Aussie Firebug

Financial Independence Retire Early

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Steve Ryan, a 31 year old property investor who at age 29 became the 2015 ‘Your Investment Property Magazine’ Investor of the year. Steven has been featured on such programs as ABC’s 7:30, Property Investor Magazine, Real Estate Talk and many more. His net worth is well into 7 figures and has reached financial independence but does not plan to stop working anytime soon.


Show Notes



Aussie Firebug: Hey guys, welcome to another episode of the Aussie firebug podcast, the financial independence podcast for Australians where I interview clever people who have already reached or are on their way to financial independence. Our guest today is Steven Ryan, a 31 year old property investor who at age 29 became the 2015 investment property magazine – investor of the year. Steven has been featured on such programs as ABC 7.30, property investor magazine, real estate talk and many more. His net worth is well into seven figures and has reached financial independence but there is no plan to stop working any time soon. Steven, welcome to the podcast –

Steven: Hey, thanks for having me –

Aussie Firebug: Ah, I guess we will just begin ah, with your story – um, and how you managed to be in the position that you are in today, starting from the beginning.

Steven: Okay, ah well – starting from the beginning – born is a pretty small town in the south Wales ah- was ah, had different views to the norm I guess um – well to figure out where that would sort of eventuate into something that was productive and useful – ah, so a lot of experiments as a teenager and as a young adult, ah trying to figure out what I wanted to do with career and stuff – ah eventually I ended up falling into graphic design job – ah, wasn’t as challenging or interesting as I had hoped, so I spent a few years trying to figure out what I actually wanted to do with my life and in the process I discovered the whole property investing and just wealth creation – and personal development ah, sides of life. Ah, a few years later after buying a few properties, I quit my job – started a mortgage [00.01.33] business to help other investors and ah, that kinda brings us today in a nut show, am sure we’ll talk in more data about some of those bits – that’s the short story.

Aussie Firebug: Okay cool Steve – so um, is it Steven or Steve – which do you prefer to be called?

Steven: ah by first name, whatever you want –

Aussie Firebug: Um, am going to call you Steve –

Steven: Okay perfect-

Aussie Firebug: Um, so when you say, um, a few, ah different opinions to the norm, what do you mean by that when you growing up?

Steven: Ah, I’ve always been inquisitive um, and always been willing to challenge conventions ah – so I ah, I think the earliest I can recall that happening is ah, when I was being brought along to Sunday schools – a very young man, ah, I had a lot of questions to ask that I, wasn’t getting sufficient answers to – um, through out of to high school I had a lot of ah, head butt moments with teachers as well – not out of ah, an interest in causing trouble, but just to – to try to understand things better and question everything, so I’ve always been curious um, am very learning driven – big passion for science as well so, um most people would describe me ah – you know me quite well as a complete [00.02.39] but then I would follow it up saying what a pretty nice guy, so um – very unconventional in just about every aspect of ah, my life I would say.

Aussie Firebug: Nothing wrong with that –

Steven: Yea well, if you keep doing what everybody else does, you get the same results and ah –

Aussie Firebug: That’s exactly right – that’s exactly right –

Steven: Yeah –

Aussie Firebug: Um, so you spoke a bit of – so you got into property investment when, even investing is not really, you know a property investing – most want to spend their money on .

Steven: Yeah –

Aussie Firebug: Do you – just walk us through a little bit of that –

Steven: Yes sure, um – I’ve always been pretty reasonable with money in terms of ah, you know saving ah, and not spending too crazily. There was a time ah, I was about 25, I believe and my parents out of nowhere ah, announced they were getting divorced and um, that was so be it – but ah, the interesting thing is that I’d remembered them working their tales of their tired old life time – ah working very, very long hours and they had barely anything to show for it when they divided assets; so ah, that kind of got me thinking – they’ve done something wrong here, they’ve really stuffed up – I mean, they did what they could with the information that they had but, for them to have worked so hard for so long and to end up with so little made me realize that something had gone wrong there and I sort of decided at that point, I didn’t want to follow in the same footsteps – that I would educate myself ah about, you know making my money and also hanging on to it and multiplying it, and that got me on the path of learning how to invest um – so it was probably early to mid 20s and ah, I’ve been saving money that entire time – managed to head on an overseas trip to Europe – I think about 22 and [00.04.32] of bags to take free breakfast for lunch and things like that – so I returned with a little bit of savings and ah, then the parents’ divorce, so I continued to save a little bit and bought the first property, I think I was 25 – yeah, it would have been 2010 October –

Aussie Firebug: And where did you buy and how much for?

Steven: I bought in city – I paid three hundred and thirteen thousand for a nice little one bedroom apartment ah, well within my budget, I could have spent quite a bit more, but I wanted to be sensible and that was the, I guess the purchase that got things rolling – but at that stage I wasn’t ah, too well read on investment. I knew that buying the property was good, I’d done my sums and realized that even if properties just [00.05.14] information, I’d need pay rises emulate that were more than realistic for me just to keep up with the higher purchase price – so it made sense and then from there I sort of put the head down and really got into learning how to invest and create wealth.

Aussie Firebug: And how did you manage um, putting the deposit down for that- um 25 years of age, you know three hundred and that’s quite a large sum of money –

Steven: yes –

Aussie Firebug: a deposit, um did you go too uni or you were working full time ?

