In this episode, armed with a wealth of business knowledge, he gives insight about a particular path he nearly took, why financial literacy is paramount, and why haggling isn’t always worth it in the end. 

Timestamps:
01:54 | Agent Khalil, Reporting for Duty
04:38 | Paternal Pathways
07:40 | Selecting a Career
11:14 | Honing His Craft
15:10 | Pivoting to Property
17:05 | Work Ethics
21:17 | Making an Impact
23:36 | The Classic Debate: Car vs. House
27:04 | Cricket and Characters

Resources and Links:

[00:14:24] The problem is there's a misalignment with what a high percentage of Australians see as a primary asset or wealth building class, which is property. So we took a decision to shift away and totally abandon financial planning and shift to more a property consultancy.

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

 

I’m Tyrone Shum and in this episode we’re speaking with Sam Khalil, the Managing Director and founding member of the DPN Group of companies. In delving into his experiences growing up and starting businesses, he shares all about the path he nearly took, why financial literacy is paramount, and why haggling isn’t always worth it in the end.

Tyrone Shum:   

With over 27 years in business under his belt and a team of over 70 people across Australia, Khalil has a wealth of knowledge in all things business. Between property development, financial planning, and more, there isn’t much he hasn’t tried! However, everything he does is tied together and always aligned with his humanist values.

Sam Khalil:   

[00:01:54] My usual day's at least 100 emails, a number of calls with key team staff, developing innovative projects within the group. Innovating [and] enhancing what we do, connecting with my wife, which is really important. I like to read. I read spy novels.

  

[00:02:15] Tom Clancy. I like that stuff. Fairly long books and stuff like that. So I haven't watched TV for years.

Tyrone Shum:   

Considering his family’s history and education, it isn’t a surprise that Khalil prefers books to TV.

Sam Khalil:   

[00:03:10] [I have an] interesting background. I was born in Sudan, which is in North Eastern Africa, neighbours with Egypt. Wasn't there for long. My dad won a scholarship out of seven nations in Northern Africa to the London School of Economics. 

  

[00:03:23] So when I was born, my grandmother took care of me for the first six months. My mum and dad went, he started at the London School of Economics. Then we followed and we lived there for three years while he got his doctorate there. 

  

[00:03:34] Then he got a job with the Reserve Bank of Australia and we ended up in Australia. And so I grew up [here], we start[ed] off in Ashfield, which is sort of inner west of Sydney, and we moved to Bangalore in the Sutherland Shire, so I grew up in the southern Shire. [I] went to a boys school called Jannali Boys High School. It was pretty rough.

  

[00:04:06] There is a bit of street smarts you learn in certain regards. So yeah, that's my upbringing in a nutshell. Sydneysiders since then, and living more in the Eastern beaches after that.

Tyrone Shum:   

His father passed away when Khalil was just six years old, but he didn’t lack for father figures.

Sam Khalil:   

[00:04:38] It was pretty sad. But my mum got married again. And my stepdad, I mean, he passed away a few years ago, but he was fantastic as a dad. And so I didn't see him as a stepdad in regard. 

  

[00:04:48] But it wasn't like there was a connection with my dad and his economics. Probably more genetic than social or nurture. It's probably more the pathway I went. So if we sort of talk about the type of work I started doing, I worked in freight forwarding after school, then some gym membership sales, office products. 

  

[00:05:13] But it was more a friend of mine that said to me, 'Hey, look, there's this new industry, it's exploding and growing. It's financial planning'. And I got into financial planning before I got really into more property focused services, or businesses or investment.

Tyrone Shum:   

[00:05:31] It's very interesting, because it sounds like you went down the path of what your dad was supposed to do.

Sam Khalil:   

[00:05:38] It is a bit different, like, he was working on actually, at the time, computer systems for the Reserve Bank, it was early stages, and helping create computer modeling for the reserve. So he sat more at a level where you're creating policy and data at a national level. So he was a professor of economics. So I didn't go down that pathway.

Tyrone Shum:  

As he’s been in Australia for the vast majority of his life, he’s definitely one to call Australia home.

Sam Khalil:   

[00:06:25] I guess if many people can recall anything before the age of four, it's only patchy and just little pictures and that. So Australia's all I've known and as you can hear by my accent, there is no accent at all. It's Australian. So it's not like I have an accent that's from the Middle East or Northern Africa.

Tyrone Shum:   

[00:06:44] And have you been back to your home country of Sudan recently?

Sam Khalil:   

[00:06:47] Only once when I was nine. So I don't really... it's not a reference point for me. So Australia is really home for me. I mean, I speak Arabic, but it's broken. And so family and friends would laugh at me when I speak and I struggle, so I probably have the vocabulary of about a four or five year old in Arabic. 

