We’re back with Futurerent founder and CEO Godfrey Dinh. In this episode we’ll delve further into Futurerent’s practices, philosophies, and future plans. We’ll hear about the scariest time the company has faced and the epiphany behind the birth of Futurerent, and we dive into the numbers that allow you to access up to two years’ worth of rent upfront. And it’s not just future rent that Futurerent can help you access— Dinh shares a story featuring a client who used his funds to buy shares, and now they’re a Futurerent customer for life thanks to their decision! If you think you may not qualify, we have some good news for you!
As a special treat for today’s listeners, head to futurerent.com.au or give Godfrey and his team a call on (02) 9358 1556 and mention you heard of Futurerent through this episode of
Property Investory, and the team will give you a discount on any deal you may have in mind.
Timestamps:
00:26 | 2020: The Year of Uncertainty
04:23 | Lightbulb Moment
06:08 | The Lowdown
10:29 | It’s Not All About the Money
14:09 | Part and Parcel
16:45 | It Was Years in the Making
17:44 | It Takes a Village
22:14 | Philosophies and Podcasts
26:37 | Always Borrow, Never Sell
Resources and Links:
Transcript:
Godfrey Dinh:
[00:07:07] So you're really just changing the timing of how you collect your rental income. And from a cost perspective, it just works out to basically half a percent per month, on the upfront amount, which I guess is the same as 6% of the annual rent. So this way, property investors, they're still able to have their cake and eat it too.
**INTRO MUSIC**
Tyrone Shum:
This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.
I’m Tyrone Shum and in this episode, we’re back with CEO and founder of Futurerent, Godfrey Dinh. We’ll discover how he came up with the business that’s available to any and every property investor, a story about a client who is now buying their second investment thanks to Futurerent, and how the end goal of the trailblazing business isn’t what you might expect.
**END INTRO MUSIC**
**START BACKGROUND MUSIC**
2020: The Year of Uncertainty
Tyrone Shum:
Dinh’s most challenging moment in his journey was not just a moment, but a year.
Godfrey Dinh:
[00:00:26] It's probably hard to hear that and not think back to even last year, right? 2020. So, more on the business side in terms of Futurerent. March 2020, I think it was the Friday, when the government announced the moratorium on evictions.
Tyrone Shum:
[00:00:44] Yeah, I remember that very well, I don't even remember which day it was.
Godfrey Dinh:
[00:00:48] It was, I mean, as you can imagine. I mean, we're repaid from rent that's paid by the tenant. And the way the government announced it, where they didn't give any detail as to from a state’s or territory’s perspective, what it actually meant, what the laws actually meant, but basically, they just said, 'Okay, well, there are no more evictions.' So, we had a pretty similar experience to most agencies around the country where about 20% of tenants put their hand up and said, 'Look, we either don't want to pay rent, or we want to pay reduced rent', or all of that.
[00:01:30] So I guess it was a scary time for us, but also just because a lot of our landlords were under quite a significant amount of pressure. But interestingly, the one thing that most people didn't realise until they called up was that our repayments, they pause automatically. So because we're only repaid from the rent that's paid by the tenant, so the tenant stops paying your repayments with us, they pause. So I guess it was something which generally resolved itself within about two months. So as more information came to light and people realised, look, it's not a complete abatement, it's just a deferral. You still need to pay rent. Most of those situations worked themselves out where people moved out, they found different accommodation.
[00:02:24] Fortunately, the book kind of just stabilised and things sort of just got back to normal. So it was a pretty crazy time. But I think if anything, it made us realise just how important those flexible repayments are for people.
Tyrone Shum:
[00:02:42] It would have been a really scary time and very unknown, uncertain for you. Because you're thinking, 'What are we going to do as a business? If all these payments start to slow down and tenants are not paying, it really, really does have a huge impact on cash flow.' And then you might never know, it could be six months, could be 12 months.
Godfrey Dinh:
[00:03:01] Yeah, that's right. We're just so lucky, aren't we, that here, things seem to have— touch wood— largely, our little part of the world feels like it's getting there, back to normal.
Tyrone Shum:
[00:03:14] It's been a complete opposite experience, for me anyway, in the last year, because things have just gone completely opposite to what I've anticipated. And I think a lot of business I've heard especially in the property space have just gone absolute gangbusters.
