He also shares some general knowledge on all kinds of investments like stocks / shares. As well as the step by step guide he uses to assess the risk of any investment. 

All that and more on this episode of Property Investory!

Timestamps:
1:15 | Financial Autonomy - the podcasts origins
4:51 | What does it take to write a book?
9:45 | Friends that Bowel together, stay together
11:07 | The job that started it all
11:25 | Be careful what you wish for
19:48 | Investment assessment: what does it look like?
23:30 | The power of choice
28:00 | There’s a first time for everything
32:04 | How to escape pesky short term leases on commercial property
38:07 | Just buy another one! Why not?

Resources and Links:

[00:16:48] I remember going to the interview and just telling the manager there that look. [00:17:12] I'm gonna apply for every single one of the roles, you advertise until you give me a job. And fortunately, he gave me the first one I applied for. 

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

I’m Tyrone Shum and in this episode, we’re talking with financial planner, and host of the Financial Autonomy podcast, Paul Benson. We learned why he purchased a commercial property instead of leasing it for his business. Hear how he managed to turn $10,000 into $90,000 on his first investment, as well as the secret to creating choice in your investments.

 

Tyrone Shum   

Paul Benson is a brilliant financial planner and property investor, with many properties under his belt. So how and why did he decide to start a podcast? 

[00:00:29] I'm a financial planner. And I've been doing that for about 20 years. You and I, of course, connected because we both host podcasts. So the podcast that I host is financial autonomy. And I've been doing that two and a half years or so, we've actually got Episode 200 coming up. So it must be about four years at least. And yeah, that's right. And, and that's, that's just been wonderful. 

Off the back of that. I got a book deal. I had a book come out last year, which was fantastic. You know, obviously met a lot of wonderful people. And it's also just helped clarify my own thoughts, I suppose, you know, from when I started the podcast. And I know, Tyrone would you know, you and I spoke a little bit about your story. And, and you know, you started as a podcast fan, and that led you to create your own podcast, or that was part of the motivation. And I was very much in the same boat, you know, keen podcast consumer got a lot out of podcasts and through different conversations, why don't we have a go at this ourselves. And it just took a little bit of time to find exactly how - what we were going to do and how it was going to be a bit different and interesting to what was already out there. 

But yeah, the financial autonomy podcast was born. And as I said, it's been a lot of fun. And it's been positive to the financial planning business. Which is, which is, frankly, what puts food on the table. And yeah, it's been a wonderful journey. So that’s kind of how we're here.

With the idea and plan ready to go, all that was left was a name. He came up with ‘Financial Autonomy’ which is super unique. So where did it come from? 

Paul Benson  

[00:02:10] Funnily enough, I heard it on a podcast, I was listening to an American podcast that interviewed financial planners about their business. And you know, because I was running a financial planning business, obviously, that was one that I listened to. So it probably doesn't have a huge listenership, because it's very niche, but it was relevant to me. And the financial planner that was being interviewed, just it was just an offhand remark. She was just talking about different bits and pieces. And she just said, we do this for our clients. And I think of it as financial autonomy. And on she went, and just that, oh, financial autonomy, I love it just stuck in my head. I just, it really resonated with me.

You know, I started the podcast, and yeah, financial autonomy, that was a name and an idea. And it just kind of worked. But it, it's all come about, and particularly, I guess, come together in the book. I have been advising and working with clients for a long time and financial planning, it's a wonderful career, I'd certainly recommend it to any particular young person if they're thinking about going to university and studying. But the great thing is you get to work with lots of people, and you get to learn about their stories. And I guess what I've been able to do is reflect on particularly, I guess, older clients that I've known for a long period of time or Who? Who would I like to be in their position, right, who do I think has really won the game who's been successful? And then I guess, reverse engineer? How did they get there? How did that happen?

