Property Investory
The Two Young Podcountants With Wisdom Beyond Their Years
April 20, 2022
While there may be many drunk accountants out there, these two are the only ones to wear the title so loud and proud they made it their (second) name. Dan Osborne and Tim Garth are directors at CATS Accountants on NSW’s Central Coast, a role Garth was born to play— just ask his dad (or ask what his initials spell if you read them backwards). He and CATS Accountants co-director Osborne host the podcast Two Drunk Accountants when they’re not accounting (sober, just to clarify), but this time it’s their turn in the limelight.
In this episode the self-proclaimed podcountants attempt to play good cop bad cop for a moment, but their inherent good cop nature shines through soon enough. The Director of Fun and Lifestyle Accountant share how they grew up together but also not at all, and how they ended up going from the pub to the podcast studio via purchasing an accountancy firm together. With their focus on small business and sticking to their roots, it’s safe to say CATS Accounting will continue to be a well-known name on the Coast for decades to come.

Timestamps:
00:05 | Introducing: Podcountants!
04:27 | Same Same, But Different
07:41 | No Boredom, Just Beer
10:05 | Creative Accounting
12:47 | Accounting, But Make It Lifestyle
18:02 | I’m Gonna Be King
22:48 | One Teacher’s Pet, and One… Not So Much
26:03 | Dr. Dan, or The Dark Side?

|

00:06 | Suddenly: Wild Equity Appears. It’s Very Effective!
02:48 | Calming Commercial Qualms
09:34 | Dangerous Avenues
11:56 | We Need Wage Growth, Now
16:40 | Keep Your Eyes Open
19:45 | Hold Up
24:14 | Paving New Paths
28:47 | From Little Seeds

Resources and Links:

Transcript:
Dan Osborne:
[00:15:46] And very quickly, once I was here, it was sort of made clear to me after a few years that that opportunity does exist. And that one day, Tim and I would be sitting here as we do right now, and we'd own this business and try [to] have that lifestyle, lifestyle work balance that we're trying to get. 

**INTRO MUSIC** 

Tyrone Shum:
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 speaking with Dan Osborne and Tim Garth, who are either CATS Accountants or Two Drunk Accountants, depending on the time of day. So much like their accounting work, their daily workings are quite varied, but they ended up working together in very similar surroundings— and inventing a brand-new occupation along the way.

**END INTRO MUSIC**

**START BACKGROUND MUSIC**

Introducing: Podcountants!

Tyrone Shum:   
The duo behind CATS Accounting wear many hats in their day to day work, and are seasoned podcasters too. Osborne and Garth initially went to school together, however they didn’t travel in the same circles until one fateful night the stars aligned— at the pub. While they’re certainly not always drunk, you can always count on them to be entertaining!

Dan Osborne:   
[00:00:05] Hi, my name is Dan.

Tim Garth:   
[00:00:07] I'm Tim, and we are here for... 

Both:   
[00:00:10] Property Investory!

Dan Osborne:   
[00:00:42] My name is Dan Osborne. I'm a director here at CATS Accountants, but also co-host of the Two Drunk Accountants podcast. We'd like to shorten that to be a podcountant. And so that's my role at the moment.

Tim Garth:   
[00:00:58] My name is Tim Garth. I am also a director and co-host of the Two Drunk Accountants podcast. We did create that, podountant! I'm not sure if anyone else uses that on their LinkedIn CV or anywhere else. It may mean nothing to other people. But it means a lot to us.

Dan Osborne:   
[00:01:14] It brings a smile to my face every time I say it or read it.

Tyrone Shum:   
[00:01:21] I love it. You guys are so much fun just already. We haven't even started the podcast! We're already kicking off with great energy here. Maybe we're all drunk at this point in time.

Tim Garth:   
[00:01:32] Yeah. We're drunk on podcasting. I mean, that's what it is.

Tyrone Shum:   
Although they’re both directors at their firm, CATS Accountants, the pair play different roles in their day to day duties. Based on the NSW Central Coast, they mainly focus on taxation for small businesses, but always leave room for fun on top of hard work.

Dan Osborne:   
[00:02:18] We do a lot of advisory work, business planning, what traditionally you may have called coaching. But being accountants, it's slightly different to what you might have experienced with a business coach in the past. 
 
[00:02:32] But then also all the compliance side. So tax returns, end of year financials and tax, bazzes, setting up entities, structuring advice... basically, you know, everything. Start at the foundations and work your way to the top. We do it all. We also do a smattering of individual tax work. 
  
[00:02:54] In the past, my role has been very much focused on compliance. I've been here for 12 years this year. And for a long time, we were very compliance focused, and that was my job, working with businesses and individuals on their end of year tax work. 
 
[00:03:12] But over time, my role has evolved. I'm co-owner and director of the business now. I manage the team, and a lot of the work I do is around that advisory sort of work with small businesses and helping them grow and achieve whatever it is their goals might be. Which sometimes includes making plans to ensure there's enough money for investment.

Tim Garth:   
[00:03:36] We also do a smattering of self managed superfunds as well, which is one thing you're missing there. So there's a bit of property-related clients there.

Tyrone Shum:   
[00:03:47] Fantastic. And Tim, for yourself, what do you mainly focus on in the business?

Tim Garth:   
[00:03:51] I like to bring the fun vibes. And a relaxed attitude.

Dan Osborne:   
[00:03:58] Tim's Director of Fun.

Tim Garth:   
[00:04:00] We do a bit of good cop bad cop here. Dan is definitely the bad director, I'm the good director. No, no! Actually, if anything, I think we're a good team. We generally reach similar outcomes. So we're both nerds and love maths. It's not why we got into accounting—

Dan Osborne:   
[00:04:24] It's why I got into accounting! Speak for yourself, Tim. 

Same Same, But Different

Tim Garth:   
[00:04:27] Mathematicians will tell you the most important thing is your workings. So actually, Dan, and I will come up with very different workings. But we'll find similar results. And we found this early in our career in accounting. We'd be talking about a different problem that a client is having, and actually giving each other the same answer. 
 