Steven: I studied, I studied for a number of years out of high school – um, I think that probably I had been working fulltime, maybe three years before that, so I probably had saved about 10 or so grand a year since starting full time work – I was ah, certainly a pretty typical teenager in terms of ah, the drinking habits and tracing girls and what not but, I was ah little bit unconventional when we went out for drinks ah- I would bring ah, a little [00.06.00] [00.06.01] with some red wine in my jacket rather than spending ah, super amount of drinks over the bar {laughter} – and so I managed to save the deposit while still having a typical ah, teenage [00.06.08] [00.06.09], yeah –

Aussie Firebug: Do you know what, do you know what? I did the exact same thing but I–

Steven: {laughter}

Aussie Firebug: I did it with um, like ah – like or something.

Steven: Yeah, okay –

Aussie Firebug: Or like ah a little flask –

Steven: Yeah –

Aussie Firebug: I dint have wine but, such ah, such at once as well. True story –

Steven: Yeah, I ah – I never did so –

Aussie Firebug: actually you know why – because I remember this now; the girl would give me funny looks every time I went to the bar and ordered coke and I was getting drunker and drunker and she must have thought, this guy has a flask and I was really sneaky –I went to the toilets and everything and the security followed me in and he found me doing it and he kicked me out. [00.06.50 – 00.06.53]

Steven: The things you do on the way to financial {laughter} independence, I can say that I wasn’t repaid [00.06.58 – 00.07.00], tables have turned.

Aussie Firebug: Alright, you save some money, full time work – you are a pretty good saver, were you still live at home when you bought this – ?

Steven: No, I moved out of home at 19 to come and study in [00.07.08] so I would grade up in [00.07.09] ah so, I was pretty smart with the money I had [00.07.12] in the whole time and lived to a typical [00.07.15] [00.07.16] or shouldn’t say – I saved quite a bit for how much I was actually earning – I should also add at the same time as studying, I was doing some freelance design work as well as I had started music [00.07.35] online and a few other things – I had a little bit of income coming through and also YouTube channel so, I was able to add a little bit of additional savings ah, just through those –ah, so throughout my studies I was actually already accumulating a small amount of money –

Aussie Firebug: You’re hustling – you’re side hustling everywhere –

Steven: I didn’t realize I was hustling but ah yeah, I guess that was what I was doing at the time.

Aussie Firebug: Ah, very good. [00.07.58 – 00.08.00] to be honest because I saved a hip of money but I was still living with my parents – that was the number one biggest advantage all I had, but you know – to say that – you said, close to you know, $10000 a year when you’ve moved out of home and living in Sydney that’s – that’s um, very good, very good savings indeed. Um so, you bought the house um, and you continued down the property path [00.08.20 – 00.08.24]?

Steven: Um, look at the stage that I bought the first place, I just knew that the numbers might [00.08.31] ah – I dint really know the intricacies investing property or anything else, so I was looking at all sorts of options – but am very analytically minded and it’s not very hard to without a calculator and do some sums and say the advantage of property ah, the fact that you able to leverage 80 – 90% means that your dollars go quite far, ah looking historically at ah, you know house prices and also factors that affect the [00.09.00] of supply and demand. I felt pretty comfortable that property was something that I could do well with – um, so I spent probably the next 3 or so years saving like [00.09.08] at the same time researching like an obsessed crazy person um, so devoured dozens of books, went to made-up, red forums, listened to videos – all kinds of stuff to educate myself – I watched [00.09.21] and researched everywhere I could think of in a stryer and eventually settled on more property as the way for me to go to fill that foundation ah, [00.09.29] second investment property – first investment property, second property September 2013 – I paid for 60, 100 dollars for that one – um using equity from the first property. So I took 3 years effectively to [00.09.47 -00.09.51] but I was able to unlock that – ah, the same time I was saving like crazy as well but I didn’t actually need to use savings for that second purchase, that was all equity – ah for like [00.10.03] again six months later, I took equity out of the second property – I [00.10.06] very well on that one – for the third and you know the story goes on so –

Aussie Firebug: So how many properties do you currently have?

Steven: Ah, I’ve got four at the moment – total value about 2.6 – 2.7 million somewhere around that point.

Aussie Firebug: And do you keep your loan to value ratio, is everything under 80%?

Steven: At the moment yep – additionally when I was [00.10.23], ah generally I was borrowing 88% – capitalizing that is mortgage insurance up to about 90%, ah if you try to accumulate assets – it kinda makes sense to use as much of other peoples’ money as you can. It allows you to [00.10.35 – 00.10.38] in case of emergencies and also just to return on your initial capital is much ah, [00.10.43]. So that initial portfolio – I think a total of my own savings period ah, maybe [00.10.53] dollars of cash has gone into that and the rest of that [00.10.57] come equity, so that’s seventy or two thousand dollars is now controlling a portfolio many times its original value ah, and I have seen at least a 10 times return on that initial capital as well so –

Aussie Firebug: What’s the rental [00.11.10] [00.11.11] across your properties?

Steven: Um, yes a good question – ah the very first place that I bought ah to live in which now I don’t occupy, that’s in the early 7%, ah so getting a pretty good rent return on that one that I have earned is ah, six and a half [00.11.21] years. This is the benefit for not turning properties over quickly to its [00.11.27] – you get appreciation value, you also find that rents tend to track up but the amount of mortgage you own doesn’t increase – so second property ah, ran five and a half [00.11.32] I would say – ah the third property, low fives – the fourth property, very high fours. So overall ah, they are just making me a few grand a year after [00.11.39 – 00.11.41] you know facted in and the tax returns gone through – ah but my initial goal for those was always focus on capital growth, ah which I believe over time there will be an appreciation value and the rents will take along as well which is what am saying now.

