Timestamps:
1.19 | Mixing Business with Pleasure
2.49 | Hard Years
6.58 | Ready, Set, Go
9.28 | We’ve Done It All…
13.34 | Using the Paper Shield
18.27 | Planning for Retirement… at 36
22.04 | You Only Get Out What You Put In
27.45 | Income from Equity
29.18 | Mentors and Friends
34.15 | If You Want Something Done Right… Do It Yourself
37.51 | An Accessible Future

Resources and Links:

[7:26] So, at grade six, we moved to the other side of Victoria and moved into a tin shed and for six years, I lived in a tin shed while we built a mud brick house.  [7:44] I remember one day, my parents arguing over whether they should buy milk or bread.

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’ll be speaking with the best-selling author and the founder of property investment group OpenCorp, Cam McLellan. He’ll tell us how he changed his life from working at the tip as a 19-year old to never having to work again by just age 36. Plus, why property investment is only way to grow wealth using someone elses money!

 

McLellan has been so succesful in his property investment journey, that he has become financial free. However, like many successful people, for McLellan property is his passion and he shares with us what that looks like.

[0:15] I'm one of the directors of Open Corp. So, we're property development funds management and property advisory. So, for property investors we teach them how to build property portfolios.

[4:36] On any given day... So, my role with Open Corp is strategic direction. I don't have a function day to day or any task I'm responsible for except for strategic direction.

[4:51] Day to day, I'll probably work Monday Tuesday and have all my meetings on Monday and Tuesday. I don't work on Wednesdays, I do a bit of writing on Wednesdays—writing for My 4 year Old the Property Developer and My Four Year Old the Business Owner at this point in time. Then Thursday and Friday I usually keep free for me to catch up with anyone and let them–nowadays I've got a really good team in place in my businesses. So, it's taken me a long time to get them to that point, automating medium-sized businesses, but I've got a great management structure in place. 

So, Monday, Tuesday are my work days and then I'll drop into the office on Thursday or Friday but not for any great length of time. The reason is not to be lazy or anything like that because I do enjoy business, I'm sure I'll be in business until I'm 95 if I'm still around. The reason I set it up like that is I like to make sure I can get my kids off to school, go to the gym in the morning, go into work and be home for my kids when they come home while they're young and when they think I'm cool. So I'll hang out with them now and when they're 15 they'll go and do their own thing for a while before they come back. So, while they're young I spend as much time as I can with them as possible.

Part of McLellan’s desire to spend time with his young family stems from the difficult experiences of his own childhood. 

[6:48] [I was in] Melbourne in my primary school years and this probably relates to the reason I've got a process with investment. My parents owned a business, a news agency in the eastern suburbs of Melbourne. They sold that when I was in primary school and in grade six, we moved down to a country town of Warrnambool  in Victoria. They bought a motel. The vendors in the motel had cooked the books in conjunction with our accountant and this was the third time they'd sold the motel. So, they were unsuspecting buyers and within six months my parents had lost all their money. They sold their house and their business and lost all their money. So, at grade six, we moved to the other side of Victoria and moved into a tin shed and for six years I lived in a tin shed while we built a mud brick house. While I didn't have a bad upbringing and overall, at the time, didn't think I wanted for anything—as a kid, my parents provided—I remember one day, my parents arguing over whether they should buy milk or bread. So, I realised at that point in time and they were pretty open with me at the time as a young kid and what was going on, but obviously I realised at that point, that money impacted their life greatly. 

Although he didn’t want to, McLellan was forced to quickly understand the value of money.  

[7:59] I think it was then that I started realising that I wanted to set myself up and have enough money not for the sake of being greedy, but so I’d never had to put my kids through something like that. Mentally I was still young at that stage thinking of it but I always wanted to get back to the city. So, there was 10 years where I grew up as a country boy and then I left school at 16 and started working. I moved back down to the city, and in my early 20s, I bought my first investment property. The reason I bought that was I understood that wealthy people had property or I didn't have the education to understand the share market and more importantly analyse company financials before investing in shares. So, I started buying— there was no seminar circuit or property speaker circuit back then where people go and get their information from now. So, I just started buying lunch from old grey haired investors basically. I was lucky that a mate—who is now one of my business partners— a mates dad was a successful investor and developer. He grabbed us for most of our 19 or 20's and showed us how to do a few developments and dual occs and tri occs and then six units and 12 units and we were building quite a large amount of property. 

