We’re chatting to Cam McLellan, director of OpenCorp Australia and author of My Four Year Old The Property Investor. You’ll find out how he grew his business and his portfolio and how skipping smashed avocados and lattes in favour of growing his portfolio paid off.
You’ll discover how McLellan built the lifestyle he wanted for himself when he was young for his own kids, why he prefers to invest in residential property and how a missed investment opportunity turned into a Hollywood film.
So what does he do in any given day?
I’m one of the directors of OpenCorp. So we’re property development funds management and property advisory. So for property investors, we teach them how to build property portfolios.
My role with OpenCorp is strategic direction, I don’t have a function day-to-day or any tasks I’m responsible for, except for strategic direction. I work and have all my meetings on Monday and Tuesday. I don’t work on Wednesdays, I do a bit of writing on Wednesdays – writing My Four Year Old The Property Developer and My Four Year Old The Business Owner at this point in time. Then Thursday-Friday, I usually keep free to catch up with anyone, but nowadays I’ve got a really good team in place in my businesses, it’s taken me a long time to get to that point, automating medium-sized businesses. I’ve got a great management structure in place.
The reason I set it up like that is I like to make sure that I can get my kids off to school, go to the gym in the morning, go into work and be home for my kids when they come home. While they’re young and they think I’m cool, I’ll hang out with them now and when they’re 15 they’ll go and do their own thing for a while before they come back. So while they’re younger, I spend as much time as I can with them as possible.
One of McLellan’s personal achievements is his book, which was published in 2015 and aimed towards teaching his children about property investing.
The book that I started to write in 2010, released a couple years ago, was My Four Year Old The Property Investor. The reason I wrote it, I’m not saying that other property books aren’t good, but what I was wanting from a property book was a way to transition knowledge to my kids. So I think it was about 2010 when I started writing it, was when I was going overseas and said to my wife, ‘If something happens while I’m away and the worst happens, I’ve got no way to transfer this 15 years of knowledge on property investment and everything I learned along the way to the kids.’ So I started writing a journal, just to achieve some basic notes on property and the basic journal which I thought might take a couple of days was 20 hours a week for the best part of the year – and that book got published. The way I constructed it was as if I’m speaking to my kids, so the majority of it is literally the way I speak to my kids – it’s very plain and simple language, but they’re fairly complex subjects that we’re going through.
So I broke it down – I’m fairly process-orientated, numbering different businesses – so an overview of the industry is all things out, which gives the basics on property and property investment in Australia particularly. Then I’ve got the process that I use because I wanted to find a way that I could determine the best property in Australia to purchase in my personal portfolio at any point in time, regardless of market cycle. So it’s pretty hard to compare property a and property b and then can get the winner of that and compare it to property c and go through the 9.4 million properties in Australia.
So I developed a process which you can go through as you know later if you need to and that enables you to pick the best property every time. Then I wrote up the check sheets that I use, everything from the idea, setting up your team, getting your finance structure correct. Finance is probably one of the main things which stops property duplicating, is the way banks want finance structures set up and the way investors need finance it up to about as polar opposites you can get.
So setting up finance structures, then how to identify the best investment in the markets, the gross corridors in property. Then settlement checks, conveyancing checks and then once I’d got to the stage where I had a pretty serious portfolio and had a process to build that portfolio, I became overwhelmed again. So I created a system which I call Cecily’s exam, which is the circle of duplication which is basically a way to continually check your equity levels, monitor your overall portfolio and know when to duplicate again.
So I created check sheets for each of those and put those in the book as well. So basically if I fell off the perch, so to speak, I could hand that to my kids and go, ‘There you go, you’re now competent property investors.’
The book went to number four in the news links, been on the bestseller list for a couple of years now. It was the number one property investment book in Australia. I couldn’t get to number three, that really frustrated me – number three at the time was 50 Shades of Grey, go figure. Women’s fantasy books versus property investment; I didn’t really have a chance!
