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

Cold Open

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

Dan: You sit down the pub and tell your mates that 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.

Kane: Hey, I'm Kane Tyler Smith, the founder and CEO of SmartFix and High Potential. 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.

How Fund Settled $552 Million in Business Lending in One Year

Today, I'm joined by Dan Steve from Fund. You've spent your entire career in banking and finance, working in senior roles with Barclays and Lloyd 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 countless business owners, investors, and families navigate finance, lending, lending, and wealth creation. In the financial year ending 2026, Fund settled 552 million in new lending. How does that make you feel?

Dan: Feels pretty good. 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. No, it feels pretty good. It's 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 at 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 yeah, of course we keep one eye on it, but we probably didn't fascinate over it until it was the end of the year and you start looking at the numbers and you start drilling into what that looks like, I guess.

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

Dan: A little bit of everything really. We were always really careful, especially at the beginning, of not trying to specialize in something that we weren't specialists in. If we specialized 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 specialized in certain areas. But as the business grew, we realized that there's nothing wrong with specializing in everything. You just got to get the right people into the business to do that. And that's all part of the growth of the business.

How to Hire Trade and Finance Specialists as Your Business Grows

Kane: And how do you find, how do you go with finding those specialists? Because something we've learned recently is we've sort of reversed. So 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. A lot, when you're a — 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 sense of the imagination, but it's a new brand. And then, last I checked — 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. 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, where, you know, I made the move of going from banker to broker at a time that — 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. 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 as well now. So certainly something that probably wouldn't have happened three years ago.

Kane: Yeah, it's an interesting point. So 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 in 3 years quite a lot and it will continue to change — you know, we'll probably sit here in 3 years time and the landscape would 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. 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, more lending that you do. So it also — your average deal size would be higher — are 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. And you know, 3 years ago you might have been doing $50,000 top-ups and then all of a sudden you're seeing properties on St George's Terrace selling for 150 million and it's completely different landscape complexity as well. It's always an education involved.

What Is a Home Loan Top-Up? Good Debt vs Bad Debt Explained

Kane: So what do you mean by top up? Is that people ref—

Dan: Yeah. Like 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.

Kane: It's an interesting one. I've probably done that reckoning 10, 15 times in my own house to re—

Dan: Welcome to the world of finance.

Kane: Refinance house. Yeah, we should use that for the business.

Dan: Use that for the business.

Kane: Do you think people, with the housing market going crazy, do you think people have taken a lot too much risk by refinancing the house to pull extra money out?

Dan: Not necessarily, because the banks put in play — like when a bank assesses a deal in the first place, or when they assess a transaction that comes through, they put in a lot of buffers into the assessment anyway. So let's say you're borrowing at 6 and a half%, the bank will assess that at 9 and a half% because they're looking at changes in circumstance, changes in the volatility of the rates. So yeah, there's always a risk when you're borrowing 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. 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 commercial property or for a business or a car — like people need cars.

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

Dan: As long as you're renovating properly, then yeah. As long as you're not a person that has no idea what they're doing with renovations and thinks that 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. And also, people underestimate what that will do for your mental health as well. People like 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.

Should You Renovate Your House Before Selling It?

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

Dan: It's you're basically explaining every episode of Selling Houses Australia, but yeah, it's funny because I actually 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 it 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. And I was, that'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, because we pretty much have done the same things. We're in our fourth house now. And this house that we're in — I think it was 1.4 million. We probably spent like maybe 800k to a million on it. But now with the housing market, like we possibly could sell it for like 3.2.

Dan: Yeah.

Kane: I like — that's the most amount of money that we would ever make off one transaction tax-free because it's your principal place. But yeah —

Dan: 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 Peaceful Bay before I was a broker, and I think we're in Mandurah and we paid 780,000 for ours and we've had ours valued at double that. And like we've done work to it and stuff, but we're not talking a second story or a new swimming pool. We're talking, aesthetically pleasing things like some flooring, or had some Veneto stone done outside, things like that. It's nothing drastic, but that's just what the housing market's done.

Kane: What has been the increase in the last 3 years percentage wise on houses?

Rental Yields in Regional WA vs Perth: Kalgoorlie and Broome Investment Property

Dan: It depends — 200% in some areas. It just depends in which areas you're looking at. We see a lot of people invest in sort of the regional areas like Kalgoorlie, Broome, because of their rental yield. A rental yield here in Perth — a decent one would be 5 to 6%. A really good one would be sort of 6%. Whereas if you go to Broome, Kalgoorlie, you can get 10, 12% because of the mining situation. Because there's a lot of infrastructure going up in Broome at the moment. So a lot of companies need housing for employees. Governments need, you know, you could get a three 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 stops — which I don't know — but if it ever stopped, is the value still there? Will people still rent 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? Does that affect the rental yield? Like, if house prices go up?

Dan: Yeah, house prices will go up. The 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 in 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.