Of course, it wasn’t quite that simple. McLellan had already learned that money doesn’t grow on trees… he had to go and earn it. 

 [9:38] Obviously I had to work in jobs before I could make property my career at that stage. Jobs, gheez, I worked in tips recycling rubbish, I worked in supermarkets as a forklift driver, I worked in every disgusting job you could ever put your fingers on and most of the time, I had two or three jobs. At one point in time when I wanted to get my first property, I sold my car and rode a bike for nine months to make sure I could get the deposit for it. So, it amazes me nowadays when—look it's gonna get tougher and tougher for kids to get property. The pricing is tougher than it was back when I was young and to get that deposit together is really tough, but I think people who are into the market really need to learn how to delay gratification. I never went out for breakfast, I never had smashed avocados and I made instant coffee back then, I didn't go and buy lattes. So, people need to look at their lifestyle and look at their expenditure. If they're serious about saving for a deposit, be serious about it, make some sacrifices, get an extra job. No one's gonna give it to you is probably the message.

An investor’s first purchase is usually memorable, for better or worse. McLellan’s was no different, but he says it changed his life. 

[12:06] The light bulb moment was the first property. I think I was working in a call centre at Telstra. At the time, I was earning $22,000 a year and I purchased the property, and this was like late 90s, early 2000s, when you could do no wrong in Melbourne when you're buying properties. It was just one of those cycles that I landed in and was lucky to get hold of, but I signed the contract three months later and on the day of settlement, I actually checked the market and got the property revalued and the property had gone up just under $40,000. I was working at the time, earning 22 grand a year and signing a contract with property going up 40k. Now with that obviously I split the block on the back and put a unit out the back, but with that revaluation it gave me the equity to do that but also gave me enough deposit to go and buy another one, which I did. 

[12:57] So, all of a sudden I was doing two properties at once and I think Felicity my wife actually worked out in four or five years, we moved 11 times. So, we’d just basically buy a house, get plans, payments, get construction started, move again and just roll that out. Then the glory days of dual blocks really came to a halt sort of early 2000s I think. Every mum and dad— what we call now recreational developers or standard builders—were getting on to the fact that they could make some quick money out of doing a dual block and they started not doing the feasibilities correctly and ended up paying too much for it which happens in every market cycle. So, what Allister my business partner and Steven and I decided to do was to pull our money together and in effect created a basic syndicate so pool our money. If Al and I wanted to chuck a couple 100 grand and Steve wanted to throw half a million dollars in we'd put our equity together and buy a site. We then realised values back then between five and $15 million, so larger developments. Developments which were out of the ballpark for most small builders or mum or dad, recreational developers, but well and truly underneath the big players in town. That was a good, sweet spot for us for about five or six years and we just started getting those sort of developments underway.

While steadily growing a personal property portfolio, you might be surprised to know that Opencorp wasn’t even McLellan’s first business venture.

[14:19] We were working at Telstra, well we started a telco company. Someone called us up at the time and he said “this guy Crazy John’s making a bucketload of money selling mobiles, what do you reckon?” So, we started a corporate Telstra dealership just business to business and we ended up having the largest corporate Telstra dealership in Australia and 150 odd staff. So, that was a real apprenticeship over a decade of automating medium sized businesses. We also started an IT company, which did many services for medium sized business and we sold those two businesses in 2012. I think Open Corp was incorporated originally in 2005, so while people knew us for our telco background we were continually doing development and that was really what we love doing. So, you're not going to solve the world's problems by selling iPhones but we we both love property during that time, so Open Corp effectively is a development company.

[15:21] We also have an arm which is the sort of charity we charge for our services. Along the way people were asking you so "how do you build a portfolio?” We got sick of having coffees on weekends and teaching friends and family how to build a property portfolio and we'd probably slowed down on building our own portfolio and wanted to look at business. So, we employed someone to build their own portfolios and to sit down with people. So, Open Corps, the mentoring side of things came from there. So, we just slowly built that business— we've been listed in AFR's fast 100 list now. So yeah, the business has gone well over the last year.

McLellan thinks one of the reasons Opencorp has been so successful is it’s honesty. 

