Timestamps:
00:37 | Not the Right Fit
05:53 | He Built Them Up to Knock Them Down
09:56 | Ciao
11:50 | NDIS Properties
15:18 | Match Your Goals to Your Timeframe
16:44 | All About High Cash Flow
21:04 | Intergenerational Wealth as the Goal
25:40 | Courses, of Course

Resources and Links:

[00:20:13] I'm really excited because of what we've developed in One Contract Property in literally changing generational wealth for everybody across Australia, so they can now choose some really high-quality cash flow properties inside the superannuation.

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

I’m Tyrone Shum and in this episode we’re back with Raymond Hempstead, the managing director of One Contract Property. After an accident that ended his 16 years in accounting, he put mind over matter and tried on a few careers for size until he found the one for him. Now his golden goose, he and his family are set to be eating golden eggs for generations to come.

**START BACKGROUND MUSIC**. 

Tyrone Shum:   

After putting in the hard yards to recover from his accident and trying out some new career prospects, he tried his hand at shopfitting— for a limited time only. The role was commission only rather than salary or even receiving an hourly pay rate. Despite his employer being an amazing tradesman, the working relationship just wasn’t meant to be.

Raymond Hempstead:    

[00:00:37] I ended up employing a range of people on behalf of the shopfitting business, and then I suppose subbing them back to the shopfitting business. 

 

[00:00:48] And then we had a disagreement on pay, because I was on commission only. And as I was growing, there was a situation where we had a disagreement. He didn't honour his commitment in one of those. And then I said, 'Okay, that's the first and last time.' And I ended up walking away. And over the next six or eight months, that business slowly went down. 

  

[00:01:13] And during that period of time, I also started working with another company with another business partner, he ended up being in demolition. So yes, I was working to sell the shops. And then another business that I started working with and then [I] ended up owning 50% of—we were then demolishing the shops in the retail setting. So we, Jamil [and I]—Jamil was my business partner there—, we ended up buying the shopfitting business off the previous owner… 

  

[00:01:53] And then moving ahead with that side of it.

Tyrone Shum   

With his time in shopfitting, Hempstead has experience in both residential and retail spaces. Shopfitting is often a costly exercise, but on the flip side, it’s also a much quicker process than with a residential renovation. 

Raymond Hempstead:   

[00:02:30] When you're looking at $200,000 to $600,000 for a shop fit out, and if you're looking at comparing that to a house, and it's a six month process for a house and getting tradies on site and off site and all the rest of it— similar sort of tradies coming into site. Like, you've got the floor, you've got the walls, your ceiling, little services, everything else. 

  

[00:02:50] But I suppose the big difference there was, one, you're paying a lot more. Because when you have the one trade in, your project management team has to know that once the electrical electricians are roughed in, the plasterers are coming in on this day, literally the next step... like, you don't have a huge window. 

  

[00:03:10] So you're paying premiums to get the tradies there on site at the time you want them. Because with Westfield, you have got a limited window of build time. And after that, you'll start paying rent. 

  

[00:03:24] And also you have a limited window of when you can work. That was very interesting seeing how it all comes together in the project management, the building process when you're on site, seeing the construction come through, [it’s] very much similar to a house, but you're inside a shopping centre rather than outside.

   

[00:03:59] See, people always say like, 'We're spending $500,000 for the fit out. We've just spent $500,000 building a house.' Where’s the comparison?

  

[00:04:15] That house took six to eight months, and this shop took four weeks to actually get all the trades in. It is an eye opener when you play in that space.

Tyrone Shum:    

He was then hit hard with some well-known businesses that went down, which signalled the beginning of the end of that portion of his professional life.

Raymond Hempstead:   

[00:04:48] We had Dick Smith as one of our major clients, and then Woolies decided to close that down, so we lost that big client. And then we had some other people that owed us a lot of money, and so, in the end, both Jamil and myself, we ended up losing everything about 15 [or] 16 years ago.

  

[00:05:08] Again, we started back from zero. 

  

[00:05:17] You lick your wounds, and what are you going to do from there?

Tyrone Shum:   

Where he went from there was demolition, as it was an area where he could make money fairly quickly.

Raymond Hempstead:   

[00:05:53] But this time... Previously, I was doing cost of motion studies. And I was doing the sales and the accounting and that side of it. This time was actually me going out and selling it. Because it was like, again, I had to make money. So what I would do? And back then, we had access to be able to do airport works—of being able to build and demolishing the airports, landside, and airside.

