a few of us by surprise, and it was kind of hidden in there when the other laws were passed.

Kane: Yeah, I only heard about that because, obviously, all the other laws were going wild on social media, but my dad mentioned the self-managed one. Because, as you know, we're in the process of selling one of our buildings, and then I'm going to use the proceeds to buy the building we're currently in off myself, in self-managed.

Dan: Yeah.

Kane: Which I believe you can do. I'm hoping you can, because I've been told you can by our accountant and our current broker. Because previously, if you bought residential in a self-managed super fund, obviously you can't live there yourself, and you can't have family live there. Nothing at arm's reach.

[32:33] Living in an SMSF property and retirement

Dan: But there's actually, and I didn't realise this until I had to tell a client, a client wanted to buy something in his self-managed super fund. It was a commercial property, but it had a residential unit in it somewhere, and he wanted to live in it. I was like, "You can't do that. You're not allowed to do that." It's a massive no-no. If you bought a residential property in your self-managed super fund, you cannot live in it.

Kane: What about when you retire? Does that change?

Dan: It does, because you can then divest your self-managed super fund, because you are at retirement age.

Kane: And is that some people's strategy? Is that what they do?

Dan: I haven't seen it often. Most people I find either continue to keep it rented out, or they just sell it for their retirement. At the end of the day, I find that people buy stuff in their self-managed super funds that they see as a good investment, not where they want to spend the rest of their lives living.

Kane: Mhm. Yeah, for us, when I found out about the whole self-managed super fund thing, it was like the best thing that ever happened, because I didn't know about it until someone brought it up. I was like, "Oh, so I can use my and my wife's super money to buy a commercial property, and we need commercial property to run the business anyway." So for us it was an absolute game changer for the business.

Dan: Yeah, same for the first unit that we bought, the one that I was talking about. I bought that in my self-managed super fund, and then my business rented it. And it made it really, really easy, because after working in a bank on PAYG, you get your standard super contributions for 10, 12 years or whatever. Between me and my wife, all of a sudden you've got this deposit that you can chuck together that you might not have had in your bank account to begin with.

Kane: 100%.

Dan: Yeah, it was a game changer for us, too. Don't get me wrong, I didn't mind working out of my kitchen, but it's certainly more productive working in an office.

Kane: Yeah, especially when you start to have other staff.

[34:39] Getting out of the house to work

Dan: Yeah. But regardless of staff, the biggest momentum shift that we ever had was getting out of the house. And that's not a derogatory thing around working from home or kids or whatever, but there are distractions at home. And also, I think when you put yourself in a position where you have an office, it feels like you're getting serious. So for us, I found that moving into an office was an absolute game changer. And probably the best bit of advice I could give any self-employed person is find a space that's not your house to work from.

Kane: Did you guys do that three years ago, when you had your first one?

Dan: Two and a half years ago. We probably did the first six months at home, and it's fine. But there are distractions constantly, whether that's the doorbell going because the postman's there, or

Kane: School holidays.

Dan: School holidays, and your kids are around asking you questions constantly. There were times where I was walking around the house just walking away from my kids constantly, trying to shut doors behind me, and they'd just open the doors. You're almost running away from your kids. My wife actually said something to me before, that she prefers me coming home later but being present when I'm home, rather than coming home early and only half being there and being on the phone all the time. And that's probably how it felt for her when I was working from home as well, where she might come through and want to have a conversation about something, but you're only half present. We actually had that conversation before I came in here today, and it resonated with me a little bit. So yeah, get your own space. Use it for the right reasons, and I think you'll find that it will have a decent impact on your business.

Kane: Mhm. Yeah, it's definitely a very good point, and it's exactly the same for me, because in the house we lived in before, I worked from home a lot more than I do now. What I would end up doing is my computer would always be on in the study. So if someone called me at 5:00, I'd go, "I'm just going to take this call," and jump in there, because it was so convenient.

Dan: Yeah.

Kane: Whereas now it's a bit different. The house we're in has a granny flat that's sort of separated, so it's way more inconvenient for me to walk out of the house and downstairs to the granny flat, because I won't do it. So now it's like, "Okay, well, I'm not at work." If I'm at work, I've either got to walk down there or come to the office.

Dan: Yeah.

[37:46] Flexible work and office culture

Kane: Yeah, but having our first office was like the best thing ever. For us it was more about the staff, because we had one person that was in the office with me and maybe four or five tradies, so it was somewhere for them to come as well. Obviously, you don't want them going to your house, because that's weird.

Dan: Yeah. No, 100%. And when I say it's not so much about the staff, it is about the staff. We obviously have probably four or five people, out of, I don't know, 32, 33 people that are in the business now, that come into the office, because we have brokers all across the country. So there are still people that work from home, and it doesn't mean there's anything wrong with that. Actually, it benefits a lot of the people. The reason why we sometimes hire people that we have no right to be hiring is because they have the comfort of working from home. They can work around the kids' school pick-ups and drop-offs. We've got a few mums that still have kids at school. So it's super convenient for them, where they can almost work full-time hours, but at the times that suit them. So even though having the office is great for staff, it doesn't mean that it's for everybody in the employee space, and that's not the reason we did it.

