Top of the list of things that can cause a property investor to come unstuck is finance. Avoiding getting stopped in your tracks and being unable to grow your investment portfolio is about getting prepared. And it helps to have a ‘creative’ mortgage broker who understands your investment journey.
This week I’m joined by residential finance expert Paul Steele from Green Finance Group for a frank chat about how to get ready to finance your next property deal.
DISCLAIMER: The Content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Whether you are a first, second or twentieth homebuyer, an experienced investor, or you simply want to save money on your existing finance, Paul Steele has the lending knowledge and experience to assist you to find a better home loan.
With a career history that spans both the banking and finance and property development industries coupled with a degree in property economics, he’s ideally placed to help you navigate the ins and outs of property purchase or investment, for both personal and business purposes, in today’s market.
A creative mortgage broker, Paul helps local families, savvy individuals and self-employed borrowers to successfully purchase property of all shapes and sizes. With a reputation for professionalism, he can often negotiate a better home loan deal than those advertised – even with your own bank!
Thanks for joining us for the Small Talk, Big Ideas podcast. A podcast to enrich your soul, where we have conversations with inspiring people about all things property, business, and life. And now, the host of Small Talk, Big Ideas, Ian Ugarte.
Ian Ugarte (00:24):
Hey there, welcome to Small Talk, Big Ideas, and today we talk to Paul Steele from Green financing, a guy who’s been helping our clients through the mortgage brokering process when no one else has been able to help them. So enjoy his story, how he’s got to where he’s got to, and how he’s actually going to grow his business in the next few years. As always, follow us on all the social media channels, you can find out more at ianugarte.com.au.
Paul Steele (00:46):
Paul Steele… Mortgage broker… yes.
Ian Ugarte (00:54):
You didn’t start there though. What’s the business name?
Paul Steele (00:56):
The Green Finance Group is who I trade under.
Ian Ugarte (00:59):
The Green Finance Group, which is a very funny story. We’ve got… I’ve done this a couple of times to Bianca, where I’ve sent here… we had these two people who were Martins, and they were Asian, so they had similar surnames, and I sent her one Martin and said, “This is the guy that’s probably going to help us out with sales,” and I gave her the other Martin. And the other Martin goes, “No, he’s never talked to me about that. But I can help out if you want, because I’m in sales.” And so it sort of worked out right. So then we’ve got Paul Steele, and then we’ve got Paul Green. So Paul Green is in our do it for you team, and I sent a few PPL to Paul Green with some financing, and Paul goes, “I don’t know what you’re talking about.” But Paul Green is who I sent them to, but then it’s Paul Steele from Green financing.
Paul Steele (01:54):
Ian Ugarte (01:55):
It just confused the hell out of everyone. Where’d you grow up?
Paul Steele (01:59):
I actually grew up in Biloela.
Ian Ugarte (01:59):
Paul Steele (02:03):
Yeah, born in Rocky and grew up in Bilo, and then came up to Brisbane, went to Nudgee.
Ian Ugarte (02:09):
Paul Steele (02:09):
Ian Ugarte (02:10):
That was private?
Paul Steele (02:10):
Ian Ugarte (02:13):
Right. So what did your parents do?
Paul Steele (02:15):
My old boy was a principal, he passed away when I was four, so mom’s a teacher. We were lucky to get into Nudgee, I had three older brother. Two older brothers, sorry. We all went to Nudgee, we were very lucky to go there, and we’re very appreciative.
Ian Ugarte (02:29):
So did you play sport there?
Paul Steele (02:32):
I did, lots of sport. Rugby, cricket, athletics.
Ian Ugarte (02:35):
League or union?
Paul Steele (02:36):
Union there, and then outside of school played league as well.
Ian Ugarte (02:41):
You so then grew up in Brisbane, stayed in Brisbane, and been since?
Paul Steele (02:44):
Ian Ugarte (02:46):
When did you move to Brisbane, what age?
Paul Steele (02:48):
Ian Ugarte (02:49):
So you were pretty old, 14, when you moved to Brisbane?
Paul Steele (02:54):
Yeah, so I was 12 I was. I was turning 13 back in those days.
Ian Ugarte (02:59):
And so at Biloela your mom was a teacher, and did you leave on [inaudible 00:03:07], or what’s it?
Paul Steele (03:11):
No, just [inaudible 00:03:11]. So dad was a principal there… so they’re the catholic system, so they rotate the principals around, and he took a job there, and when he passed away mom became a full time teacher there. So we grew up there, and then my older brother was becoming a bit of a rat bag in the Biloela State High, so he got sent of to boarding school in grade 11. And when he was grade 12 I was going into grade 8, and my middle brother was going to grade 9, so we went to boarding school for six months, and then mom relocated to Brisbane, and we lived in College Green there.
Ian Ugarte (03:42):
I’ve been through Biloela. The rat bag status of your brother probably wasn’t really much of a rat bag.
Paul Steele (03:51):
More just an attitude. Just acting up in school, and thinking he was above it all.
Ian Ugarte (03:56):
And is he better now?
Paul Steele (03:58):
Yeah. We were big fish in little ponds in terms of sport, we were all quite good at sport, but limited competition in a small country town. So you go from there to Nudgee, you get a bit of a wake up call. Nudgee was the best thing for him by a long way, and we also got right into the sport and the culture. Because we realized, you take a kid from Biloela and you walk into Nudgee, you go, “This is really cool.”