  

[00:06:26] I can make some good money in demolition—in retail demolition. So I went out and sold during the day. And then I strapped on the tool belt at night. And [I] then started with a team of boys doing demolition of retail shops at night. 

  

[00:06:41] So for the next five years, I was selling during the day, then I was rocking up on-site at six o'clock at night with the trucks and tools. And we'd do demolition until two or three o'clock in the morning. And then we rinsed and repeated that for seven days a week for the next five years. 

Tyrone Shum:   

[00:06:58] How did you have time to take even a break and sleep then? And family?

Raymond Hempstead:   

[00:07:10] I'd gone back to zero again, and my commitment was always to look after my family. At that stage I had three kids in private schools. Again, my wife's a full-time mum. Now, during this period of time, even though she's always been a full-time mum, she's been in and out of the businesses helping us over the years as well as where she could. 

  

[00:07:31] So when the kids were at school, she'd come in and do a bit of work with us. And so that's always been a blessing. So during that period of time, I didn't see the family very much. 

Tyrone Shum:   

[00:07:42] I cannot imagine... 2 a.m. in the morning? You get your sleep, and you're back out again.

Raymond Hempstead:   

[00:07:48] It comes back [to], like: What's your goal? What's your dream? Why are you doing [this]? Why are you investing? Like, why are you looking to invest? 

  

[00:07:56] And for me, my family has always been the major motivator. Yeah, I like nice cars and nice things. But it's my family and supporting my family and seeing my family grow and giving them the best opportunities. And so that's always been—whether it's investing in property or business—it's always been… my family's been the motivator. 

 

[00:08:18] So when I was working 18- [or] 22-hour days. For a long time, it was like you'd get to... [It might be] midnight, and you're sitting on a jackhammer, jackhammering a concrete floor up, and it's like, 'Why the hell am I doing this?' And I was like, 'No, no. I'm doing it because of X, Y and Z'. 

  

[00:08:39] And so because of the goals and dreams that I had, that actually pushed me through and pulled me through some of the really, really hard times physically and mentally that I went through.

  

[00:09:17] You really have to understand why [you] are doing what you're doing.

  

[00:09:21] There was a saying I heard years ago: 'If the dream’s big enough, the facts don't count'. 

  

[00:09:34] Like, you just get out and do what you [have] got to do. 

Tyrone Shum:   

You might think he’d have taken a break at that point, but Hempstead pushed on— all the way to Italy.

Raymond Hempstead:   

[00:09:56] We actually kept on going. I ended up having some project managers on site, and so I wasn't on-site at night as much anymore after that. 

  

[00:10:07] It is a hard slog. My phone was always on. Like, I went to Italy with the family during that period of time for holiday. And again, my phone was on, I had a team here in Australia working. And I remember how we were walking through the Colosseum, and my phone went off. And it was my... I looked at it. It was my site manager back here in Australia. 

  

[00:10:31] And so I took the call, because it was in the middle of the night here. And I missed half of the tour of the Colosseum because of focusing on that side of the business. 

 

[00:10:45] So yeah, there was some challenges, some good times, but then it came to a point where it was tiring [and] I had to look at something else. But I continued doing it at that pace anymore. And that's where it made the decision. 'Okay, I'll go back and get my real estate license'.

  

[00:11:00] I went back and got that. And I started into property aggregation, because I've always loved real estate. I saw the potential in it and the ability to make money in real estate. My wife laughed at me because she said like, 'Raymond...', like, ‘[you should have done this] years ago!’

  

[00:11:30] Then I got back into actually providing land and house packages for accountants and financial planners, and for marketers that were selling it to end investors in that side. So getting back into it that stage.

Tyrone Shum:   

[00:11:43] And when was that time period? Like, which year did you jump back into real estate?

Raymond Hempstead:   

[00:11:47] That was about six years ago. 

Tyrone Shum:  

[00:11:50] And since then, that's been what you've been doing for the last six years?

Raymond Hempstead:   

[00:11:54] We did that up until about three years ago. We've still got that business going. But it's more in the back burner now.

  

[00:12:03] What we had happen about three years ago, we've sold some NDIS properties. Now, I love it. One of the businesses I had in the past was dealing with kids that have been taken away from their parents because of abuse and neglect. And then we started getting into disability services. 

  

[00:12:22] So when I was involved, when I saw the NDIS, and how it was being done— and I am very selective on how I do this, by the way, because there are some opportunities out there with NDIS and they've been incorrectly promoted— but we had a couple of clients [who] purchased two NDIS properties, and the landlords are registered. And this is [at the] start of January 2020. They came to me and said, 'We want to put this into our self-managed super fund'. 