Aussie Firebug: So the, the portfolio in total is cash flow positive?

Steven: Yes – first of all, [00.12.05 – 00.12.08] a few thousand dollars of you know – its neither here nor there really, it’s a bit of pocket money ah, yeah.

Aussie Firebug: And am well aware of the strategy of pulling equity to buy the next one as I have done it myself for earning three properties, um the, the biggest thing I have with that, what is your – what is the angle because obviously you are very um, you know a lot of equity – you know ah, ah they are worth so much money and um, you got loans on them and they’ve given you a little bit of you know a few thousand dollars a year in positive cash flow – are you planning to ah, wide until the rent gets to a certain ah point until it’s you know an income or are you widing for a property to reach a certain point you might sell one and pay off the debts off the other – what’s sort of your strategy there?

Steven: Yes, so – if I hadn’t gone along the path I thought I would be which is stay as a [00.12.59] employee keep [00.13.01] along, ideally I would have continued to accumulate properties – get you know a dozen or so, um under my name and at some point in the future 10 -20 years later through one or two property cycles – sell some and pay the others off completely and then have a [00.13.20 – 00.13.21] properties all producing me rental income – but since I moved into business and the income increased somewhat, so am actually now going to moving into property development ah, just starting small initially but taking some of the equity that is in existing portfolio – using that to do small projects and then keeping everything I’ve planned to sell along the way, ah those developments will be cash flow positive and then take that chunk of equity and sky up into a solely larger project then [00.13.43 – 00.13.45] – so ah, very quickly I would have turned cash flow neutral to fairly cash flow positive at the same time as being able to hang on to those properties.

Aussie Firebug: Great – do you have any shares?

Steven: Ah yeah I do – ah, I’ve got a [00.13.57] number on ah – in the US. It’s not a portfolio I would recommend for the faint hearted ah, goes against most conventionally investing wisdom – ah, that’s a little bit more of my high risk, high return money, so it’s not the typical um, you know index [00.14.17] portfolio – ah, a very, very, very heavy ah, [00.14.24] especially relating to artificial intelligence, ah machine learning- so ah, Teslar is my biggest holding and make up about over 70% of my portfolio value –

Aussie Firebug: That’s been doing pretty well in the last couple of years, hasn’t it?

Steven: Yeah, Teslar has done reasonably well, um – I still feel that they’ve got one less ah, digit in the value of the shares compared to where they ultimately get to over the next decade. But I accept that it is pretty high risk company, but I also try to invest quite um, ethically as well so, there is a reason for investing in that company outside of trying to return a profit but just to keep things moving in a good direction as far as ah, renewable transportation.

Aussie Firebug: Yeah, and is it more fun investing like with the tech companies in the US, it’s not your bread and butter you know what you’re going to live off for the rest of your life or-

Steven: No, like honestly if my entire portfolio goes to 0 or we have JFC number 2 which will happen at some point in time I’ll be fine with that. I’m pretty risk adverse and it might sound almost unexpected for me to say but I think that shares are one of the highest risk investments that you could possibly make. Even with a high level of education, unless you are looking at a really long term hold period. And so my idea is, my portfolio is to hold for some time but I won’t be too perturbed if I see large fluctuations in the value over there. Property is the bread and butter and also business is kind of making up the main chunks there and shares are just something to diversify a little bit and see what happens there.

Aussie Firebug: You know you might have triggered a few in the financial independents crowd. Do you mean picking stock, picking shares individually or you know because majority of the people here in this space are all about those index funds right like you’ve totally read behind those lines –

Steven: I think index funds are fantastic but the unique option that we have in Australia, if we can learn to understand what drives our property values which is effectively land values rather than the building sitting on them. Given the nature of our market, that the huge difference between supply and demand excluding a few particular niche areas and types of dwellings like off the plan apartments in the eastern city CBDs. We have been underbuilding housing in Australia for a very long time we’re also one of the highest net worth countries in the world. So for somebody that’s sort of starting out or at a stage where they’re trying to accumulate capital and increase their net worth. It’s very hard to make an argument for shares having even close to a hope of competing with property assuming that you are willing to leverage property at 80-90% and that you’re not able to do much lending on shares above say a 50% land to value ratio. Keeping in mind also if you do leverage on shares you do have the risk there of something like a margin call which doesn’t occur with properties. So as I said I’m very analytical on that side of things and I think it’s great to have you know the best holdings in different kinds of investments but I’m pretty confident that my property returns are going to be multiple [00:18:01] above my shares even if I went to do something like just grab the old index funds. The other thing too is that I’m pretty impatient, you’ll certainly see good long term results on shares especially index funds are really the way to go then to be pretty conservative but it’s hard to match all highly leveraged assets.

Aussie Firebug: So what you’re basically saying is you see in the future, and we’re sort of skipping ahead because I wanted to delve in into this area a bit later on but [00:18:33]. Property returns are going to blow shares out of the water in terms of returns over the next 5/10 years? Is that –?