In some ways, the process he has created with investing into property was influenced by the adversity he experienced when he was growing up.
This probably relates to the reason I’ve got a process with investment, is my parents were in business in a newsagency in the eastern suburbs of Melbourne. They sold that when I was in primary school, grade six, we moved to the country town Warrnambool in Victoria and they bought a motel. The vendors of the motel had cooked the books in conjunction with our accountant and this was the third time they’d sold the motel to unsuspecting buyers. Within six months my parents had lost all their money – they’d sold their house, sold their business and lost all their money.
So then we moved to the other side of Victoria and moved into a tin shed; for six years I lived in a tin shed and a mud brick house. And while I didn’t have a bad upbringing and overall I didn’t think I wanted for anything, although as a kid I remember one day my parents were arguing over whether they should buy milk or bread. So I realised at that point in time the predicament we were in and they were pretty open with me at the time as a young kid and what was going on, but obviously realised that money impacted their life greatly. So I think it was then that I started realising that I wanted to set myself up and have enough money, not for the sake of being greedy, but so I’d never have to put my kids through something like that.
But I always wanted to get back to the city. So in my teen years I was a country boy, then I left home at 16, started working to move back into the city and when I was 19-20, I bought my first investment property. The reason I bought it was because I understood that wealthy people had property – I didn’t have the education to understand the share market and more importantly, analyse company financials if I was investing in shares. So I started buying lunch, there was no seminar circuit or property spruikers circuit back then, where people go and get their information from now. So I just started buying lunch from old grey haired investors basically. I was lucky that a mate, who’s now one of my business partners, my mate’s dad was a successful investor and developer. And he showed us how to do a few developments and dulocks and trilocks, then six units and twelve units and then we were building quite a large amount of property each year.
Before beginning his property investment journey, McLellan worked various jobs to save for his first deposit. He also agrees with real estate mogul Tim Gurner’s controversial statement on ‘smashed avocados.’
I worked in tips, recycling rubbish. I worked in supermarkets with a forklift driver. I worked in every disgusting job you could ever put your fingers on. Most the time I had two or three jobs going any one point in time. When I wanted to get my first property, I sold my car, rode a bike for nine months to make sure I could get the deposit for it.
It’s going to get tougher and tougher for kids to get property, the pricing is tougher than it was back when I was young, to get that deposit together is really tough. But I think people who want to get into the market really need to learn how to delay gratification. And really, I never went out for breakfast, I never had smashed avocados – I made instant coffee back then, I didn’t go and buy lattes. So people need to look at their lifestyle and look at their expenditure and if they’re serious about saving for a deposit, be serious about it. You know, make some sacrifices to get an extra job – no one’s going to give it to you.
After he had saved enough money, he put it to good use alongside two business partners, creating a syndicate to put into property developments.
It was actually a light bulb moment. Steve – who is still my property mentor and actually sits on the board of a couple our companies and I’m really good friends with him – grabbed us by the scruff of the neck and took us down the real stage and said here’s a property buying consultation.
I think I was working in a call centre at Telstra, I was earning $22 000 a year and I purchased the property. And this is like the late 90s, early 2000s when you could do no wrong in Melbourne when you’re buying property. It’s just one of those cycles that landed and I was lucky to get hold of it. I signed the contract three months later and on the day of settlement, I actually checked the market and got the property revalued and the property had gone up to just under $40 000, while I was working at the time for $22 000 a year. By signing a contract the property had gone up by $40 000. Now with that obviously we split the block and put a unit on the back.
The re-evaluation gave me the equity to do that, but also gave me enough deposit to go and buy another one, which I did. So all of a sudden I was doing two properties at once. My wife and I worked out that within four or five years time we’d moved 11 times. So we would buy a house, get plant permits, get construction started, move again and just rolled that out. Then the glory days of Dulock’s really came to a holt, sort of early 2000s. I think every mum and dad, wanted to call recreational developers or standard builders, were getting on to the fact that they could make some quick money out of doing a dulock. And they started not doing the feasibilities correctly and ended up paying too much for it, which happens in every cycle.