 

[00:12:54] And I looked at it. [I asked them], 'Have you got your self-managed super fund set up?' They hadn't. So, for those two deals, I lost those two deals, which financially hurt me a bit. But what it did do [was] it highlighted to me the ability or the lack of ability and lack of choice people had if they wanted to build property inside their super fund. 

  

[00:13:18] From my accounting background, it was... a lot of people do this correct[ly]; some people don't. It's like: It's not how much money you earn; it's how much money you keep.

  

[00:13:29] And that comes back to using our tax laws and the structuring of companies, family trusts, et cetera, in how you buy properties, which is really important. And you need to get around some good professionals that can guide you along that path to make sure your tax treatment of those is the best it can be. So you need to do that before you purchase. 

  

[00:13:52] Looking at the superannuation— superannuation, tax-wise, is the best. Like, it's 15%. 

  

[00:14:01] So, in looking at that, if I want to invest using my super, I did not have the same ability of choice as what I could do outside of super. And at that point in time, that highlighted to me, and that then started me down the path of what we do now every day.

Coming up after the break, he delves into super and why it may just be wishful thinking…

Raymond Hempstead:   

[00:16:02] The way we've been sold super at the moment is, 'Okay, put your 10.5% in your industry super fund, and, in the next 30 or 40 years, it'll increase'.

How generational wealth is an actual possibility and more than just a catch phrase…

Raymond Hempstead:   

[00:21:38] Generational[ly], now we're actually changing the mentality.

He explains what a ‘karma investment’ is and how you could help to improve peoples’ lives and your own finances at the same time.

Raymond Hempstead:   

[00:29:35] It will make you [a] good return if it's done correctly.

And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

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Tyrone Shum:   

Hempstead has a big bias for property and a keen interest in super. He focuses on three distinct approaches, each with their own distinct set of goals.

[00:15:18] For short and medium, it's building your wealth but it's stuff that you can… it's income that you can use before you retire. The long-term is how you're going to support yourself in retirement, and that's where superannuation comes in. Now, we've been sold the idea that superannuation is going to look after you long-term. 

  

[00:15:39] Now, whenever I've done property, and whenever I've done business, I say, 'Here I am now. This is where I want to end up'. And I have a goal. And it's a solid goal. If I want to build a house, I'll find a block of land or find a builder, I come up with the design. I know the structure. I know the steps that go through to actually get to a million-dollar property. I know who to finance with, the whole lot. 

[00:16:02] The way we've been sold super at the moment is, 'Okay, put your 10.5% in your industry super fund, and, in the next 30 or 40 years, it'll increase'. For me, that's not a set plan. That's a hope and a wish. 

  

[00:16:20] But in property, if you can build the right type of property inside your super fund— which you can now— you can say, 'Hey, I've got $300,000 with myself and my wife in our super. We can set up a self-managed super fund. And we can turn that $300,000 [or] $380,000, whatever it is, into a property asset today that's high cash flow and positively geared'. 

Raymond Hempstead:  

[00:16:44] So already... like, one of my staff, her and her husband took $395,000 in their super, they purchased a $1.1 million high cash flow property. And that'll be finished [and reach] completion towards the end of this year. So now, if they do nothing else, their plan is they'll have a $1.1 million property that's been paid off by the tenants inside their super fund, paying 15%. 

  

[00:17:15] If nothing goes up, they'll have a million-dollar asset in their super fund paid off, returning them about $100,000 a year rental income—because it’s a high cash flow property. And so now, they actually got a plan—a solid plan in property in how to retire. 

Tyrone Shum:   

The name One Contract Property comes from how they provide one single contract over a property, making it convenient and easy for their clients. However, the list of benefits doesn’t end there!

Raymond Hempstead:   

[00:17:53] [In] One Contract Property, we allow you to now build any property you like, anything that you and your advisors believe is the best thing for you, and you can go to any of the builders around Australia— Simons, GJ Gardner, Rawson, Celebration, all any other smaller builders, right, you can choose them. 

 

[00:18:13] Now, because they're land-and-house packages... So you buy the block of land and you purchase the house under another contract, that process in itself is illegal; you can't do that in super. What our company does: We take those two contracts and we settle on the land. And we settle with the builder and we pay the builder all their progress payments. So from their side, it stays a two-part contract. And that's why any builder will love it. 

 

[00:18:37] At the same time, we issue a single-part contract to your self-managed super fund, and you end up owning the completed property as a completed property.