New Capital Gains Tax Rules for Residential Investment Properties in Australia

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: It sounds like a nightmare. Is 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 just sounds like a message that is designed to make it sound like they're trying to help the first home buyers, but if anything, I don't think it's certainly not a 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 more it's just a shame that it feels like the message isn't there or the message that is being delivered isn't the right one, in my opinion.

Kane: So just to double check — so 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 the capital gains discount, more than anything, you're lending to buy that in the first place if you wanted to borrow to buy it — it becomes negative gearing 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 he went from $800,000 borrowing capacity to like 500,000, and it makes a massive difference.

Kane: Yeah, that's huge.

Dan: Yeah.

Kane: But if I was to build a house though, cuz I don't know if this is true or not — so if I build a house for investment purposes, can you still claim the — like you could before?

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

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

First Home Buyer Grants and the 5% Deposit Scheme in WA (Under $850K)

Dan: Well, that's a really good question. I need to be careful how I answer — what's their perspective and the government says well it's supposed to help them and this is how — I think that the government scheme, so a couple of things where there's benefit from buying new a new house — if you're a first home buyer, if you buy — all the limits are going to change very soon, but if you buy a new house there are first home buyers grant, there's the first home buyer scheme, so generally speaking, if it's under 850,000 it's a 5% deposit and no stamp duty — depending on how, so stamp duty, but only on the land. So obviously you don't pay stamp duty on the build portion of it. So it alleviates a lot of that. If you're buying in a house for 850,000 you're looking at, I don't know, 28-30 grand in stamp duty. Whereas if it's a $350,000 piece of land and then say a 450,000 build, stamp duty is going to be 2/3 of nothing. So it alleviates some of the pressure there for first home buyers straight away. First home owners grant at the moment, I think it's 750 — you get 10 grand, doesn't make a huge difference, but it makes a difference. And generally speaking, try and find a house for under 850,000 at the moment established, it's pretty difficult. I'm seeing houses in Butler going at the moment for over a million dollars, and that just wouldn't have happened, you know, 3, four years ago.

Kane: Even getting a million dollars in Mandurah or Quinns or wherever, that was in 2020 — that was, I wouldn't say it was rare, but it was rarer than it certainly is now. I was going to say there's nothing — I look at Mandurah like almost every day. I think the cheapest one at the moment is like 1.2 I think.

Dan: Yeah, it's — if you found something under a million dollars in Mandurah at the moment, I would be very surprised. It would certainly not be something that you would have paid a million dollars for 3 years ago.

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

Dan: Yeah, that'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, no. Keystart are completely different. Keystart are a 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 obviously 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 ABs, 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: No lenders mortgage insurance?

Dan: No, none.

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

Dan: There isn't one.

Kane: There isn't one. The only downside — interest rate?

Dan: No. It's 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, yeah, you can buy a house, but it has to be under 850K, which there isn't any.

Dan: No. Yeah. And the pro — what we've seen is if you're listing your house in the northern suburbs of Perth for anything between 750 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 — if it goes to $850,000 on $1, they're not eligible for the scheme at the moment. So we see it so often where people, you tell them you need to keep it under $850,000 and they come to you with a contract and it's for 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 that shouldn't — they're not actually —

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

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

What Does a Home Loan Pre-Approval Actually Guarantee?

Dan: I think pre-approval is a dirty word, because I think a lot gets put there — there's nothing wrong with a pre-approval, and we do them of course, 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 pre-approval that you have with the lender, they might not like it because there might be power lines next to the property, there's still reason 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 yeah, I don't see it the same way.

Kane: So is it like a document that you — if I was buying a house, I have this pre-approval letter that I give to the real estate, 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 probably heard me preach this a few times, but if we have a decent conversation with the real estate agents, 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've 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. 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 is 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.

Kane: Yeah, because if you were to throw at the wall in that situation, is that having a mark on the credit as well?

Dan: Every time that you put an application through. And another reason why I'm hesitant to do pre-approvals is 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 the January that lasts for 90 days in most instances, and then you need to — you don't find anything for nine months, so then you roll the pre-approval over three times which might mean three different inquiries on your credit file, and it just feels like needless damage to a credit file — I'm not saying you're going to go from a thousand to 200, but it just raises more questions than is required sometimes.

Commercial vs Residential Property: Which Is the Better Investment?

Kane: So with buying 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 all know, as an owner of commercial property yourself, when you get a lease or a decent tenant, you can get five 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. Whereas with residential property, there's always the risk that you're going to have a tenant every 6 months paying you, leasing fee 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 trading 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 other 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: Well, it's not something you hear as you go through school and your younger years. It's always like "investment house, buy an investment house, buy an investment house."

Dan: I actually, ironically, I had no experience in commercial until I was a bank manager for Westpac for years and years, and then 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 was like, I couldn't believe what I'd been missing, and then only when I kind of did that I started to really understand it, really engage with it, and then now I love talking about it.