[00:04:48] And then we'd go, 'Actually, hold on a second. We're saying the same thing here! We came to it in a different way'. And I think in business that's been really valuable. We do similar things. Actually, we do the same thing. But we may just approach it a different way or look.

Tyrone Shum:   
The name CATS Accountants typically brings to mind either the AFL team or the feline, but the origin of the business name is much more technical than you might expect. True to their personalities, Osborne and Garth have kept the name but added their own spin to it.

Tim Garth:   
[00:05:42] CATS Accountants is a family business. It was my parents that opened it up back in the '90s. And in the '90s, computer accounting was a bit of a buzzword. So actually, CATS stands for Computer Accounting Taxation Services. 
 
[00:06:02] They were using this really whiz bang software called MYOB. And that was designed to help people deal with this new tax called GST, which came out in the early 2000s. So a lot of the origins of the name were in that. It was just a bit of a mouthful. So we now just refer to it as CATS Accountants, and that's been like that for decades. 
 
[00:06:28] We like that it's different. It's not someone's name. And often people think either we're a massive Geelong Cats fan, or we love the feline. And you know, those things... well, we're not Geelong Cats fans. But cats are cool.

Dan Osborne:   
[00:06:44] What do you say, Tim?

Tim Garth:   
[00:06:47] I like to say— this is when I'm with someone that I'm having a bit of fun with— I'll say, 'Well, we like to refer to ourselves as CATS Accountants, because all of the other accountants are dogs'. 
  
[00:07:00] But that's a joke. I do like other accountants, they're great. So the name is kind of outdated now. We've toyed around with calling it Cloud Accounting and Taxation Services.

Dan Osborne:   
[00:07:11] It's just CATS. There's no real acronym anymore. It's just cats. It's just a funny name that is memorable.

Tim Garth:   
[00:07:18] It just sort of stands out. And the thing I like about it is it's not tied to our surnames. And I think people should always be building a business that's going to outlive them. That's something that my parents did really well.

Dan Osborne:   
[00:07:31] Yeah, absolutely.

No Boredom, Just Beer

Tyrone Shum:   
As for the name of their podcast, Two Drunk Accountants… Well, your first guess for that one’s probably correct. While their podcast definitely brings the fun vibes, they also ensure it provides the information they needed as a small business themselves.

Dan Osborne:   
[00:07:41] We'd been wanting to start a podcast for a while. We've been doing the podcast [for] three [or] four years now, for a long time. And for years before that, we were both really into podcasts. We listened to a lot of it. And there just wasn't that great free information for small businesses. 

[00:08:00] And we just sat there thinking, like, 'We get asked the same questions by our clients every day. We answer them every day. There's the need for this out there. We think we're pretty funny and entertaining. So let's combine those two things and just see how we go'. 
 
[00:08:15] So we sat there for a while trying to think about it and we kept procrastinating. 'We need a name, we need a theme. What are we going to do?' And one night we were sitting there having a few drinks and I don't even remember which one of us said it. And we just sort of came up with, 'Well, we're two drunk accountants. Let's call it the Two Drunk Accountants'. 
 
[00:08:40] A lot of small business podcasts can be quite boring. Or on the other hand, they tell you how to make a billion dollars in your first year and that's also not realistic or helpful. So we wanted to initially give people the impression that this is going to be something that they can listen to and digest and be useful and a bit of fun while they're doing it. Four years later, the name stuck.

Tim Garth:   
[00:09:03] We don't drink with every podcast—

Dan Osborne:   
[00:09:04] That's a lie!

Tim Garth:   
[00:09:06] We did in the early days, because we needed to loosen up a little bit. But now, like we said in the beginning, we just get drunk on podcasting. We're podcountants, so it's our alter ego.

Tyrone Shum:   
[00:09:22] I love it. I mean, honestly, no one knows, you know, in terms of getting drunk. It doesn't have to be alcohol. It could be you know tea or could be anything else you guys could be holding in that cup there.

Dan Osborne:  
[00:09:34] A bit of caffeine.

Tim Garth:   
[00:09:38] If you've only slept a few hours last night then you have a coffee, you do feel a little bit drunk. So it's not lying!

Creative Accounting

Tyrone Shum:   
Osborne and Garth dive into their backgrounds, which followed different paths along the same roads— literally— before converging as young adults.

Dan Osborne:   
[00:10:05] I was born here on the Central Coast and grew up here on the Central Coast, in various parts. Typical childhood, just went to school, had friends, hung out, went to the beach on the weekends. That was many years of my life, just doing that. 
 
[00:10:25] Tim and I actually went to the same high school together. It's how we first met. The senior campus. I went to a school that was [years] seven to 10. And Tim went to the other side of that school that was years seven to 10 and they both feed into the senior campus. So we met in senior high school. 
 
[00:10:43] But yeah, typical childhood, nothing really out of the blue here on the Central Coast. I spent a year in the US actually, when I was, like, 10. My family moved over there for some work things. And I spent a little bit of time skiing and learning to ice skate and a bit of fun there. 
 
[00:11:05] When I was a little bit older I went to uni in UNSW in Sydney. So my uni degree was spent sitting on the train and traveling to Sydney from the Central Coast and coming back and then working here a few days a week. 
 
[00:11:21] Before here, I worked in a bar. I've got a few hobbies, I was into film, I used to make a lot of short films and music videos for people and things like that, which really helped with the podcast. 

Tim Garth:   
[00:11:33] Yeah, I don't think there's many accountants that do that. 

Dan Osborne:   
[00:11:36] No, probably not. 

Tyrone Shum:   
[00:11:39] That is a very interesting mix. You know, I don't really hear [about] accountants who have that creative outlet, I guess. That's fantastic, and hence the reason why I think the podcast suits you really well, because you guys are able to talk about particularly dry subjects in something that's interesting and entertaining as well. We really need that in a different way.