Tyrone Shum:   

With such a highly educated father, you might expect Khalil to have gone straight to university from high school. However, he had other plans.

Sam Khalil:   

[00:07:40] I started working, I just wanted to work for a year. So shipping, I got a job straight out of school in handling big vessels that came in and unloaded cargo and stuff like that. So I worked for a freight forwarding company. 

  

[00:07:54] And then interesting[ly] enough, I went to Theological Seminary, I thought I was going to be a minister. I did that for a couple of years and worked part time. And, yeah, so I thought I was gonna go down that pathway. But it didn't end up going that way.

  

[00:08:22] If I go into, you know, the impact of losing my father at a young age and stuff like that, it's very shy. And I was really impacted by my local youth group, and my church community, which had a really strong formation of my character, my confidence. And I struggled as a kid, just even eating. I'd vomit at birthday parties. I was just so anxious. 

  

[00:08:46] But it was transformational for me to be part of my local church and youth group and that, I got a lot of encouragement. And I guess, for me, father figures in the church were sort of like the ministers and the youth leaders and what have you, so [they] had such a profound impact. 

  

[00:08:57] I guess it's like a kid who has had maybe a tough home life and had a teacher that has an impact on him and they want to be a teacher. And so for me, it was that sort of impact on me that I thought, 'I really want to help people go down that pathway'. 

  

[00:09:10] But interestingly, I mean, even in church, the minister would get up and talk about the footy or something to warm up the crowd and stuff. Actually, when I'd read the paper— we used to read physical papers— I would go to the sports section and throw it out. I didn't really care, but I'd be interested in the business section. [It] just seemed that was in my DNA. It's just what I would naturally go to. I was interested in businesses and business models and stories and stuff like that. 

  

[00:09:10] So yeah, I wasn't necessarily drawn to sport. And it's funny, like, I mean, I'd meet famous sports people [and] I'd have no idea who they are. Because I wouldn't be falling over them in any way. So I'd meet famous cricketers, and they'd say what they did and I'd say, 'Oh, are you any good?'

  

[00:09:59] It's a different pathway for me in starting there, but I guess what I was passionate about ended up pulling me over that way and then I'd end up back in business. I was sort of conflicted because it was probably more my heart in a certain degree that that was affected growing up. And saying, 'I want to go down this pathway', but I kept getting drawn back to being involved in business and entrepreneurial.

Honing His Craft 

Tyrone Shum:   

His friend from church who got him the membership sales role at the gym was also the catalyst for Khalil’s next career move as well.

Sam Khalil:   

[00:11:14] He went into financial planning industry and said, 'Hey, you've got to come and check that'. 

  

[00:11:17] And I was always interested in finances and things and how to help people make money. And so that's when I jumped into that field and studied and got a diploma in financial planning and what have you. But it was always on the job training. 

  

[00:11:32] So some people will say school was the best part of their life. I couldn't wait to get out of school. I was more interested in practical application and training and doing stuff as we go through. Which is very different, because it was very hard for my mum, because coming from a nation that was very poor, education— particularly tertiary or university, and that my father was a professor— she really wanted me to go to uni. There's the book smart and the street smart. And I took the street smart approach.

  

[00:12:18] And well, the main thing, again, is obviously, that you keep learning and really become great at your craft, whatever that may be.

Tyrone Shum:   

[00:12:25] And how long were you in the financial planning space for?

Sam Khalil:   

[00:12:29] A number of years, and it's really what took us into our business into property. Because we were doing quite a broad spectrum of services, anything from managed funds, shares, insurances, and what have you. And then, obviously, an asset class for people was property. 

  

[00:12:44] And just over time, even dealing with business development, people from all the funds and the funds management industry, you'd sit with them. And there's this the volatility, the share market and everything. And it was just so much work and so much compliance. And you just found that— you know, I mean, look, you've got a podcast on this— people that just love property.

  

[00:13:07] And I thought, 'You know, what? Let's just focus more on property'. And the vehicle that helps that is finance. And so as a business, we made a conscious decision to get out of financial planning. We started getting heavily regulated and it's continued to do so. And even the government, you can see now has regulated it so much, it's so expensive, and now people that can't afford it don't have access to it. So they've made it safe. But now it's so safe that people who need advice can't access it.

  

[00:13:52] Podcasts like yours now are taking over that role, and people writing books and things like that are actually creating financial literacy and education and that. So people are more having to go down those channels, because a $400 to $500 financial plan is a large chunk for a lot of people. 