Godfrey Dinh:
[00:03:36] Since about November last year, we've seen investor sentiment just go through the roof. Almost like a wealth effect, where people now are so much more comfortable spending money on their investment property, on their own home, buying more property. So yeah, it's definitely a good market at the moment and good time to be a property investor.
Lightbulb Moment
Tyrone Shum:
Although he realised the power of buy and hold with his property in Ermington, his biggest aha moment in his property journey isn’t about any particular property at all.
Godfrey Dinh:
[00:04:23] I think that one of the biggest things for me was actually when I came up with the idea of Futurerent, and I realised, wow, people have all of these cash flow needs and you've got all this money, it's already coming to you. Why shouldn't you be able to get it paid early? And if people are doing that in the commercial world, why shouldn't residential and everyday investors have that same ability to get paid their rent early?
[00:04:49] Now, that was a real epiphany for me because it can be so powerful. The difference between having $3,000 paid into your account every month, and having $36,000 just sitting there to make your next investment— it's huge. It's huge. I think the difference between and that's really— and this is a little bit jargony— but that's the difference between income and capital. Capital is powerful, you can really do something with it.
[00:05:19] And I think that, for me, has really kind of been one of my biggest moments.
The Lowdown
Tyrone Shum:
After keeping us in suspense for long enough, he dishes on the details behind Futurerent and how it works.
Godfrey Dinh:
[00:06:08] Our clients, they don't borrow money. We actually just enter into a type of lease with them on the property, that under which we pay them rent upfront to enter into that lease. And it's rent that they're receiving, they're not receiving loan funds or anything like that. They're literally receiving a year or two years' worth of rent upfront. And then that lease basically gives us the right to collect a fixed amount of rent from the property.
[00:06:37] Property manager stays in place. All that happens is we get the property manager to set up equal installments to pay us back. And they can do that over up to three years. So you can get a whole year upfront, pay it back over three years, that would be 36 equal installments. And because you're spreading that year out over three years, it's actually only taking up about a third of the rent to pay back that principal or that yield upfront.
[00:07:07] So you're really just changing the timing of how you collect your rental income. And from a cost perspective, it just works out to basically half a percent per month, on the upfront amount, which I guess is the same as 6% of the annual rent. So this way, property investors, they're still able to have their cake and eat it too, because they're still able to get like a whole year's rent up front. But they still then are able to get the majority of the rental income to pay for their mortgage, or pay for whatever it is, their property expenses or anything else that they need to.
Tyrone Shum:
[00:07:51] We're not getting money upfront from the tenants? Because they're not paying, say, 12 months of rent initially upfront, but then Futurerent is helping to pay that. Can you just explain in numbers, how that works and the times behind it?
Godfrey Dinh:
[00:08:06] Say for example, your rent is $700 a week, right? So you can either get your $700 a week, or you can get $36,500 which is a year's worth of rent upfront. And then you've got the choice as to what period of time you want to let your tenant pay that back. So say you want to let your tenant pay that back over three years, then effectively, you're going to be paying back... $36,500 over three years is basically $1,000 a month, roughly. Which needs to go to pay back Futurerent. So your property manager will basically set up 36 payments for $1,000 a month. And that'll go to Futurerent. But you're still collecting $3,000 a month gross from the tenant, less your $1,000. So you're still collecting basically $2,000 a month in rent.
Tyrone Shum:
[00:09:07] Yeah, but this is what I don't quite understand, who pays that rent upfront?
Godfrey Dinh:
[00:09:13] We do. Futurerent does.
Tyrone Shum:
[00:09:16] So how do you fund that, then? That's what I'm wondering, how do you fund that? Ultimately, you are going to get that money back from Futurerent, but how do you fund that to the landlords? Because obviously, the tenants are only going to be spreading out and paying over three years, let's say.
Godfrey Dinh:
[00:09:31] I guess we're very lucky in that we have not only our own equity, but also a wholesale debt that can grow our book. So yeah, we're very lucky that we've sort of got a lot of capital to help people do all sorts of things with their rental income.
It’s Not All About the Money
Tyrone Shum:
Dinh has created a fantastic business model with Futurerent, and not only does it thrive, but it’s sustainable.
Godfrey Dinh:
[00:10:29] We're not trying to make a lot of money on each deal, we don't make much money on each deal, we're a scale business. We really want to change the way and revolutionise the way that people collect their rent. So we see a lot of demand, we see a lot of property investors who would prefer to get their rent upfront, so they can supercharge their investment properties, or supercharge their investment strategy, whatever it is. And we're just giving people another option.
