Property Investory
How to Assess if Your Investments are Worthwhile: With Paul Benson
May 23, 2021
Paul Benson is a financial planner, podcast host, author and property owner. This week we’ll talk to him and learn about his upbringing, and the first job that opened up a world of opportunities for him. We also discover how he decided to start a podcast, and how he managed to make 90 grand on his first property.
He also shares some general knowledge on all kinds of investments like stocks / shares. As well as the step by step guide he uses to assess the risk of any investment. 

All that and more on this episode of Property Investory!

Resources and Links:

Transcript:
**SHORT SNIPPET**

Paul Benson
[00:16:48] I remember going to the interview and just telling the manager there that look. [00:17:12] I'm gonna apply for every single one of the roles, you advertise until you give me a job. And fortunately, he gave me the first one I applied for. 

**INTRO MUSIC**

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

I’m Tyrone Shum and in this episode, we’re talking with financial planner, and host of the Financial Autonomy podcast, Paul Benson. We learned why he purchased a commercial property instead of leasing it for his business. Hear how he managed to turn $10,000 into $90,000 on his first investment, as well as the secret to creating choice in your investments.

**END INTRO MUSIC**
 
**START BACKGROUND MUSIC**

Tyrone Shum   
Paul Benson is a brilliant financial planner and property investor, with many properties under his belt. So how and why did he decide to start a podcast? 

Paul Benson  
[00:00:29] I'm a financial planner. And I've been doing that for about 20 years. You and I, of course, connected because we both host podcasts. So the podcast that I host is financial autonomy. And I've been doing that two and a half years or so, we've actually got Episode 200 coming up. So it must be about four years at least. And yeah, that's right. And, and that's, that's just been wonderful. 

Off the back of that. I got a book deal. I had a book come out last year, which was fantastic. You know, obviously met a lot of wonderful people. And it's also just helped clarify my own thoughts, I suppose, you know, from when I started the podcast. And I know, Tyrone would you know, you and I spoke a little bit about your story. And, and you know, you started as a podcast fan, and that led you to create your own podcast, or that was part of the motivation. And I was very much in the same boat, you know, keen podcast consumer got a lot out of podcasts and through different conversations, why don't we have a go at this ourselves. And it just took a little bit of time to find exactly how - what we were going to do and how it was going to be a bit different and interesting to what was already out there. 

But yeah, the financial autonomy podcast was born. And as I said, it's been a lot of fun. And it's been positive to the financial planning business. Which is, which is, frankly, what puts food on the table. And yeah, it's been a wonderful journey. So that’s kind of how we're here.

Tyrone Shum 
With the idea and plan ready to go, all that was left was a name. He came up with ‘Financial Autonomy’ which is super unique. So where did it come from? 

Paul Benson  
[00:02:10] Funnily enough, I heard it on a podcast, I was listening to an American podcast that interviewed financial planners about their business. And you know, because I was running a financial planning business, obviously, that was one that I listened to. So it probably doesn't have a huge listenership, because it's very niche, but it was relevant to me. And the financial planner that was being interviewed, just it was just an offhand remark. She was just talking about different bits and pieces. And she just said, we do this for our clients. And I think of it as financial autonomy. And on she went, and just that, oh, financial autonomy, I love it just stuck in my head. I just, it really resonated with me.

You know, I started the podcast, and yeah, financial autonomy, that was a name and an idea. And it just kind of worked. But it, it's all come about, and particularly, I guess, come together in the book. I have been advising and working with clients for a long time and financial planning, it's a wonderful career, I'd certainly recommend it to any particular young person if they're thinking about going to university and studying. But the great thing is you get to work with lots of people, and you get to learn about their stories. And I guess what I've been able to do is reflect on particularly, I guess, older clients that I've known for a long period of time or Who? Who would I like to be in their position, right, who do I think has really won the game who's been successful? And then I guess, reverse engineer? How did they get there? How did that happen?

And similarly, there are some instances where I think, boy, I don't want to end up there, right? So I had a good opportunity to see all these different experiences of people. And of course, some people love their property investments. Some people like shares, some people are very conservative investors, some people are very high-income earners, other people, low-income earners, there's all sorts of different ways. And there's all sorts of different goals and objectives. And through my financial planning experience, I was able to see potentially 1000s I mean, it when I think about my career, of different examples, and I guess, learn from that. And so yeah, I guess, you know, the book and what we cover in the podcast and things today is, is the outcome of looking at all those people's different scenarios, reflecting on what worked, what didn't and then developing that into something into a framework and yeah, it's been a lot of fun.

Tyrone Shum   
Benson continues to explain what exactly goes into a book deal, and how long the whole process takes 

Paul Benson   
[00:04:51] about six months. I did it mostly. I did a good chunk of it. We always close for a few weeks over Christmas. And we work this particular summer, we weren't going away on holidays. So I was able to really rip into it then in perhaps got, I don't know, half of it done over that summer break. And then it took me several months after that, because then obviously sort of back at work, less time to devote to it. So it was really just weekends, you know, took me a few months from there. 

Yeah, but you know, there's a bit of process. I don't know, I had a publisher approach me. And then obviously, there's a bit of back and forth on how we kind of get this done. And, and then, of course, once you do the writing, then it needs to be edited. And there's all sorts of layout design, and the book has quite a lot of diagrams in it. So there's quite a bit of work to be done there. And, and the things you don't think about too, it's a classic, you don't know what you don't know. 

But I mean, just things like writing the contents pages in the back, which, fortunately, I didn't have to do. Well, not the contents page, the index bit. I mean, there was a contents of cause it’s page two, the index at the back right now, I don't have you know, the editor did that. But it still takes time. And you know, like different sources that I'd mentioned. Like they go through and validate all those sources. And yeah, it's interesting that the process involved in getting a book to the point where it can be published. And I mean, I know a lot of people self publish these days, which is, which is awesome. But I must say, I'm glad to have been fortunate enough to have worked with a publisher because there's a lot to it.

