Timestamps:
4.30 | Home is Where the Heart Is
8.25 | Ball is Life
13.01 | What Could’ve Been
16.01 | Starting from Scratch?
21.12 | No Test Runs

Resources and Links:

[3:55] It's so easy to get caught up in looking at everyone else's life thinking that you don't have something, or you should have more and you're behind and this and that. But the reality is, if you look around, there are a hundred reasons why you've got everything you need to be happy. 

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 commercial lending specialist Fabian De Marco. He shares with us his secret to contentment and an insider’s view to the very best investors in our industry and why they are successful in property. Plus, the banks vs private lenders, which one is better for you and much much more.

When we last spoke with De Marco, we heard about his positive attitude to the mistakes of his past. He says he wouldn’t change where he’s ended up and learnt so much from those experiences. That makes an impact on his day to day. 

[0:20] Probably about six months ago, I had this moment where the universe sort of tapped me on the shoulder and sort of said, ‘Here is a little bit of wisdom that you're in desperate need off.’ Up to about six months ago, I was a pretty hard worker. Not saying that I'm not hard worker now, but I would really grind it out, I would have early mornings, I went through through a period about 10 years ago where I woke up at 3am every morning. There were weeks where I'd have periods where maybe I did three days a week or two days a week, but for a good 10-year period, I would get up at 3am. I'd work, I'd hustle, I would grind all of the cliche stuff and I wasn't seeing the results that I wanted. And I started developing a bit of a chip on my shoulder because of that. I felt like the universe owed me something like if I put in the work. 

[1:25] I'd done the hours, no one else was getting up at that time, why am I not being given the accolades or all the rewards that I deserve? I started having a bit of a chip on my shoulder. Then I don't know what it was, but something sort of grounded me. One of my mentors is quite humble and sort of always drilled into my brain the importance of being humble and sort of being grateful for what you have, and thinking about that I started looking around, maybe it was COVID, started making me reflect a bit on this and started thinking, maybe spending more time with the kids. And I started realising, you know what? I'm actually quite lucky. I've got a lot of things around me that make me quite fortunate that a lot of people don't have and it just started making me think, and I started changing my mentality when I woke up in the morning. 

It’s truly fascinating the impacts of a changed mindset, across both business and life. De Marco says the moment his headspace changed, he actually started to see results. 

[2:17] Instead of waking up with this chip on my shoulder, thinking that the world owes me something, I'd wake up and I just make a declaration in the morning to the universe, I'd say, ‘I'm going to wake up today, I'm going to do everything I can, I'm going to put 100% into this day. I'll do the best I can in work, I'll do the best I can as a husband as a father. And if you want to give me anything in return, I'll happily accept it, whatever it is, I'll say thank you. If you don't want to give me anything, that's fine.’  Tomorrow, I'll wake up and do the same thing, and I'll tell you what, I don't know if it's just coincidental, but since I took that approach it's been like night and day the difference. Business has just skyrocketed, I feel a lot more relaxed, I feel a lot more at peace. And things are well. And don't get me wrong, it's not like a magic thing where nothing's gone wrong. Ever since I said that, like there are days where the universe will test me and say, 'Okay, let's see if you really stand by this.' Or is it just something you're saying, because things are going well now. But a couple of times, I sort of went through a few moments which I would classify as high frustration moments in the business. And I sort of kept my cool and stuck to what I sort of believed in and things have sort of continued on in a nice way. 

[3:43] I think there's something in that, especially in today's day and age with all this social media, I see it with so many young people. It's so easy to get caught up in looking at everyone else's life thinking that you don't have something or you know, you should have more and you're behind and this and that. But the reality is, if you look around, there are a hundred reasons why you've got everything you need to be happy. There is nothing wrong with ambition, and constantly striving for more and I think that's fundamental to sort of keeping yourself active. But there has to be a moment where you sort of say, ‘Thank you.’ Simple words, just thank you, and take that on board. That's just a personal experience. That was a moment that I'd say was life changing. It was a big shift in my head and I've definitely noticed a change.