Dan Osborne:   
[00:11:59] Exactly. So I think all [those] things kind of helped. And as Tim said before, we're huge nerds. I was a massive nerd. I was the top at maths at the school and all the things! But I always had that creative outlet as well. I was heavily into music in high school, I was in bands and played guitar and drums and sang in bands, did all sorts of things. Which I think has all led to this point where those two things are now combined in my life. Creativity and accounting. 

Accounting, But Make It Lifestyle

Tyrone Shum:   
Garth’s early life differed from his business partner’s in that he always knew where he would end up, however he didn’t take the path that others had laid out for him.

Tim Garth:   
[00:12:47] I grew up on the Central Coast as well. My childhood was interesting, because my parents were in a small business. So I loved the coast, I loved the local sport, the beaches. Unfortunately, growing up in the Central Coast, back in those days, people saw it as, like, a regional area. So a lot of my friends moved off to Sydney or internationally to get jobs and further their careers. 
 
[00:13:18] I always saw a massive opportunity to get into the family business. So I didn't really know what accountants did but I always wanted to do it. But much to the disgust of some of my teachers and things like that, because I always tried very hard at school. But to get into uni to do accounting, I think I only needed a UI of, like, 64 or something like that. 

Tyrone Shum:   
[00:13:41] It's changed a lot.

Dan Osborne:   
[00:13:44] I had to get a 94.

Tim Garth:   
[00:13:48] I stayed local and went to [the University of] Newcastle. Which was great, because there's an Ourimbah campus and Newcastle campus. My whole thing was just about building lifestyle. So I wanted to have my cake and eat it too. And I've been lucky to find a business partner in Dan. And that was just by chance, I guess. We were at the pub one... we tend to spend a bit of time drinking! 

Dan Osborne:   
[00:14:13] We believe in the name.

Tim Garth:   
[00:14:15] We were, like, 20 [or] 21. It was Dan's birthday. We were at the pub. And I was like, 'Dan, what are you doing these days?' He was studying accounting, which I couldn't believe because he was, like, singing in bands and recording videos and stuff like that. 
 
[00:14:30] He came and worked [with me] and very quickly I realised, 'I might have the business partner of the future here! I can go away on holidays and I can be the cool boss, and he can crack the whip!'
 
[00:14:42] It's worked out well because we can really tag team on the business and share stress and share responsibility and try and build our lifestyle in what was a regional area and is now becoming a bit more metro. 

Dan Osborne:   
[00:14:59] It's quite interesting actually, because this wasn't my family business. So growing up, I didn't have aspirations to.... I was very interested in business, but I never really had the thought in my head that I'd actually start one so soon after uni. I assumed I'd go get a job somewhere. My family has worked in the corporate world all through growing up. And so I kind of assumed— yeah, CEOs and things. And so I assumed, yeah, I'd go do that. It's easy to do, why not? 
 
[00:15:30] And then it wasn't 'til I did start going to uni in Sydney. And then I realised that it's not what I wanted. I think what I actually wanted was just to have this lifestyle that Tim's talking about. So I think we were lucky in a way that our values really lined up on that one. 
 
[00:15:46] And very quickly, once I was here, it was sort of made clear to me after a few years that that opportunity does exist. And that one day, Tim and I would be sitting here as we do right now, and we'd own this business and try [to] have that lifestyle, lifestyle work balance that we're trying to get. 
 
[00:16:05] And that's something we try to do for our clients too. We try [to] coin this term 'Lifestyle Accounting'. It's a bit wanky, like podcountants, but it's all about trying to match what your lifestyle goal is to what your business actually provides you. 
 
[00:16:21] It's similar [to] investing as well. The whole point is trying to get a level of wealth that then you can be comfortable with and have the lifestyle that you want. It's very similar. 

I’m Gonna Be King

Tyrone Shum:    
Garth’s parents were ahead of the times in that they wanted to create a positive work atmosphere for their fewer than 10 staff. They focused on giving their team opportunities and improving the systems, which Garth had always wanted and planned to continue.

Tim Garth:   
[00:18:02] I always knew I wanted to take over the business. I didn't know how that would look, or how the transaction would occur. But I knew at some point, I wanted to run it. So I always felt a big degree of ownership myself. 
 
[00:18:18] For Dan, Dad sat us down years out from when it all transpired and said, 'I'm keen for you guys to buy in. Whether that be a small percentage to begin with, or all of the business, that would be my succession plan. Just putting that out there now for you guys to think about. This is probably what it looks like in terms of dollar value. And this is my timeframe of [when] I'd be keen [for you to take over]'. 
 
[00:18:51] It probably was another two to three years after that first initial chat, which was now probably 2019, I think, July 2019. We felt like we owned the business from that point. 
  
[00:19:05] He did a very smart thing there, because we grew the business in those years before we actually bought it. And so he benefited from that, which is great. He's been generous with the vendor finance terms, so we didn't need to go to a bank. And for him, it's generating an annual income stream which is effectively tax free. So being an accountant, he figured out how to retire and structure that up tax effectively. 
 
[00:19:44] He was so smart with it, really, looking back. Because he worked himself out of a job basically. He let everyone else take over and rule the roost, and it felt great for us and fulfilling for us, but he was always there to support us if we ran into a brick wall, or if something went wrong. 

Dan Osborne:   
[00:20:03] From my point of view, starting in the business when I was 20, I think in the initial interview with your dad, he told me two things. Accounting is a people business, and you need to be people focused. And that he doesn't want to do this forever. And his plan is to retire in 10 to 15 years from that point.
 
[00:20:27] Being a 20 year old, I don't know what that meant. And then I continued with uni, while working here. Finished uni. And then it was sort of around that point, I think we'd started our CPA. Because we both studied that around the similar time, going through that, and then that where he sat us down and said, 'This is my plan, if you guys are interested'. And of course, we were interested. 
  
[00:20:58] We spent the next few years doing the requirements that needed to be done to get our public practice certificates in order, to get the business to a point that we were able to take charge. And as Tim said, from that moment onwards, we walked around with our heads held high. You know, 'We can do what we want here!' And luckily, so far, it's been a success. So a few years ago now, we officially bought the business from Warren and never looked back.