Steven: In terms of cash on cash returns so I would suspect that shares would have just a better chance if not more of probability in terms of percentage growth to up before property in Australia but we’re not factoring in the leverage so [Voiceover]

Aussie Firebug: That’s a key point as well. I always hear that, look and you know I’m in both camps here. I’ve got 3 properties but I’m up to about 70k in index funds now so you know if either one goes up I’m really happy. But I do think that whenever someone is saying you know shares beats you know the last ten years shares have out-performed property. Yeah maybe a dollar vs. dollar percentagewise the have but they’re completely ignoring the whole. Like I think that best thing about investing in property which is the leverage, so yes I agree with you on that point.

Steven: Yes and also we do have to be very mindful to factor in the risks as well if you are levering shares you’ve got the probability of a margin call and keep extra capital in reserve. Those kind of things as well say, as I said I’m quite conservative and so I’m not somebody who would be comfortable to leveraging into shares at all. For fear of having the margin call in the worst case scenarios so I’d be putting a dollar into shares if I double that I make two dollars whereas if I put a dollar into property I get 10 from the bank and if I you know say that the same doubling there I’ve turned 1 dollar into 10 so I get a ten times return. It’s kind of hard to argue with that.

Aussie Firebug: Sure, alright one of the – I want to move into – for those listening Steve is also the director of Interstellar Finance who are actually a finalist in 2016 Australian Mortgage awards. So is it your actual company Steve?

Steven: Yes it is my company, yes I founded and I’m the director yup.

Aussie Firebug: So can you tell us a little bit about Interstellar in general, how it came to be and what you’re looking to do in that space?

Steven: Yeah absolutely, so I rather got obsessed with the investing thing and so I could talk about and think about and do was property investment related that kind of happens I think when you see the value in something that can have a big impact on your life. So it got to a point where I had a lot of people asking for help and guidance and ideas and this that and the other. It took a while for me to – I guess for the penny to drop but I realized that I was in a job I didn’t really enjoy. I had been fired from my first and nearly lost my second as well so I was clearly not a good employee. And I found a way to transition from that design career to a full-time mortgage broker thanks to an incredibly generous and selfless mentor who changed my thinking and my life ultimately. So I transitioned across a few years ago to fulltime mortgage broker and just 100% focused on helping people who want to build wealth for themselves. Whether that’s people just starting out with property or people that are a little bit further along the path and don’t really do much lending for an occupiers, it’s really a pretty strong investor focus and I get a lot of joy out of having people come to me and discussing what their long term goals are and putting a bit of a road map together on how they might be able to achieve this.

Aussie Firebug: So you do strategy as well as outsourcing and finance?

Steven: Yes, I mean the strategy it’s not rocket science to be honest it’s really just a matter of looking at what’s somebody’s goal, what’s their timeframe, what are they trying to achieve, what are their current resources, what changes might occur you know [00:22:32] when the goal is achieved. And how can we best give them the best opportunity to achieve or come as close as they can as achieving their goals. So it’s really just a matter of looking at the numbers and putting a bit of a plan together in terms of if we can do this, this and this then this is where we will get to. Because a lot of people I think one of the mistakes that people make, maybe not so many of your listeners but in general in terms of financial goals is they might think I’m going to invest in you know some shares or invest in a property or you know buy some silver. But they don’t really know why, what the end goal is. Maybe one of my main goals is really to help people clarify exactly what they are trying to achieve but more importantly why? If you don’t have a strong why you’re not going to have the drive and willingness to do what it takes. You’ll talk yourself out of things, you’ll procrastinate, and you’ll let fear prevent you from acting. So my real job is to help people clarify what they’re trying to achieve then kind of give them the resources and empower them to actually take some action.

Aussie Firebug: Excellent, I think that’s so important as well. Clear road map, what you’re trying to achieve, why you are trying to achieve it. Rather than I should just buy a property because people have been telling me that’s what smart people do and I want to be smart, which is funny enough. The reason why I started to buy property but then I read ‘Rich Dad Poor Dad’ and the rest is history. But still –

Steven: A lot of people start and it’s better than doing nothing, but it’s definitely worth going why? And it really has to be tied to something more important than just a financial goal too. Because if you don’t know what that result is going to bring you in terms of your lifestyle, how you can give to others, how you can have freedom it’s meaningless. Like nobody cares if you’re worth 2 million dollars or 10 million dollars or if your passive income is xyz, you really need to tie that into something more meaningful than just a number. What’s it going to do for you, how is it going to change your lifestyle, how can it help other people and impact other lives in a big way as a result of achieving that goal.

Aussie Firebug: Now just while we’re talking about this I guess it a good segue so you could pull up stumps right now, you sold everything that you’d owned you’d have enough money to live passively for the rest of your life, is that correct?

Steven: Yeah a fairly moderate lifestyle but one I’ve certainly lived the majority of my life, no problems yup.

Aussie Firebug: So, and it’s funny I’ll just let the audience in on a little story we had over email as I was trying to get Steve to – we were trying to book a time to do this podcast and Steve was emailing me back saying how flooded he was at work and how he just didn’t have any time to you know do the podcast and it was hard to get days and everything like that. And I just thought it was ironic that this is a guy that’s worth over a million dollars, 31 years of age could be financially independent right now, pull up stumps and basically leave as you said a moderate lifestyle but you’re working harder than ever mate. What’s the reason behind that and with the whole financial independence retire early, I want to put it to you, what’s your goal with property investing and does the ‘retire early’ bit in fire does that interest you whatsoever?