So what Alister, who is my business partner, Steve and I decided to do is to pool our money together and in effect created a basic syndicate. So we’d put all our money in it. Al and I wanted to chuck a couple of hundred grand in and Steve wanted to throw half a million in. We’d put our equity together, buy a site. We then realised values back then, between $5-15 million, so larger developments. Developments which were out of the ballpark for most small builders or mum and dad recreational developers, well and truly underneath the big players in town. And that was a good sweet spot for us for about five or six years. We just started getting those sort of developments underway.
Even before McLellan’s development venture, OpenCorp had been operating in the background for years. And within ten years its success has only gained in momentum.
We were working at Telstra, we started when Telco company called us up at the time said, ‘There’s this guy Crazy John that’s making a bucket load of money selling mobiles, what do you reckon? So we started a corporate Telstra dealership just business to business and ended up having the largest corporate Telstra dealership in Australia, with over 150 staff. So that was a real apprenticeship over a decade of automating medium-sized businesses. We also started an IT company which managed services for medium-sized businesses. We sold those two businesses in 2012.
OpenCorp was incorporated originally in 2005. So while people knew us for our Telco, in the background we were continually doing development and that was really what we love doing. You’re not going to solve the world’s problems by selling iPhones, but we both love property.
During that time, OpenCorp is a development company. Along the way people were asking about our services and said, ‘How do you build a portfolio?’ We were sick of having morning coffees on weekends, teaching friends how to build property portfolios. And we probably slowed down on our own portfolio and wanted to look at business – so we employed someone to build our own portfolios and to sit down with people. So OpenCorp’s mentoring side of things came from there.
We just slowly built that business up and we’ve been listed in eight BRW Fast 100 lists now, so that business has gone well over the best part of a decade.
Really, our clients use us because they don’t have to think about it. Because if they don’t want to do any research, if they want to make sure that their finance is structured right, they want us to find the property, manage the property and organise everything and all they say is, ‘Yes, I have a property, then give us a tenant and tell me where to buy the next one.’ That’s really the service we provide.
The on-sold developments which OpenCorp are involved with now are worth a substantial amount.
Currently around Australia, I think we’ve got about 1 000 apartments under construction, maybe similar with land subdivisions. So probably – don’t quote me on this exactly – but I think there’s $600 million worth of projects currently underway.
McLellan’s personal property portfolio is divided between residential and commercial investments.
My wife and I have got our own portfolios, a number of different trusts. I’ve got a portfolio with one of my business partners, Allister, which we’ve got a lot of residential and commercial property in. So we’ve still built our own portfolios for sure.
With commercial, we’ve purchased businesses, we’ve purchased a commercial building to put our businesses in and we’ve just maintained those. A lot of people ask me, ‘Is it a graduation thing, you get residential first then you move to commercial?’
To give you an idea, in one of our first small medium-sized commercial buildings to be built, which is 3 500 square metres, we built a basement car park and three levels of 1 100 square metre floor plates, so 3 100 square metres of office space. We got the land, got the planning and we got a 10 year lease through VIC police, which was the victims of crime unit.
So then we constructed the building, they went into the building. That property once it was construction and tenanted was just over $400 000 positive income for us.
The day it was built, we put it on the market and sold it. And we had a bidding war from a number of super funds and different investment groups.
People say, ‘Why have you got a commercial company giving $400 000 passive income and you’ve just sold it off?’ The reason being is we took that money, paid the tax and when you bought something good, at the time 20 or 30 individual residential houses were a lot safer for us. The value of that building is at its greatest point when it’s got a new lease and everyday getting close to the end of the lease. Then the building potentially devalues until another lease is signed. So it’s much safer to have a large portfolio of small eggs than have one big. But the main reason why I’d say I prefer residential property is that the basis of growing wealth is holding the most amount of assets with the least amount of money in your back pocket.