Tim Garth:   
[00:21:30] It's been a ride. I'm sure we'll continue to learn lots of things, but [it's been] a good journey. 

One Teacher’s Pet, and One… Not So Much

Tyrone Shum:   
Osborne and Garth break down how they met each other at school, but didn’t go to the same school, but also did go to the same school, all at the same time.

Dan Osborne:   
[00:22:48] It's called a college, essentially. But there's two schools that are in different areas, different suburbs, that only go year seven to 10. And they finished at year 10. And then you have to go to a separate school in another suburb that only does year 11 and 12. So they're the two feeder schools that feed into the senior school. So we went to two separate junior high schools and then met at the senior high school, which was The Entrance.

Tim Garth:   
[00:23:16] Which is funny, because it wasn't like we were best mates at school. We weren't hanging out every day all day. We shared a class, business studies, funnily enough.

Dan Osborne:  
[00:23:26] Tim was a huge nerd. The teacher loved Tim, actually, because they knew Tim was an accountant, his family was [in the] accounting business. So every lesson they just kind of looked at Tim, like, 'You'd know all about assets! You know all about the balance sheet equation, wouldn't you, Tim?' And Tim would be like, 'Yeah, of course I do!'

Tim Garth:   
[00:23:45] That teacher was also the one that was encouraging me to go and work for the Big Four, for, like, the first 10 years of my career, which I'm so glad I didn't do. He was saying 'Yeah, you've got to go to Sydney, mate, learn the ropes, and then go back and work in your family business'. It's interesting, but...

Dan Osborne:   
[00:24:01] He doubted me. 

Tim Garth:   
[00:24:10] It is interesting how we kind of just fell into a similar circle. And here we are.

Dan Osborne:   
[00:24:17] It's funny. We've got a lot of the same friends now still. I think we've been very... I've had a lot of luck in my life. And one is being in the right place at the right time for this business. And the other is I think the group around us, we've been fortunate with our friends and our family around us. 

Tim Garth:   
[00:24:36] Definitely.

Dr. Dan, or the Dark Side?

Tyrone Shum:   
Family life was quite different between the two households. While the Garths were big into small business, Osborne’s mum found herself a Jill of all trades trying her hand at all types of odd jobs, while his dad ran large international companies— but not as an accountant.

Dan Osborne:   
[00:26:03] So accounting wasn't something... you know, you ask any 16 year old kid, 'What do you want to do when you're older?' And unless your name's Tim Garth, not many of them say, 'I want to be an accountant'. 

[00:26:17] I didn't have any influence in my life to say, 'Go do accounting'. So when it came time to apply for a degree and go to uni, I was lost. I had all these creative endeavors. But also I did have an interest in business. And I had an interest in running a business. My brother and I always used to joke through our teens about owning businesses together. And we always called it Osborne Group of Companies. 
  
[00:26:45] So that was always part of my life a little bit. So I didn't know what to do. And my dad said, 'Why don't you go do a commerce degree? You'll learn the business fundamentals. And then when you’re there, you can pick your major out of those things'. And I said, 'That's a good idea'. So I did a science degree. And a commerce degree. 
 
[00:27:07] I was doing two degrees, and then very quickly dropped the science. And for some reason fell into accounting. I was like, 'I don't mind this. This is all right. I can do this, I think'. 

Tim Garth:   
[00:27:19] That's how he came to the dark side.

Dan Osborne:   
[00:27:21] And then that's where I was out at the pub with Tim and said, 'What are you doing?' I said, 'I'm doing accounting'. And he said, 'Well, I'm looking for someone to replace me in my role, because I want to progress'.

Tim Garth:   
[00:27:34] Yeah, that was the reception. Making coffees for people and answering the phone.

Dan Osborne:   
[00:27:39] He didn't actually say that. He just told me we're looking for someone. So I said, 'Oh, great! I'm working in a bar and I hate it. I'd love to go get a desk job somewhere'. And so I did. 
  
[00:27:52] I didn't really have much influence in the accounting space. But definitely in the business sort of area of my life. My dad was very much into running businesses and the strategy and all those things. And my brother always had an interest in, he now does it as well. He was running hotels and things all around the country for years, but now he's just started up his own ventures as well. So yeah, it's in the blood I think.

Tyrone Shum:   
Turning to property, Osborne sums up his experience in one word. While it’s not quite the word you or I would use, his property journey will resonate with many of the millennials out there.

Dan Osborne:   
[00:29:29] My property journey, personally, is terrible. Going through the story, then you can see our focus for that time was really building this business. And so there was definitely sacrifice on our end in that we could have gone and worked for one of these big four firms and earnt a lot of money and would have had all the money in the world to invest. 
  
[00:29:58] But instead, we decided to stay here and build what we had. And that did come with some sacrifice. My partner is a psychologist— now she is— but for the previous six years up until recently, was studying. So we didn't have a lot to invest. So our property journey was on hold up until recently. 
 
[00:30:22] And then when I saved up my deposit and went to go [to] buy, the house market jumped 30%. That was awesome. 

Tim Garth:   
[00:30:30] Especially on the Central Coast.

Dan Osborne:   
[00:30:32] On the Central Coast, it's gone crazy. So personally, my property journey, I don't have anything wrong with investing in property and buying it, it's just that it hasn't been on the cards for me for the past 10 years. It is now, but it hasn't been in the past. 
 
[00:30:47] However, the journey for me with my clients has been very different. There's a lot of clients that come to me for advice around the tax side of things, around the investment side of things. Being an accountant and not a financial planner, we can't actually tell people whether or not a property is a good investment for them. But we are allowed to talk about the tax consequences of it, structuring it, and all that. 
  
[00:31:09] So I deal with property a lot. And there's a lot of clients who own warehouses or factories or shop fronts in their business, in different entities, in their Super funds. Personally, they're in residential properties. So capital gains, tax, negative gearing, pensions— all these things I deal with quite a fair bit. So although I personally don't own a property at this particular moment in time, I've dealt with it a lot.
 