Tyrone Shum  
On top of his podcast, Benson runs his own business as a financial planner and also writes for Fairfax. His well-planned schedule gives him time to do it all. 

Paul Benson   
[00:07:04] I own the business. And I've got three staff. And that's a nice place to be because I can control my diary. And so my diary says Mondays, Tuesdays and Thursdays, I'm available to see clients. Wednesday's is content creation. So that's creating podcasts, and I write in the Fairfax in the money section of Fairfax, I do a bit of that. There's a weekly newsletter, we do that sort of stuff. So Wednesday is my creative day. And it’s also paying the bills and do that kind of boring stuff. And then Fridays is client servicing. So you know, we've got a good group of existing clients. So I just have Fridays, blocked out. So things crop up during the week, and an existing client just needs this researched or need something done, then I've got time on Friday, and I get that done.

PERSONAL STORY

Tyrone Shum
Benson had a normal upbringing, growing up with good parents in a good area. However, he moved around quite a bit in his primary school years. 

Paul Benson  
[00:08:22] I grew up in Monterna, which is an outer Eastern suburb of Melbourne. You know, newer days 

[00:08:34] In grade prep, I went to three different primary schools, I guess that's vaguely interesting. There was a primary school I went to which was, you know, near my parents first home. And then they bought a bigger family home in a newer state further, you know, which was in Monterna. So further out. And, yeah, there was an old Primary School near where we lived. And then because it was a new estate, they built a new primary school. And so I moved to the new one for the back half of my primary school education. 

So three different primary schools, but always the same high school. And yeah, I mean, it was fairly out of town and not much public transport, but it was good to ride your bike. And there were fragments of I mean, bushes a bit kind of overstating it, but anyway, not developed land. And so yeah, you could zoom around on your BMX, and there was plenty of jumps and things to muck around on. So, no, it was good. Just, you know, pretty typical middle Australia upbringing, I would think.

Tyrone Shum  
But, as every Aussie kid knows, there’s always a fun way to escape suburban normality 

Paul Benson  
[00:09:45] I had a good friend of mine who was a Cutler. We lived in a court and his house was a couple of houses along. And during daylight savings, it was a tradition for quite a while that after dinner, he and I would go out and we just play cricket until pretty much until the streetlights came on. That was sort of the delineation of all right, it's time to go home. And always enjoyed that. And I don't know how it evolved but you couldn't wear shoes, you know, clearly, you were soft if you had to go barefoot. And, and, yeah, one of us bowled, the other one batted you can sort of drive it straight down the straight deal on the court. There was a drain further down, if you got the ball in the drain you were out because that was a pain. But inevitably, you could lift up the concrete thing and someone would crawl between the spiders and retrieve your tennis ball. But you know, never ever wrapped when it went down the drain. So yeah, look out really good memories. And that's a friend of mine that I'm still in touch with today. Although he's, I’m still in Melbourne. He's up in southern New South Wales. But yeah, we're still in touch to this day. So that's a really nice memory.

Tyrone Shum   
After high school, Benson’s plans for the future weren’t concrete, but eventually, they fell into place. 

Paul Benson    
[00:11:07] I didn't get the VCA, the HSC result that I kind of hoped for. And so I didn't get into the specific uni course that I wanted to get into. The one I did get into necessitated me moving out of home, which wasn't really part of the broader family plan. So I defer that for a year, I had when I finished high school, I actually went around and applied for a couple of jobs with some banks. And I got offered two of them. And the way that I decided which one I would take is which one started sooner because my expectation was that this was going to be a summer job, which is pretty selfish of me really, but I didn't appreciate that as a teenager. 

And so I was just looking at, you know, make a bit of cash and get a bit of experience for two or three months before uni started. So Commonwealth Bank was the one that was going to get me started the soonest. So I grabbed that one. And then as I said, I didn't get into the course that I really wanted to get into the one that I got offered, I wasn't all that thrilled about. So I deferred it just to sort of keep it up my sleeve. And I just figured out well, I'll just keep on working, I've got a job, I'll just run with it for 12 months, and then I'll apply again at the end of that 12 month period and see what happens. And so that was good. So then I worked for 12 months, just bank teller just, you know, boring, basically, you got to start somewhere sort of job. 

I got six weeks leave at one point without pay and did a bit of backpacking around Europe with some friends. So that was a wonderful experience. And that definitely made me aware that there's a big wide world out there and spending your rest the rest of your life as a bank teller was probably not the best option, you know, the best path. And I guess quite a few of my friends, of course, they were at uni as well. So that helped. So then it was getting towards the end of that year. And I still didn't want to do the course that I had actually got into. So I applied for some others and went and spoke to some and my manager at the bank branch was good enough to sort of write me a nice letter. 

Tyrone Shum 
The bank helped further, with an amazing program that supported Benson through uni. 

Paul Benson
[00:11:13] And the bank at the time had a programme where if you did a business, anything remotely related to finance, they would support you, they give you days off for exams, they give you study days. And in fact, if you're ultimately.. well, they'd reimburse you for school books, you had to pay for them. And if you passed, they would give you the money back. And they'd even cover hex down the road when you had to pay it back if you passed, and you were still working with them. So it was actually I didn't really appreciate it as an 18-year-old, but I appreciated it later on it was actually a very generous deal. So in the end, I had the course that I had always wanted to get into accepted me with this sort of bank recommendation and things, but on a part-time basis. 

So it was two nights a week. So I continued to work at the bank, I changed to a more inner-city branch so that I could get to classes on time. [14:13] Four hours, I mean it didn't always go a full four hours, but twice a week, four hours, sort of 5:30 to 9:30 and then sort of study on Saturdays. And I ended up in my initial thinking was well I'll do this for two years, which is the equivalent of one year full time and then I'll apply to transfer to full time but by that point on I got pretty used to having some money in the door and you know, the thought of going back to full-time uni didn't quite grab me. So I ended up just doing the whole lot part-time, it took six years. I think I was fortunate that I was young enough I didn't have kids and a lot of other distractions. 