If you look at today’s lending landscape, talking in regular people’s terms, if you want to buy a commercial property, most people can afford a million dollar commercial property for example – which nowadays is a milk bar. So you’ve really got to look at it and know what the stability of the business, going in there. If you live in a commercial property: Do I understand profit and loss statements? Can I analyse someone’s balance sheet? Can I analyse their cash flow? Can I talk to your management team? How stable is the business? How stable is the industry? Then factor in a six month lease-free period and things like that.
Then you’ve also got the deposit required, going back to the first statement I made. The deposit is you might have to throw in $300 000 to buy a million dollar property. If you got $300 000 worth of deposit, you can probably get $1.5-2 million worth of residential property. So for the same money out of my back pocket, I can hold a million dollar commercial property with a bucket load of risk, or I can hold nearly double that of residential property with a lot less risk. So by having a small amount out of my back pocket I can grow my wealth base a lot faster with less risk.
Leverage is power.
That’s probably one of the light bulb moments when I go back to buying that first property. Probably the key, golden information for new investors is understanding equity and how to access equity to duplicate. Then once you’ve got using other people’s money – rather than your own – to leverage up and get a greater return than you could on your own.
Then once you’re duplicating, the effect of compound growth – ‘The eighth wonder of the world,’ is what is Einstein said. It was a terrible book to read, it was Einstein’s autobiography (probably one of the most boring books that I’ve read, except for John Howard’s autobiography). But one of Einstein’s sayings is, ‘Compound interest is the eighth wonder of the world.’ He understands, earns it, he doesn’t pay it and says property investing compound is seriously where the joy comes in.
This a-ha moment for McLellan has allowed him to create the life for his family which he never experienced himself in his youth.
That was my lightbulb moment, when I realised I could get equity from other people, buy property and a bucket load more than I could earn in a year by working on something – that was really all I wanted. I mean, I’ve got toys and those sort of things and different houses so we can take our kids on holiday too, but really money’s never been my drive. My drive has been not having to wake up to an alarm clock; to do whatever I want, whenever I want to, go on a three months of a year holiday which is basically all the kids’ school holidays and I just have that freedom.
So money is the means to an end and really I knew that property could give me that through those lightbulb moments. People say to me, ‘So you must really love property.’ If elastic bands gave me compound growth, I would be an expert in elastic bands. It just so happens that property to me is the safest thing that I can understand and I’m going to give my family the lifestyle that I wanted.
Although he has always been careful with the properties he manages, he has had some letdowns with other investment vehicles – including a missed opportunity in Hollywood!
I’ve been very selective on the properties I buy and make sure that I’m satisfied if we are offering a property to a client. I’ve got to be satisfied that it’s my own personal portfolio. But I do have a terrible investing story.
Going back to my Telstra days, I invested in a company Triton in which they had some retina scanning technology. They came out and I got a tip from someone else at work that said the exact figures only spent only 26 cents a share – 10 000 shares for about $2 600 thereabouts. I had never really looked at the shares again and probably 10 years later, I moved house and I found the broker’s paperwork.
I looked up these shares and they go from 26 cents to $24 per share and then the company got into receivership. That’s probably a lesson in managing your investments isn’t it.
Another terrible moment when some friends of mine were in the film industry years ago when we were kids and I was in the Telco industry. They came to Alistair and myself and said, ‘Look we want to make this short film and then take it over to Hollywood and sell it. I need $7 000 to piece together a 10 minute short film.’
We were like, ‘Come on, man, we’re not going to give you $7 000,’ as it was a lot of money back in the early 2000s. The boys ended up piecing together the money and they made that short film, which we all loved and they took it over to Hollywood and that movie became the Saw franchise.
So you knew him?
Yeah. But in saying that, El and I love films. We’ve actually created our own production company in LA and we just finished our first feature film, which premiered in Tribecca and then at Cannes Film Festival. So. So now we’re onto our second and third feature film at this point in time.
That’s not investing, that’s having enough money and then being able to go and have a bit of fun on the side; so you don’t make films with the hope of making a lot of money. It’s not an advisable thing to do, it’s just for a hobby.