[00:32:05] We've set ourselves up. We're in a point now where things are different to what they were. So I'm keen to dive into the journey. But, Tim, what's your journey?

Tim Garth:   
[00:32:16] Well, I was just gonna say, Dan, a little bit less avo on toast, a little bit less smashed avo, maybe you'd have a property by now. But hey.

Tyrone Shum:
While Osborne and Garth are essentially carbon copies in many ways, they’re perched on different rungs of the property ladder— for now. Garth’s property journey started in 2017, which he credits to his wife and her forward-thinking and driven mindset.  Thanks to her wise ways, they’re already sitting at $300,000 equity in a scorching coastal market.

Tim Garth:   
[00:00:06] My wife, she’s a year older than me. She started her career when she was 21. And she's just so driven. And she's a saver. So she was a large part of us buying a house five years ago. 

[00:00:20] On the Central Coast I'd say, maybe seven to eight years ago, you could buy a house for, like, $200,000. And it was a pretty decent house in a good location. That doubled about, I'd say, six years ago, and then it kept going up. 
  
[00:00:38] When we bought our house, we felt like we were buying in a massive peak. Some people like potentially even like, Dan, for example, was like, 'I'm just gonna wait for it to maybe just come down a little bit, then I'm gonna buy'. Which it did do, for a couple of years! It came down maybe 10%. 
 
[00:00:54] We bought our house for $700,000 in 2017. And I'd say conservatively, it's worth over $1 million now, with no changes to it. So that then led to some interesting things for me last year, during lockdown. I was sitting in my house, wondering what I should do with myself, and started looking into investing in property myself, using the equity that I'd gained in my house. So that was interesting. 
 
[00:01:29] I didn't end up going through that. Because I came back to the fact that I've actually got a large investment, which I need to focus on right now, which is buying the business. And for me, a lot of it was around 15 to 20 year calculations on if I bought a property, say, like, an apartment in Melbourne, or a property that I could turn into a duplex in Queensland, I saw that there was a lot of good reasoning to do that. That in 15 years time, it'll help me pay down my residential loan, which is potentially in half the time that I would otherwise pay it down. 
  
[00:02:07] But then I realised I need to continue putting my time and investment into the property. And actually, that may mean I could pay down my loan in eight years instead of 15. So for me, it's been something of great interest. And we've seen some good benefit from property, just from, like, my family. Mum and Dad bought this property in Wyong that we're sitting in today, and they structured that in their Self Managed Super Fund. Which is an area that I love for clients. When they can run their business out of a commercial property that's held in the Self Managed Super Fund, I think that works beautifully.

Calming Commercial Qualms

Tyrone Shum:  
[00:02:48] Delve a little bit more into that actually, that's a very good point that you raised. And a lot of clients, investors are here do that. I know a few already that had purchased a commercial property that they own in a Self Managed Super Fund, run their business in it and collect rent from it as well. So let's delve a little bit more into that. 

Tim Garth:   
[00:03:14] I think as long as you know— again, this is coming back to your why, your purpose, and your plan— so as long as you have a good idea of what your plan is, then buying a commercial property in your super fund could be a fantastic idea. 
 
[00:03:31] Because people in business generally do end up needing space. They could be selling things, they could be selling online, so [a] warehouse, they could need a shopfront, they might need foot traffic, whatever it may be. 
 
[00:03:45] And anyone who's moved into a commercial space knows that fitting out a shop is not cheap. That is a timely and costly task. So it's a shame when, three years later, the lease ends, and they move out. Because they've either not seen eye to eye with the landlord, which we've seen a lot of over the last few years with COVID, unfortunately. Or maybe they've outgrown it, or maybe business isn't doing so well. I don't know— there's a number of reasons why they may be changing. 
 
[00:04:18] But they've just wasted that investment. Because now the owner of that property is going to inherit that fitout. Which for some businesses is several hundred thousand dollars. So without even looking at tax consequences there, there's a huge advantage to owning the property that your business works out of. Because everything you put into improving that property [remains] with you. 
  
[00:04:41] But then on the flip side of that, Self Managed Super Funds, or just Super, is concessionally taxed, so there's a huge advantage there. It's a separate entity in its own right. So it's protecting an asset and it also means that it is legally possible to charge rent at a market rate to the business. Which means you're saving tax because you're getting income out of your business into the Super Fund world, which is only taxed at 15%. 
  
[00:05:07] So that's in the life of the journey. Then it's going to help you because you've got more cash in there. So you can get deposits, which you may not otherwise have access to as a business owner. And when you retire, that is when it really comes to fruition. Because depending on the value of the property and how much other money you have in Super, that property could potentially be sold tax free. 
  
[00:05:33] So the capital gain could be completely disregarded at that point, which is pretty powerful. Or you can keep earning the rent, also tax free if you're retired. 

Dan Osborne:   
[00:05:46] I think one of the main advantages, apart from everything Tim's just said, which is huge— tax free capital gain on an investment when you go to retire is amazing— is one of the rules with the Self Managed Super Fund is you can't rent a residential property to yourself or a family member. 
  
[00:06:05] So people might be thinking, 'Oh, I should do this with my house', or, 'I should do it with an investment property and rent it to my child at a cheap rate'— you're not actually not allowed to do that. 
  
[00:06:15] But you are allowed to rent it to your business. So you can rent a commercial property to your business. So that way, that is that connection between you're putting rent in, you're not wasting the rent you're paying to someone else, it's still going to you. And you'll be able to run your business and you add in the value and then it's very tax concessional. 
  
[00:06:36] Again, it still doesn't stop it if that property is no good and goes down in value, then you're still gonna face that same problem. So it still needs to be a good investment. And it needs to work in with your broader strategy. But if you're gonna own a commercial property for your business, it's a very tax effective way to do it.

Tim Garth:   
[00:06:54] If you understand your why and your plan, it could be definitely a worthwhile thing to do. You just need to understand once it's in Super, you can't take it out until you retire. So that's the one downside. And the reality is, some of us may not live to that age, unfortunately. So there's also an element of what you need now, and what you're going to use now.