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

Dan: Yeah, 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 between — the sweet spot is 6 to 8%. 8% is pretty rare, but that sort of 6%, you put a decent deposit down, you get an interest rate of 6.2 to 6.5%, you're probably breaking even or making money depending on the deposit you're making. Interest rates are quite high at the moment, you'd expect them hopefully one day to come down. That's kind of 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 my important question — so with commercial, so the tenants pay the real estate fees, all the strata fees, everything?

Dan: Yeah, all outgoings plus GST. It's obviously flexible — you can, I've also known people to give someone 6 months off, especially in the city that's quite common. You might hire or rent out an office floor or whatever and you might get the first six to 12 months rent free, but if you're signing a 15 year lease, with 5% increases every year or whatever, then — given 6 months free is 2/3 of nothing over a 15 year period. 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: Yeah. And shorter leases, like you said before, sometimes it's six to 12 months, whereas any commercial like really nothing's really less than 3 years?

Dan: In commercial, is it? It could — really I have seen a few one-year ones going around, but no, if me personally — I mentioned to you earlier that we're renting out one of our units up in Butler, or potentially renting or selling, but I wouldn't take anything under 5 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 out again. I've owned residential investment properties in the past and you can feel attached to tenants sometimes because they stay 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 cuz I can't be bothered to deal with it — and you don't always sell it, you just find another renter and it all ends up being okay, but it's just stress that you don't sometimes need, in my opinion.

Tenant Turnover, Vacate Cleans, and Airbnb vs Long-Term Rental Income

Kane: So you mentioned before as well about, under a commercial lease, the people moving in sort of take more care of it because it's their place of business, which obviously people living in a house, you would think the same. But from my experience in having residential investments, like every house that we change tenants, we got to like repaint the whole house — it's an absolute nightmare, not necessarily because they've done it intentionally, it's just —

Dan: Genuine wear and tear on the property.

Kane: Yep.

Dan: Have you ever done a vacate clean before? That's what sucked the soul out of me every single time, because people would leave and you think, "Oh 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 — it sounds like I'm saying residential investment isn't — 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, is it okay if I'm going to turn over tenants every year, and as long as you're willing to accept that, that's fine. 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, $700 a week in rent on a standard long-term lease or a 12-month lease, that are making double that in Airbnb. Speak to your accountant about tax advice on that. But outside of that, it's a good earner for sure. But again, it's triple the effort 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. I've had an Airbnb in the past and we've gone from what looked like one person coming to stay at the house to I think having a massive party. So, part and parcel of it, I guess.

Kane: Mhm. Pros and cons to everything.

Dan: Yeah, for sure, for sure.

Self-Managed Super Fund (SMSF) Property Rules Are Changing — What Business Owners Need to Know

Kane: You mentioned before about law changing with self-managed super fund 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. So 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 done, because you're running out of time very quickly, and people are panic buying at the moment — we're seeing that a little bit. So because people are desperate to try and get some, people have set up their SMSF, maybe not prioritized finding a property, and then they found out these rule changes are coming in and you're seeing people quickly run into —

Kane: Well, so that's almost like two months notice?

Dan: Yeah.

Kane: Jeez.

Dan: Yeah.

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

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

Kane: Is there a chance that will change?

Dan: I don't think so.

Kane: Hopefully not.

Dan: Personally, I don't think so. Yeah, it was — it took a few of us by surprise, and it was kind of hidden in there when the other laws were passed.

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

Dan: Yeah,

Kane: I'm hoping you can because I've got told you can by our accountant and our current broker, cuz Yeah, because obviously previously if you bought residential in a self fund, obviously you can't live there yourself and you can't have family live there and nothing at arm's reach. I didn't realize this until I had to tell a client — client wanted to buy something in his self-managed super fund, but his intention was 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, like you're not allowed to do that.

Dan: Oh, but what's the worst that's going to happen? Like there are some pretty big — I read that somebody went to prison for doing it. So fraud, effectively, so it's a massive no-no. You cannot live in a — if you've bought a residential property in your self-managed super fund, you cannot live in it.

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

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

Kane: And is that some people's strategy? Is that what they do? They'll buy —

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 fund that they see as a good investment, not where they want to spend the rest of their lives living.

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

Dan: Yeah. Well, the same for the first unit that we bought, the one that I was talking about in Butler, I bought that in my self-managed super fund and then my business rented it out, and that made it really, really easy because — after working in a bank, PAYG, and you get your standard super contributions for 10, 12 years or whatever, but between me and my wife, we found it — 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.

Why Trade Business Owners Should Get Out of the Home Office

Kane: So 100%. Yeah, it was a game changer for us too. It gave us — don't get me wrong, I didn't mind working out of my kitchen, but it's certainly more productive working in an office.

Dan: Yeah. Especially when you start to have other staff.

Kane: Yeah.

Dan: But regardless of staff, the biggest momentum shift that we ever had was getting out of our house. And that's not a derogatory or a detrimental 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: And did you guys — that was it three years ago when you had the first one?

Dan: Yeah.

Kane: Yeah.