And similarly, there are some instances where I think, boy, I don't want to end up there, right? So I had a good opportunity to see all these different experiences of people. And of course, some people love their property investments. Some people like shares, some people are very conservative investors, some people are very high-income earners, other people, low-income earners, there's all sorts of different ways. And there's all sorts of different goals and objectives. And through my financial planning experience, I was able to see potentially 1000s I mean, it when I think about my career, of different examples, and I guess, learn from that. And so yeah, I guess, you know, the book and what we cover in the podcast and things today is, is the outcome of looking at all those people's different scenarios, reflecting on what worked, what didn't and then developing that into something into a framework and yeah, it's been a lot of fun.

Tyrone Shum   

Benson continues to explain what exactly goes into a book deal, and how long the whole process takes 

Paul Benson   

[00:04:51] about six months. I did it mostly. I did a good chunk of it. We always close for a few weeks over Christmas. And we work this particular summer, we weren't going away on holidays. So I was able to really rip into it then in perhaps got, I don't know, half of it done over that summer break. And then it took me several months after that, because then obviously sort of back at work, less time to devote to it. So it was really just weekends, you know, took me a few months from there. 

Yeah, but you know, there's a bit of process. I don't know, I had a publisher approach me. And then obviously, there's a bit of back and forth on how we kind of get this done. And, and then, of course, once you do the writing, then it needs to be edited. And there's all sorts of layout design, and the book has quite a lot of diagrams in it. So there's quite a bit of work to be done there. And, and the things you don't think about too, it's a classic, you don't know what you don't know. 

But I mean, just things like writing the contents pages in the back, which, fortunately, I didn't have to do. Well, not the contents page, the index bit. I mean, there was a contents of cause it’s page two, the index at the back right now, I don't have you know, the editor did that. But it still takes time. And you know, like different sources that I'd mentioned. Like they go through and validate all those sources. And yeah, it's interesting that the process involved in getting a book to the point where it can be published. And I mean, I know a lot of people self publish these days, which is, which is awesome. But I must say, I'm glad to have been fortunate enough to have worked with a publisher because there's a lot to it.

Tyrone Shum  

On top of his podcast, Benson runs his own business as a financial planner and also writes for Fairfax. His well-planned schedule gives him time to do it all. 

Paul Benson   

[00:07:04] I own the business. And I've got three staff. And that's a nice place to be because I can control my diary. And so my diary says Mondays, Tuesdays and Thursdays, I'm available to see clients. Wednesday's is content creation. So that's creating podcasts, and I write in the Fairfax in the money section of Fairfax, I do a bit of that. There's a weekly newsletter, we do that sort of stuff. So Wednesday is my creative day. And it’s also paying the bills and do that kind of boring stuff. And then Fridays is client servicing. So you know, we've got a good group of existing clients. So I just have Fridays, blocked out. So things crop up during the week, and an existing client just needs this researched or need something done, then I've got time on Friday, and I get that done.

Benson had a normal upbringing, growing up with good parents in a good area. However, he moved around quite a bit in his primary school years. 

Paul Benson  

[00:08:22] I grew up in Monterna, which is an outer Eastern suburb of Melbourne. You know, newer days 

[00:08:34] In grade prep, I went to three different primary schools, I guess that's vaguely interesting. There was a primary school I went to which was, you know, near my parents first home. And then they bought a bigger family home in a newer state further, you know, which was in Monterna. So further out. And, yeah, there was an old Primary School near where we lived. And then because it was a new estate, they built a new primary school. And so I moved to the new one for the back half of my primary school education. 

So three different primary schools, but always the same high school. And yeah, I mean, it was fairly out of town and not much public transport, but it was good to ride your bike. And there were fragments of I mean, bushes a bit kind of overstating it, but anyway, not developed land. And so yeah, you could zoom around on your BMX, and there was plenty of jumps and things to muck around on. So, no, it was good. Just, you know, pretty typical middle Australia upbringing, I would think.