[00:11:03] So for us, it's a scale thing, really. We really want to be the number one choice the property investors use, because we're quicker, we're easier, we're simpler than dealing with the banks. And in many cases, we actually end up cheaper as well. So yeah, we’re really trying to create a new category for property investors, something that's built for property investors and for their investment for their cash flow needs.
[00:12:01] We don't do any property management. So we just work with whatever property manager you have. So they just set up the payments for us. And otherwise, nothing really changes. All you're changing is how you collect your rent.
Tyrone Shum:
[00:12:15] And what are the criterias, for say, for example, a landlord or property investor coming to Futurerent to be able to qualify to get this?
Godfrey Dinh:
[00:12:24] It's really simple, right? The only thing we really care about is that our clients are paying their mortgage. As long as you've been paying your mortgage, you're not late on your mortgage repayments, you're eligible. We don't need to see any other paperwork. So we don't need to see any income stuff, we don't need to see any expenses. So there's no extra paperwork required from the client's perspective, which makes things really easy. People apply in somewhere between three and five minutes, we just need their basic information, like their ID, contact details for their property manager. The property manager handles the rest.
[00:13:10] From the property manager, we just get a copy of the lease, we get the property management agreement. But that's really all we require. And interestingly, a lot of people, they assume that they've got to have a year's left on their lease or something like that. They don't. Even if you've got a vacant property, you can get a whole year up front.
[00:13:31] And all it means for us is if it takes longer to lease, then it just delays the period of time, it delays our repayments. So from a consumer's point of view, it's a super, super consumer friendly product, really built for property investors.
Part and Parcel
Tyrone Shum:
What would happen if a tenant is locked into their lease and doesn’t pay their rent, and you can’t go through the lengthy eviction process?
Godfrey Dinh:
[00:14:09] We really rely heavily on the property managers. So the thing is we're all on the same page. Between the landlord, Futurerent, and the property manager, everyone wants to rectify that situation and have it resolved. We're very hands off, we don't really get involved. It's really the property manager to drive the outcome in the ordinary course. And that purely just extends the period.
[00:14:39] I mean, we had some situations like in COVID, where rents in areas like Docklands were completely smashed. We had some clients where their rent was dropped from, say, $700 to $450 a week and vacant for three or four months. And that's fine. We understand that, that's part of the business and that just means that it might take us six months longer or so to collect the rent. But that's just part of the business, really.
Tyrone Shum:
[00:15:12] I guess what I'm just trying to think is worst case scenarios for, say, for example, the landlord. Landlord's on a positive side because Futurerent's covering the rental 12 months in advance, then does that mean then once they've been paid that 12 months in advance, they will have to wait until 12 months later to get their next payment? And it's essentially just every 12 months, the landlord would be getting that, because that helps them with their capital?
Godfrey Dinh:
[00:15:36] It depends on the repayment term that they select. But you’ve got to remember Futurerent is only repaid from part of the rent that's paid by the tenant. So you as a landlord, you're always going to continue to collect some of the rent from the property. So yeah, if you pay us back over over three years, you're still going to get over 60% of the rental income. And then once Futurerent's repaid, you can do it again.
[00:16:08] The shortest term available is one and a half years, because effectively, the landlord still wants to generally collect about 25% of the rent as a minimum, just to pay basic property costs. But we want to make sure there's just always enough rent coming in to pay at least your property manager and your basic outgoings.
**ADVERTISEMENT**
Tyrone Shum:
Coming up after the break, Dinh explains how it took years to get Futurerent set up...
Godfrey Dinh:
[00:17:31] A lot of work went into getting things set up. But now it's seamless. People apply in minutes, and they're paid generally, within two days. So super, super quick.
Tyrone Shum:
What Futurerent can do for you in addition to giving you your rent upfront...
Godfrey Dinh:
[00:20:39] We've even been helping people invest in the share market. We had one client actually who took out a whole year's worth of rent, and he used it to buy shares in Zip. And he told us that it's actually gone up seven times since he bought those shares.
Tyrone Shum:
He shares the positives of mortgages.
Godfrey Dinh:
[00:22:54] And you can compare that to borrowing money for a business or borrowing money for a commercial property investment. And there are so many more strings attached. But in the residential world, it's like one of the most stable forms of capital you can get.