Ian Ugarte (04:22):
It’s a big place.
Paul Steele (04:24):
Had a golf course and everything at a school, so we thought we were high rollers-
Ian Ugarte (04:29):
[crosstalk 00:04:29] golf course there?
Paul Steele (04:29):
Yeah. Not anymore though, they’ve now got a retirement village down there.
Ian Ugarte (04:35):
It’s probably [inaudible 00:04:35] more money like that.
Paul Steele (04:35):
Yeah, much more.
Ian Ugarte (04:37):
There’s been a few golf courses that have sold off parcels of land and they’ve done retirement villages on later. All right, so you finished school, you come out. Were you a good student?
Paul Steele (04:48):
Ian Ugarte (04:48):
Paul Steele (04:48):
Ian Ugarte (04:52):
I was a good student if I wanted to be. [crosstalk 00:04:57] is what you wanted-
Paul Steele (04:56):
Well I tried hard, but I did so much sport. I just wanted to be a part of everything.
Ian Ugarte (05:02):
Did you get into any higher levels in sport.
Paul Steele (05:05):
I played first 15 and first 11. So first 11 cricket, first 15 rugby, and did touch and javelin at the athletics. And then after school played rugby league, and a couple seasons in Q Cup, and then played some union as well. Played a season of union over in Hong Kong back in 2013, that was an awesome experience.
Ian Ugarte (05:25):
Was it good?
Paul Steele (05:25):
It was awesome. That was great, that was really-
Ian Ugarte (05:30):
How did that come about? Did… talent scout, or did you say, “I’m going to go over there and play?”
Paul Steele (05:33):
So when you’re coming up there’s always opportunities to play union overseas. It’s so incredible, because my older brother, he’d gone to England after school, and he spent basically 14 years overseas playing in England, and Europe, and Portugal. And I was playing league as a 20 year old, and sort of half doing uni, half doing footy, half doing a lot of things. So I thought, “I need to probably grow up a bit.” And the opportunity came to go to Hong Kong, so I was a personal trainer as well over there, and played footy, that was a great experience. And then I… my now wife, we go back and try to… I wanted to try to have a crack at trying to [inaudible 00:06:16] over here, but via uni, ironically. And then I got injured, and that sort of-
Ian Ugarte (06:21):
What was the injury?
Paul Steele (06:23):
It was just an ankle, and then a few concussions, which is always a bit scary when you actually want to have your wits about you.
Ian Ugarte (06:30):
Well they weren’t really well know, the concussions, back then, hey? Not to the extent-
Paul Steele (06:34):
Not to the extent they are now. So the movie Concussion, that rattled a few people, especially my wife. She’s an OT, so she’s not a real fan of me… especially the fact that I like boxing and rugby. Not ideal sports if someone wants to have their wits about them when they’re in their 50s, 60s, or 70s.
Ian Ugarte (06:56):
I watched a few documentaries and a few movies that have been based on true stories, where these NFL players in the Us end up with no money, they end up sleeping in cars, pulling their teeth out with pliers. And you just go, “Man, this is serious.”
Paul Steele (07:07):
That’s the thing. You can shake off bumps and bruises. Everyone who plays sport knows that they’re going to be sore, and have aches and pains, but you don’t come back from a brain injury. It’s good that now the exposure too, you see lots of NRL players who retire, Like Jake Friend from the Roosters just retired. Even him, it was probably a little bit too late. There’s much more awareness, but we were lucky. I was pretty acutely aware of it because I got a concussion in Hong Kong, and my wife had took a video of me while we were I the hospital, and I was in a time loop, asking the same questions every eight minutes. And for some reason she’s [inaudible 00:07:42] that she was pregnant. And we were really young at that point, so it was the same sort of questions. And then [inaudible 00:07:50], and then she’d say, “Yes, I’m pregnant.” But she was playing with me.
Ian Ugarte (07:52):
Just playing around.
Paul Steele (07:54):
But watch that video, it was very funny, but that was pretty scary.
Ian Ugarte (07:58):
[crosstalk 00:07:58] big awareness.
Paul Steele (07:58):
Yeah, very scary.
Ian Ugarte (08:02):
I’ve never played league, but just playing locker football, I’ve had a couple of concussions that… one of them I drove home from, and I don’t remember the drive from the field home.
Paul Steele (08:17):
That’s not ideal.
Ian Ugarte (08:19):
And no one picked it up. It’s this drug.
Paul Steele (08:22):
It’s a lot of people’s identity as well. You see it in boxing with boxers. They should hang it up, but they just can’t, because that’s their significance, they can’t do it. And then it leads to some pretty bad results.
Ian Ugarte (08:36):
All right, so you go to Hong Kong, have a good time, come back. What do you do when you come back?
Paul Steele (08:43):
Well throughout all that I was studying, so I did a property economics degree, and I did an MBA, majoring in finance. I had a little PT studio throughout all of that. So sort of between playing rugby, studying, and managing a PT gym, I was also the PT manager of… there was Go Health Clubs at [inaudible 00:09:06], the new one when it opened up there. So that was a really good experience, being involved in the big machine like that in a managerial role, just to see how from the start, building the PT team up. That was great experience, and then from there I had a little home studio in [inaudible 00:09:21]. So a girl had set it up where she rented the house, had a gym downstairs with very basic equipment. Then she had to [inaudible 00:09:29] and she was moving overseas to Mauritius, and so she said, “Sell the business,” and I was like, “Sweet, I’ll buy it.” Because I had my existing client base, and I took hers over as well, and that was a great experience. We were there for-
Ian Ugarte (09:40):
So you rented the house, you lived upstairs.