Tyrone Shum  

But, as every Aussie kid knows, there’s always a fun way to escape suburban normality 

Paul Benson  

[00:09:45] I had a good friend of mine who was a Cutler. We lived in a court and his house was a couple of houses along. And during daylight savings, it was a tradition for quite a while that after dinner, he and I would go out and we just play cricket until pretty much until the streetlights came on. That was sort of the delineation of all right, it's time to go home. And always enjoyed that. And I don't know how it evolved but you couldn't wear shoes, you know, clearly, you were soft if you had to go barefoot. And, and, yeah, one of us bowled, the other one batted you can sort of drive it straight down the straight deal on the court. There was a drain further down, if you got the ball in the drain you were out because that was a pain. But inevitably, you could lift up the concrete thing and someone would crawl between the spiders and retrieve your tennis ball. But you know, never ever wrapped when it went down the drain. So yeah, look out really good memories. And that's a friend of mine that I'm still in touch with today. Although he's, I’m still in Melbourne. He's up in southern New South Wales. But yeah, we're still in touch to this day. So that's a really nice memory.

Tyrone Shum   

After high school, Benson’s plans for the future weren’t concrete, but eventually, they fell into place. 

[00:11:07] I didn't get the VCA, the HSC result that I kind of hoped for. And so I didn't get into the specific uni course that I wanted to get into. The one I did get into necessitated me moving out of home, which wasn't really part of the broader family plan. So I defer that for a year, I had when I finished high school, I actually went around and applied for a couple of jobs with some banks. And I got offered two of them. And the way that I decided which one I would take is which one started sooner because my expectation was that this was going to be a summer job, which is pretty selfish of me really, but I didn't appreciate that as a teenager. 

And so I was just looking at, you know, make a bit of cash and get a bit of experience for two or three months before uni started. So Commonwealth Bank was the one that was going to get me started the soonest. So I grabbed that one. And then as I said, I didn't get into the course that I really wanted to get into the one that I got offered, I wasn't all that thrilled about. So I deferred it just to sort of keep it up my sleeve. And I just figured out well, I'll just keep on working, I've got a job, I'll just run with it for 12 months, and then I'll apply again at the end of that 12 month period and see what happens. And so that was good. So then I worked for 12 months, just bank teller just, you know, boring, basically, you got to start somewhere sort of job. 

I got six weeks leave at one point without pay and did a bit of backpacking around Europe with some friends. So that was a wonderful experience. And that definitely made me aware that there's a big wide world out there and spending your rest the rest of your life as a bank teller was probably not the best option, you know, the best path. And I guess quite a few of my friends, of course, they were at uni as well. So that helped. So then it was getting towards the end of that year. And I still didn't want to do the course that I had actually got into. So I applied for some others and went and spoke to some and my manager at the bank branch was good enough to sort of write me a nice letter. 

Tyrone Shum 

The bank helped further, with an amazing program that supported Benson through uni. 

[00:11:13] And the bank at the time had a programme where if you did a business, anything remotely related to finance, they would support you, they give you days off for exams, they give you study days. And in fact, if you're ultimately.. well, they'd reimburse you for school books, you had to pay for them. And if you passed, they would give you the money back. And they'd even cover hex down the road when you had to pay it back if you passed, and you were still working with them. So it was actually I didn't really appreciate it as an 18-year-old, but I appreciated it later on it was actually a very generous deal. So in the end, I had the course that I had always wanted to get into accepted me with this sort of bank recommendation and things, but on a part-time basis. 

So it was two nights a week. So I continued to work at the bank, I changed to a more inner-city branch so that I could get to classes on time. [14:13] Four hours, I mean it didn't always go a full four hours, but twice a week, four hours, sort of 5:30 to 9:30 and then sort of study on Saturdays. And I ended up in my initial thinking was well I'll do this for two years, which is the equivalent of one year full time and then I'll apply to transfer to full time but by that point on I got pretty used to having some money in the door and you know, the thought of going back to full-time uni didn't quite grab me. So I ended up just doing the whole lot part-time, it took six years. I think I was fortunate that I was young enough I didn't have kids and a lot of other distractions. 