Speed is a crucial element in the world of football. But De Marco says in the world of property it can be an investor’s worst enemy. 

[5:39] One thing I did as a young, young man is I moved very quickly on impulses, on things that I had an interest in. I took an interest in my early days in the stock market, and I was quick to go and borrow money and invest and see how high I could could reach, but, it's like that with everything. But as I've sort of gotten older, I've realised it's better to slow down, be more strategic, really do your research. At this stage, I've got the best opportunity to learn because my job day in day out entails me looking at property development projects, understanding the numbers behind them, understanding which ones make money, which ones lose money, why they make money and why they lose money. So it's just an underground training thing at the moment. So I'm really enjoying that, I'm building up my knowledge and when the time is right, then that's something I'll definitely venture into. But at the moment, it's something that I'm sort of learning more about every day. It's something that I think a lot of people sometimes don't respect the amount of knowledge that is required in order to do something great. Which is why I think a lot of people sometimes try things, they lose money, and they never try again, because I think sometimes in the beginning, we don't give the proper amount of respect to the craft. 

[7:19] A mentor of mine once told me something really insightful. He said making money is not easy. You can have moments where it feels like money has come easy, but the reality is making money is not easy. People look at these property developers, and they think, 'Oh, wow, look how much money they make and how they built 10 apartments and made a million dollars.' Oh, that's so easy. I was buying a site tomorrow, and I'll put in 10 apartments and I'll make a million dollars. It doesn't work like that, there are about 500 things that could go wrong in that project that at any one time could turn that million dollar profit into a zero or a loss. And people don't understand that. It's not about just picking something and jumping full steam ahead into it. But you have to really understand what it is that you're doing. I heard a great saying once that risk is mitigated by the amount of knowledge you have about the subject that you're entering into. And that's why people say the stock market is risky. The stock market is risky for someone like me, that doesn't know much about stocks, yes. But for the guy who sits at home, nine hours a day, researching stocks, reading papers, immersing themselves in the stock market, the stock market is far less risky for that person than it is for me. So it's the same market, but one has a totally different level of risk. It's applicable to any subject, whether that's property development, property investing, the more you immerse yourself, the more you understand it, the less risky it is. You can never eliminate all risk, but you can certainly reduce it and the more you know about something, the less riskier it is.

De Marco gets a first-hand look at some of the most rewarding property projects in Australia everyday. He says the difference between those who make money and those who lose it is, almost always, painfully obvious. 

[10:18] Some of the successful strategies that I've seen from developers are the ones that sort of they have a bit of a plan in terms of what they're doing. When I say they have a plan, they may have a 10 project plan. So meaning that by the 10th project, they want to be at a certain level, whether that's the size of project, how much much income they want to be making, but they work backwards from there. They deconstruct it and say, 'Okay, to get to this level, I need to start from from this.' Whether I might want to start with building a duplex and I might do two or three duplexes and really understand how to do a duplex properly then I might buy a site and build four units, or six units or something like that, and slowly progress up to maybe 10 townhouses. And then once they have that experience, there might be up to say 30, or 40 units and everything is a progression leading you up to that moment. And everything that you do up to that point prepares you for those bigger projects. Those types of developers that have that strategy tend to be very successful and it comes back to that little thing I said about respecting your craft. Now, that's not to say there aren't exceptions to every rule, that's not to say that if you want to be a property developer, you have to start with a duplex. And there's no way you can start with 10 units or 20 units or something. That's not what I'm saying. 

[12:03] What I'm saying is long term, the ones that have a plan, are the ones that are successful, that have a strategy. Whether that's to have a goal that they want to reach into deconstruct that and work backwards. Now, whether their plan, you might have one developer who's very well cashed up and says, 'I want to start with 10 units, and I want to work my way to 500 units.' So each person's starting point could be different, but the theory about having a plan and the strategy is the same, and that's the main thing. I suppose the ones who get into a bit of trouble, and now this is applicable for whether it's property investing or property developing, are the ones that probably don't look at sort of a steady progression. They may try to go from a $2 million project to a $20 million, big jump. The reason why  it's not the process of doing a $20 million project versus a 2 million, the steps you have to do, council approvals, building contracts, all of those sort of things are probably very similar, if not the same, from a $2 million project to a $20 million, what's not different? The potential problems that can arise in the project, from a $2 million project to a $20 million project, all of a sudden you have a whole raft of new problems and issues that could come up that you have to deal with. 