Paul Steele (09:40):
Rented the house, lived upstairs, walked down, opened the garage door[inaudible 00:09:46] gym. It was a fantastic setup, highly-
Ian Ugarte (09:50):
Paul Steele (09:51):
It was profitable outside of the town planning boundaries. Quite a bit, but it was quite fun because-
Ian Ugarte (09:58):
As long as the neighbors are okay with it.
Paul Steele (09:59):
Well that was the fun thing, was nextdoor was a housing commission. So they tend to keep to themselves a fair bit, so I was doing PT from 5:00 AM till 7:00 PM every day for two years, not a drama. And then eventually the neighbor, he got a girlfriend, who… they live right there, and she was the one who took exception to it. So then eventually they reported us to the land lord, and then the landlord got a bit uncomfortable about it. So I said, “Look, we don’t really want to go,” so we upped the rent by about 250 bucks a week, and they were like, “Oh okay.”
Ian Ugarte (10:32):
Paul Steele (10:33):
But eventually I moved out anyway, we moved into [inaudible 00:10:38] there. Again, that was a great experience, and the home gym was a good setup.
Ian Ugarte (10:43):
So do you think that really early on business was a good strength of yours?
Paul Steele (10:46):
I think I just prefer to work for myself was well. I have lots of mentors, but also I’m pretty self driven, so I don’t really need to have someone looking over my shoulder saying, “Hey, have you done this yet? Have you done that?” I just more need to be… “Oh, I’m going too far that was, get back…” you know what I mean? Have those mentors. Because at PT, you work for yourself. So I’ve worked for myself since I was 18. I had the first tax return, and the accountant says, “So you’ve got a tax bill.” I was like, “What’s that mean?” He was like, “I think it’s at 11 grand.” And I was like, “So I get that back.” “No, you’ve got to pay it. How much have you got put aside.” And I’m like-
Ian Ugarte (11:30):
Paul Steele (11:30):
But that was a great learning curve. So just being exposed to that from day dot as an 18 year old, you sort of learn that sort of business. So I think working for myself, understanding business, having to drive your own income as well, so you don’t have that pay check. The only time I’ve really had a job recently was I worked for a bank. When I finished my degrees I went and worked for Auswide Bank there as a credit analyst, which is a fantastic way to cut my teeth for what I’m doing now.
Ian Ugarte (12:03):
And get some exposure.
Paul Steele (12:06):
And I had that job at the height of the Royal Commission, so I was trained as if, “If you don’t do this right, you’re going to end up on the Royal Commission,” and everyone was on eggshells. So I got basically trained as the most strict way possible. And so that when I came out as a broker, I had that training, but then all of a sudden the shackles are off. “If you just need this to get approved…” I was like, “Really? Okay.”
Ian Ugarte (12:28):
So did you have the intention to start a brokerage?
Paul Steele (12:30):
On. Of all things, I actually wanted to get into property development lending. That was where I wanted to get into, but I was just too impatient. So I was in the analyst role for year, and I was having a conversation with a few mentors, and there were property jobs coming up, [inaudible 00:12:51], but you needed two year experience, but I was a year in. I was like, “Oh, this is dry for me.” And to be honest, I actually thought… a lot of banks do have this attitude, that probably the quality of the submissions that the brokers were submitting wasn’t that great. I thought, “I could probably do this better.” It’s always easy when you work in a bank to say, “Oh, the brokers are shit.”
But none of them actually put their money where their… sorry, not a lot of them actually go and do it themselves. So I thought, “Right, I’ll just go and do it.” Which, again, I didn’t do that the smartest way either, I just went [inaudible 00:13:27] to start my own business under Green Finance Group with no wage, no backup, just PTing as well. And that was a bit of a reality check, [inaudible 00:13:37] heaps of deals on the go. It took me a long time to start actually earning any money.
Ian Ugarte (13:41):
So did you have to do any extra study to get into brokerage?
Paul Steele (13:44):
So I did the Cert IV, and then the diploma in mortgage brokering. So knocked that out basically straight away, and the just started trying to build it up. And it was slow at first, you know you do friends and family at first, start to build a name. And now I’ve got one person I’ve brought in, definitely need to get a second person on ASAP, because-
Ian Ugarte (14:05):
Because here’s the rub right, we’ve been sending people and you’ve been getting… where other people aren’t getting out of the line, you’re getting it done. So I’ll give you an example, someone that took twenty something days to not get an approval, and you got it in seven days, or something like that. So the thing that I’ve seen with mortgage brokers, and this is a question for you, is that when you’re doing the front face, and you’re doing what’s required, everything’s amazing. As soon as you start to bring on extras, I’ve seen brokerage firms in the past fall apart. Not fall apart, it’s just that their-
Paul Steele (14:42):
The quality control.
Ian Ugarte (14:43):
It’s your business, right?
