Steve Stemp has grown both his property developing portfolio and both his businesses from the ground up since the early ’80s from humble beginnings all over Queensland. Having struck luck in his first investment as a young man, Stemp grew in knowledge and confidence to become the businessman he is today.
Join us in this episode of Property Investory where Steve Stemp shares his story with you, including what inspired him to get into property, how he learned the tricks of the trade, and some of the highs and lows of his journey so far.
Stemp is the director of two separate companies, one of which he’s been managing for decades.
I'm the director of a company called Dual Key Homes and also a director of a company called Swift Homeloans. Dual Key Homes has been operating for a couple of years now and we sort of started from grassroots and pretty excited with the direction that the company's going. Swift Homeloans has been a company that's been established since the mid 90s primary mortgage broker it holds an Australian credit licence and between those two entities keeps me fairly busy.
Stemp’s usual day consists of setting meetings and talking with people.
My days sort of roll-on from day to day and so what's involved in my days are the set meetings they could be with you know builders developers bankers just professionals in the property industry or it could be that I'm assisting someone to arrange finance for you know for the consumer so you know when once the day starts it's in front of the computer with emails address those as quickly as I can and then pretty much my day has started and that can be quite varied.
Before getting involved in property or business, Stemp shares where he grew up.
I grew up in Queensland so on the Sunshine Coast. So I did my primary schooling on the Sunshine Coast and then getting my parents when I was younger age broke up and split up and I ended up with Dad I think had a vision that he'd always wanted to own a pub so when me and my dad ended up about five hundred ks inland central Queensland and a hotel and so I spent quite a bit a few my early teens there and then and then in North Queensland. So I'm pretty much a Queenslander southwest and north Yeah. So that's a quick snapshot of the child at any random garden.
To this day, Stemp isn’t quite sure why his dad wanted to own a pub, just that it was always his goal.
I don't really know and he hasn't really told me to this date but he is always a blue-collar worker. You know you work for the main roads and the electrical company so it was always hard work labor in position and why he chose the destination in that particular area. So I still don't know today.
Stemp reminisces on some of his childhood memories from working at the pub with his dad.
It was a town of only 100 people but it was like five pubs and four clubs and you know and there was and then the men they were they were pretty they were brought up tough like shearers and rovers and always remember that we had a new year's eve party there. I think we had every person from within a 200 go radius or come to the hotel. So it was sort of bursting at the seams and yeah there was some fun it was a funny situation there were some funny situations. It's just township people coming together and celebrating the end of a new year. Always remember that it's never seen so many people come to know to tell me. They all turn on that particular night.
After high school, Stemp decided not to continue studying and entered the workforce.
I went into the workforce at a young age so yeah did very jobs when I left school which was what they called Junior Cert stage so I was just turned 15. So I became a builders labourer for a little while and then I then we came back to the city I was working in car I was doing and factory hand positions and and and then I was made redundant and I suppose if we were moving across into India in the property once I'd finished that that period confinement I was made redundant after about 10 years and I went into real estate I think you know that was really my first touch in terms of real estate the salespersons license and that was really the commencement of getting into the property industry in a professional manner.
He believes his childhood memories of security helped him focus on real estate.
I suppose before mum and dad split up I guess I was at that very young age like this I first memories what I remember is that we never rented. So my first memories were that Mum and Dad owned the house so there was that sense of security always a child so I think that you know that didn't have much influence. You know once you know of the age of 10 so start you know was I felt secure as you know as a child.
Yeah. So I think the property was always the underlying asset and security position.
After making the decision to enter a property related career, Stemp hasn’t looked back.
Since then it's been property. I’ve worked for property developers. And then I moved into finance. So I'd gone to the property, worked for property developers, then took on the role of finance supporting builders and developers and so Swift Home Loans still continues today from back in the mid-90s early-mid-90s.
Having been one for so long, Stemp explains how different it was to be a mortgage broker in the ’90s than it is today.