Steven: Good question there so what was the first question that we were covering off?

Aussie Firebug: I think it was just what’s your goal, what’s your ultimate goal? Why you doing property investing and I know you started business down but what –

Steven: And why I’m working so hard I guess in the meantime. Yeah I’m going to give that to kind of [00:26:12] let it sink so the reason why I’m working harder than ever now is because I absolutely love what I’m doing. I’m able to take people who are at a point where they are willing to make a potentially really important decision that can change their lives for the better. And be the catalyst for them actually making that change or taking that action or you know following up on that decision. And so I spring out of bed in the morning and I kind of get myself to stop doing what I’m doing in the evening because I know that I’m really having a big impact on people’s lives whether it’s one or two conversations we have here or there or even if they don’t end up really going down the property investment path. To plant a few ideas and seeds in their minds that can really change their thinking, their mindset, their outlook. Very rewarding and after being in business for a little while I start to hear the feedback coming from people that literally saying things like you know you have completely changed my life or the way that I think, you know I’m really grateful. So what I’m doing now is so rewarding I can’t think of anything else at this point of my life that I would rather be doing with my time. So that’s what keeps me doing what I’m doing, there’s no other reason behind it which is –it’s a great position to be in, being excited to get up and wishing you didn’t need to sleep so much so you could help more people –

Aussie Firebug: Can I just add to that as well, I’ve been to a lot of foreign seminars met a whole bunch of people that are multi-millionaires that run businesses and they do it because they love doing it. And it always annoys me, so many people just can’t accept or get over the fact that someone is worth so much money but they’re still working and it’s like you know they must be a con artiste. Why would they work if they’re worth? If their story was true why would they still be working? Yada, yada, yada. It’s like actually there’s people that exist that you know legitimately just do it for the love and yes it’s a business so you’ve got to make some sort of money I mean to keep the business functioning. They’ve got stuff they’ve got to pay, you know they’re not going to do it at a loss but essentially they are giving away their time for free. This people do exist and you can be in that position if you become financially independent. I just think a lot of people have never even considered the concept of financial independence jump to all sorts of conclusions for people that have walked the walk. And yeah they might charge a little fee you know for their wealth of information that they have, that they can’t get over that fact you know. It always comes back to that why would they still be working if they were worth so much money.

Steven: Yeah I think most commonly comes down to a few things, some people are – then they’re in a position in their own lives that they’re not happy or satisfied enough with they can’t understand why anybody given the choice to just throw it all in, you know just go sit on a beach and drink cocktails wouldn’t do so. Another part of that I think is many people aren’t willing to face the fact that they’re not where they want to be in their lives and they are the only ones to – who is responsible for that. So rather than go you know what if this person is doing this, why would they still be doing this and ask more questions and uncover that they are really passionate, they enjoy what they’re doing etc. They just make a decision without all the facts based on their own perspective rather than reality.

Aussie Firebug: So would it be fair to say, so you’re working a job you didn’t particularly like, would it be fair to say you were striving for a financial independence to escape that job?

Steven: Definitely a push to get out of there, to change my circumstances absolutely.

Aussie Firebug: And now that you’re in a business that you do like do you find that you your goals have now changed– considering you do you like your job as much as you do?

Steven: Yeah, well I guess my goal of getting out of my full time job, I walked free of that a couple of years ago. It’s probably going to go down as one of the more memorable days of my life; just having the freedom to say “see you later,” and just take control of my future. Yeah, the goals probably have changed a little bit and not so much what I’m trying to do which is just get some freedom and have a big impact on a lot of people’s lives which is really what’s pushing me, coming back to your earlier question of really my goals but I’ve come to realize that I have a lot more potential and capacity than I initially thought and every time I set what I feel as an extremely ambitious goal, at some in the future I realize it was actually a quite meager and well within my capacity so my goals don’t necessarily change, they just expand so you know, I initially had some financial goals which I exceeded well ahead of schedule so I reset those and reset those and now with the business, the same kind of thing; you know I had some goals for my first year or so in business in terms of how many people I could help and stuff like that and I shot past those so the goals really just– once I am confident and have the self-belief and the mindset and thinking to know that I could chase something more, I’ll just set a bigger goal to keep pushing and learning and growing and challenging and getting out of my comfort zone.

Aussie Firebug: Cool. Great. Now, I want to get in to some nitty and gritty stuff about the industry. So, you know, 2015 Property Investor of the year, you’re the founder and director of Interstellar Finance so you’re heavily in an industry that is such a hot topic at the moment, well it’s a hot topic nearly of every moment, but I really want to pick your brains over a few questions about the Australian housing market. So firstly, do you think Australia is in a housing bubble? Why- why not?

Steven: What’s a housing bubble?

Aussie Firebug: You tell me.

Steven: Well, we need to have a clear definition of what we’re referring to.

Aussie Firebug: Alright, let me rephrase that then. Do you think that– let’s be honest, it’s now one in Sydney because I don’t buy into the whole Australia is in a, you know unaffordable– that every place is unaffordable. It’s when people start hyping on about this, it’s 95%– they’re talking about Melbourne and Sydney, they’re not talking about anywhere else, if the price increases like Melbourne and Sydney have seen the last ten years or so, is it sustainable– do you see house and apartment prices coming down by 20-30% over the next five years?