So I don't know. You know, some of my friends, because you do a lot of group assignments and stuff as I'm sure you remember. and some of the friends that I was doing those with, because it was part-time so everyone was working. They were at a point where they had children and bigger commitments. And I've got no idea how they got it done, I don't think I could have... could have managed it. But as a 19-year-old, 20-year-old, pretty self-absorbed, there's not much else going on. You just got to balance, not sort of partying too hard on the weekend, you know, I could make it work. And, of course, it was good to get that work experience on the way through. 

Tyrone Shum
While he was still in uni, Benson was offered what he thought was his dream job. 

Paul Benson
[00:11:25] And towards the end of the course, I got into a role that probably assumed you'd already finished graduated from the course. But I got in anyway, it was an analyst kind of role planning and research, which I guess was the role that I had kind of always aspired to, I thought that would be that analyst type position. That was really what I was trying to hit. My degree was economics and finance. And that was where I was, where I was going. And I've got this role. And I did it for a while. And I actually discovered that I'm not loving it. I can do it. But I'm not loving it. Actually, spending all day looking at spreadsheets. Didn't really, yeah, wasn't for me, it wasn't for me long term anyway. 

So that caused me to sort of step back and reflect what am I going to do here. And I appreciate, you know, recognise that investing, particularly, and I know this is a property podcast, but for me, particularly share investing had always been of interest and held appeal. And it was a much of a stretch from the degree that I'd done to look at investing. So I guess the benefit of being in a big organisation, there's lots of different roles. So I saw this financial planning role, which back then, was a vastly different role to what financial planning is today. And I remember, so put my hand up for a role there. And I remember going to the interview and just telling the manager there that look. At that point, I must have been with the bank, I'd finished my degree by then. So perhaps seven years, something like that, and just saying, Look I've done some time in branch land, I've done some time in head office analyst. And I've reached the point where I know what I want to do. And I know that this financial planning that that's what I want to do. So I'm gonna apply for every single one of the roles, you advertise until you give me a job. And fortunately, he gave me the first one I applied for. 

And, and so that was great. And I worked as a financial planner there for seven years, I left in 2006. And I'm glad to have left, but I'm glad to have had that sort of apprenticeship, I suppose. And, you know, there's been a lot of issues, as many of you listeners will know, with financial planning in bank land. And that sort of relates to why I'm glad I left, because, yeah, there were definitely problems with banks trying to do financial planning. You know, they're conflicted in terms of the manufacturing product, and they're trying to give advice on those products at the same time. And that was, made me uncomfortable. But it was still good learning. And it was good, there was lots of good things to come out of that as well. And it and it then enabled me to step out, start my own business in 2006 do things the way I wanted to do them and the way I felt that they should be done. And it's been a good, good journey from there.

**ADVERTISEMENT**

Tyrone Shum
Coming up after the break, we will delve into Paul Benson’s investment journey, starting with his first-ever property  

Paul Benson 
[00:28:23] This was an old, frankly, but ugly, flat. brown brick. Nothing very appealing about it, probably 1970s, but a good location. And, and it fitted in my budget

Tyrone Shum
Hear how he used his first property to buy a second one 

Paul Benson 
[00:31:55]  But it was particularly the flat, really set me up. And as I say that leverage really highlighted what was possible.

Tyrone Shum
We also find out how he escaped the trap most people fall into when leasing commercial property 

Paul Benson 
[00:32:49] And the cost of fitting it out, I was freaking out. I gotta spend all this money getting it looking nice. And then maybe five years later, I leave and the landlord just goes oh thanks for that.

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

**END ADVERTISEMENT**
 
<insert money partner advert here>

Tyrone Shum  
Benson explained the process he goes through to assess risks and assets when looking to improve any kind of investment. 

Paul Benson  
[00:19:48] We've got a framework and a key portion of that, is three different pathways, one of which property, the other is, stocks and shares and self-employment. And to circle back to say that the whole framework and the whole financial autonomy thing is, is derived from reverse engineering what's made people successful, right? And so I've looked at that and go on, okay, these are, these are the pathways that everyone that I've dealt with, who is successful financially has followed. So. And clearly, property is one usually, of the people I've dealt with, it's, it's a piece of the puzzle and not the entire puzzle. 

Often, they might, for instance, start a business, and that's quite successful. And then they will, in the course of that business, maybe they buy the factory that they operate out over the office that they operate out of, perhaps through a self-managed Superfund, for instance. There might be an opportunity, whatever, you know. Whether it's commercial property, residential property, but the property investment is kind of stage two. Stage one was creating the business, building a successful business that's then throwing off surplus cash flow. And then they're thinking about right, how can I put that surplus cash flow to work, or I'm going to put some of that into a property. Of course, you also get just regular wage earners. But that earning enough income, that there's a surplus, and again, that they can put that into property. 

Typically, most people are going to buy their own home before they're thinking about investment. But you don't have to, you could go the reverse. But I guess an observation would be that [00:21:52] the property investment portion is often sort of phase two. Phase One is either developing their career or developing their business and generating a strong cash flow. And then the property is the solution to oh I've got this surplus cash flow. And or I've got equity in my home. Because I've paid it down, and there's been good growth in my home. What's the next step? And one avenue might be investing in stocks or something, but a valid Avenue, particularly in Australia is Alright, I'm going to get some property exposure. And so that's sort of where I see it playing out.

Tyrone Shum   
Choice is something Benson talks about often because it is so important. He knows first hand how impactful the power of choice is. 

Paul Benson   
[00:23:30] When we think about financial autonomy, our definition of success is gaining choice, right? So we're not, you know, retire early, hey, if that's the choice, you want, retire early fine. But we're not particularly advocating the fine movement. Success is: you've gained choice. Whatever that looks like for you being able to quit a job because you hate the boss. Right? [00:23:54] that's what we're trying to gain, choice. And you're thinking about that equity, the property piece. As I mentioned, I became self-employed in 2006. And at the time, we had two children. One, my youngest was under one year old who's born in 2005, or maybe a little bit older than one year. but anyway, very young. My wife was at home full time caring for the children. So me quitting a job. And therefore, income stops. To start a new career or a new... not even a career - a new business was pretty risky.