[13:43] If you don't have the experience on how to deal with those problems, that's where you can get in a lot of trouble. And the thing about property development is it's a little bit like being at a casino at the blackjack table or a roulette table. And this is how it works. You go in with your first bet, duplex, put my money on the table. Great, I double it, fantastic. Let's find another site to take my money. Let's go buy another site, which might be another duplex or it could be for four units. Do the project, great, double my money, fantastic, I'm superman. Now let's go find another site. And they do this and they roll and they roll. What happens next? Because they're constantly rolling their profits into the next project. It only takes one project to go bust for them to lose everything.

The reality of property investment is that you’ve got to get it right every time. A little bit of once-in-a-lifetime luck sadly won’t cut it.  To see safe returns, playing the long game is the best way, and De Marco says it’s also a team sport. 

[14:34] You're effectively on this process where the more projects you get right, the more invincible you think you are. And sometimes it's nothing to do with the developer. The developer could have done everything right. But exactly what we're seeing right now is a strong change in the market. Rising costs, lower sales. That is a recipe that can be very disastrous for some developers if they haven't anticipated it. You're gonna have a developer that says, 'You know what? I did everything right, I did everything that I did on the last project, and I didn't cut any corners, but this has just sent me bankrupt, because the markets changed underneath.' So that's why it can be very risky. If you don't have a plan, if you don't have the right people around you. But yeah, it's one of those things where you really have to sort of know what you're doing and really have a clear strategy about it.

[16:34] The developers I see around me that are the most successful— and not just developers, I deal with a lot of corporate property investors, or corporate groups that buy commercial property, industrial property, those sort of things. The ones that are most successful are the ones that prioritise working with trustworthy and reliable people, opposed to sharp pricing, or people that can sell. And I'll explain what I mean by that. If you don't have reliable people around you, it doesn't matter how good your pricing is, you can end up getting burnt very, very badly. The guys that build a team around them—and their team starts from advisors, to consultants, to accountants, to lawyers, to brokers, to just having a good team that you trust. Property, whether it's development or property investing, you need a team around you. You need agents, you need accountants, you need someone to do your legal stuff, you need someone to arrange a finance, you need someone perhaps maybe to help source out properties. If you have the right team in place, people that are reliable and trustworthy,  there's no limit to what you can do. But if someone is not trustworthy or reliable, then they can end up hurting you in the long run. The guys that I see doing really well, they have a really close knit circle, they've got people around them that they can call on that they trust. They know how they work, and everyone sort of respects each other and it just gels, it works. That's sort of the thing that I've seen that really, really works.

 

Coming up after the break, De Marco gives us a crash course on property finance. Who does what for who and why? 

 [20:42] Now just make it clear to listeners, these private lenders only deal with non-coded loans. Now, what that means is commercial borrowers only. If you're investing in a property or developing a property, your loan would would have to be a commercial purpose.

He shares the calming mindset that informs all of his financial decisions.

[26:26] My father gave me some advice once and said, 'You need to start from where you are, with what you've got, to the best of your ability.' And it's such an easy thing to do. From where you are just where you are today, that's where you begin.

How to find funding for your project everytime.

[20:24] I don't use 280 lenders, but I like to keep track of everyone that's in the market. And at the very least, know who's about. But there are so many options out there for someone who the bank says no to now.

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

Have you ever wondered what the differences are between the big banks and the hundreds of private lenders?’ Which is the better option? And most importantly what’s best for me? Look no further. 