Steven: So the sustainableness of the growth, or sustainability, if we’re talking in the last ten years, if we average that out then– I’ll say that in the last probably three or four years, definitely not sustainable. This is what we refer to as a property cycle. So you’ll have a period of little to no growth and then you’ll have a period of pretty strong growth year on year and then things will taper off, maybe correct a little bit then [00:33:27] and you’ll have again stagnation for quite a period of time and then again a process will push pretty rapidly for a few years and that seems to be a repeating cycle going back a century or more in Australia. I see at the moment, Sydney and Melbourne in particular are pretty much peek of the market, I wouldn’t be buying there as an investment unless I’ve got a view of 15-20 years or more. I stopped buying Sydney a number of years ago and moved my money to Brisbane. Apartments, I would not be touching off-the-plan apartments with a four million kilometer pole in the Gold Coast or Brisbane or Melbourne, perhaps even Sydney, there’s quite a large amount of supply, there’s quite a large number approvals still yet to commence construction and you’re asking for trouble with those types of investments but a savvy investor wouldn’t really be buying those anyway because you know, a brand new apartment, you’re paying the developers profit margin, they’re marketing fees, their advertising fees, their agent commissions. None of my clients, for example, are buying those types of things but definitely I caution to be yielded there. Outside of that, houses are a different kettle of fish: Sydney and Melbourne again I wouldn’t be buying houses there at this stage in the cycle. I think we’re pretty much done with the growth, I don’t have a crystal ball but there’s a very large market out there at the moment in many other capital cities around Australia at a much different stage of their property cycle so plenty of opportunities out there for people willing to do their research instead of get it from the news.

Aussie Firebug: So you don’t see any sort of crash happening?

Steven: Look, I don’t have a crystal ball, I can’t say for sure but I don’t see any triggers for you know, 10-20-30% reduction in prices in Australia; that would be unprecedented outside of a few anomalies like [00:35:19] towns in the history of real estate here. Even the GFC, the worst that we saw was about a 10% reduction which a year or two later, things had bounced back to where they were so I would have to say something orders of magnitude, bigger the GFC to have any reason to believe that would happen.

Aussie Firebug: Now, you’re such a great get guest for this question because you’re in the business of sourcing people loans, I personally– I’m a bit on the fence: look, I’m not too sure what’s going to happen but I think a major contributor to the spike in house prices in the last couple years, a major contributor for that has been record-low interest rates. Now, you being a mortgage broker, where do you see interest rates moving this and the next couple of years and basically I just want to know your opinion on that whole situation and also, is now a good time to fix your rate? Why or why not?

Steven: Good questions, good questions. As I say, my crystal ball isn’t perfect so take all with it a grain of salt. My gut feel is that we’re in for pretty low rates for the foreseeable future unless there’s major improvements in our economy overall, I can’t see reason for the Reserve Bank to be lifting rates; maybe we’ll get a quarter percentage or two here or there, nothing too substantial. Any much further out than a few years, I really can’t see that far but I do feel that we’re not likely to return to the rates that out parents perhaps experienced in you know, the early nineties or in a different era, a low inflation era. We’ve got the Reserve as an inflation target that we have now which has been pretty consistently maintained as well as so I’d be surprised if we see too much movement either way with rates. That being said, lenders are within their own rights to move their rates and change their margins as they please and they do have the power to do that. I won’t name names here but certainly a year or so ago, there was a very competitive price discount being offered by certain lenders to bring on new business and retain existing. I was seeing those same lenders now call back a lot of that lost profit by lifting rates here or there, some of them under the guides of [00:37:44] you know, and APRA wanting to slow investor lending. As far as fixing rates go, that’s a much more complicated decision than just fixing so you’ve got some certainty over right; there’s some implications there around what are your plans with that loan: are you building a portfolio or are you just an occupier, will you ever consider refinancing or moving, would you ever invest, will you ever want to access equity? I actually think this is my first loan on occupier property before I knew what I was doing; probably the most costly mistake I’ve ever made actually, came to about $50,000 in total from extra interest and a huge break fee when I realized that I had made a serious error of judgment because I didn’t know what I didn’t know at the time. What do I say– talk to your broker about that stuff. Make sure that they know what your plans are longer term and they can give you a bit more guidance as to whether or not it might make sense and also just think about the risks of fixing versus not. My lens is currently all variable and I plan to keep them that way unless I see very strong reason not to do, otherwise.

Aussie Firebug: Yeah, I am a fan of variable as well. I actually did write an article about fixed versus variable, just a shameless plug and for that article, I’ll put that in the show notes but yeah, I am I’m on the variable camp as well. I think there’s very rare moments in history where you actually fix your rate and you come out ahead. Like you said, it’s a different story– it depends on circumstances like if an interest rate hike is going to put you under water then you should probably fix but if you’ve got the capital and you got the buffer, I think that variable might be the better option 80-90% of the time like throughout Australian history or something, details like that and it also you know, like you said, if you’re an investor, you think you can’t withdraw equity out and like all that stuff but I’m a fan of variable. Now, on the– so you don’t foresee it going up too much, what about the federal reserve, the US Federal Reserve Act, their rate the other day, I think in the other week, and I immediately see on the internet, I think it was ANZ or maybe it was [00:40:04], but it’s one of them, upped their rate on investor loans which like you mentioned, the investor loans– the cash rate isn’t directly tied to– like the banks can set their interest rate whatever they want. Is there a correlation there and a lot of people are speculating that the Federal Reserve is going to up their rate again possibly three times by the end of the year, how do you see that playing out?

