The benefits of purchasing an investment property as your first home

Show notes

Bushy Martin is an esteemed investor, author, podcast host, and the Founder of KnowHow Property Finance. With an impressive track record spanning over 35 years in the property industry, Bushy is committed to empowering individuals to enhance their lives through strategic real estate investments.

In today’s episode, Bushy dives deep into the topic of purchasing your first home as an investment property. In this episode, Bushy shares the story of how he got into property investment, and how he’s since built his portfolio to 12 properties across the world. Plus, Bushy explains his work with KnowHow Property Finance, and how they can help you.

This episode is part one of our two-part chat with Bushy. Join us for the next episode, where Bushy shares the essential do’s and don’ts of investing in property.

Transcript

Michael 0:00
The information contained in this podcast is general in nature and is not to be taken as financial or personal advice.

Michael 0:06
It does not consider your objectives, financial situation or needs.

Michael 0:10
You should consider whether this information is suitable for you and your personal circumstances before acting on it.

Michael 0:17
Hi and welcome to the home, run your guide to buying your first home in Australia.

Michael 0:21
On the show, I’ll walk you through the home buying process from every angle.

Michael 0:24
We cover the steps to take the pitfalls to avoid and the answers to all your questions you’ve been dying to ask no matter what stage you’re at, you’ll learn everything you need to know about buying your first home.

Michael 0:35
I’m your host, Michael Nasser and I’m a mortgage broker at Lendstreet and I really love helping people buy their first home.

Michael 0:45
Bushy Martin is an investor author, podcast host, and the founder of know-how property finance, a property finance consultancy focused on real estate investment.

Michael 0:54
With over 35 years of experience in property bushy is passionate about helping people improve their life through their investments.

Michael 1:01
In this episode.

Michael 1:02
Bushy is breaking down everything you need to know about buying your first home as an investment property.

Michael 1:07
You’ll hear how buying a property as an investor is different from buying as an owner-occupier.

Michael 1:11
We’ll talk about the all important dos and dont’s of buying an investment property and busy will she his top tips to help you get the most out of your investment?

Michael 1:19
Let’s dive in.

Michael 1:24
Bushy, Welcome to the show.

Bushy 1:25
Very humbled to join you, Michael.

Bushy 1:27
been looking forward to it and, and love the work that you’re actually doing, particularly in educating first-home buyers for their options and what they need to be doing to enjoy the benefits of property.

Michael 1:36
Thank you very much.

Michael 1:37
So, you’re a bit of a property expert for people that don’t know and, and you primarily focus in property investment, but I’m interested to hear how you started.

Michael 1:45
So when did you first buy your property investment and yeah, map that out for us and a bit of background as to how you got to where you are today.

Bushy 1:51
Yeah.

Bushy 1:52
Well, I, I want to put a little bit of context around it because I’ve really lived my life in two halves, Michael and I jokingly say, you know, the BC and the AD so BC was before my early life crisis and the AD was after my divorce, which is sad and really took me up.

Bushy 2:07
But the BC P.

Bushy 2:08
So I was just like most of us, I was chasing the Australian dream.

Bushy 2:12
I was actually an architect, Michael.

Bushy 2:13
So I activist there for about 17 odd years and you know, I was doing the normal things.

Bushy 2:18
I was working hard building a career.

Bushy 2:20
I, my intention then was to buy a home, have a family, put some money into supper and then tick off the bucket list when I retired.

Bushy 2:27
But the sad reality Michael is that while it looked on the outside because I was working on some great projects around the country on the inside.

Bushy 2:33
I was dying on the vine mate.

Bushy 2:35
I was working 12 hours a day, seven days a week.

Bushy 2:38
Unfortunately, as a result of that and no surprise, I burned my first marriage and I at the tender age of 33 I ended up burnt out, broken, and broke mate.

Bushy 2:47
It was absolute stuff again, I had nothing to start with.

Bushy 2:51
And that really woke me up to be honest.

Bushy 2:54
I and I was really determined to do things differently from that point on.

Bushy 2:58
And as fate would have it, I was lucky enough to be dragged along to a Robert Kya conference in Adelaide, living in Adelaide at the time.

Bushy 3:06
And he made a comment to me to all of us that the moment you make passive income, a part of your life, your life will change forever.

Bushy 3:13
And it was an absolute penny-drop moment for me given what I just been through.

Bushy 3:18
And overnight I started to see everything differently.

Bushy 3:21
And I again, jokingly say that I became passive-aggressive.