Back in the 90s it that there were not like it is today with aggregators and mortgage brokers in those days were not paid by banks. So I worked with builders and developers and from the face value, it looked like I was providing a free service to the builders and developers customers. And if you have a sale went through then I was paid accordingly back then. But obviously there's been a grand shift in the way that mortgages and mortgage brokers have now been accepted into the community and by the banks. So that's definitely taken to change in terms of revenue. So that's yeah that's pretty much how I started off and I think the first bank that paid an income was in those days a colonial state bank of New South Wales was the name in those days and I think it was a 250 dollar fee whether you rode a fifty thousand dollar loan or a five million dollar loan it was a flat rate. But it was exciting that the banks accepted the brokers started to and then the world changed after that.
This seemed to be a step in the right direction for the mortgage broker profession.
I could still provide that service but as someone who had a young family and was trying to put food on the table in those days and being paid by the banks and the acceptance which certainly made where you can turn it into a professional you know full-time professional career which it was and that's how I started out. And then the trail book comes in behind that so it's very professional very regulated and minutes yeah it's definitely moved in the right direction.
Stemp also describes how technology has changed how he does his job over the years.
I was telling somebody the other day that the you know the frequency of me being face to face in front of an applicant this day is you know it's becoming more and more limited like because we have got this great technology and the ID and especially if their clients within the database and the identification process has already been depleted the existing client at the bank in that process. Technology is just amazing. A big difference from when I started in the hard copies press hard and sign here.
Stemp got into the property in his 20’s, which helped him decide to enter into real estate as a career later.
I actually bought a property when I was about 20 I think and I was very very green I was single had had no savings and surplus cash each week and life was just fine so I thought I might go and buy a property and I was very very green and I only bought it on emotion. So I bought four acres and I held that for a couple of years and unbeknown to me that four items were sitting on two titles worrying about how green I was. So the twenty-five thousand dollar investment turned into forty-eight thousand dollar investment in a two year period and I thought I can make this property this property looks interesting and it's and it's paying off and it's profitable but as I say it wasn't until that was you know it was just you know last at that point because I had no idea. So it wasn't until I got into real estate and that that was probably the catalyst that I wanted to then understand and then work out how it all worked. And that's why I think I went into the real estate profession.
His experience working in real estate affected how he looked at buying and selling the property.
When I commenced real estate then I developed relationships and I was selling the property to developers that were purchasing the houses and then cutting blocks off the back and sides and basically then reselling the front house for the same now that they had originally purchased. I love getting the backlot pretty much for free time. That was my second purchase. So once I could see what they were doing then that was my second purchase so it worked. That out worked well.
After his first emotional property purchase in his 20’s, it only took a few years for Stemp to gain the knowledge and confidence to make his second, more purposeful, purchase.
The first purchase would have been in the early 80s and the second purchase being in the late 80s.
Stemp claims to have learned this development and selling tricks through his experience with property developers, as these techniques weren’t yet well known to anyone else.
Primarily through property developers. So if you came across a particular property you could make that one call and knew you knew that that property was sold.
So it was pretty much it. But yeah it wasn't known as much publicly like that particularly developer didn't have to compete with too many people in the marketplace. And most of the agents would ring in direct to effect the sale.
That's really interesting. And since then have you kept those properties or are they still in your portfolio.
No, they've been sold. So the first property sold in. I think sold 3 so I can't buy back often and sold them entirely.
At this point, Stemp focused on simultaneously growing his mortgage broking business, as well as his property development portfolio.
I focused on my mortgage business but I bought properties in that time that process as well.
So I'm still holding property that was bought the early nineties and I've bought and I've bought speculative properties with developers in the past but they were bought and sold. That was the purpose they were to be bought and sold and sometimes it was to assist the developer to move and stay along well or there'd be a relationship with builder and developer.
Stemp has clear goals and criteria when he is investing, although as he learned, sometimes things don’t always work out as you planned.