It’s very family friendly, Psychopaths is our first one. I always loved the horror movies, I know I won’t be showing the kids for a long time. I’m not twisted, but I do love the horror genre.
Probably Pulp Fiction with psychopaths, is the easiest way to describe it.
So what was McLellan’s end goal for his property investing journey?
The vision was to create a portfolio. Once I understood equity and living in equity there were probably four main exit strategies, as I see it: sell to pay off your debt, the domino effect – which is pay one property off and once you got that paid off, the rent goes into the next one and you pay each one off. It’s usually used in conjunction with how to pay down debt. You can give them away to your kids if you want at the end through a family trust, or you can live off equity. Once I understood equity I realised that as long as my portfolio was growing at a much faster rate on average than I could spend, then in effect I’m retired and do whatever I want.
So my goal at that stage, I worked out I needed basically five well-chosen properties and let them double in value and then drew up a line of credit, then draw that down slowly over the next decade when it went up in value.
But I enjoy business, I still enjoy going and creating businesses and cleaning the property space, so I’ve continued on with it. But that was my initial goal, was to have five properties which are growing in value fast enough that I didn’t have to work if I didn’t want to.
The current worth of that portfolio has now grown in value.
That portfolio of five properties was worth about $2.5 million. But anyway, say you get a 10% growth rate, which you can’t in Australia, I think it’s 8.34% on average cost of capital city year to $2.5 million might be $220 000, growing in value. If you draw $100 000 on that, which is tax free to live on you’ve still got a nice buffer there.
The banks nowadays and through private banks would deem you a professional investor and f you’ve got no income, they’d like to have your portfolio at about 50% LVR. So you might require a little bit more than that – but that was my goal when I was naive in the industry and that was our first goal and you know what I want to achieve.
When McLellan first starting investing property, he was afraid of not making a move and missing out on a great opportunity.
If I had to pinpoint it – actually my business partner’s pinpointed this for me – he said if there’s one different thing about you and the majority of Australians out there is I’ve got no self-limiting beliefs. Most people will need to analyse things and perhaps get analysis paralysis, or they’re fearful – I realised that my greatest fear was doing nothing at all. I knew that if I did nothing at all and just got a job and ticked along, that was probably the worst outcome that could come forth. So even if I’ve invested and made mistakes, I’m still better off than doing nothing.
And that gave me, I suppose, the need to want to learn about it because I didn’t want to make mistakes and I saw most property investors, the way they pick property is pretty much gambling, to be really honest. I don’t see any difference between the way most people think property is an investment and gambling. And the reason for that is they don’t have a way to pick the best investment every time; they’ll go off whatever the papers say at that point in time and sadly, I don’t know any journalist that has a good copy portfolio and could write credibly on it. I wish there were. And newspapers and all the other publications, really what are they after? They’re after selling papers or selling publications. I’m not talking about the industry publications but just in general, journalists want the wow factor, so no one is going to say, ‘Look the market is generally just bubbling along OK.’ It’s either, ‘It’s going through the roof and no one can ever afford that property again,’ or, ‘The sky’s falling on our head and the market’s going to bust and everyone’s going to be destitute and broke.’ They are the only two things that sell papers.
So rather than relying on information, I wanted a way that I could be comfortable.
To achieve this, he developed a system which would allow him to be comfortable in whatever property purchases he made.
Now I was really good at creating process for business, but when it came to property most people spend 40 hours a week working for someone else, making someone else money, but they spend no time at all with the process to select the right property to purchase. So I created a system I called Map, which is market area properties. So in the property markets, finding which ones I want to knock out, then the growth areas that I don’t want to invest in and then find the optimum size and quality property for that area. So basically I can find the best property everyday of the week, regardless of the market cycle.
When thinking about the mentors he learned from during his property investing journey, McLellan recalls being taught by a property developer named Steve Wilson.