[16:26] I think that the name Open we really liked because of the transparency. Then if someone wants to come and ask us about what's the methodology when buying investment property, I'll tell them to the point of the street that I'm investing in, they want to go and do it themselves, that's fine. I'll give them all the check sheets they need to go and invest, but really, our clients use us because they don't have to think about it. So, if they don't want to do any research, if they want to make sure that their finances are structured right they want us to find the property, manage the property, organise everything. All they say is “yes, I'll have a property thank you, there's a tenant and tell me when to buy the next one.” That's really the service we provide.

As the founder of a number of businesses, McLellan has invested in numerous commercial properties. However, he says they aren’t necessary for most portfolios. 

[18:17] Just because we've purchased commercial buildings to put our businesses in and we just maintain those. A lot of people ask me, "is it a graduation thing, you get residential first and you move to commercial?" I actually think– here is one Al and I built just to give you an idea— this was one of our first medium-sized commercial buildings that we built, which was 3500 square metres. We built a basement carpark and three levels of 1100 square metre floor plates, so 3100 square metres of office space down in Dandenong. We got the land, got the planning, and we got a 10 year lease through Vic police—the Victims of Crime Unit gave us a 10 year lease. 

So, then we constructed the building and they went into the building. Now that property once it was constructed and tenanted was just over 400k positive income for us from the day it was built and we put it on the market and sold it. We heard it being bought from a number of super funds and different investment groups, so people say "why have you got a commercial property giving you a 400k passive income and you've just clogged it off?”  The reason being is we took that money paid the tax and went and bought what was at the time 20 or 30 individual houses—residential houses were a lot safer for us. The value of that building is at its greatest point when it's got a new lease, and every day we were getting close to the end of the lease and the building potentially devalues until another lease is signed. So, it's much safer to have a large portfolio of small leases then  one big lease.  

According to McLellan minimising risk should be any investor’s biggest priority.

[19:59] The main reason I say I prefer residential property is the basis of growing wealth is holding the most amount of asset with the least amount of money in the back pocket. So, if you look at today's lending landscape, if you want to buy a commercial property, most people can afford a million dollar commercial property for example, which is nowadays, it's a milk bar, you know what I mean? So, you've really got to look at what's the stability of the business going in there? If you look at commercial property do I understand profit and loss statements? Can I analyse someone's balance sheet? Can I analyse their cash flow? Can I talk to the management team? How stable is that business? How stable is the industry? Then factoring a six months lease-free period and things like that. So, then really you've also got the deposit required. The first statement I made for the deposit you might have to throw in 300 grand to buy a million dollar property. If you got 300 000 with a deposit, you can probably get 1.5 to $2 million with a residential property. So, for the same money on my back pocket, I can hold a million dollar commercial property with a bucket load of risk, or I can hold nearly double that of residential property with a lot less risk. 

At the beginning of the episode we said property is the only investing tool where you can use other people’s money. Here’s what we mean.

[21:11] By having a small amount of my back pocket I can grow my wealth base a lot faster with less risk. That's probably one of the lightbulb moments when going back to buying that first property, probably the key. The main really golden information for new investors is understanding equity and how to access equity to duplicate. Then, once you’re using other people's money rather than your own to leverage up and getting a greater return than you could on your own. Then, once you duplicate the effect of compound growth—compound growth the eighth wonder of the world. What's Einstein saying? She's a terrible book to read Einsteins autobiography, it's probably one of the most boring books I've ever read until I read John Howard's autiobiography, but in Einsteins, one of the sayings in there is compound interest is the eighth wonder of the world. He understands it, earns it, he doesn't pay it. So, in property investing compound interest is where the joy comes in.

[22:23] That was my lightbulb moment, aha moment, when I realised I could get equity from other people, buy property and earn a bucket load more than I could earn in a year by working. That was really all I wanted back then and I've got toys and those sort of things and different houses that we can take our kids on holiday to, but I'm not into the bling. Money has never been my driver, my driver has been not having to wake up to an alarm clock and do whatever I want, whenever I want, going three months a year holiday which is basically all the kids school holidays and really just having that freedom. So, money is the means to an end and really I knew that property could give me that through those light bulb moments. People ask me, they say “you must really love property.” Really, if elastic bands gave me compound growth, I would be an expert in elastic bands. It just so happens that property to me is the safest thing that I can understand and bank on to get my family the lifestyle that I wanted.