I've invested in real estate that was underlying businesses so I've invested in agriculture and I've invested in childcare and I and I've invested in mining towns. And so you know I purchased property with a view to developing in mining towns.
And I purchased the property on the way up and down then you know it collapsed before I could get back out. I was close to removing myself from that. But anyway the timing was unfortunately not on my side and I still hold those properties today although the signs are that it is an improving market. Whether it will get to the levels of sustain sustaining, I'm all for holding on to assets when and when they don't cost. You know, in this case, but it's still currently costing.
He now believes wide research on the particular area is always important when investing.
Those real estate purchases were done based on businesses and industries instead of you know the sound logic and geographical area supported by you know populations and energy and industries. Across the board.
Stemp explains how he got involved in this deal, and shows that even with research, real estate is sometimes unpredictable.
I made the conscious decision that I would get my toe into that market and I was only going to do the one property and ended up. Thought the opportunity was better than it so I went to three so I don't think it's or I think it's you know if I could take it back again I I'd you know obviously limit the risk and the commitment enter into it into those areas that I felt that I researched to the agreement to all the meetings of all the right people. So I was committed to a higher risk area.
While this was an unreliable investment, Stemp has another moment that he claims as his worst investment decision.
I invested into a prawn farm and it is well known in the southeast here, we got the white spot, the point that the prawns got the disease in the Southeast Queensland..
So again research and all the best of information. But the white spot that that wasn't expecting that one.
Yeah. How do you overcome situations like that because you know diseases and stuff like that is really, to be honest out of control?
Well, it is and we hadn't had had the disease.
And unfortunately, you can't insure it, didn’t have insurance against it. So again it's one of those ouch moments.
But the underlying assets are still there so you know.
Why did you invest in that particular asset there and what was appealing about it it was a good return as it could capital growth.
It was, with those farms in those areas there's a number of them. They're all backed by pretty much complete buyout by Coles or Woolies. So we're in in the finance I get to see that the financials and you know it's the profitability and the contracts that were behind it in terms of the income and the revenue from the property development. So it all looks. It'll all look very good. But along came white spot.
Despite the set-back, Stemp still holds this asset and is currently looking at how to diversify his investment.
We're looking at different markets now to produce another type of marine. So we're looking at particular fish at this current time so yeah making it is a difficult process because you're trying to manage you know can. Can the prawn industry kick off again or do you go straight into another market that I have to research so?
What's happening now.
Okay and up with something like that.
Would you have to invest more capital into it to change how the farm works and functions about it?
Not a great deal no. It's already an existing hatchery and the ponds are all set up so you know.
Well I mean then there's an opportunity there.
That's all there is. Yes. So with each setback with the mining area and with this, there's this you've still got the underlying asset there. So you just have to work your work through those processes.
On a more positive note, Stemp believes his working relationships with people were the most significant catalyst in his investment journey, causing everything to click into place.
I think the aha moment but I think it's just the relationships that inform, l have had you know good success where you're working with other professionals so that if I'm working with the land and I'm working with borders and then we can come to some form of property development transaction. I found those to be you know they work effectively because they're experts in what they do and I think it's the relationships and trusted a good source of information and the people you work with are there hasn't it's long. Yeah. If you just work through and understand the investment found they have the best results.
Stemp reiterates the importance of knowledgeable people in getting good investment results.
We have people around smart people and trusted people as well as your source of information and people that you want to work with. And generally speaking, you get positive results.
And how he has gone about surrounding himself with these trusted people.
For me, that's just come through time then and then in the lending in the banking industry and relationships. You know I've been to you know listen to people over the years and you take bits and pieces from each and each time and then each time you go and then you'll be drawn and ask questions and feel comfortable with them and the information they're giving you and the double-check cross-check that and then you will you'll form that relationship where you say that person's professional and you know what they're doing.
Positive Cashflow as The Way to Go with Steve Stemp
As we heard in a previous episode with Stemp, his first investment was a four-acre block of land, which ended up being a great investment simply due to good timing.
