PODCAST INTERVIEW: OpenCorp’s Cam McLellan on community footy, property vs shares, and the impact of COVID-19 on the property market

OpenCorp’s Cam McLellan was recently interviewed by Lindsay Moore, from the Waverley Park Hawks Junior Football Club, for its Hawk Talk podcast.

OpenCorp is a keen supporter of grassroots junior footy, and a major partner of the South Metro Junior Football League‘s new Community Fund. The Hawks are part of the SMJFL.

In this candid conversation, Cam discusses:

  • his background and how he got into property investing,
  • why OpenCorp is involved with community football in Melbourne,
  • the impact of COVID-19 on the property market,
  • why he prefers property as an investment vehicle compared to shares, and
  • what types of renovation add value to your home.

You can listen to the interview or read the transcription below.

Lindsay Moore:

Our next guest is Cam McLellan, Director of Opencorp, property investment specialists, who are a major sponsor of the club, including being a jumper sponsor for the next three seasons. They’re also a major partner of the SMJFL’s Community Fund Programme Initiative. Welcome to Hawk Talk, Cam.

Cam McLellan:

Thanks mate. Thanks for having me.

Lindsay Moore:

Now, first up, I’ve listened to you speak about property investment in various online webinars and podcasts. It’s obvious you have a real passion for property and investment in property. Tell us a little bit about how you came to realise that enthusiasm that you want to be involved in property investment.

Cam McLellan:

Yeah, no worries, mate. I should premise the answer with if coffee cups, mate, gave me compound growth, rental yield, and tax benefits like property did, well I’d be an expert in coffee cups, but they don’t, so property it was for me. Mate, when I was a young tacker, grew up in the country, and left home 16, I think we were talking before. My dad was a bit of a prick but mum and dad also went through losing family businesses and homes and that sort of thing through some dodgy dealings from their accountant.

Cam McLellan:

I heard arguments with mum and dad before the drinking started even, that whether they should argue over whether they should buy milk or bread. I wanted basically, and look, I didn’t have the worst upbringing, but financially we were pretty rough, so I wanted a better environment for my kids to grow up in. I left home at 16, worked multiple jobs, and knew that property or rich people had property, so I spent a good decade just talking to a lot of investors and learning how I could get into property investing, so that I can create an environment for my kids that was a step up from what I had.

Lindsay Moore:

Just picking up on creating an environment for your children, as I said in the introduction, Opencorp business, sponsor of the SMJFL, and sponsor of our club. What’s the connection between your business and your reason for supporting grassroots junior football?

Cam McLellan:

Like all business owners, I get asked to support lots of different charities and bits and pieces, mate and to be honest the community fund really struck a chord with me. With the community fund I saw there … And going back, mate, when I was a kid, one thing that probably made me the person I am or had a large influence in me as a young tacker in the country was the footy club. Growing up and playing footy with that community spirit around me probably kept me out of a lot of trouble that I would have got in otherwise.

Cam McLellan:

When I came down to the city and started living down here and realised that there’s a huge variety of different demographics, and even in the area we’re in, there’s kids that play sport, kids that don’t. Getting kids involved in footy and getting in sport is really important to me. I coach four basketball teams, assistant coach local footy, all my kids play multiple sports, netball, footy, basketball. I think by getting more kids involved in footy, especially footy, it will build a better community for us down the track.

Cam McLellan:

When the SMJFL had the initiative, which is groundbreaking, it’s just revolutionary what they’ve done, putting the community fund together, and the goal of it is to raise a million dollars a year to make footy free for kids through that whole league. I don’t want to big note, mate, but I’ve put 100 grand into it this year to try and make footy free for kids. That’ll roll into next year when we get back in playing footy, and the reason I bring up the dollar amount, mate, is because I challenge other business owners, if they’re doing all right, then they should be sticking some money into it.

Cam McLellan:

Because if we can keep cost of sport down and get more kids involved in it, we all get a better community down the track.

Lindsay Moore:

Yeah, I couldn’t agree more. That’s a great initiative by the SMJFL, and pie in the sky maybe in terms of providing free football, but I tell you, if it comes about, it’ll be great for the community.