Since his first purchase at the age of 20, McLellan really has gotten the most out of his property investments. It’s almost nice to hear that even he can make mistakes we can laugh at.  

[25:18] Actually another terribly investing moment is and you wouldn't tell anybody this. So, some friends of mine were in the film industry years ago. So, this is when we were kids and we were in the telco industry and a mate of mine Lee came to Alistair and myself and said, "look, I want to make this short film, and then take it over to Hollywood and sell it and I need $7,000 to piece together a 10 minute short film, then James and I are going to take it to Hollywood and sell. We were like "come on man I'm not gonna give you seven grand that was a lot of money back in early 2000s. The boys ended up piecing together the money and they made the short film which we all loved and they took it over to Hollywood. That movie became Saw, the Saw franchise. So, in saying that, Al and I love films, we've actually created our own production company in LA and we just finished our first feature film, which premiered in Tribeca and then at Cannes Film Festival. So, we're onto a third feature film at this point in time. So yeah, that's not investing, that's having enough money and then being able to go and have a bit of fun on the side. So, you don't make films with the hope of making a bucketload of money. It's definitely not advisable thing to do, do it for a hobby.

To get to the point where owning a film company is a hobby, you need a plan. McLellan has shared his with us. 

[27:21] My vision was to create a portfolio. Once I understood equity and living off equity there's probably four main exit strategies: sell to pay off your debt, the domino effect, which is pay one property off and once you got that paid off the rent goes into the next one, so you slowly pay each one off, which you usually used in conjunction with the sell to pay down debt. You can give them away to your kids if you want at the end through a family trust, or you can live off equity. That was once I understood equity, I realised that as long as my portfolio was growing at a much faster rate, on average, then I could spend, then in effect I'm retired and I can do whatever I want. So, my goal at that stage I worked out I needed basically five well-chosen properties and let them double in value and then draw a line of credit and then draw that down slowly over the next decade when it went up in value. I enjoyed business and Felicity wouldn't let me stay at home all day because I'd annoy her too much so I still enjoy creating businesses and playing in the property space. So, I've just continued on with it but that was my initial goal was to have five properties which are growing in value fast enough that I didn't have to work anymore. 

[28:58] If you have a 10% growth rate, which you can in Australia, I think it's 8.34% on average, because their capital city, if you had a 2.5 million might be 220 grand, it's growing in value. If you draw 100 grand on that, which is tax free to live on you still get a nice buffer there.

[29:27] The banks nowadays through private banks or most of the areas in the private bank or retail sector will deem you a professional investor. If you've got no income, they'll like to have your portfolio at about a 50% LVR. So, you might require a little bit more than that, but that was my goal when I was first naive within the industry and that was my first goal with what I wanted to achieve.  

Coming up after the break, we hear about the personal qualities that have enabled McLellan’s success…

[0:25] Pt. 2 "if there's one different thing about you, and the majority of Australians out there is, I don't want to sound arrogant, but I've got no self limiting beliefs.

The type of people he has placed around him… 

[12:45] Pt. 2 “but we challenge each other, if one of us slows down or has a bit of time with the other, we just challenge ourself I suppose with new ideas.”

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

 

So what makes McLellan so different from other investors? He actually says not that much. It’s just about sticking to the strategy. 

[0:18] Now I think probably if I had to pinpoint it—actually my business partner pinpointed this for me and brought it up— he said, "if there's one different thing about you and the majority of Australians out there is, and I don't want to sound arrogant, but I've got no self limiting beliefs. So, when most people will need to analyse things and perhaps get analysis paralysis or fearful, I realised that my greatest fear was doing nothing at all. I knew that if I did nothing at all and just got a job and took too long that was probably the worst outcome I could account for. So, even if I invested and made mistakes I was still better off than doing nothing and that gave me I suppose the need to want to learn about it because I didn't want to make mistakes. I saw most property investors the way they pick property is pretty much gambling to be brutally honest. I don't see any difference between the most way most people pick properties and investment and gambling. The reason for that is they don't have a way to pick the best investment every time. They'll go off whatever the papers say at that point in time and sadly I don't know any journalists that have a good property portfolio and can write credibly on it, I wish there were. 