Paul Steele (14:45):
100%. So what I’ve got now is I’ve got lady, [inaudible 00:14:48], she’s based in the Philippines, but she’s under Loan Market. So she’s actually trained in-house by Loan Market over there, and so all she does basically is document verification. So she basically goes through and makes sure we’ve got all the documents. She renames them for us, we have naming conventions, so when I need to find something, it’s just there.
Ian Ugarte (15:04):
And you came up with the naming convention?
Paul Steele (15:07):
Well we used it at the bank, and now they’re actually adopting it across the Loan Market system, which is really handy. So her role I to do that for me. So all leg work, and then data entry, and then she audits me straight away. So I basically brought her on like, “Your job is, don’t let me get sued.” Because of the Royal Commission, the whole thing is not whether you’re actually showing… sorry. It’s not that you’re actually working in the best interest of the client, it’s whether you can prove it [inaudible 00:15:32] someone in layman terms. So if someone looks over the file, have you spelled out that this is why, this is the best option for them?
So basically it’s just a whole compliance thing, which is fine. We’ve just got to roll with the times. It’s such a dynamic landscape. A lot of people are getting out of it because it’s just too hard. Or they go to banking where they can just get a wage again. So in terms of quality control, that’s all they’ll ever do is the leg work basically. Because there’s a lot of data. There’s a lot of compliance there now where you’ve got to dot your Is, cross your Ts. Because the [inaudible 00:16:10] mandate was, find brokers doing the wrong thing, and fine them a million bucks. That’s what they’ve been told. They want to find people, and they want to seem… because they got basically accused of being a toothless tiger.
Ian Ugarte (16:19):
Paul Steele (16:22):
Let’s not poke the bear mate. Love you [inaudible 00:16:26]. So that’s the basic mate, is to delegate the stuff that anyone can do. My process is I have an initial conversation where the object is, “What are you looking to do?” Send out [inaudible 00:16:42] fact find. They give us all their data, where that’s where [inaudible 00:16:45], my assistant, helps oversee and collect that. I then assess it, ready to go, like, “Here’s the information, here’s what the objectives are.” While I’m assessing I call the client and say, “This, this, scenarios. Is there anything else you need to tell me, because-“
Ian Ugarte (17:00):
“I need to know now.”
Paul Steele (17:01):
Yeah, “I need to know now.” And from my credit training I could find that stuff anyway usually, and usually pick that stuff out. Because I do a full assessment like a bank does. I do a comprehensive credit report. I do all that stuff, I go trough the statements. Because its better to know at the front end the issues so that I can overcome them. You can identify, then you can either be a bit creative about where that needs to be displayed, or you just convey it in a way that’s going to be acceptable to the bank in terms of their risk appetite, in terms of their policies.
Ian Ugarte (17:33):
Because it’s really interesting. You’re working with a client. A mortgage broker’s job is to act on behalf of the client for the best product and outcome for the client. But for some reason, clients seem to want to withhold information from you, and it becomes nasty when you don’t know about it. I don’t want to say nasty, it becomes a bit of a surprise to you when you go and present something to a lender, a lender’s done some digging in the background and found out. Now you just said that the reason you’re so good at what you do is because you know the exact credit checks that the banks are going to do, which some mortgage brokers don’t even care. They just get the information from the client, and so there might be a tax bill, or there might be a credit rating from Telstra, he’s not paying a bill or something like that, where a lot of them won’t do that.
Paul Steele (18:24):
My whole thing is I’m very competitive, if you could probably tell. But I won’t submit a deal unless I’m very confident of an approval. I’ve only had two declines in my career. One of them is because he accessed [inaudible 00:18:37], and I didn’t see it in an account that I didn’t have access to you, and they had another loan which they didn’t tell me about. And then even that we could’ve got overturned somewhere else, but by then they went a different route anyway. And the other one we got approved elsewhere, but that was because of credit scoring, which we couldn’t amend. So basically when I submit the deal, I’m putting my name to it and saying, “This is a deal, we’re ready to go.” I’ve done everything. So when I get the… they issue an MIR, which is a missing information request, or an exception, or something. When I get that issue from the bank, I’m pissed. I’m like, “What is this?” And so with that-
Ian Ugarte (19:13):
It’s like when I get a request for information from a council for an application, because I want to make sure I’ve got everything in and they can’t ask me anything.
Paul Steele (19:19):
It’s like, “I couldn’t possibly have missed something.” So on that basis, usually it’s a pretty smooth approval, and then everyone’s happy. But the other thing as well is, because it is such a moving landscape… so that one that we got… we got that approved in three business days, right? That particular lender, and now they’re at eight days, because everyone’s realized that they can get quick approvals there. So now that’s no longer a viable option.
Ian Ugarte (19:43):
So you’ve got to look at the next one.
Paul Steele (19:44):
Exactly. And that’s what a lot of brokers don’t like to do, is because it’s annoying, it’s uncomfortable. You’ve got go and learn-
Ian Ugarte (19:51):
Because that’s the other thing I’ve noticed with a lot of mortgage brokers, they’re tied into aggregators of some sort, or whatever, and they can’t really go outside of that, which means that their product always is less. So do you have access to everything and everyone, or-
Paul Steele (20:04):
So Loan Market has a very big panel, a very big panel. It’s like 46 lenders. And then even if we do need to go outside of the scope, we’ve got a very good relationship where we ca just say, “Look guys, these guys aren’t on our panel,” but we just bring them in and there’s just an invoice process that goes through, and then we can do that. So in the Green Finance Group, it’s one of the biggest commercial brokering providing businesses in the country as a family owned business, so-
Ian Ugarte (20:30):
Paul Steele (20:31):
Yeah, I’m the big dog. No. So with Green Finance Group… so I’m part of the Green Finance Group. So Daniel Green, he’s the owner. So we’ve just brought on some more [inaudible 00:20:40] guys, but the commercial is the bread and butter. And so with that, having their name behind… under their name is really helpful.