Bushy 3:25
So I became very aggressive about pursuing passive income opportunities.

Bushy 3:29
So for almost from that day onwards, everything my now-life partner, Sonia, and I do both personally, and professionally enter the property sphere, had to do three things, Michael and had to produce an income stream that didn’t rely on us to deliver it and had to grow value and it had to be a saleable asset.

Bushy 3:48
So that applies to our property.

Bushy 3:50
But it also applies to what we’ve done in business since then as well because now we really tapped into the, the whole property opportunity given I was an architect, I was sort of comfortable with property anyway, to some degree.

Bushy 4:02
And it’s the best and the most obvious vehicle to invest in in this country.

Bushy 4:05
Given that the government incentivizes mums and dads do because we’ve got a massive housing shortage.

Bushy 4:10
So our initial entourage into that we were going to buy our first home and the trouble I had that coming out of the divorce, I had no money to my name and very limited capacity actually.

Bushy 4:20
So we started crunching numbers and looking around and, and an accountant that we bumped into made a really good suggestion.

Bushy 4:26
And I, he’s still my accountant by the way and I, I thank him for that.

Bushy 4:30
But he said, look, you need to buy a property that you can afford in an area that you can afford.

Bushy 4:35
And then don’t be scared to rent for lifestyle close to where you need to be.

Bushy 4:40
Now, there was no such thing as rent investing in those days wasn’t even all that, but that’s effectively what we did.

Bushy 4:45
And he actually did the numbers for me and he showed me like if we based on what we could buy, this is how much a property is gonna cost you to hold.

Bushy 4:52
If you’re an owner occupier, he did the same numbers to show me what it would look like if we bought a property as an investment property.

Bushy 4:59
And because the tenant and the tax office is covering the cost, we could buy a property that was actually putting a little bit of money in our pocket.

Bushy 5:07
So it was positive cash flow versus hundreds of dollars a week coming out of our pocket if we were going to buy it.

Bushy 5:12
So it became a bit of a no-brainer.

Bushy 5:14
And what we then did was we bought a little property in the beautiful beachside suburb of Aldinger Beach, which is about an hour south of Adelaide itself.

Bushy 5:23
It’s a little corner block, three bedroom, one bathroom, two car place.

Bushy 5:27
It’s 150 metres from the beach at the time.

Bushy 5:30
The only people who lived in Al Binga Beach were unemployed and retirees.

Bushy 5:35
So it was a pretty interesting area.

Bushy 5:37
But what we almost by default benefit from is that they put a new expressway down to just before beach and they, that first was, it was only one way and then they doubled it two way over a series of years.

Bushy 5:50
So the big influx of people that could then access that property as a result of that, the properties have just gone, the values have gone through the roof.

Bushy 5:57
So we still got that property.

Bushy 5:59
Last valuation was just under a million dollars.

Bushy 6:02
Remember when we bought it for 84 grand and effectively, it’s 10 times its value in 25 years.

Bushy 6:08
So, and it hasn’t cost us anything to hold that property because of the benefits of of the investment piece.

Bushy 6:13
So that really set us up and then our property journey was well and truly underway.

Bushy 6:18
So I often say that we stumbled across our freedom formula, which was those three things with your work and your properties need to provide an income stream grow in value and be saleable.

Bushy 6:28
And then Sonny and I, who’s my partner in life and partner in all things.

Bushy 6:31
We ended up adopting what we call the money Madison where you know, the Madison bike race where there’s a pair of riders that alternate in relay and they take it in turns.

Bushy 6:40
One race is around the track and the other rests on and then they change over and keep going well.

Bushy 6:45
We adopted that to what we were doing.

Bushy 6:46
We became what we call the worker and the wealth builder.

Bushy 6:49
We now refer to it as our relationship relay because one of us worked on building the wealth while the other created the income.

Bushy 6:56
And so we were able to buy properties.

Bushy 6:58
But our first on trade business-wise was we started a property management business which ticked those three boxes.

Bushy 7:03
And then once that was up and running and covering itself, then I jumped into the mortgage-breaking arena because I realised when we got into it, that property is absolutely a game of finance and the mortgage-breaking business.

Bushy 7:15
Also ticks those three boxes in terms of ongoing income from growing asset and a saleable asset.

Bushy 7:21
So over that time, you know, over a 15-year period, we accumulated 12 properties across Australia.

Bushy 7:26
And we also bought three in the US, we sold our property management business about five years ago to rationalize our portfolio.