Dan: But yeah, it is convenient for sure. And the one thing that I probably missed the most about leaving Westpac and going out to be self-employed was getting into the office on a Friday and talking to everybody. It didn't have to be a Friday, but Fridays always ended up with a lunch on.

Kane: [laughter]

Dan: But you do miss that. Not always that it was banter, but you do miss just talking to people, having adult conversations. And then all of a sudden you replace it with phone calls and meeting people for coffee that are clients, but it's not the same as seeing the people that you work with every single day.

[38:50] Brokers in every state

Kane: Yeah. So it's good to create that culture as well, and I think it's important to have that culture where you can meet people face to face. So how come you have brokers in each state? You operate in each state?

Dan: Every state. I just want to make sure that I'm correct in saying that. I don't think we've got one in the Northern Territory, but watch this space. But outside of that, every state. Even Tasmania. I'd like to say we've done it tactfully, but it's kind of fallen into our lap that the right people have applied for the right roles at the right times in different states, and it's worked really, really well.

Kane: So you provide finance all over Australia?

Dan: Yes. Yep.

Kane: Is WA the highest volume?

Dan: Yeah, because most of the people in our team are from WA, and this is where it all started. WA is probably the highest performing, by a decent stretch, I would say, but we've still got great people all across. In Tasmania, I think we've got one person. You can't expect them to outdo 12 people in WA.

[39:51] How Fundd grew interstate

Kane: So what were the reasons for going everywhere, as opposed to just sticking to WA?

Dan: Probably a couple of reasons there. So, Darren and Brody, who are the founders of Fundd, if you like, they're the ones that started it all to begin with. They're from Bundaberg originally. Darren still lives over in Queensland, and Brody lives down in Karratha. He moved over because he's a hippie and loves the waves. So Darren having a presence over there naturally means that we grew in Queensland pretty quickly. Then it just so happened that one of my staff moved from America back to Sydney, so I hired her. English lady, amazing, absolute gun, called Emily. She was really, really good. Then she introduced me to one of her friends that used to be a broker but needed more flexible time, so I hired her also, from just south of Sydney.

Dan: And it just comes from that. And then as you grow, you put adverts out. We have what we call client service managers, which are effectively assistants that help us with the day-to-day stuff and the input into the system. Computer work, data entry, whatever. And over time you want them to progress to become brokers. It's that natural progression, where you hire people from Seek that are just out of school, or mums or whatever, from different areas, and then they just end up progressing to be a broker. And then all of a sudden you have a broker presence in a different area. There's a guy that we're going to hire as a CSM in Albany, and he will one day progress to be a broker, I hope. And when he does, then we'll have a broker presence in regional Western Australia as well. It's just what it is.

[41:57] Becoming a broker vs running a business

Kane: What's the training to become a broker? Is it uni?

Dan: Officially? No. God, no. Officially, it's a Cert IV and a diploma. It's supposed to take three months, I think, is the guideline, but you don't have to take three months. I think I knocked mine out in three weeks. So you can do it as quickly and as self-paced as you want to. I had time to do it, so I just got it out as quickly as I possibly could. If you're coming from the banking industry, you can knock it off with recognition of prior learning, and you could be pretty much accredited within a few weeks.

Kane: So then, if someone gets their broker licence that we were just talking about, do you then need to do something more to be able to run your own business, like a licensee or something different?

Dan: Officially, no, but this is a good message for all brokers. I think a lot of people think that because they've got finance experience, it's really easy to go out and become a broker and do it on their own. Being a broker, yep, you could probably learn that pretty quickly, but running a business is completely different. Even if it's just you, because there is so much more to it than just, oh, we're just going to provide people loans and that's it. There's compliance behind the loans. Then you've got to have all your ASIC stuff sorted. Then you've got to have your professional indemnity insurance. There are so many different things that I never thought of.

Dan: And had I tried to do it on my own, I probably would not be sat here right now. If I'd just gone as a one-man band on my own, I probably would have put it in the too hard basket and gone back to my cushy job at Westpac. It's only because I had the support of other people, like Darren and Brody, that I was able to do it. But if you are thinking about becoming a broker and doing it on your own, in my opinion, you're making the wrong decision. You need to be joining a firm that will support you from day one. And that doesn't mean just with leads or whatever, but support in terms of, it can be a really stressful job sometimes.

[44:04] Compliance and fraud

Kane: I assume the compliance part of what you do is heavy.

Dan: Yeah. We have somebody that does a lot of our compliance for us in our business, because it's a full-time job. So, yeah, compliance is heavy, and it's only going to get heavier. I don't know if you saw that, predominantly over east, I believe, there was a huge amount of fraud, application fraud. It was to do with falsified documents. Anyway, I don't want to put myself in a legal battle, but yeah, it was bad, and I think that will only create more red tape. And it'll probably weed out the ones that are doing the wrong things as well.