That had no improvements, no house. It was for a piece of land which had an effect which was fenced was in a rural setting.
So as it was my first property purchase and it was all for motion I thought it was a good idea.
However, Stemp knows future investments require a lot more knowledge and strategy.
It turned out that it was a good idea that you know things have definitely changed in my mindset towards trying to maximise the benefit of all or trying to unlock the value of land or properties. So I look at a look at land now and Dual Key is pretty much a case in point. Dual Key homes now puts together land and house and try to maximize the benefit that one block of land. So you know two income streams positive cash flow positions. The way of the past was negative gearing and you only have to spend this much amount of money each week. So just trying to provide a better vehicle so that you don't have to spend money each week so that it can meet the commitment and interest payment that it can meet the commitment of the expenses of the property development. So my mindset is more about the land and trying to maximize the benefits and return from the land.
As he’s been investing for so long, Stemp typically holds onto his properties, before looking into developing them.
I've held property currently, but in the most part of maximising the benefits from the land purchase and developed and moved on and sold. So that was a business that was working alongside the mortgage the lending business so I've got I'm going to be doing a development in the new year and just having a bit of a struggle with one car park so doing a development on the Gold Coast which that was a property that I've held and held since the late 90s. So we're looking to provide put together a three-story five five-unit development there. So we're we've almost got the D.A. in place for that. So I'm excited about doing that one in the coming year.
Stemp describes his current portfolio and it’s worth.
Currently, 6 properties and approximate ballpark figure on it would be about three point five million in personal holdings.
Another aspect of his strategy apart from developing is to hold properties that aren’t costing him.
Well, the one that I spoke about previously I mean I'm looking forward to putting in the file unit development on undercards here. So currently there are two properties two buildings a duplex on that property. So that's definitely going to be a good outcome in terms of the equity position and self-servicing of the lending. So I'll continue to hold that one, wherever I've got a position where it's not costing them they're my holds.
Stemp believes his mindset and strategy are products of his early work experience with developers.
That probably stems directly from my introduction into real estate when I started when I was selling to the developers and then chose to do it myself.
So there was a message there in the early stages said that the value of the land has a value and it's a matter of maximising that position.
Stemp evaluates why he entered into real estate and investment.
I think I was or I've always been comfortable with real estate.
It's been the security position it's always been able to if need be to sell it.
Provide on that is the mining towns in areas that you have that you don't know but most of the assets or the other assets held have always been and in areas where there's good infrastructure employment parks and schools and everything else that supports are good assets so I'm always good to position to be able to leverage off those properties. So it allows you the ability to purchase other good investments so properties.
It's just staying stable and you pretty much can bank on it.
Having started buying so young, Stemp didn’t face the challenge that someone in that position would today, but he still has a strategy for the current market.
Because I started a young age I had confidence in property development because it was a good outcome.
Then the only thing that was restricting and the thing is restricting for anybody investing is you know the banks are going to support. You know at some point you know you come to an end in terms of you know your income what your maximum lending position. So that would be the only restriction in terms of. But that certainly wasn't a mindset it was just the ability if I could do it at the time and then I would do it. And again that goes back to Dual Key so providing a product where you're actually in front of them in the interest curve is a better proposition going forward than having to be in a negative geared position which is which has taken more income stream away from you. So if you want to move forward to get out and get further property then it can be calmer. It can become difficult with the lending position that obviously depending on your incomes.
Stemp shares in more detail exactly the goal of his company Dual Key for his clients.
Dual Key it's been established since 2016. So it's relatively new and it's been established primarily to provide an investment property vehicle for positive cash flow.
So in areas of growth. So we're based in where we are based in southeast Queensland so we concentrate on the property from the Gold Coast through to Sunshine Coast and whereas I say we’re looking to put together properties that are supported by good infrastructure and low rent rental conditions and positive gearing.
His specialty is in dual occupancy homes under a single title.