Steve Wilson’s an old guy now, grey haired guy that sits on the board of a couple of companies. He’d probably been in developing for about 30 years before I met him and then I became friends with his son. And Alastair his son was buying a property in Bayswater in the outer suburbs of Melbourne and I said to Steve, ‘I’m pretty keen to understand property investing,’ and he said, ‘Well there’s one, two doors up the road.’ I think I paid $125 000-$130 000 for the property at the time, it went up about $40 000 in three months and I end up chopping off the block in the backyard and putting a unit on the back of it. Steve taught us all the basics about investing in property.
Also what had sparked my interest in property was I watched an old video of Jan Somers, where she explained the theory of buying one property and using the equity to duplicate. So she explained duplication and compound growth and that was sort of that light-bulb moment for me. And until I saw it myself with my first property, I could comprehend it but didn’t see the power of it.
So we’re talking in the mid 80s, early 90s when I first got a taste of what investing could do. It wasn’t too much later until I started investing myself.
Really, Steve had a circle of friends and a couple of investors and developers, I’d just get dragged along to lunches and you know, bought them lunches and plied them with beer and just drilled them over a four or five hour session and pick their brains.
He also considers his team to be instrumental in mentoring him towards success in his property investing ventures.
I’ve had a number of business mentors, but primarily properly. I’ve got 70 people in my business which range from developed managers, corporate accountants, civil engineers, architects. So I’m pretty fortunate that I’ve got probably some of the most astute property minds in Australia under one roof and I’ll tell you what, we’re not tossing different ideas around strategies and comparing it back to the core strategy investments.
It’s probably a good place that nurtures property enjoyment and knowledge.
And the best advice he has ever received?
Land appreciates and buildings depreciate.
Although McLellan’s portfolio has growth throughout his journey, he has found it to be better not to share the particulars of his success too widely. And for good reason!
I found in the early days when i bought my first property and I told my parents and a couple of friends, no one really shines on the fact that you’re a property investor. Most people go, ‘Well done, good on you, you’re doing something.’ Most people are even negative about it and the reason they’re negative, either they’re scared to do it themselves – and Australians don’t like the tall poppy syndrome. Really most people, if you think of the amount of people in Australia who are successful investors, I think there’s about 15 000 thereabouts according to the ATO, that have six or more properties. I worked it out, I think you’d have to pack out the MCG (100 000 people) and then there’d be around 63 people in the MCG who would have six or more properties. So if you were going around talking to people in the MCG, you have to talk to every person to find the 63. So it means everyone else besides those 63 people, are going to be negative about it.
So really I just started buying property and keeping it to myself, so I don’t tell people what my property portfolio is worth anymore because it really just makes me seem like a wanker and makes them feel like s**t.
He shares about the type of properties he chooses in order to help provide him financial freedom alongside the strategy he implements to achieve his goals.
So I’ve got medium density residential property with good land content in the outer ring suburbs. It’s primarily what I purchase.
Equity growth is the only way you’ll build wealth through property and real wealth comes from doubling your asset value every seven to 10 years. I don’t know anyone in investing – prove me wrong – that frustrates me, these companies out there that sell based on negative gearing property to reduce your taxable income, or buy cash flow positive property, because that’s the way to go. I mean really they’re just promoting something to sell people property. I prefer both, I’m greedy and you should prefer both. You should get growth properties that over a short period of time – three to five years – become neutral and cash flow positive.
So the grandfather of cash flow positive properties, Steve McKnight, wrote a book a decade or so ago, I think it was From 0 to 130 Properties in 3.5 Years. That was great, back then Steve was an accountant buying $2-5 000 properties and he bought a couple of hundred properties, sold his portfolio. I’m trying to think of a video that he did a few years back, where he said it’s not possible in Australia to build a cash flow positive portfolio to supplement your income. The capital required to do that in today’s market, it’s impossible to do that. But really, I’ve never heard of anyone, even if they do get a small amount more, if you get a couple of hundred dollars extra, as Australians we spend it. We’re terrible savers.