[45:07] New ID verification checks

Kane: With the current building that we're selling, we spoke to the settlement agent, and she has to go through this whole new process as well, with

Dan: Yeah. Oh my god. Nightmare.

Kane: I know. I think we were about a day late on that, because that's only just coming in.

Dan: Yeah.

Kane: She said, "You're the first client that I've got. Let me know how the process goes." I'm like, "It's terrible." I was like, "I'll do it, but." It's been in my inbox for like three days. I'm like, "Okay, I need to go home. I need to find my driver's licence. Find my passport." I think there are other documents as well.

Dan: There's a live photo that you have to take, and if the live photo likeness isn't good compared to your passport, then it fails, and you've got to go to a post office and get yourself certified anyway.

Kane: That's going to be a pain.

Dan: But we have a lot of that with lenders as well. They call it IDV.

Kane: I think that actually came up as well, because normally when we sell our vehicles, we sell to a dealer, which is easy. But we sold one to my friend recently, and he's going to go to the VIN, take a video selfie of himself, video the vehicle VIN. That's all new to me. I've never done that before.

Dan: Yeah, private sales in equipment finance. I'm assuming he's had finance to do it. I kind of get that bit, because if you don't do that, then it could just be a cube that's been crushed for all you know, and it's still registered. But you're right. If it's a dealership, they take the dealership's word for it, I guess, because that's what they're there to do. Whereas when it's a private sale, I reckon that if you didn't have to do that, it would be pretty easy to manipulate getting lending. And that's where the fraud comes from in the first place.

Kane: True. That's only new, though, I think.

Dan: Some lenders have been doing that for years, if it's a private sale.

[47:12] Foreign buyers and where house prices are heading

Kane: Yeah, I suppose that would be a big part of the fraud. And I know, obviously, for foreign investors and foreign people buying over here, there are a lot of laws around that as well.

Dan: Yeah. We don't see a lot of that. Not anymore. We used to, but no one wants to pay the extra 7% on stuff anymore.

Kane: Yeah, that's huge.

Dan: Yeah. Ironically, a lot of people baulked at it and said, "I'm not doing that." So, people from the UK three years ago were like, "I'm not paying the extra 7%." And I agreed with them at the time. I was like, "Yeah, no, that's crazy." But in hindsight, now that three years later some of them have got their permanent residency, that extra 7% would probably have been better than the extra 100% that the house has gone up in value. Do you know what I mean?

Kane: In hindsight.

Dan: Yeah, hindsight is an amazing thing. And if you'd had a crystal ball, I would have said, "Yeah, buy it now. Pay the extra 7%." But at the time it just seemed outrageous.

Kane: Do you think house prices will go down?

Dan: Ooh. That's a good question. I don't think we're going to see the drop that news.com.au will have you believe. There's a lot of scaremongering on social media and News Corp that we're just going to see this huge plummet in house prices. Personally, I don't think we're going to see that.

Kane: Like recession kind of advice.

Dan: Yeah. Because also, when a lot of these articles come out, they're talking about Australia as a whole, but people forget that Western Australia is such a unique beast. Our debt to income is one of the better ones, because we've got FIFO over here. Debt size isn't huge in comparison to what it would be in, say, Sydney, because house prices have been high there for a long time, which means debt size is higher. But the income here is massive, because you can work on the mines and do a three and one and earn silly money. So the gap between income and debt in Western Australia, I believe, is the best in Australia, and actually some of the best in the world.

Kane: It doesn't sound like it from social media, as you said.

[49:17] Finance advice from social media

Dan: I'm glad you brought that up. If you're taking financial advice from TikTok, Instagram or Facebook, then you're doing it wrong. And we get that a lot. We get clients that message us and say, "I've just watched this on TikTok. Is this true? If I put a dollar into my home loan every day, will it reset the interest?" And sometimes you want to hit your head against the wall, because if you're taking advice from social media, A, it will 99% be incorrect, and B, you've got to wonder what their agenda is in the first place.

Kane: Do you think it'd be some people, though? Because obviously a lot of people, I suppose even myself with the Hypotential business, we're trying to do the right thing. But there are so many questions around that. A lot of the younger people, well, I know for a fact, are getting all their facts from social media, because that is their news platform. So I suppose you have to know who people follow.

Dan: It doesn't mean that everything on the internet's rubbish, but you've got to be really careful.

[50:18] The company lending loophole that TikTok closed

Dan: There was a lender that used to exclude company debt, and I'm giving you an example of how social media ruins things, effectively. There was a lender that used to exclude company debt but would also lend in a company name. So effectively, it was almost like a cheat code. If you borrowed in a company and then set a new company up every single time you wanted to buy a property, it would forget about the other company debt, so it wouldn't affect your borrowing capacity. And yeah, people used it. But a guy went on TikTok, and I think it was a broker, but don't hold me to that, and spread it to everybody. And in three days, the whole policy around company lending disappeared. Everybody withdrew from company lending, because people were abusing it.