Tyrone Shum:  
While Self Managed Super Funds have their pros and cons, one of the most obvious cons is that there are barriers to access it. 

Dan Osborne:   
[00:07:52] You can't use the equity in another property, you've got to buy it. You also need a larger deposit if you're going to borrow, because Super funds actually aren't allowed to borrow money, but you do it through a way where you've got to set up a separate entity that holds the limited recourse loan. More cost to set it up and…

Tim Garth:   
[00:08:09] The administration of the Super fund each year... 

Dan Osborne:   
[00:08:11] ... It costs money to maintain all of that. So you need, usually, at least a 30% deposit. And it's going to be [an] ongoing cost to maintain it. But in saying that, if the investment ends up being a good investment, and you keep renting it from your business, then it can be quite tax effective.

Tim Garth:   
[00:08:29] And you can have six members in a Self Managed Super Fund as well. So rolling all those balances together could get you to that point where you have $300,000 to $500,000 to use to buy a property.

Dangerous Avenues

Tyrone Shum:   
Osborne and Garth have helped many investors in both residential and commercial markets. Among all the good, they’ve also witnessed worst case scenarios due to people making mistakes, and so they’ve picked up a lot of lessons along the way.

Dan Osborne:   
[00:09:34] Not going into any specific story, but [I see] some of the broad, dangerous avenues that I see people go down occasionally. The first one is when they're 100% all in on one type of investment. So, if their portfolio is just, 'I'm just going to loan money to buy this property and only keep using the equity to buy more and more property, but that's the only thing I'm doing ever'— sometimes I worry about that, because all eggs in one basket is never a great idea.

Tim Garth:   
[00:10:07] 100%.

Dan Osborne:   
[00:10:11] I do worry about that. People recently, particularly they've seen the growth in the market. And they assume that, 'Well, that's always gonna happen. We're gonna see another 20% [or] 30% this year, and then again, and then again. So I'm going to borrow so much money and do it'. 
 
[00:10:27] But interest rates are at an all time low. They're only going to go up. The cost of repayments are only going to go up. It's likely [that] in some markets, prices might go down a little bit. Certainly not down 30% or anything, but most major banks are predicting a small, if not just stagnate, a small dip. 
 
[00:10:45] If you're holding them for a long term, that doesn't matter as much, because over time you would assume they're going to continue to go up. But if people are in it for short term gains, and they just put it all in, I worry about the risk of that. And we haven't seen the payoff of that yet, because it's happened so recently. But I'm interested to see what that looks like in a few years’ time with some clients. 
  
[00:11:11] But the other funny thing I find is targeting investments purely for the tax advantages. So what I'm talking about here is negative gearing. The amount of times I've had a client come to me and say, 'I want to get a negative geared property'. And you say, 'Why?' [They say] 'It's gonna save all this tax, it's a great investment, I think. Why wouldn't you rather an investment that not only makes money, but also increases in value? That makes more sense to me than just saving some tax'. 
  
[00:11:44] So targeting investments purely for the tax savings is never a good idea. You should always try and target them for growth and return. It seems smarter to me.

We Need Wage Growth, Now

Tim Garth:   
[00:11:56] Totally agree. I've never seen anyone too badly burnt from investing in property. I guess we do lose sight of the fact that we all think properties are just doubling these days. Anyone who had a property, it's worth double now. 
  
[00:12:16] I do see people who've bought in different places like, say, for example, Coffs Harbour. The recent increase in the market has just seen them be able to sell it for the amount that they bought it [for]. And for them, it's been a stressful experience. I think it's at a resort, so they've had a lot of politics involved. And so yeah, they couldn't wait to get out of that one. 
 
[00:12:43] But also, I think, as accountants, we see a lot of people's income. I can't say I've seen many people's income increase that drastically. Last year and the year before, potentially they artificially increased because of grants and subsidies. 
  
[00:13:03] A learning for me is that wage growth needs to happen. I've been saying this for a while. I'm no economist or anything, but the way that house prices have grown, as opposed to wage growth, is not sustainable. So I'm hoping that wages catch up a bit. 
  
[00:13:20] And I do have that in the back of my mind as an employer of people as well. Because they need to earn more, to borrow more, to buy more expensive houses. There's a lot of interesting things there. 
  
[00:13:37] About eight years ago, the property market doubled on the [Central] Coast. So a $250,000 house was worth $500,000. I had some friends who had help from a family member to purchase a house. They were at uni. So they did extremely well. They bought a house, they flipped it, and they sold it for double. Which at the time was amazing. 
 
[00:14:01] But now I actually think, 'Had they kept that, they would have made like four or five times [that amount]'. So there's a few lessons there around just hanging on to investments. And you do really need to do your research on what investment and what areas are going to be right for you. And once you commit, I think it really has to be a 10 to 20 year journey with property. That's probably what I'd plan. And if it happens to come off in two years, then well done.

Dan Osborne:   
[00:14:36] The transaction costs are so high with property. It's not like shares where it's $10 brokerage, it's tens of thousands of dollars to buy a property and to sell a property. So it takes time in normal worlds— not in the past year, but in the previous 10— it takes time for you to recoup that. And then also grow. 
  
[00:15:01] A lot of people assume that because of what they've seen, they're suddenly property gurus. And they're not. They're just a guy who happened to own a house at the right time. And so I think careful long term consideration is needed. 

Tim Garth:   
[00:15:16] I think just expectations. You're in this for the long haul, if you're doing it. And then yeah, just perhaps like having exit strategies or diversification. So choose different markets. Whether that be, like, for example, Melbourne and Brisbane. Maybe buy a property in each of those places, as opposed to property worth the culmination of those two properties in one location. Yeah, so those are a couple of the things that we've learnt.

Dan Osborne:   
[00:15:43] A few of the things we've seen and a few things we're worried about. 