Ian Ugarte (20:48):
So you sort of run your own personal business attached to these guys?
Paul Steele (20:52):
Ian Ugarte (20:52):
So you basically put a bolt on onto their business?
Paul Steele (20:55):
Yes. So I’m basically-
Ian Ugarte (20:58):
How did you come across them?
Paul Steele (21:01):
Mark [inaudible 00:21:03], he works there as well. He’s mate of mine, our wives are best mates. So when I was in the bank he was chatting, “What are your plans?” And he was telling me about Green, and when the time came up I just had a chat with Green and said, “Here’s what I want to do, I think I know everything.” And he goes, “All right, I’ll give you a crack. Here you go, you’re signed you off.” And then I learnt pretty quickly that I didn’t.
Ian Ugarte (21:25):
You didn’t know everything.
Paul Steele (21:26):
But, it’s the best way to learn, it was a baptism by fire. That first six months just working everything out, just working out by feel. It’s the best way to learn, because you never forget a stuff up. If you stuff up, you don’t do it twice. So that was how I’ve come to where I learned a lot very quickly about different lenders. Because the credit side of things and the complex side of things, that was my training. So in terms of the actual deal, I could do that with my eyes closed. It’s what I’ve had to learn is what the different lender’s appetites are, and how to treat them, and how to convey to them. That BDM relationship is paramount. I’ve got some really good relationships with BDMs now because-
Ian Ugarte (22:07):
How much sway do they really have, the business develop managers?
Paul Steele (22:10):
It depends, it depends.
Ian Ugarte (22:11):
Because some of them just seem like, again, a toothless tiger type [inaudible 00:22:15]. “I just hold a position.”
Paul Steele (22:17):
100%, 100%. And there’s the proactive ones… again, it’s all about those relationships. If the BDMs had good relationships with credit, they understand credit, then they can help you out. And that’s why I always try to… before I submit a deal I need to be very comfortable with it, because then if I need to ask a favor, I’ve got the [inaudible 00:22:37] to say, “Hey mate, can you look at this one? Can you help massage this through? Because it’s on the border there, but here’s the bid against why it’s a deal.”
Ian Ugarte (22:47):
The other part of this too is understanding property. You did a property degree. There’s a lot of brokers out there that don’t really understand what people are doing in development style deal. So that’s the first thing, you’ve obviously got an understanding of what property’s about. The second part of that is, do you invest yourself?
Paul Steele (23:12):
Yeah, so we’ve got a property in [inaudible 00:23:16], which we’ve done a cosmetic component. And now obviously we keep having babies, so we haven’t decided what our plan is yet in terms of… the original plan was to extend it, turn it into into a five and four, and then obviously [inaudible 00:23:34], and then buy another [inaudible 00:23:37], and the do the same ting. But, it’s actually a perfect location, because our kids go to daycare at Nudgee, it’s right near Nudgee. So we just haven’t bit the bullet yet about what our best-
Ian Ugarte (23:47):
You can always put your postal address.
Paul Steele (23:49):
100%, 100%. It’s more just that it’s convenient at the moment. The market in [inaudible 00:23:56], I’m just financing a property near [inaudible 00:23:58] train station, 1000 square meter block, single story house with a granny flat, $845,000.
Ian Ugarte (24:02):
So crazy. A year ago we were buying places in [inaudible 00:24:10] for $530,000, and we had a choice of al the properties, and we had a choice of timelines and conditions, we were in the bargain seat. And I’ve seen this market… Australia-wide I’ve seen it once before, so this is the second time, so ’85 to ’88. You’re probably too young for that. And I would’ve been… so ’85. I was 15, 16, and my brother just bought his first-
Paul Steele (24:38):
So you were following it then?
Ian Ugarte (24:39):
Well my brother bought his first house in ’88, with interest rates of 17.5 percent. Ad he bought it for $107,000, and he and his wife were going, “We paid $700 too mch for this.” The place is with three point something now. So I got to see that Australia-wide-
Paul Steele (25:01):
[crosstalk 00:25:01] capital growth there.
Ian Ugarte (25:02):
Absolutely. But that Australia-wide growth that happened, and everyone talks about the doomsday, and Martin North, and Harry [inaudible 00:25:09], every year. “The prices are going to plummet, the prices are going to plummet.” And they said it ’62, they said it ’70, they said it ’88, they said it 2004, 2008, 2015, 2019. And yes, it takes a hit, but it’s a cycle that just keeps coming back. So a year ago, any choice of anything at any price really. Literally three months later I was turning up at open houses, and it was in the middle of COVID, and people with masks on 40 [inaudible 00:25:45] groups. So 80 people standing at the door waiting to go in three at a time. And it’s just how quickly things move.