Steven: Yeah, so look there’s some correlation, not maybe as strong as many might believe. The raise for that lender who shall remain anonymous for fear of scaring people have other motivations as well to lifting those rates just do it with and proportion of investor lending growth on their loan books versus their own occupied growth so anything they can do to pull more capital in for their existing investor book and also deter people from bringing additional investor lending costs they’re doing at the moment. I think that there’ll be some influence you know, to fit those rates in the US; there’s a little bit of funding that the Australian lenders- at least many of them- get from the US as well but I can’t see it having a huge, huge impact and it’s really going to be you know, a little bit more down to local conditions but just on a plane earlier, you mentioned if a rate rise was going to put somebody under water then definitely worth fixing, I would say that if somebody has a loan and a single rate rise could put them under water, they should not have got a loan, it shouldn’t have been approved either. People need to be very mindful that their circumstances can change whether it’s change of household income, whether they can have injury or long period off work, all sorts of surprises and dramas can happen as well and it’s really important when people are taking on large amounts of debt that they have sufficient buffers and sufficient insurances or whatever they need to do to make sure that they can weather those kind of storms and not be blown around like a plastic bag in the wind when things change so that’s a really important point for your listeners to do well on whether you’re taking on an occupied mortgage or investing. It’s crazy not to retain a reasonable buffer of cash to cover living costs and expenses and surprises and rate changes so that you aren’t forced to sell at a bad time.

Aussie Firebug: Spoken like a great mortgage broker. That’s a good segue into my next question. You mentioned that everyone should have a buffer which I kind of agree with, fantastic advice. How have you seen the banks change their lending standards over the last few years that you’ve been in business? Has there been a big shift? If so, in what direction and how do you see it moving forwards because from what I read, it’s harder and harder to get a loan these days for an investment property.

Steven: Yeah, you’re reading fairly correctly. The timing of starting my business was pretty much in line with the beginning of the very intense tightening on lending policies so APRA has basically been in the ear of all the lenders in Australia telling them they need to pull their [00:43:23] up a little bit and that’s had a very, very large impact on mainly people– unfortunately not the right folks to really hurt, but people that are starting out and people on those low to middle incomes who have an existing mortgage or are looking at doing some investing to get ahead so up until those changes started to come through you know 18 or so months ago, it continued to get tighter and tighter. Somebody on a pretty reasonable sort of median income in Australia could start to put up a bit of a nest egg for themselves and get the ball rolling whereas now it’s become extremely challenging whereas previously many lenders were looking at your repayments on existing loans that you may have: basically at what you’re actually repaying and then a small buffer on top of that to factor in a couple of rate rises. Generally now loans that you have elsewhere and a proposed loan are being assessed at about 7.5% interest and are being assessed usually over a 25-year loan time. So we would have to see– I don’t even know how many a quarter percent interest rate rises for rates to get to that, probably talking 16 or 20. So now the lenders are effectively factoring in the Reserve Bank or themselves passing on you know, a dozen or more rate increases and saying can you afford to pay that? If you can’t, no loan for you. So it’s definitely become a lot tougher. It’s made things very challenging from my perspective as well but you know, it comes with the territory. We do have record-low interest rates at the moment and so it is sensible for lenders to be mindful they won’t stay here forever, yeah.

Aussie Firebug: I think it’s a good thing, do you think it’s a good thing?

Steven: I think so. There’s probably better ways to go about it but it’s a very complicated issue. The thing that’s very unfortunate is the people that it’s affecting are the people that it should be affecting least and that’s people on those lower and middle incomes who are now either unable to get a foot on the ladder or have thought that they were doing the right thing by paying their off as quickly as they could under the impression that I could you know, refinance it and increase their loan later you know, use that money for renovation or for a buffer and now many of those people are stuck. It’s not necessarily the best– yeah, many folks have got the short end of the stroll there. I think lenders certainly have to be responsible and generally they are with their lending as well. It’s a shame that sort of a third party needs to step in and decide what policies they’re able to implement in terms of how they’re assessing lender payments and things like that because it’s bringing the lenders more and more in line with each other and it’s getting closer to the point where it’s just like what flavor of vanilla would you like? You know, you can have yellow vanilla or the red vanilla or– there’s very little choice, I mean differentiation between the lender policies now which means less choice with consumers and it also means that the larger banks can use their resources to crush their small competitors which means less competition so…

Aussie Firebug: Interesting because most people won’t have even thought about that from that perspective but it is interesting to hear what you have to say. Do you think– so you mentioned that the banks are now calculating all loans on about 7.5% say you know, “if you can’t pay it back when it’s at 7.5% we’re not going to give you a loan,” which I think is a good thing. Do you think there’s going to be a point where a household simply cannot service a loan and in your professional view, do you think Melbourne and Sydney are close to reaching that point if current trends continue the way they’re going with prices rising, how far away is it because you know I, and I’ll bring up an example: my sister and her partner were looking for a house a few years ago in Melbourne and are both professionals working full time earning good money and like some of the houses that their friends were buying, it was just– the loans on them were at outrageous and you know, they crunched the numbers, they did their due diligence and you know, a few– a 1-2% interest rise here maybe if one of the– her or her husband lost their job, you know they’d be underwater very quickly like it was getting to a point where all their friends are you know, getting these enormous loans but they’re so close to– they’re so on the edge of something bad happening that it’s I think, and you’re going to know more than I will because you’re approving people’s loans all the time that at some point, you just– the household simply does not have the income to support a loan.  Are we anywhere near that point in specifically Sydney and Melbourne?