Tyrone Shum:
And that’s up next. I’m Tyrone Shum and you’re listening to Property Investory.
**END ADVERTISEMENT**
It Was Years in the Making
Tyrone Shum:
Dinh explains how he set up the business, and why it took several years to do so.
Godfrey Dinh:
[00:16:45] It was something that took a long time. Even before we started doing what we're doing, we spent basically two years working through all the regulation. So we got a sign off from the tax office, we actually got a ruling for the benefit of all of our landlords, basically to make sure that their position wasn't negatively impacted. And there's all of those details available online.
[00:17:10] But basically, there's no stamp duty, there's no GST, the income tax kind of works as it usually would, effectively. We spent a lot of time and energy making sure from a regulatory point of view, and then from a tech point of view, things worked.
[00:17:31] A lot of work went into getting things set up. But now it's seamless. People apply in minutes, and they're paid generally, within two days. So super, super quick.
It Takes a Village
Tyrone Shum:
[00:17:44] And what kind of technology and people and so forth did you need to be able to put all this together? Because it's not a one man band kind of website, it requires a lot of engineering and design and so forth, to be able to put something like this together.
Godfrey Dinh:
[00:17:58] It takes a village. It honestly takes a village. So it takes a village and a lot of work, a lot of testing and experimenting, and just figuring things out. But we're very fortunate that we had some good advisors and very lucky that early on, we got a group involved, our innovation fund, who are a Venture Capital Group, who were able to sort of point us in a couple of good directions. So yeah, I think it's just for us been about learning as much as we can, reading as many books, listening to as many great podcasts, trying to continually educate ourselves so that we're able to deliver what we want to deliver.
Tyrone Shum:
With Futurerent rightfully picking up steam, he sees the business growing even larger in the coming years.
Godfrey Dinh:
[00:18:58] At the moment, we're still really building awareness. It's been really rewarding to see our property investors grow with us. We've been around helping people for over two years in terms of helping people with their investment and cash flow needs. But yeah, we just want to continue to grow. And we want to make it as simple for people as a choice around when they want to collect their rental income, and we want to help people do a whole lot more. I mean, there's a whole lot of examples that I could walk you through in terms of what people have been doing. I think we really want to do a lot more of that.
[00:19:44] We've been helping a lot of people renovate not only their investment properties, but also their own homes. So people actually cashing out rent on an investment property and then renovating their principal place of residence. That's been big. We've been helping a lot of even small business owners, because small business lending is really challenging. I don't know if you've ever tried for your business to get a small business loan.
Tyrone Shum:
[00:20:11] A lot of paperwork.
Godfrey Dinh:
[00:20:12] A lot of paperwork, and it's expensive, really, really expensive. Whereas if you're lucky enough to have an investment property, you can get your rent early instead. And it's a much more consumer friendly solution. So we had a great client who's got a pizza shop that we helped buy another pizza shop, and an accountant, a whole range of sort of small business owners.
[00:20:39] We've even been helping people invest in the share market. We had one client actually who took out a whole year's worth of rent, and he used it to buy shares in Zip. And he told us that it's actually gone up seven times since he bought those shares. And now he's paid back that future rent and he actually, last week, took out another year worth of Futurerent to help him buy a house with the money that he made from the shares on Zip. So some interesting cases. The thing is, there's endless possibilities. We're not prescriptive about what people use the money for. We figure people can do what they want. We just want to continue to help people with their investment goals.
Philosophies and Podcasts
Tyrone Shum:
His biggest mentors are those he worked with at Investec, who took him under their wings and taught him the ropes.
Godfrey Dinh:
[00:22:14] I was really lucky in that when I started working at Investec, like I mentioned, I was a kid. And there were a lot of people who were older than me and wiser than me and able to teach me a whole lot of really valuable lessons. Learning the difference between good debt and bad debt, and understanding and getting comfortable with leverage. And realising that in for instance, generally— and obviously, everyone's situation is different— but in Australia, if you have a mortgage, as long as you meet your interest payments, you're all good.
[00:22:54] And you can compare that to borrowing money for a business or borrowing money for a commercial property investment. And there are so many more strings attached. But in the residential world, it's one of the most stable forms of capital you can get. So I think I had a lot of really good mentors who shared that type of philosophy with me really early on. And were really integral in cultivating that sort of mindset for me. So, I'm a big believer in continuous learning, and trying to really get specialised knowledge in as many different areas that you can. And doing that by actually doing. Because I think that's often really the only way.