Cam McLellan:

Even if the cost is reduced and it can get more kids involved, you know what I mean? Even if it can make a difference, a dint in it.

Lindsay Moore:

Picking up on Opencorp, the property side of it, why invest in property? Why not look at other forms of investments like stocks and bond and cash and managed accounts and all that sort of stuff?

Cam McLellan:

Yeah, for me, initially when I was younger, not having a high degree of schooling and leaving schooling at a young age and working multiple jobs, I knew investors usually went into either shares or property. They were the glaringly obvious ones for me as a kid growing up. Now, it was easier for me to buy a few lunches for a lot of grey haired old investors and learn the art of property investing and the strategy behind it, the risks involved in it, than it was to go and learn how to analyse a share market and specifically the companies within the share market.

Cam McLellan:

There’s a couple of reasons that I raise risk as an investment. Later on, as I really got to understand business, and having once again without blowing the trumpet, but I’m telling you this for a reason, but eight businesses listed in BRW Fast 100, the telco industry, IT industry, funds management, property advisory, mortgage broking, property management, property portfolios themselves. I’ve got rid of a lot of those businesses so I can spend more time with the kids, but the reason, I’ll get back to your question about why property over shares, if I think about people who invest in shares they usually just diversify across a share portfolio and hope to beat the average.

Cam McLellan:

Warren Buffett’s old saying, “People who don’t know how to invest diversify.” Anyone, and the reason I don’t raise business ownership up is that if you’re investing in shares, you’ve got to look at it like you’re investing in an individual business. You need to be able to analyse that business’ annual statements, read balance sheets, profit and loss statements, cash flow statements, analyse the industry, the product lines they’re in, the management team they’re in, and only then should you make an informed decision, invest in that company or that stock.

Cam McLellan:

If you can’t do that, you’re gambling in my mind. Whereas property, I can pick the eyes out of it, I can set up the finance I want, control the banks. I’ve got a set strategy for analysing each capital city market, the growth corridor within that, picking the optimum-sized property for that area and process of elimination to get down to the best property every time. Then I pick the tenant, I manage the portfolio, I duplicate it when it goes up in value, so I control the risk within the process.

Cam McLellan:

Not saying people don’t make money on shares, but the other real reason, if we match dollar for dollar, I’d also argue that shares occasionally outperform property, and I’d back someone who said that, but the reality is we don’t invest dollar for dollar in Australia, or around the world. We go to the bank and we leverage up and we get some of their money, put it with ours, and then we put it into whatever investment.

Cam McLellan:

Now, most shares, if you look at the GFC as a good example, where it crashed down 45% of the value, so I wouldn’t leverage up on shares anymore than about 50% max, because I don’t want those margin calls. With property, I’ll push it to 90% because consumer protection laws, which as long as you’re making the repayments, banks can’t look at the value and then call in your property, because it’s not valued the same. Even if we go through a dip, I hold property long term, it doesn’t worry me.

Cam McLellan:

So, I can invest in property 90%, even if I invest dollar for dollar, if I gave shares a 10% growth rate and property an 8% compound growth rate over a 20 year period, 50k investment into each, property would come out about 1.4 million ahead. I’ve done the math in the background, mate, so you can check that. But that’s a very crude example of why leverage, property beats shares every time. I reduce risk, I get a better return on my money, it’s a simpler form for investment for me to learn when I was a young tacker mate, so that was why I chose property as a career.

Lindsay Moore:

Yeah, okay. We’re living in crazy times now with COVID-19. But before we talk about the general property market, and the impact COVID’s had on it, a lot of people have been locked down, have turned to becoming a home handyman and been doing a few improvements on their house. What projects would you suggest to people in practical terms, that will add actually value to their property?

Cam McLellan:

Yep. I guarantee my wife, Felicity, had a list of projects the length of my arm when we went into lockdown, do you know what I mean? It was good to knock off a few of those. I know a lot of partners will just have the standard list of things, but if you’re looking at adding value, if that’s what you’re looking at, especially with different grants and those sort of things kicking around, you need to look at a very simple equation. “If I add a dollar worth of my dollar to my house, will I get a dollar back in bank panel valuation?”