[19:19] I always say, if pricing is the only thing you're looking for, then obviously a traditional bank is hands down, always going to be cheaper in pricing. However, with that pricing comes a lot of hoops that you need to jump through. Now, sometimes a borrower can jump through those hoops, and that's great. That's when you have a bankable deal. But sometimes those hoops might just be too much to jump through. You might not be able to meet all the criteria. You're then faced with a difficult situation where either you can't go ahead with whatever it is that you're looking at doing or you need to find an alternative funding source. Now ten, fifteen years ago, an alternative funding source was very, very difficult to find. Then you would pay through the nose, if you had to go down that option. Now we're in a market where, last count, I have a spreadsheet of about 280 private lenders, and I'm positive I don't have them all in there. Now, I can assure you, I don't use 280 lenders, but I like to keep track of everyone that's in the market. And at the very least, know who's about. But there are so many options out there for someone who the bank says no to now.

 [20:42] Now just make it clear to listeners, these private lenders only deal with non-coded loans. Now, what that means is commercial borrowers only. If you're investing in a property or developing a property, your loan would would have to be a commercial purpose. So, you would either have to have a company entity that's buying the property, or a company entity that's borrowing the money, and that reason for borrowing the money has to be to make a commercial transaction. If you tick that criteria, you now have a myriad of possibilities on how to source financing and supply and demand because there are so many of them out there. That's pushed pricing, I wouldn't say at bank rates, but it's certainly like getting to the point where people are saying, I've got developers that say, 'I know I could probably get bank funding, it would take me a while to get through all the hoops, but I could probably do it. But I don't want to waste nine weeks of my time, I'd rather just get the funding sorted and get building.’

[21:54] Because the pricing now is yes, it's more expensive, no doubt, but when they weigh it up, and they think I don't have to do pre-sales, which means now I don't have to discount any of my early sales to get them sold. I can just sell them as I'm building or at the end, they think whatever extra I'm going to pay for the interest and fees, I'm going to make it up on my sales anyway. So, it's a no brainer, they just say let's roll. That being said, I would say watch this space, because we're entering into a market where I have a feeling over the next sort of six to 12 months, we may see a lot of these private funds start to sort of disappear. Because as markets change and investors start to look at other options at the moment, there is just an influx of investors looking to invest in sort of these private mortgage funds, real estate debt funds. But that's when term deposits were virtually non- existent. If term deposits start to become attractive again, and other asset classes start to become more appealing, you may see a lot of these investors withdraw their cash from these private funds and that may see a lot of them shut up shop. But at the moment, there's definitely no shortage of them out there. 

At the end of the day, to invest in property you’ve got to have a business mindset. But we’re not all born with the vision of Warren Buffett, or with the genius of Elon Musk. De Marco says you don’t have to.

[24:41] I've been quite fortunate to sort of work with some great people. One of my old managers many years ago, has remained a close friend of mine and a mentor. His name's Mohammed Hash. He's given me some great advice that's sort of stayed with me, particularly around sort of work ethic and attitude. And I know they sound like really cliche things, but when you break these things down, they really are fundamental to being successful. integrity, honesty, these sorts of qualities, you would be surprised how rare they are, in today's day and age in the business environment. I could tell you, I deal with so many different funds and it's sad to say that integrity is not always something that they will present. And it baffles me to this day, because it becomes a very, very short relationship, when that's not at the forefront of how you do business, so things like that. My father gave me some really, really good advice once when I was younger, and I've passed this advice on. 

[26:07] I used to run a football academy as well a while back, and I coached and mentored a lot of young footballers, soccer players. And I pass this advice on to them too, because a lot of them would say, ‘I want to be a professional but I don't know where to start, what do I have to do? And my father gave me some advice once and said, 'You need to start from where you are, with what you've got, to the best of your ability.' And it's such an easy thing to do. From where you are, just where you are today, that's where you begin. And with what you got, just have a look around you, what resources do you have? Don't worry about what you don't have, just look around, what have you got? What can you do? You know, can I read a book? Can I do some research? Can I make a phone call? Can I get in front of someone? Can I learn from someone, so from where you are with what you've got. And the key thing here is to the best of your ability. So what I found is when you start with those three things, magic happens, then it just starts to create like a tornado around you and it sucks opportunity into you. 