[00:23:53] We're lucky in this day and age, there's so many resources out there. Podcasts like this. Books. The whole world is a classroom.
Tyrone Shum:
[00:24:05] Absolutely. And you mentioned that you spend a lot of time learning as well, as you said, you've got podcasts, books, and so forth. If you're an avid reader or avid listener of audiobooks and stuff, do you have any particular book or resource that you can recommend to listeners that you found really helpful in your journey?
Godfrey Dinh:
[00:24:24] There's a whole range, and I generally try to find something which is a particular challenge or problem that I'm trying to solve. But one of the great general books that I quite like is Danny Kahneman's Thinking Fast and Thinking Slow, where he really talks about the difference between, he calls it system one and system two thinking. System one is your immediate reaction to something, your immediate gut response. And that's how we're wired as humans to survive. From hundreds of thousands of years of evolution.
[00:25:03] But often, you actually really need to think much more deeply about something and slow down, to really understand the situation or to really understand what's happening. And often that's really completely counterintuitive.
[00:25:15] And in real estate, for example, the only way you're actually able to see through all the mess and buy well when everyone else is fearful, is by engaging that type of philosophy. By really actually thinking deeply about something and analysing things properly and not just moving with the crowd.
Always Borrow, Never Sell
Tyrone Shum:
[00:26:37] If you were able to visit and meet yourself, say 10 years ago, what do you think you would have said to him?
Godfrey Dinh:
[00:26:43] Oh, gosh, I think for starters, it would be, ‘Never sell.’ Don't sell the property, just keep it. I think buy, fix, keep. I mean, I had people saying it to me previously, but I still don't think I fully took advantage of how much. Borrow as much as you can, when you can. You've got to plan your financial goals around your life events and situation. Yeah, I think probably those two things.
Tyrone Shum:
With so many things to be excited about, he’s most looking forward to the fulfilling feeling he gets from helping others.
Godfrey Dinh:
[00:27:34] I'm just really excited about continuing to grow the business and continuing to help property investors. I think we still haven't really scratched the surface of the universe of property investors out there. And we want to make this as simple for people as a choice over how do you want to collect your rent. And it's so rewarding to be able to see clients who now send us snaps of a renovation they did on their home, or get in touch and tell us like, for instance, that customer in the Northern Territory, is getting an extra $15,000 a year in rent, from a really simple, clever renovation. Hearing those sorts of success stories that our clients are having, and hearing them describe us as a real breath of fresh air compared to dealing with the banks— for me, that's sort of what makes me jump out of bed every morning. I love it.
Tyrone Shum:
[00:28:35] That's fantastic. And I'm also curious, because you're the creator and founder of Futurerent, how have you been able to use Futurerent for yourself, in your investment properties?
Godfrey Dinh:
[00:28:46] I think that might be a bit of a conflict of interest. So I have had to sort of steer away from that one, unfortunately. But we're just really trying to help our clients.
Tyrone Shum:
[00:28:58] Yeah, fair enough. That would have been interesting, because I was just thinking, ‘Okay, if you did have the potential to do that, what would you use it for?’
Godfrey Dinh:
[00:29:05] Well, everyone's different, right? Everyone has something different in mind. It's amazing. It's amazing, the use cases are endless, really.
Tyrone Shum:
[00:29:16] True, true. Just as long as you don't go out and start buying, like maybe a liability, then it's okay.
Godfrey Dinh:
[00:29:22] That's right.
Tyrone Shum:
[00:29:24] Fantastic. All right. Well, Godfrey, how much of your success is due to your skill, intelligence and hard work, and how much of it do you think is because of luck?
Godfrey Dinh:
[00:29:35] I think all of those things are prerequisites. Like, I think you have to have all of those things in some combination. And I think hard work is probably a big variable there. But I think for me, I've been quite lucky in that the circumstances have really been kind of favorable for me, where the banks have kind of made it really easy for us in a way. Where they've been treating property investors like second class citizens for so long. And they haven't done anything to help property investors specifically with their own goals in an easy way and giving people access to an easy solution that's consumer friendly, that can help them grow their wealth. Instead, they're so caught up with red tape and regulation and all the rest of it. So I think circumstances for me have been really, really fortunate.
**OUTRO**
Tyrone Shum:
Thank you to Godfrey Dinh, our guest on this episode of Property Investory.