Keep Your Eyes Open

Tyrone Shum:  
For Garth, his aha moment came to him in 2021, when he was about to invest in property. While he had set it up so he would be in a better place in 15 years, his goal was to cut that timeframe down.

Tim Garth:   
[00:16:40] I was definitely setting myself up to be in a better place in 15 years. No doubt I was going to be in a better place. But when I really looked back on what I wanted to get from those investments, I wanted to be in a better place in seven years. 
  
[00:17:00] So it wasn't going to be right for me. Because if the market for some reason doesn't grow like it has been. And in seven years, it's worth the same or perhaps even less than what I invested in a property in say, Melbourne and Brisbane, I would have been disappointed. 
 
[00:17:19] And I would have been in a worse position than I could have been if I had done nothing. So for me, I was going in eyes wide open with that one, wanting something sooner, and knowing my expectations. Whereas if I was ready for that 15 year journey, and I didn't have the business investment, and I was just on wages, and I was happy with my lifestyle as it was, then I reckon I would have pulled the trigger on it for sure.

Tyrone Shum:   
While it’s easy emotionally to look at a property and see how it checks all the boxes, not even these podcountants have a crystal ball to see how it could play out in the future.

Tim Garth:   
[00:18:27] I made an informed decision. And I'll live with that. In eight years, I may rue that massively, because Brisbane houses will probably be worth double or triple. But I made an informed decision. And hopefully, also, the business has progressed and is worth more, and I paid off my home loan anyway, because that's the ultimate goal. 
 
[00:18:51] I think doing nothing out of either ignorance to the options available to you or through just sheer being busy or not looking into it is a choice. I think that's a choice. And you need to recognise that if you have done nothing previously, then that is a decision that you've made, unfortunately. 
 
[00:19:20] It's never too late to get started if you're unhappy with that decision. If you're umming and ahhing right now, that's not to say you have to decide to invest in something. But you either need to decide not to do it or to do it. You can't just be lazy or do nothing, hoping that it's all going to work out. Make an informed decision and live with it.

Hold Up

Dan Osborne:   
[00:19:45] Your aha is almost identical to my aha but for completely different reasons. The previous 10 years I hadn't been in a position to buy. No one would have lent us a cent. So two years ago, that changed, and our financial position was much better. I'm like, 'Great, let's get this deposit going'. We did. We went and did everything right, we got our pre-approval, we went, 'All right, let's go do it'. And then suddenly, the market just went insane. 
 
[00:20:22] And as much as we tried to buy a house, we couldn't. We'd offered many, we even got one, it fell through. A whole bunch of nonsense. And that was quite stressful. Extremely stressful, because we wanted in, but no matter how hard we tried, for the houses that we wanted to live in. Because a house to live in is a very different choice to a house to invest in. So we couldn't get what we wanted. 
  
[00:20:48] And so partway through, towards the end of last year, I had a similar moment where I sat down and said, like, 'No, wait, why am I doing this? Let's just sit back again. I'm stressed. Just think about what's my long term goal here? What am I trying to do?' 
 
[00:21:02] And I think that really was an aha moment. It was a take a step back, look at the big picture and try and figure out: What is the plan? Why are you doing it in this moment? Why are you not doing it in this moment? Had I wished I had rent vested five years earlier, and bought a crappy apartment somewhere that was $200,000 that maybe I could have scrounged from somewhere? Yeah.

Tim Garth:   
[00:21:27] Hindsight is 20/20. 

Dan Osborne:   
[00:21:29] Exactly. 

Tim Garth:   
[00:21:29] And coming out of high school and working to buy a business... 

Dan Osborne:   
[00:21:37] It wasn't possible at that point. So really, I think it's important to sit back at any moment and try and figure out: What's your long term goal? What's your plan? How does this fit in your plan? And what are you trying to achieve? 

[00:21:51] And if what you're looking at, if you're investing in this property, or the share portfolio, or this business, or whatever it is doesn't fit that, then don't do it. But don't regret that you didn't do it. Don't look back. Look forward.

Tim Garth:   
[00:22:06] Be confident with the decision. Even if it's the wrong one, you made the best decision at the time for you. 
 
[00:23:21] I think from our perspective, money brings options, it can bring happiness, but it doesn't always. Set your own goalposts and give yourself a pat on the back when you achieve those. And that could even just be as simple as going for a walk every day, or doing your fitness, or just being happy, whatever makes you happy. 

Paving New Paths

Tyrone Shum:   
Osborne, our resident rock star accountant, continues to buck trends when it comes to his work. His main mentors will come as no surprise, but when it comes to accounting mentors, he forges his own path.

Dan Osborne:   
[00:24:14] The obvious one for me is my family. My mum, my dad, my brother, all individually bring something completely different to the table. My dad, very logical, very smart, can think long term about, you know, business and decisions and strategy, so he's someone I often turn to when I'm trying to make a decision and I'm just trying to take the emotion out of it. I just want to think, 'What's the most logical thing to do here?' He's always been someone that I've always turned to.
  
[00:24:47] In the accounting front, working here, I've always sort of turned from the idea of a mentor and I don't know why. And I think it's because I don't necessarily always think that others have, or are doing it in the way that I thought that we could. I think that was the thing. 
 
[00:25:13] I think I felt that we had something different and unique to what a lot of other people in the accounting industry were doing. And so I wasn't sure I had anyone to hold up as, 'This is an example of who I want to do work like'. 
 
[00:25:27] So it was probably people and things in other industries, almost, that maybe I was looking forward to. But then also just the way to conduct yourself as a leader of a team. Warren was a good example. Tim's dad was very much someone who would trust his team, and give them responsibility and let them learn the lessons. And I think that's something that I've definitely learnt along the way. But in terms of who do I look up to as a mentor, and who do I try [to] follow? As stuck up as that might sound, I'm just not sure anyone in the industry was doing it the way that I felt I wanted to. 

Tim Garth:   
[00:26:07] I guess actually, that's funny. I totally agree. We did set out to try and be different. And to try and really flip it on its head. And it was around that time when Xero was really forging a path. I guess for us, we did kind of feel like we were making our own thing. 
 