  

[00:18:50] It opens up that whole market.

Tyrone Shum:    

Hempstead liquidated everything when he formed the business, and funds 65% of every single property that comes through. While all is well and good now, there was one asset he let go of that didn’t go over well!

Raymond Hempstead:   

[00:19:36] Now we're doing a couple of hundred different properties around Australia in the business already. And so, I literally got out of everything that I had. I even sold my wife's 200 series Sahara. She isn't happy about that. No, Adele, she has been really supportive on everything we've done.

  

[00:19:56] And so, yes, all of our money's in property. But it's inside One Contract Property, and so I've literally put skin in the game, supporting what we're doing. And I suppose my goal in what we're doing is... I'm really excited because of what we've developed in One Contract Property in literally changing generational wealth for everybody across Australia, so they can now choose some really high-quality cash flow properties inside the superannuation. 

  

[00:20:28] They get paid off [and] put additional money into their super. And when they get to retirement, they're actually living off property. And so they're not living off the government pension. If they do it right... 

  

[00:20:40] Like Suzy, she's on a fairly solid investment plan with her financial advisors. But she'll end up with, like, $700,000 inside her super fund, as an income coming in each year, because of... Like, she'll have seven properties, high cash flow. And she's built all of them inside of super. 

  

[00:21:00] Because you can now have that choice.

Tyrone Shum:   

[00:21:04] I mean, like you think to yourself, you're getting $700,000 saved per annum from income, [so] you're pretty much set for the rest of your life. And you can pass it on to your kids.

Raymond Hempstead:   

[00:21:14] And see, that's the intergenerational wealth I'm talking about. Because you can have a great retirement and a great lifestyle in retirement and not be eating away at the capital. You live it, you pass away, you die. And then the assets are still there, fully paid off, and you can pass those on to your kids or your grandkids. It'll probably be your grandkids at that stage. 

  

[00:21:38] Generational[ly], now we're actually changing the mentality. And even people that are full-time renters who've never owned anything, but they've got good jobs and they've got good super fund balances, they can now become property investors through their super. Because they can use that super, and they can now build a high cash flow property and have that being paid off by the tenants. 

  

[00:22:04] So when they get to retirement, they've actually got property in there giving them a lifestyle income, week in, week out. 

  

[00:22:12] It opens up that whole market to everybody. 

Tyrone Shum:   

No two people’s situations or finances are the same, so it’s important to speak to your financial planner or accountant to make sure the journey you’re on is the right one for you.

Raymond Hempstead:   

[00:22:52] If you've got capital growth, you can then draw down the equity, and then reinvest into another property. Inside super, you can't do that. And this is why you need to talk to a good accountant, a good financial planner. And we'll have a quick word on that. 

  

[00:23:07] So your structure is correct. You know where you're hitting. You know you [have] got your end goals. But they're using the money that's coming in to be able to set yourself up. So if you want to, you can buy your next second, third, and fourth property with your super. That's all done through a self-managed super fund. 

  

[00:23:23] So you set that up. You literally take the money out of the industry super fund, put it into a self-managed super fund. And now you control where that money goes and what you invest that money into. 

  

[00:23:36] You do need to have some good quality professionals around you. And I suppose have a caveat here. People talk about getting financial advice. I'm saying 80% of financial advisors, if you go to talk to them, cannot legally talk to you about property. 

  

[00:23:56] So you need to understand their biases and how they get paid. So when you go to get financial advice, ask the questions. One: Are you into property? Can you advise on property? 

[00:24:08] If they can't, then you've got a decision whether you continue down the path getting advice from that person, or you go and find someone that can advise you about property and shares, insurances, and they can advise you correctly, in my opinion. 

  

[00:24:19] And this is an opinion. But if you're getting advice, you need to be getting advice from people that have trod the path that you're looking to tread and that [will] legally guide you in that path.

Tyrone Shum:   

Hempstead began his professional life with an exceptional pair of mentors by his side. Over the past six years, he also found some mentors in the form of courses and an international acquaintance.

Raymond Hempstead:  

[00:25:40] Option courses, negative gearing courses, property courses, with a range of different people. I've always had business mentors during the process. And my biggest one, I suppose, when I started One Contract Property, I reached out to a guy called Grant Cardone. He's an American. 

  

[00:26:00] He's unique. But he knows what he's talking about in property. 

  

[00:26:06] So I got a lot of guidance from him. I actually met him. I paid to mentor with him as well. But yeah, that was probably the biggest influence in my life over the last few years on that side.