And you’ve also got to think Brisbane too. I’ve been pushing Brisbane for about 23 moths now, and we’ve had 29.3% in the last 12 months in Brisbane, and that’s because it didn’t have the exodus out of Sydney and Melbourne that they normally have, which they had in 2004, peaked in Sydney, and 2007, they peaked here in South East Queensland. But when it happened again in 2013, ’14, ’15, no one left. I don’t know why. Then COVID hit, so then people were in lockdown in Melbourne, and so the people that should’ve gone came, the people that were coming came, and the people that were locked down and were coming in the next 10 years came as well.
Paul Steele (26:41):
It’s been a perfect storm with Brisbane, the extra runway, the new casino, the infrastructure. The other this as well is, Brisbane was really flat, 10 years of that, it was leading up, it was very flat.
Ian Ugarte (26:51):
It had to happen.
Paul Steele (26:53):
Had to happen, and now it’s just gone. And the way I explained it as well, I think everyone’s…[inaudible 00:27:00], everyone’s got FOMO. I think what COVID did to everyone, and this is obviously just my opinion, is that everyone sort of did a stock take, and went, “You know what, I’ve been pretty lazy. I could probably do more with myself.” So people who have been thinking about buying got proactive, people who were [inaudible 00:27:18] and could buy investment properties were like, “Right, I’m actually going to go find out what the go is.” And then that’s just been a perfect storm. With rates so low, rent so hight, rental demand… it’s just a no brainer when you look at… you look at [inaudible 00:27:27], and you look at… [inaudible 00:27:27] rents at 2.5% locked in for three years, and you’ve got people fighting over your rental property as a standard rental. It’s a no brainer.
Ian Ugarte (27:43):
So on that, interest only or PNI?
Paul Steele (27:45):
It depends on the situation, it depends on the applicants. So if anyone’s got bad debt or non-deductible debt, I’ll always say, investment, go interest only. Because you preserve that deductibility, knock out that, and the use that equity to go again.
Ian Ugarte (28:06):
So that’s the thing I never… if you’re owner occupier, you just want to smash down your bad debt, and redraw so that you good debt it, right? But people what want to buy investment properties that want to go PNI, it never makes any sense to me. Unless you only ever want to buy one investment property. If you want to buy two, what’s the use of paying down a principal if you’re going to refinance this in three, five, eight years time? [inaudible 00:28:32] that one there. Has your wife come into the business? Does she need to? Does she want to?
Paul Steele (28:34):
Well she’s already done two degrees, she’s done a psychology and an arts degree majoring in sociology, and she’s halfway through an OT degree. So when I start talking finance and numbers her eyes glaze over, and she’s just like, “Okay, can you tell me when you’re done?” But in saying that, we’ve just had our third kid, he’s only six weeks old, and I need someone. So we are looking at possibly bringing her in in some sort of capacity, so-
Ian Ugarte (29:07):
And that’s that one thing that I said, that when you’re going good as a mortgage brokerage because it’s you front facing, the best thing to do is bring someone in close to you that has some skin in the game.
Paul Steele (29:17):
When I had the gym we did try, it didn’t work that well. So I like to just get things done, whereas my wife Annie, she is very detail oriented. She will not touch it until she knows she’s going to do it properly. So in terms of quality, if Annie touches it, it’s perfect. But I needed to be done three hours ago in my opinion. So that’s something that we need trade off.
Ian Ugarte (29:41):
And that’s very typical of any relationship, opposites attract really.
Paul Steele (29:47):
Ian Ugarte (29:47):
All right, so what’s the move forward for the business?
Paul Steele (29:54):
So [inaudible 00:29:54], but I mostly work from home, which is obviously ideal when you’re trying to help with kids, but not ideal when you’re trying to hide from them. But no, just to keep it growing. I am looking to bring someone on in the next couple of months. Ideally someone based in Australia who can be a customer service role, who can help oversee… basically what I’m looking… someone who can do the front end of the back end. So help with the leads, help qualify, help consolidate, “Here’s what they’re wanting to do,” so that I can get to the meat of it quickly. And then obviously the settlement, the handover, and all those questions that come up. That’s the plan, but at the moment it’s just keep servicing all the customers. Because at the moment it’s just nuts, it is absolutely crazy, so [crosstalk 00:30:41] flow.
Ian Ugarte (30:43):
What were you writing before this crazy crazy time, how many loans roughly a week, a month?
Paul Steele (30:52):
It sort of goes off numbers. What would be the numbers? At the moment I’m probably settling seven or eight a month at the moment, and since I’ve had [inaudible 00:31:10] on, life’s a lot better. But it’s probably gone up 100% over the last few months. At the moment I am having to turn people away, [inaudible 00:31:20] just can’t come to. Or-
Ian Ugarte (31:23):
When you say settling seven or eight…
Paul Steele (31:25):
Purchases or refinances. Mostly purchase. Because a lot of the stuff I get as well is from agents. So I don’t do commissions for agents, that’s just a policy that Green applied in terms of… a lot of brokers will pay [inaudible 00:31:41] 20% upfront, but as a company we decided that we just don’t do it. So they come to us because they know we’ll get the job done. So because of that it was a little bit slower getting agents onboard, because obviously they want to get paid. But it doesn’t take long, when they lose a settlement, they-
Ian Ugarte (31:54):
Because that’s the thing isn’t it? They go and recommend someone, they can’t get it over the line, which means they lose the contract-
Paul Steele (32:00):
And then they have to re-go again.