Dan: And it just goes to show that social media can be a great thing, and it can also completely change the landscape of finance. Accountants used to, for the right reasons, tell people to buy property in company names, especially the self-employed, because it protected their assets. And in a three-day period, we lost it all. And clients now aren't able to protect themselves the way they used to be.

[51:21] Director guarantees

Kane: So, is that an example where, for me for example, I have to be the guarantor for my business loans? Is that because of something like that?

Dan: Basically, yeah. You will always have to be a guarantor if you're a sole director of a company, or even if you're a director of a company. The reason that you're a guarantor for that debt is because the banks don't want you to just wind up your business one day and go, "Oh, well, I won't pay that debt anymore."

Kane: Wasn't that the reason for having the company in the first place, to protect yourself from that?

Dan: Yes, but it's different. So, let's say that you got sued for $100 million, but you owned your property in a company name that wasn't Smartfix. In theory, that asset is protected, because it's got nothing to do with your other company. And I've got to be careful about the advice I give here, because I'm not an accountant, but in theory, it should be protected.

Kane: Mhm. Even if you're a guarantor?

Dan: Yeah, because you're guaranteeing the debt. You're not guaranteeing

Kane: The asset.

Dan: The asset. Yeah.

Kane: So confusing sometimes.

Dan: It's irrelevant now, because somebody ruined it on TikTok.

Kane: [laughter]

[52:50] Business loans when you're growing fast

Kane: I have a question for you more around our business specifically. We've obviously borrowed lots and lots of money over the years, and we've always struggled to get finance at certain times because our business has grown so fast. Year on year, we'd always be at a negative at the end of the year with profit.

Dan: Yeah.

Kane: So then lenders are like, "Well, you're not making money. We're not going to lend to you." So we've had to use financiers for vehicles and stuff, high interest rates, which was fine. Low doc.

Dan: Yeah.

Kane: There's low doc, which was good. So now we're finally at a point where we should be in a better position to borrow money.

Dan: Mhm.

Kane: Now we've crossed over to the new financial year, we've actually got decent profit for once. I read this on your LinkedIn yesterday as well, so I thought I'd ask you. How can someone like me get a business loan that's not a redraw facility or a credit card? Can you get an actual loan, like a mortgage on a house?

Dan: Yes. It's not as common, but there is. For sure.

Kane: And that's based off company earnings, personal earnings as well?

Dan: It depends on the lender. When I made the comment that there's a thousand ways to skin a cat, there really is. So you can look at it in a group position. So, director A and director B take $250,000 in directors' fees or PAYG or whatever, then the company made a 50 grand profit, and there's 150 grand's worth of depreciation, because you can add back depreciation, you can add back interest. And if the group position looks healthy, then yeah. But if the group position doesn't look healthy, but the business position looks really healthy, then you could potentially exclude the personal people out of it completely. You still have to sign director guarantees. You still need legal advice. But it depends on the lender. Some lenders will exclude certain parts of it if there are other companies that you don't want to include, and you can potentially do that depending on what that company does. So there really is a thousand ways to skin a cat with business lending.

Dan: But a business loan like a mortgage is probably a great example. If you're buying a commercial property for a million dollars and you need $800,000 worth of debt for it, for example, then you just get a business loan secured against the commercial property, no different to how you would get a home loan secured against your home.

[55:35] Unsecured business lending

Kane: But what if there's no asset like that in position?

Dan: What do you mean?

Kane: Like if you're wanting a business loan to fund growing the business.

Dan: Yeah. So you can do cash flow lending, with unsecured business lending, which is what you're talking about. And you can borrow that for a multitude of different reasons, whether that's business growth, or just cash flow, or you want to hire somebody, or you've got a tax debt. There are always ways to do it. If you want it the really, really quick and easy way, you're probably going to pay over 10% for it. But they will do that by just looking at bank statements, looking at your turnover, and seeing if there's anything nasty in your bank statements.

Dan: But there are also financial institutions that aren't necessarily major banks. Judo is a good example, where they will lend unsecured for the right trading business. To be honest, depending on who your existing bank is, they should be looking to support you with that as well. If the trend is growing to be profitable, then for sure, they should be looking. I used Judo as an example because they look at some of the stuff that the majors don't. But Westpac, NAB, ANZ, they all have unsecured lending policies.

Kane: Do they do longer terms as well?

Dan: You'll find that unsecured lending will always have a shorter term than secured lending. If you're securing it against an asset, generally speaking, you can get up to 30 years if it's secured against your home, or up to 25 years if it's secured against commercial property. If it's unsecured, you're probably looking at 10 years, 7 years.

Kane: And a higher interest rate than a secured interest rate.