Dan: I — two and a half years ago we probably did the first six months at home and it was fine. But, you know, it's there are distractions constantly, whether that's the doorbell going because the postman's there, or 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 just open the doors and, you're almost running away from your kids. And my wife actually said something to me before about she prefers me coming home later but being present when I'm home rather than coming home early and only half really 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. And probably 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: Yeah, it's definitely a very good point. And it's exactly the same, like with me being at home, cuz the house we lived in before, I worked from home a lot more than what I do now. But what I end up doing is my computer would always be on in the study, so if someone called me at 5, I'm just going to go take this call, jump in there because it was so convenient. Whereas now it's a bit different, but the house we're in, we do have a granny flat that's sort of separated. So it's way more inconvenient for me to like walk out of the house down the stairs to the granny flat cuz I won't do it. So now it's like, okay, well I'm not at work. If I'm at work, I've always either got to walk down there or come to the office.

Dan: Yeah, I agree. Having our first office was like the best thing ever. For us, it was —

Kane: It was more about the staff cuz we had like one other person that was in the office with me and like maybe four or five trades. So it was somewhere for them to come as well. Obviously, you don't want them going and do house because that's weird.

Dan: Yeah. Yeah. No, 100%. And because we're — 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 — they probably come into the office, but because we have brokers all across the country, so there are still people that work from home, and it doesn't mean that there's anything wrong with that, and 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 pickups and drop offs. We've got a few moms that are still have kids at school, so it's super convenient for them where they can almost work full-time hours, but at the time that suits them. So even though, yeah, having the office is great for staff, doesn't mean that it's for everybody in the employee space, and that's not the reason we did it. But yeah, it is convenient for sure. And the one thing that I probably missed the most about leaving Westpac and then going out to be self-employed was I used to love going into the office on a Friday and talking to everybody — or you know it didn't have to be a Friday but Fridays always ended up with a lunch on beer — but you do miss that. Not always that it was banter, but you do miss that just talking to people, having adult conversations, and then you then all of a sudden 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.

Kane: Yeah.

Dan: So yeah, 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.

Scaling a Finance Brokerage Across Every State in Australia

Kane: Yeah, definitely. So how come you do have brokers in each state? Is that because you're massive?

Dan: Yeah. You operate in each state or just — every state? So we have — just want to make sure that I'm correct in saying that, every state. I don't think we've got one in Northern Territory, but watch this space. But outside of that, every state, even Tasmania. So yeah, 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 in every state all over Australia?

Dan: Yes.

Kane: Is WA the highest volume?

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

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

Dan: Probably a couple of reasons there. So Darren and Broady, who are the founders of Fund, 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 Quaram — 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 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 hard also from just south of Sydney. Yeah, so and it just comes from that, and then as you grow you put adverts out for — we always 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. And that natural progression where you hire people from Seek that are just out of school or moms 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 broker presence in regional Western Australia as well.

How to Become a Mortgage Broker in Australia (And Why Running Your Own Firm Is Different)

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

Dan: Officially, no. God, no. Officially, it's Cert IV and a diploma. It's supposed to take three months, I think, is the guideline, but I mean, you don't have to take three months. You can knock out — I think I knocked mine out in 3 weeks. So you can do it as quickly and self-paced as you want to. I had the time to do it, so I just got it out as quickly as I possibly could. Yeah, if you're coming from a banking industry, you can knock it off with record of prior learning and you could be pretty much accredited within a few weeks.

Kane: So then if someone then gets their broker license that we're just talking about, do you then need to do something more to be able to run your own business, like a licence 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 that it's really easy to go out and become a broker and do it on your own. Being a broker, yeah, 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 asset stuff sorted, then you've got to have your professional body insurance — there's so many different things that I never thought of. And had I tried to do it on my own, I probably would not be sat here right now. Like if I'd just gone as a one-man band on my own, I probably would have found it, put it in the two 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 Broady that I was able to do it. But if you are thinking about becoming a broker, if you're thinking about 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.

Mortgage Fraud, Compliance, and ID Verification in Australian Lending

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 is very — it's a full-time job.

Kane: Yeah.

Dan: Yeah. So compliance is heavy and it's only going to get heavier. I don't know if you saw, but over predominantly over east I believe there was a huge amount of fraud — application fraud. I don't want to quote the right number, but I think it was $4 billion worth of mortgage fraud across the banks, and it was to do with falsified documents. 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.

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

Dan: Pro — yeah.

Kane: Oh my god, what a nightmare.

Dan: I know. We — I think we were about a day late on that because that's only just come in.

Kane: Yeah, she said I am her first client that I've got.

Dan: Yeah.

Kane: She said let me know how the process goes, I'm like it's — [laughter] — I'll do it, but yeah, it's been in my inbox like 3 days, I'm like, "Okay, I need to go home, I need to find my driver's license, I need to find my passport."

Dan: Yeah, I think there's other documents as well.

Kane: And there's a live photo that you have to take, and if the live photo likeness isn't —

Dan: Good compared to your passport, then it fails, and you got to go to a post office and get yourself certified anyway. Yeah, it's — yeah, that's a pain. But we have a lot of that with lenders as well, they call it IDU.