Ian Ugarte (32:02):
And then they go again, a lot of extra work, and then the new person may have their own broker. So they know they’re going to get paid their commission if they come to you because the deals going to go through.
Paul Steele (32:13):
100%, and I’m very upfront with them from the start. If I get a deal in front of me, and I think it’s a dead duck-
Ian Ugarte (32:18):
You’re not going to-
Paul Steele (32:19):
A quick no. I’ve never had someone be annoyed at me for saying, “this is why it’s a no, and this is why it’s a no now.” To be honest that doesn’t happen very often because there’s always a solution. But it’s a better experience for everyone. For the agent, for the buyers. Because as anyone who’s ever gone through it, if you’re going to invest in buying a house, you’ve gone through the process, you’ve put an offer in, done, they accepted it, you’re like, “Yes,” gone and submitted to the bank. The banks have taken a month… to go through that process to not get approved, I just can’t imagine that. That would just do my head in. So I’m impatient, [inaudible 00:32:54], “So I want that deal now, [inaudible 00:32:57], so that’s why we’re doing the hard part at the front” And then when it’s submitted, I know it’s going to get approved, it’s just a matter of when.” And if they say they’re going to send something by 12:00 o’clock on Thursday, you can be sure as shit that I’m ringing them at 12:05 on Thursday and saying, “Where is it?”
And then that way it just [inaudible 00:33:12], and then that way I can tell my clients before they have to chase me, “This is where it’s at.” So the hard part as well is with [inaudible 00:33:22] Royal Commission as well, and it’s also managing my workflow is when you have dozens of people coming and wanting to know their capacity… the bane of my existence is when someone says, “What’s my capacity?’ And they’ve got three properties, four different loans, they’ve got this over here, they’ve got variable income. It’s like, “Well, what do you mean?” Because there’s so many variables. There’s so many variables, there’s so many lenders. There’s 46 different lenders. They all have their different policies, they all treat things differently. Depending on how much cash you’re going to put towards it, that’s going to affect [inaudible 00:33:59], it’s going to affect policy. Rental income, what rental income is feasible with it right now when the bank goes in? So it’s a matter of working through their process, and the guys are getting much better at that.
Ian Ugarte (34:10):
And so it’s not just a matter of someone coming to you and saying, “What’s my capacity to buy the next one?” You actually have so sit down and have a good full on look at something?
Paul Steele (34:17):
100%. And people get annoyed with that first, because I say, “Look, it’s a house of cards.” Because if I say you go out and buy a $1 million property, and then when you come back and try and [inaudible 00:34:27] 500 and can’t do it, you’re going to be really pissed of with me. So basically I have to actually do a full assessment of you before I give you a recommendation. The classic one is someone comes to me and says, “I haven’t done my tax returns yet, but can you just tell me what I can buy?” No. So that’s the hard one, but again, once people understand that for me to give them actual guidance I need the whole piece of the puzzle, and then that way…
We’ve had this conversation before, very rarely now do I do pre-approvals, just because pre-approvals themselves at the moment with lenders, they’re not really worth the piece of paper they’re written on. Because they don’t fully assess them, there’s just too many variables. So it’s a bit cocky, but I say my pre-approval is worth a lot more than that, because if I say you’re good to go, you’re good to go. Because it means I’ve done the whole process, because I’m shit scared that I’m going to tell you you can go and buy, and then you’re going to come back, and it’s not going to stack up. And if I say, “You’ve got a capacity of 450,” I’ve left a little bit of fat in there was well. Actually, I shouldn’t say that out loud. There’s no fat, that’s your cap. Don’t go higher.
Ian Ugarte (35:39):
Which leads us to the next thing. In the early 200s I could go down, find a broker, sign a piece of [crosstalk 00:35:49], and say, “I earn $500,000” and they would give me whatever I wanted. Last year there was an announcement, the federal government said that, “were going to ease off…” [inaudible 00:35:58] eased off. “We’re going to ease off and take responsibility away from the lender, and put it on the consumer, the borrower.” With what’s happened in the marketplace, my thing was, I can’t see it happening.
Paul Steele (36:13):
No. Well they want to see it.
Ian Ugarte (36:15):
Are they still talking about it?
Paul Steele (36:17):
I’m not sure to be honest. Because they were talking about repealing them… it was around this time it was meant to actually happen.
Ian Ugarte (36:22):
It was supposed to come out late March.
Paul Steele (36:23):
Yeah. So the thing is, they’ve got a perfect storm here with low rates, high consumer confidence, property prices gang bust. If they do that now-
Ian Ugarte (36:32):
That would be crazy.
Paul Steele (36:32):
Yeah. So to be honest, I actually think they’re going to actually try to curb things a little bit, sooner rather than later. In terms of fixed rates, for the last two years I’ve been telling people, “Do not fix, do not fix.” And people got annoyed, I’m like, “Just trust me. I shouldn’t give advice about fixing or not, but how about you just get variable first, and if you want it to set, you can always [inaudible 00:36:55] and fix it. But once you fix you can’t unfix it very easily.” But now with the cash rate as it is, the way things are going-
Ian Ugarte (37:04):
[inaudible 00:37:04] got to be a question in time where you say that, but I’ve only fixed two loans ever in 30 years, and I lost out twice. And I always say to myself, “They’re paying…” not that they’re good at it. But they pay economists a lot of money in the background of the bank to set fixed interest rates. So the wouldn’t set a fixed interest rate so that they lost.