  

[00:14:13] And sometimes it's too narrow. And they tried to change that by making it a fee based service versus a commission based service. But property was never a showing on it. So the problem is there's a misalignment with what a high percentage of Australians see as a primary asset or wealth building class, which is property. So we took a decision to shift away and totally abandon financial planning and shift to more a property consultancy.

Coming up after the break, he shares more about DPN…

[00:15:32] And then we said, 'Look, dude, we want to more establish a brand and a business from there'.

How his interest in helping people attracted the attention of one of the largest global companies…

Sam Khalil:   

[00:18:26] One of the businesses we launched was in the specialist disability accommodation.

He explains how a time where he envied his friends worked out for the best.

Sam Khalil:   

[00:25:35] I think there's a good definition of discipline. Discipline is putting off what you want now for what you want later.

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

Tyrone Shum:   

DPN has been in business since 1996, and was doing property for the majority of that time. However, it didn’t pivot to property full-time until 2008.

Sam Khalil:   

[00:15:10] And the brand was Direct Property Network. And then we shortened the name to DPN as a business, and have been just built an ecosystem of companies, as we've grown from just being a small financial planning business. There's two business partners, we have our own client base pre 2010. 

  

[00:15:32] And then we said, 'Look, dude, we want to more establish a brand and a business from there'. And I began to bring my passion for design and what have you, and really infused that into the business. And it changed then from just being some private practitioners with their own individual client base to creating a corporation and enterprise.

Tyrone Shum:   

[00:15:53] That's amazing. So it sounds like you had a very short amount of time working for someone, then you went pretty much into your business as a financial planner, at a very young age.

Sam Khalil:   

[00:16:05] I was 23 years old, I was in office products, I had a company car, earning really good money. And it was like, go start a business and leave all the security and work on commission based income. 

  

[00:16:17] And yeah, it was pretty daunting at the time. So I left and saved up money to make sure I cashflowed myself. But I was working under someone else at the time, and didn't really like their ethics. Then I left and started a business at the time called Integrated Financial Solutions, which was the genesis of DPN. And yeah, that's the financial planning business. And we did that for a number of years and all the certifications and what have you. 

  

[00:16:41] But as I said, we shifted down into more property and finance and then have built some enterprises within that.

Tyrone Shum:   

At the time, his parents were running a cafe. While it wasn’t his mother’s first choice for a career, she gave it her all and taught her son to do the same.

Sam Khalil:   

[00:17:05] My mum had a degree in law and history and that, but being new Australians and [having] English [as] a second language and stuff like [that], and what she'd studied wasn't relevant here. So, as often they end up in service industries. But strong work ethic, provided for us and what have you, but it's not like they had a massive impact on me in relation to the field of work that I've chosen, apart from being very supportive and encouraging.

Tyrone Shum:   

With his work ethic from his family, he had to pick up the property bug somewhere.

Sam Khalil:   

[00:17:42] The influence was more one of my best friends. His name is Rod Stewart— not the singer. And then, I guess, my passion for property with some friends, the more often I've visited and renovated a house, and I was just fascinated with interior design. And that sort of flicked a switch in me that's just become an obsession more than anything now. 

  

[00:18:06] I got really interested in design and architecture and all forms of design, whether it be graphic design, interior design, product design. You can see one of our core values is phenomenal presentation. So from our website to our product development, we focus heavily on having design, the creativity and the intentionality behind that. 

  

[00:18:26] One of the businesses we launched was in the specialist disability accommodation. And that's where we entered into a sector that we'd never been involved in through one of our colleagues and clients. And we built a home for disabled Australians under the NDIS. And we just took our DNA of design and infused it into that product.

  

[00:18:50] One of my great examples or admiration was for Apple as an organisation. And my staff got sick of me talking about it. But interestingly, we ended up intersecting with Apple at the headquarters, and they saw what we're doing.

One of Apple’s core values is accessibility, which aligns with DPN’s. Once they connected, they collaborated on a project.

Sam Khalil: 

[00:19:11] And then they bought three busloads of people, we opened the house in February 2020, the Prime Minister at the time, Scott Morrison, Apple were blown away, because we set the global standard for some of the accessibility products using Apple products. So the kitchen bench would elevate using Siri, and it was secure as well. 

  

[00:19:30] And to the point that I even had a bit of a streaming service with some of Apple's key employees globally around it. So it was just interesting that these core values that we had and that I've emulated created that opportunity to intersect with an organisation that I'd admired and annoyed my staff with. 