So getting growth property which would double in value is really the only way to achieve wealth and financial freedom through property.
This strategy has enabled him to earn a living without having to go into work – the freedom many property investors aspire to.
My wife’s happy and I get to go on the school holidays with the kids and spend time with them while they’re young, which is really my ultimate goal – making sure I had enough equity growth to substantiate my expenditure.
Buying growth properties for example, if I’ve got a portfolio going up $200 000 a year – on average, obviously I’ve got to wait seven to 10 years for it to double – then if it’s going up faster than if I want to spend $100 000 a year tax free, I can draw from a line of credit the equity off that. If my portfolio is going up at $200 000 a year and I’m drawing out $100 000, well my portfolio’s by growing by $100 000 a year but I don’t have to go to work for a living.
And at the same time, the rent and everything is still covering the cash flow together in the portfolio.
Yeah correct. And that’s why I like capital city properties, which go up in value because the rent will follow the growth of property and once the yield goes up – and I’ve bought lots of established houses over the years, many houses in the early days and in the last decade I’ve only purchased new properties, because I like the depreciation in the first three to five years as it really helps with reducing the holding costs of the property. To the point, I put rents up every single time, whether it’s $5 or $20, it will customise your tenants to rents going up. And in around three to five years, the property is neutral so it’s holding it currently offsetting itself and holding its own value.
And then after that you’re still getting the growth, but you’re getting cash flow positive as well. So people should be greedy and they should expect both, so don’t buy one property over the other.
Growing as a person alongside another who is on the same page has proved to motivate McLellan and add to his individual success.
Probably Alastair and I, having someone to kick with us is the best way to put it. So Alastair and myself are business partners with investing since we were kids. We invest together individually, but we challenge each other. But also if one of us slows down we just challenge ourselves with new ideas. Like, ‘There’s another deal coming up, do you want to go into this one?’ or ‘Time to buy another property.’
So I think having someone to go along the ride with is important. It’s a lot easier to build wealth next to someone and you also go on life journeys. It’s good that Alastair has built wealth as well and we can go on holidays with our families together and he can afford the things that I can. So the friendship remained strong.
He also shares some of the books he has read, which he recommends to listeners.
I love reading business books more than property books. I just finished reading a Elon Musk book, which is a cracker book. A lot of the old Branson books [as well]. I like the Jack Welsh books, Straight From The Gut, things like that. The Rise and Fall of Alan Bond and The Rise and Rise of Kerry Packer.
I read more business books than I do property. I suppose I’ve got enough knowledge on property that I don’t generally find that I get much out of the property books any more, so I just really enjoy the business stories.
He prefers these books as a method of motivation.
I think it’s just knowing watching people go through different challenges and how they approached it. I read a lot of musical biographies as well. So I think the business books initially help motivate me and usually, if I go on three or four weeks holiday with my wife and kids and get enough time by the pool, I start to go stir crazy and I need some business influence. So I’d start reading business books and next thing, I’ll be all hyped up and sending emails back to work.
But I think just like staying in touch with business and seeing as I’m not involved in my business as much day to day, then it keeps me amused. But I’ve probably backed off reading a lot about business and property over the last fair number of years now.
In structuring his week according to the tasks he aims to accomplish, McLellan wanted to organise his business in a way that would enable him to take time away from it. So how did he achieve this?
Probably came back to the point where and throughout the Telco business – the first medium sized business that I automated; there was a general manager and ops manager and all the associated team managers – was really by looking at how I could set the business up, if I wanted to take a year off. So I looked at every task that I was doing and automated it.
So every process within that business, I think that’s why I’m good at property investing some very process-orientated. Within the business, setting up standard operating procedures, so that different teams had looped reporting, reporting was reliant on other teams information. So each cog in the team was really reliant on the performance of the next team. And then there was all reporting which rolled down to individual team performance and individual performance with performance activity calendars; so everyone knows what they’re accountable for, can go home satisfied at the end of the day knowing they’ve completed what they need to.