So I don't know. You know, some of my friends, because you do a lot of group assignments and stuff as I'm sure you remember. and some of the friends that I was doing those with, because it was part-time so everyone was working. They were at a point where they had children and bigger commitments. And I've got no idea how they got it done, I don't think I could have... could have managed it. But as a 19-year-old, 20-year-old, pretty self-absorbed, there's not much else going on. You just got to balance, not sort of partying too hard on the weekend, you know, I could make it work. And, of course, it was good to get that work experience on the way through. 

While he was still in uni, Benson was offered what he thought was his dream job. 

[00:11:25] And towards the end of the course, I got into a role that probably assumed you'd already finished graduated from the course. But I got in anyway, it was an analyst kind of role planning and research, which I guess was the role that I had kind of always aspired to, I thought that would be that analyst type position. That was really what I was trying to hit. My degree was economics and finance. And that was where I was, where I was going. And I've got this role. And I did it for a while. And I actually discovered that I'm not loving it. I can do it. But I'm not loving it. Actually, spending all day looking at spreadsheets. Didn't really, yeah, wasn't for me, it wasn't for me long term anyway. 

So that caused me to sort of step back and reflect what am I going to do here. And I appreciate, you know, recognise that investing, particularly, and I know this is a property podcast, but for me, particularly share investing had always been of interest and held appeal. And it was a much of a stretch from the degree that I'd done to look at investing. So I guess the benefit of being in a big organisation, there's lots of different roles. So I saw this financial planning role, which back then, was a vastly different role to what financial planning is today. And I remember, so put my hand up for a role there. And I remember going to the interview and just telling the manager there that look. At that point, I must have been with the bank, I'd finished my degree by then. So perhaps seven years, something like that, and just saying, Look I've done some time in branch land, I've done some time in head office analyst. And I've reached the point where I know what I want to do. And I know that this financial planning that that's what I want to do. So I'm gonna apply for every single one of the roles, you advertise until you give me a job. And fortunately, he gave me the first one I applied for. 

And, and so that was great. And I worked as a financial planner there for seven years, I left in 2006. And I'm glad to have left, but I'm glad to have had that sort of apprenticeship, I suppose. And, you know, there's been a lot of issues, as many of you listeners will know, with financial planning in bank land. And that sort of relates to why I'm glad I left, because, yeah, there were definitely problems with banks trying to do financial planning. You know, they're conflicted in terms of the manufacturing product, and they're trying to give advice on those products at the same time. And that was, made me uncomfortable. But it was still good learning. And it was good, there was lots of good things to come out of that as well. And it and it then enabled me to step out, start my own business in 2006 do things the way I wanted to do them and the way I felt that they should be done. And it's been a good, good journey from there.

Coming up after the break, we will delve into Paul Benson’s investment journey, starting with his first-ever property  

Paul Benson 

[00:28:23] This was an old, frankly, but ugly, flat. brown brick. Nothing very appealing about it, probably 1970s, but a good location. And, and it fitted in my budget

Hear how he used his first property to buy a second one 

Paul Benson 

[00:31:55]  But it was particularly the flat, really set me up. And as I say that leverage really highlighted what was possible.

We also find out how he escaped the trap most people fall into when leasing commercial property 

Paul Benson 

[00:32:49] And the cost of fitting it out, I was freaking out. I gotta spend all this money getting it looking nice. And then maybe five years later, I leave and the landlord just goes oh thanks for that.

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

 

Tyrone Shum  

Benson explained the process he goes through to assess risks and assets when looking to improve any kind of investment. 