Dan: Mhm. The interest rate is there to build in risk. So if the interest rate's high, it probably means that it's deemed high risk. If the interest rate's low, it probably means that it's what we call a fully secured transaction, which is secured against something where, if you didn't pay it back, the bank would have something to collect.

Kane: Yeah. Which makes complete sense, and I suppose that's why people like us over the years have paid high interest rates, because we're looked at as high risk, because the profit's not there.

Dan: Yep. No one knows their business better than the business owner.

[57:39] Tax, the ATO and your lending position

Dan: And where business owners get frustrated is, they know their business, they know that they're

Kane: They know the vision.

Dan: Yeah. But also they know what they can afford, but their accountant's doing things to make sure, well, you can't have the best of both worlds sometimes. You can't have your books look like you're struggling but you're living a nice life. You've got to decide what's important. People often say to me, "What should I do?" And I'm like, "Well, do you want to borrow money?" Because if you want to borrow money, you can't make it look like you're making a loss. I get that it's great for tax, but it's going to be no good for your lending position. And I've seen some quirky write-offs in the past, depending on the accountant.

Kane: [laughter] Bali trip to meet the team.

Dan: Yep.

Kane: That's a good point. That's always been an issue for us. Not that we've done it on purpose, but our numbers have always looked bad. We pay PAYG and GST, and now we have to pay super on payroll.

Dan: Yep. Yeah, that changed.

Kane: We pay PAYG on payroll as well now.

Dan: Yep. In my first year, I was like, "It's fine. I'll just save my taxes as the year goes on, and then I'll pay it at the end of the year."

Kane: Did you?

Dan: Yeah, I did. And I thought, this is lovely. And I genuinely did save. Brokers, regardless of how much you earn, have to be paid with GST. So I always saved 10% of all my earnings straight away, and then obviously with my expenses, the GST got taken away, so I'd always end up with a little cushion, almost. And I always saved 25% of what was left for the company tax. And then the second year, I was like, "Why is my BAS bill so high?" And they were like, "Oh, no, you've got to pay tax up front now."

[59:43] PAYG instalments

Kane: As in PAYG?

Dan: Yeah.

Kane: As in up front, as in when you do payroll, you have to put in the other one?

Dan: Yeah, but because we made a decent profit in year one, the ATO calculated how much they thought I would make the following year. So, let's say I made a $400,000 profit in year one. Not saying these are the numbers, but let's say it was $400,000 in year one. That means I'd pay $100,000 in tax at 25%. So the ATO went, "Well, he's going to do that again next year, maybe even a little bit more." So then they started taxing me 25 grand a quarter on top of my BAS. In theory, it meant that I'd pay my tax up front, so I don't need to pay it at the end of the year. But then you do better, and then you have to pay more tax again.

Kane: What if you do worse? Do you get it back?

Dan: Yes, you get it back at the end. Well, I assume so, because we weren't in that position. And this year we've had our best year ever, so I'm dreading seeing what that's going to look like in my first quarter of this year.

Kane: I don't understand why they would do that.

Dan: They project it, and I think they do it to stop you from ending up with a massive tax bill and not paying it.

Kane: Jeez.

[1:00:46] The ATO and tax debt

Dan: The appetite with lending has changed a lot over the last five years, even when I was in the bank. It used to be, "If you have tax debt, we're not lending you money." Then it kind of eased to, "If you have tax debt, it has to be under an arrangement, on a payment plan. We'll expense out the repayments, but as long as it still works, then we'll still lend you money." Then it kind of went to, "Well, if you can show that you can pay it, then we'll probably still do it." And this is for residential lending as well. Banks don't like tax debt. But it's gone back to, we hate it again. And the government have basically said, we hate it again. People with large tax debts, where the ATO have been pretty lenient with it, they're now saying you pay it within the next six months or put it on a payment plan, basically.

Kane: Charge you 10%?

Dan: Yeah. And there are people, let me tell you, with tax debt higher than their net profit, because they've accumulated it over years, all their GST or whatever, and they haven't put a plan in place to deal with it.

Kane: Mhm. I thought you had to put a plan in place. I thought you couldn't not pay it.

Dan: People leave it for years sometimes and just don't pay it.

Kane: Don't they get accumulated fines and interest?

Dan: Yeah, and the interest isn't cheap, either. 11%, I think, at the moment.

Kane: Yeah, that's crazy.

Dan: And if there's one thing I personally think, it's that if there's one person you don't want to upset, it's probably the ATO. And not paying them on time is probably going to make them look at you a little bit harder.

Dan: I was actually talking to an accountant the other day, and they were saying, not necessarily about payroll tax, but director penalties or whatever, that the ATO used to be a little bit lenient, or they'd shave some of the cost off. There were genuinely times where I've seen people rack up a large amount of fines and debt, and some of it's been written off as almost a gesture of goodwill.

Kane: From the ATO?

Dan: From the ATO. That doesn't happen anymore.