Bushy 7:34
And that’s now put us in the privileged position of being able to be enjoying, taste, testing and looking for our forever home as we currently speak and be debt free in that situation mate.

Bushy 7:44
So that’s sort of rolled into what we’re now doing on the business side with know-how and know-how as a lifestyle business I’m on a mad mission is to wake up and shake up as many of the Australians as I can to the opportunities that property gives them and to get invested and we help people in four key ways.

Bushy 8:00
It’s education, inspiration, like podcasts like this, like the books we run live information sessions for those to educate them on what it’s all about.

Bushy 8:09
For those that we actually work with, we spend our time in really developing a strategy gps, which we call a strategy.

Bushy 8:16
And that looks at your life strategy, your finance strategy, and your property strategy.

Bushy 8:20
We’ve got the finance-breaking team that specializes in the investment piece behind it.

Bushy 8:24
Then the final part is that we sit on the, the investors side of the table and come their eyes, ears, arms, and legs to make sure that everyone in their property team is doing what they need to be doing.

Bushy 8:34
So if it’s a buyer agent account, property manages the whole bit, we’re a bit like the John West of property because it’s the properties that we reject for our clients and make sure our clients get the best.

Bushy 8:44
So, but I’ve gotta gotta spell out we are not buyers agents and we don’t sell property.

Bushy 8:48
It’s it’s really about giving people the smarts and then acting as their representative to make sure that everyone’s doing what they should be doing for the client’s benefit.

Michael 8:57
There’s actually a bit to unpack there because I think this type of episode is definitely focused on those first-home buyers that are looking to buy an investment property.

Michael 9:05
And you, you refer to the term rent investor, obviously back when you bought your initial property, that wasn’t the term referred to the objective at that point.

Michael 9:12
But that’s what we come have come to know it.

Michael 9:14
But there’s some things that ii, I just recognize that I think it’s important to, to draw on the first is that you were fortunate enough to have the accountant who you said is currently assisting you.

Michael 9:23
But they were the first group to showcase what could be possible by mapping out those relative options.

Michael 9:30
And got you thinking about that.

Michael 9:31
And I think that’s almost what you’re trying to do now by the sounds of it, because you’ve been down that path and your business is based on what you’ve experienced and the road you’ve walked.

Michael 9:38
And so you can see that and you can be guiding potentials in this particular space.

Michael 9:42
So that’s massive and then your three pillars, I guess, you know, a bit of passive income growth and saleable asset.

Michael 9:48
I think they’re sort of key fundamental property points that people are, are looking to, especially from the investment point of view, the growth and the sale, I guess that they’re tied into some extent because, well, you want to sell and you want to capitalize on that growth.

Michael 9:59
So a few things there that I think are really, really key items have showcased, I guess the experience that you have and sort of where you’ve been to this point.

Michael 10:07
What’s your property journey been like since then?

Michael 10:09
You did mention 12 properties?

Michael 10:10
Now, what’s it like now?

Michael 10:11
And, and what does your portfolio consist of?

Bushy 10:13
Yeah, really good point.

Bushy 10:14
So early on, it was all about growth for us.

Bushy 10:17
It was about growing the nest egg, the nest egg to a size where we could then convert it into cash flow.

Bushy 10:23
Because a lot of investors make the mistake of thinking, I’ll just buy a property, pay off the debt and then live off the rent.

Bushy 10:28
If you actually do the numbers on that, the rent is never going to be enough to live comfortably on.

Bushy 10:32
And we sort of worked that out fairly early as we started going through the process.

Bushy 10:36
So, the first couple of properties were in South Australia, they were again, real homes for real people in tightly held suburbs has been the, the sort of underlying thing that’s underpinned everything that we’ve done.

Bushy 10:48
And one of the key messages I’d like to get across today, Michael is that whether you’re an owner occupier or an investor, you need to think like an investor because most people who live in a home don’t live in it forever, particularly first home buyers, you, you will know this better than I, but between five and 10 years that a person normally lives in their first home before they have to move for family or other reasons.

Bushy 11:07
So if you’re going with an investment mindset, then you’re actually gonna position yourself regardless of what’s happening.

Bushy 11:14
So that was very much it, our mindset, we continued to rent vests for a fair while we then went borderless.

Bushy 11:18
So one of the mistakes a lot of investors make and we made it was to buy in your backyard.

Bushy 11:23
You know, there’s over 15,000 suburbs and nearly 11 million properties out there.

Bushy 11:28
The chance is that where you live is the best place to invest, unlikely might be but unlikely.