 And to be honest, it feels more risky. Looking back now, I was probably overconfident back in the day. I guess. Look, if this all went pear-shaped. I'm sure I could go back and get an employee job somewhere. Yes, but it was definitely the fact that we had equity in the home helped make that viable. I mean, initially, when I left I was fortunate I had eight months leave up my sleeve If I had long service leave, and so that gave me a buffer. That was my runway, I suppose. But then in 2008, I was able to buy another business from a retiring planner. And in some respects, the timing on that wasn't great, because it was just the GFC strike. And it was a bit of a challenging time. But had I not bought that business, it would have been challenging as well, because it wasn't a lot of new business inquiries through that period. But the only reason I was able to buy that business is because I had enough equity in my property in my home, to be able to secure the financing to buy that business. 

Property can be a great way to build some equity, particularly, leverage is an important part of this, which we might get to later. But build that equity, then that equity gives you choice. And this is what I was circling back to, you know, earlier, it's about having choice and property is good in gaining you that choice. For the reasons I just explained, it tends to, particularly due to the benefit of leverage, you tend to build equity reasonably quickly. And then through that equity, there's all sorts of things you can do, whether it's buy another property, buy some shares, buy a business, have a 12-month sabbatical, and, you know, live in the West Indies, or whatever floats your boat. 

But it's gaining your choice through that creation of equity. And that's something and, and the nice thing to is the equity is quite accessible. Whereas if you create equity in a share portfolio, usually the only way to access that is to sell the shares, which then triggers capital gains tax, and that you know, has some other issues, where as the property, you can retain the property and just borrow against that property, then you haven't triggered any tax. Now, if it's your home, I guess you haven't triggered any capital gains tax anyway. But there's still stamp duty and all sorts of transaction costs, you don't really want to do that. property's a lot easier to access the equity, where it's not so easy with other types of investments.

Property investment story


Tyrone Shum   
Now let's talk about Benson’s Property investment journey. With 4 properties in his portfolio, he explains how he managed to buy his first 2 properties.

Paul Benson    
[00:28:00] I've owned three big apartments, I've owned four properties, well, three of those with my wife. But the first one was before she came on the scene. And three of those I still own. I haven't done any property development. But yeah, four properties over the journey. So the first one was a flat in Queue, which is sort of inner-city, Melbourne. area, it is a nice area, this was an old, frankly, but ugly, flat. brown brick. Nothing very appealing about it, probably 1970s, but a good location. And, and it fitted in my budget, which was not very much. So I've got to start somewhere. And your first home doesn't have to be a forever home. Right? So I got in there. And I was quite lucky. I mean, I partly made that work was two-bedroom, and I've been living in shared houses prior to that. So I kind of knew how that worked. 

So when I bought that place, I could afford it on my own. But I went in there with the expectation that I would get a flatmate to just help. And, and I did, and she was wonderful. And so yeah, so that helped make it affordable. And I was probably there I think about three years, not that long. And whilst I was there, I met my wife and we decided we wanted to get a family home. But fortunately, the value of the property moved and some people listening will be disgusted with the numbers. But anyway, they were... it was cheaper back then. So I paid 107,000 and I sold it for 189,000. Now, and so that's good growth in three years. Right. I mean, I only put in a 10% deposit, right? So I put in just shy of 11 grand and I would have had a few costs. And I'm in I didn't make much dent in the mortgage during that period. But, you know, I walked out with 90 odd grand, right? So my 11 turned into 90 odd. Now I've done the math on that on the website. And in the book, I can't think of it off the top of my head, but I'm sure your listeners can see, that's a pretty awesome return, right. 

And that highlights that value of leverage that the property increased in value by 70-80%, whatever the numbers come to, but that's not per annum, obviously, but just total. But my outcome was far different to that because I'd leveraged the 90 put in a 10% deposit. And so that then gave me a good portion of equity. And then my wife and I bought our home, she had some money to contribute there as well. And I don't think it grew as quickly as that flat, I mean, and to be absolutely clear, the fact that the flat went from 107 to 189, in three years, was pure luck. There was no skill on my part, I just bought what I could afford in an area that I thought I’d like. I was working in the city. 

But you know, there was no great skill, it was just luck. But it gave me the opportunity to get into the next place, which you know, then we can buy a house. We were in Moonee Ponds for the Melbourne listeners. So reasonably, in a city, although not as much as Q, and a bit more around to the sort of North, bordering on Northwest, but a really nice part of the world. And, you know, we were able to do an extension and renovation on that a few years down the road. And you know, that's still our home today. And that's worked really well and, and as I touched on, through the equity in that property as it increased in value. And obviously, we put in a good deposit enabled me to then buy the business. And that enabled me to do some other things there. So, that was, I guess, residential flat to the home we're in today. So probably not all that exciting. But it was, particularly the flat really set me up. And as I say that leverage really highlighted what was possible.

Tyrone Shum   
Benson dabbles in many different forms of investment, one of them being property. However, sometimes the risk can seem to outweigh the reward when you are first starting out in any type of investment.  

Paul Benson  
[00:01:27] I bought the financial planning business in 2008. And at that point, the Australian share market was down 30%. Although when we struck the deal it was almost at its peak. So we struck because it just takes a long time. There's a lot of due diligence and a lot of processes to go through. So we struck the deal late 2007 - the share market was at its peak. Share market started to tank. And it's less so now, but at the time the business was - and the revenue - was very much linked to the state of the share market. A lot of the fees were a percentage of clients balances and their balances were largely in shares. 

So the market tanked, which meant the income of the business tanked. So I had to go back to the person that we'd sort of done a handshake deal on and we're in the process of formalising the contracts and say, Hey, I can't get this to stack up anymore. I know we agreed on this price. But I can't get this to work given that the incomes now dropped. And so we renegotiated there and we cut a couple 100,000 off the price. And at the time I thought great, I've got myself a good deal here. And, you know, I became the owner of the business the first of July at that point, the share market was down 30%, which historically a bear market 30% about as much as it drops. So I came in fingers crossed that the worst was behind us. And the market continued to drop another 20% a drop to 50% all up. And I'd taken on as much debt as I have ever had in my whole life.