[1:03:56] Long service leave for tradies

Kane: We have to pay long service leave for tradies, because that's an industry thing that we have to do for them.

Dan: What's the minimum time that you have to employ them to start accumulating long service leave?

Kane: Straight away.

Dan: Wow.

Kane: Straight away, yeah. So we pay whatever the percentage is, the government pays the difference, but then we have to pay payroll tax.

Dan: So, if they leave after four years, would they be entitled to long service leave? A payout?

Kane: Not by us. We pay it quarterly to MyLeave, which is the body, no matter what. So when they do eventually claim their long service leave, it's not a cost to us. We've already paid it.

Dan: But they still get it.

Kane: Yeah, they still accrue it. So if they go to a different company in the same industry, it continues. So if it's four years, that continues to five years, six years, seven.

[1:04:59] Where to invest half a million

Dan: I learn something new every day. That's crazy. I'm in the wrong job.

Kane: [laughter] Should we turn the tables?

Dan: Yeah, if you like. Am I physically coming over there?

Kane: If someone had half a million dollars to invest today, what should they invest in?

Dan: I think the answer everyone would expect me to say is buy commercial or residential property, especially based on the conversation that we've had today. But the best thing, and this is from personal experience, and I didn't have $500,000, but I had long service leave and a bonus from my previous role, the best thing that you can invest in is your career, in my opinion. And that doesn't have to be going out to be self-employed. But I used to think that the way to become wealthy was you just work really, really hard and get better at your job, and then eventually you'll get a promotion, and then you do the same thing again. You get caught in this cycle of just chasing 5 grand pay rises and slightly more authority.

Dan: But if you can invest in yourself, whether that's learning a new skill, or for me, it was going out and investing in becoming self-employed. And I know that recently the commercial banker that we brought on has done the same thing, and three months in, I already know that he knows that investment was worth it. Back yourself. Invest in yourself. Invest in a business. If you're thinking about becoming self-employed and you think, if I don't do it now, I never will, it's time to do it. Because I've seen it happen. People will say they're going to do it. "I'd love to do it." You sit down at the pub and tell your mates, "Oh, I'd love to go and do that."

Dan: And for me, I used to turn around to my wife, and on Clarecastle, you've got all those beautiful houses, and I said, "One day we'll live there, but it won't be working for Westpac, because you can't do that on 180 grand a year." You have to really do something that will change your life, and being self-employed, running your own race and motivating yourself to do it, I think, is the way to do that.

Kane: This is a good point. So, to live in one of those houses, in theory, no one can do that by being an employee.

Dan: Yeah.

Kane: So the only way of doing that is by working for yourself, because you can't invest in residential or commercial to earn that amount of money to buy a house like that just off of

Dan: No. We'd like to think that it can be done that easily. That it's a case of, I'll just keep buying another property, and I'll buy another property, and then one day I'll sell them all and buy something like that. But in reality, and look, the reason I use Clarecastle as an example is it's in Mindarie, I love it and it's beautiful. Now, in reality, do I really want to live on Clarecastle?

Kane: The sea salt would destroy the properties.

[1:08:07] The "you're getting divorced" spreadsheet

Dan: What I'm basically saying is, I'm not saying I want that house. I'm saying I want that life. You're seeing that as a measure of success. And there's nothing wrong with that. Whether we live in the same house for the next 30 years or not, that doesn't mean that we haven't been successful. But it's easy to measure success with stuff. The car that you drive, the house that you live in. I used the house as an example, but really what I'm saying is I want more success than I've currently got. And that's where I made the decision to become a broker really, really quickly. But I sat on it for three years, I reckon, thinking about it, talking about it with friends. "Oh, we could do this. Could we?"

Dan: Then you start calculating how much money you'll earn. "Oh, all we need to do is write this much money, and then we could stay married, because our wives won't leave us if we write this amount of money." And I had a spreadsheet when I first started. I used to write down every commission that I earned. And if it was under a certain number, it would have a red box that said, "You're getting divorced." And then when it turned over that number, it went to "Still married." And I'm not saying my wife would have left me, but you sell your wife the dream that you're going to go out there and do it, and you want to make sure that you back yourself and actually do it and not let anybody down. And I can't do it if she's not looking after the kids and carrying the weight of the family whilst I'm working erratic hours to door knock or whatever. So, in answer to your question, invest in yourself.

[1:09:10] Crypto, shares and management rights

Kane: Yeah, I like that answer. That's what I've done, because we don't really have any investment properties at the moment, other than a couple in commercial. And I know it's probably not the best advice, but I don't buy stocks or shares or crypto, nothing like that, because all of our money goes back into the business.

Dan: Yeah. I have zero crypto. And there have been times where I've regretted that, but I didn't understand it. And I think that's the point. I sat through a lot of painful conversations around the pub where everybody was an expert on crypto. And you sit there and you think, "Well, I don't understand it. I assume they do, because they're making loads of money." But weirdly, those conversations aren't happening down the pub anymore. I'm not hearing so many of those experts talk about their crypto anymore. I know a lot of people that made a lot of money, stuck with it, lost a lot of money. I would never invest in something I don't understand.