Bushy 11:33
So we, we applied a real data-based approach to it and we then went borderless and always focusing on 3 to 4-bedroom homes.

Bushy 11:42
You know, spot for growth in Australia is 3 to 4 bedroom homes on a block of dirt.

Bushy 11:47
The properties that in the growth phase are you avoid are units and townhouses.

Bushy 11:51
And of course, there’s very little land content, there’s heaps of them that tends to drive the price down.

Bushy 11:55
And the only people who tend to buy them are first timers, first-time investors divorces students or singles.

Bushy 12:01
So it tends to cap its growth.

Bushy 12:02
So focused on homes.

Bushy 12:04
Most Australians like to live in a home, 3 to 4 beds is a good profile.

Bushy 12:08
So that’s what we rolled out also recognise the benefit of building new homes because there are significant depreciation and stamp duty savings by building versus buying.

Bushy 12:18
So, you know, a lot of people poo poo the the building exercise.

Bushy 12:22
But if you know what you’re doing and and I guess I was fortunate because of the architectural background, if you can fix the price and you know what the delivery time and you’re building in a tightly held area, not, not amongst green fields of acres of space that’s going to be built on forever.

Bushy 12:35
Then building provided some advantages that really help with the cash flow because one of the key things that a lot of investors don’t get their head around, they think about what we’re going to buy and how much I’m going to pay for.

Bushy 12:45
What they don’t think about is how much it’s actually going to cost to hold on to that property ongoing and structuring that is really important.

Bushy 12:53
So having a good mortgage broker and investment savvy broker like yourself and our know-how team is really key to doing that because our approach is to build it all on paper first before you’ve even made offer on a property.

Bushy 13:06
And if the numbers don’t walk, walk away and keep looking the exercise in the US.

Bushy 13:10
Well, when the GFC came through, we knew straight away that was a once-in-a-lifetime opportunity.

Bushy 13:15
So we jumped on a plane, we spent three months in the US, going up the east and west coast, we ended up buying properties in Michigan, Maryland, and Washington and they were crackers because the they had fallen through the floor.

Bushy 13:27
The rental yields were still really strong.

Bushy 13:29
We were getting between 25 to 28 to 30 odd percent rent yields on those properties and the properties have now just given what’s happened, increased in value pretty substantially.

Bushy 13:39
So that’s it.

Bushy 13:40
But we’re now in the rationalization stage, Michael.

Bushy 13:42
So we’re now selling some of the properties, we’ve eliminated the debt and held onto properties that are high yielding and put the excess cash into high-yielding opportunities like index funds and others that don’t require a lot of work to give you a pretty safe and solid ongoing income stream without relying.

Bushy 14:01
So that’s pretty much the journey as we see it’

Michael 14:05
And what a journey it’s been. I mean, one word that stands out to me is strategy, I think.

Michael 14:08
And there is, you know, a lot of strategy in what you’re doing.

Michael 14:10
And I think that’s probably the key element to it.

Michael 14:12
It’s about that thinking and planning and strategising.

Michael 14:15
And you’ve mentioned, know-how and I like the word, know-how it, I think it applies very well to the experience that you have and what you’re trying to do in terms of the fact that you’ve walked down the path and you know-how to do it.

Michael 14:24
So now let me show you, tell us a little bit more about know-how property finance.

Bushy 14:28
Yeah.

Bushy 14:28
Well, I, I’ve probably covered most of it already but the a as I say, and you’re absolutely right.

Bushy 14:33
Our, our view is people know they want to do something in property, but they can’t see how.

Bushy 14:39
So the idea is that we’ll give you all the, know how that you need to make much better informed decisions around what’s right for you in property and it falls down into those four key categories.

Bushy 14:48
So, it’s education first.

Bushy 14:50
And if you, if you’re working with someone who’s not teaching you what they’re doing, then then that’s a bit of an issue I believe because our, our role is to work ourselves out of a job.

Bushy 14:58
If we can help people and increase their knowledge, comfort and skill around property, then eventually they’re not gonna need us Michael.

Bushy 15:05
And that’s a great outcome as far as we’re concerned.

Bushy 15:08
So the podcast, the books and the their live sessions do that.

Bushy 15:11
Then once we start working with people in those three distinct exercise, the the strategy piece is absolutely key.

Bushy 15:17
That is the road map that sets out the scene.

Bushy 15:19
It gives people real confidence around what they’re doing where they want to get to.

Bushy 15:23
So we, we take a slightly different approach and we start with how do you want to live?

Bushy 15:28
How much does that lifestyle cost?