Kane: Yeah, that's something that actually came up as well, cuz normally when we sell our vehicles, we sell to a dealer, which is easy, but I sold two to my friend recently, and he sort of like — go to the van, take a video, selfie of himself, video the vehicle, video the VIN — like that's all new to me, like I've never done that before.

Dan: Yeah, private sales in equipment finance, if I'm assuming he's had finance to do it. But if — like it could be, if you don't do that, I kind of get that bit, because if you don't do that, then it could just be a car that's been crushed for all you know and you just have it still registered.

Kane: So yeah, 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 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.

Dan: True. That's only new though, cuz some lenders have been doing that for years.

Kane: Okay.

Dan: Years, if it's a private sale.

Foreign Investor Stamp Duty Surcharge in Australia

Kane: Yeah. I suppose that would be a big part of the fraud. And I know like obviously for foreign investors and foreign people buying over here, there's obviously 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. There are people, ironically, a lot of people baulked at it and said "I'm not doing that" — like people from the UK three years ago that "I'm not paying the extra 7%," and I agreed with them at the time, I was like, "Yeah, that's crazy," but in hindsight, now that 3 years later, some of them have got their permanent residency, that extra 7% would probably be better than the extra 100% that house has gone up in value, do you know what I mean? So it's in hindsight —

Kane: Yeah. Hindsight's an amazing thing, and if you had a crystal ball, I would have — Yeah.

Dan: Buy it now for seven, pay the extra 7%. But at the time it just seemed outrageous.

Will Australian House Prices Drop? Why Western Australia Is Different

Kane: So, yeah. Do you think the house prices will go down?

Dan: Oh, that's a good question and probably — not one that I don't think we're going to see the drop that news.com.au will have you believe. And also, 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. I don't think we're going to, personally, I don't think we're going to see that — like recession kind of vibes. 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 because we've got FIFO over here. Debt size isn't huge in comparison to what it would be in say Sydney, because the 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 two-and-one or 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: So that doesn't sound like it from social media.

Dan: I said, if you're taking — I'm glad you brought that up. If you're taking financial advice from TikTok, Instagram or Facebook, then yeah, 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 and is this true? And 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 you're thinking, if you're taking advice from social media, it a) will 99% be incorrect, and b) you've got to wonder what their agenda is in the first place. A lot of people that are given this advice —

Why You Shouldn't Take Financial Advice From TikTok or Social Media

Kane: Do you think there'd be some people though? Because obviously a lot of people I suppose even like myself, with our High Potential business, we're trying to do the right thing, but like so many questions around that.

Dan: So a lot of the younger people I assume — well, I know for a fact they're getting all their facts from social media because that is their news platform. So I suppose you'd have to know what people can follow. Yeah, it doesn't mean that everything on the internet's rubbish, but yeah, you've got to be really careful. There was — so there was a lender that used to exclude company debt, and this is I'm giving you an example of how social media ruins things effectively. There was a lender that used to exclude company debt that would also lend in a company name. So effectively, it was almost like a cheat code of 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 to TikTok — and I think it was a broker, but don't hold me to that — but a guy went on TikTok and spread it to everybody, and in 3 days, the whole legislation around company lending disappeared. Like everybody withdrew from company lending because people were like, "Oh my god." And people were abusing it. And it just goes to show that social media can be a great thing, and it can also completely change the landscape of finance because we used to — huge accountants used to for the right reasons tell people to buy property in company names, especially for the self-employed, because it protected their assets, and in a 3-day period we lost it all and clients now aren't able to protect themselves like they used to be.

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

Dan: Yeah, basically. Yeah. I mean, 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 of 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 — that wasn't SmartFix. In theory, that asset is protected because it's got nothing to do with your other company, and you're not personally — got to be careful about the advice I give here because I'm not an accountant, but in theory it should be protected even if you're a guarantor, because you're guaranteeing the debt, you're not guaranteeing the asset.

Kane: So confusing sometimes.

Dan: It's irrelevant now because somebody ruined it on TikTok. [laughter]

How to Get a Business Loan When Your Trade Business Shows Low Profit

Kane: Yeah. I got a question for you more around our business specifically. Like we've borrowed obviously lots and lots of money over the years. We've always struggled to get financed certain times because our business has grown so fast, like year on year we'd always be at a negative at the end of the year with profit, and lenders like, "Well, you're not making money, we're not going to lend to you." So we've had to use like the — finance broker like financiers for like vehicles and stuff, high interest rates, which was fine, low doc, low doc this, low doc that, which was good. Um cuz now we're finally at a point where we should be in a better position to loan money. So I think we've got like a redraw facility which is high interest rate — this was based off our bad terms. It's like, for example, I think it's like 15% interest rate.

Dan: Wow. Yeah.

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

Dan: Yes.

Kane: Yep. It's the most common kind of business debt that there is for sure.