  

[00:19:48] Now Apple's involved in our project and helping us out in that and it was really rewarding to see that our values that we've practiced and drummed into our team time and time again manifested into a product that set the standard for disability accommodation and lifted it for everybody else. 

  

[00:20:13] And it was always, like I talked about, it's like Apple when it entered into the phone market. They'd never built a mobile phone, but totally transformed it. 

  

[00:20:20] And I guess it's part of our core purpose, which is to empower people to live the life they want. And our big, hairy, audacious goal is to empower millions of people to live the life they want to live. It sounds quite audacious, and that's what it's meant to be. But for a small company, how do you do that? It's not always that you're directly servicing every single person, but through influence, if you lift standards, and you impact your competitors and everybody else, that's how you can impact and empower people's lives.

Tyrone Shum:   

With the NDIS still in its infant stages, it’s not quite as well-oiled of a machine as it will be in the future, but it’s on its way there.

Sam Khalil:   

[00:21:17] It's tough. It's not as easy, and I think everyone's working on it. But it's a great partnership between government, not for profit organisations which still provide support and independent living, and private development companies like our organiser Casa Capace, DPN Casa Capace.

  

[00:21:33] But as we open all these homes, each one, the impact on people's lives, it brings tears to you. Like we had one lady who had been living in a hospital for six months, because she didn't have a place to stay. But she came in and she hadn't been showered properly for that time, she had tears because she could now, the way the house was done, she could have a shower. 

  

[00:21:55] And stuff like that, you just don't realise the impact that you can have, but also just how great a nation Australia is. And if you talk about, you know, how can this happen? It's just, you know, we can't take credit for that. It is just the value system our society has. 

  

[00:22:16] And I know there's some challenges with the NDIS. But fundamentally, the ethos behind it is just that we place so much value on people. And the fact that we invest so much as a society. 

  

[00:22:27] And if you look at, I mean, just even the history. And under Adolf Hitler in Nazi Germany, the way they treated some people, they dehumanised people, and they shunned them. So I think as a society, the fact that we're investing so much on people and lifting value, it has an impact that's far greater than the financial impact. The dignity we've put on people. 

 

[00:22:50] And like I said, I was born in Sudan, but Australia is an incredible nation. And we can complain about a lot of things, but frankly, from our health care system, the way we treat people, you don't want to be in many other nations compared to Australia.

Tyrone Shum:   

When it comes to property, acquiring his first home was a process that many are familiar with.

Sam Khalil:   

[00:23:36] It was as a townhouse that I bought off the plan, it was five townhouses in the project, in Kurnell Street or Kurnell Road in Cronulla, and it was $215,000. And we scraped everything. And it's just before we got married, and we just put a deposit down at some 20%. And my parents gave me a few thousand dollars. We didn't want to pay mortgage insurance at the time. 

  

[00:23:59] So the loan was $156,000. At the time, I thought, 'That's a mountain of debt. How am I ever going to pay that off?' It was overwhelming the numbers, you know, $156,000. Now it's laughable. But at the time, it was just like, 'This is crazy'. 

  

[00:24:16] It was interesting. I met Sean and Katrina, who were friends, but Sean's now a business partner in the business. But we were there, and he was teaching at the time, and we would talk about, 'Imagine you bought five of these and held them for years'. And this is not knowing that we'd end up being in this industry at some point, but we postulated the idea of with all this debt, it might be better to buy properties instead and rent them out and spread your deposit and hold them over time. Not knowing that there's a business at some point.

Tyrone Shum:   

[00:24:51] Is that what happened?

Sam Khalil:   

[00:24:53] It's still a property investment but it was a home as well. But what I do know at the time is other friends were buying pretty flashy cars, taking out a car loan for four or five years. We just saved everything to get into it. We had a crappy Daihatsu Charade, we kept one car, we packed our lunches, we had no furniture, we had furniture probably pre World War II given by family, and it was all just, 'Let's get into the property market'. 

 

[00:25:20] And what was fantastic about it was in three years that the appreciation on that was double what my friends had bought nice convertibles for. And their cars are now halved in value. And they were looking at starting to get into the market. 

  

[00:25:35] I think there's a good definition of discipline. Discipline is putting off what you want now for what you want later. And so we just had to go without, but I didn't regret it because the increase in equity was transformational. Whereas those people started coming to see me and asked me for help. And [said], 'I've got this great car', and it's like, 'Get your deposit, get into the market'.

Tyrone Shum:   

[00:25:58] Sorry, get rid of your car, get into buying the house now.

Sam Khalil:   

[00:26:02] Apart from the anomaly of COVID, generally cars don't appreciate.