Say the difference between a Dual Key is that there's one title, two dwellings with a common firewall. One side could be a three-bedroom, others could be a two-bedroom or one-bedroom or four bedrooms; two-bedroom so one set of rights but two income streams on one title. A duplex is the two dwellings but each has got an individual title. We do duplexes, triplexes and dual keys. So we're looking to maximize that benefit as I say out of that out of the block of land and house and ensure that it's supported by knowing good infrastructure around.
This isn’t the common, duplex scenario, nor a house and granny flat situation.
Common is that they’re sided by side. They look it looks like a duplex with a common wall but it's on one tile. That's what a dual key or a dual occupancy dwelling is so I suppose then just to give you an idea if you know a package it's up here 490,000 and salary costs were 10,000. Purchasing costs. So let's just say for round numbers we had 500,000 dollar investment we'd look at it getting about six hundred twenty dollars a week for that.
80 three-bedroom and 240 for two-bedroom on each side so that reflects about a six-point five per cent return so thirty-two thousand dollars thereabouts a year.
And then if you borrowed the loan at a four and a half per cent and interest-only you can do a little bit better rates there but that would be you know twenty-two and a half thousand dollars a year for the interest payments so there's we've got that we've got a ten thousand dollar Head Start and obviously then we take out the rates insurance land or insurance and manage your own. So the input you could be holding that property we don't minimise it we're minimizing the risk. So if one tenant goes you haven't you know you haven't got your full vacancy position so we can minimize the risk putting the property in a positive cash flow position and anchoring it into an area that is supported with infrastructure.
Yeah and that's great because you know from day one it's positive cash flow and therefore it can cover itself without us having to put any more money into it.
That's right. And so that makes it easier for fear investors moving forward that it's actually not a drain on your income or your primary income that you're actually in a positive position. So earlier with the banks over the past few months they're tightening and where the royal commission at all ends up and how the banks react is going to be ‘watch this space’ because it is certainly tightening going on and having negative cash flow and investment position is not going to go forward.
Stemp reminds us why the areas and these properties are ideal investments.
I think the perception for the area of where Dual Key homes are is basically you know Brisbane and southeast Queensland is very affordable in comparison to the big cities of Sydney and Melbourne currently so you know packages you know around five hundred thousand dollars and returning six and a half up to seven per cent and some interest that it is is you know it's quite incentivizing so Brisbane hasn't had a lot of growth over the last few years but it's been slow and it's been steady and it's been stable growth but you know the government is going to be spending some some some big spend on infrastructure in around Brisbane City area. So I think that's just positive signs for that area.
Like many others, Stemp had mentors that helped him on his investment journey.
They came in I didn't sort them as such but for whatever reason, they came into my life one was a developer who was working for a bank at the time and the other fella was became my partner in swift timeline's retired sense but both were in banks. Both are very conservative both very ethical people and a. They were they were they would. They were really good guides in terms of keeping me grounded and understanding numbers and how our property development worked.
They were definitely definitely the mentors after those after those gentlemen then it's people that have come into my life and I respect them in terms of their business and their argument and they're the professionals in their field.
So I've got people all around me that I trust and you know and you can't unless you need to have those in your life. They need to be they need to be there. So even if it's only to just bounce off your views and your ideas and get some feedback from you.
He also reads up on reports to give him further knowledge in investment and business skills.
I'm not a real big book reader as such Tyrone. You know I when I do pick up a book I have read Rich Dad Poor Dad and did get a lot out of that that I could sort of see you know from my dad's position where I could sort of relate to that book. Also Richard Branson's social issues and challenges he had on his journey through really really good reflective information outside of that. I read a lot of reports property reports value reports just trying to keep constant in the market and see the trends in the shifts may be going.
His position being in the finance sector gives him access to reports that are helpful to him.
Well, fortunately enough being in finance we get sent you know all of the primary values that put out their reports on a three-monthly basis sometimes as a six-monthly basis but that's a really good overview of what is happening in the marketplace where the oversupply where's the undersupply. There is a very good source and where they see the trends going. And when we're in finance itself when you get valuers with valuations coming through and the comments that they that they're making in these areas as well in terms of the market you know oversupply vacancy rates. So they're the type of report so I like to dig into.