Dan: And that's based off company earnings, personal earnings as well. You can look at it — it depends on the lender, and this — when I made the comment of 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, director B earn 250,000 in director's fees or PAYG or whatever, then the company made a 50 grand profit and there's 150 grand worth of depreciation, and because you can add back depreciation, you can add back interest, and if the group position looks healthy, then yeah — but then 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's a case of it depends on the lender. Some lenders will exclude certain parts of it. If there's other companies that you don't want to include in it, you can potentially do that depending on what that company does. So yeah, there really is a thousand ways to skin a cat with business lending. But yeah, a business loan like a mortgage is probably a great example — if you're buying a commercial property and you're buying it 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 commercial property. No different to how you would get a home loan secured against your home.

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 potentially fund growing the business.

Dan: Yeah. Yeah. So you can do cash flow lending, and cash flow lending can be done — I mean 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 whatever, you just want to hire somebody or you got a tax debt, there are always ways to do it. If you want it the really really quick and easy way, yeah, you're probably going to pay over 10% for it, but they will do that by just looking at bank statements and looking at your turnover and seeing if there's anything nasty in your bank statements. 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 business, 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 yeah for sure they should be looking. I use Judo as an example because they look at some of the stuff that the majors don't, but Westpac, ANZ, they all have unsecured lending policies. They usually have longer terms as well.

Kane: Yeah they do.

Dan: You'll find that unsecured lending will always have a shorter term than secured lending. So 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 a commercial property. If it's unsecured, you're probably looking at 10 years, seven years —

Kane: And higher interest rate than a secured.

Dan: High interest rate.

Kane: Mhm.

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

Minimising Tax vs Maximising Borrowing Power: A Trade-Off Every Business Owner Faces

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. And that's where business owners get frustrated — they know their business, they know the vision, and that — but also they know what they can afford, but their accountants doing things to make sure — like 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, and paying — but you've got to decide what's important. And people often say to me, "What should I do?" 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, lender's area. [laughter] There is — dependent on the accountant.

Kane: Barely, barely trip to meet the team.

Dan: Yeah.

Kane: Yeah, that's a good point. That's always been an issue for us — is not that we've done it on purpose, but our numbers have always looked bad, which obviously means we've never paid company tax, I don't think.

Dan: Yeah.

Kane: And we're nine years — nine years in. [laughter]

Dan: Yeah, the ATO probably hate you.

Kane: Oh, they shouldn't — we pay PAYG and GST. Yeah, yeah, yeah, which now we have to pay super.

Dan: Yeah, yeah, that changed on pay run.

Kane: Yeah, we pay.

Dan: Yeah. PAYG, we pay on pay runs as well now.

Kane: And now we've got to pay. Yep.

Dan: Yeah.

Kane: Yeah. That was — in my second year, that was probably in the first year, I was like, it's fine, I'll just save my tax as the year goes on and then I'll pay it at the end of the year.

PAYG Instalments Explained: Why the ATO Makes You Prepay Tax

Dan: Did you?

Kane: And then —

Dan: Yeah, I did. Yeah. And I thought this is lovely. And I genuinely did save — I saved my back because brokers have to be, regardless of how much you earn, you have to be paid with GST. So I always save 10% of all my earnings straight away, and then obviously 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 obviously second year I was like, why is my BAS bill so high, and they — oh no, you got to pay tax up front now. I like — holy, and yeah, that was a —

Kane: As in PAYG?

Dan: Yeah.

Kane: As in up front, as in when you do pay run you have to put in the —

Dan: Yeah, yeah. But we — so we had to start, because we made a decent profit in year one, we had to start the — the ATO calculated how much they thought I would make the following year. So let's say I made a $400,000 profit year one — not saying these are the numbers, but let's say it was $400,000 in year one, that means I 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. So —

Kane: Even if it wasn't there —

Dan: And even if it was, but in theory it meant that, "Oh, I've paid my tax up front so I don't need to pay for it at the end of the year," but then you do better and then you have to pay more tax again.

Kane: And what if you do worse, do you get it back?

Dan: Yes, you get it back at the end. Well, I assume so, because yeah, we weren't in that position. And then, you know, 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.

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

Dan: They project it, and I think they do it to say to stop you from ending up with a massive tax bill, which is not — not paying it. Because it's so — the appetite with lending has changed a lot over the last even five years — when I was in the bank it used to be like if you have tax debt we're not lending you money, then it kind of eased to, yeah, if you have tax debt but it's got to be under like it has to be under an arrangement and a payment plan —

Kane: Jeez.

Dan: Yeah, on like a payment plan, we'll expense out of the expenses, 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 then it's gone back to we hate it again, and the government have basically said we hate it again, and you're seeing people with large tax debts where the government have been, or the ATO have been pretty lenient with it, they're now saying that you pay it within the next six months or put it on a payment plan basically, charge you 10%. And there are people, let me tell you, there are people with tax debt higher than the net profit and because they've accumulated over years or the GST or whatever and they haven't put a plan in place to deal with it.