Steven: Look, Sydney and Melbourne, you need an above-average income to get a below-average house at this point in time; that’s just the nature of the property cycle. I think there’s a big gap between what people could afford to be paying, this is what a lender will give them assuming that their household expenditure is reasonable. If a lender is assessing your repayments at approximately double what they are or close to, there’s still quite a bit of room to breathe but that’s a very different issue from the fact that people who are taking out loans that they’re going to be slaves to their jobs for another 40 years just to repay them on an occupied property. They may well be able to make the repayments but the penalty they pay in terms of their lifestyle over the next two or three or four decades is a bit ridiculous at this point in time. I would be suggesting that if people are looking at getting home in somewhere like Sydney or Melbourne, to think how can they actually multiply their money now at other markets and other investment classes and bring it back into Sydney next time when they’re not going to be competing with crazy people that have been it missing out and missing out and missing out because it’s– the median price just about everywhere in Sydney now is seven figures. That’s a very long commitment; you’re going to end up paying about three times the amount back to the bank over the lifetime of the loan but a lot of people trying to keep up with the giants who don’t know any better, and we’re saying this right now: just about everybody buying homes in Sydney and Melbourne right now are making a decision that it’s going to have big– probably negative consequences for them in terms of their lifestyle for many decades to come because there are no other option.

Aussie Firebug: I know it’s crazy but surely there’s a point– you know it reaches a point where the household income just simply cannot afford to pay back a loan of a certain you know magnitude–

Steven: Well definitely beyond that point for the typical household in Sydney but given that we have extremely low levels of stock- same for Melbourne- the people that are competing for property now aren’t a typical household, they are done and dusted, they’ve been on the sidelines for a year or two. People who are competing now are people that have additional resources, higher incomes, already on the property ladder, have help from mom and dad, are downsizers so in terms of affordability for them, I think that there’s still a little bit of a room to go but in terms of affordability for a wider audience, definitely not there but given that we have such a shortage of supply and such a high demand, I won’t be surprised if the process was to continue rising throughout the rest of this year before they taper off and maybe come back a little. But from there, I think things are going to be flat for quite some time. I don’t say prices continuing to move like this for many more years to come, I think it will be very flat for quite a while.

Aussie Firebug: Yeah. Only time will tell.

Steven: That’s correct.

Aussie Firebug: Best advice to someone trying to reach financial independence in today’s time?

Steven: Educate yourself and learn from people that have done what you are trying to achieve and forget about the input from everybody else. I think one of the biggest mistakes people make is not educating themselves and not learning from people that can help them so if you want to learn how to you know, retire early from your job, is it better to talk to your colleagues who haven’t retired early or find somebody that has retired early and ask how did you do it? You’ll find that people that have had some form of success however you define that in life generally are quite generous with their time and advice and if you can find a mentor that’s also willing to spend a little bit of time to help you to recommend some resources: books, courses, seminars and to change your thinking, I think that will have the biggest impact on your life. And don’t get your investment advice from the media; their role is to sell advertisements, not give you an unbiased and accurate reflection of what’s going on. So self-education and learning from people that have walked the path, I think they’re the big tips.

Aussie Firebug: Fantastic, and was there anything else that you wanted to add or comment that we didn’t speak about in the podcast?

Steven: Actually yeah, there is one other thing to add in the mix. If you’re really, really adamant on becoming financially independent, business is definitely going to be the most effective way to get you there so I mentor of mine, my mortgage broker actually while I was investing said to me a while ago, “Steven, your biggest limiting factor is going to be your income. There’s a pretty low ceiling in your industry. Maybe you should think about business.” And at that stage, the thought had never occurred to me. Fast forward a few years and I now have started a business that’s certainly paying the bills and I think that if people are really interested in financial independence at retirement, early in particular, plugging away at a pay-cagey job you know year after year and buying your index funds stuff will certainly get you there earlier than most but if you really want to add some fuel to the fire and accelerate things, it’s well worth looking into business.

Aussie Firebug: Great. Great perspective from someone that’s done it. Anyone– if someone was to get in contact with you, where can they find you?

Steven: They can find me on a property chat forum or on my website, just Goggle Steven Ryan Investor or Mortgage Broker, I’m sure you’ll find me somehow. I’m happy to have a chat to anybody if they’d like to have a bit of a look at what their options are in terms of investing but other than that, I’d say if anyone’s curious to learn a bit more about the property stuff in particular, just head over to the the AU forum. There’s tons of people there with great amount of experience happy to share their thoughts and ideas and answer your questions and that could fill a lot of the blanks in for you.

Aussie Firebug: Right, I’ll put a link in the show notes guys to Steve’s profile on property chat and stuff like that and his website so you can find him quite easily. Alright, great. If you enjoy these podcasts and want me to make more make sure you drop me a comment in writing on iTunes, just search for Aussie Firebug on iTunes and you’ll find me. Also on Sound Cloud at A transcript and show notes of this episode can be found on my website at Thanks again for your time Steven.

Steven: My pleasure. Thanks for having me and keep doing a great work.

Aussie Firebug: Thanks, will do. Cheers mate.

Steven: Cheers


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