Dan: Stocks and shares, I understand it enough, but it doesn't excite me. It really doesn't excite me. Whereas, I'm a shareholder in a management rights business over in Queensland, which the podcast wouldn't be long enough to explain, but effectively we own the rights to houses in Queensland and we manage them, but we don't own the houses themselves. It's almost like owning a holiday park without owning the caravans, but with houses instead. That excites me, because you can see a decent return, little risk. It's in the residential property space, so it makes sense.

Kane: Your industry.

Dan: Yeah, exactly. There are different things that will excite different people, and I'm sure there are still people that get very excited about crypto and stocks and shares and stuff, but for me personally, it's not something that really gets me up and going.

Kane: Mhm. Yeah, the crypto conversations just bore me.

Dan: Yeah. There are times I want to leave the pub.

Kane: Especially when most people don't know what they're talking about.

[1:11:16] Learning from other business owners

Dan: [laughter] I know, but people like to talk about their success. And the reason why podcasts like these are good is because people like to talk about their journey or their success. People like talking about themselves, and people like talking about their success. They don't like talking so much about their failures, and there are some in every industry. It's the typical saying: you learn more from your failures than you do from your wins.

Kane: Yeah, that's a good point. I've only been on my first podcast recently, but you never really tell your story. And then when you tell it and you watch it back, you're like, I've actually done quite a lot. Or you'll talk about it and you'll remember something. This happens all the time, especially in my other business, which is business coaching for tradies. I'll talk to someone who's just started, and he'll ask me questions, and I'm like, I actually haven't looked at that in five years. I should probably go into my own business and check on those things to see what we're actually doing. It's just reminding you.

Dan: I think that's one of the best things about being self-employed, though. When you're talking to other self-employed people, sometimes you can listen for an hour and a half and learn nothing, but sometimes you can listen for 10 minutes and get something from it. And you think, A, could I implement that in the business? B, could I change my culture because of what they've said? Or C, is what they're saying resonating with me enough to make a shift in what I'm doing? I see so much benefit in talking to people like yourself, or anybody that owns a business, because we're doing really well, but there's so much room for improvement for every business, in my opinion. And just because we're doing well now, it doesn't mean we'll be doing well in 5 years or 10 years. The market might shift, things might change. One bad thing can happen, and that can have a knock-on effect. So we're always looking for ways in which we can, A, stop that from happening, but B, implement things in the business to make it better.

Kane: Yeah.

[1:13:20] AI and the human side of finance

Kane: AI being a huge thing at the moment. AI is just taking over, and it's making our lives easy.

Dan: And hard?

Dan: [sighs] A lot of people say AI is going to take our jobs one day, and I disagree in most instances. I think it would be really easy to go, well, if AI could tell me where I need to take my home loan, then why would I use a broker? But that couldn't be further from the truth. Especially with AI the way that it is now. Sometimes we ask AI a question and it'll make up a bank. So it's certainly not there yet.

Kane: I tried doing that recently, actually, when I was talking to it about the office situation and different hypotheticals. And then I got to the point where I'm like, I know for a fact this is not right. But it's probably because I'm prompting it, it's not prompting me. Whereas if I was to speak to someone like you, you'll ask me questions that prompt the correct answer. I'm just chatting with AI, and AI's only working off what I'm telling it. Whereas someone like you is going to ask me, "Yeah, but what about this? Have you considered this? How much have you got in super?" AI at the moment obviously doesn't really understand that.

Dan: Yeah, it's like you provoke the conversation.

Kane: And sometimes if you're provoking it, you're wanting it to tell you what you want to hear as well.

Dan: Yeah, 100%. I think we are asking AI questions that are taking our identity away from us a little bit. I know somebody that asks questions around how they should approach an argument with their partner. And you're like, well, you're literally taking all the organic part of the relationship away by doing that.

Kane: [laughter]

Dan: But no, there are definitely good times to use it, 100%, and we use it a lot. If we're writing a finance recommendation out to somebody, we might put it through ChatGPT to correct anything and look over the figures. But you'll never take away the authenticity of dealing with a person. It's not like when they took away cashiers at Coles and replaced them with self-serve checkouts. It's not the same thing. You will always need a level of expertise, and not just in our industry, but in so many industries.

[1:15:27] Biggest finance mistakes and using a broker

Kane: Yeah, fully agree. Is there anything we haven't spoken about that you want to?

Dan: That's a good question. Not really, no, I don't think so. I think the one thing I talk about on every podcast, actually, is when people ask, what's the most common mistake that people make with finance? In my opinion, a couple of things. Residential lending isn't commercial lending. So do not think that just because you can borrow X amount of dollars for residential lending, it's the same thing for commercial lending. That's a misconception that's made quite a lot.