Is that something that the public can get access to if there's any recommendations or is it something that.
I'm quite sure that they could. I could go to the websites of the property values that are pretty much the mainstream across lenders. I'm pretty sure that they do make that make those reports available.
He explains how useful these reports are to him.
It covers resident covers residential commercial industrial but you know my interest in residential real estate. And so it is it just puts the warnings out in the event of you know if you're wanting to buy a unit in the last couple of years and even then you probably wouldn't know because of the oversupply that's the reason that's in the city that's working its way through. So most of those that sort of information for someone who wants to invest in great and is ideal.
Stemp reveals the best advice he’s ever received
Best advice I've ever received hold assets if they're not costing you and then you make a profit. The point at the point of the purchase a lot of people think making the money at the end when you make you realise the sale that if you purchase correctly that's when you've actually done yourself a good service you have a good deal.
Stemp’s personal habits reinforce what he believes about surrounding yourself with good support.
I know I've said it previously but I think it's just about relationships and mentors and getting good people besides you that you can just sound off of. And you and someone you can respect the advice that they're giving you and then and then you know then research that but my habits, I just like forming good relationships and you know with ethical professionals in the industry. And yeah no I don't know if that's answering the question in terms of a habit but that's just big on good relationships.
If Steve Stemp met himself 10 years ago, he’d have this advice to give:
I would say don't buy real estate that's the underlying value of it is industry and one specific industry like the mining industry. And if you are and you have fully researched it maybe not go in. You know just dip your toes in, don't do what I did because. There's a little bit of pain that goes along the way when you do that. So yeah definitely the last 10 years I've bought real estate that was underpinned by specific industries in a white spot for example. And if that specific industry turns belly up then that has a direct effect on your assets.
Instead, he would advise himself to:
Come, come if you won't know a conservative approach to investing with long term gain. Stay in the infrastructure so stay where their employment is staying where the schools the private schools the sporting clubs the rail stay in the infrastructure the asset. Is it going to double in seven years? I don't know but it's surely going to hold its position if there is employment there and there will be steady growth. If you can purchase property and it's not costing you anything then that's really a bluechip investment.
Stemp has lots to look forward to in the next few years of his investment journey.
Over the next five years, I'm excited about what I'll personally I'm looking forward to next year to develop the property on the Gold Coast. And I'm excited about dual homes. It's getting good traction and people as you know as we sell our message into the marketplace. We're using a digital platform. Dual Key homes, it provides a property that is a good investment in the right areas. Positive cash flow. And yeah I'm excited about that property journey.
I think it will be successful.
He recognises the challenges upcoming in the market, and the opportunities it will provide.
I think the biggest challenge in the short term is definitely the banking industry. It's already adjusted it's adjusting and it's adjusted over the last three or four months and I believe it'll be adjusting even further. So they're going to be tightening. So if you've got the ability to invest in growth areas and the bank allows you to be able to do that, then I think you'd be better returning in that real estate market than there will be in leaving the money in the bank.
Stemp acknowledges that both luck and skill played a role in his investment success.
At the start it was luck well yes it was definitely luck.
I would like to think that my background of finance and the properties over my time you know I've got a fair knowledge of what to do and what not to do. I definitely know what not to do. So I think I've moved more into the skilled and knowledgeable area and I would like to think so that's fantastic I love it.
If you’re interested in getting in contact with Steve Stemp, here’s how:
Probably best if they come on to the Dual Key homes website which is www.dualkeyhomes.com. And then they can just make contact push the contact bar and then put their name and just leave a little message in there that they would listen to the podcast or they can ask for me and make contact with them. I'll be more than happy to do so. I'd love to have a chat and share some more experiences.
This episode was produced by Ashlyne Ocampo with narrations and interviews conducted by Tyrone Shum.