Tyrone Shum 
Just when we thought his luck couldn't get any worse, the future kept looking grimmer

Paul Benson  
[00:03:16] And six, eight months into it, the bank that lent us the money decided they weren't prepared to lend to financial planning businesses anymore. And we were a little bit lucky that we had a three-year loan. So as much as they didn't want to be in there anymore. They couldn't break the term, which is normally it's the customers thinking about or do I want to fix and then I'm locked in for three years. But in this case, it worked in my favour because probably the bank wanted to say go away. But they couldn't because I had a three-year term. So that gave me a little bit of room.

 But it was a stressful time. And I can very clearly remember coming home and speaking to my wife about we might have to sell the house here because I'm not sure I can keep all this afloat. And if the bank doesn't want to lend me the money, then I've got to find someone else to lend the money. And I don't know if anyone else is going to lend me the money. And I don't know how this is going to play out. And it's not much fun to come home to your wife and say we might lose the house. I may not lose the house, but we might be forced to sell the house here. But she was great. And she sort of looked if that's what we have to do, then that's fine. We'll rent and then we'll buy again down the road. Now, fortunately, it never came to that. And we were able to refinance and the market recovered. 

Tyrone Shum 
Although the outlook was grim, Benson realised there was a light in the dark 

Paul Benson
[00:04:31] There was an upside to acquiring the business during that difficult time, which was that clients were keen to talk to somebody because they were concerned. And they didn't attribute any blame to me because I didn't put them in the strategies, I inherited it. And the previous owner he hadn't done you know, he was fine. He had done good quality work anyway. But it's natural for people to want to blame somebody and they certainly couldn't blame me. But what they could do was find someone who was eager to listen and eager to help and eager to build a relationship. And they were eager to do something. So it gave us a good basis to create a relationship. It would have been a lot more difficult if I had have bought the business, and it ticked along fine for two years or even a year and then crashed. Then they could have said all was fine under the previous bloke and then as soon as you took over and it's all gone pear-shaped right. In this instance, they couldn't say that. 

And, as I say, It formed the basis of some great relationships and clients that are still clients to this day, because of how we work together through what for them was a really worrying time, particularly for clients who had retired or recently retired. And they had X amount in Super, and they’ve done the numbers, and this is going to last me this long, and then all of a sudden, and the share market dropped by 50%. Most people who are retired, of course, aren't going to be 100% in the share market, but their balance might have dropped 20%, which is still a heck of a lot. And you're looking at that and thinking well gee if this stays down here, or it's impossible to or not impossible, but it's a natural inclination to extrapolate and say, Well, if this keeps going, I'm going to be out of money in 10 years. 

Now, of course, that's not what happens. But in the heat of the moment, it's natural to think that way. And so working with people through that period, as much as it was stressful, and I mean, I bought the business hoping that we're going to add a whole lot of new clients. And just none of that happened. It was all just trying to keep the existing clients from jumping off a cliff. Right. Which, in terms of building a business and building profitability and paying off debt, I mean, it was pretty hard, but it was what needed to be done. And it did create good foundations long term. So in terms of worst investment experience, as I say, long term, it was a good experience. But for the first few years, it was a hard experience. And, and I probably just about every person I've spoken to that's bought a business thinks in hindsight that they paid too much. But anyway, I'm in that camp, too. In hindsight, I probably paid too much. But what are you going to do?

Tyrone Shum   
Every investor has an aha moment at some point, for Benson, it was the first property he purchased with a 10% deposit that let him walk away with $80,000. 

Paul Benson  
[00:08:06] I think that one was really crucial. Really seeing the impact of leverage. And to me that, you know, we're on a property podcast here to me. So, often, I see stories of this property, and it was such a great outcome. And actually, when I look at it, I think that's, you're attributing that too because I bought this great property in this great suburb. But I would see that as yet, leverage was really useful there. Magnifying your outcome, that's what leverage does it magnifies your outcome now magnifies it both ways. So if it goes down, you're in trouble. But if it magnifies it in the right way. That's extremely powerful. And when you think about creating wealth, creating financial security and gaining choice, using leverage is really powerful. 

And it's interesting how that's, that's changed over time. I mean, once upon a time, it was about negative gearing. And if we were recommending a strategy for a client, therefore, it's a husband and wife, then you'd say, well, we have it in the higher income earners name because they're going to get the benefit of the negative gearing. And there's a tax angle to the strategy in addition to the investment, I mean, the tax angle should be secondary, but it's still there. Today, though, that really doesn't stack up because interest rates are so low that almost nothing is negatively geared. And so we've largely flipped them. And often for couples these days, we just put it in joint names, but you might even put it in the lower-income earners’ name on the basis that there's not much from a negative - from a negative gearing point of view, could even be positively geared. 

But of course, at some point given it's an investment, there's likely to be some capital gains tax so it probably is more attractive to have it in the lower-income earners’ name at that capital gains tax point. Now the challenge with that is that usually a long way in the distance and it's a bit hard to know what ownership is best, but, but that's been a real change because it was just in the past. There was just a real black and white. If you're doing gearing then it went in the higher income earners name - doesn't apply anymore. Yeah, so yeah, I think it just sorry, slightly off-topic there. But getting back to your question. Yeah, I think it was wonderful learning for me. That experience of ‘Wow.’ If you can, if you can use some leverage and use it wisely or Luckily, but let's go with wisely. It can have an enormous impact on your financial position and your financial outcome.