Dan: But the biggest misconception is thinking that the bank that you are with is as loyal to you as you are to it. Just because you've been with that bank for 30 years does not mean that they're always doing the right thing by you. It costs you nothing to use a broker. It doesn't have to be me. It could be anybody. It costs you nothing, or it should cost you nothing. And all the broker is trying to do is the best thing for you. And even if you end up staying with your existing bank, at least the broker is keeping them honest, and the bank will know that you have other options available. You don't want to be going to 30 different banks to ask them 30 different things.

[1:17:31] The right facility vs the lowest rate

Dan: Do not be misled by a Google advert saying that you can get an interest rate of 5.5%, because firstly, it probably doesn't exist, but secondly, it doesn't mean that it will work there either. There's a misconception that a broker's role is just to find the best deal out there. Yeah, we have to find the best deal out there, but we have to find the right deal. There will be some lenders that might offer you 5.9%, but you can only borrow $200,000 with them. Whereas there might be a lender that is 0.2% more expensive, but you can actually borrow what you need to borrow. Don't get led into thinking that the interest rate is the be-all and end-all. Getting the right facility is the be-all and end-all, and that's our job to do. So whether that's me or any other broker, in my opinion, you are crazy if you're going direct to a bank.

Kane: I agree. I don't think I've ever gone directly to banks, because I've always known that brokers can go to any bank. I assume sometimes, are there any pros and cons for the broker with which one they choose? Like better deals?

[1:18:33] How brokers get paid and low doc lending

Dan: No. Generally speaking, you will get paid the same commission across all the banks. There are very, very slight differences in some banks, but in commercial lending, it's pretty much the same the whole way across the board, and in residential lending, it's pretty much the same the whole way across the board. There will be some lenders, the specialist lenders, that actually pay a little bit less, but they actually end up costing the client a little bit more. So we would never recommend them unless we actually had to. It's not like we're recommending this expensive lender because it's better for us. We actually tend to get paid less by the specialist lenders because of their risk.

Kane: Yeah. And those are the ones that will lend to the higher risk clients.

Dan: Yep. That's exactly right. The low doc stuff, where an accountant's writing a letter. That's where you tend to get paid less.

Kane: Low doc was such a keyword for us for a few years there. Is it low doc, mid doc or high doc?

Dan: Low doc is designed for people that haven't done their tax returns yet, or where there's noise in the numbers of the tax returns and it's not easily explained to a bank. You might see something as an add-back in the expenses that isn't an add-back in the bank's eyes, but the accountant thinks it's an add-back and a one-off expense, and they're willing to put that onto paper, effectively. We do a lot of low doc lending. Self-declared. Well, we do a lot of all lending. That's why we wrote $552 million. But it's still a key part of the way that finance works.

Kane: Every deal will be different. Every customer is different.

Dan: 100%. Every single deal, hey. It would be really cliché to say that the complex ones are the ones that we get really excited about, but it is kind of true. As much as we love dealing with the vanilla PAYG, 60% deposit, really, really easy ones, and they are lovely to deal with, where you build the real relationships with clients is the ones where you really had to drag yourself across the coals to make it work. And they're the ones that will recommend you to everyone.

[1:20:38] Finding a broker who gets it done

Kane: That is so true, because that happens with us. It's how I've worked for so long. If a broker got me declined on a house, for example, we'd move on. This happened like three times. Our broker was like, "There's no way you're going to get that house." I'm like, "I disagree." Went to the next broker, and said, "This is my scenario." He got it done. Same thing happened. He declined the next house, I think it was. I was like, "Nah. I'm pretty confident I can get this." Went to the next broker, and the broker we've got now just made it work. The best relationship we've formed is with him, because he'll get it done. There are certain situations where someone can't lend to us, and I'm like, "This needs to happen now."

Dan: Yeah, that's good. And that just shows that your broker is doing his job properly. I think a lot of people, especially in our industry, go, "Well, if you could get it done and another broker couldn't, you must be doing the wrong thing." And that's not the case. We probably just looked at it a little bit harder and didn't give up at the first instance.

Kane: And asked the right questions. He asked the client the right questions, because I don't know what information he needs. Obviously I'll learn a bit more over time, but you guys know what to ask.

Dan: Yeah, 100%.

[1:22:00] Where to find Fundd

Kane: Where can people find you on social media?

Dan: Fundd, on Facebook, Instagram, LinkedIn. We're all on there. Just reach out. All of our individual mobile numbers are on there. We deal with everyone and everything. And there is no such thing as a stupid question in finance, unless you're going to ask if you should go direct to your bank. That's a stupid question. But outside of that, we will happily help you. And even if you just want a second opinion on something that you are doing, either direct with a bank or with another broker, we're always happy to help.

Kane: Cool. Thanks for coming on.

Dan: Absolute pleasure. Thanks for having me.

Kane: Cheers, mate.