Paul Benson  

[00:19:48] We've got a framework and a key portion of that, is three different pathways, one of which property, the other is, stocks and shares and self-employment. And to circle back to say that the whole framework and the whole financial autonomy thing is, is derived from reverse engineering what's made people successful, right? And so I've looked at that and go on, okay, these are, these are the pathways that everyone that I've dealt with, who is successful financially has followed. So. And clearly, property is one usually, of the people I've dealt with, it's, it's a piece of the puzzle and not the entire puzzle. 

Often, they might, for instance, start a business, and that's quite successful. And then they will, in the course of that business, maybe they buy the factory that they operate out over the office that they operate out of, perhaps through a self-managed Superfund, for instance. There might be an opportunity, whatever, you know. Whether it's commercial property, residential property, but the property investment is kind of stage two. Stage one was creating the business, building a successful business that's then throwing off surplus cash flow. And then they're thinking about right, how can I put that surplus cash flow to work, or I'm going to put some of that into a property. Of course, you also get just regular wage earners. But that earning enough income, that there's a surplus, and again, that they can put that into property. 

Typically, most people are going to buy their own home before they're thinking about investment. But you don't have to, you could go the reverse. But I guess an observation would be that [00:21:52] the property investment portion is often sort of phase two. Phase One is either developing their career or developing their business and generating a strong cash flow. And then the property is the solution to oh I've got this surplus cash flow. And or I've got equity in my home. Because I've paid it down, and there's been good growth in my home. What's the next step? And one avenue might be investing in stocks or something, but a valid Avenue, particularly in Australia is Alright, I'm going to get some property exposure. And so that's sort of where I see it playing out.

Tyrone Shum   

Choice is something Benson talks about often because it is so important. He knows first hand how impactful the power of choice is. 

Paul Benson   

[00:23:30] When we think about financial autonomy, our definition of success is gaining choice, right? So we're not, you know, retire early, hey, if that's the choice, you want, retire early fine. But we're not particularly advocating the fine movement. Success is: you've gained choice. Whatever that looks like for you being able to quit a job because you hate the boss. Right? [00:23:54] that's what we're trying to gain, choice. And you're thinking about that equity, the property piece. As I mentioned, I became self-employed in 2006. And at the time, we had two children. One, my youngest was under one year old who's born in 2005, or maybe a little bit older than one year. but anyway, very young. My wife was at home full time caring for the children. So me quitting a job. And therefore, income stops. To start a new career or a new... not even a career - a new business was pretty risky.

 And to be honest, it feels more risky. Looking back now, I was probably overconfident back in the day. I guess. Look, if this all went pear-shaped. I'm sure I could go back and get an employee job somewhere. Yes, but it was definitely the fact that we had equity in the home helped make that viable. I mean, initially, when I left I was fortunate I had eight months leave up my sleeve If I had long service leave, and so that gave me a buffer. That was my runway, I suppose. But then in 2008, I was able to buy another business from a retiring planner. And in some respects, the timing on that wasn't great, because it was just the GFC strike. And it was a bit of a challenging time. But had I not bought that business, it would have been challenging as well, because it wasn't a lot of new business inquiries through that period. But the only reason I was able to buy that business is because I had enough equity in my property in my home, to be able to secure the financing to buy that business. 

Property can be a great way to build some equity, particularly, leverage is an important part of this, which we might get to later. But build that equity, then that equity gives you choice. And this is what I was circling back to, you know, earlier, it's about having choice and property is good in gaining you that choice. For the reasons I just explained, it tends to, particularly due to the benefit of leverage, you tend to build equity reasonably quickly. And then through that equity, there's all sorts of things you can do, whether it's buy another property, buy some shares, buy a business, have a 12-month sabbatical, and, you know, live in the West Indies, or whatever floats your boat. 

But it's gaining your choice through that creation of equity. And that's something and, and the nice thing to is the equity is quite accessible. Whereas if you create equity in a share portfolio, usually the only way to access that is to sell the shares, which then triggers capital gains tax, and that you know, has some other issues, where as the property, you can retain the property and just borrow against that property, then you haven't triggered any tax. Now, if it's your home, I guess you haven't triggered any capital gains tax anyway. But there's still stamp duty and all sorts of transaction costs, you don't really want to do that. property's a lot easier to access the equity, where it's not so easy with other types of investments.