Cam McLellan:

Because if we’re looking at investing and we want to access equity to buy an investment property, every dollar we spend we need to get at least a dollar back from the bank panel valuation. If you’re doing cosmetic things, a lot of the time you won’t get that. If you want to do cosmetic things to your house, do them because you just want to do them and you just want your house a bit nicer.

Cam McLellan:

If you need to do something that’s going to be a renovation, if you spend 50 grand, you want to make sure that you either do it for your living quality standards, but if you’re doing it just to get uplift in your property, make sure the bank’s going to value that. So, banks value bedrooms. They don’t value media rooms, or backyards. They look at rental yield and they look at the amount of bedrooms generally. They might go, “You’ve got a 700 square metre block or a 400 square metre block with a four bedroom on it.” There’s not a lot of science behind a lot of valuations.

Cam McLellan:

I know this from working in the valuer industry for a very long time, and one of my good mates is the head of valuations at CBRE, so it’s a sausage factory, mate. The way valuations are done. You need to make it very simple for the valuer to provide you a good valuation. But really, so around the own home, mate, just do things that are going to make you happy and keep the wife or the husband happy.

Lindsay Moore:

Yeah, okay. Moving onto something more serious about COVID, what’s it done to the overall property market in Australia? Is it a good time to be investing or is it a bad time in terms of investing in property?

Cam McLellan:

It’s a good question. The start of it, I wanted to sit back and assess things, to see how it went. What we were looking at, we’ve got 1000 odd properties on our rental roll for clients, we’ve got over 1500 clients or families, Australian families that invest through our advisory group, so I wanted to be very cautious I suppose at the start. Really, the only impact is the long term economics of … the underlying factors around the property industry, we’ve got a massive long term under supply of property. We’ve got urban growth boundaries around our capital cities, which limit the amount of land, and we’ve got an increase in population.

Cam McLellan:

Even now, without the huge population, immigration population, you’ve still got that pressure on supply. What I wasn’t sure of was obviously the economic factors. Is it going to be as bad as the GFC? The ’90 recession? These are the ones that I was kicking around for. I was at school in the ’90s, then the world was going to end then. I studied historical trends of property here and overseas, and I’ve become a bit of a historian at that.

Cam McLellan:

But what I wanted to make sure was, was this thing going to be worse than the GFC? What are the factors? The factors are reality is of a fire sale, so obviously job losses can cause a fire sale, but banks have got mortgage relief, so that nullified that. The other thing that can drop property prices, if developers need to move stock. If they go into a fire sale, developers got mortgage relief. The other thing is obviously if the rental market drops dramatically, the government put in JobKeeper and they put in … They encouraged people to work with their tenants, which we’re working with a number of tenants.

Cam McLellan:

But we’ve only seen out of well over 1000 properties, under 5% of tenants ask for any sort of mortgage relief. The reality is people are proud in Australia, we want to pay our bills, even if we’re a renter, as opposed to a homeowner, we’ve still got Australian morals and we want to make sure our bills are paid, and our expenses covered, and we stand on our own two feet.

Cam McLellan:

It was a really big test of character I think for Australia this whole process. Come September, that will be good to see how the Australian government handle that. I think they’re going to do a washed down version, but as far as investing in property, mate I’ve learned about property investing in the ’90s, off investors who were investing through the recession. I invested hard through, and we’ve got graphs and infographics, we’ve done it through the GFC. Property market dropped about 10%, bounced back hard. The underlying factors of the property market in ’17, we were in a restriction bubble, lending regulations which pulled the market back.

Cam McLellan:

That slowly eased, property market took off like it should have, because of the demand issue. COVID’s kicked in, property market’s eased fractionally. We’re talking a couple of percent. We’re not talking serious dollars here, but it’s not exciting for newspapers to write that the market hasn’t really taken a massive dive, do you know what I mean? If you listen to the writing in the paper you’ll get one … I saw on the other day. This is yesterday. By one of the major news outlets, News.com.au, “Property prices plunge.” You go into the article, property prices have reduced by 2%. You go, “Come on.”