[27:20] That probably touches on a little bit of what I said about before about that aha moment, your life sort of ties into that a bit as well. That's sort of a little bit of how I start my day as well with with sort of that mentality. But I hear it so often, and I used to hear it a lot from from the young players that I used to coach, but it can get very easy to get into this overwhelming feeling sometimes of I don't know where to start, I don't know what to do. So what's the point of just accepting fate and just being miserable, basically? And people are always sort of looking sometimes for this big grand moment to happen. Once that happens, then I know I'm ready, that now I can start properly, and it's usually Monday. That’s the moment you get that feeling, but it's not the case. You just sometimes need to stop, start from where you are, have a look around with what you've got, and just do the best you can and just focus on that every day and things start to happen. I'd say those sort of pieces of advice have resonated the most with me. 

Now equipped with valuable wisdom compounded through positive and disappointing experiences, De Marco has a few ideas.

[29:06] Me 10 years ago to now I would very politely sit him down and tell him to slow down. Slow down. I think it's a natural thing for anyone young and full of excitement and wanting to take on the world. You want to go 100 miles an hour. I didn't have an older brother, I've got a younger brother, but I've never had an older brother that sort of was sort of able to be over my shoulder and saying, ‘Hey, slow down. Listen, try this, do that.’ If I could have bumped into myself, I think just having that insight to be able to slow down, measure twice and cut once. I would tend to describe the scissors and just cut and then figure out if it fit after. Obviously now when you get older you have time to reflect and look back on things. So you sort of think, ‘Okay, if I had just relaxed and I'm learning that even within day to day operations of a business I find you're about to send an email, sometimes let it sit in your drafts overnight. Go back to in the morning.

[32:19] The Fabian 10 years ago would have said, ‘It's all down to my skill.’ And maybe, looking back now, I've got a bit of a theory that I've been sort of teaching my kids and to be successful at something, you need four things that go into it. Three of those things you can control, and one you can't. And the first three that you can control is time, how much time you put into something. Two, is the effort, how much effort you put into it? And the third one is skill, how much do you develop your skil? So talent is different from skill, Talent you have naturally, but skill can be developed by repetition, and the more you practice, so those three things, and the fourth one is luck. Now, luck, unfortunately, I don't care what anyone says, is out of your hands, it's nothing to do with this preparation meets opportunity. I don't believe in that, I believe luck is just luck. 

[33:24] For example, there are some kids that will be born on a dirt floor on the other side of the world with no food, yet I'm born in a wonderful city where you have all the resources I need to be healthy. That has nothing to do with me being better or more skill for anything. That's just sheer luck, so we might not understand that yet. Maybe in our afterlife, we can understand those things but right now, the only thing I can attribute that to is just luck. So, luck does play a part in a successful outcome. However, like I said, in my opinion, it's only one quarter of the pot, there's three parts that we can definitely influence. And there's no point putting a lot of time into something if you don't put a lot of effort into it. So hence, the two have to work hand in hand. There’s no point putting a lot of effort into something if you only put a fraction of time into it. So you got to work them together. But those four things, I'd sort of say when you put them all together, they play a real part in sort of where you get to.

So what does the future hold for De Marco?

[30:55] I'd probably say from from a business perspective, I'm really excited about the possible evolution of the business. There's a number of different directions it can be taken. I think the most fundamental part of that though is establishing a good trustworthy brand. And that's where all the focus is at the moment. But there's a number of exciting possibilities. I'd say watch this space over the next couple of years. From a personal perspective, obviously every day getting to see your kids grow up is a privilege, so I really take that on board. And I'm excited to sort of see what tomorrow brings, let alone the years ahead. Every day is a new experience. So I’m just really excited about those things.

Thank you to Fabian De Marco, our guest on this episode of Property Investory.