Tyrone Shum  
Benson then explained the problem with the negative gearing strategy 

Paul Benson  
[00:11:27] At current interest rates, it's difficult to make anything negative geared anyway, unless it's got a really low rental yield. And for some reason, you had to pay an unusually high rate of interest, but many of you're paying about 2% odd in interest. Well, in most Metro regions, your rental yields going to be 2% ish, probably a bit more depends on the area. So you know, perhaps you’re neutrally geared I mean, you're going to have council rates and a few expenses. If you're negatively geared, you're not negatively geared by much. Now, that might not always be the case. At some point, you'd imagine interest rates will go back up. But for the moment, even if you want to be negatively geared, it's pretty tough at the moment. And yeah, there is a broader question around. It's interesting that we would in the past have championed negative gearing, there is the tax angle, but set that aside for a moment negative gearing means that the investments losing money on an ongoing basis, and you're betting that there's enough capital gains, capital gain, to offset that loss. But of course, if you could get a situation where it's neutral, or even slightly positively geared, and still have the prospect of capital gain, well clearly that's better, isn't it? I mean, yeah, I don't know. There's not too many other investments that you would tolerate regularly losing and just hoping that oh yeah, that's okay. Because 10 years down the track, it's going to be worth more. I don't know that people would do that with shares or with a lot of other investments.

*** Insert from Part 1 audio ***

Tyrone Shum  
He explained the trick he used to save thousands of dollars on his third property, which was a commercial investment. 

Paul Benson   
[00:32:04] The other properties that we've been involved with. As I mentioned, I bought a business in 2008. And that had a lease on an office that come due a couple of years later. And so it was time to move. And I was looking around for office space. And I was horrified at commercial property, and as an investor, this is why you love it right. It's great from an investor's point of view because you kind of just get a shell and it's up to the tenant to figure it all out. And I was looking at a property and you've got usually a five-year lease with different options. That's a pretty long time frame. And the cost of fitting it out, I was freaking out. I gotta spend all this money getting it looking nice. And then maybe five years later, I leave and the landlord just goes oh thanks for that. I'll just keep that. Because there's no practical way that you can take that with you. And that was pretty off-putting.

And so I sort of decided, being in financial planning, we were doing quite a lot of self-managed super at the time, through the whole GFC self-managed super into property was pretty popular. But look, how about a wife and I created a self-managed superfund, roll our supers in, and let's just buy an office. Through self-managed super ordinarily, you can't lease a property off yourself, but there is an exemption for commercial property. So we did that. So then my financial planning business leases the office from our self managed Superfund. It's got to pay commercial rent. And it's all aboveboard. And you know, there's proper contracts and things. And we still do that to this day. So in fact, the office I'm sitting in right now is owned by a self-managed Superfund. 

So that solved my problem in that it meant we bought a brand new office. And I didn't feel bad about fitting it out. Because I felt that well, at least there's an there's a value there. And if we do leave five years down the track, and I lease it out to someone else, then the next tenant is going to appreciate that it’s all cut up into nice offices and all that sort of stuff. So I felt a lot better about spending money, making it look good. And, and kind of an added is just nice to have that security, hey, the landlord's never gonna kick you out. And you can sort of take care of the place. I must say, I suspect from an investment point of view, our superannuation balance would probably be bigger if it was still in shares, rather than in property. But nevertheless, it solved the problem at the time. [00:34:38] For a couple of reasons. My financial planning business, it tends to do better when the share markets going well and it and it's a bit quieter when the share markets weak. And so there was a part of me that just liked the idea of having some of my wealth and my wife's wealth not tied to the share market, right. And so having a good chunk of our super inner commercial property, you know, there was an element of that that appealed to. 

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Tyrone Shum 
Coming up after the break, we learn more about another property he bought on a limb right before the pandemic hit.

Paul Benson 
[00:35:06] At the beginning of 2020, which is an interesting time, to acquire a property given COVID. Obviously, that was unforeseen when we were shopping around.


Tyrone Shum
We delve more into the future mindset on what he wants to achieve if he retires.

Paul Benson 
[00:16:21] I'm not someone who aspires to retire early. In fact, I'd, I'd be quite happy to work till I'm 70

Tyrone Shum 
The gracious gift that got him interested in investing

Paul Benson
[00:24:25] And I think that was really key to, to getting me started thinking about money and finances and building wealth 

Tyrone Shum 
All that and more coming up after the break. I’m Tyrone Shum and you’re listening to Property Investory.

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Tyrone Shum 
Benson bought another property on a limb right before the pandemic hit.

Paul Benson
[00:35:06] At the beginning of 2020, which is an interesting time, to acquire a property given COVID. Obviously, that was unforeseen when we were shopping around 

Paul Benson   
[00:35:34] But it all worked out. Alright. Interestingly, the reason that came about is because... when I was writing the chapters in my book on property and reflecting on different things, and I was thinking about that first property that I bought, and why that was the success that it was. And I sort of recognised, anyway, some key elements about that. The fact that it was older, so it had all its depreciation, it was kind of as rundown it was as it was ever going to be. So the only way was up, it was in a really good central location, lots of good public transport, it’s solid brick, it didn't have 100 apartments, it was six in that block, had a car park.

Anyway, I just identified some key characteristics that made me realise why that property worked. And I guess also just reflecting on, I’m no handyman, and a key thing that would have put me off investment property historically is I'm not someone that's going to get in there and you know, pull apart the kitchen, or anything like that. So an apartment or a flat where there's a body corp or an owners corp, where I can pay a quarterly fee, and I just know they take care of it, that suits me. So anyway, sort of reflecting on this. And in writing the book, I wanted to put a case study together. So I was just pulling out some numbers. And it became evident to me that Gee, there are properties like that you can buy, where the length of the rent would cover the cost of the debt. 

And, you know, we, we had equity in our home. And if it was untenanted, we're in a position where we could have carried that or if interest rates went up a bit. I figured, yeah, we can carry that too. And so I actually said to my wife, just I've been writing in the morning, and I said, Look, let's jump in the car because I was googling and I'm on realestate.com, or whatever. Because I wanted to get actual numbers for this case study I was working on. And I'm like, there's a property here in Flemington. That's like, here's the rent. And here's what it costs. Well, for that money, it just pays for itself like it's costless to own. Why would you not buy it? There's got to be a catch here. So let's jump in the car, it’s open for inspection in half an hour. Let's have a look. So we went down there, like seems pretty good. It had a tenant in it was ready to go. And we sort of Oh, yeah. So we tossed it around for a few days. And we should have a crack at this. And of course, by the time we did... it was sold, right. But that gave us the seed for like, well hang on. Maybe there are others? 