  

[00:26:42] He talks about cash flow, and making sure of the property's cash flow. And he's into multi-family, like apartments and that sort of stuff, but looking at properties that cash flow positively. So whether they're a duplex, a dual key, a rooming house, or a co-living property, NDIS property—those sorts of properties that are high cash flow—and whether there's one tenant, two tenants, three tenants, and looking at that structure of it.

Tyrone Shum:   

When it comes to the NDIS, he describes it as a ‘unique beast’ where it’s crucial to approach it as though you’re the NDIS participant.

Raymond Hempstead:   

[00:27:56] If people are promoting 15% returns in NDIS they're lying to you.

  

[00:28:10] Now, this might sound nasty— the asset isn't the house; the asset is the individual participants that you're looking to put in the house, because they're the ones that have got the cash attached to them from the government. 

 

[00:28:19] So if you provide an asset, as in the house, that provides the best quality of accommodation for that participant, now you've got a long term asset. Where a lot of people that are out there marketing NDIS are marketing four-bedroom HPS, 'High Physical Support' property, telling you [you’ll] make all this money. But you're never going to get four HPS participants in their house, because it's not the right thing for the participants. 

 

[00:28:48] So in that case, you've got to look at it from the participant’s eyes and what they need, provide that requirement, and then you've got a long-term tenant, and, therefore, you've got security in that asset.

 

[00:29:31] I call it a karma investment, because the NDIS property can... It will make you [a] good return if it's done correctly. But on the other side, you're actually changing one or two people's lives. Like, they would never have that opportunity if you don't invest. And it's done correctly. 

  

[00:29:50] So yes, you make some amazing returns as an investor, but you also actually touch people's lives and you change people's lives you'll probably never even see. But you've given them the quality of life that they're not having right now.

Tyrone Shum:     

[00:30:10] If, say, for example, we take a step back and met yourself, say, 10 years ago, and you had a chance to say, you know, 'Hey, Raymond, how you doing?', what would you have said to him?

Raymond Hempstead:   

[00:30:33] Listen more to advisors. And don't be so pigheaded.

Tyrone Shum:   

[00:30:38] You didn't sound like that, though, to be honest. We had a very in-depth conversation, and I feel as though you surround yourself with great people.

Raymond Hempstead:   

[00:30:47] I did. But... and that's been a progress and education over that period of time. And I was fairly headstrong. I had been fairly headstrong most of my life. But yeah, surround yourself with better quality people.

Tyrone Shum:   

[00:31:14] What do you see yourself most excited about, say, in the next five years for yourself and the business and the family?

Raymond Hempstead:   

[00:31:22] Business and the family— like, I'm really excited about what we're doing at One Contract Property and how we're changing generational wealth in that side of it, [and] how my team’s growing, I'm really... like, I love being in business. 

  

[00:31:35] I love being in business to be able to change people's lives. I want to get into, with some of my stuff, I want to get into some property development, as in land subdivisions, and building some of my own rooming houses and own some of the social housing on that side of it. So in the next five years, we'll push down from a private side just on that and develop that, but while we'll still continue to grow the One Contract Property side of things.

Tyrone Shum:     

[00:32:20] How much of that, do you think, of that success that you've achieved now has been due to intelligence, your hard work and your skill? And how much of it do you think has been due to luck?

Raymond Hempstead:   

[00:32:33] If you think about luck and being hit by a motorbike, I don't know if that's lucky or not. But it's like, what's good luck and what's bad luck? It's depending on how you look at it at the point in time. Like, my motorbike accident could have been seen as bad luck. But if I hadn't have done that, I wouldn't be sitting here today with you, having a great business and building amazing properties around Australia. 

  

[00:32:57] But then, if I hadn't had the goals set for myself, I wouldn't have had my eyes open enough to be able to see the opportunities that [had] come across from me. Like, I use this example: Like, if you've ever gone out and looked for a car... I know my wife, when we started looking for Land Cruisers 17 years ago, I'd never seen them. And then we said, 'Okay'. I flew down to Adelaide. I saw one. Yep. Okay, I purchased it. Literally the next day, there were hundreds of Saharas around. 

  

[00:33:29] It was because my eyes had been open to a goal. They were always around. And so we get so focused on our day-to-day lives, because we don't open up our eyes and look for different opportunities, we miss them. So is that luck? I just think we don't set a big enough vision for ourself.

Thank you to Raymond Hempstead, our guest on this episode of Property Investory.