Bushy 15:29
How long before you want to be in that position?

Bushy 15:32
And then we can calculate pretty quickly, what sort of a nest egg that you need to create?

Bushy 15:35
And then we overlay that with what their capacity is.

Bushy15:38
So the finance broking team steps in and looks at what deposits have they got and equity can contribute.

Bushy 15:45
What’s their borrowing capacity?

Bushy 15:47
And as you would know, there’s an amazing difference in borrowing capacity across the lenders about a 55% variation.

Bushy 15:53
So getting the right lender is really key to that piece.

Bushy 15:56
And then in association with that, we do a thing that we call the bare fact.

Bushy 16:01
So how much can you borrow?

Bushy 16:02
How much equity you have?

Bushy 16:03
How affordable is the property?

Bushy 16:05
So again, we’ve got some software that enables us to look at how much per week a property will actually cost you when every cost in buying and holding the property including tax benefits that can be weaved in gets down to how much is that gonna cost in you?

Bushy 16:18
1235, 10, 15 beyond.

Bushy 16:21
So you’ve got real confidence around how this thing’s going to perform.

Bushy 16:24
And can you actually afford to hang on to the property long enough to enjoy the benefits of it?

Bushy 16:28
So that piece is important.

Bushy 16:29
And then the final piece, as I say, we become the investors orchestra leader, we’ll help them write their life symphony and structure that in the strategy piece.

Bushy 16:37
And then we’ll introduce with their existing players, got an existing accountant or I suggest independent accountants that we know perform really well and buyers agents and property managers and building inspectors and quantity surveyors and the, the whole bird.

Bushy 16:53
But the important piece there is vetting what they do to make sure that it’s actually what they’re suggesting is actually in the best interests of the investor.

Bushy 17:01
So that’s a bit of a unique positioning which has grown out of the fact to be honest, but we’ve seen some pretty average performance from some buyers agents in particular who talk a good story, Michael.

Bushy 17:12
But the properties they put up don’t tick the boxes.

Bushy 17:15
So we are pretty fussy around that.

Bushy 17:17
If we weren’t prepared to invest in a property ourselves, we don’t suggest our clients do, but they pay us a fee to act on their behalf to make sure that their whole team is doing the right thing.

Michael 17:27
Yeah.

Michael 17:27
And I guess for someone that’s looking to get into investment properties as a means of, I guess that passive income, what you’ve described is effectively almost everything that they need to know.

Michael 17:35
And there are factors that you’re gonna be able to guide them through which I guess gets magnified when we’re talking about first home buyers, which obviously we do with the home run.

Michael 17:43
So if we put this into context, a lot of our listeners are looking to buy their first home, maybe to be an own occupier.

Michael 17:50
But there are also lots of people that are looking at that want to buy their first home as an investment.

Michael 17:53
So to start off with, can you explain what an investment property is for somebody that’s just contemplating this thought for the very first time?

Bushy 18:00
Yeah.

Bushy 18:01
Well, if you come back to those three pillars that we’ve been talking about an investment property is a property that’s gonna give you a residual income.

Bushy 18:09
Number one, it’s going to increase in value and you can sell it at some point in time for a profit.

Bushy 18:14
They are the three essential pieces an owner occupier property ticks two of those boxes.

Bushy 18:19
If you bought right property, it’s gonna increase in value and you can sell it at a later point in time, but it’s not giving you an income.

Bushy 18:25
And in fact, it’s gonna cost you money and depending on what you buy and how you buy it, it can potentially cost you a lot of money to hang on to and then becomes a bit of a, a golden handcuffs to prevent you from investing because you’ve used up all your horsepower and the Taj Mahal from the day one.

Michael 18:40
And I think something that resonates there is what you mentioned before is you’ve always got to buy as if you are purchasing an investment property, even if you are buying an owner occupier.

Michael 18:47
And I would imagine that’s because when you’re buying as an investment property, you are thinking strategically and not emotionally perhaps.

Michael 18:53
And it’s that emotional side that comes into the owner-occupier purchase, which may push you to that limit or beyond that limit, which may make the next step a little bit harder if that’s the path you, you wanna go down.

Michael 19:07
Thanks for listening to part one of our two-part series.

Michael 19:10
Join us next time for the conclusion.

Michael 19:14
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Michael 19:18
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Michael 19:21
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Michael 19:27
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Michael 19:29
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Michael 19:35
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Michael 19:38
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Michael 19:43
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Michael 19:46
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Michael 19:49
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Michael 19:52
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