Tyrone Shum 
Now determined to find another property to buy, they kept looking

Paul Benson
[00:38:07] We had a look around a few more came across a place in a suburb that most people probably never heard of was called Travancore, which is kind of near Flemington. It's quite inner city, Melbourne, just a really quiet little wedge. But we found a place, I think it's got eight apartments, again, sort of 1970s-ish. had a tenant who wanted to stay. Funnily enough during the open for inspection. She was there sitting on the couch. So I was actually able to say, Well, first, do you want to stay? Yep. Is there any? Is there anything broken? Is there any work you need? Done? I'm just trying to think through, am I gonna have to spend any money here if I buy this. Nope, she's happy as Larry. 

And so we just sort of, well, this looks pretty solid. It's an old kitchen. At some point, the kitchen needs to be replaced. But if it's got a tenant, we've got cash flow from day one. Air Conditioner was just about new, and it just fine. And the commitment was not all that much, we could say that the rent was going to cover the loan. And, you know, outgoings. So we put in an offer, the offer was accepted. Done deal, right. And, yeah, as I said on February 2020, and then COVID hit a month later, but it was fine. The tenant, she didn't lose her job, and she kept on paying and, and it's all worked out. 

Well. And, you know, we're really grateful that she's been a great tenant, and so, you know, we won't be putting up the rent anytime soon. We were a bit concerned. I mean we could manage that but I'm glad not to have had to, you know, yeah, have been empty. It would have been difficult to find a tenant if we got through 2020. So yeah, so I dare say we haven't. If we sold that property today, I doubt we'd make any money or almost certainly we wouldn't, but you know, buy a property with the intention that you're gonna sell it 8 months later or not even. I Still feel really good about that property. It's an awesome location, it's so good. I mean if I was a single person you know - there's a bike track that takes you into the city, just at the bottom of the street is a tram. At the other end it's really close you can walk to the hospitals and all the parks, and it's got a really big north-facing window, and it's on the second storey gets heaps of natural light. It's a great place. And yeah, one day we'll put a new kitchen in and that sort of stuff and freshen that up. But the bones are awesome.

*** End from Part 1 audio ***


Mindset segment
Tyrone Shum  
Benson shares what his why was, and the motivation behind accumulating wealth. 

Paul Benson  
[00:13:28] I guess we've got a few elements. And this is something my wife and I've obviously discussed because there's a couple. I'm sure you're the same. I mean, you've got to work those things out together. It is interesting financial planning how often I get couples in and: All right, so what do we want to do here? And husband and wife have never talked about it. And in fact, sometimes it's one of the members of the couple dragging the other one in reluctantly because every time they want to talk about where we want to get to in the future, the other one clams up or walks out the door. And so they dragged me in to try and you know, get it out of them. So, so yeah, so we've got, we've certainly got some plans. I guess a key, certainly self-employed was something that I had always hoped to be one day and we touched on earlier. You know how I managed my week. And it's wonderful to have that degree of control. And it was great. My kids are a bit older now.

But when they were young, it was wonderful to be able to do classroom help and do some of these things. You know, I coached both my boy’s basketball for a lot of years. And sometimes it was four o'clock training and these sorts of things. And being self-employed, being in control of my diary and just being able to block out time and I've got this commitment was a key goal for me. And I'm glad that I've had the opportunity to do that. We, when … my youngest is in year 10 now and when he finishes high school for a long time now my wife and I have had as a goal that we want to be able to live for two to three months a year. overseas, once both the boys are adults, and we particularly like the idea of whilst they're at university because then it gives them a bit of freedom, but also they can feed the pets and look after the house and stuff. 

Paul Benson  
[00:15:14] And we're well on track for that. And in fact, to a slight degree COVID help they're a little bit because it proved that I mean, I work from our spare room for almost a year, and the business ticked over just fine. So If can work from a spare room, then I can equally work from some house that we rent in the south of France, or something for two or three months, right. So and it got everyone a bit more comfortable with zoom meetings and that sort of stuff. So we feel clearly at the moment with COVID be a bit difficult to travel. But that's not always going to be the case. And it's a few years away for us. So the expectation is we're still on track for that, and we feel that's more doable than ever and more positive and more committed to that than ever. 

And so, yeah, the expectation is two to three months, sort of New York and that area, one year, we'll do London and England, and we'll do several different European countries and some other parts around the world as well. So certainly looking forward to that phase of our life. And that's, that's been a key goal that we've worked on for a long time. I'm not someone who aspires to retire early. In fact, I'd be quite happy to work till I'm 70, perhaps maybe not five days a week, but I really enjoy my work. I love it. And so early retirements, not something that appeals to me, but I have, you know, our financial plan is built around us being in a position that I could retire at 60 if I chose. So, I've got to work that back as to right, how much do I need to contribute to Super? How much do I need to contribute to other investments so that at age 60 if I wish I can retire? As I said, not my intention, but I want to have that option. And so again, that's, I guess, the choice scenario. So that's, that's a plan. That's, that's in progress now. And we're in meeting the goals that we need to meet. So that's realistic, that will happen. 

PERSONAL HABITS / RESOURCES SEGMENT

Tyrone Shum 
Although Benson always wanted a mentor, he knows it’s proven difficult to find one. So he took matters into his own hands.

Paul Benson  
[00:18:25] I've always been on the lookout for a great mentor. And I must say, I've never really found one, I think it would be awesome. And similarly, I've been on the lookout to help someone else. And there is one person that every second month we catch up for lunch via zoom and just have a bit of a chat. Although to be honest, the relationship is developed such that I get as much out of it as he does. It's really a two-way street. But I did originally approach it on the basis of Hey, do you need a mentor and you know, if you'd like, I’d be there. It's a little bit of an awkward conversation to have, though, because that kind of potentially suggests you're a bit full yourself, you know, so it's slightly awkward. But I guess mindful that I couldn't find someone I was trying to be proactive. And yeah. You know, he and I catch up for lunch, and it's good. 