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

Dan: No, people have let people leave it for years sometimes and just don't pay it.

Kane: Then they get accumulated fines and interest?

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

Kane: Yeah, that's crazy.

Dan: And if there's one thing I personally think is 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.

Kane: Yeah. Sorry. Yeah. We had — I think we had — I think there's one time we just completely missed one because we pay payroll tax monthly. I think we missed one maybe like two years ago or something, completely just — mistake, just brutal. We had to pay that plus a fine, I think the fine was like 20% or something.

Dan: Yeah. I think payroll tax is a big no-no.

Kane: No warning though. Nothing. [laughter]

Dan: No, you do see that. And I was actually talking to an accountant the other day and they were saying — not necessarily about payroll tax, but like director penalties or whatever — that where the ATO used to be a little bit lenient, or they'd shave some of the cost off, or there would generally times where I've seen people rack up a large amount of fines and debt, and it's some of it's been written off as almost like a gesture of goodwill from the ATO — that doesn't happen anymore.

Payroll Tax and Long Service Leave Obligations for Tradies

Kane: There's another one recently actually — last week we, because we have to pay long service leave for tradies because that's like an industry thing that we have to do for them, and I think the accountant made a mistake where we weren't paying some — I think it was payroll tax on my portion — because they didn't think you had to, but obviously you do, so then we had to back pay it over like the last x amount of time.

Dan: What's the minimum time that they have to pay payroll — oh sorry, 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.

Dan: Yeah.

Kane: So we pay obviously the 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 a long service leave payout?

Kane: Uh, not by us. So we pay it quarterly, so we pay it to MyLeave, which is the body, no matter what. And 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. Yeah.

Dan: Yeah, they still get it. So if they go to a different company, same industry —

Kane: It continues. So if it's four years, that continues, five years, six years, seven —

Dan: Oh, you learn something new every day. That's crazy. I'm in the wrong job. [laughter]

If You Had $500,000 to Invest Today, What Should You Do? Invest in Yourself First

Kane: Should we turn the table?

Dan: Yeah, if you like.

Kane: Do what you — we can do what? Am I physically coming over there? Christ. 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 — but 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 yeah, 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 you do the same thing again. You get caught in this cycle of just chasing five grand pay rises and slightly more authority. But if you can invest it 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, the commercial banker that we brought on, he's done the same thing, and 3 months in I already know that he knows that 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 you will eventually — I've seen it happen. People will say they're going to do it, "I'd love to do it." You sit down the pub and tell your mates that "I'd love to go and do that." And for me it was, I used to turn around to my wife and — on Claremont 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 really change your life, and being self-employed and running your own race and motivating yourself to do it, I think is the way to do that.

Kane: Yes. So it's a good point. So having that money then, I suppose living in one of those houses like that in theory — no one can do that by having being an employee?

Dan: Yeah. So the only way of doing that is by working for yourself, because you can't — you can't invest in residential or commercial to earn that amount of money to buy a house like that just off of — no, it's interest. We'd like to think that it can be done that easily, and if it was a case of, "Oh, we'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." In reality — and for me, look, Claremont, the reason I use that as an example is it's in mind, I love it, and it's beautiful. Now, in reality, do I really want to live in Claremont? We've got an autistic 5-year-old that is drawn to water, we can't be that close to water.

Kane: The sea salt would destroy properties.

Dan: It's — you're basically what you're saying is, you're not saying "I want that house," you're 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. But I use 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 3 years, I reckon, thinking about it, talking about it with your friends. "Oh, we could do this, could we?" "Yeah." 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, and I used to write down every commission that I earned, and I wrote it to a point where it was like if it was under a certain number, it would have a red box that said "you're getting divorced," and a number under — like 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 in 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 yeah, answers your question — invest yourself, invest in yourself.

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

Crypto vs Stocks vs Management Rights: Investing in What You Understand

Dan: Yeah, I'm the same. I have zero crypto, and there have been times where I've regretted that, but I didn't understand it, so if I don't — anyone — well, I think that's the point. And 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 anymore down the pub, I'm not hearing so many of those experts talk about their crypto anymore. So I know a lot of people that made a lot of money, stuck with it, lost a lot of money, and yeah, I would never invest in something I don't understand. Stocks and shares, yeah, I understand it enough, but it doesn't excite me, like it really doesn't excite me. And I think if you're invested in something — like we, I'm a shareholder in a management rights business over in Queensland, which the podcast wouldn't be long enough to explain what that actually is, 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, I suppose, without owning the caravans, but the 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: And that industry —

Dan: Yeah, exactly. Everything — there are different things it looks like 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: Yeah, the crypto conversations used to bore me.

Dan: Yeah. Oh yeah, I wanted to leave the pub, especially when people — most people don't know what they're talking about.

Kane: No, I know, I know. But people like to talk about their success.