Tyrone Shum   

Now let's talk about Benson’s Property investment journey. With 4 properties in his portfolio, he explains how he managed to buy his first 2 properties.

Paul Benson    

[00:28:00] I've owned three big apartments, I've owned four properties, well, three of those with my wife. But the first one was before she came on the scene. And three of those I still own. I haven't done any property development. But yeah, four properties over the journey. So the first one was a flat in Queue, which is sort of inner-city, Melbourne. area, it is a nice area, this was an old, frankly, but ugly, flat. brown brick. Nothing very appealing about it, probably 1970s, but a good location. And, and it fitted in my budget, which was not very much. So I've got to start somewhere. And your first home doesn't have to be a forever home. Right? So I got in there. And I was quite lucky. I mean, I partly made that work was two-bedroom, and I've been living in shared houses prior to that. So I kind of knew how that worked. 

So when I bought that place, I could afford it on my own. But I went in there with the expectation that I would get a flatmate to just help. And, and I did, and she was wonderful. And so yeah, so that helped make it affordable. And I was probably there I think about three years, not that long. And whilst I was there, I met my wife and we decided we wanted to get a family home. But fortunately, the value of the property moved and some people listening will be disgusted with the numbers. But anyway, they were... it was cheaper back then. So I paid 107,000 and I sold it for 189,000. Now, and so that's good growth in three years. Right. I mean, I only put in a 10% deposit, right? So I put in just shy of 11 grand and I would have had a few costs. And I'm in I didn't make much dent in the mortgage during that period. But, you know, I walked out with 90 odd grand, right? So my 11 turned into 90 odd. Now I've done the math on that on the website. And in the book, I can't think of it off the top of my head, but I'm sure your listeners can see, that's a pretty awesome return, right. 

And that highlights that value of leverage that the property increased in value by 70-80%, whatever the numbers come to, but that's not per annum, obviously, but just total. But my outcome was far different to that because I'd leveraged the 90 put in a 10% deposit. And so that then gave me a good portion of equity. And then my wife and I bought our home, she had some money to contribute there as well. And I don't think it grew as quickly as that flat, I mean, and to be absolutely clear, the fact that the flat went from 107 to 189, in three years, was pure luck. There was no skill on my part, I just bought what I could afford in an area that I thought I’d like. I was working in the city. 

But you know, there was no great skill, it was just luck. But it gave me the opportunity to get into the next place, which you know, then we can buy a house. We were in Moonee Ponds for the Melbourne listeners. So reasonably, in a city, although not as much as Q, and a bit more around to the sort of North, bordering on Northwest, but a really nice part of the world. And, you know, we were able to do an extension and renovation on that a few years down the road. And you know, that's still our home today. And that's worked really well and, and as I touched on, through the equity in that property as it increased in value. And obviously, we put in a good deposit enabled me to then buy the business. And that enabled me to do some other things there. So, that was, I guess, residential flat to the home we're in today. So probably not all that exciting. But it was, particularly the flat really set me up. And as I say that leverage really highlighted what was possible.

In a future episode of Property investory, we’ll continue the conversation with Paul Benson. Where we’ll discuss his worst investment decision, 

[00:03:20] the bank that lent us the money decided they weren't prepared to lend to financial planning businesses anymore

The power of leverage. 

[00:08:34] That's what leverage does, it magnifies your outcome. Now magnifies it both ways. So if it goes down, you're in trouble. But if it magnifies it in the right way. That's extremely powerful.

The flip side to buying a business during the Great Financial Crisis or GFC

[00:04:36] clients were keen to talk to somebody because they were concerned

And that’s next time in a future episode of Property Investory.