Really once that was in place, I could sit anywhere in Australia, look at my phone I have a look at how my business is going. And really employing people and paying them a bucket load more than anyone else would pay them, so that they really take ownership of the business and enjoy it – and are solid within the business. So it hasn’t been easy and it’s not a task that’s foolproof, there’s always something going on, but I am going to be involved in business till I get very old, otherwise I’ll go crazy.
I love what you said about automation and also hiring the best people you can, because obviously it allows you to scale up a lot more and also take that strategic approach, which you’ve done three years ago.
I expect my team members to walk over hot coals and follow me into hell if need to. I expect them to work harder than anyone else, when required. But I want them to enjoy themselves and be satisfied with the role that I pay them extremely well to do.
So if he could meet himself as he was 10 years ago, what would he say to himself?
Ten years ago I’d probably just sold my first major business at that point in time. I think 10 years ago, my lawyer said, ‘The money’s in the bank,’ and I went to the travel agent and booked the next flight to Fiji for a few weeks with my family at that time. But I think that was a good learning curve, my first business which is the Telco business, which probably took me a decade as an apprentice, learning about business.
When we really turned to OpenCorp as an operating into the probably achieve the same in about 18 months or 24 months, as far as automating that business and getting it to the same maturity. Although the talent within the business was a lot greater, it was a different scope of people we were employing. So I don’t know what I’d tell myself. I think you shouldn’t look back, you should look forward.
It’s interesting, because when you look back at what you’ve achieved and the successes that you’ve had, it’s amazing that you’ve been able to move much faster. As you said, it’s taken you 10 years to build Telco and it took you only 18 months to build OpenCorp.
Compounding effect of everything isn’t it? Your wealth compounds faster, your knowledge compounds faster, your ability to execute.
Today McLellan is most excited about creating another pathway for Australians to invest in property, if they are not able to purchase property themselves.
So we’ve rolled out a property management division across two different states. Just had a mortgage broking business wasn’t talking down, our developments are ticking along well. We’re looking at starting a large scale residential fund, so there’s a lot of commercial property trusts in Australia and I think I mentioned to you before, sadly I believe it’s going to become very difficult for people to get into the property market in Australia with the way prices are going. It’s becoming more and more difficult for a younger generation to get into property.
So I wanted a way that people could invest in property, if they can’t purchase the property themselves. We’re in the early throes of rolling out a financial services licence, rolling out a fund which holds residential property across the capital cities, which will allow people to invest and trade shares within property, invest in Australian property and get the growth in rental yields without having to hold the whole property themselves. So yeah, that’s going to be something new for the market.
Even if you’re thinking you’ve got a small amount of money and you want to continue to save for a deposit, you could invest in the fund itself and get the same growth that you could only hold property. And then if you want to go and buy your own home you can take the money out of it. So we’re looking at making sure that the shares are able to be liquid, so they’re tradeable and then listed effectively.
So I’ll be holding out a ring medium density property with good growth, good yields, some more very low yield blue chip property and also doing developments in that; so we’re getting development profit in the fund as well. So investors in that, overall, will get the benefits of all property classes effectively.
Do you think that this hyper fund will outperform say for example, the average S and P?
Because of the development fund and it’s across Australia, over the long term very much so. While there’s no past performance to indicate future performance, if I could use a required term, because you can’t promise anyone anything but their product disclosure statement will give an idea of the investment and investors can make their own informed decisions. But the idea is that we will be able to outperform. But there’s no guarantees.
If you want to connect with McLellan and learn more from him, you can do so through visiting his website at:
www.opencorp.com.au, which is o p e n c o r p.com.au, otherwise shoot us an email. It does take me a long time to get back to people because my wife limits my computer and iPhone use and that.
Make sure to also check out his great book.
I think most bookshops have got it, off the website you can buy it, Newslink at the airports has got it. So yeah, My Four Year Old The Property Investor. Google is about to get a copy through any of the major online or local retailers.