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

What Business Owners Can Learn From Other Entrepreneurs' Failures

Kane: Yeah, that's a good point. Like I've only been on my first podcast recently, but you never really tell your story — you never really tell, when you tell it and you watch it back, "oh, I've actually done — 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 trades. I'll talk to someone who's just started, and he'll ask me questions like — I actually haven't looked at that in like five years, I should probably go into my own business and check on those things to see what we're actually doing. But it's just reminding, and yeah —

Dan: That's the — 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 you can 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? And I think 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 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 it 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.

Can AI Replace a Mortgage Broker? AI in Finance and Business

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

Dan: And hard. I think 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 the AI the way that it is now, and it makes it — 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 I got to a point I'm like — this is — 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 spoke to someone like you, you ask me questions that prompt like the correct answer, whereas I don't, I'm just chatting with AI, and AI is only working off what I'm telling it —

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

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%, 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 Chris, you're literally taking all the organic part of the relationship away by doing that." [laughter]

Kane: And then immediately tried it myself. But no, it's — 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, look over the figures, but you'll never take away the authenticity of dealing with a person. It's not like when people took away cashiers at Coles and replaced it 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.

Dan: Yeah, totally agree.

Biggest Mistakes People Make With Business and Home Loans

Kane: Is there anything we haven't spoken about that you want to?

Dan: That's a good question. Not really, I don't think so. I think the one thing I talk about on every podcast actually, when people say what's the most common mistake that people make with finance — in my opinion, so 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. But the biggest misconception is thinking that the bank that you are with is as loyal to you as you are to it. And 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 can be anybody, it costs you nothing, it should cost you nothing, and all a broker is trying to do is the best thing for you. And even if you end up staying with your existing bank with that broker, 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. 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. Like there'll 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 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 direct to a bank because I've always known that brokers — yes, can go to any bank, I assume sometimes. Is there any sort of pros and cons to the broker with which one they choose, like better deals and —

How Broker Commissions Work and What Low Doc Lending Means

Dan: No, no. Generally speaking, you will get paid the same commission across all the banks. There are 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 that will actually end up costing the client a little bit more. So we would never recommend them unless we actually had to, do you know what I mean? 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, 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 key word for us for a few years there.

Dan: Yeah. And low doc, mid doc, or high doc — it's got to be low doc. Low doc is designed for people that haven't done the tax returns yet, or there is more noise in the numbers of the tax returns and it's not easily explained to a bank — like 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 it's a one-off expense and they're willing to put that into paper effectively. So yeah, we do a lot of low doc lending, self-declared. We do a lot of — 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. Every deal will be different, every customer is different.

Kane: Every single deal. Hey. Yeah, 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.

Dan: As much as we love dealing with the vanilla — 60% deposit, really really easy, and they are lovely to deal with, but where you build the real relationships with clients are the ones that you really had to drag yourself across the coals to make it work, and they're the ones that will recommend you to everyone.

Why Choosing the Right Mortgage Broker Matters

Kane: That is so true, cuz that happens with us. The broker we haven't used for a fair while — like this is how I operate for so long — if a broker got me declined, like a house for example, we'd move on. This happened like three times, broker — like "are you," there's no way you're going to get that house, I'm like, I disagree. Went to next broker, was like, "this is my scenario," got it done. Same thing happened. Yeah, he declined the next — I think it was next house, I was like, nah, I don't — I think that's — I'm pretty confident I can get this. Went to next broker and the broker we got now has just made it work. But yeah, the best relationship we formed with him is because like he'll get it done.

Dan: Yeah.

Kane: A certain situation where someone can't lend to us, I'm like, this needs to happen.

Dan: Yeah, yeah.

Kane: Credit card that we managed to get our credit card to like 500k limit, which was like quite hard to get it there.

Dan: Yeah, that's a higher credit card limit than I would normally say. You don't get those Mastercards on TikTok. [laughter]

Kane: Yeah, that's it's good. And that just shows that your broker is doing its job properly.

Dan: And probably it doesn't — I think a lot of people, especially in our industry, they 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 probably didn't give up at the first instance.

Kane: Ask the right questions.

Dan: Yeah.

Kane: Ask that client the right questions, because I don't know what information he needs.

Dan: Yeah.

Kane: Obviously I'll learn a bit more over time, but you guys know what to ask.

Dan: Yeah.

Closing

Kane: Where can people find you on social media?

Dan: Fund, F-U-N-D, on Facebook, Instagram, LinkedIn. Yeah, we're all on there, just reach out. All of our personal — all of our individual mobile numbers are on there. Yeah, 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, it's yeah, we will happily help you, and even if it's just you want a second opinion on something that you are doing either direct with a bank or another broker, we're always happy to help.

Kane: Cool. Thanks for coming on.

Dan: Absolute pleasure. Thanks for having me. Cheers, mate.

Kane: Cool. Thanks for tuning in to this episode of Unlocking Business. If you've enjoyed this conversation, please take a second to like, subscribe, and follow our channels. It really helps us to bring on more guests and have great conversations. If you'd like to connect with today's guest, the details are in the description below. I'm Kane Tyler Smith. I'll see you on the next one.