Cam McLellan:

So, don’t listen to the headlines. Read the facts. RP Data is a really good source of information, but I’m buying property right now. There’s some really good buying out there, because builders want to make sure they’re getting building contracts kicked off, so they’re offering some really good incentives. So, we’ve got a lot of clients who have taken advantage of this period of time. If you’re happy to buy a property and hold it long term, mate, during a downturn is a fantastic time to invest.

Cam McLellan:

Talk about Warren Buffett again, his famous saying, “Be greedy when others are fearful and fearful when others are greedy.” Hopefully that answers, you know?

Lindsay Moore:

Yeah, if you have the capacity or the capability, it appears to be a good time to invest. Now, we’re a junior footy club, which means we probably cover a fair gamut of the various life stages. We’ve got children, young families that are either renting or low equity in their first home, through to more established families who have probably get heaps of equity in their home or even paid it off, through to the grandparents and retirees and empty nesters. Any general advice through each of those sort of listeners?

Cam McLellan:

Yeah. Kids should probably be putting away three quarters of whatever they earn into savings and spending a quarter of it. I’ve got a Money Smarts course which we can make available to you, which I do for year 12 kids, which is basically teaching, so this is if we’re thinking about the juniors through the club, really up until most adults to be brutally honest, I think should do this course. It’s about an hour and a half and teach you the core fundamentals about money.

Cam McLellan:

I’ve rolled this course out for … It doesn’t talk a huge amount about property. It’s more about the mistakes the majority of Australians make and why 90 odd percent of the population retire poor. It’s really about understanding the basics, how to do the basic things that’ll put you so far ahead of the population, even if you’re not an aggressive investor. I’ve rolled this course out to every A-League soccer club, every NBL team, AFL players, Australian cricketers, jockeys, NBA players.

Cam McLellan:

This is a course which people who are transitioning out of the mum and dad world into … This course was designed for year 12 kids, so every couple of weeks I go out to different schools and do this course, but I recorded it because schools were after it during the COVID period. That would be a really good start for anyone wanting to understand the basics about money and then for people who are have got their own home and a bit of equity, learning the safe basic steps of investing, so to keep their own home safe and out of the banks’ hands, to buy their first property, buying a property that’s low cost to hold so they don’t put a strain on their household income.

Cam McLellan:

And then people who are transitioning into retirement, there’s different methods of basically … a lot of people find they’re asset rich and income poor, so it’s a matter of transitioning that asset into something that’s going to generate income for them. There’s a number of different funds. We’ve got one called Resifund.com.au which a lot of people transition during that period. Don’t want to just keep promoting Opencorp, mate, but there’s other things that you can do.

Cam McLellan:

We’ve got investment consulting team, if people who are over 18 and they want to talk to one of the investment consultants, they’re more than welcome to. Otherwise that Money Smarts course is a really good one to do. I’ve got a best-selling book, My Four-Year-Old The Property Investor, which I can make available for listeners free of charge for you, as well, mate.

Lindsay Moore:

Thanks Cam. It’s been an interesting chat, but before you go, always finish with at least one football question, so firstly, who do you follow in the AFL?

Cam McLellan:

North, mate.

Lindsay Moore:

North Melbourne. Now, if North aren’t to win the premiership this year, who do you think will or who would you like to win the flag this year?

Cam McLellan:

I don’t mind some of the old Melbourne clubs, mate, just because I grew up in the VFL, that sort of thing. I’d probably go with a Hawthorn or something like that. I know they’ve had a few. Actually, there you go, Hawthorn. You guys are the Hawks, aren’t you? I’ll give you that one.

Lindsay Moore:

Go local.

Cam McLellan:

Yeah, that’s right.

Lindsay Moore:

Thanks Cam. Appreciate your time today, and the property investment advice you’ve given our listeners. On behalf of the club and also I’d like to thank you and everyone at Opencorp for your support of the club in these difficult times. Finances are tough for everyone. A lot of people and organisations are struggling and our club’s no exception, so it’s through the goodwill of your support and other supporters of our club that will enable us to have 400 players get out on the park this season. Thanks very much, Opencorp, and thank you, Cam, for your time today.

Cam McLellan:

No worries, mate. There’s two economies out there, mate. For any other businesses out there that are doing okay, put your hand in your pocket and help out.