  

[00:26:12] It's just a supply demand thing, but you know, it is an anomaly. And it's not like you're gonna make anything that's going to transform your life. It's great. I mean, there's been some amazing stories with collectors cars, but fundamentally, it's not a strategic game changer for anyone.

Tyrone Shum:   

As for developments, his worst moment is one he wasn’t in control of and features an unnamed but well-known cricketer-turned-developer.

Sam Khalil:   

[00:27:04] We started off with raising funds from clients to invest in development projects that were large subdivisions. And there's just, I guess, a level of trust involved. And they did well, and then clients rolled into the next one, but this person kept borrowing too much, high leverage and [the] GFC came. And it just collapsed. Two million dollars of client funds and that was terrible. 

  

[00:27:30] And I guess one of the key things we learnt out of that, you learn in lending, it's character of the person. And Lloyd, my business partner said his grandfather than me, 'I wish we'd known this principle when'. 

  

[00:27:44] You can never do a good deal with the wrong person. 

  

[00:27:49] And that was such a sage piece of wisdom, which is [something] we've tried to really keep [at the] forefront. What's the character? It doesn't matter how good the deal is, [it] doesn't matter how good the contract you have [is]. If the character is wrong, this deal is going to blow up at some point [in] time. It doesn't matter how much money or opportunity is in it. 

 

[00:28:05] It doesn't even have to be an evil person. Because when we say the wrong person, it just means that it's either a character issue, a capacity issue, or a competence [issue]. So you've got to look at those three things. So as we've looked at some other ventures is, someone's [got a] great character, the competence good, but then look at the capacity. They're too stretched, they can't fulfill on it. 

  

[00:28:33] Character's an easy one. You can't trust them, it's just gonna blow up, [it] doesn't matter how good the deal is. And the other one could be competence, they could have a lot of time, they could have a great character, but are they able to do it? 

  

[00:28:46] So I think if you look at those three things, they're really important. Particularly in development or whatever you're going to do in business, you can't get away from that. So if you go into business, you've got to see it as a very intimate relationship. And you can't do a good deal. [It] doesn't matter how good the deal or the opportunity. If I've given anything to your listeners it's some wisdom is it will never work out. Because who it is will always impact that venture. And don't delude yourself that you'll get away with it by striking the deal or taking advantage or making it in your favour.

Tyrone Shum:   

Ultimately, deals, transactions, and businesses are all people anyway. Khalil recognises that if you took people out of the equation, nothing would exist.

Sam Khalil:   

[00:29:30] They influence it more than anything else. So even technology and that, people are going to be critical in having a positive negative or neutral impact.

  

[00:29:41] [In] 2016 I bought a house at Whale Beach, at the northern beaches of Sydney, Palm Beach, like pretty prestigious sort of area. It's a couple of million dollars and it was a bit more of an emotional thing, but I thought it'd go up really well, and three years later, it had gone sideways. I could have just bought a normal investment property in St. Mary's or Western Sydney for better. 

 

[00:30:06] Changed it up again with the advent of COVID, the area's exploded because it was so far away. Like you said, 'where is it?'. But because it's just so far away in the northern parts of Sydney, it just geographically ended up being a second home place for people. People have that as a holiday, but now because people can work remotely quite often, lifestyle has trumped accessibility.

Tyrone Shum:   

Another low point for him was following the GFC when properties were down. At that time, he was looking for a home to purchase and renovate.

Sam Khalil:   

[00:30:42] And sort of part of our story was at Paddington, and I was just driving the bargain too hard for $20,000 less. Which was negligible, it was, like, 1% of the price. And the property doubled in two years.

  

[00:30:56] It was a bad decision in that I was being just too frugal. It's something that, you know, I work with clients, people all the time, they say, 'I can't afford more than $1 million'. And it's just human psychology. I said, 'Can you afford $1,001,000?' 

  

[00:31:10] Sometimes we undo ourselves with nice and symmetrical numbers when we don't actually objectively look at the opportunity. So you can do yourself in by making the wrong decisions, but you could also miss opportunities because of being emotionally bound to certain numbers. So that was an opportunity cost decision, because I was just trying to get a nice round number that I liked.

Sam Khalil’s story continues in the next episode of Property Investory. We dive deeper into his passion for design…

 

[00:02:40] But what I do like about it is the craftsmanship, the design, and again, the whole theme of design.

 

Why there’s a difference between excellence and perfection…

 

[00:09:04] Because you say, 'Let's make this the standard, not accept what status quo is'.

He reveals the chance he took that went against what everybody told him.

[00:10:04] And not many developers would do this, you know, because there's too much of a headache.

 

And that’s next time on Property Investory.