But I think what I found really helpful was colleagues in a similar position to myself. So I was a bit fortunate when I did initially go out on my own. I was under a licensee that was part of a broader group, and it had two or 300 different practices around the country. And so they'd have a couple of catch-ups each year. A couple that were just like Melbourne Metro, but once a year, they'd have a big national one. And I always got a lot out of those. It was great to speak to other colleagues in the same boat as me. They weren't mentors, but they were peers. And often, these days, they'd be professional development days typically and so they'd be guest speakers and economists and various bits and pieces. And actually, the best stuff you got out of the day was the cup of tea, or the, you know, the morning tea break or whatever, when you're just having a chat with someone. And they happen to mention or just discovered, you could do such and such. And, you know, we helped some clients do this sort of, it's genius. What didn't I think of that? Right? And then you go back, and then you implement that. So? mentors? No, but peers? Yes, very helpful.

I've had a couple of times. I mean, I've sort of formed one group of different business owners that I knew to see if we could get that to work, it was alright, but it faded out. I was in a paid sort of group along those lines, where there was someone that sort of hosted it, and then half a dozen other business owners around a table, a bit diminishing returns on that I probably got a lot out of that the first three to six months, but then it, its usefulness diminished. I think everyone had kind of shared their story. And maybe I'd kind of squeeze the juice out of that. But it was good for a while. So yeah, I guess that's, that's what I found valuable and useful, specifically, in terms of my journey as a business owner, which is, frankly, the source of my wealth. And that's how I generate my income. And I'm not, I'm not driving around in a Ferrari by any stretch. But you know, we're getting there. It's a process, as I say, you know, my kids are still at high school. So we've had school fees and bits and pieces - expensive time of life, but, we're on track. 

Not surprisingly, as a financial planner, I have a financial plan. We're following it. And we're where we need to be in terms of milestones, which is an important piece of the puzzle. So yeah, and so the business is the business success has been fundamental to that. And so that's, as I say, where the peers and the network has been really good.

Tyrone Shum  
Benson then provided some insight on how he became interested in investing  

Paul Benson   
[00:23:29] My grandfather got me interested in... it was shares. And I know this is a property podcast, but I guess it was investment broadly, right? Yes. And in fact, the first shares that I owned was some shares that he gave me he, he worked for a company called CSR, which is gyprock plasterboard and stuff, some of you listeners might not, and he worked there, I think pretty much all his life. And so he must have got given some shares over the journey. And so he split them up across his eight grandchildren. So we all got, and it wasn't, it wasn't a lot of money. But as a teenager, I owned some shares. And it was back in the day, we got a share certificate, even though it wasn't all on chest. So that was pretty cool. Right? And that got me interested in investing. And I think that was really key to getting me started thinking about money and finances and building wealth and learning about... you get these dividends every six months, and the price goes up and down. But if I don't sell that doesn't really matter. 

So yeah, I think learning about that getting some first-hand experience as a teenager was really valuable. I mean, we didn't touch on it. But I mentioned that first property I bought and it's 10% deposit and I know in the context of today, an 11 grand deposit doesn't sound like very much. But it still took me a fair while to save that, and especially as I was living in different share houses and things. So I had rent to pay and those type of things. But a key way that I accumulated that was through buying shares. And, and those shares that my grandfather gave me were part of that. And I wouldn't have necessarily had he not got me started, I don't know that I would have been buying shares in my 20s. And if I hadn't bought shares in my 20s, then I wouldn't have been able to buy that first property in I think I bought that when I was 24. And had not bought that first property, then I couldn't have bought my home. And if I hadn't bought my home, then I wouldn't have had the equity to buy the business. So it's all a cascade. 

Tyrone Shum   
The domino effect had a positive impact on Benson’s investment journey, and we find out what he would tell his past self if he could speak to him now. 

Paul Benson   
Can I go back 20 years?  And so I need to go back, I need to go back longer. And only because I'm thinking so my oldest son is at university this year. And so I guess what would I say to him, you know, thinking in my own shoes, and it was probably, perhaps to be a bit more ambitious, but also maybe slightly less worried about what others think, and a bit less worried about fitting in, I guess or doing what everyone else is doing. Being a bit more prepared to tread my own path. I mean, I think I've kind of done that anyway. But maybe I could have fast-forwarded that five or 10 years. Don't know that's about where I'm at. But as I say, I wouldn't change anything. Otherwise, I'd be in a different place now. And I'm happy with where I am now.

Tyrone Shum 
Although Benson is extremely successful, he isn’t ignorant or entitled. He acknowledges how being born into a privileged life has helped him along the way. However, he also realises the importance of hard work. 

Paul Benson   
[00:29:02] I mean, there's obviously the luck of being born in a western country with good health care and good education. And yeah, so there's, there's clearly luck involved in where we're born. And the opportunities that that presents. and obviously, yeah, there's some luck in terms of like, particularly that initial property purchase. 

Um, but beyond that, I think it's been pretty much up to me, I mean, doing uni over six years at night whilst working during the day is not everyone's cup of tea. And it was important that I did that university study because I mean, I could have at the time, I could have started as a financial planner without it, but I doubt I would have got the job without it Anyway. And certainly today, you can't be a licenced financial planner without a degree. So it was important that I got that those studies done, and that then created opportunities for me and no one else made that happen. So I think everyone's got a, say, some luck in where you're born and the opportunities that gives. But um, but I'm not gonna say it's all luck. You know, I do feel like I’ve made my own opportunities and look, maybe I could have made more of it. I could have studied harder and these sort of things. But anyway, we're where we are today. And it's not a terrible place to be so...

**OUTRO**

Tyrone Shum: 
Thank you to Paul Benson, our guest on this episode of Property Investory.