[1:27] The newspapers and all the publications really, what are they after? They're after selling papers, selling publications whatever the publication is. So ,they don't report — not talking about the industry publications, but just in general, journalists want the wow factor. [1:43] So, no one's going to say the market is generally just bubbling along, either it's going through the roof and no one can ever afford property again, or the sky is falling out our head and the market is going to bust and everyone's going to be destitute and broke because they're the only two things and things are so painful. So, I really wanted a way, rather than relying on information, I wanted a way that I could be comfortable. Once I was motivated to buy property, I wanted a way that I could be comfortable. Now, I was really good at creating processes for business, but when it came to property most people spend 40 hours a week working for someone else making someone else money but they spend no time at all with a process to select the right property to purchase. So, I created a system I called map, which is market area property. So, I analyse the property markets finding which ones I want to knock out, then the growth areas that I don't want to invest in and then finally I find the optimum size and quality property for that area. So, basically I can find this property every day of the week, regardless of market cycle. 

Success brings with it a new set of challenges. 

[3:10] I'm building around 1000 apartments a year, but really I found in the early days, I bought my first property and I told my parents and a couple of friends. No one really shines on the fact that you're a property investor, most people go “well done, good on you doing something.” Most people will be negative about it and the reason they're negative about it is two reasons. Either they're scared to do it themselves and the Australians don't like the tall poppy syndrome. Really most people, if you think of the amount of people in Australia who are successful investors, so I think there's about 15,000 thereabouts according to the ATO, that have six or more properties. I've worked it out and I think you'd have to pack out the MCG with 100,000 people and then they'd be around 63 people in the MCG who have six or more properties. So, if you were going around talking to people in the MCG, you'd have to talk to every person in the MCG to find the 63. So, that means everyone else besides those 63 people are going to be negative at it. So really, I just started buying property and keeping it to myself. So, I don't tell people what my property portfolio is worth anymore because really, it just makes me seem like a wanker and makes them feel like shit. 

McLellan says the property strategy he used to achieve his lifestyle goals, was really the only option. 

[4:42] Medium density residential property with good land content in the outer ring suburbs is primarily what I purchase.

[5:04] [But] equity growth is the only way you'll build wealth through property and real wealth comes from doubling the asset value every seven to 10 years. I don't know anyone, any investor— and prove me wrong, that frustrates me there are companies out there that sell based on “buy negative gearing property to reduce your taxable income more”, “buy cashflow positive property, because that's the way to go.” I mean, really, they're just promoting something to sell to plug people property. I prefer both. I'm greedy and you should to prefer both. You should get growth properties that over a short period of time—three to five years—become neutral and cashflow positive. So, I've never heard of anyone—so the  grandfather of cashflow positive properties Steve McKnight wrote a book a couple of decades, a decade or so ago, I think it was zero to 250 properties in three years or something. I can't remember.

[6:00] That was great back then. Steve was an accountant, buying $2000 to $5,000 properties, he bought a couple 100 properties, sold his portfolio and —don't quote me I'm trying to think of a video that he did a few years back where he said, “it's not possible in Australia to build a cashflow positive portfolio to supplement your income.” The reason for that is the capital required to do that in today's market is impossible to do, but really I've never heard of anyone, even if they do get a small amount more, if you get a couple of $100 extra, as Australians we spend it, we're terrible savers. So, getting growth property, which will double in value is really the only way to achieve wealth and financial freedom through property.

McLellan has been kind enough to share with us the specifics behind his approach to creating income from equity. 

[7:18] Buying growth properties for example. If I've got a portfolio going up at $200,000 a year on average—obviously you've got to wait and it’d be safe to wait seven to 10 years for it to double—then if it's going up faster than if I want to spend — using hypothetical numbers, if I want to spend $100,000 a year tax free, I can draw from a line of credit the equity offer. If my portfolio is going up at 200,000 a year and I'm drawing at 100,000. Well, my portfolios growing by 100,000 a year but I don't have to go to work for a living.

[7:57] Yeah, correct. That's why I like capital city properties which go up in value, because rents obviously follow the growth of property. Once the yield goes up, and I've bought lots of established houses over the years—many, many established houses in the early days. In the last decade I have only purchased new properties because I like that depreciation in the first three to five years, because it really helps with reducing the holding cost of the property until a point. I put rents up every single time on them, whether it's $5, or $20. It will accustomise your tenants to rents going up by putting your rent up every time and in around three to five years the property's neutral, so it's currently offsetting itself and holding its own value. Then after that, you're still getting the growth but you're getting cashflow positive as well. People should be greedy and they should expect both so don't buy property on one or the other.