Paul Steele (37:25):
100%,and that what I’ve said to people as well. I used to say, “You’re basically backing your own judgment over the bank’s when it comes to that, in terms of things.” But nowadays it just seems so low. Can you go lower? I don’t think so. Just because it just seems like everything is going up, like the confidence. Everything seems to be going gangbusters. So I don’t see how the rates could get in, but… this is not financial advice.
Ian Ugarte (37:49):
Paul Steele (37:50):
Yeah, there’s definitely that component. But it also just comes down to your situation. If you’re setting up this investment property, you don’t turn property over in one or two years. Unless that’s your [crosstalk 00:38:00].
Ian Ugarte (38:00):
That’s what you want to do.
Paul Steele (38:02):
So fixing it for three years of investment property at that rate-
Ian Ugarte (38:07):
Because for some people it’s anxiety thing. Some people hate lending money, or borrowing money I should say. And it’s peace of mind of them to know that they’ve got X amount of payments every week, and-
Paul Steele (38:18):
And for budgeting and stuff, it’s ideal.
Ian Ugarte (38:20):
It’s great. You’ve seen Karina’s deal, where she basically bought a block of units off an owner that had fixed their interest rate at 8.9% for 10 years. And when did they fix it? That was 2019 so in 2009. So imagine… what were you thinking?
Paul Steele (38:42):
I had a mate of mine reach out to me. He’d fixed at 5% for five years, and he was like, can you help me? I’m like, “I can try.” And his break cost bill was like… I want to say 60 grand.
Ian Ugarte (39:00):
And that’s what happened to me twice. Once it cost me 23 grand to break, because I was selling, and then the other I just waited it out and sold it after that. But I certainly wouldn’t go down that path. What’s the one tip that you would give anyone that needs to get a loan?
Paul Steele (39:21):
As a first time buyer, or as an investor?
Ian Ugarte (39:25):
As an investor.
Paul Steele (39:26):
As an investor… well it comes back to knowing what your objectives are. If you know your objectives, like what you actually want to achieve. Are you wanting capital growth? Are you wanting cashflow? Are you wanting negative gearing? If you understand what you’re actually wanting to do, everything else is just steps. It’s just a process to get you there. So probably do a bit of reading, and do a bit of just having some exposure. Go have a look at some properties as well, and see, “Would I be happy to own this?” Because that’s the other thing, for first home buyers, what’s the best advice I ever heard, is, are you happy to live there? If the property price shit itself tomorrow, are you happy to live here for 10 years time, and for the cycle to come back around again? So I guess it’s just identify your objectives, and then just get good people onboard who aren’t going to just give you yeses. They need to actually be able to stand up to you and say, “No, you can’t do that, because in the long run you’re going to get yourself in trouble.”
Ian Ugarte (40:27):
Are there still people looking to get negative gearing?
Paul Steele (40:32):
Ian Ugarte (40:35):
Makes me laugh.
Paul Steele (40:36):
When they first come to me, yes. I have had those conversations. But again, and I’ve probably stolen some of our lines are well when it comes to it, but yes, the thing is, not many properties [inaudible 00:40:51] negative [crosstalk 00:40:52] in this market.
Ian Ugarte (40:52):
Not anymore, that’s right.
Paul Steele (40:53):
Because it’s just such a hot market.
Ian Ugarte (40:54):
I just love those people, “I just bought my client a positively geared property.” Well that’s not fricking hard at the moment dude. All right, how do they get in contact with you?
Paul Steele (41:04):
So I think I’ll just share my number. I’ll share my number, and it’s just email@example.com, and I’ll put up all my details there as well. So just a phone call-
Ian Ugarte (41:14):
Is that you?
Paul Steele (41:17):
It is hot looking stuff, hey?
Ian Ugarte (41:19):
How long ago was that?
Paul Steele (41:19):
It was only like a year and a half.
Ian Ugarte (41:19):
It doesn’t look like you.
Paul Steele (41:24):
I didn’t even put makeup on either. They tried to put makeup on me. I haven’t got glasses on, I can’t really see. But yeah. So just reach out, I’m always happy to have a chat. I do need to start delegating times to call people back rather than just taking phone calls so I get myself-
Ian Ugarte (41:42):
Paul Steele (41:43):
Three hours an application, I’m taking four or five phone calls, fed the baby, done this, done that.
Ian Ugarte (41:49):
Fair enough. All right, thanks Paul Steele from Green Finance for coming and talking to us today.
Paul Steele (41:56):
Thanks very much mate, awesome.
Ian Ugarte (41:58):
So there you have it, Paul Steele, who seems to be getting stuff over the line because he does much more than the average standard mortgage broker. He wants to make sure the deal’s going to get over the line. So you’ve got his contact details there if you want to get more information from him. As always, follow us on all the social media channels, you can get us on ianugarte.com.au. Thanks for listening to today’s episode, and we’ll catch you next time on Small Talk, Big Idea.
Thanks for tuning in to the Small Talk, Big Ideas podcast. We hope we’ve succeeded in our goal to inspire and challenge you, and we look forward to catching you on the next episode of Small Talk, Big Ideas, with Ian Ugarte.