[00:26:26] But I think it's changed since then. Like there's a lot of other accountants. And Xero has built this awesome community. So other accountants trust each other more. Go back five plus years ago, and mostly, you'd say hello and you're like, 'You busy?' And they'd be like, 'Yeah, busy, busier than I've ever been'. And it's like, 'Okay, cool. Good on you. So are we'. That was it. Now we deep dive into each other's businesses and problems. And yeah, we've made some really good relationships with other accountants.

Dan Osborne:   
[00:26:58] I don't think you can discount the lessons learnt from other people's experience[s]. So by not having a mentor, I don't mean that I'm definitely not listening to other people in the industry and hearing what they've got to say, because that's different. I just don't think I hold or we hold any one example. It's more of a community these days where everyone is helping anyone.

Tim Garth:   
[00:27:20] I try to take a page out of different people's books as to how they've done something or their approach, and try [to] bring that perspective into our business. That could be a friend that runs a marketing firm, or there could be something that I learnt from Dad, when I just reflect and think about how the business used to be versus how it is now. 

Dan Osborne:   
[00:27:44] Getting as much information from as many sources as possible has always been the better strategy. 

Tim Garth:   
[00:27:49] Trying to be open to learnings, but also trying to forge our own path. That's been kind of what we've had to do, really. 

From Little Seeds

Tyrone Shum:    
[028:47] Now, Dan, if say, for example, you were able to stick yourself back in a time machine and meet yourself 10 years ago, what do you [think you] would have said to him?

Dan Osborne:   
[00:28:58] It's a tough one, because the obvious answer is, 'Do everything you can to go buy a place [because] it's going to be bloody hard when you're ready. You've never heard of this thing called COVID-19, but when it happens, it's going to completely screw all of your plans’. That's the obvious answer.
 
[00:29:17] In saying that, I probably wouldn't be in the position I am now having not made all the decisions I've made to this point. So I don't have any regrets. No regrets for me. However, I think the biggest one was [to] start thinking long term earlier. Start thinking about what the next 10 years looks like, what do the next 20 years look like? And start planting little seeds. Plant little seeds early, is I think the advice I would have given myself back then.

Tim Garth:   
[00:29:50] I agree with that. I think possibly just enjoy the moment. Enjoy what you've got. Because I was definitely in a mindset of the harder you work, the more you'll get out. Which isn't necessarily true— hard work is definitely required. You have to work hard. But that doesn't mean 10 [to] 12 hour days. Which I've done, I've been there and done that. And I've learnt that I don't need to do that. Which is definitely a journey. 
 
[00:30:26] I think just enjoying what you have and appreciating your own goals and reaching those. Actually if I reflect, I'm pretty happy with how the 10 years has gone. Just go for it. Do it and enjoy it.

Tyrone Shum:   
[00:30:45] So this is the Tim that you would have said 10 years ago and said these things is like, 'Enjoy your journey'.

Dan Osborne:   
[00:30:54] And that Tim would have said, 'Shut up, Tim.’

Tim Garth:
[00:30:58] ‘You're wasting my time! I've got stuff to do!’

Dan Osborne:
[00:31:00] ‘I'm trying to get billable hours done today!' 

Tim Garth:
[00:31:05] And I still need to slow down and stop reaching for the future.

Tyrone Shum:   
[00:31:15] Perhaps for you, Dan, how much of your success do you think has been because of your intelligence, skill and hard work? And how much of it is because of luck?

Dan Osborne:   
[00:31:22] I like this question. I like this question a lot. Because I've actually thought about it a lot. Funnily enough. I really have! This is something I've heard, and I've thought about a fair bit. And we've been making jokes at my own expense here about not having a property while I'm on a property podcast here. 
  
[00:31:45] But the investment that I have made is different. We own a business that's worth far more than anything I would have had as a property, because of the time and investment and the hard work that we've put into that. 
 
[00:31:58] However, I was incredibly lucky to be in the position that I was and to just stumble into this business when I did, because that led to the opportunity. So being particularly smart people, Tim and I, I think it definitely plays a factor. But I'd say it's about 20%. And I'd say luck is the other 80%.

Tim Garth:   
[00:32:20] That's a fair call. 

Dan Osborne:   
[00:32:24] You should always be prepared and work hard for when an opportunity arises. But no matter how hard you work, if that opportunity doesn't arise, it won't happen. 

Tim Garth:   
[00:32:33] I'm going to agree with that. And I'm gonna say you do to some degree, create your own luck through hard work and being open. Having an open mindset.

Dan Osborne:   
[00:32:43] It's more like hard work is the foundation and setting it up, and then luck gets you over that line. Without either, neither of them happen. 

Tim Garth:   
[00:32:55] You've got to recognise the lucky thing when it happens and act upon it. 

Tyrone Shum:   
[00:33:00] And what about you, Tim, what are your thoughts on that question? 

Tim Garth:   
[00:33:04] I agree. Definitely. I mean, I was just lucky, I guess I was born into a family— I always joke [about] my initials. So my name is Timothy Shane Garth. Which [means] my initials backwards are GST. So I was born being an accountant. I don't know, you might look at that as a lucky thing. You might look at that as an unlucky thing. You tell me. If you hadn't asked that question, I would undersell how lucky I was being born into that family, and having the opportunity of the business to, to get into.

Dan Osborne:   
[00:33:41] It takes hard work to capitalise on those opportunities.

Tim Garth:   
[00:33:45] In saying that, there's so many other accounting firms. Perhaps if you worked hard enough, and you built relationships, you could not go into and with a bit of luck, perhaps you could have been their succession plan as well. I think it's 50/50 hard work and luck to have good friends and people around us at the right time.

Dan Osborne:   
[00:34:06] Be prepared for when the lucky opportunities arise. 

Tim Garth:   
[00:34:09] Take your luck when it comes.

**OUTRO**

Tyrone Shum: 
Thank you to Dan Osborne and Tim Garth, our guests on this episode of Property Investory.