The most effective way to learn is to learn by doing. When you add an experienced mentor to that process, it helped him to be the best. 

[9:11] Steve Lewison is an old guy now— old grey haired guy that sits on the board of a couple of companies. He'd probably been developing for about 30 years before I met him and then I became friends with his son. Alistair his son was buying a property in Bayswater in the outer suburbs of Melbourne. I said to Steve, I'm pretty keen to understand property investing and Steve said, "well, there's one two doors up the road.” I think I paid $125,000 or $130,000 for the property or something like that at the time. It went up about $40,000 in three months and I ended up chopping off the block in the backyard and putting a unit on the back of it and Steve taught us how to and all the basics of investing in property. 

[9:53] What had sparked my interest in property was I watched an old video of Jan Somers where she explained that the theory of buying one property and using the equity to duplicate. So, she explained duplication really and compound growth and that was sort of that light bulb moment for me. Until I saw it myself on my first property, I could comprehend it but didn't see the power of it. Jan Somers back then, you know, the big shoulder pads, so, we're talking in the mid 80s, early 90s is when I first sort of got a taste of what investing could do but it wasn't till later until I started investing myself. 

[10:59] Really just Steve had a circle of friends, of property investors and developers. I'd just get dragged along to lunches and buy them lunches and supply them with beer and just drill them over a four or five hour session and pick their brains and go out on site with them.

[11:37] Business mentors, I've had a number different business mentors, but primarily property. I've got 70 people in my business, which range from development managers, corporate accounting, to civil engineers, architects. So, I'm pretty fortunate that I've got probably some of the most astute property minds in Australia under one roof and I tell you what a minute doesn't go by where we're not tossing different ideas around and strategies and comparing it back to the core strategy and investment. So, it's probably a good house— a good place that just nurtures property, enjoyment, knowledge.

Iron sharpens iron… McLellan says having someone to share with is as valuable as money itself. 

[12:28] A personal habit, contributing to my success. It's probably Alistair and I probably having someone to play kick to kick with, I suppose is the best way to put it. So, obviously him and myself are business partners, we've been investing since we were kids. We invest together individually, but we challenge each other. If one of us slows down or has a bit of time with the other, we just challenge ourselves I suppose with new ideas. “There's another deal coming up, do you wanna go into this one or is it the time to buy another property?” So, I think having someone to go along the ride with is important. It's a lot easier to build wealth next to someone and you will also go on life journeys. It's good that Alistair has built wealth as well and we can go on holidays with our families together, and he can afford the things that I can so the friendship remains strong. 

Many investors have had their lives completely changed through the permeating power of books. For McLellan, reading is not as much about gaining knowledge as it is finding inspiration. 

[13:37] Books ! Books are really crazy man. Actually, I used to read probably a book every couple of weeks, but a lot of mine are horror novels and those sort of things. I love reading business books more than property books. I just finished reading Elon Musk's book, which is a cracker book. A lot of the old Branson books, I like my Jack Welsh books— Straight From The Gut and things like that. The Rise and Fall of Alan Bond and the Rise and Rise of Kerry Packer. I read more business books than I do property as well—I've gotten enough knowledge on property that I don't generally find that I'll get much out of the property books anymore. So, more enjoy the business stories.

[14:36] I think it's just watching people go through different challenges and how they approached it. I read a lot of musical biographies and that sort of thing as well, so I think—I mean the business books initially helped motivate me and usually I’d read him if I go on three or four weeks holiday with my wife—this is before kids— but you get enough time by the pool and I start to go stir crazy and I'd need some business influence. So, I'd start reading business books and the next thing I'd be all hyped up and send emails back to work. I think just staying in touch with business and because I'm not involved in my business as much day to day and I've probably backed off reading a lot about business and property over the last year for a number of years now.

Of course, books are great vehicles for passing on knowledge, but McLellan struggled to find the right ones in his early property journey. So, he wrote his own. 

[0:43 Pt 1] The book that I have currently—I started writing in 2010 and released it a couple of years ago, was My Four Year Old the Property Investor. The reason I wrote it, there was really nothing out there—so not saying that property books aren't good, but what I was wanting for a property book was a way to transition knowledge to my kids. I think it was about 2010 when I started writing— it was when I was going overseas and said to my wife, if something happens while I'm away and the worst happens, I've got no way to transfer this 15 years of knowledge of property investment and everything I've learned along the way to the kids. 

I started writing a journal, just literally some basic notes on property and a basic journal, which I thought might take a couple of days, was 20 hours a week for the best part of the year. That book got published and the way I constructed it was as if I'm speaking to my kids. So, the majority of it is literally the way I speak to my kids, that's very plain and simple language, but they're fairly complex subjects that we're going through. So, I broke it down—we’re fairly process orientated, I have a number of different businesses that are very process orientated. So, an overview of the industry, all the ins and outs, which gives the basics on property and property investment in Australia particularly. Then I've got the process that I use because I wanted to find a way that I could determine the best property in Australia to purchase and add to my personal portfolio at any point in time, regardless of market cycle. 

[ 2:14 Pt1] So, it's pretty hard to compare property A and property B, and then get the winner of that and compare it to property C and go through the 9.4 million properties in Australia. I developed a process which I'm happy to go through with you later if you need to that enables you to pick the best property every time. Then, I wrote up the check sheets that I use, everything from the idea of setting up your team and getting your finance structure correct, because finance is probably one of the main things which stops property investors duplicating. The way banks want finance structure set up and the way property investors need finance set up are about as polar opposite as you can get. So, setting up finance structures, then how to identify the best investment and certainly the market growth corridors for your property. Then settlement checks, conveyancing checks and then once I got to the stage where I had a pretty serious portfolio and I had a process to build that portfolio, I became overwhelmed again. So, I created a system, which I called— fairly zen— which is the circle of duplication which is basically a way to continually check your equity levels, monitor your overall portfolio and know when to duplicate again. So, I created check sheets for each of those and put those in the book as well. So, basically, if I fell off the perch so to speak, I could hand that to my kids and go “there, you're now competent property investors.” 

What started as a helpful journal for his own family, has now become one of Australia’s best sellers.

[3:41 Pt. 1] They can read it when they're old enough to comprehend it. The book went to number four on Newslinks, it's been in the bestseller list for a couple of years now as it was the number one property investment book in Australia. I couldn't get it to number three, that really frustrated me because number three at the time was 50 Shades of Grey. So, go figure, women's fantasy books versus property investment. I didn't really have a chance. 

Even with his family set for life, it’s not the end of McLellan’s property journey or for OpenCorp. New and exciting opportunities await. 

[19:19] We've rolled out a property management division across two different states. We just had a mortgage broking—business wise we're talking— our developments are ticking along well. We're looking at starting a large scale residential fund, so there's a lot of commercial property trusts in Australia and I think I mentioned to you before, sadly, I believe it's going to become very difficult for people to get into the property market. In Australia with the way prices are going it's becoming more and more difficult for a younger generation to get into property. So, one of the ways that people could invest in property without if they can't purchase a property themselves. So, we're in the early throes of rolling out a financial services licence, rolling out a fund which holds residential property across the capital cities which will allow people to invest and trade shares within property and invest in Australian property and get the growth and rental yields, without having to hold a whole property themselves. So yeah, it's gonna be something new for the market.

[20:28] Even if you're thinking that you've got a small amount of money and you want to continue to save for a deposit, you could invest in the fund itself and get the same growth that you could owning a whole property. Then if you want to go and buy your own home you take the money out of it. So, we're looking at making sure that the shares are able to be liquid, so they're tradeable and then listed effectively, but we're looking at a number of different—So, I'll be holding outer-ring, medium-density properties with good growth, but good yields, some more very low-yield, blue-chip property and also doing developments in that, so we're getting development profit in the fund as well. So, investors overall will get the benefits of all property classes effectively.

[21:21] Because it’s a development fund and it's across Australia over the long term very much so. While there's no past performance to indicate future performance, if I use a required term, you can't promise anyone anything but the product disclosure statement will give an idea of the investment. Investors can make their own informed decisions, but the idea is that we will be able to outperform, but there's no guarantees. It's a financial product so there’s no way you can give guarantees of any sort.

Thank you to Cam McLellan, our guest on this episode of Property Investory.